The U.S. Court of Appeals for the Second Circuit recently joined a growing majority view by holding that a violation of the False Claims Act’s (FCA) “first-to-file bar cannot be remedied by amending or supplementing the complaint” but, instead, requires dismissal. United States ex rel. Wood v. Allergan, Inc., 899 F.3d 163, 166 (2d Cir. 2018).
The first-to-file bar is “one of several … provisions” in the FCA that help to avoid the “danger of parasitic exploitation of the public coffers.” Id. at 167. It provides that, “[w]hen a person brings an action under [the FCA], no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.” 31 U.S.C. § 3730(b)(5). This “ensures that only one relator shares in the Government’s recovery and encourages potential relators to file their claims promptly.” Wood, 899 F.3d at 167.
In July 2010, relator John Wood sued Allergan, Inc. in the Southern District of New York, alleging that the company had violated the FCA through a kickback scheme causing federal and state governments to make false claims for Allergan drugs. At that time, however, “two other actions alleging similar FCA violations were pending” but under seal—one in New Jersey (filed in October 2008) and another in the District of Columbia (filed in January 2010). Id. Like Wood, those cases “allege[d] a scheme where Allergan provided free cataract surgery recovery kits to induce increased use of Allergan products.” Id. at 169.
By 2016, Wood’s case was the only one of the three still pending. Both of the earlier-filed cases were dismissed in 2012 for failure to properly serve Allergan. Id. at 168. The government subsequently declined to intervene in Wood’s case, and Allergan moved to dismiss under the FCA’s first-to-file bar. Id. Because Wood had amended his complaint in March 2016, after the other two cases had been dismissed, Wood argued—and the district court agreed—that the first-to-file bar did not apply. Id. The Second Circuit reversed.
The court of appeals made two important points in holding that the first-to-file provision required dismissal of Wood’s complaint. First, the Second Circuit rejected the relator’s contention that the earlier-filed suits did not trigger the bar because they were deficiently pled and were not as detailed as Wood’s complaint. Id. at 170. According to the Second Circuit, it was enough that the first two cases “in essence alleged very similar kickback schemes.” The court of appeals found no support in the statute for creating the “precarious dynamic” of asking “one court to evaluate the sufficiency of a complaint pending before another court,” as Wood requested. Id.
Second, the court held that, if a “related action” is “pending” when the relator initially files the complaint, the relator is not “entitled to file an amended or supplemental complaint to cure the violation of the first-to-file bar” after the earlier actions are no longer “pending.” Id. Rather, the relator’s action is “incurably flawed from the moment he file[s] it.” Id. at 171. That result followed from the “clear” and unambiguous language of the FCA, from “the statutory scheme as a whole,” and from the legislative history. Id. at 170-74. It also had the added benefit of avoiding “problematic inefficiencies” and “anomalous results.” Id. at 173. The Second Circuit recognized the potential statute of limitations implications but rejected Wood’s belief that the rule “would deter relators from coming forward with claims.” Id. at 170, 174.
The Second Circuit’s decision is the latest in a line of first-to-file authority that has been gaining increased momentum. Indeed, although not every court of appeals yet agrees, id. at 170-71, the United States “changed its stance on appeal” in this case to argue that the plain text of the statute “compels” dismissal. Id. at 174, n.8. The government recently made the same point to the Supreme Court. See Br. for the U.S. as Amicus Curiae, United States ex rel. Carter v. Halliburton Co., No. 17-1060, 2018 WL 2357727 (May 22, 2018). First-to-file violations simply cannot be “cured” through amendment but require dismissal—full stop.