Case Information

United States, ex rel. v. Allstate Ins. Co

UNITED STATES COURT OF APPEALS F OR THE S ECOND C IRCUIT _______________

August Term, (Argued: March Decided: April 4, 2017) Docket No.

_______________ U NITED S TATES OF A MERICA , EX REL J. M ICHAEL H AYES , Plaintiff Appellant,

– – A LLSTATE I NSURANCE C OMPANY , D AIMLER C HRYSLER I NSURANCE C OMPANY , E RIE I NSURANCE C OMPANY OF N EW Y ORK , E RIE I NSURANCE E XCHANGE , I NC ., E RIE

I NDEMNITY C OMPANY , F ARMERS I NSURANCE E XCHANGE , T RUCK I NSURANCE E XCHANGE , F IRE I NSURANCE E XCHANGE , F OREMOST I NSURANCE G ROUP , G EICO , I NSURANCE , GMAC I NSURANCE , K EMPER I NDEPENDENCE I NSURANCE C OMPANY ,

L IBERTY M UTUAL I NSURANCE C OMPANY , L IBERTY M UTUAL G ROUP , L IBERTY M UTUAL H OLDING C OMPANY , I NC M ETROPOLITAN G ROUP P ROPERTY AND C ASUALTY I NSURANCE C OMPANY , M ETROPOLITAN P ROPERTY AND C ASUALTY

I NSURANCE C OMPANY , N ATIONWIDE G ENERAL I NSURANCE C OMPANY , N ATIONWIDE F INANCIAL S ERVICES I NCORPORATED , N ATIONWIDE M UTUAL I NSURANCE C OMPANY N EW Y ORK C ENTRAL M UTUAL F IRE I NSURANCE C OMPANY , P REFERRED M UTUAL I NSURANCE C OMPANY P ROGRESSIVE I NSURANCE C OMPANY

T HE P ROGRESSIVE C ORPORATION , I NC ., R EPUBLIC F RANKLIN I NSURANCE C OMPANY , U TICA M UTUAL I NSURANCE C OMPANY , G RAPHICS A RTS M UTUAL I NSURANCE C OMPANY , U TICA N ATIONAL I NSURANCE C OMPANY OF T EXAS , U TICA

N ATIONAL I NSURANCE C OMPANY OF O HIO , U TICA N ATIONAL A SSURANCE C OMPANY , U TICA L LOYD ’ S OF T EXAS , U TICA S PECIALTY R ISK I NSURANCE C OMPANY , F OUNDERS I NSURANCE C OMPANY , F OUNDERS I NSURANCE C OMPANY OF M ICHIGAN ,

U TICA N ATIONAL I NSURANCE G ROUP , S TATE F ARM M UTUAL A UTOMOBILE I NSURANCE C OMPANY , H ARTFORD F INANCIAL S ERVICES G ROUP , I NC ., T RAVELERS

I NSURANCE G ROUP H OLDING , I NC ., T RAVELERS P ROPERTY C ASUALTY C ORPORATION , T HE T RAVELERS C OMPANIES , I NC ., Z URICH N ORTH A MERICA , F EDEX

C ORPORATION , F EDEX E XPRESS , F EDEX G ROUND , F EDEX F REIGHT , F EDEX O FFICE ,

F EDEX C USTOM C RITICAL , F EDEX T RADE N ETWORKS , F EDEX S UPPLY C HAIN S OLUTIONS , F EDEX S ERVICES , J.B. H UNT T RANSPORT S ERVICES , I NCORPORATED ,

U H AUL I NTERNATIONAL , T HE E RIE I NSURANCE C OMPANY , Defendants Appellees ,

A LLSTATE C ORPORATION , C ASTLE P OINT N ATIONAL I NSURANCE C OMPANY , S PECIALTY U NDERWRITERS A LLIANCE , I NC ., T OWER G ROUP C OMPANIES , M AIDEN H OLDING LTD, K EMPER C ORPORATION , M EDICAL L IABILITY M UTUAL I NSURANCE

C OMPANY , N ATIONWIDE C ORPORATION , N EW Y ORK S TATE I NSURANCE R ECIPROCAL , T HE P RUDENTIAL I NSURANCE C OMPANY OF A MERICA , P RUDENTIAL F INANCIAL , I NC ., H EARTLAND E XPRESS , I NCORPORATED , N ATIONWIDE , F ARMERS

I NSURANCE G ROUP C OMPANIES , F ARMERS U NDERWRITERS A SSOCIATION , AIG, B ERKSHIRE H ATHAWAY I NC N ATIONWIDE M UTUAL I NSURANCE I NTERCOMPANY P OOL , N ATIONWIDE , Z URICH F INANCIAL S ERVICES AG, Z URICH I NSURANCE

G ROUP AG,

Defendants

_______________

B e f o r e:

K ATZMANN Chief Judge P OOLER L YNCH Circuit Judges *3 _______________

Relator J. Michael Hayes brought action under the False Claims Act (“FCA”), U.S.C. § et seq against numerous insurance and trucking companies. United States District Court for the Western District of New York (Skretny, J .) dismissed the with prejudice as Hayes sanction under Federal Rule of Civil Procedure On appeal, primarily challenges the imposition the sanction of dismissal. Several the defendants urge us affirm the district court’s judgment on alternative ground district lacked Hayes’s claims, which according these satisfy statute’s first file rule. We join D.C. Circuit holding FCA’s is jurisdictional. Accordingly, need consider defendants’ arguments on issue. For reasons stated herein and accompanying summary order discussing court’s imposition sanction dismissal, judgment AFFIRMED _______________

J. M ICHAEL H AYES (Peter M. Jasen, Buffalo, NY, on brief ), for Plaintiff Appellant

J OHN W. C AMPBELL Federal Express Corporation, Memphis, TN, for Defendants Appellees FedEx Corporation, Federal Express Corporation, FedEx Ground Package System Inc., FedEx Freight Corporation, FedEx Office and Print Services, Inc., FedEx Custom Critical, Inc., FedEx Trade Networks Inc., Supply Chain Systems, Inc., and FedEx Corporate Services, Inc.

D AVID L. Y OHAI (Lori L. Pines John P. Mastando III, brief ), Weil, Gotshal Manges LLP, New York, NY, Defendants ‐ Appellees Farmers Insurance Exchange, Truck Insurance Exchange, Fire Insurance Exchange, Foremost Property Casualty Insurance Company. *4 Bryce L. Friedman, Simpson Thatcher & Bartlett LLP, New York, NY; Deborah L. Stein, Simpson Thatcher & Bartlett LLP, Los Angeles, CA, for Defendants Appellees Travelers Insurance Group Holding, Inc., Travelers Property Casualty Corporation, and The Travelers Companies, Inc.

Jonathan M. Freiman, Wiggin and Dana LLP, New Haven, CT, for Defendant Appellee Hartford Financial Services Group, Inc. Sharon Angelino, Goldberg Segalla LLP, Buffalo, NY, for Defendants ‐ Appellees J.B. Hunt Transport Services Inc., Founders Insurance Company, Founders Insurance Company Michigan, Graphic Arts Mutual Insurance Company, Republic Franklin Insurance Company, Utica Mutual Insurance Company, Utica National Insurance Company Texas, Utica National Insurance Company Ohio, Utica National Assurance Company, Utica Lloyd’s Texas, Utica Specialty Risk Insurance Company, and Utica National Insurance Group.

Heath J. Szymczak, Bond, Schoeneck King, PLLC, Buffalo, NY, for Defendants Appellees Erie Insurance Company New York, Erie Insurance Exchange, Inc., Erie Indemnity Company, and The Erie Insurance Company.

Steven M. Levy and Alan S. Gilbert, Dentons US LLP, Chicago IL; Sean C. Cenawood, Dentons US LLP, New York, NY; Sharon Angelino, Goldberg Segalla LLP, Buffalo, NY, Defendants ‐ Appellees Allstate Insurance Company, Allstate Indemnity Company, Kemper Independence Insurance Company, Metropolitan Group Property and Casualty Insurance Company, Metropolitan Property Casualty Insurance Company; Defendants Kemper Corporation Allstate Corporation.

Suzanne O. Galbato, Bond, Schoeneck & King, PLLC, Syracuse, NY, for Defendant Appellee Preferred Mutual Insurance Company. Terrance M. Connors, Connors LLP, Buffalo, NY; Michael K. Loucks, Skadden, Arps, Slate, Meagher & Flom LLP, Boston, MA, for Defendants Appellees Progressive Insurance Company and Progressive Corporation, Inc.

Douglas W. Baruch Anayansi Rodriquez Carbo, Fried, Frank, Harris, Shriver & Jacobson LLP, Washington, D.C.; Dan David Kohane, Hurwitz & Fine, P.C., Buffalo, NY, for Defendant ‐ Appellee State Farm Mutual Automobile Insurance Company. Michael J. Willett, Gibson, McAskill & Crosby, LLP, Buffalo, NY, for Defendant Appellee Zurich North America.

Stephen Sozio, Jones Day, Cleveland, OH; Matthew Corcoran, Jones Day, Columbus, OH; Mark C. Davis, Lippes Mathias Wexler Friedman LLP, Buffalo, NY, for Defendants Appellees Nationwide General Insurance Company, Nationwide Financial Services Incorporated, Nationwide Mutual Insurance Company.

Eric Dranoff, Saretsky Katz Dranoff, LLP, New York, NY, for Defendant Appellee New York Central Mutual Fire Insurance Company.

Susan L. Swatski, Hill Wallack LLP, Princeton, NJ, for Defendant ‐ Appellee CorePointe Insurance Company f/k/a Daimler Chrysler Insurance Company.

Barry I. Levy, Cheryl F. Korman, Brian L. Bank, Rivkin Radler LLP, Uniondale, NY, Defendant Appellee Geico, Insurance. *6 Kevin J. Fee and Amy C. Gross, Duane Morris LLP, New York, NY: Dennis R. McCoy, Barclay Damon, LLP, Buffalo, NY, for Defendants Appellees Liberty Mutual Insurance Company, Liberty Mutual Group, and Liberty Mutual Holding Company, Inc.

Kevin M. Hogan, Phillips Lytle LLP, Buffalo, NY, Defendant ‐ Appellee U Haul International.

_______________

P ER C URIAM :

Relator J. Michael Hayes appeals from district court’s dismissal with prejudice of his False Claims Act (“FCA”) action sanction pursuant Federal Rule of Civil Procedure On appeal, argues misstatements his complaint were made in bad faith did not justify sanction dismissal. He further argues he should have been granted leave amend his complaint. Although all contend court’s imposition sanction dismissal denial leave amend were proper, several defendants, those affiliated with Federal Express Corporation (hereinafter “non FedEx defendants”), additionally argue lacked consequently err dismissing it. We address opinion only non defendants’ *7 challenge district court’s jurisdiction, and discuss Hayes’s argument that sanction dismissal was wrongfully imposed in a separate summary order filed simultaneously with this opinion.

B ACKGROUND In action, see U.S.C. § et seq relator Hayes alleged that defendant companies, which are primarily, but exclusively, liability insurance companies, have been systematically intentionally noncompliant with their obligations under Medicare Secondary Payer Act reimburse Medicare certain payments made behalf Medicare beneficiaries. As discussed more fully in accompanying summary order, Hayes alleged he had personal knowledge each defendant’s participation a nationwide scheme defraud Medicare. assigned magistrate judge district court ultimately concluded Hayes had no such knowledge had acted bad faith falsely purporting have it. result, dismissed with prejudice as Hayes as sanction under Federal Rule Civil Procedure appeals from decision. Although all contend correctly dismissed Hayes’s complaint sanction,

non FedEx defendants also advance an alternative basis affirming district court: district court lacked subject matter Hayes’s because did not satisfy FCA’s to rule. non FedEx raised argument district court (although they had not raised it before magistrate judge), but court address it.

D ISCUSSION Because “every federal appellate has special obligation ‘satisfy itself only its own jurisdiction, but also [of] lower courts cause under review,” will consider non defendants’ contention lacked jurisdiction. Arnold Lucks F.3d (2d Cir. 2004) (internal quotation marks omitted).

I. relevant Hayes’s claim, FCA imposes liability any person who “knowingly conceals or knowingly improperly avoids or decreases an obligation pay or transmit money or property Government.” U.S.C. § 3729(a)(1)(G). “The may be enforced just through litigation brought by Government itself, but also through civil actions are filed private parties, called relators, ‘in name Government.’” Kellogg Brown *9 & Root Servs., Inc. v. U.S., ex rel. Carter 135 S. Ct. 1970, 1973 (2015) (quoting 31 U.S.C. § 3730(b)(1)). There are, however, certain limitations on FCA qui tam actions. Under so ‐ called “first ‐ ‐ file rule” at issue here, “[w]hen a person brings an action under [the FCA], no person other than Government may . . bring related action based facts underlying pending action.” U.S.C. § 3730(b)(5). That rule prevents an individual from bringing an action if another action invoking same facts already pending at time individual files suit. See Kellogg Brown Root S. Ct. at 1974,

The non FedEx argue Hayes satisfy because when he filed his complaint in October 2012, “related” action was already pending, coincidentally same district. According non defendants, alleged same general scheme: many same insurance companies had systematically failed reimburse Medicare required under Medicare Secondary Payer Act. See Complaint, U.S. ex rel. Takemoto The Hartford Fin. Servs. Grp., Inc. F. Supp. 3d (W.D.N.Y. 2016) (No. cv 613). Takemoto complaint was filed July 2011, year before filed his purportedly related complaint. See id Although Takemoto case has since been dismissed, see F. Supp. 3d at aff’d sub nom. U.S. ex rel. *10 Takemoto v. Nationwide Mut. Ins. Co. No. ‐ 365, WL 214572, at *3 (2d Cir. Jan. 20, 2017), non ‐ FedEx defendants contend that existence Takemoto case at time filed his complaint deprived subject matter jurisdiction over Hayes’s from outset.

If non are correct first to ‐ file rule is jurisdictional, their arguments on point are merely an available alternative on which we may affirm court; instead, they raise an issue resolve before turning merits Hayes’s appeal. See Ruhrgas AG v. Marathon Oil Co. U.S. 574, (1999) (“Article III generally requires federal satisfy itself its before it considers merits case.”). result, consider below whether first file rule is jurisdictional.

II. Several circuits have stated or assumed jurisdictional. See, e.g., U.S. ex rel. Carter Halliburton Co F.3d (4th Cir. 2013), aff’d part, rev’d part other grounds sub nom. Kellogg Brown Root *11 135 S. Ct. at 1979 (2015) ^[1] ; U.S. ex rel. Branch Consultants v. Allstate Ins. Co ., 560 F.3d 371, 376–77 (5th Cir. 2009); Walburn v. Lockheed Martin Corp ., 431 F.3d 966, 970 (6th Cir. 2005). The D.C. Circuit, however, has reached the opposite conclusion. See U.S. ex rel. Heath v. AT&T, Inc ., 791 F.3d 112, 120–21 (D.C. Cir. 2015). For the reasons articulated below, we join the D.C. Circuit holding that the first ‐ to ‐ file rule is jurisdictional instead bears on merits whether a plaintiff has stated a claim. Supreme Court has warned against “profligate use term

‘jurisdiction.’” Sebelius v. Auburn Reg ʹ l Med. Ctr ., 133 S. Ct. 817, 824 (2013). “To ward off” such use, Supreme Court has “adopted a ‘readily administrable bright line’ determining whether classify statutory limitation as jurisdictional.” Id . (quoting Arbaugh v. Y&H Corp. U.S. 500, (2006)). Courts are “inquire whether Congress has ‘clearly stated’ that rule *12 jurisdictional; absent such a clear statement, . . . ‘courts should treat restriction nonjurisdictional in character.’” Id . (brackets omitted) (quoting Arbaugh , 546 U.S. at 515–16). Under this test, a “provision ‘does speak in jurisdictional terms or refer in any way to jurisdiction of district courts’” will be considered jurisdictional. Arbaugh , 546 U.S. at 515 (quoting Zipes Trans World Airlines, Inc U.S. 385, 394 (1982)). provides “no person other than Government”

may bring an FCA claim is “related” a claim already “pending.” U.S.C. § 3730(b)(5); see also Kellogg Brown Root S. Ct. at D.C. Circuit observed, language “speaks only who may bring a private action when,” Heath F.3d at but “does speak in jurisdictional terms or refer in any way jurisdiction of courts,” id. (quoting Arbaugh U.S. at 515). This sharp contrast other provisions of do explicitly invoke jurisdiction courts. See, e.g., U.S.C. § 3730(e)(1) (“No shall have jurisdiction over an action brought former or present member armed forces . . . against member armed forces arising out such person’s service armed forces.”); id . § 3730(e)(2)(A) (“No shall have an brought . against Member *13 Congress, a member the judiciary, or a senior executive branch official if the action is based on evidence or information known to the Government when the action was brought.”). “Where Congress includes particular language in one section a statute but omits it in another section same Act, it is generally presumed that Congress acts intentionally purposely in disparate inclusion or exclusion.” Kucana Holder U.S. (2010) (brackets omitted). Because FCA “clearly state[s]” that other limitations on qui tam actions are jurisdictional, but does “clearly state[]” first ‐ ‐ file rule is jurisdictional, we must treat first ‐ file rule “as nonjurisdictional in character.” Auburn Reg ʹ l Med. Ctr S. Ct. at (quoting Arbaugh U.S. at 515–16). a result, we join D.C. Circuit in holding FCA’s first file rule “bears only on whether plaintiff has properly stated claim.” Heath F.3d at Accordingly, does lack an may be barred merits first file rule.

C ONCLUSION For foregoing reasons, we join D.C. Circuit holding ‐ jurisdictional. Because conclude summary *14 order accompanying opinion did err imposing sanction dismissal, need consider non defendants’ argument Hayes’s satisfy rule. For these reasons, judgment AFFIRMED

[1] On review, Supreme Court address Fourth Circuit’s observation first file rule was jurisdictional but focused instead whether first file rule was satisfied particular case. See S. Ct. at We agree with D.C. Circuit’s conclusion Supreme Court’s discussion was “decidedly nonjurisdictional . raising issue after it decided nonjurisdictional statute limitations issue.” U.S. ex rel. Heath AT T, Inc F.3d n.4 (D.C. Cir. 2015). result, do read Supreme Court’s decision implicitly affirming Fourth Circuit’s observation was jurisdictional.