Second Circuit: The First-To-File Rule Is Not Jurisdictional

May 11, 2017Articles

The Second Circuit recently joined the D.C. Circuit’s minority position when it held that the first-to-file rule is not a jurisdictional bar to qui tam cases. See United States ex rel. Hayes v. Allstate Ins. Co., No. 16-705, 2017 U.S. App. LEXIS 5774 (2d Cir. Apr. 4, 2017). Instead, the Second Circuit held the first-to-file rule is a defense that can be raised through a motion to dismiss arguing a relator failed to properly state a claim. While a non-jurisdictional first-to-file rule may still be used by defendants to dispense with repetitive FCA claims, it lacks the force of its jurisdictional counterpart in other circuits.

The Hayes decision is contrary to those in the majority of circuits in which the first-to-file rule remains a jurisdictional bar.1 Historically, the purpose of the first-to-file rule was to prevent opportunistic plaintiffs from bringing parasitic cases. Courts in other circuits have concluded using the first-to-file rule to defeat a court’s subject-matter jurisdiction is consistent with both the historic purpose of the rule and the overarching purpose of the FCA, which is to alert the government to the essential facts of alleged fraudulent activity. Under the rationale of those courts, once the government has notice of the first case to be filed, any subsequent, parasitic cases would not alert the government of fraudulent activity. See United States ex rel. Ven-A-Care of the Fla. Keys, Inc. v. Baxter Healthcare Corp., 772 F.3d 932, 937-38 (1st Cir. 2014).

The Hayes decision marks an emerging trend away from this traditional understanding of the rule. In Hayes, the court held the first-to-file rule was non-jurisdictional, in part, because the statutory text does not contain any language stating expressly that Congress intended it to be jurisdictional. The court leaned on the Supreme Court’s “bright line” rule for determining whether statutory limitations are jurisdictional, under which courts treat statutory limitations as non-jurisdictional unless, “Congress has ‘clearly stated’ that the rule is jurisdictional.” The Hayes court held that the statutory language in the first-to-file rule merely determines who may bring a private action and when a private action may be brought. Because there is no language explicitly invoking jurisdiction, as in other FCA provisions limiting qui tam actions, the court held the first-to-file rule is non-jurisdictional.2

While the first-to-file rule has traditionally been one of an FCA defendant’s most effective methods for dispensing with parasitic FCA claims, decisions like Hayes blunt its utility. In the circuits that treat it as a jurisdictional bar, the rule is generally asserted through a Rule 12(b)(1) motion to dismiss for lack of subject-matter jurisdiction. In a Rule 12(b)(1) motion, the onus is on the relator to show that the court has jurisdiction, and materials outside of the pleadings can be considered. If the first-to-file rule is not jurisdictional, however, the burden shifts to the defendant to show the relator failed to adequately state a claim under Rule 12(b)(6), and all of relator’s well-pleaded allegations are treated as true for purposes of that analysis. A non-jurisdictional version of the rule also lacks the finality of its jurisdictional counterpart because the relator can theoretically amend his or her complaint and remedy a pleading defect, whereas a relator cannot create jurisdiction via amendment if the court did not have jurisdiction over the action in the first instance.

1 See, e.g., United States ex rel. Ven-A-Care of the Fla. Keys, Inc. v. Baxter Healthcare Corp., 772 F.3d 932 (1st Cir. 2014); United States ex rel. Branch Consultants v. Allstate Ins. Co., 560 F.3d 371 (5th Cir. 2009); Walburn v. Lockheed Martin Corp., 431 F.3d 966 (6th Cir. 2005).
2 Some circuits have also determined that the public disclosure bar is not jurisdictional for similar reasons. In 2010, Congress amended the FCA public disclosure bar in 31 U.S.C. 3730(e)(4) and removed language explicitly stating that “[n]o court shall have jurisdiction” over a claim that has been publicly disclosed. Courts have held that the removal of such explicit language renders the public disclosure bar non-jurisdictional. See, e.g., United States ex rel. Osheroff v. Humana, Inc., 776 F.3d 805, 810 (11th Cir. 2015).