D.C. Circuit: First-To-File Bar’s Applicability Is Determined When the Relator Files the Second Complaint

The D.C. Circuit recently rejected a qui tam relator’s attempt to dodge the FCA’s first-to-file bar by amending his complaint. United States ex rel. Shea v. Cellco P’ship, 863 F.3d 923 (D.C. Cir. 2017).  The panel’s correct interpretation of the first-to-file bar stymies relators’ ability to keep copycat FCA suits in court.

The relator, a telecommunications industry consultant, filed a qui tam suit against Verizon Communications, Inc. in 2007. He accused Verizon of billing the United States General Services Administration for non-billable items, such as certain taxes and surcharges.  The government intervened in that first case.

While the first case was pending, the relator filed a second qui tam suit.  In the second suit, the relator alleged that Verizon employed the same fraudulent billing scheme for 20 additional federal contracts. The government declined intervention in the second case.

In 2011, the parties settled the first case. Verizon did not admit liability in the settlement terms. Pursuant to the FCA’s qui tam provisions, the relator received an almost $20 million cut of the settlement.

The district court, concluding that the first-to-file bar permanently barred any related suit filed while the first action was pending, dismissed the relator’s second case in 2012. The relator climbed the appellate ladder to the United States Supreme Court, which vacated the dismissal based on the Court’s 2015 decision in Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, and remanded the case to the district court for additional proceedings.  In Kellogg Brown & Root, the Supreme Court held that the first-to-file bar would not apply if a second suit is filed after the first suit is finished.

Post-Kellogg Brown & Root, a relator could avoid the first-to-file bar by re-filing her complaint after the prior suit’s conclusion—in that circumstance, there would be no “pending” lawsuit to bar the second suit.  But this path presents problems for some relators, because the FCA’s statute of limitations precludes them from re-filing timely FCA claims. That was the case for the relator in Shea. Instead of re-filing, the relator tried to cure the first-to-file defect by amending his complaint after the first suit was dismissed, thereby avoiding statute of limitations issues.

On remand, the district court again dismissed the relator’s case.  The court held that amending the complaint could not remedy a violation of the first-to-file bar.  The only way to cure the defect was to file a new complaint.

The D.C. Circuit, per Judge Srinivasan, affirmed the dismissal.  The court noted that the first-to-file bar applies to actions, not complaints.  According to the court, amending the second complaint does not change the fact that the second action was brought during the first action’s pendency.  Courts determine the bar’s applicability at the time qui tam relators initiate the second action.  “For purposes of the first-to-file bar, in short, [the relator]’s action was incurably flawed from the moment he filed it.”  The D.C. Circuit agreed with the district court that the only remedy for the relator was to re-file the second complaint. Shea gives effect to the plain language of the first-to-file bar. Relators cannot circumvent the bar by amending their complaints—rather, they must file completely anew.