In a recent Southern District of New York decision, Judge Jed S. Rakoff examined the original source exception to the False Claims Act’s (“FCA”) public disclosure bar.  In United States ex rel. Associates Against Outlier Fraud v. Huron Consulting Group, Inc., 2012 WL 506824 (S.D.N.Y. Feb. 16, 2012), the relator alleged that defendant Huron Consulting, through its control of St. Vincent’s Medical Center, massively inflated “outlier” claims for reimbursement from the government, without any corresponding increase in costs.  The relator also alleged that the financial intermediary, Empire Medicare Services, recklessly ignored the claim inflation.

The FCA provides that a qui tam complaint is subject to dismissal if the fraud allegations were publicly disclosed, unless the relator is an original source of the information.  In Huron, the relator had filed Freedom of Information Act (“FOIA”) requests and used information in the government’s FOIA responses in the qui tam complaint.  The Supreme Court has held that documents issued in FOIA responses are “reports” that trigger the FCA’s public disclosure bar against qui tam actions.  Schindler Elevator Corp. v. United States ex rel. Kirk, 131 S. Ct. 1885 (2011).

In Huron, Judge Rakoff held that although there was a public disclosure of the fraud allegations because of the FOIA responses, the relator had “direct and independent knowledge” of the fraud and was therefore an “original source” of the information.  The relator was therefore not precluded from bringing suit.  To reach this conclusion, however, the Court held that part of the Second Circuit decision in United States ex rel. Dick v. Long Island Lighting, 912 F.2d 13 (2d Cir. 1990), had been abrogated by a later Supreme Court decision.  Under Long Island Lighting, in order to be an original source, a relator would have to be directly or indirectly a source to the entity that made the public disclosure, such as the federal agency issuing the FOIA responses in Huron.  Subsequently, however, in Rockwell Int’l Corp. v. United States ex rel. Stone, 549 U.S. 457 (2007), the Supreme Court held that original source status depends on the information underlying the lawsuit, not the information underlying the public disclosure.  The Huron Court found there was “no other conclusion” to draw except that the Long Island Lighting requirement that relator be a source of the public disclosure had been abrogated.

In language that will give comfort to relators, the Court stated that “it would be wholly contrary to the purposes of … the False Claims Act to require relators with direct (though perhaps not complete) knowledge of the fraud to file their complaints before seeking corroboration through FOIA requests.”  The Court went on to find that even if Long Island Lighting did still apply, relator was an “indirect source” of the information in the public disclosure because he had made the FOIA request.

The Huron decision provides potential FCA relators with a strong argument for buttressing their fraud allegations with information gained from FOIA requests, without violating the FCA’s public disclosure bar.