Federal Court in South Carolina Holds That A Complaint Is Not Barred by The FCA’s First-to-File Rule If the Earlier-Filed Complaint was Voluntary Dismissed

The United States District Court for the District of South Carolina held that the False Claims Act’s (FCA) first-to-file rule requires that another complaint must be pending. Thus, the voluntary dismissal of an earlier-filed complaint clears the way for subsequent complaints, and no comparison of content of the complaints is necessary to allow the later-filed case to proceed.

The FCA’s first-to-file bar provides that when a private person brings an FCA action, “no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.”

In United States ex rel. Denk v. PharMerica Corp., in July 2009, Relator Jennifer Denk filed a qui tam action alleging that PharMerica Corp. dispensed medicine with inadequate prescriptions. In January 2010, Denk amended her complaint to include kickback allegations. In May 2013, after an almost three year investigation, the government notified the court of its decision to intervene on Denk’s claims related to inadequate prescriptions, but not to intervene in Denk’s kickback claims. In November 2013, Denk voluntarily dismissed her kickback claims with prejudice.

In a separate qui tam action, United States ex rel. Kurnik v. PharMerica Corp. and Kindred Healthcare, Inc., Relator Frank Kurnik alleged that PharMerica and Kindred solicited and received illegal kickbacks to induce doctors to prescribe certain drugs. Kurnik filed his original complaint in June 2011 and filed an amended complaint in April 2014. Thus, when Kunik filed his amended complaint (in April 2014), Denk’s kickback claims were no longer pending (as she dismissed them on November 20, 2013).

In the Kurnik case, PharMerica and Kindred Healthcare filed a motion to dismiss, alleging that Kurnik’s complaint was barred by the first-to-file rule. The district court analyzed the first-to-file rule and held that it applies only when the first-filed complaint is still pending in court. Denk voluntarily dismissed her kickback claims before Kurnik filed his kickback claims, and as such, when Kurnick filed his kickback claims, there was no pending action on the kickback claims. In other words, though Denk was first-to-file on the kickback claims, Kurnik is not barred by the first-to-file rule and can proceed with his kickback claims because Denk voluntarily dismissed those claims before Kurnik filed his kickback claims. Additionally, since the court resolved the motion to dismiss by analyzing whether Denk’s complaint was “pending” at the time that Kurnik filed his kickback claims, the court did not engage in any further analysis comparing the complaints.

Tagged: False Claims Act (FCA), Fraud Types, Medicare Fraud, Whistleblower Laws (Federal)