17-2191-cv United States of America ex rel. Wood v. Allergan, Inc.

17‐2191‐cv United States of America ex rel. Wood v. Allergan, Inc.

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

August Term 2017

(Argued: February 7, 2018 Decided: August 9, 2018)

Docket No. 17‐2191‐cv

UNITED STATES OF AMERICA EX REL. JOHN A. WOOD, Plaintiff‐Appellee,

COMMONWEALTH OF MASSACHUSETTS, STATE OF MONTANA, DISTRICT OF COLUMBIA, STATE OF INDIANA, STATE OF NEW YORK, COMMONWEALTH OF VIRGINIA, STATE OF LOUISIANA, STATE OF DELAWARE, STATE OF MINNESOTA, STATE OF OKLAHOMA, STATE OF MICHIGAN, STATE OF HAWAII, STATE OF NORTH CAROLINA, STATE OF CALIFORNIA, STATE OF GEORGIA, STATE OF TENNESSEE, STATE OF FLORIDA, STATE OF WISCONSIN, STATE OF NEW MEXICO, STATE OF ILLINOIS, STATE OF NEVADA, STATE OF CONNECTICUT, STATE OF NEW JERSEY, STATE OF TEXAS, STATE OF COLORADO, STATE OF RHODE ISLAND, Plaintiffs, v.

ALLERGAN, INC., Defendant‐Appellant,

ALLERGAN PLC, Defendant.*

* The Clerk of Court is directed to amend the caption as set forth above.

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK

Before: WALKER, LYNCH, and CHIN, Circuit Judges.

Interlocutory appeal from an opinion and order of the United States

District Court for the Southern District of New York (Furman, J.), holding that a

violation of the False Claims Actʹs first‐to‐file bar, which prohibits the filing of a

ʺrelated actionʺ when a False Claims Act case is ʺpending,ʺ

(a),

3730(b)(5), can be cured by the filing of an amended complaint after the first‐filed

related action is no longer pending.

REVERSED AND REMANDED.

DEREK T. HO, Kellogg, Hansen, Todd, Figel & Frederick, P.L.L.C, Washington, D.C. (Sherrie R. Savett, Berger & Montague, P.C., Philadelphia, Pennsylvania, W. Scott Simmer, Thomas J. Poulin, Simmer Law Group P.L.L.C., Washington, D.C., on the brief), for Plaintiff‐Appellee.

JEFFREY S. BUCHOLTZ (Paul Alessio Mezzina, Christopher R. Healy, on the brief), King & Spalding L.L.P., Washington, D.C., for Defendant‐ Appellant.

SARAH CARROLL (Douglas N. Letter, Michael S. Raab, Charles W. Scarborough, on the brief), for Chad A.

2

Readler, Acting Assistant Attorney General, United States Department of Justice, Civil Division, Washington, D.C., for Amicus Curiae the United States, in support of Allergan, Inc.

Steven P. Lehotsky, Warren Postman, U.S. Chamber Litigation Center, Inc., Washington D.C.; John P. Elwood, Ralph C. Mayrell, Vinson & Elkins LLP, Washington, D.C., for Amicus Curiae the Chamber of Commerce of the United States, in support of Allergan, Inc.

Jacklyn N. DeMar, Taxpayers Against Fraud Education Fund, Washington, D.C.; Jennifer M. Verkamp, Maxwell S. Smith, Morgan Verkamp LLC, Cincinnati, Ohio, for Amicus Curiae Taxpayers Against Fraud Education Fund, in support of John A. Wood.

CHIN, Circuit Judge:

In this qui tam action, the relator, plaintiff‐appellee John A. Wood,

contends that defendant‐appellant Allergan, Inc. (ʺAllerganʺ), a pharmaceutical

company, violated the False Claims Act (the ʺFCAʺ),

et seq.,

through a kickback scheme that caused the United States (the ʺGovernmentʺ),

state governments, and the District of Columbia to make overpayments of

Medicare, Medicaid, and other benefits.

Wood, however, was not the first relator to sue Allergan under the

FCA based on this alleged scheme. Consequently, the district court (Furman, J.) 3

found that Woodʹs complaint violated the FCAʹs ʺfirst‐to‐file bar,ʺ which

prohibits a person from bringing a ʺrelated actionʺ when an FCA suit is

ʺpending.ʺ

(b)(5).

In this interlocutory appeal, the issue presented ‐‐ a question of first

impression for this Court ‐‐ is whether a violation of the FCAʹs 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 imposes significant penalties on any person who

ʺknowingly presents, or causes to be presented, a false or fraudulent claim for

payment or approvalʺ to the Government or any person who ʺknowingly makes,

uses, or causes to be made or used, a false record or statement material to a false

or fraudulent claim.ʺ

(a)(1)(A)‐(B).

4

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 provisions 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 ʺmidway through the Civil War, in response to frauds

perpetrated in connection with Union military procurement.ʺ

.

Under the FCAʹs qui tam provisions, ʺa private party, called the

relator, challenges fraudulent claims against the [G]overnment on the

[G]overnmentʹs behalf, ultimately sharing in any recovery.ʺ United States ex rel.

Shea v. Cellco Pʹship,

(D.C. Cir. 2017); see

(b). The

relator may be awarded up to thirty percent of the proceeds ultimately

recovered.

(d). Relators need not allege personal injury but

instead sue ʺto remedy an injury in fact suffered by the United States.ʺ Vt.

Agency of Nat. Res. v. United States ex rel. Stevens,

(2000). The

Government may intervene in any qui tam action, taking over from the relator,

5

and, in that event, limiting the relatorʹs share of the recovery to at most twenty‐

five percent.

(b)(2), (d)(1).

The FCA provides that a ʺcopy of the complaint . . . shall be served

on the Government.ʺ

§ 3730(b)(2). ʺThe complaint shall be filed in camera,

shall remain under seal for at least 60 days, and shall not be served on the

defendant until the court so orders. The Government may elect to intervene and

proceed with the action within 60 days after it receives both the complaint and

the material evidence and information.ʺ Id. Moreover, the ʺGovernment may,

for good cause shown, move the court for extensions of the time during which

the complaint remains under seal.ʺ Id. § 3730(b)(3). ʺBefore the expiration of the

60‐day period or any extensions,ʺ however, the Government shall ʺ(A) proceed

with the action, in which case the action shall be conducted by the Government;

or (B) notify the court that it declines to take over the action, in which case the

person bringing the action shall have the right to conduct the action.ʺ

Id. § 3730(b)(4).

The FCA includes several other limiting provisions, in part a

response to the possibility that the large profits available to qui tam relators

created ʺthe danger of parasitic exploitation of the public coffers.ʺ United States

6

ex rel. Springfield Terminal Ry. Co. v. Quinn,

(D.C. Cir. 1994). To

limit such abuses, Congress established several restrictions on FCA qui tam

actions. State Farm Fire & Cas. Co. v. United States ex rel. Rigsby,

(2016). One of these provisions, known as the ʺfirst‐to‐file bar,ʺ provides that

ʺ[w]hen a person brings an action under [the FCA], no person other than the

Government may intervene or bring a related action based on the facts underlying

the pending action.ʺ

(b)(5) (emphasis added). ʺThe command is

simple: as long as a first‐filed complaint remains pending, no related complaint

may be filed.ʺ United States ex rel. Batiste v. SLM Corp.,

(D.C.

Cir. 2011). The first‐to‐file bar ensures that only one relator shares in the

Governmentʹs recovery and encourages potential relators to file their claims

promptly. See United States ex rel. LaCorte v. SmithKline Beecham Clinical Labs., Inc.,

(3d Cir. 1998).

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 least 2003 through 2011, Allergan

7

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 for 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

8

distribution of free patient kits.1 See United States and District of Columbia ex rel.

Caryatid, LLC v. Allergan, Inc., No 10‐CV‐46 (D.D.C.). Wood filed the instant

action on July 26, 2010, while both of these actions were pending, but under seal.

On July 27, 2011, the Caryatid complaint was unsealed. On February 16, 2012, the

United States declined to intervene and requested that the Lampkin complaint be

unsealed. Subsequent to Woodʹs filing, both Caryatid, on January 23, 2012 and

Lampkin, on December 14, 2012, were dismissed, for failure to properly serve

Allergan.2

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

1 There are several different names used by the various relators that appear to refer to the same set of products. Wood uses the term ʺCustomer Care Kit,ʺ while Lampkin uses ʺsurgical kitʺ and Caryatid uses ʺpatient kit.ʺ All refer to a similar set of post‐cataract treatment products, namely sunglasses, dressings, and carrying cases. 2 In Lampkin, though the claims against Allergan were dismissed for failure to 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). 9

Federal Rule of Civil Procedure 12(b)(1) or alternatively 12(b)(6). See United

States ex rel. Wood v. Allergan, Inc.,

, 788 n.7 (S.D.N.Y.

2017). The district court first determined that at the time of the filing of the

lawsuit there was at least one pending related action (Lampkin), which had since

been dismissed.

. The district court next concluded that the first‐to‐file

bar is not jurisdictional, and the action need not be dismissed pursuant to Rule

12(b)(1).3

. Finally, the district court held that the first‐to‐file bar did not

require dismissal of Woodʹs claims as there were no pending related actions

when the complaint was amended (i.e., the Third Amended Complaint), and

therefore Woodʹs claims could proceed.

at 799 n.16. Noting that this final

question was one of first impression for this Court, the district court granted

leave for Allergan to file an interlocutory appeal. We accepted review.

DISCUSSION

ʺWe 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.ʺ Drimal v. Tai,

(2d Cir. 2015). ʺTo survive

3 This Court has since confirmed that the first‐to‐file bar is not jurisdictional. United States ex rel. Hayes v. Allstate Ins. Co.,

(2d Cir. 2017) (ʺ[A] district court does not lack subject matter jurisdiction over an action that may be barred on the merits by the first‐to‐file rule.ʺ). 10

a motion to dismiss, a complaint must contain sufficient factual matter, accepted

as true, ʹto state a claim to relief that is plausible on its face.ʹʺ Ashcroft v. Iqbal,

(2009) (quoting Bell Atl. Corp. v. Twombly,

(2007)).

We consider first the threshold question 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 FCAʹs 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 actions are not related; and, second, the earlier‐

filed complaints were deficiently pled and, accordingly, do not trigger the first‐

to‐file bar.

ʺA second action is ʹrelated,ʹ within the meaning of [Section

3730(b)(5),] if the claims incorporate ʹthe same material elements of fraudʹ as the

earlier action, even if the allegations incorporate additional or somewhat

11

different facts or information.ʺ United States ex rel. Heath v. AT&T, Inc.,

(D.C. Cir. 2015) (quoting United States ex rel. Hampton v. Columbia/HCA

Healthcare Corp.,

(D.C. Cir. 2003)). In other words, to be related,

the cases must rely on the same ʺessential facts.ʺ United States ex rel. Wilson v.

Bristol‐Myers Squibb, Inc.,

(1st Cir. 2014) (collecting cases). If the

first‐filed complaint ensures that the Government ʺwould be equipped to

investigateʺ the fraud alleged in the later‐filed complaint, then the two cases are

related within the meaning of Section 3730(b)(5). Heath, 781 F.3d at 121.

Though Woodʹs allegations may be more detailed than those

asserted in Lampkin, the two cases in essence alleged very similar kickback

schemes. See id. at 122 (citing cases where a second complaint ʺmerely added

additional facts or widened the circle of victims of the same fraudulent conductʺ

and thus, were related).4 Lampkin and Wood both allege a scheme where

Allergan provided free cataract surgery recovery kits to induce increased use of

Allergan products. Compare Lampkin, No. 08‐cv‐5362 (D.N.J), Dkt. No. 1 at 4‐5

(Allergan ʺpaid kickbacks to doctors nationwide in the form of free surgical kits

that have a greater than nominal value. These free and valuable surgical kits

4 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). 12

were routinely offered and delivered to physicians to induce the physicians to

refer or arrange for a health care item or service to be provided and reimbursed

by a federal health care insurance program. . . .ʺ), with Wood, 10‐cv‐5645

(S.D.N.Y.), Dkt. No. 38 at 2 (ʺAllergan successfully induced ophthalmologists,

including cataract surgeons, by providing, at no cost, a suite of cataract surgery‐

related goods, including prescription drugs, patient post‐surgery supplies,

physician‐branded pre‐printed prescription pads and prescription pad imprint

stamps. . . .ʺ).5 Accordingly, the district court properly concluded that Lampkin

and Wood are related actions.

Next, Wood urges this Court to adopt the Sixth Circuitʹs approach in

Walburn v. Lockheed Martin Corp., which held that an earlier‐filed complaint that

was ʺlegally infirm under [Federal Rule of Civil Procedure] 9(b)ʺ fails to bar a

ʺlater‐filed action despite the fact that the overly‐broad allegations of the [first‐

filed] complaint ʹencompassʹ the specific allegations of fraud madeʺ by the later‐

5 The Lampkin complaint was not included in the appellate record. On considering a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), however, we may consider documents ʺof which a court may take judicial notice.ʺ Tellabs, Inc. v. Makor Issues & Rights, Ltd.,

(2007); see also Goel v. Bunge, Ltd.,

(2d Cir. 2016) (noting that we may look at ʺmatters of which judicial notice may be takenʺ when considering motions to dismiss under Rule 12(b)(6) (internal quotation marks omitted)). 13

filed complaint.

(6th Cir. 2005). We are not persuaded.

ʺNothing in the language of Section 3730(b)(5) incorporates the particularity

requirement of Rule 9(b), which militates against reading such a requirement

into the statute.ʺ Batiste,

. Rule 9(b) and Section 3730(b)(5) serve

different purposes, the former intending to protect defendants in fraud cases

from ʺfrivolous accusationsʺ and the latter designed to reward a qui tam relator

for putting the Government on notice of a potential fraud without the dilution of

ʺcopycat actions that provide no additional material information.ʺ

Additionally, the Sixth Circuitʹs rule would require one court to

evaluate the sufficiency of a complaint pending before another court, creating a

precarious dynamic. Id.; see also United States ex rel. Branch Consultants v. Allstate

Ins. Co.,

, 378 n.10 (5th Cir. 2009) (ʺThe sufficiency of the [earlier]

complaint under Rule 9(b) is a matter for [the court the complaint is before] to

decide in the first instance.ʺ). To illustrate the problem, consider how the

following scenario could play out if Woodʹs (and the Sixth Circuitʹs) view were

adopted: Suppose a relator in New Jersey files a complaint alleging a fraud.

Several months later, a relator in New York files a similar complaint. The New

York district court may then, before the New Jersey court has evaluated the

14

sufficiency of the complaint before it, conclude that the New Jersey complaint is

deficiently pled and allow the New York action to proceed. Later, the New

Jersey court may reach the opposite conclusion, allowing what it has determined

to be a sufficient complaint to also proceed. Such a system would be

unworkable.

Accordingly, we agree with the district court that the first‐to‐file bar

applied here. See Wood,

(ʺ[A]s long as Lampkin was a

ʹpending action,ʹ . . . as it was when Wood filed his original complaint (and first

two amended complaints), the first‐to‐file bar applied.ʺ).

2. Can a Violation of the First‐to‐File Bar Be Cured?

Wood next contends that even if a ʺrelated actionʺ was ʺpendingʺ

when he initially filed his complaint, once the related action was dismissed and

no longer ʺpending,ʺ 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 statute 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

15

on the later‐filed case before the first‐filed case has been disposed of. See

(b).6

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,

(dismissing amended complaint as blocked by first‐

to‐file bar), with United States ex rel. Gadbois v. PharMerica Corp.,

, 4‐5

(1st Cir. 2015) (finding defendantʹs position that supplementation cannot cure

first‐to‐file defect ʺuntenableʺ); see also United States ex rel. Chovanec v. Apria

Healthcare Grp., Inc.,

(7th Cir. 2010) (in deciding whether a

complaint filed in violation of first‐to‐file bar should be dismissed with or

without prejudice, noting that ʺʹa related action based on the facts underlying the

pending actionʹ must be dismissed rather than stayedʺ). The Fourth Circuit has

held that the first‐to‐file bar requires dismissal of a later‐filed action even if the

6 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. 16

first‐filed action is dismissed while the later‐filed action is still pending; it has not

decided whether amending or supplementing a complaint after dismissal of the

first‐filed action allows the later‐filed action to proceed. United States ex rel.

Carter v. Halliburton Co.,

(4th Cir. 2017) (Wynn, J. concurring),

cert. denied, ‐‐ S. Ct. ‐‐,

(mem.) (June 25, 2018) (ʺ[T]he majority

opinion does not address, much less adopt, the district courtʹs reasoning that an

amendment or supplement to a complaint cannot, as a matter of law, cure a first‐

to‐file defect.ʺ); see also United States ex rel. Lujan v. Hughes Aircraft Co.,

(9th Cir. 2001). We agree with the D.C. Circuit and conclude that

Woodʹs ʺaction was incurably flawed from the moment he filed it.ʺ Shea,

.

When answering questions of statutory interpretation, we begin

with the language of the statute. Saks v. Franklin Covey Co.,

(2d

Cir. 2003) (ʺEvery exercise in statutory construction must begin with the words of

the text.ʺ). If the statutory language is unambiguous, ʺwe construe the statute

according to the plain meaning of its words.ʺ Nwozuzu v. Holder,

(2d Cir. 2013). We discern plain meaning by ʺlooking to the statutory scheme

as a whole and placing the particular provision within the context of that

17

statute.ʺ Saks,

. Only when the terms are ambiguous or unclear do

we consider legislative history and other tools of statutory interpretation.

Nwozuzu,

.

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.

(b)(5).

By its express terms, then, no private individual ʺmay . . . bring a

related actionʺ when an FCA action is ʺpending.ʺ 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. ʺAs a general rule, if an

action is barred by the terms of a statute, it must be dismissed.ʺ Hallstrom v.

Tillamook Cty.,

(1989). Accordingly, absent any exceptions, when a

plaintiff fails to heed a ʺclear statutory command,ʺ the district court ought to

dismiss the suit. See McNeil v. United States,

(1993) (holding that

an action must be dismissed when statutory exhaustion requirement was not met

until after action was filed). Indeed, when the Supreme Court recently held that

18

a violation of the FCAʹs sealing requirement did not require dismissal, it gave

Section 3730(b)(5) as an example of one of ʺa number of provisions [in the FCA]

that do require, in express terms, the dismissal of a relatorʹs action.ʺ Rigsby, 137

S. Ct. at 442‐43; accord Shea,

(noting that the Supreme Court

ʺspecifically cited section 3730(b)(5) ‐‐ the first‐to‐file bar ‐‐ as an example of a

provision explicitly requiring dismissal. In the ordinary course, then, the

existence of a pending qui tam action should occasion the dismissal of a related

action.ʺ (citation omitted)). Under the terms of the statute, dismissal is the

obvious response to an improperly filed action ‐‐ to permit the action to continue

would be to ignore the violation.

Woodʹs 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, he argues that Section 3730(b)(5) provides that ʺ[w]hile

another action is pending, no person other than the Government may continue to

prosecute a related action,ʺ and contends that a second action can simply be

stayed until the first‐filed action is no longer pending. Chovanec,

.

But that is not what the statute says. See

Rather, the statute bars a person

from bringing ‐‐ not continuing to prosecute ‐‐ a related action during the

19

pendency of an FCA case, see

(b)(5) (ʺWhen a person brings an

action under [the FCA,] no person other than the Government may intervene or

bring a related action based on the facts underlying the pending action.ʺ

(emphasis added)), and it makes no provision for a stay of proceedings until the

prior‐filed action is resolved. The first‐to‐file bar is thus clear: an action cannot

be brought while a first‐filed action is pending.

In construing the term ʺbring,ʺ we ʺproceed under the assumption

that the statutory language, unless otherwise defined, carries its plain meaning,ʺ

Chen v. Major League Baseball Props., Inc.,

(2d Cir. 2015) (internal

quotation marks omitted); see also Kellogg Brown & Root Servs., Inc. v. United States

ex rel. Carter, ‐‐ U.S.‐‐,

(2015) (seeing ʺno reason not to

interpret the term ʹpendingʹ in the FCA [

(b)(5)] in accordance

with its ordinary meaningʺ). To ʺbring an actionʺ is to ʺinstitute legal

proceedings.ʺ Blackʹs Law Dictionary 231 (10th ed. 2014); see also Goldenberg v.

Murphy,

(1883) (ʺA suit is brought when in law it is

commenced.ʺ). Legal proceedings are instituted by the origination of formal

proceedings, such as the filing of an initial complaint. See Serna v. Law Office of

Joseph Onwuteaka, P.C.,

(5th Cir. 2013) (Smith, J., dissenting) (ʺIn

20

the context of federal law, a suit is brought . . . by filing a complaint with the

court.ʺ (citing Fed. R. Civ. P. 3) (internal quotations marks omitted)). Therefore,

amending or supplementing a complaint does not bring a new action, it only

brings a new complaint into an action that is already pending. Chovanec,

(statutes structured in the form ʺʹdo not bring an action untilʹ . . . are

understood to forbid the commencement of a suit; an action . . . ʹbroughtʹ while

the condition precedent is unsatisfied must be dismissed rather than left on iceʺ).

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.7

As Wood suggests, it is true that deficiencies in a complaint can

often be cured by amendment. See Mathews v. Diaz,

, 75 n.9 (1976)

(citing

). The problem for Wood, however, is that an amended or

7 As we decide that Wood cannot remedy a first‐to‐file defect by amendment or supplementation, we need not address Woodʹs 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 Woodʹs position and indicates that, though he wishes to proceed on the amended complaint, he still understands his action to have been brought at a time when it was in violation of the first‐to‐file bar. 21

supplemental pleading cannot change the fact that he brought an action while

another related action was pending, as is prohibited by the first‐to‐file bar. See

United States ex rel. Shea v. Verizon Commcʹns, Inc.,

(D.D.C.

2015), affʹd, Shea,

(ʺThe first‐to‐file bar prohibits bringing a ʹrelated

action,ʹ not a related complaint. . . . No matter how many times [a later‐filing

relator] amends his Complaint, it will still be true that he brought a related action

based on the facts underlying the then pending action.ʺ (emphasis in original)

(internal quotation marks, brackets, and citation omitted)).

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 of 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, ʺif a relator brings suit while a related action

is pending, her ability to proceed with her action upon the first‐filed suitʹs

completion could depend on the pure happenstance of whether the district court

reached her case while the first‐filed suit remained pending.ʺ Shea,

. That could create anomalous results among similarly situated relators based

22

on the idiosyncrasies of the judge the case is before or the district the case is in.

Shea went on to illustrate:

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 [Woodʹs] 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 governmentʹs reward).

(citation omitted).

Woodʹs 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

(ʺʹ[I]f an action is barred by the terms of the statute, it must be dismissedʹ

rather than left on ice.ʹʺ (quoting Hallstrom,

)). Additionally, courts

would face a wave of problematic questions. For example, if the first‐filed action

23

is dismissed while the second‐to‐file and third‐to‐file actions are still pending,

who gets to proceed as the new first‐filed case? Is it the first to amend the

complaint or the second to have filed the initial complaint? If the amended

complaint relates back to the time of filing, then could the third‐to‐file move

forward only to be stopped again once the second‐to‐file amends? These sorts of

questions illustrate the conundrum posed by the rule endorsed by the district

court. Such a system would also essentially make any statute of limitations

obsolete. Relators could simply file unlimited related actions and keep each one

ʺon iceʺ until the case before it is dismissed, allowing the next case to take its

turn. See Chovanec,

(ʺThen § 3730(b)(5) would do nothing to block

an infinite series of claims; me‐too actions could proliferate, provided only that

the copycat asked for a stay until the action ahead of it in the queue had been

resolved.ʺ). That would force defendants to defend the same claim again and

again.

Finally, although we need not rely on legislative history because the

statutory language and scheme are clear, the legislative history also undercuts

Woodʹs position. Allowing a first‐to‐file defect to be ʺcuredʺ by amending or

supplementing a complaint contravenes the FCAʹs purpose. Indeed, even if, as

24

the district court noted, ʺthe primary, if not sole, purpose of the first‐to‐file rule is

to help the Government uncover and fight fraud,ʺ it is unlikely that Congress

intended to do so in an inefficient manner prone to anomalous outcomes. Wood,

; see also Campbell v. Redding Med. Ctr.,

, 823 (9th

Cir. 2005) (noting that the 1986 Amendments to the FCA, which introduced the

first‐to‐file bar, were intended to ʺencourage more private enforcement suitsʺ

(quoting S. REP. No. 99‐345, at 23‐24 (1986), reprinted in 1986 U.S.C.C.A.N. 5266,

5288‐89)). ʺCongress presumably would not have intended a relatorʹs fate to

depend on chance considerations such as the extent of a particular courtʹs

backlog and the timeliness of a particular courtʹs entry of a dismissal.ʺ Shea,

.8 Perhaps some relators may be barred from bringing meritorious

claims when their actions are dismissed and then blocked by the statute of

limitations. That risk, however, is always present when there is a statute of

8 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 Governmentʹs 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 ʺ[t]he plain text of the statute compelsʺ 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.

25

limitations, and it is weighed against countervailing concerns of Congress. See id.

at 932.

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 FCAʹs 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

ʺthe golden mean between adequate incentives for whistle‐blowing insiders . . .

and discouragement of opportunistic plaintiffs.ʺ Springfield Terminal Ry. Co.,

. Additionally, in many circumstances, absent a statute of limitations

issue, the relator will be able to re‐file her action, without violating the first‐to‐

file bar.

26

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

Woodʹs 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 Woodʹs claim

from proceeding. See Shea,

(expressing ʺno view on the potential

applicability of equitable tolling principles if [the relator] refiles his actionʺ).

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.

27