district court disagreed, finding that although the AdvanceMed letters disclosed “suspicious patterns” in the defendants’ billing practices and a “recurring lack of documentation to support those billing practices,” the letters did not actually accuse the defendants of knowingly or intentionally engaging in those practices – which the district court found to be an essential element of the fraud. Because the letters were meant to serve only as “additional education,” the district court found that they did not carry an inference of wrongdoing and thus could not satisfy the requirements of the public disclosure bar. When Is a Relator an Original Source? Even if a relator’s allegations are substantially the same as prior public disclosures, the relator may nevertheless maintain an action if he or she qualifies as an “original source.” An “original source” is a person who either “voluntarily disclosed” the information in
could not show “direct knowledge” of the fraud because his allegations were “speculative” and failed to identify any actual instances of false claims for reimbursement. 148 Similarly, in United States v. Kindred Healthcare, Inc. , the district court held that the relator’s boilerplate allegations of “direct and independent knowledge” were insufficient to satisfy the pleading standard because he failed to explain how he learned of the relevant information. 149 The district court in Cameron- Ehlen Grp., Inc. v. Fesenmaier likewise held that the relator could not claim the benefit of the “original source” exemption where the relator merely elicited the disclosure from another individual. 150 And, the district court in U.S. ex rel. Rigsby v. State Farm Fire & Cas. Co. held
Even if a relator’s knowledge of fraud is direct and independent of a prior disclosure, the relator still does not qualify as an original source if the relator fails to materially add to the prior disclosures.
a complaint prior to any public disclosure or has “knowledge that is independent of and materially adds to” the public disclosures and “voluntarily provided” that information to the government before filing the qui tam complaint. 145 Whether the Relator Pleaded Entitlement to the Original Source Exception Because the public disclosure bar is often raised during the motion to dismiss stage of litigation, multiple courts this year held that it is the relators’ obligation to plead entitlement to the original source exception in their qui tam complaints. For example, in both U.S. ex rel. Zafirov v. Florida Med. Assocs. LLC , 146 and U.S. ex rel. Guzman v. Insys Therapeutics, Inc. , 147 the
An “original source” is a person who either “voluntarily disclosed” the information in a complaint prior to any public disclosure or has “knowledge that is independent of and materially adds to” the public disclosures and “voluntarily provided” that information to the government before filing the qui tam complaint.
that the relators failed to plead “direct and independent knowledge” in their amended complaint because the record indicated that, at the time of their original complaint, the relators were not even aware of the rule they later alleged had been violated. 151 Whether the Relator Materially Adds to Prior Disclosures Even if a relator’s knowledge of fraud is direct and independent of a prior disclosure, the relator still does not qualify as an original source if the relator fails to materially add to the prior disclosures. For example, similar to the Sixth Circuit’s 2020 decision in U.S. ex rel. Maur v. Hage-Korban , the district court in U.S. ex rel. Zafirov v. Florida Med. Assocs. LLC determined that allegations of continuing misconduct, which had been disclosed in a prior FCA case and public settlement were not material additions to those disclosures because the CIA remained in effect with active oversight by the government of the underlying allegations. 152 The relator could not be an “original source” of the alleged fraud because the government was still supervising the defendant’s actions and receiving disclosures. Whether the Disclosure Was Voluntary The “voluntary” requirement of the original source exception has been important in decisions. Courts have consistently held that merely complying with a government investigation is not considered voluntarily disclosing that information to the government for purposes of the public disclosure bar. In Cameron-Ehlen Grp., Inc. v. Fesenmaier , the district court applied this same logic to ongoing litigation. 153 The defendant was the relator in another FCA action alleging that Precision Lens was engaged in an unlawful kickback scheme. After disclosing information
district court dismissed the relators’ complaints without prejudice and with leave to amend because although the relators claimed to be original sources, they did not plead allegations showing they were entitled to this exception to the public disclosure bar. Whether the Relator’s Knowledge Is Direct and Independent Several courts dismissed claims under the public disclosure bar where relators failed to plead sufficient facts demonstrating that their knowledge was “direct and independent” of the public disclosures. In Solis v. Millennium Pharms., Inc. , the Ninth Circuit affirmed the district court’s dismissal under the public disclosure bar, holding that the relator
148 852 F. App’x 298 (9th Cir. 2021). 149 417 F. Supp. 3d 367 (E.D. Pa. 2021). 150 2021 WL 5011375 (D. Minn. Oct. 28, 2021). 151 2021 WL 1170086 (S.D. Miss. Mar. 26, 2021). 152 2021 WL 4443119 (M.D. Fla. Sept. 28, 2021). 153 2021 WL 5011375 (D. Minn. Oct. 28, 2021).
145 31 U.S.C. § 3730(e)(4)(B). 146 2021 WL 4443119 (M.D. Fla. Sept. 28, 2021). 147 2021 WL 4306020 (C.D. Cal. May 19, 2021).
FALSE CLAIMS ACT UPDATE BASS, BERRY & SIMS | 24
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