9th Circuit Sets Aside Case Precedent on Whistleblowers Under False Claims Act

On July 7, 2015, in U.S. ex rel Hartpence v. Kinetic Concepts, Inc., the Ninth Circuit, sitting en banc, created an easier path for whistleblowers to recovery under the False Claims Act for disclosure of fraudulent claims for Medicare reimbursement.  From its introduction to the ruling in consolidated civil qui tam suits:

If a whistleblower informs the government that it has been bilked by a provider of goods and services, and that scheme is unmasked to the public, under what conditions can that same whistleblower recover part of what the guilty provider is forced to reimburse the government? We hold today that there are two, and only two, requirements in order for a whistleblower to be an “original source” who may recover under the False Claims Act: (1) Before filing his action, the whistleblower must voluntarily inform the government of the facts which underlie the allegations of his complaint; and (2) he must have direct and independent knowledge of the allegations underlying his complaint. Abrogating our earlier precedent, we conclude that it does not matter whether he also played a role in the public disclosure of the allegations that are part of his suit. We also hold that the district court erred in its application of the rule that a whistleblower must be the first to file an action seeking reimbursement on behalf of the government based on the fraudulent scheme.

According to one lawyer interviewed here, the impact of the decision to reverse 25-year old case precedent, though important, may be limited to older cases, “since 2010 amendments to the False Claims Act have further clarified the ‘original source’ requirements. 

Additional history — and predicting clarifications —  about the public disclosure provisions of the False Claims Act comes from Albany Law Emeritus Professor Beverly Cohen, in an article from Mercer Law Review, titled “Trouble at the Source: The Debates Over the Public Disclosure Provisions of the False Claims Act’s Original Source Rule.”   For more, see Professor Cohen’s interesting article (in my own law school’s law review, I was happy to discover!), “Kaboom! The Explosion of Qui Tam False Claims Under the Health Reform Law.”