Tuesday, February 26, 2019

A Case to Keep In Your Pocket: Two Dismissal Rule Applies to Identical Qui Tam Cases Brought by Different Relators

Dear Readers:

I came across a small case to keep in your pocket as it might be needed one day: Arizona Medical Billing, Inc. v. FSIX LLC, 2019 U.S. Dist. Lexis 19164 (February 6, 2019). This case addresses the frequent issue of who is a party in a non-intervened qui tam: the government, relator, or both. This issue is addressed in the context of applying Fed. R. Civ. P. 41(a)(1). Rule 41(a)(a) governs voluntary dismissals of cases and provides for what is commonly referred to as the “two dismissal rule.” According to Rule 41(a)(1), an action that has been voluntarily dismissed without a court order or by filing a stipulation signed by the parties is presumed to be without prejudice unless it states otherwise “but a voluntary dismissal of a second action operates as a dismissal on the merits if the plaintiff has previously dismissed an action involving the same claims.” 

In Arizona Medical, the Court decided whether the two dismissal rule applies to two different relators who brought “identical” qui tams against the same defendants and then voluntarily dismissed each. The Court held that Rule 41(a)(1) applied and barred the second relator from reviving its previously dismissed qui tam.

Here are the facts of the case: Relator #1 brought a qui tam against FSIX LLC and three individuals alleging that these defendants had violated the False Claims Act due to their alleged violations of Medicare’s mileage reimbursement policies. A second Relator subsequently filed a separate qui tam suit against these same defendants along with one other individual defendant and made similar allegations against them. The defendants in Relator #2’s qui tam moved to dismiss on the grounds that #2's suit violated the “first to file” rule due to Relator #1’s pending qui tam. Relator #2 stipulated to the motion to dismiss. Interpreting the stipulation as a voluntary dismissal pursuant to Fed. R. Civ. P. 41(a), the Court in Relator #2’s case dismissed that qui tam without prejudice. Months later, the defendants in Relator #1’s qui tam case moved to dismiss and Relator #1 voluntarily dismissed its case. The Court “granted [Relator #1’s] notice of voluntary dismissal and dismissed the claims without prejudice.” With the first qui tam gone, Relator #2 filed a new qui tam that was identical to the one it had previously filed and dismissed. The defendants moved to dismiss Relator #2’s new qui tam on the grounds that a “common plaintiff, the United States of America, has filed two proper lawsuits . . . against the Defendants alleging identical claims” and thus should be dismissed pursuant to Rule 41(a).

In dismissing Relator #2’s new qui tam, the Court found that the two dismissal rule applied because “[i]t is undisputed that a common plaintiff, the United States of America was the primary plaintiff” in these two qui tams that “alleged identical claims.” The Court noted further that pursuant to 31 USC 3730, the relators in both cases could not have dismissed their actions without the “explicit consent of the Government as the primary plaintiff.” The Court rejected Relator #2’s argument that Rule 41 did not apply because the “relators in each case were different.” The Court found that Relator #2’s second dismissal “operated as an adjudication on the merits” because the claims in both cases were “identical.”

Arizona Medical illustrates that for the purpose of Rule 41(a), the United States is a party to a qui tam even if it has declined to intervene. In addition, while separate dismissals by relators bringing identical actions is uncommon, it does occur on occasion and Defense counsel now have a new case to defend against these serial actions.

A. Brian Albritton
February 26, 2019