A whistleblower was recently denied any portion of the Government’s recovery in a False Claims case despite the Government obtaining a settlement of approximately $322 million. The decision arose in the case of United States ex rel. Swoben v. SCAN Health Plan, Case No. 09-cv-5013-JFW pending in the United States District Court for the Central District of California. Mr. Swoben had alleged that SCAN had received duplicative or overlapping payments during a time period spanning approximately 20 years. Mr. Swoben’s claims were brought under both the federal False Claims Act and the California False Claims Act. The litigation was ultimately settled between Mr. Swoben and the Government for $322 million, although SCAN did not admit to any wrongdoing in connection with the settlement.
As a result of the settlement, Mr. Swoben anticipated and sought a substantial recovery for his role in filing and pursuing the litigation. However, Judge John Walter found that Mr. Swoben’s claims were based upon publicly disclosed information and that he did not qualify as an original source of the information. The FCA’s public disclosure bar is found at 31 U.S.C. § 3730(e)(4)(A) and provides generally that a whistleblower is jurisdictionally barred from bringing claims on behalf of the Government where such claims have already been publicly disclosed and the whistleblower is not an original source of the information (i.e. does not have direct and independent knowledge of the alleged fraud).
Prior to filing his lawsuit, Mr. Swoben had raised his concerns both internally at SCAN and to Alan Lowenthal, who was a California State Senator at the time. Mr. Lowenthal relayed the information to the State of California Controller’s Office, which subsequently issued a report regarding SCAN’s reimbursements. Judge Walter found that report to be public information that triggered the public disclosure bar and precluded Mr. Swoben from any recovery. Judge Walter explained that “[a]lthough a relator need not be the original source of every element of his claim, a relator must do more than apply his expertise to publicly disclosed information. Thus, secondhand information may not be converted into direct and independent knowledge because the plaintiff discovered through investigation or experience what the public already knew.”
Notably, the Swoben opinion was issued based upon the prior version of the FCA’s public disclosure bar, which was amended through the Affordable Care Act. However, many FCA cases include conduct that predates the amendment, which means that analogous factual scenarios may well arise in the future. Additionally, the Swoben case is important because it illustrates the fact that courts will enforce the provisions of the FCA carefully and not simply award money to a relator who is not entitled to a recovery under the FCA.
The opinion in Swoben should serve as a cautionary tale to potential relators who lack first-hand knowledge and would hope to take advantage of publicly available information in the hopes of a significant recovery.