This week, the U.S. Court of Appeals for the First Circuit declined to revive a False Claims Act qui tam suit against Baxter Healthcare Corporation, agreeing with the district court that the relators were not the “first to file.” The case is United States ex rel. Ven-A-Care of the Florida Keys, Inc. v. Baxter Healthcare Corp., Nos. 13-1732, 13-2083 (1st Cir. Dec. 1, 2014).

The first-to-file rule prevents an aspiring FCA relator from filing a suit that is similar or related to an already-pending qui tam suit. It derives from 31 U.S.C. § 3730(b)(5), which provides that “no person other than the Government may intervene or bring a related action based on the facts underlying” a pending qui tam suit. In the First Circuit, the first-to-file rule is jurisdictional, which allowed the appeals court here to dispose of the case on that ground alone and avoid a myriad of tricky issues wrapped up in this procedurally convoluted case. As the court noted, however, it is less clear whether other jurisdictions, like the D.C. Circuit, consider the first-to-file rule to be jurisdictional.

The would-be relators in this case were a former Baxter employee and an employee of a Baxter customer. In a 2005 suit, they alleged that Baxter, a pharmaceutical company, defrauded the Government by artificially padding the prices of its drugs, which triggered inflated reimbursements from Medicare and Medicaid. But a decade earlier, in 1995, a Florida pharmacy had filed a similar qui tam action alleging the same types of claims against multiple pharmaceutical companies, including Baxter. Baxter ultimately settled with the pharmacy, but not until 2011—6 years after the employee-relators filed their case. After extensive procedural skirmishing unrelated to the issue at hand, Baxter asserted that the employee-relators could not maintain their qui tam suit because the Florida pharmacy was the first to file.

The district court agreed. On appeal, the First Circuit affirmed that ruling. It explained that the first-to-file rule serves two main purposes: “ensur[ing] the federal government receives the information it needs to launch a meaningful investigation into fraudulent conduct,” and incenting relators to timely notify the Government of fraud. To further these purposes, a court must determine whether the two complaints involve the same fraud and whether the first-filed complaint included “all the essential facts” of the alleged fraud.

The employee-relators argued that they were actually the first to file because the Florida pharmacy’s “complaint was so vague and conclusory” that it failed to help the Government investigate fraud at all. The First Circuit disagreed with this characterization. It acknowledged that the employee-relators provided more detail on certain topics, but observed that “the first-to-file rule does not necessarily protect more detailed, later-filed complaints from less detailed, earlier-filed ones.” The first complaint need only provide the “essential facts” of the alleged fraud; it need not be identical to the later complaint or meet the heightened pleading standard of Federal Rule of Civil Procedure 9(b). It was sufficient here that the pharmacy’s complaint “identif[ied] the key highlights about how Baxter conducted the supposed fraud”; “detailed the particular pricing mechanism Baxter used for carrying out the alleged fraud”; “specified the drugs involved”; “described the time period during which the scheme occurred”; and included some purported corroborating evidence of the fraud.

The First Circuit also rejected the employee-relators’ attempt to cabin the pharmacy’s complaint to Baxter’s pre-2000 fraudulent activities, pointing to a change in industry price-reporting procedures in 2000. The appeals court found that Baxter’s alleged fraud was not bifurcated into pre- and post-2000 schemes, and the pharmacy’s complaint provided sufficient information to allow the Government to meaningfully investigate Baxter’s activities in both time periods. It further observed that the pharmacy’s last amended complaint was filed in late 2002 and thus described several years of Baxter’s activities in the later period.

This opinion follows an August 2014 decision in the First Circuit finding certain payments in settlement of alleged FCA violations to be tax-deductible. Both decisions are part of the rapidly expanding universe of FCA jurisprudence developing across the country. Indeed, next month the Supreme Court will hear argument on the first-to-file rule, addressing a circuit split on the question of whether the rule actually allows multiple relators to file similar qui tam suits as long as those suits do not overlap in time, but rather proceed one after another. That case is Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, No. 12-1497. Along with the growing case law on the first-to-file rule in the lower courts, Carter has the potential to rein in—or vastly enlarge—the scope of possible FCA litigation that industry, including government contractors, may face.