In March, we published an article entitled “New Questions Regarding The Jurisdictionality Of The FCA’s Public Disclosure Bar: Potential Hurdles And Increased Costs In Defending Against Parasitic Qui Tam Actions,” The Government Contractor, Vol. 55, No. 12 (Mar. 27, 2013). We explored whether, given the 2010 amendments to the civil False Claims Act (FCA) under the Patient Protection and Affordable Care Act (PPACA), the public disclosure bar1 still implicated a federal court’s subject matter jurisdiction. See P.L. 111-148, title X, § 10104(j)(2), 124 Stat. 119 (2010); 31 USCA § 3729 et seq. (2012). Surveying the few cases to have addressed the issue, we concluded that it was largely an open question. The only opinion to have substantially analyzed the question at that time had concluded that the bar was still jurisdictional. See United States ex rel. Beauchamp v. Academi Training Ctr., No. 1:11-cv-371, 2013 WL 1189707, at *9 (E.D. Va. Mar. 21, 2013).2
Since then, several courts have reached the opposite conclusion. Two have made passing reference to the point in footnotes. See United States v. Chattanooga-Hamilton Cnty. Hosp. Auth., No. 1:10-cv-322, 2013 WL 3912571, at *7 n.6 (E.D. Tenn. July 29, 2013); United States ex rel. Fox Rx, Inc. v. Omnicare, Inc., No. 1:11-cv-962, 2013 WL 2303768, at *8 n.15 (N.D. Ga. May 17, 2013). Another has been more direct, comparing the two versions of the public disclosure bar and concluding that “[a]fter the 2010 amendment, the bar does is [sic] not described as jurisdictional in nature; instead, the statute simply directs that the action or claim be dismissed . . . .” United States ex rel. Paulos v. Stryker Corp., No. 11-0041-cv, 2013 WL 2666346, at *3 (W.D. Mo. June 12, 2013).
But a recent opinion from the Southern District of New York provides the most detailed analysis to date. See United States ex rel. Ping Chen v. EMSL Analytical, Inc., No. 10 Civ. 7504, 2013 WL 4441509 (S.D.N.Y. Aug. 16, 2013). It observes a “split as to whether the public disclosure provision remains jurisdictional in nature.” Id. at *8. The case responds to some of the more academic questions that we posed in our previous article, and illustrates well the practical consequences of these questions.
Questions Answered and Unanswered
In our previous article, we surveyed some of the finer points of statutory interpretation that are implicated by this issue. For example, we observed that one of the strongest arguments against the bar remaining jurisdictional is that Congress deliberately removed the word “jurisdiction,” arguably evincing an intent to relegate the bar to a non-jurisdictional status. This point, which had not been raised by any court prior to the publication of our article, did not escape Judge Abrams in Ping Chen. Failing to find a “clear statement” of jurisdictionality, as required by Supreme Court precedent, he reasoned in part that “Congress deliberately removed such clear language from the provision where it could have kept it in.” Id. at *9. This legislative background is likely to undergird those opinions that conclude that the bar is no longer jurisdictional.
One facet of the new bar that was not addressed by Judge Abrams in Ping Chen was the government’s new veto power. Under the amended public disclosure bar, a court must dismiss an action “unless opposed by the government.” 31 U.S.C. § 3730(e)(4)(A) (2012). It appears that no court has yet considered the argument that the Executive’s power to intervene necessarily renders the new bar non-jurisdictional. This constitutional question thus remains open.
More interestingly, the Ping Chen opinion does not reflect any consideration of whether the government opposed dismissal in that case. The government had declined to intervene, so the question would seem pertinent. Yet there is no evidence that the government was given an opportunity to oppose dismissal. This begs the question of how the new bar will work in practice—a question we also posed in our March article. Will courts ask the U.S. Attorney’s office whether they oppose dismissal before rendering an opinion? Or will the government be heard to object after the fact? Much remains to be seen.
The thesis of our previous article was that, although the 2010 amendments might seem benign or semantic, the practical ramifications of a non-jurisdictional public disclosure bar are anything but. The effects of this new interpretation are evident in the Ping Chen opinion, and manifest themselves in two pertinent ways.
First, under a non-jurisdictional bar, a court will not refer to evidence outside the pleadings “except to the extent [it has] been provided to place before the Court documents that may be considered on a motion to dismiss, in this case, judicially-noticeable public disclosures.” See id. (emphasis added). Under that standard, a court may only consider “the fact that press coverage, prior lawsuits, or regulatory filings contained certain information, without regard to the truth of their contents.” Id. (citing Staehr v. Hartford Fin. Servs. Group, Inc., 547 F.3d 406, 425 (2d Cir. 2008). This was not ultimately fatal to the defendant’s challenge in Ping Chen, because there were “judicially-noticeable” documents that the court concluded had publicly disclosed the fraud. But there will inevitably be cases where the defendant’s argument depends upon declarations, affidavits, or other evidence that is not judicially noticeable. Those defendants, who have historically been able to introduce such evidence, are not likely to fare as well in the wake of Ping Chen and similar decisions.
Second, regardless of the evidence available, the court will henceforth place the burden of persuasion on the defendant and not the plaintiff. This is the consequence of converting a public disclosure bar challenge from a Rule 12(b)(1) motion into a Rule 12(b)(6) motion. This point was made expressly by the court in Ping Chen, 2013 WL 4441509 at *9. And while the Defendants were able to carry the day in that case, this sea change in the relative burdens will yield substantially more relators surviving motions to dismiss. Put simply, more defendants will be forced into discovery and to litigate cases that otherwise would have been dismissed for lack of subject-matter jurisdiction.
Is the public disclosure bar still “jurisdictional”? It is not merely an academic question, but one with very real practical consequences. The growing split among district courts suggests that a resolution in a court of appeals is not far off. And the answer has the potential to drastically increase the time and expense of defending qui tam actions under the FCA.
1 The FCA contains a well-known public disclosure bar, which generally forbids qui tam suits when the fraud allegations or fraudulent transactions have been publicly disclosed. See id. § 3730(e)(4)(A).↩
2 Several other courts have continued to treat the bar as jurisdictional, though they offered no analysis of the underlying question. See U.S. ex rel. Hoggett v. Univ. of Phoenix, No. 2:10-cv-2478, 2013 WL 875969, at *1 (E.D. Cal. Mar. 7, 2013); U.S. ex rel. Watson v. King-Vassel, No. 11-cv-236, 2012 WL 5272486, at *3 (E.D. Wisc. Oct. 23, 2012); U.S. ex rel. Osheroff v. Humana, Inc., No. 10-24486-cv, 2012 WL 4479072, at *4 (S.D. Fla. Sept. 28, 2012).↩