A Bar with Teeth—The Second Circuit Revives the First-to-File Bar in United States ex rel. Wood v. Allergan

Like Mark Twain, who once said "the reports of my death are greatly exaggerated," one could have said the same about the FCA's first-to-file bar, a statutory bar that prohibits relators from bringing qui tam actions related to an already-pending qui tam suit. First came the Supreme Court's decision in Kellogg Brown & Root, Services, Inc. v. United States ex rel. Carter, 135 S. Ct. 1970 (2015), which held that the first-to-file bar is not an impediment in perpetuity; it is only a bar while the first suit remains pending. Then came the First Circuit's decision later that year in United States ex rel. Gadbois v. Pharmerica, 809 F.3d 1 (1st Cir. 2015), which permitted relators who would have been barred to circumvent the FCA's first-to-file bar by supplementing their complaints after the first-filed suits were dismissed. After Gadbois, relators thought they could file a copycat action and just wait until the first-filed suit was dismissed to supplement or amend their complaint to avoid the first-to-file bar. Righting the ship somewhat was last year's decision by the D.C. Circuit, who firmly disagreed with the First Circuit, in United States ex rel. Shea v. Cellco P'ship, 863 F.3d 926 (D.C. Cir. 2017).

Entering into this circuit split now—and confirming the vitality of the first-to-file bar—is the Second Circuit's recent decision in United States ex rel. Wood v. Allergan, 899 F.3d 163 (2d Cir. 2018). The Second Circuit joined the D.C. Circuit in holding that the first-to-file bar should be evaluated as of the date a relator files his complaint. If a related suit was pending at the time, the first-to-file bar compels dismissal of the second suit. Nothing could change that result. Not dismissal of the initial suit after the second suit was filed and certainly not amendment following that earlier suit's dismissal. Echoing the words of the D.C. Circuit, the Court stated that the second action "was incurably flawed from the moment [Relator] brought it."

Focusing on the initial filing date of the subsequent qui tam, the Second Circuit held that the first-to-file bar "bars a person from bringing—not continuing to prosecute—a related action during the pendency of an FCA case." Because suit cannot be brought, later-occurring developments—like amendment—are immaterial to whether the first-to-file bar applies. As a result, the Second Circuit dismissed Relator's suit. It is worth noting that the United States filed an amicus brief in the case arguing for dismissal for the same reasons as the Second Circuit, which the Court described as a "significant consideration, as the FCA is designed to promote the Government's interest."

Wood is an important FCA development for several reasons. First, it strengthens the first-to-file bar as a defense, deterring relators from bringing copycat suits, at least in district courts in the Second and D.C. Circuits, and then waiting it out until the earlier related suits are dismissed. Second, it makes the statute of limitations a relevant consideration; because amendment cannot cure first-to-file deficiencies, the clock starts anew if the relator files a new action following a first-to-file dismissal. As the Court noted, although "some relators may be barred from bringing meritorious claims when their actions are dismissed and then blocked by the statute of limitations," such considerations must give way to an "unambiguous" statutory command that "Congress designed." The Court left for a "future court" whether "equitable tolling" might preserve relator's claims under those circumstances.

It remains to be seen whether other circuit courts will endorse the now-majority opinion or whether this issue interests the Supreme Court, which has examined the first-to-file bar a number of times over the last few years. The momentum appears to favor giving greater teeth to the first-to-file bar by holding that amendment cannot overcome first-to-file deficiencies.

© Arnold & Porter Kaye Scholer LLP 2018 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.