August 20, 2010 (Vol. 25 No. 28)
The False Claims Act 31 U.S.C.A. sec. 3729 et seq. (FCA) allows the federal government to prosecute fraudulent claims for payments presented to federal entities. Its qui tam provision encourages individuals to bring civil suits on behalf of the government and to claim up to 30% of the recovered assets. This incentive has the potential for abuse, but it has been balanced by a Public Disclosure Bar (PDB) which disallows actions based upon certain public information.1 This PDB is integral to the protection of business civil liberties because of the potentially huge damage awards levied for FCA violations.
Recently, the Supreme Court issued a landmark ruling in Graham County Soil & Water Conservation Dist. v. United States ex rel. Wilson, 130 S. Ct. 1396 (2010). The Court interpreted the PDB expansively to include state administrative investigations, reports, audits, and hearings as well as their federal counterparts. Almost before the ink could dry on this decision, however, the United States Congress revised the statute so the PDB only applied to federal sources.2
Current FCA Public Disclosure Bar jurisprudence has done little, however, to flesh out the limits of the meaning of "news media," which is a frequent source of information for qui tam relators. "New media," as numerous Internet sources are collectively known, have become increasingly important as sources of news and information for the public. The explosion of online media and the corresponding decline in traditional periodicals demands the attention of the courts. Courts must determine whether online news media sources, such as blogs and other Internet postings, are public disclosures within the meaning of the statute.
This LEGAL BACKGROUNDER will outline the history of the False Claims Act PDB, analyze lower court approaches to Internet sources under the statute, and propose a balanced approach taking into consideration the interests of whistleblowers and private enterprise. To achieve this balanced policy, reasonably reliable Internet sources containing news should count as "news media" under the FCA Public Disclosure Bar.
The history of FCA PDB jurisprudence can be split into three eras. The first could be called the "Parasitic Era" in which the FCA PDB was overly permissive. This is exemplified by Marcus v. Hess, 317 U.S. 537 (1943), which ruled that a qui tam relator who made a direct copy of a criminal indictment could collect a portion of the judgment in an FCA civil action. This led to revisions of the statute and to what could be called the "Overly Restrictive Era." This era is characterized by United States ex rel. State of Wisconsin v. Dean, 729 F.2d 1100 (7th Cir. 1984) in which the court ruled that the State of Wisconsin could not bring a Medicare fraud action under the FCA because the government had knowledge of the essential information of the action before the suit despite the state being an original source. This case helped build support for further revisions to the statute, which culminated in the 1986 amendments and the "Golden Mean Era."
The Golden Mean Era receives its name from United States ex rel. Fine v. Sandia Corp., 70 F.3d 568 (10th Cir. 1995). The court explained that Congress amended the PDB to obtain "the golden mean between adequate incentives for whistle-blowing insiders with genuinely valuable information and discouragement of opportunistic plaintiffs who have no significant information to contribute of their own." Id. at 571. Courts in all of the circuits have applied this approach with slightly varying language.
Though it is possible that recent amendments to the PDB signal a beginning of a new "Pseudo-Parasitic Era," the revisions to the statute leave the "news media" portion untouched. This means there will not likely be a substantial break in PDB jurisprudence on this part of the statute. A continued Golden Mean approach to this issue is likely when considering the interpretation of "news media" in light of Internet technology.
Recent Court Attempts at Interpreting "News Media" in Light of Internet Technology.
A number of District Courts and one Appellate Court have attempted in recent years to interpret "news media" as it relates to Internet technology. Substantial agreement on interpretive principles has not yet developed. In fact, there is even disagreement within circuits on how to best deal with Internet news media.
In United States ex rel. Fried v. West Independent School Dist., 527 F.3d 439, 442 (5th Cir. 2008), the court mentioned a variety of publicly disclosed sources before adding, "Finally, West ISD's program itself was disclosed in trade publications and on the Internet." This appears to suggest that the Internet disclosure is a public disclosure. The court spends no time on this Internet disclosure when discussing whether the action was "based upon" public disclosures leading to some confusion on whether the court interpreted the Internet disclosure as a public disclosure within the meaning of the statute. Two district courts within the Fifth Circuit interpreted this ruling as saying "These fora [trade publications and the Internet], however, are not the same as those mentioned in the language of 31 U.S.C. sec. 3730(e)(4)(A)."3 Thus, it is uncertain whether Internet sources are considered "news media" in the Fifth Circuit.
Federal district courts in other circuits have been left without direction from appellate courts. Instead, the district courts have relied on their own discretion to fashion a reasonable interpretation of "news media" in an Internet age.
In United States ex rel. Radcliffe v. Purdue Pharma, L.P., 582 F. Supp. 2d 766 (W.D. Va. 2008), the court faced the issue of Internet news media directly. The defense in this case cited United States ex rel. Doyle v. Diversified Collection Services, Inc., 2006 WL 3834407 (S.D. Ohio Dec. 29, 2006) for the proposition that a "publication on the Internet constitutes a public disclosure" under the PDB. Radcliffe, 582 F. Supp. 2d at 771. The Radcliffe court analyzed the issue, stating:
this web page could be affiliated with a news publication and, as such, would be updated regularly and would disseminate information to the public in a periodic manner. Its affiliation with a traditional news outlet or periodical or its identification as an online news outlet also identifies to the public that it is a place where news or periodical information on a particular topic can be found. Given the vast array and varying credibility of web pages on the Internet, I am not ready to conclude that anything posted online would automatically constitute a public disclosure within the meaning of sec. 3730(e)(4)(A). Id. at 772.
This court applied this understanding to the facts at hand and concluded the Internet disclosure was not a public disclosure because it was not "analogous to a traditional news outlet or periodical." Id.
The court in United States ex rel. Liotine v. CDW Government, Inc., 2009 WL 3156704 (S.D. Ill. Sept. 29, 2009) unwittingly lent support to this approach. Buried in footnote 5 was an interpretation of two cases dealing with the Internet.4 The court interpreted Brickman to mean that the Internet only counts as a public disclosure when it discloses information contained in a source enumerated in the PDB statute. The court rejected United Here because it was "hesitant to find that any posting on the Internet constitutes ‘news media.'" Id. at *6. This can be synthesized with Radcliffe to assert the proposition that when an Internet posting contains news, then it is a public disclosure particularly when it is associated with a traditional news source.
Another logical extension to this interpretation can be found in United States ex rel. Brown v. Walt Disney World Co., 2008 WL 2561975 (M.D. Fla. June 24, 2008). The court ruled that Wikipedia counts as a public disclosure within the meaning of the statute. In footnote 7, the Court referenced United Here for the proposition that "The Internet can qualify as ‘news media.'" Id. at *4. This interpretation makes sense because Wikipedia contains information about current events and has the ability to be updated quickly -- often more quickly than traditional news media outlets.
Interpreting reasonably reliable Internet sources as "news media" is consistent with the Federal Rules of Evidence. Rule 201 states "Public records and government documents, including those available from reliable sources on the Internet, are subject to judicial notice" (emphasis added). In United States ex rel. Dingle v. BioPort Corp., 270 F. Supp. 2d 968, 973 (W.D. Mich. 2003), the court refused to take judicial notice of Internet sources because the information found on these websites was "subject to reasonable dispute" and the "Court could not verify [the websites] for accuracy or authenticity." Thus, the courts can adopt a broader interpretation of "news media" consistently with its ability to take judicial notice of the sources.
A Balanced Approach to Internet News Media.
The courts should adopt an interpretation of the PDB which would count Internet postings as public disclosures if the postings contain "news media" and are reasonably reliable. Websites associated with traditional news media sources and/or that have gained a reputation as reliable sources of news information are obvious examples of this. On the other hand, websites which are not analogous to traditional news outlets and periodicals, or are not reasonably reliable, will not be considered "news media." Under this approach, The New York Times Online and The Wall Street Journal blog would likely be considered "news media," but internet sources of contestable quality, such as those in Dingle, would not.
Such an interpretation is in line with the Golden Mean approach to PDB jurisprudence and is consistent with the revised PDB statute. As stated in United States ex rel. Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645, 651 (D.C. Cir. 1994), "The history of the FCA qui tam provisions demonstrates repeated congressional efforts to walk a fine line between encouraging whistle-blowing and discouraging opportunistic behavior." By interpreting Internet postings which are deemed as reasonably reliable sources of news as "news media," the courts can effectuate these congressional efforts because true whistle-blowers will still have access to courts when information is not disclosed publicly or by original sources. At the same time, opportunists will not be able to bring parasitic suits based upon news stories they read on the Internet. The revised PDB statute does not limit "news media" to traditional periodicals and news outlets, and thus it is consistent with the application of the Golden Mean approach to the Internet.
The issue of whether Internet postings are "news media" under the PDB is a ripening one for the courts. How the appellate courts interpret "news media" in coming years will be a useful test to determine whether PDB jurisprudence will maintain the Golden Mean or if it will slide back towards the Parasitic Era. Businesses should pay close attention to the outcomes of these cases because their civil liberties are at stake in what will likely be an increasingly litigious time.
R. Ben Sperry, a 2010 summer fellow with Washington Legal Foundation, is studying at George Mason University Law School where he is a candidate member of the George Mason Law Review.
1. 31 U.S.C.A. sec. 3730(e)(4)(a) (West 2010) states: "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."
2. 2009 CONG US S 2964 amends 31 U.S.C.A. sec. 3730(e)(4)(a) to state: "The court shall dismiss an action or claim under this section, unless opposed by the Government, if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed-