Should a Relator’s Status as an Original Source Limit the Temporal and Geographic Scope of Her Claims?

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An issue that several courts have recently reached conflicting opinions about is whether a relator’s status as an original source is a limitation on the claims the relator may bring. In cases where there has been no public disclosure, relators are usually allowed to pursue their claims beyond the periods of time they worked for the defendant and beyond the locations of their employment, so long as they have a basis for alleging that the defendant’s culpable conduct extended to other time periods and locations. But when the relator is an original source, and the claims have been otherwise publicly disclosed, courts have reached differing opinions about whether the relator can reach beyond the periods and locations of her own independent knowledge, which is usually defined by the relator’s employment.

The basic issue is that a relator proceeding under the original-source exception is necessarily pursing claims that have been otherwise publicly disclosed. The relator is nevertheless allowed to pursue the claims under 31 U.S.C. 3730(e)(4)(B) because she either (1) disclosed the information to the government before the public disclosure, or (2) has “knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions.”

In United States ex rel. Galmines v. Novartis Pharm. Corp., No. CIV.A. 06-3213, 2015 WL 851837, at *3 (E.D. Pa. Feb. 27, 2015), the defendant asked the “[c]ourt [to] read a strict time limitation into the original source exception, such that a relator’s status as an original source begins and ends strictly when her direct and independent knowledge begins and ends.” The defendant contended that the relator’s independent knowledge ended when he “left Novartis’s employ.” Id. The court rejected the argument, recognizing that “such a reading comports neither with the law nor the policy behind the False Claims Act.” Id.

The Galmines court held that “a relator’s allegations need not be strictly limited to the information as to which she has direct and independent knowledge, provided that the relator has direct and independent knowledge of the critical elements of the alleged fraudulent scheme.” Id. As the court recognized, “[t]he precise start and end dates of a fraudulent scheme are not ‘critical elements’ of a False Claims Act claim. Id. (citing United States ex rel. Judd v. Quest Diagnostics Inc., No. 10–4914, 2014 WL 2435659, at *8 (D.N.J. May 30, 2014)). Rather, “[t]he precise duration of a fraudulent scheme goes not to liability but to damages—and not even to the existence of damages, but to the quantum of damages.” Galmines, 2015 WL 851837, at *3. The court noted that the exact period of the fraud is a fact the relator should be allowed to flesh out in discovery; thus, once the relator has adequately alleged the existence of a fraudulent scheme, he should be permitted discovery to define its scope. Id. (“One would expect that a relator with direct and independent knowledge of the critical elements of the fraud might not know when the fraudulent scheme began or ended, and it would make little sense not to allow a relator to obtain these details during discovery and amend her complaint accordingly.”).

Similarly, in United States ex rel. Emanuele v. Medicor Associates, Inc., No. 1:10-CV-00245-JFC, 2014 WL 3747689, at *6 (W.D. Pa. Apr. 29, 2014), report and recommendation adopted, No. CIV.A. 10-245, 2014 WL 3747666 (W.D. Pa. July 29, 2014), the defendant argued that the relator was “not an original source as to allegations after he left” his employment. The court, however, rejected that contention, finding that the original source exception was not a basis to limit the relator’s discovery in that case. Since the court allowed the relator to pursue discovery of potential fraud after his employment officially ended, the court implicitly ruled that the relator’s claims were not limited by the period of his employment. See also United States ex rel. McCartor v. Rolls-Royce Corp., No. 1:08-CV-00133-WTL, 2013 WL 5348536, at *2 (S.D. Ind. Sept. 24, 2013) (noting that “that it is not appropriate to graft an ‘original source’ definition from the FCA onto the discovery rules for qui tam cases,””; holding that the relators could pursue claims beyond those which they had direct and independent knowledge of); United States ex rel. Fiederer v. Healing Hearts Home Care, Inc., No. 2:13-CV-1848-APG-VCF, 2014 WL 4666531, at *5 (D. Nev. Sept. 18, 2014) (“Limiting a relator’s discovery rights to the duration of her employment would weaken the Act by placing limits on qui tam actions that do not exist for government-initiated actions. Additionally, it would dissuade whistleblowing by limiting a relator’s claim, not to the plausible allegations regarding the submission of false claims—which is the Act’s focus—but to the duration of the relator’s employment, on which the Act is silent.”); United States ex rel. Guardiola v. Renown Health, No. 3:12-CV-0295-LRH VPC, 2014 WL 5780426, at *3 (D. Nev. Nov. 5, 2014) (rejecting defendant’s effort to limit discovery to period similar to relator’s period of employment).

Courts have held that this same rationale applies to geographic limitations on a relator’s claims. United States ex rel. Booker v. Pfizer, Inc., 9 F. Supp. 3d 34, 58 (D. Mass. 2014) (after finding relators were original sources, court determined that “Relators have adequately pled that those claims extend over a wide geographic scope” because they alleged, inter alia, that the fraudulent conduct “was coordinated at a national level”).

However, other courts have reached different conclusions. For example, in United States ex rel. Nelson v. Sanford-Brown, Ltd., 27 F. Supp. 3d 940, 945 (E.D. Wisc. 2014), the court limited the original-source relator’s claims to the exact location he was employed by the defendant and to the exact period of time he was so employed.  Based on the pre-FERA version of the public disclosure bar, which made the bar jurisdictional, and based on the relator’s admissions that he had no “direct and independent knowledge” of any facts outside of the time he worked for the defendant or at the defendant’s other locations, the court held that the “baseline for the balance of the [c]ourt’s subject matter jurisdiction analysis is limited to [location where relator worked] for the period of time running from the start of the 2008 academic school year at that institution to the date relator departed his position in January 2009.”

A nuanced, fact-specific inquiry is undoubtedly required on this issue. While there is a solid argument that relators–even original sources–should not be able to expand their claims to areas that have already been publicly disclosed, there are also many good reasons that original-source relators’ claims should not be narrowly circumscribed. Courts should continue to examine the precise allegations original-source relators are able to make consistent with Rule 11 and to allow relators to pursue claims beyond the exact temporal and geographic scope of their employment if they have a plausible basis (think Twombly and Iqbal) for alleging that the fraudulent activities extended beyond the time periods and locations of their employment. Additionally, now that FERA has removed the jurisdictional nature of the public-disclosure bar, the argument that courts cannot allow original-source relators to extend their claims is even less persuasive. On the other hand, original-source relators must be mindful that courts are going to look suspiciously on any attempts to fish for evidence of new or different fraudulent activity in discovery when the relator has provided the court with no basis for believing such fraud exists. As with most areas of the law, thoughtful moderation is the order of the day.