In a recently published decision favorable to False Claims Act (FCA) defendants, a federal district court dismissed FCA claims asserted against Pennsylvania-based Guthrie Healthcare System, Inc. (Guthrie) and other co-defendants.  One of the bases for the district court’s ruling was that certain information in plaintiff/relator’s FCA qui tam action had already been made public in other lawsuits in which Guthrie and/or the co-defendants had been involved.  This, the district court judge wrote, barred plaintiff’s FCA lawsuit.

The case, United States ex. rel. Rodney Repko v. Guthrie Clinic, P.C., et al., No: 304-cv-1556, involved allegations by Guthrie’s former general counsel that Guthrie and the co-defendants had defrauded Medicare and Medicaid by setting up a scheme whereby clinics operating under one of Guthrie’s arms were illegally paid by Guthrie to refer patients to its hospitals, thereby violating the Stark Law and Anti-Kickback Statute.  Notably, around the time plaintiff filed his complaint in the Guthrie matter, he had recently been arrested on federal financial charges and entered into a plea agreement under which he agreed to provide information on the alleged criminal activities of Guthrie and the other defendants.  Some of this information included the claimed FCA violations by Guthrie.

Before District Judge James Munley were defendants’ motions to dismiss for lack of subject matter jurisdiction and for summary judgment, and plaintiff’s motion for summary judgment.  With respect to the issue of subject matter jurisdiction, the district court examined whether the FCA’s jurisdictional bar provision had been triggered.  That provision, 31 U.S.C. § 3730(e)(4)(A), prohibits courts from exercising jurisdiction over an FCA action “if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed” in certain other proceedings or “from the news media.”

Citing United States ex. rel. Paranich v. Sorgnard, 396 F.3d 326 (3d Cir. 2005), the district court noted that the threshold for whether information is deemed “public” is whether it “would have been equally available to strangers to the fraud transactions had they chosen to look for it as it was to the relator.”  The jurisdictional bar, then, effectively boils down to a two-prong test:  (1) whether the information was publicly disclosed via one of the sources set out in the statute (e.g., a federal criminal, civil, or administrative hearing in which the government or its agent is a party); and (2) whether the relator’s complaint is based on such information.

With respect to plaintiff’s Stark Law and Anti-Kickback Statute allegations, defendants asserted that the information on which they were based—in particular, information regarding the alleged illegal financial transactions between defendants—was previously disclosed in prior litigation and on certain internet websites.  The litigation at issue included a dispute over exemptions from Pennsylvania real estate taxes and a case filed in the Orphans’ Court of Bradford County, Pennsylvania.  Plaintiff, however, contended that this information was not “publicly” disclosed within the statute’s meaning.  Further, plaintiff argued, the financial transactions at issue could not lead to an inference of fraud because the fraud at issue did not simply involve the financial transactions themselves—they dealt, rather, with defendants’ certifications that failed to acknowledge the illegal transactions (i.e., the purported false claims).

The district court agreed with defendants, finding that, among other things, the information dealing with the financial and referral relationships between defendants had been publicly disclosed in accordance with the FCA’s meaning because it could have permitted an “outsider to make an inference of fraud.”  The district court further found that plaintiff’s claims were based on this publicly disclosed information because plaintiff’s allegations of improper financial relationships between the defendants were “substantially similar” to the publicly disclosed information at issue.  Accordingly, the district court granted defendants’ motion to dismiss for lack of subject matter jurisdiction.

A copy of United States ex. rel. Rodney Repko v. Guthrie Clinic, P.C., et al., No: 304-cv-1556 may be found here.