D.C. Circuit Interprets the First-to-File Rule Narrowly
A decision this week from the D.C. Circuit shed light on three important issues. United States ex rel. Heath v. AT&T, Inc., No. 14-7094 (D.C. Cir. June 23, 2015). In 2008, the appellant, Todd Heath, filed an FCA qui tam suit against Wisconsin Bell, Inc., a wholly owned subsidiary of AT&T. In that suit Heath alleged that certain employees of Wisconsin Bell made affirmative misrepresentations to E-Rate schools and libraries within Wisconsin. In 2011, Heath filed a separate suit against AT&T alleging a corporate-wide institutional scheme that defrauded libraries and schools under the E-Rate program in seventeen states and three cities. In this second suit, AT&T moved to dismiss Heath’s complaint under the first-to-file bar and Rule 9(b).
First, the court held that the first-to-file rule is not jurisdictional. In doing so, the court specifically disagreed with the First and Fourth Circuits’ conclusion that the rule is jurisdictional. See United States ex rel. Ven-A-Care of the Florida Keys, Inc. v. Baxter Healthcare Corp., 772 F.3d 932 , 936 (1st Cir. 2014); United States ex rel. Carter v. Halliburton Co., 710 F.3d 171 , 181 (4th Cir. 2013).
Second, the court held that the first-to-file rule did not bar Heath’s complaint against AT&T. The decision focused on the fact that Heath’s 2008 complaint discloses only the “rogue actions of individuals within a single AT&T subsidiary and their specific, overt misrepresentations.” Whereas, the second complaint alerted the United States to “a nationwide scheme centered in AT&T’s corporate headquarters.” The court summarized this distinction in a notable illustration: “A single broken branch does not mean that the entire tree is diseased.”
Finally, the court found that Heath’s complaint was sufficiently detailed under Rule 9(b) because it laid out the nature of the scheme, the governmental program at issue, the specific forms on which the misrepresentations were implicitly conveyed, the particular falsity in the submission’s content, its materiality, the means by which AT&T concealed the fraud, and the timeframe of the fraud. There is no need, the court said, to identify specific individuals who perpetrated the fraud or to set forth representative samples of the fraud.