United States of America, ex rel. v. Community Health Systems, Inc.

1
RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
ELECTRONIC CITATION: 2003 FED App. 0322P (6th Cir.)
File Name: 03a0322p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
UNITED STATES OF AMERICA,
ex rel.,
Plaintiff-Appellee,
SEAN BLEDSOE,
Plaintiff/
Relator-Appellant,
v.
COMMUNITY HEALTH
SYSTEMS, INC.; SPARTA
HOSPITAL CORPORATION
d/b/a White County
Community Hospital,
Defendants-Appellees.
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No. 01-6375
Appeal from the United States District Court
for the Middle District of Tennessee at Cookeville.
No. 00-00083—William J. Haynes, Jr., District Judge.
Argued: March 12, 2003
Decided and Filed: September 10, 2003
2 United States of America, et al. v.
Community Health Systems, et al.
No. 01-6375
*The Honorable David M. Lawson, United States District Judge for
the Eastern District of Michigan, sitting by designation.
Before: MOORE and CLAY, Circuit Judges; LAWSON,
District Judge.*
_________________
COUNSEL
ARGUED: Mike Bothwell, MIKE BOTHWELL, P.C.,
Roswell, Georgia, for Appellant. Steve Frank, UNITED
STATES DEPARTMENT OF JUSTICE, CIVIL DIVISION,
APPELLATE SECTION, Washington, D.C., Michael L.
Waldman, FRIED, FRANK, HARRIS, SHRIVER &
JACOBSON, Washington, D.C., for Appellees. ON BRIEF:
Mike Bothwell, G. Mark Simpson, MIKE BOTHWELL,
P.C., Roswell, Georgia, for Appellant. Steve Frank, Douglas
N. Letter, UNITED STATES DEPARTMENT OF JUSTICE,
CIVIL DIVISION, APPELLATE SECTION, Washington,
D.C., Michael L. Waldman, FRIED, FRANK, HARRIS,
SHRIVER & JACOBSON, Washington, D.C., John R.
Jacobson, BOWEN, RILEY, WARNOCK & JACOBSON,
Nashville, Tennessee, for Appellees.
_________________
OPINION
_________________
CLAY, Circuit Judge. Plaintiff/Relator Sean Bledsoe
(“Relator”) appeals from an order entered by the district court
on September 19, 2001. Relator had brought a qui tam action
against Defendants Community Health Systems, Inc. (“CHS”)
and Sparta Hospital Corporation d/b/a White County
Community Hospital (“White County Hospital”), alleging
violations of the False Claims Act (“FCA”), 31 U.S.C. § 3729

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1The other listed defendants in the original complaint were
Forstmann Little & Co. (a privately-owned compa ny that wholly owns
CHS ), Cookville Regional Medical Center (a nonprofit corporation),
Theod ore Forstmann (chief executive officer (“CEO”) and chief financial
officer (“CFO”) of Forstmann Little & Co.), Thomas H. Lister (general
partner of Forstmann Little & Co.), E. Thoma s Chaney (former president
and CEO of CHS), Ernest Baco n (president and CEO o f CHS), Barry
Stewart (CFO of CHS), and John Does and John Doe corporations 1-99.
2“A copy of the complaint and written disclosure of substantially all
material evidence and informatio n the person possesses shall be served on
the Government pursuant to Rule 4(d)(4) [now Rule 4(i)] of the Federal
Rules of Civil P rocedure. The complaint shall be filed in camera, shall
remain under seal for at least 60 days, and shall not be served on the
defendant until the co urt so orders. The Government may elect to
intervene and proceed with the action within 60 days after it receives bo th
et seq. The district court entered an order in which it denied
Relator’s motion to recognize a settlement agreement reached
between the United States government and CHS, granted
Defendants’ motion for judgment on the pleadings, and
dismissed Relator’s claims with prejudice.
In this case involving some issues of first impression, we
REVERSE the judgment of the district court for the reasons
discussed below.
BACKGROUND
Procedural History
On February 17, 1998, Relator filed a qui tam action
against CHS, as well as other entities and officers of the
various entities, in the United States District Court for the
Northern District of Georgia.1 The complaint alleged that
CHS and others violated the FCA, 31 U.S.C. § 3729 et seq.,
by “unbundling services and billing Medicare and Medicaid”
and “miscoding and upcoding items billed to Medicare and
Medicaid.” (J.A. at 25.) Pursuant to 31 U.S.C. § 3730(b)(2),2
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No. 01-6375
the com plaint and the m aterial evidence and information.” 31 U .S.C.
§ 3730 (b)(2).
the complaint was filed under seal and served upon the United
States, but the government declined to intervene in the action.
Relator thereafter served the complaint on the named
defendants in May of 1999.
On July 3, 2000, Relator filed a First Amended Complaint
(“amended complaint”). The amended complaint deleted
some defendants, added a defendant, and contained new
substantive allegations. CHS and White County Hospital
(collectively “Defendants”) filed separate answers to the
amended complaint.
Relator’s case subsequently was transferred to the Middle
District of Tennessee. Defendants then filed a motion,
pursuant to Federal Rule of Civil Procedure 12(c), for
judgment on the pleadings on November 3, 2000. Relator
filed a brief in opposition to Defendants’ motion.
Additionally, Relator filed a motion to recognize a separate
settlement agreement entered into between the government
and CHS, claiming that he was entitled to a relator’s share of
the settlement proceeds.
On September 18, 2001, the district court filed a
memorandum opinion, which (1) granted Defendants’ Rule
12(c) motion, (2) denied Relator’s motion to recognize the
settlement, and (3) dismissed Relator’s lawsuit with
prejudice. An order to this effect was entered on the same
day. Relator’s timely appeal followed.

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3“Upcoding,” a common form of Medicare fraud, is the practice of
billing Med icare for medical services or equipment designated under a
code that is more expensive than what a patient actually needed or was
provided. See Bo nnie Schreib er et al., Health Care Fraud, 39 AM . CRIM .
L. REV. 707, 750 n.331 (2002 ).
Substantive Facts
A. Relator’s and CHS’ Cooperation with the
Government
In 1995, Relator began working at White County Hospital,
which is one of several hospitals owned by CHS. At some
point during his tenure at White County Hospital, Relator
became aware of “a serious problem with upcoding and other
billing irregularities”3 (J.A. at 167), and he reported these
irregularities to the government between 1996 and 1998.
Sometime in the fall of 1997, CHS was approached by the
government about possible upcoding at two different CHS
hospitals. On December 18, 1997, CHS contacted the Office
of Inspector General of the United States Department of
Health and Human Services (“OIG-HHS”), and disclosed
that it had detected medical coding irregularities at its
hospitals during recent internal audit efforts. CHS informed
OIG-HHS of its plans to undertake an audit of its hospitals’
coding, disclose the results, and repay any overpayments it
had received from Medicare. After lengthy negotiations,
CHS conducted the self-audit, and it presented preliminary
findings to OIG-HHS on December 18, 1998. OIG-HHS
simultaneously worked with the Department of Justice
(“DOJ”) to investigate whether a FCA violation might have
occurred. This investigation, of which Relator apparently was
unaware at the time, concluded in mid-1999.
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4“Unbundling” occurs when a health provider, who initially issues a
service as one package, breaks down the service into compone nt parts and
finds individual reimbursement codes for those components, so long as
the individual rates combined exceed the global rate. See Schreiber et al.,
supra note 4, at 750 n.331.
B. Relator’s Original Complaint and Written Disclosure
In the meantime, Relator filed his qui tam action in
February of 1998. The original complaint alleged that the
Cookville Regional Medical Center (“Cookville”), one of the
original named defendants, “perpetrated a scheme of
defrauding the United States Government by unbundling
services and billing Medicare and Medicaid,” and that CHS
and other defendants “engaged in a scheme of defrauding the
United States Government by miscoding and upcoding items
billed to Medicare and Medicaid.” (J.A. at 25.) Count One
of the complaint alleged that the defendants “knowingly
presented, caused to be presented, or conspired to present”
false claims in violation of 31 U.S.C. § 3729(a)(1). (J.A. at
25.) Count Two alleged that the defendants “agreed to
undermine [the Medicare and Medicaid] laws, rules, and
regulations” and that they “conspired . . . to defraud the
government by acting collectively to submit or cause to be
submitted false and fraudulent claims for payment to the
United States in violation of 31 U.S.C. § 3729(a)(3).” (J.A.
at 26.)
With the sealed complaint, Relator also furnished to the
government, as required, a “written disclosure of substantially
all material evidence and information [he] possesse[d].” 31
U.S.C. § 3730(b)(2). In the written disclosure, Relator
indicated, in pertinent part, that he had witnessed first-hand,
or learned from others about, (1) unbundling4 of services
while working at Cookville; (2) upcoding of contract services
and disposable equipment, as well as fraudulent inflation of
cost reports, in White County Hospital’s nursing and

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5Specifically, the governm ent was acting through the DOJ and on
behalf of OIG-HH S. Other parties joining the United States in the
settlement agreement were TRICARE Management Activity, various
states, and relator H ealth Outcome T echnologies.
respiratory departments; (3) misuse of a doctor’s medical
provider number in the emergency room; (4) double billing
and billing for unbillable items; (5) improper changing of
patients’ statuses from an outpatient/observation status to an
inpatient status; (6) billing for fictitious continuous heart
monitoring; and (7) improperly premature discharging of
hospital patients when Medicare reimbursement eligibility
had been exhausted. In support of his allegations, Relator
also provided a list of hospital employees and asserted his
possession of supporting documents.
C. The Government and CHS’ Settlement Agreement
The government5 and CHS ultimately agreed on a
settlement in which CHS would repay to the government
Medicare overpayments in the amount of $30,904,625.56.
The original version of the settlement agreement also
“specifically reserved and excluded from the scope and terms
of this Agreement as to any entity or person (including the
Released Parties)” claims asserted in a qui tam action brought
by another relator in the Middle District of Tennessee. (J.A.
at 354-55.) Relator’s qui tam suit was not referenced in the
original version of the settlement agreement. On or about
March 28, 2000, a revised version of the settlement agreement
was circulated, including a substituted page 12, which
included Relator’s claim among the claims specifically
excluded from the settlement agreement. All the parties then
signed the revised settlement agreement. The settlement
agreement’s effective date was May 8, 2000.
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No. 01-6375
D. Dr. Adams’ Intervening Lawsuit and Relator’s
Amended Complaint
On January 15, 1999 (after the government declined to
intervene in Relator’s qui tam action but before Relator’s
complaint was served on Defendants), Dr. Robert Adams,
former medical director of White County Hospital’s
geropsychiatric treatment program, filed a complaint in
Tennessee state court, alleging wrongful termination.
Specifically, he contended that he was terminated for refusing
to participate in White County Hospital’s policies regarding
Medicare billings, which included “provid[ing] unneeded
medical services, falsify[ing] patient charts, and [performing]
other illegal and unethical activities,” with the goal of
producing longer patient stays and, thus, higher hospital
reimbursement amounts.
After the filing of Dr. Adams’ Tennessee state court
lawsuit, Relator filed an amended complaint on July 3, 2000.
The amended complaint, among other things, contained new
substantive allegations, including fraud in White County
Hospital’s psychiatric unit. Specifically, the amended
complaint asserted that Defendants had engaged in a scheme
to defraud the government by admitting to the psychiatric unit
patients who were not Medicare or Medicaid eligible.
Additionally, the amended complaint alleged that Defendants
“encourag[ed] physicians to maximize the average length of
stay [in the psychiatric unit], whether medically necessary or
not, . . . [and] terminated Dr. Robert Adams as director of the
psychiatric unit because he declined to increase the average
length of stay of patients unnecessarily.” (J.A. at 48, 49.)
The amended complaint also alleged a variety of other
fraudulent Medicare billing practices, including fraudulent
uses of provider numbers, fraudulent billing for continuous
monitoring services, improper payment of bonuses to
providers based on hospital admissions, misrepresentation of
the employment status of certain physicians recruited for an

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underserved area in order to obtain federal funds, and
unbundling of various services.
E. The District Court’s Rulings
On September 18, 2001, the district court granted
Defendants’ motion for judgment on the pleadings, pursuant
to Federal Rule of Civil Procedure 12(c). In doing so, it
reasoned that Relator’s amended complaint was required to
state its FCA claims with particularity, pursuant to Federal
Rule of Civil Procedure 9(b), and that the amended complaint
had failed in this regard. The court then decided to dismiss
Relator’s claims with prejudice, reasoning that Relator had
enjoyed a sufficient time period in which he could have
amended his amended complaint to comply with Rule 9(b)
but had failed to do so.
The district court also denied Relator’s motion to recognize
the May 8, 2000 settlement between the government and
CHS, reasoning that Relator was not entitled, under any
provision of the FCA, to a relator’s share of the settlement
proceeds. Pursuant to these two rulings, the district court
dismissed the case.
ANALYSIS
The FCA, 31 U.S.C. § 3729 et seq., is an anti-fraud statute
that prohibits the knowing submission of false or fraudulent
claims to the federal government. Specifically, § 3729
imposes liability when (1) a person presents, or causes to be
presented, a claim for payment or approval; (2) the claim is
false or fraudulent; and (3) the person’s acts are undertaken
“knowingly,” i.e., with actual knowledge of the information,
or with deliberate ignorance or reckless disregard for the truth
or falsity of the claim. Id. § 3729(a)(1), (b). Section
3729(a)(3) prohibits conspiracies “to defraud the Government
by getting a false or fraudulent claim allowed or paid.” Id.
§ 3729(a)(3). Persons who violate the FCA are liable for civil
10 United States of America, et al. v.
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No. 01-6375
penalties and double or treble damages, plus the costs
incurred in bringing a FCA lawsuit. Id. § 3729(a).
Additionally, the FCA allows a private individual to bring
a lawsuit alleging FCA violations on behalf of the
government, which is known as a qui tam action. Id. § 3730.
The private individual bringing the qui tam suit, known as a
relator, must first serve the complaint upon the government,
where the complaint then remains under seal for at least sixty
days. Id. § 3730(b)(2). During this time period, the
government may elect to intervene. Id. If the government
does not intervene in the action, the relator may proceed with
the action. Id. § 3730(b)(4)(B), (c)(3). If the relator
successfully recovers funds for the government in pursuing
the qui tam action, he or she is entitled to 25-30% of the
proceeds recovered. Id. § 3730(d)(2). However, there are
restrictions upon a relator’s ability to proceed with a qui tam
suit. For instance,
No court shall have jurisdiction over an action under this
section based upon the public disclosure of allegations or
transactions in a criminal, civil, or administrative hearing
. . . unless the action is brought by the Attorney General
or the person bringing the action is an original source of
the information.
Id. § 3730(e)(4)(A). In other words, a relator may continue
the qui tam suit based on publicly-disclosed information only
if the relator is the original source of that information.
If the government intervenes in the action, it takes over the
relator’s case and adopts any or all of the allegations
contained in the qui tam suit. Id. § 3730(c)(1). The relator,
in turn, is entitled to 15-25% of any proceeds of the action or
settlement. Id. § 3730(d)(1). Additionally, “the Government
may elect to pursue its claim through any alternate remedy
available to the Government, including any administrative
proceeding to determine a civil money penalty.” Id.

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§ 3730(c)(5). If the government elects to pursue an “alternate
remedy,” the relator “shall have the same rights in such
proceeding as such person would have had if the action had
continued under this section.” Id.
On appeal, we must resolve three issues: (1) whether the
district court correctly dismissed Relator’s amended
complaint with prejudice for failure to comply with Federal
Rule of Civil Procedure 9(b); (2) whether certain portions of
Relator’s amended complaint fall outside our subject matter
jurisdiction because they are based upon publicly-disclosed
information of which Relator was not the original source; and
(3) whether the district court correctly determined that Relator
was not entitled to a relator’s share of the May 8, 2000
settlement agreement executed between the government and
CHS.
I.
We first consider whether the district court erred in granting
Defendants’ motion for judgment on the pleadings and
dismissing with prejudice Relator’s amended complaint for
failing to comply with Federal Rule of Civil Procedure 9(b).
We will address this issue as a three-part inquiry: (1) whether
a complaint alleging FCA violations must comply with Rule
9(b); (2) if so, whether Relator’s amended complaint satisfied
the Rule 9(b) requirement; and (3) if the amended complaint
did not satisfy the requirement, whether the district court
properly dismissed it with prejudice.
A. A Complaint Alleging Violations of the FCA Must
Comply with Federal Rule of Civil Procedure 9(b).
Relator argues on appeal that the district court erred in
granting Defendant’s Rule 12(c) motion because a complaint
stating a violation of the FCA need not comply with Rule
9(b), which mandates that in “all averments of fraud . . . the
circumstances constituting fraud . . . shall be stated with
12 United States of America, et al. v.
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No. 01-6375
particularity.” Fed. R. Civ. P. 9(b). We review de novo the
district court’s statutory interpretation of the FCA as requiring
Rule 9(b) compliance. United States v. Rapanos, __ F.3d __,
2003 WL 21789241, at *2 (6th Cir. Aug. 5, 2003) (citing
United States v. Markwood, 48 F.3d 969, 975 (6th Cir.
1995)).
We recently held in a published case that a complaint
alleging FCA violations must allege the underlying facts with
particularity as required by Rule 9(b). See Yuhasz v. Brush
Wellman, Inc., __ F.3d __, 2003 WL 21976038, at *2 (6th
Cir. Aug. 20, 2003). Therefore, the district court correctly
required Relator’s complaint to comply with Rule 9(b).
Although the FCA’s statutory language does not expressly
require Rule 9(b) compliance, it strongly suggests the
propriety of requiring such compliance. Section 3729(a)(1)
imposes liability when a person “knowingly presents, or
causes to be presented, to an officer or employee of the
United States Government or a member of the Armed Forces
of the United States a false or fraudulent claim for payment
or approval.” 31 U.S.C. § 3729(a)(1) (emphasis added).
Moreover, Section 3729(a)(3) prohibits a person from
“conspir[ing] to defraud the Government by getting a false or
fraudulent claim allowed or paid.” 31 U.S.C. § 3729
(emphasis added). Legislative history further reveals that
Congress views the FCA “[a]s a civil remedy designed to
make the Government whole for fraud losses.” S. Rep. 99-
345, at 6 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5271;
see also United States v. Borstein, 423 U.S. 303, 309 (1976)
(noting that the purpose of the FCA, when originally enacted,
was to stop “the massive frauds perpetrated by large
contractors during the Civil War”). In short, “[i]t is self-
evident that the FCA is an anti-fraud statute.” Gold v.
Morrison-Knudsen Co., 68 F.3d 1475, 1476 (2d Cir. 1995).
Thus, when pleading violations of the FCA, a fraud statute,
one necessarily makes averments of fraud and necessarily

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6Indeed, Congress clarified the “knowing” standard in 198 6 to
emphasize that the government need not prove that the defendant had
actual knowledge or a specific intent to submit a false claim, reasoning
that this high standard was “inappropriate in a civil remedy” and
“prohibit[ed] the filing of many civil actions to recover taxpayer funds
lost to fraud.” S. Rep. 99 -345 , at 7, reprin ted at 1986 U.S.C.C.A.N. 5266,
5272. The Committee Report further noted that the “actual knowledge”
standard precluded the government from “hold[ing] respo nsible those
corp orate officers who insulate themselves from know ledge of false
must state with particularity the circumstances constituting
the fraud. Fed. R. Civ. P. 9(b).
Relator disputes our characterization of the FCA as a
“fraud” statute. He points out that Rule 9(b) only applies to
“averments of fraud” and only requires that the
“circumstances constituting fraud” need be stated with
particularity, Fed. R. Civ. P. 9(b), whereas the FCA imposes
liability on a person who “knowingly presents, or causes to be
presented . . . a false or fraudulent claim for payment or
approval.” 31 U.S.C. § 3729(a)(1). Therefore, Relator
observes, a complaint alleging a FCA violation need only
show that the person “knowingly,” or with “reckless
disregard” or “deliberate ignorance,” presented a false claim,
and the FCA suit is not required to prove many of the other
traditional elements of fraud, such as scienter (intent to
defraud), “actual damages” to the government, or “reasonable
reliance” by the government. Relator argues that such a
lowered level of intent demonstrates that the FCA is not a
fraud statute and, consequently, a complaint need not state its
FCA allegations with particularity.
We are not persuaded by the distinctions Relator has drawn.
The fact that the FCA does not require proof of all the
traditional elements of a fraud claim, such as scienter, does
not mean that the FCA is not an anti-fraud statute. Congress
may have had special reasons for liberalizing the level of
intent needed to prove a FCA violation,6 but its unambiguous
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claims submitted by lower-level subordinates. This ‘ostrich-like’ conduct
which can occur in large corporations poses insurmountable difficulties
for civil false claims recoveries.” Id. at 6-7, 1996 U.S.C.C.A.N. at 5272.
7Mo reover, all the other circuits to have considered the issue have
held that FC A claim s must co mply with Rule 9(b). See Bly-Magee v.
California, 236 F.3d 1 014, 101 8 (9th Cir. 2 001 ); Harrison v.
Westinghouse Savannah River Co., 176 F.3d 776, 783 -84 (4th Cir. 1999);
LaCorte, 149 F.3d at 234; United States ex rel. Thompson v.
Columbia/HCA Heathcare Co rp., 125 F.3d 8 99, 903 (5th Cir. 1997 );
Gold, 68 F .3d at 147 6; United States ex rel. Cooper v. Blue Cross & Blue
Shield of Florida, 19 F.3d 56 2, 568 (11th Cir. 1994 ).
legislative intent was to combat fraud and, consequently, to
hold civilly liable those persons who submit fraudulent
claims. Moreover, as other courts have pointed out, the
FCA’s more lenient intent requirement “does not conflict with
Rule 9(b), since ‘[m]alice, intent, knowledge, and other
condition of mind of a person may be averred generally.’”
Gold, 68 F.3d at 1477 (quoting Fed. R. Civ. P. 9(b)). Relator
is not required to state with particularity Defendant’s intent to
defraud; he is only required to state with particularity the
circumstances (i.e., the time, place, and substance)
surrounding the fraudulent activity. See id. Application of
Rule 9(b) is appropriate in that it would deter those alleging
FCA violations from making “overly broad allegations.”
United States ex rel. LaCorte v. SmithKline Beecham Clinical
Labs., Inc. 149 F.3d 227, 234 (3d Cir. 1998).7
Therefore, stating a violation of the FCA constitutes an
“averment[] of fraud” for purposes of Rule 9(b), and a
complaint alleging such a claim must state the circumstances
surrounding the FCA violation with particularity. Yuhasz,
2003 WL 21976038, at *2.

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B. The Allegations of FCA Violations in Relator’s
Amended Complaint Are Not Stated with Sufficient
Particularity.
Our review of whether the district court properly granted
Defendants’ motion for judgment on the pleadings under
Federal Rule of Civil Procedure 12(c) is guided by that of a
motion to dismiss under Federal Rule of Civil Procedure
12(b). Ziegler v. IBP Hog Market, Inc., 249 F.3d 509, 511-12
(6th Cir. 2001) (citing Mixon v. Ohio, 193 F.3d 389, 399-400
(6th Cir. 1999)). Thus, our review of the district court’s
ruling is de novo. Grindstaff v. Green, 133 F.3d 416, 421
(6th Cir. 1998). Our inquiry is whether, based on the
allegations in the amended complaint, Relator can prove any
set of facts that would entitle him to relief. Mixon, 193 F.3d
at 400. In undertaking this inquiry, we will construe the
amended complaint in the light most favorable to Relator and
accept all of its factual allegations as true. Ziegler, 249 F.3d
at 512.
In complying with Rule 9(b), a plaintiff, at a minimum,
must “allege the time, place, and content of the alleged
misrepresentation on which he or she relied; the fraudulent
scheme; the fraudulent intent of the defendants; and the injury
resulting from the fraud.” Coffey v. Foamex L.P., 2 F.3d 157,
161-62 (6th Cir. 1993) (internal quotation marks and citations
omitted); see also United States ex rel. Branhan v. Mercy
Health Sys. of Southwest Ohio, No. 98-3127, 1999 WL
618018, at *1 (6th Cir. Aug. 5, 1999) (affirming dismissal of
a complaint alleging improper billing in violation of the FCA
because it “failed to allege a single specific incident in which
improper billing occurred and the plaintiff never set forth the
dates, times, or the names of individuals who engaged in the
alleged improper billing”). Essentially, the amended
complaint should provide fair notice to Defendants and enable
them to “prepare an informed pleading responsive to the
specific allegations of fraud.” Advocacy Org. for Patients &
Providers v. Auto Club Ins. Ass’n, 176 F.3d 315, 322 (6th Cir.
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1999) (citing Michaels Bldg. Co. v. Ameritrust Co., N.A., 848
F.2d 674, 679 (6th Cir. 1988)).
We agree with the district court that Relator’s amended
complaint failed to state FCA violations with sufficient
particularity. Notably, the amended complaint failed to set
forth dates as to the various FCA violations or any particulars
as to the incidents of improper billing Relator supposedly
witnessed first-hand. Additionally, the amended complaint
did not specify the names of any individuals involved in the
improper billing, save for Dr. Adams, who was allegedly
terminated in retaliation for refusing to engage in the
fraudulent billing practices. Indeed, the amended complaint
often states that “Defendants” engaged in certain practices,
without ever specifying the defendants to which it was
referring. A complaint “may not rely upon blanket references
to acts or omissions by all of the ‘defendants,’ for each
defendant named in the complaint is entitled to be apprised of
the circumstances surrounding the fraudulent conduct with
which he individually stands charged.” Benoay v. Decker,
517 F. Supp. 490, 493 (E.D. Mich. 1981) (internal quotation
marks and citations omitted), aff’d, 735 F.2d 1363 (6th Cir.
1984); see also Yuhasz, 2003 WL 21976038, at *3 (holding
that the complaint at issue did not comply with Rule 9(b)
inasmuch as it failed to “identify specific parties, contracts, or
fraudulent acts”). Based on all these deficiencies, we agree
with the district court that the allegations in Relator’s
amended complaint have failed to comply with Rule 9(b).
C. The District Court Abused Its Discretion in
Dismissing Relator’s Amended Complaint with
Prejudice.
Relator alternatively challenges the district court’s decision
to dismiss his amended complaint with prejudice instead of
affording him an opportunity to comply with Rule 9(b) by
amending his amended complaint. We review a district
court’s decision to dismiss a complaint with prejudice for an

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abuse of discretion. Shepherd v. Wellman, 313 F.3d 963, 971
(6th Cir. 2002) (citing Grover v. Eli Lilly & Co., 33 F.3d 716,
718 (6th Cir. 1994)). We agree with Relator that dismissing
his amended complaint with prejudice was improper.
In EEOC v. Ohio Edison Co., 7 F.3d 541, 546 (6th Cir.
1993), we held that “where a more carefully drafted complaint
might state a claim, a plaintiff must be given at least one
chance to amend the complaint before the district court
dismisses the action with prejudice.” (quoting Bank v. Pitt,
928 F.2d 1108, 1112 (11th Cir. 1991)); see also Coffey, 2
F.3d at 162 (observing that “‘federal courts must be liberal in
allowing parties to amend their complaints’”) (quoting
Hayduk v. Lanna, 775 F.2d 441, 445 (1st Cir. 1985)).
“Denial may be appropriate, however, where there is ‘undue
delay, bad faith or dilatory motive on the part of the movant,
repeated failure to cure deficiencies by amendments
previously allowed, undue prejudice to the opposing party by
virtue of allowance of the amendment, futility of the
amendment, etc.’” Morse v. McWhorter, 290 F.3d 795, 800
(6th Cir. 2002) (quoting Foman v. Davis, 371 U.S. 178, 182
(1962)). The relevant issues in our inquiry are (1) whether
Relator had sufficient notice that his amended complaint was
deficient, and (2) if so, whether Relator had an adequate
opportunity to cure the deficiencies.
In this case, the district court declined to grant Relator an
opportunity to amend the complaint, reasoning that “[g]iven
the Relator's alleged first hand knowledge of these events and
the pendency of this action for more than two years, Relator
has had ample opportunity to cure the cited factual
deficiencies in his pleadings.” (J.A. at 317.) However, we
are not persuaded that Relator was on sufficient notice that his
amended complaint was deficient. The district court’s
September 18, 2001 opinion we now review constituted its
first communication to Relator that (1) he was required to
satisfy Rule 9(b) and (2) he failed to satisfy it. Yet this very
same ruling denied Relator the opportunity to correct the
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No. 01-6375
defects of which he had just been informed, electing instead
to dismiss the amended complaint with prejudice.
Defendants argue that Relator was sufficiently on notice of
the amended complaint’s defects. Specifically, they point out
that shortly after the original complaint had been unsealed and
served upon the named defendants, defense counsel had
contacted Relator’s counsel and informed him that
Defendants planned to file a motion for dismissal and
sanctions against Relator unless Relator voluntarily dismissed
the complaint. Among defense counsel’s cited reasons for
dismissal was the complaint’s failure to state its allegations
with sufficient particularity. The parties subsequently signed
a stipulation to give Relator time to amend his complaint.
Relator thereafter filed an amended complaint that included
additional allegations but did not sufficiently particularize its
allegations for purposes of complying with Rule 9(b).
We disagree with Defendants that the communications
between the parties’ counsel about amending the complaint to
provide for more specificity constituted sufficient notice in
this case. At the time Relator had filed his original and
amended complaints, the law was unsettled as to whether a
complaint alleging FCA violations needed to comply with
Rule 9(b), and Relator therefore was not definitively on notice
that he had to state his allegations with the specificity
required by Rule 9(b). Indeed, his first notice that the
complaint was deficient came from the district court’s
September 18, 2001 opinion, which then proceeded to dismiss
his case with prejudice. Moreover, we do not discern from
the record any “undue delay, bad faith or dilatory motive on
the part of” Relator, or any “undue prejudice to [Defendants]
by virtue of allowance of the amendment.” Morse, 290 F.3d
at 800 (quoting Foman v. Davis, 371 U.S. at 182) (internal
quotation marks omitted).
Finally, there is some indication from the record that
Relator possessed additional information that could have

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allowed his amended complaint to allege the FCA violations
and other fraud allegations with sufficient particularity,
specifically his disclosure to the United States government
when he filed his qui tam suit. For instance, the district
court’s opinion noted that Relator failed to name any
individuals who engaged in the FCA violations, but in the
disclosure filed with the government at the commencement of
his qui tam suit Relator did provide some names and asserted
his possession of supporting documents and additional
information.
Given that “federal courts must be liberal in allowing
parties to amend their complaints,” Coffey, 2 F.3d at 162
(citing Hayduk, 775 F.2d at 445), we will remand the case to
the district court to allow Relator to comply with Rule 9(b) by
amending his amended complaint.
II.
Defendants contend that even if the district court did not
properly dismiss Relator’s amended complaint with prejudice
for failure to comply with Rule 9(b), Relator is barred from
proceeding with paragraphs 17-24 of the amended complaint,
pursuant to the FCA’s public disclosure doctrine. We agree
with Defendants.
As discussed earlier, the FCA precludes a federal court
from exercising jurisdiction over allegations in a qui tam suit
that are based upon publicly-disclosed information, unless the
relator is the original source of that information. 31 U.S.C.
§ 3730(e)(4)(A). Thus, we must determine the following:
(1) whether there was a public disclosure, (2) whether
paragraphs 17-24 of Relator’s amended complaint were
“based upon” that public disclosure, and (3) whether Relator
was an original source of the information.
There is little doubt that Dr. Adams’ complaint, filed in
Tennessee state court, qualifies as a public disclosure. See
20 United States of America, et al. v.
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No. 01-6375
United States ex rel. McKenzie v. Bellsouth Telecomms., Inc.,
123 F.3d 935, 939 (6th Cir. 1997) (‘“Public disclosure’ also
includes documents that have been filed with a court, such as
. . . a plaintiff’s complaint.”).
Furthermore, Relator’s amended complaint was “based
upon” information publicly disclosed in Dr. Adams’
complaint. It is true that paragraphs 17-24 of the amended
complaint were not wholly copied from Dr. Adams’
complaint. Indeed, only part of the “fraud in the psychiatric
unit” section of Relator’s amended complaint appears to have
been “borrowed” from Dr. Adams’ complaint. Most notably,
paragraphs 21, 23, and 24 of the amended complaint, which
discussed the deliberate lengthening of patient stays in the
psychiatric unit, appear to parallel Dr. Adams’ allegations.
Relator does allege other fraudulent activity in the psychiatric
unit not discussed in Dr. Adams’ complaint, to wit,
classifying hospital employees principally stationed in other
units as psychiatric unit employees to charge additional
hospital expenses (paragraph 19); scheming to admit patients
not qualifying for Medicare or Medicaid and fraudulently
billing services to Medicare or Medicaid, and scheming to
prolong patient stays until such eligibility expired or was
close to expiring (paragraph 20); and recycling patients
through the psychiatric unit in violation of Medicare and
Medicaid regulations (paragraph 22).
Nevertheless, we have held that “based upon” means
“‘supported by,’ which includes any action based even partly
upon public disclosures.” McKenzie, 123 F.3d at 940
(emphasis added). We made it clear that under our
interpretation of “based upon,” a person who bases any part
of a FCA claim on publicly disclosed information is
effectively precluded from asserting that claim in a qui tam
suit. Id. Thus, although Relator’s amended complaint
contains more detailed allegations about the fraudulent billing
practices in White County Hospital’s psychiatric unit, Dr.
Adams’ complaint already effectively alerted the public to the

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8Relator argues that subject matter jurisdiction exists for his entire
amended complaint because he filed his original complaint in federal
court before Dr. Adams filed his complaint in state court, and because the
com plaint satisfied jurisdiction at the time the action commenced,
fraud occurring therein. Consequently, paragraphs 17-24 of
the amended complaint were “based upon” Dr. Adams’
complaint because three of the paragraphs in the amended
complaint directly parallel Dr. Adams’ allegations.
Finally, it appears that Relator is not an “original source”
of the information contained in paragraphs 17-24 of his
amended complaint. “Original source” means that the relator
possesses “direct and independent knowledge of the
information on which the [publicly disclosed] allegations are
based,” 31 U.S.C. § 3730(e)(4)(B), and voluntarily provided
that information to the government before filing the qui tam
action and prior to any public disclosure. Id.; McKenzie, 123
F.3d at 943.
In the instant case, Relator’s original complaint made no
mention of fraud in White County Hospital’s psychiatric unit,
or of Dr. Robert Adams. Relator did not raise allegations of
fraud in White County Hospital’s psychiatric unit until after
Dr. Adams filed his state court lawsuit. Furthermore, the
record does not reflect any evidence indicating that Relator
informed the government about allegations of fraud in the
psychiatric unit prior to the public disclosure (i.e., the filing
of Dr. Adams’ complaint). The disclosure accompanying
Relator’s original complaint makes no mention of the
psychiatric unit whatsoever, and Relator points to nothing
else on the record to support his case. Therefore, we find that
Relator was not the original source of the fraud in White
County Hospital’s psychiatric unit. Relator’s allegations
having failed all three parts of the inquiry, no subject matter
jurisdiction lies for paragraphs 17-24 of Relator’s amended
complaint.8
22 United States of America, et al. v.
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No. 01-6375
subsequent events cannot “oust” jurisdiction. We disagree. The fact
remains that Relator did not allege the various billing improprieties in
W hite County Hospital’s psychiatric unit until he filed the amended
com plaint, which occurred after Dr. Adams filed his com plaint in state
court. Barring Relator from pleading these items after the fact is
consistent with Congress’ desire “[t]o prevent ‘parasitic’ qui tam actions
in which relators, rather than bringing to light independently discovered
information of fraud, simply feed off of previous disclosures of
government fraud.” McKenzie, 123 F.3d at 94 3 (quoting United States ex
rel. Siller v. B ecton Dick inson & Co., 21 F .3d 1 339 , 1347 (4 th Cir.
199 4)).
III.
Finally, we consider the district court’s denial of Relator’s
motion to recognize the May 8, 2000 settlement agreement
executed between the government and CHS. Because the
district court’s decision to deny Relator’s motion to recognize
the settlement was based upon its construction of statutory
law, our review is de novo. See Heggen v. Lee, 284 F.3d 675,
679 (6th Cir. 2002) (“We engage in a de novo review because
[the pertinent issue to be reviewed] is a question of law.”).
The district court denied Relator’s motion, reasoning that
Relator was not entitled to any of the proceeds of the
settlement because the government had not intervened in
Relator’s qui tam action; it instead pursued separate
settlement negotiations with CHS, in which Relator did not
take part. Relator contends that 31 U.S.C. § 3730(c)(5)
entitles him to a share because the settlement agreement
between the government and CHS constituted an “alternate
remedy” with respect to the claims in his case. We agree with
Relator.
As discussed earlier, § 3730(c)(3) provides that if the
government elects not to intervene in a relator’s qui tam
action, the relator “shall have the right to conduct the action.”
31 U.S.C. § 3730(c)(3). Section 3730(c)(5) adds,

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Notwithstanding subsection (b), the Government may
elect to pursue its claim through any alternate remedy
available to the Government, including any
administrative proceeding to determine a civil money
penalty. If any such alternate remedy is pursued in
another proceeding, the person initiating the action shall
have the same rights in such proceeding as such person
would have had if the action had continued under this
section.
31 U.S.C. § 3730(c)(5) (emphasis added). Relator argues that
this means that he is entitled to a share of the settlement
proceeds, even though the government did not intervene in his
qui tam suit, because it pursued an “alternate remedy,” i.e.,
settlement negotiations. The government contends that
Congress intended the “alternate remedy” provision to apply
only when the government has intervened in the action. The
answer turns on the proper definition of “alternate remedy,”
either as an alternative to judicial enforcement of the FCA
once the government has intervened in a qui tam suit, or an
alternative to intervening in the qui tam suit entirely. The
facts of this case present an issue of first impression for our
circuit. We hold that “alternate remedy” refers to the
government’s pursuit of any alternative to intervening in a
relator’s qui tam action.
We begin our analysis with the plain language of the FCA.
United States v. Ninety-Three (93) Firearms, 330 F.3d 414,
420 (6th Cir. 2003) (citations omitted). In so doing, we
observe that § 3730(c)(5) does not expressly require the
government’s intervention before the “alternate remedy”
becomes applicable, nor does it define or discuss “alternate
remedy” within the context of a government’s intervention in
a qui tam action. Rather, § 3730(c)(5) states that “the
Government may elect to pursue its claim through any
alternate remedy available to the Government.” 31 U.S.C.
§ 3730(c)(5). The FCA contemplates enforcement by the qui
tam relator, or intervention and judicial pursuit of the FCA
24 United States of America, et al. v.
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No. 01-6375
claims by the government. The most logical reading of
“alternate remedy” is as the government’s alternative to
judicial pursuit of the relator’s claims, i.e., an alternative to
intervening in a qui tam action. The government’s
interpretation of § 3730(c)(5) as applying only when the
government has intervened, on the other hand, is less logical.
Section 3730(c)(5) seeks to insure a relator’s right to a share
of any proceeds obtained through an alternate remedy; yet
§ 3730(d)(1) already guarantees a relator a percentage of the
proceeds if the government intervenes in the action. Thus,
limiting “alternate remedy” to situations where the
government has intervened would render § 3730(c)(5) at least
partially superfluous, a result we generally avoid in
construing a statute. See Ninety-Three (93) Firearms, 330
F.3d at 420 (“When interpreting the plain language of a
statute, we ‘mak[e] every effort not to interpret a provision in
a manner that renders other provisions of the same statute
inconsistent, meaningless or superfluous.’”) (quoting
Cafarelli v. Yancy, 226 F.3d 492, 499 (6th Cir. 2000))
(alteration in Ninety-Three (93) Firearms). Thus, we are
persuaded that the plain language of § 3730(c)(5) makes clear
that a relator’s participation rights are preserved when the
government pursues the relator’s claims through any means
alternative to intervening in the qui tam action.
The government contends that the FCA’s legislative history
supports its interpretation of § 3730(c)(5). It points to the
Senate Report accompanying the 1986 amendments to the
FCA, which states, in pertinent part, the following:
Subsection (c)(3) of section 3730 clarifies that the
Government, once it intervenes and takes over a false
claim suit brought by a private individual, may elect to
pursue any alternate remedy for recovery of the false
claim which might be available under the administrative
process.

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S. Rep. 99-345, at 27, 1986 U.S.C.C.A.N. at 5292 (emphasis
added). We are not persuaded. In the first place, the quoted
passage of the Senate Report refers to § 3730(c)(3), not
§ 3730(c)(5), suggesting that it might refer to an earlier draft
of the 1986 FCA amendments. The quoted passage is
particularly difficult to reconcile with the plain language of
§ 3730(c)(5), which seeks to preserve a relator’s rights in the
event that the government pursues “any alternate remedy” and
makes no mention of intervention as a prerequisite to
pursuing the “alternate remedy.”
Indeed, another segment of the same Senate Report tends
to support our interpretation of “alternate remedy.”
Specifically, the Senate Report made clear that
[w]hile the Government will have the opportunity to
elect its remedy, it will not have an opportunity for dual
recovery on the same claim or claims. In other words,
the Government must elect to pursue the false claims
action either judicially or administratively and if the
Government declines to intervene in a qui tam action, it
is estopped from pursing [sic] the same claim
administratively, or in a separate judicial action.
Id. at 27, 1986 U.S.C.C.A.N. at 5292. Thus, this passage
suggests that the government may either proceed judicially
(by intervening in the qui tam suit) or pursue an alternative to
judicial enforcement (i.e., an “alternate remedy”).
Moreover, interpreting “alternate remedy” as an alternative
to intervening in a qui tam action is more consistent with the
congressional intent expressed in making the 1986
amendments to the FCA. Congress made it clear that its
“overall intent in amending [§ 3730] [was] to encourage more
private enforcement suits.” Id. at 23-24, 1986 U.S.C.C.A.N.
at 5288-89. It emphasized its belief that “[i]n the face of
sophisticated and widespread fraud . . . only a coordinated
effort of both the Government and the citizenry will decrease
26 United States of America, et al. v.
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No. 01-6375
this wave of defrauding public funds.” Id. at 2, 1986
U.S.C.C.A.N. at 5267. It is readily apparent that, under the
government’s interpretation of § 3730(c)(5), the government
could decline to intervene in a qui tam suit, then settle that
suit’s claims separately and deny the relator his or her share
of the settlement proceeds simply because the government
had not formally intervened in the qui tam action.
Consequently, the government would frequently carry the
incentive to decline to intervene in an action and, having been
apprised of possible FCA violations by a private citizen, to
independently pursue an investigation of the alleged FCA
violator(s). Such a result would not further Congress’
legislative intent that the government and private citizens
collaborate in battling fraudulent claims, and it would impede,
not further, Congress’ legislative intent to encourage private
citizens to file qui tam suits.
Finally, we are not alone in our view of a § 3730(c)(5)
“alternate remedy.” The Ninth Circuit has held that an
administrative suspension or debarment proceeding pursued
by the government, and a settlement agreement arising
therefrom, constituted an “alternate remedy” within the
meaning of § 3730(c)(5), even though the government had not
intervened in a qui tam suit alleging the conduct contemplated
in the settlement. United States ex rel. Barajas v. United
States, 258 F.3d 1004, 1010-13 (9th Cir. 2001). Similarly,
the Fourth Circuit appears to view § 3730(c)(5) as protecting
a relator’s rights when the government pursues an alternative
to intervening in the relator’s qui tam action. See LaCorte,
185 F.3d at 192 (“Section 3730(c)(5) assumes that the
original qui tam action did not continue. The government
here did not pursue an alternate remedy . . . . It instead
intervened in the action, prosecuted it, and settled it with the
plaintiffs’ consent.”) (emphasis added).
We therefore hold that a settlement pursued by the
government in lieu of intervening in a qui tam action asserting

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the same FCA claims constitutes an “alternate remedy” for
purposes of 31 U.S.C. § 3730(c)(5).
The government argues alternatively that even if the May 8,
2000 settlement agreement operated as an “alternate remedy”
for purposes of § 3730(c)(5), Relator nevertheless is not
entitled to a relator’s share of the settlement proceeds. Its
principal contention in support is that the language of the
settlement agreement “specifically reserved and excluded”
claims asserted in Relator’s qui tam action from the
agreement’s “scope and terms.” We are not persuaded. If the
government has recovered funds lost from conduct asserted in
Relator’s qui tam action, then the government has essentially
settled Relator’s claims, regardless of whether it formally
intervened in Relator’s action or not. The FCA provides that
a relator is entitled to 15-25% of the proceeds when the
government has settled the claims stemming from a relator’s
valid qui tam suit. There is no language in the FCA
suggesting that a relator’s statutory right to a share of the
proceeds from the settlement of claims he or she had asserted
may properly be abrogated by an agreement to which the
relator was not a party.
Indeed, the government does not provide statutory support
for its argument; instead it suggests that the settlement
agreement carefully preserved Relator’s rights by excluding
Relator’s claims from the agreement and insuring that Relator
could pursue his claims separately. However, this approach
would lead to consequences unintended by the FCA. If
indeed the government settled Relator’s claims, either
Defendants would assert an accord and satisfaction defense
(which, if successful, would deny Relator part or all of his
rightful share of the recovered funds), or Defendants would be
forced to pay the civil penalties and double or treble damages
associated with the very same claims for which they had
already paid penalties and damages by way of the settlement.
Under either result, adverse consequences (to either Relator
or Defendants) would ensue that the FCA had not intended.
28 United States of America, et al. v.
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No. 01-6375
9Relator also suggests that there is an open factual issue as to the
validity of the exclusion language in the settlement agreem ent because
some of the versions circulated to the parties to the settlement did not
con tain the substituted page 12 with the exclusion pertaining to Relator,
and because two of the signatures predated the circulation of the
substituted page. Because we hold that the exclusion language in the
settlement agreement does not constitute a proper basis for excluding
Relator from sharing in the settlem ent pro ceed s, we do not reach this
issue.
See S. Rep. 99-345, at 27, 1986 U.S.C.C.A.N. at 5292
(“While the Government will have the opportunity to elect its
remedy, it will not have an opportunity for dual recovery on
the same claim or claims.”); id. at 2, 23-24, 1986
U.S.C.C.A.N. at 5267, 5288-89 (emphasizing its intent to
provide a financial incentive for relators bringing valid qui
tam suits and its belief that the government and private
citizens must work together to battle FCA violations).
We therefore hold that the government may not settle a
relator’s claims and seek to avoid paying a relator his or her
statutory share to the settlement proceeds by excluding the
relator’s claims from the terms of the settlement agreement.9
Next, the government asserts that because Relator failed to
state a claim with sufficient particularity, as required by Rule
9(b), he would not be entitled to a share of the settlement
because his qui tam action was invalid. While it is true that
a threshold requirement for a relator’s ability to share in the
proceeds of a FCA lawsuit is to file a valid qui tam action, 31
U.S.C.. § 3730(b)(1), we already have decided to remand the
case to allow Relator to restate his allegations to comply with
Rule 9(b). Therefore, Relator’s prior failures in this regard do
not offer a present basis for denying his motion.
Finally, the government contends that we alternatively
could affirm on grounds that the conduct alleged in Relator’s
complaint is unrelated to the FCA violations discussed in the

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10W e refer here to R elator’s complaint, rather than his amended
com plaint, because at the time the May 8, 2000 settlement agreement was
executed Relator had not yet am ended his comp laint. Therefore, the
original complaint constitutes the operative document for purposes of the
inquiry of whether overlap exists between the conduct covered in the
settlement agreement and the conduct alleged in Rela tor’s original
com plaint.
settlement agreement.10 According to the settlement
agreement, the relevant conduct pertained to Defendants’
practice of submitting to Medicare, Medicaid, and TRICARE
claims with improper diagnostically related group (“DRG”)
coding, while Relator’s complaint, on the other hand,
discussed other types of improper coding. Relator insists that
there is overlap between the conduct alleged in his qui tam
suit and the conduct contemplated in the settlement
agreement. He points in support to his original complaint,
which alleged that Defendants engaged in “miscoding and
upcoding items billed to Medicare and Medicaid” (J.A. at 25),
and he also insists that prior to filing his qui tam action he had
provided the government with information relating to various
DRG coding violations. Because the district court held that
Relator was not entitled, under any interpretation of 31 U.S.C.
§ 3730, to a share of the settlement’s proceeds, it did not
reach this issue and therefore made no findings of fact as to
whether there exists any overlap between the conduct in the
settlement agreement and the conduct in Relator’s qui tam
action.
Although the government may be correct that the conduct
contemplated in the settlement agreement does not overlap
with the conduct alleged in Relator’s complaint, we decline
to decide this factual issue on appellate review. We are aware
that we may affirm the district court on any grounds
supported by the record. Hayes v. Equitable Energy Res. Co.,
266 F.3d 560, 569 (6th Cir. 2001) (citing United States v.
Allen, 106 F.3d 695, 700 n.4 (6th Cir. 1997)). However, we
generally do not consider on appeal an issue not discussed by
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No. 01-6375
the district court, unless “the issue is presented with sufficient
clarity and completeness and its resolution will materially
advance the progress of . . . litigation.” Pinney Dock &
Transp. Co. v. Penn Cent. Corp., 838 F.2d 1445, 1461 (6th
Cir. 1988) (citations omitted). In the present case, the
original complaint’s allegation that Defendants engaged in
“miscoding and upcoding items billed to Medicare and
Medicaid” indicates that there may exist overlap between the
settlement agreement’s contemplated FCA violations and
Relator’s allegations. However, this statement in itself is too
broad to support a factual finding of overlap. In other words,
Relator must provide more concrete evidence that he apprised
the government of Defendants’ DRG coding violations. We
hold that Relator is entitled to an evidentiary hearing at which
he may present evidence supporting his assertion that there
exists overlap between the information he provided to the
government and the FCA violations contemplated by the
settlement agreement. The district court will then be able to
make findings of fact as to whether there exists any overlap
between Relator’s allegations and the conduct discussed in
the settlement agreement.
Because we hold that Relator might be entitled to a share of
the settlement agreement’s proceeds, we remand this issue to
the district court for further proceedings. Specifically,
Relator is entitled to an opportunity to amend his amended
complaint in order to state his FCA claims with sufficient
particularity. Fed. R. Civ. P. 9(b). If the Relator
satisfactorily complies with Rule 9(b)’s particularity
requirement, and the district court is satisfied that it has
subject matter jurisdiction over the FCA claims, see, e.g., 31
U.S.C. § 3730(e), the district court will then determine
whether the conduct contemplated in the May 8, 2000
settlement agreement overlaps with the conduct alleged by
Relator in bringing his qui tam action. For purposes of
making this determination, the district court will hold an
evidentiary hearing at which Relator and the government may
present evidence in support of their positions.

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CONCLUSION
For the foregoing reasons, we REVERSE the judgment of
the district court, and remand the case to the district court for
further proceedings consistent with this opinion.

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