Uncertain Case Law Encourages Qui Tam Relators to File Actions Sooner

The False Claims Act includes a so-called “first-to-file bar,” 31 U.S.C. 3730(b)(5), which bars subsequent whistleblowers from recovering a reward. They are barred if their complaint is sufficiently similar to prior complaints. However, because the federal rules require whistleblowers to sufficiently detail the alleged fraud, questions have emerged over whether a deficiently pled complaint can still derail a later-filed complaint. There is a widening split in the courts on this issue.

For years, the qui tam bar and the U.S. Department of Justice have advocated the position embraced by the Sixth Circuit Court of Appeals, in United States ex rel. Walburn v. Lockheed Martin Corp., 431 F.3d 966, 972 (6th Cir. 2005). In Walburn, the Court imposed a heightened pleading requirement on complaints for first-to-file purposes. Such an interpretation strikes the appropriate balance between the first-to-file rule’s twin purposes—to encourage whistleblowers to come forward with allegations of fraud and to prevent copycat actions that do not provide additional material information to the Government. Requiring a complaint to meet the Rule 9(b) standards would ensure the complaint provides the Government sufficient information to pursue an investigation, as well as prevent an overly-broad complaint from barring a more detailed, later-filed complaint.

Recently, however, some courts have gone off track and adopted a reading of the first-to-file bar that undermines the government’s enforcement of the False Claims Act. For example, a few months ago, the D.C. Circuit Court of Appeals, affirming a lower court decision, held that a later-filed qui tam action can be barred even when the first-filed suit failed to sufficiently plead the details of the fraud, as required under Federal Rule of Civil Procedure 9(b). All that matter for the D.C. Circuit was that the earlier-filed barebones suit was still “pending” when the later-filed suit was filed.

The District Court of Massachusetts recently echoed the D.C. Circuit, when it held that an earlier-filed qui tam suit could derail a later-filed qui tam suit, even when the first suit failed to clear Rule 9(b). United States ex rel. Heineman-Guta v. Guidant, Civ. No. 09-11927 (D. Mass. July 5, 2012). According to the court, “The purpose of a qui tam action is to provide the government with sufficient notice that it is the potential victim of a fraud worthy of investigation.”

While this is certainly a worthy goal, it conflicts with the statutory language, which dictates that only a “pending action” triggers the first-to-file bar. Thus, the Sixth Circuit correctly noted that “in order to preclude later-filed qui tam actions, the first-filed qui tam complaint must not itself be jurisdictionally or otherwise barred.” Walburn, 431 F.3d at 972. In short, a first-filed action is not really an “action” unless it satisfies the requisite pleading and jurisdictional requirements.

Moreover, by embracing this wayward reading of the Act, such courts are injecting additional uncertainty into the qui tam practice, discouraging well-pled and well informed qui tam actions. Under either reading of the first-to-file-bar, the import is the same for qui tam practitioners’: expeditious preparation of cases in one key to success.

More information for whistleblowers is located at the Nolan & Auerbach, P.A. website.