Whistle-Blower Can Only Bring One Suit Per Fraud Scheme, Court Holds

The U.S. Appeals Court for the Washington, D.C., circuit has barred a whistle-blower, who won nearly $20 million in a lawsuit against Verizon, from bringing a second lawsuit with similar facts and allegations.

According to the opinion, in 2007, Stephen Shea, a communications consultant, filed a lawsuit under the qui tam, or whistle-blower, provision of the False Claims Act against Verizon. His lawsuit alleged Verizon had engaged in a "billing platform" that involved Verizon overcharging corporate clients and the General Services Administration for state, local and federal taxes and surcharges, according to the opinion.  

Verizon never admitted liability, but agreed to settle the case with the government. As the whistle-blower, Mr. Shea received $19.3 million of the total $93 million settlement, according to the opinion. 

In 2008, Mr. Shea filed another lawsuit against Verizon under the False Claims Act's qui tam provision. The second lawsuit alleged different government agencies and different contracts were involved in the same "billing platform," according to the opinion.

In 2012, a federal court dismissed the complaint under Rule 12(b)(1) of the Federal Rules of Civil Procedure, or the "first-to-file" bar. The rule states "When a person brings an action under [the False Claims Act], no person other than the government may intervene or bring a related action based on the facts underlying the pending action." The court further held the allegations made in the first case provided the government with the facts it needed to investigate the allegations made in the second lawsuit filed by Mr. Shea, according to the opinion.

Mr. Shea filed an appeal, arguing the two cases did not involve identical facts and allegations and therefore the first-to-file bar should not apply, but the appeal's court ruled against Mr. Shea. The court held the two complaints "allege the same fraudulent scheme," and the government had the information it needed to investigate the scheme from the allegations made in the first lawsuit, according to the opinion.  

Although the fraud scheme involved in these cases did not involve the healthcare industry, the court's holding is important to hospitals because it applies to any FCA case. If a whistle-blower attempts to bring a second lawsuit against a healthcare provider alleging a similar fraud scheme as a previous case, the court's holding supports the dismissal of the second case, even when the two cases are not identical.

More Articles on False Claims Act:

Judge Recommends Throwing Out One Claim in $522M FCA Case
5 Recent FCA Employee Whistle-Blower Case Settlements 

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