Can a Whistleblower in an Existing Qui Tam Case Add A Co-Whistleblower to the Action?

In the life cycle of a qui tam case, it is common for a whistleblower (also referred to as a “relator”) to learn that another whistleblower has brought a qui tam action against the same defendant for the same or a substantially similar fraudulent scheme. For the second-filed (or third-filed, and so on) case, the “first-to-file bar” may preclude later-filed actions from proceeding against the same defendant for the same alleged fraud. When confronted with this situation, if the whistleblowers in the related cases offer complementary information toward proving the alleged fraud, the whistleblowers will often enter into private relator-sharing agreements and join forces to litigate their actions together. Doing so, however, gives rise to a host of procedural questions, not the least of which is what effect, if any, will the first-to-file bar have on the relators’ decision to jointly litigate their cases.

For instance, imagine a scenario where the first-to-file relator brought its action in one federal district court, and the second-to-file relator initiated its action in another. If the United States declines to intervene in both actions, and the two relators decide to jointly litigate their cases, the question becomes how can and how should the whistleblowers proceed? Can one relator voluntarily dismiss its case and the other relator move for leave to amend its complaint to add the voluntarily dismissed relator? Does such a course of action implicate the first-to-file rule?

There are few appellate cases that address the question of whether the first-to-file rule precludes the addition of a second relator to an existing case. And federal district courts have come out both ways on this issue with several courts concluding that adding a relator to an existing case triggers the first-to-file bar, and other courts allowing for such amendments under Federal Rule of Civil Procedure 15 (amendments to pleadings), but not Rule 24 (intervention by a non-party).

The False Claims Act’s (“FCA”) first-to-file rule provides: “When 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.” 31 U.S.C. § 3730(b)(5). The principal circuit court case addressing the issue of whether additional relators may be added to an existing qui tam case—United States ex rel. The Precision Co. v. Koch Indus., Inc., 31 F.3d 1015 (10th Cir. 1994)—holds that Rule 15 amendment in an FCA case, unlike Rule 24 intervention, does not implicate the first-to-file bar where the relators are either related to one another, or their actions raise common issues of fact and law.

A sampling of the decisions that have been persuaded by the reasoning in The Precision Co. v. Koch Indus., Inc. include:

• United States v. Space Coast Med. Assocs., L.L.P., Case No. 6:13-cv-1068-Orl-22TBS, 2014 WL 12616950 (M.D. Fla. Oct. 22, 2014) (granting Motion to Amend Complaint to Add a Plaintiff-Relator pursuant to Rule 15, allowing first-to-file relator to add second-to-file relator and factual allegations of second-to-file relator’s knowledge of the alleged scheme because “the first-to-file rule does not bar a plaintiff in a False Claims Act case from voluntarily amending his complaint to add another plaintiff-relator, and there are no other valid grounds to deny leave to amend”).

• United States ex rel. Boise v. Cephalon, Inc., Civil Action No. 08-287, 2014 WL 5089671 (E.D. Pa. Oct. 9, 2014) (denying 12(b)(1) motion to dismiss to the extent that defendant argued that the court lacked jurisdiction over the allegations of the subsequently joined relators due to the first-to-file bar because “the first-to-file rule does not apply to the voluntary addition of relators by amended complaint in a pending action where relators have entered into a private agreement regarding the division of potential proceeds from the action”).

• United States ex rel. Fisher v. Homeward Residential, Inc., 2015 WL 3776478 (E.D. Tex. June 17, 2015) (denying defendant’s 12(b)(1) motion to dismiss based on the first-to-file bar by concluding that the first-to-file rule does not apply to voluntarily adding a co-relator to an existing lawsuit and stating policy rationale that “barring a second relator who has been voluntarily added to an existing qui tam action would not advance the purpose of the first-to-file bar. Barring a second relator to an existing suit could have a negative consequence of discouraging voluntary agreements between relators with information concerning related claims against a single defendant and decrease judicial efficiency”).

Examples of decisions that have come out the other way to find that the addition of a relator to an existing qui tam case implicates the first-to-file bar include:

• United States ex rel. Fry v. Guidant Corp., Civil Action No. 3:03-0842, 2006 WL 1102397 (M.D. Tenn. Apr. 25, 2006) (denying in part relator’s Motion for Leave to File a Second Amended Complaint Adding a Relator Party to the extent that relator sought to add a second relator based on the reasoning that the first-to-file bar foreclosed the addition of the second relator, as only the government, and not a private person, can “intervene” in a pending qui tam action under 31 U.S.C. § 3730(b)(5)).

• United States ex rel. Duxbury v. Ortho Biotech Products, L.P., 551 F. Supp. 2d 100 (D. Mass. 2008), aff’d in part, rev’d in part on other grounds, 579 F.3d 13 (1st Cir. 2009) (concluding that first-to-file rule barred second relator added as a co-plaintiff/relator).

• Health Choice Group, LLC v. Bayer Corp., Case No. 5:17-CV-126-RWS-CMC, 2018 WL 3637381, at *7–11 (E.D. Tex. June 29, 2018) (“[A] relator cannot circumvent the first-to-file bar merely by pleading additional details of an alleged fraud already disclosed in an earlier-filed complaint . . . The additional details added in the FAC do nothing to put the Government on notice of new conduct, let alone any fraud. The Court therefore recommends [the added relator] be dismissed as a co-relator in this action.”).

In light of district court decisions coming out both ways and the dearth of controlling appellate cases on the question of whether a whistleblower can add a co-whistleblower to its existing action without implicating the first-to-file bar, whistleblowers and their counsel should carefully consider the potential risk posed by the first-to-file bar and strategize how to jointly litigate their cases without triggering its application.

If you have any questions regarding adding additional relators to an existing qui tam case and the potential first-to-file bar implications of such action, contact the attorneys at Rabin Kammerer Johnson in West Palm Beach at 561-659-7878.