Opinion ID: 4538681
Heading Depth: 3
Heading Rank: 2

Heading: The South Carolina Complaints

Text: Having discarded three of the four potential public disclosures, we assess whether Holloway’s action is barred by the South Carolina complaints. Our decision could, in theory, turn on which version of the public-disclosure bar applies because the amendments are not retroactive. See Antoon, 788 F.3d at 614–15. Previously, the 1986 version of the statute barred claims that were “based upon” allegations or transactions that had already been publicly disclosed. 31 U.S.C. § 3730(e)(4)(A) (1986). Now, the statute bars claims “if substantially the same allegations or transactions” have been publicly disclosed. 31 U.S.C. § 3730(e)(4)(A) (2010) (emphasis added). We must decide whether the South Carolina complaints disclosed the fraud alleged in Holloway’s complaint under either version of the public-disclosure bar.6 5It does not matter that the relators dropped the FCA claims because “the disclosure is not required to use the word ‘fraud’ or provide a specific allegation of fraud,” let alone a specific allegation of an FCA violation. See Poteet, 552 F.3d at 512. 6Both parties believe that they should prevail under either version of the public-disclosure bar. Heartland states in a conclusory fashion that the amendments do not affect our analysis. Appellee Br. at 37 n.12. Holloway neither disputes nor concedes that, and she cites both pre- and post-amendment precedent. See Reply Br. at 16. No. 19-3646 U.S. ex rel. Holloway Page 13 Heartland argues that Holloway’s claims must be dismissed under either version of the public-disclosure bar because Holloway’s allegations depict essentially the same scheme as that described in the South Carolina complaints. Appellee Br. at 37–38. We agree and hold that Holloway’s claims must be dismissed under either version of the public-disclosure bar.
We begin with the pre-amendment public-disclosure bar. Prior to the 2010 amendments, we held that a claim is “based upon” a prior public disclosure when it is “‘supported by’ the previously disclosed information,” Poteet, 552 F.3d at 514 (quoting U.S. ex rel. McKenzie v. Bellsouth Telecomm., Inc., 123 F.3d 935, 940 (6th Cir. 1997))—meaning that a “substantial identity exists between the publicly disclosed allegations or transactions and the qui tam complaint,” id. (quoting Jones, 160 F.3d at 332).7 In applying the substantial-identity test, we held that the relator’s claims are based on prior public disclosures where “essentially the same . . . scheme” was “the primary focus” of each. Id. Qui tam actions are barred if they are “based even partly upon public disclosures.” McKenzie, 123 F.3d at 940 (emphasis added). Heartland asserts, based on McKenzie, that Holloway’s claims are barred because they are at least partly based on the South Carolina complaints. McKenzie was our first opportunity to decide how to interpret the “based upon” language in the public-disclosure bar. In doing so, we declined to adopt the Fourth Circuit’s interpretation of “based upon,” which would have required a relator to personally know about the prior disclosures, and instead adopted the Tenth Circuit’s approach. Id. We stated that, under a plain text analysis, the Tenth Circuit interpreted “based upon” to “include[] any action based even partly upon public disclosures.” Id. (citing United States ex rel. Precision Co. v. Koch Indus., 971 F.2d 548, 552 (10th Cir. 1992)) (emphasis added). The Tenth Circuit reasoned that “Congress chose not to insert the adverb ‘solely,’ and we cannot, because to do so would dramatically alter the statute’s plain meaning.” Id. (quoting Precision, 971 F.2d at 552). After explaining the Tenth Circuit’s textual analysis, we noted that “[t]he Tenth Circuit later clarified its interpretation by explaining that a court ‘must determine whether ‘substantial identity’ exists between the publicly disclosed allegations or transactions 7We have also used the term “substantial likeness.” See Poteet, 552 F.3d at 514. No. 19-3646 U.S. ex rel. Holloway Page 14 and the qui tam complaint.” Id. (quoting U.S. ex rel. Fine v. Advanced Sciences, Inc., 99 F.3d 1000, 1006 (10th Cir. 1996)). We have described the test for “substantial identity” as whether the relator’s complaint and the prior disclosures depict “essentially the same” scheme. Poteet, 552 F.3d at 514. That, in turn, is informed by the principle that qui tam actions will be barred only when “enough information exists in the public domain” to put the government on notice of the fraud alleged. Walburn, 431 F.3d at 975; Poteet, 552 F.3d at 512. The simple reason is that the entire point of qui tam actions is “to prosecute fraud of which the government is unaware.” U.S. ex rel. Dingle v. BioPort Corp., 388 F.3d 209, 215 (6th Cir. 2004). To decide whether the government is already on notice of the fraud alleged, we ask whether the relator “merely ‘adds details’ to what is already known in outline.” U.S. Bank, 816 F.3d at 432 (quoting U.S. ex rel. Bogina v. Medline Indus., Inc., 809 F.3d 365, 370 (7th Cir. 2016)). We can presume that the government is on notice of particular frauds once a general disclosure of fraud has been made. See id. at 431–32; Dingle, 388 F.3d at 215; U.S. ex rel. Gilligan v. Medtronic, Inc., 403 F.3d 386, 391 (6th Cir. 2005). Thus, relators cannot avoid the public-disclosure bar “by focusing [their] allegations . . . on sub-classes of potential claims covered by the initial [disclosure].” U.S. Bank, 816 F.3d at 432. It is not enough to allege new, slightly different, or more detailed factual allegations. Dingle, 388 F.3d at 215; Poteet, 552 F.3d at 514. For instance, in Dingle, we barred a relator’s qui tam action alleging a scheme in which a company supplied the U.S. government with FDA-noncompliant vaccines. 388 F.3d at 215. Prior public disclosures revealed that the FDA had cited the company for unspecified “deviations” from FDA requirements and that there were allegations that the company’s vaccine was not FDA-approved. Id. at 214. Because the prior disclosures were “more general and could have referred to several types of fraud,” the government was on notice of the particular scheme that the relator alleged. Gilligan, 403 F.3d at 391 (citing Dingle, 388 F.3d at 213). The same was true in Gilligan, where the relators alleged that a company caused doctors and hospitals to submit false claims to Medicare for use of its FDA-noncompliant pacemakers with malfunctioning leads. See id. Prior allegations disclosed that the leads were not safe, that there No. 19-3646 U.S. ex rel. Holloway Page 15 was manufacturing fraud, and that there were design deviations. Id. Even though the new allegations concerned a “slightly different type of fraud,” the prior allegations “were sufficiently general, and like the allegations in Dingle, could have encompassed the claim of manufacturing fraud and design deviations surrounding the . . . leads.” Id. “So long as the government is put on notice to the potential presence of fraud, even if the fraud is slightly different than the one alleged in the complaint, the qui tam action” must be dismissed. Dingle, 388 F.3d at 214–15. Heartland contends that that is exactly what we have in this case—Holloway is simply adding new, slightly different, or more detailed allegations to what has already been disclosed in the South Carolina complaints. We agree. Both sets of allegations were levied against the same corporate parent for the same type of fraud. Both accuse Heartland of making false claims for payment from Medicare for hospice patients. Both allege a systemic and patterned practice of altering or omitting information from clinical documents to make these patients appear to be terminally ill. Both allege that staff were fired if they challenged this practice, and that Heartland set a “census,” or required number of patients, for enrollment. We acknowledge, as the district court observed, that Holloway’s complaint “alleges a complex, sophisticated scheme” that targets corporate-wide conduct. Heartland Hospice, 386 F. Supp. 3d at 898 (quotation omitted). But we disagree with the district court’s conclusion that the scheme that Holloway alleges “differ[s] in both degree and in kind from” the South Carolina complaints. Id. at 899. Even if the South Carolina complaints were focused on a single hospice facility, the allegations against Heartland as a whole were sufficiently general and alike to those alleged here such that the government was put on notice of the corporate-wide conduct alleged in this case. We therefore hold that Holloway’s claims are barred by the pre-amendment public-disclosure bar.
Having held that Holloway’s claims do not survive the pre-amendment public-disclosure bar, we must decide whether they surmount the “more lenient” post-amendment publicdisclosure bar. See U.S. Bank, 816 F.3d at 430. The 2010 amendments to the public-disclosure bar replaced “based upon” with “substantially the same.” See 31 U.S.C. § 3730(e)(4)(A) (2010). Accordingly, the text now reads, “The court shall dismiss an [FCA] action or claim . . . if substantially the same allegations or transactions as alleged in the action or claim were publicly No. 19-3646 U.S. ex rel. Holloway Page 16 disclosed . . . .” Id. How we interpret the post-amendment public-disclosure bar is informed by the statutory text and the competing purposes of the qui tam provisions. Prior to the amendments, a majority of circuits adopted interpretations of “based upon” analogous to our “substantial-identity” test, using the same or slightly different language. See U.S. ex rel. Ondis v. City of Woonsocket, 587 F.3d 49, 57 (1st Cir. 2009) (collecting cases). Many circuits described their test as whether “the relator’s allegations are substantially similar to information disclosed publicly,” see id. (emphasis added),8 while others described their test as whether “the allegations in the complaint were substantially the same as allegations in the public disclosures,” U.S. ex rel. Fine v. Sandia Corp., 70 F.3d 568, 572 (10th Cir. 1995) (emphasis added).9 Still others asked whether “material elements” of the allegations were publicly disclosed, U.S. ex rel. Kirk v. Schindler Elevator Corp., 601 F.3d 94, 103 (2d Cir. 2010), rev’d on other grounds by Schindler Elevator Corp. v. U.S. ex rel. Kirk, 563 U.S. 401 (2011), or whether the relator made “essentially the same” allegations, U.S. ex rel. Reagan v. E. Tex. Med. Ctr. Reg’l Healthcare Sys., 384 F.3d 168, 176 (5th Cir. 2004).10 By the time the publicdisclosure bar was amended in 2010, all but one circuit had adopted some version of this interpretation. See Ondis, 587 F.3d at 57. The Fourth Circuit was the lonely outlier, interpreting “based upon” as barring suits only if the relator actually knew about the public information—a reading the majority of circuits rejected. See U.S. ex rel. Siller v. Becton Dickinson & Co., 21 F.3d 1339, 1348 (4th Cir. 1994) (barring suits “only where the relator has actually derived 8See U.S. ex rel. Atkinson v. Pa. Shipbuilding Co., 473 F.3d 506, 519–21 (3d Cir. 2007) (substantially similar); Glaser v. Wound Care Consultants, Inc., 570 F.3d 907, 910 (7th Cir. 2009) (substantially similar); U.S. ex rel. Newell v. City of St. Paul, 728 F.3d 791, 797 (8th Cir. 2013) (substantially similar); U.S. ex rel. Meyer v. Horizon Health Corp., 565 F.3d 1195, 1199 (9th Cir. 2009) (using “substantial identity” and “substantially similar” interchangeably), overruled on other grounds by U.S. ex rel. Hartpence v. Kinetic Concepts, Inc., 792 F.3d 1121, 1128 n.6 (9th Cir. 2015); U.S. ex rel. Osheroff v. Humana, Inc., 776 F.3d 805, 814 (11th Cir. 2015) (using “substantially similar” and “substantially the same” interchangeably); U.S. ex rel. Findley v. FPR-Boron Employees’ Club, 105 F.3d 675, 690 (D.C. Cir. 1997) (substantially similar), overruled on other grounds by U.S. ex rel. Davis v. District of Columbia, 679 F.3d 832, 838–39 (D.C. Cir. 2012). 9The Tenth Circuit has occasionally used the “substantial identity” language that our circuit has used. See, e.g., U.S. ex rel. Grynberg v. Praxair, Inc., 389 F.3d 1038, 1051 (10th Cir. 2004); U.S. ex rel. Precision Co. v. Koch Industries, Inc., 971 F.2d 548, 553–54 (10th Cir. 1992). 10The Fifth Circuit also used “substantively identical” in this case. See id. No. 19-3646 U.S. ex rel. Holloway Page 17 from that disclosure the allegations upon which his qui tam action is based” (emphasis added)); Ondis, 587 F.3d at 57. Unsurprisingly, then, the circuits that were in the majority have held that their preamendment precedent continues to control, to varying degrees.11 See Bellevue v. Universal Health Servs. of Hartgrove, Inc., 867 F.3d 712, 718 (7th Cir. 2017) (“The current version of the statute expressly incorporates the ‘substantially similar’ standard in accordance with the interpretation of this circuit and most other circuits.”); U.S. ex rel. Reed v. Keypoint Gov’t Sols., 923 F.3d 729, 743–45 (10th Cir. 2019) (holding that its pre-amendment precedent should “primarily guide” its post-amendment inquiry”); U.S. ex rel. Osheroff v. Humana, Inc., 776 F.3d 805, 812, 814 (11th Cir. 2015) (slotting the new “substantially the same” test into its existing analytical framework); U.S. ex rel. Winkelman v. CVS Caremark Corp., 827 F.3d 201, 208 n.4 (1st Cir. 2016) (stating that “[t]he revised statutory language—‘substantially the same’—merely confirms [its] earlier understanding,” but also that the amended language “has no substantive effect in this case” (emphasis added)). For our part, we indicated in an unpublished case, United States ex rel. Armes v. Garman, that we would continue to be guided by our “based upon” precedent as we embark on interpreting the amended public-disclosure bar. 719 F. App’x 459, 463 n.2 (6th Cir. 2017) (“Because this court had already interpreted the “based upon” language to mean a “substantial identity,” Poteet, 552 F.3d at 514, the 2010 amendment does not affect our public-disclosure analysis at this second step.”). But we have not expressly adopted our pre-amendment precedent in a published case. In one post-amendment case, both versions technically applied, but we used the “more lenient” amended version for the sake of simplicity because the relator would lose either way. U.S. Bank, 816 F.3d at 430. We implicitly adopted two principles from our preamendment precedent: (1) an action is barred if a prior disclosure puts the government on notice of the fraud alleged in the qui tam complaint, id. at 431, and (2) a broader prior disclosure bars a 11“Similar” obviously has a different meaning than “same.” “Same” means identical; “similar” means analogous, comparable, or resembling the other. The Merriam-Webster dictionary would have us believe otherwise, as it dubiously defines “same” as (among other things) “something identical with or similar to another.” Same, MERRIAM-WEBSTER ONLINE DICTIONARY (last visited Feb. 14, 2020). We instead are guided by the wisdom of Judge Learned Hand, that “it is one of the surest indexes of a mature and developed jurisprudence not to make a fortress out of the dictionary.” See Cabell v. Markham, 148 F.2d 737, 739 (2d Cir. 1945). No. 19-3646 U.S. ex rel. Holloway Page 18 qui tam action based on a narrower set of allegations stemming from the same fraud, id. at 432. In another case, we decided that the outcome would be the same under either version of the bar because, even after the amendments, “a common principle remains[:] public disclosure occurs ‘when enough information exists in the public domain to expose the fraudulent transaction.’” Ibanez, 874 F.3d at 918 (quoting Antoon, 788 F.3d at 614–15). We stated that courts must “look at the essential elements of alleged fraud to determine if enough information exists in the public domain to expose the fraudulent transaction.” Id. “Thus, the public disclosure bar is not implicated—even if one or more of a claim’s essential elements are in the public domain—unless the exposed elements, taken together, provide adequate notice that there has been a fraudulent transaction.” Id. at 918–19. So far, then, we have adopted principles from our pre-amendment cases that are compatible with the amended statutory text.12 From a textual standpoint, “substantially the same” facially demands a greater degree of similarity between the qui tam complaint and the prior disclosures than “based upon” does. And “substantially the same” undoubtedly is more rigorous than “even partly based upon,” as we interpreted “based upon” to mean. Without the “based upon” language in the statute, there is no textual hook for McKenzie’s “even-partly-based-upon” rule. See McKenzie, 123 F.3d at 940 (citing Precision, 971 F.2d at 552).13 We can think of no reason why that plain text interpretation of “based upon” should influence our reading of the amended text. At the same time, we continue to be guided by the statute’s general purpose of encouraging genuine whistleblower actions while snuffing out parasitic suits. See Walburn, 431 F.3d at 970. The public-disclosure bar was intended to be “wide-reaching,” Schindler, 563 U.S. at 408, but to stop short of “wip[ing] out qui tam suits that rest on genuinely new and material information,” Goldberg, 680 F.3d at 935–36. In light of this purpose and the statute’s 12We have not cited McKenzie in any of our binding post-amendment precedent. See U.S. Bank, 816 F.3d 428; Ibanez, 874 F.3d 905. 13The Tenth Circuit, which created the “even-partly-based upon” rule in Precision, conspicuously has avoided citing to that case for that rule in its post-amendment precedent. See Reed, 923 F.3d at 743–45. It has instead emphasized its substantial-identity test from Fine, 99 F.3d at 1006. See Reed, 923 F.3d at 743–45. Moreover, it has said only that prior precedent should “primarily guide [its] substantially-the-same inquiry.” Reed, 923 F.3d at 745 (emphasis added). No. 19-3646 U.S. ex rel. Holloway Page 19 plain text, we read “substantially the same” as more sensitive to differences between the qui tam complaint and prior disclosures than the prior “based upon” language. Holloway’s claims, nevertheless, cannot survive the more lenient post-amendment public-disclosure bar. As we have already described, Holloway’s allegations are substantially the same as those made in the South Carolina complaints. If anything, Holloway’s allegations add some new details to describe essentially the same scheme by the same corporate actor. We accordingly hold that Holloway’s claims must be dismissed under the amended public-disclosure bar as well. Because both versions of the public-disclosure bar apply, we need not address whether Holloway’s allegations were sufficient under Federal Rule of Civil Procedure 9(b) or the limited exception to that standard that we announced in Prather, 838 F.3d 750. The district court rightly dismissed Holloway’s claims.