Opinion ID: 2982785
Heading Depth: 4
Heading Rank: 2

Heading: “Publicly Disclosed”

Text: Although the Supreme Court has not construed the term “public disclosure” under § 3730(e)(4), the Court has cautioned “against interpreting the public[-]disclosure bar in a way inconsistent with a plain reading of its text.” Schindler, 131 S. Ct. at 1892; see also Graham, 559 U.S. at 285 (explaining that the jurisdictional bar is triggered “when the relevant information has already entered the public domain through [one of the three categories of disclosures set forth in § 3730(e)(4)(A)]”). Erlanger urges this court to follow the lead of the Seventh Circuit, which has interpreted the term “public disclosure” to include the disclosure of an alleged false claim to a competent public official who has managerial responsibility for that very claim. See United States ex rel. Mathews v. Bank of Farmington, 166 F.3d 853, 861 (7th Cir. 1999), overruled on other grounds, Glaser v. Wound Care Consultants, Inc., 570 F.3d 907 (7th Cir. 2009). The court in Bank of Farmington reasoned, based on one definition of “public,” that disclosure to a government official “authorized to act for or to represent the community on behalf of government can be understood as public disclosure.” Id. The court found this was consistent with the general purposes of the FCA, and that “disclosure to the public official responsible for the claim effectuates the purpose of disclosure to the public at large.” Id. This court has not addressed the soundness of the Seventh Circuit’s interpretation of “public disclosure”, but all of the other circuits to do so have held that the plain meaning of No. 13-6645 United States, et al. v. Whipple, et al. Page 10 § 3730(e)(4) requires some affirmative act of disclosure to the public outside the government. See, e.g. United States ex rel. Wilson v. Graham Cnty. Soil & Water Conservation Dist., -- F.3d --, 2015 WL 427649, at -5 (4th Cir. Feb. 3, 2015) (noting that no circuit has adopted the Seventh Circuit’s interpretation of “public disclosure”); United States ex rel. Oliver v. Philip Morris USA Inc., 763 F.3d 36, 42 (D.C. Cir. 2014) (holding that the “three channels through which information can be made public for purposes of invoking the bar” do not include “[t]he government’s own, internal awareness of the information”); United States ex rel. Meyer v. Horizon Health Corp., 565 F.3d 1195, 1200 & n.3 (9th Cir. 2009) (citing cases); United States ex rel. Maxwell v. Kerr-McGee Oil & Gas Corp., 540 F.3d 1180, 1186 (10th Cir. 2008) (“Interpreting the FCA to establish release of information into the public domain as the trigger to remove subject matter jurisdiction fits with the purposes of the Act and the 1986 amendments.”); United States ex rel. Rost v. Pfizer, Inc., 507 F.3d 720, 728-30 (1st Cir. 2007) (rejecting Bank of Farmington and citing cases), overruled on other grounds by Allison Engine Co. v. United States ex rel. Sanders, 553 U.S. 662 (2008). In Rost, a leading case involving disclosure of fraud to the government, the First Circuit rejected the Seventh Circuit’s interpretation and held that “[t]he mere fact that the disclosures are contained in government files someplace, or even that the government is conducting an investigation behind the scenes, does not itself constitute public disclosure.” Rost, 507 F.3d at 728. We agree.8 The plain meaning of § 3730(e)(4) “does not bar jurisdiction over qui tam actions based on disclosures of allegations or transactions to the government,” but “only for actions based on qualifying disclosures made to the public.” Rost, 507 F.3d at 728. If a disclosure to the government in an audit or investigation would be sufficient to trigger the bar, the term “public” would be superfluous. Id. at 729 (“If providing information to the government were enough to trigger the bar, the phrase ‘public disclosure’ would be superfluous.”). Moreover, the Seventh Circuit’s interpretation, which equates “government” with “public,” is inconsistent with other uses of the term “government” in the FCA. Id. at 728; accord United States ex rel. Cox v. Smith 8 This court has held, albeit in another context, that FOIA documents do not constitute public disclosures under the FCA until they are requested and received by someone. See United States v. A.D. Roe Co., 186 F.3d 717, 723 (6th Cir. 1999) (“It would be extreme to hold that all information for which someone might potentially make a FOIA request is ‘publicly disclosed.’”). In reaching that conclusion, the court recognized a distinction between actual and merely theoretical availability. Id. (discussing United States ex rel. Schumer v. Hughes Aircraft Co., 63 F.3d 1512, 1519-20 (9th Cir. 1995), vacated on other grounds, 520 U.S. 939 (1997)). No. 13-6645 United States, et al. v. Whipple, et al. Page 11 & Nephew, Inc., 749 F. Supp. 2d 773, 782-84 (W.D. Tenn. 2010) (holding that defendant’s voluntary disclosure of information to government officials was not “public disclosure”). The public-disclosure bar “clearly contemplates that the information be in the public domain in some capacity and the Government is not the equivalent of the public domain.” Kennard v. Comstock Res., Inc., 363 F.3d 1039, 1043 (10th Cir. 2004); see also United States ex rel. Schumer v. Hughes Aircraft Co., 63 F.3d 1512, 1518 (9th Cir. 1995) (“information that was ‘disclosed in private’ has not been publicly disclosed”). Accordingly, we conclude that Erlanger’s disclosure of information to the government in the administrative audit and investigation did not constitute a public disclosure that would trigger the public-disclosure bar. Alternatively, Erlanger maintains that there was a prior public disclosure of fraud in the administrative audit and investigation to others outside the government who were “strangers to the fraud.” United States ex rel. Doe v. John Doe Corp., 960 F.2d 318, 323 (2d Cir. 1992) (finding innocent employees were “strangers to the fraud”); but see Schumer, 63 F.3d at 1518-19 (declining to adopt Doe). In Doe, an investigator divulged allegations of fraud to the defendant’s employees while a search warrant was being executed. 960 F.2d at 322. The court found that many of the employees were “strangers to the fraud” who knew nothing about the scheme, were not targets or potential witnesses, and were under no obligation to keep the information confidential when they learned of the fraud. Id. at 322-23. Erlanger points specifically to disclosures between OIG and AdvanceMed and between Erlanger and the Deloitte auditors. Neither constituted a public disclosure of fraud that would trigger the public-disclosure bar. With respect to AdvanceMed, the district court relied on two disclosures in the administrative audit or investigation of information that revealed the same kind of fraud alleged by Whipple: (1) when the OIG referred the anonymous complaint for review by AdvanceMed; and (2) when the OIG referred the matter for administrative resolution by AdvanceMed. Although AdvanceMed is a private corporation, there is no question that AdvanceMed received the information in question in its capacity as the Medicare Part A Program Safeguard Contractor for Tennessee, and for the purpose of acting on behalf of the government as part of the administrative audit and investigation. Further, these disclosures were confidential and remained so until after this action was filed. No. 13-6645 United States, et al. v. Whipple, et al. Page 12 Having concluded that some disclosure outside the government is required, there is no basis to conclude that these disclosures to AdvanceMed were “public.” See Maxwell, 540 F.3d at 1184-86 (holding communication between federal and state officials in an active investigation under a duty of confidentiality with respect to that information is not a public disclosure insofar as the information is not released into the public domain); United States ex rel. Ramseyer v. Century Healthcare Corp., 90 F.3d 1514, 1521 n.4 (10th Cir. 1996) (holding disclosure among government employees does not constitute public disclosure). Indeed, the Ninth Circuit has held in an analogous situation that the government’s dissemination of an audit report to a private company hired by the government to audit the contract was not a public disclosure for purposes of § 3730(e)(4). See Berg v. Honeywell Int’l, Inc., 502 F. App’x 674, 676 (9th Cir. 2012). Distinguishing an earlier case in which the government disclosed information to an “outsider” to the investigation, the court held that the government contractor “was not an ‘outsider’ to the investigation, but rather was acting on behalf of the government and had an incentive to keep confidential the information learned during its audit.” Id. Finally, we accept, as the district court did, the evidence that, with the approval of the OIG’s Office, Erlanger engaged Deloitte to assist in its investigation of the issues concerning the inpatient billing raised by AdvanceMed. In particular, an internal OIG investigative report and the letter from Erlanger’s counsel to the OCIG’s Office summarizing the investigation and results of Erlanger’s internal review both indicated that Erlanger provided seven Deloitte auditors with specific information concerning the issues raised by the OIG’s Office of Investigations. Why, however, disclosure of that information to the Deloitte auditors should constitute a “public disclosure” is not clear. Erlanger asserts that the Deloitte auditors were “strangers to the fraud.” It is true that, like the “innocent employees” in Doe, the auditors were not alleged to have participated in the fraudulent billing, and were not potential witnesses. However, it cannot be said that they were under no obligation to keep the information confidential. Deloitte was engaged to assist Erlanger in responding to the government’s audit and investigation, and the information was disclosed by Erlanger in order for Deloitte to evaluate the billing issues raised and conduct a broader independent audit to determine the scope of those issues. The results of Erlanger’s internal No. 13-6645 United States, et al. v. Whipple, et al. Page 13 investigation, including Deloitte’s findings, were presented to the government. The disclosure of the information by Erlanger to the Deloitte auditors in the course of their work did not release the information into the public domain, and was more akin to the “private” disclosure to the defendant’s employees in Schumer. Further, to the extent that the disclosures are considered to have been made through the government’s audit and investigation, the Deloitte auditors cannot be said to have been “outsiders” to that investigation. See Seal I v. Seal A, 255 F.3d 1154, 116162 (9th Cir. 2001); cf. United States ex rel. Aflatooni v. Kitsap Physicians Servs., 163 F.3d 516, 523-24 (9th Cir. 1999) (holding disclosures in internal corporate investigation were not made in an administrative audit and investigation under § 3730(e)(4)). Accordingly, the district court’s dismissal of Whipple’s short-stay, same-day-surgery, and renal-dialysis claims as barred under § 3730(e)(4) is REVERSED and the matter is REMANDED for further proceedings consistent with this opinion.