In this qui tam action, the relator, plaintiff-appellee John A. Wood, contends that defendant-appellant Allergan, Inc. ("Allergan"), a pharmaceutical company, violated the False Claims Act (the "FCA"),
Wood, however, was not the first relator to sue Allergan under the FCA based on this alleged scheme. Consequently, the district court (Furman, J. ) found that Wood's complaint violated the FCA's "first-to-file bar," which prohibits a person from bringing a "related action" when an FCA suit is "pending."
In this interlocutory appeal, the issue presented -- a question of first impression for this Court -- is whether a violation of the FCA's first-to-file bar can be cured by the filing of an amended or supplemented complaint after the first-filed related action is no longer pending. We hold that a violation of the first-to-file bar cannot be remedied by amending or supplementing the complaint. Accordingly, we reverse and remand with instructions for the district court to dismiss the Third Amended Complaint -- the operative complaint -- without prejudice.
BACKGROUND
1. Statutory Background
The FCA impоses significant penalties on any person who "knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval" to the Government or any person who "knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim."
Rather than rely solely on federal enforcement of these provisions, Congress decided to deputize private individuals, encouraging them to come forward with claims on behalf of the Government in the form of qui tam suits. Qui tam provisiоns are not new to federal law, appearing as early as the first Congress. J. Randy Beck, The False Claims Act and the English Eradication of Qui Tam Legislation , 78 N.C. L. REV. 539, 554 n.54 (2000). In fact, the FCA and its qui tam provisions emerged "midway through the Civil War, in response to frauds perpetrated in connection with Union military procurement."
Under the FCA's qui tam provisions, "a private party, called the relator, challenges fraudulent claims against the [G]overnment on the [G]overnment's behalf, ultimately sharing in any recovery." United States ex rel. Shea v. Cellco P'ship ,
The FCA provides that a "copy of the complaint ... shall be served on the Government."
The FCA includes several other limiting provisions, in part a response to the possibility that the large profits available to qui tam relators created "the danger of parasitic exploitation of the public coffers." United Statesex rel. Springfield Terminal Ry. Co. v. Quinn ,
2. Factual Background
Allergan is a pharmaceutical company that develops, manufactures, and markets health care products, including products relevant to cataract surgeries. Wood, a former Allergan employee, alleges that in the course of his employment he became aware that, from at lеast 2003 through 2011, Allergan provided large quantities of free medical products to physicians to entice them to prescribe Allergan drugs, specifically to cataract patients, many of whom were beneficiaries of government-funded health programs (e.g., Medicaid and Medicare). Wood contends that certain products were given to physicians who promised to begin prescribing or to increase their orders of Allergan products. Wood claims, inter alia, that these acts caused Medicare and Medicaid providers to present false claims fоr payment for Allergan drugs to the Government in violation of the FCA.
Wood filed this action, on behalf of the Government, twenty-five states, and the District of Columbia, on July 26, 2010. At the time, two other actions alleging similar FCA violations were pending. First, in October 2008, a relator filed an action in the United States District Court for the District of New Jersey alleging that Allergan induced physicians to prescribe Allergan-brand cataract products by sending them, inter alia , free surgical kits. See United States ex rel. Lampkin v. Johnson & Johnson, Inc., No. 08-CV-5362 (D.N.J.). Second, in January 2010, a second relator filed a similar lawsuit against Allergan, in the United States District Court for the District of Columbia, concerning the distribution of frеe patient kits.
In March 2016, the Government declined to intervene in this action and the case was unsealed. On May 23, 2016, Wood filed the Third Amended Complaint. Allergan moved to dismiss the Third Amended Complaint on August 4, 2016.
As relevant to this appeal, Allergan argued that Wood violated the first-to-file bar and that therefore the action should be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(1) or alternatively 12(b)(6). See United States ex rel. Wood v. Allergan, Inc. ,
DISCUSSION
"We review de novo the denial of a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted." Drimal v. Tai ,
We consider first the threshold questiоn of whether the first-to-file bar applies to this case. We conclude that it does. We then turn to the principal question on appeal: Whether a violation of the FCA's first-to-file bar can be cured by an amended pleading. We conclude that it cannot.
1. Does the First-to-File Bar Apply?
Wood contends that the first-to-file bar does not apply to his claims and asks this Court to affirm on the alternate grounds that his claims were the first to adequately allege a claim for relief under the FCA. Wood makes two arguments: First, the fraud he alleges is broader and more detailed than the earlier-filed suits and thus the actiоns are not related; and, second, the earlier-filed complaints were deficiently pled and, accordingly, do not trigger the first-to-file bar.
Though Wood's allegations may be more detailed than those asserted in Lampkin, the two cases in essence alleged very similar kickback schemes. See
Next, Wood urges this Court to adopt the Sixth Circuit's approach in Walburn v. Lockheed Martin Corp., which held that an earlier-filed complaint that was "legally infirm under [Federal Rule of Civil Procedure] 9(b)" fails to bar a "later-filed action despite the fact that the overly-broad allegations of the [first-filed] complaint 'encompass' the specific allegations of fraud made" by the later-filed complaint.
Additionally, the Sixth Circuit's rule would require one court to evaluate the sufficiency of a complaint pending before another court, creating a precarious dynamic.
Accordingly, we agree with the district court that the first-to-file bar applied here. See Wood,
2. Can a Violation of the First-to-File Bar Be Cured?
Wood next contends that even if a "related action" was "pending" when he initially filed his complaint, once the related action was dismissed and no longer "pending," he was entitled to file an amended or supplemental complaint to cure the violation of the first-to-file bar. The issue may be significant because of the stаtute of limitations: If a violation of the first-to-file bar cannot be cured by the filing of an amended or supplemental complaint after the earlier related action is no longer pending, the statute of limitations may run on the later-filed case before the first-filed case has been disposed of. See
We are not the first court to be presented with this question: The First and D.C. Circuits have considered it and come to different conclusions. Compare Shea ,
When answering questions of statutory interpretation, we begin with the language of the statute. Saks v. Franklin Covey Co. ,
We begin with the language of the statute. Section 3730(b)(5) provides:
When 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.
By its express terms, then, no private individuаl "may ... bring a related action" when an FCA action is "pending." While the statute does not include a provision mandating dismissal when there is a violation, the clear import of the language is that dismissal is required. "As a general rule, if an action is barred by the terms of a statute, it must be dismissed." Hallstrom v. Tillamook Cty.,
Wood's position that a violation of the first-to-file bar can be cured by the filing of an amended pleading is inconsistent with the language of the statute. In essence,
In construing the term "bring," we "proceed under the assumption that the statutory language, unless otherwise defined, carries its plain meaning," Chen v. Major League Baseball Props., Inc.,
The statutory command is not ambiguous: a claim is barred by the first-to-file bar if at the time the lawsuit was brought a related action was pending. Accordingly, even after Wood filed the Third Amended Complaint, his action still violated the first-to-file bar because he instituted legal proceedings, by filing the initial complaint, while a related action was pending.
As Wood suggests, it is true that deficiencies in a complaint can often be cured by amendment. See Mathews v. Diaz ,
The statutory scheme as a whole, and the placement of Section 3730(b)(5) within the context of the FCA, confirms what the language plainly states. A rule that would permit a violation of the first-to-file bar to be cured by the filing оf an amended or supplemental pleading would pose serious administrative concerns and disrupt the orderly operation of the FCA. As the D.C. Circuit explained, for example, "if a relator brings suit while a related action is pending, her ability to proceed with her action upon the first-filed suit's completion could depend on the pure happenstance of whether the district court reached her case while the first-filed suit remained pending." Shea,
For instance, imagine a situation in which relators A, B, and C each file a qui tam action alleging the same fraud. Relator A reaches the courthouse first and his action therefore goes forward. Relator B reaches the courthouse second, but the district court determines his suit is blocked by the first-to-file bar and thus dismisses it per the ordinary course. Relator C files last, and shortly thereafter, the first-filed action is dismissed. But suppose relator C filed her suit so late in the game that the district court fails to dismiss her action before dismissing the first-filed suit. Under [Wood's] proposed rule, relator C would receive a windfall: she, unlike relator B, could simply amend her existing complaint and thereby secure herself pole position in the first-to-file queue. Relator C would jump past relator B for the opportunity to proceed with her suit (and to share in the government's reward).
Wood's proposed interpretation of the rule also has the potential to create problematic inefficiencies. For example, a district court may hold related cases indefinitely awaiting the potential dismissal of the first-filed action. See
Finally, although we need not rely on legislative history because the statutory language and scheme are clear, the legislative history also undercuts Wood's position. Allowing a first-to-file defect to be "cured" by amending or supplementing a complaint contravenes the FCA's purpose. Indeed, even if, as the district court noted, "the primary, if not sole, purpose of the first-to-file rule is to help the Government uncover and fight fraud," it is unlikely that Congress intended to do so in an ineffiсient manner prone to anomalous outcomes. Wood ,
Wood, recognizing these practical concerns, argues that the rule we endorse today would deter relators from coming forward with claims. That, however, is unlikely. Because many claims remain under seal for a long time, relators are aware that their claims may very well be barred by the time they get to the courthouse, and our answer to the question before us today does not significantly alter the incentive structure to which would-be relators have become accustomed. The FCA's scheme is difficult for relators, who may substantially invest in claims, only to find out that a recently unsealed complaint blocks their action, months if not years down the road. This, however, is how Congress designed the statutory scheme, and it is carefully calibrated to strike "the golden mean between adequate incentives for whistle-blowing insiders ... and discouragement of opportunistic plaintiffs." Springfield Terminal Ry. Co.,
Lastly, Wood asks us to consider whether equitable tolling should apply to his claim. It is very well possible that a future court would consider Wood's claim equitably tolled. It is not, however, a matter for this Court to consider at this time. Equitable tolling is not of concern in this case where the first-to-file bar, rather than the statute of limitations, is preventing Wood's claim from proceeding. See Shea ,
Accordingly, we conclude that a first-to-file violation cannot be cured by amending or supplementing a complaint, even when the first-filed case is no longer pending, and that actions brought in violation of that rule should be dismissed without prejudice.
CONCLUSION
For the reasons set forth above, we REVERSE and REMAND the case with instructions to dismiss the action without prejudice.
Notes
There are several different names used by the various relators that appear to refer to the same set of products. Wood uses the term "Customer Care Kit," while Lampkin uses "surgical kit" and Caryatid uses "patient kit." All refer to a similar set of post-cataract treatment products, namely sunglasses, dressings, and carrying cases.
In Lampkin , though the claims against Allergan were dismissed for failure tо serve, the claims against two other defendants, Alcon, Inc. and Alcon Laboratories, Inc., were dismissed for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6).
This Court has since confirmed that the first-to-file bar is not jurisdictional. United States ex rel. Hayes v. Allstate Ins. Co.,
As Lampkin was the first-filed action and one related action will do, we need not consider whether Caryatid is also a related action under Section 3730(b)(5).
The Lampkin complaint was not included in the appellate record. On considering a motion to dismiss under Federal Rule of Civil Proсedure 12(b)(6), however, we may consider documents "of which a court may take judicial notice." Tellabs, Inc. v. Makor Issues & Rights, Ltd.,
Section 3731(b) provides that:
A civil action under section 3730 may not be brought -- (1) more than 6 years after the date on which the violation of section 3729 is committed, or (2) more than 3 years after the date when facts material to the right of action are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances, but in no event more than 10 years after the date on which the violation is committed, whichever occurs last.
As we decide that Wood cannot remedy a first-to-file defect by amendment or supplementation, we need not address Wood's argument that his Third Amended Complaint relates back for statute of limitations purposes. We do note, however, that this suggestion betrays the internal inconsistency in Wood's position and indicates that, though he wishes to proceed on the amended complaint, he still understands his action to have been brought аt a time when it was in violation of the first-to-file bar.
When considering the purpose of the first-to-file bar. we note that the Government agrees with our reading of the statute and urges dismissal of the action -- perhaps a significant consideration, as the FCA is designed to promote the Government's interest. See Brief of the United States as Amicus Curiae. Though at oral argument before the district court the Government supported Wood, it has changed its stance on appeal, now arguing that "[t]he plain text of the statute compels" the conclusion that such actions be dismissed, as they will, even after amending or supplementing the complaint, have been brought while another related action was pending. Id. at 1.