Ninth Circuit Abrogates Precedent To Loosen Original Source Requirement

Posted by Scott Stein and Paul Belonick

On July 7, 2015, the Ninth Circuit Court of Appeals announced its decision in two consolidated False Claims Act cases, U.S. ex rel. Hartpence v. Kinetic Concepts, Inc. (12-55396) and U.S. ex rel. Godecke v. Kinetic Concepts, Inc. (12-56117), and expressly abrogated the Ninth Circuit requirement that the relator have had a “hand in the [public] disclosure” to qualify as an original source, first announced by the Circuit in U.S. ex rel. Wang v. FMC Corp., 975 F. 2d 1412 (9th Cir. 1992).

As previously reported here and here, the district court dismissed the Relators’ cases under the public disclosure bar on the ground that neither Relator had had a hand in the public disclosure of the information, which occurred through a federal audit in 2007. On appeal, the Relators argued that the “hand in the disclosure” prong of the Wang test was not supported by the plain language of the FCA, and that Wang had been abrogated by the Supreme Court’s decision in Rockwell Int’l Corp., v. United States, 549 U.S. 457 (2007), which held that the “direct and independent knowledge” that a relator must have under the FCA to qualify as an original source is the information upon which his or her own complaint is based, and not the information underlying the previous public disclosure.

The Ninth Circuit’s unanimous en banc opinion focused largely on the FCA’s statutory language, and concluded that the original source rule contains two—and only two—requirements: “where an FCA claim has been publicly disclosed before a relator filed his complaint, the relator may bring a qui tam suit if he can show that (1) he has direct and independent knowledge of the information on which the allegations in his court-filed complaint are based and (2) he has voluntarily provided the information to the Government before filing his civil action.”

The court accordingly overruled Wang’s purported third “hand in the disclosure” prong as an incorrect inference taken from the FCA’s legislative history—and not found in the plain text of the statute itself—that the phrase “‘original source of the information’ . . . meant the information underlying the publicly disclosed allegations that triggered the public disclosure bar, rather than the information which underlay the plaintiff’s complaint.” In so holding, the court joined several fellow circuits that have rejected Wang’s third prong, and noted Rockwell’s holding in support.

The court acknowledged Appellee’s contention at oral argument that such a rule might lead to more “parasite” suits, but countered that Congress could reasonably seek to reward whistleblowers with the language as written, and that the plain words of the FCA constrained the court from making its own policy judgments. No doubt, Wang’s “respectful burial,” as the court put it, eases the way for qui tam plaintiffs—at least for suits pre-dating 2010. The 2010 amendments to the FCA, however, altered the language that the court interpreted today, which will lessen the impact that this decision will have long-term. The court then remanded the cases back to the district courts to consider whether the Relators qualify as original sources under the new, post-Wang articulation of the standard.