638 F. App'x 162
3d Cir.2015Background
- Relator James Judd, a physician and former managing partner of Hatboro Medical Associates (HMA), filed a qui tam FCA action against Quest Diagnostics alleging a kickback scheme: Quest allegedly provided free supplies and discounted testing to induce referrals, causing false Medicare/Medicaid claims.
- Judd’s amended complaint alleged the scheme began before 2005 and affected HMA and other providers across Southeast Pennsylvania; he sued under the FCA and state false-claims statutes in 2010.
- Quest moved to dismiss under the FCA’s public disclosure bar (31 U.S.C. § 3730(e)(4)) and Fed. R. Civ. P. 9(b), citing prior public lawsuits (Urbanek; F.L.P.A.; Hunter Labs) that purportedly disclosed the same allegations.
- The District Court held the pre-ACA public disclosure bar barred Judd’s claims about providers other than HMA for conduct before 2010, and found Judd was not an original source for those claims; it retained only claims as to HMA (which Judd later voluntarily dismissed).
- The District Court also dismissed with prejudice all claims regarding non-HMA providers (pre- and post-2010) for failure to meet Rule 9(b) particularity as clarified by this Circuit’s Foglia decision.
- The Third Circuit affirmed: it applied the pre-ACA public disclosure bar to pre-2010 conduct, found Urbanek and Hunter Labs publicly disclosed the same schemes, ruled Judd was not an original source for non-HMA allegations, and agreed the non-HMA claims failed Rule 9(b).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Which version of the public-disclosure bar applies (pre-ACA vs. ACA-amended) | Judd urged applying the ACA-amended bar to claims filed after ACA effective date | Quest argued apply pre-ACA law for conduct occurring before ACA | Court applied pre-ACA rule to conduct before 2010; amendments are not retroactive absent clear congressional intent |
| Whether prior lawsuits publicly disclosed the alleged fraud (Urbanek, Hunter Labs) | Judd argued his allegations (scope, timeframe, federal program focus) differed sufficiently | Quest argued Urbanek and Hunter Labs disclosed substantially similar allegations about supplies/discounts inducing referrals | Court held Urbanek and Hunter Labs publicly disclosed the same underlying allegations for non-HMA providers pre-2010 |
| Whether Judd is an "original source" for publicly disclosed allegations | Judd claimed firsthand knowledge and that his information materially added to public disclosures | Quest contended Judd’s knowledge was limited to HMA and not independent as to other providers | Court held Judd was not an original source for non-HMA claims (lacked direct, independent knowledge) |
| Whether the Amended Complaint satisfied Rule 9(b) for non-HMA FCA claims | Judd argued allegations and discussions with other providers suffice under Foglia’s relaxed standard | Quest argued complaint lacked particulars (who, when, inducements, submitted false federal claims) | Court held non-HMA claims failed Rule 9(b): pleadings lacked specific allegations and reliable indicia that false federal claims were submitted; dismissal affirmed |
Key Cases Cited
- Graham Cnty. Soil & Water Conservation Dist. v. United States ex rel. Wilson, 559 U.S. 280 (Sup. Ct.) (public-disclosure bar deprives courts of jurisdiction where allegations already public)
- Hughes Aircraft Co. v. United States ex rel. Schumer, 520 U.S. 939 (Sup. Ct.) (presumption against retroactive application of statutes that eliminate defenses)
- United States ex rel. Zizic v. Q2 Administrators, LLC, 728 F.3d 228 (3d Cir.) (public-disclosure bar applies even if later complaint adds some different details)
- United States ex rel. Foglia v. Renal Ventures Mgmt., LLC, 754 F.3d 153 (3d Cir.) (Rule 9(b) permits alleging particular scheme details plus reliable indicia that false claims were submitted)
- Rockwell Int’l Corp. v. United States, 549 U.S. 457 (Sup. Ct.) (limitations on "claim smuggling" under § 3730(e)(4))
- United States ex rel. Stinson, Lyons, Gerlin & Bustamante, P.A. v. Prudential Ins. Co., 944 F.2d 1149 (3d Cir.) (original-source test requires substantive, particularized independent information)