A relator bringing an action under the civil False Claims Act (FCA) is required to be an “original source” of the allegations. 31 U.S.C. § 3730(e)(4). To qualify as an original source under the statute, the relator must (1) have “direct and independent knowledge” of the information giving rise to the claims and (2) “provide the information to the Government before filing the action.” For the past 23 years, the Ninth Circuit also had a third requirement to qualify as an original source: the relator must have had “a hand in the public disclosure of allegations that are a part of [the] suit.” That third requirement, however, came to an abrupt end on July 7, 2015, when the Ninth Circuit in United States ex rel. Hartpence v. Kinetic Concepts reversed course, ruling that its holding in United States ex rel. Wang v. FMC Corp., 975 F.2d 1412 (9th Cir. 1992) was “wrongly decided” and that only the two requirements specified in the statutory language of the FCA must be satisfied for a relator to qualify as an original source. Plaintiffs’ lawyers throughout the Ninth Circuit are rejoicing.
In Hartpence, a consolidated qui tam case, former employees of Kinetic Concepts, Inc. and KCI USA, Inc. filed complaints alleging that the companies “engaged in fraudulent conduct by submitting claims to Medicare that did not comply with the [Durable Medical Equipment Medicare Administrative Contractors’] local coverage determinations.” A local coverage determination that a claim satisfies the applicable payment criteria is required before the claim can be reimbursed. The defendants filed motions to dismiss the complaints under Rule 12(b)(1) of the Federal Rules of Civil Procedure asserting, among other things, that the “Relators did not qualify as original sources.” The District Court agreed and dismissed the complaints, finding that there had been public disclosures of the relators’ allegations “in the form of a 2007 federal audit report and at least one decision by an Administrative Law Judge.” Because the relators “had not shown that they had a hand in those public disclosures,” they did not qualify as an original source under Wang.
The Ninth Circuit heard the Hartpence appeal en banc to determine whether the holding of Wang was valid. On appeal, the relators argued that the “hand-in-the-public-disclosure rule” is not referenced anywhere in the FCA and that a relator is only required to meet the two requirements specified in the statutory language. The Ninth Circuit eventually agreed and gave the third requirement established in Wang “a respectful burial.” In Wang, the third original source requirement had been “inferred” based on the FCA’s legislative history. The reference to “information” in the phrase “original source of the information” was interpreted in Wang to mean “the information underlying the publicly disclosed allegations that triggered the public disclosure bar, rather than the information which underlay the plaintiff’s complaint.”
In the new Hartpence decision, the Ninth Circuit examined the original source language in the FCA and concluded that it “contains no requirement that the relator have had a hand in the public disclosure of the fraud.” Because the Ninth Circuit found no ambiguity in the statute, there was no need for the court to examine any “extrinsic material” like legislative history. As a result, the court concluded that, to qualify as an original source, a relator need not have played a role publicly disclosing the alleged fraud. The court was not persuaded by the defendants’ argument that eliminating the third original source requirement from Wang was “inconsistent with an overarching goal of the False Claims Act—to encourage private citizens to uncover fraud, not simply to report it.” The court noted that such a goal must be considered by Congress “when enacting the Act, [and is] not for the judiciary” to create such a policy.
The Ninth Circuit’s recent decision in Hartpence will make it far easier for so-called “whistleblowers” to qualify as an original source (especially in the Ninth Circuit, but also in other regions of the country as well, which routinely look to the Ninth Circuit for guidance on these types of issues). As a result of this decision, whether or not the relator had “a hand” in the public disclosure is no longer relevant to the original source analysis in the Ninth Circuit. All that is required now for a relator to qualify as an original source in the Ninth Circuit is direct and independent knowledge of the information on which the allegations are based, and voluntarily providing that information to the government prior to filing suit.