The False Claims Act bars suits initiated by whistleblowers, known as qui tam suits, if the action is "based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government [sic] Accounting Office report, hearing, audit, or investigation, or from the news media, unless ...the person bringing the action is an original source of the information." 31 U.S.C. § 3730(e)(4)(A). The obvious purpose of this bar, which was enacted as part of the 1986 amendments to the FCA, was to prevent so-called parasitic suits in which whistleblowers filed suits alleging fraud that had been exposed by others. United States v. Bank of Farmington, 166 F.3d 853, 858 (7th Cir. 1999). Nevertheless, there has been no consensus among the courts regarding the proper meaning of the terms based upon, public disclosure, and original source.

Recently, however, two ways of interpreting the term public disclosure appear to have developed. In Bank of Farmington, the Seventh Circuit held that "[d]isclosure of information to a competent public official about an alleged false claim against the government" constitutes a "public disclosure" within the meaning of the Act's jurisdictional bar. 166 F.3d at 861. In this case, the disclosure had been made by the defendant to the government in circumstances that did not appear to fit into any of the examples of public disclosures set forth in § 3730(e)(4)(A). Taking a common sense approach, after noting that "[t]he point of public disclosure of a false claim against the government is to bring it to the attention of authorities," the court determined that the disclosure could be construed as having been made in the course of an "administrative investigation." 166 F.3d at 861, 862.

In United States ex rel. Dunleavy v. County of Delaware, 123 F.3d 734 (3d Cir. 1997), the Third Circuit gave the statutory language a much more literal reading. As in Farmington, the Dunleavy case involved a disclosure of the alleged fraud by the defendant to the government agency that was allegedly defrauded. The Third Circuit ruled that the disclosure did not constitute an "administrative report" because "the terms 'report, hearing, audit, or investigation' are modified by the words "congressional, administrative, or Government Accounting Office." As a result, according to the court, "'administrative' when read with the word 'report' refers only to those administrative reports that originate with the federal government." 123 F.3d at 745. Because the report at issue originated with the defendant, it was not a public disclosure.

In United States ex rel. Brennan v. The Devereux Foundation, No. CIV.A.01-4540, 2003 WL 715750 (E.D. Pa. Feb. 25, 2003), the Eastern District of Pennsylvania, which is governed by Third Circuit precedent, followed the Devereux decision to its logical conclusion. Upon the discovery of Medicare and Medicaid billing irregularities, The Devereux Foundation notified Medicare and Medicaid. The court determined, however, that this voluntary disclosure did not constitute a public disclosure for purposes of the jurisdictional bar because there had been no federal investigation or audit, and there was no disclosure that was "directly in the public's view or within the public's access." 2003 WL 715750, at *3. It would thus appear that Pennsylvania, New Jersey, and Delaware, the states within the Third Circuit, are not the ideal places in which to make a disclosure of billing irregularities. Fortunately, other jurisdictions take a moderate approach.

In United States ex rel. Feingold v. Administar Federal, 324 F.3d 492 (7th Cir. 2003), the Seventh Circuit reiterated the common sense approach it took in Farmington, by ruling that HCFA reports, upon which the action was based, had been publicly disclosed "[b]ecause the purpose of a public disclosure is to alert the responsible authority that fraud may be afoot, and that purpose is served where that authority has itself issued the reports containing information that substantiates an allegation of fraud...." 324 F.3d at 496.

In Hays v. Hoffman, 325 F.3d 982 (8th Cir. 2003), the Eighth Circuit also rejected the Third Circuit's narrow reading of the Act. At issue were audit reports prepared by the Minnesota Department of Human Services. The whistleblower and the government urged the court to follow Dunleavy and rule that the reports were not administrative reports or audits because they were prepared by a state, not the federal government. The court rejected this argument, ruling that "anti-fraud compliance audits conducted by state or local agencies or private contractors should qualify as public disclosures if they are prepared by or at the behest of the relevant federal agency, or by or at the behest of a state agency that administers the federal grant program under 'significant Federal regulation and involvement.'" 325 F.3d at 989. While the court's ruling does not appear to encompass self-disclosures, that issue was not before it. Given the flexible approach taken by the Eighth Circuit in Hays, one would hope that if the issue of self-disclosure is ever presented to that court, it would adopt the Farmington approach. In the meantime, the Supreme Court has rejected the whistleblower's appeal.