A federal circuit court decision issued last week recognizes important limitations on a relator's ability to bring multiple lawsuits against the same contractor or alleging related fraud. The U.S. Court of Appeals for the District of Columbia Circuit held that allowing multiple suits by the same relator would violate the intent behind the "first-to-file" rule: preventing duplicative claims.
The relator, telecommunications consultant Stephen M. Shea, brought an initial lawsuit in 2007 claiming that Verizon had overbilled the GSA on two government contracts by including federal, state and local taxes in its bills. After the federal government intervened in the suit, Verizon paid $93.5 million to settle these claims. Shea's share of the recovery was $19 million.
Shea then filed a second lawsuit alleging overbilling by Verizon on 20 other contracts with other federal agencies. The government did not intervene in the second suit. U.S. District Judge Gladys Kessler dismissed the second suit in November 2013, ruling that it was barred by the first-to-file rule because it was too similar to the first suit.
On appeal, Shea had argued that the bar should not apply because (1) the original case was resolved; (2) the second case was different enough that it was not related; and (3) the bar only applies to new relators. The rule proposed by Shea would arguably have given relators a nearly unfettered right to bring additional FCA suits after the successful resolution of the initial one, defeating the purpose of the first-to-file rule.
The D.C. Circuit rejected each of these arguments. Significantly, the Court found that because the second suit argued the same fraudulent scheme, the original complaint served its purpose of putting the government on notice to investigate the allegations of fraud in the second suit. The Court also found that the plain language stating "no person other than the Government" may bring a related claim includes the original relator.
This decision recognizes important restrictions on FCA relators. It incentivizes them to disclose to the government and include in their original complaints all of the alleged fraud about which they have knowledge. If the Court had adopted Shea's reading of the first-to-file rule, relators would be allowed to file an initial "test case" and, if successful, file subsequent lawsuits asserting claims that could have been raised in the initial suit. This is precisely the type of conduct the first-to-file rule was intended to prevent.
The copy of the full opinion can be found here.
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