Third Circuit Upholds Application of pre-ACA Public Disclosure Bar to FCA Claims Filed after the ACA’s Effective Date
On August 26, the United States Court of Appeals for the Third Circuit upheld a district court’s decision to apply the version of the FCA’s public disclosure bar in existence before the enactment of the Patient Protection and Affordable Care Act (“ACA”) to qui tam claims filed after the ACA’s effective date. United States ex rel. Judd v. Quest Diagnostics Inc., No. 14-3156 (3d Cir. Aug. 26, 2015).
As explained by the Third Circuit, the FCA’s public disclosure bar “deprives courts of jurisdiction over qui tam suits when the relevant information has already entered the public domain through certain channels.” Prior to enactment of the ACA in 2010, the FCA’s public disclosure bar mandated dismissal of qui tam suits where the allegations were based on information that had been publicly disclosed at the local, state, or federal level. As amended by the ACA, the public-disclosure bar requires dismissal only where such disclosures have been made in federal proceedings and sources.
The relator, Judd, argued on appeal that the ACA-amended public disclosure bar must apply to qui tam claims filed after the ACA’s effective date. Judd alleged that a number of healthcare providers throughout Southeast Pennsylvania, including Hatboro Medical Associates, P.C. (“HMA”) where he was CEO, had been engaging in a kickback scheme with large diagnostic testing company Quest since before 2005. The district court had applied the pre-ACA public disclosure bar to Judd’s claims arising before 2010—when the ACA was enacted—to hold that the majority of these claims must be dismissed. The court reasoned that such claims were based upon allegations previously disclosed in state court proceedings.
Relying on the Supreme Court’s holding in Hughes Aircraft Co. v. United States ex rel. Schumer, 520 U.S. 939 (1997), the Third Circuit affirmed the district court’s application of the pre-ACA public disclosure bar to Judd’s claims arising before 2010. The court observed that, under Hughes Aircraft, “there is a presumption against retroactive ligation . . . that is applied unless Congress had clearly manifested its intent to the contrary, and the legal effect of conduct should ordinarily be assessed under the law that existed when the conduct took place.” The court added that “[t]his presumption . . . is even stronger where an amendment eliminates a defense to a qui tam suit.” Citing to a footnote in Graham Cnty. Soil & Water Conservation Dist. v. United States ex rel. Wilson, 559 U.S. 280 (2010), the court concluded that “[t]here is no indication, however, that Congress intended to make the amendments to the public disclosure bar retroactive.”
The court also affirmed the district court’s dismissal of all Judd’s claims regarding healthcare providers other than HMA, because they failed to satisfy the requirements under Federal Rule of Civil Procedure 9(b). The court stated that, despite its adoption of the “more lenient standard” under Rule 9(b) with regard to FCA claimants, Judd’s claims failed because “[h]e provides no reason to believe that Quest submitted claims for Medicare reimbursement in connection with its kickbacks.” Rather, the only mention of Quest’s dealings with non-HMA providers was “a brief, conclusory assertion that ‘[Judd’s] discussions with other providers in South Eastern Pennsylvania demonstrate that Quest’s practices are not limited to HMA and they extend to other medical practices.”