Labor & Employment Law Daily Wrap Up, WHISTLEBLOWERS—4th Cir.: Fourth Circuit affirms that relator was not first to file, (Feb 19, 2025)

By Donielle Tigay Stutland, J.D.

Neither the addition of a new subsidiary defendant, nor the addition of fraud in a new state, saves a relator from the first-to-file bar when the underlying fraud is the same.

The Fourth Circuit affirmed the decision of a district court in North Carolina to dismiss federal claims in a qui tam lawsuit alleging violations of the False Claims Act and the Anti-Kickback Statute for lack of jurisdiction pursuant to the first-to-file rule, as a similar case was brought in South Carolina against the primary defendants several years earlier. Although the Fourth Circuit indicated that the district court should have considered the plaintiff’s amended complaint, it nevertheless affirmed the lower court’s decision, concluding that neither the addition of a new subsidiary defendant, nor the addition of fraud in a new state, saved the plaintiff from the first-to-file bar in a whistleblower suit with the same fraud claims (U.S. ex rel. Rosales v. Amedisys North Carolina, LLC, No. 24-1418 (4th Cir. Feb. 14, 2025)).

Background. Amedisys Holding, LLC, and its various subsidiaries provide hospice care, including for Medicare and Medicaid patients. In 2014, a nurse, Jackie Byers, who worked for Amedisys Holding’s South Carolina subsidiary, noticed what she later alleged were “fraudulent practices”—namely, that Amedisys Holding was admitting and recertifying patients “for hospice care who [did] not meet hospice requirements.” In 2015, Byers filed a qui tam complaint on behalf of the United States in the District of South Carolina against Amedisys Holding and its South Carolina subsidiaries (Original Byers Complaint) bringing federal and state claims, including two claims under the False Claims Act. The complaint was filed under seal to give the government time to determine whether to intervene.

The named plaintiff in the instant case, Ganesa Rosales, “a home hospice case manager” for Amedisys North Carolina, LLC (Amedisys NC) from November 2017 to March 2019, filed her own False Claims Act complaint under seal (Original Rosales Complaint) in 2020. Her complaint alleged that she had seen Amedisys Holding and its subsidiaries (including Amedisys NC) engage in fraudulent behavior, including “unlawfully bill[ing] Medicare and Medicaid through the admission of unqualified and ineligible patients for hospice care, who are not terminal.” On October 15, 2021, Rosales filed an amended complaint (Amended Rosales Complaint), adding as defendants Appellees Dr. Sanjay Batish and his practice, Batish Medical Service, PLLC. Rosales reiterated the four claims from the Original Rosales Complaint and added a fifth False Claims Act claim pursuant to the Anti-Kickback Statute.

On May 24, 2023, the United States and North Carolina filed a notice in Rosales’s case declining to intervene. In April 2024, the district court dismissed Rosales’s federal claims against the three Appellees without prejudice for lack of jurisdiction pursuant to the first-to-file rule—because of Byers’s earlier-filed action—and declined to exercise supplemental jurisdiction over her state-law claim. Rosales appealed.

First to File. The court began its analysis by considering which of Rosales’ complaints to review when applying the first-to-file rule. The district court concluded that it was restricted to reviewing the Original Rosales Complaint. However, the Fourth Circuit determined that the district court erred because the False Claims Act’s first-to-file rule must be applied claim-by-claim and defendant-by-defendant, and stressed that its analysis should look to the most recent properly filed complaint. The Fourth Circuit also highlighted that one other circuit has implied that an amendment might cure a first-to-file deficiency if it served to demonstrate that a relator was bringing at least one truly new claim. Wrote the court, “And if a relator files a complaint asserting Claim A, then files an amended complaint asserting Claims A and B, the fact that the court later concludes that Claim A is barred by the first-to-file rule does not necessarily tell us anything about whether Claim B ought also to be barred.” Here, the Fourth Circuit pointed out that Rosales, “is merely arguing that she was in fact the first to file certain (allegedly) new claims clarified or raised in the Amended Rosales Complaint.” The Fourth Circuit concluded that a district court applying the False Claims Act’s first-to-file rule should analyze all properly filed complaints claim-by-claim to determine which relator was the first to bring a specific claim, or to bring that claim against a particular defendant. Nevertheless, the Fourth Circuit concluded that, even with the consideration of Rosales’ amended complaint, the district court was correct to dismiss this matter based on the application of the first-to-file rule.

Looking at the addition of Amedisys NC and Dr. Batish as defendants, the Fourth Circuit indicated that the False Claims Act’s first-to-file rule does not create a bright-line distinction based on the identities of the defendants. Said the court, “there is no firm rule that claims brought against different defendants, no matter how similar the underlying facts and no matter the corporate relationship between the defendants, are permissible. Nor is there an inverse bright-line rule that claims against one entity bar claims against that entity’s parent, subsidiary, or sister entity.” The Fourth Circuit further explained, “if a parent company and its subsidiaries are engaging in the same fraud, a lawsuit pointing to fraud by the parent—or the parent and some subsidiaries—alerts the government to the possibility that other subsidiaries may be engaging in the same conduct.” The court determined that the 2015 qui tam suit against Amedisys Holding and Amedisys South Carolina was sufficient to alert the government to the same alleged fraud that Rosales later asserted against Amedisys NC, as both the Original Byers Complaint and the Amended Rosales Complaint alleged that Amedisys Holding admitted and recertified patients “for hospice care who [did] not meet hospice requirements,” with the medical director signing off “without having seen the patient or having reviewed the patient records,” and with false “documentation of patients’ conditions.” The court also highlighted that both complaints also alleged that nurse case managers were pressured to admit patients, and that the company would “send a different nurse to admit the patient” if they refused. And, importantly, both complaints alleged that these practices were not limited to the particular locations where the relators worked, but instead were “systematic” and “wide-spread.” Additionally, Dr. Batish “is a medical director, and the [Original Byers Complaint] includes allegations against Amedisys [Holding]’s medical directors,” meaning the Original Byers Complaint gave “the government... enough information to discover the fraud in North Carolina that Rosales alleges.”

The court also laid out that the Amended Rosales Complaint put forward the same essential elements of fraud. She did not allege a North Carolina-specific scheme; to the contrary, she alleged that the fraud was not “limited to only North Carolina,” but was “a company-wide (nationwide) phenomenon.” The court determined that “[n]either [Rosales]’s factual additions”—including the addition of Amedisys NC as a defendant—“nor the fact that [her] experience took place in [North Carolina], as opposed to [Byers]’s experience in [South Carolina], saves [her] from the first-to-file bar.”

Finally, looking at the Anti-Kickback Statute, the court determined that Rosales claim failed to demonstrate that it is distinct from the allegations in the Original Byers Complaint or the other complaints filed before hers, as, at least two of the earlier suits alleged a kickback scheme and cited the Anti-Kickback Statute.

The case is No. 24-1418.

Judge: Wynn, J.

Attorneys: Christopher Michael Anderson, Office of the U.S. Attorney, for the U.S. Matthew Ryan Petracca, North Carolina Department of Justice, for North Carolina. John J. Beins (Beins Goldberg) for Ganesa Rosales. Brian Kenneth French (Nixon Peabody) for Amedisys North Carolina, L.L.C., Sanjay Batish and Batish Medical Service, PLLC.

Companies: Amedisys North Carolina, L.L.C.; Batish Medical Service, PLLC

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