'Unleash The Hounds!' – Third Circuit Gives Lawyers The Green Light To File Their Own FCA Claims Based On Information They Learn Through Discovery

On February 2, 2016, the U.S. Court of Appeals for the Third Circuit held that a law firm qualified as an "original source" and could bring its own claim under the False Claims Act (FCA) based on information it learned during discovery in a federal civil case in which the United States was not a party. U.S. ex rel. Moore & Co. v. Majestic Blue Fisheries, LLC, et al., 2016 WL 386087 (3d Cir. Feb. 2, 2016). The decision is a boon to the enterprising and arguably unethical attorney who, when conducting depositions and reviewing documents on behalf of his or her clients, keeps a watchful eye for evidence that can be used for the attorney's own future profitable FCA claim.

Background

In June 2010, the F/V Majestic Blue sank in the South Pacific resulting in the death of its captain. The law firm of Moore & Co. (Moore) represented the captain's wife in a wrongful death action in federal court against Majestic Blue LLC and Dongwon Industries, the owners of the vessel. During discovery in that action, Moore obtained documents and deposed individuals related to the ownership of the F/V Majestic Blue and its sister vessel, the F/V Pacific Breeze. Through this discovery, Moore learned that the owners of the two vessels allegedly obtained lucrative fishing licenses under the South Pacific Tuna Treaty by fraudulently certifying to the U.S. Coast Guard that the two vessels were commanded, owned, and controlled by U.S. citizens, but in fact the vessels were commanded by Korean nationals and the American LLCs that purported to own the vessels were shell companies designed to mask the true owner, Korea-based Dongwon Industries. Moore added the information it learned during discovery to information it acquired from a Freedom of Information Act (FOIA) request as well as media and public blog reports, and filed a qui tam claim in 2012 against purported the shell company LLCs and their true Korean owners.

The defendants filed a motion to dismiss for lack of subject matter jurisdiction and for failure to state a claim. The district court granted the Rule 12(b)(1) motion on the basis that the allegations fell within the FCA's public disclosure bar and that Moore did not qualify for the "original source" exception. 69 F. Supp. 3d 416 (D. Del. 2014).

Third Circuit

The Third Circuit reversed based on three critical changes that were made to the FCA in the 2010 Patient Protection and Affordable Care Act (PPACA). First, the amended FCA eliminated the language stating that a court lacked jurisdiction over the action if the public disclosure bar applied. Second, the amended FCA reduced the number of enumerated public disclosure sources, specifically providing that information disclosed in a prior federal case qualified as "public" only if the...