Eleventh Circuit Clarifies Public Disclosure Bar for Defense of FCA Qui Tams
A recent Eleventh Circuit ruling further expands what qualifies as news media when applying the public disclosure bar to whistleblower False Claims Act (FCA) claims.
The “public disclosure bar” is a key defense to FCA qui tam suits filed by whistleblowers, also called relators. While the FCA encourages individuals to report government-related fraud by filing a qui tam, the public disclosure bar prevents what the Eleventh Circuit described as “opportunistic relators with nothing new to contribute [from] exploit[ing] the False Claims Act’s qui tam provisions for their potential benefit.” Specifically, it prevents a relator from bringing an FCA qui tam suit based on “substantially the same information” that has been previously disclosed in the “news media.”
In United States ex rel. Jacobs v. JP Morgan Chase Bank, N.A., the Eleventh Circuit further clarified the public disclosure bar’s application. The court addressed what types of internet websites qualify as news media, the extent to which disclosed content must be substantially the same as the allegations of the qui tam and confirmed that the “quick trigger” determination continues to apply after the 2010 amendment.
In United States ex rel. Jacobs, the relator alleged that JP Morgan Chase acquired mortgage promissory notes from Washington Mutual after its collapse in 2008 and that “millions” of notes for mortgage loans were not properly executed. The relator claimed that JP Morgan Chase forged endorsements for these loans using signature stamps of former Washington Mutual employees. He accused the bank of submitting false claims for loan servicing costs to Fannie Mae and Freddie Mac.
The Eleventh Circuit upheld the district court’s dismissal of the relator’s complaint on the grounds that the FCA's public disclosure bar applied. The court found that the allegations had already been disclosed in three blog posts prior to the qui tam suit, and as a result, the relator was not an original source of the information in his qui tam.
The Eleventh Circuit’s opinion addressed the following key areas:
1. News media include online blogs written for the purpose of publicly disseminating information.
The court expanded on its analysis in United States ex rel. Osheroff v. Humana, Inc as to what constitutes news media. The court reaffirmed that the public disclosure bar’s reference to news media was to be given a “broad sweep” and include “publicly available websites intended to disseminate information to the public.”
In Jacobs, the defendant sought dismissal on the grounds that three blog articles published online prior to the relator’s suit constituted news media and that the content of those blogs publicly disclosed the fraud subsequently alleged in the qui tam. The court agreed and rejected the relator’s attempt to characterize the online blogs as “merely individual-run accounts that broadcast the personal views of their authors.” Blogs, the court found, can be a source for the dissemination of public information under the FCA if they are intended to disseminate information to the public. The court left for another day the issue of whether private or personal social media pages could qualify as news media.
2. “Substantially the same” allegations do not mean identical allegations:
The public disclosure bar prohibits qui tams based on substantially the same allegations previously disclosed in news media. The court clarified that “substantially the same” does not mean the allegations must be identical. Rather, the court reaffirmed Osheroff, finding that publicly disclosed allegations need only “significant[ly] overlap” with the qui tam complaint.
Significant overlap does not require that the publicly disclosed information allege a violation of the FCA. While Rule 9(b) requires an FCA complaint to plead fraud with particularity, including details about the submission of fraudulent claims, this level of detail is not necessary for the public disclosure bar.
In Jacobs, the court found it sufficient that the blogs disclosed the “core fraud” hypothesis concerning Washington Mutual’s original alleged fraud. The blog articles provided a sufficient inference of fraud, and the court rejected the relator’s claim that the additional details he provided made him an original source, exempt from the public disclosure bar. The court observed that the relator’s allegations “merely supplement[ed] and contextualize[d] the core fraud hypothesis in the blog articles.”
3. District courts are to make a “quick trigger” determination as to whether the allegations in the qui tam complaint are substantially the same as allegations or transactions contained in public disclosures.
Prior to the 2010 amendments to the FCA’s public disclosure bar, the Eleventh Circuit prescribed a three-prong “Cooper” test for determining whether the public disclosure bar applied:
- Have the allegations made by the plaintiff been publicly disclosed?
- If so, is the disclosed information the basis of the plaintiff’s suit?
- If yes, is the plaintiff an “original source” of that information?
The second prong was meant to act as a “quick trigger” to get to the “more exacting original source inquiry.” The 2010 FCA amendments eliminated the “based upon” language of prong two. Osheroff clarified that “substantially the same” was to be substituted for “based upon” in the three-prong test. At least one district court, however, in United States ex rel. Rubin v. Sterling Knight Pharms., questioned whether, in evaluating prong two, courts should still make a “quick trigger determination” when comparing publicly disclosed allegations with the qui tam complaint.
Jacobs makes explicitly clear that the quick trigger determination still applies and that the more exacting determination still resides with whether the relator is an original source of the information he provided as defined by the FCA.
In sum, Jacobs further expands what qualifies as news media for the FCA and how such sources can be marshalled to support defendants seeking dismissal of FCA claims based on the prior public disclosure of substantially the same allegations against a defendant online.
Please contact A. Brian Albritton, Raquel Ramirez Jefferson or any member of Phelps’ white collar defense and investigations team with questions or for advice and guidance.
