U.S. ex rel. Meyer v. Horizon Health Corp.

• Decision Date: 14 May 2009
• Docket Number: No. 06-17084.,06-17084.
• Citation: 565 F.3d 1195
• Parties: UNITED STATES of America, ex rel., Michael M. MEYER; Patricia J. Szerlip, Plaintiffs-Appellants, v. HORIZON HEALTH CORPORATION; Summit Medical Center; Sukhdeep Grewal, M.D., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

565 F.3d 1195

UNITED STATES of America, ex rel., Michael M. MEYER; Patricia J. Szerlip, Plaintiffs-Appellants, v. HORIZON HEALTH CORPORATION; Summit Medical Center; Sukhdeep Grewal, M.D., Defendants-Appellees.

No. 06-17084.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted January 13, 2009.

Filed May 14, 2009.

Sarah S. Wright, San Rafael, CA, and John A. McGuinn, San Francisco, CA, for the plaintiffs-appellants.

Thomas M. Brown, Kenneth P. White, George P. Schiavelli, Teresa Cespedes Ellis, and Amber Finch, Los Angeles, CA, for defendant-appellee Horizon Health Corporation.

Gregory M. Luce, Washington, D.C., and Shawn Hanson and Tracy M. Strong, San Francisco, CA, for defendant-appellee Summit Medical Center.

Robert R. Moore and Michael J. Betz, San Francisco, CA, for defendant-appellee Sukhdeep Grewal, M.D.

Appeal from the United States District Court for the Northern District of California, Saundra B. Armstrong, District Judge, Presiding. D.C. No. CV-00-01303-SBA.

Before: MYRON H. BRIGHT,^* STEPHEN REINHARDT, and A. WALLACE TASHIMA, Circuit Judges.

Opinion by Judge MYRON H. BRIGHT; Dissent by Judge REINHARDT

BRIGHT, Circuit Judge:

In this appeal, qui tam relators Michael M. Meyer and Patricia J. Szerlip contend that the district court erred by granting a motion to dismiss for lack of subject-matter jurisdiction brought by Horizon Health Corporation, Summit Medical Center, and Dr. Sukhdeep Grewal (collectively "appellees"). The principal issues on appeal relate to whether relators' fraud allegations are based on a public disclosure, and, if so, whether the relators were the original source of those allegations. Having jurisdiction under 28 U.S.C. § 1291, we affirm.

FACTS AND PROCEDURAL HISTORY

In 2000, relators Meyer, Szerlip, and Vicki Weatherford sued appellees, asserting claims under the qui tam provisions of the False Claims Act, 31 U.S.C. §§ 3729-3733 ("the Act"). Meyer and Szerlip were psychiatric nurses employed by Summit; Weatherford was employed by Horizon as the "Senior Bridges" program director. The Senior Bridges program was a geropsychiatric unit managed by Horizon at a facility owned by Summit.

The gravamen of relators' allegations assert that appellees fraudulently billed Medicare for patient services. Specifically, relators contend that appellees admitted patients to the Senior Bridges program despite knowing that those patients, who suffered from dementia, could not benefit from the program. Appellees received a considerably larger daily Medicare reimbursement for a patient in the Senior Bridges program ($1,830) than for a patient in the regular "medical/surgical unit" ($1,085).

After a long delay in its decision, the government in May 2004 declined to intervene. Relators then filed their First Amended Complaint ("FAC") against appellees in September 2004. Appellees moved to dismiss the FAC, asserting that relators failed to allege the fraud with particularity. The district court granted the motion to dismiss, but permitted relators to file a Second Amended Complaint ("SAC"), which they filed in May 2005. Appellees moved to dismiss the SAC under Fed.R.Civ.P. 9(b) and 12(b)(6). In September 2005, the district court granted appellees' motion, dismissed the complaint, and granted relators leave to file a Third Amended Complaint ("TAC"). After relators filed the TAC, appellees moved to dismiss the TAC under Fed.R.Civ.P. 9(b) and 12(b)(6), which the district court denied.

In March 2006, relator Weatherford withdrew from the suit. In August 2006, appellees moved to dismiss the TAC under Fed.R.Civ.P. 12(b)(1), arguing that the district court lacked subject-matter jurisdiction because the allegations of the remaining relators, Meyer and Szerlip, had been publicly disclosed by Weatherford's 1999 state-court wrongful-termination suit and they were not original sources of the allegations. The district court granted the motion, dismissed the TAC, and this appeal follows.

DISCUSSION

I. The district court did not err by granting appellees' motion to dismiss.

Relators contend first that the district court improperly granted appellees' 12(b)(1) motion to dismiss the TAC. Specifically, relators challenge the district court's determinations that the TAC was based on prior public disclosure and that the relators did not qualify as original sources of the allegations. We review a district court's conclusion that it lacks subject matter jurisdiction de novo and the findings of fact relevant to that determination for clear error. See A-1 Ambulance Serv., Inc. v. California, 202 F.3d 1238, 1242-43 (9th Cir.2000).

The Act prohibits false or fraudulent claims for payment to the United States, 31 U.S.C. § 3729(a), and authorizes civil actions to remedy such fraud to be brought by the Attorney General, § 3730(a), or by private individuals in the government's name, § 3730(b)(1). But the Act provides that

[n]o court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative or Government Accounting Office report, hearing, audit, or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.

§ 3730(e)(4)(A).

The public-disclosure bar in § 3730(e)(4)(A) sets up a two-tiered inquiry. First, "we must determine whether there has been a prior `public disclosure' of the `allegations or transactions' underlying the qui tam suit." A-1 Ambulance Serv., 202 F.3d at 1243. "If and only if there has been such a public disclosure, we next must inquire whether the relator is an `original source' within the meaning of § 3730(e)(4)(B)." Id. Relators, as the qui tam plaintiffs, bear the burden of establishing subject-matter jurisdiction by a preponderance of the evidence. United States v. Alcan Elec. & Eng'g, Inc., 197 F.3d 1014, 1018 (9th Cir.1999). We now turn to this analysis.

A. Public disclosure

Relators filed this suit in April 2000 after very similar allegations were publicly disclosed in a wrongful-termination suit that Weatherford filed in state court in October 1999. Accordingly, the district court dismissed relators' suit, holding that the Weatherford suit was a public disclosure and that relators' qui tam allegations "plainly share a substantial identity with the allegations disclosed through the Weatherford complaint filed in state court in 1999." Whether a particular disclosure "triggers the jurisdictional bar of § 3730(e)(4)(A) is a mixed question of law and fact, which we review de novo." A-1 Ambulance Serv., 202 F.3d at 1243.

The public-disclosure question potentially implicates two distinct but related determinations. First, "we must decide whether the public disclosure originated in one of the sources enumerated in the statute." Id. When a public disclosure originates in one of these sources, we must then determine "whether the content of the disclosure consisted of the `allegations or transactions' giving rise to the relator's claim, as opposed to `mere information.'" Id. (quoting Hagood v. Sonoma County Water Agency, 81 F.3d 1465, 1473 (9th Cir.1996)). For a qui tam suit to be "based upon" a prior public disclosure, § 3730(e)(4)(A), the publicly disclosed facts need not be identical with, but only substantially similar to, the relator's allegations. See United States ex rel. Lujan v. Hughes Aircraft Co., 243 F.3d 1181, 1189 (9th Cir.2001); see also United States ex rel. Biddle v. Bd. of Trustees of Leland Stanford, Jr. Univ., 161 F.3d 533, 537 (9th Cir.1998) ("[A] claim is `based upon' public disclosure when the claim repeats allegations that have already been disclosed to the public.").

Here, relators concede that (1) Weatherford filed her suit nearly six months before they filed this suit; (2) the Weatherford suit contains similar fraud allegations; and (3) a lawsuit can publicly disclose allegations or transactions under the Act. Relators argue only that they "made the first public disclosure when they presented evidence to the government through their counsel to Medicare fraud investigator Steven M. Lack, on July 6, 1999, fully three months before the Weatherford lawsuit." In other words, their suit is not subject to the Act's public-disclosure bar because they "were the first to disclose the Medicare fraud."¹ We reject this contention.

Even accepting relators' assertion that they disclosed the allegations of Medicare fraud to the government before Weatherford filed her suit, we reject relators' argument because it fails the first prong of the two-part test described in A-1 Ambulance Serv.²

Public disclosure may occur in only three categories of fora: (1) in a "criminal, civil, or administrative hearing"; (2) in a "congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation"; or (3) in the "news media." § 3730(e)(4)(A); A-1 Ambulance Serv., 202 F.3d at 1243. Relators' apparent argument is that they made the first public disclosure by informing the government of the allegations during a meeting with Investigator Lack. But relators offer no argument (and cite no authority) in support of their contention that such a private disclosure to a government employee is a public disclosure, as the Act defines the term.

In any event, relators' argument, which asks us to read into the Act a fourth forum for a public disclosure, is foreclosed by caselaw. For example, this court has held that "information that was `disclosed in private'" is not a public disclosure under the Act.³ United States ex rel. Schumer v. Hughes Aircraft Co., 63 F.3d 1512, 1518 (9th Cir.1995) (quoting United States ex rel. Stinson, Lyons, Gerlin & Bustamante v. Prudential Ins. Co., 944 F.2d 1149, 1161 (3d Cir.1991)), vacated on other grounds by 520 U.S. 939, 117 S.Ct. 1871, 138 L.Ed.2d 135 (1997); see also ...