Qui Tam

Listen to this article

7^th Circuit Court of Appeals

Case Name: Cause of Action v. CTA

Case No.: 15-1143

Officials: FLAUM, RIPPLE, and SYKES, Circuit Judges.

Focus: Qui Tam

Court does not have subject matter jurisdiction of qui tam claim due to allegations being made public when action commenced.

“Since Bank of Farmington, we have embraced the proposition that because “the purpose of a public disclosure is to alert the responsible authority that fraud may be afoot,” the Government’s possession of the information exposing a fraud is alone sufficient to trigger the public-disclosure bar. Glaser, 570 F.3d at 914 (quoting Feingold, 324 F.3d at 496). Building on this rationale, we held in Feingold that administrative reports containing the critical elements of fraud, when generated by the responsible authority itself, “are publicly disclosed because, by their very nature, they establish the relevant agency’s awareness of the information in those reports.” 324 F.3d at 496. Six years after Feingold, we invoked Bank of Farmington again, this time in the context of an administrative investigation. Glaser, 570 F.3d at 913–14. In Glaser v. Wound Care Consultants, Inc., 570 F.3d 907 (7th Cir. 2009), the qui tam relator alleged that the defendant, a wound-care services provider, had been allowing its nurse practitioner to bill Medicare at a higher rate by representing that the practitioner’s services were “incident to” the services of a physician when, in reality, they were provided without supervision. Id. at 911. Prior to the filing of the complaint, however, the Centers for Medicare & Medicaid Services (“CMS”) had discovered the defendant’s billing irregularities during a routine audit and begun “periodically sen[ding] letters asking [the defendant] to repay funds it received at the higher doctor’s rate.” Id. Based on the CMS’s letters to the defendant, we determined that the responsible authorities possessed more than “mere…awareness of wrongdoing,” which alone would have been insufficient to establish a public disclosure. Id. at 913–14 (citing Bank of Farmington, 166 F.3d at 860 n.5). Rather, the communications indicated that CMS “had knowledge of possible improprieties…and was actively investigating those allegations and recovering funds.” Id. at 914. We held therefore that “the critical elements exposing the transaction as fraudulent [had been] placed in the public domain, and therefore the allegations at the heart of [the relator’s] lawsuit were publicly disclosed by the time her complaint was filed.” Id. (first alteration in original) (citation omitted) (internal quotation marks omitted).”

Affirmed

Full Text

Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.