On Remand, Eastern District of Virginia Narrowly Construes Supreme Court’s KBR Holding

By on November 18, 2015
Posted In Uncategorized

In a November 12, 2015 decision in a long running qui tam suit under the False Claims Act (FCA), the U.S. District Court for the Eastern District of Virginia dismissed a relator’s case pursuant to the first-to-file bar (31 U.S.C. § 3730(b)(5)) for the second time. The case, including the meaning of the first-to-file bar, was the subject of a May 26, 2015 Supreme Court decision on which we previously reported. (Kellogg Brown & Root Servs., Inc. v. United States ex rel. Carter, 135 S. Ct. 1970 (2015) (“KBR”)). In that decision, the Supreme Court interpreted the word “pending” in the first-to-file bar to mean that the bar is inapplicable if the first-filed suit has been dismissed.

On remand in the district court, the defendants again moved to dismiss on first-to-file grounds. The relator argued that although there were prior actions asserting similar claims pending at the time he filed his case, the fact that such actions had since been dismissed meant that, under the Supreme Court’s decision, the first-to-file bar was inapplicable. The district court explained, “Carter believes the dismissal of the earlier actions automatically advanced him to the first-filer position, even though he filed this case when those actions were pending in 2011. For the following reasons, Carter interprets [KBR] too broadly.” The district court found that whether the first-to-file bar applies depends on whether the prior action is pending at the time the second case is filed; subsequent dismissal of the prior action is irrelevant. The first-to-file bar is not assessed “mid-course whenever an earlier suit is dismissed.”

The district court held that this result does not conflict with the Supreme Court’s holding, which was narrow and only concerned whether “new claims” would be barred by dismissed cases. According to the district court, the Supreme Court did “not purport to address what effect a dismissal has on existing claims that were previously barred.” The district court thus held that because the prior cases were pending when the relator filed his suit, the relator’s claims were barred, and the subsequent dismissal of those suits did not “automatically advance” the relator to first-filer position.

Moreover, in response to the relator’s request for leave to amend, the district court held that amendment would not cure the preclusive effect of the first-to-file bar, rejecting the relator’s assertion that a court should look at the facts in existence at the time an amended complaint is filed. The district court observed that “[i]n the first-to-file context, however, the timing of the [initial] filing carries the weight of jurisdictional relevance.”

The court did not dismiss the relator’s claims with prejudice, however, despite defense arguments that refiling would be foreclosed by the statutes of limitations and repose. The district court determined that doing so before any such refiling would effectively be issuing an advisory opinion, which it declined to do. Accordingly, there may be yet another chapter in this long-running litigation. But the district court’s rejection of the broad interpretation of the Supreme Court’s KBR holding advocated by the relator is certainly heartening for FCA defendants. In the Eastern District of Virginia, at least, defendants seeking dismissal of a case on first-to-file grounds can rely on the facts in existence at the time the case was filed.

Laura McLane
Laura McLane serves as head of McDermott's Boston Litigation Practice Group. Laura represents national and international clients in health care, securities and other government enforcement matters, both civil and criminal. She also represents clients in professional and products liability cases and in complex commercial disputes. A significant part of Laura's practice is devoted to representing health care and other companies, as well as individuals, in government investigations and qui tam litigation based on the False Claims Act (FCA) and related statutes, including the Anti-Kickback Statute and the Stark Law. Read Laura McLane's full bio.