United States of America v. Allstate Insurance Company
OPINION, affirming the judgment of the district court, per curiam RAK, RSP, GEL, FILED. [16-705]
Case 16-705, Document 225, 04/04/2017, 2003477, Page1 of 14
United States, ex rel. Hayes v. Allstate Ins. Co.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term, 2016
(Argued: March 2, 2017 Decided: April 4, 2017)
Docket No. 16‐705
UNITED STATES OF AMERICA, EX REL. J. MICHAEL HAYES,
– v. –
ALLSTATE INSURANCE COMPANY, DAIMLER CHRYSLER INSURANCE COMPANY,
ERIE INSURANCE COMPANY OF NEW YORK, ERIE INSURANCE EXCHANGE, INC., ERIE
INDEMNITY COMPANY, FARMERS INSURANCE EXCHANGE, TRUCK INSURANCE
EXCHANGE, FIRE INSURANCE EXCHANGE, FOREMOST INSURANCE GROUP, GEICO,
INSURANCE, GMAC INSURANCE, KEMPER INDEPENDENCE INSURANCE COMPANY,
LIBERTY MUTUAL INSURANCE COMPANY, LIBERTY MUTUAL GROUP, LIBERTY
MUTUAL HOLDING COMPANY, INC., METROPOLITAN GROUP PROPERTY AND
CASUALTY INSURANCE COMPANY, METROPOLITAN PROPERTY AND CASUALTY
INSURANCE COMPANY, NATIONWIDE GENERAL INSURANCE COMPANY,
NATIONWIDE FINANCIAL SERVICES INCORPORATED, NATIONWIDE MUTUAL
INSURANCE COMPANY, NEW YORK CENTRAL MUTUAL FIRE INSURANCE COMPANY,
PREFERRED MUTUAL INSURANCE COMPANY, PROGRESSIVE INSURANCE COMPANY,
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THE PROGRESSIVE CORPORATION, INC., REPUBLIC ‐ FRANKLIN INSURANCE
COMPANY, UTICA MUTUAL INSURANCE COMPANY, GRAPHICS ARTS MUTUAL
INSURANCE COMPANY, UTICA NATIONAL INSURANCE COMPANY OF TEXAS, UTICA
NATIONAL INSURANCE COMPANY OF OHIO, UTICA NATIONAL ASSURANCE
COMPANY, UTICA LLOYD’S OF TEXAS, UTICA SPECIALTY RISK INSURANCE COMPANY,
FOUNDERS INSURANCE COMPANY, FOUNDERS INSURANCE COMPANY OF MICHIGAN,
UTICA NATIONAL INSURANCE GROUP, STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY, HARTFORD FINANCIAL SERVICES GROUP, INC., TRAVELERS
INSURANCE GROUP HOLDING, INC., TRAVELERS PROPERTY CASUALTY
CORPORATION, THE TRAVELERS COMPANIES, INC., ZURICH NORTH AMERICA, FEDEX
CORPORATION, FEDEX EXPRESS, FEDEX GROUND, FEDEX FREIGHT, FEDEX OFFICE,
FEDEX CUSTOM CRITICAL, FEDEX TRADE NETWORKS, FEDEX SUPPLY CHAIN
SOLUTIONS, FEDEX SERVICES, J.B. HUNT TRANSPORT SERVICES, INCORPORATED,
U‐HAUL INTERNATIONAL, and THE ERIE INSURANCE COMPANY,
ALLSTATE CORPORATION, CASTLEPOINT NATIONAL INSURANCE COMPANY,
SPECIALTY UNDERWRITERS ALLIANCE, INC., TOWER GROUP COMPANIES, MAIDEN
HOLDING LTD, KEMPER CORPORATION, MEDICAL LIABILITY MUTUAL INSURANCE
COMPANY, NATIONWIDE CORPORATION, NEW YORK STATE INSURANCE
RECIPROCAL, THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, PRUDENTIAL
FINANCIAL, INC., HEARTLAND EXPRESS, INCORPORATED, NATIONWIDE, FARMERS
INSURANCE GROUP COMPANIES, FARMERS UNDERWRITERS ASSOCIATION, AIG,
BERKSHIRE HATHAWAY INC., NATIONWIDE MUTUAL INSURANCE INTERCOMPANY
POOL, NATIONWIDE, ZURICH FINANCIAL SERVICES AG, and ZURICH INSURANCE
B e f o r e:
KATZMANN, Chief Judge, POOLER and LYNCH, Circuit Judges.
Case 16-705, Document 225, 04/04/2017, 2003477, Page3 of 14
Relator J. Michael Hayes brought this qui tam action under the False
Claims Act (“FCA”), 31 U.S.C. § 3729 et seq., against numerous insurance
and trucking companies. The United States District Court for the Western
District of New York (Skretny, J.) dismissed the action with prejudice as to
Hayes as a sanction under Federal Rule of Civil Procedure 11. On appeal,
Hayes primarily challenges the imposition of the sanction of dismissal.
Several of the defendants urge us to affirm the district court’s judgment on
the alternative ground that the district court lacked subject matter
jurisdiction over Hayes’s FCA claims, which according to these defendants
did not satisfy the statute’s first‐to‐file rule. We join the D.C. Circuit in
holding that the FCA’s first‐to‐file rule is not jurisdictional. Accordingly,
we need not consider the defendants’ arguments on that issue. For the
reasons stated herein and in the accompanying summary order discussing
the district court’s imposition of the sanction of dismissal, the judgment of
the district court is AFFIRMED.
J. MICHAEL HAYES (Peter M. Jasen, Buffalo, NY, on the brief), for
JOHN W. CAMPBELL, Federal Express Corporation, Memphis, TN, for
Defendants‐Appellees FedEx Corporation, Federal Express
Corporation, FedEx Ground Package System Inc., FedEx
Freight Corporation, FedEx Office and Print Services, Inc.,
FedEx Custom Critical, Inc., FedEx Trade Networks Inc.,
FedEx Supply Chain Systems, Inc., and FedEx Corporate
DAVID L. YOHAI (Lori L. Pines and John P. Mastando III, on the brief),
Weil, Gotshal & Manges LLP, New York, NY, for Defendants‐
Appellees Farmers Insurance Exchange, Truck Insurance
Exchange, Fire Insurance Exchange, and Foremost Property
and Casualty Insurance Company.
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Bryce L. Friedman, Simpson Thatcher & Bartlett LLP, New York,
NY; Deborah L. Stein, Simpson Thatcher & Bartlett LLP, Los
Angeles, CA, for Defendants‐Appellees Travelers Insurance
Group Holding, Inc., Travelers Property Casualty
Corporation, and The Travelers Companies, Inc.
Jonathan M. Freiman, Wiggin and Dana LLP, New Haven, CT, for
Defendant‐Appellee Hartford Financial Services Group, Inc.
Sharon Angelino, Goldberg Segalla LLP, Buffalo, NY, for Defendants‐
Appellees J.B. Hunt Transport Services Inc., Founders
Insurance Company, Founders Insurance Company of
Michigan, Graphic Arts Mutual Insurance Company,
Republic‐Franklin Insurance Company, Utica Mutual
Insurance Company, Utica National Insurance Company of
Texas, Utica National Insurance Company of Ohio, Utica
National Assurance Company, Utica Lloyd’s of Texas, Utica
Specialty Risk Insurance Company, and Utica National
Heath J. Szymczak, Bond, Schoeneck & King, PLLC, Buffalo, NY, for
Defendants‐Appellees Erie Insurance Company of New York,
Erie Insurance Exchange, Inc., Erie Indemnity Company, and
The Erie Insurance Company.
Steven M. Levy and Alan S. Gilbert, Dentons US LLP, Chicago IL;
Sean C. Cenawood, Dentons US LLP, New York, NY; Sharon
Angelino, Goldberg Segalla LLP, Buffalo, NY, for Defendants‐
Appellees Allstate Insurance Company, Allstate Indemnity
Company, Kemper Independence Insurance Company,
Metropolitan Group Property and Casualty Insurance
Company, Metropolitan Property and Casualty Insurance
Company; and Defendants Kemper Corporation and The
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Suzanne O. Galbato, Bond, Schoeneck & King, PLLC, Syracuse, NY,
for Defendant‐Appellee Preferred Mutual Insurance Company.
Terrance M. Connors, Connors LLP, Buffalo, NY; Michael K. Loucks,
Skadden, Arps, Slate, Meagher & Flom LLP, Boston, MA, for
Defendants‐Appellees Progressive Insurance Company and The
Progressive Corporation, Inc.
Douglas W. Baruch and Anayansi Rodriquez Carbo, Fried, Frank,
Harris, Shriver & Jacobson LLP, Washington, D.C.; Dan David
Kohane, Hurwitz & Fine, P.C., Buffalo, NY, for Defendant‐
Appellee State Farm Mutual Automobile Insurance Company.
Michael J. Willett, Gibson, McAskill & Crosby, LLP, Buffalo, NY, for
Defendant‐Appellee Zurich North America.
Stephen Sozio, Jones Day, Cleveland, OH; Matthew Corcoran, Jones
Day, Columbus, OH; Mark C. Davis, Lippes Mathias Wexler
Friedman LLP, Buffalo, NY, for Defendants‐Appellees
Nationwide General Insurance Company, Nationwide
Financial Services Incorporated, and Nationwide Mutual
Eric Dranoff, Saretsky Katz & Dranoff, LLP, New York, NY, for
Defendant‐Appellee New York Central Mutual Fire Insurance
Susan L. Swatski, Hill Wallack LLP, Princeton, NJ, for Defendant‐
Appellee CorePointe Insurance Company f/k/a Daimler
Chrysler Insurance Company.
Barry I. Levy, Cheryl F. Korman, and Brian L. Bank, Rivkin Radler
LLP, Uniondale, NY, for Defendant‐Appellee Geico, Insurance.
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Kevin J. Fee and Amy C. Gross, Duane Morris LLP, New York, NY:
Dennis R. McCoy, Barclay Damon, LLP, Buffalo, NY, for
Defendants‐Appellees Liberty Mutual Insurance Company,
Liberty Mutual Group, and Liberty Mutual Holding
Kevin M. Hogan, Phillips Lytle LLP, Buffalo, NY, for Defendant‐
Appellee U‐Haul International.
Relator J. Michael Hayes appeals from the district court’s dismissal with
prejudice of his False Claims Act (“FCA”) qui tam action as a sanction pursuant to
Federal Rule of Civil Procedure 11. On appeal, Hayes argues that the
misstatements in his complaint were not made in bad faith and did not justify the
sanction of dismissal. He further argues that he should have been granted leave
to amend his complaint. Although all of the defendants contend that the district
court’s imposition of the sanction of dismissal and denial of leave to amend were
proper, several defendants, those not affiliated with Federal Express Corporation
(hereinafter the “non‐FedEx defendants”), additionally argue that the district
court lacked subject matter jurisdiction over the action and consequently did not
err by dismissing it. We address in this opinion only the non‐FedEx defendants’
Case 16-705, Document 225, 04/04/2017, 2003477, Page7 of 14
challenge to the district court’s subject matter jurisdiction, and we discuss
Hayes’s argument that the sanction of dismissal was wrongfully imposed in a
separate summary order filed simultaneously with this opinion.
In this FCA qui tam action, see 31 U.S.C. § 3729 et seq., relator Hayes alleged
that the defendant companies, which are primarily, but not exclusively, liability
insurance companies, have been systematically and intentionally noncompliant
with their obligations under the Medicare Secondary Payer Act to reimburse
Medicare for certain payments made on behalf of Medicare beneficiaries. As is
discussed more fully in the accompanying summary order, Hayes alleged that he
had personal knowledge of each defendant’s participation in a nationwide
scheme to defraud Medicare. The assigned magistrate judge and district court
ultimately concluded that Hayes had no such knowledge and had acted in bad
faith by falsely purporting to have it. As a result, the district court dismissed the
action with prejudice as to Hayes as a sanction under Federal Rule of Civil
Hayes appeals from that decision. Although all of the defendants contend
that the district court correctly dismissed Hayes’s complaint as a sanction, the
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non‐FedEx defendants also advance an alternative basis for affirming the district
court: that the district court lacked subject matter jurisdiction over Hayes’s action
because Hayes did not satisfy the FCA’s first‐to‐file rule. The non‐FedEx
defendants raised this argument to the district court (although they had not
raised it before the magistrate judge), but the district court did not address it.
Because “every federal appellate court has a special obligation to ‘satisfy
itself not only of its own jurisdiction, but also [of] that of the lower courts in a
cause under review,” we will consider the non‐FedEx defendants’ contention
that the district court lacked subject matter jurisdiction. Arnold v. Lucks, 392 F.3d
512, 517 (2d Cir. 2004) (internal quotation marks omitted).
As relevant to Hayes’s claim, the FCA imposes liability on any person who
“knowingly conceals or knowingly and improperly avoids or decreases an
obligation to pay or transmit money or property to the Government.” 31 U.S.C.
§ 3729(a)(1)(G). “The FCA may be enforced not just through litigation brought by
the Government itself, but also through civil qui tam actions that are filed by
private parties, called relators, ‘in the name of the Government.’” Kellogg Brown
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& Root Servs., Inc. v. U.S., ex rel. Carter, 135 S. Ct. 1970, 1973 (2015) (quoting 31
U.S.C. § 3730(b)(1)). There are, however, certain limitations on FCA qui tam
actions. Under the so‐called “first‐to‐file rule” at issue here, “[w]hen a person
brings an action under [the FCA], no person other than the Government may . . .
bring a related action based on the facts underlying the pending action.” 31
U.S.C. § 3730(b)(5). That rule prevents an individual from bringing an FCA qui
tam action if another action invoking the same facts is already pending at the
time the individual files suit. See Kellogg Brown & Root, 135 S. Ct. at 1974, 1978.
The non‐FedEx defendants argue that Hayes did not satisfy the first‐to‐file
rule because when he filed his complaint in October 2012, a “related” action was
already pending, coincidentally in the same district. According to the non‐FedEx
defendants, that action alleged the same general scheme: that many of the same
insurance companies had systematically failed to reimburse Medicare as
required under the Medicare Secondary Payer Act. See Complaint, U.S. ex rel.
Takemoto v. The Hartford Fin. Servs. Grp., Inc., 157 F. Supp. 3d 273 (W.D.N.Y. 2016)
(No. 11‐cv‐613). The Takemoto complaint was filed in July 2011, over a year before
Hayes filed his purportedly related complaint. See id. Although the Takemoto case
has since been dismissed, see 157 F. Supp. 3d at 276, aff’d sub nom. U.S. ex rel.
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Takemoto v. Nationwide Mut. Ins. Co., No. 16‐365, 2017 WL 214572, at *3 (2d Cir.
Jan. 20, 2017), the non‐FedEx defendants contend that the existence of the
Takemoto case at the time that Hayes filed his complaint deprived the district
court of subject matter jurisdiction over Hayes’s action from the outset.
If the non‐FedEx defendants are correct that the first‐to‐file rule is
jurisdictional, their arguments on that point are not merely an available
alternative on which we may affirm the district court; instead, they raise an issue
to resolve before turning to the merits of Hayes’s appeal. See Ruhrgas AG v.
Marathon Oil Co., 526 U.S. 574, 583 (1999) (“Article III generally requires a federal
court to satisfy itself of its jurisdiction over the subject matter before it considers
the merits of a case.”). As a result, we consider below whether the first‐to‐file
rule is jurisdictional.
Several circuits have stated or assumed that the first‐to‐file rule is
jurisdictional. See, e.g., U.S. ex rel. Carter v. Halliburton Co., 710 F.3d 171, 181 (4th
Cir. 2013), aff’d in part, rev’d in part on other grounds sub nom. Kellogg Brown & Root,
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135 S. Ct. at 1979 (2015)1; U.S. ex rel. Branch Consultants v. Allstate Ins. Co., 560 F.3d
371, 376–77 (5th Cir. 2009); Walburn v. Lockheed Martin Corp., 431 F.3d 966, 970
(6th Cir. 2005). The D.C. Circuit, however, has reached the opposite conclusion.
See U.S. ex rel. Heath v. AT&T, Inc., 791 F.3d 112, 120–21 (D.C. Cir. 2015). For the
reasons articulated below, we join the D.C. Circuit in holding that the first‐to‐file
rule is not jurisdictional and instead bears on the merits of whether a plaintiff has
stated a claim.
The Supreme Court has warned against “profligate use of the term
‘jurisdiction.’” Sebelius v. Auburn Regʹl Med. Ctr., 133 S. Ct. 817, 824 (2013). “To
ward off” such use, the Supreme Court has “adopted a ‘readily administrable
bright line’ for determining whether to classify a statutory limitation as
jurisdictional.” Id. (quoting Arbaugh v. Y&H Corp., 546 U.S. 500, 516 (2006)).
Courts are to “inquire whether Congress has ‘clearly stated’ that the rule is
On review, the Supreme Court did not address the Fourth Circuit’s observation that
the first‐to‐file rule was jurisdictional but focused instead on whether the first‐to‐file
rule was satisfied in that particular case. See 135 S. Ct. at 1979. We agree with the D.C.
Circuit’s conclusion that the Supreme Court’s discussion was “decidedly
nonjurisdictional . . . , raising the issue after it decided a nonjurisdictional statute of
limitations issue.” U.S. ex rel. Heath v. AT & T, Inc., 791 F.3d 112, 121 n.4 (D.C. Cir. 2015).
As a result, we do not read the Supreme Court’s decision as implicitly affirming the
Fourth Circuit’s observation that the first‐to‐file rule was jurisdictional.
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jurisdictional; absent such a clear statement, . . . ‘courts should treat the
restriction as nonjurisdictional in character.’” Id. (brackets omitted) (quoting
Arbaugh, 546 U.S. at 515–16). Under this test, a “provision that ‘does not speak in
jurisdictional terms or refer in any way to the jurisdiction of the district courts’”
will not be considered jurisdictional. Arbaugh, 546 U.S. at 515 (quoting Zipes v.
Trans World Airlines, Inc., 455 U.S. 385, 394 (1982)).
The first‐to‐file rule provides that “no person other than the Government”
may bring an FCA claim that is “related” to a claim already “pending.” 31 U.S.C.
§ 3730(b)(5); see also Kellogg Brown & Root, 135 S. Ct. at 1974. As the D.C. Circuit
observed, this language “speaks only to who may bring a private action and
when,” Heath, 791 F.3d at 120, but “does not speak in jurisdictional terms or refer
in any way to the jurisdiction of the district courts,” id. (quoting Arbaugh, 546
U.S. at 515). This is in sharp contrast to other provisions of the FCA that do
explicitly invoke the jurisdiction of the district courts. See, e.g., 31 U.S.C.
§ 3730(e)(1) (“No court shall have jurisdiction over an action brought by a former
or present member of the armed forces . . . against a member of the armed forces
arising out of such person’s service in the armed forces.”); id. § 3730(e)(2)(A)
(“No court shall have jurisdiction over an action brought . . . against a Member of
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Congress, a member of the judiciary, or a senior executive branch official if the
action is based on evidence or information known to the Government when the
action was brought.”). “Where Congress includes particular language in one
section of a statute but omits it in another section of the same Act, it is generally
presumed that Congress acts intentionally and purposely in the disparate
inclusion or exclusion.” Kucana v. Holder, 558 U.S. 233, 249 (2010) (brackets
omitted). Because the FCA “clearly state[s]” that other limitations on qui tam
actions are jurisdictional, but does not “clearly state” that the first‐to‐file rule is
jurisdictional, we must treat the first‐to‐file rule “as nonjurisdictional in
character.” Auburn Regʹl Med. Ctr., 133 S. Ct. at 824 (quoting Arbaugh, 546 U.S. at
515–16). As a result, we join the D.C. Circuit in holding that the FCA’s first‐to‐file
rule “bears only on whether a qui tam plaintiff has properly stated a claim.”
Heath, 791 F.3d at 121. Accordingly, a district court does not lack subject matter
jurisdiction over an action that may be barred on the merits by the first‐to‐file
For the foregoing reasons, we join the D.C. Circuit in holding that the first‐
to‐file rule of the FCA is not jurisdictional. Because we conclude in the summary
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order accompanying this opinion that the district court did not err by imposing
the sanction of dismissal, we need not consider the non‐FedEx defendants’
argument that Hayes’s action did not satisfy the first‐to‐file rule. For these
reasons, the judgment of the district court is AFFIRMED.
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