good afternoon made please the court my name is bruce howard i represent the appellant in this matter was the relator in the underlying quiett am action paul solomon there are two key issues upon which this case turns issue number one the district court improperly drew inferences in favor of defendants in finding that relate or is allegations of fraud were based upon publicly disclosed information and the district court failed to view of events in the light most favorable to mr solomon opposing summary judgment in connection with information contained in a document unique to mr solomon called a memorandum of agreement abbreviated m l a in the briefs sometimes referred to as the mo of this the this or court failed to draw favorable inferences from this document regarding the scope of defendant scheme in the public disclosures the second issue is the district court erred and inferring that as part of his job responsibilities the relator had a duty to disclose fraud and therefore his disclosures were not b en terry and so finding the district court adopted an interpretation that leads to an unwarranted expand and unprecedented expansion of the voluntary disclosure doctrine the first issue the district court drew improperly drew inferences in favor of the defendants in finding that there's been public disclosure of the allegations in mr solomon's complaint the district court based this finding on two public disclosures one was a report by the defense contract management agency the d c i may that did an audit of locke eat and the second was ok with court by the government accounting office approximately six months later the district court found that the defense contract management agency report the d c m a report evidence to the fraud at issue in this case that's based upon nothing more than an inference and i'll argue it was a huge inference at that and one that was not reasonable the d c m a conducted a mall pi agency compliance audit of lock earned value management system e b m mass again it is a compliance review to see if they're complying with an arcane set of standards regarding how to manage a project or not accounting standards project management standards the d c m may audit consisted of six different agencies who participated in the audit there was participating by the defense contract management agency earned value center the headquarters out of d c there was the local d c mayotte office contract management office out of four or there was the defense contract audit agency the d c a which has powers of expect extend beyond just the v m s compliance but also billings and the like it's broader than just even a mouse compliance the naval air systems command participated in the audit the joint strike fighter system program office out of wright patterson participated as did the drone strike fighter program out of washington d c six different federal agencies participated in this audit the audit report the audit found lockheed was noncompliant with nineteen of thirty two industry guidelines contained in the earned value management standards it did not find fraud it found noncompliance  report relied upon the d c m a report regarding earned value management system compliance they did not do their own audit but expressly refer to the d c amaze findings  while the g a o was critical of lack of use of management reserve they did not find fraud in fact while they were alarmed by the depletion of management reserve which is a fund that i supposed to be used for content unexpected contingencies that arise during a contract but the rules expressly say it's not to cover cost overruns lockheed had massively depleted management reserve the o was concerned about that but they did not find fraud in fact the most they found was that a root cause analysis was necessary in order to find out why there was this massive depletion fraud there should be no inference of fraud from the  report the district court however found that the d c m air report disclosed that lockheed had been misusing management reserve to conceal cost overruns that that and nothing more than that makes it virtually identical to the related complaint that finding says nothing about this mission of the of false award for the claims of the government there's no connection between the misuse of management reserves and the of the false claims in this case the district court inferred that the misuse of management reserve impacted lacky lack it's mission in so doing it's drawing an inference comes from a separate piece of information that was publicly disclosed that's not something the district court relied upon but they're saying regardless of the district court's inference there is a piece of data out there it is a model contract it are i'm sorry northrop argues that you can infer from these two data points the fraud and in so doing that they claim that anyone with passing knowledge of government contracts could speculate that the possible motive for improving these metrics could be to enhance award fees that's the basis that northrop argues the inference is there i would argue that that is not a reasonable inference and that the object of evidence says so you have mr solomon who's and e d m s auditor in house employee of northrop who never found fraud while he was an auditor never suspected that the noncompliance he saw was fraudulent there was his d c m a resident counterpart in the house at at northrop that never found fraud there should consists of six different federal agencies or departments that participated in that audit at best they found noncompliance with the eevee on the standards there is no finding of fraud and simple  noncompliance should not be a basis for inferring fraud now mr solomon was removed from the f thirty five program in august of two thousand and seven he was removed from the project by northrup his employer he was still employed he was frustrated at northrop's failure to address the noncompliance issues he highlighted a contractor is supposed to come up with corrective actions when noncompliance is found and mr solomon did not believe that noncompliance findings were being adequately addressed and he sought to institute an ethics investigation internal to northrop in the process of gathering evidence for his ethics investigation he came across the memorandum of agreement it is a document from two thousand and five that memorializes a an agreement between northrop and maki the agreement was reached on january nineteenth two thousand and five we have the date of the actual agreement the greenman indicates that an accurate estimate at completion had been developed and the last minute completion this is  the realistic estimate of what the entire how untracked is going to cost at the end of the day the system design and development contract the memorandum of agreement demonstrates they knew what the realistic expectation was at that time but out of quote affordability considerations they were going to intentionally submit a false statement to the government understated northrop share of the estimated costs at completion by two hundred thirty three million dollars that has nowhere been publicly disclosed by anyone other than mr solomon that sets up the scheme to intentionally falsified the estimated cost of the program having done so that they recognize explicitly in the agreement that's going to cause cost overruns and that makes us look bad so that's a critical element of the fraudulent and then and there not because people don't know that that's disclosed until he discovers that correct that's correct so and that's a critical element it's whether whether the critical elements were already out there right or whether  they concluded was you guys are not properly calculating your estimate completion and there's no link to the sub to subsequent cost overruns or to the subsequent misuse of management reserves it's just right now you're about how to calculate in the ac they did it intentionally that sets up a scheme once they understood the cost of the program in order to keep the funding flowing they recognize it's going to lead to cost overruns and those o simply recognize that there was a massive depletion of research and they called for a root cause analysis saying this is alarming but we don't know why it's happening report where lockheed had misused ninety seven million dollars worth of management reserve and the e c m a has discrepancy with the call discrepancy reports and there's two levels one level says this is very serious stuff you need to fix it before we can close out the audit the second level a discrepancy report level two means it's not serious enough to keep this audit open but please fix  and that was the level that the d c m they assigned to that ninety seven million dollars misuse of management reserve they clearly didn't make the link to the submission of claims to the government they didn't even think it was an issue worth keeping the one of the phrases is public disclosure must provide specific details about the fraudulent scheme that could put govern vesta gaiters on the trail of what was really going on what you're focusing on in this two thousand and five memo is whatever it means that at best it means that there's some confession of a scheme but but you have the evidence already of these accounts being not mismanaged but poorly managed and so does seem to me that the real question here is not whether the governor was going to pursue it that's not the issue in one of these cases is whether there was a nuffin the public disclosure that could have led investigators on  that it is not reasonable to believe that a fraud investigator based upon simple noncompliance would jump to conclusion this is due to fraud and one you have the same a report with six different entities including the defense contractor audit agency not making any connection not suggesting any of the noncompliance is fraud i would suggest that the objective evidence would say that that inference is not reasonable or  issue as well as the direct and independent requirement for original source and your honor so district court was right that mr solomon the relator here did not qualify as an original source followed the existing case law you and mr solomon under those standards simply did not cannot qualify as having done voluntary disclosure this court's decision in little is particularly instruct that regard the relator is in little we're auditor's from the mineral management service of the department of the interior and the court that the government specifically argued that all government employees were  prevented from being related and the court rejected that it noted that the language of the statute permitted qui tam actions by any person and there was no exception recovery regarding government employees in other words there was no textual basis to distinguish government employees rather than a critical section of the decision what it found was that the auditor's could not be voluntary sources by looking simply at what their job duties was there was no mention of their being government employees and if found if a related or is employed in order to discover fraud and report it to the government then he cannot be meet the voluntary   it seems to me that there's a difference between northrop or lockheed hiring somebody to provide reports to do investigations by before it's in the government itself employed by the into t v being directly employed by the unity being investigated in there or a least a conceptual difference between the kind of orators we're dealing with and little in most cases in this one your honor i'd agree with that if we were talking about it a government contractor employee in the normal course but here mr solomon was in a very specific situation he was the e v f mass monitor who was designated under the joint surveillance plan that the government and northrop grumman had entered into and under that plan he had a very unusual duty and that was a duty to report fraud directly to the government whether the unison usually is because it does end up working against your employer and that's the kind of dynamic that worries me in extending this i'm not saying you're wrong there's a lot on your side of this point but there is that barrier not a barrier hurdle  it seems to me it is a very unusual situation because it's a it's fraught with conflict your honor the cases have have specifically indicated that it is not the fact that there may be some difficulty in reporting distinguishes the situation both the bill case from the ninth circuit and the present their case from the ninth circuit more recently both noted that the relator there a government employee was arguing that there were some restrictions put on them the the a c e o in bittle argued specifically that he was instructed not to act as an auditor not to find fraud and the court said that's not what's important what's important is what the job duties are and mr and mr solomon present exactly the the point that underlies the policy against allowing people who are responsible for reporting fraud to the government to act as relator and that is that you create the situation discussed extensively in the fine case in the on bank opinion from the ninth circuit of a divided loyalty you have an individual who has this drama obligation to report to the government fraud that's occurring and at the same time not be the case and should be precluded from being allowed to have for so so we have a situation where mr solomon was acting under a specific responsibility to report problems and discrepancies that occur in the evie amassed system the e b m s system which is not some highly arcane thing it is the princip cost performance measurement for the department of defense and he understood he was directed he actually wrote the plan that set sixteen eleven in the our way and that required that he work with the d reserve that pages sixteen twelve and sixteen thirteen in the record of the peel and he made findings from that your honor which were specific findings that indicated and i'm rick quoting from seven hundred fifteen in the record of appeal this is a report of mr solomons in august of two thousand and seven management reserve was improperly used to offset the cumulated cost over runs for the mere purpose of improving performance metrics instead of being you held for current and future needs that's he understood what his obligations were which were to report problems problems which amount to fraud and he did do that he said in a report in august of two thousand and seven seven hundred thirty six in the r o way management reserve was used to offset cost overruns that again is something in one of his surveillance reports part of his management duties your honor if you look to mr solomon's declaration that was filed in opposition to northrop grumman motion for summary judgment here is a very telling paragraph in which he says and this is a paragraph fifty four in the course of my surveillance duties on the j f program i uncover numerous instances in which lockheed and northrop misused management reserve budget to falsely improve northrop's cost performance numbers and in turn lockheed's program y cost performance he's going to the specific allegations which are the allegations which ended up in his complaint and he is by his own words indicating that he provided those as part of his obligation in carrying out his for his responsibilities could you please remind us of what would extend to the private private employer when who is ever done that let we don't want to be pioneers you're not a pioneer your honor the the the district court in district in were two auditors who worked first for the office of personnel management then they left the office of personnel management went to work for a private firm which had a contract with the office of personnel management then they went back again later the office of personnel management and the court faced specifically the question of whether there was a difference from the period when they were acting as private contractors from the time that they were acting as a government employee and citing fine the court said no there wasn't because in both instances if you look to the employment obligation it was to report fraud to the government and that is what's what is the critical thing let me address just briefly the memorandum of understanding but it seems to me that this court's decision in free tells us the answer of the standard to apply and that is whether there is anything that is qualitatively different and solomon's own words show that there is not anything that is qualitatively different about the memorandum of agreement it alleges the centrally that lockheed martin northrop grumman had a possible agreement to use program reserve to cover northrop grumman cost overruns in circumstances that mr solomon believed were an improper that is precisely what he said in his reports in his management reports was being done it is precisely that he includes in his in his at is declaration was being done that northrop and and lockheed together were misusing management reserve in order to cover cost overruns and it is also as mr bronson will address what he alleges was included in the complaint of sorry in the the c m a report thank you your may please the court michael bronson for lockheed martin your honour's the test for whether mr solomon's allegations were publicly disclosed which mr solomon did not address is the standard laid out in the reagan and little and colquitt cases which the court and colquitt analyzed as an x plus y equals the formula where x represents the allegedly false facts why is the truth set of facts and is the resulting inference of fraud mr solomon's argument focuses squarely on the element he suggests that there is no claim of fraud of outright fraud in the public disclosures there are no explicit references to knowing or intentional conduct in the public disclosure so therefore the public disclosure bar is not triggered the first reason that argument is without merit is the law is clear that the word fraud or allegations of outright fraud don't have to be disclosed there was no prior disclosure like that and report by abbott labs indicating that certain stents were appropriate for biliary use there was nothing on the face of the submission that suggested that that was a problem much less that it was it was fraud or other knowing misconduct the court there found there was a public disclosure because elsewhere in the public domain documents could be found in synthesised which is all that the standard requires that disclosure publicly disclos resolution of why this particular effect on the account occurred and it was not a fraudulent expert an explanation of fraud which is not quite i think what you just it may be actually what you dress may be a harder case i don't know but it's not the same as what we have here when we do think these facts presented much clearer public disclosure than in colquitt or frankly any of the cases the parties have cited to the court the reason the reason this matter was not addressed as a fraud case is because there was no actual fraud here there was a there were administrative findings that gave rise to an inference of fraud but there's no and that's why we think there's no merit to the case because the government the d c i'm a certainly has access to a lot more of the underlying information than mr solomon does that's one of the several reasons mr solomon has no direct or independent knowledge of his allegations against lockheed martin he's guessing at what happened between lockheed martin and its government customer d c m a came in and they determined it's all in the face of the audit report they determined and alleged false set of facts which was that lockheed martin was misusing management reserves to understate cost overruns and improve its cost performance and it disclosed that in fact the cost overruns were much higher in one case to the tune of  hundred about one hundred twenty four million dollars in the d c and they actually went beyond that the d c and they actually also noted that lockheed martin gave a quote justification of purposeful and intentional conduct and that the d c m a did not accept that approach and determined that lockheed martin's actual actual purpose was to improve its cost performance metrics that is actually we believe the disclosure of the c so the x in the y are that lockheed martin on the one hand was understating cost overruns on the other on the other hand the true set of facts the cost overruns were much higher the z is that they were misstating the purpose for what they were doing that is all disclosed in the d c m a report and other documents as to the level one argument that mr solomon's counsel made very similar point your honor we believe the fact that this was an elevated is it's a relevant the question is only whether this is public and satisfies the test d c m a good and clearly understood understood the facts much better than mr solomon does i'd like to address the him away as well your honor the district court here correctly held in our view that the in the way is evidence at most of an alleged conspiracy that can't exist independent of the underlying f c a claims which were publicly disclosed mr solomon did not appeal the dismissal of the conspiracy count so that's one reason to set that argument aside there are other reasons based on the record in the law as mr o'donnell said d c m a report another disclosure the nature of the core allegations and so it really depends on whether we believe this is like when colquitt says demonstrates a new and disclose relationship between disclosed fact that's really what that's his argument that it's a new an undisclosed relationship between the facts and so we have to decide whether or not there is an attack to new and disclose relationship between the fat and your honor we would certainly submit that there clearly is not and that again what mr solomon asking you to do is look at that document and infer directly and for fraud you don't have to do that you go back to the x plus y equals the test and your honor we would submit you don't also don't have to do that because mr solomon before he started briefing these issues in the case alleged in his in his own complaint in his amended  ninety one r o a one fifty that lockheed martin's publicly disclosed practice was quote very unusual and strongly indicative of the fraudulent scheme so we would argue that is an acknowledgment by mr solomon that there was an inference of fraud here we would submit that is actually conclusive on the public disclosure issue how would you articulate the standard x y and z not that how would you articulate the standard of what has to be available in the public disclosed information and i talked earlier from one of our cases about it it's enough there just to allow investigators to go down the path to find whatever it is to be found how would you put it what should we be thinking oh well that the disclosures have to be enough to put the government on the trail of fraud that's one thing this court has said so they're going to and have said here the government does didn't need that because the government was the entity that publicly disclosed these allegations in the first place does it matter that the government did not seem interested in going down that path your honor it does not because you go back to the standard all the government has to do is have be put on the trail of knowledge to articulate it in the way that you asked and to have the well you have to have a genuine issue of material fact and we would submit that the public disclosures here are clear they are conclusive mr solomon has not created a genuine issue of material fact there is no question of fact at all  and that especially goes for the based upon inquiry and the last issue i'd like to touch on which is the direct and independent knowledge issue again in mr solomon's own complaint in this case he cites the d c m a report and the g a o report and comments on the senate floor so these are the same disclosures we're talking about triggering the jurisdictional bar he cites those or relies on those nine times in his original complaint more than twenty five times in his two complaints in this case to say because there is no fraud but why weren't the auditors if they didn't have any suspicion that there was fraud during the relevant time period that it was good that the noncompliance was due to fraud and that would tend to make you think that it wasn't so readily apparent well your honor i can't speak to and i don't think the record speaks to what the auditors were suspicious of what we can say is you you for shattered my answer there was no fraud the auditors would come in and the auditors would ask about this practice the auditors documented a number noncompliance of this and then they would go talk to the government customer which again mr solomon has no firsthand knowledge of any of the communication running between lockheed martin and the government customer those explain why there is no fraud but again that is that that goes to the merits of the case there's no jurisdiction to reach those but those communications running from lockheed martin to the government for prime contractor for lockheed martin and in this case that is the information on which this case has to be based under the original source standard d c m a has access to that mr solomon cannot know and does not know any of that information never worked for lockheed martin never worked at lockheed martin never communicated with lockheed martin and its government customer about any of the issues contract modification estimates of completion lockheed martin's the v m s management reserves those facts are undisputed he had efforts to hand knowledge he had to get this him away to rely on it for purposes of the original source analysis he had to have some participation in developing that or offering that he did not it is undisputed that that document was authored before mr solomon was on the program and he got his hands on that document after are you answering a question i'm sorry you on the issue of voluntary disclosure i think the first error by the district court was that it inferred mr solomon had a job responsibility to disclose fraud his job responsibility description was to be a compliance auditor were they properly calculating any ac therefore it is normal northrop that had the obligation as the contractor if it detected fraud to report fraud to the government there's a question of whether mr solomon's job description said he had to report fraud but on a factual level though i think it's uncontested that while mr solomon had f thirty five responsibilities he did not suspect fraud noncompliance is not fraud he was frustrated that they weren't coming up with corrective actions northrup in their brief sets forth twice what the purpose of e v a s compliance auditing is first it's done to five when problems are developing on a program are costs rising let's identify that because we've got to try and contain costs if there seems to be a problem developing corrective actions are supposed to be instituted trying get it back on course that has nothing to do with the scheme in this case where they knew up front that understated the whole cost of the program and they weren't going to be able to meet those numbers mr solomon was just there to audit whether or not there was compliance with  ying developing problems and instituting corrective actions he did not suspect fraud therefore he could not have reported fraud while he had surveillance responsibilities on the f thirty five are you arguing that he would have been bar some way as outside of his duties if he suspected and found evidence of fraud there was somehow prevented from report on it i don't believe that would be a bar to mr solomon who is not a government employee the purpose of the nine hundred eighty six amendments to the false claims act the overriding purpose was to encourage later is to step forward to help the government recover fraud to recover funds and the way to do that was to provide incentive for them to do so there is a his family's back shelter overs families had they may retaliate against them and the fact that there's anti retaliatory measures in the false claims act as express recognition that a relator who is an employee of a corporation puts his job at risk therefore he deserves a reward mr solomon isn't in that situation where he would put a job at risk by reporting fraught this is unlike the government fraud investigator who does not report fraud that he sees and tries to take advantage of the fraud the government fraud investigator bears no risk when he is investigating fraud and should he report that properly there's no chance of retaliation there's zero risk therefore there's no reason to reward the government fraud investigator as they do a corporate employee who discloses fraught i guess i'm not following completely seems to me a compliance officer if fraud is discovered that is noncompliance and he would be obligated to report it the issue here is voluntary necessity seems to me if his duties who qualified that he really do have to get over the hurdle and understand that we're not pioneers i believe is the word of whether this particular employee could be subject to these rules but nonetheless if ontarian this applies to what he has to report through his job description it seems to me he's reporting the evidence that that that supports reported all the noncompliance he saw didn't suspect fraud therefore there was no fraud report or referral he reported what he saw it wasn't until they removed him from the program the form of possible retaliation for aggressive not science findings the prototypical relator who's blowing the whistle at least in terms of noncompliance to remove him from the program and that's when he discovers the moa in the course of preparing his ethics complaint from internal investigation at northrop and in the course of finding the moa that defines a scheme of fraud that is much  pos can possibly be inferred from the d c m a in the course of preparing his report he then realized the link between the noncompliance and it resulting in the submission of false claims and not until that point he was no longer