Court Opinion

ID: 857921
Source: CourtListenerOpinion
Date Created: 2013-04-12 17:25:15.011858+00
Date Added: 2024-06-11T09:06:38.007792
License: Public Domain

United States Court of Appeals
                      For the First Circuit

No. 12-1258

       UNITED STATES EX REL. ESTATE OF ROBERT CUNNINGHAM,

                      Plaintiff, Appellant,

                                v.

          MILLENNIUM LABORATORIES OF CALIFORNIA, INC.,

                       Defendant, Appellee.

          APPEAL FROM THE UNITED STATES DISTRICT COURT
                FOR THE DISTRICT OF MASSACHUSETTS

           [Hon. Joseph L. Tauro, U.S. District Judge]

                              Before

                 Torruella, Howard and Thompson,
                         Circuit Judges.

     John Roddy, with whom Elizabeth Ryan, Bailey & Glasser LLP,
Robert A. Griffith, Dana P. Petrillo, and Gargiulo/Rudnick, LLP,
was on brief for appellant.
     Catherine E. Stetson, with whom Jessica L. Ellsworth, David M.
Ginn, and Hogan Lovells US LLP, were on brief for appellee.

                          April 12, 2013
            TORRUELLA, Circuit Judge.          This is an appeal from a

dismissal of a federal False Claims Act ("FCA") complaint on

grounds that it was jurisdictionally barred by the FCA's public

disclosure   provision.        The   Appellant,       the   Estate   of    Robert

Cunningham ("Relator"),1 brought an FCA suit against Millennium

Laboratories of California ("Millennium") and John Doe physicians

(collectively, "Appellees"), alleging that Millennium encouraged

physicians to bill the government multiple times for single drug

tests and to perform excessive, medically unnecessary original and

confirmation tests.

            Prior to the filing of said complaint, Millennium had

filed a suit against Relator's employer, Calloway Laboratories

("Calloway"),   in     California    state    court    ("California       suit"),

attaching    e-mails    from   Calloway      employees      to   third    parties

suggesting fraudulent activity in Millennium's billing practices.

The district court found this prior disclosure to constitute a

jurisdictional bar to Relator's suit, dismissing his complaint.

This appeal followed.

            Since we find error in the district court's dismissal of

all of Relator's claims when only some of them had been disclosed

by way of being substantially similar to the information contained

in Millennium's prior California suit, we affirm in part and vacate

1
   Robert Cunningham passed away on December 5, 2010. After his
death, the Estate of Robert Cunningham was substituted as Relator.

                                     -2-
in part the district court's dismissal, remanding for the district

court's consideration of whether Relator's remaining FCA claim was

sufficiently pled under Fed. R. Civ. P. 12(b)(6) and 9(b).

                           I.   Background

A.   Factual Background

           Jurisdiction is determined based on whether it existed at

the time the plaintiff filed the original complaint, Sallen v.

Corinthians Licenciamentos LTDA, 273 F.3d 14, 23 (1st Cir. 2001),

so we provide the factual background as alleged in Relator's

original complaint.   Since we ultimately find that said facts were

integrated in Relator's amended complaint, we only distinguish

between the two complaints when there are noted differences as to

the language and count number of their respective allegations.2

2
   While it is true that the original complaint contained four
separate FCA counts and the amended complaint contains only one,
the number of counts is not determinative of either the number of
FCA claims alleged or of the factual allegations underlying those
claims.   Ordinarily, the issue of stating multiple claims in a
single count is dealt with as a "shotgun" pleading, or a pleading
that fails to identify claims with sufficient clarity to enable a
defendant to frame a responsive pleading.    Under Fed. R. Civ. P.
10(b), a party must state "each claim founded on a separate
transaction or occurrence . . . in a separate count or defense" if
doing so would promote clarity. However, a pleading deficiency is
usually addressed by motion for a more definite statement pursuant
to Fed. R. Civ. P. 12(e), and unless none of the multiple claims
alleged in a single count assert a ground for subject matter
jurisdiction, the "shotgun" nature of the pleading on its own
cannot serve as a basis for granting a motion to dismiss pursuant
to Fed. R. Civ. P. 12(b)(1). See, e.g., Ledford v. Peeples, 605
F.3d 871, 892 (11th Cir. 2010), vacated on other grounds, 657 F.3d
1263 (11th Cir. 2011) ("When faced with a complaint [that lumps
multiple claims together in one count, and] in which the counts
incorporate by reference all previous allegations and counts, the

                                 -3-
           As relevant here, Millennium developed a urine drug-

testing program for physicians to monitor the medications of

chronic pain patients and to assess patients' compliance with

prescribed medication regimes. The testing method begins as point-

of-care testing in a doctor's office and uses various chemically-

treated test strips ("units") inserted into a single cup filled

with the patient's urine ("specimen") (collectively, the "test

kit").

           Robert Cunningham, now deceased, worked as a compliance

officer for Calloway, a competitor of Millennium's, in 2007 and

2008.    It was during his employment at Calloway that Cunningham

learned of the allegedly improper billing practices at issue in his

qui tam complaint against Millennium and the unnamed physicians.

Cunningham   labeled   Millennium's    alleged   fraudulent   practices,

collectively, as "Millennium's Physician Billing Model" in his

district court must cull through the allegations, identify the
claims, and, as to each claim identified, select the allegations
that appear to be germane to the claim. This task can be avoided
if the defendant moves the court for a more definite statement or
if the court, acting on its own initiative, orders a repleader.");
Kuehl v. FDIC, 8 F.3d 905, 908 (1st Cir. 1994) ("Our federal rules
promote the disposition of claims on the merits rather than on the
basis of technicalities, and courts should be reluctant to impose
a dismissal with prejudice for a rules violation that is neither
persistent nor vexatious, particularly without some review of the
merits.") (citing Foman v. Davis, 371 U.S. 178-181-82 (1962)).
Therefore, for the purposes of our review, we focus on the factual
allegations and the legal claims pled based on said allegations,
not the number of counts listed in the amended complaint.

                                 -4-
original complaint.         The overall scheme is alleged to involve

different components, but as a general matter, is

            designed to 1) encourage physicians to perform
            and order medically excessive and unnecessary
            testing, thereby significantly increasing the
            revenues   of   the   John    Doe   [physician]
            defendants at the expense of the government
            and private health insurance programs, and 2)
            by increasing the John Doe [physician]
            defendants' revenues, significantly increase
            Millennium's   revenues   and   market share,
            enabling Millennium to profit from the billing
            for reflex screenings and confirmations.

The complaint states that, unlike other laboratories "which profit

from the tests ordered by a physician with no payment to the

physician," Millennium's model allows a physician "to substantially

increase his    or    her   revenue    based upon the     laboratory      tests

ordered."    The complaint then proceeds to break down the various

aspects of the larger scheme, which involves alleged fraudulent

activity    related    to   multiple    billing   for   single     test   kits,

excessive    testing    without       medical   necessity,   and     improper

confirmation testing.

            First, Millennium is alleged to have billed multiple

times for the testing of a single test kit.              Specifically, the

original complaint alleges that Millennium encouraged doctors "to

use a multi-class qualitative drug screen which uses a single

specimen, and to bill the government and private insurance programs

multiple units for the single testing event devices" ("Aspect 1").

Millennium    then    encouraged      doctors   "to   improperly    bill    the

                                       -5-
government under CPT codes 80101, 80101QW, and/or other pathology

and laboratory codes," resulting in federal monies lost as a result

of "laboratory services which were not performed as claimed or were

inflated."       Millennium did this by informing physicians that,

rather than bill one unit of 80101QW for each test kit, the

physician should bill "as many units as there are panels in the

test kit."     (emphasis added).        Further, Millennium gave physicians

a document, entitled           "Gross Revenue by Insurance Category for

Multi-Clin 11 Panel Test Kit," which suggested that "each physician

can bill at least 9 units per kit," despite the fact that all nine

units are tested "in a single testing event."                    Relator alleges

fraud in that payment because use of CPT code 80101QW "would only

be   proper    if   it   was   billed   in    one    unit.   .   .   .   Rather,   at

Millennium's encouragement and in conspiracy with Millennium, the

John Doe [physician] defendants . . . have billed Federal programs

and other health insurance programs multiple units of 80101QW per

patient per day."

              Second,    Relator   claims     that    Millennium     directed      and

encouraged physicians to test excessively, more than was reasonable

or medically necessary ("Aspect 2").                Specifically, the original

complaint alleges that Millennium

              represents to the physician that by simply
              ordering one (1) test per day and billing
              Medicare at the rate of $19.24 per panel for
              nine (9) units, the physician can earn $173.18
              per day . . . . Millennium also informs the
              physician that if she or he were to order

                                        -6-
           twenty (20) tests per day and bill Medicare at
           the rate of $16.67 per panel for nine (9)
           units, the earnings would be $3,463.20 per
           day. . . .

Thus, as distinct from the first set of allegations, the second set

of allegations does not involve billing more than one time for a

single unit, but rather involves the unnecessary frequency with

which physicians were encouraged to use and bill entire test kits.

These allegations also include charges that Millennium informed

physicians that, if they were to order twenty tests per day, they

could earn $8,640.00 per day based on "the standard indemnity, auto

insurance, and [w]orkmen's compensation policies at the reasonable

and customary rate of $80.00 per panel for nine (9) units."         These

amounts are also reflected in the "Gross Revenue by Insurance

Category for Multi-Clin 11 Panel Test Kit" document, which also

breaks down the potential revenues a physician can earn by ordering

between one and twenty tests per day.         The complaint states that

Millennium thus "encourages the physician to order more testing

than that physician would have prior to engaging in Millennium's

point[-] of[-]care model, and increases Millennium's market share

by drawing other physicians to the practice with the hope and

promise   of   greater   revenues."     It   further   alleges   that   the

physician defendants did order "significantly more testing for

their patients since entering the conspiracy than they did prior to

participating in the conspiracy with Millennium.             This would

include . . . the initial screens conducted by" the physician

                                  -7-
defendants.       The alleged fraud consists of Millennium's promotion

of said billing model and physician defendants' misrepresentation

of "the medical necessity of the tests performed."

               Third   and   finally,    the   complaint   alleges fraudulent

activity related to confirmation testing of initial screen tests

("Aspect 3").          After performing an initial qualitative test,

physicians at the point of care may confirm the results of those

tests by another method.           The complaint claims that Millennium

encouraged physicians to order more testing than they would have

otherwise not only with respect to the initial tests, but with the

confirmation tests as well.           The fraud that the complaint alleges

is that Millennium "knowingly encouraged the [physician] defendants

.   .   . to    misrepresent    the     medical   necessity   of   confirmation

testing.        Defendants knew that these practices and procedures

resulted in fraudulent claims to the federal government through the

Medicare, Medicaid, and other federally funded programs."3

               Prior to the Relator's filing of the instant suit,

Millennium filed a complaint in its own right against Calloway and

unnamed John Does, inclusive, in the Superior Court of California,

alleging, inter alia, defamation and intentional interference with

3
  The amended complaint states the same facts detailed above as to
Aspects 2 and 3, although it omits separate FCA counts charging
Millennium and the physician defendants with the underlying facts
pertaining to Aspects 2 and 3.       The amended complaint does,
however, incorporate those facts by reference in the single FCA
count brought.

                                         -8-
contractual relations.   Millennium's complaint alleged that two

Calloway account executives sent e-mails to individuals and a

Millennium customer describing Millennium's practice of billing

insurance companies and the government twice for the same service,

and claiming that that practice could put both Millennium and

physicians at risk of "potential legal exposure" or "potential

insurance fraud."   Since the e-mails attached to the California

complaint were both the factual basis for the claims alleged in the

complaint, as well as basis for the district court's jurisdictional

determination regarding prior public disclosure, we will describe

the facts alleged therein in detail.   We only list facts that are

relevant for the public disclosure bar as it governs Relator's

complaint.

          The first e-mail attached to the California complaint is

from a Calloway account executive, Greg Williams, to Michael

Schatman, Ph.D., of Pacific Northwest University Health Sciences in

Yakima, Washington, and Marty Schultz.       Williams expresses his

shock that their clinic chose a lab for services "that allow[] the

clinic to generate revenue by billing for the drug screens.   There

is a very un-reputable lab going around, called Millennium, that is

offering this revenue generating scenario.    I hope this is not the

lab you all have bought into."    Williams goes on to describe the

"severe pitfalls" of the physician billing scheme utilized by

Millennium, stating that: (1) "there are . . . patients and

                                 -9-
insurances being billed twice for the same service"; and (2) the

"in-house screens that clinics are billing the 80101 code for

should be bundled, but clinics are 'un-bundling' each metabolite

screened for on the cup or test strip."              Williams suggests that

these practices are unlawful, unethical, and the basis for an

office being audited.4

           The second e-mail was also sent by a Calloway account

executive, Stephen Schur, but was sent to a Millennium customer.

Schur's e-mail consisted of a two-sentence introduction to an

attached question-and-answer information sheet ("Q & A Sheet I").

The introduction indicates that the attached sheet "should clear

things up" and invites further contact should the customer have any

questions.      Q & A Sheet I in its own right appears to be a guide

drafted   for    physicians   as   a    means   to   clarify   the   value   of

Calloway's urine-testing services. The Sheet distinguishes between

Calloway's own model and the competing point-of-care "physician

screening model."      It does not mention Millennium by name, but

states that "[s]ome laboratories" that promote the "physician

4
   While Williams' e-mail mentions confirmation testing, it does
not do so in reference to Millennium.            Rather, Williams
distinguishes Millennium's point-of-care drug screens from the kind
of testing that occurs at "confirmation labs like Calloway."
Williams argues that such confirmation labs "are becoming so
prevalent in the market place because the medical community
recognizes the only information of value in this day and age comes
from the results of a confirmed specimen."      If anything, then,
Williams' e-mail, Exhibit A to Millennium's California complaint,
distances Millennium from direct involvement with any confirmation
tests.

                                       -10-
screening model" "are sure to attract the attention of regulatory

authorities"     for   unlawful    billing   practices.     These   include

"suggesting that a physician can bill multiple units of CPT Code

80101, sometimes with a 'QW' modifier, for qualitative tests

performed by a physician's office using one of a variety of drug

testing kits on the market."         Q & A Sheet I then claims that the

Center    for   Medicare   and    Medicaid   Services   ("CMS")   "does   not

authorize the billing of multiple units of 80101; i.e. -- they are

considered a single test for billing."           It further asserts that

state Medicaid manuals require that, "when a test kit with multiple

drug test cards is used, the provider should bill for a single

instance of 80101 with a 'QW' modifier, not multiple."            Secondly,

the Q & A Sheet provides the following question and answer about

confirmation testing by labs promoting the "physician screening

model":

            The lab promoting the "Physician Screening
            Model" does confirmation testing so at least
            the issue of detecting specific drugs within a
            drug class is handled. Right?

            Possibly. It appears some of these labs are
            performing   and    billing    for   so-called
            "confirming EIA analysis." This is considered
            double-billing by CMS because your Point-of-
            Care-Testing    is    also    "EIA"    (Enzyme
            Immunoassay)    testing     and    regulations
            specifically prohibit one EIA test confirming
            another EIA test.     The physician needs to
            order only confirmation tests performed by
            GC/MS or LC/MS/MS.

                                     -11-
            The third e-mail attached to the California complaint was

also sent by Stephen Schur to Teresa Tinc of Pain Diagnosis, and

contained another Q & A Sheet ("Q & A Sheet II").                  The body of

Schur's e-mail described the attached Q & A Sheet more fully,

identifying the information contained therein as "info that is

pertinent to a physician billing model like Millennium's. . . . a

model that is potentially fraudulent."             The first question on Q &

A Sheet II involves whether a physician who "perform[s] a drug

screen    with    a    Point-of-Care    device"    may   "bill   the   patient's

insurance for drug screening."            The response states that, while

"[s]ome     laboratories      promote     a    'Physician    Screening    Model'

suggesting that a physician can bill multiple units of CPT Code

80101, sometimes with a 'QW' modifier . . . . This is incorrect and

possibly abusive."        It states the same reasons for challenging the

practice as stated in Q & A Sheet I -- CMS not authorizing the

billing of multiple units when they should be considered as a

single test and also referencing state Medicaid manuals prohibiting

the practice.         Q & A Sheet II also copies exactly the language of

Q & A Sheet I regarding confirmation testing under the "Physician

Screening Model" described therein.

B.   Procedural History

            Cunningham filed his original complaint in this action

five     days    after    Millennium    filed     the    California    suit,   on

December 29, 2009.          On February 25, 2011, his Estate filed an

                                        -12-
amended complaint.       Millennium moved to dismiss that complaint on

three grounds: the FCA's public disclosure bar deprived the court

of subject matter jurisdiction; in the alternative, Relator failed

to state a claim upon which relief could be granted under Fed. R.

Civ. P. 12(b)(6); and, lastly, he failed to plead fraud with the

requisite particularity under Fed. R. Civ. P. 9(b).

           The      district    court    granted     Millennium's       motion,

dismissing Relator's complaint with prejudice on grounds that it

lacked    subject    matter    jurisdiction       under   the   FCA's   public

disclosure bar.

                               II.   Discussion

A.   The FCA's Public Disclosure Bar

           In challenging the district court's dismissal order,

Relator argues that the court erred when it found that Millennium's

California complaint had publicly disclosed all of the allegations

made in Relator's own complaint.             Even if the multiple billing

allegations described as Aspect 1 were disclosed in the California

suit, Relator claims, Millennium's complaint did not state facts

relating to Aspects 2 and 3 of the fraudulent billing practices

that Relator's complaint exposes, namely, excessive testing and

excessive confirmation testing of negative results.

           Further, Relator contends that mere rumors of improper

billing   stated    in   Calloway's     account   executives'    e-mails   are

insufficient to constitute a "public disclosure" of Millennium's

                                      -13-
fraudulent conduct and it does not put the government on notice of

fraud as required under the statute and this Circuit's case law.

What is exposed, Relator claims, is a sanitized, innocuous version

of Millennium's business model, not the details of the fraudulent

conduct.        Relator    also       asserts         that    the   allegations     in   his

complaint were not "based upon" Millennium's California complaint

since:    (1)   Aspects        2   and    3    are     only   discussed    in     Relator's

complaint and are not mentioned in the California complaint; and

(2) Relator did not learn of the multiple billing fraud of Aspect

1 from the California complaint. Relator argues in the alternative

that, if the court finds that the information contained in the

instant complaint was publicly disclosed in the California suit,

the court should assert jurisdiction under the "original source"

exception as Cunningham was an original source who acquired all of

his   information      through           his     own    investigation,       without     an

intervening agency.

            Finally,      Relator         states       that    it   was   error    for   the

district court to dismiss the complaint with prejudice, without

granting leave to amend, because the dismissal was based on a

"mistakenly abridged reading" of the complaint, and on remand,

Relator should be allowed to file a second amended complaint given

the "well-known, liberal standards for amendment." Upon amendment,

Relator    promises       to       provide      more     of    Millennium's       marketing

materials, e-mails, and laboratory testing forms demonstrating

                                               -14-
Millennium's intent that physicians profit from billing for a

multiplicity of results derived from a single urine test, and that

Millennium and the defendant physicians both profit from performing

as many tests as possible regardless of medical necessity, in

violation of the FCA.

          This Court reviews de novo the district court's dismissal

of a complaint for lack of subject matter jurisdiction.     Abdel-

Aleem v. OPK Biotech LLC, 665 F.3d 38, 41 (1st Cir. 2012).

Jurisdiction is determined based on whether it existed at the time

the plaintiff filed the original complaint.    Sallen, 273 F.3d at

23.

          Pursuant to the FCA, 31 U.S.C. § 3730(e)(4)(A) (2006),

          [n]o court shall have jurisdiction over an
          action . . . based upon the public disclosure
          of allegations or transactions in a . . .
          civil . . . hearing . . . , unless the action
          is brought by the Attorney General or the
          person bringing the action is an original
          source of the information.5

For the public disclosure bar to apply, each of three elements must

be met: (1) a public disclosure of the allegations or transactions

in a relator's complaint must have occurred; (2) said disclosure

must have occurred in the manner which is specified in the FCA; and

5
  In 2010, Congress amended the public disclosure provision of the
FCA and explicitly narrowed the jurisdictional bar to disclosures
in federal rather than federal and state cases or hearings. 31
U.S.C. § 3730(e)(4)(A) (2010). Since Relator's complaint was filed
prior to amendment, his complaint could be properly barred on the
basis of a public disclosure of information in a state court
proceeding.

                               -15-
(3)   the   relator's    suit   must    be    "based    upon"   those   publicly

disclosed allegations or transactions.                 United States, ex rel.

Duxbury v. Ortho Biotech Prods., L.P., 579 F.3d 13, 21 (1st Cir.

2009) (quotations and citation omitted).               If those elements have

been met, then a court may only exercise jurisdiction over the suit

if the relator falls within the "original source" exception.                Id.

            A prior public disclosure may occur through any public

document available on the docket in a civil hearing.                See United

States ex rel. Poteet v. Bahler Med., Inc., 619 F.3d 104, 111 (1st

Cir. 2010).     To be a disclosure "of fraud," a disclosure must

either contain a direct allegation of fraud or allow for a proper

inference of fraud by revealing a misrepresented state of facts in

conjunction with a true state of facts.           Id. at 110.     In assessing

whether a given later-filed suit is "based upon" publicly disclosed

allegations,     we     look    to     whether    those      allegations    are

"substantially similar" to said allegations. United States ex rel.

Ondis v. City of Woonsocket, 587 F.3d 49, 57 (1st Cir. 2009).                We

do this by comparing the substance of the prior disclosures with

the substance of a relator's complaint.            Poteet, 619 F.3d at 114.

            As a preliminary matter, we must address the issue of

which complaint -- Relator's original or amended complaint -- we

are comparing to Millennium's California complaint for the purposes

of the public disclosure bar.           The record is not entirely clear

which complaint was reviewed below for the purposes of the public

                                       -16-
disclosure bar.   The district court first cited to the proper rule

-- that a court must determine whether it has subject matter

jurisdiction over an action based on the original complaint filed

-- but then only considered its subject matter jurisdiction over

the allegations made in Count One of the original complaint,

summarily stating in footnote 59 that, since Relator's other three

counts "do not appear in the First Amended Complaint," they "thus

have no bearing on this motion to dismiss."        The district court

then went on to say that, even if the additional three claims were

not barred by the public disclosure bar, "they do not provide

Relator with the ability to amend the complaint to include a claim

that was jurisdictionally barred at the time Cunningham filed the

original Complaint."   After making this statement in a footnote,

the district court did not analyze whether the claims made in the

three separate counts in the original complaint were either: (1)

integrated into the amended complaint in its factual section or

under the single FCA count; or (2) barred by the FCA's public

disclosure provision as a result of having been disclosed in

Millennium's California suit.

          The district court erred in the first instance when it

did not consider all FCA counts of the original complaint in

determining whether or not said complaint was jurisdictionally

barred by prior public disclosure.     It also erred when it failed to

meticulously compare Relator's allegations in both the original and

                                -17-
amended complaint regarding excessive and confirmatory testing with

the information contained in Millennium's California complaint and

attached     e-mails.      Specifically,        in    reciting    the   relevant

"substantially similar" facts shared by Millennium's California

complaint and Relator's complaint, the district court only cited to

the California complaint's attached e-mails detailing the multiple

billing fraudulent scheme, or, as the district court described the

scheme, "a plan that billed insurance agencies and the federal

government    multiple    times    for    the   same     test."     A   detailed

comparison, however, reveals that, while the district court was

correct    that    Millennium's    California        complaint    discussed   the

purportedly       fraudulent   activity     associated     with    Millennium's

multiple billing practices, it failed to assess whether Relator's

excessive and confirmatory testing allegations contained in Counts

2 and 3 of the original complaint, and retained in paragraphs 1, 5,

16, 18, 22 and 23 of the amended complaint, were also disclosed in

the California suit.      Therefore, while we agree with the district

court that Aspect 1 of Relator's fraud allegations was disclosed in

the California suit, we must also address the prior disclosure of

Aspects 2 and 3 as alleged in the original complaint and retained

in the amended complaint.         Perusing both Relator's complaints and

the California complaint, we find that Aspect 3 of Relator's FCA

allegations was also disclosed in the California suit, but Aspect

2 was not.

                                     -18-
               1.    Aspects 1 and 3 of the Alleged Scheme

               We first discuss the multiple billing allegations and our

reasons    for       affirming    the   district     court's    dismissal     of   the

Relator's complaint as barred by the FCA's public disclosure

provision.          Relator appears to concede that the multiple billing

scheme alleged as Aspect 1 of its FCA claim was disclosed in the

California complaint, stating that that complaint was "limited to

th[e] discrete issue of multiple billing," and the district court's

holding    in       dismissing    the   complaint     was    "wrong     because    the

California Complaint is devoid of the other two aspects of the

fraud     --    excessively       frequent      testing,     and      the   automatic

confirmation of negative results." (emphasis added). However, for

the sake of thoroughness, we briefly review the reasons the public

disclosure       bar    applies    to   Aspect   1   as     alleged    in   Relator's

complaint.

               Relator is incorrect and misguided in suggesting that

Aspect 1 was not "publicly disclosed" in the California suit "as

fraud" because the allegations made in that case consisted of "mere

rumors."       Since Relator does not contest that a disclosure of

information on a civil docket may constitute "public disclosure"

for the purposes of the FCA, we construe Relator's challenge to be

directed at the extent to which Millennium's complaint made a

direct or properly inferrable public disclosure of fraud. Yet, the

California complaint and attached e-mails could not have been more

                                         -19-
explicit that the information the Calloway account executives were

spreading     about    Millennium's       billing     practices    concerned

allegations    that    they   involved      and   encouraged   unlawful    and

unethical misrepresentations to the government and private insurers

about billing for multiple tests when in fact only a single unit

was tested. As cited supra, in the first e-mail attached, Williams

states the following about Millennium's billing practices:

            First, there are the patients and insurances
            being billed twice for the same service.
            Medicaid and Medicare frown upon being billed
            twice for the same thing. . . . Second, these
            in-house screens that clinic are billing the
            80101 code for should be bundled, but clinic
            are "un-bundling" each metabolite screened for
            on the cup or test strip and again Medicaid
            and Medicare frowns upon that.

The third e-mail attached to the California complaint states that

"participating    in   any    plan   to   increase    revenues    by   billing

excessive or incorrect codes violates a number of federal and state

statutes," and that Millennium's billing model involving billing

for each test strip rather than the single testing event puts

physicians "at risk for potential insurance fraud."

            Even assuming these statements did not constitute direct

allegations of fraud, the e-mails compare Millennium's version of

the facts associated with its billing practices6 with the "true"

state of those facts as claimed by Calloway account executives.

6
   Relator concedes as much in his opening brief in stating that
"the California Complaint artfully describes only those aspects of
Millennium's billing practices that are arguably legitimate."

                                     -20-
Specifically, the e-mails say that, while Millennium represents

that "physicians can bill multiple units of 80101 . . . for

qualitative tests[,] . . . [CMS] does not authorize the billing of

multiple units of 80101: i.e.--they are considered a single test

for billing." Therefore, the district court did not err in finding

that the disclosure constituted a disclosure of fraud.

           While we share Relator's concern that a person or entity

committing fraud against the government could theoretically shield

itself from a qui tam action through preemptively filing its own

action, thus creating a sanitized public disclosure while barring

a future whistleblower action, the Supreme Court has been clear

that self-disclosure can bar such suit under the FCA, and it has

further characterized concerns about insulation from FCA liability

as unwarranted in most cases.        Schindler Elevator Corp. v. United

States ex rel. Kirk, 131 S. Ct. 1885, 1895 (2011) (dismissing as

"pure speculation" concerns that potential defendants may insulate

themselves from FCA liability by making FOIA requests); Graham

Cnty. Soil & Water Conservation Dist. v. United States ex rel.

Wilson,   130   S.   Ct.   1396,   1410    (2010)   (stating   that   careful

disclosure of potential fraud would not immunize a fraudulent actor

"from FCA liability in an action brought by the United States"

because it still tips off the Attorney General; furthermore,

Congress "carefully preserved the rights of the most deserving qui

                                    -21-
tam plaintiffs: those whistle-blowers who qualify as original

sources") (quotations and citations omitted).

           Finally, Relator is incorrect in suggesting that his suit

is not "based upon" the allegations contained in the California

suit as to Aspect 1.       Relator misconstrues what this court has

understood the terms "based upon" to mean in the context of FCA

liability.      We do not, as Relator suggests, determine whether

information in a subsequently filed action is "based upon" a prior

filing in terms of whether the former is "parasitic" to the latter.

Rather,    we   compare   the   respective      substance     of    the     prior

disclosures with a relator's complaint and determine if they are

"substantially    similar."     Ondis,    587    F.3d   at    57.      As    just

discussed, the allegations in both suits detail a scheme involving

multiple   billing   or   individual     billing    for      the    "unbundled"

components for a single test under CPT codes 80101 and 80101QW.               We

thus find that, as to Aspect 1, the district court was not

incorrect in finding that all requirements of the public disclosure

bar were met, and it properly found that it lacked subject matter

jurisdiction as to Relator's FCA claim based on the Aspect 1

allegations.

           Relator's FCA claim based on its allegations as to Aspect

3 of Millennium's purportedly fraudulent scheme is also barred

since Aspect 3 was both publicly disclosed and was "substantially

similar" to information provided in Millennium's California suit.

                                  -22-
The facts alleged pertaining to Millennium's confirmation testing

scheme in Relator's complaint were as follows: (1) since the start

of the company in 2007, Millennium used and promoted the Physician

Billing Model designed to, inter alia, "increase [the physician]

defendants' revenues, [and] significantly increase Millennium's

revenues and market share, enabling Millennium to profit from the

billing for . . . confirmations"; (2) the physician defendants

ordered    "significantly    more    testing   for   their    patients   since

entering the conspiracy than they did prior to participating in the

conspiracy with Millennium," and this included "confirmatory tests

ordered by the [physician] defendants"; and (3) in conspiracy with

the physician defendants, Millennium "knowingly encouraged" them

"to misrepresent the medical necessity of confirmation testing."7

            The   California    complaint      states   that      Millennium's

business   strategy     included    physicians   sending     drug   tests   and

results "to an independent laboratory, such as Millennium, for

confirmation testing and additional testing for drugs not tested

with the point[-]of[-] care device," and further states that "the

laboratory only bills for any confirmation tests and additional

testing    that   is   necessary."     This    statement     in   Millennium's

complaint is counterposed with statements made in Calloway account

executives' e-mails regarding confirmation testing and billing. As

7
   The original and amended complaints state the same facts as
pertaining to Aspect 3.

                                     -23-
cited supra, Calloway account executives forwarded Q & A Sheets

warning of the potential fraud surrounding billing for confirmation

tests.    Specifically, they warned that billing practices like

Millennium's may be "considered double-billing by CMS because your

Point-of-Care-Testing is also 'EIA' (Enzyme Immunoassay) testing

and regulations specifically prohibit one EIA test confirming

another EIA test.       The physician needs to order only confirmation

tests performed by GC/MS or LC/MS/MS."

              Thus, the allegations in Relator's complaint and the

California suit both concern fraudulent billing of confirmation

tests when such tests were purportedly unnecessary, and they

further link that practice with Millennium's billing model which

benefits Millennium and the physician defendants.                   Since these

allegations are "substantially similar," Relator's FCA claim as

based    in    Aspect      3    of      Millennium's   fraudulent   scheme    is

jurisdictionally barred.

              Further, the claims arising from Aspects 1 and 3 in

Relator's complaint cannot be saved by Relator's belated assertion

that he was the "original source" of the information concerning

Millennium's alleged fraud.              An "original source," as defined by

statute at the time Relator's original complaint was filed, is "an

individual     who   has       direct    and   independent   knowledge   of   the

information on which the allegations are based and has voluntarily

provided the information to the Government before filing an action

                                          -24-
under this section which is based on the information."                   31 U.S.C.

§ 3730(e)(4)(B) (2009).

            Knowledge is "direct" if it is as "marked by absence of

an intervening agency, instrumentality, or influence: immediate."

Ondis, 587 F.3d at 59 (citation omitted).            Knowledge is not direct

if it is "based on research into public records, review of publicly

disclosed materials, or some combination of these techniques." Id.

Knowledge is "independent" if it did not depend on the public

disclosure or if it merely constitutes a use of an individual's

"unique   expertise     or     training   to   conclude    that    the   material

elements already in the public domain constitute a false claim."

Id. at 59-60. The relator as the proponent of federal jurisdiction

bears the burden of proving its existence by a preponderance of the

evidence.    Id. at 54.

            Relator raises his original source argument for the first

time on appeal.    He contends that he had direct and independent

knowledge of the information at issue because he undertook an

independent investigation into Millennium's activities by reviewing

Millennium's Physician Billing Model and other documents as well as

speaking to a number of people about Millennium's practices during

his tenure at Calloway.         Specifically, he claims that he reviewed

"complaints from the sales force, interviews with lead industry

personnel,    actions     he    observed,      documents   he     obtained,    and

information he gleaned independently." Relator further claims that

                                      -25-
even information he gleaned from public sources, including the

California complaint, should be exempted from the public disclosure

bar because he "discovered and synthesized that information."

           However, because Relator never raised his original source

argument   before   the     district   court,   it   is   waived.   Warren

Freedenfeld Assocs. v. McTigue, 531 F.3d 38, 48 (1st Cir. 2008)

("If any principle is settled in this circuit, it is that, absent

the most extraordinary circumstances, legal theories not raised

squarely in the lower court cannot be broached for the first time

on   appeal.")   (quoting    Teamsters, Chauffeurs,       Warehousemen   and

Helpers Union, Local No. 59 v. Superline Transp. Co. et al., 953
F.2d 17, 21 (1st Cir. 1992)).8         In any event, while Relator claims

8
  In Relator's reply brief on appeal, he argues that he raised the
original source argument in his sur-reply to Millennium's motion to
dismiss before the district court. However, the cited page numbers
of the sur-reply brief only include Relator's argument that his
case was not "based upon" the allegations contained in Millennium's
California complaint.      Original source doctrine is in fact
referenced, but only in Relator's explication of the arguments
raised in United States ex rel. Hutcheson v. Blackstone Med., Inc.,
694 F. Supp. 2d 48, 59 (1st Cir. 2010), not in relation to his own
case.   Instead of arguing that the original source exception
applied to retain subject matter jurisdiction, Relator claimed that
one of the elements required for the public disclosure bar to apply
-- the requirement that the allegations be "based upon" the prior
disclosure -- was not met in his case:

      The Relator in this case specifically states in the
      Amended Complaint that his allegations are based upon his
      experience in the urine drug testing industry, not the
      allegations in the California defamation action. . . .
      Here, Plaintiff/Relator's suit is most certainly not
      derived from Defendant's California Complaint. Under the
      Hutcheson I & II analysis, which is currently the law
      within the First Circuit, the Amended Complaint cannot be

                                   -26-
in   a   conclusory         manner     that    he   conducted   an     independent

investigation of Millennium's fraudulent practices, he fails to

show how the knowledge he obtained was "direct." Specifically, the

sources he lists for obtaining the information -- Calloway's sales

force and lead industry personnel -- are third parties, and Relator

makes    no   argument      to   meet    his    burden   in   showing    that    the

information gleaned from those sources is "marked by the absence of

an intervening agency, instrumentality, or influence."                  See Ondis,

587 F.3d 59.        Further, our case law is clear that "[k]nowledge that

is based on research into public records, review of publicly

disclosed materials, or some combination of these techniques is not

direct."      Id.    To the extent that Relator asks this court to join

other    circuits      in    holding    that    discovery     and    synthesis    of

information from different public sources during the course of an

independent investigation can result in original sourcing, we

     'based upon' the California Complaint.      Jurisdiction
     exists over this case under the 1986 version of the FCA,
     and Defendant's Motion to Dismiss must be denied.

While it appears that Relator may have confused the "based upon"
analysis with some aspects of the original source doctrine, it
nevertheless remains true that Relator never presented to the
district court briefing, argumentation, or allegations to support
his claims that he was an original source of information on
Millennium's fraudulent billing scheme, and thus the district court
was never able to evaluate what the basis for such an exception to
the public disclosure bar could consist of in this case. This was
also the district court's own understanding in its memorandum
dismissing Relator's complaint: "[t]he Relator does not even
attempt to argue that it fits into the original source exception to
the bar."

                                         -27-
decline to do so.    This, because of the scant and vague evidentiary

basis upon which Relator makes his claims both as to Aspects 1 and

3 of the alleged fraud and as to the nature of his purported

"independent investigation" beyond interviews with Calloway's sales

force and leading industry personnel.            See, e.g., Kennard v.

Comstock Resources, Inc., 363 F.3d 1039 (10th Cir. 2004); United

States v. Bank of Farmington, 166 F.3d 853, 864 (7th Cir. 1999);

United States ex rel. Barajas v. Northrop Corp., 5 F.3d 407, 410

(9th Cir. 1993); see also United States ex rel. Yannacopolous v.

Gen. Dynamics, 315 F. Supp. 2d 939, 953-54 (N.D. Ill. 2004).

            Finally, we review a district court's denial of leave to

amend a complaint for abuse of discretion.             Aponte-Torres v.

University of Puerto Rico, 445 F.3d 50, 58 (1st Cir. 2006).        There

was no such abuse here with respect to denying Relator leave to

amend his complaint as to Aspects 1 and 3.           Assuming Relator's

request in his sur-reply brief and at oral argument constituted a

"sufficient request" to amend pursuant to Fed. R. Civ. P. 15(a),

see Rost, 507 F.3d at 734, our comparison of the information

disclosed    in   Relator's   complaint   and   Millennium's   California

complaint, and Relator's failure to indicate any additional facts

in its briefing as to Aspects 1 and 3 beyond the information

disclosed in the California complaint, leaves us to conclude that

the jurisdictional defect with respect to those FCA claims is

incurable.

                                   -28-
            We   thus   affirm    the    district    court's    dismissal    with

prejudice of Relator's complaint as to the FCA claim based on

Aspect 1 of Millennium's purported fraudulent scheme.                Aspect 3 of

that scheme is also jurisdictionally barred.

            2.   Aspect 2 of the Fraudulent Scheme

            As stated supra, Relator's complaint alleges that one

component   of     Millennium's    fraudulent       billing    scheme   included

directing    and    encouraging    the     physician    defendants      to   test

excessively in a manner that was not medically necessary,

            represent[ing] to the physician that by simply
            ordering one (1) test per day and billing
            Medicare at the rate of $19.24 per panel for
            nine (9) units, the physician can earn $173.18
            per day . . . . Millennium also informs the
            physician that if she or her were to order
            twenty (20) tests per day and bill Medicare at
            the rate of $16.67 per panel for nine (9)
            unites, the earnings would be $3,463.20 per
            day. . . .

The allegations thus involve testing patients with an unnecessary

frequency   while     incentivizing       that   testing   through      providing

revenue sheets that break down the gross revenues a physician could

earn by ordering multiple tests rather than one test per day.

            Neither Millennium's California complaint nor the e-mails

attached thereto mention this kind of excessively frequent testing

as part of Millennium's fraudulent scheme.             The first e-mail from

Williams only references allegations pertaining to Aspect 1 of

Relator's complaint, and the other two e-mails and attached Q & A

                                        -29-
Sheets reference facts pertaining only to Aspects 1 and 3 of

Millennium's billing practices.

           However, while Relator's factual allegations pertaining

to Aspect 2 of Millennium's model may not be subject to the FCA's

public disclosure bar, Relator must still sufficiently plead the

fraud associated with those allegations to survive dismissal under

Fed. R. Civ. P. 12(b)(6) and 9(b).          While Millennium's motion to

dismiss Relator's complaint included alternative grounds to dismiss

the complaint pursuant to Rules 12(b)(6) and 9(b), the district

court   never   reached   those   questions    since    it   dismissed    the

complaint on jurisdictional grounds.          The parties did not fully

brief those issues on appeal.9     For deficiencies under Fed. R. Civ.

P. 9(b), leave to amend is often given, at least for plausible

claims.    N.   Am.   Catholic    Educ.   Programming    Found.,   Inc.    v.

Cardinale, 567 F.3d 8, 16 (1st Cir. 2009).         Accordingly, we vacate

the order dismissing Relator's complaint as to Relator's Aspect 2

allegations and remand to allow the district court to consider

whether   Relator's   complaint    should    be   dismissed    under   Rules

12(b)(6) and 9(b).     Singleton v. Wulff, 428 U.S. 106, 120 (1976)

9
    Millennium mentions pleading deficiencies as to Relator's
allegations of medically unnecessary testing under Rule 9(b) in its
opposition brief, but that argument was cursorily incorporated into
its broader argument that Relator's amended complaint only alleged
a single theory of fraud in the FCA count that remained following
amendment from the original complaint.      Relator, for his part,
limited his briefing to the district court's jurisdictional grounds
for dismissing his complaint.

                                   -30-
("It is a general rule . . . that a federal appellate court does

not consider an issue not passed upon below.").

                         III.   Conclusion

           We conclude that the district court did not err in

dismissing Relator's complaint as jurisdictionally barred as to

Aspects 1 and 3 of Millennium's alleged fraudulent scheme, and we

therefore affirm dismissal as to those claims.    However, we vacate

the district court's order dismissing with prejudice Aspect 2 of

Relator's FCA claim, remanding said claim to the district court for

its consideration of whether Relator alleged sufficient facts to

survive dismissal under Fed. R. Civ. P. 12(b)(6) and 9(b).      The

district court may award Plaintiff-Appellant the costs of the

appeal in the event that Plaintiff-Appellant ultimately prevails on

the merits of the remaining FCA claim.       Plaintiff-Appellant may

then seek costs taxed in the district court under Fed. R. App. P.

39(e).   See, e.g., L-3 Communs. Corp. v. OSI Sys., 607 F.3d 24 (2d

Cir. 2010).

           Affirmed in Part, Vacated in Part, and Remanded.

                                -31-