McGuire v. Estate of Robert Cunningham , 923 F.3d 240 ( 2019 )

United States Court of Appeals
For the First Circuit
No. 17-1106
UNITED STATES OF AMERICA; STATE OF CALIFORNIA; STATE OF
COLORADO; STATE OF CONNECTICUT; STATE OF DELAWARE; DISTRICT OF
COLUMBIA; STATE OF FLORIDA; STATE OF GEORGIA; STATE OF HAWAII;
STATE OF ILLINOIS; STATE OF INDIANA; STATE OF IOWA; STATE OF
LOUISIANA; STATE OF MARYLAND; COMMONWEALTH OF MASSACHUSETTS;
STATE OF MICHIGAN; STATE OF MONTANA; STATE OF NEVADA; STATE OF
NEW JERSEY; STATE OF NEW MEXICO; STATE OF NEW YORK; STATE OF
NORTH CAROLINA; STATE OF OKLAHOMA; STATE OF RHODE ISLAND; STATE
OF TENNESSEE; STATE OF TEXAS; COMMONWEALTH OF VIRGINA; and STATE
OF WISCONSIN, ex rel. MARK MCGUIRE, WENDY JOHNSON, and
RYAN UEHLING,
Plaintiffs,
v.
MILLENIUM LABORATORIES, INC., MILLENIUM LABORATORIES OF
CALIFORNIA, INC.; JAMES SLATTERY; HOWARD APPEL,
Defendants.
MARK MCGUIRE,
Cross-Claimant, Appellant,
ESTATE OF ROBERT CUNNINGHAM; RYAN UEHLING; OMNI HEALTHCARE INC.;
AMADEO PESCE; JOHN DOE a/k/a CRAIG DELIGDISH,
Cross-Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Nathaniel M. Gorton, U.S. District Judge]
Before
Torruella, Lynch, and Thompson,
Circuit Judges.
Michael Tabb, with whom Thomas M. Greene, Ryan P. Morrison,
and Greene LLP were on brief, for appellant.
Michael B. Bogdanow, with whom Robert Foster and Meehan,
Boyle, Black & Bogdanow, P.C. were on brief, for appellees.
May 6, 2019
LYNCH, Circuit Judge. The False Claims Act (FCA), 31
U.S.C. § 3729 et seq., authorizes private persons, known as
relators, to "bring a civil action . . . in the name of the
Government" against those who make fraudulent claims against the
United States, id. § 3730(b)(1). When a relator brings such a qui
tam suit, the government may intervene and proceed with the action,
or it may decline to intervene and allow the relator to proceed.
See id. § 3730(b)(1)-(4), (c).
The FCA encourages relators to bring qui tam suits by
allowing them to share in any recovery obtained for the government.
To avoid diluting this potential payout, the FCA's first-to-file
rule prohibits relators other than the first to file from
"bring[ing] a related action based on the facts underlying the
pending action." Id. § 3730(b)(5).
This case arises out of the government's successful
intervention in several qui tam suits against Millennium Health
(formerly Millennium Laboratories). Millennium settled with the
government for $227 million, setting aside fifteen percent of that
money as a relator's share. The question on appeal is who is the
first-to-file relator and how that is determined.
Mark McGuire brought a crossclaim for declaratory
judgment that he is the first to file and is entitled, under 31
U.S.C. § 3730(d)(1), to the fifteen-percent share. Robert
Cunningham, who had brought an earlier qui tam suit against
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Millennium, moved to dismiss the crossclaim, arguing that he, not
McGuire, was the first to file. Finding that the first-to-file
rule was jurisdictional, and based on its review of extrinsic
materials outside of the complaints, the district court agreed
with Cunningham. United States ex rel. Cunningham v. Millennium
Labs., Inc., 202 F. Supp. 3d 198, 209 (D. Mass. 2016). The district
court dismissed McGuire's crossclaim for lack of subject-matter
jurisdiction. Id.We hold, for the first time in this circuit, that the
first-to-file rule is not jurisdictional, reversing earlier
circuit precedent, and we hold that we have jurisdiction over
McGuire's crossclaim. We then describe the appropriate method for
the first-to-file analysis and hold that McGuire was the first-
to-file relator and that he has stated a claim that he is entitled
to the relator's share of the settlement. We reverse and remand
for further proceedings consistent with this opinion.
I.
A. The False Claims Act
President Abraham Lincoln signed the FCA into law in
1863. It was originally intended "to combat rampant fraud in Civil
War defense contracts." S. Rep. No. 99-345, at 8 (1986). Today,
the FCA is the federal government's "primary litigative tool for
combatting fraud." Id. at 2.
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The FCA imposes liability on any person who "knowingly
presents . . . a false or fraudulent claim for payment or
approval," 31 U.S.C. § 3729(a)(1)(A), "to an officer, employee, or
agent of the United States," id. § 3729(b)(2)(A)(i). A relator
may enforce the FCA by bringing a civil qui tam action "in the
name of the Government." Id. § 3730(b).
To bring such an action, the relator must file a
complaint under seal and must serve the United States with a copy
of the complaint and a disclosure of all material evidence. Id.
§ 3730(b)(2). After reviewing those materials, the United States
may "proceed with the action, in which case the action shall be
conducted by the Government." Id. § 3730(b)(4). Or, "[i]f the
government does not exercise its right to intervene in the suit,
the relator may serve the complaint upon the defendant and proceed
with the action." United States ex rel. Karvelas v. Melrose-
Wakefield Hosp., 360 F.3d 220, 225 (1st Cir. 2004), abrogated on
other grounds by Allison Engine Co. v. United States ex rel.
Sanders, 553 U.S. 662 (2008).
The FCA entitles the relator to a portion of any
resulting judgment or settlement. Before the 1986 amendments to
the FCA, the relator's share in a case in which the government had
intervened was capped at "10 percent of the proceeds of the action
or settlement of the claim." S. Rep. No. 99-345, at 41. The FCA
now mandates a relator award in such a case of "at least 15 percent
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but not more than 25 percent of the proceeds of the action or
settlement of the claim, depending upon the extent to which the
person substantially contributed to the prosecution of the
action."1 31 U.S.C. § 3730(d)(1).
The 1986 amendments also added a significant restriction
on recoveries in qui tam suits that is relevant here: the "first-
to-file" rule in paragraph 3730(b)(5). That paragraph provides,
"When a person brings an action under [31 U.S.C. § 3730(b)], no
person other than the Government may intervene or bring a related
action based on the facts underlying the pending action." Id.§ 3730(b)(5). Legislative history shows that this rule was meant
to "clarify in the statute that private enforcement under the civil
False Claims Act is not meant to produce class actions or multiple
separate suits based on identical facts and circumstances." S.
Rep. No. 99-345, at 25.
B. The Complaints
Because we hold that the first-to-file issue is to be
addressed under Federal Rule of Civil Procedure 12(b)(6), not Rule
12(b)(1), we confine our review to the pleadings and to facts
subject to judicial notice. Haley v. City of Bos., 657 F.3d 39,
1 When the government declines to intervene and the
relator successfully prosecutes the action, the relator may
receive up to 30 percent of the payout (with the remainder to the
United States). 31 U.S.C. § 3730(d)(2). That is not the situation
here.
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46 (1st Cir. 2011). We limit our background discussion to facts
alleged in Cunningham's amended complaint, McGuire's original
complaint, and in the government's complaint in intervention and
settlement agreement.2
1. Cunningham's Amended Complaint
In late 2009 and early 2010, relator Robert Cunningham3
filed qui tam actions against five competitors of Calloway
Laboratories, his employer. One competitor he sued was Millennium.
Cunningham filed his first amended complaint4 against
Millennium on February 24, 2011. It detailed a mechanism of fraud
arising from Millennium's "Physician Billing Model," the key
component of which was Millennium's "multi-class qualitative drug
screen," which Cunningham's complaint labels a "test kit." The
test kit was a urine specimen collection cup with chemical test
2 Cunningham's amended complaint and McGuire's original
complaint are subject to judicial notice. See Zucker v. Rodriguez,
919 F.3d 649, 651 n.5 (1st Cir. 2019) (citing E.I. Du Pont de
Nemours & Co. v. Cullen, 791 F.2d 5, 7 (1st Cir. 1986) (Breyer,
J.)). And the government's complaint in intervention and
settlement agreement are also properly before us because McGuire
attached them as exhibits to his crossclaim.
3 Cunningham died in December 2010. His estate has
continued to pursue his action. For simplicity, we refer to
Cunningham and his estate as "Cunningham."
4 Cunningham's amended complaint states, "This First
Amended Complaint does not add any facts to those contained in the
Original Complaint; rather, it removes some of the allegations
that had been contained therein." The amended complaint's
allegations were the only allegations "pending" when McGuire filed
his suit.
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strips embedded in it. This kit, which "c[ould] be purchased for
less than" ten dollars, "use[d] a single specimen" collected at
the point of care to detect "multiple drug classes."
We described the three aspects of Cunningham's
allegations in United States ex rel. Estate of Cunningham v.
Millennium Labs. of Calif., Inc., 713 F.3d 662, 665-66 (1st Cir.
2013). Cunningham's complaint alleged that Millennium used its
inexpensive point-of-care test kits to induce physicians into
excessive billing (Aspect One), excessive testing (Aspect Two),
and excessive confirmatory testing (Aspect Three).5 In Cunningham,
5 We describe the first two aspects more fully. Aspect
One: Cunningham alleged that Millennium told physicians that this
test kit could "substantially increase his or her revenue."
Because the kits performed several tests at once, Millennium told
the physicians that they could "bill both government and private
health insurance companies" for several drugs tests per kit. Under
then-current government billing codes, the physicians should have
only billed for one test per test kit. Cunningham alleged that a
document distributed by Millennium "suggest[ed] each physician can
bill at least 9 units per kit." And Cunningham alleged that
Millennium separately informed physicians that they should bill
"as many units as there are panels in the test kit." Cunningham
alleged that, under this model, physicians could bill between
$16.67 and $80 per unit and so extract per-kit revenues of between
$173.18 to $432.
Aspect Two: Cunningham alleged that Millennium encouraged
physicians to conduct excessive tests. Millennium informed
physicians that, if they were to order twenty tests per day, they
could earn up to $8,640 per day. The complaint stated that
Millennium thus "encourage[d] the physician to order more testing
than that physician would have prior to engaging in Millennium's
[point-of-care] model, and increase[d] Millennium's market share
by drawing other physicians to the practice with the hope and
promise of greater revenues." It further alleged that
participating physicians ordered "significantly more testing for
their patients since entering the conspiracy than they did prior
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we held that Aspects One and Three were jurisdictionally barred by
the FCA's public disclosure provision, 31 U.S.C. § 3730(e)(4)(A),
because they had been "publicly disclosed" in a California state
defamation suit brought by Millennium against Calloway. 713 F.3d
at 671. We then vacated the district court's order dismissing
Aspect Two of Cunningham's claim and remanded that claim for
further proceedings. Id. at 676. On remand, the district court
dismissed Aspect Two of Cunningham's claim for lack of
particularity under Federal Rule of Civil Procedure 9(b) and for
failure to state a claim under Rule 12(b)(6). United States ex
rel. Estate of Cunningham v. Millennium Labs. of Cal., No. 09-
12209-RWZ, 2014 WL 309374, at *2 (D. Mass. Jan. 27, 2014). That
decision is currently on appeal.
Only Aspect Three is potentially relevant to the first-
to-file issue here.6 Cunningham alleged that if the initial
qualitative test uncovered any of the tested drugs, that test
"w[ould] need to be followed up by a quantitative screen" and then
to participating in the conspiracy with Millennium." The alleged
fraud consisted of Millennium's promotion of this billing model
and physician defendants' misrepresentation of the medical need
for the tests performed.
6 McGuire argues, based on Campbell v. Redding Medical
Center, 421 F.3d 817 (9th Cir. 2005), that because we found Aspect
Three to be jurisdictionally barred, it does not count as a
"pending" claim for first-to-file purposes. We do not address
this argument because we find McGuire was the first-to-file relator
even if we consider Aspect Three of Cunningham's complaint.
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"confirmed by another method." The complaint alleges that
Millennium's point-of-care model led to "significantly more
testing," including "confirmatory tests."
Cunningham alleged generally that this scheme
"increas[ed] the revenues of the [physician] defendants at the
expense of the government and private health insurance programs"
and "significantly increase[d] Millennium's revenues and market
share." Cunningham's amended complaint never mentions the terms
"custom profiles" or "standing orders" or describes any fraudulent
schemes by Millennium associated with either.
Cunningham filed three disclosures of material evidence
to the government in December 2009, September 2010, and February
2012, respectively.
2. McGuire's Original Complaint
Mark McGuire, appellant here, filed his original qui tam
complaint on January 26, 2012. It focused not on point-of-care
testing, the first stage of urinary drug testing, as Cunningham's
complaint had done, but on confirmatory (or quantitative) testing,
a later stage. McGuire alleged that after a point-of-care test
discloses an unexpected drug (or shows the lack of an expected
drug), a physician can order confirmatory tests. These tests,
which require sophisticated equipment and so can be expensive,
determine how much of the substance is present (or not).
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McGuire alleged that Millennium engaged in a scheme that
resulted in unnecessary confirmatory tests being performed and
billed to the government after the point-of-care tests. Millennium
persuaded physicians to execute "custom profiles," which are
standing orders for a battery of confirmatory tests on every urine
sample, regardless of whether the point-of-care testing showed a
need. McGuire alleged that "even if [a point-of-care test] comes
back completely negative, . . . based on the customized profile
Millennium has gotten the physician's office to sign, Millennium
runs 10 confirmatory tests." Millennium profited because "[t]hese
10 unnecessary tests are then billed to Medicare, Medicaid or other
federal plans." And physicians and hospitals who signed up for
"custom profiles" profited because they could bill the government
for the unnecessary tests.
This scheme was, according to McGuire's complaint, a
matter of corporate policy. McGuire alleged that Millennium
supervisors required their sales representatives to aggressively
market standing orders to physicians -- the representatives would
return time and time again until the physicians executed custom
profiles for at least ten confirmatory tests. Some physicians,
with Millennium's participation, included up to twenty-five tests
in their profiles.
McGuire also alleged that Millennium provided free
point-of-care cups (test kits) to physicians to induce them to
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send confirmation testing orders to Millennium. This tactic helped
Millennium gain market share in a highly competitive and
potentially quite lucrative business.
3. The Complaint and Settlement Agreement of the United
States
In December 2014, the government announced its intention
to intervene in McGuire's action (as well as the actions of three
other relators, none of whom were Cunningham). It filed its
complaint in intervention in those actions on March 19, 2015. The
complaint describes two fraudulent schemes: (1) Millennium's
submission of claims for excessive and unnecessary urine drug
testing ordered by physicians through standing orders without an
individualized assessment of patient need; and (2) urine drug
testing referred by physicians who received free point-of-care
testing supplies, in violation of the Stark Act and the Anti-
Kickback Statute. Millennium used these schemes to "knowingly
submit[] many millions of dollars' worth of false claims" to the
government.
The United States complaint in intervention alleges that
"[a] core element of Millennium's business model was the use of
physician standing order forms." These standing orders led to
unnecessary drug tests conducted "regardless of each patient's
individualized need and condition." Millennium required
physicians to use these forms or be cut off from processing
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specimens, set and enforced testing thresholds for standing
orders, and promoted routine confirmatory testing of even negative
point-of-care test results. This standing order practice
generated unnecessary testing, including confirmatory testing for
rarely abused drugs, even when point-of-care test results showed
no need for follow-up testing.
The government's complaint also alleged that Millennium
engaged in an illegal kickback scheme involving point-of-care
cups. After the Center for Medicare and Medicaid Services (CMS)
changed the reimbursement structure for point-of-care cups
effective April 2010, "the [point-of-care] test cups were no longer
a source of significant reimbursement revenue for physicians." In
response, Millennium "dramatically" expanded its "Free Cup
program." Under this program, Millennium distributed $5 million
worth of point-of-care test cups for free to physicians in exchange
for "referrals" to Millennium. A physician "refers" a test by
sending a sample for confirmatory testing. The government alleged
that this program violated the Stark Law and the Anti-Kickback
Statute, which require point-of-care test cups to be sold at fair
market value.
On October 16, 2015, the government and Millennium
reached a settlement under which Millennium agreed to pay $227
million plus interest to resolve these claims. The settlement set
aside fifteen percent of the recovery as a relator's share, but
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did not resolve which relator was entitled to the award.7 The
agreement provided that the district court "shall retain
jurisdiction as to . . . [r]elators' claims for a share of the
proceeds of the Settlement Amount." The district court dismissed
only the relators' claims against Millennium on March 24, 2016 and
stated that the "[r]elators' respective claims, between and among
themselves, for a portion of the agreed-upon 'relator share' of
the Settlement Amount . . . are not dismissed and will remain
pending."
C. Post-Settlement Procedural History
On October 23, 2015, McGuire filed a crossclaim for
declaratory relief, asserting that he was the first to file a
complaint that alleged the essential facts underlying the
government's complaint in intervention and settlement agreement.
He argued that he was entitled to the entire fifteen-percent
relator's share because he was the first-to-file relator.8 On
December 7, 2015, Cunningham moved to dismiss McGuire's
crossclaim, arguing that he, not McGuire, was the first to file.
7 The settlement also preserved the relators' rights to
seek reasonable costs and attorney's fees and expenses under 31
U.S.C. § 3730(d)(2) and preserved some relators' employment-
retaliation claims.
8 McGuire brought this crossclaim against Cunningham and
several other relators but not against Wendy Johnson, Allstate
Insurance Co., and Lawrence Spitz -- McGuire reports that he
"reached an agreement" with this last group. The cross-defendants
other than Cunningham have conceded that they filed behind McGuire.
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The government took no position on this issue. It did,
however, urge the district court to confine its first-to-file
analysis to "the text of the complaints themselves, and not on any
subsequent investigation by the United States of such complaints
or any related communications."
On August 19, 2016, the district issued its order
dismissing McGuire's crossclaim. Cunningham, 202 F. Supp. 3d at
209. The district court held, relying on this circuit's precedent,
that the first-to-file rule was jurisdictional and that
Cunningham's motion to dismiss was a factual challenge to the
court's jurisdiction. Id. at 205-06. The district court looked
beyond the complaints to extrinsic evidence and concluded that the
first-to-file rule applied and barred McGuire's crossclaim. Id.
at 206. The district court dismissed the crossclaim for lack of
subject-matter jurisdiction. Id. at 209. The order entered on
the docket three days later, on August 22, 2016.9
McGuire moved for reconsideration of the order
dismissing his crossclaim. The district court denied that motion.
This appeal followed.
9 There was no "separate document," Fed. R. Civ. P.
58(c)(2)(A), accompanying that order, so judgment entered 150 days
later, on January 19, 2017. McGuire had 30 days from then to file
his notice of appeal. McGuire's January 20, 2017 filing was
timely. Cunningham's arguments to the contrary are meritless.
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II.
A federal appellate court normally must "satisfy itself
both of its own subject-matter jurisdiction and of the subject-
matter jurisdiction of the trial court before proceeding further."
Royal Siam Corp. v. Chertoff, 484 F.3d 139, 143 (1st Cir. 2007)
(citing Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 541
(1986); Irving v. United States, 162 F.3d 154, 160 (1st Cir. 1998)
(en banc)). We consider whether the first-to-file rule is
jurisdictional under the Supreme Court's most recent caselaw. On
de novo review, and in light of that precedent, we hold that the
first-to-file rule, 31 U.S.C. § 3730(b)(5), is nonjurisdictional
and that we have jurisdiction over McGuire's crossclaim.10
"Characterizing a rule as jurisdictional renders it
unique in our adversarial system." Sebelius v. Auburn Reg'l Med.
Ctr., 568 U.S. 145, 153 (2013). A jurisdictional objection may be
raised at any time, even after trial. And a trial court without
jurisdiction lacks "all authority to hear a case."11 United States
v. Kwai Fun Wong, 135 S. Ct. 1625, 1631 (2015).
10 McGuire argues that the district court erred in holding
that his crossclaim for declaratory judgment under paragraph
3730(d)(1) is subject to the first-to-file rule. Cunningham, 202
F. Supp. 3d at 203. We need not reach this argument because even
if the first-to-file rule does not apply to McGuire's crossclaim,
it applies to his underlying action against Millennium. And
because that action eventually gave rise to McGuire's crossclaim,
we must assure ourselves of the district court's jurisdiction.
11 So even in a case like this one, in which seven years
have passed since McGuire first filed his complaint, a
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The Supreme Court has attempted to "ward off profligate
use of the term 'jurisdiction.'" Auburn Reg'l Med. Ctr., 568 U.S.
at 153. As such, it has held that we must apply a "readily
administrable bright line" rule and see if Congress has "clearly
state[d]" that the provision under review is jurisdictional.
Arbaugh v. Y&H Corp., 546 U.S. 500, 515 (2006).
In considering this issue, we do not write on a clean
slate. As the district court quite properly noted, this court has
several times characterized the first-to-file rule as
jurisdictional. See United States ex rel. Wilson v. Bristol-Myers
Squibb, Inc., 750 F.3d 111, 117 (1st Cir. 2014); United States ex
rel. Heineman-Guta v. Guidant Corp., 718 F.3d 28, 34 (1st Cir.
2013); United States ex rel. Duxbury v. Ortho Biotech Prods., L.P.,
579 F.3d 13, 16, 33 (1st Cir. 2009).
While we are "ordinarily 'constrained by prior panel
decisions directly (or even closely) on point,'" we are not so
bound when "non-controlling authority that postdates the decision
. . . offer[s] 'a compelling reason for believing that the former
panel, in light of new developments, would change its collective
mind." Sánchez ex rel. D.R.-S. v. United States, 671 F.3d 86, 96
(1st Cir. 2012) (quoting United States v. Guzmán, 419 F.3d 27, 31
jurisdictional objection may result in dismissal. And that could
mean "many months of work on the part of the attorneys and the
court may be wasted." Henderson ex rel. Henderson v. Shinseki,
562 U.S. 428, 435 (2011).
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(1st Cir. 2005)). There are several compelling reasons for such
a belief here.
First, new developments cast serious doubt on our prior
characterization of the first-to-file rule as jurisdictional. In
2015, the Supreme Court decided Kellogg Brown & Root Services,
Inc. v. United States ex rel. Carter, 135 S. Ct. 1970 (2015), a
qui tam case. Carter "addressed the operation of the first-to-
file bar on decidedly nonjurisdictional terms, raising the issue
after it decided a nonjurisdictional statute of limitations
issue." United States ex rel. Heath v. AT & T, Inc., 791 F.3d
112, 121 n.4 (D.C. Cir. 2015). The clear implication is that the
Court did not consider the first-to-file rule to be jurisdictional.
Interpreting Carter, the D.C. Circuit and the Second Circuit have
both held that the first-to-file rule is nonjurisdictional.12 See
United States ex rel. Hayes v. Allstate Ins. Co., 853 F.3d 80, 85
(2d Cir. 2017); Heath, 791 F.3d at 120-21.
This court has twice declined to reach the issue of
whether the first-to-file rule is jurisdictional when it was not
necessary to resolution of the appeal, while recognizing that
Carter affects the analysis. See United States ex rel. Kelly v.
Novartis Pharm. Corp., 827 F.3d 5, 12 n.9 (1st Cir. 2016) ("We
12 The Fourth Circuit has, after Carter, based on circuit
precedent, maintained that the first-to-file rule is
jurisdictional. See United States ex rel. Carter v. Halliburton
Co., 866 F.3d 199, 203 n.1 (4th Cir. 2017).
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assume, but need not decide, that the first-to-file bar remains
jurisdictional. This position is not without doubt."); United
States ex rel. Gadbois v. PharMerica Corp., 809 F.3d 1, 6 n.2 (1st
Cir. 2015) ("[W]e have no need to consider the relator's back-up
argument that the first-to-file bar is not jurisdictional in light
of Carter.").
Second, this circuit's prior cases labeling the first-
to-file rule as jurisdictional, all of which predate Carter,
devoted no substantive analysis to this issue. Duxbury, the oldest
case, listed the first-to-file rule among the FCA's
"jurisdictional bars" only in passing as dicta. 579 F.3d at 16.
But it did not ask, and no later First Circuit decision has asked,
if Congress clearly stated that the first-to-file rule was
jurisdictional. Because these rulings failed to apply the Arbaugh
clear-statement test, they should be "accorded 'no precedential
effect' on the question whether the federal court had authority to
adjudicate the claim in suit." Arbaugh, 546 U.S. at 511 (quoting
Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 91 (1998)).
And third, applying the bright line rule leads to only
one conclusion: the first-to-file rule is nonjurisdictional.
Neither statutory text nor context nor legislative history
suggests otherwise. See Kwai Fun Wong, 135 S. Ct. at 1632-33(looking to text, context, and legislative history to determine
whether a statutory provision was jurisdictional).
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As always in matters of statutory interpretation, we
start with the text. United States v. Musso, 914 F.3d 26, 30 (1st
Cir. 2019). Paragraph 3730(b)(5) provides that "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). As the D.C. Circuit recognized, this "language 'does
not speak in jurisdictional terms or refer in any way to the
jurisdiction of the district courts.'" Heath, 791 F.3d at 120
(quoting Arbaugh, 546 U.S. at 515).
We next look to context. Paragraph 3730(b)(5) does not
speak in jurisdictional terms; nearby provisions, by contrast,
explicitly do so. Cf. Musso, 914 F.3d at 31 (drawing a negative
inference from word choices made in neighboring statutory text).
For instance, paragraph 3730(e)(1) provides, "No court shall have
jurisdiction over an action brought by a former or present member
of the armed forces . . . against a member of the armed forces
arising out of such person's service in the armed forces." 31
U.S.C. § 3730(e)(1). And paragraph 3730(e)(2) states, "No court
shall have jurisdiction over an action brought . . . against a
Member of Congress, a member of the judiciary, or a senior
executive branch official if the action is based on evidence or
information known to the Government when the action was brought."
Id. § 3730(e)(2). So, as the D.C. Circuit recognized, "[w]hen
Congress wanted limitations on False Claims Act suits to operate
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with jurisdictional force, it said so explicitly." Heath, 791
F.3d at 120.
And finally, as a check to confirm the accuracy of our
textual analysis, we turn to legislative history. See Kwai Fun
Wong, 135 S. Ct. at 1633 ("[E]ven assuming legislative history
alone could provide a clear statement (which we doubt), none does
so here."). Congress added the first-to-file rule when it amended
the FCA in 1986. The Senate Report states that the purpose of the
first-to-file rule was to clarify that "only the Government may
intervene in a qui tam action" and that "private enforcement under
the civil False Claims Act is not meant to produce class actions
or multiple separate suits based on identical facts and
circumstances." S. Rep. No. 99-345, at 25. The first-to-file
rule advances this goal even when the provision is not
jurisdictional.
Finding Congress had made no clear statement that the
rule was jurisdictional, the D.C. Circuit held that "the first-
to-file rule bears only on whether a qui tam plaintiff has properly
stated a claim." Heath, 791 F.3d at 121. The Second Circuit,
relying heavily on Heath, reached the same conclusion. Hayes, 853
F.3d at 85-86. Given Carter, Heath, Hayes, and the Supreme Court's
clear statement rule, there is a compelling reason to believe that
prior panels would no longer view the first-to-file rule as
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jurisdictional. For the same reasons, we now hold that the first-
to-file rule is not jurisdictional.
Because the first-to-file rule is not jurisdictional,
the district court had subject-matter jurisdiction over McGuire's
claim against Millennium. The district court also had subject-
matter jurisdiction over McGuire's crossclaim under 28 U.S.C.
§§ 1331 and 2201. And we have jurisdiction under 28 U.S.C. § 1291.
III.
The remaining question is whether, under 31 U.S.C.
§ 3730(d)(1), McGuire is entitled to the relator's share of the
government's settlement with Millennium.13 In assessing this
question, we confine our review to the pleadings and to "facts
susceptible to judicial notice."14 Haley, 657 F.3d at 46.
As we demonstrate below, the crucial component of this
question, as framed in this case, is whether McGuire was the first-
to-file relator. Rather than remand, we address the first-to-file
13 The district court purported to deny Cunningham's
12(b)(6) motion, but only after granting his 12(b)(1) motion. We
have noted that "if the court lacks subject matter jurisdiction,
assessment of the merits becomes a matter of purely academic
interest." Deniz v. Mun. of Guaynabo, 285 F.3d 142, 150 (1st Cir.
2002). Deciding a Rule 12(b)(6) motion after finding no subject-
matter jurisdiction is "gratuitous." Id. at 149.
14 The district court analyzed Cunningham's motion to
dismiss as a factual challenge under Rule 12(b)(1) and so engaged
its "broad authority" to look outside the pleadings "to determine
its own jurisdiction." Valentin v. Hosp. Bella Vista, 254 F.3d
358, 363 (1st Cir. 2001).
- 22 -
issue as a matter of law because it has been fully briefed, because
neither party suggests that the issue requires remand, and because
the basic facts are uncontested. See G. & C. Merriam Co. v.
Webster Dictionary Co., 639 F.2d 29, 40 (1st Cir. 1980); see also
Levy v. Lexington Cty., S.C., 589 F.3d 708, 716 (4th Cir. 2009);
LNC Invs., Inc. v. First Fid. Bank, N.A. N.J., 173 F.3d 454, 464
(2d Cir. 1999).
Subsection 3730(d), entitled "Award to qui tam
plaintiff," provides in relevant part:
If the Government proceeds with an action
brought by a person under subsection (b), such
person shall, subject to the second sentence
of this paragraph, receive at least 15 percent
but not more than 25 percent of the proceeds
of the action or settlement of the claim,
depending upon the extent to which the person
substantially contributed to the prosecution
of the action.
31 U.S.C. § 3730(d)(1). We look to whether the government's
recovery from Millennium constitutes the "proceeds of the . . .
settlement of the claim" McGuire brought. See Rille v.
PricewaterhouseCoopers LLP, 803 F.3d 368, 373 (8th Cir. 2015) (en
banc) ("[A] relator seeking recovery must establish that 'there
exists [an] overlap between Relator's allegations and the conduct
discussed in the settlement agreement.'" (quoting United States
ex rel. Bledsoe v. Cmty. Health Sys., Inc., 342 F.3d 634, 651 (6th
Cir. 2003))).
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To be entitled to the relator's share under paragraph
3730(d)(1), a relator must be a person who "br[ings]" "an action
under . . . subsection [3730(b)]." 31 U.S.C. § 3730(d)(1); Rille,
803 F.3d at 372 ("The relators' right to recovery is limited to a
share of the settlement of the claim that they brought."). The
first-to-file rule bars any "person other than the Government"
from "bring[ing] a related action based on the facts underlying
the pending action." 31 U.S.C. § 3730(b)(5). So only the first-
to-file relator can claim the relator's share of the settlement
proceedings for each claim.
Nearly all courts share this conclusion. See United
States ex rel. Shea v. Cellco P'ship, 863 F.3d 923, 927 (D.C. Cir.
2017) ("The first-to-file bar thereby ensures only one relator
will share in the government's recovery . . . ."); United States
ex rel. LaCorte v. SmithKline Beecham Clinical Labs., Inc., 149
F.3d 227, 231 (3d Cir. 1998) ("[N]o qui tam plaintiff may . . .
share in a government settlement if his or her allegations repeat
claims in a previously filed action."); see also United States ex
rel. Merena v. SmithKline Beecham Corp., 205 F.3d 97, 103-06 (3d
Cir. 2000) (Alito, J.) (concluding "that a relator whose claim is
subject to dismissal under [the public-disclosure rule in 31 U.S.C.
§] 3730(e)(4) may not receive any share of the proceeds
- 24 -
attributable to that claim," id. at 106); Fed. Recovery Servs.,
Inc. v. United States, 72 F.3d 447, 450 (5th Cir. 1995).15
This conclusion also aligns with the policies underlying
the first-to-file rule. The rule is "part of the larger balancing
act of the FCA's qui tam provision, which 'attempts to reconcile
two conflicting goals, specifically, preventing opportunistic
suits, on the one hand, while encouraging citizens to act as
whistleblowers, on the other.'" Wilson, 750 F.3d at 117 (quoting
LaCorte, 149 F.3d at 233). "The 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." Shea, 863 F.3d at 927. Allowing a follow-on filer
to siphon off the first-filed suit's proceeds "weaken[s] the
incentive to dig out the facts and launch the initial action."
United States ex rel. Chovanec v. Apria Healthcare Grp. Inc., 606
F.3d 361, 364 (7th Cir. 2010).
To resolve the first-to-file issue here, we ask whether
Cunningham's amended complaint "contained 'all the essential
15 See also United States ex rel. Dhillon v. Endo Pharm.,
617 F. App'x 208 (3d Cir. 2015) (unpublished) (summarily affirming
the district court's finding that only the first-to-file relator
was entitled to the relator's share of a settlement). But see
United States ex rel. Doghramji v. Cmty. Health Sys., Inc., 666 F.
App'x 410, 418 (6th Cir. 2016) (rejecting this conclusion).
- 25 -
facts'" of the fraud McGuire alleged.16 United States ex rel. Ven-
A-Care of the Fla. Keys, Inc. v. Baxter Healthcare Corp., 772 F.3d
932, 938 (1st Cir. 2014) (quoting Heineman-Guta, 718 F.3d at 34).
While this "essential facts" standard does not require "identity
between the two complaints to trigger the first-to-file rule,"
id., the rule still may bar a different "claim even if that claim
incorporates somewhat different details," id. (quoting Wilson, 750
F.3d at 118). The essential facts test "presents a question of
law about the statutorily required threshold for notifying the
government of the fraud alleged in the later-filed suit." Id.
Our review is de novo.17 Id.
We apply the essential facts test by comparing
Cunningham's amended complaint and McGuire's original complaint.
See Heath, 791 F.3d at 121 ("Similarity is assessed by comparing
16 Other circuits, such as the D.C. Circuit, preclude
recovery from not-first-to-file relators when the first-filed
complaint alleges the "material elements of fraud" at issue and
"equip[s] the government to investigate" that fraud. United States
ex rel. Batiste v. SLM Corp., 659 F.3d 1204, 1209 (D.C. Cir. 2011).
For purposes of this case, we see no difference between this
standard and the essential facts test.
17 Cunningham argues that the settlement independently
reserved this issue for the district court to resolve as a matter
of fact, and that we must accept the district court's findings.
The premise is wrong -- the settlement says nothing of the sort.
It states only that the district court "retain[ed] jurisdiction"
over this issue, and that the relators "reserve[d] their rights
against Millennium to seek attorneys' fees, costs and expenses"
under applicable provisions. It does not displace normal first-
to-file law.
- 26 -
the complaints side-by-side . . . ."); Ven-A-Care, 772 F.3d at 938
("[W]e compare the Ven-A-Care complaint to the Sun and Hamilton
complaint."); In re Nat. Gas Royalties Qui Tam Litig. (CO2
Appeals), 566 F.3d 956, 964 (10th Cir. 2009) ("The first-to-file
bar is designed to be quickly and easily determinable, simply
requiring a side-by-side comparison of the complaints."). First-
to-file analysis is limited to the four corners of the relevant
complaints. See Duxbury, 579 F.3d at 33-34 (refusing to consider
allegations in a later-filed Information because the relator "had
his opportunity to [include those allegations] when he filed [his]
Original Complaint"). We conclude, based on those two complaints,
that Cunningham and McGuire do not allege similar frauds, but
allege different frauds with different mechanisms.
We proceed claim-by-claim. Merena, 205 F.3d at 102("[T]he court must conduct a claim-by-claim analysis in order to
determine if section 3730(b)(5) applies."). Two claims of fraud
are relevant here: (1) Millennium's custom profile fraud, and
(2) Millennium's point-of-care cup kickback scheme. Cunningham's
complaint lacks all the essential elements of both claims.
Cunningham argues that he was the first to file a claim
against Millennium for excessive and unnecessary drug testing.
But this is too general an argument. We must look to the actual
mechanism (the "essential facts") of the fraud that Cunningham
alleged. In his amended complaint, Cunningham alleged that
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Millennium's Physician Billing Model, which involved physicians
billing the government for multiple tests for each point-of-care
cup, led to "significantly more testing." And he alleged that
this increased point-of-care testing led, in turn, to more
"confirmatory tests." But CMS revised its reimbursement rules to
defeat such fraud, so physicians can no longer bill for multiple
tests from a single cup. And Cunningham's amended complaint never
mentions "standing orders" or "custom profiles," as McGuire's
does.
Cunningham's allegations do not cover the essential
elements of the fraud that McGuire described in his original
complaint. McGuire alleged that Millennium required physicians to
execute custom profiles. And McGuire alleged that these profiles
directed Millennium to automatically conduct a battery of
confirmatory tests regardless of individual patient need and
regardless of what the point-of-care test showed. The fraud
McGuire alleged had a different mechanism (the custom profiles)
and focused on a different stage of testing (the confirmatory
stage) than the one Cunningham described. McGuire was the first
relator to file a claim including the essential elements of
Millennium's custom profile fraud, which the government then
pursued.
Cunningham also argues that he alleged the essential
elements of Millennium's point-of-care cup kickback scheme, the
- 28 -
second scheme the government pursued. He says he "alleged
Millennium provided test kits at a nominal cost, and encouraged
doctors to bill for numerous tests rather than for just one multi-
panel test." But Cunningham's amended complaint makes only one
mention of cost: it says that the point-of-care cups "can be
purchased for less than $10.00." Cunningham did not allege that
this was less than fair market value. And he did not allege that
Millennium provided the cups for free in exchange for physicians
referring confirmatory testing. McGuire, by contrast, alleged
that Millennium provided point-of-care cups, "a valuable
diagnostic tool," to physicians for free to induce them to send
confirmation testing orders to Millennium.
Again, Cunningham's allegations do not include the
essential elements of the fraud McGuire alleged. Further, the
fraud the government pursued was that alleged by McGuire.18 The
government alleged that Millennium distributed $5 million worth of
free point-of-care test cups in exchange for the doctors referring
the cups to Millennium for confirmatory testing. This was an
illegal kickback because, "absent an applicable statutory
18 McGuire attached the government's complaint in
intervention to his crossclaim, so it is properly before us. In
any event, the government's complaint would be subject to judicial
notice. See Zucker, 919 F.3d at 651 n.5 (citing E.I. Du Pont de
Nemours & Co., 791 F.2d at 7 (Breyer, J.)).
- 29 -
exception[, point-of-care] cups had to be sold at 'fair market
value' to comply with the Stark Law and Anti-Kickback Statute."
The district court erred when it found that
"Cunningham's materials provided the government with 'sufficient
notice to initiate an investigation into [Millennium's] allegedly
fraudulent practices.'" Cunningham, 202 F. Supp. 3d at 206
(quoting Ven-A-Care, 772 F.3d at 938). Mere notice -- particularly
of a different fraud than the government chose to pursue -- is not
enough. As we made clear in Ven-A-Care, "we must ask not merely
whether the first-filed complaint provides some evidence from
which an astute government official could arguably have been put
on notice, but also whether the first complaint contained all the
essential facts of the fraud it alleges." 772 F.3d at 938
(emphasis added) (internal citation and quotation marks omitted).
McGuire has established that he was the first to file a
claim alleging the essential facts of Millennium's custom profile
fraud and point-of-care cup kickback scheme. He has also
adequately pleaded that the government's recovery from Millennium
constitutes the "proceeds of the . . . settlement of the claim[s]"
he brought.19 31 U.S.C. § 3730(d)(1).
19There is no assertion by the government or anyone else
that McGuire did not plead the conduct that formed the basis of
the claims the government ultimately settled. We need not address
the issue decided by the Eighth Circuit in Rille. See 803 F.3d at
374 (remanding for further factual development in a case in which
"[t]he government objected to [the relators'] recovery on the
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IV.
We reverse20 and remand for further proceedings
consistent with this opinion.
ground that the relators' complaint did not plead the conduct that
formed the basis of the claims that the government ultimately
settled," id. at 371).
20 Our holding moots McGuire's appeal of the district
court's denial of his motion to reconsider.
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