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D.C. Circuit Court Upholds Dismissal of Verizon FCA Suit

In this qui tam action, Relator, Stephen Shea ("Shea"), alleged that Verizon Communications, Inc. ("Verizon") overbilled the United States General Services Administration ("GSA"), in violation of the False Claims Act ("FCA"). Judge Gladys Kessler of the United States District Court for the District of Columbia ruled that Shea, who has previously brought a qui tam case against Verizon, was prevented from bringing this second case against the company by the "first-to-file" rule.1 The first-to-file rule holds that if a person brings an action under the FCA, no other person or entity may intervene other than the Government to "bring a related action based on the facts underlying the pending action."2 The District Court held that this rule does, in fact, apply "to the same relator who later files a second related action."3 The D.C. Circuit Court agreed.

In the first case Shea brought against Verizon, he alleged that the telecommunications giant knowingly charged various illegal surcharges to the United States when providing services for the GSA. He argued that the two Verizon cases were different because they "involve different contracts and different agencies." The District Court found that since the second case Shea brought also pertained to illegal surcharges levied by Verizon, "the government already would be equipped to investigate based on the [earlier-filed] [c]omplaint."4 The D.C. Circuit Court agreed that the claims were related "within the meaning of the FCA.... to Shea's earlier action... and that the [first-to-file] bar remains effective even after the first action is no longer pending."5

Shea argued that it did not matter if the first-to-file rule applies to the same relator or to similar underlying facts because he filed his second amended complaint in his second case after the first case had been settled and, hence, was no longer "pending."6 The District and Circuit Courts held that the first case was pending when the second action began because the first case had not settled before he filed a complaint in the second case.

The D.C. District Court noted that when enacting the FCA, Congress wanted to "walk a fine line between encouraging whistle-blowing and discouraging opportunistic behavior."7 That is the reason that Congress included the first-to-file rule as part of the FCA. The D.C. Circuit Court has also held that the rule has the purpose of assisting the government in addressing fraudulent behaviors that it cannot pursue on its own, while simultaneously "'rejecting suits which the government is capable of pursuing itself.'"8 "Once the government is put on notice of its potential fraud claim, the purpose behind allowing qui tam litigation is satisfied."9 In the case Kellogg Brown & Root Services, Inc. v. U.S. ex rel. Carter, U.S. 2014, No. 12-1497, the Supreme Court will address the issue of whether the first-to-file rule "functions as a 'one case-at-a-time' rule allowing an infinite series of duplicative claims so long as no prior claim is pending at the time of filing."10 This may have an impact on whether or not the Supreme Court will hear Shea's case about the first-to-file rule.

If you have any questions regarding this subject or this posting, please contact James E. Miller (jmiller@sfmslaw.com) or Michael Ols (mols@sfmslaw.com). We can also be reached toll-free at (866) 540-5505.

Shepherd Finkelman Miller & Shah, LLP is a law firm with offices in California, Connecticut, Florida, New Jersey, New York, Pennsylvania and Wisconsin. SFMS also maintains an affiliate office in London, England and is an active member of Integrated Advisory Group (www.iaginternational.org), which provides us with the ability to provide our clients with access to excellent legal and accounting resources throughout the globe. For more information about our firm, please visit us at www.sfmslaw.com.

Sources:

1. www.law360.com/governmentcontracts/articles/572540?utm_source=shared-articles&utm_medium=email&utm_campaign=shared-articles

2. U.S. ex rel. Stephen M. Shea v. Verizon, 904 F. Supp. 2d 28, (U.S.D.C. 2012)

3. U.S. ex rel. Stephen M. Shea v. Verizon, 904 F. Supp. 2d 28, (U.S.D.C. 2012)

4. U.S. ex rel. Stephen M. Shea v. Verizon, 904 F. Supp. 2d 28 (2012)

5. U.S. ex rel. Stephen M. Shea v. Cellco Parntership Doing Business as Verizon Wireless, 748 F.3d 338 (C.A.D.C 2014)

6. http://www.law360.com/governmentcontracts/articles/572540?utm_source=shared-articles&utm_medium=email&utm_campaign=shared-articles

7. U.S. ex rel. Springfield Terminal Ry. V. Quinn, 14 F. 3d 645 (C.A.D.C. 1994)

8. U.S. ex rel. Stephen M. Shea v. Verizon, 904 F. Supp. 2d 28 (U.S.D.C. 2012)

9. Gynberge v. Koch Gateway Pipeline Co., 390 F. 3d 1276 (10th Cir. 2004)

10. www.scotusblog.com/case-files/cases/kellogg-brown-root-services-inc-v-united-states-ex-rel-carter/

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