United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
September 21, 2004
FOR THE FIFTH CIRCUIT
_____________________ Charles R. Fulbruge III
Clerk
No. 03-20376
_____________________
United States of America, ex rel., SALLY A. REAGAN,
Plaintiffs - Appellants,
versus
EAST TEXAS MEDICAL CENTER REGIONAL HEALTHCARE
SYSTEM; ET AL.,
Defendants,
EAST TEXAS MEDICAL CENTER REGIONAL HEALTHCARE
SYSTEM; EAST TEXAS MEDICAL CENTER REGIONAL
HEALTH FACILITIES; EAST TEXAS MEDICAL CENTER;,
Defendants - Appellees.
__________________________________________________________________
Appeal from the United States District Court
for the Southern District of Texas
_________________________________________________________________
Before JOLLY, JONES, and BARKSDALE, Circuit Judges.
E. GRADY JOLLY, Circuit Judge:
Sally A. Reagan filed this qui tam lawsuit under the False
Claims Act, 31 U.S.C. § 3729 et seq. The district court granted
summary judgment in favor of the defendants, holding that the suit
was barred by the Act’s jurisdictional bar (31 U.S.C. §
3730(e)(4)(A)) and, alternatively, that Reagan’s claims failed on
the merits. Reagan appeals and we affirm.
I
The University Park Hospital (“UPH”) facility is owned by the
East Texas Medical Center (“ETMC”), a subsidiary of the East Texas
Hospital Foundation (“East Texas”). The UPH facility was built in
the early 1980s as the cooperative project of Mother Frances
Hospital (“Mother Frances”) and East Texas Regional Health Care
Facilities (“ET Facilities”). In January 1983 the Texas Health
Facilities Commission issued a Certificate of Need (“CON”)
authorizing Mother Frances and ET Facilities to construct and
operate UPH. The CON directed that the UPH project costs must not
exceed $5,378,250. Moreover, the CON directed that $3,753,611 of
the project costs be financed through the issuance of revenue bonds
and that East Texas contribute $2,000,000 to the project. Contrary
to the CON, however, East Texas never contributed the $2 million
that it had promised and, instead, the project was financed through
a bond issue of $5.6 million. Subsequently, UPH recognized that
the project costs were going to exceed the anticipated amount and,
consequently, the CON was amended to require the completion costs
for the UPH project not to exceed $6,286,993. Finally, in 1995 UPH
was completed for a total cost of $6.2 million.
UPH leases its facilities from East Texas at an annual cost of
$726,000. UPH also purchases other “ancillary” services from the
2
East Texas defendants -- laundry, maintenance, radiology,
laboratory services, etc.1
In April 1991 Sally Reagan (“Reagan”) was hired as the
executive director of UPH. Reagan alleges that, during her tenure
at UPH she became suspicious of certain “financial irregularities”,
namely false Medicare reporting; she further alleges that in May
1992 she was terminated because she began to investigate these
“irregularities”.2
Following her termination, Reagan reported her suspicions to
the Health Care Financing Administration (“HCFA”), the federal
agency that administers the Medicare program for the United States
Department of Health and Human Services (“HHS”). Reagan also
reported her suspicions to Blue Cross and Blue Shield of Texas
(“BCBS”), the fiscal intermediary between the HCFA and individual
Medicare claimants in Texas.3 Finally, Reagan filed a lawsuit
1
The “East Texas Defendants” consist of East Texas Medical
Center Regional Healthcare System, East Texas Medical Center
Regional Health Facilities, and East Texas Medical Center.
2
Most Medicare providers are reimbursed based on a
“prospective payment system” whereby the providers are paid
prospectively-fixed rates per patient discharge according to the
patient’s primary diagnosis. See 42 U.S.C. § 1395ww(d), 42 C.F.R.
Part 412. Certain providers, such as psychiatric hospitals like
UPH, are reimbursed on a “reasonable cost basis” where they are
reimbursed the reasonable costs actually incurred in providing
services to Medicare beneficiaries. See 42 C.F.R. Part 413.
3
A “fiscal intermediary” is a private entity, typically an
insurance company, that acts on behalf of the HHS Secretary to
ascertain the Medicare payment due to the provider based upon the
records the provider submits. See 42 U.S.C. § 1395h, 42 C.F.R. §§
3
against UPH, East Texas Medical Center, and others in Texas state
court, alleging that she was terminated because she refused to go
along with the defendants’ alleged illegal Medicare reporting.
While the state court lawsuit was still pending, Reagan filed
the instant action, on behalf of the United States government,
under the qui tam provisions of the False Claims Act, 31 U.S.C. §
3729, et seq., (“FCA”) and the government chose not to intervene.4
Specifically, Reagan alleged claims under §§ 3729(a)(1)-(3) and (7)
of the Act.
Reagan’s qui tam complaint alleged false statements to the
government in essentially three general categories. First, Reagan
claimed that UPH misrepresented its compliance with the CON
requirements in reports filed with BCBS. Second, she alleged that
421.3, 421.100-421.128. The fiscal intermediary will make payments
to the provider throughout the year based upon projections of the
provider’s allowable Medicare related expenses. See 42 C.F.R. §
413.64(e). The final determination of how much the provider should
be paid for the year is made based on a year end cost report filed
by the provider. See 42 C.F.R. §§ 413.24(f)(4), 413.64(f). After
reviewing this report and requesting additional information if
necessary, the intermediary will issue a Notice of Program
Reimbursement (“NPR”) indicating the total reimbursement due to the
provider for the year. If the total projected payments for the
year are less than the NPR amount, the Secretary will pay the
deficiency; if, however, the provider has been overpaid, it must
remit the excess to the intermediary. 42 C.F.R. §§ 405.1803(c),
413.64(f).
4
Under the FCA, after a relator has filed suit the action is
sealed and stayed and the United States is notified. 31 U.S.C. §
3730(b)(2). The complaint must remain under seal for at least 60
days while the government decides whether to intervene. Id. If,
as in this case, the government chooses not to intervene, the
relator may then prosecute the action herself. 31 U.S.C. §
3730(4)(B).
4
UPH falsely certified that it was in compliance with applicable
Medicare regulations. Specifically, Reagan argued that UPH did not
pay “reasonable” rates for goods and services purchased from East
Texas, its parent, and failed to keep proper records of its actual
expenditures. Finally, Reagan alleged that UPH misstated its
status as a “related party” to East Texas and, as a result,
received reimbursements to which it was not entitled.5 The district
court granted summary judgment in favor of the appellees, holding
that Reagan’s qui tam suit was barred by the Act’s jurisdictional
bar (31 U.S.C. § 3730(e)(4)(A)) and, alternatively, that Reagan’s
claims under §§ 3729(a)(1),(2) and (7) failed on the merits.
II
We must first address whether the district court properly
dismissed Reagan’s claims for lack of jurisdiction under the FCA’s
“public disclosure bar”, found at 31 U.S.C. § 3730(e)(4). If the
jurisdictional bar applies, then dismissal was proper and we need
go no further. “[A] challenge under the FCA jurisdictional bar is
necessarily intertwined with the merits” and is, therefore,
properly treated as a motion for summary judgment. United States
5
As discussed infra, certain costs, such as capital costs and
costs paid to a “related entity”, are subject to specific Medicare
restrictions. See 42 C.F.R. §§ 413.130, 413.17. Related party
transactions, however, are not prohibited; instead, the provider
can only be reimbursed for the actual cost incurred by the related
entity. 42 C.F.R. § 413.17. This actual cost must not exceed the
price for which comparable services, products, or facilities could
be purchased elsewhere. Id.
5
ex. rel. Laird v. Lockheed Martin Eng’g & Sci. Servs., Co., 336
F.3d 346, 350 (5th Cir. 2003) (citations and quotations omitted).
A grant of summary judgment is reviewed de novo, using the
same standard as applied by the district court. Id. at 350-51;
Performance Autoplex II Ltd. v. Mid-Continent Casualty Co., 322
F.3d 847, 853 (5th Cir. 2003). A grant of summary judgment is
proper if, viewing the evidence and inferences drawn from that
evidence in the light most favorable to the non-moving party, there
is no genuine issue of material fact and the moving party is
entitled to judgment as a matter of law. FED. R. CIV. P. 56(c);
Daniels v. City of Arlington, Tex., 246 F.3d 500, 502 (5th Cir.
2001). At the summary judgment stage, a court may not weigh the
evidence or evaluate the credibility of witnesses, and all
justifiable inferences will be made in the non-moving party's
favor. Morris v. Covan Worldwide Moving, Inc., 144 F.3d 377, 380
(5th Cir. 1998) (citing Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 255 (1986)).
A
In general terms the FCA permits certain “suits by private
parties on behalf of the United States against anyone submitting a
false claim to the government”. Laird, 336 F.3d at 351.6
6
For general information regarding the procedure and history
of qui tam actions under the False Claims Act, see Riley v. St.
Luke’s Episcopal Hosp., 252 F.3d 749, 752-53 (5th Cir. 2001) (en
banc), and Searcy v. Phillips Elec. N. Am. Corp., 117 F.3d 154, 160
(5th Cir. 1997)
6
The district court held that Reagan’s FCA claims were barred
under the “public disclosure” provision set forth in 31 U.S.C. §
3730(e)(4)(A). Under this provision:
No court shall have jurisdiction over an
action . . . 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
investigations, or from the news media, unless
. . . the person bringing the action is an
original source of the information.
This jurisdictional inquiry requires us to consider three
questions: “(1) whether there has been a ‘public disclosure’ of
allegations or transactions, (2) whether the qui tam action is
‘based upon’ such publicly disclosed allegations, and (3) if so,
whether the relator is the ‘original source’ of the information.”
Laird, 336 F.3d at 352 (citing United States ex rel. Federal
Recovery Services, Inc. v. Crescent City E.M.S., 72 F.3d 447, 451
(5th Cir. 1995)). The purpose of this jurisdictional bar is to
accommodate the primary goals of the False Claims Act: (1)
“promoting private citizen involvement in exposing fraud against
the government” and (2) “preventing parasitic suits by
opportunistic late-comers who add nothing to the exposure of
fraud”. Laird, 336 F.3d at 351 (citing United States ex rel.
Rabushka v. Crane Co., 40 F.3d 1509, 1511 (8th Cir. 1994)).
(1)
Under 31 U.S.C. § 3730(e)(4), we first ask “whether there has
been a ‘public disclosure’ of allegations or transactions”. Laird,
7
336 F.3d at 352. The “public disclosure” jurisdictional bar
applies where the allegations have been disclosed in “a criminal,
civil, or administrative hearing, in a congressional,
administrative, or government accounting office report, hearing
audit, or investigations, or from the news media”. 31 U.S.C. §
3730(e)(4)(A).7 In the instant case the district court held that
Reagan’s allegations had been publicly disclosed in three ways:
(1) Reagan’s state court lawsuit; (2) BCBS and HHS audits and
investigations; and (3) documents procured by Reagan pursuant to
requests under the Freedom of Information Act, 5 U.S.C. § 552 et
seq.
With respect to Reagan’s state court lawsuit, it is clear that
the allegations disclosed there were publicly disclosed. “Any
information disclosed through civil litigation and on file with the
clerk’s office should be considered a public disclosure of
allegations in a civil hearing for the purposes of section §
3730(e)(4)(A)” and “[t]his includes civil complaints”. Fed.
Recovery Serv., Inc., 72 F.3d at 450 (quoting United States ex rel.
Siller v. Becton Dickinson & Co., 21 F.3d 1339, 1350 (4th Cir.
1994)). We will therefore move to the second method of disclosure
at issue here, which requires more discussion.8
7
Because we find that all of the relevant public disclosures
fall within the enumerated list, we need not consider Reagan’s
argument that the list is exhaustive.
8
The question arises why we need go any further to determine
whether there has been a public disclosure, inasmuch as our finding
8
With respect to the BCBS audits and the HFCA investigation,
the district court held that the information that formed the basis
of Reagan’s qui tam suit had been publicly disclosed through both
the audits and the HFCA investigation. Specifically, the district
court concluded that the BCBS audit was central to the issue of
whether UPH and ETMC were “related entities” and that the HFCA
investigations resulted in public disclosures. Thus, according to
the district court, these audits and investigations put the
government “on the trail” of the alleged fraud.
Reagan argues that the BCBS audits and the HCFA investigation
did not constitute a public disclosure within the meaning of 31
U.S.C. § 3730(e)(4), because the reports did not disclose both (1)
the true state of facts and (2) that the defendants represented the
facts to be something other than what they were. See United States
ex rel. Minn. Ass’n of Nurse Anesthetists v. Allina Health Sys.
Corp., 276 F.3d 1032, 1048-49 (8th Cir. 2002). The record fails to
support this contention. The core of Reagan’s complaint is that
ETMC and UPH were related entities, so they should not have been
reimbursed by Medicare for anything other than the actual cost of
that the state court law suit constituted a public disclosure of
the information underlying Reagan’s FCA claims. It is necessary
for us to address the disclosures made in the HCFA investigations,
BCBS audits, and FOIA requests because it is not altogether clear
the extent to which the state law claim disclosed all of the basic
allegations made in Reagan’s FCA claim. It is clear, however, that
when the BCBS audits, the HCFA investigation, the FOIA requests,
and the state court lawsuit are considered as a whole, the entire
basis of her claim has been disclosed within the meaning of the
FCA.
9
the goods and services sold to one another. In cost reports
submitted from 1985 to 1990, UPH claimed that it was not related to
any East Texas entity. In 1987 –- four years before Reagan came
onto the scene –- BCBS conducted an audit of the UPH cost report
for fiscal year 1985, precisely because it believed this
characterization of the relationship to be false. Based on this
audit and another conducted in 1991, BCBS determined the “true
state” of facts -- that UPH and ETMC were related entities –- and
reduced reimbursements for ancillary services and hospital lease
payments by a total of approximately $2.25 million.
Reagan further argues that the information she later provided
to BCBS and HCFA in 1995 cannot be regarded as “publicly
disclosed”, because to treat it as such would convert a statutory
pre-condition to filing suit -- disclosure of the alleged facts to
the government -- into a jurisdictional bar. Reagan’s disclosure
to BCBS and HFCA, however, is not the government disclosure
required by § 3730(e)(4)(B). Under the FCA, a qui tam plaintiff,
before filing suit, must voluntarily provide the relevant
information to the United States Attorney, FBI, other suitable law
enforcement office, or the agency or official responsible for the
particular claim in question. See United States ex rel. Matthews
v. Bank of Farmington, 166 F.3d 853, 866 (7th Cir. 1999). The
explicit terms of the Act require that “[a] copy of the complaint
and written disclosure of substantially all material evidence and
information the person possesses” must be served on the government
10
to give it the opportunity to intervene. 31 U.S.C. § 3730(b)(2).
The statutorily required government disclosure was thus made in
September 1997 when Reagan filed her initial complaint in this
case. The BCBS audits and HFCA investigations, on the other hand,
were conducted before Reagan initiated this lawsuit and were
properly considered public disclosures.9
We next turn to consider whether Reagan’s FOIA requests also
constitute a “public disclosure”. Although this issue has not been
considered by this court, it was addressed by the Third Circuit in
United States ex rel. Mistick v. Hous. Auth. of the City of
Pittsburgh, 186 F.3d 376 (3rd Cir. 1999), where the court held that
“the disclosure of information in response to a FOIA request is a
‘public disclosure’” under § 3730(e)(4)(A). Mistick, 186 F.3d at
383. The Mistick court reasoned that the specific purpose of the
FOIA was to make certain information available for public scrutiny.
Id. The court also found it persuasive that the Supreme Court had
9
Reagan’s argument is, in essence, that no disclosure to the
government by the relator should be considered a public disclosure.
Her reasoning is not fully clear to us. The best translation of
her argument, however, is that a relator is hoisted on her own
petard, if the relator, acting in good faith to remedy the fraud,
discloses to the government the fraudulent activity, and then,
based on that disclosure, is barred from bringing suit. This
argument fails wholly to take into account the original source
exception under the statute: if the relator is the original source
of such disclosure to the government, the “public disclosure bar”
does not apply. Here, for example, if Reagan had been the original
source of the disclosure to the government –- i.e., if she had
“direct and independent knowledge” of the information publicly
disclosed to BCBS and HCFA –- she would not be barred from bringing
suit.
11
held that a FOIA request was a “public disclosure” for the purposes
of the Consumer Product Safety Act, 15 U.S.C. § 2055(b)(1). Id.
(citing Consumer Product Safety Commission v. GTE Sylvania, Inc.,
447 U.S. 102, 108-09 (1980)) (stating that “[a] disclosure pursuant
to the FOIA . . . seem[s] to be most accurately characterized as a
‘public disclosure’ within the plain meaning of [the Consumer
Product Safety Act]”). Finally, the court concluded that the
agency response to the FOIA request “constituted an ‘administrative
. . . report’”, which is an enumerated public disclosure under §
3730(e)(4)(A), because the response (1) “constituted official
government action” -- i.e. it is administrative -- and (2)
“provides information and notification regarding the results of the
agency’s search for the requested documents” -- i.e., it is a
report. Mistick, 186 F.3d at 383. Accordingly, we are persuaded
by the reasoning of Mistick and hold that the response to Reagan’s
FOIA request is an administrative report constituting a public
disclosure under § 3730(e)(4)(A).10
For all the reasons set forth above, we conclude that a
“public disclosure” has occurred within the meaning of the FCA.
(2)
10
The only contrary case cited by Reagan supporting her
contention that the FOIA response is not a “public disclosure” is
an unpublished opinion from the Fourth Circuit that offers no
analysis. See United States ex rel. Bondy v. Consumer Health
Found., 2001 WL 1397852 at *3 n.2 (4th Cir. Nov. 9, 2001).
12
We now turn to the next question of our jurisdictional
inquiry: whether Reagan’s qui tam action is “based upon” the
publicly disclosed allegations. Laird, 336 F.3d at 352. “An FCA
qui tam action even partly based upon public allegations or
transactions is nonetheless ‘based upon’ such allegations or
transaction[s]”. Fed. Recovery Serv., 72 F.3d at 451 (quoting
United States ex rel. Precision Co. v. Koch Indus., Inc., 971 F.2d
548, 552 (10th Cir. 1992)).
Reagan’s qui tam action is certainly “partly based” -- indeed,
in significant part -- upon her state court complaint, the BCBS and
HCFA investigations, and the responses she received from her FOIA
requests, all “publicly disclosed allegations”. First, Reagan’s
state court lawsuit alleged that she was terminated from UPH
because she refused to “become complicit in fraud and to aid and
abet in criminal conduct” when she refused to go along with the
defendants’ alleged illegal Medicare reporting -- essentially the
same allegations at issue in this case. Moreover, BCBS and the
HCFA had investigated and reported on essentially the same
allegations made by Reagan -- noncompliance with the CON and the
rules regarding reimbursements for related parties -- before Reagan
filed the instant lawsuit. Finally, Reagan attested that the
information she obtained pursuant to the FOIA requests
substantiated the allegations she made both in state court and her
current claims under the FCA. See Fed. Recovery Serv., 72 F.3d at
451 (holding that a qui tam plaintiff cannot “avoid the
13
jurisdictional bar simply by adding other claims that are
substantively identical to those previously disclosed in the state
court litigation”).
B
Finally, because we have found that there has been a public
disclosure, and that the instant action is “based upon” those
disclosures, we do not have jurisdiction under 31 U.S.C. §
3730(e)(4) unless Reagan “is the ‘original source’ of the
information”.11 Laird, 336 F.3d at 352. The “original source”
exception explicitly requires the satisfaction of a two-part test:
“(1) the relator must demonstrate that he or she has ‘direct and
independent knowledge of the information on which the allegations
are based’ and (2) the relator must demonstrate that he or she has
‘voluntarily provided the information to the Government before
filing’ his or her qui tam action.” Laird, 336 F.3d at 352
(quoting 31 U.S.C. § 3730(e)(4)(B)). It is undisputed that Reagan
provided her “information” to the government before filing this qui
tam action; therefore, the relevant inquiry is whether she had
“direct and independent knowledge of the information on which the
allegations are based”. Laird, 336 F.3d at 352.
11
The FCA defines an original source as “an individual 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).
14
Under this standard, the relator is not required to “have
‘direct’ and ‘independent’ knowledge of each false claim alleged in
his complaint”. Laird, 336 F.3d at 352-53.12 Instead, the relator
is simply required to possess direct and independent knowledge of
the “information on which the publicly disclosed allegations are
based”. Laird, 336 F.3d at 355.
The plain meaning of the term “direct” requires “knowledge
derived from the source without interruption or gained by the
relator’s own efforts rather than learned second-hand through the
efforts of others.” Laird, 336 F.3d at 355 (citing WEBSTER’S NEW
INTERNATIONAL DICTIONARY 640 (3d ed. 1961)). The relator’s knowledge
12
At the time of the district court’s decision in this case
this court had not addressed the meaning of the phrase “information
on which the allegations are based”. The district court, however,
followed the magistrate judge’s recommendation and adopted the
interpretation followed by a minority of Circuit Courts of Appeals
and defined the phrase to mean “the information underlying or
supporting the fraud allegations in the plaintiff’s qui tam
complaint”. See Laird, 336 F.3d at 354; U.S. ex rel. Stone v.
Rockwell Int’l Corp., 282 F.3d 787, 802 (10th Cir. 2002).
After the district court’s decision, however, this court
decided Laird, in which we rejected the approach taken by the
district court. Instead, we followed the majority approach,
defining the phrase as “information on which the publicly disclosed
allegations are based rather than the information contained in the
relator’s qui tam complaint.” Laird, 336 F.3d at 355.
Although Laird has determined that the district court applied
the wrong standard, the error does not preclude our resolution of
this issue, without remand, utilizing the Laird standard. Both
parties have briefed the Laird standard to this court in light of
the record, and on review of the summary judgment, we may consider
the record de novo. Neither party has advanced the suggestion that
application of Laird requires further factual development.
15
is considered “independent” if it is not derived from the public
disclosure. See Laird, 336 F.3d at 355 (citing United States ex
rel. Findley v. FPC-Boron Employees’ Club, 105 F.3d 675, 690 (D.C.
Cir. 1997); Minn. Ass’n of Nurse Anesthetists, 276 F.3d at 1048-49;
United States ex rel. McKenzie v. Bellsouth Tele., Inc., 123 F.3d
935, 941 (6th Cir. 1997)). Under this approach, we are required to
“look to the factual subtleties of the case before [us] and attempt
to strike a balance between those individuals who, with no details
regarding its whereabouts, simply stumble upon a seemingly
lucrative nugget and those actually involved in the process of
unearthing important information about a false or fraudulent
claim.” Laird, 336 F.3d at 356.
Our review of the qui tam claims made by Reagan convinces us
that the knowledge underlying these claims is not “independent”
within the meaning of 31 U.S.C. § 3730(e)(4)(B). We arrive at this
conclusion because the knowledge is derived almost entirely from
information that has been publicly disclosed. Reagan’s knowledge
of events surrounding the alleged non-compliance with the CON, as
well as her knowledge of alleged misrepresentations regarding the
amendment of the CON, are based entirely on public records of
testimony by East Texas executives at the CON hearings in the early
1980s.
The only matter in which the information proffered by Reagan
arguably is not derived entirely from public records implicates
(slightly) the “related entity” status of UPH and ETMC. Reagan
16
states that she “observed the invoices” that ETMC sent to UPH each
month for the building’s lease and ancillary services and that she
“knew from her experience as a hospital administrator” that other
hospitals paid less for similar services and facilities. Reagan
argues that based on this knowledge, and after her discharge from
UPH, she began “piecing together fragments of documentation”
through FOIA requests, interviews, and review of documents in the
state archives, ultimately concluding (as indeed had BCBS in 1987
and 1991) that UPH and ETMC were “related entities”.
In Laird, we held that the original source exception requires
independent knowledge of “information on which the publicly
disclosed allegations are based . . . .” 336 F.3d at 355. In this
case, the public disclosure of the allegations –- i.e., the BCBS
and HCFA investigations and the CON testimony –- was based upon
events that transpired years before Reagan joined UPH. She admits
that her knowledge of these events is not “independent”, but
instead is based on public records.
Thus, if Reagan can be said to have informed the government of
anything that was new and independent from the earlier audits and
investigations, it was only her disagreement with the results of
the investigative work of BCBS and the HCFA; that is, that BCBS and
the HCFA simply failed to recognize fully the fraudulent nature of
the defendants’ activities. This proffer is not information
17
obtained from “independent” knowledge; it is only a difference of
opinion with respect to the same information.13
Neither does Reagan’s knowledge meet the “directness”
requirement of 31 U.S.C. § 3730(e)(4)(B). Again, by her own
admission, the knowledge that she brings to the case is almost
entirely indirect –- that is, based on research and review of
public records, not, with minor exceptions, her own observation.
Reagan argues, however, that her research and expertise enabled her
to recognize the significance of the limited information to which
she was privy and thereby “unearth” the knowledge that formed the
basis of her claims.
It is true that some other circuits have held that a relator
may meet the “direct and independent knowledge” requirement by
13
Reagan argues that, although the BCBS audits and HCFA
investigation had already alerted the government to the related
status of UPH and ETMC, she may still qualify as an original source
if she made the same discovery independently. She relies on the
Eighth Circuit’s decision in Minnesota Ass’n of Nurse Anesthetists
for the proposition that the original source exception of 31 U.S.C.
§ 3730(e)(4)(B) “does not distinguish between those who first bring
a claim to light and others who later make the same discovery
independently”. 276 F.3d at 1048.
Unlike a number of other circuits, this court has yet to
decide whether a party who independently and directly learns of
information already publicly disclosed may qualify as an
independent source. Compare Minn. Ass’n of Nurse Anesthetists, 276
F.3d at 1048, with Wang v. FMC Corp., 975 F.2d 1412, 1418-20 (9th
Cir. 1992) (holding that only a person who caused the public
disclosure may be an original source). Because Reagan’s
independent knowledge of the cost reports from 1991 is not
knowledge of the information required by our holding in Laird
(i.e., information on which the publicly disclosed allegations were
based), we need not decide this question here.
18
contributing her own investigative efforts and experience to
develop allegations of fraud. See, e.g., United States ex rel.
Cooper v. Blue Cross & Blue Shield of Fla., Inc., 19 F.3d 562, 568
(11th Cir. 1994); CLAIRE M. SYLVIA, THE FALSE CLAIMS ACT: FRAUD AGAINST THE
GOVERNMENT § 11:63 (2004) (citing United States ex rel. Stinson,
Lyons, Gerlin & Bustamante, P.A. v. Prudential Ins. Co., 944 F.2d
1149, 1161 (3d. Cir. 1991); United States ex rel. Springfield
Terminal Ry. Co. v. Quinn, 14 F.3d 645, 657 (D.C. Cir. 1994)).
These cases, however, do not mean that second-hand information may
be converted into “direct and independent knowledge” simply because
the plaintiff discovered through investigation or experience what
the public already knew. Instead, the investigation or experience
of the relator either must translate into some additional
compelling fact, or must demonstrate a new and undisclosed
relationship between disclosed facts, that puts a government agency
“on the trail” of fraud, where that fraud might otherwise go
unnoticed. See, e.g., U.S. ex rel. Cooper, 19 F.3d at 564, 568
(qui tam plaintiff was considered an original source because his
investigation first alerted HCFA to specific violations of Medicare
Secondary Payer law by Blue Cross Blue Shield of Florida); U.S. ex
rel. Springfield Terminal Ry. Co., 14 F.3d at 648, 657 (plaintiff
was deemed an original source because its investigation of phone
records and pay vouchers from ongoing litigation first revealed
fraud of a federally appointed arbitrator).
19
Reagan’s extensive investigation did not put the government
“on the trail” of any new malfeasance; it only led her to re-tread
the same ground that BCBS and HCFA had already covered, and to
reach a different conclusion. BCBS had already investigated ETMC’s
status as a related party before Reagan began working at UPH; and
in 1991 -- approximately the same time Reagan began working at UPH
-- had determined that UPH and ETMC were indeed related parties.
As a result, it reduced reimbursements to UPH by over $2.25 million
to reflect overpayments on the lease and for ancillary services.
Furthermore, when BCBS also investigated Reagan’s claims regarding
the defendants’ non-compliance with the CON in 1995, it determined
that the defendants were in compliance.14
For the reasons discussed above, Reagan’s investigation did
not unearth important information about a false or fraudulent
claim. Laird, 336 F.3d at 356. Instead, Reagan took disclosures
that had already been investigated and reported by BCBS and HCFA
and, based on her own experience, claimed that they were
fraudulent; this disagreement with the legal conclusions of BCBS
and HCFA does not qualify as “information” under the original
source exception.
14
At Reagan’s behest, the results of the BCBS audits in 1987,
1991, and 1995 were reviewed by HCFA Regional senior auditor
Freddie Kemp. Kemp determined that no further investigation of
Reagan’s allegations was necessary. In 1996, Kemp again reviewed
the BCBS audits and found that they were well documented and
“extraordinarily thorough”.
20
Thus, because we conclude that Reagan was not the original
source of the information underlying her claims, we hold that the
claims are jurisdictionally barred by 31 U.S.C. § 3730(e)(4). The
district court’s dismissal of Reagan’s claims for lack of
jurisdiction is therefore
AFFIRMED.
21
United States v. E TX Med Regn Sys
Court: Court of Appeals for the Fifth Circuit
Date filed: 2004-09-21
Citations: 384 F.3d 168
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