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First Circuit Rules First-Filed Complaint Need Not Satisfy Rule 9(b) to Bar Subsequent Qui Tam Actions

Written By Kevin McGinty

To incentivize whistleblowers to bring false claims promptly to the government’s attention, the False Claims Act (FCA) includes a so-called “first-to-file rule" (31 U.S.C § 3730(b)(5)), which bars a person other than the government from “bring[ing] a related action based on the facts underlying” a pending action alleging violation of the FCA.  In a recent case of first impression, the First Circuit affirmed dismissal of a qui tam complaint under the first-to-file rule even though the relator argued that the previously filed complaint had not pleaded the alleged FCA violation with the particularity required under Rule 9(b) of the Federal Rules of Civil Procedure.  See United States ex rel. Heineman-Guta v. Guidant Corp., No. 12-1867, slip op. at 2 (1stCir. May 31, 2013) (Heineman-Guta).

The complaints in Heineman-Guta and the earlier action both alleged that the defendant had provided illegal kickbacks to physicians who implanted devices manufactured by the defendant.  The sufficiency of the earlier complaint, however, was never litigated in the earlier action.  After the government declined to intervene, the complaint in the earlier action was unsealed and then voluntarily dismissed.

The government also declined to intervene in Heineman-Guta, and the action was then unsealed.  The defendant then moved to dismiss, arguing that the first-to-file rule precluded the relator from bringing a FCA violation arising from the same alleged conduct that gave rise to the prior complaint.  Relator argued that the first-to-file rule did not apply because the complaint in the prior action, unlike her complaint, failed to satisfy Rule 9(b)’s requirement to allege the detailed facts necessary to plead fraud with particularity.  Because the complaint in Heineman-Guta pleaded additional facts that purportedly were not alleged in the earlier complaint, relator argued that her complaint was not “based on facts underlying” the earlier action, thus making the first-to-file rule inapplicable.

Both the trial court and the First Circuit disagreed.  As the First Circuit notes, because Congress did not incorporate the text of Rule 9(b) into the first-to-file rule, any argument that Rule 9(b)’s particularity requirement expressly applies to first-to-file rule is precluded.  The court found that the purposes of Rule 9(b) and the first-to-file rule are different.  Unlike the former - which is intended to provide a defendant with sufficient notice of the grounds for a claim of fraud - the first-to-file rule was intended “to provide the government with sufficient notice of potential fraud.”   According to the court, this means “that if the first-filed complaint contains enough material information (the essential facts) about the potential fraud, the government has sufficient notice to launch its investigation. At that point, the purpose of the qui tam action under § 3730(b) is satisfied.”  Accordingly, the First Circuit held that “for the purposes of the first-to-file rule, the earlier-filed complaint need not meet the heightened pleading standard of Rule 9(b) to provide sufficient notice to the government of the alleged fraud and bar a later-filed complaint under § 3730(b)(5); earlier-filed complaints must provide only the essential facts to give the government sufficient notice to initiate an investigation into allegedly fraudulent practices.”  Applying that standard, the court concluded that the earlier complaint alleged sufficient facts to permit the government to conduct its investigation, thereby barring subsequent qui tam actions under the first-to-file rule.  

The ruling in Heineman-Guta places the First Circuit on the same side of this issue as the D.C. Circuit, which held in United States ex rel. Batiste v. SLM Corp., 659 F.3d 1204, 1210 (D.C. Cir. 2011), that a complaint need not satisfy Rule 9(b) requirements to bar a later-filed complaint pursuant to the first-to-file rule.  There is a split on this issue between the First and D.C. Circuits and the Sixth Circuit, which ruled in Walburn v. Lockheed Martin Corp., 431 F.3d 966, 972 (6th Cir. 2005), that Rule 9(b)'s heightened pleading standard applies to first-filed complaints under the first-to-file rule.  It remains to be seen how other circuits will fall on this issue, or whether the Supreme Court will be given an opportunity to resolve the split.  For now, the slight weight of authority in the federal Courts of Appeals favors dismissal of later-filed qui tam actions, even if the initial action fails to meet the particularity requirement under Rule 9(b).


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Karen S. Lovitch

Chair, Health Law Practice & Co-Chair, Health Care Enforcement Defense Practice

Karen advises industry clients on regulatory, transactional, operational, and enforcement matters. She has deep experience handling FCA investigations and qui tam litigation for laboratories and diagnostics companies.