1st Circuit Rules Non-Specific Complaint Can Trigger First-to-File Bar


Agreeing with the decision by the D.C. Circuit in United States ex rel. Batiste v. SLM Corp., 659 F.3d 1204 ( 2011), and rejecting the reasoning of the 6th Circuit in Walburn v. Lockheed Martin Corp., 431 F.3d 966 (6th Cir. 2005),  the 1st Circuit Court of Appeals ruled in  U.S. ex rel. Heineman-Guta v. Guidant Corp., 718 F.3d 28 (1st Cir.  May 13, 2013), that a qui tamcomplaint need not meet the “particularity” requirements of Rule 9(b) of the Federal Rules of Civil Procedure in order to bar a later-filed complaint under the False Claims Act’s first-to-file provision, 31 U.S.C. ‘ 3730( b)(5).   The U.S. Courts of Appeals have now ruled 2-1 in favor of an interpretation of the first-to-file provision that allows even a complaint subject to dismissal under Rule 9(b) to bar a later qui tam complaint.

Allegations and Procedural History

In November 2009, the relator, Heidi Heineman-Guta, filed a qui tam action alleging that Guidant Corporation had engaged in a kickback scheme to promote the sale and use of cardiac rhythm management devices through lavish trips, expensive dinners, exorbitant speaker fees, excessive “case management” fees and payments for sham clinical trials.  Her complaint included the details of which physicians were paid the kickbacks, which patients received implantations on which dates, and the specific trips, meals and hotel reimbursements used as inducements.

Approximately one year earlier, in October 2008, another relator had filed an action also alleging that Guidant paid kickbacks to doctors and hospitals to promote sales of various cardiac rhythm management devices; in this case, the alleged kickbacks included follow-up medical services, billing services and grants alongside the speaker honoraria and dinners.    The Government declined to intervene in the action in September 2011 and the action was voluntarily dismissed the following month without the district court having examined the sufficiency of the allegations under Rule 9(b).

Guidant moved to dismiss the Heineman-Guta complaint under the FCA’s “first-to-file” provision, 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.”  Heineman-Guta argued that the earlier-filed complaint should not bar her complaint because the first relator had not alleged the specifics of the fraud, such as dates, places and physician names, and therefore their complaint was not sufficiently particularized to meet the pleading requirements of Fed. R. Civ. Pr. Rule 9(b), requirements which generally have been held to be applicable to False Claims Act complaints.  The district court dismissed the action, ruling that a qui tam complaint need not comply with Fed. R. Civ. Pr. Rule 9(b) to bar a later-filed complaint.

Court Holding

The Court of Appeals initially set forth the generally-accepted judicial interpretation of the first-to-file provision, which is that a first-filed complaint  must only “put the Government on notice” of the “essential facts” of a fraudulent scheme in order to bar a later complaint.   The Court noted that the first-to-file bar and Rule 9(b) have different purposes, with the former being about the “preclusion” of actions that merely “mirror” earlier allegations and add nothing meaningful to the earlier action’s notice to the government,  and the latter concerned with protecting the defendant from and deterring frivolous complaints.   Apparently concluding that the Government has the inclination and ability to investigate a complaint based on non-particularized allegations, the Court went on to rule that compliance with Rule 9(b) was not necessary to provide the Government with sufficient notice to launch an investigation.

The Court’s holding unfortunately is out-of-step with the practical realities of qui tamproceedings. As qui tam practitioners know full well, however, it is the rare case in which the Department of Justice will initiate an investigation of generalized allegations that are not supported by specific evidence or information.  This is particularly the case as the Government’s law enforcement and investigatory resources have dwindled in the age of sequestration.