District Court Opinion Analyzes the Impact of the 2010 FCA Amendments on the Public Disclosure Bar

By on October 11, 2016

On September 30, 2016, the US District Court for the Southern District of Indiana issued an opinion in United States ex rel. Conroy v. Select Medical Corp., et al. (Case No. 12-cv-000051) regarding the 2010 False Claims Act (FCA) Amendments to the public disclosure bar (31 U.S.C. § 3730(e)(4)(A)) and the government’s associated right to veto  a public disclosure-based dismissal.

The opinion addresses a motion to dismiss a non-intervened FCA suit based on several grounds, including the public disclosure bar.  Complicating matters was that the allegations involved claims that arose both prior to and after March 23, 2010 – the effective date of the amendments to the public disclosure bar.  In addition, the government, despite not intervening with respect to the FCA claims, filed its own brief opposing a public disclosure bar-based dismissal. 

The court’s opinion delves into three significant changes made to the public disclosure bar in 2010: (1) removal of express jurisdictional language; (2) addition of a so-called “government veto” power, allowing the government the ability to prevent dismissal of an FCA suit on public disclosure grounds; (3) revision of the definition of an “original source.”

First, the court addressed the removal of express jurisdictional language, namely the replacement of the phrase “[n]o court shall have jurisdiction” with “[t]he court shall dismiss”.  , The court held that the public disclosure bar as amended in 2010 does not provide a jurisdictional basis for dismissal under Federal Rule of Civil Procedure 12(b)(1).  Rather, post-amendment qui tam defendants must move for dismissal on public disclosure grounds under Rule 12(b)(6).

Second, the court turned to the “government veto” power.  The 2010 amendments adopted statutory language that states that courts “shall dismiss an action or claim under this section, unless opposed by the Government . . .”  The court rejected the defendants’ argument that this power was unconstitutional, holding that the amendments did not pose any separation of powers, non-delegation or due process concerns.  The court further rejected the defendants’ argument that the amended statutory language left dismissal discretionary when opposed by the government, holding unequivocally that the amended public disclosure statute requires that “courts must dismiss qui tam claims based on public information, unless the government objects or the relator qualifies as an original source.”

Finally, as to the definition of “original source,” the court noted that the pre-2010 definition of this term (“an individual who has direct and independent knowledge of the information on which the allegations are based and has voluntarily provided the information to the Government before filing an action under this section which is based on the information”) had proven “difficult to apply in the courts.”  In 2010 this definition was replaced with the following language: “an individual who . . . prior to a public disclosure [under 31 U.S.C. § 3730 (e)(4)(a)], has voluntarily disclosed to the Government the information on which allegations or transactions in a claim are based, or . . . who has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions, and who has voluntarily provided the information to the Government before filing an action under this section.”  The court noted that this revised definition has not, to date, altered the approach of courts in the Seventh Circuit, which continue to apply the following three-step inquiry to determine if the public disclosure bar is applicable: (1) whether the allegations have been “publicly disclosed’ through one of the enumerated channels; (2) if so, whether the action is “based upon” the publicly disclosed information; and, (3) if it is, the court must dismiss unless the relator qualifies as an “original source.”  As was the case before the revisions, relators bear the burden of proof on this inquiry.

Turning to the case at hand, the court first addressed claims based on conduct that occurred under the pre-amendment version of the FCA.  In particular, the court held that the relator’s allegations were “substantially similar” to allegations disclosed in a New York Times article and an earlier suit in Ohio, and that the relator’s information did not materially add to the pre-existing public disclosures.  Given the pre-amendment timing of the conduct at issue in these claims, they were dismissed pursuant to the pre-March 23, 2010 statute on subject matter jurisdiction grounds under Rule 12(b)(1).  The government’s opposition to dismissal had no impact on these claims, as the “government veto” language did not exist prior to the 2010 FCA amendment.  As to post-amendment conduct, the court found that the government’s opposition to dismissal controlled and denied the motion to dismiss on public disclosure grounds with respect to conduct occurring on or after March 23, 2010.

This case is among a series of decisions that have grappled with the impact of the 2010 changes to the public disclosure bar, and we can expect to see it cited by relators as well as the government in seeking to oppose a public disclosure-based dismissal of a qui tam suit.

Emre N. Ilter
Emre N. Ilter focuses his practice on complex commercial and antitrust litigation. Emre frequently represents clients involved in antitrust price fixing and conspiracy class action litigation. He also has experience representing clients in domestic and international arbitration disputes, qui tam actions, congressional and grand jury inquiries, and mass tort litigation. In addition, Emre regularly represents clients in responding to investigative and third-party subpoenas. Read Emre N. Ilter's full bio.