Secondhand Knowledge Held Insufficient to Qualify False Claims Act Relator as “Original Source”

In United States ex rel. Saldivar v. Fresenius Medical Care Holdings, Inc., 2016 WL 6595937 (11th Cir. Nov. 8, 2016), the Eleventh Circuit joined the Third, Seventh, Eighth, and Tenth Circuits holding that “secondhand” knowledge is insufficient to make someone an “original source” under the False Claims Act (FCA).  The plaintiff alleged in a qui tam action that the defendant had violated the FCA by overbilling for Medicare drug reimbursement.  The district court had granted summary judgment to the defendant because its actions did not meet the requisite intent for a knowing violation.  The defendant had twice unsuccessfully argued that the court dismiss for lack of subject matter jurisdiction due to the FCA’s Public Disclosure Bar, which prevents qui tam actions if the allegations were publicly disclosed.  31 U.S.C. § 3730(e)(4).  The district court rejected this argument because it found that the plaintiff was an “original source” and thus an exception to the Public Disclosure Bar.  31 U.S.C. § 3730(e)(4)(B).

The Public Disclosure Bar deprives courts of jurisdiction under the FCA whenever the allegations made by the plaintiff have been publicly disclosed, the disclosed information is the basis of the plaintiff’s suit, and the plaintiff is not an original source of that information. The FCA defined “original source” as one who has “direct and independent knowledge of the information on which the allegations are based.”  31 U.S.C. § 3730(e)(4)(B) (2007).  The Eleventh Circuit first noted its two previous decisions that had held that background information is insufficient to grant original source status and that it is not necessary for a relator to have all the relevant information in order to qualify as “independent.”

The court then grappled for the first time with the question of whether secondhand knowledge is sufficient to confer original source status because the plaintiff had direct and independent knowledge of the administration but not of the billing of the drug in question.  Plaintiff Saldivar was directly responsible for inventory sheets and placing orders as inventory ran low, but he was not privy to price-related contracts and was simply told that the forms were the basis of billing Medicare.  The court found persuasive the reasoning of the Tenth, Eighth, Third, and Seventh Circuits who had either directly held that secondhand knowledge does not constitute direct and independent knowledge or held on similar facts that knowledge of related aspects of the claim do not create direct and independent knowledge of the claim itself.  Therefore, the Eleventh Circuit reversed the decision of the district court and held that it lacked subject-matter jurisdiction to hear the case.

Posted by Keith Emanuel.

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