Fifth Circuit Gives Relator a Crash Course in Issue Preclusion
The Fifth Circuit recently affirmed the dismissal of a qui tam action accusing Rolls-Royce of submitting false claims to the U.S. Air Force for defective aviation equipment because the relator had previously participated in not one, but two prior lawsuits involving the same facts. The only difference in the third case was that the relator switched out the defendants. The court held that the case, United States ex rel. Gage v. Rolls Royce North America, Inc., was "the perfect candidate for issue preclusion"—a doctrine that prevents a plaintiff from taking multiple bites at the judicial apple by re-litigating the same factual assertions against different defendants "in a piecemeal fashion."
The previous cases were brought in the Western District of Texas in 2010 and 2012. At issue in both were allegations that defective parts from a crashed civilian aircraft were sold to the Air Force without proper inspection or disclosure. Gage, a former consultant for Rolls-Royce, served as the company's expert witness in the first litigation, brought by Davis S.R. Aviation, LLC, concerning statements that Rolls-Royce made about Davis selling these defective parts to the Air Force. The parties ultimately settled, but Gage then filed his own FCA suit a few months later against Davis and other aviation companies, alleging that they submitted false claims related to the sale of the same defective aircraft parts at issue in the first litigation. Gage did not, however, name Rolls-Royce as a defendant despite having had the opportunity to amend his complaint twice and referencing the company several times throughout. The district court dismissed Gage's first FCA case with prejudice under Rule 9(b), reasoning that he failed to allege specific information about who purchased, repaired, sold, and installed the defective parts or which regulations or contractual requirements were violated. The Fifth Circuit affirmed.
In 2016, Gage tried again—filing a second FCA action based on nearly identical factual allegations, but this time, against Rolls-Royce. He argued that the company had also been involved in supplying the Air Force with the same defective aircraft parts at issue in the previous lawsuits. The district court dismissed, holding that Gage was barred under the doctrine of issue preclusion from re-litigating the same dispute that had been resolved against him. The Fifth Circuit affirmed, noting that "[n]early every single paragraph in the complaint was copied and pasted" from Gage's complaint in his prior qui tam. The Fifth Circuit reasoned that the prior complaint explicitly referenced Rolls-Royce and thus "eras[ed] any doubt about [Gage's] ability to join Rolls-Royce as a defendant in that action."
This case serves as a reminder that relators do not get to hedge their bets by bringing an FCA suit against one defendant, with the hope that they can just try again by naming a different defendant. Relators have to go all in on the first attempt. FCA defendants should remember to always check whether the relator has filed a similar suit in the past because issue preclusion may provide additional grounds for dismissal.
© Arnold & Porter Kaye Scholer LLP 2019 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.