STATEMENT OF THE
ISSUES
TAF relies on Appellant
Campbell’s statement of the issues.
STATEMENT
OF THE CASE
TAF relies on Appellant
Campbell’s statement of the case.
ARGUMENT
This appeal involves a
matter of first impression in the interpretation
of section 3730(b)(5) of the Federal False Claims
Act (31 U.S.C. §§ 3729-33), also known as the
“first-to-file” bar, and its interplay
with the section 3730(e)(4) public disclosure bar
and original source exception. Both
provisions were enacted as part of the overall
legislative scheme of the 1986 amendments to the
False Claims Act, which serve the dual goals of
encouraging private enforcement suits by true
whistleblowing insiders, while barring parasitic
or opportunistic suits that do not enhance the
Government’s fraud-fighting efforts.
The district court
dismissed Appellant Campbell’s qui tam
action pursuant to section 3730(b)(5). The
district court erroneously held that, after a
full public disclosure of the allegations or
transactions making up the fraudulent scheme, a
suit filed by a non-original source plaintiff
over which the district court never had subject
matter jurisdiction is a “pending
action” that bars all later-filed actions
pursuant to section 3730(b)(5). In so ruling, the
district court failed to interpret the plain
meaning of the provision in light of the overall
purposes and policy objectives of the 1986
amendments.
I. SECTION
3730(b)(5) MUST BE APPLIED IN ACCORDANCE WITH THE
LEGISLATIVE PURPOSES BEHIND THE ENACTMENT OF THE
1986 AMENDMENTS TO THE FALSE CLAIMS ACT
A. The 1986
Amendments Were Designed to Encourage Those
With Inside Knowledge of Fraud Against the
Government to Bring Private Enforcement Suits
In 1986, Congress
legislated a major overhaul of the Federal False
Claims Act in response to reports of the
“growing pervasiveness of fraud” in
Government contracts and programs. S. Rep. No.
345, 99th Cong., 1st Sess. 2 (1986), reprinted
in 1986 U.S.C.C.A.N. 5266 (herein S.
Rep.). Recognizing that the Government
alone lacks the resources to detect and punish
fraud adequately, Congress amended the FCA to
“allow and encourage assistance from the
private citizenry,” which it expected to
“make a significant impact on bolstering the
Government’s fraud enforcement
effort.” Id. at 8.
The 1986 amendments
contained numerous changes both to the Act’s
general provisions and to its qui tam
whistleblower provisions.[1] Strengthening the
law’s qui tam provisions was a
crucial part of the legislature’s strategy:
The proposed legislation seeks
not only to provide the Government’s law
enforcers with more effective tools, but to
encourage any individual knowing of
Government fraud to bring that information
forward. In the face of sophisticated
and widespread fraud, the Committee believes
only a coordinated effort of both the
Government and the citizenry will decrease
this wave of defrauding public funds.
S. Rep. at 2, 1986 U.S.C.C.A.N. at 5266-67.
There is no doubt that
the public-private partnership
engendered by the qui tam provisions has
served its intended
purposes. Since 1986, the Federal
Government has obtained over
$12 billion in judgments and settlements in civil
fraud cases, largely
due to the efforts of whistleblowers. See
Press Release,
Department of Justice, False Claims Act
Recoveries Exceed $12
Billion Since 1986 (Nov. 10, 2003), available
at www.usdoj.gov.
. . . . .Qui tam suits have
been used successfully to recover fraud
losses in the full range of government programs,
including defense
procurement, health care, housing subsidies,
environmental
cleanup, and more. The whistleblower provisions
have been
particularly effective in the fight against
Medicare and
Medicaid fraud. In recent years, health
care fraud cases have
accounted for the lion’s share of qui tam
recoveries, returning
$1.7 billion to the federal treasury in fiscal
year 2003 alone.
DOJ Press Release, supra.
B. The
Enactors of the 1986 Amendments Sought to
Achieve the Dual Goals of Encouraging True
Whistleblowers While Preventing Opportunistic
Suits
While in 1986 Congress
sought to encourage those with knowledge of fraud
to come forward to assist the Government, it also
sought to bar opportunistic or
“parasitic” lawsuits that do not add
information or resources to the Government’s
fraud-fighting efforts. See, e.g.,
United States ex rel. LaCorte v. SmithKline
Beecham Clinical Lab., Inc., 149 F.3d 227,
233-4 (3d Cir. 1998) (discussing legislative
history). See also United States ex rel.
LaCorte v. Wagner, 185 F.3d 188, 191 (4th
Cir. 1999) (“Congress…struck a careful
balance between encouraging citizens to report
fraud and stifling parasitic lawsuits”).
With these dual, competing goals in mind,
the legislature enacted the two provisions at
issue in this appeal. Section 3730(b)(5),
which prevents the filing of repetitive,
successive claims once the Government has been
fully informed of the fraud, provides:
When a person brings
an action under this subsection, no person
other than the Government may intervene or
bring a related action based on the facts
underlying the pending action.
There is only one
sentence in the legislative history addressing
the provision, which states that section
3730(b)(5) was meant to “clarify…that
private enforcement under the civil False Claims
Act is not meant to produce class actions or
multiple separate suits based on identical facts
and circumstances.” S. Rep. No. 345 at
25, 1986 U.S.C.C.A.N. at 5290.
At the same time, as
another part of its qui tam legislative
strategy, in 1986 Congress enacted section
3730(e)(4), which forecloses federal subject
matter jurisdiction over any complaint which is
based upon the public disclosures of the
allegations or transactions making up the fraud,
unless the person bringing the complaint is an
“original source.” 31 U.S.C. §
3730(e)(4)(A) and (B). See also United
States ex rel. Barajas v. Northrop Corp., 5
F.3d 407, 411 (9th Cir. 1993) (“[I]f the
allegations or transactions were publicly
disclosed, the relator may bring the suit only if
she was ‘an original source of the
information’”). The statute
defines an original source as:
[a]n 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 under this section which is based
on the information.
The legislative history
indicates that this provision is designed to
ensure that individuals who are the source of the
Government’s knowledge of the fraud and who
assist in the Government’s investigation
prior to filing suit are still considered
eligible for a qui tam share of the
Government’s recovery, even if their
information becomes publicly disclosed prior to
the filing of their complaint. 132 Cong.
Rec. 20,536 (1986). It also seeks to ensure
that members of the general public who learn of
the fraud from publicly disclosed sources do not
attempt to seek a financial reward by filing a
complaint solely based upon that publicly
available information. Id.
II. THE DISTRICT
COURT ERRED IN DISMISSING CAMPBELL’S SUIT
PURSUANT TO SECTION 3730(b)(5)
This appeal arises from
the district court’s dismissal of Dr.
Patrick Campbell’s qui tam suit
pursuant to subsection 3730(b)(5). Campbell
alleged that Redding Medical Center, owned by
Tenet Healthcare Corporation, billed Medicare and
MediCal for the performance of medically
unnecessary heart surgeries. Campbell
provided his evidence to the FBI in Redding in
July 2002 and filed his qui tam complaint
on November 8, 2002, three days after a complaint
against Redding Medical Center was filed by John
Corapi and Joseph Zerga. Appellant’s
ER at 1. Both complaints were filed after
the full public disclosure of the fraud
allegations against Redding Medical Center via
the U.S. Attorney’s release of the FBI
Search Warrant Affidavit to the public and the
press on October 30, 2002. Appellant’s
ER 9 at 360-372.
As discussed more fully
in the Appellant’s brief (Brief at 34-37),
the district court was required for purposes of
deciding the motion to dismiss to construe all
the facts and evidence in favor of
Campbell. The district court was required
to assume, and did assume, that the Corapi
plaintiffs were not original sources and
therefore lacked standing, and that Campbell is
an original source. Despite making the
required assumptions, the district court
incorrectly held that the filing of a complaint
by a plaintiff who lacks standing and whose
complaint does not confer jurisdiction on the
district court is a “pending action”
within the meaning of section 3730(b)(5).
A. The District
Court’s Holding Does Not Advance the
Legislative Purposes Behind the Enactment of
the First-to-File and Public Disclosure Bars
For purposes of this
appeal, the Court need not evaluate the relative
merits of the Campbell and Corapi cases or
determine who is an original source.
Rather, the Court should reinstate
Campbell’s qui tam action based on
the required assumption that Campbell is an
original source, by applying section (b)(5) using
the following bright-line test that comports with
the legislative purposes behind the 1986
amendments: where multiple qui tam
actions are filed after a full public disclosure
of the fraudulent transactions, only the qui tam
action filed by the first original source is a
viable, “pending action” that can serve
to bar later-filed actions pursuant to section
3730(b)(5).
The Court must construe
even a statute’s plain meaning in light of
the object and intent of the statutory scheme as
a whole. See, e.g., John
Hancock Mutual Life Insurance Company v. Harris
Trust and Savings Bank, 510 U.S. 86, 94
(1993) (“[W]e examine…the language of
the governing statute, guided not by ‘a
single sentence or member of a sentence, but
looking to the provisions of the whole law, and
to its object and policy’”) (quoting Kelly
v. Robinson, 479 U.S. 36, 43 (1986)). See
also Northwest Forest Res. Council v.
Glickman, 82 F.3d 825, 830 (9th Cir. 1996)
(“[W]e look first to the plain language of
the statute, construing the provisions of the
entire law, including its object and policy, to
ascertain the intent of Congress”).
The district court’s application of section
(b)(5) allows parasitic lawsuits filed by persons
without standing to bar those filed by original
sources, in direct contravention of congressional
objectives in passing the 1986 amendments.
The district court’s holding is particularly
inapposite in situations where a whistleblower
who has provided his evidence of fraud to the
Government and assisted in the Government’s
investigation prior to filing suit, thereby
leading to the Government’s public
disclosure of the allegations underlying its
investigation, is barred because a non-original
source plaintiff filed first. This in
effect revives the “government
knowledge” bar to qui tam suits that
was removed by the 1986 amendments.
As described above, the
“overall intent” of the legislature in
revamping the FCA in 1986 was “to encourage
more private enforcement suits.” S.
Rep. No. 345 at 23-24; accord United States ex
rel. Stinson, Lyons, Gerlin & Bustamante v.
Prudential Ins. Co., 944 F.2d 1149, 1154 (3d
Cir. 1991). To that end, the legislature
removed a number of disincentives that existed in
the pre-1986 False Claims Act, in particular a
jurisdictional bar to qui tam suits based
upon evidence or information already in the
possession of the United States.[2] This so-called Government
knowledge bar was enacted in response to a suit
in which the qui tam plaintiff received a
reward despite filing a complaint that was simply
copied from a publicly available criminal
indictment, where the relator had no previous
involvement in the matter. United States
ex rel. Marcus v. Hess, 317 U.S. 537
(1943). Despite its admirable purposes,
this jurisdictional provision had the unfortunate
result of barring suits based on information
already in the possession of the Government, even
where the Government only knew of the fraud
because the qui tam relator had disclosed
it to the Government before filing the
action. See, e.g., United
States ex rel. Wisconsin v. Dean, 729 F.2d
1100 (7th Cir. 1984).
The 1986 amendments
removed the Government knowledge bar and replaced
it with the subsection 3730(e)(4) public
disclosure and original source provisions.
These provisions were intended to strike a better
balance between the competing goals of the
statute; they prevent would-be plaintiffs from
seeking financial gain by simply
“copying” information that is in the
public domain, while rewarding inside observers
who truly provide previously unknown information
about fraud to the Government.
In interpreting the
meaning of “original source,” this
Court has held that to have “direct and
independent knowledge” a person must witness
the fraud “with their own eyes or obtain
their knowledge of it through their own labor,
unmediated by anything else.” United
States ex rel. Devlin v. State of California,
84 F.3d 358, 360-362 (9th Cir. 1996). The Devlin
action was dismissed for lack of subject matter
jurisdiction because the Court found that Devlin
“did not make a genuinely valuable
contribution to the exposure of the alleged
fraud.” Id. at 362. Under
the district court’s reasoning in the case
at bar, someone who has created a complaint based
entirely upon information garnered from the
public disclosure of the government’s
investigation, an investigation made possible by
the information supplied to the Government by an
original source, trumps the original source
pursuant to the first-to-file bar. In this
scenario, the complaint simply parrots what the
Government already knows and is exactly the type
of “parasitic” lawsuit that the 1986
amendments were designed to deter.
B. The
District Court’s Reliance On Lujan
is Misplaced
The district court
dismissed Campbell’s qui tam action
in reliance on
this Court’s opinion
in the Lujan case, which stated that
section
3730(b)(5) creates an
“exception-free” first-to-file
bar. United
States ex rel. Lujan
v. Hughes Aircraft Co., 243 F.3d 1181, 1187
(9th Cir. 2001).
Amicus TAF is not asking the Court to find an
exception to the
first-to-file bar, but rather to apply section
(b)(5)
as its framers
intended. The exceptions to the bar that
were
requested by the
plaintiff in Lujan are completely
inapplicable to the
analysis in this case.
Lujan involved the
application of section 3730(b)(5) to the Schumer
and Lujan qui tam suits, filed in
1989 and 1992 respectively, both of which alleged
that Hughes Aircraft Company submitted false
billings to the Government arising out of the Air
Force’s B-2 bomber program. Finding
that Lujan’s suit alleged the same material
facts as Schumer’s, the Court ruled that
Lujan’s suit was a “related
action” and therefore barred under section
(b)(5). The Court ruled further that even
subsequently dismissed actions can be
“pending” actions for purposes of the
provision.
However, the Schumer
case was dismissed pursuant to a judgment on the
merits and not for lack of subject matter
jurisdiction. United States ex rel.
Schumer v. Hughes Aircraft Co., 63 F.3d 1512
(9th Cir. 1995). Therefore, the Lujan
Court never considered and did not rule on the
matter of first impression at issue on this
appeal: whether an action filed by a
plaintiff with no standing and over which the
federal district court lacks subject matter
jurisdiction is a “pending action” for
purposes of this
subsection.
C. An Action
Which Must Be Dismissed for Lack of Subject
matter Jurisdiction is Not a “Pending
Action”
This Court has held that
a district court which lacks subject matter
jurisdiction retains “no power to make
judgments relating to the merits of the
case.” Cook v. Peter Kiewit Sons
Co., 775 F.2d 1030, 1035 (9th Cir. 1985),
(quoting Franklin v. Oregon State Welfare
Division, 662 F.2d 1337, 1343 (9th Cir.
1981)). See also Morongo Band of Indians
v. California, 858 F.2d 1376, 1380 (9th Cir.
1988) (“[W]hen subject matter jurisdiction
is lacking the District Court ‘ha[s] no
power to do anything, other than to dismiss the
action, and any order other than to dismiss is a
nullity.”) Therefore, a complaint
filed by a non-original source whistleblower
after full public disclosure of the fraud cannot
be a “pending action” for purposes of
subsection 3730(b)(5).
CONCLUSION
For the reasons stated
above, amicus TAF submits that the judgment of
the district court should be reversed.
March 9, 2004
Respectfully submitted,
____________________
Amy M. Wilken
Taxpayers Against Fraud Education Fund
1220 19th Street, NW
Suite 501
Washington, D.C. 20036
(202) 296-4826
Counsel for Amicus
Curiae
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Footnotes
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