Whistleblower Must be First to File

Handling Whistleblower Cases Nationwide from Newport News, Virginia

As a general rule, for a whistleblower to recover in a False Claims Act case, he or she must be the first to file suit.  This is a statutory requirement  pursuant to 31 U.S.C. Section 3737(b)(5).  Furthermore, there are a few policy reasons typically cited that support the law.  First, the government wants to give incentives to whistleblowers to come forward quickly.  Second, the government wants to discourage “parasitic” suits where individuals come forward once they have learned about someone else filing suit.  Because of the first to file provisions of the statute, there can sometimes be a “race to the courthouse” situation created, often with millions of dollars at stake. This can make life difficult for whistleblower attorneys who need to balance the necessity to file quickly against taking the time to prepare a well researched and thorough complaint.

There are circumstances where a party that files second, or even later, can share in the recovery.  This can occur where the later-filing party has alleged different types or aspects of fraud than the party that filed first.  In such a case, the court performs a claim by claim analysis to determine if the same type of fraud was alleged.  The United States Fifth Circuit recently affirmed this type of analysis on April 16, 2014 in the case of United States ex rel. Smart v. Christus Health.  In this case, Smart was the first to file and asserted that a subsequent whistleblower, Guardiola, was not entitled to share in the recovery.  Smart argued that Guardiola’s claim was a parasitic suit that involved the same hospitals, physicians, time periods, and billing fraud. As a result, she argued that the second suit was barred by the first-to-file rule.   Smart’s claim against Christus Heath was that Christus rented office space at below-market rates to induce doctors to refer patients to its hospital.  This conduct constituted a violation of the False Claims Act Anti-Kickback statute, 42 U.S.C. Sections 1320a-7b(b) and the Stark Law, 42 U.S.C. Section 1395nn.  These statutes prohibit a hospital from giving something of value to physicians in an attempt in induce the referral of patients.

In contrast, Guardiola’s complaint asserted that the hospital committed billing fraud by improperly using inpatient codes for outpatient services to obtain more money from health insurance in violation of the Texas Medicaid Fraud Prevention Act, Tex. Hum. Res. Code Ann. Section 36.001., et. seq.  Smart argued that the allegations in her complaint were sufficient to alert the government of the fraud alleged by Guardiolas, and that therefore, Guardiolas could not share in the recovery.  The court rejected this argument and agreed with the lower court that the two complaints did not have the same essential elements.

This case is yet another illustration of how whistleblower counsel must file suit quickly, but also must research the matter well before they file so that they do not miss other possible aspects of ongoing fraud.  If you have any knowledge of fraud against the government, feel free to contact us for a free confidential consultation.  The rewards can be significant with the relator receiving a portion of the recovery.  Also, there is a “first to file rule”  that can prevent you from recovering if someone else files before you so it is important to consult with an attorney quickly.