ready and then we'll thank you good afternoon it may please the court my name is paul burke's i represent richard and ralph lynn bloom where the plaintiffs relator is in this illinois false claims act case this is an appeal of an order granting home depot's motion to dismiss and deny plaintiff's motion amended plain the complaint alleges single claim for relief under section three of the on my thoughts claims act for knowingly avoiding an obligation to the state specifically to korea location is that home depot is a retailer that it sells tangible personal property that among the tangible personal property it sells are dishwashers and microwave ovens that it also offers installation services that the offering of installation services does not alter its obligations as a discovered this they brought their information to the illinois department of revenue and in february of two thousand and fifteen the department then did its own investigation of that information and issued a compliance alert in the end they brought them earlier they did they did they also detention the apartment did something something in two thousand and four i don't i believe that the department issued what they call a general information let rajel which was sort of generally spoke about what the requirements are changed that home depot and other retailers discovered they had not and then brought this claim under seal my foster name zakk so the complaint a search the by carrying out the scheme home depot is knowingly avoiding its obligation of the state namely its avoiding its r o t and thereof as an incident to a construction contract so what we what we pointed out in our briefs is materials those those have actual real meanings materials of fixtures or something that the wall recognizes materials or like lumber or cooperated into the building bricks they become materials and fixtures when construction contractors sell them as part of the contract is part of think about you know the construction of a home where you would build build a home or are remodel the room and you would include with the materials and section b two of their regulations specifically says that our t is still do is do on the sale of refrigerators washers dryers stoves and other quote portable equipment of this kind which may be connected to an operated from a building's electrical or plumbing system but is not but which is not actually a part of such a system so they've given you examples bridges stoves these are not fixtures these are appliances appliances tend to be personal  dishwasher and a microwave oven they fit right in to be to with these other plans is section b two which says r o t's do and they don't fit into section c which requires that the materials are fixtures incorporated as an integral part of the to to to fail to avoid the payment of r o t what the circuit court held was that it was a very specific holding that the third amended complaint didn't state a claim for a violation because it didn't allege a specific sale and which home depot it failed to collect the  that was due so lowes was also a defendant in this case in the complaint a specific sale was alleged with respect to those those was not dismissed from the case and that that claim is pending on summary judgment of the circuit court so what ha sales person said own people doesn't charge a tax when they when they install the appliance that's just how home depot does it so we've already got it missions from their own agents who engage in the sales that they do not charge tax when they it's when they also provide type of evidence we cited on pages fourteen and fifteen of our brief some federal cases that have adjudicated under the federal false claims act the same provision and identical provision that we're litigating under in the illinois state state act and they have identified the pleading standard for this type of a claim as you have to plead details of the scheme to avoid the obligations along with reliable in dish of that be to a strong inference that standard i mean that standard makes sense for libel and disha that lead to a strong inference that obligations were avoided i don't know that is that different from just the the standard pleading standard of you know can you please facts that have proven a trial would support the judgment but in two thousand and ten actually remove the requirement of a specific misrepresentation with respect to this voiding obligations to the state aspect of the statute so you don't need to plead a specific misrepresentation so it's sort of doesn't make sense to require you to plead a misrepresentation with that kind of particular app particularities saw but weaving that aside i think that even if we were required to plead you know swith specificity i think the pleading of of the of the admissions by the sales agents plead sufficient specificity strong inference that if they please enough facts they could lead to a strong inference that they've actually void their obligations because their employees are saying that that's what we did furthermore we did move to amend the complaint assuming for a moment that the kind of specificity that home depot bonds is required the the motion to amend the complaint the proposed amended complain well the excuse was we didn't think we need it we thought we had pleaded a sufficient complaint without a specific transaction and in fact the judge in the hearing an hour and the motion dismissed or second amended complaint agreed he said i don't think a specific transaction has to be pleaded you've back and say oh i have a transaction yes and these are months it took a couple of months but we did come up with a transaction within the period of the statute of limitations but within the period that we're litigating we have a transaction but we also have the admission so i did think it was kind of belt and suspenders that we could we would come back in and do what the court asked and plead the specific transaction which would satisfy any any specificity of pleading says who it says why it says where the transaction self does reveal all of that and it and it cures whatever their whatever the problem was in the third amended complaint and it does so without any prejudice of the defendants because we're still in the pleading stages and very early  so either grounds either because the third amended complaint did plead a violation or because the fourth amended complaint here that that that problem i think that the circuit court's decision should be reversed here i want to address one other issue that that th about home depot's tax collection practices in wisconsin and the court didn't find the circuit court to find that was a public disclosure we think that that was error because what the malaki journal article says is that home depot is following the law in wisconsin but wisconsin law isn't one of the it's different it's the opposite we would have if we would we would propose that it's the opposite that if the different state each state has its own sales tax law there's no there there is no law that the retailers occupation the illinois structure and the requirements under it are different than wisconsin so the idea that because someone is is not collecting taxes in wisconsin they therefore that somebody in illinois or the department of revenue illinois should know that they're  against young people in the market journal yes rather turning to the original source which is where the circuit court actually did agree with with the wind blows that even if there were a public disclosure that they were the original source there's no there's no question that their information was independent that they did the investigation they found the information without reading the milwaukee journal article that's what independent means within the statute and then the question is really was immaterial and i think the circuit courts answer and that is correct  so you can see that what the lindens did the information they gave to the department of revenue was tiriel because the department acted so even if there were public disclosure we feel like to complain would survive under the original source exception as well  know i didn't use my full seventeen minutes but i think at this point i will i will seek them out to the home depot and then reserve my three minutes for about thank you thank you m thank your honour's i'd like to start with why this is a fraud claim and why the fraud standard for pleading does apply and the two dimensions of the fraud standard that i think the circuit court correctly held it's usually of a related should not satisf so it is true that in two thousand and ten to reverse false claims for version of the statute was amended now there's three ways that you can commit fraud and violate the false claims act and the reverse clause claims context used to be always have a false statement that was the means that you had to use to commit fraud now the fraud can take a variety of forms including but not limited to a false statement or false record but knowing an improper avoidance of an obligation which is the theory here under the false claims act is still fraud it's still the false claims act the other part is equally important if the allegations have to give rise to a necessary or probable inference of fraud so here we have both problems and they're related and this is an important point because your honor asked the question what would adding information about specific transactions add why would that matter and the answer is it would matter because it's impossible to create a necessary or probable inference of fraud here without knowing more facts without knowing more about the know i mean they laid it all out  under the tax law under the administrative code one thirty point one nine hundred forty the provision that my friend cited if there isn't a black letter rule that if you install an over the range microwave or a dishwasher you pay are ot the rate that this person does not mention over the a question of whether paxil and had under the provisions of the of the law because what your own or what determines how it's taxable let me take a step back first there's no dispute here that either sales tax to the to the customer and are o t by the retailer is do or use tax by the retailers it's not whether taxes do it which taxes do and the answer to that question under one one thirty point one nine hundred forty turns on the circumstances again the reg doesn't mention dishwashers or microwaves it doesn't say anything specific about about them what it says is that where the fixtures were sorry let me find the exact provision that i want to refer others to it's  construction contractors be one liable for tax so my friend cited part of b two which refers to where portable equipment is connected to an electrical or or another system of a building but is not well if they didn't collect the taxes so a specific incident isn't going to help one iota i don't see how how can possibly help you answer this one let me try one more time about her because it is an important point when you read one thirty point  forty when you read the private letter rulings and the general information letters all the guidance over the decades that the department of revenue has tried to provide about this you will see if the answer to which taxes do whether the person is acting as a construction contractor is acting as a retailer opposite of this case the taxpayer sold racking systems for a warehouse the taxpayer explained that there but the racking system for bolted to the floor they're not free standing or bolted to the floor but the taxpayer said they're typically intended for only a few years  reconfigured because of the work of the warehouse after a few years and you can detach them from the floor of the taxpayer said with no or minimal damage to the floor so the taxpayer said these are just portable this is just portable equipment this isn't a fixture of this isn't something that becomes integrated with real estate the department of revenue disagreed and said no because of the circumstances here it appears that the parties intend this to be part of the real estate of the departed rebbie said two things that are important in that private letter ruling one is it's an intention test it matters what the part degree to which the extent to which property is connected to is integrated into is built into the real effects taken over the range micro way there's a there's a hit the microwave sli realistic because it isn't always that simple your honor and the facts of how any particular over the range microwave is installed and how what degree again it's the extent to which under this very literal wing that matters the extent to which it's connected to real estate if you simply plug it in like you would with a freestanding appliance but i don't think there is a dispute but that's not the way over the range of market rates or does funky bolt on in each transaction do they instructed sales people t customer how they intend to install this and apply it to the child and whether they should charge sales tax so if your honor were here on a motion to dismiss and the allegations of the complaint or the allegations of the complaint so i don't know all of the fire that's i agree with it in and that's why i question what you're saying because you seem to be arguing on the merits of the question for the court to decide once the once he has the complaint it seems to me that the plane itself definitely makes the statements of what's necessary under the false claims and you're saying well this doesn't apply but that's your defense but as far as the allegations concerned a specific sale isn't going to make a difference one way or the other we're talking about thousands and thousands of sales where home depot did have paid the so if it were true your honor that it's not for the reasons that i've tried to explain if it were true that the tax laws specifically called out for example dishwashers and said sales even with installation of dishwashers never trigger the construction contractor provision always trigger our o t then perhaps all you would need to know is sales of dishwashers with insulation not payment of our o t that's not the way the tax laws work and again the standard for fraud pleading is necessary or probable inference of fraud i think it's also important to take another step back here and think about the fraud scheme it's alleged here so again this isn't about paying the loons came on the scene but the department of revenue audits home depot department of revenue was auditing home depot on the precise transactions at issue in this case and as of the time that an affidavit to this effect was submitted below the department of revenue had not found exactly said what why that was false and what the specifics of the fraud were and where the court reemphasized that a fraud claim has to be has to be not just plausible this isn't just fact pleading it isn't notice pleading it isn't the the  standard for plausibility that applies in federal court this is a standard of requiring a necessary or probable inference of fraud where the department of revenue knows exactly what we're doing because they audit us and we pay tax it's just says well i think under the necessary and probable inference of fraud standard you can't disconnect the facts that are pleaded from the reality of the situation you have to analyze whether but they did actually does give rise to a necessary or probably of fraud if writers don't agree with me about that i want to make sure at least briefly address the public disclosure issue here so that the point of the public disclosure bar is now we think we understand the point that but the point is there was a disclosure talking so little ninety three by me let me try to explain what i what i'm why i don't think it's meaningless the public disclosure part asks whether there's been a public disclosure of the allegations or transactions in this case so here  point of a public disclosure bar is if the government is already on the trail of the alleged fraud if it already knows what it needs to in order to go after the alleged fraud it doesn't need to relate or to help it shouldn't have to pay over later share at the point of the public disclosure bar here of the department of revenue if intervene but there's evidence in the record if the department of revenue was auditing and found nothing late nobody took in this in the past by case we've talked about right on that arguing that the government action two thousand and ten general information letter that's it see eighty where again the the way these work is the identity of the taxpayer requesting the guidances is redacted so you know with the facts very wise when you read that letter the description of what the taxpayer is doing and brief on this to say that the public disclosure by requires one hundred percent identity and specificity between the news media article or the other disclosure and the allegations that it would be impossible to ever have the public disclosure bar applied just a relator would always leave something a little bit different from to home depot does describe well and we think that the allegations that are made against him people here describe compliance with illinois tax law but that's a different is again the cause of my understand but the point is when you combine the walkie newspaper article which does mention home depot with all of the department of revenue illinois department of revenue public disclosures about about these issues that was more than enough for the state to be on the trail of this alleged fraud i can't understand how an article is in the new york between a construction contract and a retail sales so yeah illinois law is a little bit different from wisconsin law that regard and the article was about wisconsin but it's the same basic issue of how you decide how you decide how much integration into the structure is enough to transform a retail sale with insulation or plugging something into the kind of installation that makes something part of the realty that's the same issue it's the issue that oracle was all about so i do think that that as the trial court clue to that that was a judge say you don't have to plead a specific transaction and then flip his position and and that's the are that's the argument that the other side makes that it was unfair to dismiss the complaint because of the failure to play that kind of specifics when the court said that that wasn't require that's not really what the court said if if you're ours look at this is the april for two thousand and seventeen hearing on the motion to dismiss second amended complaint page see nine hundred eighty if you read that page in the whole context with the court is talking about there is the original source issue the court is not talking about whether it's six fifty whether the pleading standard requires the kind of specifically you're talking about or not so the full quote is this is the court saying i think the failure to collect intent or the tax or later telling the state we have evidence that this particular taxpayer in this particular transaction failed to collect and tender wire tax would perhaps be very good independent evidence which materially advance the matter but isn't the sole type of evidence or information which they could provide to the state that's clearly talking about original source because the original source issue turns into if the information the relator is provided to the state materially add to what the state already knew because if not again there's no point in letting the relator take a share of what the state might recover so that's what the evidence but you have to plead something this is a fraud claim that you need more specifics on and and over again they come back and maybe they rearrange the paragraphs but they came in and said number one my father worked for home depot for several years and he was personally familiar with the fact they didn't charge sales tax on these types of clients is that they spoke to a salesperson about a particular appliance what would what just to get back to your question about what the but the judge said at the hearing because i want your understand the context at the hearing on the motion to dismiss the second of a complaint even though the discussion about particularity and specificity was in the context of the original source issue and not the six fifteen issue what mr burke said repeatedly is we completely elevate this is what i'm quoting now is ninety four we can plead the allegations with more specificity and plea will be disclosed to the state with more specificity as well and then he didn't you don't have to  question now is does he have to and the judge said he did this and that's what you're finding in the question before us is does he or doesn't i understand it all the only point i'm trying to make is if your honour's agree with us that that kind of pleading specificity is required because this is a fraud claim then you honour's might consider the appeal of the denial of reconsideration my only point about that would be there's no basis to say the trial court abused its discretion in denying reconsideration reconsideration is inherently a very discretionary thing truck or doesn't have to endlessly entertain new  i'm going to dismiss this because of lack of specificity he asks let me make sure do you have specific transactions and you just neglected to put them in your complaint or would you have to go find specific transactions and the answer was from their leaders that they would have to go find them they could find them it wouldn't take to it wouldn't take too long or confident they could find them but the answer was clearly we don't have them it's not that we have them and we just didn't think we needed to but when our complaint we don't have be can go get them would you agree  transaction and all that's alleged there but there's a receipt receipt doesn't there's no information in the complaint or in the receipt if it's actually to it about what degree of integration with the structure was required to install that particular  all you have is the bare allegation that the bare example of a sale with installation and no sales tax showing on the receipt you have no other information to put that into context so you have no ability to judge whether that is probably a violation not saying that but in lots of federal cases where this issue comes up under rule nine b in the regular adverse false claims contacts the rule is generally that you do have to plead example representative examples of the false claims know one is usually not enough is five enough is ten enough it depends so i don't know what the number is from that perspective but more importantly the number is information about the circumstances relating to the transaction that would enable the court to decide whether practice i think if the common factor in a lot of the federal cases is as mr burks described it there's allegations with some degree of specificity about the alleged scheme and then you don't have allegations with any specificity about the claims about the actual violation because the act requires the avoidance of a of an obligation or requires the submission of a claim so you have an underlying course of conduct that might be alleged you know by a former employee who would actually have a basis to allege that unlike here buyers go in and sneak in buy a dishwasher and and get the receipt and carry it back to the lindblom so they could attach that to their complaint and they would have and you and you're not telling us where they'd be one of those we're our bosses are cheating this state this is a whole different thing these are outsiders that don't have access to that information until the gates case gets to a different stage for a can do and there's some discovery so you're complaining about the pleading but you're not defining how they're going to they could never please what you point if if certain if a certain person wants to be or later but doesn't have the information necessary to satisfy the standard for it's the information is more important than the number and again it but i'm the most important point that i'm going to try to make here today is can't make any judgment about whether there's been a violation of the tax law without knowing more information about don't know what they disclosed in those audits to say that the state maybe could have uncovered it had they done the right kind of odd it will need to talk to the auditor and find out what they knew and what they discovered and what was hidden from them i can say from the from the  litigation that we've been going through that they also raised the question of audits an ace and they've and they brought in sixty five thousand transactions and they said it was in here the fact that we weren't paying the taxes in these sixty five thousand transactions the auditor seen it but they never sprout in the auditors say so so it goes to what the court was saying earlier this is a factual question whether they void it or conceal from the auditor and from the department of revenue their practice is a question that we're going to have to u honestly would just be to refer to i think just to reaffirm what justice mason just said which is to say that home depot argues that each individual transaction may or may not have been properly taxed based on the individual intent of each of the consumers but well we've alleges that they never charge the tax when they sell a dishwasher or a microwave oven and the customer says i'd like an installed they do not charge tax as a matter of practice that's what their employee said that's what we know or what my clients know from their thirty years of experience in the business and having customers come into their shop that's what they know from their father they never charge the tax so even if home depot was correct that there was this individual intent and i think if you look at the regulation that they're citing you will see it is not an individual i standard subsection b two that we that i quoted earlier which talks about refrigerators stoves and washers and driers other portable equipment attached in the same way says those items are always taxable even if you're a construction contractor even if you install that those items are taxable it doesn't say dishwashers true but it says that those appliances in appliances they're