WASHINGTON (CN) - A communications consultant who won nearly $20 million in a whistle-blower lawsuit against Verizon is barred from filing a second, similar suit, the D.C. Circuit ruled.
Stephen Shea filed a qui tam complaint on behalf of the U.S. government against Verizon in January 2007, alleging violations of the False Claims Act. He claimed Verizon knowingly overcharged the General Services Administration for federal, state and local taxes, duties and surcharges, a "billing platform" the carrier also applied to corporate clients.
The United States intervened and the case was settled for about $93 million without Verizon admitting liability. Shea received $19.3 million for blowing the whistle.
In 2009, he filed a second, similar lawsuit against Verizon, the difference between the two complaints being the contracts, charges and government agencies involved.
In 2012, D.C. Federal Court dismissed the complaint for lack of subject matter jurisdiction under the Federal Rules of Civil Procedure (FRCP).
The court ruled that the "first-to-file" bar under the FRCP 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."
The court added that Verizon II, as the court has dubbed the case, alleges "a fraudulent scheme the government already would be equipped to investigate based on the complaint in Verizon I."
Shea argued that Verizon II should be dismissed with prejudice since Verizon I was no longer pending, but the court was not persuaded.
Shea filed an appeal with the D.C. Circuit. He claimed the two complaints would have to be identical to be considered "related" under the False Claims Act's first-to-file bar.
But the D.C. Circuit found that "these complaints allege the same fraudulent scheme," and that "Verizon I would suffice to equip the government to investigate Shea's expanded allegations in Verizon II."
Shea also claimed the first-to-file bar applies only to litigants other than the relator who filed the original action.
The court disagreed.
"The text of the statute clearly directs that 'no person' is allowed to bring a related suit," Senior U.S. Circuit Judge David Sentelle wrote for the three-judge panel. "It is not nonsense to disallow all persons - the original relator included - from bringing a related action. The statue is written in the disjunctive. A second relator need not be capable of both forms of prohibitive behavior to be eligible for prohibition."
Finally, Shea based his claim that the court should dismiss Verizon II without prejudice because Congress did not intend the bar to "continue into perpetuity."
The circuit found, however, that "duplicative suits would contribute nothing to the government's knowledge of fraud. And, Shea has forwarded no reason why the rule should be read to bar a related claim one day, but not the next. We reject Shea's argument that the first-to-file bar represents a temporal limit on related actions."
U.S. Circuit Judge Sri Srinivasan dissented. He agreed that Verizon II is "related" to the prior case, but disagreed that the first-to-file bar "persists even after the initial action concludes."
He added: "The other courts of appeals to consider the question have determined - correctly, in my view - that the bar operates only while the first action remains 'pending.' The terms of the stature require that conclusion. Because here, the first action is no longer 'pending,' the first-to-file bar should pose no continuing obstacle to the filing of a subsequent action. The proper disposition thus should be to dismiss the complaint without prejudice rather than with prejudice."
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