Opinion ID: 2719374
Heading Depth: 2
Heading Rank: 2

Heading: jurisdiction

Text: On appeal, Momence first argues that two statutory provisions contained in the FCA action deprived the district court of jurisdiction over the relators’ FCA claims. See 31 U.S.C. § 3730(e)(3), (e)(4). In 2007, the Supreme Court held that one of these provisions, § 3730(e)(4), is a jurisdictional requirement that must be addressed before a court can reach the merits of the FCA claims. See Rockwell Int’l Corp. v. United States, 549 U.S. 457, 467–70 (2007) (“we may, and indeed must, decide whether [the FCA plaintiff] met the jurisdictional requirement”); Fednav 10 Nos. 13-1886 & 13-1936 Int’l Ltd. v. Cont’l Ins. Co., 624 F.3d 834, 837 (7th Cir. 2010) (“‘we are bound to evaluate our own jurisdiction, as well as the jurisdiction of the court below’” (quoting Int’l Union of Operating Eng’rs, Local 150 v. Ward, 563 F.3d 276, 282 (7th Cir. 2009))).8 The Supreme Court’s reasoning was based on the fact that, at the time, § 3730(e)(4) contained the language “‘[n]o court shall have jurisdiction over an action under this section … .’” Rockwell, 349 U.S. at 467 (quoting 31 U.S.C. 3730(e)(4)(A)). However, in 2010, § 3730(e)(4) was amended and the quoted language was replaced with the following language: “The court shall dismiss an action or claim under this section … .” See The Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 (2010); U.S. ex rel. Heath v. Wis. Bell, No. 12-3383, 2014 WL 3704023, at  n.1 (7th Cir. Jul. 28, 2014). So it is no longer clear that Rockwell’s holding is still good law. Regardless, the 2010 amendments to § 3730(e)(4) are not retroactive. Heath, No. 12-3383, 2014 WL 3704023, at  n.1 (citing Schindler Elevator Corp. v. U.S. ex rel. Kirk, 131 S. Ct. 1885, 1889 (2011)). Thus, because the conduct underlying this action and the filing of the action itself all occurred well before the 2010 amendments to § 3730(e)(4), we apply that section as it 8 Before Rockwell, we remarked in dicta that the Supreme Court had held that § 3730(e)(4) presents issues of substantive law rather than jurisdiction. U.S. ex rel. Feingold v. AdminaStar Fed., Inc., 324 F.3d 492, 494 (7th Cir. 2003) (citing Hughes Aircraft Co. v. United States, 520 U.S. 939, 950–51 (1997)). But the Court actually said that the bar speaks “not just to the power of a particular court [i.e., jurisdiction] but to the substantive rights of the parties as well.” Hughes, 520 U.S. at 951 (emphasis added). Regardless, Rockwell made clear that § 3730(e)(4) must be addressed before a court can reach the merits of the underlying FCA claims. 549 U.S. at 467–70. Nos. 13-1886 & 13-1936 11 existed before 2010. Consequently, Rockwell compels us to address whether § 3730(e)(4) bars the relators’ qui tam claims before addressing the merits of those claims. However, there is an additional wrinkle: Momence also invokes § 3730(e)(3) as a jurisdictional limit on the district court’s power to entertain the relators’ qui tam claims. But § 3730(e)(3) does not contain the language relied upon by Rockwell in concluding that § 3730(e)(4) was jurisdictional. (Section 3730(e)(3) was untouched by the 2010 amendments.) So it is not clear that § 3730(e)(3) imposes a true jurisdictional limitation. Regardless, as discussed below, Momence’s argument based on § 3730(e)(3) fails for the same reason that the argument based on § 3730(e)(4)—which we clearly must address—fails. Prior to the 2010 amendments, § 3730(e)(4) provided: (A) No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information. (B) For purposes of this paragraph, “original source” means an individual who has direct and independ- ent knowledge of the information on which the allegations are based and has voluntarily provided the information to the Government before filing an 12 Nos. 13-1886 & 13-1936 action under this section which is based on the information. (Footnote omitted). Thus, under § 3730(e)(4), the district court must determine whether the relators’ allegations have been “publically disclosed,” and whether the qui tam action is “based upon” those publically disclosed allegations. Glaser v. Wound Care Consultants, Inc., 570 F.3d 907, 913 (7th Cir. 2009). If so, § 3730(e)(4) will preclude the action unless “the relator is an ‘original source’ of the information upon which his lawsuit is based.” Id. Section 3730(e)(3) provides: “In no event may a person bring an action under subsection (b) which is based upon allegations or transactions which are the subject of a civil suit or an administrative civil money penalty proceeding in which the Government is already a party.” We review de novo challenges made pursuant to the FCA’s bars. U.S. ex rel. Feingold v. AdminaStar Fed., Inc., 324 F.3d 492, 494–45 (7th Cir. 2003). But we review findings of fact considered in determining jurisdiction only for clear error. Bowyer v. Dep’t of Airforce, 875 F.2d 632, 636 (7th Cir. 1989). “At each stage of the jurisdictional analysis, the [relators bear] the burden of proof.” Glaser, 570 F.3d at 913; see also John T. Boese, Civil False Claims and Qui Tam Actions §4.02[A], at 4-56 (4th ed. Supp. 2014) (“Relators bear the burden of proving on a claimby-claim basis that subject-matter jurisdiction exists by a preponderance of the evidence.”). Both § 3730(e)(3) and § 3730(e)(4) share a common feature—the phrase “allegations or transaction.” These statutory bars operate only when the qui tam FCA action is Nos. 13-1886 & 13-1936 13 “based upon allegations or transactions” which either are the subject of a governmental civil action or penalty proceeding, § 3730(e)(3), or already have been “publically disclosed,” § 3730(e)(4). Although we have never had occasion to interpret the phrase “allegations or transactions” within the meaning of these sections of the FCA, the District of Columbia Circuit has held that the phrase refers to allegations or transactions of fraudulent conduct. U.S. ex rel. Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645, 653–54 (D.C. Cir. 1994). The other circuits to interpret the phrase “allegations or transactions” have come to the same conclusion. See U.S. ex rel. Found. Aiding The Elderly v. Horizon W., 265 F.3d 1011, 1015 (9th Cir. 2001) (adopting Quinn’s analysis); U.S. ex rel. Dunleavy v. Cnty. of Del., 123 F.3d 734, 741 (3d Cir. 1997) (same), abrogated on other grounds by Graham Cnty. Soil & Water Conservation Dist. v. U.S. ex rel. Wilson, 559 U.S. 280 (2010); Costner v. URS Consultants, Inc., 153 F.3d 667, 676 (8th Cir. 1998) (“The present suit is based upon allegations of fraud involving the submission of false claims for payment for environmental remediation work completed at the Vertac site. Such allegations or transactions have never before been the subject of a FCA suit or any other suit or proceeding brought by the government or anyone else.” (emphasis added)).9 Thus, the two bars “prohibit qui tam actions only 9 In declining to apply § 3730(e)(3), the First Circuit observed that the government had “not proceed[ed] against the defendants to this action, for fraud or otherwise … .” U.S. ex rel. S. Prawer & Co. v. Fleet Bank of Maine, 24 F.3d 320, 328 (1st Cir. 1994) (emphasis added). It appears that the First Circuit is merely emphasizing that the government had not proceeded (continued...) 14 Nos. 13-1886 & 13-1936 when either the allegation of fraud or the critical elements of the fraudulent transaction themselves” are the subject of a governmental civil action or penalty proceeding or already have been “publically disclosed.” Quinn, 14 F.3d at 654. If an allegation of fraud has already been made, the analysis is straightforward. But even if no allegation of fraud has been made, the bars contained in § 3730(e)(3) and § 3730(e)(4) may still apply so long as facts disclosing the fraud itself are in the government’s possession or the public domain. In this latter case, the court must determine whether facts establishing the essential elements of fraud—and, consequently, providing a basis for the inference that “fraud has been committed”—are in the government’s possession or the public domain. Id. Here, no prior allegations of fraud—arising from the provision of non-compliant care at the facility—had been leveled against Momence (either by the government or other publically disclosed source). However, as Momence contends, the relators’ FCA claims were based extensively upon incidents of non-compliant care documented in government survey reports that gave rise to administrative penalty proceedings. Specifically, after a November 1998 survey revealed issues with resident hygiene and pressure sore management, Momence developed a plan of correction and was found to have resolved the issue by February 1999. To remedy the interim period, IDPH imposed civil monetary penalties of $4,850 and $3,050. Likewise, after a March 2003 report found issues with scabies and infection control, Momence adopted a new infection 9 (...continued) against the defendant in any way. Nos. 13-1886 & 13-1936 15 control policy and assessed all residents for possible skin problems. In April 2003, the facility was found to have resolved the problem. In addition to the monetary penalties already mentioned, IDPH imposed a penalty of $50 per day for the period from July 16, 2003, through September 26, 2003, and CMS imposed a penalty of $2,600 for the period from May 6, 2005, through May 18, 2005. In addition, for violations found on February 16, 2006, CMS imposed a penalty of $5,000, while IDPH imposed a separate penalty of $10,000. Momence contends that these facts tend to establish one of the essential elements of fraud—namely, that Momence provided non-compliant care to its residents—and were already “publically disclosed” (within the meaning of § 3730(e)(4)(A)) prior to the relators filing this action. See Graham Cnty., 559 U.S. at 283 (“The question before us is whether the reference to ‘administrative’ reports, audits, and investigations in [§ 3730(e)(4)(A)] encompasses disclosures made in state and local sources as well as federal sources. We hold that it does.”); Feingold, 324 F.3d at 496 (“Administrative reports are publicly disclosed because, by their very nature, they establish the relevant agency’s awareness of the information in those reports.”). And these facts were the subject of administrative penalty proceedings within the meaning of § 3730(e)(3). However, the relators also offered evidence that Momence refused to chart incidents of scabies, pressure ulcers, and rashes. Momence does not offer evidence that the government survey reports disclosed this misconduct. Moreover, the surveys’ disclosure of Momence’s provision of non-compliant care and the related administrative penalty proceedings are not 16 Nos. 13-1886 & 13-1936 enough to trigger either § 3730(e)(3) or § 3730(e)(4) because the surveys did not disclose facts establishing that Momence misrepresented the standard of care in submitting claims for payment to the government. See Horizon W., 265 F.3d at 1016 (“[T]he surveys must disclose both ‘a misrepresented state of facts and a true state of facts.’” (quoting Quinn, 14 F.3d at 655)). The government survey reports do not disclose this essential element of a fraud claim under the FCA.10 Therefore, the relators’ FCA claims are not barred by § 3730(e)(3) or § 3730(e)(4). See Horizon W., 265 F.3d at 1016–17.