Lead Opinion
LAWSON, D.J., delivered the opinion of the court in which McKEAGUE, J., joined and GIBBONS, J., joined in part and in the result. GIBBONS, J. (pp. 620-22), delivered a separate concurring opinion.
OPINION
When Colonel David Antoon (United States Air Force, retired) learned that he needed prostate surgery, he researched treatment options and specialists, which led him to the Cleveland Clinic and defendant Dr. Jihad Kaouk. Col. Antoon interviewed Dr. Kaouk and arranged for him to perform the operation, or so he thought. When Col. Antoon experienced complications following the surgery, his further investigation caused him to suspect that Dr. Kaouk did not actually perform the surgery, and passed off the major duties to a surgical resident. Based on that suspicion, Col. Antoon lodged complaints with several individuals and agencies, and he filed a medical malpractice action in state court, which was dismissed voluntarily. Finding no satisfaction, Col. Antoon brought the present lawsuit as a relator under the qui tarn provisions of the False Claims Act (FCA), premised on the theory that Dr. Kaouk billed the government for work he did not perform, and promoted the robotic surgical device he recommended in violation of the anti-kickback statute. The United States declined to intervene, and the district court granted the defendants’ motion to dismiss, after denying Col. Antoon leave to file a second amended complaint. Although we do not necessarily agree with some of the district court’s grounds for dismissing the case and declining the amendment, we do find that Col. Antoon cannot maintain a false claims action against the defendants because of a jurisdictional bar. Col. Antoon does not have any direct and independent knowledge of the information upon which his fraud allegations are based; therefore he cannot qualify as an original source of that information, and cannot establish standing as a qui tarn plaintiff under the FCA. On that basis, we affirm the judgment of the district court.
I. Facts and proceedings
Col. Antoon began this action by filing a pro se complaint under seal in the district court on behalf of himself and his wife. He followed that with an amended complaint. After the government declined to intervene and the lawsuit was served, the defendants filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) and (6). Col. Antoon then obtained counsel, who responded to the motion and moved for leave to file a second amended complaint.
A. First amended complaint
In the first amended complaint, Col. An-toon alleged that he met with Dr. Kaouk on December 6, 2007 to discuss surgical options to treat prostate cancer. At that meeting, Dr. Kaouk informed him that “robotic surgery was the safest surgical option and provided the best surgical outcomes for continence and potency.”
On January 8, 2008, Col. Antoon underwent surgery, which resulted in multiple permanent complications causing disability and loss of employment. Col. Antoon alleges that he “did not see Jihad Kaouk in the operating room,” and told a surgical resident, Dr. Raj Goel that only Dr. Kaouk was authorized to perform his surgery. Dr. Goel called Dr. Kaouk twice from the operating room to express Col. Antoon’s concerns and then directed surgery to proceed over Col. Antoon’s objections. Dr. Kaouk called Ms. Antoon over the phone to say he “had trouble” and “got stuck,” apparently in an effort to explain the lengthy surgery.
On January 15, 2008, Col. Antoon returned to the hospital for post-surgery procedures. A physician’s assistant removed Col. Antoon’s surgical drain and catheter, but no physician or resident met with him. Col. Antoon alleged that' he “began experiencing multiple complications” after the visit, which he communicated to Dr. Kaouk, but were not documented in his chart.
Since July 2009, Col. Antoon alleged that he lodged complaints with the deve-la^ Clinic Foundation (CCF), the Ohio Department of Health, the State Medical Board of Ohio, the federal Centers for 'Medicare/Medicaid Services (CMS), the Joint Commission on Accreditation, and government insurance programs TRI-CARE and the Civil Health and Medical Program of the Uniformed Services (CHAMPUS). He submitted multiple Freedom of Information Act (FOIA) requests to state and federal agencies. He also filed a medical malpractice action in the Cuyahoga County, Ohio Court of Common Pleas. Other former patients of Dr. Kaouk contacted the plaintiff after a newspaper article was published about Col. An-toon’s civil complaint.
The CCF ombudsman, Daniel DiCello, investigated Col. Antoon’s complaint and concluded that there was “no indication that anything was done outside of the standard of care.” The ombudsman confirmed that “Staff Surgeon # 16 [Jihad Kaouk] performed all critical points of the surgical procedure, consistent with the information provide[d] to the patient prior to surgery” and “the surgical fellow [Raj Goel] was limited to non-critical points of the surgical procedure, as [is] typically the case with procedures of this type.” But Col. Antoon insisted that CCF’s findings were “false and intentionally misleading.” Col. An-toon maintained that many records, documents, and communications were concealed, disappeared, or redacted to conceal complications from the surgery.
The amended complaint states a single claim under the FCA; it appears that Col. Antoon’s theory was that CCF and Dr. Kauok violated several provisions of the TRICARE manual when submitting the bill for Col. Antoon’s prostate surgery. The essence of the false claim was the submission of a CMS-1500 claim form for surgery by Dr. Kauok, when in truth the surgery was performed by an unsupervised surgical resident. The relators also alleged that Dr. Kauok, the CCF, and device manufacturer Intuitive violated the Medicare and Medicaid Patient Protection Act by falsely promoting the efficacy of the robotic surgical device Dr. Kauok recommended when the doctor received compensation from Intuitive. Presumably, they meant to cite the anti-kickback provision in 42 U.S.C. § 1320a-7b(b)(2). The relators
B. Proposed second amended complaint
The proposed second amended complaint, which was rejected by the district court on futility grounds, was considerably more detailed; it spanned 116 pages, contained 569 paragraphs, and included over 700 exhibits. But the theory of liability was the same: the defendants violated a condition of payment under the TRICARE and CHAMPUS programs when they submitted a CMS-1500 claim form and certified that the surgery was performed personally by Dr. Kaouk. The condition of payment was found in the TRICARE reimbursement manual. The plaintiffs alleged that several medical records do not indicate that Dr. Kaouk was present for the surgery or that the records were altered or signed weeks after the surgery to cover up multiple investigations for fraud. The second amended complaint would have added 26 state law claims as well.
The second amended complaint elaborated on Col. Antoon’s experience in the operating room. He says that he met with an anaesthesiologist around noon to discuss the risks and benefits of anesthesia. Thereafter, Dr. Goel, a resident urologist, entered the room and called Dr. Kaouk. Col. Antoon was taken to the operating room shortly before 1:00 p.m. He asked Dr. Goel why Dr. Kaouk was not present. Dr. Goel stated that Kaouk was in another surgery, but would arrive shortly. Goel stated to the anesthesiologist “Let’s get going! We are late.” Col. Antoon was under anesthesia from 1:05 p.m. until 5:20 p.m.; the surgery began at 1:45 p.m. and concluded at 4:47 p.m. Col. Antoon “never saw Kaouk” prior to the anesthesia or in recovery.
Col. Antoon’s wife, Linda Antoon, told her husband that Dr. Kaouk “paged her to a telephone to inform her that he had ‘trouble’ and ‘got stuck.’ ” Dr. Kaouk met with Col. Antoon the next day and informed him that “it took him more time to get the bowel adhesion down, because there was a lot of adhesions, and that he needed the extra 40 minutes to get all the bowel adhesions out of the way.” Dr. Kaouk expected a full recovery. However, during a meeting in December 2008, Dr. Kaouk said that Col. Antoon did not have adhesions and that Dr. Kaouk “probably placed clamps on his nerves.”
In the proposed second amended complaint, the Antoons alleged that the CMS-1500 claim form Dr. Kaouk submitted contained a legend below Dr. Kaouk’s signature stating: “I certify that the statements on the reverse apply to this bill and are made a part thereof.” The reverse side of the CMS-1500 form stated:
I certify that the services shown on this form were medically indicated and necessary for the health of the patient and were personally furnished by me or were furnished incident to my professional service by my employee under my immediate personal supervision, except as otherwise expressly permitted by Medicare or CHAMPUS regulations.
The Antoons also elaborated on their conversation with CCF Ombudsman Di-Cello. They alleged that on July 27, 2009, DiCello called the Antoons and told them that “resident Lee ... had no recollection of Kaouk being present in Antoon’s surgery” and that “customarily, Kaouk would only be present during the ‘nerve sparing portion of the surgery.’ ” “No findings were discussed other than the assertion by DiCello that Antoon authorized doctors in training to do his surgery and he accepted such risk.” Shortly thereafter, Col. An-toon sent DiCello an email asking “[a]t what point in my surgery did Kaouk arrive?” On August 4, 2009, Antoon re
The Antoons alleged that on October 31, 2009, Dr. Thomas Cook, an orthopedic surgeon, informed Col. Antoon that a surgeon is not allowed to bill for services unless present for the critical procedures. Col. Antoon asked Dr. Cook which portions of a radial prostatectomy are considered critical and Cook responded, “almost the entire surgery.”
On November 16, 2009, Dr. Jack Pence, a urologist, reviewed Col. Antoon’s surgical records and concluded that Col. An-toon’s negative outcome was probably the result of an unsupervised resident doing his surgery. Pence stated that “it was common knowledge that multiple simultaneous surgeries were performed at Cleveland Clinic and other training hospitals by residents with a staff surgeon not present,” “he was aware of surgeons at the CCF allowing residents to do surgeries without patient knowledge or consent,” and “his last four penile implant procedures were on prostatectomy patients from CCF.”
Col. Antoon also clarified that in addition to the complaints he lodged with the several agencies noted earlier, he tendered “41 FOIA submissions to CMS, 38 submissions to DOD/TRICARE, and 7 to HHS.” Several of those investigations revealed substantial violations related to medical records, surgical services, and staff credentials. The Antoons also alleged that after they filed their malpractice lawsuit and the Cleveland Plain Dealer published its article about the case, the “other victims of Dr. Kaouk” who contacted Col. Antoon said that they never saw Dr. Kaouk during their surgeries.
C. Proceedings in the district court
After the Antoons filed their lawsuit under seal, and after the United States declined to intervene, the district court ordered service on the defendants and portions of the record unsealed. The defendants filed motions to dismiss under Federal Rules of Civil Procedure 8(a), 9(b), 12(b)(1), and 12(b)(6), arguing that the district court lacked subject matter jurisdiction and the amended complaint failed to state a claim upon which relief could be granted.
In granting the motion to dismiss and refusing leave to file the second amended complaint, the district court held that (1) the amended complaint did not state a claim under the FCA because it did not satisfy Rule 9(b)’s particularity requirement where it did not identify the services that Col. Antoon received, the specific claim form submitted for those services, and the date the claim forms were submitted; (2) the amended complaint did not contain sufficient facts to allege a fraudulent scheme because it did not allege that the defendants submitted any claims that were factually false, ie., that Dr. Kaouk did not provide any medical services; and (3) the relators did not cite a condition of payment that would be violated if Kaouk was not present during the operation, because the TRICARE reimbursement manual did not constitute a law or regulation, which is what the FCA required.
The district court also held that it lacked subject matter jurisdiction over the FCA allegations against Intuitive, Dr. Kaouk, and the Cleveland defendants because there was public disclosure of the Antoons’ allegations before they filed their FCA complaint in federal court, and they could not allege plausibly that they were an original source. The district court observed that facts concerning Dr. Kaouk’s financial arrangement and his practice of providing
Finally, the court held that the amended complaint did not state a claim for a violation of the anti-kickback statute because the parts of that statute cited in the amended complaint are criminal provisions and may only be enforced by the government; and even if the Antoons could bring the claim, the factual allegations were insufficient to state a claim. The court also denied leave to amend because the proposed second amended complaint did not cure the defects in the FCA claims, and the court would have declined to exercise supplemental jurisdiction over the remaining state-law claims.
II. Discussion
Although we do not necessarily agree with some of the district court’s rulings based on Rule 12(b)(6), the success of this case for the Antoons boils down to the question of subject matter jurisdiction, which was addressed by the defendants’ motion under Rule 12(b)(1). We give fresh review to a district court’s dismissal of an FCA complaint for lack of subject matter jurisdiction. Russell v. Garrard,
Some of the defendants’ challenges address the substance of the fraud allegations and attack the merits of the relators’ claims. We have warned that attacks on the merits should not be confounded with jurisdictional challenges, admonishing courts to be more exacting when addressing arguments styled as jurisdictional attacks. Primax Recoveries, Inc. v. Gunter,
However, although it is obvious that Col. Antoon’s main grievance stems from his belief that he received poor medical care, or perhaps that he was deprived of the benefit of his bargain (he hired the seasoned pro but believes he got the untested rookie instead), the actual victim of the federal claim he seeks to advance is the United States. Under the FCA, it is illegal to present a false claim for payment to the government. 31 U.S.C. § 3729(a)(1). The qui tam provisions of the Act grant standing to a limited class of private individuals to bring such claims. See United States ex rel. Dick v. Long Island Lighting Co.,
One of those requirements is that when the basis of the lawsuit has been publically disclosed in advance, the person filing the action must be the original source of the information that a false claim has been presented. Poteet,
A. 2010 amendments to the FCA
Before we address the CCF defendants’ public disclosure bar arguments, we must determine which version of the statute applies to this case. The events described in the complaint occurred in 2007 and 2008. Congress amended the FCA in March 2010 and modified several aspects of the public disclosure bar, including the definition of “original source” in section 3730(e)(4)(B). There is no indication that the statute was meant to havé retroactive effect, which would be necessary to apply it to conduct that occurred before the amendment. See Hughes Aircraft Co. v. United States ex rel. Schumer,
B. Original source
A relator cannot establish qui tam status if the “action under ... section [3730 is] based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media” unless the relator “is an original source of the information.” 31 U.S.C. § 3730(e)(4)(A) (1986). Congress has defined an “original source” as
an 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.
31 U.S.C. § 3730(e)(4)(B) (1986). The district court held that the relators did not qualify as an original source because they did not disclose their information to a Department of Justice official. On appeal, the CCF defendants also argue that the relators did not have personal knowledge of the fraudulent conduct. The relators challenge both conclusions on appeal, as well as the conclusion that a public disclosure occurred.
1. Public disclosure
A public disclosure occurs “when enough information exists in the public domain to expose the fraudulent transaction.’ ” United States ex rel. Jones v. Horizon Healthcare Corp.,
Two types of disclosures are sufficient to put the government on notice of fraud. Poteet,
Several aspects of the. relators’ pleadings show that there was a prior public disclosure of fraud. First, the Antoons filed a state court complaint on June 6, 2010, nearly two years before they filed their federal court action, in which they alleged that “upon information and belief, Dr. Kaouk either was not present during Colonel Antoon’s surgery, or he merely observed while key aspects of the procedure were completed by Dr. Goel, Dr. Lee, or some other doctor-in-training.” Second, the Cleveland Plain Dealer published an article highlighting the Antoons’ allegations and referenced the CMS investigation that, among other things, reviewed whether Dr. Kaouk performed his surgery. Third, the amended complaint and proposed second amended complaint contain allegations that the Antoons learned from responses to FOIA requests. Not only are those allegations sufficient to put the government on notice of the likelihood of “related fraudulent activity,” Poteet,
Further, the relators’ qui tam complaint was “based upon” a prior disclosure of fraud because there was “ ‘a substantial identity ... between the publicly disclosed allegations or transactions and the qui tam complaint.’ ” Id. at 514 (quoting Jones,
2. Disclosure to the “Government”
The district court held that the Antoons cannot be an original source because they did not disclose their information about the defendants’ fraud to a Department of Justice official. A relator must disclose evidence of fraud to the government before filing an action under the FCA. Jones,
3. Direct and independent knowledge
An original source is “an individual: (1) with direct and independent knowledge of the information on which‘the allegations are based.... ” Jones,
In arriving at that conclusion, we observed that the meaning of “direct knowledge” is commonly “interpreted as ‘marked by absence of intervening agency,’ ” Id. at 941 (quoting United States ex rel. Stinson v. Prudential Ins. Co.,
However, that definitional question presents itself here, because much of the information of the fraud alleged by the Antoons was pieced together from their interpretation of the records they gathered and their suspicion generated by what Col. Antoon saw — or’ did not see — immediately before and after his surgery. The CCF defendants argue that a relator cannot have “direct knowledge” under section 3730(e)(4)(B) unless his knowledge is firsthand.
However, there is nothing in the statutory text that limits “direct knowledge” to first-hand knowledge. And “we have never stated whether a relator must possess a certain nature and quantity of information in order to have ‘direct and independent knowledge’ of her allegations.” United States ex rel. Branhan v. Mercy Health Sys. of Sw. Ohio,
Certainly, proof of first-hand knowledge of fraud is sufficient to establish direct knowledge. " After all, “[t]he paradigmatic ‘original source’ is a whist-leblowing insider” who is a “ ‘close observer[ ] or otherwise involved in the fraudulent activity.’ ” United States ex rel. Stinson, Lyons, Gerlin & Bustamante, P.A. v. Prudential Ins. Co.,
Each case is different and must be analyzed to assess the degree of the relator’s original input into the facts disclosed to the government. As the court explained in Kennard v. Comstock Resources, Inc.,
A mere compilation of documents or reports already in the public domain will not allow a relator to qualify as an original source. However, a complete and thorough investigation of a fraud on the Government will likely necessarily involve some review of contracts, documents, or other information in the public domain. It is the character of the relator’s discovery and investigation that controls this inquiry.
Id. at 1045; see also Atkinson,
Applying these principles requires us to focus on the character of the information of which Col. Antoon had direct knowledge. He knew that Dr. Kaouk was not present in the operating room before his surgery or after he woke up in the recovery room, but he did not personally observe whether Dr. Kaouk performed his surgery. Nor did Col. Antoon personally observe Dr. Kaouk create fraudulent medical records or bill TRICARE for other surgeries that he alleges Dr. Kaouk did not perform himself. Col. Antoon contends that the allegations that CCF and Dr. Kaouk violated conditions of payment are based on his own observations and a review of his private medical records. He received a copy of those records on February 11, 2009, March 11, 2010, and March 17, 2010 — in the case of some documents, years before he received any FOIA responses. The heart of the Antoons’ FCA claim appear to be based on his review of those records — which led him to believe that Dr. Kaouk did not perform his surgery — and the fact that Col. Antoon did not see Dr. Kaouk before or after he performed his surgery.
Because Col. Antoon is not an original source of the information on which his complaint was based, the public disclosure bar deprived the district court of subject matter jurisdiction over this action. Dismissal of the amended complaint; therefore, was proper. And because the proposed amended complaint did not cure those defects, refusal to allow the amendment on futility grounds was proper.
III.
For the reasons discussed above, the district court’s judgment of dismissal is AFFIRMED.
Concurrence Opinion
concurring.
CONCURRENCE
I agree with the result reached by the majority, but I differ in my analysis of the meaning of “direct and independent knowledge.” 31 U.S.C. § 3730(e)(4)(B). The majority is correct that the records and experts relied upon by the Antoons could not support their knowledge of the fraud they alleged. Even assuming that the An-toons could rely completely on secondhand knowledge, the Antoons had at most, as the majority notes, a set of facts and inferences that gave them a “ ‘mere suspicion,’ ” Maj. Op. at 620 (quoting United States ex rel. Vuyyuru v. Jadhav,
’ But since the majority addresses that question, I believe the better approach would hew more closely to that of the Findley court. In other words, “to be ‘direct,’ the information must be first-hand
A personal knowledge requirement seems to me a closer reading of the cases from our sister circuits. In fact, this is quite possibly what the Aflatooni and Vuyyuru courts meant when they dismissed the claims before them as founded on suspicion and conjecture. See Vuyyuru,
In addition to aligning more closely with case law, a rule of some first-hand knowledge comports with the normal meaning of
Notes
. This is especially true since the class of claims governed by that language is finite and shrinking, see 31 U.S.C. § 3731(b), after the 2010 amendments to the original source definition.