Sixth Circuit Issues Pivotal Ruling Involving ‘Public Disclosure Bar’ in FCA Cases

The False Claims Act’s public disclosure bar prohibits any whistleblower from filing a claim if the facts of the claim are based on information that would be readily available to the public, regardless of whether the whistleblower actually knew about or reviewed the public information prior to initiating the lawsuit. However, recent appellate court decisions have revealed some legal tension in the definition of “disclosure,” with many defendants claiming that all whistleblower lawsuits that reach the investigatory stage should automatically bar later-filed complaints.

In a recent decision out of the Sixth Circuit, the court held the opposite – ruling that confidential investigations by government agencies and third parties do not necessarily trigger the public disclosure bar if there is, practically speaking, no way for the public to have gathered the information. The holding represents a strong majority across the circuits, with only the Seventh Circuit maintaining that any third-party awareness of the fraud is enough to trigger the public disclosure bar.

Details of the Sixth Circuit’s Holding

In United States ex rel. Whipple v. Chattanooga-Hamilton County Hospital Authority, the Sixth Circuit considered whether relator Whipple should have been prevented from filing a lawsuit under the False Claims Act against the Chattanooga-Hamilton County Hospital Authority since the hospital had already been investigated by the Department of Health and Human Services for several possible billing violations. The case involved allegations of healthcare fraud involving Medicare and Medicaid, and was originally triggered by an anonymous tip resulting in the launch of a formal government investigation. After the OIG’s review of the defendant’s billing records, the hospital retained an independent third party accounting agency to conduct an audit. The result of the investigations revealed several billing discrepancies and the defendant voluntarily paid $500,000 to the government before any lawsuit was initiated.

About two years later, a former employee of the hospital authority initiated a whistleblower lawsuit against it, relying on information gathered in his position as a temporary revenue cycle consultant – a position he held at the same time the company was under investigation by the OIG. Agreeing with the defendant’s contentions that the investigation and third-party audit constituted a “public disclosure” of the facts of the fraud, the District Court dismissed the case. However, the whistleblower initiated an appeal, which ultimately proved successful.

Sixth Circuit’s Analysis of the Public Disclosure Bar

Upon a review of the facts presented at trial and each side’s oral arguments on appeal, the Sixth Circuit concluded that the OIG’s investigation and third-party audit did not constitute a public disclosure of the information relied upon by the relator, and his whistleblower case was to be reinstated. In so doing, the court analyzed whether the investigative activities having occurred prior to the filing would be considered publicly disclosed within the plain meaning of that term.

To help solve this inquiry, the Court opted to rely on the interpretation of “public disclosure” relied upon by virtually all other circuit courts, excluding the Seventh Circuit. In determining whether the information as to the investigation or audit was publicly disclosed, the court opined that this would require some “affirmative act of disclosure to the public outside the government.” In other words, the bar is not triggered merely by the government’s own internal awareness of the situation.

In reaching this point, the Court then pointed to the defendant’s other argument: the third-party auditor (not a government agency) was made aware of the situation. The Court rebutted this assertion by highlighting that the auditors were “strangers to the fraud,” were not made aware of any of the details of the investigation, and were not potential witnesses. In sum, the Court concluded that the information was not publicly disclosed.

This case helps to solidify the meaning of “public disclosure” in terms of whether a relator can continue with a case even after a government investigation.

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