Appeals court overturns KCI win in whistleblower case

A federal appeals court this week overturned the dismissal of a lawsuit filed against Kinetic Concepts Inc. (now Acelity), in the process resetting the precedent used to establish standing in whistleblower lawsuits.

The U.S. Court of Appeals for the 9th Circuit cut 1 of the 3 prongs for establishing a qui tam whistleblower case, ruling that whistleblowers don’t need to prove they played a role in the public disclosure of the alleged wrongdoing. Plaintiffs must only prove that they brought the allegations to the government before filing suit and had direct and independent knowledge of the allegations, according to the 9th Circuit’s en banc July 7 ruling.

Steven Hartpence and Geraldine Godecke filed the lawsuit in 2008 in the U.S. District Court for Central California, alleging that KCI caused fraudulent billings to government healthcare programs for its negative-pressure wound therapy devices. Judge George King dismissed the case in 2012, ruling that Hartpence and Godecke failed to show that they had a part in bringing the allegations to light.

Writing for the 9th Circuit, Judge Carlos Bea said that the circuit court’s 1992 decision in Wang ex rel. United States v. FMC “read a nonexistent, extratextual 3rd requirement into [the False Claims Act].”

“We overrule it as wrongly decided. In this case, the district court concluded that neither relator qualified as an ‘original source’ on the sole basis of the hand-in-the-public-disclosure requirement that we now repudiate,” Bea wrote. “The district court did not consider whether relators met the first (and now the only) 2 requirements of the original source test: That they have direct and independent knowledge of the information on which their allegations are based and that they voluntarily provide that information to the government before filing suit. We remand so that the district court may make this determination in the first instance.”

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