United States Ex Rel. Shea v. Cellco Partnership
2017 U.S. App. LEXIS 13346
| D.C. Cir. | 2017Background
- Relator Stephen M. Shea filed two qui tam False Claims Act suits against Verizon alleging systematic overbilling of the federal government for taxes and surcharges; the United States intervened in the first (Verizon I) and settled (Shea received ~$20M).
- While Verizon I was pending, Shea filed a second qui tam action (Verizon II) asserting similar fraud across ~20 additional government contracts; the government declined to intervene in Verizon II.
- The district court and a divided D.C. Circuit panel initially held Verizon II barred by the FCA’s first-to-file rule and dismissed it with prejudice; the Supreme Court vacated and remanded after Kellogg Brown & Root v. Carter (holding a qui tam suit ceases to be “pending” once dismissed).
- On remand the district court dismissed Verizon II without prejudice under the first-to-file bar (concluding amendment could not cure filing the action while the first suit was pending) and denied Verizon’s motion to dismiss with prejudice under the public-disclosure bar and Rules 8/9(b).
- Shea appealed only the requirement to refile (arguing amendment should suffice); Verizon cross-appealed seeking dismissal with prejudice under the public-disclosure bar and for inadequate pleading.
- The D.C. Circuit affirmed: dismissal without prejudice under the first-to-file bar was proper; the public-disclosure bar and Rules 8/9(b) did not require dismissal with prejudice on the record before the court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a relator who filed a related qui tam action while a first action was pending may cure the first-to-file bar by amending the later-filed complaint after the first action ends | Shea: amendment to the existing complaint should permit continuation; dismissal and refiling is unnecessary and elevates form over substance | Verizon: statute forbids bringing a related action while another is pending; dismissal (without prejudice once first suit ends) is the proper remedy | Court: Dismissal was correct; an amended complaint cannot undo the fact the action was brought while a related suit was pending, so dismissal without prejudice (permit refiling) is appropriate |
| Whether dismissal should be with prejudice because allegations were publicly disclosed (public-disclosure bar) | Shea: his claims relied on nonpublic information (MCI document and former employee) and thus are not barred | Verizon: public contracts, guides, and media disclosure made allegations public and jurisdictionally barred under the pre-2010 statute | Court: Publicly available materials did not supply the nonpublic link (Y element); public-disclosure bar does not apply on this record |
| Whether complaint failed to meet Rules 8 and 9(b) so as to warrant dismissal with prejudice | Shea: complaint alleges mechanics of scheme and could be cured if deficiencies identified; leave to amend appropriate | Verizon: allegations lack particularity (who, what, when, which fees per contract) and plaintiff admitted lack of certainty as to contract specifics | Court: District court did not abuse discretion in refusing to dismiss with prejudice; amendment likely possible; Rule 12(d) prevents converting to summary judgment here |
| Whether courts should treat statutory defect (first-to-file) differently to avoid windfalls due to docket timing | Shea: dismiss/allow amendment would avoid statute of limitations issues and unfairness | Verizon: allowing amendment would create inequitable procedural advantages for later filers | Court: Requiring refiling preserves parity among relators and follows the statute’s terms and precedent |
Key Cases Cited
- Vermont Agency of Nat. Res. v. United States ex rel. Stevens, 529 U.S. 765 (relator need not allege personal injury to sue under FCA)
- Kellogg Brown & Root Servs., Inc. v. United States ex rel. Carter, 135 S. Ct. 1970 (a qui tam suit ceases to be "pending" once dismissed)
- State Farm Fire & Cas. Co. v. United States ex rel. Rigsby, 137 S. Ct. 436 (distinguishing seal requirement from FCA provisions that mandate dismissal, citing the first-to-file bar)
- United States ex rel. Springfield Terminal Ry. v. Quinn, 14 F.3d 645 (D.C. Cir.) (public-disclosure bar framework and X + Y formulation)
- Mathews v. Diaz, 426 U.S. 67 (supplementing pleadings can cure certain statutory conditions when equitable and the government has waived objection)
- Ciralsky v. CIA, 355 F.3d 661 (distinguishing dismissal of a complaint without prejudice from dismissal of an action/case)
- United States ex rel. Staples, Inc. v. 773 F.3d 83 (example where public disclosures triggered the public-disclosure bar)