Eleventh Circuit Says Whistleblower’s Suit Should Never Have Been Heard

By on November 16, 2016

On November 8, 2016, the US Court of Appeals for the Eleventh Circuit issued a decision in U.S. ex rel. Saldivar v. Fresenius Medical Care Holdings, Inc., remanding the case for entry of an order dismissing the case for lack of subject matter jurisdiction based on the False Claims Act’s (FCA) pre-2010 public disclosure bar.

We previously posted about the US District Court for the Northern District of Georgia’s October 30, 2015, decision granting Fresenius’ motion for summary judgment. As a reminder, relator Chester Saldivar alleged that Fresenius violated the FCA by billing the government for the “overfill” in medication vials, which is the extra medication included to facilitate the extraction of the amount labeled on the vial.

Fresenius maintained that the action should be dismissed for lack of subject matter jurisdiction due to the pre-2010 version of the public disclosure bar in the FCA, which prevents qui tam actions if the allegations in question were publicly disclosed and the relator is not an original source. The district court concluded that Saldivar’s allegations of overfill billing were publicly disclosed to the government in communications between Fresenius and the Centers for Medicare and Medicaid Services (CMS) as well as publicly in a complaint in another matter. But, the district court held that Saldivar was an “original source” and not barred from bringing the action because of his experience in managing the inventory of the medication and his discussions with supervisors and coworkers about overfill use and billing.

On the merits of Saldivar’s allegations, the district court then held that Saldivar could not prove that Fresenius knew that billing for overfill was impermissible. On that basis, the district court granted Fresenius’ motion for summary judgment and Saldivar appealed.

On appeal, the Eleventh Circuit focused on whether the court had jurisdiction to hear the case based on the pre-2010 version of the public disclosure bar, a necessary prerequisite to addressing the merits. The court used a three-part inquiry to determine if jurisdiction exists under 31 U.S.C. § 3730(e). For the first prong, the court agreed with the district court that the use and billing of overfill allegations had been publicly disclosed. For the second prong, the court agreed with the district court that that the disclosed information was the basis of Saldivar’s suit. However, for the third prong—whether Saldivar is the “original source” of that information—the Eleventh Circuit disagreed with the district court and held that Saldivar failed to meet the original source requirement.

The “original source” inquiry allows for jurisdiction to exist even when the information has been publicly disclosed. The Eleventh Circuit explained that “[w]hile Saldivar had independent knowledge of the administration of overfill, his knowledge of the critical component—the alleged billing for drugs Fresenius received at no cost—was derived from secondhand sources.” There was no dispute that Saldivar had knowledge that the vials contained the overfill because he was directly responsible for the inventory of the drugs. But, with respect to billing, Saldivar’s knowledge came from secondhand sources—his coworkers. Saldivar was told by his coworkers that his inventory spreadsheets were used for billing purposes. His coworkers also told him about overfill billing practices and alleged corporate policies and reports that rewarded clinics that efficiently used overfill. According to the Eleventh Circuit, Saldivar explained that “he was not in the billing department and thus could not speak to many billing related practices.”

Because the Eleventh Circuit found that the allegations underlying Saldivar’s complaint were publicly disclosed and that Saldivar was not an original source, the court held that it lacked jurisdiction to hear the case. Accordingly, the court did not reach the merits of the motion for summary judgment granted by the district court and remanded the case for entry of an order dismissing the case for lack of subject matter jurisdiction.

It is possible that the outcome of this case may have been different under the post-amendment version of the FCA’s public disclosure bar. Among other things, the amendments expanded the “original source” definition in the statute. Moreover, a number of courts have held that the amended public disclosure bar is no longer jurisdictional. Indeed, the Eleventh Circuit specifically stated that it “did not imply any view about whether the issues would be decided differently under the new version of the statute. . . .”