United States Court of Appeals
For the Eighth Circuit
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No. 15-2220
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In re: Baycol Products Litigation.
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United States of America, ex rel. Laurie Simpson,
lllllllllllllllllllll Plaintiff,
Laurie Simpson,
lllllllllllllllllllll Plaintiff Relator - Appellant,
v.
Bayer Healthcare, doing business as Bayer Healthcare Pharmaceuticals; Bayer
Pharmaceuticals Corporation; Bayer Corporation; Bayer A.G.,
lllllllllllllllllllll Defendants - Appellees.
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Appeal from United States District Court
for the District of Minnesota - Minneapolis
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Submitted: February 7, 2017
Filed: September 8, 2017
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Before LOKEN, COLLOTON, and KELLY, Circuit Judges.
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COLLOTON, Circuit Judge.
Laurie Simpson appeals the district court’s dismissal of her qui tam action
under the False Claims Act, 31 U.S.C. §§ 3729-3733 (2006), for lack of subject matter
jurisdiction.* The court concluded it lacked jurisdiction because Simpson’s action was
based on public disclosure of allegations or transactions, and she was not an original
source of the information on which her allegations were based. See id.
§ 3730(e)(4)(B). Because the district court misapplied circuit precedent on the
meaning of “original source,” we reverse and remand for further proceedings.
The underlying facts and most of the procedural history are laid out extensively
in this court’s decision in In re Baycol Products Litigation, 732 F.3d 869 (8th Cir.
2013). We therefore recite only the facts and procedural history that are relevant to
the issue raised here.
In 2006, Simpson filed a qui tam action against Bayer Healthcare as a relator
on behalf of the government. See 31 U.S.C. § 3730(b)(1). She alleged that Bayer
knew, but downplayed, the risks that use of Baycol, a statin drug, would cause
rhabdomyolysis. She also alleged that Bayer misrepresented Baycol’s efficacy when
compared to competing drugs, and paid illegal kickbacks to physicians to increase
Bayer’s share of the market for statin drugs. Simpson claimed that Bayer fraudulently
caused the government to make reimbursements for Baycol prescriptions through
federal health insurance programs. She further asserted that Bayer fraudulently
induced the Department of Defense to enter into two contracts for the purchase of
Baycol.
*
All citations are to the 2006 version of the Act that was in effect when Simpson
brought her action. The statute, including the provision at issue here, was amended
in 2010. Patient Protection & Affordable Care Act, Pub. L. No. 111-148, tit. X, §
10104(j)(2), 124 Stat. 119, 901-02 (2010).
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The district court first dismissed Simpson’s suit because she failed to plead
fraud with particularity as required by Federal Rule of Civil Procedure 9(b). On
appeal, this court affirmed the dismissal of Simpson’s claim relating to federal health
insurance programs. 732 F.3d at 877-80. But a divided panel concluded that Simpson
adequately pleaded her fraudulent-inducement claim regarding the Department of
Defense contracts, and reversed the dismissal of that claim. Id. at 875-77.
On remand, Bayer moved again to dismiss, this time arguing that the court
lacked subject matter jurisdiction because Simpson’s action was based on allegations
or transactions that had been publicly disclosed. Bayer urged that Simpson had not
demonstrated, as required by the Act, that she was an original source of the
information on which her allegations were based.
The False Claims Act allows private citizens, acting on the behalf of the United
States, to recover damages from any person who knowingly makes a false or
fraudulent claim for payment or approval upon the United States, or who submits a
false record or statement in support of such a claim. 31 U.S.C. §§ 3729(a)(1)-(2),
3730(b)(1). The Act limits, however, when a citizen may proceed based on
allegations or transactions that have been publicly disclosed:
No court shall have jurisdiction over an action under this section based
upon the public disclosure of allegations or transactions in a criminal,
civil, or administrative hearing, in a congressional, administrative, or
Government 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.
§ 3730(e)(4)(A). An “original source” is an “individual who has direct and
independent knowledge of the information on which the allegations are based and has
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voluntarily provided the information to the Government before filing an action . . .
which is based on the information.” § 3730(e)(4)(B).
The district court granted Bayer’s motion to dismiss. The court reasoned that
information underlying Simpson’s allegations—that Bayer allegedly concealed
Baycol’s risks in its marketing efforts, and that Bayer had entered into contracts with
the Department of Defense—previously had been disclosed in lawsuits, news articles,
public filings, and medical literature. The court thus concluded that it lacked
jurisdiction under § 3730(e)(4) unless Simpson was an original source. The district
court then ruled that to be an original source, Simpson must have direct and
independent knowledge of the communications that form the basis of her fraudulent-
inducement claim. The court said that she “must demonstrate knowledge that Bayer
actually sent false and misleading communications to persons with the DoD with the
intent to fraudulently induce the DoD to execute” the two Baycol contracts. Because
Simpson did not demonstrate that she “had direct or independent knowledge of any
communication between Bayer and the DoD that form the basis of the fraudulent
inducement claim,” the court dismissed the action.
Our precedent, however, does not require Simpson to have direct and
independent knowledge of Bayer’s allegedly false communications to the Department
of Defense. In Minnesota Association of Nurse Anesthetists v. Allina Health System
Corp., 276 F.3d 1032, 1040 (8th Cir. 2002), this court concluded that “to qualify as
an original source, a relator does not have to have personal knowledge of all elements
of a cause of action.” Id. at 1050. As long as the relator has “direct knowledge of the
true state of the facts,” she can be an original source even though her “knowledge of
the misrepresentation is not first-hand.” Id.; accord United States ex rel. Newell v.
City of St. Paul, 728 F.3d 791, 797 (8th Cir. 2013).
Nurse Anesthetists adopted the textual analysis of United States ex rel.
Springfield Terminal Railway Co. v. Quinn, 14 F.3d 645, 656 (D.C. Cir. 1994). The
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Act requires the relator to possess direct and independent knowledge of the
“information” on which her allegations are based, not of the “transaction,” a term used
earlier in the same provision. 31 U.S.C. § 3730(e)(4)(B). Springfield Terminal
reasoned that the public disclosure bar thus does not dictate that a relator must
“possess direct and independent knowledge of all of the vital ingredients to a
fraudulent transaction.” 14 F.3d at 656-57. Rather, “direct and independent
knowledge of any essential element of the underlying fraud transaction” is sufficient
to give the relator original-source status under the Act. Id. at 657. Reading
“information” as synonymous with “transaction,” said the court, would “undo
Congress’ careful choice of wording.” Id. It also would not seem to serve the
purposes of the Act, for the government already knows about communications made
to the government by an alleged defrauder. Id.
We address here only the ground relied upon by the district court in granting
Bayer’s motion to dismiss. The district court did not reach other arguments raised by
Bayer. On the question of original source, the district court did not determine whether
Simpson had direct and independent knowledge of the “true state of the facts,”
namely, that Bayer allegedly possessed evidence to know that Baycol was not as
efficacious as represented and caused increased risks of rhabdomyolysis. Nor did the
district court address whether Simpson’s claim is barred by the statute of limitations.
These matters should be addressed by the district court in the first instance.
* * *
The judgment of the district court is reversed, and the case is remanded for
further proceedings.
LOKEN, Circuit Judge, dissenting.
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I would affirm for the reasons stated in the district court’s thorough opinion.
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