Health Care Reform Bill Strengthens False Claims Act

Health Care Reform Bill Strengthens False Claims Act

When Congress passed the Patient Protection and Affordable Care Act, it put a dent in defense tactics in qui tam cases by better defining the "public disclosure bar" in a way which encourages resolution of false claims act cases on their merits rather than dismissal based on a clever or imaginative 'technical' defense. Often used as a first line defense in cases where the government decides not to intervene, the "public disclosure bar" has resulted in good cases being dismissed because of the lethal combination of its broad language and its jurisdictional prohibition.

Previously, lawsuits "based upon" transactions or allegations publicly disclosed in a criminal, civil, or administrative hearing, a congressional, administrative, or GAO report, hearing, audit, or investigation, or from the new media, were thrown out of court unless the whistleblower was an "original source," having "direct and independent knowledge" of the fraud. Since this defense was a challenge to the court's jurisdiction, defendants filed a motion to dismiss right out of the gate, halting progress on the case until the court determined the issue and prolonging litigation even in cases where the motion failed. Moreover, the words "based upon" were given such a broad swath by courts that they encompassed virtually any information in the public media (or myriad federal, state and local government sources) that could arguably be said to underlie transactions or allegations in the complaint, regardless of whether or not the whistleblower was even aware of it, let alone relied upon it for the complaint.

The new law grants the government the discretion to eliminate defense attempts to dismiss a non-intervened qui tam complaint using the claim that the information had already been publicly disclosed. It also removes the jurisdictional language, keeping defense lawyers from delaying the progress of litigation by putting the case on hold until the issue has been decided. And, perhaps most importantly, it exempts from the term "public disclosure" information that may already exist in state and local government reports and private litigation. Overall, the amendment will keep highly paid corporate defense counsel from scouring the internet, state and local government sources for potential "public disclosures" with the sole purpose of scuttling an otherwise meritorious qui tam case.