When do qui tam whistleblowers qualify as an original source?
An interesting opinion came out a few weeks ago from the U.S. District Court for the Eastern District of Wisconsin, and I thought it well worth a post. The opinion is important because it discusses in a detailed and comprehensive way when qui tam whistleblowers qualify as an “original source” for purposes of bringing a case. The case cite is U.S. ex rel. Nelson v. Sanford-Brown, Ltd.
In Sanford-Brown the relator filed a qui tam suit against two educational institutions, alleging violations of the False Claims Act. The defendants moved to dismiss the fraud allegations, arguing that the FCA’s public disclosure provision barred the relator’s claims, because the alleged fraud had been previously publicly disclosed in various news reports, lawsuits, and government investigation. A few words about the nature of the original source requirement will most likely prove helpful.
What is the original source requirement and why is it so important?
Pursuant to 31 U.S.C. §3730(e)(4) of the federal False Claims Act only the original source of the information or the Attorney General may bring a case if there has been a public disclosure of the information on which a case is based. This important limitation is, in the world of qui tam whistleblower litigation, known as the public disclosure bar.
There are two parts to the “original source” exception to the public disclosure bar – a relator must have direct and independent knowledge of the false claims, and the relator must voluntarily disclosure the information he or she has to the government prior to filing the case under seal. It is important to remember that in the information age, it is literally impossible for a relator’s lawyer to know for sure whether there has been a public disclosure of the information on which a case is based. It is therefore of paramount importance for lawyers representing qui tam whistleblowers to serve a detailed pre-filing disclosure in each and every case.
As an aside, I am not quite certain how this particular case got into this posture. I say that because the federal FCA was amended by Congress in 2009 and then again in 2010 and 2011, and among the major changes made were changes to the public disclosure bar; more specifically, the public disclosure bar was amended such that it is no longer a jurisdictional affirmative defense that can be raised by defendants…but that is exactly what the defendants in this case did.
Back to the story of the relator in Sanford-Brown.
An examination of the types of pre-filing disclosures and whether they qualify a whistleblower as the original source
Relator asserted that he was the “original source” of the fraud allegations and thus was not prohibited from bringing his case by the public disclosure bar. The relator here had no trouble satisfying first prong — that is, the “direct and independent knowledge” requirement — of the original source provision; the main focus of the opinion is whether relator voluntarily provided the information on which his fraud claims were based to the government before filing his qui tam suit. In that regard, relator submitted several different types of documents which, he claimed, were his initial disclosures to the government. The documents submitted consisted of emails and letters that he either sent to or received from (1) two U.S. Congresswomen, (2) a state education approval board, and (3) a United States Attorney. The court examined each item in turn.
With respect to the relator’s emails to the two U.S. Congresswomen, the court interpreted Seventh Circuit precedent to indicate that an original source’s voluntary disclosure to the government must be made to “an enforcing branch of the Government – one that might be able to do something with the information it receives.” The court suggested that an email to a legislator would not satisfy that requirement. But the court also noted that the legislative history of the FCA’s original source provision defines “government” to include Congress, among other entities. Ultimately, however, the court did not need to decide this issue because it determined that neither email actually discussed the relator’s fraud allegations. The Court next turned its attention to the relator’s emails to the state education board, which it held could not qualify as a disclosure because for the purposes of the federal FCA, the term “government” means only the federal government.
A letter to the U.S. Attorney does the trick
Finally, the court considered the relator’s letter to the U.S. Attorney. There could be no dispute that this letter was a voluntary disclosure to the government as contemplated by the FCA, so the defendants instead tried a different attack, by arguing that since the letter arrived at the U.S. Attorney’s Office only three days before the qui tam suit was filed, it was insufficient to give the government adequate time to investigate the fraud allegations. The court theorized that the voluntary disclosure provision serves no purpose if a qui tam relator can satisfy the requirement by “submitting a draft complaint to the Government mere days or even hours before formally filing their complaint.”
But the court held that by the FCA’s plain language, the relator would comply with the voluntary disclosure requirement “so long as [he] had gotten his letters to the Government even one minute before filing his complaint.”
In reaching this conclusion, the court distinguished the relator’s letter – which the court held was “purely voluntary” – from relators’ statutorily required disclosures to the government pursuant to the FCA’s procedural provisions that require relators to file their qui tam complaints under seal, but to serve on the government a copy of the complaint and a written disclosure of all relevant information in the relator’s possession.
The court had already determined that the relator had direct and independent knowledge of the information his remaining fraud claims were based on, and because the relator was able to establish that he voluntarily disclosed that information to the government prior to filing his qui tam suit, the court held that the relator was an original source who could overcome the FCA’s public disclosure provision.