Opinion ID: 4538681
Heading Depth: 3
Heading Rank: 1

Heading: Overview of Potential Public Disclosures

Text: Because Holloway does not argue that she was an original source, she either must show that the purported prior disclosures were not “public,” or that their contents did not “disclose” her allegations.4 First, Heartland points to a Department of Justice (“DOJ”) settlement of FCA claims with SouthernCare Inc., an entity that fraudulently billed Medicare for hospice-ineligible patients but that is in no way connected with Heartland. See R. 82-14 (SouthernCare Settlement) (Page ID #874). The accompanying DOJ press release describes only misconduct by SouthernCare Inc., not an industry-wide scheme. Id. Similarly (and second), Heartland points to a qui tam complaint filed by Holloway against her former employer and its affiliates, which are also in no way connected with Heartland. See R. 82-2 (CLP Compl.) (Page ID #702). The complaint portrays a similar scheme to that alleged here. See id. Critically, all that these actions have in common is the same type of fraud in the same industry—without a shared corporate parent. We have never inferred an industry-wide disclosure from a set of allegations against a particular company. That can only work the other way around, when the prior disclosures describe “industry-wide abuses and investigations.” See U.S. ex rel. Gear v. Emergency Med. Assocs. of 4The list of potential “public” disclosures shrank with the 2010 amendments to exclude filings and rulings associated with state court proceedings. U.S. Bank, 816 F.3d at 430; compare 31 U.S.C. § 3730(e)(4)(A) (2010) with 31 U.S.C. § 3730(e)(4)(A) (1986). That change does not affect our analysis of the purported disclosures in this case. No. 19-3646 U.S. ex rel. Holloway Page 9 Ill., Inc., 436 F.3d 726, 729 (7th Cir. 2006). Accordingly, neither of these sources disclosed the fraud alleged in Holloway’s complaint. Third, Heartland points to a report issued by the Health and Human Services Office of Inspector General (“OIG report”) that found that four percent of claims “did not meet certification of terminal illness requirements.” R. 82-16 (OIG Report at ii, 16) (Page ID #897, 916). The OIG report does not itself constitute a public disclosure. Although a report need not use the word “fraud” to qualify as a disclosure, it still must carry an inference of wrongdoing. U.S. ex rel. Burns v. A.D. Roe Co., 186 F.3d 717, 724 (6th Cir. 1999) (quoting U.S. ex rel. Jones v. Horizon Healthcare Corp., 160 F.3d 326, 332 (6th Cir. 1998)). The OIG report even falls short of that. It calls out what it perceives to be a compliance problem stemming from the technical nature of the claims process. See R. 82-16 (OIG Report at iii, 17) (Page ID #898, 917). Its recommended action is not an investigation, but instead better education, training, and monitoring. See id. There is no insinuation of fraud, but at most noncompliance. That said, a disclosure can arise from multiple documents taken together, rather than from a single document. See U.S. ex rel. Poteet v. Medtronic, Inc., 552 F.3d 503, 512 (6th Cir. 2009). Courts use the following formula to explain that concept: “[I]f X + Y = Z, Z represents the allegation of fraud and X and Y represent its essential elements. In order to disclose the fraudulent transaction publicly, the combination of X and Y must be revealed, from which readers or listeners may infer Z, i.e., the conclusion that fraud has been committed.” Jones, 160 F.3d at 331 (quoting U.S. ex rel. Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645, 654 (D.C. Cir. 1994)). In the district court’s view, the OIG report “further marks, however slightly, the trail of fraud in this case” by “set[ting] out the then-current state of affairs.” Heartland Hospice, 386 F. Supp. 3d at 896. But we do not see how a disclosure of the “current state of affairs” matters because the South Carolina complaints expressly allege fraud in the first place (i.e., the South Carolina complaints are the “Z” and there is no need for an “X” or “Y”). At best, the OIG report lends some support to Heartland’s industry-wide disclosure theory, which we have already rejected. Finally, Heartland points to three qui tam complaints filed in the United States District Court for the District of South Carolina against HCR ManorCare—Heartland’s parent No. 19-3646 U.S. ex rel. Holloway Page 10 company—and other Heartland entities (“South Carolina complaints”). See R. 82-6 (Litwin Compl.) (Page ID #794); R. 82-7 (Olson Compl.) (Page ID #803); R. 82-8 (Williams Compl.) (Page ID #813). The government declined to intervene, and the initial complaints were unsealed on July 9, 2007. R. 82-9 (Unsealing Order at 1–2) (Page ID #824–25). Each of the relators jointly stipulated to dismissal on November 12, 2008. R. 82-13 (Joint Stipulation of Dismissal at 2–9) (Page ID #865–72). Holloway’s first line of defense against the South Carolina complaints is that they are not “public” under the amended public-disclosure bar. The amended statutory text bars claims that were publicly disclosed in a federal proceeding “in which the Government or its agent is a party.” 31 U.S.C. § 3730(e)(4)(A)(i) (2010). Holloway argues that a qui tam relator is not the government’s agent and, therefore, that the case is not “public” unless the government intervenes. District courts are split over this question, and we have yet to weigh in. See, e.g., U.S. ex rel. Forney v. Medtronic, Inc., 327 F. Supp. 3d 831 (E.D. Pa. 2018); U.S. ex rel. Gilbert v. Virginia College, LLC, 305 F. Supp. 3d 1315 (N.D. Ala. 2018). Courts that have adopted Holloway’s position reason that a qui tam relator is not the government’s agent because the relator is not authorized by statute to act in the government’s place, is not labeled an “agent” under the statutory scheme, and is not subject to the government’s control. See Forney, 327 F. Supp. 3d at 842–44. A majority of courts have rejected that reasoning and instead have held that a qui tam relator is the government’s agent because the government “is the real party in interest,” “the relator is the assignee of the Government’s damages claim,” and the government “exerts a fair amount of control over qui tam litigation.” Gilbert, 305 F. Supp. 3d at 1324. Even when the government declines to intervene, it “still receives copies of all pleadings and deposition transcripts, can move to stay discovery if it interferes with an ongoing criminal or civil investigation, and has the right to approve or reject a stipulated dismissal.” Id. (citing § 3730(b)(1), (c)(2)(D)(3), (c)(4)). It “may even intervene at a later date upon a showing of a good cause and subsequently dismiss a case over the relators’ objections.” Id. (citing § 3730(c)(2)(D)(3); § 3730(c)(2)(A)). The district court in this case added that Holloway’s position “would render the phrase ‘or its agent’ . . . meaningless.” Holloway, 386 F. Supp. 3d at 895. “Who, if not the private relator, is the government’s agent?” Id. We are persuaded by the majority of district courts’ and our own district court’s reasoning and hold that the qui tam No. 19-3646 U.S. ex rel. Holloway Page 11 relator is, in all cases, the government’s agent under § 3730(e)(4)(A)(i). Accordingly, the South Carolina cases are public under both versions of the public-disclosure bar, despite the fact that the government did not intervene. Now we turn to the substance of the South Carolina complaints. The relators in the South Carolina cases were registered nurses who worked at a single South Carolina Heartland hospice facility until they were fired for calling out its practice of making false claims for Medicare payments for patients who were not terminally ill. See R. 82-10 (Litwin Am. Compl. at 7, ¶ 26) (Page ID #838); R. 82-11 (Olson Am. Compl. at 9, ¶ 37) (Page ID #850); R. 82-12 (Williams Am. Compl. at 7, ¶ 26 (Page ID #860). They initially alleged FCA violations alongside wrongful termination and tort claims. R. 82-6 (Litwin Compl. at 5–8, ¶¶ 29–53) (Page ID #798– 801); R. 82-7 (Olson Compl. at 6–8, ¶¶ 29–53) (Page ID #808–10); R. 82-8 (Williams Compl. at 6–8, ¶¶ 29–53) (Page ID #818–20). Specifically, the relators alleged that Heartland “engaged in a practice and pattern of altering medical records or omitting crucial information from the charts,” and in doing so, “systematically misrepresented . . . information concerning the patients’ diagnosis and need for hospice care.” R. 82-6 (Litwin Compl. at 5, ¶¶ 21, 26) (Page ID #798); R. 82-7 (Olson Compl. at 5, ¶¶ 21, 26) (Page ID #807); R. 82-8 (Williams Compl. at 5, ¶¶ 21, 26) (Page ID #817). According to all three relators, there were “several occasions” when they were told not to verify a patient’s hospice-eligibility and “to let the office handle it so they could continue to identify the patient as being eligible.” R. 82-6 (Litwin Compl. at 5, ¶ 25) (Page ID #798); R. 82-7 (Olson Compl. at 5, ¶ 25) (Page ID #807); R. 82-8 (Williams Compl. at 5, ¶ 25) (Page ID #817). When the relators instead insisted that their patients’ diagnoses were not “supported in their medical charts,” they were fired. R. 82-6 (Litwin Compl. at 5, ¶ 25) (Page ID #798); R. 82-7 (Olson Compl. at 5, ¶ 25) (Page ID #807); R. 82-8 (Williams Compl. at 5, ¶ 25) (Page ID #817). Two of the three South Carolina relators ultimately abandoned their FCA claims in their amended complaint, but all three added examples of particular patients they thought were hospice-ineligible. R. 82-10 (Litwin Am. Compl. at 4, ¶¶ 17–23) (Page ID #835–38); id. at 8–9, ¶¶ 37–45 (Page ID #839–40); R. 82-11 (Olson Am. Compl. at 5–8, ¶¶ 21–27) (Page ID #846– 49); id. at 9–11, ¶¶ 41–54 (Page ID #850–52); R. 82-12 (Williams Am. Compl. at 4–7, ¶¶ 17–23 No. 19-3646 U.S. ex rel. Holloway Page 12 (Page ID #857–60); id. at 8–9, ¶¶ 37–45 (Page ID #861–62).5 In each example, they stated that they “were told they would be fired if they didn’t continue to work with patients whether they met the criteria or not.” R. 82-10 (Litwin Am. Compl. at 4, ¶¶ 17–23) (Page ID #835–38); R. 8211 (Olson Am. Compl. at 5–8, ¶¶ 21–27) (Page ID #846–49); R. 82-12 (Williams Am. Compl. at 4–7, ¶¶ 17–23 (Page ID #857–60). They also alleged for the first time that Heartland was “attempting to develop a ‘census’ of patients under continuous care.” R. 82-10 (Litwin Am. Compl. at 7, ¶ 26) (Page ID #838); R. 82-11 (Olson Am. Compl. at 9, ¶ 37) (Page ID #850); R. 82-12 (Williams Am. Compl. at 7, ¶ 26 (Page ID #860). All in all, “twenty-two (22) of the approximately forty-three (43) patients [at the South Carolina facility] failed to meet the criteria and should [have] be[en] discharged.” R. 82-10 (Litwin Am. Compl. at 7, ¶ 26) (Page ID #838); R. 82-11 (Olson Am. Compl. at 9, ¶ 37) (Page ID #850); R. 82-12 (Williams Am. Compl. at 7, ¶ 26 (Page ID #860). Because the South Carolina complaints concerned the same corporate parent and the same type of fraud implicated in this case, we will analyze more fully below whether they bar Holloway’s qui tam action.