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No. 2015-01

IN THE

Supreme Court of the United States

__________

UNITED STATES EX REL. KLEIN, Petitioner,

V.

OSBORN LABORATORIES, INC. Respondent.

__________

On Petition for Writ of Certiorari to the United States Court of Appeals

for the Thirteenth Circuit __________

PETITION FOR A WRIT OF CERTIORARI

__________

RECORD 2015 Julius H. Miner Moot Court Competition

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(ORDER LIST: 572 U.S.)

Wednesday, January 14, 2015 15–01 UNITED STATES EX REL. KLEIN V. OSBORN LABORATORIES, INC.

The petition for a writ of certiorari is granted and the Thirteenth Circuit’s mandate is stayed pending the outcome of this appeal.

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QUESTIONS PRESENTED

1. Whether an insufficiently pleaded False Claims

Act complaint may preclude a subsequent related claim under the Act’s first-to-file bar after the earlier-filed claim is dismissed.

2. Whether a complaint filed pursuant to the False Claims Act must allege specific false or fraudulent invoices submitted to the government in order to state a claim with sufficient particularity under Rule 9(b) of the Federal Rules of Civil Procedure.

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IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF WIGMORE

____________________________________ ) UNITED STATES ex rel. KLEIN, ) ) Plaintiff, ) Case No. 2014-CM-0839 )

v. ) ) Judge Burton Q. Guster OSBORN LABORATORIES, INC., ) ) Defendant. ) ____________________________________)

ORDER AND REASONS

Cite as: United States ex rel. Klein v. Osborn Laboratories, Inc., No. 2014-CM-0839 (S.D. Wig. May 1, 2014)

Before the Court are the motions of defendant OSBORN LABORATORIES, INC. for

dismissal under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). Plaintiff UNITED STATES EX REL. KLEIN opposes both motions.

Osborn Laboratories, Inc. (“Osborn”) moves, pursuant to Fed. R. Civ. P. 12(b)(1), to dismiss

plaintiff’s cause of action, arguing that plaintiff’s complaint is barred by 31 U.S.C. § 3730(b)(5) (2012)––the False Claims Act’s (“FCA”) first-to-file bar. Plaintiff Rav I. Klein (“Klein”) filed his initial complaint on November 17, 2013. When Klein filed his initial complaint, a claim alleging a similar fraudulent scheme against Osborn was already awaiting review in another court in this circuit, the District Court for the Northern District of Rodriguez (“Stewart complaint”). Osborn moved for dismissal, claiming that Klein’s complaint was barred by the FCA’s first-to-file bar, and this Court granted Osborn’s motion. However, after the Northern District of Rodriguez dismissed the Stewart complaint for failing to state a claim with sufficient particularity, Klein returned to this Court and filed the instant complaint (“First Amended Complaint”). Osborn again moves for dismissal under Fed. R. Civ. P. 12(b)(1) claiming that despite its dismissal, the Stewart complaint bars any and all subsequent claims.

Alternatively, Osborn moves for dismissal under Fed. R. Civ. P. 12(b)(6), arguing that Klein

has failed to state his claim with sufficient particularity. Specifically, Osborn alleges that Klein’s First Amended Complaint does not reference any particular fraudulent claim for government payment, and that absent such a specific allegation, the First Amended Complaint does not meet Fed. R. Civ. P. 9(b)’s heightened standard for pleading fraud.

Having considered the record, the memoranda of counsel, and the law, the Court DENIES

both motions. However, because the Court’s orders involve controlling questions of law “as to which there is substantial ground for difference of opinion and that an immediate appeal from the order[s] may materially advance the ultimate termination of the litigation,” 28 U.S.C. § 1292(b),

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the Court hereby certifies these issues of law for interlocutory appeal to the United States Court of Appeals for the Thirteenth Circuit.

I. BACKGROUND

Over the past fifteen years, a series of debilitating, rapidly evolving, and increasingly complex forms of influenza have swept across the country and globe. At first, these superbugs caused serious public panic, but they initially had relatively small adverse health impacts.1 Pharmaceutical companies developed effective preventative vaccines, and when these preventative vaccines stopped working, the industry began designing effective medicines to treat new strains of the virus. In subsequent years, however, more deadly and less treatable iterations of the virus began to sweep across the country. The Ursa-Avian Flu (H11N15) of 2001, for example, led to the deaths of 40,000 people in the United States over a period of six months before a traditional epidemiological response could contain the virus.

At first, pharmaceutical companies found some success responding to these superbugs. In the

winter of 2002, Partridge Labs successfully developed BR-P1G, a vaccine to prevent the Ursa-Swiney Flu (H13N17). In June 2003, Swanson Pharmaceuticals staved off an aggressive form of Hyper Avian Flu (H14N17) with Wingaway MP, an expensive but highly effective vaccine. Three other pharmaceutical companies eventually proved capable of responding to these early outbreaks, including defendant Osborn Laboratories. Before entering the flu vaccine research and development market, Osborn first made its mark on the pharmaceutical industry when it created StayLight, the now leading pharmaceutical treatment for obesity. Although its StayLight business has been highly profitable throughout the last decade, Osborn has also made a name for itself as an industry leader in research and development related to nonflu viruses such as HIV, Ebola, polyomavirus, and marburg virus.

Pharmaceutical companies like Osborn enjoyed some success (and collected substantial

profits) during the first few outbreaks in the early 2000s, but these new, highly advanced forms of the influenza virus proved much less predictable than their predecessors. The viruses developed what scientists called a “truly remarkable ability to mutate in resistance to developed vaccines.” Robert Neville, An Oral History of the HAUSI Virus and its Predecessor Superbugs, 38 WIGMORE J. OF PUB. HEALTH 1, 24 (2014). In fact, “it was as though the influenza virus developed a consciousness—upon discovering that a vaccine had been developed, it would evolve and almost immediately render old vaccines obsolete.” Id. In October 2005, a particularly devastating outbreak of Avian-Swine Flu spread swiftly throug the southeastern United States, killing nearly one million people in Georgia, Alabama, Florida, and Mississippi. The five pharmaceutical companies in the market responded swiftly, devoting billions of dollars and immense resources to developing a new vaccine, but by the time one of them—in this particular instance, Duckworth Pharma, Inc.—created an effective drug, the virus had run its course, and Duckworth had no consumers to whom it could sell its vaccine. Duckworth nearly bankrupted itself in search of a vaccine; when, six months later, another highly evolved flu virus swept through the Pacific Northwest, Duckworth chose not to research or participate in the market for finding a cure. Nearly 150,000 people died before a vaccine was developed.

1 From the 1972–73 flu season through the 1994–95 flu season, an average of 20,000 people died each year from early iterations of flu superbugs. See T. LYNNETTE BRAMMER, ET AL., CTRS. FOR DISEASE CONTROL, Surveillance for Influenza — United States, 1994–95, 1995–96, and 1996–97 Seasons, MORBIDITY & MORTALITY WKLY. REP., Apr. 28, 2000, at 14, available at http://www.cdc.gov/mmwr/PDF/ss/ss4903.pdf.

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From 2005 to 2008, five more outbreaks yielded inconsistent results. Occasionally, a pharmaceutical company would produce a vaccine quickly enough to stop an outbreak (and, not incidentally, collect substantial profits). More often, as in Duckworth’s case, some company would develop a vaccine too late: by the time the vaccine was ready to go to market, the virus would have slowed by some combination of traditional public health responses (e.g., quarantines, school and public venue closures, etc.) and the passage of time. Of course, sometimes a strain would spread quickly and disappear just as fast—before the pharmaceutical industry could develop a vaccine at all. Only one thing was consistently true in all cases: developing vaccines took time, research, and, perhaps most significantly, a lot of money.

Duckworth was the first pharmaceutical company to exit the flu vaccine market, but it was

not the last. Pharmaceutical companies knew that searching for and producing a vaccine made incurring significant costs an absolute certainty, but because of the unpredictable nature of the virus, recovering costs was unlikely, and turning a profit was virtually impossible. After the March 2007 outbreak of Hyper Ursa-Avian Flu, Beakman Laboratories closed its influenza R&D labs and declined to continue participating in the market. In 2008, Partridge and Swanson both exited the market as well. When Osborn suffered large losses attempting to uncover a vaccine for the Hyper Avian-Swine Flu during the Great Outbreak of January 2009,2 it exited the market as well. In the outbreaks that followed in November 2009, January 2010, and June 2010, no capable pharmaceutical company even attempted to develop a vaccine. Hundreds of thousands of Americans perished, and millions more suffered through illness without any available remedy. The EPIDEMIC Act

In July 2010, Congress took action. Recognizing that profit-seeking pharmaceutical companies did not have adequate incentives to research and develop new vaccines to these advanced iterations of the influenza virus, Congress passed the Lonky-McCall Ensuring Pharmaceutical Industry Development of Effective Medicines and Iterative Cures (EPIDEMIC) Act. Under the Act, pharmaceutical companies who endeavor to develop new cures to the fast-mutating influenza virus may enter into grant agreements with the National Institute of Health (NIH). Under these grant agreements, participating companies would be allowed to submit monthly invoices3 to the NIH and receive reimbursements of 50% of certain research costs. Reimbursements would cover costs incurred (1) developing test viruses,4 (2) hiring leading

2 By now, the story should be familiar to those who lived through it. During the Great Outbreak, nearly two

million people in the northeastern United States died over a span of five weeks. By the time Osborn had produced an effective vaccine, the virus had mutated and could easily overtake the drug. Osborn redeveloped the drug and delivered a new version a few weeks later, but by that point the virus had all but run its course—very few infected survivors remained. The American public celebrated Osborn for its valiant effort, but what it gained in reputation hardly made up for its pecuniary losses. See Filbert Morphrey, Osborn Laboratories Saves the Day . . . Or What’s Left of It, WIGMORE TIMES, Feb. 11, 2009, at A1.

3 Pharmaceutical companies participating in the EPIDEMIC program have praised the quick turnaround time for reimbursements, with program participants typically receiving a reimbursement two or three weeks after submitting an invoice.

4 Developing test viruses is an important aspect of epidemiological research, especially where, as here, viruses are highly mutative and can develop immunities to early vaccines. See Garbra Freisand, Seriously? You’re Making MORE Super-Flu?? What Are You, Crazy?! . . . and Other Panicked, Irresponsible Responses to the EPIDEMIC Act, 113 WIGMORE U. L. REV. 323, 328 (2010). Given concerns about the handling and security of such highly contagious viruses, the Act made clear that the NIH could craft EPIDEMIC grant agreements so as not to require grant recipients to disclose too much detail about the nature and scope of their research when making reimbursement requests. Accordingly, the NIH’s agreement with Osborn––like all other EPIDEMIC grant agreements––states that

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scientists from the world’s most elite research institutions and laboratories, and (3) inventing, manufacturing, or purchasing related lab equipment. The reimbursements would not, however, cover all of the costs associated with vaccine development; indeed, the purpose of the EPIDEMIC program was to spur private investment in flu vaccine research, not completely replace it. See, e.g., Matthew Herper, The Truly Staggering Cost of Inventing New Drugs, FORBES, Feb. 10, 2012, http://www.forbes.com/sites/matthewherper/2012/02/10/the-truly-staggering-cost-of-inventing-new-drugs/.

The EPIDEMIC Act was an unqualified success. Four of the five major pharmaceutical

companies who had exited the market—Beakman, Partridge, Swanson, and Osborn—reopened their influenza research and development programs. Participating in this market still required substantial internal investment, but the government reimbursement program allowed these companies essentially to break even. Furthermore, the guarantee of cost reimbursement allowed participating pharmaceutical companies to take much more proactive approaches to iterative flu research, creating the possibility for a company to come across a deadly flu strain and develop a vaccine before a serious outbreak had taken place. Though they were often forced to siphon off funds from some of their other more lucrative enterprises to fund superbug vaccine research, the reputational benefits concordant with striving to cure epidemic outbreaks kept all four companies in the market. The HAUSI Virus

When the Hyper-Avian-Ursa-Swiney iterative influenza virus (HAUSI) first appeared in September 2013, it looked to be the most deadly iteration ever. Patient zero reported to a hospital in Los Angeles, California, on September 5, 2013; by September 8th, 10,000 cases had been reported in hospitals as far northwest as Seattle, Washington, and as far southeast as Austin, Texas. By September 14th, half a million people had been infected, and over 150,000 had died. Industry experts rightly predicted that research costs would be prodigious: because HAUSI was unusually mutative and highly adaptive, a vaccine capable of adapting with the virus would need to be created. Moreover, the potency of HAUSI demanded powerful dosages of any available vaccine, creating immunodeficiencies in human test subjects. HAUSI posed an unprecedentedly dangerous threat to public health and general welfare.

Osborn and its peers in the pharmaceutical industry set to work developing a new vaccine,

building on prior EPIDEMIC-funded research to fight this frightening new epidemic. On an expedited timeline, each company invested heavily to develop a vaccine, and the NIH approved substantial reimbursements for all four major pharmaceutical companies. On September 23, 2013, Osborn announced that it had solved the puzzle and that its controlled mutative vaccine, Roundi-HAUSI-Kick (RHK), would be available to consumers within days. RHK arrived to long lines at pharmacies across the country (by which time over 700,000 people had died from the HAUSI virus), ending the epidemic and saving an estimated twenty million American lives.

It was during the HAUSI epidemic and Osborn’s quest to produce a viable vaccine that

questions began to arise regarding the company’s business and billing practices.

reimbursement invoices need only contain basic detail about the invoiced costs and a certification that all costs are associated with research on iterative flu viruses. The NIH reserves the right to conduct intensive audits to ensure proper use of grant funds.

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Dr. Rav I. Klein’s Complaint5

In April 2010, Osborn hired Plaintiff-Relator Rav I. Klein to work as a Research Advisor (RA) in one of its influenza research laboratories. Klein is a resident of Wigmore. He completed undergraduate studies at North Wigmore University with a Bachelor’s of Science degree in Epidemiology and then went on to obtain an M.D. and a PhD in Epidemiology from Central Wigmore University. Klein became an assistant professor at Southern Wigmore University, where his teaching and research focused on influenza in the twenty-first century. Klein has published numerous articles on twenty-first century viruses and the history of influenza, and is generally considered by epidemiology experts to be a rising star in his field.

On November 17, 2013, Klein filed his 270-page original complaint in this Court. That

complaint alleged that Osborn violated the False Claims Act by knowingly submitting false claims for payment to the United States and making or using false records to do so. 31 U.S.C. §§ 3729(a)(1)(A), (B). The complaint included a veritable laundry list of Osborn executives, research directors, and rank-and-file employees, stating the role of each employee in the allegedly false billing scheme. It also included as exhibits numerous documents and published reports, which Klein says decisively demonstrate that he was reassigned to conduct research unrelated to flu vaccines, and that he was instructed to place EPIDEMIC Act billing codes on his time sheets. Importantly, the complaint did not allege details of any particular fraudulent invoice submission to the government.

Osborn initially hired Klein as a part-time consultant, but Klein quickly accepted a full-time

position and suspended his university teaching and research. Senior Research Directors6 (SRDs) would provide him with discrete research assignments. Given the high-security nature of the research projects, Klein would sometimes, but not always, be told the exact purpose of each given assignment. Nonetheless, RAs and SRDs worked together in close quarters and often spoke casually about the larger implications of the projects assigned. Even absent these casual divulgences, Klein could almost always “reverse engineer” how his assignments related to given flu vaccines. Klein’s work at Osborn was “groundbreaking,” and he claimed that his research in the summer of 2013 laid the foundation for Osborn’s eventual rapid development of RHK in response to the HAUSI outbreak.

Despite his apparent success at Osborn, Klein’s relationship with the company began to

deteriorate in the fall of 2013. In September of that year, Klein was instructed by his SRDs to suspend his current research assignments and begin work on other highly confidential projects. After spending a few days familiarizing himself with the tests and materials involved, he was unable to determine how his new assignments related to influenza research and development. When Klein questioned his SRDs about the new projects and whether they were related to the EPIDEMIC program, Klein was told to focus on his research assignments and trust company leadership to set his research priorities. Klein was suspicious that these new assignments were unrelated to influenza vaccine development, but he was given (and followed) instructions to continue filling out timesheets and billing for equipment and material expenses using EPIDEMIC billing codes. Klein continued to keep an ear and eye out for information about the new projects he was working on.

5 For the purposes of this Order, we take as true all well-pleaded facts in the plaintiff’s complaint. 6 For the purposes of this Order and Reasons, Osborn employees identified in Klein’s complaint are identified

by position title and not name.

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On September 17, Klein confirmed with coworkers that at least thirty RAs in his research laboratory had been similarly reassigned. When factoring in the labor of the RAs, their assistants, and material and equipment expenses, Klein estimated that this group’s costs could easily total upwards of a million dollars per month.

On September 19, Klein overheard two of his SRDs discussing new departmental objectives

for products unrelated to influenza treatment. Klein had heard of Osborn’s work on StaySlight, a new and as-of-yet unapproved obesity medication for very tall people (a sister drug to StayLight), and he knew that significant manpower and resources were being devoted to its development. But his SRDs had previously represented to him that he and his colleagues’ sole responsibility was to work on influenza-related projects reimbursable under the EPIDEMIC Act.

On September 22, Klein overheard an SRD and an executive from the company’s finance

department discuss how department invoices should be written in order “to make them appear eligible” for EPIDEMIC reimbursement.

On September 24, Klein was copied on a department email that provided instructions on how

RAs should describe the work they were doing on the new projects. Klein noticed that, in addition to RAs at his lab, the email was sent to at least two hundred different RAs located at different Osborn facilities. Although the email did not mention the EPIDEMIC program or make clear that the new projects would be reimbursed by the government, the directions in the email comported with the details of the September 22 conversation that Klein had overheard. Given the large number of researchers copied on the email, Klein estimated that expenses associated with these new assignments totaled at least $20 million per month.

On September 26, Klein expressed to a coworker his displeasure with working on such

highly secretive projects not clearly linked to influenza vaccine development. This coworker responded by sharing her frustrations and detailing how she and a number of others had been reassigned to a seemingly non-flu-related project some five months before and were also told to bill their work using codes tied to the EPIDEMIC program. Over the following three weeks, Klein phoned four different friends working as RAs in other Osborn labs around the country. He heard a similar story from each of them. Klein points to these conversations as an indication that Osborn’s false claims for reimbursement spanned at least months and likely totaled hundreds of millions of dollars.

Klein cited Osborn’s recent financial statements and analyst reports on the company to

explain Osborn’s motivation for the false billing. At the start of 2013, Osborn reported that some of its nonflu research and development programs had gone over budget and were behind schedule. Osborn’s CEO announced a “surge strategy” by which the company would “do what it takes” to get the projects back on track, “including pushing our available lines of financing to the limit.” The market generally responded well to Osborn’s strategy, but analysts noted that Osborn’s periodic reports for the first two quarters of 2013 reflected lower-than-normal cash reserves and greatly increased debt obligations.

As previously mentioned, Klein provided no detail on specific false invoices submitted to the

Government. Instead, he referenced the litany of other facts alleged and cited “reason and belief” to claim that Osborn regularly submitted false invoices throughout the five-month period spanning from May to October 2013. Klein also pointed to Osborn’s quarterly financial reports for 2013, which do not reflect a significant drop in Osborn’s receipt of EPIDEMIC funding, even

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though Osborn allegedly diverted hundreds of millions of flu-research dollars towards nonflu projects.

On October 22, 2013, after becoming fully convinced that Osborn was engaged in unlawful

activity, Klein resigned from his position and recommenced his teaching and research at Southern Wigmore University. While Klein’s decision to return to academia was certainly motivated by strained relations with his Osborn supervisors, the complaint did not allege that he was fired or forced out because of Osborn’s alleged wrongful conduct. The Stewart Complaint

On November 10, 2013—just one week before Dr. Klein filed his complaint—Dr. French P. Stewart, a 29-year-old RA in Osborn’s research facility in the midwestern state of Rodriguez, filed suit under the False Claims Act, as amended, 31 U.S.C. § 3729. The 214-page Stewart complaint alleged that in the course of researching and developing RHK, SRDs at Osborn directed Dr. Stewart to conduct research related to StaySlight, a StayLight sister medication for tall people. Dr. Stewart claimed he was instructed to continue entering the same billing codes he had entered for reimbursable labor under the EPIDEMIC Act. Per § 3730(b)(2), the Stewart complaint was filed under seal, and the government was given sixty days to investigate the alleged fraud and determine whether to intervene as a plaintiff against Osborn. Meanwhile, one week after the Stewart complaint was filed, Klein filed his own qui tam action under seal with this Court. Again, the government had sixty days to investigate the underlying facts and to decide whether to intervene as a plaintiff in Klein’s suit.

On January 10, 2014, the government declined to intervene in either case, and the cases were

promptly unsealed. Osborn was served with copies of both complaints on January 11. The next day, on January 12, Osborn filed a 12(b)(1) motion with this Court, seeking to dismiss Klein’s suit as barred under § 3730(b)(5) by the earlier-filed Stewart action. This Court granted Osborn’s motion on March 7, 2014, and dismissed Klein’s complaint without prejudice. Three weeks later, on March 28, 2014, the district court in Rodriguez dismissed the Stewart complaint without prejudice for failure to state a claim under Fed. R. Civ. P. 12(b)(6). According to the Northern District of Rodriguez’s dismissal order, the Stewart complaint was dismissed because it failed to meet the heightened pleading requirements of Rule 9(b); it broadly and generally alleged a fraudulent scheme without specifically enumerating who at Osborn was involved, when, and how.

Klein returned to this Court on March 29, 2014, amending and refiling his First Amended

Complaint, which is identical in form and content to his original complaint. As with the prior complaints, Klein’s second action was filed under seal, and the government investigated to determine whether it would intervene. After a brief investigatory period, the government again declined to intervene, the case was unsealed, and Klein proceeded with his action. As before, Osborn moves to dismiss Klein’s case pursuant to Rule 12(b)(1), and it also moves for dismissal under Rule 12(b)(6).

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II. LAW AND ANALYSIS A. The First-to-File Bar

The False Claims Act, 31 U.S.C. § 3730(b)(1), allows private citizens with nonpublic

information about false or fraudulent claims for government funding to bring causes of action on behalf of the United States Government. As an incentive to such citizens––referred to as qui tam relators––the statute was written to allow them to share in any government recovery. See Richard A. Bales, A Constitutional Defense of Qui Tam, 2001 WIS. L. REV. 381, 382–84. This bounty program carried with it the risk of parasitic follow-on suits, which provide little or no valuable information to the government in uncovering fraud while siphoning off part of the government’s—and therefore the private citizen’s—recovery. Given this reality, Congress amended the FCA in 1986 to add a number of provisions designed to thread the needle between adequately incentivizing whistleblowers with valuable information, and adequately discouraging opportunistic relators who make no significant contribution. See Elletta Sangrey Callahan & Terry Morehead Dworkin, Do Good and Get Rich: Financial Incentives for Whistleblowing and the False Claims Act, 37 VILL. L. REV. 273, 273–74 (1992). One such provision is 31 U.S.C. § 3730(b)(5), colloquially known as the FCA’s “first-to-file bar.”

The first-to-file bar provides that “[w]hen a person brings an action under [the FCA], 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 first-to-file bar establishes a first-in-time rule, which is jurisdictional in nature, and it is clear that while an action is pending before a court, § 3730(b)(5) bars subsequent related actions. U.S. ex rel. Carter v. Halliburton, 710 F.3d 171 (4th Cir. 2013); U.S. ex rel. Chovanec v. Apria Healthcare Grp., Inc., 606 F.3d 361, 365 (7th Cir. 2010). What is unclear, however, is whether a complaint that fails to plead a cause of action with sufficient particularity is capable of barring future related suits, and, if so, whether the earlier action retains preclusive effect once it is no longer before a court.

Osborn moves for dismissal under Fed. R. Civ. P. 12(b)(1), arguing that Klein’s First

Amended Complaint is barred by the first-to-file rule. Because the Stewart action filed in the Northern District of Rodriguez preceded this suit, Osborn reasons, Klein’s claim is barred forever. According to Osborn, the intervening dismissal of the Stewart complaint and Klein’s subsequent re-filing does not matter. Klein opposes Osborn’s motion on two grounds. First, Klein claims that, because the Stewart complaint failed to satisfy Fed. R. Civ. P. 9(b) pleading requirements, it does not activate the FCA’s first-to-file bar. Second, Klein asks this Court to construe § 3730(b)(5) as temporally limited, prohibiting only claims filed while an earlier-filed related suit is still before a court. Klein asserts that because all other related claims against Osborn were no longer awaiting review when he filed the instant complaint, he was free to bring his own qui tam action.

In reviewing a motion to dismiss for lack of subject matter jurisdiction, this Court accepts as

true all of the factual allegations asserted in Klein’s complaint. However, those allegations receive closer scrutiny in determining a 12(b)(1) motion than when resolving a 12(b)(6) motion for failure to state a claim. United States ex rel. Shea v. Verizon Bus. Network Solutions, Inc., 904 F. Supp. 2d 28, 32 (D.D.C. 2012). Moreover, in opposing Osborn’s motion, Klein must show by a preponderance of the evidence that this Court has subject matter jurisdiction. McNutt v. Gen. Motors Acceptance Corp., 298 U.S. 178, 189 (1936); see also United States ex rel. Carter v. Halliburton Co., 973 F.Supp.2d 615, 622 (E.D. Va. 2013).

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Initially, the Court notes as a threshold matter that the first-to-file bar only applies to actions

that are “related.” In determining whether claims are related under § 3730(b)(5), courts do not require factual identity, but rather look to general similarities between cases. See Carter, 710 F.3d at 181. What matters for relatedness under the first-to-file bar is whether the complaints allege the same material elements of fraud. Id. at 182. Thus, although the Stewart complaint and Klein’s First Amended Complaint involve different facts, different labs, and different scenarios of Osborn’s alleged fraud, “differences in specifics—such as geographic location or added facts” will not render Klein’s First Amended Complaint unrelated to the Stewart complaint. Id. Because Klein’s First Amended Complaint alleges the same broad scheme as does the Stewart complaint—namely, that Osborn improperly requested reimbursement through the EPIDEMIC Act for expenses incurred researching drugs outside the Act’s purview—the two cases are related despite their limited factual dissimilarity, and thus the first-to-file bar is in play.

In opposing Osborn’s motion to dismiss, Klein argues that a complaint that does not meet the

heightened pleading standard of Fed. R. Civ. P. 9(b) cannot serve to bar subsequent qui tam actions under the FCA’s first-to-file provision. Although the FCA does not by its terms explicitly require particular pleading, courts throughout the country have uniformly held that complaints alleging violations of the FCA by their very nature allege fraud, and thus must specify the circumstances surrounding the alleged fraud with the particularity required by Rule 9(b). See, e.g., Walburn v. Lockheed Martin Corp., 431 F.3d 966, 972 (6th Cir. 2005); United States ex rel. Costner v. United States, 317 F.3d 883, 888 (8th Cir. 2003); United States ex rel. Russell v. Epic Healthcare Mgmt. Group, 193 F.3d 304, 308 (5th Cir. 1999). This is because both the text of the Act and the legislative history behind it demonstrate that the FCA is an antifraud statute. Walburn, 431 F.3d at 972. Although it is true that the elements of an FCA cause of action do not map perfectly to those of common-law fraud, it is sensible that Rule 9(b) should apply and require that a plaintiff “allege the time, place, and content of the alleged misrepresentation on which he or she relied; the fraudulent scheme; the fraudulent intent of the defendants; and the injury resulting from the fraud.” Coffey v. Foamex L.P., 2 F.3d 157, 161–62 (6th Cir. 1993).

The Stewart complaint was certainly long and detailed, but it was nonetheless legally

deficient for its failure to satisfy the requirements of Rule 9(b). Despite its fairly specific claims as to the content of Osborn’s alleged fraudulent activity at the Rodriguez plant, including dates of invoices allegedly submitted to the government for reimbursement, the Northern District of Rodriguez determined that the Stewart complaint was legally insufficient because it broadly alleged fraud without indicating when, how, and which named defendants perpetrated the fraud by submitting falsified or fraudulent invoices. The Stewart complaint was “legally infirm from its inception, and therefore it cannot preempt [a subsequent] action under the first-to-file bar.” Walburn, 431 F.3d at 972.

Osborn argues that requiring a prior related complaint to meet Rule 9(b)’s heightened

pleading standard in order to activate the first-to-file bar incentivizes litigants to file the very “parasitic” suits Congress sought to eliminate when it amended the FCA in 1986. Campbell v. Redding Med. Ctr., 421 F.3d 817, 823 (9th Cir. 2005). Although Osborn is certainly right that exempting a class of suits from activating the first-to-file bar necessarily results in an increased number of “second-to-file” suits, the Court is unpersuaded that the interest in avoiding a slight uptick in second suits outweighs the interests protected by Rule 9(b). Rules 8 and 9 are principally concerned with placing defendants on notice. Walburn, 431 F.3d at 973; Bledsoe v. Cmty. Health Sys., Inc., 342 F.3d 634, 643 (6th Cir. 2003) (holding that fraud must be

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particularly pled in order to allow defendants the opportunity to “prepare an informed pleading responsive to the specific allegations of fraud”). Overly broad allegations of fraud are legally insufficient precisely because they fail to notify defendants; it is illogical to hold that a clearly overbroad, insufficiently particular pleading that is legally incapable of placing defendants on notice is nonetheless capable of providing the government adequate information from which to devise a plan of action to uncover an alleged fraudulent scheme.

The Stewart complaint did not contain the facts underlying the alleged fraud requisite to state

a claim for fraud and place the defendant and the government on notice. Accordingly, the Stewart complaint is incapable of activating the first-to-file bar and cannot preclude Klein’s action before this Court. For this reason, the Court agrees with Klein and DENIES Osborn’s Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction.7 B. Rule 9(b) Particularity

In the alternative, Osborn moves for dismissal under Fed. R. Civ. P. 12(b)(6). While Osborn argues generally that Klein’s First Amended Complaint satisfies neither Rule 8(a) nor Rule 9(b), its central––and most persuasive––argument is that Klein’s First Amended Complaint must be dismissed because he has not provided detail about any particular certifications or claims for payment actually submitted to the government. By the reasoning of some, but not all, circuit courts of appeals, Rule 9(b) requires plaintiffs to provide this level of specificity. Osborn argues that this Court is compelled to dismiss Klein’s complaint despite its otherwise robust depiction of a fraudulent scheme because it lacks any detail regarding specific actual claims for payment submitted by Osborn to the government.

The general elements needed to establish an FCA claim are “that (1) the defendant made a

claim against the United States; (2) the claim was false or fraudulent; and (3) the defendant knew the claim was false or fraudulent.” See In re Baycol Prods. Litig., 732 F.3d 869, 875 (8th Cir. 2013). “The purpose of the FCA is to encourage private citizens who are aware of fraud against the government to expose the fraud, while preventing opportunistic suits by individuals who hear of fraud publicly but play no part in exposing it.” U.S. ex rel. Matheny v. Medco Health Solutions, Inc., 671 F.3d 1217, 1222 (11th Cir. 2012). A district court reviews a motion to dismiss under Rule 12(b)(6) “accepting the allegations contained in the complaint as true and drawing all reasonable inferences in favor of the nonmoving party.” U.S. ex rel. Joshi v. St. Luke’s Hosp., Inc., 441 F.3d 552, 555 (6th Cir. 2006). On a Rule 12(b)(6) motion, a district court assesses a complaint alleging fraud for conformity with both Rule 8(a) and 9(b). See Matheny, 671 F.3d at 1222.

As for Rule 8(a), the Court cannot take seriously Osborn’s contention that Klein’s complaint

does not contain factual allegations sufficient to “raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Klein’s factual allegations sufficiently depict a fraudulent scheme, pertinent dates, pertinent players, and the stakes involved. Even without the broader allegations about the hundreds of other Osborn workers billing nonflu work to the EPIDEMIC program, Klein’s personal experiences alone––and particularly the conversation he overheard between a senior researcher and a finance department executive––give this Court ample reason to at least infer that Osborn was billing the government for research and development unrelated to the EPIDEMIC program. The accuracy of Klein’s

7 In so holding, this Court need not reach the question of whether the first-to-file bar applies when the first action is no longer “pending.”

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factual allegations would certainly prove critical at a latter stage in this case, but taken as true for the time being, Klein has satisfied Rule 8(a).

The particularity requirements of Rule 9(b) impose a distinct and meaningful burden on

plaintiffs filing False Claims Act complaints. Exactly what Rule 9(b) requires in the FCA context is a question that has recently divided the various circuit courts of appeals. The matter is one that the Thirteenth Circuit has not yet addressed. Accordingly, this Court looks to other circuits.

There is no doubt that a central element of an FCA claim is an actual submission of a

fraudulent claim. See Corsello v. Lincare, Inc., 428 F.3d 1008, 1012 (11th Cir. 2005). Overlaying Rule 9(b)’s particularity requirements onto this substantive element of the False Claim Act, some circuits insist that an FCA complaint cannot satisfy Rule 9(b) without alleging specific details regarding actual false billing. See id. at 1013; see also Joshi, 441 F.3d at 556–57. Not requiring specific allegations about actual false billing means a court might have to draw inferences and make assumptions about the defendant’s alleged behavior, which these circuits hold “would strip[] all meaning from Rule 9(b)’s requirements of specificity.” Corsello, 428 F.3d at 1013 (alteration in original) (internal quotation marks omitted). By this line of argument, Rule 9(b) requires more than laying out how the defendant’s conduct “could have led” to false claims. U.S. ex rel. Nathan v. Takeda Pharma. N. Am., Inc., 707 F.3d 451, 457 (4th Cir. 2013). Instead, where the plaintiff does not explicitly allege actual false claims, inference drawing is appropriate only where the defendant’s actions must have necessarily led to false claims. Id.

This Court finds more sensible and persuasive the reasoning of the many other circuit courts

that do not impose such strict requirements on FCA pleadings. These circuits take the view that Rule 9(b) “is context specific and flexible and must remain so to achieve the remedial purpose of the False Claim Act.” U.S. ex rel. Thayer v. Planned Parenthood of the Heartland, 765 F.3d 914, 918 (8th Cir. 2014) (quoting U.S. ex rel. Grubbs v. Kannegati, 565 F.3d 180, 190 (5th Cir. 2009)). But this Court is not persuaded that Rule 9(b) values form over substance. Rule 9(b) must be applied with bite to serve as a meaningful gatekeeper to discovery, but it does not reflect a subscription to antiquated fact pleading. Grubbs, 565 F.3d at 185–86. While the objective of Rule 9(b) is to protect defendants from baseless claims, a complaint supporting a “strong inference” that claims were actually submitted should be accepted so as not to frustrate legitimate efforts by relators to expose fraud. Thayer, 765 F.3d at 918; see also U.S. ex rel. Duxbury v. Ortho Biotech Prods., L.P., 579 F.3d 13, 29 (1st Cir. 2009). Proving actual false claims is of course essential, but to require that degree of specificity at the start––particularly when the relator does not work in the defendant’s billing department––does not make sense when a relator has made much more than just “vague and unsubstantiated accusations of fraud.” U.S. ex rel. Lusby v. Rolls-Royce Corp., 570 F.3d 849, 854–55 (7th Cir. 2009).

Osborn argues that allowing Klein’s case to proceed will lead to just the “costly discovery

and public obloquy” that Rule 9(b) is meant to deter. Id. at 855. However, Klein has supplied the sort of particularized facts that support not just an inference, but a strong inference that he was not only instructed to bill nonflu research on the EPIDEMIC tab, but also that those bills made their way through Osborn’s accounting department and into EPIDEMIC reimbursement requests. Klein has earned the right to conduct discovery––which at least initially can be limited to only the dates and locations associated with his personal experiences and not the broader scheme. This Court respectfully disagrees with courts that view this sort of discovery as eviscerating the meaning of Rule 9(b). See Joshi, 441 F.3d at 559.

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There is no doubt that strong policy interests are at stake here. Osborn has a sterling reputation as a leader in the pharmaceutical industry, and has proven an invaluable contributor to the American health community’s response to perhaps the greatest public health crisis this nation has ever faced. Nothing suggests that iterative flu pandemics will stop any time soon, and Osborn is one of the few players capable of keeping up with new iterations and saving millions of lives. Allowing this case to proceed will impose costly and time-consuming litigation on Osborn, and it is entirely possible that discovery will vindicate the company and reveal Klein to be just the sort of abusive opportunist the False Claims Act and Rule 9(b) seek to deter.

But dismissing Klein’s case at this juncture poses the high risk of inappropriately absolving

an entity that has abused its privileged status to drain the government of its scarce resources––all because the relator in question is not in the position to comply with a pleading formality not clearly required by Rule 9(b). Following the reasoning in Takeda and under the facts and circumstances of how Osborn operates, it is not clear that any individual within Osborn not already complicit in the alleged billing scheme would be in a position to bring an FCA claim. Employees in Klein’s position may come across all the facts necessary to plead the knowingly false billing elements of an FCA claim but have no reasonable means of knowing exactly how and when Osborn bills––that would require the knowledge of an employee in Osborn’s billing department. Although employees in Osborn’s billing department would know how and when Osborn seeks EPIDEMIC reimbursements, it is not at all clear that they would have a reasonable means of knowing whether the bills they process actually tie to flu-related research.

The FCA and Rule 9(b) do not require someone in Klein’s position to snoop around his

employer’s billing department and dig through its accounting files to find an invoice before bringing an FCA claim. Instead, Rule 9(b) is satisfied where a relator presents a highly plausible fraudulent billing scheme and where targeted discovery can convert a strong inference into an explicit fact. Using personal information, inaccessible to the public, Klein has presented this Court with the “who, what, when, where, and how” of a deeply troubling fraudulent billing scheme. Again, it may prove true that Klein is unable to produce any proof of false billing, but proof is not what Rule 9(b) requires. To the extent Klein’s First Amended Complaint fails to explicitly detail actual false billing, it raises the strong inference that Osborn was billing the Government for its flu-research team’s work on non-EPIDEMIC projects.

For this reason, the Court DENIES Osborn’s Rule 12(b)(6) motion to dismiss.

III. INTERLOCUTORY APPEAL

The memoranda of counsel for each party stipulate that this case, apart from the underlying

merits of plaintiff’s allegations, hinges on two questions of law: (1) whether the False Claims Act’s first-to-file bar precludes a claim after an earlier-filed related claim is dismissed as insufficiently pleaded; and (2) whether Federal Rule of Civil Procedure Rule 9(b) requires that a complaint under the False Claims Act, 31 U.S.C. §§ 3729–3733, allege specific false claims that were presented for payment to the government. Subject to the dual approval of both a district court and a reviewing circuit court of appeal, 28 U.S.C. § 1292(b) allows a district court’s ruling on controlling questions of law to receive interlocutory review by the court of appeals.

The Court recognizes that grave consequences inhere to finding subject matter jurisdiction in

this case and finding Dr. Klein’s complaint sufficient under Rule 9(b). This is true not only for Osborn and prospective consumers who enjoy the benefits of Osborn’s cutting-edge research and

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life-saving medicines, but also for Americans everywhere whose lives are at risk and whose health care expenses increase exponentially each year. Moreover, the questions presented in this case are matters of first impression for the Thirteenth Circuit, and other circuit courts are split on these issues. This Court is of the opinion that this exceptional case calls for interlocutory review and therefore certifies for interlocutory appeal this Order denying defendant’s motions to dismiss under Rules 12(b)(1) and 12(b)(6).

Accordingly, IT IS ORDERED that defendant’s motion to dismiss is DENIED and the

controlling questions of law herein are CERTIFIED FOR INTERLOCUTORY APPEAL.

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IN THE UNITED STATES COURT OF APPEALS

FOR THE THIRTEENTH CIRCUIT ________________________

No. 14-0840

United States ex. rel. Klein,

Plaintiff-Appellee,

v. Osborn Laboratories, Inc.,

Defendant-Appellant.

________________________

Appeal from the United States District Court for the Southern District of Wigmore

No. 2014-CM-0839 — Burton Q. Guster, Judge. ________________________

Argued Nov. 13, 2014 — Decided Dec. 18, 2014

________________________

Cite as: United States ex rel. Klein v. Osborn Laboratories, Inc., No. 14-0840 (13th Cir. 2014)

Before: DEMPSEY, BAXTER, and DIVOLIVIA, Circuit Judges. Judge DEMPSEY delivered the opinion of the court, in which Judge BAXTER joined. Judge DIVOLIVIA delivered a separate opinion concurring in part and dissenting in part.

OPINION OF THE COURT DEMPSEY, Circuit Judge, with whom BAXTER, Circuit Judge, joins.

This appeal presents two novel questions in the Thirteenth Circuit: First, whether an

insufficiently pleaded complaint is capable of triggering § 3730(b)(5), the False Claims Act’s (FCA) first-to-file bar, and, if so, whether it bars subsequent related claims even after the first-filed suit is dismissed; and second, whether Rule 9(b) of the Federal Rules of Civil Procedure requires FCA claims to contain allegations of specific falsely made claims submitted to the government for payment. Appellant Osborn Laboratories, Inc. (“Osborn”) appeals the district court’s denial of Osborn’s motion to dismiss an FCA action filed against it by Dr. Rav I. Klein (“Klein”). On interlocutory appeal, pursuant to 28 U.S.C. § 1292(b), Osborn asserts that Klein’s

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suit should be barred by the FCA’s first-to-file provision because at the time Klein’s suit was filed, a related claim awaited review by the Northern District of Rodriguez. Osborn argues, alternatively, that Klein’s First Amended Complaint fails to state a cognizable claim for relief, warranting dismissal under Fed. R. Civ. P. 12(b)(6). Klein in turn asks this Court to affirm the district court’s denial of Osborn’s motion to dismiss.

In its order denying Osborn’s motion to dismiss under Fed. R. Civ. P. 12(b)(1) and 12(b)(6),

the district court certified these two questions of law for appeal under 28 U.S.C. § 1292. We agreed with the district court’s reasoning that § 1292(b) review was prudent in this case––as did the parties to this litigation––and therefore permitted appellate review. We hereby adopt and incorporate by reference the facts from the order and reasons below. United States ex rel. Klein v. Osborn Laboratories, No. 2014-CM-0839 (S.D. Wig. May 1, 2014). For the following reasons, we now AFFIRM IN PART and REVERSE IN PART the district court’s order.

I. In the Thirteenth Circuit, as in our sister circuits, we review pure questions of law such as the

two at issue in this case de novo. Cf. In re Baycol Prods. Lit., 732 F.3d 869, 874 (8th Cir. 2013); United States ex rel. Carter v. Halliburton, 710 F.3d 171, 177 (4th Cir. 2013); Corsello v. Lincare, Inc., 428 F.3d 1008, 1012 (11th Cir. 2005); United States ex rel. LaCorte v. SmithKline Beecham Clinical Labs., Inc., 149 F.3d 227, 232 (3d Cir. 1998).

II.

We first direct our attention to the FCA’s first-to-file bar to determine whether the district court had subject matter jurisdiction to hear Klein’s case. We consider (a) whether an insufficiently pleaded FCA complaint is capable of activating the first-to-file bar; and (b) if so, whether a first-filed action may continue to preclude subsequent actions even after the first-filed action has been dismissed.

A. When a plaintiff brings a cause of action in federal court alleging fraud or mistake, he must

do so in compliance with Rules 8 and 9 of the Federal Rules of Civil Procedure to avoid dismissal for failure to state a cognizable claim for relief. This means a plaintiff must submit “a short and plain statement of the claim showing that the pleader is entitled to relief,” Fed. R. Civ. P. 8(a)(2), which adequately places the defendant on notice by alleging each element of the claimed offense. Conley v. Gibson, 355 U.S. 41, 47 (1957); see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007) (allegations must raise plausible inference of unlawful acts). Furthermore, fraud claims must be pled “with particularity.” Fed. R. Civ. P. 9(b); Coffey v. Foamex L.P., 2 F.3d 157, 161–62 (6th Cir. 1993) (holding that a well-pleaded fraud claim must include the time, place, and content of any false misrepresentations, misrepresented facts, and detrimental reliance). If these requirements are not met and a district court determines that the complaint does not sufficiently place defendant on notice, a plaintiff’s complaint will be dismissed upon defendant’s motion pursuant to Fed. R. Civ. P. 12(b)(6).

Qui tam actions, however, are not filed in a district court with the singular purpose of placing

a private-party defendant on notice. They are of course required to do so, and remain subject to Rule 12(b)(6) dismissal if they are not compliant with the federal rules. But qui tam complaints serve the dual role of placing defendants on notice and notifying the government—in whose shoes the plaintiff-relator stands—that an action has been filed on its behalf. The FCA’s first-to-

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file bar requires as much: if the government is unaware of the relator’s suit, the suit may not bar future actions. Valid qui tam complaints, including those arising under the FCA, must meet the requirements of the federal rules while also sufficiently alerting the government to the action. The question before this Court, however, is whether a qui tam action that fails to place a defendant on notice remains nonetheless capable of serving its government-notification purposes.

Because the Stewart complaint filed in the Northern District of Rodriguez did not satisfy the

requirements of Rule 9(b), the court below held that the Stewart suit was incapable of activating the FCA’s first-to-file bar. The district court essentially held that a complaint that does not comply with the strictures of Rule 9(b), and thus fails to effect notice on the defendant, thereby fails to effect notice on the government as well. The court reasoned that notice is the principal focus of the Federal Rules and our Constitution’s overriding concern with due process of law, and that frivolous and incomplete complaints that do not state a cognizable cause of action should not serve to bar otherwise-valid later complaints that do.

This approach is not without support among other federal courts. In Walburn v. Lockheed

Martin Corp., the Sixth Circuit refused to allow an insufficiently pleaded complaint to bar a subsequent action under the first-to-file bar. 431 F.3d 966 (6th Cir. 2005). The court reasoned that because the earlier-filed suit failed to comply with Fed. R. Civ. P. 9(b) it was “legally infirm” and thus did not activate the FCA’s first-to-file bar. Id. At the heart of the Walburn court’s determination was the fact that a complaint is insufficient under Rule 9(b) “precisely because it fails to provide adequate notice to the defendant” of the alleged fraud. Id. at 973. The court then reasoned that a complaint that does not provide notice to a defendant cannot provide notice to the government. Id. The Sixth Circuit was concerned that allowing complaints with scant factual allegations to bar subsequent qui tam actions would hamper the government’s ability to investigate and uncover fraud, and would discourage relators with potentially superior information from filing suit. Id.

We are sympathetic to the policy concerns animating the Sixth Circuit’s analysis, but we

cannot agree with its conclusion. The Sixth Circuit’s approach fails to draw a vital distinction between the purpose of Rule 9(b) pleading requirements and the question of whether the government itself has sufficient notice to undertake an investigation. Rule 9(b) exists to ensure a defendant faced with accusations of fraud has full notice of the claims against it. However, as the First Circuit noted in United States ex rel. Heineman-Guta v. Guidant Corp: “A complaint that does not comply with Rule 9(b)’s particularity requirements to protect the defendant’s interests may nonetheless provide the government sufficient notice to begin an investigation of an alleged fraudulent scheme.” 718 F.3d 28, 36 (1st Cir. 2013).

This distinction may seem semantic, but the difference is important. Rule 9(b) serves to

protect defendants from frivolous suits and allow them to develop an appropriate defense against fraud claims. The amount of information required to put a defendant on notice and render her capable of defending against a suit is quite a bit more than that required to allow the government to begin an investigation into an alleged fraud. Thus, when a prior-filed suit provides enough material information to put the government on notice, regardless of whether that suit meets the high bar of Rule 9(b), the first-to-file bar has been satisfied.

This approach is preferable for many reasons. First, it accords with the plain text of

§ 3730(b)(5). United States ex rel. Batiste v. SLM Corp., 659 F.3d 1204, 1210 (D.C. Cir. 2011)

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(“Nothing in the language of Section 3730(b)(5) incorporates the particularity requirement of Rule 9(b) . . . .”). Second, this approach requires relators to, at a minimum, allege enough facts to put the government on notice of fraud. This requirement should serve to weed out many of the frivolous or overbroad complaints with which the Sixth Circuit was concerned in Walburn. Finally, this approach avoids the undesirable situation in which a district court might need to determine the legal sufficiency of a complaint that is currently awaiting review in another district court. Batiste, 659 F.3d at 1210.

Accordingly, we now join our peers in the First and District of Columbia Circuits in holding

that in order to act as a bar to subsequent suits, a prior complaint must, at a minimum, provide the government with sufficient notice of the alleged fraud; it need not plead fraud with particularity sufficient to survive a Rule 12(b)(6) motion in order to activate the first-to-file bar. See Heineman-Guta, 718 F.3d at 36; Batiste, 659 F.3d at 1210.

The Stewart complaint was dismissed for failing to sufficiently place Osborn on notice, but it

clearly notified the government. We know this, in fact, because the government investigated and determined that it would not pursue the Stewart FCA claim against Osborn. The district court therefore incorrectly determined that the Stewart complaint was incapable of precluding subsequent action under the FCA’s first-to-file bar. We proceed now to address whether Klein’s action remained barred once the Stewart complaint was dismissed.

B.

Although the Stewart complaint was no longer before the Northern District of Rodriguez when Klein filed his First Amended Complaint, Osborn argues that the FCA’s first-to-file bar nevertheless precludes Klein from proceeding. More specifically, Osborn argues that because Klein’s First Amended Complaint is related to the Stewart complaint, and the Stewart complaint was filed earlier in time, the Stewart complaint serves to bar Klein’s complaint—and any other related complaint, for that matter—in perpetuity.

Osborn asks this Court to read the word “pending” in § 3730(b)(5) simply as a reference to

the first-filed action rather than as an indicator of when and for how long the first-to-file bar applies. Osborn maintains that this is the clearest way to read the plain text of the statute. This approach has been adopted by the District of Columbia Court of Appeals. In United States ex rel. Shea v. Cellco Partnership, 748 F.3d 338 (D.C. Cir. 2014), the majority reasoned that the word pending merely serves to “identify which action bars the other.” Id. at 343. Shea’s textual analysis is somewhat compelling. The relevant language of § 3730(b)(5) reads, “no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.” The real crux of this provision, as Osborn and the D.C. Circuit see it, is that the first-filed action bars all subsequent actions “based on the [same] facts” underlying the earlier filed complaint, regardless of whether the earlier action remains before a court. Shea, 748 F.3d at 343 (emphasis added).

Osborn’s statutory arguments are also buttressed by important policy considerations. Osborn

points out that the one-at-a-time approach advocated by Klein will allow qui tam suits against government contractors like Osborn to continue indefinitely regardless of whether later-filed actions bring to light any new information that could help uncover fraud on the government. Moreover, Osborn argues that Klein’s approach would result in a rather arbitrary outcome, whereby potential qui tam relators would be barred by a first-filed complaint one day and then not the next. Osborn posits that the central purpose of the FCA’s qui tam provisions is to ensure

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that the government is placed on notice of potential fraud. The first-to-file bar helps further this purpose by incentivizing relators to come forward with relevant information that can put the government on notice. It makes no sense, in Osborn’s view, to think that the resolution of a pending action “somehow put[s] the government off notice of [a complaint’s] contents.” Shea, 748 F.3d at 344. For Osborn, the operative inquiry is whether the earlier-filed suit has put the government on notice of fraud. If it has done so, all subsequent actions are barred.

While Osborn’s approach has a ring of simplicity and finality, that tone ultimately rings

hollow. Reading the word pending as referential is overly simplistic. As Judge Srinivasan noted in his dissent in Shea, “[T]here is no great mystery about ‘which action bars the other.’” Id. at 347 (Srinivasan, J., dissenting). By including the phrase “a related action” in § 3730(b)(5), it is clear that an earlier-filed suit bars subsequent related actions. The word pending is therefore not necessary to identify that a first-filed action bars later-filed related claims. The more natural reading, and the reading that gives significance to every word in the provision, is to give pending its temporal significance. Pending serves to define how long the bar operates. The first-to-file bar operates while the first-filed action is before a court but not thereafter. In the Court’s opinion, this is the simpler (and more desirable) reading of the first-to-file bar. See, e.g., U.S. ex rel. Carter v. Halliburton, 710 F.3d 171 (4th Cir. 2013) (“Once a case is no longer pending the first-to-file bar does not stop a relator from filing a related case.”).

While a temporal reading of pending does create a one-at-a-time approach to the first-to-file

bar in certain situations, Osborn’s concerns about an endless stream of follow-on, copycat actions are overblown. The FCA’s public disclosure bar, § 3730(e)(4)(A), which bars complaints based on factual information gleaned from information disclosed to the government through federal reports, investigations, reports, and news publications, also prohibits the most opportunistic qui tam relators. In In re Natural Gas Royalties Qui Tam Litigation, the Tenth Circuit made clear that an unsealed qui tam complaint also qualifies as a public disclosure. 566 F.3d 956, 963 (10th Cir. 2009). Any filings based only on the information disclosed in an earlier-filed qui tam action are barred by the public disclosure bar. Id. The first-to-file bar is therefore not necessary to block these kinds of suits.

There are other significant reasons to think that the first-to-file bar only operates while a related claim awaits review. First, this Court recognizes that the purpose of the FCA’s qui tam provisions is to incentivize whistleblowers with helpful information to come forward. See Heineman-Guta, 718 F.3d at 36; In re Natural Gas Royalties, 566 F.3d at 963–64. A first-to-file bar that allows the first suit, no matter how blunt, overbroad, or vague, to bar all subsequent suits would not just disincentivize subsequent relators, it would prohibit them from bringing new information, in the form of a qui tam action, to the government’s attention. The interpretation we adopt today avoids the problematic outcome in which defendants faced with fraud claims might be immunized from all future liability by the improvident filing of a complaint by a hasty, ill-prepared qui tam relator. Second, allowing subsequent relators to come forward with their own independent information after a prior suit has been resolved recognizes that the government, even after being notified of fraud by a first-filed action, may lack the resources, political will, or sufficient evidence to convince it to pursue a claim. See In re Natural Gas Royalties, 566 F.3d at 963. Allowing subsequent qui tam actions to proceed after an earlier-filed claim is no longer before a court will fill any deterrence gap created by governmental reluctance to pursue claims, and it may also allow relators to eventually bring forward enough evidence of fraud to entice the government to intervene. Id.

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Today we join the Fourth, Seventh, and Tenth Circuit Courts of Appeals in holding that the FCA’s first-to-file bar precludes a second qui tam action only when an earlier-filed qui tam action is in fact before a court awaiting review. Although the Stewart complaint, while before the Rodriguez court, was capable of precluding future actions (contrary to the district court’s ruling), it was no longer before the court when Klein submitted his First Amended Complaint. Thus the first-to-file bar did not apply, and Klein’s First Amended Complaint appropriately invoked federal jurisdiction. We therefore AFFIRM the trial court’s denial of Osborn’s motion to dismiss for lack of subject matter jurisdiction under Fed. R. Civ. P. 12(b)(1).

III.

Having determined that the district court appropriately found subject matter jurisdiction to hear Klein’s case, we turn now to Osborn’s motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief may be granted. Osborn argues that Klein’s First Amended Complaint is insufficient to state a cognizable claim for relief because it has failed to meet the basic notice and plausibility requirements imposed by Fed. R. Civ. P. 8(a) and the particularity requirements imposed on all fraud claims under Fed. R. Civ. P. 9(b).

Osborn first suggests that Klein’s First Amended Complaint fails to meet the notice and plausibility requirements imposed by Rule 8(a) and Supreme Court case law. See Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002); see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007). The trial court below, upon a thorough review of Klein’s long and detailed complaint, held that:

[For the purposes of a 12(b)(6) motion to dismiss, a district court] accept[s] the allegations contained in the complaint as true and draw[s] all reasonable inferences in favor of the nonmoving party. . . . [T]he Court cannot take seriously Osborn’s contention that Klein’s complaint does not contain factual allegations sufficient to “raise a right to relief above the speculative level.” Klein’s factual allegations sufficiently depict a fraudulent scheme, pertinent dates, pertinent players, and the stakes involved. Even without the broader allegations about the hundreds of other Osborn workers billing nonflu work to the EPIDEMIC program, Klein’s personal experiences alone, and particularly the conversation he overheard between a senior researcher and a finance department executive, give this Court ample reason to at least infer that Osborn was billing the Government for research and development unrelated to the EPIDEMIC program. The accuracy of Klein’s factual allegations would certainly prove critical at a latter stage in this case, but taken as true for the time being, Klein has clearly satisfied Rule 8(a).

Klein, No. 2014-CM-0839, at *10 (internal citations omitted).

We agree with the district court’s analysis insofar as it appears that, were it not subject to the heightened pleading requirements of Rule 9(b), this complaint would perhaps be permissible. Like the district court, we reject Osborn’s argument regarding the factual validity of Klein’s allegations. Klein might ultimately be unable to elicit evidence or testimony supporting a verdict in his favor, but determining the factual validity of his cause of action is a task reserved for the finder of fact at trial unless judgment is granted as a matter of law after discovery, either before trial (through summary judgment) or after it concludes (through judgment as a matter of law or judgment notwithstanding the fact-finder’s verdict).

However, in the context of fraud, mere adherence to Rule 8(a)’s demand that a pleader

provide only a “short and plain statement” is not enough to state a cause of action. Where a

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plaintiff alleges fraud or mistake, Rule 9(b) commands that the pleader “must state with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b).

As an initial matter, to the extent that it is even necessary to explicitly do so here, this court

joins its sister circuits in holding that Rule 9(b) applies to actions filed under the FCA. United States ex rel. Clausen v. Lab. Corp. of Am., 290 F.3d 1301, 1308–09 (11th Cir. 2002); Bly-Magee v. California, 236 F.3d 1014, 1018 (9th Cir. 2001); United States ex rel. Russell v. Epic Healthcare Mgmt. Group, 193 F.3d 304, 308 (5th Cir. 1999); Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 783–84 (4th Cir. 1999); United States ex rel. LaCorte v. SmithKline Beecham Clinical Labs., Inc., 149 F.3d 227, 234 (3d Cir. 1998); Gold v. Morrison-Knudsen Co., 68 F.3d 1475, 1476–77 (2d Cir. 1995).1

Although Klein’s complaint pleaded with particularity many of the facts giving rise to his

cause of action, his First Amended Complaint neither directly alleges the existence of any specific fraudulent invoice nor provides a factual basis upon which the Court might conclude such invoice exists. Nevertheless, the district court held that because he particularly pleaded detailed allegations of the murmurs, mumblings, and misdeeds of Osborn staffers, Klein met Rule 9(b)’s particularity requirement as to Osborn’s purported scheme to defraud the federal government.

When examining whether an FCA complaint satisfies Rule 9(b)’s requirement to particularly

plead fraud, appellate courts accept as true all well-pleaded facts (ignoring all conclusory allegations), construing them in the light most favorable to the plaintiff. U.S. ex rel. Nathan v. Takeda Pharma. N. Am., Inc., 707 F.3d 451, 455 (4th Cir. 2013). Confining our analysis to the text of the complaint, we look to determine whether the plaintiff “set[s] forth the who, what, when, where and how of the alleged fraud.” Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir. 1997) (internal quotation marks omitted). Rule 9(b) thus requires that a plaintiff “set forth the time, place, and contents of the false representation, the identity of the party making the false statements and the consequences thereof.” Koch v. Koch Indus., 203 F.3d 1202, 1236 (10th Cir. 2000).

Rule 9(b) imposes meaningful obligations on plaintiffs alleging fraud. The rule serves the

multiple purposes of “providing notice to a defendant of its alleged misconduct, of preventing frivolous suits, of eliminat[ing] fraud actions in which all the facts are learned after discovery, and of protect[ing] defendants from harm to their goodwill and reputation.” Nathan, 707 F.3d at 456. Fraud is exceptionally easy to allege relative to the extraordinary discovery and litigation costs that arise out of such an allegation; fraud claims “rest[ing] primarily on facts learned through the costly process of discovery . . . [are] precisely what Rule 9(b) seeks to prevent.” United States ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370, 380 (4th Cir. 2008).

This is why a complaint under the FCA must contain allegations of at least one specific

fraudulent billing. The FCA was designed to punish a very specific type of fraud on the

1 We cannot accept appellee’s preposterous suggestion that Rule 9(b)’s application to “fraudulent claim”

complaints ought not apply to “false claim” complaints, nor will we entertain the notion that Rule 9(b) is intended to apply only to common law fraud claims. The Supreme Court has repeatedly identified the FCA as an anti-fraud statute. Vmt. Agency of Nat. Resources v. United States ex rel. Stevens, 529 U.S. 765, 781 (2000); United States v. Neifert-White Co., 390 U.S. 228, 233 (1968). Additionally, courts throughout the country have refused to limit Rule 9(b) to claims whose elements mirror common-law fraud, regularly applying Rule 9(b) to statutory securities fraud, mail fraud, and wire fraud claims. Clausen, 236 F.3d at 1309.

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Government, one in which an entity transacting business with the government actually submits false or fraudulent invoices. See United States v. McNinch, 356 U.S. 595, 599 (1958) (“[I]t is . . . clear that the False Claims Act was not designed to reach every kind of fraud practiced on the Government.”). The district court rightly noted that in order for a plaintiff to successfully prove an FCA claim before a trier of fact, he must elicit evidence that an actual fraudulent invoice was submitted to the government for payment. Even if a relator were to prove that a fraudulent scheme existed, he would be unable to overcome a summary judgment motion without some evidence of the actual submission of some fraudulent invoice; the presentment of an actual false claim is an essential element of an FCA cause of action, without which a relator cannot prove his case.

Klein argues that this circuit should adopt an approach under which courts may draw an

inference from particularly pleaded fraudulent schemes that fraudulent billing actually took place. We refuse to do so. Regardless of whether the surrounding circumstances suggest a likelihood that some fraudulent billing might have been submitted, the very concept of plausible particular pleading would be undone if we were to permit such broad inferences from so conclusory a method of demonstrating an essential element of the cause of action before us. See Nathan, 707 F.3d at 457 (“Rule 9(b) requires that some indicia of reliability must be provided in the complaint to support the allegation that an actual false claim was presented to the government. Indeed, without such plausible allegations of presentment, a relator not only fails to meet the particularity requirement of Rule 9(b), but also does not satisfy the general plausibility standard of Iqbal.”) (internal citations and quotation marks omitted). Construing facts in favor of the plaintiff when faced with a motion to dismiss does not require that we draw inferences as to elements of an offense that need to be particularly pleaded. See Corsello v. Lincare, Inc., 428 F.3d 1008, 1013 (11th Cir. 2005).

Klein attempts to draw a distinction between his First Amended Complaint and those in

Corsello and United States ex rel. Joshi v. St. Luke’s Hosp., Inc., 441 F.3d 552, 557 (8th Cir. 2006), cases in which the Eleventh and Eighth Circuits, respectively, refused to draw an inference of fraudulent billing from the fraudulent schemes alleged. Klein suggests that he does not advocate for a standard that would permit inferences to be drawn from conclusory allegations and lightly detailed or otherwise defectively pleaded complaints. Instead, he argues for a standard that would permit inference drawing in the narrow class of cases in which a relator has enough information to meticulously and precisely set forth a broad fraudulent scheme but simply lacks the access necessary to point to specific fraudulent claims. In other words, he suggests that we should look to how logical it would be to infer fraud from the surrounding circumstances, rather than whether inference may be drawn at all. But the very act of drawing an inference as to an essential element of the cause of action defies the teachings of Iqbal and undermines the purpose of Rule 9(b). See Corsello, 428 F.3d at 1013 (“[W]e decline to make inferences about the submission of fraudulent claims because such an assumption would ‘strip[] all meaning from Rule 9(b)’s requirements of specificity.’” (quoting Clausen, 290 F.3d at 1312 n.21)).

That some specific fraudulent invoice exists is a necessary point of proof for an FCA claim,

and the issue lies at the heart of a relator’s cause of action. Yet the circuit courts upon whose reasoning the district court relied would hold that the relator need not specifically plead it with particularity. It defies logic to require a plaintiff to plead with particularity all of the elements of his fraud claim except the very element that gives life to his claim in the first place. It is only sensible to require a relator in Klein’s position to make specific and particular allegations as to actual fraudulent acts, for “we cannot be left wondering whether a plaintiff has offered mere

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conjecture or a specifically pleaded allegation on an essential element of the lawsuit.” Clausen, 290 F.3d at 1313. Without alleging a specific instance of fraudulent billing, Klein’s complaint is defective and his cause of action may not proceed. Joshi, 441 F.3d at 557 (requiring relator to “provide some representative examples of [the defendants’] alleged fraudulent conduct”); Clausen, 290 F.3d at 1313 (“If Rule 9(b) is to carry any water, it must mean that an essential allegation and circumstance of fraudulent conduct cannot be alleged in such conclusory fashion.”).

This Court acknowledges and takes seriously the high stakes involved in this case. Indeed, claims filed under the FCA tend naturally to implicate major public policy concerns. But unlike the court below and our peers on the First, Fifth, and Seventh Circuits, we believe this is all the more reason to adhere strictly to the text and purpose of Rule 9(b) and ensure that the only defendants subjected to the incredible time and financial costs of litigation are those against whom plaintiff–relators file complaints containing readily identifiable allegations of an actual false claim.

IV.

For the foregoing reasons, we REVERSE the district court’s order denying Osborn’s motion to dismiss under Fed. R. Civ. P. 12(b)(6). This case is hereby REMANDED to the district court with instructions to dismiss Klein’s complaint without prejudice. DIVOLIVIA, Circuit Judge, concurring in part and dissenting in part:

I agree with the majority’s conclusion that the FCA requires Klein to plead his case with more particularity. I also concur with the majority’s holding that a prior qui tam complaint need not meet the pleading requirements of Federal Rule of Civil Procedure 9(b) in order to activate the FCA’s first-to-file bar. I write separately, however, because the majority has missed the point: the Stewart complaint, however lacking in its ability to put Osborn on notice, put the government on notice. It was therefore a “pending action” under the FCA, 31 U.S.C. § 3730(b)(5), that operates to bar Klein’s suit in perpetuity. Because Klein’s suit should have been dismissed with prejudice for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1), I respectfully dissent.

Under the FCA, private citizens, called relators, may file civil lawsuits on behalf and in the

name of the United States and, if successful, recover a portion of the damages when a party is defrauding the government. Id. at §§ 3730(b), (d). These suits are known as qui tam actions, and the private attorneys general—the relators—who bring them are colloquially called “whistleblowers.” In 1986, legislators amended the statute substantially for the first time since it was signed into law in 1863, introducing the current version of the qui tam claim preclusion provision at issue today.

The first-to-file bar states: “When a person brings an action under [the FCA], no person other

than the Government may intervene or bring a related action based on the facts underlying the pending action.” § 3730(b)(5) (emphasis added). In other words, when two plaintiffs bring “related” claims before a court, the second plaintiff is out of luck. Unfortunately, judges have made this rule more complicated than it should be. But despite the differing interpretations of the first-to-file bar, all courts agree that the rule furthers the FCA’s “twin” aims of encouraging whistleblowers to put the government on notice of fraud, and preventing “copycat” claims that

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fail to notify the government of additional, material information. See, e.g., Batiste, 659 F.3d at 1210; accord Carter, 710 F.3d at 181 (“While encouraging citizens to act as whistleblowers, the Act also seeks to prevent parasitic lawsuits based on previously disclosed fraud.”).

Two essential issues arise under the first-to-file bar: When are actions related, and what does

“pending” mean? Only the latter question is relevant here, but for the sake of completeness, I will briefly discuss the former. Significantly, the policy behind the resolution of relatedness is the same policy behind the resolution of pending; the overarching purpose of the statute illuminates both questions and therefore buttresses the reasoning of this dissent.

Circuit courts have taken various approaches to interpret the meaning of related for purposes

of the first-to-file bar. Most courts have rejected the “identical facts” test because the plain language of § 3730(b)(5) uses the word related instead of “identical.” Carter, 710 F.3d at 181. The most prominent approach is the “same material elements” test. The Third, Fourth, Fifth, Sixth, Ninth, Tenth, and D.C. Circuits have adopted this approach. This test bars a subsequent action if the claim is based on the “same material elements of fraud” as the first action even if the later suit “incorporates somewhat different details.” Id. at 182. Instead, if both complaints “suffice[] to put the U.S. government on notice” and “to equip the government to investigate [the defendant]’s allegedly fraudulent forbearance practices nationwide,” the actions allege the same material elements and are therefore related. Batiste, 659 F.3d at 1209. If, however, the complaints give rise to substantially “different investigation[s] or recover[ies],” they do not plead the same material facts and are therefore not related. Shea, 748 F.3d at 341–42. This harkens back to the first-to-file bar’s twin purposes of “rejecting suits which the government is capable of pursuing itself, [and] promoting those which the government is not equipped to bring on its own.” Id. at 342. The district court properly found that the Stewart action and Klein’s action were related under § 3730(b)(5). Klein, No. 2014-CM-0839, at *9.

The second issue, the meaning of pending in § 3730(b)(5), is the ultimate question before this

Court. Specifically, whether a first-filed claim that does not meet the heightened pleading requirements of Rule 9(b), and therefore no longer awaits a court’s review, is a pending action for purposes of the first-to-file bar. Because the district court held that the Stewart complaint did not activate the first-to-file bar, it never considered this question in-depth. And today, the majority incorrectly answers the question in the negative, holding that a claim that is dismissed for failing to plead fraud with particularity under Rule 9(b) is no longer pending for purposes of the first-to-file bar.

Under the most sensible interpretation of the statute—which comports with the statutory

scheme of a qui tam action, conforms to a plain reading of the statutory language, and achieves the purposes underlying the FCA—once the first plaintiff files suit, any subsequent action must be dismissed. This is the case even when the first-filed complaint does not meet the stringent pleading requirements of Rule 9(b); once the government is put on notice of fraud, which the majority acknowledges, ante, happened in this case, there is no need for a subsequent plaintiff to alert the Government to a similar fraudulent scheme. Thus, the Stewart complaint activated the first-to-file bar, and the first-to-file bar precludes Klein’s action from going forward. Several arguments support this position, including those the majority advanced in support of its decision in the alternative.

First, the FCA’s statutory scheme imagines this result. When a qui tam plaintiff files suit

under the FCA, the complaint and other relevant materials are served on the government under

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§ 3730(b)(2). The complaint remains under seal for at least sixty days, pending a government motion requesting more time, so that the government may determine whether it will intervene as lead prosecutor and proceed with the action, or whether the relator will preserve that right. 31 U.S.C. §§ 3730(b)(2)–(4); see also DEP’T OF JUSTICE, FALSE CLAIMS ACT CASES: GOVERNMENT INTERVENTION IN QUI TAM (WHISTLEBLOWER) SUITS 1–2 (2011) (noting that once a complaint is filed under seal the government is required to investigate the allegations). Thus, once a plaintiff files suit under the FCA, the complaint effects notice on the government of the allegedly fraudulent scheme. See Heineman-Guta, 718 F.3d at 30 (“This procedure gives the government an opportunity to assess the relator’s complaint and decide whether to intervene and assume primary responsibility for prosecuting the case.”). Even if the facts as alleged would not suffice to put the defendant on notice of the fraud it should expect to refute, the government is put on notice. See, e.g., Roberts v. Accenture, LLP, 707 F.3d 1011, 1017–18 (8th Cir. 2013) (awarding a percentage of settlement proceeds to the qui tam relators even though the complaint likely did not meet the pleading requirements of Rule 9(b)). It is illogical to conclude that once the government has examined the complaint and conducted an internal evaluation of the allegations, a subsequent court’s decision rendering the complaint “legally infirm,” Walburn, 431 F.3d at 973, will reverse the notice afforded to the government. See Shea, 748 F.3d at 344 (“The resolution of a first-filed action does not somehow put the government off notice of its contents.”). After spending ample space distinguishing the pleading requirements of Rule 9(b) from the notice-effecting requirements of an FCA complaint, the majority falls short by failing to connect the dots: the very act of putting the government on notice triggered the first-to-file bar and precluded Klein’s complaint. That is the point of the statute.

Second, the plain—and most reasonable—reading of § 3730(b)(5) imputes a referential

meaning to the word pending. In interpreting the FCA, this Court should “look first to the plain language of the statute, construing the provisions of the entire law, including its object and policy, to ascertain the intent of Congress.” United States ex rel. Lujan v. Hughes Aircraft Co., 243 F.3d 1181, 1187 (9th Cir. 2011) (emphasis added). Although the plain meaning of pending, in isolation, lends credence to the majority’s interpretation, when read in the context of the entire first-to-file bar, and in the context of the qui tam provisions as a whole, such a reading is inconsistent with the spirit of the statute. When read in light of the FCA’s purpose and underlying policy, “pending” most logically takes on a referential meaning. Moreover, “[i]t is a well-established canon of statutory construction that a court should go beyond the literal language of a statute if reliance on that language would defeat the plain purpose of the statute.” Bob Jones Univ. v. United States, 461 U.S. 574, 586 (1983).

The first-to-file bar improves the government’s ability to uncover fraud by simultaneously

encouraging whistleblowers and minimizing duplicative claims that “contribute nothing to the government’s knowledge of fraud.” Shea, 748 F.3d at 344; see also Walburn, 431 F.3d at 970. The bar is an “absolute, unambiguous exception-free rule,” Carter, 710 F.3d at 181, that prevents successive relators from filing claims notifying the government of the same underlying fraudulent scheme. Lujan, 243 F.3d at 1187. Whoever wins the proverbial race to the courthouse proceeds, and the second (or third, or fourth) relator’s case is dismissed because the purpose of the qui tam provisions has already been served by the first-filed claim. The word pending in § 3730(b)(5) “serves to identify which action bars the other” and acts “as shorthand for ‘first-filed.’” Shea, 748 F.3d at 343. This interpretation not only advances the simplest reading of the rule, but also provides the clearest direction for courts and, ultimately, whistleblowers.

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If pending contains a temporal limit, perverse results abound. As the majority points out (but does not resolve), this reading has the potential to require a district court in one jurisdiction to determine the legal sufficiency of a claim filed before a district court in another, where different precedent might dictate different results. See Batiste, 659 F.3d at 1210. Second, this interpretation provides relators with improper guidance and expectations, and it breeds troublesome incentives. Although the “race to the courthouse” implies a near-impossible awareness among relators, the temporal reading of the bar actually requires one. Under the majority’s reading, whistleblowers not only need to know whether they are the first or second in line to report fraudulent behavior, but also they must keep tabs on other (initially secret) lawsuits around the country that may or may not allege related facts to determine when their complaints should be refiled. Alternatively, whistleblowers will feel compelled to file blatantly unsubstantiated claims so as to sit on the opportunity to amend their complaints and remain the pending action. This invites exactly the parasitic lawsuits the first-to-file bar aimed to eradicate. Under the referential reading of the statute, whistleblowers are encouraged to act quickly—but also carefully—to report substantiated fraudulent activity as soon as it is probative, because once a related scheme has been brought to the government’s attention, subsequent relators will be barred. In fact, because the initial relator’s first-filed claim can even bar the initial relator’s own attempts to refile after his complaint is dismissed under Rule 12(b), the referential reading of pending further insures against hollow claims. See Shea, 748 F.3d at 342–43.2

Moreover, the temporal interpretation makes any given relator’s success pendent on a given

federal docket’s—a given judicial chamber’s, even—timing and workload. Repetitive and feckless claims may continue indefinitely, and a first-filed complaint will be barred one day but not the next. Considering the rising number of qui tam complaints filed each year, compared to the success rate of individual actions, these concerns are hardly “overblown.” See ante; see also Fraud Statistics - Overview: October 1, 1987 - September 30, 2013, DEP’T OF JUSTICE, (Dec. 23, 2013 2:42:03 PM), http://www.justice.gov/sites/default/files/civil/legacy/2013/12/26/C-FRAUDS_FCA_Statistics.pdf. Furthermore, the majority’s conclusory assertion minimizing the potential for these absurd decisions does not advance a justification or resolution.

Finally, the majority claims that the referential reading prohibits subsequent relators from

filing a qui tam suit that sheds new light on a previously filed fraudulent scheme. Not so. The FCA’s statutory scheme requires the government to review the allegations within each qui tam action filed, precluding a court from withholding new and helpful information from the government. A district court does not even decide the outcome of a Rule 12(b) motion until after the government has had ample time to verify the complaint and to decide whether to intervene. Moreover, the referential reading of the first-to-file bar does not apply to claims that give rise to different investigations and recoveries; the relatedness inquiry accounts for this possibility. See Shea, 748 F.3d at 341–42. The referential interpretation provides a better screening function than its temporal alternative. And if any definition of pending serves as the better gatekeeper to discovery, it is the referential reading that best weighs discovery’s potential fruits against its massive costs.

2 Although I envision a first-to-file bar that precludes subsequent related claims, I do not doubt that some

actions will in fact be too “blunt, overbroad, or vague” to put the government on notice of actual fraudulent activity. See ante. But this Court does not today face the issue of whether subsequent suits may be barred by a no-longer-pending action that is so incredibly deficient as to fail to even notify the government of an alleged fraud, as my colleagues in the majority correctly pointed out.

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The purpose of the first-to-file bar is to effect notice on the government so that it may investigate and extinguish fraud. Once a relator has accomplished this, there is no need for a second relator. Even if the first-filed claim is dismissed for procedural defects, an outstanding need to notify the government no longer exists. Notice, like the first-to-file bar, functions in perpetuity; it is not undone by virtue of failing to abide by a procedural rule. If a subsequent relator brings to the government’s attention new details that spring a significantly new investigation or suggest a significantly different remedy, that claim is not barred because the two actions are not related as a matter of law. The first-to-file bar “prevents the less vigilant whistle-blower from using insignificant factual variations to allege what is essentially the same fraudulent scheme already made known to the government.” Batiste, 740 F. Supp. 2d at 102. Giving pending its referential meaning achieves this, encourages whistleblowers to come forward, and discourages copycat lawsuits. To read the word in isolation and ascribe temporal limits does the opposite, and defeats the purpose of the FCA’s qui tam provisions.

For these reasons, I dissent.