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DC Circuit Affirms First-to-File under Federal False Claims Act

By Robyn Hagan Cain on December 02, 2011 | Last updated on March 21, 2019

Under the federal False Claims Act, a person who is not affiliated with the government can file a claim against a federal contractor, asserting fraud against the government. The law allows the filer to receive a share of recovered damages, but it's generally governed by a first-to-file limitation.

The D.C. Circuit Court of Appeals offered clarification regarding the first-to-file requirement in November, holding that, in the case of duplicative False Claims Act complaints, the earlier-filed complaint does not have to meet the heightened fraud or mistake pleading standards of Federal Rule of Civil Procedure 9(b) to allege facts sufficient to prompt a government investigation, and bar later-filed complaints on the same facts.

In the case, USA v. SLM Corporation, Sheldon Batiste filed a whistleblower lawsuit in 2008 on behalf of the United States against SLM Corporation, (better known as Sallie Mae), under the False Claims Act.

In the complaint, Batiste alleged that SLM defrauded the U.S. government through its administration of student loans under the Federal Family Education Loan Program. According to Batiste, SLM presented false certifications to the government in conjunction with claims for funds. Batiste said that SLM unlawfully put student loans into forbearance to allow more interest to accrue and receive special allowances from the Department of Education.

The problem with Batiste's claim was that Michael Zahara, who was employed by a wholly-owned SLM subsidiary, filed a similar complaint in 2005.

The district court dismissed Batiste's lawsuit for lack of subject matter jurisdiction under the first-to-file rule. Batiste appealed to the D.C. Circuit Court of Appeals, arguing that the district court improperly concluded that the False Claims Act's first-to-file bar does not require a first-filed complaint to meet the pleading standards for fraud.

In a first-impression review, the D.C. Circuit ruled that the first-to-file does not need to meet the heightened standard of Rule 9(b) to bar later complaints under the federal False Claims Act; the claim only needs to provide sufficient notice for the government, at its discretion, to initiate an investigation into the allegedly fraudulent practices.

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