United States ex rel. Little v. Triumph Gear Sys., Inc.

• Decision Date: 18 September 2017
• Docket Number: No. 16-4152.,16-4152.
• Citation: 870 F.3d 1242
• Parties: UNITED STATES of America EX REL. Donald LITTLE and Kurosh Motaghed, Plaintiffs-Appellees, v. TRIUMPH GEAR SYSTEMS, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

870 F.3d 1242

UNITED STATES of America EX REL. Donald LITTLE and Kurosh Motaghed, Plaintiffs-Appellees,

v.TRIUMPH GEAR SYSTEMS, INC., Defendant-Appellant.

No. 16-4152.

United States Court of Appeals, Tenth Circuit.

FILED September 18, 2017

Douglas W. Baruch, Fried, Frank, Harris, Shriver & Jacobson LLP, Washington, D.C. (John T. Boese, Michael J. Anstett and Aaron T. Tucker, Fried, Frank, Harris, Shriver & Jacobson LLP, Washington, D.C., and Jason D. Boren, Ballard Spahr, LLP, Salt Lake City, Utah, with him on the brief), for Defendant-Appellant.

Edward A. McConwell, McConwell Law Offices, Mission, Kansas (Donald E. Little, Austin, Texas, with him on the brief), for Plaintiffs-Appellees.

Before TYMKOVICH, Chief Judge, LUCERO and MORITZ, Circuit Judges.

MORITZ, Circuit Judge.

This appeal arises from the efforts of several whistleblowers to navigate the procedural minefield of the False Claims Act (FCA). See 31 U.S.C. §§ 3729 - 3733. In 2012, Joe Blyn commenced this FCA action by filing a sealed complaint in the district court. The complaint named Donald Little as Blyn's counsel of record. Months later, Little filed an amended complaint that named himself and a third person, Kurosh Motaghed, as the sole relators.¹ Blyn was excised from the caption—and the rest of the amended complaint—without explanation.

Defendant Triumph Gear Systems, Inc. (Triumph) moved to dismiss Little and Motaghed's claims. Triumph argued that their claims are barred by the FCA's first-to-file rule, which prohibits new relators from intervening in a pending FCA action. See § 3730(b)(5). The district court denied Triumph's motion, and Triumph appeals. Because we conclude that Little and Motaghed's entry into the action violated § 3730(b)(5), we reverse.

I

Triumph is a government contractor that manufactures aerospace gear systems. Blyn worked as an independent contractor for Triumph, and he alleges that he witnessed instances of fraud on the United States by Triumph. In October 2012, Blyn filed a sealed complaint in the district court claiming that Triumph violated the FCA. The complaint named Blyn and three John Does as relators. And the complaint identified Little as Blyn's counsel of record, but not as a relator.

In July 2013, Blyn vanished from the action. Little filed an amended complaint that made no mention of Blyn or the John Does, either in the caption or elsewhere. Inexplicably, in several instances, Little seems to have simply substituted his name for Blyn's without regard for the resulting incongruities. For example, Paragraph 24 of the complaint alleges that "[o]n September 6, 2006, Relator Joseph Blyn went down to heat treat and verified in person that the inspection requirements for gear inspection" were "not being carried out." App. 22. Paragraph 24 of the amended complaint makes an identical allegation, but substitutes attorney Little for Blyn.² And while the docket sheet indicates that the original complaint was "filed by Joe Blyn," the amended complaint was "filed by Donald Little [and] Kurosh Motaghed." App. 4. Oddly, none of the amended complaint's substantive allegations pertain to Motaghed, despite his status as a putative relator.

After the United States declined to intervene, the district court unsealed the amended complaint. Little and Motaghed amended the complaint twice more, and Triumph moved to dismiss the third amended complaint on multiple grounds. As relevant to this appeal, Triumph argued that the district court lacked jurisdiction over Little and Motaghed's claims under the FCA's first-to-file rule. Under that rule, when a relator brings a qui tam action under the FCA, "no person other than the [g]overnment may [1] intervene or [2] bring a related action based on the facts underlying the pending action." § 3730(b)(5). Triumph maintained that when Little filed the amended complaint, he and Motaghed effectively intervened as new relators and replaced Blyn.

The district court disagreed. Relying on our decision in United States ex. rel. Precision Company v. Koch Industries, Inc. , 31 F.3d 1015 (10th Cir. 1994), the district court reasoned that § 3730(b)(5)'s bar on "interven [ing]" applies only to interventions under Federal Rule of Civil Procedure 24 —and not to additions or substitutions accomplished through Federal Rule of Civil Procedure 15. The district court concluded that Little and Motaghed entered the action through a Rule 15 amendment and, accordingly, aren't barred by § 3730(b)(5). The district court rejected Triumph's additional grounds for dismissal and denied Triumph's motion.

The district court certified for interlocutory appeal its order denying Triumph's motion to dismiss. We granted Triumph's petition for permission to file this interlocutory appeal.

After the appeal was docketed, Little and Motaghed filed a motion in this court to amend the third amended complaint. Their proposed fourth amended complaint would add Blyn as a plaintiff.

II

Triumph argues on appeal that the district court lacked jurisdiction over Little and Motaghed's claims. Because Triumph's argument presents questions of subject matter jurisdiction and statutory interpretation, our review is de novo. Niemi v. Lasshofer , 770 F.3d 1331, 1344 (10th Cir. 2014) ; Precision , 31 F.3d at 1017.

The FCA permits a qui tam plaintiff to "bring a civil action ... for the [plaintiff] and for the United States [g]overnment." § 3730(b)(1). If the suit ultimately yields damages for the government, the relator generally shares in the award. See § 3730(d)(1)-(3). Congress intended this private cause of action to "encourage those with knowledge of fraud to come forward." United States ex rel. Fine v. MK-Ferguson Co. , 99 F.3d 1538, 1546 (10th Cir. 1996). But to prevent parasitic and duplicative lawsuits, the FCA imposes an important constraint on qui tam actions: the first-to-file rule. See Grynberg ex rel. United States v. Exxon Co., USA (In re Nat. Gas Royalties Qui Tam Litig. ), 566 F.3d 956, 961 (10th Cir. 2009) ("The first-to-file bar thus functions both to eliminate parasitic plaintiffs who piggyback off the claims of a prior relator, and to encourage legitimate relators to file quickly by protecting the spoils of the first to bring a claim.").

The rule provides that when a qui tam plaintiff brings an action under the FCA, "no person other than the [g]overnment may [1] intervene or [2] bring a related action based on the facts underlying the pending action." § 3730(b)(5). Triumph argues that Little and Motaghed are "person[s]" who "intervene[d]" in Blyn's action. Id. And because § 3730(b)(5) is "a jurisdictional limit on the courts' power," Grynberg , United States ex rel. v. Koch Gateway Pipeline Co. , 390 F.3d 1276, 1278 (10th Cir. 2004), accepting Triumph's argument would spell the end of Little and Motaghed's claims.³

The success of this argument turns on the meaning of the word "intervene" in § 3730(b)(5). In the FCA context, the Supreme Court has defined "intervention" as "the requisite method for a nonparty to become a party to a lawsuit." United States ex rel. Eisenstein v. City of New York , 556 U.S. 928, 933, 129 S.Ct. 2230, 173 L.Ed.2d 1255 (2009) ; see id. (defining intervention as "[t]he legal procedure by which ... a third party is allowed to become a party to the litigation" (alterations in original) (quoting Black's Law Dictionary 840 (8th ed. 2004))). Under that broad formulation, intervention takes place when a non-party becomes a party—regardless of the mechanism by which that occurs.

Rigidly applying that definition here would make for an easy resolution. Before the amended complaint was filed, Little and Motaghed weren't parties. After its filing, they were. Thus, under Eisenstein 's definition, they intervened—and the first-to-file rule would bar their claims. See Grynberg , 390 F.3d at 1278. But we aren't writing on a blank slate; our analysis must account for this court's decision in Precision , 31 F.3d 1015. There, we held that two new relators didn't "intervene" in violation of § 3730(b)(5) when the original plaintiff added the relators through a Rule 15 amendment. Id. at 1017-18. Here, the district court applied Precision and determined that Little and Motaghed didn't intervene.

We conclude that Precision isn't controlling here. There, a corporate entity named Precision brought a qui tam action against defendant Koch Industries. After the district court ruled that Precision wasn't the "original source" of the allegations set forth in the complaint,⁴ Precision amended its complaint to add two individual relators. Id. at 1016. The new relators were Precision's sole stockholders. Id. The district court dismissed the amended complaint, reasoning in part that the new relators intervened in violation of § 3730. Id. at 1017.

We reversed, explaining that

the focal point for proper analysis is the word "intervene" contained in § 3730(b)(5). Is that word to be interpreted in its narrow, [ Rule 24 ] plain legal meaning, or should it be granted greater breadth, as defendants suggest, to include any form of joinder? Our judgment tells us the statute implies intervention of the types set forth in Rule 24(b)(2), and the addition of parties does not constitute intervention.

Id. ; see id. at 1019 (reversing dismissal).⁵ And because the new relators in Precision entered the action through a Rule 15 addition—and not a Rule 24 intervention—we concluded that they didn't "intervene" as § 3730(b)(5) uses that term. Id. at 1016-17.⁶ Precision thus established a dichotomy between addition and traditional intervention: in this circuit, § 3730(b)(5) permits the former, but not the latter.⁷

But Little and Motaghed can't rely on Precision 's narrow exception to the first-to-file rule, because they didn't enter this action through a Rule 15 addition.⁸ Rule 15 provides that "[a] party may amend its pleading once as a matter of course within ... 21 days after serving it." Fed. R. Civ. P. 15(a)(1)(A). Although the Rule doesn't define the term "amend," ...