Savings Program. The Sixth Circuit held that the public disclosure bar applied because the “essential elements” (X&Y) of the allegations were previously disclosed in a press release from the Connecticut Attorney General, which stated that Rite Aid excluded Medicare and Medicaid beneficiaries from its Rx Savings Program; that Connecticut passed a law mandating Rite Aid bill its Medicaid program at the lowest price offered to consumers, including any member discount programs; and that Rite Aid in turn raised its Rx Savings Program prices, but only in Connecticut. Although the relator argued that the press release contained “no suggestion of billing fraud against Rite Aid,” the Sixth Circuit held that the press release and surrounding news coverage placed the essential elements of the fraud “in plain sight.” Multiple courts have held that no magic words of fraud are required to be included in prior public disclosures. In U.S. ex rel. Sanders v. USAA Fed. Sav. Bank , the relators alleged that USAA and Navy Federal were running “affinity programs” in which they shared portions of the real estate brokers’ commissions with their members in violation of the Real Estate Settlement Procedures Act and the Truth in Lending Act. 140 The district court dismissed the claims under the public disclosure bar because USAA and Navy Federal publicly advertised these programs, which were also the subject of numerous news articles spanning several decades, noting: “it matters not that the conduct was not specifically labeled as fraudulent” by the articles discussing those programs. 141 Likewise, in U.S. ex rel. Rigsby v. State Farm Fire & Cas. Co. , the district court concluded that even though the prior public disclosures did not expressly allege fraud, the relators “could have synthesized an inference of fraud from the publicly available information” because the disclosures revealed both that State Farm represented to FEMA it had performed line-by-line estimates for which it requested payment under the normal schedule (X), and that State Farm had in fact performed an expedited claims-handling procedure which was entitled to a lower flat fee adjustment (Y). 142 At least one district court also held that additional interpretive effort of public information by a relator does not change the nature of the disclosure itself. In U.S. ex rel. Sirls v. Kindred Healthcare, Inc. , the district court recognized that the relator expended the additional effort of obtaining an expert to analyze information received through a Freedom of Information Act (FOIA) request in order to craft his allegations. 143 The district court, however, held that because the FOIA request disclosed public information that included all of the essential elements from which the fraud could be inferred, the fact that the relator utilized an expert to review and analyze that information did not change the fact that the essential elements had already been disclosed. Some courts have required more. In U.S. ex rel. Grant v. Zorn , the relator alleged that the defendants were engaged in an improper upcoding scheme. 144 The defendants argued that the relator’s upcoding allegations were barred by the public disclosure bar because the upcoding practices were the subject of two prior letters from AdvanceMed. But, the
NUMBER OF NEW QUI TAM LAWSUITS FILED BY YEAR (FY 2017-2021)
750
681
672
700
648
638
650
589
600
550
2017
2018
2019
2020
2021
What Must Have Been Previously Disclosed? Courts generally agree that to bar future allegations of fraud, a public disclosure must, at minimum, place the government on notice of potential wrongdoing. But, the level of specificity required for a qualifying public disclosure can vary from case to case and court to court. Most courts have adopted the D.C. Circuit’s “Springfield formula,” which mandates that the prior disclosure must contain the false statement or claim (X), along with the true set of facts showing the falsity of the statement or claim (Y), which taken together would reasonably allow the conclusion that fraud has occurred (Z). For example, in U.S. ex rel. Bibby v. Mortgage Investors Corp. , two mortgage brokers alleged that Mortgage Investors Corp. was charging veterans prohibited fees and then falsely bundling those fees with other allowable charges together on a single line of their HUD-1 forms. 138 On appeal, the defendant argued that the fraud was previously disclosed by a consumer protection lawsuit in which one of the defendant’s HUD-1 forms was filed on the docket. The Eleventh Circuit found that the previously-disclosed HUD-1 form only contained the false statement (X), but did not include any information showing how or why the statement was false (Y), and therefore did not lead to an inference of fraud (Z). The Sixth Circuit applied this same formula in U.S. ex rel. Rahimi v. Rite Aid Corp. 139 There, the relator filed suit alleging that Rite Aid misrepresented its U&C price to the government because it did not take into account the discounts offered to customers enrolled in its Rx
140 2021 WL 3513663 (W.D. Va. Aug. 10, 2021). 141
The district court in U.S. ex rel. CKD Project, LLC v. Fresenius Med. Care Holdings, Inc. , 2021 WL 3240280 (E.D.N.Y. July 30, 2021), applied a similar analysis of this formula to a publicly-disclosed SEC filing. 142 2021 WL 1170086 (S.D. Miss. Mar. 26, 2021). 143 517 F. Supp. 3d 367 (E.D. Pa. 2021). 144 2021 WL 4145724 (S.D. Iowa Mar. 8, 2021).
138 987 F.3d 1340 (11th Cir. 2021). 139 3 F.4th 813 (6th Cir. 2021).
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