The federal court in the Western District of Tennessee, a court in the Sixth Circuit, held as a matter of first impression that self-reporting to the government of failures to comply with federal law does not constitute a “public disclosure” which could bar a lawsuit brought by a relator under the False Claims Act. See United States ex rel. Cox v. Smith & Nephew, Inc., No. 08-2832, 2010 WL 4365467 (W.D. Tenn. Nov. 4, 2010). In so holding, the Tennessee court rejected the Seventh Circuit rule and purportedly joined the First, Ninth, Tenth, and Eleventh Circuits.
The Public Disclosure Bar of the False Claims Act can preclude lawsuits where the allegations in the relator’s complaint had been publicly disclosed and where the relator is not an original source of information. Specifically, prior to 2010, the public disclosure bar provided that no court shall have “jurisdiction” over an action based upon the public disclosure of allegations “in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media,” unless the relator is an original source of information.
The 2010 Patient Protection and Affordable Care Act (PPACA) amended the Public Disclosure Bar. The term “jurisdiction” was eliminated and now the FCA provides that “the court shall dismiss an action or claim unless opposed by the Government” (emphasis added). Congress revised the language that the action be “based upon” the public disclosures; instead the Public Disclosure Bar applies when the public disclosures are “substantially the same…as alleged in the action.” Congress modified the sources of public disclosures. Public disclosures from a “hearing” are now limited to a “Federal hearing in which the Government or its agent is a party.” Finally, Congress also expanded the scope of reports by adding the broad category “other Federal report.”
In Cox, the defendant, Smith & Nephew disclosed to the federal government that it sold products to the VA and Department of Defense manufactured in Malaysia, China and Thailand without identifying these countries of manufacture; thus, Smith & Nephew failed to comply with the federal procurement law. Smith & Nephew argued that these self-disclosures constituted public disclosures, thereby barring the lawsuit since the relator was admittedly not an original source. The court disagreed with the defendant and Seventh Circuit precedent, and instead found persuasive the First Circuit case, United States ex rel. Rost v. Pfizer, Inc., 507 F.3d 720 (1st Cir. 2007):
[T]he Court agrees with the First Circuit's statement in Rost that allowing disclosure to competent government officials to substitute for disclosure to the public at large would be tantamount to reviving the government knowledge bar Congress removed in 1986. Acceptance of Smith & Nephew's position would also, as stated in Rost, conflate the statute’s use of “government” and “public” without any textual basis indicating that Congress intended the two terms to be used interchangeably. See United States ex rel. Cox v. Smith & Nephew, Inc., 2010 WL 4365467, at *8.