Refusing to Read “Voluntary” Out of Original Source Exception, Second Circuit Affirms Public Disclosure Bar Dismissal of FCA Lawsuit Against U.S. Oncology

On November 12, 2024, the Second Circuit affirmed the District Court for the Eastern District of New York’s dismissal of a qui tam suit that Omni Healthcare Inc. (Omni) filed against U.S. Oncology alleging improper repackaging and billing for overfill of injectable oncology drugs. Omni Healthcare Inc. et al. v. U.S. Oncology, Inc., No. 23-1334-cv, 2024 WL 4751635 (2d Cir. Nov. 12, 2024).

As discussed in a prior Qui Notes post, the district court dismissed the case last year, finding that the public disclosure bar of the False Claims Act (FCA) applied because previous filings had publicized U.S. Oncology’s alleged misconduct and Omni had not demonstrated that it qualified for the original source exception under either the pre- or post-amendment versions of the bar (both versions applied as the allegations spanned both time periods).

In affirming the dismissal, the Second Circuit, among other things, agreed with the district court’s conclusion that Omni did not qualify for the post-amendment version of the original source exception, which requires both a “voluntar[y]” disclosure and one that was made “prior to a public disclosure.” 31 U.S.C. § 3730(e)(4)(B)(i). Omni argued that it had indeed “voluntarily” disclosed the information by submitting a disclosure statement to the government, as required by the FCA, weeks before filing its suit and before any public disclosures. Omni’s pleading explicitly referenced the FCA’s mandatory disclosure provision, which obligates a relator to serve on the government “[a] copy of the complaint and written disclosure of substantially all material evidence.” 31 U.S.C. § 3730(b)(2). But the Second Circuit rejected that argument, finding that it would “read[] the voluntary requirement out of” the statute. The Second Circuit agreed with the district court’s rejection of Omni’s argument that the “mandatory disclosure may simultaneously be voluntary if a relator discloses information to the government prior to public disclosures.” (emphasis added). And the Second Circuit was similarly unpersuaded by Omni’s own assertion in the complaint that its disclosure was voluntary, which the circuit court found was “a legal conclusion that we do not accept as true without plausible substantiating factual assertions.”

Stay tuned as we continue to monitor how other circuit courts address the public disclosure bar and its original source exception.

© Arnold & Porter Kaye Scholer LLP 2024 All Rights Reserved. This Blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.