Whistleblower’s Receipt of Report of Government’s Investigation of His Claims Ruled a Public Disclosure

Posted by Jaime L.M. Jones and Brenna Jenny

A decision earlier this month by the Central District of California that the public disclosure bar had been triggered marked an unusual ruling in which the court determined that a whistleblower whose allegations led to an administrative investigation may be precluded from sharing in the settlement funds due to the disclosure of the resulting report to the relator himself. United States ex rel. Swoben v. SCAN Health Plan, No. 09-cv-05013 (C.D. Cal. June 1, 2015).

Relator James Swoben, a former employee in the claims processing department for SCAN, a health plan servicing Medicare Advantage (“MA”) and Medi-Cal beneficiaries, approached a state legislator with allegations that SCAN was being paid by both federal and state programs for the same services. The legislator referred the information to the State of California Controller’s Office (“SCO”), which opened an investigation. The SCO concluded that Swoben was not certain that SCAN was in fact receiving duplicative payments; nonetheless, the SCO ultimately released a report determining that the state of California had failed to take into account revenues SCAN received from Medicare when determining SCAN’s Medi-Cal capitated payment rates.

The SCO’s report was released to federal and state agencies and legislators, and a copy was also provided to Swoben. Following this circulation, Swoben filed a qui tam suit against SCAN, alleging that SCAN had received duplicative payments and had committed fraud and FCA violations in the course of these transactions. Swoben later amended his complaint to add other MA plans and providers servicing those plans. In August 2012, SCAN reached a settlement with the governments, and in July 2013, the court granted motions to dismiss with prejudice as to the remaining defendants under Rule 12(b)(6). The court determined that granting leave to amend would be futile because, among other reasons, the “new” facts Swoben sought to add to his fourth amended complaint were based on publicly available information. The court did not rule on whether the original allegations against SCAN, and subsequently, the additional defendants, had been based on public disclosures.

Following the dismissal, it became apparent that Swoben and the United States were at odds over whether he should share in the recovery from SCAN. Swoben served interrogatories on the United States requesting information as to the government’s position on whether the public disclosure bar had been triggered through the SCO report. The government maintained that it had been, which would preclude Swoben from being entitled to share in the proceeds of SCAN’s 2012 settlement. Swoben responded by filing a motion for partial summary judgment, seeking to establish that the court was not deprived of subject matter jurisdiction over his FCA claims through application of the public disclosure bar.

The court first determined that because the pre-ACA amended public disclosure bar applied, the bar was not limited to federal actions and the state-level administrative report and investigation could implicate the public disclosure bar. The court then determined that Swoben’s complaint was “based on” the SCO report because Swoben had merely layered allegations of fraud and FCA violations on top of conclusions restated from the report. Finally, the court ruled that the report was publicly disclosed, by applying the Ninth Circuit’s rule that disclosure of the results of an investigation to “outsiders” constitutes a public disclosure, where outsiders include anyone who was not a current employee of the investigation’s target or an employee of the government entity conducting the investigation. Because Swoben had not been an employee of SCAN at the time he received the report detailing the results of the investigation, and was not a government employee, his own receipt of the report triggered the public disclosure bar as to his qui tam claims. Swoben will be allowed to file a motion to attempt to establish that he can still share in the government’s recovery against SCAN because he is an original source of the information underlying those claims.

A copy of the court’s opinion can be found here.