In United States ex rel. Poteet v. Bahler Medical, Inc., No. 09-1728, 2010 WL 3491159 (1st Cir. Sept. 8, 2010), the First Circuit affirmed the dismissal of a relator’s qui tam action. The relator brought the action against 120 spine surgeons and 18 medical device distributors, making allegations surrounding the promotion of a medical device manufactured by Medtronic to third-party doctors allegedly knowing that the third-party doctors would submit false claims for reimbursement. The First Circuit affirmed the District Court’s holding that the claims against the doctors were jurisdictionally barred by the FCA’s “public disclosure bar” because the alleged fraud was publicly disclosed in civil complaints against Medtronic and various doctors and in the related media coverage.
Section 3730(e)(4)(A) of the FCA provides that no court shall have jurisdiction over an FCA action brought by a relator that is based on prior public disclosures of fraud. The First Circuit held that “[t]o be a disclosure ‘of fraud’ the disclosure must contain either (1) a direct allegation of fraud, … or (2) both a misrepresented state of facts and a true state of facts so that the listener or reader may infer fraud.” The Court also held that the public disclosures must be from the “statutorily specified sources,” which include “civil…hearing” and “news media.”
There was no dispute that civil complaints filed in state and federal court contained the direct allegations of fraud. The relator argued, however, that civil complaints did not qualify as public disclosures under the FCA. The First Circuit rejected this argument, holding that, for purposes of this provision of the FCA, “hearing” is synonymous with “proceeding,” and thus, civil complaints fall within the statutorily specified public disclosures. The First Circuit also rejected the argument that civil complaints filed in state court as opposed to federal court should not qualify as public disclosures. The public disclosure bar, therefore, deprived the court of jurisdiction.
The relator did not claim to be an “original source” of information, so this exception to the public disclosure bar did not apply. Additionally, the First Circuit held that, though a case dismissed for lack of subject matter jurisdiction is usually without prejudice since it is not on the merits and jurisdictional defects may be cured, in this case, the jurisdictional defect was incurable, and thus, the case is “forever barred.”
This case was decided under the version of the FCA’s public disclosure bar in effect prior to its amendment by the Patient Protection and Affordable Care Act (PPACA). The First Circuit noted that the PPACA’s addition of the term “Federal” before “criminal, civil, or administrative hearing” means that civil complaints filed in state court no longer qualify as public disclosures under the FCA. In other words, according to the First Circuit, a relator may not be barred from bringing an FCA Action where the fraud was previously publicly disclosed in an action filed in state court.