The First-to-File Rule
One of the many procedural obstacles that a potential qui tam plaintiff must overcome is the first-to-file (“FTF”) rule. This provision of the False Claims Act (“FCA”) states that “no 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).
The FTF provision basically means that once an FCA case has been filed against a particular defendant for specific misconduct, any later-filed suit for substantially the same claims is subject to dismissal.
This is an odd provision, in part because many later-filed suits get filed while the first-filed case is still under seal and simply unknowable to anyone. Nonetheless, the rule persists, apparently in an effort to streamline litigation and reduce the chances of multiple suits causing confusion for defendants or even for the government in terms of figuring out which relator is entitled to an award upon successful resolution of a case. In theory, at least, the government will inform a relator or her counsel if there is an earlier-filed case, and may facilitate discussions between the first- and later-filed actions to see if the parties want to reach some type of accommodation to allow both relators to contribute to the case and derive some benefit from any resolution.
Issues Arising Under the First-to-File Rule
Many questions arise from the implementation of the FTF rule, including:
-Whether a case that is dismissed still bars a later-filed action,
-Whether a second relator can join in an already-filed suit, and
-When a defendant needs to assert the FTF defense in a later-filed action.
The Supreme Court resolved the “still pending” question in Kellogg Brown & Root Services Inc. v. United States ex rel. Carter, KBR, 135 S. Ct. 1970 (2015), basically holding that a later-filed action is only barred by a first-filed case if that case is still pending when the second action is filed. The issue of how and when a defendant can assert the FTF rule against a later-filed action remains very much a matter of dispute, however. In April of this year, the Second Circuit followed the D.C. Circuit in holding that the FTF rule is not considered jurisdictional, meaning that it must be asserted in a timely fashion or it is waived, as well as influencing the procedural nature of how the defense is adjudicated.
Is the First-to-File Rule Jurisdictional?
In United States ex rel. Hayes v. Allstate Ins. Co., 2017 WL 1228551 (2d Cir. Apr. 4, 2017), the court held, “Because the FCA clearly states that other limitations on qui tam actions are jurisdictional, but does not clearly state that the first-to-file rule is jurisdictional, we must treat the first-to-file rule as nonjurisdictional in character.” This followed the decision of the D.C. Circuit, which was the first appellate court to break from the established pattern of deeming the FTF rule as jurisdictional. See U.S. ex rel. Heath v. AT&T Inc., 791 F.3d 112, 119 (D.C. Cir. 2015), cert. denied, 136 S. Ct. 2505 (2016).
Both of the circuit courts looked to a line of recent Supreme Court cases, in which the Court warned against loose holdings that statutory requirements are jurisdictional. Thus the Court observed in Sebelius v. Auburn Regional Medical Ctr., 133 S.Ct. 817, 824 (2013), that “[c]haracterizing a rule as jurisdictional renders it unique in our adversarial system.” The principal reason is that subject matter jurisdiction is not waivable. “Objections to a tribunal’s jurisdiction can be raised at any time, even by a party that once conceded the tribunal’s subject-matter jurisdiction over the controversy.” Id.
In an earlier decision, the Supreme Court had noted that a requirement that goes to subject-matter jurisdiction means that courts have an obligation to consider the issue even if parties have not raised it or if they affirmatively concede that jurisdiction is appropriate. Gonzalez v. Thaler, 132 S.Ct. 641, 648 (2012).
How These New Decisions Might Impact Potential FCA Filings
The decisions in Heath and Hayes potentially create an easier path for plaintiffs who are concerned about FTF issues. The FTF defense may be deemed to be waived if a defendant does not raise it promptly, generally in a motion to dismiss, although it is difficult to see how that would be applied if the defendant didn’t know of an earlier-filed case that remained under seal while a later-filed case moved forward. But there would be at least some constraints on defendants being able to raise the FTF defense very late in the game, or a court suddenly deciding to analyze that question, even near the close of litigation. Particularly since violations of the FTF rule are often totally innocent – because later-filing plaintiffs could not find out about a filed case that was still under seal – this move toward mitigating the harsh consequences of dismissal of the later-filed case is a positive step for FCA litigation.