Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-98-07180/USCOURTS-caDC-98-07180-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 8, 1999 Decided December 21, 1999

No. 98-7180

United States of America ex rel. Earl S. Settlemire,

Appellant

v.

The District of Columbia,

Appellee

Appeal from the United States District Court

for the District of Columbia

(No. 96cv00568)

Joyce E. Mayers argued the cause and was on the briefs

for appellant. Pamela J. Bethel entered an appearance.

Donna M. Murasky, Assistant Corporation Counsel, argued the cause for appellee. With her on the briefs were John

M. Ferren, Corporation Counsel at the time the main brief

was filed, Jo Anne Robinson and Robert R. Rigsby, Interim

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Corporation Counsel at the time supplemental briefs were

filed, and Charles L. Reischel, Deputy Corporation Counsel.

Douglas N. Letter, Attorney, U.S. Department of Justice,

argued the cause for the United States as amicus curiae.

With him on the brief were David W. Ogden, Acting Assistant

Attorney General, Michael F. Hertz and David M. Gossett,

Attorneys, and Wilma A. Lewis, U.S. Attorney.

Before: Edwards, Chief Judge, Sentelle and Randolph,

Circuit Judges.

Opinion for the Court filed by Circuit Judge Sentelle.

Sentelle, Circuit Judge: Appellant-relator Earl S. Settlemire brought this qui tam action against the District of

Columbia, alleging that the District spent funds appropriated

by the United States for purposes other than those intended

by Congress, thereby violating the False Claims Act ("FCA"

or "Act"), 31 U.S.C. ss 3729-3733 (1994). The district court

dismissed the action for lack of subject matter jurisdiction.

We agree with the district court that Settlemire's allegations

fall within the Act's jurisdictional bar against actions based on

publicly disclosed information. See 31 U.S.C. s 3730(e)(4)(A).

Because we further hold that Settlemire has not satisfied the

original source exception to the jurisdictional bar, we affirm

the district court's dismissal of this action.

I. Background

Under the FCA, a private party may bring suit for fraud

committed against the United States. The ability to bring

such actions is limited by the "public disclosure" provision of

the Act, which divests courts of jurisdiction over claims

"based upon the public disclosure of allegations or transactions" in specified types of public proceedings, "unless ... the

person bringing the action is an original source of the information." 31 U.S.C. s 3730(e)(4)(A). An original source is a

plaintiff with "direct and independent knowledge" of the

relevant facts who has revealed his knowledge to the Government before public disclosure and before filing suit. 31

U.S.C. s 3730(e)(4)(B); see United States ex rel. Findley v.

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FPC-Boron Employees' Club, 105 F.3d 675, 690 (D.C. Cir.),

cert. denied, 118 S. Ct. 172 (1997). This creates a two-step

process in which a court decides whether the action is based

on publicly disclosed information, and if so, whether the

plaintiff may still proceed because he is an original source of

that information.

Settlemire brought suit under the FCA alleging the following facts. In 1989, the government of the District of Columbia requested federal financial assistance in order to increase

the officer strength of the Metropolitan Police Department

("MPD"). Congress subsequently enacted the District of

Columbia Police Authorization and Expansion Act of 1989,

Pub. L. No. 101-223, s 2, 103 Stat. 1901, 1901-02 ("Expansion

Act") (codified at D.C. Code Ann. s 47-3406(c) (1997 repl.)),

which authorized the appropriation of funds for fiscal years

1990 through 1994 for "salaries and expenses (including benefits) of 700 additional officers and members of the Metropolitan Police Department of the District of Columbia." Id.

s 2(c)(1). Under the statute, these funds were to be available

only to pay for "officers and members of the [MPD] in excess

of 4,355 officers and members (and supplies, equipment, and

protective vests for reserve officers of the [MPD])." Id.

s 2(c)(2).

Congress first appropriated funds under the Expansion Act

for fiscal year 1990, in the amount of $17,630,000. See

District of Columbia Appropriations Act, 1990, Pub. L. No.

101-168, 103 Stat. 1267, 1267-71 (1989). The Conference

Report accompanying this act recognized that it would be

impossible for the District to hire and train enough new police

officers above the 4,355 threshold to use all of the appropriated funds. See H.R. Conf. Rep. No. 101-270, at 5-6 (1989).

Thus the report stated that the "first priority" of Expansion

Act funds was for the hiring of additional officers, but provided that if the funds were not so expended, they "may be used

to purchase goods and services in the non-personal object

classes including support and other materials as well as

capital items." Id.

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A similar sequence of events occurred for fiscal year 1991.

Congress again appropriated funds, and the Conference Report contained the same language. See District of Columbia

Appropriations Act of 1991, Pub. L. No. 101-518, 104 Stat.

2224, 2224-29 (1990); H.R. Conf. Rep. No. 101-958, at 10-11

(1990).1

On May 7, 1990, the District claimed that the police department had reached a staffing level of 4,355 and began to access

the Expansion Act funds. A number of Congressional hearings occurred in 1990 and 1991 which included discussions

about the use of Expansion Act funds.

First, a subcommittee of the Senate Committee on Appropriations held hearings on May 24, 1990. See Hearings

Before the Senate Subcomm. of the Comm. on Appropriations, District of Columbia Appropriations for Fiscal Year

1991, 101st Cong. (1990). Mayor Marion S. Barry, Jr. testified as to what was happening to the Expansion Act monies.

In his submitted statement he declared: "Now that we are

able to access the $17 million we will be using some of those

funds for overtime as well as to continue the hiring of the 700

police officers." Id. at 50. During his oral testimony, he

explained why the MPD's overtime spending was over budget:

Why did we spend it? Because we wanted to demonstrate our commitment. We knew we were going to

access the $17 million. We knew it did not require a

reprogramming. Only that, as I understand it, we had to

reach a police officer level of 4,355 before we could access

the $17 million for the police department.

....

Congress gave us $17.6 million. When you take [the

District's other funds] and add it to the $17.6 million that

__________

1 The parties dispute whether funds were actually appropriated

under the Expansion Act for fiscal years 1992 and 1993, but we

need not resolve that issue. See infra n.2.

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would give us enough overtime money to finish the rest

of this year.

Id. at 68-69.

Isaac Fullwood, Jr., Chief of Police, testified to similar

effect:

We were spending that money as if we already had

access to it.

We knew that once we reached a police officer

strength of 4,355 that we would have direct access to the

funds. It was our understanding that no reprogramming

would be required. The money was virtually unencumbered in the way that the Congress intended us to use it,

as long as it was used specifically for law enforcement

purposes.

Id. at 71.

On May 22, 1991, a House subcommittee held budget

hearings regarding District appropriations for the 1992 fiscal

year. See Hearings Before a Subcomm. of the Comm. on

Appropriations: Subcomm. on District of Columbia Appropriations, Fiscal Year 1992, 102d Cong. (1991). Chairman

Julian Dixon questioned District representatives about the

use of Expansion Act funds:

When the Mayor sent up her [budget] reductions of $216

million, a major part of that was a reduction of some

$12.5 million in the police department.

From my way of looking at it, it was a reduction of

money that you had already received. Is that correct?

In other words, you got $17.6 million in fiscal year 1991

to hire additional police officers. You have that money in

your pocket, and when the Mayor sent up the budget,

she said I am going to cut $12.5 million in the police

department. My response would be that you already

have that money so you are not cutting anything--you

are just keeping our money but you are not spending it

for the purpose it was intended.

Id. at 1160.

While Expansion Act funds were being appropriated by

Congress, appellant headed the budget branch of the MPD's

Office of Finance and Resource Management. He claims that

he had access to reports that detail how the District spent

Expansion Act funds on items other than for additional

officers beyond the 4,355 threshold. He filed the instant

action in the district court on March 22, 1996 under seal, as

required by the FCA. See 31 U.S.C. s 3730(b). After the

U.S. Department of Justice notified the district court that it

did not wish to intervene, the seal was released, and the

complaint served on the District.

After discovery, both parties filed motions for summary

judgment. The District additionally moved for dismissal for

lack of subject matter jurisdiction based upon the jurisdictional limitation of the FCA which bars suits based upon

publicly disclosed transactions. See 31 U.S.C. s 3730(e)(4).

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The district court concluded that Settlemire's claims were

precluded by the jurisdictional bar, and that Settlemire did

not fall under the "original source" exception. Because of

these conclusions, the district court dismissed for lack of

subject matter jurisdiction. Settlemire has appealed the

dismissal.

Prior to oral argument, we requested additional briefing on

the relevance of United States ex rel. Long v. SCS Business

& Technical Inst., 173 F.3d 870 (D.C. Cir.) (holding that a

state is not a "person" subject to suit under the FCA),

supplemented by, 173 F.3d 890 (D.C. Cir.), petition for cert.

filed, 68 U.S.L.W. 3116 (U.S. Aug. 2, 1999) (No. 99-213). The

United States submitted an amicus brief and participated in

oral argument on that matter. As explained below, we do not

reach the issue.

II.

Since its original enactment in 1863, the FCA has allowed

any private party to bring suit, on behalf of the United States

government, based on that party's knowledge of fraud committed against the government. See Findley, 105 F.3d at

679-81 (reviewing the history of and amendments to the Act);

see also 31 U.S.C. s 3729(a) (defining the underlying conduct

that constitutes a false claim). As an incentive to bring such

qui tam suits, the FCA allows a plaintiff to receive a portion

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of the funds that were the subject of the false claim. See 31

U.S.C. s 3730(d).

A number of amendments have been made to the Act over

the years, including the 1986 amendments, which restricted

the subject matter jurisdiction of these qui tam actions in

cases where the suit is based on publicly disclosed information:

(A) 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, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media, unless the action is

brought by the Attorney General or the person bringing

the action is an original source of the information.

(B) For purposes of this paragraph, "original source"

means an individual who has direct and independent

knowledge of the information on which the allegations

are based and has voluntarily provided the information to

the Government before filing an action under this section

which is based on the information.

31 U.S.C. s 3730(e)(4). Under this regime, jurisdiction is

lacking "whenever the relator files a complaint describing

allegations or transactions substantially similar to those in the

public domain, regardless of the actual source for the information in the particular complaint." Findley, 105 F.3d at

682; see also United States ex rel. Mistick PBT v. Housing

Auth. of the City of Pittsburgh, 186 F.3d 376, 388 (3d Cir.

1999). Although a qui tam plaintiff may be able to present

"allegations or transactions" with copious detail, we inquire

only as to whether the publicly disclosed information " 'could

have formed the basis for a governmental decision on prosecution, or could at least have alerted law-enforcement authorities to the likelihood of wrongdoing.' " United States ex rel.

Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645, 654

(D.C. Cir. 1994) (quoting United States ex rel. Joseph v.

Cannon, 642 F.2d 1373, 1377 (D.C. Cir. 1981)). We have

expressed this inquiry in a formula:

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[I]f X + Y = Z, Z represents the allegation of fraud and

X and Y represent its essential elements. In order to

disclose the fraudulent transaction publicly, the combination of X and Y must be revealed, from which readers or

listeners may infer Z, i.e., the conclusion that fraud has

been committed.

Springfield Terminal, 14 F.3d at 654.

Once it is determined that "public disclosure" has occurred,

the court considers whether the relator is an "original

source." See id. at 651. Under 31 U.S.C. s 3730(e)(4)(B),

two elements must be shown. First, the relator must show

"direct and independent knowledge of the information on

which the publicly disclosed allegations are based"; such

information must be firsthand and cannot depend on the

public disclosures. See Findley, 105 F.3d at 690. Second,

the relator must voluntarily disclose his information to the

federal Government before filing his lawsuit. Such voluntary

disclosure must occur prior to the public disclosures which

invoke the jurisdictional bar. See id.

III.

A. Public Disclosure

Settlemire asserts that the District spent Expansion Act

money for purposes other than those required by that Act.

Regardless of what other purpose the funds were spent on,

any purpose other than those required by the statute could

constitute a false claim against the government. Here however, District officials disclosed in public Congressional hearings that they were using the funds for purposes beyond

those listed in the Expansion Act. Of course, their willingness to disclose this information makes it appear that they

thought nothing was improper. As Chief Fullwood said, the

District believed the funds were "virtually unencumbered in

the way that the Congress intended us to use it, as long as it

was used specifically for law enforcement purposes." This

disclosure that the District was using and planned to continue

to use Expansion Act funds in ways outside the letter of the

statute, "enable[d] the government to adequately investigate

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the case and to make a decision whether to prosecute,"

Findley, 105 F.3d at 688. It therefore publicly disclosed the

alleged false claims as contemplated in s 3730(e)(4)(A).

The fact that Settlemire is able to provide more specific

details about what happened to the allegedly misspent funds

does not matter. In Findley, we noted that a relator's ability

to reveal specific instances of fraud where the general practice has already been publicly disclosed is insufficient to

prevent operation of the jurisdictional bar. See Findley, 105

F.3d at 687-88. There is no requirement, as Settlemire

appears to contend, that the relevant public disclosures irrefutably prove a case of fraud. It is sufficient that the

"publicly disclosed transaction is sufficient to raise the inference of fraud." Id. at 687.

Nor is it of any concern that the District had not accessed

all of the Expansion Act funds when the public disclosures

where made. As we held in Findley, disclosures going back

as far as forty years prior to the relator's lawsuit were

sufficient to disclose the practices which formed the basis of

the relator's suit. See id. at 685-87. Cases may arise where

disclosures of a practice are insufficient to be considered

public disclosures of later instances of fraud, as "Congress did

not prescribe by mathematical formulae the quantum or

centrality of nonpublic information that must be in the hands

of the qui tam relator in order for suits to proceed." Springfield Terminal, 14 F.3d at 653. But, as here, where we have

before us publicly disclosed information showing how this

same defendant intended to spend monies appropriated under

this same statute, it is clear that public disclosure under

s 3730(e)(4)(A) has occurred.2

__________

2 The parties spend a good deal of time in their briefs arguing

over which years Congress actually appropriated funds under the

Expansion Act. Settlemire claims that $93,220,000 was appropriated in total for fiscal years 1990 through 1993. The District asserts

that no funds were provided in fiscal years 1992 and 1993. Neither

dispute that funds were not appropriated in fiscal year 1994.

Settlemire correctly points out that each count of fraud alleged in a

qui tam action is considered separately under the jurisdictional bar

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B. Original Source

Although the District's practices were publicly disclosed,

that does not end our endeavor. Settlemire's action may

nonetheless proceed if he can demonstrate that he is an

"original source" of the information as defined by 31 U.S.C.

s 3730(e)(4)(B). That is, he must show that he met the

"direct and independent knowledge" requirement and voluntarily disclosed his information to the Government prior to

the public disclosures and the filing of his lawsuit. He has

not made such a showing.

While the District's Rule 12(b)(1) motion properly raised

the original source issue, Settlemire dwelled only on the

independent knowledge element and presented no evidence of

voluntary disclosure. Only in his reply brief before this court

did Settlemire finally address the voluntary disclosure issue,

relying on his supplemental declaration dated five days prior

to the filing of the reply brief. In the absence of extraordinary circumstances, Settlemire's failure to assert sufficient

jurisdictional facts in a timely fashion means that he cannot

satisfy the requirements of 31 U.S.C. s 3730(e)(4)(B). See

District of Columbia v. Air Florida, Inc., 750 F.2d 1077, 1084

(D.C. Cir. 1984) (court need not consider issues not presented

to the district court); United States v. Whren, 111 F.3d 956,

958 (D.C. Cir. 1997) (court need not consider issues that

appellant fails to raise in opening appeal brief although issue

was raised below), cert. denied, 118 S. Ct. 1059 (1998); National Anti-Hunger Coalition v. Executive Comm. of the

President's Private Sector Survey on Cost Control, 711 F.2d

1071, 1075 (D.C. Cir. 1983) (appellate court will generally not

consider new evidence on appeal).

__________

provision. See United States ex rel. Alexander v. Dyncorp, Inc.,

924 F. Supp. 292, 298-302 (D.D.C. 1996). However, because the

public disclosures in this case were sufficient to disclose the District's general practices regarding Expansion Act funds for all of

the years in question, it makes no difference whether funds were

appropriated for only two or as many as four years. This being the

case, we need not decide the issue.

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It was completely proper for Settlemire to assert below

that the jurisdictional bar did not apply because, in his view,

the public disclosures did not fall under 31 U.S.C.

s 3730(e)(4)(A). Upon losing on this ground however, Settlemire does not have a right to recast his claim on appeal so as

to avoid the consequences of that decision.

Settlemire moved to supplement the joint appendix at the

same time he filed his reply brief in order to provide evidence

supporting his voluntary disclosure argument. The District

opposed the motion and also moved to strike the reply brief.

We deferred consideration of these motions pending oral

argument. As additional evidence not presented to the district court is not ordinarily considered on appeal, see National Anti-Hunger Coalition, 711 F.2d at 1075, we will deny

Settlemire's motion to supplement. There is no need to

strike the reply brief in its entirety, so we will also deny that

motion. However, we note in passing that even if we were to

consider Settlemire's additional materials, he still does not

allege that he actually disclosed any information to the Government before the public disclosures occurred.

After our review of the record, we hold that Settlemire has

not proved himself to be an "original source." The district

court concluded that Settlemire did not have "direct and

independent knowledge of the information on which the allegations are based." 31 U.S.C. s 3730(e)(4)(B). But as it is

patently clear that Settlemire did not present evidence of

voluntary disclosure, we affirm the district court's holding

that Settlemire cannot qualify as an original source on those

grounds alone. When the judgment of the court below is

correct as a matter of law, we may affirm on different

grounds. See, e.g., Haddon v. Walters, 43 F.3d 1488, 1491

(D.C. Cir. 1995).

C. Supplemental Issue

Because of our lack of subject matter jurisdiction over this

action, we do not proceed to the claim-for-relief question

posed by the possible application to the District of Columbia

of United States ex rel. Long v. SCS Business & Technical

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Inst., 173 F.3d 870 (D.C. Cir.) (holding that a state is not a

"person" subject to suit under the FCA), supplemented by,

173 F.3d 890 (D.C. Cir.), petition for cert. filed, 68 U.S.L.W.

3116 (U.S. Aug. 2, 1999) (No. 99-213). We had ordered

additional briefing sua sponte on the relevance of Long, but

now have no occasion to address that issue and express no

opinion on its merits. See Steel Co. v. Citizens for a Better

Env't, 118 S. Ct. 1003, 1012-16 (1998); United States ex rel.

Kreindler & Kreindler v. United Technologies Corp., 985

F.2d 1148, 1155-56 (2d Cir. 1993) (holding that court should

consider 12(b)(1) jurisdictional challenges before 12(b)(6) challenges).3

IV. Conclusion

For the reasons set forth above, we conclude that the

allegations of Settlemire's complaint fall within the FCA's

jurisdictional bar against actions based on publicly disclosed

information. We further hold that Settlemire has not satisfied the original source exception to the jurisdictional bar.

Accordingly, the district court's dismissal of this action is

Affirmed.

__________

3 We are aware that the Supreme Court recently expanded the

scope of its review in Vermont Agency of Natural Resources v.

United States ex rel Stevens, 120 S. Ct. 523 (1999), another FCA

qui tam case, to consider whether "a private person [has] standing

under Article III to litigate claims of fraud upon the government."

As we have already disposed of this case on other jurisdictional

grounds, we do not address the issue.

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