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How does the public disclosure bar work in False Claims Act cases?

How the Public Disclosure Bar Works in False Claims Act Cases

The public disclosure bar is an important part of the False Claims Act (FCA) that prevents “parasitic” lawsuits where someone files a qui tam case based on allegations of fraud that have already been publicly disclosed. The goal is to encourage people to bring new information about fraud against the government while preventing people from profiting from information that is already publicly known.

Specifically, 31 U.S. Code § 3730 states that a court does not have jurisdiction over an FCA lawsuit if the allegations or transactions in the suit have been publicly disclosed in certain ways, unless the person bringing the suit is an “original source” of the information.

What Counts as a Public Disclosure?

There are several ways that allegations can be considered publicly disclosed under the law:

• In a criminal, civil, or administrative hearing
• In a congressional, Government Accountability Office, or other federal report, hearing, audit or investigation
• From the news media

So essentially, if evidence of the alleged fraud has already come out through official proceedings or has been reported in the news, then it is considered a public disclosure.

When Does the Public Disclosure Bar Apply?

There is a three-part test courts use to decide if a False Claims Act case is barred under the public disclosure provision:

1. Has there been a public disclosure of the allegations or transactions?
2. Is the qui tam action based on those publicly disclosed allegations or transactions?
3. If yes to both, is the relator/qui tam plaintiff an original source of the information?

All three prongs must be met for the public disclosure bar to apply. So even if the allegations have been publicly disclosed, the case can still move forward if the relator is an original source of the information.

What is an Original Source?

An original source is someone who:

• Has direct and independent knowledge of the information on which the allegations are based
• Has voluntarily provided the information to the Government before filing the lawsuit

So essentially the relator must have learned about the fraud on their own, not from the public disclosures, and must have brought the information to the government first before filing the qui tam case.

Examples Where Public Disclosure Bar Was Found to Apply

There have been several FCA cases where courts have applied the public disclosure bar:

• In U.S. ex rel. Fine v. Chevron, allegations about Chevron’s oil procurement practices were found to have been publicly disclosed in prior lawsuits. So the relator’s case was barred.
• In U.S. ex rel. Paranich v. Sorgnard, allegations about Medicare fraud had appeared in earlier news reports and lawsuits. So the relator’s case was prohibited under the public disclosure bar.
• In U.S. ex rel. Jamison v. McKesson Corp., claims about McKesson’s drug pricing practices had been publicly disclosed in earlier lawsuits. So Jamison’s case was blocked even though he claimed to have inside information.

Defeating the Public Disclosure Bar as an Original Source

Even where there have been public disclosures, relators can sometimes pursue False Claims Act cases by showing they are an original source of the information. For example:

• In U.S. ex rel. Springfield Terminal Railway Co. v. Quinn, the relator brought extensive first-hand knowledge of fraud schemes that had not been publicly revealed previously. So even though some elements were disclosed, the relator qualified as an original source.
• In U.S. ex rel. Fine v. Advanced Sciences, Inc., the relator provided enough specific, first-hand details of the alleged fraud to overcome the public disclosure bar as an original source, even though the basic allegation was publicly known.

Pros and Cons of the Public Disclosure Bar

There are good arguments on both sides of the public disclosure bar:

Pros:

• Prevents parasitic lawsuits that don’t contribute new information
• Encourages people to bring new, valuable fraud allegations to light in order to qualify as relator
• Upholds spirit of False Claims Act to uncover new frauds against government

Cons:

• May block some valid cases where relator has useful inside information to support case
• Relies on courts to decide what counts as “substantially similar” to public disclosures
• May prevent cases where publicly disclosed information was not widely recognized as fraud previously

So in essence, the public disclosure bar tries to balance preventing parasitic lawsuits against encouraging people with genuinely valuable new information to come forward.

Key Takeaways

• The public disclosure bar blocks False Claims Act lawsuits based on fraud allegations that have already been publicly disclosed, unless the relator qualifies as an original source.
• Both prongs – public disclosure and not being an original source – must apply for the case to be barred.
• An original source is someone with direct, first-hand knowledge who informs the government about the fraud before filing suit.
• The public disclosure bar attempts to achieve the goals of preventing parasitic lawsuits while encouraging genuine whistleblowers.

So in summary, the public disclosure bar tries to weed out “copycat” qui tam cases based purely on publicly available information, while providing an exception for true insiders bringing valuable first-hand knowledge of fraud against the government.

Sources:

• 31 U.S. Code § 3730
• the public disclosure bar to qui tam actions under
• Public Disclosure Bar for False Claims Act Lawsuits
• The public disclosure bar of former subdivision (d)(3)(A)