Ninth Circuit expands “original source” exception, joins sister circuits

An eleven-judge panel unanimously reversed 23 years of precedent in the Ninth Circuit early last week, making it easier for federal False Claims Act (“FCA”) whistleblowers to survive a challenge based on the statute’s public disclosure bar. While last Tuesday’s decision undoubtedly loosens the requirements for whistleblowers in the Ninth Circuit, it does not dramatically expand the scope of the public disclosure bar in a manner inconsistent with other jurisdictions’ interpretation of the statute.

Under the public disclosure provision of the FCA, a whistleblower (also called a “relator”) may not bring a suit if the information on which the allegations are based has already been publicly disclosed—unless the whistleblower can prove that he is an “original source” of that information.

To qualify as an “original source” for purposes of getting around the public disclosure bar, a whistleblower must (1) voluntarily inform the government before filing suit, and (2) have direct and independent knowledge of the allegations on which the suit is based. The 1992 precedent set in Wang ex rel. U.S. v. FMC Corp.—which was overturned on Tuesday—added a third requirement: that the whistleblower must have “a hand in the public disclosure of [the] allegations” of fraud.

The Ninth Circuit now believes that this third requirement went a step too far, adding an extra hurdle not based in the statute’s text. Finding that Wang had been incorrectly decided, the court gave this “nonexistent, extra-textual third requirement” a “respectful burial.” In doing so, the Ninth Circuit joins its sister circuits, many of which had declined to adopt the additional “hand-in-the-public-disclosure” requirement.

Note that the FCA’s public disclosure bar was amended by the Patient Protection and Affordable Care Act. This case addressed only the pre-2010 version of the “original source” provision.

The full opinion is available on the Ninth Circuit’s website. The cases are US ex rel. Steven Hartpence et al. v. Kinetic Concepts Inc., case number 12-55396, and US ex rel. Godecke v. Kinetic Concepts Inc., case number 12-56117. The case overturned by Tuesday’s decision is Wang ex rel. United States v. FMC Corp., 975 F.2d 1412 (9th Cir. 1992).