United States ex rel. Shea v. Cellco P'ship
| Decision Date | 11 April 2014 |
| Docket Number | No. 12-7133,12-7133 |
| Parties | UNITED STATES OF AMERICA, EX REL. STEPHEN M. SHEA, APPELLANT v. CELLCO PARTNERSHIP, DOING BUSINESS AS VERIZON WIRELESS, ET AL., APPELLEES |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
UNITED STATES OF AMERICA, EX REL. STEPHEN M. SHEA, APPELLANT
v.
CELLCO PARTNERSHIP, DOING BUSINESS AS VERIZON WIRELESS, ET AL., APPELLEES
No. 12-7133
United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 26, 2013
Decided April 11, 2014
Christopher Mead argued the cause for appellant. With him on the briefs was Mark London.
Seth P. Waxman argued the cause for appellees. On the brief were Randolph D. Moss and Brian M. Boynton.
John P. Elwood, Eric A. White, Rachel L. Brand, and Steven P. Lehotsky were on the brief for amicus curiae The Chamber of Commerce of the United States of America in support of appellees.
Before: SRINIVASAN, Circuit Judge, and EDWARDS and SENTELLE, Senior Circuit Judges.
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Opinion for the Court filed by Senior Circuit Judge SENTELLE.
Opinion concurring in part and dissenting in part filed by Circuit Judge SRINIVASAN.
SENTELLE, Senior Circuit Judge: Relator Stephen M. Shea, on behalf of the United States, appeals the district court's dismissal of his qui tam complaint for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1). The district court held that a complaint Shea had earlier filed barred its consideration of this complaint under the first-to-file rule of the federal False Claims Act ("FCA"), 31 U.S.C. § 3730(b)(5). We affirm the district court. We hold that this complaint is sufficiently related to Shea's earlier action, that the first-to-file bar applies to Shea even though he brought the first action, and that the bar remains in effect even after the first action is no longer pending.
A. Verizon I
On January 16, 2007, Stephen M. Shea filed a complaint on behalf of the United States government against Verizon (Verizon I) under the qui tam provisions of the FCA, 31 U.S.C. §§ 3729-3732. The FCA authorizes private parties ("relators") to bring false claims actions in the name of the United States, and to recover a portion of the proceeds of the action if successful. See id. § 3730(b), (d).
Shea's 2007 complaint alleged the submission of false claims by Verizon. More specifically, the complaint contained the following allegations: (1) that Verizon made "knowing submission to the United States of certain prohibited surcharges
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under contracts to provide telecommunications services" to the General Services Administration ("GSA"); (2) that Shea is a telecommunications consultant; (3) that Shea based his allegations on experience with Verizon's alleged practice of "billing corporate clients not only for federal, state and local taxes levied on the customer but also for surcharges (often labeled as, or lumped together with, taxes) that were added to bills . . . to inflate . . . revenue," 2007 Complaint ¶¶ 2, 12; (4) that Verizon used "the same billing platform" for both business customers and the United States, 2007 Complaint ¶¶ 6, 81; (5) that through this practice, Verizon charged the government "Federal, State, and local taxes and duties" contrary to Federal Acquisition Regulations ("FAR"), FAR 52.229-4(b), 48 C.F.R. 52.229-4(b), 2007 Complaint ¶ 20; and (6) that Shea became aware of the alleged conduct through an internal document he received in 2004 which listed "the taxes and surcharges that the Federal Government is responsible for." 2007 Complaint ¶ 70. The United States intervened in Verizon I, and in February 2011, the parties settled the case without admission of liability. Shea received nearly $20 million for his role in the litigation.
B. Verizon II
Shea filed the present second qui tam action against Verizon (Verizon II) on June 5, 2009, and on September 12, 2012 filed a Second Amended Complaint ("SAC"). The SAC closely mirrors Shea's complaint in Verizon I: (1) it too alleges a scheme by Verizon "to defraud the United States by knowingly billing the government for non-allowable surcharges," SAC ¶ 1; (2) it traces Shea's knowledge to "his experience consulting with large commercial telecommunications customers" through which he "learned that most telecommunication carriers, including . . . Verizon . . . had a custom and practice of charging [Non-Allowable Charges]," SAC ¶ 3; (3) it identifies the same 2004 document as the source of his information, SAC ¶ 4; and
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(4) it alleges that Verizon "overcharged the United States, just like its commercial customers" by billing non-allowable charges on several government contracts. SAC ¶¶ 4, 28. The only difference between the 2007 Complaint and the SAC is that the SAC expands Shea's allegations to more contracts, more charges, and more governmental agencies.
C. Procedural History
On November 15, 2012, the district court dismissed Shea's complaint for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1). U.S. ex rel. Shea v. Verizon Bus. Network Servs. Inc., 904 F. Supp. 2d 28, 37 (D.D.C. 2012). The court held that under the FCA's first-to-file bar, Shea's complaint in Verizon I barred the court's consideration of his complaint in Verizon II. The first-to-file bar provides that "[w]hen a person brings an action under [The FCA], no person other than the Government may intervene or bring a related action based on the facts underlying the pending action." 31 U.S.C. § 3730(b)(5).
The district court concluded that Verizon II was barred because it alleged "a fraudulent scheme the government already would be equipped to investigate" based on the complaint in Verizon I. Shea, 904 F. Supp. 2d 28 at 36 (quoting United States ex rel. Batiste v. SLM Corp., 659 F.3d 1204, 1209 (D.C. Cir. 2011)). Shea argued that dismissal under the first-to-file bar should be without prejudice, because Verizon I was no longer pending when the court disposed of Verizon II; thus, Shea urged, he should be able to re-file his action. The district court disagreed. This appeal followed.
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Shea raises three arguments on appeal: (A) the district court erred in finding Verizon I and Verizon II related because they involve different contracts and different agencies; (B) the district court improperly held that the first-to-file bar applies to Shea even though he was the relator in both actions; and (C) the district court erred in dismissing Verizon II with prejudice because Verizon I was no longer pending when Shea filed his second amended complaint in Verizon II.
Reviewing the dismissal for lack of jurisdiction de novo, see Batiste, 659 F.3d at 1208, we agree with the district court that this complaint is "related"—within the meaning of the FCA— to Shea's earlier action, that the first-to-file bar applies to Shea even though he brought the first action, and that the bar remains effective even after the first action is no longer pending.
A. Same Material Elements of Fraud
Under the first-to-file bar, "[w]hen a person brings an action under [the FCA], no person other than the Government may intervene or bring a related action based on the facts underlying the pending action." 31 U.S.C. § 3730(b)(5). A second action is "related" if it incorporates "the same material elements of fraud" as the earlier-filed action. U.S. ex rel. Hampton v. Columbia/HCA Healthcare Corp., 318 F.3d 214, 217 (D.C. Cir. 2003). "[T]wo complaints need not allege identical facts for the first-filed complaint to bar the later-filed complaint." Batiste, 659 F.3d at 1208. Instead, later actions are barred where the first would have "suffice[d] to equip the government to investigate" the fraud alleged in the later action. Id. at 1209.
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Shea argues that Verizon I and Verizon II are unrelated. He seizes on language in Batiste, where we noted that one aspect of the relatedness inquiry goes to whether the second complaint would "give rise to a different investigation or recovery" than the first. Batiste, 659 F.3d at 1210. As Shea notes, Verizon II includes agencies, contracts, and charges not included in Verizon I. These differences would necessitate further investigation, and—were Shea successful—result in additional recovery. Because Verizon II would give rise to a different investigation and further recoveries, he contends, the actions are not related. We are unconvinced.
On Shea's reasoning, two complaints would have to be identical in order to be "related." After all, any difference in any aspect of a later complaint could result in some "different investigation or recovery." Cf. Batiste, 659 F.3d at 1210. Relatedness is broader than identity. As we noted in Batiste, the first-to-file rule serves two purposes: "rejecting suits which the government is capable of pursuing itself," and "promoting those which the government is not equipped to bring on its own." Id. at 1208 (quoting Hampton, 318 F.3d at 217). A side-by-side comparison shows that Verizon II is precisely the kind of action barred under this standard.
Both complaints claim that Shea discovered the alleged scheme based on his experience as a telecommunications consultant. See 2007 Complaint ¶ 12; SAC ¶ 3. Both complaints trace Shea's knowledge to the same billing document he received in 2004. 2007 Complaint ¶ 70; SAC ¶ 4. Both complaints allege that Verizon billed the U.S. government with the same system it used for commercial customers. 2007 Complaint...
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