Ninth Circuit Overturns Precedent to Simplify Original Source Exception to Public Disclosure Bar

By on July 8, 2015

Overruling its 23-year precedent, the Ninth Circuit, sitting en banc, held that to avoid dismissal under the False Claims Act’s (FCA) public disclosure bar, relators need not have participated in the public disclosure of alleged fraud to qualify as an “original source.” Although the court’s decision concerned the pre-2010 version of that bar, it is likely that its reasoning will also apply to the post-2010 version, given that the issue before the Ninth Circuit did not turn on the 2010 amendments.

U.S. ex rel. Hartpence v. Kinetic Concepts, Inc. consolidated two FCA complaints brought by former employees against Kinetic Concepts.  The complaints alleged that the company improperly submitted reimbursement claims using an automatic payment modifier code for medical devices that improve wound healing, even though the claims required individual review.  The alleged fraud was already publicly disclosed.  Thus, the FCA’s public disclosure bar precluded the suits unless the relators qualified as original sources of the information.

The pre-2010 FCA statutory language included two requirements for a relator to qualify as an original source: (1) that the relator have direct and independent knowledge of the publicly-disclosed information, and (2) that the relator provide that information to the government before filing suit.  Yet, Ninth Circuit precedent in Wang ex rel. United States v. FMC Corp., 975 F.2d 1412, added a third requirement not apparent on the face of the statute: the relator had to have had a hand in the public disclosure of the alleged fraud.  Based on Wang, the lower court dismissed the complaints against Kinetic Concepts, finding that the relators had not had a hand in the public disclosure.

In overturning Wang, the Ninth Circuit noted that a number of other circuits had declined to adopt Wang’s third prong, including the Fourth and Eighth Circuits.  The Ninth Circuit re-construed the statutory text and found that facially, the original source provision only had two requirements: (1) direct and independent knowledge of the information on which the allegations are based and (2) voluntary provision of the information to the government before filing an action based on the information.  The appellate court remanded the case to determine if the relators were original sources based on the other two prongs found in the FCA text.