A Relator’s Reliance is Irrelevant in a Public Disclosure Bar Inquiry

By Sherrie Savett and Jonathan DeSantis

The False Claims Act (“FCA”) contains a public disclosure bar which, generally speaking, prohibits a relator from pursuing FCA claims where the false or fraudulent conduct on which the claims are based has already been publicly disclosed.[1] Various courts have concluded that the public disclosure bar applies even where a relator did not know about the public disclosures and did not rely upon the public disclosures in bringing FCA claims. Ordinarily, this rule harms relators but, as addressed below, it can work in relators’ favor in some circumstances.

The Public Disclosure Bar

The public disclosure bar provides that “[t]he court shall dismiss an action or claim . . . if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed” through certain sources, including media and government reports.[2] The critical questions under the public disclosure bar are whether the underlying fraud was publicly disclosed and if so, whether a relator’s claims are substantially similar to the disclosed fraud.[3] If yes, then a court is required to dismiss a relator’s claims, even if the claims are otherwise meritorious. To answer these questions, courts ask “whether the disclosures in question exposed all the essential elements of the alleged fraud.”[4]

A Relator’s Knowledge of or Reliance Upon Public Disclosures is Irrelevant

Courts have consistently and repeatedly held that a relator’s knowledge of or reliance on public disclosures is irrelevant in determining whether the public disclosure bar applies.[5] Put differently, the public disclosure bar applies even if a relator independently discovered the underlying fraudulent conduct without reference to any public disclosures. Under these circumstances, a relator does not in any way benefit from the public disclosures, and the relator’s lawsuit is not in any way derived from the public disclosures; still, the public disclosure will preclude the relator from moving forward with FCA claims.[6]

Typically, this rule works against relators, because it means that a relator cannot pursue an otherwise meritorious FCA lawsuit even where the relator did not base his or her claims on publicly disclosed materials. For example, if a newspaper article discussed all of the material elements of a fraud and a relator later files an FCA case based upon the same fraudulent conduct disclosed in the newspaper article, it is irrelevant that the relator never read the newspaper article and thus did not rely upon the newspaper article at all in forming his or her FCA claims.

Using the Rule to a Relator’s Advantage

However, this rule could actually benefit relators in certain circumstances best illustrated through the following hypothetical:

-During the deposition of a relator in an FCA lawsuit, a clever defense attorney asks the relator artful questions meant to engender responses suggesting that a public disclosure revealed a defendant’s fraudulent conduct. For example, a defense attorney might ask: “Isn’t it true that a reasonable person could discern from this newspaper article that this company was engaged in the fraud you are alleging?”

-Perhaps fooled by the clever question or not appreciating the ostensible significance of his or her response with respect to the public disclosure bar inquiry, the relator responds affirmatively.

-Actual review of the newspaper article illustrates that it does not reveal the essential element of the defendant’s fraud. Put differently, there is no way that anyone could have known the defendant was engaged in fraud from the newspaper article.

-The defendant then uses isolated snippets of the relator’s testimony in a subsequent motion seeking dismissal of the lawsuit under the public disclosure bar.

Under the above-described rule, a court should reject the relator’s deposition testimony as irrelevant to the public disclosure bar inquiry. If a relator’s knowledge of or reliance upon public disclosures is irrelevant, it follows that a relator’s own testimony as to the contents or significance (or lack thereof) of a public disclosure is also irrelevant.

Rather, courts must look to the public disclosures themselves and ask whether they disclose all of the essential elements of the fraud alleged by the relator. Simply put, public disclosures either disclose all of the essential elements of a defendant’s fraudulent conducts or they do not, and a relator’s testimony cannot change the contents or significance of the public disclosures.

Conclusion

In conclusion, a relator’s characterization of his or her knowledge of or reliance upon publicly disclosed materials is irrelevant to the public disclosure bar inquiry. Whether there is a public disclosure which can bar an FCA claim depends on an analysis of the public disclosure itself. Consequently, courts should reject attempts by defendants in FCA cases to use a relator’s own testimony as evidentiary support for a public disclosure bar argument.

[1] 31 U.S.C. § 3730(e)(4). The public disclosure bar is subject to exceptions, including when the Government opposes dismissal on public disclosure grounds or a relator satisfies the “original source” exception. These exceptions are beyond the scope of this article.

[2] Id.

[3] E.g. United States ex rel. Shea v. Cellco P’ship, 863 F.3d 923, 933 (D.C. Cir. 2017); United States ex rel. Colquitt v. Abbott Labs., 858 F.3d 365, 373 (5th Cir. 2017).

[4] U.S. ex rel. Kester v. Novartis Pharm. Corp., 43 F. Supp. 3d 332, 347 (S.D.N.Y. 2014) (internal quotation marks omitted).

[5] See e.g. U.S. ex rel Mistick PBT v. Hous. Auth. of City of Pittsburgh, 186 F.3d 376, 388 (3d Cir. 1999) (“All of the other circuits that have reached this question have disagreed with the Fourth Circuit and have held that ‘based upon’ means ‘supported by’ or ‘substantially similar to,’ so that the relator’s independent knowledge of the information is irrelevant.”).

[6] See e.g. U.S. ex rel. Biddle v. Bd. of Trustees of Leland Stanford, Jr. Univ., 161 F.3d 533, 540 (9th Cir. 1998).