Relators Qualify for FCA’s Original Source Exception Even for Defendants’ Post-Employment Conduct

In the False Claims Act (“FCA”) arena, special attention is paid to opinions coming from courts with full FCA dockets. Because the Eastern District of Pennsylvania is one of those jurisdictions, the qui tam legal community welcomed a recent decision, which held that relators may still qualify for the public disclosure bar’s original source exception for conduct that occurred after they left their employment with the defendant-employer. See U.S. ex rel. Galmines v. Novartis Pharma Corp., No. 06-CV-03213 (Feb. 27, 2015). This decision departs from other court decisions, which have largely come from courts with less experience with the FCA.

In this case, the relators alleged that during their employment with Novartis, the company engaged in off-label marketing and entered into kickback arrangements with respect to the drug Elidel. In an earlier ruling, the court determined these allegations had been sufficiently disclosed to the public, triggering the FCA public disclosure bar. However, the court concluded that the relators were an original source of those allegations, as defined by the original source exception.

Subsequently, the relators moved to amend their Complaint to extend the time period of the alleged misconduct past the termination of their employment. Despite the defendant’s objections, the court ruled that the relators qualifed as an original source for the post-employment conduct, thus the relators could “pursue the entire fraudulent scheme for which they have direct and independent knowledge of the operative substantive facts,” without limitation to the “specific time periods for which they have direct and independent knowledge.”

The court was mindful of the interplay between the FCA’s public disclosure bar and the first-to-file bar. As the court noted, if the court were to constrain a relator to the time period of his employment, this could create situations in which no relator could bring a qui tam action for a particular time period of fraud. The court opined that this could arise where an original source who was the first to file lacked direct knowledge of a later portion of the scheme, but would-be relators with direct knowledge as to this later period would be barred from filing a case under the first-to-file bar.

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