The district court granted the defendant’s motion to dismiss a qui tam case as untimely, finding the relator was not entitled to equitable tolling due to a six-year government investigation of his claims. The relator had previously filed two identical complaints, which were precluded by the first-to-file bar until several earlier-filed cases were dismissed. By the time the relator filed his third action, the statute of limitations had passed, but the court found that neither the government’s lengthy investigation of the claims nor an appeal to the Second Circuit had prevented the relator from dropping his first complaint and filing a new complaint that was not subject to the first-to-file bar. While the vagaries of the government’s involvement and various competing complaints pushed the relator up against the statute of limitations, the court explained that this hardship was not an extraordinary circumstance that warranted equitable tolling. The court also granted the defendant’s motion to dismiss the relator’s claim of unlawful employment retaliation as untimely, as this claim was never subject to the first-to-file bar and therefore the relator was never prevented from pursuing this complaint within the statute of limitations.
Relator John Wood filed a third amended complaint alleging that Allergan Inc. violated the federal and various state False Claims and Antikickback statutes.
Previously, following an interlocutory appeal, the court dismissed Wood’s first suit because it was barred by the FCA’s first-to-file rule. Wood voluntarily dismissed a second suit after the defendant argued that it, too, violated the first-to-file rule. This third complaint followed, in which Wood alleged Allergan engaged in a kickback scheme that spanned from 2003 to 2011, and that the defendant terminated him in July 2010 in retaliation for engaging in protected activity.
At the time of Wood’s first complaint, two other suits alleging the same kickback scheme were pending under seal in other federal courts. Accordingly, the first suit violated the first-to-file rule. However, those two cases were unsealed in 2012 and dismissed. Therefore, in 2016, when the government declined to intervene in Wood’s case and the case was unsealed, there was no longer another action pending.
At that time, the court concluded that Wood could cure his first-to-file violation simply by amending his complaint, because those earlier cases had been dismissed. The court certified the issue for interlocutory appeal and approved an agreement between the parties to toll any and all statute of limitations from May 4, 2017, through and until the Second Circuit issued its mandate in connection with the appeal.
On August 9, 2019, the Second Circuit reversed, holding that Wood could not cure the initial first to file violation by amending his complaint and directing the district court to dismiss the action without prejudice. Wood filed his second complaint, alleging the same claims, but the defendant argued that the first suit was still pending, because the time for Wood to petition the Supreme Court for review of the Second Circuit’s decision had not yet expired. Wood voluntarily dismissed his complaint and in May 2019, filed the pending action.
The defendants now argued this latest complaint must be dismissed as untimely, because the facts material to the complaint were known to the government no later than July 2010, when the first lawsuit was filed.
The relator opposed the motion, arguing that he was entitled to equitable tolling of the limitations period as of July 26, 2010, because he diligently pursued his claims but was prevented from proceeding due to the requirement that his complaint remain under seal for a period of six years while the government investigated and considered whether or not to intervene.
First, the court concluded that any claims based on alleged violations that occurred before December 8, 2007—10 years prior to the date on which this third complaint was filed, minus the 515 days tolled pursuant to the prior tolling agreement—were plainly time-barred because Wood was not entitled to equitable tolling of the ten-year statute of repose.
The court found Wood on stronger ground arguing that equitable tolling is available for his claims relating to alleged violations on or after December 8, 2007, but nonetheless held that even if tolling were available, Wood was not entitled to it. The court found Wood had not demonstrated the two elements required for equitable tolling: that he had diligently pursued his rights; and that some extraordinary circumstance stood in his way.
First, the court held that Wood was not entitled to equitable tolling from July 26, 2010, to December 14, 2012, when the second of the two suits filed before Wood I was dismissed, as Wood’s case was barred by the first-to-file rule itself, not the government’s delay or the Second Circuit proceedings. The court noted the first-to-file rule is intended to strike a balance between adequate incentives for whistleblowers and discouragement of opportunistic lawsuits, and that sometimes that balance means a legitimate relator may be barred by the time they get to court or run against the statute of limitations.
According to the court, granting equitable tolling during the period in which Wood was statutorily barred from filing would reduce the incentive for relators to rush to be the first to file. Instead, opportunistic relators could wait for dismissals of cases brought by more diligent relators and swoop in after, with the benefit of equitable tolling.
Second, the court held Wood was not entitled to equitable tolling for the periods from December 14, 2012, to May 4, 2017, when the parties’ tolling period began, and from October 1, 2018, to October 3, 2018, the date on which Wood I was dismissed. The court concluded Wood was not prevented from timely refiling, but could have immediately sought dismissal of Wood I and brought a new action once the actions brought by other relators were dismissed. In fact, the court noted Wood did exactly that before filing his second action.
Wood argued that he did not have the benefit of the Second Circuit’s decision when he was litigating Wood I, whereas he did when he was litigating Wood II. While the court acknowledged this fact, it could not conclude that Wood was prevented from proceeding. Further, the court found that rulings from other federal courts—including court splits—put Wood on notice that the first-to-file rule might bar his complaint. The court concluded it was Wood’s strategic choice to continue litigating Wood I despite that risk, presumably to secure his place as the first to file after the earlier-filed suits had been dismissed, that caused his untimely refiling.
Finally, Wood invoked the court’s observation in Wood I that not allowing amendment to cure a first-to-file violation would provide a windfall to defendants in Allergan’s position because it could result in the relator’s claims being precluded by the statute of limitations through no fault of his own.
The court acknowledged that the Second Circuit’s decision could make it harder for relator’s like Wood to get out of the gate, as a relator would have to quickly voluntarily dismiss their own suit, with the government and court’s consent, and still be the first to refile, even if refiling is possible given the public disclosure bar. However, the court concluded this hardship was not a basis for equitable tolling. The court reasoned that the government is the real party in interest to an FCA case and that the law’s provisions are intended to prompt some relator—not a particular relator—to bring an action so that the government can investigate and recover.
By that standard, the court concluded the system worked as intended, as the government had ample opportunity to intervene and bring its own claims, but decided not to. That fact reduced the chance Allergan’s escapes from liability amounted to an unfortunate windfall.
Because Wood was not entitled to equitable tolling, the court found his claims untimely and dismissed the complaint. For the same reasons, the court dismissed Wood’s retaliation claim, as it was never subject to the first-to-file bar and Wood could have pursued it within the statute of limitations. Finally, the court declined to exercise supplemental jurisdiction over the state-law claims, and dismissed those claims without prejudice to refiling in state court.
