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Public Disclosure Bar Defense Under False Claims Act Jeopardized by Recent Federal Amendments

The public disclosure bar under the False Claims Act (FCA) recently spelled defeat for the whistleblower plaintiff in U.S. v. McKesson Corp. In this action, which arose under the FCAs qui tam provisions, a federal court in Mississippi granted summary judgment in favor of McKesson and the other defendants after finding that the claim brought by the qui tam whistleblower plaintiff was based on publicly disclosed information and that he was not the original source of that information. During the relevant period for this ruling, the jurisdictional bar under the FCA provided a solid defense mechanism for companies defending qui tam lawsuits brought by parasitic whistleblowers.

Recent amendments to the public disclosure bar provision of the FCA, however, may have severely narrowed a companys future ability to rely on this defense. Specifically, the Patient Protection and Affordable Care Act (PPACA), which was signed into law by President Obama on March 23, 2010, fundamentally altered this statutory provision in several different ways. First, the term publicly disclosed now includes only information from federal sources and the news media, not state or local proceedings. Second, the original source exception has been expanded to include persons who have knowledge that is independent of and materially adds to publicly disclosed information. And, third, the Department of Justice has been given significant discretion to oppose the dismissal of qui tam actions even if they are based on substantially the same allegations or transactions that have already been publicly disclosed.

 

Reprinted with Permission ©2010 Thomson Reuters


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