923 F.3d 240
1st Cir.2019Background
- This case concerns competing qui tam relators (McGuire and Cunningham) asserting entitlement to a 15% relator's share from a $227 million government settlement with Millennium Health under the False Claims Act (FCA).
- Cunningham filed an earlier qui tam action (amended complaint Feb. 24, 2011) alleging Millennium's point-of-care urine test kit model led to excessive testing and confirmatory testing; his amended complaint did not mention "custom profiles" or free cups as kickbacks.
- McGuire filed a later qui tam complaint (Jan. 26, 2012) alleging two distinct schemes: (1) "custom profiles" or standing orders that caused routine, unnecessary confirmatory testing billed to federal programs; and (2) a kickback scheme where Millennium distributed free point-of-care cups to induce referrals for confirmatory testing.
- The United States intervened (2015) and sued based primarily on the theories McGuire alleged (standing orders/custom profiles and free cup kickbacks); Millennium settled for $227 million and the settlement reserved a 15% relator's share without designating which relator would receive it.
- The district court treated the FCA first-to-file bar as jurisdictional, considered extrinsic materials, concluded Cunningham was the first-to-file, and dismissed McGuire's crossclaim for lack of subject-matter jurisdiction. McGuire appealed.
Issues
| Issue | Plaintiff's Argument (McGuire) | Defendant's Argument (Cunningham) | Held |
|---|---|---|---|
| Whether the FCA first-to-file rule (§ 3730(b)(5)) is jurisdictional | First-to-file is nonjurisdictional; court should decide on the merits | First-to-file is jurisdictional and permits jurisdictional dismissal | The rule is nonjurisdictional; prior panel precedent to the contrary is overruled in this respect |
| Whether the court may consider only the pleadings (not extrinsic evidence) when deciding first-to-file | First-to-file should be assessed by comparing the four corners of the complaints | Court may look beyond complaints if treating as a jurisdictional factual challenge | First-to-file analysis is a merits (Rule 12(b)(6)) inquiry limited to the pleadings and judicially noticeable materials |
| Whether Cunningham's amended complaint contained the "essential facts" of the fraud the government pursued (bar McGuire) | McGuire argues Cunningham did not plead the essential elements of the custom-profile or free-cup kickback schemes | Cunningham argues his earlier complaint gave sufficient notice of the same frauds | Held for McGuire: Cunningham's complaint lacked essential elements (no custom profiles, no free-cup kickback allegation), so it did not bar McGuire |
| Whether McGuire is entitled to a relator's share under § 3730(d)(1) | McGuire claims he was the first to bring the claims the government settled and therefore is entitled to the relator's share | Cunningham claims he was first-to-file and thus entitled | Court holds McGuire was the first-to-file relator as to the core schemes the government pursued, so he has stated a claim to the relator's share and the case is remanded for further proceedings |
Key Cases Cited
- Arbaugh v. Y & H Corp., 546 U.S. 500 (courts must use a clear-statement rule to treat statutory limits as jurisdictional)
- Sebelius v. Auburn Regional Medical Center, 568 U.S. 145 (explaining consequences of labeling a rule jurisdictional)
- Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, 135 S. Ct. 1970 (Supreme Court qui tam decision affecting first-to-file analysis)
- United States ex rel. Ven-A-Care of the Fla. Keys, Inc. v. Baxter Healthcare Corp., 772 F.3d 932 (1st Cir. 2014) ("essential facts" framework for first-to-file assessment)
- United States ex rel. Estate of Cunningham v. Millennium Labs. of California, Inc., 713 F.3d 662 (1st Cir. 2013) (prior proceedings in Cunningham's suit)
- United States ex rel. Duxbury v. Ortho Biotech Prods., L.P., 579 F.3d 13 (1st Cir. 2009) (earlier panel language treating first-to-file as a jurisdictional bar)
- Rille v. PricewaterhouseCoopers LLP, 803 F.3d 368 (8th Cir. 2015) (discussing overlap requirement between relator allegations and settlement)
- United States ex rel. Heath v. AT & T, Inc., 791 F.3d 112 (D.C. Cir. 2015) (holding first-to-file nonjurisdictional post-Carter)
- United States ex rel. Hayes v. Allstate Ins. Co., 853 F.3d 80 (2d Cir. 2017) (following Heath; first-to-file nonjurisdictional)