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Massachusetts Lawsuit Against Long-Term Pharmacy Care Provider Fails to Clear the Legacy FCA Public Disclosure Bar

On April 30, 2018, the U.S. District Court for the District of Massachusetts dismissed the last remaining state False Claims Act (FCA) claims against long-term care pharmacy provider PharMerica, Inc. on the grounds that neither relator qualified as an “original source” under the applicable pre-2010 version of the FCA, thereby precluding their claims under the public disclosure bar. Critically, neither relator had firsthand, “direct” knowledge of the alleged fraud scheme. In 2007, two relators (employees of a pharmaceutical company) filed suit alleging that their employer had offered financial incentives to two long-term care pharmacy providers (LTCPs) in exchange for the pharmacy providers’ promotion of prescriptions of a specific antidepressant. Specifically, the relators alleged that their employer offered significant discounts and rebates to LTCP customers in exchange for increased promotion of the antidepressant, and that market-tier discounts were...

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DOJ Issues Memorandum Outlining Factors for Evaluating Dismissal of Qui Tam FCA Cases in Which the Government Has Declined to Intervene

As first reported in the National Law Journal, the US Department of Justice (DOJ), Civil Division, recently issued an important memorandum to its lawyers handling qui tam cases filed under the False Claims Act (FCA) outlining circumstances under which the United States should seek to dismiss a case where it has declined intervention and, therefore, is not participating actively in the continued litigation of the case against the defendant by the qui tam relator. Authored by Michael Granston, director, Fraud Section, Commercial Litigation Branch of the Civil Division of the DOJ, the eight-page memorandum follows comments made by Mr. Granston last year suggesting that—in cases where the DOJ has determined that allegations in a qui tam complaint lack merit—the United States would more aggressively exercise its statutory authority to dismiss FCA complaints pursuant to 31 U.S.C. § 3730(c)(2)(A). The DOJ later indicated that Mr. Granston’s public discussion of its...

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Tenth Circuit Expands First-to-File Rule, Dismissing Complaint after Substitution of Parties

On September 18, 2017, the Tenth Circuit reversed a decision of the US District Court for the District of Utah in United States ex rel. Little v. Triumph Gear Sys., Inc. In doing so, the Tenth Circuit concluded that the False Claims Act’s first-to-file bar extends to situations where relators’ counsel substitute parties prior to the initial complaint even being unsealed. In this case, relator Joe Blyn brought a qui tam action against a government contractor, alleging that he witnessed instances of fraud. The initial complaint named Blyn and three John Does as relators. The following year, Blyn and the John Does “vanished” from the action with Blyn’s counsel, David Little, instead naming himself, and Kurosh Motaghed as the sole relators.  After the court unsealed the action, Triumph moved to dismiss the amended complaint, arguing that the substitution of parties triggered the “first-to-file” bar, which prevents private parties from intervening in existing...

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Medicare Part B Provider Secures Dismissal of FCA Claims Under First-to-File Bar

On February 27, 2017, the US District Court for the Southern District of Mississippi granted a defense motion to dismiss False Claims Act (FCA) claims in United States ex rel. Dale v. Lincare Holdings, Inc., on the grounds that the claims were precluded by the FCA’s first-to-file bar. The defendant, Lincare Holdings, Inc., is a national respiratory care provider that serves Medicare Part B patients via the sale and rental of medical oxygen supplies. The relator, a former salesperson for a Lincare subsidiary, filed his complaint on February 23, 2015, under seal, alleging that Lincare implemented a scheme to falsify and manipulate medical necessity testing in order to generate false reports that would allow it to sell oxygen and other Medicare-covered services to patients who were not medically qualified for coverage. The relator alleged that an office manager and nurse instructed employees to direct patients to take a variety of steps, such as raising their...

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When a Bar is Not a Bar: First Circuit Denies En Banc Rehearing of First-To-File Bar Ruling

After a First Circuit Court of Appeals panel restored a relator’s False Claims Act (FCA) suit against PharMerica, a long-term care pharmacy, the First Circuit denied the company’s petition for rehearing and rehearing en banc on Monday, January 25, 2016 in U.S. ex rel. Gadbois v. PharMerica Corp.   As a result, the relator will have another day in district court  to pursue his allegations that the company submitted false Medicare and Medicaid claims by seeking reimbursement for drugs provided without a legal prescription– this time to argue for a chance to supplement his pleading to cure a lack of subject matter jurisdiction under the first-to-file bar. The December First Circuit panel decision, and the decision to let it stand, is significant because the court addressed a matter of first impression to the First Circuit, deciding that that Federal Rule of Civil Procedure 15(d) is available to cure most defects in subject matter jurisdiction.  Here, the defect...

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

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,...

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