The False Claims Act forbids “knowingly present[ing], or caus[ing] to be presented, a false or fraudulent claim for payment or approval” and “knowingly mak[ing], us[ing], or caus[ing] to be made or used, a false record or statement material to a false or fraudulent claim,” where the claim is submitted to the federal government for payment.[1] The elements of a False Claims Act claim are generally stated as follows: “(1) a false statement or fraudulent course of conduct, (2) made with the scienter, (3) that was material, causing (4) the government to pay out money or forfeit moneys due.”[2] False Claims Act defendants face treble damages—i.e., three times the amount of damages the government has sustained—plus civil penalties of up to $21,916 per false claim.[3] In 2018 alone, the government recovered more than $2.8 billion under the False Claims Act.[4]
[1] 31 U.S.C. § 3729(a)(1).
[2] United States ex rel. Campie v. Gilead Scis., Inc., 862 F.3d 890, 899 (9th Cir. 2017), cert. denied sub nom. Gilead Scis., Inc. v. U.S. ex rel. Campie, 139 S. Ct. 783 (2019).
[3] 31 U.S.C. § 3729(a); 28 CFR § 85.3(a)(9) (2017) (adjusting penalties for inflation).
[4] Justice Department Recovers Over $2.8 Billion from False Claims Act Cases in Fiscal Year 2018 (Dec. 21, 2018), https://www.justice.gov/opa/pr/justice-department-recovers-over-28-billion-false-claims-act-cases-fiscal-year-2018.
The False Claims Act attaches liability to a “claim for payment.”[1] Thus, evidence of an actual false claim is “the sine qua non of a False Claims Act violation.”[2] It is “sufficient,” however, “to allege particular details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims were actually submitted.”[3] And the False Claims Act can be violated indirectly; as long as a false statement was “integral to a causal chain leading to payment,” it does not matter that a third party filed the paper claim with the Government.[4]
False claims contemplated by the Act can take many forms: “Of seven types of actionable conduct listed in the FCA, only three require that the misconduct involve an actual demand for payment.[5] In the remaining categories, “the ‘false claim’ lies in the fraudulent use of a receipt, §§ 3729(a)(4)-(5), unauthorized purchase of government property, § 3729(a)(6), or use of a ‘false record or statement’ to avoid payment to the government, § 3729(a)(7).”[6] In any event, False Claims Act liability can only attach if the defendant “in some way, falsely assert[s] entitlement to obtain or retain government money or property.”[7]
[1] United States ex rel. Hopper v. Anton, 91 F.3d 1261, 1266 (9th Cir. 1996).
[2] United States ex rel. Aflatooni v. Kitsap Physicians Serv., 314 F.3d 995, 1002 (9th Cir. 2002).
[3] Ebeid ex rel. United States v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010).
[4] United States ex rel. Hendow v. Univ. of Phoenix, 461 F.3d 1166, 1174 (9th Cir. 2006).
[5] Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055–56 (9th Cir. 2011) (citing 31 U.S.C. §§ 3729(a)(1)-(3)).
[6] Id.
[7] Id.
A claim is false when “the claim for payment is itself literally false or fraudulent.”[1] “[F]alse” means “‘not true,’ ‘deceitful,’ or ‘tending to mislead.’”[2] In the “paradigmatic” overcharging case, a “claim is false because it ‘involves an incorrect description of goods or services provided or a request for reimbursement for goods or services never provided.’”[3] Thus, falsity arises when an invoice incorrectly describes the services provided, requests payment for goods that were never delivered, or seeks payment above a contracted rate.[4] In United States v. Bourseau,[5] for example, requests for reimbursement under Medicare were false because they sought reimbursement for interest that was never actually paid, bankruptcy legal fees that were falsely presented as related to patient care, additional space that was falsely presented as necessary for patient care, management services that were never provided, and rental expenses that never existed.
[1] U.S. ex rel. Hendow v. Univ. of Phoenix, 461 F.3d 1166, 1170 (9th Cir. 2006).
[2] Mikes v. Straus, 274 F.3d 687, 696 (2d Cir. 2001)).
[3] United States v. Sci. Applications Int'l Corp., 626 F.3d 1257, 1266 (D.C. Cir. 2010).
[4] See Hendow, 461 F.3d at 1170.
[5] 531 F.3d 1159, 1164-67 (9th Cir. 2008).
The typical False Claims Act suit alleges that a person or company submitted a bill to the government for work that was not fully performed, or not performed at all, resulting in an undeserved payment. There are also “reverse” false claims, which create liability where a defendant “conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government.”[1] The “obligation” covered by this requirement encompasses “an established duty, whether or not fixed, arising from an express or implied contractual, grantor-grantee, or licensor-licensee relationship, from a fee-based or similar relationship, from statute or regulation, or from the retention of any overpayment.”[2] The reverse false claims provision therefore targets obligations that are improperly avoided. “Such claims are ‘reverse’ false claims, because the financial obligation that is the subject of the fraud flows in the opposite of the usual direction.”[3] The “reverse false claims” concept does not eliminate or supplant the false claims requirements of the False Claims Act; it rather expands the meaning of a false claim to include statements made to avoid paying a debt or returning property to the United States.[4] Reverse false claims include improper retention of an overpayment from the government,[5]and the Affordable Care Act specifically linked reverse false claims act liability to its 60-day rule for reporting and returning “identified” overpayments.[6] Reverse false claims also include avoidance of tariffs.[7]
[1] 31 U.S.C. § 3729(a)(1)(G).
[2] 31 U.S.C. § 3729(b)(3).
[3] U.S. ex rel Huangyan Imp. & Exp. Corp. v. Nature’s Farm Prod., Inc., 370 F. Supp. 2d 993, 998 (N.D. Cal. 2005).
[4] Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1056 (9th Cir. 2011).
[5] S. Rep. No. 111-10, at 15 (2009).
[6] Pub. L. No. 111-148, § 6402, 124 Stat. 119, 753 (2010).
[7] S. Rep. No. 111-10, at 14 (2009).
Known as “Lincoln’s Law,”[1] the False Claims Act “was adopted in 1863 and signed into law by President Abraham Lincoln in order to combat rampant fraud in Civil War defense contracts.”[2] It was adopted after “a series of sensational congressional investigations” prompted hearings where witnesses “painted a sordid picture of how the United States had been billed for nonexistent or worthless goods, charged exorbitant prices for goods delivered, and generally robbed in purchasing the necessities of war.”[3] According to testimony uncovered through the investigations, this included the purchase of the following from unscrupulous vendors:
The False Claims Act has grown from its Civil War roots. Recoveries in the modern area have been obtained from a wide range of areas, including health care, military supplies, and federal loan and grant programs.
[1] Am. Bankers Mgmt. Co., Inc. v. Heryford, 885 F.3d 629, 634 (9th Cir. 2018).
[2] S.Rep. No. 99–345, p. 8 (1986).
[3] United States v. McNinch, 356 U.S. 595, 599 (1958).
[4] Cong. Globe, 37th Cong., 3d Sess. 955 (1863).
[5] H.R. Rep. No. 37-2 at 2 (1862).
[6] H.R. Rep. No. 37-2 at L.
[7] H.R. Rep. No. 37-2 at 1477.
[8] H.R. Rep. No. 37-2 at LVI.
[9] H.R. Rep. No. 37-2 at LVI.
[10] H.R. Rep. No. 37-2 at 233.
When Congress enacted the False Claims Act in 1863, it followed “long tradition … in England and the American Colonies” and authorized private persons to bring suit to recover damages suffered by the United States.[1] Thus, while the Attorney General may enforce these provisions, the False Claims Act also allows private citizens to “bring civil actions in the Government’s name.”[2] When brought by a private party, an enforcement action under the False Claims Act “is called a qui tam action, with the private party referred to as the relator.”[3]
When a private citizen files a qui tamcomplaint under the False Claims Act, the complaint must remain under seal for at least sixty days.[4] During that time, the government must determine whether it will intervene in the lawsuit.[5] With a showing of good cause, the government may request extensions of the sixty-day period during which the suit remains under seal.[6] If the government chooses to intervene in the qui tam action, the relator is entitled to fifteen to twenty-five percent of the proceeds of the action or settlement.[7] If it declines to do so, however, the relator may proceed with the case on behalf of the United States, and the relator is entitled to twenty-five to thirty percent of the proceeds of the action or settlement.[8] Even when the Attorney General initially declines to intervene in the suit, the district court “may nevertheless permit the Government to intervene at a later date upon a showing of good cause.”[9]
[1] Vermont Agency of Nat. Res. v. United States ex rel. Stevens, 529 U.S. 765, 768, 772-74 (2000).
[2] Schindler Elevator Corp. v. U.S. ex rel. Kirk, 563 U.S. 401, 404 (2011).
[3] United States ex rel. Eisenstein v. City of New York, 556 U.S. 928, 932 (2009) (internal quotation marks omitted).
[4] 31 U.S.C. § 3730(b)(2).
[5] 31 U.S.C. § 3730(b)(4).
[6] 31 U.S.C. § 3730(b)(3).
[7] 31 U.S.C. § 3730(d)(1).
[8] 31 U.S.C. § 3730(d)(2).
[9] 31 U.S.C. § 3730(c)(3).
One might naturally think that a whistleblower that was not actually harmed by the alleged fraud might lack standing to bring a qui tam action. The Supreme Court addressed this standing concern in Vermont Agency of Nat. Res. v. U.S. ex rel. Stevens.[1] The Stevenscase presented “the question whether a private individual may bring suit in federal court on behalf of the United States against a State (or state agency)” under the FCA.[2] There, a relator brought a cause of action against the Vermont Agency of Natural Resources alleging that the agency had submitted false claims to the Environmental Protection Agency in connection with federal grant programs.[3] The federal government declined to intervene in the action, and the Vermont Agency of Natural Resources moved to dismiss the case.[4]
The Supreme Court acknowledged that “[t]he Art. III judicial power exists only to redress or otherwise to protect against injury to the complaining party.”[5] But the complaining party in a qui tam suit under the False Claims Act is a relator who has suffered no injury.[6] The only injury from a False Claims Act violation is “injury to the United States—both the injury to its sovereignty arising from violation of its laws and the proprietary injury resulting from the alleged fraud.”[7]
The Court nonetheless held that “a qui tam relator under the FCA has Article III standing.”[8] That decision rested on “the doctrine that the assignee of a claim has standing to assert the injury in fact suffered by the assignor.”[9] As the Supreme Court explained, “[t]he FCA can reasonably be regarded as effecting a partial assignment of the Government's damages claim” from the United States to the relator.[10] It is only by virtue of that assignment that a relator has Article III standing to assert “the United States’ injury in fact.”[11] Stevenstherefore makes clear that a relator’s Article III standing depends fully on his or her status “as a partial assignee of the United States.”[12]
[1] 529 U.S. 765 (2000).
[2] Id. at 768.
[3] Id. at 770.
[4] Id.
[5] Id. at 771 (internal quotation marks omitted).
[6] Id. at 772-73.
[7] Id. at 771.
[8] Id. at 778.
[9] Id. at 773.
[10] Id. at 773 & n.4.
[11] Id. at 774.
[12] Id. at 773 n.4
The Supreme Court has shown a keen interest in the False Claims Act, and in the materiality and scienter elements in particular. On June 16, 2016, the U.S. Supreme Court in Universal Health Services, Inc. v. United States ex rel. Escobar,[1] unanimously upheld the implied certification theory of False Claims Act liability.[2] I.e., it held that that False Claims Act liability could be available where the defendant submits a claim to the government that “does not merely request payment, but also makes specific representations about the goods or services provided,” and the defendant’s “failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths.” Id.
The Supreme Court’s analysis in Escobar significantly impacted the False Claims Act’s materiality requirement. The Court described the materiality standard as focused on “the likely or actual behavior” of the government agency that made the payment decision.[3] The Court therefore rejected the Department of Justice’s stance—previously adopted by some lower courts—that a defect was material in any case where the agency had the legal authority to deny payment based on the alleged defect.[4] To be material, Escobar explained, the misrepresentation must go to the essence of the bargain, and not “minor or insubstantial.”[5] The Court noted that materiality can be determined based on several factors, none necessarily dispositive, and held that a court’s decision, although fact-specific, could nonetheless lead to dismissal at the motion to dismiss or summary judgment stage.[6]
As one court put it, “Escobar rejects a system of government traps, zaps, and zingers that permits the government to retain the benefit of a substantially conforming good or service but to recover the price entirely—multiplied by three—because of some immaterial contractual or regulatory non-compliance.”[7] Thus, “[a] principal mechanism to ensure fairness and to avoid traps, zaps, and zingers is a rigorous standard of materiality and scienter.”[8] As a result, under Escobar, “the government’s payment to a vendor despite knowledge of a defect ‘very strongly’ evidences the defect’s immateriality.”[9]
Escobar is also significant for its holding regarding scienter. The Supreme Court made clear that “concerns about fair notice and open-ended liability” should be “addressed through strict enforcement of the Act’s materiality and scienter requirements.”[10] On this point, the Supreme Court held that liability may lie only when “the defendant knowingly violated a requirement that the defendant knows is material to the Government’s payment decision.”[11] The Ruckhcase also offered insight into Escobar’s focus on the scienter element, finding it relevant that there was no evidence offered in trial “that the defendants submitted claims for payment despite the defendants’ knowing that the governments would refuse to pay the claims if either or both governments had known about the disputed practices.”[12] The court emphasized that the government had been “aware of the defendants’ disputed practices, aware of this action, aware of the allegations, aware of the evidence, and aware of the judgments [against the defendants],” but had not “ceased to pay or even threatened to stop paying the defendants for the services.”[13]
[1] 136 S. Ct. 1989 (2016),
[2] Id. at 2001.
[3] Id. at 2002.
[4] Id. at 2004; see also United States v. President & Fellows of Harvard Coll., 323 F. Supp. 2d 151, 186 (D. Mass. 2004) (“Evidence of the government’s actual conduct is less useful for FCA purposes than evidence of the government's legal rights.”).
[5] 136 S. Ct. at 2003.
[6] Id. at 2004 n.6.
[7] United States ex rel. Ruckh v. Salus Rehab., LLC, 304 F. Supp. 3d 1258, 1263 (M.D. Fla. 2018).
[8] Id.
[9] Id.
[10] Escobar, 136 S. Ct. at 2002 (emphasis added).
[11] Id. at 1996.
[12] United States v. Salus Rehab., LLC, 304 F. Supp. 3d 1258, 1260 (M.D. Fla. 2018).
[13] Id.
Among the statutory responses to these problems with whistleblower suits is what is referred to as the public disclosure bar. Congress enacted the public disclosure bar “to prevent ‘parasitic’ qui tam actions in which relators, rather than bringing to light independently-discovered information of fraud, simply feed off of previous disclosures of government fraud.”[1] The public disclosure bar prohibits a relator from bringing a False Claims Act lawsuit based on a fraud that has already been disclosed through public channels, unless the relator is an “original source” of the information.[2] Specifically, the public disclosure bar is triggered when: “‘(1) the disclosure at issue occurred through one of the channels specified in the statute[3]; (2) the disclosure was ‘public’; and (3) the relator’s action is ‘based upon’ the allegations or transactions publicly disclosed.’”[4] It therefore serves to “weed out FCA claims not based on genuine whistleblower information.”[5] Without this bar, relators with no special insight into corporate practices “have a strong dollar stake in alleging fraud whether or not it exists.”[6] An original source—who can bring a lawsuit based on publicly disclosed allegations—is “an individual who has direct and independent knowledge of the information on which the allegations are based and has voluntarily provided the information to the Government before filing [suit].”[7]
In Schindler Elevator Corp. v. U.S. ex rel. Kirk, 563 U.S. 401 (2011), the Supreme Court explained that the “report” public channel listed in the public disclosure bar should be interpreted broadly.[8] It therefore held that the Department of Labor’s responses to Freedom of Information Act requests issued by the relator were “reports” under the Act because each “was an official or formal statement that gave information and notified Mrs. Kirk [the relator] of the agency’s resolution of her FOIA request.”[9] Courts have relied on this same reasoning to find that data files of the Centers for Medicare and Medicaid Services are “reports” for public disclosure purposes because they are “something that gives information.”[10] Courts have also held that information gleaned from internet sources qualifies under the “news media” public channel listed in the public disclosure bar.[11]
For a relator’s allegations to be “based upon” a prior public disclosure—and therefore trigger that element of the public disclosure bar—“the publicly disclosed facts need not be identical with, but only substantially similar to, the relator’s allegations.”[12] Thus, “the phrase ‘based upon’ in § 3730(e)(4)(A) means substantially similar to, not derived from.”[13] A relator’s allegations are substantially similar to prior public disclosures where the “essential elements” of the purported fraudulent transaction were publicly disclosed.[14] This includes cases where the relator that it “infer[s]” a fraudulent transaction from facts revealed in public disclosures.[15] The public disclosure bar does not dictate that a relator must “possess direct and independent knowledge of all of the vital ingredients to a fraudulent transaction.”[16] Instead, “direct and independent knowledge of any essential element of the underlying fraud transaction” is sufficient to give the relator original-source status.[17] The D.C. Circuit in Springfield Terminal[18]set forth the following criteria to evaluate whether a public disclosure bars a lawsuit:
"[I]f X + Y = Z, Z represents the allegation of fraud and X and Y represent its essential elements. In order to disclose the fraudulent transaction publicly, the combination of X and Y must be revealed, from which readers or listeners may infer Z, i.e., the conclusion that fraud has been committed. . . . [I]f the elements of the fraudulent transaction (X + Y) are already public, plaintiff’s additional information, even if nonpublic, cannot suffice to surmount the jurisdictional hurdles. Thus, a qui tam action cannot be sustained where all of the material elements of the fraudulent transaction are already in the public domain and the qui tam relator comes forward with additional evidence incriminating the defendant."
Other courts, including the Ninth Circuit, have adopted the same articulation of the standard.[19]
To overcome the public disclosure bar where substantially the same allegations in the case have been publicly disclosed, a relator must show that it is an “original source of the information.”[20] An “original source” is someone who “(1) prior to a public disclosure . . . has voluntarily disclosed to the Government the information on which allegations or transactions in a claim are based,” or “(2) who has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions, and who has voluntarily provided the information to the Government before filing an action under this section.”[21] Independent knowledge is “knowledge that preceded the public disclosure,”[22]and to “materially add” to a public disclosure, a relator’s knowledge must “provide essential elements of the fraudulent scheme which were missing from the prior disclosures.”[23]
[1] U.S. ex rel. Siller v. Becton Dickinson & Co. By & Through Microbiology Sys. Div., 21 F.3d 1339, 1347 (4th Cir. 1994).
[2] 31 U.S.C. § 3730(e)(4)(A).
[3] The channels of public disclosure are generally those made in: reports, hearings, audits, or investigations of the federal government, and the news media. 31 U.S.C. § 3730(e)(4)(A).
[4] U.S. ex rel. Solis v. Millennium Pharm., Inc., 885 F.3d 623, 626 (9th Cir. 2018) (quoting U.S. ex rel. Mateski v. Raytheon Co., 816 F.3d 565, 570 (9th Cir. 2016)).
[5] U.S. ex rel. Hong v. Newport Sensors, Inc., 728 F. App’x 660, 662 (9th Cir. 2018).
[6] U.S. Dep’t of Justice, Office of Legal Counsel, Constitutionality of the Qui Tam Provisions of the False Claims Act, 13 Op. O.L.C. 207, 220 (1989).
[7] 31 U.S.C. § 3730(e)(4)(B).
[8] Id. at 408.
[9] Id. at 411 (internal quotation marks and brackets omitted); see also id. at 407-08 (reasoning that a “report” is “something that gives information or a notification or an official or formal statement of facts or proceedings”) (internal quotation marks, citations, and alterations omitted).
[10] See, e.g., U.S. ex rel. Ibanez v. Bristol-Myers Squibb Co., 2015 WL 12991207, at *4 (S.D. Ohio Sept. 24, 2015) (finding that Medicare Provider Utilization and Payment Data from the Centers for Medicare and Medicaid Services qualified as a “report” since “the aggregate data are an official statement of facts”); U.S. ex rel. Conrad v. Abbott Labs., Inc., 2013 WL 682740, at *4–5 (D. Mass. Feb. 25, 2013) (finding data files on the Centers for Medicare and Medicaid Services’ website fell within Schindler’s definition of “report”); see also U.S. ex rel. Ambrosecchia v. Paddock Labs., LLC, 2015 WL 5605281, at *5-6 (E.D. Mo. Sept. 23, 2015) (finding that public disclosure bar applied, in part, because relator relied on the same government reports, including public data files, as relator in Conrad); cf. U.S. ex rel. Davis v. Prince, 753 F. Supp. 2d 569, 588 (E.D. Va. 2011) (“There can be little doubt that the 2005 OIG Audit Report is a qualifying public disclosure.”); accord U.S. ex rel. Hartpence v. Kinetic Concepts, Inc., 2012 WL 11977661, at *3 (C.D. Cal. 2012), rev’d on other grounds, 792 F.3d 1121 (9th Cir. 2015).
[11] See, e.g., U.S. ex rel. Hong v. Newport Sensors, Inc., 2016 WL 8929246, at *5 (C.D. Cal. May 19, 2016) (“Information publicly available on the Internet generally qualifies as ‘news media.’”), aff’d, 728 F. App’x 660 (9th Cir. 2018); U.S. ex rel. Carter v. Bridgepoint Educ., Inc., 2015 WL 4892259, at *6 n.4 (S.D. Cal. Aug. 17, 2015) (online commentary on San Diego Reader website qualified as news media); U.S. ex rel. Unite Here v. Cintas Corp., 2007 WL 4557788, at *14 (N.D. Cal. Dec. 21, 2007) (finding fact was publicly disclosed in the new media because “that information was available on the Internet”); U.S. ex rel. Beauchamp v. Academi Training Ctr., 816 F.3d 37, 43 n.6 (4th Cir. 2016) (“Courts have unanimously construed the term ‘public disclosure’ to include websites and online articles.”); U.S. ex rel. Green v. Serv. Contract Educ. & Training Tr. Fund, 843 F. Supp. 2d 20, 32 (D.D.C. 2012) (explaining courts have construed “news media” to include “readily accessible websites”); U.S. ex rel. Brown v. Walt Disney World Co., 2008 WL 2561975, at *4 (M.D. Fla. June 24, 2008) (finding Wikipedia qualified as “news media”); U.S. ex rel. Osheroff v. Humana, Inc., 776 F.3d 805, 813 (11th Cir. 2015) (concluding that “news media” included medical clinics’ publicly available websites because the term “has a broad sweep” and the clinics’ websites were “intended to disseminate information about the clinics’ programs”).
[12] U.S. ex rel. Mateski v. Raytheon Co., 816 F.3d 565, 573 (9th Cir. 2016).
[13] Malhotra v. Steinberg, 770 F.3d 853, 858 (9th Cir. 2014) (internal quotation marks omitted).
[14] U.S. ex rel. Kirk v. Schindler Elevator Corp., 437 F. App’x 13, 17 (2d Cir. 2011).
[15] U.S. ex rel. Lissack v. Sakura Glob. Capital Mkts., Inc., 2003 WL 21998968, at *10 (S.D.N.Y. Aug. 21, 2003) (internal quotation marks omitted), aff’d, 377 F.3d 145 (2d Cir. 2004); see also U.S. ex rel. Winkelman v. CVS Caremark Corp., 827 F.3d 201, 208 (1st Cir. 2016) (“a public disclosure occurs when the essential elements exposing the particular transaction as fraudulent find their way into the public domain,” meaning that the publicly available facts “lead to a plausible inference of fraud when combined”) (internal quotation marks omitted.
[16] United States ex rel. Springfield Terminal Railway Co. v. Quinn, 14 F.3d 645, 656 (D.C. Cir. 1994).
[17] Id. at 657.
[18] id.at 654, 655.
[19] Mateski, 816 F.3d at 571.
[20] 31 U.S.C. § 3730(e)(4)(A).
[21] Id. § 3730(e)(4)(B).
[22] Malhotra, 770 F.3d at 860.
[23] Osheroff, 776 F.3d at 815 (finding relator did not “materially add to the public disclosures” because public disclosures “were already sufficient to give rise to an inference that the clinics were providing illegal remuneration to patients”).
The False Claims Act’s first-to-file bar provides that “[w]hen 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.”[1] This rule stands as an “exception free” hurdle meant “to promote incentives for whistle-blowing insiders and prevent opportunistic successive plaintiffs.”[2] Simply put, “the first-to-file bar stops repetitive claims.”[3] The “facts underlying the later-filed complaint need not be ‘identical’ to those underlying the earlier-filed complaint for the complaint later to be barred.”[4] Instead, “§ 3730(b)(5) bars later-filed actions alleging the same material elements of fraud described in an earlier suit, regardless of whether the allegations incorporate somewhat different details.”[5] This is true “even if the allegations cover a different time period or location.”[6] In deciding whether the bar applies, courts consider whether the government could have discovered the underlying fraud based on the allegations of the first-filed complaint and absent the later-filed complaint.[7] In several circuits, including the Ninth Circuit, the first-to-file rule is jurisdictional.[8] Other courts, however, conclude that the rule is non-jurisdictional. See, e.g., United States v. Millenium Labs., Inc., 923 F.3d 240 (1st Cir. 2019).
[1] 31 U.S.C. § 3730(b)(5).
[2] United States ex rel. Lujan v. Hughes Aircraft Co., 243 F.3d 1181, 1187 (9th Cir. 2001).
[3] Id.
[4] United States ex rel. Hartpence v. Kinetic Concepts, Inc., 792 F.3d 1121, 1130 (9th Cir. 2015).
[5] Lujan, 243 F.3d at 1189.
[6] Id. at 1189.
[7] Hartpence, 792 F.3d at 1131; see also United States ex rel. Marion v. Heald Coll., LLC, 2015 WL 4512843, at *3 (N.D. Cal. July 24, 2015).
[8] Hartpence, 792 F.3d at 1130.
31 U.S.C. § 3731(b) provides:
(b) 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.
The False Claims Act originally had a six year statute of limitations.[1] In the course of amending the Act in 1986, however, Congress heard evidence that the six year period allowed some wrongdoers to escape liability where their frauds remained undetected during the limitations period.[2] As a result, Congress added the second provision of section 3731(b), allowing a suit to be filed within three years after the government is apprised of the fraud, subject to a ten-year outer limit.[3] Although circuits were previously split on the issue, the U.S. Supreme Court held in Cochise Consultancy, Inc., et al., Petitioners v. United States, ex rel. Billy Joe Huntthat both of the limitations periods in § 3731(b) apply regardless of whether the government has intervened in a case, and a relator’s interview with the government could therefore shift the limitations period beyond six years.
[1] 31 U.S.C. 3731(b) (1982).
[2] False Claims Act Amendments: Hearings before the Subcomm. on Administrative Law and Governmental Relations of the House Comm. on the Judiciary, 99th Cong., 2d Sess. 159 (1986); False Claims Reform Act: Hearing on S. 1562 before the Subcomm. on Administrative Practice and Procedure of the Senate Comm. on the Judiciary, 99th Cong., 1st Sess. 39 (1985).
[3] False Claims Amendments Act of 1986, Pub. L. No. 99-562, § 5, 100 Stat. 3158.
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