In an opinion last week in U.S. ex rel. Hagerty v. Cybertronics, Inc., No. 13–10214–FDS, 2015 WL 1442497 (D. Mass. Mar. 31, 2015), the U.S. District Court for the District of Massachusetts addressed the status of the False Claims Act’s public disclosure bar after the Patient Protection and Affordable Care Act (PPACA).  Specifically, the district court examined whether the bar continues to be jurisdictional, holding that while the prior version of the bar clearly presented a question of subject matter jurisdiction (“[n]o court shall have jurisdiction over an action” based on publicly disclosed allegations), the post-PPACA version “appears to be non-jurisdictional.”

The district court first determined that the First Circuit Court of Appeals has not directly addressed the issue, notwithstanding the First Circuit’s explicit reference to the post-PPACA public disclosure provision as a “jurisdictional bar.”  See U.S. ex rel. Estate of Cunningham v. Millenium Labs. of Cal., Inc., 713 F.3d 662, 669, n.5 (1st Cir. 2013).  The district court was dismissive of the First Circuit’s statement in Cunningham, finding that it was made in a footnote and was “not part of the holding of that case.”

The district court then concluded that the bar is no longer jurisdictional, citing decisions in the Fourth and Eleventh Circuits.  The district court reasoned that the reference to “jurisdiction” has been removed from the statute, which now states that a court “shall dismiss” an action based on publicly-disclosed allegations.  The district court also pointed out that the government can now elect to allow an action to proceed even if it would otherwise be barred.

For FCA defendants, whether or not the current version of the public disclosure bar is jurisdictional shapes the framework for seeking dismissal.  The Hagerty court held that dismissal on public disclosure grounds in the post-PPACA world should be sought based on failure to state a claim under Fed. R. Civ. P. 12(b)(6), which, among other things, generally precludes reliance on matters outside the complaint in a motion to dismiss.  Historically, public disclosure-based dismissals have been sought pursuant to Fed. R. Civ. P. 12(b)(1) (lack of subject matter jurisdiction), which is not similarly limited.

However, even the Hagerty court recognized that items such as news articles that are susceptible to judicial notice can properly be considered in the context of a Rule 12(b)(6) motion to dismiss.  Given that courts are often willing to take judicial notice of matters that are public in nature, the procedural vehicle for seeking dismissal ultimately may not matter all that much.  Indeed, while the Hagerty court concluded that the public disclosure bar did not bar the relator’s FCA claims, the jurisdictional issue had no real bearing on that outcome, which was driven by the court’s comparison of the substantive content of the prior disclosure to the allegations in the complaint before the court.

Despite holding that the relator’s claims were not precluded by the public disclosure bar, the district court nonetheless dismissed the relator’s FCA claims for failure to plead fraud with particularity in a discussion [...]

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