A whistleblower considering reporting fraud under the False Claims Act should be aware that getting a qui tam case on file before any other potential whistleblower is a critical and necessary part of any potential recovery.
The False Claims Act provides that “no other person other than the Government may intervene or bring a related action based on the facts underlying the pending action.” 31 U.S.C. § 3730(b)(5). This so-called “first-to-file” rule bars a later allegation of fraud if it states all the essential facts of a previously-filed whistleblower claim or the same elements of a fraud described in an earlier qui tam suit.
Only the whistleblower who first reports a fraud to the government can recover a monetary award as the result of providing information.
Policy Behind the First-to File Rule
There are several reasons for the existence of the False Claims Act’s first-to-file rule. First, the first-to-file rule is intended to provide incentives to relators to promptly alert the government to the essential facts of a fraudulent scheme. Only the whistleblower who first reports a fraud to the government can recover a monetary award as the result of providing information. By encouraging whistleblowers to report fraud as soon as possible, the rule serves to further the interests of the government in recovering money that it paid out as the result of fraud.
Second, the False Claims Act’s first-to-file rule discourages additional lawsuits based on the same facts that have been or are being litigated in an earlier-filed action because they do not enhance the government’s ability to investigate and prosecute fraud. Once the government has been made aware of the fraud by the initial whistleblower, allowing additional suits would only serve to drain resources with no potential for any additional recovery by the government.
The First-to File Rule Bars Related Actions
Most courts examining the first-to-file rule have interpreted the meaning of “related action based on the facts underlying the pending action” quite broadly. The facts of the second qui tam suit need not be identical for the suit to be barred by the rule. Instead, the majority of courts to consider the issue have interpreted the rule to apply when a later-filed qui tam complaint is based on either (1) the same “type of fraud”; (2) the same “essential elements”; or (3) the same “material elements” of fraud.
Two critical questions help determine whether a later-filed whistleblower action is related to a pending suit:
- Does it allege a different type of wrongdoing or fraud based on facts different from those alleged in the prior qui tam suit; and
- Does it give rise to a separate and distinct recovery by the government?
Most courts have applied some form of these questions to decide that a whistleblower’s claim must be distinct in order for the suit to survive and result in a relator’s award.
Key Takeaways From the First-to-File Rule
There are several key takeaways for a potential whistleblower from the first-to-file rule. The whistleblower must file a qui tam complaint as early as possible in order to ensure that the claim is not barred and the whistleblower receives credit for reporting the fraud. If there is another fraud at the same company, the whistleblower must try to distinguish any previously filed case and show that a new qui tam complaint will result in a separate recovery for the government.
Perhaps the most important takeaway is that the potential whistleblower must hire experienced counsel to bring the qui tam suit. Experienced qui tam counsel can help ensure that a claim is made both promptly and accurately, so the complaint is the first one on file while still withstanding scrutiny from a defendant or the Court. Experienced counsel can also fight to distinguish a previously-filed complaint so the whistleblower’s claim is not barred. In these ways, counsel can help to maximize the potential recovery for a whistleblower reporting fraud.
Contact Us to Learn More
Do you need a Whistleblower Lawyer or want to know more information about Qui Tam Law and your rights under the False Claims Act?
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