On November 6, 2020, U.S. District Judge Lucy H. Koh granted defendants’ motions to dismiss a False Claims Act (“FCA”) lawsuit based, in part, on the public disclosure bar, holding that the information available and acquired through a Freedom of Information Act (“FOIA”) report cannot be a basis for an FCA action.  The case is captioned United States ex rel. Jones v. Sutter Health, No. 18-CV-02067-LHK, 2020 WL 6544412 (N.D. Cal. Nov. 6, 2020).

The FCA contains a “qui tam” provision, which allows private citizens to act on behalf of the government and sue parties who defraud the government.  These private citizens are known as relators or informally called “whistleblowers.”  Generally, unless a relator is an original source (as defined by 31 U.S.C. § 3730(e)(4)), the relator is prohibited from bringing an FCA lawsuit based on a fraud disclosed through certain public channels. Specifically, “[t]he court shall dismiss” a qui tam action “if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed” in any of several sources.  Id.; 31 U.S.C. § 3730(e)(4)(A).  

Courts must decide whether the allegations serving as the basis of the FCA lawsuit were previously disclosed and, if so, whether the relator meets the “original source” definition.  In 2011, the U.S. Supreme Court held that FOIA reports fall within the public disclosure bar prohibition.  Schindler Elevator Corp. v. U.S. ex rel. Kirk, 563 U.S. 401, 404 (2011).  The Supreme Court noted that the public disclosure bar discourages opportunistic litigation, explaining that “[a]nyone could identify a few regulatory filing and certification requirements, submit FOIA requests until he discovers a federal contractor who is out of compliance, and potentially reap a windfall in a qui tam action under the FCA.” Id. at 414.

In Sutter Health, the Court cited the public disclosure bar provisions and noted that “[o]ne source covered by the public disclosure bar is a federal report” and that a FOIA report constitutes a “report” within the meaning of the public disclosure bar.  Since the relator in Sutter Health also used a FOIA report, which contained the material elements of the alleged fraudulent transaction, the Court noted that the Supreme Court’s Shingler Elevator opinion controls.  Based on the information in the FOIA report, the relator’s evidence and information were possessed by the government when the FCA suit was brought, and the government had sufficient information to enable it to investigate the case and to decide whether to prosecute.  The relator’s suit based on a FOIA report was “a paradigmatic example of a suit foreclosed by the public disclosure bar,” according to the Court. 

To maintain the suit, the Sutter Health relator had to fall within the “original source” definition.  A relator may be considered an original source if the relator (1) has voluntarily disclosed to the Government the information on which allegations or transactions in a claim are based, or (2) has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions, and who has voluntarily informed the Government before suing.  31 U.S.C. § 3730(e)(4)(B).  According to the Sutter Health Court (citing various jurisdictions), the relator had to overcome the “meaningful hurdle” and “rigorous” thresholds for satisfying materiality to be considered an original source.  Based on the information presented by the relator, the Court determined that the relator did not have “knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions,” and was not an original source. 

The attorneys at Chilivis Grubman represent clients of all types and sizes in connection with False Claims Act investigations and qui tam litigation.  If you need assistance with such a matter, please contact us today.