United States: Ninth Circuit Lowers Public Disclosure Bar

In a reversal of 23-year-old precedent, the US Court of Appeals for the Ninth Circuit ruled en banc in two consolidated cases that a False Claims Act (FCA) (31 U.S.C. § 3729, et seq.) relator may qualify as an “original source” of publicly disclosed allegations even if the relator played no role in the public disclosure.  U.S. ex rel. Hartpence v. Kinetic Concepts, Inc., No. 12-55396, 2015 WL 4080739 (9th Cir. July 7, 2015).  The consolidated cases are U.S. ex rel. Steven Hartpence et al. v. Kinetic Concepts Inc., case number 12-55396, and U.S. ex rel. Godecke v. Kinetic Concepts Inc., case number 12-56117.

In Kinetic Concepts, each of the relators alleged in their respective cases that their former employer fraudulently claimed Medicare reimbursements.  After the allegations were publicly disclosed in a federal audit report and administrative proceedings, the relators each informed the government of the alleged fraud and then filed complaints in district court.  The district court held that it lacked jurisdiction under the FCA’s public disclosure bar, 31 U.S.C. § 3730(e)(4), as the allegations had been publicly disclosed and neither relator qualified as an “original source” because they had not contributed to the public disclosures.  The district court relied on the Ninth Circuit’s decision in Wang ex rel. United States v. FMC Corp., 975 F.2d 1412, 1418 (9th Cir. 1992), in which the court held that an “original source” must have: (1) “direct and independent knowledge” of the information underlying their claims; (2) voluntarily provided the information to the government before filing suit; and (3) had a role in the public disclosure of the allegations.

In overturning the district court, the Ninth Circuit in Kinetic Concepts held that Wang was “wrongly decided” and that the third requirement established in Wang did not exist in the FCA’s text.  The Ninth Circuit also stated that its decision in Wang was in “serious tension” with the US Supreme Court’s decision in Rockwell International Corp. v. United States, 549 U.S. 457 (2007), which held that the word “information” in the public disclosure bar referred to the information on which the relator’s allegations are based and not the information in the public disclosure.  

The cases consolidated in Kinetic Concepts were pending when the FCA was amended in 2010 by the Patient Protection and Affordable Care Act (PPACA), Pub. L. No. 111-148, 124 Stat. 119 (2010).  The Ninth Circuit analyzed the cases under the pre-2010 version of the FCA.  Under the pre–2010 statute, an “original source” is defined as follows:

31 U.S.C. § 3730(e)(4)(B) (1986), amended by PPACA, P.L. 111–148, Title X, Subtitle A, § 10104(j)(2), 124 Stat. 901 (Mar. 23, 2010).  The amended version now provides:

31 U.S.C. § 3730(e)(4)(B) (2010).  

The Ninth Circuit did not limit its decision to the pre-2010 FCA.  Thus, it is almost certain that the test adopted in Kinetic Concepts will also apply to the post-2010 version of the public disclosure bar.

The Kinetic Concepts decision eases the standard in the Ninth Circuit for relators to pursue claims based on publicly disclosed allegations.  The Ninth Circuit’s interpretation under Wang was unique and it now joins the majority of circuits in holding that for a relator to be considered an “original source,” at least under the pre-2010 FCA, there are only two requirements: (1) the relator must voluntarily inform the government before filing suit; and (2) the relator must have direct and independent knowledge of the allegations.  This decision, therefore, reduces the burden to establish that a relator is an “original source,” thereby making it more difficult for contractors to obtain dismissals in the Ninth Circuit of parasitic suits based on allegations in the public domain.

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