Congress has again amended the False Claims Act (FCA) to expand opportunities for whistleblowers to bring suits going forward, just a few days before the Supreme Court published a decision limiting the bases for whistleblowers' suits under the old act. As a result of the amendment, whistleblowers (or "qui tam relators") now will be able to bring more suits based on secondhand information or allegations that had already been partially publicly disclosed, and the Government will have greater control over whether courts dismiss whistleblowers from lawsuits.
The new language, part of the Patient Protection and Affordable Care Act, likely will lead to more qui tam suits against Government contractors and regulated industries and greater involvement in litigation by whistleblowers—even when they may not have direct knowledge of the allegations or when similar information was already publicly disclosed. Meanwhile, the Supreme Court decision, which prevented whistleblowers from bringing fraud claims based on information disclosed through state and local administrative reports, will affect pending cases, but be effectively moot for new cases as a result of the amendment.
Both the Congressional amendment and the Supreme Court case involve the language of the public disclosure bar, 31 U.S.C. § 3730(e)(4), a provision of the FCA that prevents whistleblowers from bringing FCA suits based on publicly disclosed information, unless the relator was an "original source" of the information. While the public disclosure bar still remains part of the FCA, Congress has made several key changes:
- No longer must courts dismiss a claim that is "based upon" publicly disclosed allegations or transactions. Now, the act only prohibits whistleblower suits that contain "substantially the same allegations or transactions" as were publicly disclosed.
- Public disclosure is no longer an issue of jurisdiction for courts. The old language required courts to dismiss relators that failed the public disclosure bar. Now, if the Government opposes dismissing a relator in such a situation, the relator may continue to participate in the case. The amended language provides no criteria on which the Government must base its decision—leaving the participation of such a relator entirely within the discretion of the Government.
- Even if information has been publicly disclosed, a whistleblower can now qualify as an "original source" (and therefore continue with the suit) if the whistleblower has "independent" knowledge that "materially adds to" the publicly disclosed allegations or transactions. Previously, the relator needed "direct and independent knowledge" of the alleged fraud. With "direct" knowledge no longer a requirement, relators with secondhand information may be able to bring claims under the FCA as long as they have learned of it through a source independent of the public disclosure.
- Alternatively, a whistleblower can qualify as an "original source" merely by voluntarily disclosing the information to the Government before the public disclosure occurs. The old act required direct and independent knowledge of the allegations regardless of when the public disclosure occurred.
- Relators can now bring actions that are based on—or even identical to—information disclosed in state or local cases, investigations, audits, or hearings. Allegations or transactions revealed in civil suits in which the Government or its agent is not a party (even those in federal court) can also be a basis for a relator to bring an FCA suit under the amended act. The amendment makes clear that only disclosures in certain federal domains or in the news media qualify as "public disclosures" under the FCA.
The last of these changes was the subject of a Supreme Court decision earlier this week. The previous version of the statute did not specify whether allegations or information revealed in state or local proceedings constituted "public disclosures" under the FCA. In Graham County Soil and Water Conservation District v. United States ex rel. Wilson , a whistleblower sued based on information that was already disclosed in a state agency's administrative report. The Supreme Court ruled that disclosures made in a state or local report, audit, or investigation may trigger the public disclosure bar.
The decision's scope was limited from the moment it was handed down, though, by Congress's amendment, which passed just days earlier. While the Graham County decision applied to qui tam cases filed before the amendment, the amended language will govern any suits going forward.
This amendment to the FCA is also the latest development in a trend by Congress to loosen the strictures on whistleblower suits, give prosecutors greater power to investigate fraud allegations, and limit defenses by prospective defendants. Congress made significant changes to the FCA last year accomplishing many of these goals. Just last week, the Department of Justice implemented regulations authorizing United States Attorneys to issue civil investigative demands before deciding whether to intervene in whistleblower actions. In response to these changes, those doing business with the government will have fewer available options for defeating whistleblower claims, are likely to see more such actions filed and will need to be prepared for potentially aggressive investigations and litigation.