S.D.N.Y. Notes Split Re Public Disclosure of Fraud Allegations in Qui Tam Actions Under the False Claims Act

Per U.S. ex rel. Anti-Discrimination Center of Metro New York, Inc. v. Westchester County, New York, --- F.Supp.2d ----, 2007 WL 2012901 (S.D.N.Y. Jul 13, 2007) (NO. 06 CIV 2860 DLC):

To determine whether the statutory bar to jurisdiction applies, a court must examine, among other issues, whether there was a "public disclosure" of the wrongdoing, and whether that disclosure occurred in one of the ways listed in the statute [the False Claims Act]. Doe, 960 F.2d at 323. "[A]llegations of fraud are publicly disclosed when they are placed in the 'public domain.' " Id. at 322 (citation omitted). This requirement precludes "qui tam suits based on information that would have been equally available to strangers to the fraud transaction had they chosen to look for it as it was to the relator." Kreindler & Kreindler, 985 F.2d at 1158 (citing United States ex rel. Stinson, Lyons, Gerlin & Bustamante, P.A. v. Prudential Ins. Co., 944 F.2d 1149, 1155-56 (3d Cir.1991)).

Insofar as the manner of public disclosure is concerned, the modes include state and federal hearings and trials, and federal government reports, hearings, audits, and investigations. See, e.g., Kreindler & Kreindler, 985 F.2d at 1158 (civil lawsuit filed in federal court); Doe, 960 F.2d at 323 (federal government agency investigation). The Second Circuit has not yet addressed whether state government reports, hearings, audits, and investigations are also encompassed by the jurisdictional bar, and other circuits are divided on the issue. Compare United States ex rel. Dunleavy v. County of Delaware, 123 F.3d 734, 745 (3d Cir.1997) ("Congress was not referring to administrative reports produced by non-federal government sources."), with United States ex rel. Bly-Magee v. Premo, 470 F.3d 914, 918 (9th Cir.2006) (agreeing with the Eighth Circuit in Hays v. Hoffman, 325 F.3d 982, 988 (8th Cir.2003), that audit reports prepared by a state agency may be public disclosures).


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