3rd Circuit Holds FCA’s “First to File” Rule Not Jurisdictional

In a recent decision, a three-judge panel of the U.S. Court of Appeals for the Third Circuit held that the “first to file rule” under the False Claims Act (FCA) is not jurisdictional but instead determines whether a complaint properly states a claim.

The original plaintiff in the case was a partnership formed by two doctors and a former pharmaceutical representative for the sole purpose of filing a qui tam action under the FCA.  The partnership alleged that the defendant pharmaceutical companies promoted a particular drug to patients despite knowing that many of them would be genetically immune to its benefits.  After filing the complaint, one of the original partners left the partnership and was replaced by a new partner.  The plaintiff then amended its complaint to name the new partnership as plaintiff.

The defendants subsequently moved to dismiss the amended complaint under the FCA’s “first to file” rule, which states that “[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.”  The defendants argued, and the district court agreed, that the new partnership violated the “first to file” rule by “intervening” in the case on behalf of the original partnership, which had been dissolved.

Upon the plaintiff’s appeal, a Third Circuit panel considered whether adding or substituting relators to a pending qui tam action amounts to the type of “intervention” prohibited by the FCA.  The Third Circuit determined that the plain meaning of the “first to file” rule does not prohibit the type of joinder that occurred in this case, in which an existing party voluntarily brings in a third party.  Instead, the Third Circuit held, in drafting the “first to file” rule, Congress only intended to bar the independent intervention of unrelated third parties entering a case to protect their own interests.

The Third Circuit also addressed the question of whether the “first to file” rule is jurisdictional.  If so, defendants could move to dismiss a complaint for violating the “first to file” rule at any time during the life of the case by claiming the federal court lacks subject matter jurisdiction to hear the merits of the case.  If not, defendants must instead file a motion to dismiss for failure to state a claim and must do so prior to trial.

In determining that the FCA’s “first to file” rule is not jurisdictional, the Third Circuit relied on a Supreme Court rule which instructs that, unless Congress plainly states that a rule is jurisdictional, it should be treated as non-jurisdictional.  The Third Circuit found no such plain statement in the “first to file” rule or surrounding sections of the statute addressing jurisdiction.  With this holding, the Third Circuit has further deepened a circuit split: the First, Second, and D.C. Circuits have also held that the “first to file” rule is not jurisdictional while the Fourth, Fifth, Sixth, Ninth, and Tenth Circuits have held the opposite.

WBK previously wrote about a Second Circuit decision, in which the court also held the “first to file rule” is not jurisdictional, on April 19, 2017.