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No Claim Left Behind? Jurisdiction and The Public Disclosure Bar

The article was selected as a Wolters Kluwer Legal Scholar winner and discusses what these decisions will mean.

The False Claims Act (FCA) is a powerful enforcement tool for fraudulent Medicare payments. Under the FCA, any person who submits a false claim for payment by the U.S. government can be liable for three times the amount claimed. One of the few defenses available is the “public disclosure bar” enacted in 1986. Recently, courts have been making the public disclosure bar defense more expansive.

Originally the public disclosure bar was considered a jurisdictional defense. Any claim that fit within the requirements was considered a jurisdictional defect and was dismissed by the court. The law was amended in 2010, removing any reference to “jurisdiction.” After the amendment, the public disclosure bar was still available as a defense, but was no longer a jurisdictional defect. Courts have struggled since the amendment with claims submitted before the 2010 amendment, but which were within qui tam actions brought after.

The Southern District of Florida recently struggled with this very issue in U.S. ex rel. Wilhelm v. Molina Healthcare of Florida, Inc. In Molina, a relator filed a qui tam action in 2012, which contained publicly available information. The defendant, a large health system in Florida, filed a motion to dismiss the claim for lack of jurisdiction. The relator countered that the motion was improper, as the 2010 amendment eliminated the jurisdictional element of the public disclosure bar. The court held the correct way to evaluate this situation is to consider the date the claim was made, not the date the suit was filed. Since the claim in Molina was from before 2010, the court held they lacked jurisdiction to hear the claim unless the relator qualified as an original source.

This amended public disclosure bar can increase litigation costs associated with FCA litigation. When the defense was jurisdictional, it would be dealt with at the outset of litigation through a motion to dismiss. The parties only needed to exchange targeted discovery to determine whether the public disclosure bar was applicable. Now, defendants must wait for a summary judgment motion to determine whether the public disclosure bar applies. This could increase the number of settlements, as the discovery process may be too expensive.

The amended public disclosure bar, however, may be unconstitutional. The language of the amended act states;“[t]he court shall dismiss an action or claim under this section, unless opposed by the government,” if the allegations have been publicly disclosed and the relator is not an original source. The clear language of this statute suggests a defendant can still move to dismiss a case, but the government is able to veto the defense. Some believe this is a violation of the separation of powers giving the executive branch control over the judiciary.

Molina was not the first case to strengthen the public disclosure bar defense. In U.S. ex rel. Heath v. Wisconsin Bell, Inc., the Seventh Circuit Court of Appeals held the public disclosure bar only applies to claims based solely on public information. This means relators who gain use some original information can survive the public disclosure bar.Wisconsin Bell is not the first time the Seventh Circuit has taken an expansive view on the public disclosure bar. This, however, is the minority view. The majority view is that once information has been publicly disclosed, the defense will be triggered.

The public disclosure bar remains a contentious area for FCA litigation. At this point it is unclear whether more courts will adopt the reasoning of the Molina court, create a new rule, or find the amendment unconstitutional. The current circuit split regarding how much information must be public may prompt the Supreme Court to step in as well. At this point, only one thing is clear: litigation over the public disclosure bar is far from over.

Vaughn Bentley is a joint J.D. and LL.M. in Health Law candidate at DePaul University College of Law, and is expected to graduate in May of 2016. Vaughn attended State University of New York, College at Oswego and is the Jaharis Health Law Institute Director of Marketing, Editor-in-Chief the Jaharis Health Law Institute E-Pulse, and has been published in the DePaul Journal of Health Care Law. Vaughn would like to focus his career in governmental and litigation work after graduation.