Opinion ID: 2814858
Heading Depth: 3
Heading Rank: 2

Heading: First-to-File Bar

Text: The district court concluded that, even if Relators qualified as original sources, Godecke’s claims would be precluded by the first-to-file bar. Godecke, 2012 WL 11979268, at . Because this is a legal determination that did not rest on factual findings, we review de novo. See Campbell v. Redding Med. Ctr., 421 F.3d 817, 820 (9th Cir. 2005). On appeal, Godecke does not contest the district court’s conclusion that her first qui tam claim is precluded by the first-to-file bar; it overlaps with Hartpence’s claims, which all 20 U.S. EX REL. HARTPENCE V. KINETIC CONCEPTS relate to misuse of the KX modifier. Godecke points out, however, that her second and third claims relate to violations of a different Medicare program requirement—the requirement that a supplier receive Detailed Written Orders before delivering a V.A.C. pressure wound pump. Godecke argues that she is the first to file on the claims addressing the lack of DWOs and the resulting receipt of improper overpayments. We agree. The first-to-file bar provides: “When a person brings an action under this subsection, 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). We treat the first-to-file bar as jurisdictional. Lujan, 243 F.3d at 1186–87. We have clarified that the facts underlying the later-filed complaint need not be “identical” to those underlying the earlier-filed complaint for the later complaint to be barred. Id. at 1183. We reasoned: Limiting § 3730(b)(5) to only bar actions with identical facts would be contrary to the plain language and legislative intent: (1) using a narrow jurisdictional bar, such as an identical facts test, would decrease incentives to promptly bring qui tam actions; (2) multiple relators would expect a recovery for the same conduct, thereby decreasing the total amount each relator would potentially receive and incentives to bring the suit; and (3) a narrow identical facts bar would encourage piggyback claims, which would have no additional benefit for the government . . . U.S. EX REL. HARTPENCE V. KINETIC CONCEPTS 21 Id. at 1189. We reiterated that the first-to-file bar, enacted as part of the 1986 amendments, has two purposes: “to promote incentives for whistle-blowing insiders and prevent opportunistic successive plaintiffs.” Id. at 1187. Lujan has been our principal opportunity to explore the contours of the first-to-file bar. In Lujan, relators William Schumer and Linda Lujan filed separate qui tam actions against Hughes Aircraft alleging fraudulent use of “commonality agreements.” Id. at 1183.7 Hughes used these agreements to allocate costs among four defense contracts. Id. at 1185–86. The contracts included the “B2 contract,” which involved the development of an airplane radar system. Id. at 1185. Schumer’s complaint alleged that Hughes used the commonality agreements “to misbid, misallocate, and mischarge costs among the four contracts.” Id. at 1886. Schumer claimed, for example, “that Hughes charged the development of a radar signal processor to the F15 contract but then also charged these development costs to the F14, F18, and B2 contracts.” Id. Lujan alleged that “Hughes routinely mischarged costs associated with the design and development of various B2 radar system contracts.” Id. Thus, Lujan’s claims related to misconduct within the B2 radar contracts, rather than across all four defense contracts. Id. We held that the district court did not err when it determined that Lujan’s and Schumer’s claims were based on the same material facts. Id. at 1190; see also Hughes Aircraft, 162 F.3d at 1033 (“The Schumer and Lujan allegations both involve cost-sharing transactions among and 7 These are contracts that “permit each program using a common component to share in some portion of its development and production costs.” United States ex rel. Lujan v. Hughes Aircraft Co., 162 F.3d 1027, 1032 (9th Cir. 1998). 22 U.S. EX REL. HARTPENCE V. KINETIC CONCEPTS within the radar system programs on four aircraft. The two claims involve the same . . . agreements and the same radar program contracts.”). Relying on Lujan, the district court concluded that Godecke’s and Hartpence’s complaints involved the same “material elements.” Godecke, 2012 WL 11979268, at . It noted that the complaints named the same defendants, arose out of the same time period, involved KCI’s billing practices for the same therapy device, alleged incorrect use of the same billing codes (the KX modifier), shared “100 nearly identical paragraphs,” and were drafted by the same counsel. Id. The district court reasoned that “the two qui tam actions alleged . . . slightly different variations of false billing for claims submitted for VAC Therapy devices.” Id. at . Thus, it concluded, “Godecke’s later-filed action provided the Government no additional benefit.” Id. We disagree with both the premise and the conclusion. First, we think that Godecke’s complaint is more than a slight variation on Hartpence’s complaint. Godecke’s second claim involves different underlying facts. Whereas Hartpence’s claims all allege knowing misuse of the KX modifier, Godecke’s second claim is based on facts which show KCI’s violation of a different Medicare program requirement—the requirement that a provider receive Detailed Written Orders for the V.A.C. device before beginning to treat patients with the device. While Lujan declined to distinguish between claims that a defense contractor had improperly allocated funds among four government contracts, on the one hand, and within one of those contracts on the other—noting that both claims centered on the same commonality agreements—here the claims are based on different material facts. The rules governing use of KX modifiers and DWOs were disseminated U.S. EX REL. HARTPENCE V. KINETIC CONCEPTS 23 at different times, in different publications, and are plainly treated as separate regulations under the program. We further disagree that Godecke’s action provided no additional benefit to the government. Unaided by Godecke’s complaint, the government may have never discovered that KCI, in addition allegedly to misusing the KX coding system, was allegedly submitting V.A.C. claims before receiving DWOs. The two alleged frauds are materially different: the KX fraud allegations are based on government payment for devices which were used, but unnecessary for treatment, while the DWOs fraud allegations are based on the government paying for devices that were never used at all. The alleged frauds, in short, exist completely independent of one another. Nor can we agree that dismissal of Godecke’s claims would, as the district court found, necessarily serve the dual purposes of the first-to-file bar: “to promote incentives for whistle-blowing insiders and prevent opportunistic successive plaintiffs.” Lujan, 243 F.3d at 1187. First, although it is true that increasing the class of potential qui tam claimants reduces the potential incentive for any individual plaintiff to bring suit, see id. at 1189, allowing claims for related but distinct fraud claims encourages broader investigation and increases the total potential for recovery. Second, dismissal of Godecke’s claim does not serve to discourage opportunistic “piggyback claims, which would have no additional benefit for the government.” Id. Godecke provided information about a different form of fraud, and without that information the government might not have investigated beyond KCI’s fraudulent coding practices. We conclude that Godecke’s second and third claims are based on different material facts than the claims contained in Hartpence’s earlier-filed complaint. Thus, they are not 24 U.S. EX REL. HARTPENCE V. KINETIC CONCEPTS precluded by the first-to-file bar. The district court erred in holding otherwise.8