U.S. ex rel. Jones v. Horizon Healthcare Corp.

• Decision Date: 11 January 1999
• Docket Number: No. 97-1635,97-1635
• Citation: 160 F.3d 326
• Parties: UNITED STATES of America, ex rel. Maxine JONES, Plaintiff-Appellant, v. HORIZON HEALTHCARE CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 326

160 F.3d 326

UNITED STATES of America, ex rel. Maxine JONES, Plaintiff-Appellant, v. HORIZON HEALTHCARE CORPORATION, Defendant-Appellee.

No. 97-1635.

United States Court of Appeals Sixth Circuit.

Argued June 19, 1998.

Decided Nov. 9, 1998.

Rehearing and Suggestion for Rehearing En Banc Denied Jan. 11, 1999.

H. Nathan Resnick (argued and briefed), Leigh Dones Moss (briefed), Resnick & Associates, W. Bloomfield, Michigan, for Plaintiff-Appellant.

James H. Geary (argued and briefed), Howard & Howard, Kalamazoo, Michigan, Brad A. Rayle (briefed), Carol A. Friend (briefed), Howard & Howard, Bloomfield Hills, Michigan, for Defendant-Appellee.

Before: MOORE, CLAY, and GILMAN, Circuit Judges.

CLAY, J., delivered the opinion of the court, in which MOORE, J., joined. GILMAN, J. (pp. 335-337), delivered a separate opinion concurring in the result.

OPINION

CLAY, Circuit Judge.

Plaintiff-Appellant Maxine Jones brought this qui tam action under the Federal False Claims Act, 31 U.S.C. §§ 3729-3733 (1994), against Defendant-Appellee Horizon Healthcare Corporation on the basis of Horizon Healthcare's allegedly fraudulent activities against the United States. The district court granted summary judgment in favor of Horizon Healthcare for lack of subject matter jurisdiction. For the reasons set forth below, we hereby AFFIRM the ruling of the district court.

I.

Plaintiff-Appellant Maxine Jones ("Appellant") was hired by Defendant-Appellee Horizon Healthcare Corporation ("Appellee") as a patient care services consultant in November of 1992. Her job responsibilities included reviewing Medicare claim forms which sought reimbursement for services performed at several of Appellee's skilled health care facilities in Michigan and Wisconsin.

Appellant claims that while conducting a claims review in March of 1993, she discovered that several of the claim forms prepared by Appellee's administration and employees were incorrect because the services allegedly performed did not correspond with the patients' files and the instructions of the medical staff. Appellant alleges that she informed management of the fraudulent claims and, as a result of her actions, her employment was terminated three months later. After her termination, Appellant applied for unemployment benefits with the Michigan Employment Security Commission and provided a statement detailing the reasons for her discharge, including her allegation that Appellee was preparing, and perhaps filing, false Medicare claims. Appellant also allegedly contacted someone at the Michigan Department of Public Health about her allegations of fraud.

On September 16, 1993, Appellant filed a complaint in the United States District Court for the Eastern District of Michigan, pursuant to diversity jurisdiction, under the Michigan Whistleblower's Protection Act, MICH. COMP. LAWS ANN. §§ 15.361-.369 (West 1994) ("WPA"), asserting that she was wrongfully terminated after she discovered that false reimbursement claims had been prepared by Appellee. Appellant claims that she did not know at that time whether the forms actually had been submitted in violation of Medicare guidelines, because she had only been told that the matter was "being taken care of" when she had complained to management.

On April 21, 1994, Appellant filed a second complaint in the United States District Court for the Eastern District of Michigan against Appellee relating to the fraudulent Medicare forms, this one a qui tam action ¹ pursuant to the Federal False Claims Act, 31 U.S.C. §§ 3729-3733 (1994) ("FCA"). The FCA complaint, which was filed under seal as required by the statute, specifically alleged that Appellee had submitted the false Medicare forms to the government for reimbursement. Appellant claims that it was during the interim between the filing of the two complaints that she was able to determine that the false claims had been submitted, which was necessary for a violation of the FCA. On May 2, 1994, the FCA complaint was served upon the Attorney General of the United States, but the Department of Justice ultimately declined to intervene.

Appellee filed a motion for summary judgment in the FCA action on December 20, 1996. The district court granted Appellee's motion on March 11, 1997, and dismissed the complaint for lack of subject matter jurisdiction under the FCA, which prohibits qui tam actions "based upon" public disclosures of fraud unless the plaintiff is an "original source" of the information. The district court later denied Appellant's motion for reconsideration and clarified that the dismissal of the FCA action was without prejudice to the United States. This timely appeal followed. ²

II.

This court's review of a district court's dismissal of a Federal False Claims Act case on the basis of lack of subject matter jurisdiction is reviewed de novo. United States ex rel. McKenzie v. Bellsouth Telecomms., Inc., 123 F.3d 935, 938 (6th Cir.1997), cert. denied, --- U.S. ----, 118 S.Ct. 855, 139 L.Ed.2d 755 (1998). All factual allegations in the complaint are accepted as true and construed in the light most favorable to the plaintiff. Id. However, because federal courts are courts of limited jurisdiction, the plaintiff bears the burden of establishing jurisdiction. Id.

III.

The FCA, 31 U.S.C. §§ 3729-3733, has a qui tam provision that allows a private individual to bring a civil action for violation of § 3729. See 31 U.S.C. § 3730(b)(1) (1994). The individual brings the action as a "relator" ³ in a qui tam suit, acting on behalf of the United States government. The government may recover treble damages from anyone who has committed a fraud upon the government, and the individual who brings the action may receive up to thirty percent of the money recovered. 31 U.S.C. § 3730(d)(2) (1994). The history of the FCA was set forth in this Circuit's recent opinion in the McKenzie case:

The original version of the FCA, enacted in 1863, allowed anyone to bring a qui tam action and receive 50 percent of the amount recovered. S. R EP. NO. 345, 99th Cong., 2d Sess. 8-10 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5273. This broad provision led to abuse and in 1943, following the Supreme Court's decision in United States ex rel. Marcus v. Hess, 317 U.S. 537, 63 S.Ct. 379, 87 L.Ed. 443 (1943), which held that a relator could bring a qui tam action even though the action was based entirely upon information contained in a government indictment, Congress amended the FCA. The 1943 version precluded actions "based on evidence or information the government had when the action was brought." United States ex rel. Stinson v. Prudential Insurance Co., 944 F.2d 1149, 1153 (3d Cir.1991) (quoting 31 U.S.C. § 3730(b)(4)(1982) (superseded)). This led to claims being barred even in cases where the qui tam plaintiff supplied the information to the government before filing the claim. See United States ex rel. Wisconsin v. Dean, 729 F.2d 1100, 1106 (7th Cir.1984).

In 1986, Congress amended the FCA again "to encourage any individual knowing of Government fraud to bring that information forward." S. R EP. N O. 345, 99th Cong., 2d Sess. (1986), reprinted in 1986 U.S.C.C.A.N. 5266. "To revitalize the qui tam provisions, the amendment provided incentives for private enforcement, including increased monetary awards, adopted a lower burden of proof, and allowed the qui tam plaintiff to remain a party to the action even if the Government intervenes." Stinson, 944 F.2d at 1154.

McKenzie, 123 F.3d at 938.

The current version of the jurisdictional bar of the FCA provides that:

(4)(A) No 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.

(B) For purposes of this paragraph, "original source" means an individual who has direct and independent knowledge of the information on which the allegations are based and has voluntarily provided the information to the Government before filing an action under this section which is based on the information.

31 U.S.C. § 3730(e)(4)(A) and (B)(1994).

MIV.

In determining whether the jurisdictional bar of § 3730(e)(4) applies to a relator's case, it is useful to break the inquiry down into its elements: (A) whether there has been a public disclosure in a criminal, civil or administrative hearing; or congressional, administrative, or government report, hearing, audit, or investigation; or from the news media; (B) of the allegations or transactions that form the basis of the relator's complaint; and (C) whether the relator's action is "based upon" the publicly disclosed allegations or transactions. If the answer is "no" to any of these questions, the inquiry ends and the qui tam action may proceed. If the answer to each of the above questions is "yes," then the final inquiry is (D) whether the relator qualifies as an "original source" under § 3730(e)(4)(B), which also would allow the suit to proceed. See, e.g., United States ex rel. Dunleavy v. County of Del., 123 F.3d 734, 740 (3d Cir.1997). Each of these elements of the jurisdictional bar will be discussed in turn.

(A) Whether There Has Been a "Public Disclosure"

The first inquiry in determining whether the jurisdictional bar of the FCA applies is whether there has been a "public disclosure" of the claims raised by Appellant in her FCA complaint. The district court ruled that the filing of Appellant's WPA complaint constituted a "public disclosure in a criminal, civil, or administrative hearing" under § 3730(e)(4)(A). During the pendency of this appeal, a panel of this Circuit ruled in the McKenzie case that "public disclosure" includes filing documents with a...