Sunday, October 7, 2012

Do Public Disclosures Have to Satisfy a Rule 9 Like Test for the Public Disclosure Bar to Apply?

In "District Court Dismisses Whistleblower's Case Against Humana for Public Disclosure," 9/30/12, attorney Ben Vernia and his blog,, recently highlighted an interesting decision from the Southern District of Florida on the application of the "public disclosure bar" and whether the bar applies when the facts or allegations underlying the claim are publicly disclosed in newspaper articles and a lawsuit, even when those facts are innocently characterized and not presented as violating the False Claims Act.

In US ex rel Osheroff v. Humana, Case no. 10-24486-cv-Scola (SDFL, 9/28/12), the Relator brought a case against Humana, a Medicare Advantage provider, and several so called "Cuban-style medical clinics" with whom it contracted alleging that the Defendants "conspired to induce patients to enroll in Medicare Advantage Plans . . . by offering them improper benefits in violation of anti-kickback and anti-inducement laws." Along with standard "primary and specialty medical care," the Clinics offered patients "wellness programs and social activities, along with free transportation, meals, massages, salon services, and entertainment." The Relator alleged that these benefits constituted improper inducements and that offering patients such benefits caused Defendants to present false claims to Medicare and to falsely certify their compliance with the AntiKickback Act.

Defendants moved to dismiss the Relator's claims on the grounds that they were barred by the "public disclosure bar." Modified in 2010, the public disclosure bar provides that the Court shall dismiss claims brought by a relator "if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed - (i) in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party; (ii) in a congressional, Government Accountability Office, or other Federal report, hearing, audit, or investigation; or (iii) 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).

Defendants contended that the public disclosure bar precluded the Relator's claims because newspaper articles and advertisements, Defendants' websites and print brochures, and Florida state court litigation "disclose[d] information that is substantially the same as the allegations and transactions described in the Amended Complaint." For example, Defendants pointed to articles in the Miami Herald about the "Cuban-style" medical clinics which described how the clinics "offer their patients free social activities and meals" and that over half of clinic clients "arrive by van—at no charge.” They also pointed to advertisements about the Clinics and their services as well as disclosures made about the Clinics in a state court case. The Court found that the articles and advertisements as well as the state court litigation (though only for the pre-2010 version of the statute) qualified as public disclosures.

What is interesting about the case is that the Relator argued that for the public disclosure bar to apply, media disclosures must "reveal Defendants’ participation in the alleged fraud with the same specificity as would be required pursuant to Rule 9(b) of the Federal Rules of Civil Procedure; generalized, 'innocuous' information about the subject matter of the suits . . . will not suffice." Stated another way, the Relator argued that the public disclosures must not only reveal the facts which would constitute a violation of the AntiKickback Act, but must also show that the Defendants were knowingly engaged in wrongdoing. In fact, the Relator went so far as to argue that the bar did not apply because the articles had not shown that the inducements offered by the Defendants fell outside the "safe harbors" permitted by Medicare for limited patient inducements.

The Court rejected the Relator's arguments. Instead, the Court found that the articles and advertisements revealed facts sufficient to show that Clinics were offering remuneration to existing and prospective Medicare recipients and that such revelations were "sufficient to bring the Defendants' alleged fraud to the Government's attention." In turn, the Court found that Relator's claims were "based upon" and "substantially the same" as facts disclosed in the public disclosures, and since the Relator did not have "independent knowledge" of and was not an "original source" for his claims, the Court dismissed his claims against Humana and the Clinics with prejudice.

A. Brian Albritton
October 7, 2012

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