Public Disclosures in Civil Complaints and Media Bar Relator's Action

Posted on September 10, 2010 by Cliff Katz

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. 
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Supreme Court Denies Certiorari on "Original Source" Question

Posted on June 24, 2010 by Sojin Yoon

On June 21, 2010, the U.S. Supreme Court denied certiorari in Ortho Biotech Products, L.P. v. United States ex rel. Duxbury, No. 09-654, 2010 U.S. LEXIS 5091, thereby  allowing a circuit split to continue on a question relating to the jurisdiction over a relator’s action. The Government did not intervene in this action, so this action was litigated solely by the relator. Under the FCA, where there has been a public disclosure of the allegations, the court only has jurisdiction over a relator’s action if the relator is an “original source” of the information and voluntarily provided the information to the Government. 

The circuits have been split on whether this requirement means that the relator was required to provide the information to the Government before the “public disclosure” or simply before filing the lawsuit. In United States ex rel. Duxbury v. Ortho Biotech Products, L.P., 579 F.3d 13 (1st Cir. 2009), the First Circuit joined the Fourth and Eighth Circuits in holding that a relator need only provide information to the Government before filing suit, and not before the public disclosure. By contrast, the Sixth and DC Circuits have held that an “original source” must provide the Government with the information prior to any public disclosure. The Second and Ninth Circuits have adopted an even stricter requirement, holding that a relator must actually be the source of the public disclosure.

Congress recently amended the FCA’s “original source” provision in the Patient Protection and Affordable Care Act (PPACA), Pub. L. No. 111-148, 124 Stat. 119 (Mar. 23, 2010). The PPACA provides that a person qualifies as an “original source” if the person either: (a) voluntarily discloses the information to the Government “prior to a public disclosure,” or (b) voluntarily discloses the information to the Government before filing an action and “has knowledge that is independent of and materially adds to the publicly disclosed allegations.” However, this provision of the PPACA is not retroactive, see Graham County Soil & Water Conservation Dist. v. United States ex rel. Wilson, 130 S. Ct. 1396, 1400 n. 1 (2010), and thus, the Duxbury question and the circuit split will continue to have practical significance for cases that will be decided under the prior version of the FCA. 
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