Seventh Circuit Court of Appeals Commentary : In Their Opinion : Lawyer & Attorney Michael E. Rigney : Kelley Drye & Warren Law Firm

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• Qui Tam Jurisdictional Bar Is Satisfied When The Relator's Allegations Are Substantially Similar To The Publicly Disclosed Allegations">Share Link

GLASER v. WOUND CARE CONSULTANTS, INC. (July 2, 2009)
 

Carol Glaser is a Medicaid recipient with some serious medical problems. She started receiving care at Wound Care Consultants, Inc. in 2002. At some point, an attorney contacted her and advised her that Wound Care may have submitted improper billing to Medicaid. Glaser filed a qui tam action under the False Claims Act in April of 2005. However, several months before she filed, a routine audit led the Centers for Medicare & Medicaid Services ("CMS") to begin an investigation of Wound Care. Glaser and her attorney stated that they were unaware of the CMS investigation. Nevertheless, the district court dismissed the action on the ground that it was based upon a public disclosure and that Glaser was not an “original source.” Glaser appeals.

In their opinion, Judges Cudahy, Kanne and Sykes affirmed. The Court described the essence of the False Claims Act. The Act prohibits false payment claims to the government. It allows private citizens to file actions on the government’s behalf and receive a substantial share of the recovery, if successful. Qui tam actions, as they are called, are barred if the action is “based upon the public disclosure” of allegations unless the person is an “original source.” This jurisdictional bar necessitates a three-part inquiry: a) whether the allegations have been publicly disclosed, b) if so, whether the action is based upon the disclosure, and c) if so, whether the person is an original source. The Court applied the test to the facts. Public disclosure is satisfied when, as here, the very agency responsible for investigating claims of abuse has started an investigation before the action was filed. The fact of the investigation need not be widely known. With respect to the second prong, the Court noted its earlier precedent that held that “based upon” meant that the allegations actually depended on and were derived from the publicly disclosed information. However, the Court recognized that eight other circuits apply a different test -- an allegation is "based upon" publicly disclosed information when the allegations are substantially similar. The Court conceded the merits of the majority position. Although its construction of the statute is consistent with the plain language doctrine, the Court recognized that its position made the third prong of the test -- original source -- superfluous. In doing so, the Court overruled Bank of Farmington and Caremark. Applying their new standard, the Court concluded that Glaser's allegations were not only substantially similar, but were nearly identical, to those of CMS. Finally, with respect to the third prong of the test, the Court held that Glaser was not an "original source" of the information contained in her action. The Court principally relied on the fact that Glaser knew of the fraudulent conduct only through her attorney but asserted the attorney-client privilege to prevent disclosure of how she learned the information. Thus, she did not meet the burden of proving that she had independent knowledge of the fraud.