# United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Ar gued November 16, 2011 Decided May 15, 2012

No. 11

- 7039

U NITED S TATES OF A MERICA

, EX REL

. M ICHAEL L. D AVIS

, A PPELLANT

v.

D ISTRICT OF C OLUMBIA

, A PPELLEE

Appeal from the United States District Court
for the District of Columbia (No. 1:06

- cv

- 00629)

Frederick A. Douglas argued the cause for appellant.
With him on the briefs were Curtis A. Boykin and Alex M.
Chintella

.

Stacy L. Anderson , Assistant Attorney General, Office of

t he Attorney General for the District of Columbia, argued the cause for appellee. With her on the brief were Irvin B.
Nathan , Attorney General, Todd S. Kim , Solicitor General,
and Donna M. Murasky , Deputy Solicitor General.

Before: B ROWN

, G RIFFITH

, and K AVANAUGH

, Circuit Judges

.

Opinion for the Court filed by Circuit Judge G RIFFITH

.2

G RIFFITH

, Circuit Judge : Michael L. Davis brought this qui tam 1 suit alleging the District of Columbia and its schools violated the False Claims Act by submitting a Medicaid reimbursement claim without maintaining adequate supporting documentation. The district court dismissed the case, relying on a precedent of this Court. Because we
conclude that the Supreme Court has implicitly overruled that precedent, we reverse.

I

It is common knowledge that Medicaid is a joint federal and state program that funds health care services for certain

groups. Less well known is the process by which Medicaid funds are disbursed through local government agencies to care
for those in need and the safeguards in place to make sure that the proper amounts of funds are provided for services properly rendered. This case involves allegations of misconduct that undermine some of those safeguards brought by one involved in that process.

T he M edical Assistance Administration (MAA) , a District agency, administered the District’s Medicaid Plan at the time relevant to this suit

. The District of Columbia Public Schools ( DCPS ) is eligible for Medicaid reimbursement for the medical and transportation services it provides to special
education students. MAA reimburses DCPS for the estimated costs of these services throughout the year with federal funds
from the Centers for Medicar e and Medicaid Services

. A t the

en d of the year DCPS submit s a reimbursement claim to

1 Qui tam is short for the Latin phrase “ qui tam pro domino rege quam pro se ipso in hac parte sequitur ,” which means “who pursues this action on our Lord the King’s behalf as well as his
own.” Rockwell Int’l Corp. v. United States , 549 U.S. 457, 463 n.2 (2007).3

MAA that sets forth the actual costs of these services. Under the District’s Medicaid Plan, MAA must review those claim s at least once e very two years and determine wheth er DCPS is
owed additional funds or whether the schools must return any
overpayment

. Thi s annual filing of a reimbursement claim is
similar to how a tax return reconciles an individual’s withholding s throughout the year with proof of the actual tax
owed at year end

. F ederal regul ations require DCPS to
maintain financial data based on audit

- quality documentation
that allow s “proper determination of costs payable. ” 42 C.F .R. § 413.20 (a) ; see also id. § 413.24(a). To ensure that the
claimed services were ac tually provided, auditors check f or financial documentation and review student files for service

specific medical records or progress notes signed by the
actual service provider

. C laims lacking “the required service

sp ecific documentation . . . [may ] not be part of any cost
settlement.” Def

. ’ s Mot. to Dismiss Ex. D, at 3.

II

Because we are reviewing the grant of a motion to dismiss, we accept Davis’s version of the facts and draw all
inferences in his favor. Atherton v. D.C. Office of the Mayor

, 567 F.3d 672, 677 (D.C. Cir. 2009)

. Davis’s firm, Davis & Associates (D&A), prepared the Medicaid reimbursement
claims made by DCPS for fiscal years 1995, 1996, and 1997. While D&A was preparing the claim for fiscal year 1998, DCPS replaced the firm with Max imus, Inc. D&A completed work on the claim anyway, but DCPS never submitted it to
MAA

, filing instead a claim prepared by Maximus. According to Davis, only he had the required documentation supporting the claim, and he never gave it back to DCPS. Upon lear ning
that DCPS had submitted the claim prepared by Maximus

, Davis told District officials that the claim lacked supporting
documentation and did not represent the full amount owed to4

DCPS

. Despite Davis’s warnings

, DCPS made no adjustments
to its claim at that time

. In May 2000, MAA paid DCPS $10.3 million as a tentative settlement for fiscal year 1998 . MAA also hired an
auditor to review D CPS’s cla ims for fiscal years 1996

- 1998. The auditor determined that portions of DCPS’s claims should
be disallowe d because they were not adequately documented,
and MAA eventually returned to the federal government $7.6 million that had been overpaid to DCPS for 1998. On August 7, 2002, the Office of the District of Columbia Auditor
released to the public a report dis closing that for fiscal years
1996

- 1998

, “$15 million of costs incurred for services rendered to special education students [by DCPS] were disallowed for Medicaid reimbursement due to the absence or unavailability of supporting documentation,” and that “documentation of services” had to be “immediately improved.” Def

. ’s Mot. to Dismiss Ex. E

, at ii

.

On April 4, 2006, Davis filed this action alleging that the
District and DCPS had violated the False Claims Act

, 31 U.S.C. §§ 3729

- 3733, by submitting the 1998 reimbursement claim without maintaining adequate supporting documentation. Th e Act prohibits false or fraudulent claims for payment from the United States,
id. § 3729(a), and authorizes private individuals to bring suit in the government’s name to remedy such fraud, id. § 37 30(b)(1). T hese whistleblower plaintiffs (known as “relators”) are permitted to share in the government’s

recovery

. Id. § 3730(d)

. The Act authorizes a statutory penalty for each violation, plus treble damages for any actual damages suffered by the government. See id. § 3729(a). Davis’s amended complaint alleges that the submission of the 1998
reimbursement claim without supporting documentation
violates the Act’ s prohibitions o n knowingly presenting a false claim, id. § 3 7 2 9(a)(1), using a false statement to get a5

false claim paid, id. § 3 7 2 9(a)(2 )

, and conspiring to get a false claim paid

, id. § 3 7 2 9(a)(3 )

. Davis asserts that submitting a claim for Medicaid reimbursement that lacks the supporting documentation called for by regulation defrauds the United
States because the government would not have knowingly paid such a claim. Davis does not allege, however, that any
claimed services were not provided or that any costs were exaggerated

.

The 1986 version of the Act, which applies to this case,
bars suits “based upon the public disclosure of allegations or

transac tions

. . . unless the action is brought by the Attorney General or the person bringing the action is an original source
of the information.” 31 U.S.C. § 3730(e)(4)(A) (2006) (amended 2010) . An original source is “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 o n the information.” Id. § 3730(e)(4)(B)

. In short, if a qui tam suit is “based upon” a “public disclosure,” the suit is barred unless the relator is an “original source.”

On December 23, 200 8, the district court granted in part
the defendants’ motion to dismiss Davis’s qui tam action

. United States ex rel. Davis v. District of Columbia ( Davis I )

, 591 F. Supp. 2d 30 (D.D.C. 2008). T he court d ismissed DCPS
as a defendant because D.C. law provides that it cannot be sued directly

. Id. at 40. The court also dismissed Davis’s treble damages and conspiracy claim s because he had not alleged actual damage to the government

. Id. at 39

- 40. T he

court rejected

, however, the District’s challenge to its subject matter jurisdiction, holding that even though the Auditor’s report had publicly disclosed the alleged fraud , Davis was an original source. Id. at 36

- 37

. The parties proceeded with6

discovery and Davis filed an amended c omplaint . Davis then moved for summary judgment and the District moved again to dismiss for lack of subject matter jurisdiction.

This time, the district court agreed and concluded Davis was not an original source under our decision in United States ex rel. Findley v. FPC

- Boron Employees’ Club , 105 F.3d 675 (D.C. Cir. 1997). United States ex rel. Davis v. District of
Columbia ( Davis II ) , 773 F. Supp. 2d 21, 32 (D.D.C. 2011).

In Findley , we held that a relator must provide his information
to the government not only prior to filing suit but “ prior to any public disclosure. ” 105 F.3d at 690. Because t h ere was no evidence that Davis notified the federal government of the alleged fraud before the 2002 Auditor’s report, the court
concluded it was without jurisdiction to hear his claim. Davis

II , 773 F. Supp. 2d at 33

- 34.

Davis timely appeal ed both the district court’s conclusion that it lacked subject matter jurisdiction and its dismissal of
his claims for treble damages and conspiracy. We take jurisdiction under 28 U.S.C. § 1291.

II I

A

D avis first argues that his suit is not “based upon” the August 2002 A udit or’s report. We have explained that a suit is “based upon” publicly disclosed “allegatio ns or transactions” when the allegations in the complaint are “substantially similar” to those in the public domain

. Findley

, 105 F.3d at 682. This rule prevents suits by those other than an “original source” when the government already has enough information “to investigate the case and to make a decision whether to prosecute ” or where the information “could at least7

have alerted law

- enforcement authorities to the likelihood of wrongdoing.” U.S. ex rel. Springfield Terminal Ry. 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) )

.

The 2002 A uditor’s report disclosed that, for fiscal years
1996

- 1998, DCPS was not reimbursed for $15 million worth of services provided to special education students but not adequately documented. Def

. ’s Mot. to Dismiss Ex. E

, at ii. The report revealed to the public the “allegation” that DCPS
did not have adequate supporting documentation for its 1998
Medicaid reimbursement claim and provided ample reason for the government to investigate further. See Springfield
Terminal , 14 F.3d at 654 . Davis contends that his allegation is more specific than what was in the Aud itor’s report, and that
is true. H e points out the 1998 claim lacked any documentation while the Auditor’s report found some for three years, just not enough. But providing “more specific details about what happened” does not change the fact that
Davis’s a llegation is substantially similar to and therefore “based upon” the publicly disclosed allegations in the Auditor’s report. United States ex rel. Settlemire v. District of
Columbia , 198 F.3d 913, 919 (D.C. Cir. 1999)

.

Davis’s claim can proceed only if h e is an “original
source.”

B

The District argues that Davis is not an original source because he did not prove he voluntarily provided his information to the government before filing suit

, let alone that8

he did so before Findley ’s public

- disclosure deadline. 2 The
district cou rt found that he had provided his information to the
government before filing suit

, relying on two letters Davis
received from federal officials which acknowledged that he had written them alleging “Medicaid fraud” and “diversion of
Medicare funds.” Davis II , 773 F. Supp. 2d at 32. At oral
argument, we questioned whether these letters , vague as they

are, were sufficient. After argument, Davis provided us with
other letters he sent to the government and an affidavit asserting their authenticity. 3 Most relevant, in a letter dated August 19, 2004

, he informed the Inspector General of the U.S. Department of Health & Human Services that the District and DCPS “do not have in their possession documentation to support a drawdown of federal m edi caid
funds for [199 6

- 199 8]. ” Appellant’s Mot. to Supp l

. R.

, Attac h. at 1. This letter removed any concern we had about
whether Davis had “ provided the information to the
G overnment ” before filing suit.

Relying upon our decision in Findley , t he district court dismissed Davis’s suit because he failed to provide his
information to the government prior to the publication of the
Auditor’s report. Davis II , 773 F. Supp. 2d at 33

- 34. Davis argues that the Supreme Court eliminated this requirement in

2 The District concedes on appeal that Davis had direct and independent knowledge that the 1998 claim for Medicaid reimbursement lacked documentation. Appellee’s Br. 34.

3 Although we normally do not consider evidence presented for the first time on appeal, we have discretion to make “limited exceptions to this rule when ‘ injustice might otherwise result.’” In re AOV Indus., Inc. , 797 F.2d 1004, 1012 (D.C. Cir. 1986) (quoti ng Singleton v. Wulff , 428 U.S. 106, 121 (1976)). Because these new documents go “to the heart of the contested issue, it would be inconsistent with this court’s own equitable obligations . . . to pretend that they do not exist.” Id. at 1013.9

Rockwell Internationa l Corp. v. United States , 549 U.S. 457 (2007)

. The district court acknowledged that Rockwell raised
doubts about Findley but concluded that it would not “lightly infer an abrogation of settled precedent.” Davis II

, 773 F. Supp. 2d at 33. Although w e have previously expressed doubt
about whether this part of Findley survived Rockwell

, s ee United States ex rel. Davis v. District of Columbia , 413 F

. App ’x 308 , 310 (D.C. Cir. 2011) (noting this concern but dismissing a related suit by Davis on different grounds) , we have not yet had occasion to address the issue squarely

. Today we do, and we agree with Davis.

Findley established this requirement based on its reading
of the statute and a resulting policy concern

. First, interpreting § 3730(e)(4)’s text

, the court concluded that “the allegations”
referred to in subparagraph (B) were the publicly disclosed “allegations or transactions” in subparagraph ( A ) , “since those are the only allegations mentioned at all in section 3730(e)(4)

. ” Findley , 105 F.3d at 690. From this, the court
determined that the word “information ” in both subparagraphs
referred to the information “on which the [publicly disclosed] allegations are based.” Id. (alteration in origina l)

. Under this reading, the information an original source must provide to the government is the information underlying t he publicly disclosed allegations.

Findley then turned to the question at i ssue here: when

must the relator p rovide thi s information to the government? Although the text seems to impose a clear deadline of “before filing an action,” Findley held that “the only reading of the statute that accounts for the requirement that an ‘original source’ voluntarily provide information to the government before filing suit , and Congress’ decision to use the term ‘original source’ . . . is one that require s an original source to provide the information to the government prior to any public10

disclosure.” Id. at 691. The court offered two primary reasons for this reading

. First, it would be odd to call someone an “original source” of information if the government had already obtained the relevant information from the public

. See
id. Second, and mo re centrally, Findley surmised that “ [o]nce the information has been publicly disclosed . . . there is little need for the incentive provided by a qui tam action.” Id. A
relator add s little value , so the thinking goes, by repeating
what is already publicly available and known to the
government.

In Rockwell , the Supreme Court rejected Findley ’s reading of what information a relator must provide the government, concluding that the word “information” in § 3730(e)(4) refers to “the information on which the relator’s allegations are based [, not] the information on which the publicly disclosed allegations that trigg ered the public

disclosure bar are based. ” 549 U.S. at 470. With the wrong “information” in mind, Findley ’s argument that the
information must be provided to the government not only before suit is filed but before a public disclosure is made simply unravels. Findley ’s concern about why Congress use d

t he term “original source” is answered : T he relator can be an “original source” to the government of his information even if
the publicly disclosed information came from someone else

.

And Findley ’s judgment that “ [o]nce the information has been publicly disclosed . . . there is little need for the incentive provided by a qui tam action, ” 105 F.3d at 691, no longer follows because Rockwell changed the premise . W e now understand that the “information” provided is the
relator’s. Importantly, the relator’s information can be different and more valuable to the government than the
information u nderlying the public disclosure, which might be nothing more than speculation or rumors. See Rockwell , 54911

U.S. at 472. The relator may have an eyewitness account or important documents supporting the public allegation, but not available from any other sou rce, which could aid the
government. Findley ’s reading of the statute assumed the relator could provide nothin g new after a public disclosure

. Rockwell rejected that view. Given this, it is apparent that Findley ’s categorical rule bars productive suits

. See United States ex rel. Duxbury v. Ortho Biotech Prods. , L.P. , 579 F.3d 13, 24

- 25 (1st Cir. 2009) (concluding that Rockwell “substantially undercuts” Findley and shows that Findley “has the potential to bar productive suits”). Findley ’s requirement
no lo nger has any textual basis , and the policy judgment upon which it relied contradicts Rockwell ’s rationale.

A pplying the 1986 version of the Act, we will no longer require that a relator provide information to the government prior to any public disclosure of allegations substantially
similar to the relator’s and will instead enforce only the text’s deadline of “before filing an action.” 4

4 Although Ro ckwell corrected Findley ’s tendency to bar some productive suits, the 1986 Act’s approach is itself imperfect
because it allows suits in wh i c h the relator’s information does in fact mirror the publicly disclosed information, the situation Findley
assumed w ould always apply . Congress has since addressed this problem by amending the statute to provide incentives to only those
relators whose information adds value. T he Act now defines an “original source” as B ecause Davis satisfies

a n individual who either (i) prior to a public dis closure . . . has voluntarily disclosed to the Government the information on which allegations or transactions in a claim are based, or (2) who has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions, and who has voluntarily provided the information to the Government before filing an action under this section.12

the requirements of § 3730(e)(4)(B) , we conclude that he is an original source and that the distr ict court ha s jurisdiction over
his claims.

I V

Davis also argues that the district court wrongly
dismissed his claims for treble damages and conspiracy on the ground that he failed to allege ac tual damage to the United
States . He argues that the entire amount the federal
government paid to DCPS in 1998 constitutes damages
because the government would not have paid DCPS a ny thing
had it known there was no documentation for its
reimbursement claim. We conclude, however, that the district court was right to find that the government suffered no damages.

The False Claims Act imposes two types of liability:

First, a defendant who submits a false claim

. . . is liable for civil penalties regardless of whether the government
show s that the submission of that claim caused the
government damages. Secon d, the defendant is liable for

“ 3 times the amount of damages which the Government
sustains because of the act of [the defendant]

. ”

United States v. Sc i. Applications Int’l Corp.

, 626 F.3d 1257

, 1277

- 78 (D.C. Cir. 2010) (quoting 31 U.S.C. § 3729(a) )

31 U.S.C. § 3730(e)(4)(B) (Supp. 2010) . Thus, as the district court explained, the Act now “allows a relator to proceed if he either
meets the Findley pre

- public disclosure notification requirement, or if he possesses knowledge independent of the public disclosure that materially adds to the public disclosure, and he provides the information to the Government prior to filing suit.” Davis II , 773 F. Supp . 2d at 33 n.9.13

(citation omitted)

. Our decision in Science Applications sets forth the proper framework for determining d amages in qui

tam actions . There, a contractor who had agreed to provide a
feder al agency with expert advice certified it had no conflicts of interest. The contractor provided the advice but failed to
disclose several conflicts. Id. at 1261

- 62. Like Davis does here, t he government sought damages equal to the full amount
it had paid th e contractor and relied on evidence showing it would not have paid the contractor anything had it known of
the conflicts. But we explained that this evidence only proved causation, not damages, because False Claims Act damages

are meant to “put[] the government in the same position as it
would have been if the defendant’s claims had not been
false.” Id. at 1278. Thus, “[t]o establish damages, the government must show not only that the defendant’s false claims caused the government to make pa yments that it would have otherwise withheld, but also that the performance the government received was worth less than what it believed it had purchased.” Id. at 1279. Although the government was not entitled to recover all of its payments, we concluded t hat a jury could find that the value of the contractor’s performance “was compromised by the appearance of bias created by the company’s failure to live up to its contractual conflict of interest obligations.” Id. at 1278. We therefore instructed that
the proper measure of damages was the difference in value between “services tainted by potential conflict” and the untainted services promised

. Id. at 1280

.

Under the Medicaid program

, the federal government pays for specified services to be provided to elig ible recipients. In this case, Davis does not allege that any services paid for were not provided. The sole defect Davis claim s is
the failure to maintain documentation for those services

. Unlike the contractor’s undisclosed conflicts in Science Applicatio ns , the defect in this case in no way calls into14

question the value of the medical care provided by DCPS.

T he purpose of maintaining documentation is to ensure that the government pays only for services actually rendered.

Because all agree that the services paid for were provided, the maintenance of documents to prove that they were has no independent monetary value. This is the rare case in which
there is no allegation that what the “government received was
worth less than what i t believed it had purchased.” Id

. at 1279 ; cf. United States ex rel. Schwedt v. Planning Research Corp. , 59 F.3d 196, 200 (D.C. Cir. 1995) (finding actual damage because, unlike here, the defendant’s false claims had caused the government to pay for “usele ss goods”). A server ’s failure to bring a receipt after dinner causes no harm when you know you’ve been properly charged. The same is true
here: T he government got what it paid for and there are no damages. Cf. Ab

- Tech Constr., Inc. v. United States , 31 Fe d. Cl. 429, 434 (1994); United States v. Woodbury , 359 F.2d 370, 379 (9th Cir. 1966). If Davis proves his claims he may still be eligible to share in the statutory penalties assessed against the District.

Finally, t he District invokes the Act’s six

- year statute of
limitations to bar some of Davis’s claims. See 31 U.S.C. § 3731(b)(1)

. Because the district court had no occasion to address t his question, we leave i t the opportunity to do so i n the first instance on remand.

V

For the foregoing reasons, th e district court’s order dismissing the case for lack of jurisdiction is vacated and the case is remanded for further proceedings consistent with this opinion.

So ordered

.