Signaling an interest in stepping in to resolve long-standing and growing circuit splits on critically important “public disclosure” and Rule 9(b) issues, the Supreme Court has asked the Solicitor General to weigh in on the questions raised in the petition for certiorari in Ortho Biotech Product, L.P. v. United States ex rel. Duxbury, No. 09-654 (U.S.) (Order issued Feb. 22, 2010). If it grants certiorari and decides these issues, the Court’s decision will have a major impact on False Claims Act litigation for years to come. The questions presented in Duxbury are:

  • Whether a federal court lacks subject matter jurisdiction over a qui tam suit that repeats publicly disclosed allegations from prior litigation, where the FCA relator did not provide the government with information on the suit’s allegations before the public disclosure.
  • Whether an FCA relator, alleging that the defendant induced a third party to submit false or fraudulent claims, can satisfy Rule 9(b) without identifying a single false or fraudulent claim, but merely by alleging facts sufficient “to strengthen the inference of fraud beyond possibility.”

These questions are frequently raised in FCA cases and the disparate treatment of these issues means that some FCA cases that would otherwise be dismissed are allowed to proceed at substantial cost to the litigants. The Solicitor General should welcome the opportunity for the Supreme Court to resolve these issues and should urge the Court to grant certiorari on both questions.

The Public Disclosure Question: What Does “Voluntarily Provided” Require?

The Supreme Court addressed the “original source” exception to the public disclosure bar once before in Rockwell International Corp. v. United States, but it expressly declined to determine how or when a relator meets the “voluntarily provided” requirement because the relator in that case did not pass the threshold requirement of having “direct and independent” knowledge. 549 U.S. 457, 476 (2007). See FraudMail Alert No. 07-04-11. In United States ex rel. Duxbury v. Ortho Biotech Products, L.P., 579 F.3d 13 (1st Cir. 2009), the First Circuit found that the relator met both requirements and therefore qualified as an “original source,” despite widespread publicity about the off-label marketing and average wholesale pricing practices at issue, multiple lawsuits against various defendants, and a long-standing government investigation on the allegations. The First Circuit ruled that the relator had satisfied the “voluntarily provided” requirement merely by providing his information to the government prior to filing the complaint, even though he had not provided his information to the government prior to the many documented public disclosures. See FraudMail Alert No. 09-08-19. The First Circuit’s decision is in direct conflict with decisions of the Second, Sixth, Ninth and DC Circuits, all of which have required--in order to deter parasitic lawsuits based on public disclosures--that the relator either provide his information to the government prior to the public disclosure or demonstrate that the relator was the cause of the public disclosure. See, e.g., United States ex rel. Dick v. Long Island Lighting Co., 912 F.2d 13 (2d Cir. 1990); 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. Findley v. FPC-Boron Employees’ Club, 105 F.3d 675 (D.C. Cir. 1997).

Notably, the Justice Department argued vigorously to the First Circuit in Duxbury that the “voluntarily provided” requirement should not be interpreted to allow the unintended result of qualifying relators as an original source after a comprehensive government investigation has been publicly disclosed. Instead, DOJ maintained that the focus of the requirement was on its twin purposes--“alerting the Government to potential fraud and creating incentives for relators to do so at the earliest possible time.” See DOJ’s Amicus Br. at 23 (filed Aug. 28, 2007) (No. 08-1409). The First Circuit’s mechanical interpretation of the requirement is at odds with these purposes and defies common sense. Consistent with DOJ’s position in Duxbury, the Solicitor General should challenge the First Circuit’s interpretation and urge the Court to focus on the purposes of the “voluntarily provided” requirement. While several recent Congressional bills adopt the requirement that the original source must voluntarily disclose the information to the government prior to a public disclosure, the Court could resolve this question now without amending the statute. See H.R. 3590, § 10104(j)(2), 111th Cong. (2009); S. 2964, § 303, 111th Cong. (2010).

The Rule 9(b) Question: Does Pleading a Fraudulent Scheme Suffice?

The second question raised in the Duxbury petition--whether it is always necessary to plead a specific false claim under Rule 9(b) in FCA cases--has also been the subject of a circuit split. The First Circuit’s decision to allow the relator to proceed past the motion to dismiss stage without identifying a false claim in Duxbury, and a similar decision by the Fifth Circuit in United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180 (5th Cir. 2009), conflict with several other circuits that require false claims to be identified in the complaint in order to satisfy Rule 9(b). The First Circuit relaxed Rule 9(b)’s requirement for specificity in Duxbury on the grounds that the allegation was that the defendant caused others to submit false claims. In that circumstance, the First Circuit held that it is sufficient for the relator to plead evidence other than a false claim “to strengthen the inference of fraud beyond possibility.” Duxbury, 579 F.3d at 29 (quoting United States ex rel. Rost v. Pfizer, Inc., 507 F.3d 720, 733 (1st Cir. 2007)). This relaxed standard conflicts with the decisions of several other circuits requiring, at a minimum, that the relator specifically identify representative examples of a false claim in order to satisfy Rule 9(b). See, e.g., United States ex rel. Joshi v. St. Luke’s Hosp., 441 F.3d 552 (8th Cir. 2006); Yuhasz v. Brush Wellman, Inc., 341 F.3d 559 (6th Cir. 2003); United States ex rel. Clausen v. Laboratory Corp. of Am., 290 F.3d 1301 (11th Cir. 2002). It is also at odds with the statutory basis for liability and damages under the False Claims Act, which requires a knowing false claim. Under both Section 3729(a)(1)(B) and Section 3729(a)(1)(A), the key element in the cause of action is the false claim, and the FCA is designed to reward those with knowledge of the fraud, not those seeking to learn about it through discovery. See John T. Boese, Civil False Claims and Qui Tam Actions § 5.04[C] at 5.63 (3d ed. 2006 & Supp. 2010-1) (“Rule 9(b) should prohibit fraud actions in which the facts must be learned through discovery”).