Hurdle for Whistleblowers Simplified in 9th Circuit

A new court ruling clarifies who can bring a whistleblower or qui tam action. The 9th Circuit revisited a decades old interpretation of a rule that barred whistleblower actions based on publicly disclosed allegations unless the person bringing the action was the original source of the information. Federal law defines an original source as someone with "direct and independent knowledge" of the facts and who "voluntarily provided the information to the Government before filing" the whistleblower action.

The case involved claims brought by two different employees relating to misuse of the KX modifier in billing for a wound healing device. The first whistleblower alleged the provider billed using the KX modifier without meeting the requirements for using that modifier. The second whistleblower also alleged the KX modifier was used when criteria weren't met and that the provider failed to get Detailed Written Orders before delivering the device and beginning treatment. These claims were initially denied because the court determined that the information on which the claims were based had already been publicly disclosed and the whistleblowers weren't the original source of the information.

Previously, the 9th circuit had interpreted the rule to require three criteria be satisfied to find a whistleblower plaintiff is an original source: 1) direct and independent knowledge of the relevant information; 2) voluntary submission of the information to the government before filing a whistleblower claim; and 3) having a "hand in the public disclosure" of the information. The 9th circuit reviewed that old interpretation and decided that it was contrary to the language in the False Claims Act. Noting that other circuit courts didn't impose the "hand in public disclosure" requirement, the 9th Circuit declared it would give that requirement "a respectful burial."

Therefore, the court ruled there are only two requirements for the original source exception to the rule barring whistleblower actions that are based on information in the public domain: 1) a plaintiff must have direct and independent knowledge of that information and 2) the plaintiff must have voluntarily provided the information to the government before bringing the whistleblower claim. "He need not have played any role in making the disclosure public."

The new interpretation follows a U.S. Supreme Court ruling that said the law's reference to "information on which the allegations are based" refers to the information on which the whistleblower claims are based, not the publicly disclosed information that gives rise to the public disclosure bar.

The court also addressed a "first-to-file" rule that prevents piggybacking of whistleblower claims. Only the first whistleblower to file can bring and profit from a qui tam or whistleblower action. No one else can file a whistleblower claim based on the same facts. In this case, while all the claims related to the KX modifier usage, the second whistleblower also had claims that related to violations of a different Medicare requirement—the need for Detailed Written Orders before delivery of the device and beginning treatment. The court agreed that those claims were not made in the first whistleblower's complaint so the second whistleblower could bring those specific claims separately without violating the first-to-file rule.

Takeaway: Whistleblowers in the 9th Circuit will have an easier time meeting the original source rule and bringing their qui tam claims to court.