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Ninth Circuit, En Banc, Overrules Jurisdictional Precedent
Opinion Says First-to-File Rule Under False Claims Act Does Not Deprive Court of Adjudicatory Authority; Forrest, Bumatay Write Separately to Critique Circuit’s Dicta-As-Binding Jurisprudence
By Kimber Cooley, associate editor
An en banc panel of the Ninth U.S. Circuit Court of Appeals held yesterday that the first-to-file rule under the in fraud-against-the government cases—which bars lawsuits based on the same material facts as an existing case—is not jurisdictional as the law fails to clearly state an intent to deprive courts of adjudicatory authority, overruling two earlier decisions.
The False Claims Act (“FCA”) imposes liability on entities that defraud government programs and permits private citizens to sue for damages and penalties on the state’s behalf. At issue is a provision found at 31 U.S.C. §3730(b)(5), which provides that “[w]hen a person brings an action under this subsection, no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.”
Plaintiffs Marcia Stein and Rodolfo Bone filed an FCA action in 2016 against their former employer, Kaiser Foundation Health Plan Inc., and related entities, asserting that the healthcare provider submitted “false and fraudulent claims to the Centers for Medicare and Medicaid Services” by submitting “false, inaccurate and exaggerated diagnoses,” among other allegations.
Similar cases against Kaiser, including one initiated by Ronda Osinek in 2013, were consolidated with the Stein and Bone matter.
Jurisdictional Bar
On May 5, 2022, Senior District Court Judge Edward M. Chen of the Northern District of California dismissed the Stein and Bone complaint. Chen found that the first-to-file rule deprived the court of jurisdiction over their complaint as the claims overlap with those asserted in the case initiated by Osinek.
Judgment in favor of the Kaiser defendants was entered in November 2022.
Senior Circuit Judge Sidney R. Thomas, Circuit Judge Danielle J. Forrest, and Senior Circuit Judge Danny J. Boggs of the Sixth U.S. Circuit Court of Appeals, sitting by designation, affirmed the judgment in a memorandum decision on Jan. 10. In May, the court ordered a rehearing, en banc, on the matter.
Forrest authored yesterday’s opinion for the unanimous panel, reversing the judgment and holding that the first-to-file rule does not deprive a court of jurisdiction over later-filed complaints, overruling the 2001 decision in Lujan v. Hughes Aircraft Co., written by then-Circuit Judge (now Senior Circuit Judge) Barry G. Silverman, and the 2015 opinion in Hartpence v. Kinetic Concepts Inc., authored by then-Circuit Judge (now Senior Circuit Judge) Carlos T. Bea.
Joined by Circuit Judge Patrick J. Bumatay, Forrest also wrote separately to critique Ninth Circuit jurisprudence establishing that well-reasoned dicta is binding precedent.
In addition to Forrest and Bumatay, the en banc panel consisted of Chief Judge Mary H. Murguia and Circuit Judges Johnnie B. Rawlinson, Milan D. Smith Jr., Jacqueline H. Nguyen, Bridget S. Bade, Kenneth K. Lee, Gabriel P. Sanchez, Roopali H. Desai, and Anthony D. Johnstone.
Lack of Analysis
Forrest wrote:
“Two decades ago [in Hughes] we labeled this rule ‘jurisdictional’ without any analysis….Then, sitting en banc in Hartpence, we cited Hughes and reiterated that we ‘treat the first-to-file bar as jurisdictional.’….But we again neglected to provide any analysis. Simply put, the nature of the first-to-file rule was hardly part of our consideration of these cases.
“Since Hughes and Hartpence, the Supreme Court has….has instructed that a narrow rule governs: A statutory bar is jurisdictional ‘only if Congress ‘clearly states’ that it is.’ ”
The jurist continued:
“Applying the Court’s clear-statement rule, we now conclude that the FCA’s first-to-file rule is not jurisdictional. As a starting point, § 3730(b)(5) does not use the term ‘jurisdiction.’ Rather, the text speaks only to who may bring an action and when. It says nothing about the ‘court’s adjudicatory authority.’….Nor does it include any other textual clue that points to jurisdiction.”
Noting that “other provisions in the FCA use explicitly jurisdictional language,” she said that the court will presume that Congress intentionally excluded the term from the first-to-file rule.
She pointed out that “[f]our of our sister circuits agree that the FCA’s first-to file rule is not jurisdictional,” citing cases from the First, Second, Sixth, and D.C. Circuits, but noted that the Fourth, Fifth, and Tenth Circuits disagree.
However, she noted that the cases expressing the minority view “like Hughes and Hartpence,…predate the Supreme Court’s reinvigoration of the clear-statement rule and did not engage in any independent analysis of the jurisdictional question.”
Forrest concluded:
“Therefore, the circuit split, which exists no matter what we do today, does not give us pause. We conclude there simply is no meaningful authority supporting the conclusion that the FCA’s first-to-file rule is jurisdictional.”
She added:
“When our law is wrong, it is our duty to correct it. This case brings to light an error in our caselaw. All we do today as an en banc court is bring ourselves in line with current Supreme Court doctrine.”
Forrest wrote separately to express concern with the current Ninth Circuit view that well-reasoned dicta in prior decisions is binding precedent, saying:
“Overruling bad law is good but getting it right in the first place is better. This case demonstrates that our dicta-is-binding rule is burdensome and misguided….But even more troubling, it lacks legal foundation. We should discard it because it causes unnecessary inefficiency and wastes resources, as it did here, and because it is contrary to the common-law tradition of judging, the jurisprudence of the Supreme Court and every other circuit court in the nation, and the Constitution.”
She remarked:
“We established that the False Claims Act’s (FCA) first-to-file rule, 31 U.S.C. § 3730(b)(5), is jurisdictional seemingly without care or thought….The three-judge panel in this case felt duty bound to apply our prior pronouncement despite its tension with Supreme Court precedent, and the en banc court had to convene to tidy up the law.
“As appellate judges, we show our work. We give reasons to explain our decisions.”
The judge said that “[w]e stand out like a flamingo in a flock of finches in treating dicta as binding” if it is well-reasoned and opined:
“Whatever ground we might have gained in not having to parse what is and is not dicta, we lost in having to parse what is and is not well-reasoned. And this was not an equivalent trade. Whether something is ‘well-reasoned’ depends on who you ask: not much of a legal standard.”
The case is Stein v. Kaiser Foundation Health Plan Inc., 22-15862.
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