867 F.3d 712
7th Cir.2017Background
- Hartgrove, a psychiatric hospital licensed for 150 beds (maintained 152), billed Medicaid for inpatient care while some newly admitted adolescents slept in a dayroom on rollout beds; 13 such instances alleged in 2011 period and audits showed many over‑census occasions in 2008–2009.
- Bellevue, a former Hartgrove nursing counselor (Oct 2009–Oct 2014), filed a qui tam FCA and IFCA complaint alleging false claims via over‑capacity admissions and certifications of compliance; he provided his information to government investigators before suing.
- Government (IDPH and CMS) letters and a CMS audit report from March–May 2009 documented Hartgrove being over census on multiple occasions; these materials were presented below to test jurisdiction.
- The district court dismissed Bellevue’s amended complaint with prejudice under Rules 12(b)(6) and 9(b), finding failure to state an FCA claim; the court had earlier declined the public‑disclosure bar as a jurisdictional bar but later concluded the merits were insufficient.
- On appeal the Seventh Circuit addressed whether the FCA public‑disclosure bar (pre‑ and post‑2010 versions) barred Bellevue’s suit, whether his allegations were substantially similar to public disclosures, and whether he was an original source under the amended definition.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the FCA public‑disclosure bar deprives the court of jurisdiction | Bellevue argued his allegations were not barred because public disclosures did not show scienter and his personal knowledge added new information | Hartgrove argued the government letters and audit publicly disclosed the critical elements of the fraud, triggering the bar | The court treated the pre‑2010 bar as jurisdictional for relevant allegations and applied it — public‑disclosure bar precludes the claims |
| Whether the government materials publicly disclosed the critical elements (including scienter) | Bellevue said audits only showed over‑census, not knowing misrepresentations | Hartgrove said the audit data permitted a direct inference of knowing submission of false claims | Court held the audit and letters disclosed critical elements and scienter could be reasonably inferred, so the information was publicly disclosed |
| Whether Bellevue’s allegations were substantially similar to the public disclosures (including post‑May 5, 2009 conduct) | Bellevue claimed his post‑May 2009 allegations and assertions of ongoing practice were new and not substantially similar | Hartgrove argued the complaint described the same entity, conduct, and continued practice disclosed in audits | Court held allegations both pre‑ and post‑May 5, 2009 were substantially similar to the public disclosures (continuous practice doctrine) |
| Whether Bellevue was an "original source" under §3730(e)(4)(B) (2010) | Bellevue argued his employment gave independent knowledge and he materially added specific instances to the public record | Hartgrove argued Bellevue did not materially add to publicly disclosed allegations and therefore is not an original source | Court held Bellevue did not materially add to the public disclosures and thus was not an original source; claims barred |
Key Cases Cited
- Graham Cnty. Soil & Water Conservation Dist. v. United States ex rel. Wilson, 559 U.S. 280 (FCA qui tam framework and limits on opportunistic relators)
- Rockwell Int'l Corp. v. United States, 549 U.S. 457 (public‑disclosure bar treated as jurisdictional pre‑2010)
- Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (viability of implied false certification theory)
- United States ex rel. Marshall v. Woodward, Inc., 812 F.3d 556 (7th Cir. FCA elements)
- United States ex rel. Absher v. Momence Meadows Nursing Ctr., Inc., 764 F.3d 699 (public‑disclosure bar and when scienter can be inferred)
- Cause of Action v. Chicago Transit Auth., 815 F.3d 267 (continuing practice and original‑source analysis under amended statute)
- United States ex rel. Bogina v. Medline Indus., Inc., 809 F.3d 365 (amended definition of original source controls; public‑disclosure analysis)
- Leveski v. ITT Educ. Servs., Inc., 719 F.3d 818 (substantially similar and time‑period considerations)