Lead Opinion
CLAY, J., delivered the opinion of the court, in which MOORE, J., joined. GILMAN, J. (pp. 335-337), delivered a separate opinion concurring in the result.
OPINION
Plaintiff-Appellant Maxine Jones brought this qui tam action under the Federal False Claims Act, 31 U.S.C. §§ 3729-3733 (1994), against Defendant-Appellee Horizon Healthcare Corporation on the basis of Horizon Healthcare’s allegedly fraudulent activities against the United States. The district court granted summary judgment in favor of Horizon Healthcare for lack of subject matter jurisdiction. For the reasons set forth below, we hereby AFFIRM the ruling of the district court.
I.
Plaintiff-Appellant Maxine Jones (“Appellant”) was hired by Defendant-Appellee Horizon Healthcare Corporation (“Appellee”) as a patient care services consultant in November of 1992. Her job responsibilities included reviewing Medicare claim forms which sought reimbursement for services performed at several of Appellee’s skilled health care facilities in Michigan and Wisconsin.
Appellant claims that while conducting a claims review in March of 1993, she discovered that several of the claim forms prepared by Appellee’s administration and employees were incorrect because the services allegedly performed did not correspond with the patients’ files and the instructions of the medical staff. Appellant alleges that she informed management of the fraudulent claims and, as a result of her actions, her employment was terminated three months later. After her termination, Appellant applied for
On September 16, 1993, Appellant filed a complaint in the United States District Court for the Eastern District of Michigan, pursuant to diversity jurisdiction, under the Michigan Whistleblower’s Protection Act, Mioh. Comp. Laws Ann. §§ 15.361-369 (West 1994) CWPA”), asserting that she was wrongfully terminated after she discovered that false reimbursement claims had been prepared by Appellee. Appellant claims that she did not know at that time whether the forms actually had been submitted in violation of Medicare guidelines, because she had only been told that the matter was “being taken care of’ when she had complained to management.
On April 21, 1994, Appellant filed a second complaint in the United States District Court for the Eastern District of Michigan against Appellee relating to the fraudulent Medicare forms, this one a qui tam action
Appellee filed a motion for summary judgment in the FCA action on December 20, 1996. The district court granted Appellee’s motion on March 11,1997, and dismissed the complaint for lack of subject matter jurisdiction under the FCA, which prohibits qui tam actions “based upon” public disclosures of fraud unless the plaintiff is an “original source” of the information. The district court later denied Appellant’s motion for reconsideration and clarified that the dismissal of the FCA action was without prejudice to the United States. This timely appeal followed.
II.
This court’s review of a district court’s dismissal of a Federal False Claims Act case on the basis of lack of subject matter jurisdiction is reviewed de novo. United States ex rel. McKenzie v. Bellsouth Telecomms., Inc.,
III.
The FCA, 31 U.S.C. §§ 3729-3733, has a qui tam provision that allows a private individual to bring a civil action for violation of § 3729. See 31 U.S.C. § 3730(b)(1) (1994). The individual brings the action as a “relator”
The original version of the FCA, enacted in 1863, allowed anyone to bring a qui tam action and receive 50 percent of the amount recovered. S. Rep. No. 345, 99th Cong., 2d Sess. 8-10 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5273. This broad provision led to abuse and in 1943, following the Supreme Court’s decision in United States ex rel. Marcus v. Hess,317 U.S. 537 ,63 S.Ct. 379 ,87 L.Ed. 443 (1943), which held that a relator could bring a qui tam action even though the action was based entirely upon information contained in a government indictment, Congress amended the FCA. The 1943 version precluded actions “based on evidence or information the government had when the action was brought.” United States ex rel. Stinson v. Prudential Insurance Co.,944 F.2d 1149 , 1153 (3d Cir.1991) (quoting 31 U.S.C. § 3730(b)(4)(1982) (superseded)). This led to claims being barred even in cases where the qui tam plaintiff supplied the information to the government before filing the claim. See United States ex rel. Wisconsin v. Dean,729 F.2d 1100 , 1106 (7th Cir.1984).
In 1986, Congress amended the FCA again “to encourage any individual knowing of Government fraud to bring that information forward.” S. Rep. No. 345, 99th Cong., 2d Sess. (1986), reprinted in 1986 U.S.C.C.A.N. 5266. “To revitalize the qui tam provisions, the amendment provided incentives for private enforcement, including increased monetary awards, adopted a lower burden of proof, and allowed the qui tam plaintiff to remain a party to the action even if the Government intervenes.” Stinson,944 F.2d at 1154 .
McKenzie,
The current version of the jurisdictional bar of the FCA provides that:
(4)(A) No court shall have jurisdiction over an action under this section 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 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.
31 U.S.C. § 3730(e)(4)(A) and (B)(1994).
IV.
In determining whether the jurisdictional bar of § 3730(e)(4) applies to a relator’s ease, it is useful to break the inquiry down into its elements: (A) whether there has been a public disclosure in a criminal, civil or administrative hearing; or congressional, administrative, or government report, hearing, audit, or investigation; or from the news media; (B) of the allegations or transactions that form the basis of the relator’s complaint; and (C) whether the relator’s action is “based upon” the publicly disclosed allegations or transactions. If the answer is “no” to any of these questions, the inquiry ends and the qui tam action may proceed. If the answer to each of the above questions is “yes,” then the final inquiry is (D) whether the relator qualifies as an “original source” under § 3730(e)(4)(B), which also would allow the'suit to proceed. See, e.g., United States ex rel. Dunleavy v. County of Del.,
(A) Whether There Has Been a “Public Disclosure”
The first inquiry in determining whether the jurisdictional bar of the FCA
(B) Whether the Public Disclosure was of the Allegations or Transactions that Form the Basis of Appellant’s FCA Complaint
Appellant contends that her WPA complaint was not a public disclosure of the allegations or transactions that form the basis of her FCA complaint. Appellant argues that because her WPA complaint reveals the basis for her allegedly wrongful firing but does not actually allege that Appellee engaged in the fraudulent or actionable event of submitting the false claims to the government, the jurisdictional bar does not apply.
In the case of United States ex rel. Springfield Terminal Ry. Co. v. Quinn,
[I]f X + Y = Z, Z represents the allegation of fraud and X and Y represent its essential elements. In order to disclose the fraudulent transaction publicly, the combination- of X and Y must be revealed, from which readers or listeners may infer Z, i.e., the conclusion that fraud has been committed.
* * * *
[Q ]ui tam actions are barred only when enough information exists in the public domain to expose the fraudulent transaction (the combination of X and Y), or the allegation of fraud (Z).
Springfield,
Fraud consists of two elements — a misrepresented state of facts and a true state of facts — that constitute the X and the Y of the equation. See Springfield,
Obviously, the mere use of the word “fraud” is not sufficient to determine whether the WPA complaint consists of an allegation of fraud or the essential elements of fraud. At the same time, Appellant’s argument that the WPA complaint does not allege fraud because it does not specifically allege that the false claims were submitted to the
Cases such as Springfield and Dunleavy did not constitute allegations of fraud or the essential elements of fraud because the disclosed information did not create an inference of impropriety. See Rabushka,
(C) Whether Appellant’s FCA Complaint is “Based Upon” the Public Disclosure
Appellant contends that her FCA complaint is not “based upon” a public disclosure, but rather is “based upon” her employment with Appellee, her own hands-on investigation, and the documents she retained upon her termination. Furthermore, Appellant contends that because she was the source of information for both the WPA suit and the FCA suit, it is irrelevant whether the facts alleged in the FCA suit are similar to the facts set forth in the WPA suit.
At least one circuit has held “based upon” to mean “derived from.” See United States ex rel. Siller v. Becton Dickinson & Co.,
Although Appellant’s qui tam action may not be, as a factual matter, derived from her WTPA action, this does not exempt her from the “based upon” standard that this court has adopted in light of the problems with a “derived from” standard. See McKenzie,
(D) Original Source Inquiry
The FCA states that a court'does not have jurisdiction over an action based upon a public disclosure unless the person bringing the action is an “original source” of the information. See 31 U.S.C. § 3730(e)(4)(A) and (B) (1994). “Original source” is defined as an individual: (1) with direct and independent knowledge of the information on which the allegations are based; and (2) who has voluntarily provided the information to the government before filing an action under the FCA which is based upon the information. See § 3730(e)(4)(B).
The parties do not dispute the district court’s finding that Appellant has “direct and independent knowledge” of the allegations or transactions that are the subject of her FCA complaint. Her knowledge of the facts regarding the alleged fraud clearly is the result of her employment with Appellee and the information she acquired and witnessed as a result of her position. Therefore, the only issue with regard to Appellant’s status as an original source is whether she voluntarily provided information to the government about Appellee’s allegedly fraudulent conduct prior to filing her FCA complaint.
In addition to the requirement that a relator must have provided information to
The district court in this case ruled that Appellant was not an original source because, although Appellant did provide information about Appellee’s allegedly fraudulent conduct to the Michigan Employment Security Commission and the Michigan Department of Public Health prior to bringing suit, she failed to disclose her allegations to the federal government before filing her WPA and FCA actions.
Section 3730(e)(4)(A) provides, in part, that an original source is one who has “voluntarily provided the information to the Government before filing an action.” Appellant argues that “Government” is ambiguous and, therefore, the court should examine legislative history in order to render an interpretation that gives effect to Congress’ intent. See United States v. Noland (In re First Truck Lines, Inc.),
V.
The qui tam provisions of the Federal False Claims Act are intended to encourage private individuals who are aware of fraud being perpetrated against the government to bring such information forward and to prevent parasitic qui tam actions in which relators simply feed off of previous disclosures of government fraud. See McKenzie,
Because Appellant’s FCA action was based upon the prior public disclosure of the allegations of fraud against Appellee, and because Appellant does not qualify as an original source due to her failure to bring the information to the federal government prior to the public disclosure, the district court properly determined that it lacked subject matter jurisdiction over her action. Accordingly, we hereby AFFIRM the ruling of the district court.
Notes
.“Qui tam” is an abbreviation for the Latin phrase "qui tam pro domino rege quam pro si ipso in hac parte sequitur,” meaning "Who sues on behalf of the King as well as for himself.” Black's Law Dictionary 1251 (6th ed.1990). A qui tam action is an action "brought by an informer, under a statute which establishes a penalty for the commission or omission of a certain act ..., part of the penalty to go to any person who brings such action and the remainder to the state or some other institution.” Id.
. On Appellant's motion, the district court had consolidated the WPA and the FCA cases for purposes of judicial economy on March 5, 1996. (J.A. at 128.) Because Appellee's motion for summary judgment was solely with regard to the FCA action, and the district court's dismissal was expressly limited to that action, the present appeal involves only the FCA case.
. A "relator” is "[a] party in interest who is permitted to institute a proceeding in the name of the People or the Attorney General when the
. While admitting that the FCA is not a model of clarity, the concurrence questions our precedent that interprets "based upon” in § 3730(e)(4)(A) to mean "supported by,” opining that this interpretation yields "an unnatural contortion of the language.” Although the "supported by” interpretation may be somewhat inelegant, we believe that it is correct and that interpreting "based upon” to mean "derived from,” as the concurrence suggests, would be problematic. Had Congress simply precluded the bringing of qui tam actions based upon publicly disclosed information, the "derived from” interpretation would be sensible. Congress went on, however, to provide an exception. Neither the concurrence nor the Fourth Circuit opinion cited by the concurrence, United States ex rel. Siller v. Becton Dickinson & Co.,
. The concurrence questions whether it was appropriate for the McKenzie court to infer a requirement that an original source provide information to the government prior to any public disclosure. We believe that the McKenzie court’s interpretation of this problematic statute was both legitimate and correct. First, inferring this additional requirement does not conflict with the literal language of the statute. Section 3730(e)(4)(A) permits an original source to proceed with a qui tam action despite public disclosure, not despite prior public disclosure as the concurrence asserts. The difference is critical. As interpreted by McKenzie, the statute does not bar a relator who discloses information to the government prior to filing suit and prior to this information becoming public from maintaining the action despite the information becoming public before the action is heard. Without the original source exception, the court would lack jurisdiction to hear such an action. In this respect, the McKenzie interpretation is perfectly consistent with the statute as written. Second, the McKenzie interpretation merely ensures that an "original source” be original. This requirement encourages individuals to reporl fraud to the government expeditiously and works to preclude parasitic actions. The McKenzie court recognized that the other circuits that had considered this interpretive question were split, and this court decided that an interpretation of these sections that requires a relator to disclose the relevant information to the government prior to any public disclosure was most in keeping with the language and intent of the statute. We believe that this decision was correct, and it is certainly the law of the Circuit.
. Appellant alleges for the first time on appeal that her counsel contacted someone with the Department of Justice in December of 1993, pri- or to filing the FCA case. Appellee disputes this contention and properly notes that this argument may be considered waived because it is raised for the first time on appeal. See Brickner v. Voinovich,
. We note that 31 U.S.C. § 3730(b)(2) instructs a relator to file her FCA complaint under seal, as Appellant did here.' It is Appellant’s prior WPA complaint, not her sealed FCA complaint, that constitutes the public disclosure that must be preceded by disclosure to the federal government to comply with the original source requirements of 31 U.S.C. § 3730(e)(4)(B) as interpreted in McKenzie.
Concurrence Opinion
concurring.
I concur in the result reached by the majority, both because Maxine Jones failed to report her allegations of fraud to the federal government before filing her False Claims Act (FCA) complaint (an explicit requirement of 31 U.S.C. § 3730(e)(4)(B)), and because we are bound by the earlier decision of this court in United States ex rel. McKenzie v. Bellsouth Telecomms., Inc.,
The first ruling I question is the court’s construction of the phrase “based upon” in 31 U.S.C. § 3730(e)(4)(A) as meaning “supported by.” Id. at 940. The other ruling I question is the judicial addition to 31 U.S.C. § 3730(e)(4)(B) of a requirement “that, to be an original source, a relator must inform the government of the alleged fraud before the information has been publicly disclosed.” Id. at 942.
For ease of reference, I have repeated below the operative language from the FCA:
(A) No court shall have jurisdiction over an action under this section 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 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.
31 U.S.C. § 3730(e)(4)(A) and (B)(1994). (Henceforth these subsections will simply be referred to as (A) and (B).)
To say the least, the above statutory language has not been found to be a model of clarity. The District of Columbia Circuit had this to say about (A) (the “public disclosure” prong of the statute):
Virtually every court of appeals that has considered the public disclosure bar explicitly or implicitly agrees on one thing, however: the language of the statute is not so plain as to clearly describe which cases Congress intended to bar.
United States ex rel. Findley v. FPC-Boron Employees’ Club,
As with the “public disclosure” prong, courts addressing the “original source” prong of the jurisdictional bar have interpreted it in varying ways.
Id. at 689.
Interpreting ambiguous statutory language, of course, is the bread-and-butter work of the federal courts. In doing so, the courts should adopt a reasonable interpretation that furthers the purpose that Congress intended. United States v. American Trucking Ass’ns Inc.,
Which brings me to the first McKenzie ruling I question: the interpretation of “based upon” in (A) to mean “supported by.” I believe that the Fourth Circuit got it right when it found that “based upon” means “derived from.” United States ex rel. Siller v. Becton Dickinson & Co.,
This brings me to the second McKenzie ruling that I question: the judicial addition to (B) of a requirement “that, to be an original source, a relator must inform the government of the alleged fraud before the information has been publicly disclosed.” McKenzie,
The majority opinion correctly states that the statutory requirements to be an “original source” are as follows:
“Original source” is defined as an individual: (1) with direct and independent knowledge of the information on which the allegations are based; and (2) who has voluntarily provided the information to the government before filing an action under the FCA which is based upon the information. See § 3730(e)(4)(B).
But then, based on McKenzie, the majority adds the additional requirement that “a relator must also provide the government with the information upon which the allegations are based prior to any public disclosure.” See McKenzie,
Although there may well be good policy reasons to support this new requirement (as explained in both McKenzie (
Despite my misgivings as set forth above, the law of this circuit is clear that one panel of this court cannot overrule a decision by a prior panel. Salmi v. Secretary of Health and Human Servs.,
