United States Court of Appeals, District of Columbia Circuit
United States of America, ex rel. Stephen Shea, and Stephen M. Shea, Appellant
Cellco Partnership, doing business as Verizon Wireless, et al., Appellees
October 24, 2016
with 15-7136 Appeals from the United States District Court
for the District of Columbia (No. 1:09-cv-01050)
Christopher B. Mead argued the cause for
appellant/cross-appellee. With him on the briefs were Mark
London and Stuart A. Berman.
P. Waxman argued the cause for
defendants-appellees/cross-appellants. With him on the briefs
were Jonathan G. Cedarbaum and Daniel Winik.
P. Elwood, Craig D. Margolis, Jeremy C. Marwell, Kathryn
Comerford Todd, and Steven P. Lehotsky were on the brief for
amicus curiae The Chamber of Commerce of the United States of
America in support of defendants-appellee/cross-appellants.
Before: Srinivasan and Millett, Circuit Judges, and Randolph,
Senior Circuit Judge.
SRINIVASAN, CIRCUIT JUDGE
False Claims Act penalizes the knowing submission of a false
or fraudulent claim for payment to the federal government. 31
U.S.C. § 3729(a)(1). Rather than rely solely on federal
agencies to police fraudulent claims, Congress authorized
private persons to bring what are known as qui tam
actions. In a qui tam suit, a private party, called
the relator, challenges fraudulent claims against the
government on the government's behalf, ultimately sharing
in any recovery.
qui tam case, the relator is appellant Stephen M.
Shea. He alleges that Verizon Communications, Inc. violated
the False Claims Act by overbilling the government in its
telecommunications contracts. Shea filed two qui tam
suits against the company. The first ended in a settlement
under which Shea received a $20 million payout. While that
suit was pending, Shea brought a second qui tam
action against Verizon, alleging that the company's fraud
extended to twenty additional federal contracts.
district court held that Shea's second suit violated the
False Claims Act's "first-to-file" bar, 31
U.S.C. § 3730(b)(5), which prohibits a relator from
bringing any action related to a pending qui tam
suit. The district court thus dismissed Shea's second
action. But because Shea's first action had ended by that
time, such that the first-to-file bar would no longer
prohibit the filing of a new suit, the district court
dismissed Shea's second action without prejudice to his
now appeals the dismissal of his action, contending that the
district court should have allowed him to amend the complaint
rather than require him to initiate a new suit. Verizon
cross-appeals, arguing that the district court should have
dismissed Shea's action with prejudice, such
that he could not refile it. In support of its argument for a
dismissal with prejudice, Verizon relies on the False Claims
Act's "public disclosure" bar, id.
§ 3730(e)(4), and on the pleading requirements
established by Federal Rules of Civil Procedure 8 and 9(b).
reject both Shea's arguments in his appeal and
Verizon's arguments in its cross-appeal. We therefore
affirm the district court in all respects.
bringing a qui tam action under the False Claims
Act, a relator need not allege a personal injury. See Vt.
Agency of Nat. Res. v. United States ex rel. Stevens,
529 U.S. 765, 772-73 (2000). Instead, she can bring suit
"to remedy an injury in fact suffered by the United
States." Id. at 771, 774. To encourage relators
to bring suits on the government's behalf, Congress gave
them a stake in the controversy: they can share up to 30
percent of any proceeds ultimately recovered. 31 U.S.C.
§ 3730(d). The government also can elect to intervene
in, and assume control of, any qui tam action, in
which event the relator's share of the recovery becomes
capped at 25 percent. Id. § 3730(b)(2), (d)(1).
time, Congress learned that the bounty available to qui
tam relators created "the danger of parasitic
exploitation of the public coffers." United States
ex rel. Springfield Terminal Ry. v. Quinn, 14 F.3d 645,
649 (D.C. Cir. 1994). To curtail abusive suits, Congress
established "a number of restrictions" on qui
tam actions. State Farm Fire and Cas. Co. v. United
States ex rel. Rigsby, 137 S.Ct. 436, 440 (2016);
see United States ex rel. Heath v. AT&T, Inc.,
791 F.3d 112, 116 (D.C. Cir. 2015). This case involves two of
those restrictions: (i) the first-to-file bar and (ii) the
public disclosure bar.
first-to-file bar operates on the recognition that, because
relators can bring suit without having suffered a personal
injury, countless plaintiffs in theory could file a qui
tam action based on the same fraud and then share in the
proceeds. And if multiple relators could split the recovery
for the same conduct, they would have less "incentive to
bring a qui tam action in the first place."
United States ex rel. LaCorte v. SmithKline Beecham
Clinical Labs., Inc., 149 F.3d 227, 234 (3d Cir. 1998).
The first-to-file bar addresses that problem. It provides
that, "[w]hen a person brings an action under [the False
Claims Act], no person other than the Government may
intervene or bring a related action based on the facts
underlying the pending action." 31 U.S.C. §
3730(b)(5). The first-to-file bar thereby ensures only one
relator will share in the government's recovery and
encourages prompt filing from relators desiring to be first
to the courthouse. LaCorte, 149 F.3d at 234.
public disclosure bar similarly seeks "the golden
mean" between, on one hand, encouraging relators with
valuable information to bring suit, and, on the other hand,
discouraging unduly "opportunistic plaintiffs."
See Graham Cty. Soil & Water Conservation Dist. v.
United States ex rel. Wilson, 559 U.S. 280, 294 (2010)
(quoting Springfield, 14 F.3d at 649). Originally,
the False Claims Act allowed qui tam relators simply
to copy information already in the public domain. Indeed, in
one landmark case, the relator parroted the government's
own filings but still shared in the government's
reward. See United States ex rel. Marcus v. Hess,
317 U.S. 537, 545-48 (1943). In response, Congress
established what became the public disclosure bar. The bar
prohibits private parties from bringing suit based on a fraud
already disclosed through identified public channels (unless
the relator is "an original source of the
information"). 31 U.S.C. § 3730(e)(4)(A).
2007, Shea filed a qui tam action against Verizon
alleging that the company had knowingly charged the General
Services Administration (GSA) for non-billable taxes and
surcharges. Shea first became suspicious of Verizon while
working as a consultant for commercial telecommunications
customers. He learned that Verizon regularly overbilled its
commercial customers for taxes, fees, and surcharges. Shea
suspected Verizon of employing the same scheme against the
government. After investigating, he allegedly confirmed that
Verizon had billed the GSA for taxes and surcharges
prohibited by its contract. The United States intervened in
Shea's action. In February 2011, the parties settled the
action without any admission of liability by Verizon. Shea
received nearly $20 million in the settlement.
the parties settled Shea's first action (Verizon
I), Shea apparently deduced that Verizon had used the
same fraudulent billing scheme in twenty additional federal
contracts. Rather than amend his complaint, however, Shea
brought a second qui tam action against Verizon
(Verizon II). This time, the government chose not to
2012, the district court dismissed Shea's second qui
tam suit with prejudice. The district court held that
Verizon II was related to Verizon I, such
that the False Claims Act's first-to-file bar blocked the
later action. Although Verizon I had ended in a
settlement the previous year, the court thought the