Court Eliminates Hurdle for Whistleblowers to Collect

July 10, 2015

A federal appeals court has made it slightly easier for whistleblowers to collect awards after it nixed one of three requirements for being considered an original source in a qui tam lawsuit. The ruling also overturns the dismissal of a consolidated qui tam lawsuit against Kinetic Concepts, now known as Acelity.

In the July 7 ruling involving two former KCI employees, Steven Hartpence and Geraldine Godecke, the U.S. Court of Appeals for the Ninth Circuit determined that there are two requirements whistleblowers must meet to recover under the False Claims Act: they must voluntarily inform the government of the facts underlying the allegations, and they must have independent knowledge of the allegations.

The decision tosses out precedent set in a 1992 case, Wang ex rel. United States v. FMC Corp., which added a third requirement: that the whistleblower also played a role in the public disclosure of the allegations.

Courts Drop Third Prong

In its decision, the court notes that many other circuits have declined to apply the third prong, saying it “impermissibly grafts onto the statute a requirement nowhere to be found in the statute’s text,” according to court documents. “Today, we join our sister circuits; after reviewing the statutory text, we conclude that Wang’s hand-in-the-public-disclosure requirement has no textual basis, and we give it a respectful burial,” the circuit says.

Hartpence and Godecke separately accused KCI, which manufactures wound-healing products, of fraudulently collecting reimbursements from Medicare. The district court found the two didn’t qualify as an original source because neither had a hand in the public disclosure under the third prong of Wang. It also barred Godecke’s claims because she was not the first to file.

In its decision, the circuit court says the district judge erred because some of Godecke’s claims were materially distinct from those of Hartpence.

As a result of the ruling, U.S. Ex Rel., Steven J. Hartpence v. Kinetic Concepts, Inc.; KCI-USA, Inc., and U.S. Ex Rel, Geraldine Godecke v. Kinetic Concepts, Inc.; KCI-US, Inc., have been remanded to the U.S. District Court for the Central District of California for further proceedings. — Elizabeth Hollis