A recent Sixth Circuit opinion continues to “snuff [ ] out parasitic suits” brought under the False Claims Act (“FCA”) through the public-disclosure bar.  In U.S. ex rel. Holloway v. Heartland Hospice, Inc. (June 3, 2020 opinion), the court affirmed the lower court’s entry of summary judgment in favor of a hospice provider on grounds that the relator’s claims were barred in light of prior public disclosures of the underlying allegations contained in the complaint.  The Holloway court’s holding is significant in that it found that relators can be the Government’s “agent” for purposes of the public-disclosure analysis, even when the Government declines to intervene.

The relator in this action, Holloway, was a former hospice employee who sued Heartland Hospice and related entities (“Heartland”) under the FCA alleging that Heartland engaged in a fraudulent scheme wherein patients were recruited and kept in hospice care, despite the fact that many of these patients were not terminally ill.  According to Holloway, clinicians were trained to document patient care using language specifically designed to ensure hospice eligibility (e.g., “new episodes of chest pain”; “shortness of breath”; “refusing meals”). Holloway also accused Heartland of misleading Medicare auditors by simply failing to respond to audit requests, resulting in a minor penalty, rather than answering audits honestly and risking the discovery of the entire scheme.

Heartland moved for summary judgment arguing that the relator was not a “genuine whistleblower” as her claims were drawn from prior allegations against Heartland in a different portion of the country.  Those cases, brought in South Carolina, alleged similar conduct involving different hospices owned by the same parent company.  As many readers will know, the FCA’s public disclosure bar precludes FCA suits that “merely feed off prior public disclosure of fraud.” Such cases include “substantially the same allegations” as those previously disclosed in public sources, including hearings in which “the Government or its agent” is a party.

Here, Heartland argued the Holloway’s allegations merely added “new, slightly different, or more detailed allegations” to what had already been disclosed in prior complaints.  In response, Holloway argued that because the Government did not intervene in the prior cases, such cases could not be considered public sources “in which the Government or its agent is a party.” The court declined to adopt this interpretation and ruled in favor of the defendants, dismissing the suit.

The court joined what it believed was the majority of district courts, holding that even when the Government declines to intervene in a qui tam suit, the relator is the Government’s agent for purposes of the public disclosure bar.  The court reasoned that even where the Government declines to intervene, it remains the real party in interest and exerts a fair amount of control over any qui tam litigation.  Accordingly, the prior FCA suits brought by other relators in South Carolina were considered “public disclosures” under the FCA, and therefore, barred under the public-disclosure bar standard.

The Sixth Circuit reasoned that its decision was guided by the statutory purpose of “encouraging genuine whistleblower actions while snuffing out parasitic suits.”  This decision may impact larger providers who often have similar conduct across their platform.  As other relators and defendants analyze claims under the public disclosure bar, they will need to consider similar claims against other parts of the platform, some of which may be under seal.