More on the CVSG in False Claims Act qui tam Jurisdictional Issue

The following commentary is by Gary Thompson, an attorney in Akin Gump’s DC office.

On Tuesday, the Court sent a pending case dealing with qui tam actions under the federal False Claims Act (“FCA”) to the Solicitor General’s office for its views on the matter. At issue in the case, No. 06-1269, United States ex rel. Bly-Magee v. Premo, 06-1269, is whether the jurisdictional bar on qui tam actions based on “the public disclosure of allegations or transactions…in a congressional, administrative, or [GAO] report, hearing, audit, or investigation” encompasses disclosures by state and local governments or refers to disclosures only by the federal government.

The FCA is the federal government’s primary weapon to combat alleged fraud. Under the law, the federal government and private citizens (known as qui tam relators or whistleblowers) can file actions for treble damages and substantial civil penalties against any person alleged to have knowingly submitted false or fraudulent claims upon the government. Relators are entitled to receive up to thirty percent of the government’s recovery if the case is successful. However, the FCA also contains a specific jurisdictional bar designed to prevent whistleblowers from bringing qui tam actions based upon information already in the public domain unless they are an “original source,” — i.e., they have direct knowledge of the alleged fraud and voluntarily provide the information to the government prior to filing suit.

With the Court having recently considered the proper application of the FCA’s jurisdictional public disclosure bar with respect to the “original source” requirement in No. 05-1272, Rockwell Int’l v. United States, a cert. grant in Premo would bring further clarification to the exact scope of the public disclosure bar, which has perhaps been the most litigated aspect of the FCA since its amendment in 1986.

The case involves a qui tam action brought by Charlotte Bly-Magee, the former executive director of a Southern California disabilities provider, who alleged that over a five-year period ending in 2000 the California Department of Rehabilitation (“CDR”) and its employees defrauded the federal government by causing it to pay inflated rates for services and to purchase duplicate services. Significantly, the California State Auditor in 2000 issued a report containing findings similar to Bly-Magee’s allegations. After the district court dismissed the suit on public disclosure grounds, the Ninth Circuit upheld the dismissal, holding that a state audit report qualifies as a “public disclosure” for purposes of the jurisdictional bar.

The Eighth and Eleventh Circuits have also held that the enumerated means under the bar encompass state and local government sources of information. The Third Circuit, however, has expressly held that “administrative . . . reports, hearings, audits or investigations” include only federal sources of information; state audit reports are not encompassed by the jurisdictional bar.

Magee’s petition urges the Court to grant certiorari to resolve the clear split within the circuits and adopt the Third Circuit rule. Notably, the Department of Justice – which has authority over the FCA – has on at least one occasion submitted a supporting brief arguing in favor of the Third Circuit rule.

There is no deadline for the Solicitor General to file his brief. However, if past practice is any guide, the brief will likely be filed by the end of the year so that, if the case is granted, the Court could set the case for argument during OT2007.