As many industry observers know, the Department of Justice (DOJ) recently filed an appellate brief arguing that the Affordable Care Act (ACA) should be struck down in its entirety following Congress’ 2017 decision to eliminate the financial penalty assessed when individuals fail to obtain health insurance. On its face, the case in question—Texas v. United States, No. 19-10011 (5th Cir.)—has nothing to do with the False Claims Act (FCA). DOJ’s new legal position, however, could have important ramifications under the FCA.
Section 10104(j)(2) of the ACA made significant revisions to the FCA’s public-disclosure bar, 31 U.S.C. § 3730(e)(4). The public-disclosure bar was originally designed to limit parasitic lawsuits filed by private individuals who had no personal knowledge of alleged fraud against the United States but who brought bounty-seeking lawsuits based on allegations contained in such things as government indictments and press reports. See, e.g., United States ex rel. Marcus v. Hess, 317 U.S. 537, 545 (1943) (addressing case where qui tam relator allegedly copied portions of a federal indictment filed against certain contractors and used the indictment as the basis for an FCA complaint filed against the contractors a few weeks later).
The ACA amended the public-disclosure bar by, among other things, giving DOJ discretion to waive the bar and eliminating the ability of state and local government disclosures to trigger the bar. The former amendment turned what had been an absolute jurisdictional defect requiring a qui tam case’s dismissal into a defect that DOJ could waive in its sole discretion, unguided by statutory language as to how that discretion must be exercised. The latter amendment, which narrowed what types of disclosures could trigger the bar, anticipated—and effectively disagreed with—the outcome of a case before the Supreme Court that would be decided just one week after the ACA was enacted. See Graham Cnty. Soil & Water Conservation Dist. v. United States ex rel. Wilson, 559 U.S. 280, 283 (2010) (holding that the pre-ACA version of the FCA’s public-disclosure bar could be triggered by disclosures made in state and local administrative reports, audits, and investigations).
While most have predicted that DOJ will ultimately lose its argument in favor of striking down the entire ACA, those currently engaged in FCA litigation or involved in related investigations would be well-advised to appreciate the FCA-related ramifications should DOJ prove successful in having the ACA struck down in its entirety. And given that jurisdictional defects can typically be raised at any point in the federal judicial process (including for the first time on appeal), a decision by the Fifth Circuit and/or the Supreme Court that strikes down the entire ACA and effectively reverts the public-disclosure bar to its pre-ACA form could prove problematic for qui tam relators and DOJ alike, providing a welcome reprieve for certain defendants.