UNITED STATES еx rel. Steven J. HARTPENCE, Plaintiff-Appellant, v. KINETIC CONCEPTS, INC.; KCI-USA, Inc., Defendants-Appellees. United States ex rel. Geraldine Godecke, Plaintiff-Appellant, v. Kinetic Concepts, Inc.; KCI-USA, Inc., Defendants-Appellees.
Nos. 12-55396, 12-56117
United States Court of Appeals, Ninth Circuit
Argued and Submitted En Banc March 17, 2015. Filed July 7, 2015.
792 F.3d 1121
Gregory M. Luce (argued), Maya P. Florence, and Colin V. Ram, Skadden, Arps, Slate, Meagher & Flom LLP, Washington, D.C.; Matthew E. Sloan, Skadden, Arps, Slate, Meagher & Flom LLP, Los Angeles, CA, for Defendants-Appellees.
Before: SIDNEY R. THOMAS, Chief Judge and STEPHEN REINHARDT, ALEX KOZINSKI, KIM McLANE WARDLAW, WILLIAM A. FLETCHER, RONALD M. GOULD, MARSHA S. BERZON, CONSUELO M. CALLAHAN, CARLOS T. BEA, SANDRA S. IKUTA and N. RANDY SMITH, Circuit Judges.
OPINION
BEA, Circuit Judge:
If a whistleblower informs the government that it has been bilked by a provider of goods and services, and that scheme is unmasked to the public, under what conditions can that same whistleblower recover part of what the guilty provider is forced to reimburse the government? We hold today that there are two, and only two, requirements in order for a whistleblower to be an “original source” who may recover under the False Claims Act: (1) Before filing his action, the whistleblower must voluntarily inform the government of the facts which underlie the allegations of his complaint; and (2) he must have direct and independent knowledge of the allegations underlying his complaint. Abrogating our earlier precedent, we conclude that it does not mаtter whether he also played a role in the public disclosure of the allegations that
OVERVIEW
The False Claims Act (“FCA“),
However, the FCA also includes several provisions that deprive federal courts of subject-matter jurisdiction over certain qui tam actions. These cases concern two such provisions, the “public disclosure” bar and the “first-to-file” bar. The public disclosure bar precludes qui tam suits where there has been a public disclosure of the fraud, unless the relator qualifies as an “original source” of the information.
In these consolidated qui tam cases, Steven Hartpence and Geraldine Godecke (“Relators“) allege their former employer fraudulently claimed reimbursements from Medicare. After these allegations of Medicare fraud were publicly disclosed, Relators each informed the government of the alleged fraud and then filed separate complaints in district court. Under the public disclosure bar, the district court lacked jurisdiction over these actions unlеss Relators qualified as “original sources” under the FCA.
I. The FCA
The FCA authorizes whistleblowing private citizens to file suit after dis
The 1943 amendments had the curious effect of barring a plaintiff from bringing a qui tam action based on information already in the government‘s possession even where the plaintiff himself was the source of the government‘s knowledge. See, e.g., United States ex rel. Wis. Dept. of Health & Soc. Servs. v. Dean, 729 F.2d 1100 (7th Cir.1984). In 1986, Congress overhauled the FCA with a series of key amendments. See Wilson, 559 U.S. at 294. Among other things, Congress jettisoned the “government knowledge” bar to suit in favor of a new condition, the “public disclosure” bar. This was an effort to strike the proper “balance between encouraging private persons to root out fraud and stifling parasitic lawsuits.” Id. at 295. The publiс disclosure bar deprives district courts of jurisdiction over any action “based upon the public disclosure of allegations or transactions” concerning the alleged fraud, “unless ... the person bringing the action is an original source of the information.”
The 1986 amendments implemented another jurisdictional bar, the first-to-file bar, which prohibits anyone other than the government from intervening or bringing “a related action based on the facts underlying [a] pending action.”
II. The Complaints
Kinetic Concepts, Inc. and KCI USA, Inc. (collectively, “Defendants” or “KCI“) manufacture medical devices to speed the healing оf wounds, using various technological innovations. One such innovation is Vacuum Assisted Closure (“V.A.C.“) Therapy. V.A.C. devices perform negative-pressure wound therapy (“NPWT“), which promotes healing by applying sub-atmospheric pressure to the site of a wound. Since 2000, the Medicare program has covered NPWT devices as “durable medical equipment.” As the district court explained:
The coverage criteria for NPWT devices are found in Local Coverage Determinations (“LCDs“), which are issued by private claims processing contractors known as Durable Medical Equipment Medicare Administrative Contractors (“DME MACs“). There are four separate DME MACs that serve the United States. Because the DME MACs are organized regionally, each DME MAC issues its own LCD for its respective region of the country. In the case of
NPWT, the four regional DME MACs have issued separate, but nearly identical, LCDs. When a supplier of NPWT therapy, such as KCI, submits a claim for reimbursement to Medicare, the claim is initially reviewed by one of the DME MACs in a process known as “initial determination.” If the DME MAC concludes that a particular claim satisfies its payment criteria, the DME MAC may reimburse the claim. If the DME MAC denies reimbursement of a claim the supplier may appeal that denial through a statutorily authorized administrative apрeals process administered by the Secretary of the U.S. Department of Health and Human Services.
United States ex rel. Hartpence v. Kinetic Concepts, Inc., No. CV 08-1885-GHK, 2012 WL 11977661, at *1 (C.D.Cal. Jan. 30, 2012) (citations omitted).
During the course of their employment by Defendants, Hartpence and Godecke allegedly discovered that KCI engaged in fraudulent conduct by submitting claims to Medicare that did not comply with the DME MACs’ local coverage determinations. The substance of the fraud they claim KCI perpetrated was laid out in their respective district court complaints. Hartpence, who served as KCI‘s Senior Vice President of Business Systems until July 2007, filed his initial complaint in district cоurt on March 20, 2008. As relevant here, his operative complaint2 alleges that KCI violated the FCA by knowingly misusing what is known as the “KX modifier.” This is a billing code that certified (allegedly falsely) to Medicare‘s automated processing system that KCI had “records to show that [the] V.A.C. claim billed for met all ... criteria, and that Medicare did not need to look for additional data.” Hartpence alleges that KCI improperly submitted claims with the KX modifier: (1) when there was no wound improvement in the previous month; (2) for the treatment of wounds for which V.A.C. therapy was neither reasonable nor necessary; (3) when the required wound measurement documentation was absent; (4) fоr wounds that had been improving even without V.A.C. therapy; (5) falsely claiming that there had been wound improvement when in fact there was none; and (6) for treatment of wounds that were too small to require V.A.C. therapy. Moreover, Hartpence claims that KCI committed a separate FCA violation by retaining overpayments it obtained as a result of these schemes.
Godecke, who served as KCI‘s Director of Medicare Cash and Collections until October 2007, filed her initial complaint on September 29, 2008, six months after Hartpence‘s filing. Her operative complaint alleges first that KCI violated the FCA by knowingly misusing the KX modifier in submitting claims for a full month of V.A.C. therapy, even when the therapy that had been stopped and restarted within the same month.3 As a separate violation, Godecke alleges that KCI ignored the requirement to receive correct and completed Detailed Written Orders (“DWOs“) before delivering supplies and beginning therapy.4 Third, Godecke alleges that
III. Procedural History
Both complaints were initially filed under seal to allow the government time to review the complaints and decide whether to intervene. See
On appeal, Relators do not challenge the district court‘s determination that the 2007 federal audit report and at least one ALJ decision constitute “public disclosures” under the FCA. Rather, they contend that the district court erred when it determined that neither Relator qualified under the original source exception because neither had a “hand in the public disclosure,” Wang, 975 F.2d at 1418. They argue that the hand-in-the-public-disclosure rule is “found nowhere in the statutory language.” Godecke further argues that her claims are not precluded by the first-to-file bar, because they are sufficiеntly distinct from the claims asserted by Hartpence. The original three-judge panel sua sponte called for this case to be heard en banc to review Wang‘s continued validity.
DISCUSSION
I. Jurisdiction and Standard of Review
We have jurisdiction under
II. Analysis
A. Original Source Exception
The public disclosure bar and original source exception that govern these lawsuits read, in full:
(A) No court shall have jurisdiction over an action under this section based upon the public disclosure of allеgations 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 action is brought by the Attorney General or the person bringing the action is an original source of the information.
(B) For purposes of this paragraph, “original source” means 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.
We previously interpreted the requirements of the original source exception in Wang, 975 F.2d 1412. There, we affirmed the dismissal of a suit brought by an engineer against his former employer under the FCA. Because the relator‘s suit was based on allegations already in the public domain, which triggered the public disclosure bar in
Wang has been the law of this circuit for 23 years. As an en banc court, however, we have the authority—and, indeed, the obligation—to review whether Wang was correctly decided. See Hart v. Massanari, 266 F.3d 1155, 1171 (9th Cir.2001) (“Once a panel resolves an issue in a precedential opinion, the matter is deemed resolved, unless overruled by the court itself sitting en banc, or by the Supreme Court.“). We note that many of our sister circuits have declined to adopt Wang‘s third prong—the hand-in-the-public-disclosure requirement—finding that it impermissibly grafts onto the statute a requirement nowhere to
In construing the provisions of a statute, we begin by looking at the language of the statute to determine whether it has a plain meaning. BedRoc Ltd. v. United States, 541 U.S. 176, 183, 124 S.Ct. 1587, 158 L.Ed.2d 338 (2004). “The preeminent canon of statutory interpretation requires us to presume that the legislature says in a statute what it means and means in a statute what it says there. Thus, our inquiry begins with the statutory text, and ends there as well if the [statute‘s] text is unambiguous.” Id. Where the statute‘s language is plain, we do not consider “the legislative history or any other extrinsic material.” Kwai Fun Wong v. Beebe, 732 F.3d 1030, 1042 (9th Cir.2013) (en banc) (internal quotation marks omitted).
On its face, the original source exception has two, and only two, requirements. An original source is “an individual who [1] has direct and independent knowledge оf the information on which the allegations are based and [2] has voluntarily provided the information to the Government before filing an action ... based on the information.”
The Supreme Court‘s decision in Rockwell International Corp. v. United States lends further support to our interpretation.6 In Rockwell, the Court asked: “[D]oes the phrase ‘information on which the allegations are based’ [in
This excerpt from Rockwell stands in serious tension with the hand-in-the-public-disclosure requirement this court adopted in Wang. In Wang, we surmised that the term “information” in
We pause to address Appellee‘s argument that our interpretation is inconsistent with an overarching goal of the False Claims Act—to encourage private citizens to uncover fraud, not simply to report it. See, e.g., Wilson, 559 U.S. at 295. But the FCA also aims to incentivize persons with firsthand knowledge of fraud to report it to the government and to prosecute cases against the offending entities, in a sense acting as private Attorneys General. We think it entirely reasonable that Congress sought to reward those who assume responsibility for prosecuting, on the government‘s behalf, fraud claims about which they have direct and independent knowledge, even if they were not in the chain that caused the public disclosure of the fraud. Yet even if we thought that Congress struck the wrong balanсe, whom to reward and what actions to incentivize are considerations for Congress, when enacting the Act, not for the judiciary. Indeed, if Congress‘s plain words like those contained in
We conclude that Wang impermissibly drew on language from
B. First-to-File Bar
The district court concluded that, even if Relators qualified as original sources, Godecke‘s claims would be precluded by the first-to-file bar. Godecke, 2012 WL 11979268, at *9. Because this is a legal determination that did not rest on factual findings, we review de novo. See Campbell v. Redding Med. Ctr., 421 F.3d 817, 820 (9th Cir.2005).
On appeal, Godecke does not contest the district court‘s conclusion that her first qui tam claim is precludеd by the first-to-file bar; it overlaps with Hartpence‘s claims, which all relate to misuse of the KX modifier. Godecke points out, however, that her second and third claims relate to violations of a different Medicare program requirement—the requirement that a supplier receive Detailed Written Orders before delivering a V.A.C. pressure wound pump. Godecke argues that she is the first to file on the claims addressing the lack of DWOs and the resulting receipt of improper overpayments. We agree.
The first-to-file bar provides: “When a person brings an action under this subsection, no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.”
Limiting
§ 3730(b)(5) to only bar actions with identical facts would be contrary to the plain language and legislative intent: (1) using a narrow jurisdictional bar, such as an identical facts test, would decrease incentives to promptly bring qui tam actions; (2) multiple relators would expect a recovery for the same conduct, thereby decreasing the total amount each relator would potentially receive and incentives to bring the suit; and (3) a narrow identical facts bar would encourage piggyback claims, which would have no additional benefit for the government....
Id. at 1189. We reiterated that the first-to-file bar, enacted as part of the 1986 amendments, has two purposes: “to promote incentives for whistle-blowing insiders and prevent opportunistic successive plaintiffs.” Id. at 1187.
Lujan has been our principal opportunity to explore the contours of the first-to-file bar. In Lujan, relators William Schumer and Linda Lujan filed separate qui tam actions against Hughes Aircraft alleging fraudulent use of “commonality agreements.” Id. at 1183.7 Hughes used these agreements to allocate costs among four defense contracts. Id. at 1185-86. The contracts included the “B2 contract,” which involved the development of an airplane radar system. Id. at 1185. Schumer‘s complaint alleged that Hughes used the commonality agreements “to misbid, misallocate, and mischarge costs among the four contracts.” Id. at 1886. Schumer claimed, for example, “that Hughes charged the development of a radar signal processor to the F15 contract but then also charged these development costs to the F14, F18, and B2 contracts.” Id. Lujan alleged that “Hughes routinely mischarged costs associated with the design and development of various B2 radar system contracts.” Id. Thus, Lujan‘s claims related
Relying on Lujan, the district court concluded that Godecke‘s and Hartpence‘s complaints involved the same “material elements.” Godecke, 2012 WL 11979268, at *8. It noted that the сomplaints named the same defendants, arose out of the same time period, involved KCI‘s billing practices for the same therapy device, alleged incorrect use of the same billing codes (the KX modifier), shared “100 nearly identical paragraphs,” and were drafted by the same counsel. Id. The district court reasoned that “the two qui tam actions alleged ... slightly different variations of false billing for claims submitted for VAC Therapy devices.” Id. at *9. Thus, it concluded, “Godecke‘s later-filed action provided the Government no additional benefit.” Id.
We disagree with both the premise and the conclusion. First, we think that Godecke‘s complaint is morе than a slight variation on Hartpence‘s complaint. Godecke‘s second claim involves different underlying facts. Whereas Hartpence‘s claims all allege knowing misuse of the KX modifier, Godecke‘s second claim is based on facts which show KCI‘s violation of a different Medicare program requirement—the requirement that a provider receive Detailed Written Orders for the V.A.C. device before beginning to treat patients with the device. While Lujan declined to distinguish between claims that a defense contractor had improperly allocated funds among four government contracts, on the one hand, and within one of those contracts on the other—noting that both claims centеred on the same commonality agreements—here the claims are based on different material facts. The rules governing use of KX modifiers and DWOs were disseminated at different times, in different publications, and are plainly treated as separate regulations under the program.
We further disagree that Godecke‘s action provided no additional benefit to the government. Unaided by Godecke‘s complaint, the government may have never discovered that KCI, in addition allegedly to misusing the KX coding system, was allegedly submitting V.A.C. claims before receiving DWOs. The two alleged frauds are materially different: the KX fraud allegations are basеd on government payment for devices which were used, but unnecessary for treatment, while the DWOs fraud allegations are based on the government paying for devices that were never used at all. The alleged frauds, in short, exist completely independent of one another. Nor can we agree that dismissal of Godecke‘s claims would, as the district court found, necessarily serve the dual purposes of the first-to-file bar: “to promote incentives for whistle-blowing insiders and prevent opportunistic successive plaintiffs.” Lujan, 243 F.3d at 1187. First, although it is true that increasing the class of potential qui tam claimants reduces the potential incentivе for any individual plaintiff to bring suit, see id. at 1189, allowing claims for related but distinct fraud claims encourages broader investigation and increases the total potential for recovery. Second, dismissal of Godecke‘s claim does not serve to discourage opportunistic “piggyback claims, which would have no additional benefit for the government.” Id. Godecke provided information about a different form
We conclude that Godecke‘s second and third claims are based on different material facts than the claims contained in Hartpence‘s earlier-filed complaint. Thus, they are not precluded by the first-to-file bar. The district court erred in holding otherwise.8
CONCLUSION
For the foregoing reasons, we overrule Wang‘s addition of a hand-in-the-public-disclosure requirement to the original source exception, because the requirement has no basis in the statutory text. We also find that the district court erred in holding that the second and third counts in Godecke‘s complaint were barred by the first-to-file bar. We REVERSE the decision of the district court and REMAND for further proceedings consistent with this opinion.