Recent Developments In Cases Dealing With The False Claims Act’s First-To-File And Public Disclosure Bars

This blog post is a preview of a presentation Mr. Turetzky will be giving at the American Bar Association Public Contracts Law Section's Fall Meeting in Miami, Florida on November 1, 2014.

The False Claims Act, 31 U.S.C. §§ 3729-3733, enables whistleblowers—also known as qui tam relators— to file fraud suits on behalf of the United States against private government contractors. With the assistance of qui tam relators, the United States government has recovered billions of dollars in False Claims Act settlements and judgments. Allowing private persons to litigate on the government's behalf, however, often encourages parasitic, unmeritorious lawsuits. For this reason, Congress has limited the power of qui tam litigants in a number of ways.

Two of the limitations imposed on qui tam relators are found in the so-called "first-to-file" and "public disclosure" bars. The "first-to-file" bar is set forth in 31 U.S.C. § 3730(b)(5), which states "[w]hen a person brings an action under this subsection, no person other than the Government may intervene or bring a related action based on the facts underlying the pending action." The "public disclosure" bar is set forth in 31 U.S.C. § 3730(e)(4), which states in part that "[t]he court shall dismiss an action or claim under this section, unless opposed by the Government, if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed." The public disclosure bar does not apply if the qui tam relator is the "original source" for the disclosed information.

There have been several new developments over the last few months in how federal courts' are interpreting the False Claims Act's "first-to-file" and "public disclosure" bars:

First, there remains a circuit split over how the "public disclosure" bar is applied. In the Fourth Circuit, the court uses an "actually derived from" test, which is a very permissive standard for qui tam relators. United States ex rel. Ahumada v. NISH, 756 F.3d 268 (4th Cir. 2014). Under this standard, only claims that were "actually derived from" publicly disclosed information will be barred, and relators are often able to shape their allegations to camouflage the origins of the allegation. Most other circuits use a "based upon," "supported by," or "substantially similar" test. These tests are broader, but still require the actual claim in the parasitic law suit to have been disclosed publicly. United States ex rel. Heath v. Wisconsin...