The FCA Insider

The FCA Insider

Insights and updates on False Claims Act Litigation

Defense Arguments

Circuit Court Rules that Ambiguous Regulatory Requirements Cannot Give Rise to FCA Liability

By David Pivnick

A recent decision from the United States Court of Appeals for the District of Columbia Circuit evaluated whether a regulatory requirement was sufficiently ambiguous that it precluded a finding of liability under the False Claims Act (FCA).

United States ex rel. Purcell v. MWI Corporation involved the sale of water pumps to Nigeria.  The relator alleged that MWI Corporation had made improper certifications to the Export-Import Bank in order to obtain loans that would finance the sales at issue.  Specifically, the allegation was that MWI had falsely certified that it had only paid “regular commissions” to the sales agent who was involved in obtaining the sales contract.  The United States intervened in the litigation.

The case was tried to a jury, which found that the certifications had been false and awarded the Government $7.5 million in damages, which was trebled to $22.5 million. However, the loan at issue had been repaid and the district court found that the repayment of the loan should be offset against the damages.  Accordingly, MWI was only subject to civil penalties of $10,000 per certification for the 58 certifications at issue.  Both sides appealed the verdict.

On appeal before the D.C. Circuit, the primary issue was whether the term “regular commissions” was ambiguous and, if so, whether FCA liability could be based upon such an ambiguous term. The Court noted that the parties did not contest the fact that the term “regular commissions” was ambiguous and acknowledged that this term was subject to at least three possible standards (industry-wide, intrafirm or individual-agent).  The Court explained that “[c]ontentions like these—that a defendant cannot be held liable for failing to comply with an ambiguous term—go to whether the government proved knowledge.”  Ultimately, the Court concluded that MWI’s interpretation of the term “regular commissions” was objectively reasonable.  The Court also found that MWI had not been adequately informed that it was not properly interpreting the term.

Accordingly, the Circuit Court reversed the judgment and remanded the case with instructions to enter judgment in favor or MWI.

FCA Litigation

Freddie Mac and Fannie Mae Not Considered Government Agents Under the FCA

By Brett Barnett

In United States ex rel. Adams v. Aurora Loan Servs., Inc., 2016 WL 697771, — F.3d —- (9th Cir. Feb. 22, 2016), the Ninth Circuit found that Fannie Mae and Freddie Mac were not government entities for purposes of the False Claims Act.  In so holding, the Ninth Circuit provided further clarity to the distinction between claims under 31 U.S.C. § 3729(b)(2)(A)(i) (claims presented to an officer, employee, or agent of the government) and claims under 31 U.S.C. § 3729(b)(2)(A)(ii) (claims presented to entities that contract with the government and the government’s funds are used to advance a government program).

In Adams, the relator alleged that various lenders and loan servicers violated the FCA by making false certifications to Fannie Mae and Freddie Mac that certain loans were free and clear of liens and charges.  The relator pursued its FCA claims under 31 U.S.C. § 3729(b)(2)(A)(i), contending that Fannie Mae and Freddie Mac should be considered government officers, employees or agents.   The relator focused solely on 31 U.S.C. § 3729(b)(2)(A)(i), arguing that Fannie Mae and Freddie Mac were government agents because: (1) the Ninth Circuit had previously determined that these entities were federal instrumentalities for state/city tax purposes; and (2) these entities were subject to the Federal Housing Finance Agency (“FHFA”) conservatorship.   The relator—for reasons unexplainable to the Ninth Circuit—did not bring claims under 31 U.S.C. § 3729(b)(2)(A)(ii) or otherwise allege that Fannie Mae and Freddie Mac received and used money from the government to advance a government program.

In rejecting the relator’s arguments, the Ninth Circuit explained that although Fannie Mae and Freddie Mac are chartered by the federal government, they are still private companies. The Ninth Circuit reasoned further that “just because an entity is considered a federal instrumentality for one purpose does not mean that the same entity is a federal instrumentality for another purpose.”  The Court also found that the relator’s conservatorship argument was faulty, explaining that the conservatorship did not provide the FHFA with the authority to control Fannie Mae and Freddie Mac, it simply gave the FHFA the same rights and duties as these entities.

The Ninth Circuit declined to express an opinion on whether the relator could have stated a claim under 31 U.S.C. § 3729(b)(2)(A)(ii); however, it did note that the trial court “was mistaken” in ruling that claims made to Freddie Mac and Fannie Mae could never constitute claims under the FCA, stating that “[a] properly pled claim under § 3729(b)(2)(A)(ii) could give rise to FCA liability” if pled properly.  Adams serves to benefit the FCA defense bar as it provides a strong explanation of the distinction between claims under 31 U.S.C. § 3729(b)(2)(A)(i) and claims under 31 U.S.C. § 3729(b)(2)(A)(ii) and underscores the importance of properly establishing the government’s relationship to the purportedly fraudulent activity.

FCA Litigation

First Circuit Applies Kellogg Brown & Root to Allow Relator to File Motion to Supplement Previously Dismissed Complaint

By Brett Barnett

In United States ex rel. Gadbois v. PharMerica Corp., — F.3d —- (1st Cir. 2015), the First Circuit, in a matter of first impression, held that a relator’s complaint was not subject to dismissal under the first-to-file bar where an earlier-filed action based on the same underlying facts was settled and dismissed while the relator’s case was pending on appeal. Gadbois serves as a guidepost for other courts seeking to interpret the first-to-file doctrine subsequent to the Supreme Court’s decision in Kellogg Brown & Root Servs., Inc. v. United States ex rel. Carter, — U.S. —- (2015).  We have previously discussed Kellogg Brown & Root here and here; in short, the Court held that the phrase “pending action” in 31 U.S.C. § 3730(b)(5) means that “an earlier suit bars a later suit while the earlier suit remains undecided but ceases to bar that suit once it is dismissed.”

In Gadbois, the relator alleged that PharMerica’s distribution of pharmaceuticals to long-term care facilities violated the FCA.  PharMerica moved to dismiss under the first-to-file rule, which states that if an action is already pending involving the same subject matter 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).  In support, PharMerica highlighted similarities between the relator’s allegations and those in an earlier-filed case pending in the Eastern District of Wisconsin.  The district court agreed with PharMerica and dismissed the relator’s complaint.

While the case was pending on appeal, the Supreme Court issued its opinion in Kellogg Brown & Root and the related action in the Eastern District of Wisconsin was settled and dismissed.  In light of these two developments, the relator moved to supplement his complaint under Federal Rule of Civil Procedure 15(d), which allows a litigant to amend its pleadings to include any “occurrence, or event that happened after the date of the pleading to be supplemented.”  In response, PharMerica argued that jurisdiction is determined at the time the original complaint is filed and because the relator’s original complaint was barred by the first-to-file bar, the court lacked subject matter jurisdiction.

The First Circuit rejected PharMerica’s argument, holding that in light of the Court’s ruling in Kellogg Brown & Root the case should be remanded to the district court for consideration of the relator’s motion to supplement.  The first-to-file doctrine has seen significant developments over the past couple of years as the court of appeals are now divided on whether the first-to-file bar is jurisdictional.  Compare United States ex rel. Heath v. AT&T, Inc., 791 F.3d 112 (D.C. Cir. 2015) (first-to-file bar is not jurisdictional), with United States ex rel. Wilson v. Bristol–Myers Squibb, Inc., 750 F.3d 111, 117 (1st Cir.2014) (first-to-file bar is jurisdictional). With Gadbois applying Kellogg Brown & Root to hold that a first-to-file based dismissal is at times only temporary, it is likely that we are going to continue to see some important changes to this important area of FCA litigation.

Defense Arguments, FCA Litigation

Defendants Obtain Summary Judgment In an FCA Action Because the Plaintiffs Failed to Identify Evidence of Specific False Claims

By David Pivnick

It is often stated that the sine qua non (the indispensable and essential action) of a violation of the False Claims Act (FCA) is the submission of a false or fraudulent claim. This principle has been recognized and cited in federal courts throughout the country. A recent case that was decided in the United States District Court for the Southern District of Georgia, U.S. ex rel. Lawson v. Aegis Therapies, Inc., provided further confirmation of this principle. In Lawson, summary judgment was granted in the defendants’ favor because neither the Relator nor the Government was able to conduct any allegation of purported wrongdoing by the defendants to the submission of any specific false claim for payment by the Government.

Lawson involved claims that were brought against skilled nursing facilities by William Lawson, who had previously been employed by defendant Aegis as a staff physical therapist. The federal Government intervened in the litigation. Lawson alleged that the defendants had engaged in schemes of wrongdoing by attempting to maximize their reimbursement from the Government by assigning the highest levels of rehabilitative therapy to patients and by providing group therapy “without regard to outcome, performance, or medical benefit.” Despite making these allegations and providing general information regarding his observations of certain patient care, Lawson “could not identify a single patient who was kept in therapy so a higher RUG category than was medically necessary could be billed” and he also could not “identify a single patient who he witnessed receiving medically unnecessary services.”

The defendants filed a motion for summary judgment and argued, in part, that there was no evidence of any specific false claims that were presented to the Government. The Court considered certain schemes that had been alleged — such as an allegation of unnecessary therapy that had purportedly been provided to a single patient and allegations of improper group therapy — and found that those allegations had not been connected to any particular claims that had been submitted to the Government. As the Court explained, “Plaintiffs have not come forward with admissible evidence of a single claim and said ‘this one is objectively false.’” Accordingly, the Lawson court found that summary judgment for the defendants was appropriate.

The Lawson court also considered the allegations that evidence of wrongdoing could be found in the benchmarks that the defendants had purportedly used in connection with the therapy levels. The court found that there was no evidence that these benchmarks had been used in a wrongful manner that was intended to cause most patients to be billed at the highest therapy level. Rather, the Lawson court found that the benchmarks “were simply a business metric” that allowed for monitoring of the facility’s operations.  Thus, the court rejected the assertion that these benchmarks demonstrated that the defendants were acting with knowledge that false claims were being submitted to the Government.

It is oft-stated that a relator must link allegations of wrongdoing to specific false claims that were actually submitted to the Government. The Lawson case further confirmed this principle by granting summary judgment in the defendants’ favor where the relator and the Government were unable to adduce evidence of any specific false claims that had actually been submitted by the defendants.

Settlements

Whistleblower Denied Recovery In FCA Case With $322 Million Settlement

By David Pivnick

A whistleblower was recently denied any portion of the Government’s recovery in a False Claims case despite the Government obtaining a settlement of approximately $322 million. The decision arose in the case of United States ex rel. Swoben v. SCAN Health Plan, Case No. 09-cv-5013-JFW pending in the United States District Court for the Central District of California. Mr. Swoben had alleged that SCAN had received duplicative or overlapping payments during a time period spanning approximately 20 years. Mr. Swoben’s claims were brought under both the federal False Claims Act and the California False Claims Act. The litigation was ultimately settled between Mr. Swoben and the Government for $322 million, although SCAN did not admit to any wrongdoing in connection with the settlement.

As a result of the settlement, Mr. Swoben anticipated and sought a substantial recovery for his role in filing and pursuing the litigation. However, Judge John Walter found that Mr. Swoben’s claims were based upon publicly disclosed information and that he did not qualify as an original source of the information. The FCA’s public disclosure bar is found at 31 U.S.C. § 3730(e)(4)(A) and provides generally that a whistleblower is jurisdictionally barred from bringing claims on behalf of the Government where such claims have already been publicly disclosed and the whistleblower is not an original source of the information (i.e. does not have direct and independent knowledge of the alleged fraud).

Prior to filing his lawsuit, Mr. Swoben had raised his concerns both internally at SCAN and to Alan Lowenthal, who was a California State Senator at the time. Mr. Lowenthal relayed the information to the State of California Controller’s Office, which subsequently issued a report regarding SCAN’s reimbursements. Judge Walter found that report to be public information that triggered the public disclosure bar and precluded Mr. Swoben from any recovery. Judge Walter explained that “[a]lthough a relator need not be the original source of every element of his claim, a relator must do more than apply his expertise to publicly disclosed information. Thus, secondhand information may not be converted into direct and independent knowledge because the plaintiff discovered through investigation or experience what the public already knew.”

Notably, the Swoben opinion was issued based upon the prior version of the FCA’s public disclosure bar, which was amended through the Affordable Care Act. However, many FCA cases include conduct that predates the amendment, which means that analogous factual scenarios may well arise in the future. Additionally, the Swoben case is important because it illustrates the fact that courts will enforce the provisions of the FCA carefully and not simply award money to a relator who is not entitled to a recovery under the FCA.

The opinion in Swoben should serve as a cautionary tale to potential relators who lack first-hand knowledge and would hope to take advantage of publicly available information in the hopes of a significant recovery.

FCA Litigation

Fifth Circuit Rejects FCA Case Based On Purported Improper Legal Billings

By Brett Barnett

Although litigants frequently contend that the opposing party’s arguments are without factual or legal support, it is uncommon and unconventional for a litigant to contend that the opposing party has violated the FCA by advancing a purportedly weak legal argument. Despite the apparent oddity of such allegations forming the basis for an FCA claim, the Fifth Circuit was confronted with this precise issue in United States ex rel. Guth v. Roedel, Parsons, Koch, Blache, Balhoff & McCollister, No 15-30043, 2015 WL 5693302, — F. App’x —- (5th Cir. Sept. 29, 2015). In a holding that should be of particular interest to attorneys, the Fifth Circuit affirmed the dismissal of the Relator’s claims, explaining that a purportedly weak legal argument, in itself, cannot form the basis for a violation of the FCA.

Defendant, a law firm, was hired by Louisiana State University (“LSU”) to acquire and expropriate properties so that LSU could construct new medical facilities. Funding for the project was provided by the United States Department of Housing and Urban Development. To acquire a property, Defendant would have two appraisals performed and then compensate the owner at the higher amount. Defendant appraised the Relator’s property and subsequently brought an expropriation suit after Relator failed to sell his property for its appraised value.

While the parties were still litigating the expropriation suit, Relator filed a qui tam action alleging that Defendant violated the FCA by overbilling and double billing its legal work for LSU. Relator alleged that Defendant overbilled LSU by advancing arguments that lacked factual and legal support and by failing to act in good faith when negotiating settlement with the Relator. The Relator also contended that Defendant improperly double billed LSU by having multiple attorneys work on the same expropriation case.

The Fifth Circuit was understandably perplexed by the Relator’s FCA claims, explaining that the allegations were factually deficient and legally unsupported as there was no indication as to how the purported fraudulent billing gave rise to a violation of the FCA. In addressing the Relator’s overbilling allegations, the Court explained that “advancing a purportedly weak legal argument does not constitute, by itself, a false statement or fraudulent course of conduct.” As the double billing allegations, the Court explained that although the Relator may disagree with how Defendant staffed its cases, there was no indication that the use of multiple attorneys was unnecessary or improper. For Relator’s legal deficiencies, the Fifth Circuit explained that claims for services rendered in violation of a regulation do not automatically give rise to FCA liability. Accordingly, even if Defendant’s billing violated a regulation, there was no explanation as to how the violation formed the basis for an FCA claim.

Defense Arguments

Persons Convicted for Participating in the Fraudulent Scheme Are Barred from Pursuing an FCA Action

By David Pivnick

The qui tam provisions of the False Claims Act (FCA) are broad in scope and permit a wide array of individuals to pursue FCA litigation as relators acting on behalf of the Government. However, the ability of individuals to pursue FCA litigation on behalf of the Government is not unfettered. For example, a member of the armed forces is barred from bringing an FCA action “arising out of such person’s service in the armed forces.” 31 U.S.C. § 3730(e)(1). Another provision of the FCA prevents an individual who was convicted of criminal conduct relating to the individual’s involvement in the violation of the FCA from bringing a claim as a relator. 31 U.S.C. § 3730(d)(3). Specifically, Section 3730(d)(3) provides that:

Whether or not the Government proceeds with the action, if the court finds that the action was brought by a person who planned and initiated the violation of section 3729 upon which the action was brought, then the court may, to the extent the court considers appropriate, reduce the share of the proceeds of the action which the person would otherwise receive under paragraph (1) or (2) of this subsection, taking into account the role of that person in advancing the case to litigation and any relevant circumstances pertaining to the violation. If the person bringing the action is convicted of criminal conduct arising from his or her role in the violation of section 3729, that person shall be dismissed from the civil action and shall not receive any share of the proceeds of the action. Such dismissal shall not prejudice the right of the United States to continue the action, represented by the Department of Justice.

31 U.S.C. § 3730(d)(3).

The scope of the claims bar that is set forth in Section 3730(d)(3) was recently analyzed in the case of Schroeder ex rel. United States v. CH2M Hill, Case No. 13-35479, 2015 U.S. App. LEXIS 12287 (9th Cir. July 16, 2015). The defendant in the Schroeder case, CH2M Hill, was alleged to have engaged in the fraudulent submission of claims for hourly work. Schroeder was a former employee of the defendant who had submitted false time cards. Schroeder had previously pled guilty to one count of conspiracy to commit fraud, which is a felony. Despite his participation in the fraud, Schroeder commenced a qui tam action against the defendant based on its alleged fraudulent billing and the Government eventually intervened in the action and filed a motion to dismiss Schroeder as a relator because of his prior felony conviction for conspiracy to commit fraud. The motion to dismiss was granted.

On appeal, Schroeder challenged the district court’s decision to grant the motion to dismiss by arguing that the involvement of minor participants in the alleged fraud should not require dismissal. The Ninth Circuit rejected Schroeder’s argument and held that the dismissal was appropriate because the plain language of Section 3730(d)(3) did not include an exception for individuals who had played only a small role in the fraud at issue.

Defense Arguments

Relator’s Allegations from Prior Lawsuit Serve as Basis for Public Disclosure Bar Dismissal

By Brett Barnett

In United States ex rel. Wilhelm v. Molina Healthcare of Florida, No. 12-24298, 2015 WL 5562313 (S.D. Fla. Sept. 22, 2015), the court provided further clarification on two frequently litigated issues of the FCA’s public disclosure bar: (1) whether the date of filing or the date of the alleged FCA violation controls for determining which version of the public disclosure bar applies; and (2) can the allegations from a relator’s previous lawsuit form the basis for dismissal under public disclosure bar?  In finding that the relator’s claims were prohibited under the public disclosure bar, the court held that the date of the alleged FCA violation establishes which version of the public disclosure bar applies, and answered the second question in the affirmative.

Defendant was a managed care organization (“MCO”) for the Florida Medicaid program.  The relator had an indirect ownership interest in a separate MCO for the Florida Medicaid program.  The relator’s MCO was acquired by defendant in 2009.  As is the case with many MCOs, defendant was paid on a capitated basis by Florida.  Under this arrangement, defendant was paid a fixed amount per member per month regardless of the healthcare services and costs for each member.  According to the relator, soon after acquiring the relator’s MCO, defendant began working to have many of its high-cost members disenroll.  Defendant purportedly accomplished this by delaying and withholding benefits and by failing to provide adequate and timely care to its high-cost members.  In 2010, the relator filed suit against defendant for breach of contract, alleging that defendant’s attempts at disenrolling these members violated the terms of the parties’ purchase agreement.  That suit ultimately settled.

In 2012, the relator filed his qui tam action, alleging that the defendant violated the FCA.  The relator’s FCA complaint was based on the same allegations as his previous breach of contract action.  The defendant moved to dismiss on public disclosure grounds.  As an initial matter, the court was tasked with determining whether the pre or post 2010 version of the public disclosure bar applied as the alleged FCA violation took place in 2009, but the qui tam complaint was not filed until 2012.  Although both versions of the public disclosure bar are largely similar, the post 2010 version alters the types of records that constitute a public disclosure and arguably removes the statute’s jurisdictional bar.  The court rejected the relator’s argument that the version of the public disclosure bar in effect when the claim is filed controls, and relied on Third and Ninth Circuit cases to hold that “the date on which the false claim was made is the relevant date.”  Accordingly, the pre-2010 version of the public disclosure bar controlled.

Turning to the merits of the parties public disclosure bar arguments, the court first quickly determined that the relator’s previously filed breach of contract action could form the basis for a public disclosure.  The relator argued that despite this public disclosure, his FCA claim should survive because he was the original source of the information as the breach of contract complaint was based on his personal knowledge and experience with the defendant.  Here too, the court rejected the relator’s argument concluding that it was clear that the majority of the plaintiff’s knowledge was secondhand.  For instance, the relator admitted that his knowledge of the defendant’s claims payment system was derived from the defendant’s previous discovery responses, and that he had learned other information by interviewing people and reviewing documents.  The court explained that because the relator’s knowledge was derivative in nature, he was not the original source of the information.  Consequently, his FCA claims were dismissed with prejudice.

Although neither of the court’s holdings in Wilhelm break new ground, the court’s thorough and well-reasoned analysis helps reinforce fundamental public disclosure bar principles and serves as another helpful case for the FCA defense bar.

Settlements

How Is a Relator’s Recovery in an FCA Settlement Taxed?

By Brett Barnett

This rarely litigated question was presented to the Seventh Circuit in Patrick v. Commissioner of Internal Revenue, No. 14-2190, 2015 WL 5024985, — F.3d —- (Aug. 26, 2015). Previously, the First Circuit, in Fresenius Medical Care Holdings, Inc. v. United States, 763 F.3d 63, 71-72 (1st Cir. 2014), answered the related question of how an FCA defendant’s settlement payments should be treated for tax purposes, explaining that in the absence of a tax characterization agreement, the settlement can be deducted if the objective “economic realities” indicate that the settlement was intended to be compensatory. The Seventh Circuit recognized that its issue—how an FCA relator’s settlement proceeds should be treated for tax purposes— had not been addressed by that court; in fact, the Ninth Circuit is the only other circuit court to have looked at the issue. See Alderson v. United States, 686 F.3d 791 (9th Cir. 2012).

In Patrick, plaintiff had served as the relator in an FCA action against Kyphon, Inc., alleging that Kyphon had induced hospitals to file claims for Medicare reimbursement for unnecessary inpatient hospital stays. The government intervened and settled the case and the plaintiff received $5.9 million of the settlement proceeds. Plaintiff also received $900,000 from the settlement proceeds of a related FCA case against the hospitals. Subsequently, plaintiff reported his FCA settlement proceeds as capital gains in his tax returns. The Commissioner of Internal Revenue disagreed with plaintiff’s determination and informed him that the settlement proceeds must be reported as ordinary income. The Tax Court agreed with the Commissioner.

The Seventh Circuit affirmed, holding that FCA settlement proceeds are taxable as ordinary income. The Seventh Circuit explained that capital gains are the “gain from the sale or exchange of a capital asset,” and “generally involve[] a ‘realization of appreciation in value accrued over a substantial period of time’ of an investment of capital.” Patrick, 2015 WL 5024985, at *2-3 (quoting 26 U.S.C § 1222(1), (3) in former and Comm’r v. Gillette Motor Transp., Inc., 364 U.S. 130, 134-35 (1960) in latter). Conversely, FCA settlement proceeds are more akin to a “reward” or “bounty” and constitute a payment for services, and therefore, should be considered ordinary income. Id. at *2. Accordingly, the Seventh Circuit held that plaintiff owed an additional $811,597 under the higher tax rate for ordinary income.

Although the tax implications for a settlement are rarely at the forefront of FCA litigants’ concerns, their financial impact is significant. For FCA defendants, the best approach to ensure that your settlement payments are deductible is to include a tax characterization agreement in the settlement agreement itself. Without this agreement, there is a chance that FCA defendants will end up in further litigation with the government to determine the tax consequences of their FCA settlement. For FCA relators, the two circuit courts that have addressed the issue—the Seventh and the Ninth—have both held that settlement proceeds must be taxed as ordinary income. Given the absence of any case law holding to the contrary, it would be prudent for FCA relators to report settlement proceeds as ordinary income so as to avoid the costs and penalties resulting from incorrectly filing your tax returns.

Defense Arguments, FCA Litigation

Supreme Court Clarifies the First to File Bar

By David Pivnick

The first to file bar is a limitation on the rights of members of the public to commence certain litigation under the FCA.  In essence, the first to file bar prevents a member of the public from commencing an action based upon facts that have already been placed at issue in another piece of FCA litigation.   Specifically, “[w]hen a person brings an action under this subsection, 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 “subsection” being referenced in Section 3730(b)(5) permits members of the public to commence FCA litigation for violations of 31 U.S.C. § 3729 on their own behalf and on behalf of the Government.

The first to file bar has become a frequently used defense, along with the public disclosure bar, in cases in which a relator’s allegations involve facts that are duplicative to those that have been alleged in a previously filed FCA case.  However, there has been dispute regarding the parameters of the first to file bar.  Specifically, some have argued that the first to file bar precludes subsequent litigation even if the initial litigation was dismissed; whereas others have asserted that the first to file bar applies only if the prior litigation involving the same facts remains pending.

In the case of Kellogg Brown & Root Services, Inc. v. United, which was previously discussed in this blog, the United States Supreme Court specifically addressed this issue.  The Supreme Court considered the divergent positions on the first to file bar and analyzed the statutory text and concluded that the first to file bar applies only if the first filed litigation remains pending.  The Supreme Court’s holding was predicated on the inclusion of the word “pending” in Section 3730(b)(5).  This decision means that relator’s will not be barred under Section 3730(b)(5) for filing claims with factual allegations that are duplicative of a previously filed, but dismissed, FCA action.  However, other defenses, such as the public disclosure bar, may serve to preclude such a subsequent claim.

 

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