Carol Glaser v. Wound Care Consultants, Inc.

In the

United States Court of Appeals
For the Seventh Circuit

No. 07-4036

C AROL A. G LASER,
Plaintiff-Appellant,
v.

W OUND C ARE C ONSULTANTS, INCORPORATED ,
M ELISSA E. M ILLER, and D R. S TEVEN M ILLER,

Defendants-Appellees.

Appeal from the United States District Court
for the Southern District of Indiana, Indianapolis Division.
No. 05 C 573—Larry J. McKinney, Judge.

A RGUED A PRIL 15, 2008—D ECIDED JULY 2, 2009

Before C UDAHY, K ANNE, and SYKES, Circuit Judges.
S YKES, Circuit Judge. Carol Glaser received medical
treatment from Wound Care Consultants and was later
contacted by an attorney who told her that Wound Care
might have improperly billed Medicaid for her treat-
ment. She filed this qui tam action under the False Claims
Act (“FCA”), 31 U.S.C. § 3730, seeking recovery as a
relator for money the government paid as a result of
2 No. 07-4036

alleged false or fraudulent Medicare and Medicaid
claims submitted by Wound Care. But the government
was already aware of the possible improprieties in
Wound Care’s billing practices and had commenced an
investigation more than four months before Glaser
filed her lawsuit. Accordingly, the district court dis-
missed Glaser’s complaint for lack of subject-matter
jurisdiction under 31 U.S.C. § 3730(e)(4), which blocks
jurisdiction if the FCA action is “based upon” a “public
disclosure” of the alleged fraudulent conduct “unless . . .
the person bringing the action is an original source of
the information.” Glaser appealed.
The threshold jurisdictional question in this case
requires us to determine whether Glaser’s lawsuit is
“based upon” a “public disclosure” of Wound Care’s
alleged fraudulent billing practices. We take this opportu-
nity to revisit our prior interpretation of the phrase
“based upon” in § 3730(e)(4)(A). In United States v. Bank
of Farmington, we held that an FCA lawsuit is “based
upon” a public disclosure and therefore subject to the
jurisdictional bar of § 3730(e)(4) when the lawsuit “de-
pends essentially upon publicly disclosed information
and is actually derived from such information.” 166
F.3d 853, 864 (7th Cir. 1999). Although we reaffirmed
the Bank of Farmington holding in United States ex rel.
Fowler v. Caremark RX, L.L.C., we acknowledged that it is
the minority interpretation. 496 F.3d 730, 738 (7th Cir.
2007). To date, eight other circuits have read the
phrase “based upon” in § 3730(e)(4)(A) more broadly,
holding that an FCA lawsuit is “based upon” a public
disclosure when the relator’s complaint describes allega-
No. 07-4036 3

tions or transactions that are substantially similar to
those already in the public domain.
We now conclude that the majority interpretation of
the phrase “based upon” in the FCA’s jurisdictional
bar—which we acknowledged in Caremark was sup-
ported by “powerful arguments,” 496 F.3d at 738—is the
better one. The approach we adopted in Bank of
Farmington is problematic because it essentially
eliminates the “original source” exception to the public-
disclosure bar and therefore upsets the balance struck in
§ 3730(e)(4) between two competing policy goals:
blocking opportunistic lawsuits filed by plaintiffs
seeking to capitalize on information already in the
public domain and encouraging lawsuits by relators
who have firsthand knowledge of fraud against the
government.
When an FCA relator’s allegations are substantially
similar to information about an alleged fraud that is
already publicly disclosed, the statute permits the
relator to avoid the jurisdictional bar only if he has
“direct and independent knowledge of the information
on which the allegations are based” and “voluntarily
provided the information to the Government before
filing” a qui tam action. 31 U.S.C. § 3730(e)(4)(B). Yet under
Bank of Farmington’s understanding of when an FCA
lawsuit is “based upon” publicly disclosed information,
the original-source exception serves no purpose. That is,
if the jurisdictional bar kicks in only if the allegations
in the relator’s lawsuit are actually derived from a public
disclosure, there is no point in asking whether
4 No. 07-4036

the relator was an original source of the informa-
tion—he cannot be. Under our present approach, the entire
original-source inquiry—asking whether the relator
had “direct and independent knowledge” of the informa-
tion and “voluntarily provided” it to the government—is
superfluous. Accordingly, we overrule the interpretation
adopted in Bank of Farmington and Caremark and hold
that an FCA relator’s complaint is “based upon” publicly
disclosed allegations or transactions when the allega-
tions in the relator’s complaint are substantially similar
to allegations already in the public domain.1
Applying this standard to Glaser’s case, we affirm the
district court’s application of the jurisdictional bar. Allega-
tions that Wound Care was improperly billing Medicare
and Medicaid for services performed by physician’s
assistants were publicly disclosed in early 2005 when
the government notified Wound Care that it was investi-
gating these billing practices. Glaser’s complaint is
based on this publicly disclosed information in that her
allegations of fraudulent billing are substantially similar
to those the government had already lodged against
Wound Care in its investigation. Glaser cannot show she
is an original source of the allegations in her complaint
because she learned about Wound Care’s alleged fraudu-
lent billing from her attorney and then asserted the

1
Because this decision overrules prior decisions of this court,
pursuant to Circuit Rule 40(e), we have circulated it among
all judges in regular active service. No judge has requested
to hear the case en banc. Circuit Judge John Daniel Tinder
did not participate in the consideration of this case.
No. 07-4036 5

attorney-client privilege to avoid divulging how her
attorney learned of this information. The district
court properly dismissed Glaser’s complaint for lack of
subject-matter jurisdiction.

I. Background
Both Medicare and Medicaid comprehensively regulate
how health-care providers may obtain reimbursement
for services provided by physician’s assistants. There are
some differences in the regulatory framework for each
program, reflecting the fact that Medicare is administered
at the federal level by the Department of Health and
Human Services and is applied uniformly throughout
every state while Medicaid programs are administered
at the state level according to rules each state promul-
gates. We can simplify our analysis in this case
by assuming that the general rule under these programs
is that physician’s assistants must bill Medicare and
Medicaid at a lower rate for the work they do than if
the same work had been performed by a doctor. How-
ever, a health-care provider may use a doctor’s identifica-
tion number to bill Medicare and Medicaid for services
performed by a physician’s assistant—and thus obtain
reimbursement at the doctor’s rate—if the assistant ren-
dered services “incident to” the services of a physician.
Most relevant for purposes of this case, an assistant’s
services are “incident to” a physician’s services only if
the doctor directly supervises the assistant’s performance.
Dr. Steven Miller and Melissa Miller own Wound Care
Consultants, which, as its name indicates, provides wound-
6 No. 07-4036

care services. In January 2005, nearly four months
before this lawsuit was filed, a medical-review nurse
with the federal Centers for Medicare & Medicaid
Services (“CMS”) contacted Wound Care to discuss
billing irregularities that had been identified in a routine
agency audit. According to a March 2005 letter from
CMS,2 Wound Care allowed an advanced registered
nurse practitioner to use Dr. Miller’s identification
number to bill Medicare at a higher rate—therefore repre-
senting that the nurse practitioner’s services were
“incident to” the services of a physician—even though
Dr. Miller did not supervise the nurse practitioner’s
activity. CMS eventually expanded its audit to review
all Medicare claims submitted using Dr. Miller’s iden-
tification number. From March 2005 to December 2006,
CMS periodically sent letters asking Wound Care to
repay funds it received at the higher doctor’s rate rather
than at the lower assistant’s rate. Wound Care claims it
repaid everything CMS asked it to.
The relator in this case, Carol Glaser, is a Medicaid
recipient with post-polio syndrome, respiratory failure,
and arthritis. As a result of her conditions, Glaser had
numerous wounds that required treatment. Beginning in
2002, Glaser obtained wound-care services from Wound

2
Technically, the letter was sent by AdminaStar Federal (which
has since changed its name to National Government Services).
But because AdminaStar contracted with CMS to administer
the Medicare program, a responsibility that includes identi-
fying and addressing billing errors, we refer to AdminaStar’s
investigation as a CMS investigation.
No. 07-4036 7

Care on at least 12 occasions, and she says each treatment
was provided by a physician’s assistant. Glaser never
saw how Wound Care billed Medicaid, and she remained
oblivious to Wound Care’s billing practices in general
until her attorney in this case, Mary Lapointe, contacted
her.3
We have no idea how Lapointe learned of Wound Care’s
billing practices because both Glaser and Lapointe have
invoked the attorney-client privilege to avoid revealing
Lapointe’s source. We do know that these conversa-
tions inspired Glaser to file this suit against Wound Care
under the FCA in April 2005. The complaint alleged that
Wound Care recorded Glaser’s treatments as having
been performed by a physician’s assistant “incident to”
Dr. Miller’s services. This practice was fraudulent, Glaser
asserted, because Dr. Miller was not on the premises
when Glaser received treatment and therefore could not
have directly supervised the assistant’s performance.
The government declined to intervene, and Wound Care
moved to dismiss Glaser’s suit for lack of subject-matter
jurisdiction under 31 U.S.C. § 3730(e)(4) because it was

3
We do not know when Lapointe first contacted Glaser. Glaser
was deposed on June 7, 2007. During her deposition, she
testified that she first became aware of potential billing impro-
prieties “[p]robably a year and a half ago,” which would be
around December 2005. This is almost certainly wrong be-
cause her qui tam action was filed in April 2005 and govern-
ment officials interviewed Glaser in May 2005. The record is
otherwise silent as to when Glaser learned about Wound
Care’s improper billing practices from Lapointe.
8 No. 07-4036

“based upon the public disclosure of allegations or transac-
tions” and Glaser was not an “original source” of CMS’s
investigation. Glaser testified that she had no knowl-
edge of Wound Care’s billing practices until Lapointe
contacted her, and neither Glaser nor Lapointe have
revealed how Lapointe learned of Wound Care’s
allegedly fraudulent billing practices. Glaser and Lapointe
nevertheless told the district court that they had no
knowledge of the CMS investigation when Glaser filed
her complaint; in Glaser’s view this was enough to show
that her claim was not “based upon” publicly disclosed
information because it was not “derived from” the CMS
audit.
The district court disagreed and dismissed Glaser’s
suit. The court noted that when Glaser filed her suit, CMS
had already launched an inquiry into the same billing
practices that formed the basis of Glaser’s lawsuit. The
district court also concluded that because Glaser
testified that all her knowledge of Wound Care’s billing
practices came from her attorney and because Glaser
refused to say how her attorney learned of the billing
irregularities, Glaser had failed to prove that the lawsuit
was not “based upon” a public disclosure or that she
was an “original source.” The district court denied
Glaser’s motion for reconsideration and Glaser appealed.

II. Discussion
We review de novo the district court’s dismissal for lack
of subject-matter jurisdiction. Scott v. Trump Ind., Inc., 337
F.3d 939, 942 (7th Cir. 2003). The jurisdictional inquiry
No. 07-4036 9

focuses on Glaser’s most recent amended complaint. See
Rockwell Int’l Corp. v. United States, 549 U.S. 457, 473-74
(2007) (“[W]hen a plaintiff files a complaint in federal
court and then voluntarily amends the complaint, courts
look to the amended complaint to determine jurisdiction.”).
The False Claims Act prohibits the submission of false
and fraudulent claims for payment to the government.
31 U.S.C. § 3729(a). It also authorizes private citizens
(called “relators”) to file civil actions on behalf of the
government (called “qui tam” actions) to recover money
that the government paid on account of false or
fraudulent claims. Id. § 3730(b)(1). To encourage private
citizens to come forward with knowledge of fraudulent
activity, the FCA entitles prevailing relators to collect
a substantial share of the funds they recover. Id.
§ 3730(d)(1)-(2). Qui tam actions are subject to a juris-
dictional bar when the relator’s action is
based upon the public disclosure of allegations or
transactions in a criminal, civil, or administrative
hearing, in a congressional, administrative, or Gov-
ernment [sic] Accounting Office report, hearing,
audit, or investigation, or from the news media,
unless the action is brought by the Attorney General
or the person bringing the action is an original source
of the information.
Id. § 3730(e)(4)(A). As we explained in United States ex rel.
Gear v. Emergency Medical Associates of Illinois, Inc., “[t]he
bar is designed to deter parasitic qui tam actions,” 436
F.3d 726, 728 (7th Cir. 2006), and “ ‘once information
becomes public, only the Attorney General and a relator
10 No. 07-4036

who is an “original source” of the information may repre-
sent the United States,’ ” id. (quoting United States ex rel.
Fallon v. Accudyne Corp., 97 F.3d 937, 941 (7th Cir. 1996)).
Under § 3730(e)(4), the district court must conduct a
three-step inquiry to determine whether it has jurisdic-
tion to hear a qui tam suit under the False Claims Act.
First, it examines whether the relator’s allegations
have been “publicly disclosed.” If so, it next asks whether
the lawsuit is “based upon” those publicly disclosed
allegations. If it is, the court determines whether the
relator is an “original source” of the information upon
which his lawsuit is based. See, e.g., Caremark, 496 F.3d
at 736. At each stage of the jurisdictional analysis, the
plaintiff bears the burden of proof. See 31 U.S.C. § 3731(c);
Hagood v. Sonoma County Water Agency, 81 F.3d 1465, 1472
(9th Cir. 1996); cf. United Phosphorus, Ltd. v. Angus Chem.
Co., 322 F.3d 942, 946 (7th Cir. 2003) (“The burden of
proof on a 12(b)(1) issue is on the party asserting juris-
diction.”).

A. Have Glaser’s Allegations Been Publicly Disclosed?
For purposes of § 3730(e)(4), a “public disclosure” occurs
when “the critical elements exposing the transaction as
fraudulent are placed in the public domain.” United States
ex rel. Feingold v. AdminaStar Fed., Inc., 324 F.3d 492, 495
(7th Cir. 2003). Feingold explained that a public disclosure
“bring[s] to the attention of the relevant authority
that there has been a false claim against the govern-
ment.” Id. The public-disclosure bar is designed to
No. 07-4036 11

prevent lawsuits by private citizens in such situations
because “[w]here a public disclosure has occurred, that
authority is already in a position to vindicate society’s
interests, and a qui tam action would serve no purpose.” Id.
Glaser contends that the district court erroneously
concluded that the CMS investigation into Wound Care’s
billing practices constituted a public disclosure, which is
a question of law. She believes that unless the allegations
of wrongdoing have been widely disseminated, the
government must take some affirmative step to
publicize its investigation. Nothing in § 3730(e)(4)
requires such a showing. To the contrary, we have held
that allegations have been publicly disclosed when they
appeared in a warning letter from an agency, United
States ex rel. Gross v. AIDS Research Alliance-Chi., 415
F.3d 601, 606 (7th Cir. 2005); when they were the subject
of a government audit, Gear, 436 F.3d at 728; when they
were included in reports prepared by a government
agency, Feingold, 324 F.3d at 496; or when information
about fraudulent behavior has been provided to a “compe-
tent public official . . . who has managerial responsi-
bility for the very claims being made,” Bank of Farmington,
166 F.3d at 861.
Here, the allegations against Wound Care were publicly
disclosed in an “administrative . . . audit or investigation,”
31 U.S.C. § 3730(e)(4)(A), when CMS sent a letter to
Dr. Miller in March 2005 demanding repayment for
Wound Care’s improper use of Dr. Miller’s billing code.
CMS also made clear to Wound Care beginning in
January 2005 that it was actively investigating its billing
practices. Although Glaser correctly notes that mere
12 No. 07-4036

governmental awareness of wrongdoing does not mean
a public disclosure occurred, see Bank of Farmington, 166
F.3d at 860 n.5, “the purpose of a public disclosure is to
alert the responsible authority that fraud may be afoot,
and that purpose is served where that authority has
itself issued [documents] containing information that
substantiates an allegation of fraud,” Feingold, 324 F.3d
at 496. This is not a case where the government was
simply aware of Wound Care’s billing practices. Rather,
the appropriate entity responsible for investigating
claims of Medicare abuse had knowledge of possible
improprieties with Wound Care’s billing practices and
was actively investigating those allegations and re-
covering funds. See Bank of Farmington, 166 F.3d at 861
(“[D]isclosure to a public official with direct responsi-
bility for the claim in question of allegations or trans-
actions upon which a qui tam claim is based constitutes
public disclosure within the meaning of § 3730(a)(4).”).
CMS’s communications with Wound Care indicate that
it had commenced an investigation by March 2005 de-
signed to recover money Wound Care should not have
received. When Glaser filed her lawsuit challenging
Wound Care’s billing practices in April 2005, “the
critical elements exposing the transaction as fraudulent
[had been] placed in the public domain,” Feingold,
324 F.3d at 495, and therefore the allegations at the
heart of Glaser’s lawsuit were publicly disclosed by the
time her complaint was filed.4

4
The Supreme Court recently granted certiorari to decide the
related question of whether a public disclosure has occurred
(continued...)
No. 07-4036 13

B. Is the Lawsuit “Based Upon” Publicly Disclosed
Information?
To trigger the public-disclosure bar of § 3730(e)(4), it is
not enough that allegations of wrongdoing have been
publicly disclosed; the relator’s allegations must also
be “based upon” the public disclosure. Glaser argues
that her allegations are not “based upon” the CMS investi-
gation of Wound Care because they neither depend
“essentially upon publicly disclosed information” nor are
they “actually derived from such information.” Caremark,
496 F.3d at 737 (internal quotation marks omitted).

4
(...continued)
under § 3730(e)(4) when allegations of wrongdoing appear in
administrative reports or audits issued by state or local govern-
ments, as opposed to the federal government. See United States
ex rel. Wilson v. Graham County Soil & Water Conservation Dist.,
528 F.3d 292 (4th Cir. 2008) (holding that state and local admin-
istrative reports and audits are not public disclosures),
cert. granted, No. 08-304, 2009 WL 1738653 (U.S. June 22, 2009).
The Court’s resolution of this question will not affect our
analysis in this case because the disclosures at issue here
appeared in the course of an investigation conducted by a
federal agency. We note that before it granted certiorari in
Graham County Soil, the Court sought the views of the Solicitor
General; the Solicitor General recommended that the Court
grant review. The Solicitor General’s brief also noted the
intercircuit conflict regarding the proper interpretation of the
phrase “based upon” but observed that the Court need not
resolve the circuit split in the process of deciding Graham
County Soil. Brief for the United States as Amicus Curiae at 21
n.9, Graham County Soil, No. 08-304 (U.S. May 20, 2009).
14 No. 07-4036

Glaser’s argument rests on the interpretation of
the phrase “based upon” that we adopted in Bank of
Farmington and reaffirmed in Caremark. Those cases
held that a qui tam suit is based upon publicly disclosed
information when it “depends essentially upon publicly
disclosed information and is actually derived from such
information.” Bank of Farmington, 166 F.3d at 864. This
interpretation rested on a plain-language understanding
that “based upon” normally means “derived from.” Id.;
accord United States ex rel. Siller v. Becton Dickinson & Co.,
21 F.3d 1339, 1347-48 (4th Cir. 1994) (citing W EBSTER’S
T HIRD N EW INTERNATIONAL D ICTIONARY 180 (1986)). Bank
of Farmington reasoned that if the purpose of the juris-
dictional bar is to block parasitic claims filed by oppor-
tunists trying to capitalize on publicly disclosed allega-
tions of wrongdoing, it should not prohibit a suit by a
relator who independently uncovers evidence of wrong-
doing through his own investigation even though his
allegations are the same or similar to allegations in the
public domain. 166 F.3d at 863.
Although the Fourth Circuit has agreed with our ap-
proach, see Siller 21 F.3d at 1347-48, every other circuit
to consider this question has adopted a different inter-
pretation of § 3730(e)(4). Under the majority view, a
lawsuit is based upon publicly disclosed allegations
when the relator’s allegations and the publicly disclosed
allegations are substantially similar. United States ex rel.
Mistick PBT v. Hous. Auth. of the City of Pittsburgh, 186 F.3d
376, 388 (3d Cir. 1999); accord United States ex rel. Boothe v.
Sun Healthcare Group, Inc., 496 F.3d 1169, 1171-72 (10th
Cir. 2007); Minn. Ass’n of Nurse Anesthetists v. Allina
No. 07-4036 15

Health Sys. Corp., 276 F.3d 1032, 1047 (8th Cir. 2002);
United States ex rel. Biddle v. Bd. of Trs. of the Leland Stanford,
Jr. Univ., 161 F.3d 533, 537 (9th Cir. 1998); United States ex
rel. McKenzie v. BellSouth Telecomms., Inc., 123 F.3d 935, 940
(6th Cir. 1997); United States ex rel. Findley v. FPC-Boron
Employees’ Club, 105 F.3d 675, 684-85 (D.C. Cir. 1997);
Fed. Recovery Servs., Inc. v. United States, 72 F.3d 447, 451
(5th Cir. 1995); United States ex rel. Doe v. John Doe
Corp., 960 F.2d 318, 324 (2d Cir. 1992). These decisions
generally concede that the approach adopted in Bank of
Farmington is a faithful ordinary-meaning interpretation
of the statute but nevertheless reject it because it
renders the original-source exception to the § 3730(e)(4) bar
superfluous. In addition, these circuits conclude that a
broader interpretation is more consistent with the
overall design of the jurisdictional bar, which balances
the dual objectives of “encourag[ing] private individuals
who are aware of fraud against the government to
bring such information forward at the earliest possible
time,” United States ex rel. Barth v. Ridgedale Elec., Inc., 44
F.3d 699, 704 (8th Cir. 1995), and deterring “self-serving
opportunists, who do not possess their own insider
information, [who will try] to get in on the action and
try to collect on parasitic claims when the allegations
have already been publicly disclosed and the insiders
have nothing new to add,” Caremark, 496 F.3d at 739.
Information brought forward by relators in qui tam suits
is less useful to the government once revelations about
fraudulent conduct are in the public domain because
the government is already aware that it might have
been defrauded and can take responsive action. Thus, the
16 No. 07-4036

public-disclosure bar implements the congressional
interest in “paying [relators] only for useful information.”
Minn. Ass’n of Nurse Anesthetists, 276 F.3d at 1047.
Because our approach in Bank of Farmington and
Caremark is out of step with the approach taken by eight
other circuits, Wound Care invites us to revisit it. “Al-
though we must give considerable weight to our prior
decisions, we are not bound by them absolutely and
may overturn Circuit precedent for compelling reasons.”
Russ v. Watts, 414 F.3d 783, 789 (7th Cir. 2005). We
have overruled our prior decisions when our position
remains a minority one among other circuits, id.; when
the Supreme Court issues a decision on an analogous
issue that compels us to reconsider our position, Haas v.
Abrahamson, 910 F.2d 384, 393 (7th Cir. 1990); or when an
intracircuit conflict exists, Shropshear v. Corp. Counsel of
City of Chi., 275 F.3d 593, 595-97 (7th Cir. 2001). Each of
these justifications is present in this case.
We note for starters that only one other circuit (the
Fourth) has adopted our interpretation. The Third Circuit
has characterized the circuit split as “a clash between
two textual arguments . . . : one based on the ordinary
meaning of the phrase ‘based upon’ and one based on
the precept that a statute should be construed if possible
so as not to render any of its terms superfluous.” Mistick,
186 F.3d at 387. The eight circuits that have rejected the
ordinary-meaning interpretation have done so largely
because, as the D.C. Circuit has aptly observed, it “swal-
lows the original source exception whole.” Findley, 105
F.3d at 683.
No. 07-4036 17

The original-source exception permits jurisdiction
over an FCA action even if the relator’s lawsuit is based
upon publicly disclosed information provided that the
relator is “an original source of the information.”
§ 3730(e)(4)(A). The FCA defines an “original source” as
someone “who has direct and independent knowledge
of the information on which the allegations are based
and has voluntarily provided the information to the
Government before filing an action under this section
which is based on the information.” 31 U.S.C.
§ 3730(e)(4)(B). If “based upon” means “actually derived
from,” as Bank of Farmington says, it is hard to understand
the import of the “independent knowledge” component of
the original-source exception; a relator who “actually
derived” his allegations of fraud from (and therefore
“based” his allegations “upon”) information in the public
domain could never avoid the jurisdictional bar by show-
ing that he has “independent knowledge” of the fraud. Put
another way, following our minority interpretation of
“based upon,” once a court concludes that a lawsuit is
actually derived from publicly disclosed information,
asking the original-source question never affects the
jurisdictional result.5

5
It is possible to imagine a handful of situations where the
original-source exception might have independent meaning,
such as if a lawsuit is “actually derived” only in part from public
disclosures. See Mistick, 186 F.3d at 399-400 (Becker, C.J.,
dissenting). But every circuit to have considered the position
of the Mistick dissent has rejected its approach, and we agree
(continued...)
18 No. 07-4036

Conversely, consider what happens when a court
following the minority interpretation of “based upon”
concludes that a lawsuit is not “actually derived” from
publicly disclosed information. In those cases, the court
has jurisdiction over the lawsuit whether or not the
relator was an original source of the allegations in the
qui tam complaint. Thus, under our minority interpret-
ation of “based upon,” the original-source exception is
extraneous no matter how a court resolves the “actually
derived from” question. If a court answers the question in
the negative, the original-source exception is not impli-
cated; if a court answers in the affirmative, the original-
source inquiry is a waste of time.
Despite this difficulty, Caremark adhered to the Bank of
Farmington interpretation—though acknowledging that
the circuits in the majority had “powerful arguments” for
rejecting it—because “the minority standard holds the
trump card, the plain language interpretation.” 496 F.3d at

(...continued)
with their conclusion. See, e.g., Minn. Ass’n of Nurse Anesthetists,
276 F.3d at 1045 n.9 (“[Chief Judge Becker’s interpretation]
requires us to conclude that Congress used the ‘based upon’
language and the ‘original source’ language to refer to the
same concept—whether a suit is derived from a public disclo-
sure. Moreover, it would have been much more natural and
straightforward for Congress to have said ‘partly based
upon the public disclosure’ and ‘original source of part of the
information’ if the distinction between partial derivation and
sole derivation had been central to how Congress meant the
statute to work.”).
No. 07-4036 19

738. We now conclude that this places too much impor-
tance on a dictionary interpretation of the phrase “based
upon” to the exclusion of other significant interpretive
considerations. Beyond the damage to the original-source
exception, other portions of § 3730(e)(4)(A) would yield
baffling results if we read them literally without regard to
context. For example, § 3730(e)(4)(A) refers to audits or
investigations by the “Government Accounting Office”
instead of the General Accounting Office, as well as
information obtained from criminal and civil “hearing[s]”
even though the statutory bar presumably covers informa-
tion publicly disclosed in trials, which are not commonly
referred to as “hearings.” See also Mistick, 186 F.3d at 387-88
(describing other examples of poor drafting). As the
Third Circuit noted in Mistick, § 3730(e)(4) is hardly a
model of careful draftsmanship; the drafting errors
throughout § 3730(e)(4) should make us “hesitant to
attach too much significance to a fine parsing of the
syntax.” Id. at 388. Bank of Farmington and Caremark parsed
§ 3730(e)(4) finely, but their focus on the dictionary mean-
ing of “based upon” alone was too narrow in the context
of the rest of the statute. Pace v. DiGuglielmo, 544 U.S. 408,
420 (2005) (statutory terms are given “their ordinary
meaning in the context of the statutory scheme in which they
appear” (emphasis added)).
Ultimately, the interpretation that carried the day in
Bank of Farmington and Caremark violates the principle
that “[a] statute should be construed so that effect is given
to all its provisions, so that no part will be inoperative or
superfluous, void or insignificant”—a principle the Su-
preme Court recently described as “one of the most basic
20 No. 07-4036

interpretive canons.” Corley v. United States, 129 S. Ct. 1558,
1566 (2009). We might tolerate this result if the original-
source inquiry added little or nothing to the jurisdictional
analysis. But that is hardly the case. The original-source
exception requires relators to establish that they have
(1) “direct” knowledge of fraudulent activity; (2) “inde-
pendent” knowledge of fraudulent activity; and (3) volun-
tarily provided their information to the government before
filing a qui tam action. 31 U.S.C. § 3730(e)(4)(B). If a rela-
tor’s allegations are actually derived from a public dis-
closure, the relator might be able to show that he has
“independent” knowledge of the fraudulent activity and
therefore bring himself within the second component of
the original-source definition. But to avoid the jurisdic-
tional bar at the original-source stage of the jurisdictional
inquiry, the relator must also show he had “direct” knowl-
edge of the fraud, a phrase usually interpreted to require
the relator to establish that his knowledge of the wrong-
doing was based on his own investigative efforts and not
derived from the knowledge of others. See United States ex
rel. Laird v. Lockheed Martin Eng’g & Sci. Servs. Co., 336
F.3d 346, 355 (5th Cir. 2003).
In addition, to be considered an original source, the
relator must also have voluntarily disclosed the informa-
tion to the government before filing a qui tam action, a
requirement that is designed to reward those who come
forward with useful information and not those who
provide information in response to a governmental in-
quiry. See, e.g., United States ex rel. Paranich v. Sorgnard, 396
F.3d 326, 338-41 (3d Cir. 2005). Yet as we have explained,
under the Bank of Farmington and Caremark interpretation
No. 07-4036 21

of the phrase “based upon,” a relator can avoid the juris-
dictional bar by showing that his information did not
“actually derive” from a public disclosure without a
showing that he had direct knowledge of fraudulent
conduct or that he voluntarily disclosed what he knew
to the government.
To illustrate this, compare our decisions in Caremark
and United States ex rel. Lamers v. City of Green Bay, 168 F.3d
1013 (7th Cir. 1999), both of which concluded that the
plaintiff-relator had avoided the jurisdictional bar. In
Lamers, the relator alleged that a city agency lied about
its efforts to transport local schoolchildren on public
buses in order to obtain federal grant money; the relator
had acquired this information by personally observing
public bus routes to see if they complied with federal
regulations. Although the Federal Transit Administration
had issued an administrative decision several months
prior to the qui tam filing finding that the City had
violated federal regulations, the relator had conducted
his investigation independently before the FTA decision
was publicized and voluntarily gave the results of his
investigation to the FTA. We concluded that the juris-
dictional bar did not apply because the relator was an
original source—he had direct and independent knowl-
edge of fraudulent activity and had voluntarily given
that information to the government.6 Id. at 1017-18. By

6
Our decision in Lamers, which was issued about a month after
Bank of Farmington was decided, appears to have followed the
(continued...)
22 No. 07-4036

contrast, in Caremark we concluded that the jurisdictional
bar did not apply because the relator’s complaint was not
“actually derived from” publicly disclosed information.
496 F.3d at 739. The relators in Caremark were thus able
to avoid the jurisdictional bar without showing they had
direct, independent knowledge of fraudulent activity or
that they disclosed their knowledge to the government
before filing their lawsuit.7

(...continued)
analysis called for under the majority approach. Since the
§ 3730(e)(4) inquiry is a sequential one, our consideration of
whether the relator was an “original source” necessarily
presupposed that the relator’s claim was based on a public
disclosure. It is true that Lamers did not address how the
threshold “based upon” inquiry should be approached. But if
Lamers had applied the approach we announced in Bank of
Farmington, our conclusion should have rested on a different
ground—namely, that the relator’s action was not based upon
a public disclosure because the relator did not “actually
derive” his allegations from the public disclosure. E.g., United
States ex rel. Cooper v. Blue Cross & Blue Shield of Fla., Inc., 19 F.3d
562, 565 (11th Cir. 1994) (“A court reaches the original source
question only if it finds the plaintiff’s suit is based on informa-
tion public[ly] disclosed.”). Caremark did not cite Lamers.
7
We note that the relators in Caremark would likely have been
able to avoid the jurisdictional bar even under the interpreta-
tion of “based upon” that we adopt today because they would
have been able to show they were original sources of the
information in their complaint. The relators were employed by
Caremark at two of its prescription-drug facilities, and they
(continued...)
No. 07-4036 23

Caremark justified its continued adherence to the minor-
ity approach of Bank of Farmington because it struck a
balance between two competing policy concerns: the fear
that opportunistic plaintiffs would try to “get in on the
action” when they “have nothing new to add” and the
desire to encourage those with knowledge about fraudu-
lent conduct to come forward. Id. These are, as we have
noted, the manifest objectives of § 3730(e)(4), but Caremark
went astray in thinking that the threshold “based upon”
language in the statute addresses these competing
policies by itself. Instead, § 3730(e)(4) must be considered
in its entirety.
The threshold jurisdictional bar against lawsuits that
are “based upon” publicly disclosed allegations addresses
the first policy concern: prohibiting FCA lawsuits filed by

(...continued)
claimed that Caremark engaged in a variety of fraudulent
schemes. The allegations against Caremark had been publicly
disclosed when Caremark gave the U.S. Attorney’s office
thousands of documents during the government’s investigation
of Caremark’s business practices. Caremark, 496 F.3d at 736-37.
Yet our analysis also suggested that the relators, who first
alerted the government to possible improprieties in Caremark’s
business practices and therefore “voluntarily provided” it to
the government, had “direct and independent” knowledge of
Caremark’s business practices; the complaint was based on the
relators’ personal knowledge (and so the relators had “direct”
knowledge) and did not rely on any information obtained
from the U.S. Attorney’s office (and so their knowledge was
“independent”). Id. at 738-39.
24 No. 07-4036

opportunistic plaintiffs concerning information about
fraud that is already in the public domain. By carving
out an exception for original sources, the statute
preserves the objective of “inspiring whistleblowers to
come forward promptly with information concerning
fraud so that the government can stop it and recover ill-
gotten gains.” Findley, 105 F.3d at 685. The qui tam provi-
sions of the FCA are designed to “encourage persons with
‘first-hand knowledge of fraudulent misconduct,’ or those
‘who are either close observers or otherwise involved in the
fraudulent activity’ to come forward.” Barth, 44 F.3d at
703 (citation omitted). Bank of Farmington’s interpretation
subverts this goal by allowing relators to avoid the public-
disclosure bar without demonstrating that they have
direct knowledge of fraudulent activity or that they are
not under any governmental compulsion to reveal
their knowledge of fraudulent conduct.
We also note that while the minority interpretation
tends to resolve the jurisdictional inquiry at the “based
upon” stage, the Supreme Court recently implied in
Rockwell International Corp. v. United States, 549 U.S. 457,
that the main jurisdictional focus is on the “original
source” requirement. In Rockwell, the Court was asked to
interpret the original-source requirement of § 3730(e)(4)(B).
One of the questions before the Court was whether the
phrase “information on which the allegations are based” in
§ 3730(e)(4)(B) refers to information on which the
relator’s allegations are based or information on which
the publicly disclosed allegations that triggered the public-
disclosure bar of § 3730(e)(4)(A) are based. The Court
adopted the former interpretation and in doing so imag-
No. 07-4036 25

ined a hypothetical relator who “has direct and independ-
ent knowledge of different information supporting
the same allegation.” The Court concluded that such a
relator would be considered an original source. 549 U.S. at
471-72. Although Rockwell did not address the meaning
of the phrase “based upon” in § 3730(e)(4)(A), we think
it significant that under our minority interpretation of
the phrase, the hypothetical posited by the Court would
be resolved at an earlier step of the jurisdictional
inquiry without ever reaching the question of whether
the relator was an original source. Yet given the
sequential nature of the jurisdictional inquiry required
by the statute, the Supreme Court’s discussion assumes
that its hypothetical relator is subject to the public-disclo-
sure bar, for otherwise there would be no need to address
the original-source exception at all. Id. at 467 (“As this case
comes to the Court, it is conceded that the claims on
which Stone prevailed were based upon publicly disclosed
allegations within the meaning of § 3730(e)(4)(A).”); see
also Barth, 44 F.3d at 703 (“A court reaches the original
source question only if it finds the plaintiff’s suit is
based on information that has already been publicly
disclosed.”). This is another reason to rethink our inter-
pretation of the “based upon” language in § 3730(e)(4)(A).
The facts of this case aptly illustrate the flaws in the
Bank of Farmington/Caremark approach. Glaser testified
that she learned of Wound Care’s improper billing from
her attorney, and her attorney said she first became
aware of possible fraudulent billing practices in
August 2003. That means that more than 20 months
elapsed from the time that Glaser’s attorney said she
26 No. 07-4036

first learned of Wound Care’s conduct and the time she
filed this qui tam action on Glaser’s behalf. In the mean-
time, CMS commenced an investigation of Wound Care’s
billing irregularities and eventually—some four months
before Glaser’s lawsuit was filed—notified Wound Care
of its findings. The relator provisions of the FCA are
designed “to encourage private individuals who are
aware of fraud against the government to bring such
information forward at the earliest possible time.” Barth,
44 F.3d at 704. The circumstances here illuminate the
inconsistencies between the Bank of Farmington/Caremark
approach and the statutory design.
Accordingly, we are now convinced that Bank of
Farmington and Caremark gave undue weight to the “dic-
tionary” interpretation of § 3730(e)(4) without considering
the phrase “based upon” in the context of the rest of the
public-disclosure bar—particularly the original-source
exception. Our interpretation of “based upon” as meaning
“actually derived from” renders the original-source
exception superfluous and ignores the exception’s role
in balancing the FCA’s competing policy goals. The
majority interpretation, as the Tenth Circuit put it, treats
the question of whether a lawsuit is “based upon” a public
disclosure as a “threshold analysis . . . intended to be
a quick trigger for the more exacting original source
analysis.” United States ex rel. Grynberg v. Praxair, Inc., 389
F.3d 1038, 1051 (10th Cir. 2004) (internal quotation
marks omitted). We now adopt the majority position and
conclude that a relator’s FCA complaint is “based upon”
publicly disclosed allegations or transactions when the
allegations in the relator’s complaint are substantially
No. 07-4036 27

similar to publicly disclosed allegations. To the extent
Bank of Farmington and Caremark interpreted the
statutory phrase “based upon” differently, those cases
are overruled.
Applying this standard to Glaser’s complaint, we
conclude that her allegations are based upon the allega-
tions that were the subject of CMS’s prior investigation.
As the March 2005 letter from CMS to Dr. Miller makes
clear, the CMS investigation focused on whether Wound
Care had properly billed the government for services
performed by its physician’s assistants. Like the CMS
investigation, Glaser’s complaint alleges that Wound Care
overbilled the government for physician’s assistants’
services by falsely representing that they had been per-
formed “incident to” a physician’s services. These allega-
tions of wrongdoing are virtually identical—they pertain
to the same entity and describe the same fraudulent
conduct—which is enough for us to conclude that
Glaser’s allegations are substantially similar to the allega-
tions that were at the heart of the CMS investigation.
Glaser argues that her complaint is not based on the
CMS investigation because her complaint contains par-
ticular allegations of fraud that are not mentioned in
CMS’s January or March 2005 communications with
Wound Care nor discovered during its investigation into
Wound Care’s billing practices. It is true that Glaser’s
complaint adds a few allegations not covered by CMS’s
investigation. But this is not enough to take this case
outside the jurisdictional bar, properly understood; “based
upon” does not mean “solely based upon.” Accord
28 No. 07-4036

McKenzie, 123 F.3d at 940; Fed. Recovery Servs., 72 F.3d at
451. “[A]n FCA qui tam action even partly based upon
publicly disclosed allegations or transactions is nonethe-
less ‘based upon’ such allegations or transactions. Congress
chose not to insert the adverb ‘solely’, and we cannot,
because to do so would dramatically alter the statute’s
plain meaning.” United States ex rel. Precision Co. v. Koch
Indus., Inc., 971 F.2d 548, 552 (10th Cir. 1992). We
therefore conclude that because the allegations in
Glaser’s complaint (or most of them) were substan-
tially similar to publicly disclosed allegations, Glaser’s
complaint is based upon those public disclosures and
therefore falls within the threshold jurisdictional bar of
§ 3730(e)(4)(A). E.g., United States ex rel. Battle v. Bd. of
Regents for the State of Ga., 468 F.3d 755, 762 (11th Cir. 2006).

C. Was Glaser an Original Source of the Allegations in
Her Complaint?
Glaser may avoid the public-disclosure bar if she can
show that she was an “original source” of the information
upon which the allegations in her complaint were based.
See Rockwell, 549 U.S. at 470-72. She is an “original source”
if she (1) has “direct” knowledge of the information on
which her allegations are based; (2) has “independent”
knowledge of the information on which her allegations
are based; and (3) “has voluntarily provided the infor-
mation to the Government before filing” a complaint
based on her information. 31 U.S.C. § 3730(e)(4)(B).
We question whether Glaser can show she has direct
knowledge of the information supporting her allega-
No. 07-4036 29

tions. We have never precisely defined the term “direct,”
and we need not do so today.8 But we note that the only
knowledge Glaser has of Wound Care’s billing practices
comes from her attorney. At oral argument Glaser made
much of the fact that she had direct knowledge that she
had been treated by a physician’s assistant and not a
doctor. But the fraud alleged pertains to the billing, not
the treatment. Glaser’s only knowledge that Wound Care’s
billing practices were improper came from Lapointe,
with whom Glaser had no prior relationship and who
contacted her out of the blue. It would be one thing to
say that an FCA relator has direct knowledge of the
information supporting her allegations because she is
personally aware of at least one instance of fraudulent
conduct and her attorney’s subsequent investigation

8
We note that other courts have used a variety of formulations
to describe what Congress meant when it used the term “direct.”
Other circuits have interpreted “direct” to mean “marked by
absence of an intervening agency, instrumentality, or influence:
immediate,” Stinson, 944 F.2d at 1160 (internal quotation
marks omitted); “first-hand,” Findley, 105 F.3d at 690; “saw
with [the relator’s] own eyes,” United States ex rel. Wang v. FMC
Corp., 975 F.2d 1412, 1417 (9th Cir. 1992); “unmediated by
anything but [the relator’s] own labor,” id.; and “[b]y the
relator’s own efforts, and not by the labors of others, and . . . not
derivative of the information of others,” United States ex rel.
Hafter v. Spectrum Emergency Care, Inc., 190 F.3d 1156, 1162
(10th Cir. 1999). Given our conclusion that Glaser lacks inde-
pendent knowledge of the information on which her allega-
tions are based, we need not settle on one of these descriptions
today.
30 No. 07-4036

uncovers other fraudulent behavior. See Paranich, 396
F.3d at 336. It would be quite another to say that an
FCA relator has direct knowledge for purposes of the
original-source exception even though she had no knowl-
edge whatsoever of the fraudulent conduct before hearing
from an attorney.
Ultimately, it does not matter whether Glaser could
have been deemed to have “direct” knowledge under
the statute because she has not met her burden of
proving she has “independent” knowledge. To establish
this element, we have required that the relator be “some-
one who would have learned of the allegation or transac-
tions independently of the public disclosure.” Bank of
Farmington, 166 F.3d at 865. Glaser thinks she can
establish this simply by providing (1) her own testimony
that she had no knowledge of the CMS investigation
and that her only knowledge of Wound Care’s billing
practices came from her attorney and (2) an affidavit
from her attorney who swears she first learned of the
problems with Wound Care’s billing practices by 2003
and had no knowledge of the CMS investigation.
The problem is that Glaser has asserted the attorney-
client privilege to prevent us from learning how her
attorney first learned of Wound Care’s billing practices.
If a relator says all her knowledge of fraudulent activity
comes from a third party (even if the third party is her
attorney) but refuses to explain how that third party
learned of the fraud, she cannot meet her burden of
proving she has independent knowledge just by claiming
she had no knowledge of public disclosure. Because
No. 07-4036 31

Glaser has the burden of proving the jurisdictional facts,
she has not established her independent knowledge of
improprieties in Wound Care’s billing practices and
therefore she cannot be an original source of the allega-
tions in her complaint.9 See United States ex rel. Houck v.
Folding Carton Admin. Comm., 881 F.2d 494, 505 (7th
Cir. 1989).

III. Conclusion
The district court correctly concluded that the juris-
dictional bar of § 3730(e)(4)(A) applies to Glaser’s qui tam
suit. The allegations in Glaser’s complaint about Wound
Care’s billing practices are based upon publicly dis-
closed information, and Glaser has not shown she is an
original source of the information used to support the
allegations. We therefore A FFIRM the judgment of the
district court dismissing the case for lack of subject-
matter jurisdiction.

9
It is not necessary to decide in this case whether infor-
mation obtained by a relator’s agent may be imputed to the
relator for the purpose of § 3730(e)(4).

7-2-09