District Court Applies FCA's First-to-File Rule to Determine Relator's Entitlement to Settlement Proceeds

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On June 23, 2014, a U.S. District Court in Pennsylvania held that the first relator to file a qui tam complaint under the FCA is the only relator eligible to recover a portion of the settlement, notwithstanding the existence of a settlement agreement including multiple relators. U.S. ex rel. Ryan v. Endo Pharm., Inc., Civ. No. 05-3450 (E.D. Pa.).

Three separate relators filed qui tam complaints against Endo Pharmaceuticals, Inc. (Endo) for allegedly promoting off-label uses of the drug, Lidoderm. Peggy Ryan was the first relator to file a complaint in 2005, amending her complaint in 2009. Subsequently, in 2010 and 2011, two other relators filed complaints. On February 21, 2014, the government elected to intervene on behalf of all three relators, who subsequently all entered into a voluntary settlement agreement with the defendant, Endo. The settlement agreement specifically reserved the issue of the relators' entitlement to share in the proceeds of the FCA settlement.

After holding that Ryan's amended complaint, filed in 2009, was pled with sufficient particularity to state a claim under the FCA, the District Court applied the FCA's first-to-file rule to analyze whether the other two relators were entitled to a portion of the settlement proceeds. The FCA's "first-to-file" rule provides that once someone files a claim alleging an FCA violation, "no person other than the Government may intervene or bring a related action based on the facts underlying the pending action." 31 U.S.C. § 3730(b)(5). The court here held that the first-to-file rule blocked the other two relators' claims because the second and third relators failed to provide any "unique essential facts" relating to the alleged fraudulent acts and/or to raise any new claims that were distinct from Ryan's claims. Thus, the court held that Ryan was the only relator entitled to share in the settlement proceeds.

A copy of the court's opinion is available here.

Reporters, Rebecca Gauthier, Summer Associate, Washington, D.C., + 1 202 626 9238, rgauthier@kslaw.com and Susan Banks, Washington, D.C., + 1 202 626 2953, sbanks@kslaw.com

 

Topics:  False Claims Act, First-to-File, Qui Tam, Settlement

Published In: Civil Procedure Updates, Civil Remedies Updates, Health Updates, Science, Computers & Technology Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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