The U.S. Court of Appeals for the First Circuit recently ruled that whistleblower complaints under the False Claims Act (FCA) need not satisfy the particularity requirements for pleading fraud under Federal Rule of Civil Procedure 9(b) in order to bar subsequent complaints based on the same facts. Applying the FCA’a “first-to-file” rule, the court reasoned that the earlier-filed complaint need only provide the essential facts to give the government sufficient notice to initiate an investigation into allegedly fraudulent practices. The case is United States ex rel. Heineman-Guta v. Guidant Corp.
The FCA’s qui tam provisions permit citizens to bring fraud actions on behalf of the United States, but once a complaint is filed, the “first-to-file” rule bars other individuals from bringing suit based on similar facts. This requirement is designed to protect defendants from duplicative claims.
In this case, the plaintiff alleged that Boston Scientific Corporation (“BSC”) had defrauded the federal government by providing kickbacks to physicians using BSC devices, causing the physicians to submit false claims for Medicare reimbursement. The district court dismissed the complaint because a previously filed complaint had alleged nearly identical facts, putting the government on notice of potential fraud. On appeal, the plaintiff argued that because the previously filed complaint lacked sufficient details of the alleged kickback scheme to satisfy Rule 9(b), the “first-to-file” rule should not apply and her complaint should not be dismissed.
In determining whether to apply Rule 9(b)’s heightened pleading standard to the “first-to-file” rule, the First Circuit construed Congress’s omission of a Rule 9(b) requirement from the FCA as an indication that it did not intend for that rule to apply under these circumstances. The court further reasoned that Congress’s reference to the Federal Rules of Civil Procedure in other FCA provisions provided significant support for its construction. Insofar as the purpose behind the qui tam provision is to alert the government to potential fraud, the court concluded that a later-filed complaint that merely elaborates upon the essential facts set forth in the first-filed complaint is unnecessarily duplicative.
In its Heineman-Guta decision, the First Circuit contributed to a growing circuit split. Like the First Circuit, the D.C. Circuit has also ruled that the FCA’s “first-to-file” rule does not impose upon the first-filed complaint Rule 9(b)s requirement that plaintiffs plead with particularity the circumstances that constitute the fraud. The Sixth and Ninth Circuits, however, have reached the opposite conclusion, ruling that a first-filed FCA complaint does not bar later-filed complaints if it fails Rule 9(b)’s heightened pleading standard. By refusing to apply Rule 9(b) to the first-to-file rule, the First Circuit protects employers from repetitive FCA lawsuits. This circuit split is ripe for Supreme Court guidance on the necessary standard for a first-filed complaint to have preclusive effect under the FCA.