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Taxpayer’s
Against Fraud Seminar
Recent Developments in the Law
The Public Disclosure Bar and the Original Source
Exception
William Louis Hurlock |
| I. |
Public
Disclosure Bar
No court shall have
jurisdiction over an action under this section
based upon the public disclosure of allegations
or transactions in a criminal, civil, or administrative
hearing, in a congressional, administrative,
or Government Accounting Office report, hearing,
audit, or investigation, or from the news media,
unless the action is brought by the Attorney
General or the person bringing the action is
an original source of the information. 31 U.S.C. § 3730
(e)(4)(A).
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| II. |
Original
Source Exception
For purposes of this paragraph, “original
source” means an individual who has direct
and independent knowledge of the information on
which the allegations are based and has voluntarily
provided the information to the Government before
filing an action under this section which is based
on the information.
31 U.S.C. § 3730 (e)(4)(B).
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| III. |
Recent
Cases Analyzing the Public Disclosure Bar/Original
Source Exception
(October 1, 2005 – Present)
| A. |
District
Court Cases
United States ex rel. Bannon v. Edgewater
Hosp., Inc., 2005 WL 991757 (N.D. Ill.
Apr. 14, 2005) (Rule 9(b) does not require
that relator’s averments as to public
disclosure be stated with particularity since
information indicating the original source
of fraudulent claims is not an averment of
fraud. However, court dismisses complaint,
with leave to amend, under Rule 9(b) because
relator failed to state with particularity
the underlying fraudulent conduct to support
the claim, such as when misrepresentations
were made and which defendant submitted fraudulent
claims.)
United States ex rel. Englund v. L.A. County,
2005 WL 2089216 (E.D. Cal. Aug. 30, 2005) (Relator
files FCA complaint alleging Los Angeles County
made false claims to receive unwarranted Federal
Medicaid funds via intergovernmental transfers,
court becomes irritated with defendant’s
counsel failure to cite to specific instances
of the alleged disclosure in numerous, lengthy
exhibits - “Judges are not like pigs,
hunting for truffles buried in briefs.” Court
denies defendant’s motion to dismiss finding
no public disclosure of relator’s claims.)
United States ex rel. Ernst v. Tenet Healthcare
Corp., 2005 WL 474244 (N.D. Cal. Mar. 1,
2005) (Relator files FCA complaint regarding
fraudulent payments for certain medical claims.
After granting defendant’s motion to
dismiss because of a public disclosure, court
permits relator to amend complaint where relator
claims that he is an original source, but failed
to plead allegations to support the claim in
the amended complaint.)
United States ex rel. Ervin v. Hamilton Sec.
Group, Inc., 370 F. Supp. 2d 18 (D.D.C.
2005) (Relator files complaint alleging reverse
false claim relating to HUD receiving less
for a mortgage note sale. Court analyzed whether
relator was an original source following the
public disclosure of allegations and found
that relator was an original source because
he had direct and independent knowledge of
the fraud alleged and provided the information
voluntarily to the Government.)
United States ex rel. Farmer v. Houston,
2005 WL 1155111 (S.D. Tex. May 5, 2005) (Relator
brings FCA complaint alleging over billing for
repairs to roof after tropical storm Allison.
Court finds that while relator relied heavily
upon public information, she was an original
source because of the knowledge gleaned from
similar repair to roof made years earlier.)
United States ex rel. Gear v. Emergency Med.
Assoc. of Ill. Inc., 2005 WL 991789 (N.D.
Ill. Apr. 13, 2005) (Relator, a senior resident
who worked as an attending physician during
residency hours, alleges double billing
and upcoding. Court held relator’s allegations
were publicly disclosed and relator was not
an original source where, among other things,
relator was the editor of publication noting
billing irregularities and admitted to never
speaking to the Government prior to filing
suit.)
United States ex rel. Smith v. Yale-New
Haven Hospital, Inc., 2005 WL 2072514 (D.Conn.
Aug. 25, 2005) (Relator files FCA complaint
alleging false billing for radiological procedures.
Defendant files a motion to dismiss pursuant
to Fed. R. Civ. P. 12(b)(1) arguing that relator’s
allegations were publicly disclosed. Court
recognizes: (1) that it is possible, in principle,
to resolve public disclosure issue pursuant
to Fed. R. Civ. P. 12(b)(1), however the factual
record in the case precluded such a determination;
and (2) it is within a court’s discretion
to order discovery on the issue of disclosure
however, relator’s complaint is dismissed
because relator was not the first to file.)
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| B. |
United States Court of Appeals Cases
United States ex re. Campbell
v. Redding Med. Ctr., 421 F.3d 817 (9th
Cir. 2005) (First pair of patient relators
files FCA case against medical center alleging
fraudulently billing of “thousands” of
unnecessary invasive cardiac procedures, second
physician relator then files FCA claims against
same defendants alleging fraudulent billing
for unnecessary cardiac procedures. Government
moves to dismiss second complaint of physician
because of the first-to-file bar and District
Court grants dismissal. Physician appeals decision
asserting that patients were not original sources.
Court of Appeals remands to District Court
to determine if patients were original sources,
in so doing, court recognizes that when public
disclosure is an issue, the first-to-file rule
bars only subsequent complaints filed after
a complaint that fulfills the jurisdictional
requirements of section 3730(e)(4).)
United States ex rel. Dingle v. Bioport Corp.,
388 F.3d 209 (6th Cir. 2004) (Relator files FCA
complaint alleging drug company made false statements
relating to proper manufacture of anthrax vaccines.
Court affirms district court dismissal stating
that relator’s claims were publicly disclosed
and relator was not an original source. In so doing,
court declined to reevaluate the “based upon” language
of section 3730 (e)(4)(b) (original source) adopted
by prior Court of Appeals panel that stated “based
upon” meant “supported by.”)
United States ex rel. Gilligan v. Medtronic,
Inc., 403 F.3d 386 (6th Cir. 2005) (Relators
file FCA complaint alleging fraud relating to
pacemaker leads, and acknowledged that they were
not original sources. Court recognizes two types
of disclosures to put Government on notice of
fraud: (1) information of a false state of facts
and a true set of facts has been disclosed and;
(2) a public allegation of fraud, despite the
specificity of the allegation. Thus, there need
not be a specific disclosure of fraud to find
public disclosure if the information publicly
available as to the true state of facts and the
false state of facts underlying alleged fraud
warrants dismissal as a public disclosure. Prior
product liability lawsuits against manufacturer
defeated FCA claims.)
United States ex rel. Gross v. AIDS Research
Alliance-Chicago, 415 F.3d 601 (7th Cir.
2005) (Relator files FCA complaint alleging mismanagement
and negligence relating to AIDS study. Court
dismisses plaintiff’s complaint because,
among other deficiencies, relator’s claims
were based on a public disclosure and relator
did not allege that he was an original source.)
United States ex rel. Grynberg v. Praxair,
Inc., 389 F.3d 1038 (10th Cir. 2004), cert. denied,
125 S.Ct. 2964 (2005) (Relator files FCA complaint
alleging reverse false claims for royalty payments
due to Government. Court finds that information
used by relator was publicly disclosed, complaint
was based on publicly disclosed transaction,
and relator did not satisfy the direct and independent
knowledge element.)
United States ex rel. Paranich v. Sorgnard,
396 F.3d 326 (3d Cir. 2005) (Relator files FCA complaint
alleging over billing for electrical nerve stimulation
devices. Defendant establishes that there was a public
disclosure of the alleged fraud, and court found
that relator was not an original source for providing
information in addition to that requested by the
Government in a subpoena.)
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