David Stone, Presentation at 5th Annual Taxpayers Against Fraud Conference, The One Relator Rule Under 31 U.S.C. § 3730(b)(5).

October 28th, 2005

Presented by David S. Stone

Mr. Stone is the Managing Partner at the New Jersey offices of Stone & Magnanini LLP, 150 JFK Parkway, Short Hills, NJ 07078.  He would like to thank Gerald C. Robinson for his assistance in preparing this presentation.

The False Claims Act (“FCA”) limits standing to one relator for each claim alleged in a false claims lawsuit. 31 U.S.C. §3730(b)(5). Historically, disputes between relators on standing issues were set aside until the lawsuit neared resolution. However, recent trends in FCA litigation suggest that determining which relator is the “first-to-file” on each claim is now something that counsel must address as soon as he or she becomes aware of the existence of other relators with claims against the same defendant. While complex cases usually favor a compromised approach by a team of relators and attorneys for the mutual benefit of all relators and the Government, such collaboration is becoming increasingly difficult to negotiate. Absent this type of cooperation, a relator should seek an early determination of the proper relator with standing as to each claim.

  1. The Statutory Language And Congressional Intent

    As noted above, Section 3730(b)(5) of the FCA limits standing to a single relator for each claim:

    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.

    31 U.S.C. § 3730(b)(5) (1986).  This provision was part of the 1986 amendments to the FCA enacted by Congress to encourage more relators to expose and prosecute frauds against the Government.  The goal for Congress was to reach “the golden mean” between providing adequate incentives for legitimate whistleblowers, while discouraging “opportunistic plaintiffs” who provide no significant information to the Government. United States ex rel. Springfield Terminal Railway v. Quinn, 14 F.3d 645, 649 (D.D.C. 1994).

    The 1986 amendment was a marked expansion of the FCA’s existing standing limitations, and reflected a change in the Government’s impressions of relators and false claims litigation in general.  The prior version of the FCA, enacted in 1943, sought to curb abuse by opportunistic relators by eliminating standing for relators in cases where the Government was already aware of the information underlying the lawsuit. Weiss v. Schwartz, 546 F.Supp. 422, 424-26 (N.D.Cal. 1982)(detailing legislative history of 1943 amendments). With this goal in mind, the former Section 232(C) provided:

    The court shall have no jurisdiction to proceed with any such suit brought under clause (B) of this section or pending suit brought under this section whenever it shall be made to appear that such suit was based upon evidence or information in the possession of the United States, or any agency, officer or employee thereof, at the time such suit was brought.

    31 U.S.C. § 232(C)(1943).  The unintended result of this revision, however, limited relator standing to such an extent that even bona fide relators were discouraged or precluded from filing lawsuits.  As a result of this limitation, the Department of Justice concluded in the early 1980’s that it could not effectively discover and prosecute abuses in the Government’s extensive procurement programs that cover everything from military hardware to prescription drugs.

    In an effort to remedy this problem while striking a balance between encouraging meritorious relators and discouraging opportunistic relators, the 1986 amendments allow for only one relator per claim, but allow that relator to remain a party after the Government intervenes (§3730(b)(5)), and also allow the relator to remain in the case if there has been public disclosure of the information so long as the relator is a qualified “original source” (§3730(e)(4).  United States ex rel. Stinson, Lyons, Gerlin & Bustamante, P.A. v. Prudential Ins. Co., 944 F.2d 1149, 1152-54 (3d Cir. 1991) (recounting history of FCA from 1863 inception through 1986 amendment).

  2. Judicial Interpretations

    As amended in 1986, the FCA provides that once a relator files a false claims lawsuit, subsequent persons may not “bring a related action based on the facts underlying the pending action.” 31 U.S.C. § 3730(b)(5).  Since the enactment of this provision, however, courts have struggled to define what qualifies as a “pending action” and whether or not later-filed actions are “based on the facts underlying” the “pending action.”

    1. The “First-to-File” Misnomer

      In interpreting the “pending action” aspect of Section 3730(b)(5), courts adopted the phrase “first-to-file” to denote the provision’s effect of granting standing to only one private relator per claim. United States ex rel. Erickson v. Am. Inst. of Biological Sciences, 716 F.Supp. 908, 918 (E.D.Va. 1989) (referring  to Section 3730(b)(5), the court asserted that “[s]imply put, this provision establishes a first in time rule”); United States ex rel. Merena v. SmithKline Beecham Corp., 52 F.Supp. 2d 420 (E.D.Pa. 1998) (first case referring to §3730(b)(5) as a “first-to-file” bar to later cases), rev’d on other grounds, 205 F.3d 97 (3d Cir. 2000).  Unfortunately, the phrase “first-to-file” emphasizes only the temporal aspect of the rule, and ignores the requirement that the first-filed complaint, like all complaints, must satisfy all applicable pleading requirements to invoke the court’s jurisdiction.  The case law discussed below highlights the shortcoming of this strictly chronological approach.

      (1) “First-to-File” and the “Original Source” requirement

      Two recent cases from the United States Court of Appeals for the Ninth Circuit highlight both the evolution of the temporal “first-to-file” approach and the shortcomings inherent in its application. After adopting a strictly sequential approach to its “first-to-file” analysis, the Ninth Circuit reversed course when presented with a first-filed complaint that seemingly failed the FCA’s “original source” requirement with regard to the contested claim.

      In United States ex rel. Lujan v. Hughes Aircraft Co., 243 F.3d 1181, 1183 and 1187-88 (9th Cir.), cert. denied, 534 U.S. 1040 (2001) (Lujan III), the Ninth Circuit examined the chronological tone of the emerging case law regarding Section 3730(b)(5) and concluded that the provision created an “exception-free, first-to-file bar” to any future relator’s claims.  The limitations of this absolute approach, however, were made clear to the court this summer in United States ex rel. Campbell v. Redding Medical Ctr., 421 F.3d 817 (9th Cir. 2005).  In Campbell, the Government moved to dismiss a later-filed complaint to gain the court’s approval of a settlement agreement benefiting the first relator, before the second relator had an opportunity to challenge the initial complaint as being based solely on public information. Id. at 819; see also Appellant’s Reply Brief at 1-4 (June 3, 2004).  The District Court dismissed the later-filed complaint, holding that allegations that the first complaint was jurisdictionally deficient were irrelevant under the “exception-free” approach adopted by the Ninth Circuit in Lujan III.  421 F.3d at 819.  On appeal, the Ninth Circuit clarified its ruling in Lujan III, holding that Section §3730(b)(5) will not bar a later-filed complaint where the initial complaint is a jurisdictionally deficient “placeholder complaint.” Id. at 821-22, 825.  Consistent with this ruling, the Ninth Circuit remanded the matter to the District Court for a determination of the first relator’s qualifications as an “original source.” Id. at 825.  If the first relator was not an “original source” on the contested claim, the first-filed complaint would not have been sufficient to invoke the court’s jurisdiction over the claim, and thus would not preclude the second relator’s allegations. Id.  As these cases demonstrate, Ninth Circuit case law has now evolved from a rigid, chronological interpretation of “pending action” to a more flexible pronouncement that emphasizes that winning the race to the courthouse is meaningless unless you also hold the key to invoke the court’s jurisdiction.

      (2) “First-to-File” and Federal Rule of Civil Procedure 9(b)

      While the Campbell decision focused on the “original source” requirement for invoking a court’s jurisdiction under the FCA, Federal Rule of Civil Procedure 9(b) may also be a factor to consider when multiple relators exist, since it too imposes jurisdictional prerequisites for claims of fraud. The following cases illustrate this point:


      • United States ex rel. LaCorte v. SmithKline Beecham Clinical Labs., Inc.,
        149 F.3d 227, 234-35 (3d Cir. 1998) (noting that Fed. R. Civ. P. 9(b) would provide sufficient safeguard against an opportunistic placeholder complaint, but nonetheless barring later-filed, seemingly more detailed complaints).
      • United States ex rel. Clausen v. Lab. Corp. of Am., Inc.,
        290 F.3d 1301, 1312 (11th Cir. 2002) (dismissing FCA claim for failure to satisfy Rule 9(b)), cert. denied, 537 U.S. 1105 (2004).
      • United States ex rel. Karvelas v. Melrose Wakefield Hosp.,
        360 F.3d 220, 233 (1st Cir.) (requiring compliance with Rule 9(b) regarding allegations concerning the dates, content and amount of the claims charged to the Government), cert denied, 125 S. Ct. 59 (2004).
      • United States ex rel. Totten v. Bombadier Corp. et. al,
        286 F.3d 542, 551-52 (D.C. Cir. 2002) (following Second, Fifth and Ninth Circuit courts’ holdings that Rule 9(b) applies to FCA complaints).
      • United States ex rel. Campbell v. Redding Medical Ctr,
        421 F.3d 817 (9th Cir. 2005) (acknowledging applicability of Rule 9(b) to qui tam complaints).
    2. When Are Later Claims “Based on the Facts” Of Other Pending Actions.

      When faced with two complaints that otherwise satisfy the jurisdictional prerequisites of a claim under the FCA, a court must determine whether the second claim is a “related action based on the facts underlying” the first claim.  The analysis necessarily requires a “snapshot” examination of the complaints at the time the second complaint is filed, without regard to any later amendments. United States ex rel. Grynberg v. Koch Gateway Pipeline, 390 F.3d 1276, 1279 (10th Cir. 2004).  In crafting a test to facilitate this analysis, courts have almost uniformly rejected an “identical facts” test on the grounds that the provision refers to a “related” action rather than an “identical” action. United States ex rel. LaCorte v. SmithKline Beecham Clinical Labs., Inc., 149 F.3d 227, 232-33 (3d Cir. 1998).  As set forth below, most courts have adopted some form of the “material facts” or “material elements” test first espoused by the Third Circuit in LaCorte:

      • United States ex rel. LaCorte v. SmithKline Beecham Clinical Labs., Inc., 149 F.3d 227, 234-35 (3d Cir. 1998) (Rejecting the “identical claims” test  and holding: (1) “if a later allegation states all the essential facts of a previously-filed claim, the two are related and section 3730(b)(5) bars the later claim;” and (2) a later-filed action will be barred if it alleges the “same elements of a fraud” as an earlier complaint.  While the court used the terminology “essential facts,” “material facts,” “same material elements” and “essential element” interchangeably in its analysis, the approach adopted is often referred to as the LaCorte “material facts” or “material elements” test) (emphasis added).
      • United States ex rel. Lujan v. Hughes Aircraft Co.,
        243 F.3d 1181, 1183 and 1189 (9th Cir.), cert. denied, 534 U.S. 1040, 122 S.Ct. 615, 151 L.Ed.2d 538 (2001) (Lujan III) (noting that provision refers to “related” rather than “identical” actions, and holding that §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”)(emphasis added).
      • United States ex rel. Hampton v. Columbia/HCA Healthcare Corp.,
        318 F.3d 214, 218 (D.C. Cir. 2003) (adopting “same material elements” test as set forth in Lujan III for interpreting whether second complaint was “based on the facts underlying” the earlier action)(emphasis added).
      • United States ex rel. Erickson v. Am. Inst. Of Biological Science,
        716 F.Supp. 908, 918 (E.D.Va. 1989) (adopting two-part test: “A subsequently filed qui tam suit may continue only to the extent that it is (a) based on facts different from those alleged in the prior suits and (b) gives rise to separate and distinct recovery by the government”).
      • United States ex rel. Capella v. United Technologies Corp.,
        No. 3:94-CV-2063 (EBB), 1999 WL 464536 at *8 (D.Conn. 1999) (holding that a later claim is barred unless “(1) it alleges a different type of wrongdoing, based on different material facts than those alleged in the earlier suit; and (2) it gives rise to a separate recovery of actual damages by the government,”  In connection with this inquiry, the court discussed so-called “host-parasite” analysis under §3730(b)(5) and considered whether the later suit “receives support or advantage without offering any useful or proper return”).
      • United States ex rel. Ortega v. Columbia Healthcare, Inc.,
        240 F.Supp.2d 8, 12-13 (D.D.C. 2003) (combining Erickson and Capella tests to create the following test: “A later-filed qui tam complaint is barred unless (1) it alleges a different type of wrongdoing, based on different material facts than those alleged in the earlier suit; and (2) it gives rise to separate and distinct recovery by the government”).

      While the “material elements” approach appears simple because it requires nothing more than comparing two competing complaints, its practical application has yielded inconsistent results as courts disagree over how comprehensive and meticulous this comparison should be. Some courts prefer a sweeping approach, finding that if the first complaint would have led the Government to find abuses set forth in later complaints, the first relator will be deemed the proper relator for all of the claims.  In this vein, courts have held that later claims alleging the same abuses at geographically distant locations, or alleging additional methods and techniques by which the fraud was perpetrated were simply “details” that would have been discovered as a result of the allegations in the first complaint.  Other courts, while recognizing the expedient nature of these approaches, have criticized them for creating a windfall for the first relator at the expense of other relators who may have brought valuable information to the table.

      • United States ex rel. Grynberg v. Koch Gateway Pipeline,
        390 F.3d 1276, 1279 (10th Cir. 2004) (later complaint alleging additional methods and techniques of committing fraudulent measurements of natural gas and underpayment of royalties was insufficient to state a separate claim,  and was therefore barred by §3730(b)(5)).
      • United States ex rel. Hampton v. Columbia/HCA Healthcare Corp.,
        318 F.3d 214, 218 (D.C. Cir. 2003) (holding that broad allegations of corporation-wide fraud contained in first-filed complaint barred later complaint asserting detailed allegations of similar fraud in a specific region of the company’s operations, characterizing the later allegations as “mere variations on the fraud” set forth in the first complaint).
      • Palladino v. VNA of Southern New Jersey, Inc.,
        68 F.Supp.2d 455, 477 (D.N.J. 1999) (barring later complaint alleging same misconduct at different geographic location of defendant’s operations).
  3. Multiple Relators – An Increasingly Common Conundrum

    As false claims lawsuits become more complicated and more widespread, disputes among multiple, “intervening” relators regarding standing will likely increase.  Unfortunately, only one reported decision thoroughly discusses the nature of the prohibition against a person other than the Government “intervening” to become an additional relator.  United States ex rel. Precision Co. v. Koch Ind., Inc., 31 F.3d 1015 (10th Cir. 1994) (“Precision II”).  In Precision II, the United States Court of Appeals for the Tenth Circuit concluded that the FCA only contemplated interventions of the type proscribed by Fed. R. Civ. P. 24(b)(2), and therefore only prohibited permissive interventions in a relator’s action by unrelated parties. Id. at 1017-18.  Because this conclusion addressed only the corporate relator’s request to its shareholders as co-relators, it is arguably too narrow to accommodate other situations.  Regardless, the court’s approach overlooked other considerations as well, specifically the lack of jurisdictional authority allowing a putative corporate relator to cure the jurisdictional defects of its complaint (the corporation was not an “original source”) by amending the complaint to add shareholders as relators.

    Nothing in Section 3730(b)(5), however, precludes the filing of a qui tam action by one or more friendly relators, or from the consolidation of two or more related actions.  Indeed, the courts have come to recognize that “[o]ften several [relators] together may each contribute a piece of the mosaic.” United States ex rel. Garibaldi v. Orleans Parish Sch. Bd., 21 F.Supp.2d 607, 617 (E.D.La. 1998).  The following cases illustrate the practice of two or more persons filing a claim together and the practice of courts consolidating related claims against the same defendant:

    • United States ex rel. LaCorte v. SmithKline Beecham Clinical Labs., Inc.,
      149 F.3d 227, 230-31 (3d Cir. 1998) (noting that relator Grossenbacher’s action was later joined by relator Robinson; that relator Spear’s action was commenced with two other co-relators; and that both of these actions were consolidated with the first action filed by relator Merena).
    • United States ex rel. Hampton v. Columbia/HCA Healthcare Corp.,
      318 F.3d 214, 215 (D.C. Cir. 2003) (relator Hampton’s case and 29 others from various districts across the country transferred for consolidated pretrial proceedings).
  4. Creating a Mosaic of Worthy Relators

    Rather than expending resources quarreling among themselves, relators may find it advantageous to agree to work together at the outset of a false claims lawsuit.  This can be done even where some of the relators remain anonymous and complaints remain under seal.  Under such an agreement, relators might agree:

    • Not to assert jurisdictional or other dispositive challenges against one another under §3730(e)(4)(B), §3730(b)(5), or Fed. R. Civ. P. 9(b).
    • To share all common costs equally.
    • To share all recoveries equally, or according to specific percentages.
    • That counsel will be paid under fee agreements negotiated with their respective client.
    • That dismissal of a relator will not affect the agreement, and particularly that the attorney for the dismissed party will continue as part of the team and be entitled to payment of fees and costs.
    • To resolve all disputes arising under the agreement by alternate dispute resolution.
    • That the agreement is binding whether or not the United States Government intervenes.
  5. Securing Rights as Against Opportunists: Avoid Campbell’s Procedural Nightmare

    In the years following the 1986 Amendments to the FCA, cases typically settled quickly if the Government intervened.  As a result, it was not until the parties’ presented their proposed settlement to the court for approval that the multiple relators would cross-move to determine whether their complaints asserted more than one cognizable claim, and to determine who the proper relator was for each claim.  However, in Campbell, the Government departed from this recognized practice and moved to dismiss the second relator before he had the chance to challenge the standing of the first relator, whose skeletal “placeholder complaint” was later found to be based upon publicly disclosed information. 421 F.3d at 824-25.  Although there may be grounds to challenge the Government’s standing to make such a motion if it does not directly affect its interests, 2 the lesson of Campbell is that a relator can no longer risk waiting for the case to be resolved before addressing the first-to-file issue.

    Relators, however, are somewhat limited in their ability to enforce their rights with regard to other relators because complaints are filed under seal and there is no central database where relators’ counsel can discover whether other claims are filed against the same defendants.  While a relator can move the court for partial unsealing of a case involving the same defendants in order to assess relative rights, counsel must first be apprised of the existence of the case.  It is thus often good practice to inquire about the existence of other “related” suits with the DOJ, because the Government can seek a partial unsealing of complaints and disclose the existence of “related” suits to relators’ counsel.

    2 Arguably, the U.S. government’s interests are not affected by a determination of which relator has standing, unless it impacts the size of the relator’s share.


    The FCA rule granting standing to only one relator per claim is an issue that must be addressed as soon as counsel becomes aware of other relators with claims against the same defendant.  Although the right is exclusive, the realities of complex cases may counsel compromising one’s exclusivity in favor of leveraging the knowledge and efforts of a team of relators and attorneys for the mutual benefit of all relators and the Government.  Absent a spirit of cooperation among relators, however, a relator should consider seeking an early determination of the proper relator with standing as to each claim.