The First Circuit recently followed the D.C. Circuit's decision in United States ex rel. Batiste v. SLM Corp., 659 F.3d 1204 (D.C. Cir. 2011) in holding that a relator's qui tam complaint does not have to satisfy the heightened pleading requirement of Federal Rule of Civil Procedure 9(b), which requires that fraud be pled with particularity, in order to bar qui tam suits based on the same facts filed by subsequent relators: U.S. ex rel Heinman-Guta v. Guidant Corp., 2013 WL 2364172 (1st Cir., May 31, 2013).
Referred to as the "first-to-file rule," 31 USC 3730(b)(5) of the False Claims Act provides that "when a person brings an action under this
subsection, no person other than the Government may intervene or bring a
related action based on the facts underlying the pending action." In interpreting the first-to-file rule, the Sixth Circuit held in Walburn v. Lockheed Martin Corp., 431 F.3d 966, 972 (6th Cir. 2005) that in deciding whether a second or subsequently filed qui tam complaint was barred, the initial relator's complaint concerning the same matter must satisfy the heightened pleading standard of Rule 9(b). If the initial relator's qui tam complaint does not plead fraud with sufficient particularity to satisfy Rule 9(b), then section 3730(b)(5) does not apply and will not bar a subsequent relator's suit based on the same facts.
The First Circuit's Guidant decision, along with Batiste, rejects Walburn, and it essentially holds that Rule 9 has no bearing on whether to bar or allow a subsequently filed qui tam complaint. Rather, according to the "plain language" of 3730(b)(5), "if the earlier filed complaint contains enough material facts to alert the government to a potential fraud, a later-filed complaint . . . containing the same essential facts but incorporating additional or somewhat different details is . . . barred."
The First Circuit was certainly not troubled by the policy concern that guided the Sixth Circuit's Walburn decision: "failing to impose Rule 9's particularity requirements on earlier filed complaints . . . would encourage would be qui tam relators to file overly broad, vague and speculative complaints simply to prevent other potential relators from filing more-detailed complaints." In fact, the Court could not imagine "how an overly broad and speculative complaint lacking essential material facts would be sufficient in the first instance to notify the government of a fraudulent scheme under the FCA." The Court stated further that "[a] first-filed complaint that failed to [allege essential facts] would not preclude a later-filed complaint . . ." Yet, the Court does not really provide any instruction as to what this means. Apparently, it does not take much to preclude subsequently filed qui tam complaints because the "purpose of the first-filed complaint under section 3730(b)(5) is to provide notice of the potential fraud to the government so that it may initiate its investigation into the fraudulent scheme, nothing more."
In reality, the "purpose" of section 3730(b)(5) is not so clearly reflected in the statute's plain language and the identified policy of simply "providing notice" does not reflect how important the quality of a relator's information is to the government. In order to prosecute the False Claims Act and to effectively employ the government's limited investigative resources, the government needs factually intensive, well pled, investigated, and supported qui tams. If valuable information is provided by a subsequent relator, what incentive does that person have to file or cooperate, often at risk to themselves, if their subsequent complaint is barred?
A. Brian Albritton
June 6, 2013
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