Tenth Circuit dismisses qui tam suit on Government's motion; declines to rule on first-to-file issue

by Ben Vernia | April 18th, 2012

On April 4, the Tenth Circuit Court of Appeals, in U.S. ex rel. Wickliffe v. EMC Corp., an unpublished opinion, ruled that the government’s interest in terminating a duplicating qui tam suit was sufficient to justify its unusual motion to dismiss the case.

In the suit, the whistleblowers alleged that the defendant, a computer company, provided defective computers to government agencies and fraudulently concealed the existence of the defect. Another whistleblower had raised the allegations first, and the U.S. moved to dismiss on both first-to-file grounds (under 31 USC 3730(b)(5)) and then under its authority to move to dismiss qui tam cases (under 31 USC 3730(c)(2)(A)).

The Court described the parties’ disagreement over whether a first-filed case must satisfy Rule 9(b)’s requirement of particularity in order to obtain the benefit of the bar to later-filed cases, but it concluded that although the first-to-file rule is jurisdictional, it could nevertheless reach the question of the government’s authority to dismiss, and that in doing so, it avoided the need to address 9(b).

With respect to the government’s right to dismiss qui tam cases, the Court noted that the Circuits are split regarding the standard of review in such cases, with the Ninth Circuit adopting a test requiring the government to identify a valid governmental purpose that is rationally related to dismissing the action, after which the burden shifts to the relator to demonstrate that the dismissal is nevertheless fraudulent, arbitrary and capricious, or illegal. The D.C. Circuit had reasoned that the government’s decision is virtually unreviewable, and that the hearing required under the Act only provides the relator with a formal opportunity to convince the government that its decision is mistaken. In the Tenth Circuit, the Court had previously adopted the Ninth Circuit’s approach, but it had not done so in a case such as this one, where the relator had not yet served the complaint on the defendant.

The Court concluded that even if it applied the higher standard, the government met it here. The government had settled the prior action, and is had “a valid interest in ending duplicative litigation involving resolved claims,” the Court wrote, and the dismissal was rationally related to serving this goal. The relators then failed to meet their burden of showing that the dismissal was invalid. The Court rejected the relators’ argument that they, and not the prior relator, were the proper relators – the government had conceded the validity of the allegations in the other reported dismissals in which they prevailed. The Court also rejected the relators’ claims that their case provided a catalyst which led to the settlement of the earlier case; this was too speculative, the Court reasoned.

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