Some of the most contentious matters of statutory interpretation that arise under the False Claims Act relate to the FCA’s “public disclosure bar.” This provision, which remains in place following the recent FCA amendments, determines the fate of many qui tam relators and the defendants they sue. It has been the source of numerous circuit court splits, one of which will be decided by the Supreme Court in the next term. See FraudMail Alert No. 09-06-22, Supreme Court Agrees to Hear the Question of Whether Administrative Reports Issued by State and Local Governments Qualify as “Public Disclosures.”

In United States ex rel. Duxbury v. Ortho Biotech Products, LP, No. 08-1409, 2009 WL 2450716 (1st Cir. Aug. 12, 2009), the First Circuit recently interpreted the “voluntarily provided” requirement in section 3730(e)(4)(B)—a requirement that must be met in order to establish a relator as an “original source” when allegations in a qui tam suit have been publicly disclosed. To prove original source status, relators must “voluntarily provide” the information on which the qui tam complaint is based to the government before filing their complaint.

In Duxbury, the First Circuit expressly joined the Fourth Circuit (and implicitly joined the Eighth Circuit as well) in holding that the “voluntarily provided” requirement means that an original source must merely disclose the information some time (even just a day) prior to filing suit. As is explained below, the Second, Sixth, Ninth and DC Circuits have interpreted the statute to require more from a relator when the allegations are already in the public domain and thus subject to abuse by a parasitic relator. The Duxbury court’s interpretation was based primarily on what it viewed as a plain reading of the statutory language, and the court rejected arguments made by the defendant and the Justice Department in favor of an interpretation which would have followed the plain meaning of the statute but also would have considered the purpose of requiring prior disclosure and thus prevented many parasitic suits. The First Circuit recognized that its interpretation was broad enough to allow relators to recover under parasitic qui tam suits that are based on publicly disclosed allegations, but held that its interpretation followed from the plain language of the statute and did not conflict with the intent of Congress as reflected in the history and structure of the FCA. The First Circuit was wrong on both counts.

Brief Summary of the Complex Procedural Background in Duxbury

The interpretive issue in Duxbury arose in a complicated procedural setting involving qui tam complaints filed by three different relators in two different qui tam suits against the defendant, Ortho Biotech, a distributer and promoter of the drug, Procrit. The qui tam allegations in these complaints included allegedly fraudulent average wholesale pricing (“AWP”), kickbacks, and improper off-label promotion allegations. Before the three complaints were filed against Ortho Biotech, allegations of industry-wide AWP fraud were publicly disclosed in multi-district litigation before the District of Massachusetts. The First Circuit in Duxbury addressed the meaning of the “voluntarily provided” requirement in determining whether one of the three relators who worked as an employee of Ortho Biotech qualified as an original source of the AWP allegations. As detailed below, the appellate court agreed with the district court that, despite the public disclosure of the AWP allegations in the multi-district litigation, the relator met the “voluntarily provided” requirement under the plain meaning of the statutory language. It also affirmed the district court’s decision that the relator’s off-label marketing claims were barred by a prior pending complaint, but it reversed the lower court’s dismissal of the relator’s claims for lack of specificity under Rule 9(b).

The First Circuit’s Analysis of the “Voluntarily Provided” Requirement

The First Circuit noted that both the DC and Sixth Circuits held that an “original source” must provide the government with the required information prior to any public disclosure, and that the Second and Ninth Circuits required the original source to be the cause of the public disclosure. See United States ex rel. Findley v. FPC-Boron Employees’ Club, 105 F.3d 675 (D.C. Cir. 1997); United States ex rel. McKenzie v. BellSouth Telecomms., Inc., 123 F.3d 935 (6th Cir. 1997); United States ex rel. Wang v. FMC Corp., 975 F.2d 1412 (9th Cir. 1992); United States ex rel. Dick v. Long Island Lighting Co., 912 F.2d 13 (2d Cir. 1990). See also United States ex rel. Zaretsky v. Johnson Controls, Inc., 457 F.3d 1009 (9th Cir. 2006) (finding that the D.C. Circuit's requirement in Findley was contrary to the purposes of the FCA because it precluded qui tam actions that were not parasitic). The First Circuit declined to adopt these approaches in favor of an interpretation that it believed relied upon a reading of the plain language of the original source provision. See Duxbury, 2009 WL 2450716, at *7 (citing United States ex rel. Siller v. Becton Dickinson & Co., 21 F.3d 1339 (4th Cir. 1994)). See also Minnesota Ass’n of Nurse Anesthetists v. Allina Health Sys. Corp., 276 F.3d 1032 (8th Cir. 2002). Unfortunately, this approach ignores the common sense reason the “voluntarily provided” requirement was imposed—namely, to allow the government to act on the information as quickly as possible.

Under its interpretation of language in section 3730(e)(4)(B) requiring the relator to “voluntarily provide[] the information to the Government before filing an action,” the court recognized that, as long as a relator had direct and independent knowledge of the fraud and brought the information to the government one day before filing, a parasitic suit based on publicly disclosed information would be allowed. It found, however, that the original source exception contained no other timing requirement. The court declined to construe “original source” according to its ordinary meaning, as the Justice Department argued it should, based on the finding that, in providing a specific definition of “original source” in section 3730(e)(4)(B), Congress intended the statutory definition to be applied.

The court rejected the government’s argument that the plain language interpretation should not be followed because it leads to the unintended result of permitting relators to qualify as an original source after various public disclosures about a longstanding government investigation. The court’s response was that, under the approach adopted by the DC and Sixth Circuits, some possibly productive qui tam suits could also be barred. It reasoned that the original source exception was enacted to provide a balance between encouraging qui tam suits by true whistleblowers—such as the state relator in United States ex rel. Wisconsin v. Dean, 729 F.2d 1100 (7th Cir. 1984), that was dismissed under the previous “government knowledge” bar—and preventing parasitic suits, and it agreed with the Fourth Circuit that courts should not read requirements into the statute without textual support:

It strikes us as especially inappropriate (not to mention frighteningly treacherous) to attempt, as these courts have done, to distill from such broad, generalized objectives, the answers to the kind of specific statutory questions that we herein address; fine calibrations are just not possible through the use of such crude instruments. This is particularly so in this context, given that, although we can perhaps divine from these abstract purposes a congressional intention to balance the need to encourage qui tam actions against the need to prevent parastic suits, we can discern virtually nothing as to precisely how Congress ultimately believed it achieved that balance. If the language of law is to have any meaning at all, then surely it must prevail over the kind of speculation that is entailed in such an enterprise as these courts have undertaken.

Duxbury, 2009 WL 2450716, at *13 (quoting Siller, 21 F.3d at 1354-55). The problem with the First Circuit's approach, however, is that the requirement for "prior disclosure" already exists, and the question is whether that requirement is merely mechanical and technical or has real meaning and purpose. The court's interpretation robs the statutory language of any real meaning in favor of a technical requirement. If this provision was not an important jurisdictional requirement designed to keep a parasitic relator from obtaining public money, perhaps the court's interpretation could be accepted. As it is, however, this interpretation will result in more frivolous qui tam cases proceeding to discovery and more public funds given to relators who have added little or nothing to the investigation.

Pending Amendments to the FCA’s Public Disclosure Bar

While the FCA amendments in the Fraud Enforcement and Recovery Act of 2009 (“FERA”) did not change any of the requirements in the FCA’s public disclosure bar and original source exception, two pending bills would radically alter these provisions. See S. 458, 111th Cong. (2009); H.R. 1788, 111th Cong. (2009). See also FraudMail Alert No. 09-05-21, The False Claims Act is Amended for the First Time in More Than Twenty Years as the President Signs the Fraud Enforcement and Recovery Act of 2009. Amendments to the public disclosure bar in these pending bills would preclude defendants from moving to dismiss parasitic qui tam relators, claims, and suits, and would allow only the Attorney General to move to dismiss them under very narrow circumstances. While the qui tam relators’ bar is likely to applaud the First Circuit’s decision in Duxbury, they are still pursuing legislative changes to further eviscerate the public disclosure bar.