Qui tam cases alleging violations of the False Claims Act remain red hot in today's climate. The Federal government continues to use the FCA both as shield against those seeking to defraud the government and a sword to claw back money from allegedly undeserving government contractors.
In particular, the healthcare and construction industries have seen a rise in "whistle blower" cases brought by industry employees seeking to expose fraud – as well as cash in on the government's (often multi-million) dollar recoveries.
One of the hurdles facing potential qui tam relators is the "public disclosure bar." In simple terms, the bar acts as a gatekeeper against unqualified realtors seeking a financial windfall from an FCA case brought based on information already available in the public domain. When publicly available information is used as the basis for a FCA suit, the relator can only overcome the bar by showing that she is an "original source." An "original source" is marked by "direct and independent knowledge" of the fraud at issue.
Unsurprisingly (given the subjective nature of terms like publicly available and direct and independent knowledge), Federal courts have veered off in several directions in their respective interpretations of key provisions of the public disclosure bar.
Recently, however, the 9th Circuit added some clarity to the situation by reeling in its original source requirement. In the 1992 decision in Wang ex rel. United States v. FMC Corp., the Court set three conditions for relators seeking to invoke the "original source" exception to the FCA's public disclosure bar:
(1) The relator must have "direct and independent knowledge" of the fraud;
(2) The relator must voluntarily provide that information to the government before filing her lawsuit; and
(3) The relator must have had a hand in the public disclosure of allegations that are a part of her FCA action.
The third prong of the Court's test came under fire in the recent case of US ex rel Hartpence v. Kinetic Concepts, Inc. In overturning the public disclosure requirement as outside the text of the FCA, the Court stated that "it does not matter whether the [original source] whistleblower also played a role in the public disclosure of the allegations."
Writing on behalf of the Court, Judge Carlos T. Bea concluded that: "Wang's hand-in-the-public-disclosure requirement has no textual basis, and we give it a respectful burial."
The 9th Circuit's decision is a win for potential FCA relators as it keeps the door open to whistle blower actions even after a public disclosure. For government contractors, the best defense remains establishing a culture of compliance. ICYMI, check out our Guide to Government Lawsuits and How to Avoid Them.
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