The False Claims Act (FCA) is the federal government’s “primary litigative tool for combatting fraud.”
In addition to providing the government with a means to recover civil penalties and treble damages,
the FCA also contains a qui tam provision that allows private citizens—called “relators”—to sue on behalf of the United States and obtain a portion of the judgment.
The FCA has allowed the government to recover billions of dollars in judgments and settlements, and these recoveries serve as a powerful deterrent to those who might consider defrauding the United States.
A key provision of the FCA is its first-to-file rule, which effectively prohibits any party, except the United States government, from intervening or filing a separate FCA case based on the same operative facts as a case that has already been filed.
Given the powerful incentives for private citizens to file suits under the FCA,
the rule serves an important function by limiting duplicative relator-filed actions.
Many provisions of the FCA have provided interpretive challenges for the federal courts,
and the first-to-file rule is no exception. Because the rule is meant to act as a procedural bar, courts have often been called on to interpret how the first-to-file requirement relates to Rules 8 and 9 of the Federal Rules of Civil Procedure.
As a result, much of the scholarship regarding the first-to-file rule has also focused on its relationship to Rules 8 and 9.
In recent years, however, a new issue regarding the first-to-file rule has arisen: Does the rule limit the subject matter jurisdiction of the federal district courts, or does the rule simply affect whether a later-filed suit states a claim for relief on the merits? Prior to 2015, all six U.S. courts of appeals to confront this issue held—or assumed—that the first-to-file rule was jurisdictional.
The D.C. Circuit broke away from this pattern in United States ex rel. Heath v. AT&T, Inc. (Heath II ), holding that the rule was nonjurisdictional and instead bore only on whether the relator had stated a claim.
The Second Circuit recently joined the D.C. Circuit,
cementing a split between the eight circuits that have addressed this issue thus far. The first-to-file rule serves a critical procedural role in FCA litigation, and this disagreement among the circuits has created several unresolved questions that are important to both relators and defendants.
This Note proceeds in three Parts. Part I discusses the FCA’s qui tam provision and first-to-file rule, the dichotomy between jurisdictional and nonjurisdictional rules, and the procedural law underlying the first-to-file rule. Part II examines the debate among the courts of appeals regarding whether the first-to-file rule is jurisdictional and the implications of these competing constructions for FCA litigation. Part III argues that construing the first-to-file rule as nonjurisdictional is preferable for three primary reasons. First, building on the D.C. and Second Circuits’ analyses, construing the rule as nonjurisdictional is consistent with several established theories of statutory interpretation. Second, the Supreme Court’s past characterization of the role of relators in FCA suits, as articulated in Vermont Agency of Natural Resources v. United States ex rel. Stevens,
also supports a nonjurisdictional first-to-file rule. Finally, a nonjurisdictional rule would strike an appropriate balance between the competing policy goals undergirding the FCA’s qui tam provision.
Part III also addresses several open questions related to a nonjurisdictional first-to-file rule and provides guidance as to how the lower federal courts could best apply such a rule in practice.
I. The FCA and Jurisdictional vs. Nonjurisdictional Rules
The FCA provides for several different theories of liability that the federal government may use to recover civil penalties and damages.
The most commonly litigated provisions of the Act impose liability upon “any person who knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval” or who “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.”
The FCA defines the term “claim” very expansively,
and “person” is similarly defined broadly.
This flexibility has allowed the government to recover significant monetary sums,
which provides the FCA with much of its deterrent power.
This Part examines the components of the FCA relevant to the current debate regarding whether the first-to-file rule implicates subject matter jurisdiction. Section I.A discusses the FCA’s qui tam provision and its first-to-file rule, which applies to relator-filed suits. Section I.B considers the dichotomy between jurisdictional and nonjurisdictional rules.
A. Incentivizing Private Actors: Qui Tam, Government Intervention, and the First-to-File Rule
1. Relators and the Government’s Right to Intervene. — Qui tam suits by private parties have become a central mechanism for enforcement of the FCA. While the Attorney General can bring FCA actions of her own volition,
the FCA’s qui tam provision empowers private parties to “bring a civil action for a violation of section 3729 for the person and for the United States Government.”
In response to significant fraud against the government
—as well as the perception that incentives for private parties were too weak—Congress strengthened the FCA’s qui tam provision in 1986.
The liability and qui tam provisions were further strengthened by the Fraud Enforcement and Recovery Act of 2009 (FERA) to help the government fight fraud in the financial sector.
These expansions have greatly increased the number of suits filed under the FCA, especially by private parties.
FCA suits brought by members of the public have become more prevalent partly because successful relators are entitled to a portion of the judgment against the defendant, including both civil penalties and treble damages.
This share can vary between fifteen and twenty-five percent if the government intervenes or between twenty-five and thirty percent if the government elects not to intervene.
Within these ranges, a district court has the discretion to determine the relator’s share of the judgment.
Relators can also recover reasonable expenses and costs of litigation, including attorneys’ fees.
With this combination of incentives, it is unsurprising that the majority of FCA cases are now brought pursuant to the Act’s qui tam provision.
In addition to providing incentives for private citizens to hold government contractors accountable, the qui tam provision serves an important information-sharing function. Even in cases filed by relators, the FCA provides substantial control and authority to the Attorney General and, by extension, the U.S. Department of Justice (DOJ).
Each FCA complaint must be filed under seal, and a “copy of the complaint and written disclosure of substantially all material evidence and information the person possesses shall be served on the Government.”
The qui tam provision thus can provide the government with information of which it was previously unaware. By “creating a strong financial incentive for private citizens to guard against efforts to defraud the public fisc,” qui tam actions serve the function of, by proxy, bolstering the government’s constrained resources.
When a private citizen brings a qui tam action, the federal government has sixty days after being served with the complaint and material evidence to determine whether to intervene.
If it chooses to intervene, the government then has the sole discretion to conduct the action.
By contrast, if the government chooses not to intervene, the relator then has the right to conduct the action as she sees fit.
Whether the DOJ intervenes has important implications for the potential success of a qui tam action.
At the time FERA was enacted, the DOJ intervened in only twenty to twenty-five percent of relator-filed cases.
However, the overwhelming majority of settlements and favorable judgments have occurred in cases in which the DOJ either brought the case or intervened.
Conversely, in cases in which the DOJ declined to participate, a similarly large majority of cases fell flat, resulting in neither a settlement nor a favorable judgment for the relator.
Between 1987 and 2016, relators recovered more than nine times the share of judgments, by dollar value, when the U.S. government participated in the action versus when it declined to participate.
The stark differences in outcomes may be due to the government’s extensive experience reviewing, evaluating, and litigating these claims. However, the government is not required to justify its intervention decisions, and some commentators have noted that it is not always clear why the government chose a particular course of action.
Indeed, the government may decide not to pursue a case for a multitude of different reasons, including cost–benefit analysis or lack of merit.
Alternatively, this difference in outcomes may suggest that the federal courts are more sympathetic to FCA cases in which the government participates, perhaps under some perception that government intervention represents a stamp of merit.
2. The First-to-File Rule. — The potential for a share of a large judgment can spur both relators with legitimate claims as well as those who might file unmeritorious lawsuits hoping to obtain a settlement. Recognizing this, Congress incorporated several procedural safeguards in the FCA. These safeguards, including the first-to-file rule, seek to strike an appropriate balance between encouraging private citizens to bring meritorious actions and discouraging litigation that would not uncover any new evidence of fraud.
The first-to-file rule provides that “[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.”
This rule effectively precludes follow-on actions, regardless of merit, that are based on the same facts underlying a previously filed claim so long as the previously filed claim is still pending.
Before the 1986 amendments to the FCA, a pending suit could bar a later-filed suit only if the latter was “based on evidence or information the Government had when the action was brought.”
For this procedural bar to apply, the information in the government’s possession must have been “sufficient to enable it adequately to investigate the case and to make a decision whether to prosecute.”
Relators were often able to overcome this relatively imprecise standard so long as their claim was predicated on some facts that were different than those that the government already possessed.
By contrast, defendants can avail themselves of the first-to-file rule’s protection simply by identifying that a different relator filed suit first. However, certain judicial glosses on this rule are also relevant in determining whether the rule can be used to bar a later-filed suit. For example, courts have generally interpreted “facts underlying the pending action” loosely; identical facts are not required to bar a subsequent suit under the rule.
Further, while the Supreme Court has stated that relators must satisfy Rule 9(b) of the Federal Rules of Civil Procedure to survive a motion to dismiss,
several circuits are split on whether a first-filed complaint can preclude a later-filed one if the former has failed to satisfy Rule 9(b)’s requirements.
Given the remedies at stake—as well as the potential downsides for waiting to bring one’s claim—the first-to-file rule creates a powerful incentive to move quickly. While this rule has the potential to indirectly encourage shoddy legal work simply to beat competitors to the courthouse steps,
it does further “Congress’ explicit policy choice to encourage prompt filing and, in turn, prompt recovery of defrauded funds by the United States.”
And the conclusion that the first-to-file rule “incentivizes ‘bare bones’ or ‘haphazard’ claims” is far from universally accepted.
What is clear, however, is that judicial constructions affecting how the rule operates are critical to defining the rights and expectations of relators and defendants alike.
B. Subject Matter Jurisdiction and the Supreme Court’s “Clear Statement” Rule
Procedural bars, such as the first-to-file rule, can be divided into two distinct categories: jurisdictional rules, which implicate a court’s subject matter jurisdiction, and nonjurisdictional rules, which instead bear only on whether a plaintiff’s claim is meritorious or provide procedures for processing that claim. Section I.B.1 examines the substantive and procedural differences between jurisdictional and nonjurisdictional rules. Section I.B.2 discusses the Supreme Court’s recent jurisprudence related to the dichotomy between jurisdictional and nonjurisdictional rules.
1. The Dichotomy Between Jurisdictional and Nonjurisdictional Rules. — Jurisdiction relates to “the power or authority of a court to issue legitimate, binding, and enforceable orders.”
Due to the limited subject matter jurisdiction of the federal courts,
these courts have uniformly held that “the absence of jurisdiction [is] fatal to a particular adjudication, other legal considerations notwithstanding.”
To preserve this result, legal rules that implicate subject matter jurisdiction, which this Note characterizes as jurisdictional rules, generally “have clear and well-settled effects.”
Often, these rules focus on subjects that do not affect the merit of the plaintiff’s underlying claim, such as the legal source of that action.
For example, unlike personal jurisdiction, the consent of the parties is irrelevant when considering subject matter jurisdiction; courts have the power, and indeed the obligation, to address sua sponte whether subject matter jurisdiction is lacking.
Further, arguments citing a “jurisdictional rule can be raised by any party at any time,” even on appeal, and cannot be forfeited or waived.
Finally, jurisdictional rules are generally not subject to traditional equitable doctrines such as estoppel, which permit courts to exercise discretion when principles of equity indicate that strictly applying a rule would be unjust or unfair.
To invoke a jurisdictional rule, a defendant may move to dismiss for lack of subject matter jurisdiction pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure.
If the court agrees that it lacks subject matter jurisdiction over the complaint, the court must dismiss the action; it generally cannot proceed to consider the merits of the plaintiff’s claim.
Dismissals under Rule 12(b)(1) do not ordinarily constitute judgments on the merits for the purposes of claim preclusion.
Nonjurisdictional rules, however, do not automatically have the opposite effects of jurisdictional rules.
In part, this is because these rules do not result in uniform legal consequences.
Indeed, in many cases, nonjurisdictional rules can exhibit several characteristics that are generally associated with jurisdictional rules.
Nonjurisdictional rules typically focus on the validity of the plaintiff’s claim or the procedural means for processing that claim as opposed to the claim’s adjudicative basis.
Additionally, whether right or wrong, courts tend not to apply nonjurisdictional rules as “rigidly, literally, [or] mercilessly” as they do jurisdictional rules.
Consequently, simply characterizing a rule as nonjurisdictional does not resolve all ambiguities surrounding that rule’s application or the conduct required for a party to avail itself of the rule’s protections.
In contrast to jurisdictional rules, when defendants invoke a nonjurisdictional rule, they may be required to raise such an issue in their responsive pleading or rely on a motion to dismiss for “failure to state a claim upon which relief can be granted.”
After a plaintiff files her initial complaint, or, in the case of FCA litigation, when the court unseals it, a defendant is generally obligated to file a responsive pleading within a specified time window or assert a defense by motion.
Depending on whether a nonjurisdictional rule is characterized as an affirmative or a negative defense, a defendant may have to move quickly to invoke that rule’s protection.
Further, and very importantly, dismissals for failure to state a claim pursuant to Rule 12(b)(6) are generally considered judgments on the merits for the purposes of claim preclusion.
2. The Supreme Court’s “Clear Statement” Rule. — In the first half of the nineteenth century, the federal courts regularly identified procedural rules as jurisdictional, though these courts likely did not have today’s rigid conception of jurisdiction in mind.
Broad definitions of what constituted a jurisdictional rule continued through the Taney Court and even as late as the mid-twentieth century.
During this period, however, the Supreme Court routinely allowed for exceptions to jurisdictional rules, perhaps out of recognition of the harsh consequences of applying these rules rigidly.
Because of this, Justice Scalia, in Steel Co. v. Citizens for a Better Environment, recognized that “‘[j]urisdiction’ . . . ‘is a word of many, too many, meanings.’”
Recently, however, the Court has sought to narrow the meaning of the term “jurisdictional.” As Professor Erin Morrow Hawley identified, “the Rehnquist and Roberts Courts have carried out a quiet revolution in the nature and meaning of jurisdiction” by routinely “abandon[ing] [their] treatment of procedural requirements as presumptively jurisdictional.”
In carrying out this revolution, the Court has sought to more clearly define and distinguish jurisdiction from the substantive elements of a claim and the procedural requirements to enforce it.
As a result, the Court has developed what is colloquially referred to as a “clear statement” rule to help lower courts determine whether a particular rule is jurisdictional. Justice Ginsburg’s unanimous opinion in Arbaugh v. Y & H Corp. announced the clear statement rule in this context:
If the Legislature clearly states that a threshold limitation on a statute’s scope shall count as jurisdictional, then courts and litigants will be duly instructed and will not be left to wrestle with the issue. But when Congress does not rank a statutory limitation on coverage as jurisdictional, courts should treat the restriction as nonjurisdictional in character.
While seemingly straightforward, applying the clear statement rule as a guidepost in interpreting statutes is not without difficulty.
Yet, while there is a live debate in the academy about the benefits and detriments of the clear statement rule,
the Supreme Court and the lower federal courts have continuously applied the rule while remaining mindful of the murkiness of past rulings regarding jurisdiction.
For example, consider the Supreme Court’s recent decisions in United States v. Kwai Fun Wong
and Sebelius v. Auburn Regional Medical Center.
In Kwai Fun Wong, the rule at issue was § 2401(b) of the Federal Tort Claims Act (FTCA), which states that “a tort claim against the United States ‘shall be forever barred’ unless it is presented to the ‘appropriate Federal agency within two years after such claim accrues’ and then brought to federal court ‘within six months’ after the agency acts on the claim.”
In Auburn Regional, the rule at issue was a 180-day time limit for filing administrative appeals for reimbursement claims related to certain services provided to Medicare patients.
In both cases, the Court applied its clear statement rule and held that these rules were nonjurisdictional precisely because neither rule spoke in terms of the federal courts’ power to adjudicate the disputes.
While these recent cases dealt with time bars, the Supreme Court has not limited its application of the clear statement rule to this type of procedural rule.
II. A New Interpretive Challenge: Does the First-to-File Rule Implicate Subject Matter Jurisdiction?
Armed with this understanding of the FCA’s qui tam provision and first-to-file rule, as well as the jurisdictional versus nonjurisdictional rule dichotomy, this Part turns to how the courts of appeals have considered the first-to-file rule’s jurisdictionality. Currently, the circuits are split on whether the first-to-file rule implicates a district court’s subject matter jurisdiction: The First,
Circuits have each construed the rule as jurisdictional, while the D.C.
Circuits have construed the rule as nonjurisdictional.
Therefore, depending on the district in which the case is brought, an FCA case may proceed in very different ways.
This Part proceeds as follows: Section II.A surveys the circuit court opinions prior to 2015, which uniformly identified the first-to-file rule as implicating subject matter jurisdiction. Section II.B examines the D.C. and Second Circuit opinions, which split from the other circuits and held that the rule did not implicate subject matter jurisdiction. Section II.C argues that this split among the circuits, as well as the relatively narrow scope of the D.C. and Second Circuit opinions, has created several open questions for FCA litigants.
A. Uniformly Jurisdictional: Circuit Court Opinions Pre-2015
Prior to 2015, the first-to-file rule was uniformly interpreted as implicating subject matter jurisdiction.
Of the six circuits to address this issue, several implicitly assumed that the rule affected subject matter jurisdiction.
Others announced that the rule was jurisdictional but did not provide detailed analysis of why this was so.
The First, Fifth, and Sixth Circuits, however, provided slightly more detailed analyses in United States ex rel. Wilson v. Bristol-Myers Squibb, Inc.,
United States ex rel. Branch Consultants v. Allstate Insurance Co.,
and Walburn v. Lockheed Martin Corp.,
respectively. In each of these cases, the district court had dismissed the relator’s complaints for lack of subject matter jurisdiction.
These courts recognized that the jurisdictional rule served to balance two competing policy goals: (1) providing sufficient incentives to encourage private parties to bring suits for the public good, and (2) preventing duplicative lawsuits that do little to serve the public interest because a previously filed claim already provided the government with sufficient notice of the alleged fraud.
Beyond citing these policy goals, the courts offered no more analysis to explain why the first-to-file rule divested the district court of jurisdiction to hear follow-on relator-filed FCA complaints.
As these cases show, those circuit courts that have treated the first-to-file rule as a jurisdictional bar have provided relatively little justification for that interpretation. Their analyses were simple and pragmatically focused on the policy goals behind the FCA’s qui tam provision; they were not grounded in specific theories of statutory interpretation or in constitutional inquiry.
While these courts may have clearly stated that the first-to-file rule implicated subject matter jurisdiction, their opinions also suggest that they were not called upon to specifically confront whether the first-to-file rule was jurisdictional or nonjurisdictional.
Nevertheless, the district courts in these circuits have continued to apply the rule in a jurisdictional manner.
While the Supreme Court did grant a petition for a writ of certiorari related to a first-to-file case in 2014,
the petition did not call for the Court to address whether the rule implicated subject matter jurisdiction.
Therefore, the Court declined to reach the issue.
B. Breaking from the Pack: The D.C. and Second Circuits’ Opinions
1. The D.C. Circuit Moves First: Heath II. — In 2015, the D.C. Circuit broke from the long-standing practice of treating the first-to-file rule as jurisdictional.
In Heath II, relator Todd Heath, an auditor of telecommunications bills, filed a claim under the FCA’s qui tam provision alleging that AT&T had fraudulently overbilled the Universal Service Fund (USF)
over more than a ten-year period.
In response, AT&T seized on the fact that this was not Heath’s first FCA qui tam suit.
In 2008, Heath had filed suit against Wisconsin Bell, a wholly owned AT&T subsidiary.
In that case, he alleged that Wisconsin Bell had charged certain qualifying customers more than others but nevertheless improperly submitted the reimbursements to the USF.
The U.S. District Court for the Eastern District of Wisconsin originally dismissed the Wisconsin Bell case.
However, the Seventh Circuit reversed the dismissal,
and the case, on remand, was still pending while Heath’s case against AT&T was being actively litigated.
AT&T moved to dismiss Heath’s complaint in the U.S. District Court for the District of Columbia.
The court granted the dismissal for want of subject matter jurisdiction,
holding that it was barred from considering the suit against AT&T under the FCA’s first-to-file rule.
The D.C. Circuit in United States ex rel. Shea v. Cellco Partnership, approximately one year before taking up Heath’s case, had affirmed a district court’s dismissal of an FCA case under Rule 12(b)(1) on first-to-file grounds.
In that case, however, the issue of whether the first-to-file rule was jurisdictional was not expressly before the court and was not necessary to resolve the controversy.
In Heath II, the D.C. Circuit confronted this question head on.
Given the significant impact that jurisdictional rules can have on a case, the D.C. Circuit understood the importance of providing clarity on this issue—especially in the face of “recurring confusion in the district courts.”
The D.C. Circuit first considered the text of the first-to-file rule itself. The rule reads, in relevant part, “[N]o person other than the Government may intervene or bring a related action based on the facts underlying the pending action.”
The court emphasized that the word “jurisdiction” was wholly absent from the rule’s text.
Instead, the court concluded that the rule spoke only to “who may bring a private action and when” while saying “nothing about the court’s ‘power’ to consider claims.”
Given this textual analysis, the court refused to read jurisdiction into a rule that did not specifically provide it.
The court also cited the structure of the FCA generally to bolster its conclusion that the first-to-file rule was nonjurisdictional.
The court identified other provisions within the FCA in which Congress had clearly articulated that it wanted particular procedural bars to “operate with jurisdictional force.”
These examples made clear, in the court’s judgment, that Congress was perfectly capable of expressly designating that the first-to-file rule should operate as a jurisdictional bar.
In other words, by not including the term “jurisdiction” in the first-to-file rule, Congress made a conscious choice to not implicate jurisdictional issues.
Therefore, the court concluded that reading the rule to operate as a jurisdictional bar would cut directly against both the statute’s text as well as Congress’s intent. Based on the combination of its textual analysis, structural analysis, and consideration of the procedural consequences of reading the rule as jurisdictional, the D.C. Circuit ultimately concluded that “[b]ecause nothing in the text or structure of the first-to-file rule suggests, let alone ‘clearly state[s],’ that the bar is jurisdictional . . . we hold that the first-to-file rule bears only on whether a qui tam plaintiff has properly stated a claim.”
A petition for writ of certiorari related to this case, which did not ask the Supreme Court to consider the rule’s impact on a court’s subject matter jurisdiction, was denied.
2. The Second Circuit Follows Suit: United States ex rel. Hayes v. Allstate Insurance Co. (Hayes II). — For approximately two years, the D.C. Circuit was the lone circuit on its side of this jurisdictional–nonjurisdictional debate. In Hayes II, however, the Second Circuit also adopted the D.C. Circuit’s nonjurisdictional view.
In Hayes, a relator filed suit, pursuant to the FCA’s qui tam provision, against Allstate as well as a number of other liability insurance companies for perceived violations of their obligations under the Medicare Secondary Payer Act.
Specifically, Hayes brought his claim under § 3729(a)(1)(G) and alleged that each of the defendants failed to make certain reimbursement payments to the federal government as part of “a nationwide scheme to defraud Medicare.”
The district court, adopting the recommendation of the magistrate judge assigned to the case, concluded that Hayes had filed his suit in bad faith and therefore dismissed the suit with prejudice as a Rule 11 sanction.
On appeal, several defendants argued that the case should have been dismissed on first-to-file grounds because a complaint filed one year before Hayes’s alleged the same general scheme.
Even though the district court had not addressed this argument below,
the Second Circuit felt an obligation to “satisfy itself not only of its own jurisdiction, but also [of] that of the lower courts in a cause under review.”
Ultimately, the Second Circuit agreed with the D.C. Circuit that the first-to-file rule was not jurisdictional.
Like the D.C. Circuit, the Second Circuit emphasized that the rule “does not speak in jurisdictional terms” in direct contrast to other provisions of the FCA.
The court especially stressed that “[w]here Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.”
The panel also invoked the Supreme Court’s clear statement jurisprudence to bolster its conclusion.
The court ultimately held that “a district court does not lack subject matter jurisdiction over an action that may be barred on the merits by the first-to-file rule.”
Following this decision, a petition for a writ of certiorari, this time specifically calling on the Supreme Court to determine whether the first-to-file rule is jurisdictional, was also denied.
C. Open Questions Surrounding This Debate Among the Circuits
The current disagreement among the circuits has created several yet unresolved questions that are important to both relators and defendants alike. These questions primarily fall into one of two categories: those that exist as a direct result of the split among the circuits, and those that are created by the D.C. and Second Circuits adopting a nonjurisdictional first-to-file rule without having occasion to fully decide how such a rule would operate in practice. This section identifies several of each of these effects and discusses them in further detail in subsections II.C.1 and II.C.2, respectively.
1. Open Questions Resulting Directly from the Circuit Split. — Depending on the circuit in which an FCA case is filed, defendants face substantially different hurdles to avail themselves of the first-to-file rule’s protections.
One such hurdle involves the burdens of pleading, production, and persuasion. If the rule implicates subject matter jurisdiction, the relator bears the burden of pleading on this issue.
While a relator could satisfy this, at least initially, by simply making “a short and plain statement of the grounds for the court’s jurisdiction,”
a defendant can challenge the facts supporting jurisdiction by filing a Rule 12(b)(1) motion to dismiss. If such a factual challenge is made, the relator would then bear the burdens of production and persuasion, by a preponderance of the evidence, to establish that her claim is either the first such claim filed or is sufficiently different from a previously filed claim so as not to be barred by the rule.
By contrast, under a nonjurisdictional first-to-file rule, a defendant could be required to discover the underlying facts supporting invocation of the rule, plead those facts in her answer, and potentially even produce sufficient evidence to persuade the fact finder that the rule applies.
Another key difference between a jurisdictional and nonjurisdictional first-to-file rule pertains to the substantially different timelines on which a defendant must act. Under a jurisdictional first-to-file rule, there is no formal deadline for a defendant to act or forfeit the rule’s protection—a motion to dismiss for lack of subject matter jurisdiction may be made at any time during the litigation.
A nonjurisdictional rule, however, could necessitate much swifter action. Depending on how the rule is determined to operate, a defendant could be required to invoke the rule in as few as twenty days.
While defendants would presumably have notice of other similar claims that had previously been filed against them,
this time burden is not a trivial one. Even if defendants are not required to invoke the first-to-file rule at the pleading stage, they would still be strongly incentivized to invoke the rule at summary judgment.
The fact that some jurisdictions make it more difficult for defendants to avail themselves of the first-to-file rule’s protections could also incentivize forum shopping by relators.
Opportunistic relators would likely seek to file suit in the district courts in the D.C. and Second Circuits, which presumably provide relators greater protection from first-to-file challenges. While incentives to forum shop are not always frowned upon in the law,
allowing two different constructions of the first-to-file rule to encourage this kind of opportunistic behavior could lead to inequitable application of the same federal law in different federal courts. These forum-shopping incentives could prove quite strong since many large companies that contract with the federal government have expansive operations throughout the United States, conceivably making personal jurisdiction available in a wide array of fora.
2. Open Questions Surrounding a Partially Developed Nonjurisdictional First-to-File Rule. — Another important consideration are the several yet unresolved questions around the application of a nonjurisdictional first-to-file rule in the D.C. and Second Circuits, as well as in any circuits that might decide to join them. While nonjurisdictional rules plainly have different legal consequences than jurisdictional rules, even within the category of nonjurisdictional rules the legal consequences are not uniform.
A district court could, consistent with the D.C. and Second Circuits’ opinions in Heath II and Hayes II, conceivably construe the FCA’s first-to-file rule in a number of ways. While the D.C. and Second Circuits answered the critical jurisdictional question, they left several important questions unanswered, providing little guidance for lower courts.
For one, a district court could assign the burdens of pleading, production, and persuasion related to a nonjurisdictional first-to-file rule to either of the parties.
For example, the rule could conceivably operate as an affirmative defense, which would thus obligate FCA defendants to comply with Federal Rule of Civil Procedure 8(c)’s requirements or risk waiver.
As a general matter, the burden of proof of an affirmative defense, including each of its components, is generally borne by the defendant who seeks to invoke the defense.
Conversely, the rule could operate as a de facto element of a relator’s FCA claim. Defendants could then allege that another relator’s claim was filed first, and relators would bear the burden of showing that they have satisfied the rule’s requirements in order to recover.
Additionally, a district court could theoretically determine that some traditional attributes of nonjurisdictional rules should not apply to the first-to-file rule in particular. For example, even though the first-to-file rule is nonjurisdictional, it could nevertheless be construed as mandatory. A mandatory first-to-file rule would still possess the traditional “nonjurisdictional attributes of being waivable, forfeitable, and consentable,” but, similar to a jurisdictional rule, “if the rule is properly invoked by the party for whose benefit it lies, a court has no discretion to excuse noncompliance.”
On the other hand, the rule could operate as a fully nonjurisdictional rule subject to potential equitable exceptions.
Finally, the D.C. and Second Circuit opinions do not confront what preclusive effect, if any, should be given to FCA claims that are decided on first-to-file grounds. Dismissals for lack of subject matter jurisdiction under Rule 12(b)(1) specifically do not constitute judgments on the merits.
Dismissals for failure to state a claim under Rule 12(b)(6) or judgments against the relator under Rule 56, however, presumptively do.
In the FCA context, claim preclusion poses special problems because a suit by a prior relator with whom a later relator has virtually no relationship may nevertheless preclude the later relator’s suit.
Concerns with the preclusive effect of such a judgment are particularly alarming if the first-filed case was dismissed or decided at summary judgment with little to no consideration of the merits of the relator’s claim.
III. Adopting a Nonjurisdictional First-to-File Rule and Establishing Its Effective Administration
Faced with this landscape, the federal courts can either select (or continue to apply) the jurisdictional construction of the first-to-file rule employed by the First, Fourth, Fifth, Sixth, Ninth, and Tenth Circuits, or the nonjurisdictional construction employed by the D.C. and Second Circuits.
Section III.A argues that courts should hold that the first-to-file rule does not divest district courts of subject matter jurisdiction for several reasons. Section III.B identifies several unresolved questions related to a nonjurisdictional first-to-file rule and provides guidance as to how district courts can best address them.
A. Nonjurisdictional: The Better of Two Choices
This section identifies several reasons that favor adopting the D.C. and Second Circuits’ conception of the FCA’s first-to-file rule. Section III.A.1 builds on the Second and D.C. Circuits’ analyses and argues that textualist, structural, and intentionalist interpretative principles all support a nonjurisdictional first-to-file rule. Section III.A.2 considers the Supreme Court’s decision in Vermont Agency of Natural Resources v. United States ex rel. Stevens
and argues that the Court’s past characterization of the relator’s role in FCA qui tam litigation also supports adopting a nonjurisdictional first-to-file rule. Finally, section III.A.3 argues that even though a nonjurisdictional first-to-file rule would provide less protection from duplicative qui tam suits to FCA defendants than a jurisdictional rule would, such a rule—when considered within the overall statutory framework of the FCA—strikes an appropriate balance between the twin policy goals of the FCA’s qui tam provision.
1. The Text, Structure, and Purpose of the First-to-File Rule: Expanding on the D.C. and Second Circuits’ Analyses. — Understanding the first-to-file rule involves consideration of the statutory text, the legislative history surrounding the rule, and the purpose of both the rule and the FCA more generally. While textualist and intentionalist approaches to statutory interpretation might differ in some instances,
with regard to the first-to-file rule both interpretive methods ultimately lead to the conclusion that the rule is nonjurisdictional.
Regardless of one’s general theory of statutory interpretation, beginning the interpretive inquiry with the first-to-file rule’s text as well as the text of neighboring provisions is appropriate.
As both the D.C. and Second Circuits clearly identified, the text of the first-to-file rule “does not speak in jurisdictional terms or refer in any way to the jurisdiction of the district courts,” while nearby provisions of the FCA clearly do.
Both courts concluded that this fact, coupled with the Supreme Court’s clear statement jurisprudence, was enough to hold that the rule was nonjurisdictional.
Neither court, however, proceeded to consider other materials beyond the text and structure, such as Congress’s legislative purpose.
Even going beyond the text and structure of the FCA, an intentionalist would see little reason to disagree with the conclusion that the first-to-file rule does not implicate a district court’s subject matter jurisdiction. This is especially true because the legislative history surrounding the first-to-file rule is unilluminating. The purpose of the rule was to clarify that “only the [g]overnment may intervene in a qui tam action” and that “private enforcement under the civil False Claims Act is not meant to produce class actions or multiple separate suits based on identical facts and circumstances.”
The general purpose of the FCA is to combat fraud against the federal government, no matter who may commit it.
The FCA’s qui tam provision serves the dual purposes of incentivizing relators to file suits, thereby bolstering the government’s enforcement resources, and preventing duplicative follow-on litigation by relators that does little to serve the public interest.
These general goals do not provide much insight as to how to resolve whether the first-to-file rule divests a district court of subject matter jurisdiction. Indeed, either construction of the rule would arguably further each of these aforementioned purposes. In short, the purpose of the first-to-file rule individually, as well as the purposes of the FCA’s qui tam provision and even the FCA generally, provide little reason to diverge from the conclusion to which the rule’s text and the Act’s structure lead.
Supported by these principles of statutory interpretation, the benefits of holding that the first-to-file rule is nonjurisdictional also counsel toward reaching this conclusion. A nonjurisdictional construction of the rule would ensure that the rule’s protections are available to a defendant who properly raises the issue, while at the same time placing the obligation on the parties to properly put the issue before the court.
Eliminating the potentially costly obligation on the courts that comes along with a jurisdictional rule—that is, the duty to raise first-to-file issues sua sponte—would conserve judicial resources and promote finality by foreclosing the possibility of a first-to-file objection being raised at a late stage of litigation.
2. Vermont Agency of Natural Resources v. United States ex rel. Stevens: Also Supporting a Nonjurisdictional First-to-File Rule. — In addition to both the text and structure of the FCA, the Supreme Court’s past characterization of a relator’s role in an FCA case provides strong support in favor of finding that the first-to-file rule is nonjurisdictional. In Vermont Agency of Natural Resources v. United States ex rel. Stevens, the Supreme Court confronted whether a qui tam relator has standing to sue on behalf of the United States.
Before ultimately holding that relators satisfy the constitutional standing requirements, the Court discussed the implications of the FCA providing relators with the power to bring a civil action both on behalf of themselves and the United States.
Justice Scalia, writing for the majority, identified two different roles that relators occupy in FCA litigation: partial assignees and litigating agents.
Scalia explained that relators operate as partial assignees—because they have their own concrete interest in the litigation—with respect to the portion of the recovery that the relator retains for successfully bringing or prosecuting the FCA suit.
Conversely, relators operate as litigating agents with respect to the portion of any FCA recovery that the United States is entitled to retain.
Considering Scalia’s characterization of relators, the first-to-file rule can be understood as answering two primary questions: (1) who has the power to act as the government’s litigating agent, and (2) to whom has the government assigned a portion of its claim. By its operation, the rule limits the authority to act as the United States’ litigating agent to the first relator to file suit.
The assignment of a portion of the recovery is thereby also limited to the relator who has the authority to serve as a litigating agent on behalf of the United States.
Neither of these concepts appears to implicate subject matter jurisdiction.
These limitations speak only to who may bring a claim and who is entitled to a portion of any judgment—in other words, whether a particular relator has a valid claim for relief. They do not speak to the traditional subjects of jurisdictional rules.
Rather, the first-to-file rule, like other nonjurisdictional “merits rules,” simply defines “‘who is entitled to sue whom, for what, and for what remedy’” under the FCA.
In this way, the first-to-file rule limits the relator’s power, not the court’s.
The Federal Rules of Civil Procedure reinforce the conclusion that the first-to-file rule’s limitation on who may serve as the United States’ litigating agent, and correspondingly who is entitled to a portion of any judgment, does not implicate subject matter jurisdiction. While all parties are required to plead “a short and plain statement of the grounds for the court’s jurisdiction,”
the Federal Rules generally do not require a party to allege in its pleadings that it has the “authority to sue or be sued in a representative capacity.”
Further, while parties are required to allege in their pleadings a “claim showing that [they are] entitled to relief,” this requirement is distinct from the jurisdictional pleading requirement.
Based on the structure of the pleading rules, the Advisory Committee seems to have contemplated that a party’s authority to litigate is distinct from the court’s jurisdiction.
3. A Nonjurisdictional First-to-File Rule and Balancing the Twin Policy Goals of the FCA’s Qui Tam Provision. — The FCA’s qui tam provision seeks to strike an appropriate balance between two competing policy goals: encouraging private citizens to file suits and preventing duplicative litigation.
In deciding whether to treat the first-to-file rule as nonjurisdictional, courts should consider the effects that such a rule would have on this balancing.
Even though construing the first-to-file rule as nonjurisdictional is both preferable as a matter of statutory interpretation and most consistent with the Supreme Court’s past pronouncements about the proper role of relators in FCA litigation, questions remain about whether such a rule will afford sufficient protection to defendants or succeed in deterring frivolous litigation.
Even those who favor a nonjurisdictional first-to-file rule would likely concede that a jurisdictional construction would provide the most protection against duplicative suits.
However, while a nonjurisdictional rule could make it more difficult for defendants to avail themselves of the first-to-file rule, sufficient protections still exist. A nonjurisdictional first-to-file rule would not, in any way, impede defendants from moving to dismiss for failure to state a claim under Rule 12(b)(6), and it is far from a formality for a relator to clear this hurdle given the Supreme Court’s Rule 12(b)(6) jurisprudence.
Even if a relator with a less-than-meritorious claim survives a motion to dismiss, summary judgment still imposes a significant barrier to recovery.
Because § 3730(b)(3) of the FCA requires that complaints be served on defendants pursuant to Rule 4 after they have been unsealed, FCA defendants would presumably possess the requisite facts to support such a motion.
Therefore, construing the first-to-file rule as nonjurisdictional strikes an appropriate balance between allowing defendants to dispose of frivolous, unmeritorious claims before trial while also serving the FCA’s general truth-finding function.
The government’s right to intervene in any case filed under the FCA also serves a critical role in balancing these two competing goals. Because the government must be served with not only the complaint but also a written record disclosing all the material evidence,
the government occupies valuable territory in the middle of the relator–defendant relationship. It has at least sixty days before it must make the critical decision of whether to intervene,
and in making this decision it can consider not only the potential merits of the specific case at bar but also whether the case alleges conduct that is materially the same as what has been alleged in other previously filed cases.
Due to the FCA’s service requirement, as well as the government’s extensive experience litigating FCA cases, the government is in a unique position to make a reasoned determination, even if resource constraints may prevent it from being able to intervene in all FCA qui tam cases.
And whether a matter of causation or simply correlation, it is clear that government intervention bears a strong relationship with outcomes for FCA litigants.
B. A Nonjurisdictional First-to-File Rule Applied: Providing Guidance to the Lower Courts
While a nonjurisdictional first-to-file rule may be preferable for each of the foregoing reasons, adopting such a rule does not resolve, and could actually create, several ambiguities surrounding its application. This section considers several of these open questions and proposes solutions to help guide district courts as to how best to operationalize a nonjurisdictional first-to-file rule. Section III.B.1 considers whether the burdens of pleading, production, and persuasion to invoke the rule should rest with the relator or the defendant. Section III.B.2 examines whether the rule should be subject to equitable exceptions or should be construed as mandatory.
Section III.B.3 addresses concerns related to the claim-preclusive effect to give decisions made on first-to-file grounds.
1. The Burdens of Pleading, Production, and Persuasion. — The FCA’s text and legislative history provide little help in determining whether the relator or the defendant should bear the burdens of pleading, production, and persuasion related to the first-to-file rule.
However, based on the rule’s substance and the facts that would be needed to establish that it applies, courts would be wise to hold that the rule operates as an affirmative defense. Doing so would assign each of the aforementioned burdens to the defendant.
While the first-to-file rule is not specifically enumerated in Rule 8(c), the way the rule operates arguably falls within 8(c)’s catchall statement that “a party must affirmatively state any avoidance or affirmative defense.”
While Rule 8(c) does not provide much guidance to determine what falls within the ambit of its catchall statement, the first-to-file rule has generally been found to include two types of defenses: (1) those admitting the allegations in the complaint for the sake of argument but suggesting another reason why the plaintiff is not entitled to recover, and (2) those containing allegations outside of the plaintiff’s prima facie case.
The first-to-file rule arguably could fit either definition.
In determining whether a particular defense must satisfy Rule 8(c)’s requirements, Professors Charles Alan Wright and Arthur R. Miller argue that courts must often consider “policy, fairness, and in some cases probability.”
In the case of the first-to-file rule, each of these considerations favors construing the rule as an affirmative defense. As a matter of policy, requiring the defendant to plead a first-to-file defense is appropriate because a defendant’s reliance on the first-to-file rule says nothing about the wrongfulness of their conduct and instead relies on facts outside of those the plaintiff is likely to plead. Indeed, invoking the first-to-file rule would not “controvert the [relator’s] proof” of wrongdoing at all.
Fairness also supports requiring defendants to affirmatively plead the defense because defendants are in a much better position than relators to identify duplicative suits.
Further, the fact that first-to-file issues are not part of the typical elements required to establish liability under the FCA counsels in favor of requiring the party relying on this unusual occurrence to “plead it affirmatively so that the usual assumptions may be indulged in as a matter of course wherever there is no such claim.”
Construing the rule as an affirmative defense would impose a stiff burden on defendants to plead the defense in their responsive pleadings twenty days after the complaint is served on them.
However, while this would give defendants a short window in which to invoke the rule’s protections, defendants are routinely able to raise affirmative defenses of claim preclusion within the same time window.
Defendants would theoretically have notice of similar claims that have been filed against them, and they face similar incentives to seek out and identify filed claims as they do to identify past judgments for the purposes of claim preclusion.
Consequently, requiring this of defendants would not impose too substantial a burden on them.
2. Mandatory or Subject to Equitable Exception? — Another important consideration for a nonjurisdictional first-to-file rule is whether it should be mandatory or potentially subject to equitable exceptions. The text of the FCA’s first-to-file rule supports adopting the more rigid mandatory construction of the rule, as do the policy concerns behind the rule’s adoption. Construing the rule in this manner strikes an appropriate balance between the flexibility provided by a nonjurisdictional rule and the rigidity of a jurisdictional one.
The rule’s text evinces Congress’s intent to limit the discretion of the district courts to permit such cases to go forward.
Allowing equitable exceptions would do little to further the qui tam provision’s information-sharing and deterrence functions.
A duplicative suit, even if meritorious and brought in good faith, would not provide the government with new information critical to uncovering the extent of the fraud or prosecuting the case.
If it did provide important new information, the first-to-file rule would not apply.
Permitting a later-filed case to go forward might even overincentivize relators to bring qui tam actions; the fact that a different suit was filed first demonstrates that sufficient incentives already exist to spur plaintiffs to action. Rather, permitting such cases to go forward would simply punish defendants twice for the same conduct. If Congress had intended to create exceptions to the first-to-file rule, it could have provided for them within the FCA’s framework.
Holding that the first-to-file rule is not subject to equitable exceptions is not likely to destroy the effectiveness of the FCA. After all, several circuits have already recognized that the rule is not subject to exception,
albeit for the wrong reasons,
and the FCA’s utility has not been severely undermined.
While there is some historical tradition of reading certain nonjurisdictional rules to accommodate equitable exceptions even if the rule’s text does not explicitly provide for them,
it does not necessarily follow that such exceptions should be assumed to apply to all nonjurisdictional procedural rules. “If one assumes that Congress generally means its statutory directives to be just as rule-like as they seem on the surface,” then for certain especially rule-like procedural bars—like the first-to-file rule—reading ad hoc exceptions into the rule could be construed as disparaging a duly made legislative decision.
Additionally, while there is potential for harsh consequences in specific cases, the inflexibility of a mandatory construction of the first-to-file rule has its own benefits.
Such an interpretation would promote compliance with the rule’s terms and strengthen a relator’s incentives to file suit quickly, thus providing the government with critical information in a timely fashion.
Mandatory rules also constrain judicial discretion, which would increase uniformity and fairness across FCA cases.
Finally, refusing to permit equitable exceptions would allow for conservation of judicial resources by avoiding any need to litigate these issues.
One situation in which an equitable exception could theoretically be warranted, however, is when a similar claim to the later-filed suit was filed first but that complaint remained under seal at the time the defendant’s responsive pleading was required in the later-filed suit.
A strict application of the first-to-file rule in this case could lead to a defendant effectively being forced to waive the rule’s protections when it would have been impossible for them to know the facts necessary to assert the defense. Even in this situation, though, an equitable exception would not be necessary because the Federal Rules of Civil Procedure already provide a resolution. Rule 15, which provides parties with opportunities to amend their pleadings, is sufficient to address this concern because defendants can be afforded a chance to plead the defense once they become aware of the critical facts (that is, once they are served with the previously sealed complaint).
Courts should freely give defendants leave to amend in this situation, as justice would seem to require it.
3. The Preclusive Effect of Claims Decided Under a Nonjurisdictional First-to-File Rule. —Yet another challenge that courts might face related to a nonjurisdictional first-to-file rule pertains to what, if any, preclusive effect to give FCA claims that are decided against relators on first-to-file grounds. Because these decisions would presumably be made under Rule 12(b)(6) or Rule 56, they would ordinarily constitute judgments on the merits and could potentially operate to preclude later-filed cases—and perhaps even the first-filed case—alleging similar facts.
Claim preclusion generally requires three elements: “(1) an identity of the parties or their privies; (2) [an] identity of the cause of action; and (3) a final judgment on the merits.”
However, the extent to which decisions on first-to-file grounds should constitute judgments on the merits and whether subsequent suits by relators satisfy claim preclusion’s “same party” requirement are unclear and would often require fact-intensive inquiry.
Nevertheless, the applicability of claim preclusion related to complaints decided on first-to-file grounds rests on one major assumption: that district courts will dismiss such cases with prejudice. District courts can avoid the difficulties of assessing the potential claim-preclusive effect of dismissals under the first-to-file rule by simply stating that these dismissals are without prejudice. Dismissing without prejudice would be appropriate because it would bar the refiling of the second relator’s suit so long as the first-filed case remains pending without also preventing a potentially meritorious claim from being refiled should the first-filed claim fall flat. Dismissals without prejudice, by definition, do not operate as judgments on the merits and thus would not be entitled to any claim-preclusive effect.
This approach has already been adopted by at least one district court and has been approved by both the D.C. and Second Circuits.
Yet, while the first-to-file rule would not then bar the second relator from refiling her suit, her claim could still be subject to any potential claim-preclusive effects of the first-filed case.
The district courts would need to make difficult judgments about the preclusive effects of the
first-filed case. However, the resolution of the first-filed case would likely have reached the underlying claims’ merits. The district court would thus avoid having to consider what preclusive effect to give to a case that was decided with likely little to no consideration of the merits of the action.
And while this may result in meritorious second-filed cases never being able to proceed—because the first-filed case reached a merits judgment, thereby precluding later-filed claims—this is wholly consistent with the FCA’s vision. Congress, in strengthening the qui tam provisions of the FCA, intended to better harness the interests of private litigants for the benefit of the government, not to provide relators with a cause of action for harms that they have suffered individually.
The FCA’s first-to-file rule has provided interpretive challenges for courts in the past, but recently a new interpretive dilemma has arisen: Does the rule have the power to divest the district courts of subject matter jurisdiction? The circuits have split on this issue and have created several as-yet unresolved questions that are important to both relators and defendants alike. This Note suggests that the federal courts should adopt a nonjurisdictional first-to-file rule, as advocated by the D.C. and Second Circuits, for three reasons: (1) textualist, structural, and intentionalist principles of statutory interpretation each support a nonjurisdictional first-to-file rule; (2) a nonjurisdictional construction is most consistent with the Supreme Court’s past discussion of the role of relators in FCA qui tam cases; and (3) a nonjurisdictional first-to-file rule still provides sufficient protection to FCA defendants. While adopting a nonjurisdictional version of the first-to-file rule would create several uncertainties, this Note offers suggestions for how to resolve several of these open questions. Adopting this nonjurisdictional construction, as well as the proposed guidance for employing it, would allow the district courts to ensure uniformity in applying the rule while also remaining faithful to the policy goals that motivated Congress to amend the FCA in 1986.