United States: Recent Ninth Circuit En Banc Decision Makes It Easier For Relators To Be An Original Source And The First-To-File

On July 7, 2015, the United States Court of Appeals for the Ninth Circuit issued an en banc decision that potentially makes it easier for relators to prevail on pending False Claim Act qui tam suits and bring new actions in the Ninth Circuit. First, the court abandoned its twenty-three year-old requirement that a relator must have had a hand in the public disclosure of allegations of fraud to qualify as an original source under the original source exception to the public disclosure bar. Second, the court applied the first-to-file bar in a narrow manner, allowing a complaint based on allegations of fraud involving the same therapy services at issue in a prior complaint to go forward because it raised allegations of violations of a separate regulatory requirement. It is important to note that Congress amended the False Claims Act in 2010, changing the definition of original source, and the Ninth Circuit decision interpreted the definition of that phrase before the 2010 amendments. 


The Ninth's Circuit's decision came in two cases consolidated on appeal. The two cases, brought by separate relators against the same defendants (Kinetic Concepts, Inc. and KCI USA, Inc.), both allege that defendants improperly billed Medicare for Vacuum Assisted Closure Therapy performed using medical devices manufactured by the defendants. The first-filed case, United States ex rel. Hartpence v. Kinetic Concepts, Inc., alleges that defendants knowingly misused a billing code intended to certify that the claim met all Medicare coverage criteria. The second filed case, United States ex rel. Godecke v. Kinetic Concepts, Inc., alleges that defendants misused the same billing code, and additionally alleges that defendants failed to obtain required orders before beginning therapy.

The district court granted defendants' motions to dismiss in both cases. The district court held that there had been public disclosures of defendants' alleged fraud in a 2007 federal audit report and in at least one administrative law judge decision. The district court further held that the relators did not qualify as original sources because they had not shown they had a hand in the public disclosures. Additionally, the district court held in the alternative that the Godecke action was barred by the first-to-file bar because it was no more than a slight variation on Hartpence's earlier-filed claims.

On appeal, the relators urged the Ninth Circuit to abandon its prior holding in Wang ex rel. United States v. FMC Corp., 975 F.2d 1412 (9th Cir. 1992) that under the False Claims Act (as effective before the 2010 amendments), in order to qualify as an original source, a relator must have "had a hand in" the public disclosure of the allegations at issue in the complaint. The relators argued that this requirement is unsupported by the text of the pre-2010 False Claims Act's original source provision and that Wang should be abrogated by the Supreme Court's decision in Rockwell Int'l Corp. v. United States, 549 U.S. 457 (2007). Relator Godecke also contended that her claims are not barred by the first-to-file bar because they are distinct from the claims asserted by Hartpence. After the consolidated cases were briefed and argued before a three-judge panel, the Ninth Circuit took the unusual step of ordering that the cases be heard by an en banc panel prior to a decision by the three-judge panel.

The Ninth Circuit's Holding

A unanimous en banc panel reversed the district court's decisions. The court overruled Wang as wrongly decided, holding that, under the pre-2010 version of the False Claims Act, to qualify as an original source a relator must meet only the two requirements explicitly stated in the statute's original source provision: the relator must have (1) "direct and independent knowledge of the information on which the allegations are based" and, (2) "voluntarily provided the information to the Government before filing an action." 31 U.S.C § 3730(e)(4)(B).1  The court concluded that Wang was wrong to have imposed an extra-textual requirement that the relator have had a hand in the public disclosure: "[A]fter reviewing the statutory text, we conclude that Wang's hand-in-the public-disclosure requirement has no textual basis, and we give it a respectful burial." United States ex. rel. Harptence v. Kinetic Concepts, Inc., --- F3d ----, 2015 WL 4080739, at *5 (9th Cir. July 7, 2015).

The court noted that the Supreme Court's Rockwell decision undermined the reasoning in Wang. The Wang decision was premised on understanding, based on the legislative history, that the term "information" in the statutory phrase "information on which the allegations are based" refers to information underlying the publicly disclosed allegations, but in Rockwell the Supreme Court specifically concluded that the term "information" in this phrase refers to information underlying a relator's allegations or complaint. The court further noted that many of its sister circuits have declined to impose a requirement that a relator have a hand in the public disclosure. The court remanded the cases to the district court to determine whether relators qualify as original sources under the two requirements enumerated in the statute.

The court also reversed the district court's holding that Godecke's action was barred by the first-to-file bar. While Godecke conceded that her claims regarding the misuse of the identical billing code were barred, the court held that her remaining claims were not barred. The court rejected the district court's finding that the Godecke's and Hartpence's complaints involved the same "material elements" and held that Godecke's remaining claims, though based on the same therapy, are based on different false statements because they involve a different Medicare reimbursement requirement (i.e. the requirement to receive certain orders before beginning therapy). The court also reasoned that its holding furthers the aims of the first-to-file bar and Godecke's remaining claims benefitted the government by alerting it to a separate, independent fraud.


The Ninth Circuit's decision makes it easier in some pending cases for relators to prevail on a motion to dismiss, and might make the Ninth Circuit a more attractive forum in general for qui tam relators. Because the first part of the decision interpreted the original source provision as it existed before the 2010 amendments to the False Claims Act, its biggest effect will be on pending cases filed before the 2010 amendments. However the second part of the decision's application of the first-to-file bar might increase the number of relators filing in the Ninth Circuit, especially in cases where there has been a previous filing against the same defendant. Finally, the opinion as a whole might burnish the Ninth Circuit's reputation as a relator-friendly Circuit. 

Ropes & Gray will continue to monitor developments in this area.


1. The public disclosure and original source provisions of the False Claims Act were amended in 2010, but the amendments did not apply retroactively to actions pending at the time the amendments were enacted. Statutory references herein refer to the pre-2010 version of the statute.

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