The FCA And The Ever-Narrowing Public Disclosure Bar

On February 25, 2015, the Sixth Circuit became the latest federal court of appeals to weigh in on the scope of the False Claims Act's (FCA) public disclosure bar in its decision in United States ex rel. Whipple v. Chattanooga-Hamilton County Hospital Authority.1 Specifically, the Sixth Circuit held that the government's earlier administrative audit and investigation was not a bar to FCA liability, continuing the trend among Courts of Appeal of narrowing the scope of the FCA's public disclosure bar.

FALSE CLAIMS ACT, QUI TAM ACTIONS AND THE PUBLIC DISCLOSURE BAR

The FCA imposes civil liability when false or fraudulent claims for payment are presented to the government.2 The Act authorizes "qui tam" actions in which private party whistleblowers, known as relators, bring civil actions in the government's name.3 If a qui tam action is successful, the relator shares in the proceeds of the action or settlement.4 A relator seeking to bring a qui tam action under the FCA must first disclose his or her claims to the government. The government may then elect to intervene or to allow the relator to proceed with the lawsuit.5

The FCA places several restrictions on a relator's ability to bring a qui tam action, including a public disclosure bar, which restricts a relator from bringing an action when the fraud allegations or fraudulent transactions have been publicly disclosed.6 The public disclosure bar before 2010 provided a clear and explicit withdrawal of subject matter jurisdiction.7 Amendments to the FCA made in 2010 authorize a court to dismiss an action or claim if the public disclosure bar applies.8 Additionally, the amended public disclosure bar prohibits lawsuits where the allegations in the complaint are "substantially the same" as (rather than "based upon") allegations or transactions contained in public disclosures, unless the plaintiff is the original source of the information. Courts generally employ a two-part test to determine whether the public disclosure bar applies9: "first whether there has been any public disclosure of fraud [(1) in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party; (2) in a congressional, Government Accountability Office, or other Federal report, hearing, audit or investigation; or (3) from the news media], and second whether the allegations in the instant case are 'based upon' the previously disclosed fraud."10 If either requirement is not satisfied, the bar does not apply and the relator's claim may proceed. If both requirements are met, the suit may not proceed unless the relator qualifies as an "original source" under the statute.11

THE UNDERLYING FACTS AND THE DISTRICT COURT DECISION IN WHIPPLE

The relator, Whipple, alleged that the defendant hospital violated the FCA by knowingly submitting false or fraudulent claims for reimbursement to federally funded health care programs. Whipple claimed that he discovered the alleged fraud...