Unusual circumstances dooms qui tam on public disclosure grounds, Massachusetts court rules

by Ben Vernia | February 16th, 2012

On January 30, Judge Joseph L. Tauro of the District of Massachusetts granted the defendant’s public disclosure-based motion to dismiss in U.S. ex rel. Cunningham v. Millenium Labs. of Calif.. The relator alleged that the defendant, a medical testing laboratory, encouraged physicians to “unbundle” the tests for separate drugs it performed on test kits. The relator – who died after filing suit and whose estate was substituted – worked for a competitor of the defendant and filed his case days after the defendant sued the relator’s employer for defamation; in that case, the defendant described its billing practices.

Judge Tauro first noted that the parties differed over which public disclosure bar applied to the case – the 1986 amendment to the FCA, or the healthcare reform amendment. The relator filed his suit the year before the 2010 Patient Protection and Affordable Care Act, but amended it after the Act amended the public disclosure provision. Judge Tauro concluded, however, that the amended complaint could not save the case if the original one was jurisdictionally barred because its allegations were publicly disclosed, and so he analyzed it only under that version of the FCA.

Typically, he noted, cases disclosing allegations are brought against the defendant, and not by the defendant itself. Despite this unusual circumstance, however, he found that the prior action “undoubtedly” publicly disclosed the allegations. The state action fit within the definition of the means of public disclosure in the prior version of the FCA, he noted, and applying the interpretation of “based upon” as equivalent to “substantially similar,” he found that the relator’s case was substantially similar to what the defendant disclosed in its action against the relator’s employer.

Judge Tauro also declined to exercise supplemental jurisdiction over the relator’s state FCA causes of action, and dismissed the case.

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