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Ninth Circuit Decision Makes it Easier for Whistleblowers to Bring Qui Tam Actions

In a new, important development for how False Claims Act cases will proceed, the U.S. Ninth Circuit Court of Appeals overturned precedent that had limited whistleblowers’ ability to recover money reimbursed to the federal government under the FCA to a more significant extent than a large number of other circuits. The ruling came in the case of United States ex rel. Hartpence v. Kinetic Concepts, Inc.

The FCA generally does not allow people to knowingly submit fraudulent or otherwise false claims to the federal government for payment. Private parties (referred to in the legal world as “relators”) are allowed to file civil suits called “qui tam actions” under the FCA on behalf of the U.S. government against any entities that are believed to have submitted fraudulent claims to the government for payment. If the government does not intervene in the suit, the relator could be paid between 25 and 30 percent of any money recovered.

However, the FCA does not allow federal courts jurisdiction over some qui tam actions because of the “public disclosure” barrier to recovery. What this means is that if the fraud has been publicly disclosed, federal courts do not have jurisdiction over FCA claims unless the relator in the case is an original source of the information. This can present of complexities, as the definition for the terms “information” and “original source” may vary. The Ninth Circuit used to use a three-part test to determine if a relator was an original source of the information.

In this case, the relators were Hartpence and Godecke, who allegedly uncovered information that Kinetic Concepts, Inc. (their employer) had knowingly submitted fraudulent Medicare claims by purposefully misusing a billing code. Before they filed the complaints, however, the fraud was publicly disclosed by KCI in a federal audit report — and so a district court ruled Hartpence and Godecke were not original sources because they could not prove they played a role in the information being publicly disclosed.

The Ninth Circuit, for its part, ruled the district court was mistaken, stating that other circuits have opted to not use the “having a hand in the public disclosure” requirement. Thus, whistleblowers acting as relators have a greater ability to recover funds when they report wrongdoing.

For more information on how this decision could affect a case, consult respected Dallas Attorney Steve Kardell with Whistleblower Law for Managers.

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