Multiple Filings Should Not Have Doomed Relators

A worker and his union filed a False Claims Act case as joint relators, alleging that several defendants caused the Springfield Metropolitan Housing Authority to present false claims to the United States regarding construction contracts. A disagreement arose between the two relators when the worker wished to continue efforts to investigate the fraud during the seal period. While the first case was still under seal, he filed a second False Claims Act case regarding the same conduct jointly with a third relator. After the United States declined to intervene in both cases, the worker and the union dismissed the first case. The second case was eventually served on the defendants. These facts are discussed in the opinion United States ex rel. Moore v. Pennrose Props., LLC, 2015 U.S. Dist. LEXIS 37373, 2015 WL 1358034 (S.D. Ohio Mar. 24, 2015).

The defendants moved to dismiss the second case.

United States District Judge Walter Rice correctly rejected the defendants’ argument that the relators’ provision of the disclosure statement to the Government and filing of the first qui tam case under seal were public disclosures that barred the second case. These actions happen in every False Claims Act case and so if they constituted public disclosures, every relator would have to qualify as an original source to proceed with the case — which not what the False Claims Act provides. The Court also pointed out that a False Claims Act case is filed under seal and remains non-public until the seal is lifted.

The Court also rejected the defendants’ argument that the worker who filed the first case with the union necessarily breached the seal by discussing the fraud with his co-relator in the second case. The seal is not breached by merely discussing the fraud with another party, so long as the existence of the case remains secret.

However, the Court dismissed the second case anyway, holding that the False Claims Act’s first to file bar prohibited the relators in the second case from proceeding because the first case was pending at the same time that the second case was pending.

There may be a ray of light for these relators. Two months after their case was dismissed, the Supreme Court held that a first filed action no longer counts as “pending” for purposes of application of the False Claims Act’s first to file bar once the first filed action is dismissed. Kellogg Brown & Root Servs. v. United States ex rel. Carter, 135 S.Ct. 1970, 1978 (2015) (“an earlier suit bars a later suit while the earlier suit remains undecided but ceases to bar that suit once it is dismissed”).

Even if these relators successfully turn this decision around, this result could have been avoided had the worker not filed a second case, and instead proceeded with the first case with or without co-relators. The False Claims Act is full of pitfalls. If you need help navigating them, or if you know of fraud against the Government, feel free to contact us.