Eleventh Circuit Makes Key Ruling on Public Disclosure Bar: US ex rel. Osheroff v. Humana

In the case of U.S. ex rel. Osheroff v. Humana, Inc., et al., 2015 WL 223705 (Jan. 16, 2015 11th Cir), the Eleventh Circuit clarified a number of key issues concerning the "public disclosure bar" of the False Claims Act, as amended by the Patient Protection and Affordable Care Act (2010), 31 U.S.C. 3730(e)(4). See a helpful redline of the pre/amended versions of the public disclosure bar, 31 U.S.C. 3730(e)(4), found at the HelmerMartins blog entry, "False Claims Act Redline." 

• The Eleventh Circuit applied the pre-amendment version of the public disclosure bar to conduct occurring before the amendment’s effective date (which the Court stated was March 23, 2010) and the post-amendment version to conduct occurring after the effective date of the amendment.

• The Eleventh Circuit decided that the amended version of the public disclosure provision is no longer jurisdictional.

• As the amended version of the public disclosure bar is no longer jurisdictional, the Court held that a motion to dismiss under Rule 12(b)(6) is the appropriate vehicle for asserting the public disclosure bar regarding conduct subject to the amended version of the statute rather than a motion under Rule 12(b)(1).

• In considering a Rule 12(b)(1) motion regarding conduct that is subject to the pre-amendment version of the provision, the district court is permitted to look at extrinsic documents.

• While the Court found that a district court generally may not look beyond the pleadings in considering a Rule 12(b)(6) motion for conduct that is subject to the post-amendment version of the statute, district courts may consider extrinsic documents if they are central to a relator’s claim and their authenticity is not challenged. 

• For example, the Court found that in deciding a 12(b)(6) motion to dismiss, the district court properly took judicial notice of newspaper advertisements, and publicly available websites in determining whether there was a prior public disclosure of the relator's allegations. The Court explained that the term "news media as used in 3730(e)(4)" has a "broad sweep" and as a result "newspaper advertisements and the [defendant] clinics' publicly available websites qualify as news media for the purposes of the public disclosure provision." These advertisements and websites, like the newspaper articles, discussed the clinics' "free services" which the relator claimed gave rise to violations of the Anti-Kickback Statute.

• The Eleventh Circuit clarified its prior decision in Cooper v. Blue Cross Blue Shield of Florida, Inc. 19 F.3d 562 (11th Cir. 1994), and stated that it does not require that the public disclosure contain an allegation of wrongdoing. Rather, the Court found that the disclosures referenced the defendant's clinics' "free services" as being "paid for by taxpayer dollars"; this was "sufficient to raise an inference of fraud" under the Anti-Kickback Statute or the Civil Monetary Penalties Act.

• The Court found that the "significant overlap between the [relator's] allegations and the public disclosures is sufficient to show that the disclosed information forms the basis of this lawsuit and is substantially similar to the allegations of the complaint."

• The Court held that the relator was not an original source even though the relator argued that he "conducted his own investigation of the programs offered at the clinics", and his complaint included "some details that are not present in the public disclosure." The Court found that such allegations, "at most" add "background information and details relating to the value of the services offered." Such background information, the Court observed, only "helps one understand or contextualize a public disclosure" but is "insufficient" to grant original source status to a relator under either the pre-amendment or post-amendment versions of the False Claims Act.

Overall, Osheroff joins an increasing number of courts that find the amended 2010 version of the public disclosure bar NOT to be jurisdictional and subject to attack only by a 12(b)(6) motion to dismiss. Though the Court made it look easy in this case to take judicial notice of newspaper articles and websites in applying the public disclosure bar, the Court's ruling will make it much harder in practice to assert this defense if only "undisputed" evidence can be introduced at the motion to dismiss stage. To deal with this, defendants will likely have to seek early summary judgments on the public disclosure defense.

A. Brian Albritton

Guy P. McConnell

February 2, 2015

Recents Blog Posts and Articles of Interests

I have recently come across of a number of blog posts and articles which I commend to you:

• Seventh Circuit Rejects Constructive Knowing As Basis for Retaliation Claim

Scott Stein at Sidley Austin's Original Source blog writes about the case Halasa v. ITT Educational Services, Inc., 8/14/12, wherein the Seventh Circuit recently dismissed a False Claims Act retaliation claim and rejected the plaintiff's claim that "constructive knowledge" on the part of those who discharged him was sufficient to prove retaliation. The Court found that without actual knowledge of plaintiff's protected activities, plaintiff had not established a "causal link" between the plaintiff's reports of irregularities and his termination. 

• DOJ Brings Suit Against Gallup Organization

 Under the column of interesting qui tams, the Department of Justice recently announced it had intervened in a qui tam suit filed against none other than the polling organization, Gallup.  "According to the whistleblower’s complaint, Gallup violated the False Claims Act by giving the government inflated estimates of the number of hours that it would take to perform its services, even though it had separate and lower internal estimates of the number of hours that would be required.   The complaint further alleges that the government paid Gallup based on the inflated estimates, rather than Gallup’s lower internal estimates."

• Qui Tam Relator Not Original Source; U.S. ex rel. Repko v. Guthrie Clinic

Ellyn Sternfield at MintzLevin's Health Law & Policy Matters blog writes about the Repko case, wherein the Third Circuit dismissed the qui tam brought against Guthrie Healthcare System by its former general counsel and executive VP, Rodney Repko, on the grounds that Repko was not an original source such that he could avoid the public disclosure bar of the False Claims Act.  Repko had been charged with trying to steal two million dollars from Guthrie after he left the company and had pled guilty.  As part of his plea agreement, he was required to provide the government with "information concerning the unlawful activities of others."  As the article points out, the Third Circuit "was persuaded by the fact Repko had initially disclosed the challenged arrangements to the government under his plea agreement; the disclosure was bargained-for consideration which enabled Repko to obtain a lower sentence on his bank fraud charges.  While never mentioning the word 'voluntarily,' the court found that since the plea agreement compelled his disclosures to the government, Repko was essentially estopped from invoking the original source exception."

•  District Court Rules That Wartime Suspension of Limitations Act Suspends False Claims Act's Six-Year Statute of Limitations

Douglas Baruch and John Boese of Fried Frank recently wrote a "FraudMail Alert®" on the case of United States v. BNP Paribas SA, No. H-11-3718, 2012 WL 3234233 (S.D. Tex. Aug. 6, 2012), wherein a federal court in Texas applied the Wartime Suspension of Limitations Act, 18 U.S.C. § 3287 (2008) (“WSLA”) and held that the statute of limitations in a False Claims Act case had been suspended  due to the Iraq and Afghanistan conflicts. In addition, Baruch and Boese write "the district court’s ruling makes clear that the WSLA’s suspension is not limited to FCA cases arising out of wartime contracting or even Defense Department contracting in general, meaning that the FCA’s statute of limitations would be rendered ineffective in all sorts of cases, including those involving allegations arising out of the financial and healthcare industries."  Finding the case to run "counter to the plain meaning of the WSLA as well as the clear intent of Congress," they analyze the case in detail and declare it to be just plain "wrong."

A. Brian Albritton
August 30, 2012









 

Can Government Employees Be Relators? The 5th Circuit says, Yes.

In a case of first impression for the circuit, the 5th Circuit Court of Appeals recently held that government employees who learn of alleged violations of the False Claims Act within the scope of their employment may nevertheless file a qui tam and are not precluded from acting as relators even though their job as a government employee was "to investigate a fraud." Randall Little  and Joel Arnold on behalf of the United States v. Shell Exploration and Production Co., et al., Case no. 11-20320, (5th Cir. July 31, 2012).

In this case, the relators were auditors with the Minerals Management Service ("MMS"), an agency of the Department of Interior, and part of the mission of their agency was "to uncover theft and fraud in the royalty programs" for offshore drilling.  The relators alleged that Shell failed to pay the United States $19 million in royalties due it from Shell's offshore drilling. The Court noted that it was "undisputed that the Shell allegations came to light during the course" of the relators' "official duties" and that reporting their findings was "a job requirement."  The relators reported their requirements and then subsequently filed two different qui tams.  The government did not intervene.

Overturning the District Court's grant of summary judgment, the 5th Circuit found that government employees, such as the relators, qualified as "persons" under the False Claims Act. 31 U.S.C. 3730(b)(1)("A person may bring a civil action for a violation of section 3729 . . . ").  In making its decision, the Court declined a number of policy and statutory construction arguments offered by the government in an amicus and the defendant as to why government employees cannot be relators, including arguments based on the text of the statute; the "absurdity" of having government employees as relators, and that government employees serving as relators would violate "ethics guidelines" applicable to government employees.  The Court also noted that the 10th and 11th Circuits also permit government employees to be relators.  U.S. ex rel Williams v. NEC Corp., 931 F.2d 1493, 1501-02 (11th Cir. 1991) and U.S. ex rel Holmes v. Consumer Ins. Grp., 318 F.3d 1199, 1208-12 (10th Cir. 2003); but see U.S. ex rel. LeBlanc v. Raytheon Co., 913 F.2d 17, 19-20 (1st Cir. 1990)(some federal employees may not be qui tam claimants.)

Additionally, the Court remanded the case for the District Court to properly apply the 2006 version of the "public disclosure bar," 31 U.S.C. 3730(e)(4), which has been subsequently amended, as defendants  had alleged that the "scheme" alleged by the relators had been the source of several public disclosures.  The Court did note, however, that if public disclosure had occurred, the relators cannot be an "original source" and the action must be dismissed.  To be an original source, a relator must have "direct and independent knowledge" of the allegations of his or her complaint and must have "voluntarily provided the information to the government." 31 U.S.C. 3730(e)(4).  Following other courts, the 5th Circuit held that a relator who was "employed specifically to disclose fraud is sufficient to render his disclosures nonvoluntary."

Overall, this opinion is somewhat of a monument to plain language statutory interpretation.  The Court appears to acknowledge that having government employees as relators may be problematic ("we are are of the dilemmas identified").  But, it refuses all invitations on the basis of policy to create an exception to what it characterizes as clear statutory language.

A. Brian Albritton
August 2, 2012

D.C. Circuit Overturns Long Held Requirement That False Claims Act Relator Make Disclosure to Goverment Before Public Disclosure of Same Allegations

Whistleblowers Protection Blog recently wrote about the the District of Columbia Court of Appeals overturning its earlier ruling in U.S. ex rel Findley v. FPC-Boron Employees Club, 105 F.3d 675 (D.C. Cir. 1997).  In that case, the D.C. Circuit had held that to be "an 'original source' [in a False Claims Act case] a whistleblower must make his or her disclosure to the government before there is any public disclosure of the same allegation."  In U.S. ex rel Davis v. District of Columbia, No. 11-7039, May 15, 2012), the D.C. Circuit relied on the Supreme Court's ruling in Rockwell International Corp. v. United States, 549 U.S. 457 (2007), to reject the view, found in Findley, that a "relator could provide nothing new after a public disclosure."  Noting that the False Claims Act has been changed to further clarify who can be an original source (see 31 USC 3730(e)(4)(B)), the Court held "[a]pplying the 1986 version of the Act, we will no longer require a relator provide information to the government prior to any public disclosure of allegations substantially similar to the relator's and will instead enforce the text's deadline of 'before filing an action.'" 

Davis is a odd case and with an unsympathetic relator.  In the other part of the case, the Court sustained the District Court's ruling that the relator, Davis, was not entitled to treble damages and that the relator had failed to allege any actual damage to the United States.  Davis had been an accountant to the District of Columbia Public Schools ("DCPS") and his firm prepared Medicaid reimbursement claims made by DCPS to Medicaid for 1995 - 1997.  Apparently, DCPS replaced the realtor's firm with another in 1998, and the other firm submitted the DCPS Medicaid reimbursement for 1998.  According to Davis, however, DCPS submitted it claims without the required documentation since "only [Davis] had the required documentation supporting the claim and he never gave it back to DCPS."  DCPS subsequently received a Medicaid reimbursement of over 10 million , but most of that amount had to be returned to Medicaid after an auditor found that the DCPS 1998 claim had "not been adequately documented."  Four years after the Auditor's Report on the 1998 claim, Davis filed a qui tam against DCPS and the District of Columbia alleging that they had improperly submitted the 1998 Medicaid reimbursement claims without proper documentation -- thus the issue about whether he could be an original source.

Davis, the Court observed, did not allege in his suit that any of the claimed services were not provided to the DCPS or that any costs were exaggerated --in short, he did not allege that the government has suffered any damage as a result of the alleged lack of documentation.  In fact, "[b]ecause all agree that the services paid for were provided, the maintenance of documents to prove that they were has no independent monetary value.  This is the rare case in which there is no allegation that what the government received was worth less than what it believed it had purchased. . . . . The government got what it paid for and there are no damages."  The Court noted that Davis may still be entitled to "share" in any statutory penalties assessed against the District.

In view of the lack of damages, this case sounds like a great waste of time for everyone, and it appears to be an strange vehicle for the Court to change it position that a relator can still be an original source even if the relator approaches the government after disclosure.  The relator's conduct in Davis certainly does not justify such a change.


A. Brian Albritton
May 20, 2012