First-To-File Rule
Judge Rejects FCA Settlement Deal: No Rubber Stamping and Bromides Won’t Do
A recent decision by the U.S. District Court for the Northern District of California to reject a proposed $57 million settlement in a False Claims Act (FCA) litigation highlights the unique challenges and complexities that surround the resolution of FCA cases—challenges that set them apart from ordinary civil litigation. Background: The Tetra Tech Case The settlement arises from a case about the Hunters Point Naval Shipyard in southeast San Francisco, which is a Superfund cleanup site due to radiological contamination. In the 1990s, the U.S. Navy agreed to convey the shipyard piecemeal as it was remediated to San Francisco to develop for residential or commercial purposes. From about 2005 to 2018, the defendant in the litigation, Tetra Tech EC, did remediation work on contracts worth approximately $262 million. Whistleblowers (qui tam relators) filed a sealed complaint under the FCA in 2013. In 2019, the government filed a complaint-in-intervention alleging that the defendant, among other things, violated the False Claims Act by submitting soil samples for testing that were known to be clean, manipulating other testing data, and reporting these false results to the Navy. Earlier this year, the government and Tetra Tech separately agreed to a $40 million settlement a claim under Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) for remediation costs at the former Navy site. That included an agreed consent decree, which the court had already approved. That was just one of five counts against the defendant, however. The government and Tetra Tech recently reached an agreement to settle the remaining four claims, including two counts under the FCA, a common law fraud count, and a breach of contract count, for $57 million. The settlement allocated $51.87 million to “soil fraud allegations” and $5.13 million to “building scan fraud allegations.” Court Scrutiny: More Than a Rubber Stamp Like ordinary civil litigations, the FCA allows resolution of claims under the statute and for the parties to seek dismissal of the claims. But the FCA also uniquely conditions voluntary dismissal of FCA claims on “written consent” from the court and the Department of Justice “and their reasons for consenting.” See 31 U.S.C. § 3730(b)(1). In addition, where a qui tam relator objects to a settlement reached between the government and the defendant, the FCA requires the court approve only settlements that are “fair, adequate, and reasonable under all the circumstances.” See 31 U.S.C. § 3730(c)(2)(B). In this case, the government and the qui tam relators disagreed on the share of the proceeds due to the relators. But the government sought approval of the settlement despite the continuing dispute over the share. The court declined to approve the settlement on the current record, noting that the government’s justifications were vague and generic, and did not address the specific concerns raised by the case, such as the adequacy of the settlement considering the serious radiation remediation issues. The court emphasized that it cannot simply “rubber stamp” the government’s decision and must conduct a meaningful review. Another layer of complexity in FCA cases is the determination of a qui tam relator’s share of the settlement. In this case, the qui tam relators sought a 23% share as a group, while the government proposed different allocations based on the nature of the allegations and invoked a statutory bar, the “first-to-file” rule, as to three the qui tam relators. The court found both sides’ proposals lacking in specificity and evidentiary support, directing the parties to provide detailed, claim-by-claim analyses addressing whether and what award should be made jointly or individually to each qui tam relator. The Court directed the parties to file supplemental briefing to address these issues. Takeaways: Why FCA Settlements Are Different The Tetra Tech case is a vivid illustration of why FCA settlements are often not routine. Settling FCA cases can be complex for several reasons. Courts are called to provide a rationale for even a basic dismissal and, where a relator objects, may review settlements for reasonableness and fairness. Alleged frauds against the government run the gamut of potential public policy interests, from environmental safety (like in this case) to public health and welfare to national defense and security. The government’s interests in resolution of an FCA action may diverge from those of whistleblowers, inviting careful judicial balancing of those interests.
November 12, 2025
by Chris DeLong
First-To-File Rule
$34 Million Reversal: First Circuit Overturns Its Precedent and Redirects Relator’s FCA Award to Another
Earlier this month, the U.S. Court of Appeals for the First Circuit overturned its own precedent to hold the FCA’s first-to-file rule is “non-jurisdictional.” In so doing, the First Circuit flipped the district court’s award of $34 million from one whistleblower to another. United States v. Millenium Labs., Inc., No. 17-1106, 2019 U.S. App. LEXIS 13506 (1st Cir. May 6, 2019). The appeal arises out of the government’s successful intervention in and settlement of several qui tam suits against drug-testing giant Millennium Health for $227 million. Fifteen percent of the settlement, totaling just over $34 million, was set aside for the relator’s share under the FCA. While the FCA encourages such qui tam suits by permitting relators to share in any recovery obtained by the government, the statute’s “first-to-file” rule ensures that the potential payout is not diluted by prohibiting relators other than the first from bringing a related action and sharing in the recovery. The first-to-file rule specifically states 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 First Circuit had to address whether Mark McGuire or Robert Cunningham—both of whom had filed related qui tams against Millennium Health—was the first-to-file relator. McGuire, who had filed his qui tam after Cunningham, brought a claim for declaratory judgment that he was the first to file. Cunningham moved to dismiss the claim under Rule 12(b)(1), arguing that because he filed his complaint first in time the district court lacked subject matter jurisdiction to consider McGuire’s claim. Under existing First Circuit precedent, the district court addressed the “first-to-file” question as “jurisdictional,” and therefore looked beyond the pleadings to consider extrinsic evidence on the question of whether Cunningham truly was the first to provide sufficient notice to the government that it was a victim of the alleged fraud. After considering such evidence, the district court found that Cunningham was the first to file and, therefore, that McGuire’s claim was barred. On appeal, however, the First Circuit relied on “new developments,” including the Supreme Court’s decision in Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, 135 S. Ct. 1970 (2015), to overturn its precedent and join the D.C. and Second Circuits in holding that the first-to-file rule is “non-jurisdictional.” As a result, the First Circuit parted company with the Fourth Circuit’s decision post-Carter that maintained the first-to-file rule as jurisdictional, flagging a circuit split that may ultimately require clarification by the Supreme Court. The First Circuit’s reversal of its own precedent was critical because it meant its analysis of the first-to-file rule was limited to the allegations in the pleadings under a Rule 12(b)(6) analysis. Analyzing only the facts alleged within the four corners of the complaints, the First Circuit determined McGuire was the first-to-file relator because Cunningham’s general allegations did not include the “essential facts” of the fraud McGuire alleged, which was the fraud that the government ultimately pursued. The First Circuit reiterated that mere notice – particularly of a different fraud than the government chose to pursue – is not sufficient; the first-to-file complaint must contain all the essential facts of the fraud it alleges.
May 21, 2019
by Siena Caruso
First-To-File Rule
Supreme Court Considers Whether to Extend FCA Statute of Limitation
On Tuesday, March 19, the Supreme Court considered whether to extend the FCA’s alternate 10-year statute of limitations to cases in which the government does not intervene. The case, Cochise Consultancy Inc. v. United States, ex rel. Hunt, involves a whistleblower’s qui tam action alleging that two defense contractors defrauded the government. The case centers on the FCA’s two statutes of limitations. One allows lawsuits to be filed within six years of the alleged fraud. 31 U.S.C. § 3731(b)(1). The other allows lawsuits to be filed three years after the federal government knows of facts “material to the right of action,” but never more than 10 years after the alleged fraud. 31 U.S.C. § 3731(b)(2). In Cochise, the relator filed his complaint in 2013, more than six after the alleged fraud, which took place in 2006 and 2007. The relator argued that his complaint was timely under the 10-year limitations period of § 3731(b)(2) because he filed it within three years after the FBI learned of the fraud in 2010. It was undisputed that if the government had intervened, the 10-year limitations period would have applied. At issue was whether that period can apply in cases where, as in Cochise, the government does not intervene. The Fourth and Tenth Circuits had previously ruled that it could not, but the Eleventh Circuit created a split when it ruled—in the decision on appeal in Cochise, and as previously reported by this blog here—that that period could apply to cases in which the government is not a party. At Tuesday’s argument, defense contractors’ counsel argued that extending the 10-year limitations period would result in increased claims, impose higher evidentiary burdens, and allow relators to “wait in the weeds” while developing their cases. But relator’s counsel argued that, in practice, relators have a strong incentive to file as soon as possible, because otherwise the potential plaintiff risks their claim being dismissed under the “first to file bar,” which is intended to avoid duplicative FCA litigation by prohibiting subsequent FCA actions based upon the same essential facts as a previously filed qui tam action. The Solicitor General’s Office also argued the relator’s position was consistent with the FCA’s purpose because “the majority of any recovery would go to the United States” even where the government does not intervene. Although it is difficult to predict the Court’s decision based on oral argument, it seems at least possible that the Court will extend the FCA’s 10-year statute of limitations to cases where the government does not intervene. That result would likely increase risk and costs for defendants facing FCA claims.
March 22, 2019
by Alan J. Iverson
