1997 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

8-21-1997

Dunleavy v. Delaware

Precedential or Non-Precedential:

Docket 96-1617

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Recommended Citation

"Dunleavy v. Delaware" (1997). 1997 Decisions. Paper 201.

http://digitalcommons.law.villanova.edu/thirdcircuit_1997/201
iled August 21, 1997 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

No. 96-1617 

UNITED STATES OF AMERICA, EX. REL. 

ANTHONY J. DUNLEAVY 

v. 

COUNTY OF DELAWARE, EDWIN B. ERICKSON, III 

EXECUTIVE DIRECTOR; COUNCIL OF THE COUNTY OF 

DELAWARE, WARD T. WILLIAMS, ESQ., CHAIRMAN; 

MARYANN ARTY; EDWIN B. ERICKSON; MATTHEW J. 

HAYES; WARD WILLIAMS, ESQUIRE 

Anthony J. Dunleavy, 

Appellant. 

On Appeal from the United States District Court 

for the Eastern District of Pennsylvania 

(D.C. Civil Action No. 94-cv-07000) 

Argued January 30, 1997 

Before: BECKER and ROTH, Circuit Judges

and BARRY,1 District Judge 

(Opinion Filed August 21, 1997) 

_________________________________________________________________ 

1. Honorable Maryanne Trump Barry, United States District Court Judge 

for the District of New Jersey, sitting by designation. 
Regina D. Poserina, Esq. (Argued) 

7415 West Chester Pike 

Upper Darby, PA 19082 

 Attorney for Appellant 

Francis X. Crowley, Esq. (Argued) 

Paul D. McNichol, Esq. 

Blank, Rome, Comisky & McCauley 

1400 North Providence Road, 

 Suite 301 

Media, PA 19063 

 Attorneys for Appellees 

Priscilla R. Budeiri, Esq. 

Lisa R. Hovelson, Esq. 

Alan Shusterman, Esq. 

Gary W. Thompson, Esq. 

Taxpayers Against Fraud 

The False Claims Act Legal Center 

Suite 501 

1220 Nineteenth Street, N.W. 

Washington, D.C. 20036 

 Attorneys for Amicus-Appellant 

OPINION OF THE COURT 

ROTH, Circuit Judge: 

With this appeal, we examine another chapter in the

history of Route 476, known to those in the Philadelphia 

area, who for so many years awaited its opening, as the 

"Blue Route." In this qui tam action, Anthony J. Dunleavy 

(the "Relator") sues Delaware County on behalf of the 

United States to recover treble damages in the amount of 

$1,450,000, the return of over $16 million in Department of 

Housing and Urban Development funds made available to 

the County from 1992 to 1995, and various other costs, 

interest, and penalties associated with the County's alleged 

violations of the False Claims Act (the "FCA" or "Act"), 31 

U.S.C. §§ 3729-3733. 

 2 
The district court dismissed Dunleavy's Second Amended 

Complaint on the ground that it lacked subject matter 

jurisdiction because the action was based solely on

information or allegations that had been publicly disclosed 

through various newspaper articles, a pre-trial 

memorandum prepared by Delaware County in previous 

unrelated litigation, several annual audits prepared by 

Delaware County and submitted to the federal government, 

and a 1992 Grantee Performance Report ("GPR") prepared 

by Delaware County and submitted to HUD. This appeal 

raises issues which require us to further define the 

circumstances under which a qui tam action will be deemed 

to be "based upon the public disclosures of allegations or 

transactions." We find that the district court relied upon 

assumptions which broadened the FCA's Public Disclosure 

Bar beyond its intended scope. Hence, we will reverse and 

remand this case for further proceedings. 

I. Facts and Procedural History

The following facts are taken from Dunleavy's Second 

Amended Complaint. For purposes of this motion to 

dismiss, they, in the main, may be taken as true.2 

The events challenged here occurred in 1976 while 

Dunleavy was working as a consultant to Delaware County. 

Dunleavy's role was to advise the County with respect to 

HUD's Community Planning and Development programs, 

HUD's Community Development Block Grant program 

("CDBG"), and other related federal government programs. 

_________________________________________________________________ 

2. We realize that where jurisdiction is at issue, the norm is not to accord 

the party whose burden it is to plead jurisdiction the presumption of 

truth as to facts pleaded that must be resolved in answering that 

question. See 5A Charles Alan Wright & Arthur R. Miller, Federal Practice

and Procedure § 1350 (Supp. 1996). We are also cognizant that in certain 

situations in which our jurisdiction is at issue we may be entitled to look 

beyond the pleadings to satisfy ourselves as to the existence or nonexistence of jurisdiction. See, e.g., Mortensen v. First Fed. Sav. and Loan

Ass'n, 549 F.2d 884, 891 (3d Cir. 1977). Neither of these principles 

influences the outcome of this case because our review can be 

accomplished without relying on these disputed facts and without 

consideration of contested matters not appearing in the pleadings. 

 3 
In 1976, the County acquired by way of condemnation a 

56.6 acre tract of land adjacent to the Smedley County Park 

in Nether Providence Township. The tract is known locally 

as the Penza Tract. To make this acquisition, the County 

appropriated approximately $1,839,500 in funds provided 

by HUD and $685,000 in its own funds. 

Despite the County's original plans to expand the park, 

on January 26, 1979, it sold a 26.3 acre portion of the 

Penza Tract to the Pennsylvania Department of 

Transportation ("PennDOT") for $1,988,550. PennDOT 

acquired the land for the planned construction of Route I476. A short time later, in 1981, the County conveyed an 

additional 1.9 acre section of the Penza Tract to PennDOT 

for $103,950. Both sales were, however, contingent on 

pending environmental litigation being resolved in a way 

that would permit the Blue Route to be constructed 

through the region. For this reason, the County agreed to 

place the proceeds of the two Penza Tract sales in an 

escrow investment account. 

The completion of the Blue Route remained blocked by 

litigation for the next several years. In 1988, however, the 

County transferred yet another parcel of the Penza Tract to 

PennDOT at a cost of $1,000,000.3 The last litigation 

barrier to the construction of the Blue Route was resolved 

in 1991, when the remaining actions were settled. 

Construction began again and the Blue Route was opened 

a short time later. 

Dunleavy left the service of Delaware County in 1992 

when his consulting firm's contract was terminated. On 

November 18, 1994, Dunleavy initiated this qui tam action 

against Delaware County, the County Council, and certain 

current and former members of the Council and officers in 

the County. On March 7, 1995, Dunleavy filed a First 

Amended Complaint. Then on August 14, he filed a Second 

Amended Complaint without seeking leave of the Court or 

the other parties' consent. On September 15, Dunleavy 

_________________________________________________________________ 

3. The County disputes the accuracy of this allegation, contending that 

this sale actually involved a different tract of land not subject to HUD 

oversight. This is a factual question for resolution on the merits. We 

need not address it here. 

 4 
belatedly filed a Petition for Leave to Amend which, despite 

the procedural irregularity, was granted by the district 

court on November 8, 1995. 

This action remained under seal, as required by 31 

U.S.C. § 3730(b)(2), until September 5, 1995. During that 

period the U.S. Attorney and HUD investigated the viability 

of Dunleavy's complaint.4 On August 10, 1995, at the 

conclusion of the investigation, the U.S. Attorney issued a 

Notice of Declination of Appearance, pursuant to 31 U.S.C. 

§ 3730(b)(4)(B), concluding that the matters raised in 

Dunleavy's complaint did not constitute fraud within the 

meaning of the False Claims Act. At the same time, the U.S. 

Attorney turned over control of the investigation to HUD to 

review the matter for compliance with CDBG guidelines. 

HUD pursued its own investigation of the Penza Tract 

fund in March and April of 1996 and issued a Limited 

Audit Review on April 29, 1996. As a result of the Audit, 

HUD made a demand on the County for the return of 

nearly $2 million in HUD funds. At some point the County 

and HUD began negotiations to determine the amount of 

the funds owing to HUD. After learning of the possibility of 

settlement, Dunleavy claimed rights to notice and a hearing 

under § 3730(c)(2)(B) of the FCA. He alsofiled numerous 

Freedom of Information Act requests on HUD and on the 

U.S. Attorney. 

Despite Dunleavy's protests against a settlement, HUD 

denied him the opportunity to intercede and participate in 

the negotiations. On September 11, 1996, HUD agreed to 

accept the County's settlement offer of $1,921,699. Under 

the terms of the settlement, the County was to remit a 

check to HUD, and HUD would then return the funds to 

the County's line-of-credit where the monies would be 

available for eligible and fundable activities. Dunleavy 

unsuccessfully petitioned the district court to stay the 

administrative action necessary for settlement.5 Dunleavy 

then unsuccessfully sought a stay from this Court. 

_________________________________________________________________ 

4. An unknown party did leak information about the suit to the press in 

the interim. 

5. As of the date of the consummation of the settlement and of 

Dunleavy's application to the district court for a stay, Dunleavy's qui tam

action had already been dismissed by the district court for want of 

jurisdiction. 

 5 
Dunleavy's Second Amended Complaint alleges three 

counts of violation of the False Claims Act, 31 U.S.C. 

§§ 3729(a)(1), (a)(2), & (a)(7), one count of common law 

fraud, one count of payment under mistake of fact, and one 

count of breach of contract. Dunleavy's theory is that 

Delaware County defrauded HUD by not reporting and 

returning proceeds from the sale of the Penza Tract. 

Specifically, Dunleavy contends that the HUD funds used 

to acquire the Penza Tract were subject to a contractual 

agreement between the County and the federal government. 

This agreement required the County to follow HUD rules 

and regulations which limit the permissible uses of the 

funds and impose certain reporting requirements on the 

County. Dunleavy reasons that, since the Penza Tract was 

originally acquired with HUD funds, the County was 

required to treat the monies as "program income" and to 

provide accounts of the transactions to HUD. Dunleavy 

further contends that, once it became apparent in 1991 

that the County would not reacquire the Penza Tract, the 

defendants should have known, or knew but recklessly 

disregarded, their obligation to report the receipt of the 

Penza Tract monies in Annual Audits and Grantee 

Performance Reports and to repay those moneys to HUD. 

On July 12, 1996, the district court dismissed Dunleavy's 

Second Amended Complaint, finding that it lacked subject 

matter jurisdiction. United States ex rel. Dunleavy v. County

of Delaware, No. 94-7000, 1996 WL 392545 (E.D. Pa. July 

12, 1996). The district court held that Dunleavy's action 

violated the jurisdictional bar of 31 U.S.C. § 3730(e)(4)(A), 

which divests the federal courts of jurisdiction over qui tam

suits "based upon publicly disclosed allegations or

transactions." The trial court found that certain newspaper 

articles, a pre-trial memorandum from unrelated litigation, 

and the County's annual audits and GPRs publicly 

disclosed, prior to the filing of Dunleavy's complaint, both 

the misrepresented and the actual facts necessary to 

complete the inference of fraud. The district court assumed 

that all these documents were acceptable sources of public 

disclosure under the Act. The court then concluded that 

Dunleavy had not qualified as an original source under the 

Act. 

 6 
Dunleavy filed a timely notice of appeal. We have 

jurisdiction pursuant to 28 U.S.C. § 1291. Our review of the 

district court's dismissal of the complaint for lack of subject 

matter jurisdiction is plenary. United States ex rel. Stinson,

Lyons, Gerlin & Bustamante, P.A. v. Prudential Ins. Co., 944 

F.2d 1149, 1152 (3d Cir. 1991). 

II. Discussion 

The False Claims Act has been with us in one form or 

another since the Civil War. Act of March 2, 1863, ch. 67, 

§ 4, 12 Stat. 698 (1863). The FCA sets out civil and criminal 

penalties for persons who knowingly submit false claims to 

the government. 

The novel aspect of the FCA is the mechanism Congress 

has chosen for its enforcement. A private person with 

knowledge of fraud against the government, acting as a de 

facto "attorney general," can instigate litigation on the 

government's behalf against the parties responsible. Such 

suits are known as qui tam actions.6 

The FCA contains a built in incentive for a private

plaintiff, known as the "relator," to bring suit. Under the 

original statute, a prevailing relator could come away with 

up to one-half of the damages and forfeitures recovered and 

collected.7 S. Rep. No. 345, 99th Cong., 2d Sess., at 10, 

reprinted in 1986 U.S.C.C.A.N. 5266, 5275. Congress has 

shrewdly "offset inadequate law enforcement resources and 

encouraged `a rogue to catch a rogue' by inducing informers 

`to betray [their] conspirators.' " United States ex rel. Findley

v. FPC-Boron Employees' Club, 105 F.3d 675, 679 (D.C. Cir. 

_________________________________________________________________ 

6. qui tam action takes its name from the Latin phrase "qui tam pro 

domino rege quam pro si ipso in hac parte sequitur" meaning "who sues 

on behalf of the King as well as for himself." Black's Law Dictionary 1251 

(6th ed. 1990). Qui tam actions have their origins in the Thirteenth 

century royal courts of England where they were employed as a form of 

legal fiction. Lightly regarded local courts had jurisdiction over private 

wrongs. But a recitation that the suit was in the King's interest could 

provide access to the royal courts. See John T. Boese, Civil False Claims

and Qui Tam Actions 1-7 (1995). 

7. The most recent incarnation of the Act has reduced this percentage 

but it still remains substantial. See 31 U.S.C. § 3730(d). 

 7 
1997) (quoting Cong. Globe, 37th Cong., 3d Sess. 955-56 

(1863)). 

The Act requires a qui tam plaintiff, before proceeding 

with suit, to disclose to the government the information on 

which the claim is based. 31 U.S.C. § 3730(b). The 

government then has sixty days to investigate the matter 

and to decide whether to intervene. The government also 

has the option to step into the action at a later date. 31 

U.S.C. § 3730(c)(3). In either case, the relator is not entitled 

to a recovery under the Act if the action is one which runs 

afoul of the jurisdictional bars contained in 31 U.S.C. 

§ 3730(e). 

For example, the public disclosure bar operates under 

this section to divest the plaintiffs of subject matter 

jurisdiction if: (1) there was a public disclosure; (2) of 

"allegations or transactions" of the fraud; (3) "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."; 

(4) that the relator's action was "based upon." If the relator 

fails the public disclosure bar, he or she can only establish 

subject matter jurisdiction if he or she is an "original 

source" of the information. 31 U.S.C. § 3730(e)(4).

A. Effect of HUD Settlement

At oral argument, we questioned the parties about the 

viability of this suit after HUD's settlement with the County. 

Both the parties and this Court agree that, notwithstanding 

the settlement, Delaware County continues to have an 

interest in the outcome of this qui tam action because 

damages may be awarded which exceed the amount paid by 

Delaware County to HUD in settlement. 

There is no question that under certain circumstances it 

is appropriate for the federal government to proceed 

administratively against a FCA defendant. The Act expressly 

contemplates such a move: 

Notwithstanding subsection (b), the Government may 

elect to pursue its claim through any alternate remedy 

available to the Government, including any 

 8 
administrative proceeding to determine a civil money 

penalty. If any such alternate remedy is pursued in

another proceeding, the person initiating the action 

shall have the same rights in such proceeding as such 

person would have had if the action had continued 

under this section. 

31 U.S.C. § 3730(c)(5). What is not clear on the record 

before us is whether the U.S. Attorney and HUD intended 

the settlement with the County to extinguish the 

government's claims under the FCA or whether the 

settlement addressed a less serious transgression such as 

a misinterpretation by the County of its obligations under 

the CDBG program.8 

However, we need not decide whether the settlement 

terminated the government's rights against Delaware

County under the Act, because Dunleavy's right to proceed 

with his qui tam action remains unimpaired. Subsection 

(c)(5) preserves a relator's right to a percentage of the 

recovery even when the government chooses to pursue its 

claim administratively. See United States ex rel. Green v.

Northrop Corp., 59 F.3d 953, 963-64 (9th Cir. 1995), cert.

denied, 116 S. Ct. 2550 (1996); United States ex rel.

DeCarlo v. Kiewit/AFC Enterprises, Inc., 937 F. Supp. 1039, 

1045 (S.D.N.Y. 1996). Because the government never 

exercised its rights to intervene, the settlement between 

HUD and Delaware County does not negate Dunleavy's 

ability, as the relator, to proceed independently with his qui

tam action. 

We agree with the Eleventh Circuit's conclusion that the 

False Claims Act's purpose is not limited to punishing the 

wrongs against the general public; the FCA alsofills a 

remedial capacity in redressing injury to the individual 

_________________________________________________________________ 

8. In its Notice of Declination to Appear, the government stated its belief, 

formed after its investigation of the allegations contained in Dunleavy's 

complaint, that the County's actions did not amount to fraud within the 

meaning of the FCA. Additionally, it is not clear whether the 

investigation undertaken by the government even amounted to the type 

of alternate proceeding contemplated in § 3730(c)(5). HUD did no more 

than conduct an audit and make a demand upon Delaware County for 

payment, at which point the parties reached a settlement. 

 9 
relator. See United States ex rel. Neher v. NEC Corp., 11 

F.3d 136, 137 (11th Cir. 1994). In Neher, the court 

described the reasons for treating a qui tam action as one 

addressed to the relator's injuries: 

First, a qui tam relator can suffer severe emotional 

strain due to the discovery of his unwilling involvement 

in fraudulent activity. Moreover, the actual or potential 

ramifications on a relator's employment can be 

substantial. As several courts have recognized, qui tam 

relators face the Hobson's choice of "keeping silent 

about the fraud, and suffering potential liability (and 

guilty consciences), or reporting the fraud and suffering 

repercussions, some as extreme as dismissal." Finally, 

the relator can suffer substantial financial burdens as 

a result of the time and expense involved in bringing a 

qui tam action. 

Id. at 138 (quoting United States ex rel. Robinson v.

Northrop Corp., 824 F. Supp. 830, 835 (N.D. Ill. 1993). 

The legislative history of the 1986 Amendments to the Act 

is also instructive. The report accompanying the Senate 

version of the amendments, which Congress passed in lieu 

of those in the House bill, explains the Government's right 

to proceed administratively as an alternate remedy to an 

FCA action. See S. Rep. 99-345, 99th Cong., 2d Sess. 27, 

reprinted in 1986 U.S.C.C.A.N. 5266, 5292. While the 

Government can compel dismissal or settlement of a qui

tam action if it formally intervenes, 31 U.S.C.§ 3730(c), 

Congress believed that "if the Government declines to 

intervene in a qui tam action, it is estopped from pursuing 

the same action administratively or in a separate judicial 

action." Id., reprinted in 1986 U.S.C.C.A.N. at 5292. 

Since Dunleavy, if a proper relator, has an interest in 

pursuing his claim independently of the government, the 

government, which has elected not to intervene, cannot 

compromise Dunleavy's claim even if the government has 

settled its own claim. A viable case or controversy therefore 

continues to exist since Delaware County's potential 

exposure in Dunleavy's qui tam action may ultimately 

exceed that which it accepted in its settlement with HUD. 

 10 
B. The Public Disclosure Bar

The present language of the Public Disclosure Bar comes 

from Congress's extensive amendment of the False Claims 

Act in 1986. As recounted more fully in our opinion in 

United States ex rel. Stinson, Lyons, Gerlin & Bustamante,

P.A. v. The Prudential Ins. Co., 944 F.2d 1149, 1152-54 (3d 

Cir. 1991), the 1986 amendments were an attempt to 

correct what Congress perceived as a century old imbalance 

between the under-deterrence of the original Act, which 

permitted "parasitic" qui tam actions to be brought by 

individuals with no independent knowledge of fraud, and 

the over-deterrence of the 1943 amendments which denied 

jurisdiction over all qui tam actions "based on evidence or 

information the government had when the action was 

brought." 31 U.S.C. § 3730(b)(4) (1982) (superseded). Given 

that the 1943 Act almost entirely prevented the successful 

prosecution of qui tam suits, it is apparent from the 

legislative history of the 1986 amendments that Congress 

was mindful of the need "to encourage persons with firsthand knowledge of fraudulent misconduct to report fraud." 

Stinson, 944 F.2d at 1154. Moreover, Congress sought to 

enhance the government's ability to detect fraud by gaining 

"the cooperation of individuals who are either close 

observers or otherwise involved in the fraudulent activity." 

S. Rep. No. 345, 99th Cong. 2d Sess. 4, reprinted in 1986 

U.S.C.C.A.N. 5269. 

The current version of the Public Disclosure Bar has 

generated a host of interpretive issues, some of which are 

implicated in this appeal. Among the questions generated 

are the following: 

(1) whether the alleged "public disclosure" contains 

allegations or transactions from one of the listed 

sources; (2) whether the alleged disclosure has been 

made "public" within the meaning of the False Claims 

Act; (3) whether the relator's complaint is "based upon" 

this "public disclosure"; and, if so, (4) whether the 

relator qualifies as an "original source" under section 

3730(e)(4)(B)." 

United States ex rel. Fine v. MK-Ferguson Co. , 99 F.3d 1538, 

1544 (10th Cir. 1996). We are concerned with only the first 

 11 
two of these four questions. Because we conclude that 

jurisdiction is present based on our finding that 

"allegations or transactions" of fraud were never contained 

in sources qualifying as "public disclosures" under the FCA, 

we need not proceed further. 

1. Are the Disclosures of "Allegations or Transactions"?

We must first determine whether the County has 

identified any sources which publicly disclosed the alleged 

fraud or the underlying fraudulent transaction. The County 

points to four sources for the jurisdictional bar: (i) several 

newspaper articles discussing the acquisition of the Penza 

tract; (ii) a pre-trial memorandum filed with the court in 

prior unrelated litigation initiated by a community interest 

group to challenge the County's use of HUD funds; (iii) 

annual financial audits submitted to the federal 

government pursuant to the County's obligation under the 

Single Audit Act, 31 U.S.C. § 7502; and (iv) a 1992 Grantee 

Performance Report prepared by the County and submitted 

to HUD as required by § 104(e) of the Housing and 

Community Development Act of 1974, 52 U.S.C. § 5304(e). 

For the reasons that follow, we conclude that only the 

County's GPR, if considered a public disclosure, reveals 

information crucial to making an inference of fraud. 

In this regard, the crucial question arises from the 

statutory language, "based upon the public disclosure of 

allegations or transactions." 31 U.S.C. § 3730(e)(4)(A). We 

must consider whether the information disclosed 

constitutes "allegations or transactions." As another court 

has explained, "the Act bars suits based on publicly 

disclosed `allegations or transactions,' not information." 

Wang v. FMC Corp., 975 F.2d 1412, 1418 (9th Cir. 1992). 

It is clear that the FCA's reference to "allegations or 

transactions" is in the disjunctive, so that disclosures 

which reveal either the allegations of fraud or the elements 

of the underlying fraudulent transaction are sufficient to 

invoke the jurisdictional bar. Findley, 105 F.3d at 686-87; 

United States ex rel. Precision Co. v. Koch Indus., Inc., 971 

F.2d 548, 552 n.2 (10th Cir. 1992); see also Hagood v.

Sonoma Water County Agency, 81 F.3d 1465, 1473 (9th 

 12 
Cir.), cert. denied, 117 S. Ct. 175 (1996) ("the jurisdictional 

bar may be raised by public disclosure unaccompanied by 

an explicit allegation of fraud"). 

The District of Columbia Circuit has devised a useful 

formula for determining the quantum of information that 

must be disclosed before the jurisdictional bar comes into 

play: 

[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. 

United States ex rel. Springfield Terminal Ry. Co. v. Quinn, 

14 F.3d 645, 654 (D.C. Cir. 1994). The Springfield Terminal

court goes on to explain that the inference of fraud requires 

recognition of but two elements: "a misrepresented state of 

facts and a true state of facts." Id. at 655. Injected into the 

above formula the variables take on the following labels: "X 

(misrepresented state of facts) + Y (true state of facts) = Z 

(fraud)." Findley, 105 F.3d at 687. 

It is not seriously contended that the Z variable has been 

disclosed here. The record is devoid of any public 

accusation of wrongdoing against the County before 

Dunleavy filed his qui tam action. HUD's audit of Delaware 

County's CDBG Program Penza Tract Fund did not begin 

until March 1996 and was itself a product of this suit. 

Therefore, unless we find disclosures in the record of both 

the X and Y variables, we have no reason for calling down 

the jurisdictional bar. 

In everyday language, a "transaction" generally involves 

"an exchange between two parties or things that 

reciprocally affect or influence one another." Springfield

Terminal, 14 F.3d at 654 (citing Webster's Third New 

International Dictionary 55 (1976)). What makes a 

particular transaction "fraudulent" within the meaning of 

the False Claims Act is less clear. We think it is sufficient, 

at least in considering the application of the disclosure bar, 

that the transaction merely be one in which a set of 

 13 

misrepresented facts has been submitted to the government.9 

This we believe is consistent with the broader definitions of 

fraud employed in the False Claims Act. See Wang, 975 

F.2d at 1420 ("The Act's scienter requirement is something 

less than that set out in the common law"). 

In discussing the contents of his Second Amended 

Complaint, Dunleavy insists that 
his allegation of fraud was not Delaware County's mere 

failure to return the proceeds to HUD. By contrast, Mr. 

Dunleavy alleged that Delaware County only had the 

obligation to return the proceeds after the Blue Route 

opened. Mr. Dunleavy's allegation of fraud, therefore, is 

that after the Blue Route opened, Delaware County had 

an obligation to report or return the proceeds to the 

government but failed to do so. 

Appellant's Br. at 14. By this statement, we understand 

Dunleavy to contend that the crucial acts by the County 

necessary to the completion of this fraudulent transaction 

were its retention of the proceeds from the sale of the Penza 

Tract and its failure to inform HUD that it had these funds 

after the opening of the Blue Route ripened the obligation 

to return the money. 

We view the fraudulent scheme pled in Dunleavy's 

Second Amended Complaint as having four essential 

elements for purposes of our jurisdictional inquiry under 

the FCA's public disclosure bar: (1) the County was the 

recipient of funds belonging to the federal government; (2) 

the County had an obligation to repay those funds to the 

federal government; (3) the County failed to repay those 

funds to the federal government after the obligation became 

owing; and (4) the County failed to disclose to the federal 

government that funds belonging to it were in the County's 

possession. Elements one through three account for the 

"actual state of facts," while the fourth element corresponds 

to the "misrepresented state of facts." 

_________________________________________________________________ 

9. This broad statement assumes, of course, the relator's good faith 

attempt to make allegations conforming to claims specified in 31 U.S.C. 

§ 3729(a). 

 14 
The County identifies three newspaper articles which 

appeared in February 1980 and discussed Delaware 

County's purchase and sale of the Penza tract as well as its 

relationship with HUD.10 One of the articles stated "the 

county paid $1.8 million in federal Community 

Development funds for the [Penza Tract] property in 1976. 

. . . In January [1980] the county sold 26 - acres less than 

half the tract - to PennDOT for the Blue Route for $1.9 

million . . . ." App. at 90. Another article from the same 

year reported in greater detail on the possible uses for the 

sale proceeds: 

[Delaware County's Council Chairman, Charlie] Keeler 

said the original $1.8 million the county spent with 

Community Development funds would have to be spent 

on projects permitted under that program's 

regulations. Any additional property accrued in interest

could be spent for other purposes, including improving

the remaining park area.

App. at 91 (emphasis added). A third article explained the 

transaction in which the Penza Tract was sold but 

contained no references to what would become of the sale's 

proceeds. App. at 92. The district court viewed all three 

articles as revealing essential facts about the purchase and 

sale of the Penza Tract as well as the use made by the 

County of CDBG funds and of the Penza Tract sale's 

proceeds. 

The district court also relied on a Pretrial Memorandum 

prepared on the County's behalf in an unrelated citizens' 

suit against the County. Dunleavy refers to this 

memorandum in his Second Amended Complaint. Second 

Amended Compl. at ¶ 24. In the memorandum, County 

officials represented that proceeds from the sale of the 

Penza Tract to the Commonwealth would "be returned to 

the Community Development program in accordance with 

HUD regulations." App. at 33. The district court viewed the 

_________________________________________________________________ 

10. Although these newspaper articles are not mentioned in the 

pleadings, there is no reason why they may not be relied upon in 

determining whether we possess subject matter jurisdiction. Indeed, the 

newspaper articles were appended to the County's Rule 12(b)(1) Motion 

to Dismiss filed in the district court. 

 15 
memorandum as a public disclosure of the County's 

knowledge of its obligation to return the funds to the 

federal fisc. 

A third source of information derives from Annual 

Financial Audits submitted by the County to the federal 

government in accordance with its obligations under the 

Single Audit Act, 31 U.S.C. § 7501 et seq. These audits 

each contained a Balance Sheet and Statement of 

Revenues, Expenditures, and Changes in Fund Balance for 

several accounts including one called the Penza Fund. The 

Penza Fund was described in the audits as a fund 

established to account for the proceeds and related

investment income on the sale of a County owned tract 

of land to the Commonwealth of Pennsylvania, the 

County's intention is to use these funds for the 

purchase of land. 

See, e.g., App. at 94. Despite the changes in the status of 

the accounts from 1985 to 1993, this description of the 

fund's purpose remained a constant. The district court 

found that these audits revealed the County's retention of 

the proceeds from the sale of the Penza Tract and the 

County's use of the interest from these proceeds. 

The final source identified by the parties and relied on by 

the district court is a 1992 GPR submitted by the County 

to the federal government. In this report, the County failed 

to account for the proceeds of the sale of the Penza Tract 

held in its accounts. The district court found that, by 

omitting the Penza Tract fund from the GPR, the County 

completed the disclosure of all material elements of the 

fraudulent transaction since this act "disclosed the 

County's alleged failure to report the proceeds to HUD as 

program income." Dunleavy, 1996 WL 392545, at *3. 

Dunleavy now contends that no combination of these 

documents could have revealed all the necessary elements 

to complete the inference of fraud. In particular, Dunleavy 

dismisses the GPR as "devoid of any information related to 

the Penza tract, the escrow fund, or the fraud scheme." 

Dunleavy insists that the GPR does not complete the

disclosure of the fraudulent transaction because 

 16 
[t]he 1992 GPR does not report any program income 

related to the sale of the Penza tract. It contains

absolutely no information about the escrowed proceeds 

of the sale of a portion of the Penza tract, the obligation 

to return those proceeds or the use of those proceeds. 

It is absolutely silent as to any issue that is related the 

fraud scheme alleged by Mr. Dunleavy. 

Appellant's Br. at 22. 

The County concedes the accuracy of Dunleavy's reading 

of the GPR but argues the significance of this source 

derives from what the GPR does not say: 

[T]he only allegation which arguably was not disclosed 

was the actual non-reporting of the proceeds (and the 

interest thereon) as Program Income under the CDBG 

program. However, as shown herein, the County did

report the receipt of the proceeds and interest through 

other public disclosures (i.e. the articles and audits). 

. . . [T]he fact of non-reporting was in the possession of 

the Government -- that is, in addition to being the

recipient of most (if not all) of the public disclosures, 

the Government also received the annual Grantee 

Performance Report ("GPR") which allegedly omitted the 

proceeds as Program Income. . . . HUD was in 

possession of the public disclosures outlined above and

was in possession of the GPRs allegedly omitting the 

Program Income . . . . 

Appellee's Br. at 27. The County maintains that it is the 

submission of the 1992 GPR to the federal government 

which completes the inference of fraud since it publicly 

exposed the inconsistencies in the County's other 

statements which acknowledged the County's retention and 

use of program income and interest, and the non-disclosure 

of that Program Income in the GPR itself. 

We conclude that the 1992 GPR is the only source that, 

if publicly disclosed, would complete the inference of fraud.11 

_________________________________________________________________ 

11. Here there is no evidence that, prior to Dunleavy's filing of his 

Complaint, the federal government had done anything more than place 

this information, along with countless other reams of paper, in some 

government file room. 

 17 
As already stated, no source makes a public allegation of 

fraud. The remaining sources disclosed only the actual

state of facts, i.e. the County's retention of the Penza Tract 

proceeds and interest. It is undisputed that only the 1992 

GPR contained the misrepresented state of facts, i.e., the 

County's failure to inform the federal government that it 

had these funds in its possession.12 

Although neither Dunleavy nor the County has produced 

the 1992 GPR as part of the record, they are in apparent 

agreement that Delaware County was obliged, but failed, to 

disclose its possession of the Penza Tract proceeds in the 

1992 GPR. Congress explicitly provided for the submission 

of such reports to be used in the Secretary's review of 

program implementation: 

Each grantee shall submit to the Secretary . . . a 

performance report and evaluation report concerning

the use of funds made available under section 5306 of 

this title, together with an assessment by the grantee 

of the relationship of such use to the objectives 

identified in the grantee's statement [of objectives 

previously provided to the Secretary]. . . . The 

grantee's report shall indicate its programmatic 

accomplishments, the nature and reason for changes 

in the grantee's program objectives, indications of how 

the grantee would change its program as a result of its 

experiences, and an evaluation of the extent to which 

its funds were used for activities that benefited lowand moderate-income persons. The report shall include 

a summary of any comments received by the grantee 

from citizens in its jurisdiction respecting its program. 

42 U.S.C. § 5304(e) (1992) (emphasis added). Specifically, 

HUD regulations imposed a duty to record program income 

received or expended as part of the CDBG program. See 24 

C.F.R. § 570.504(a) (1993). 

_________________________________________________________________ 

12. To Dunleavy's way of thinking, disclosures that antedated the 

opening of the Blue Route are immaterial to our consideration of the 

public disclosure bar. We do not agree. While the inference of fraud may 

not have been complete until the County's 1992 GPR disclosed the 

misrepresented state of facts, the elements of the fraud disclosed prior 

to that point are relevant to such a fraudulent scheme and do not 

become immaterial because of the simple passage of time. 

 18 
Without the benefit of Dunleavy's insider position,

someone investigating government fraud would be able to 

ascertain that the County had not fulfilled its reporting 

obligation only if that individual had access to the GPR. 

2. Is the GPR a Public Disclosure?

Our only remaining task then is to determine whether the 

County's 1992 GPR constitutes a "public disclosure" within 

the meaning of § 3730(e)(4)(A). Neither party focussed on 

this issue;13 instead, both litigants concentrate on 

identifying the elements of the alleged fraudulent 

transactions, under the apparent assumption that the GPR 

effected a public disclosure under the "potentially available" 

standard developed by this Court in Stinson, 944 F.2d at 

1157-60. Indeed, the district court shared this view of the 

GPRs in its simple conclusion that "[t]he omission of the 

Penza Fund from annual GPRs disclosed the County's 

alleged failure to report the proceeds to HUD as program 

income." Dunleavy, 1996 WL 392545, at *3. We believe, 

however, that this aspect of the case merits more attention 

than it has been given. 

To answer the question whether a certain fact has been 

"publicly disclosed," we must make two distinct inquiries. 

The first is to ask whether the source is one recognized by 

the Act. The second posits whether the extent of disclosure 

is sufficient to support the conclusion that the information 

contained therein is now public within the meaning of the 

Act. Stinson supports this division of our exploration. 944 

F.2d at 1154-60. In Stinson, we also undertook a two-part 

inquiry. We first examined whether the term "civil . . . 

hearing" as used in § 3730(e)(4)(A) encompassed documents 

produced by a litigant but not filed with the court as part 

of discovery proceedings during civil litigation. Id. at 1154- 

1157. Upon concluding that the statute did indeed 

contemplate this aspect of litigation as a source, we next 

determined to what extent the disclosure must be made 

_________________________________________________________________ 

13. Dunleavy does note in passing that "[t]he GPR's are not the types of 

disclosures enumerated by the statute, and must not be considered as 

public disclosures." Appellant's Br. at 16-17. 

 19 
public before the jurisdictional bar is invoked. Id. at 1157- 

60. 

Similarly, we will first consider whether a GPR represents 

a source of disclosure contemplated by Congress in drafting 

the jurisdictional bar. Section 3730(e)(4)(A) identifies the 

following sources for disclosures: "a criminal, civil, or 

administrative hearing, . . . a congressional, administrative, 

or Government Accounting Office report, hearing, audit, or 

investigation, or . . . the news media . . . ." The prevailing 

view is that this list constitutes an exhaustive rendition of 

the possible sources. We agree. As explained by the

Eleventh Circuit, we may safely assume that Congress 

knew what it was doing when it crafted the FCA: 

The list of methods of "public disclosure" is specific 

and is not qualified by words that would indicate that 

they are only examples of the types of "public 

disclosure" to which the jurisdictional bar would apply. 

Congress could easily have used "such as" or "for 

example" to indicate that its list was not exhaustive. 

Because it did not, however, we will not give the 

statute a broader effect than that which appears in its 

plain language. 

United States ex rel. Williams v. NEC Corp., 931 F.2d 1493, 

1499-1500 (11th Cir. 1991); see also United States ex rel.

Fine v. Advanced Sciences, Inc., 99 F.3d 1000, 1004 (10th 

Cir. 1996) (holding that § 3730(e)(4)(A) "defines the sources 

of allegations and transactions which trigger the bar but 

. . . does not define the only means by which public 

disclosure can occur"); United States ex rel. Doe v. John Doe

Corp., 960 F.2d 318, 323 (2d Cir. 1992) ("Section 

3730(e)(4)(A) furnishes an exclusive list of the ways in 

which a public disclosure must occur for the jurisdictional 

bar to apply."); United States ex rel. LeBlanc v. Raytheon

Co., Inc., 913 F.2d 17, 20 (1st Cir. 1990) (Section 

3730(e)(4)(A) "does not deny jurisdiction over actions based 

on disclosures other than those specified . . . ."). 

The only way to bring the GPR, prepared by the County, 

within the language of § 3730(e)(4)(A) is for the GPR to be 

considered an "administrative . . . report." It is unlikely that 

Congress intended the public disclosure bar to be invoked 

 20 
without limitation as to the content or source of such 

administrative reports. Indeed, we conclude that Congress 

was not referring to administrative reports produced by 

non-federal government sources. 

As we determined in our review of the FCA in Stinson, we 

find that Congress gave us little specific guidance to 

determine the scope of public disclosure sources, including 

"administrative reports." It is noteworthy, however, that the 

terms "report, hearing, audit, or investigation" are modified 

by the words "congressional, administrative, or Government 

Accounting Office." The word "administrative" is capable of 

many meanings. Congress has provided no clear legislative 

intent or meaning for it in the FCA. We will, therefore, turn 

to the doctrine of noscitur a sociis, which permits us to 

treat this word as one which "gathers its meaning from the 

words around it." Jarecki v. G.D. Searle & Co., 367 U.S. 

303, 307 (1961); In re Continental Airlines, Inc., 932 F.2d 

282, 288 (3d Cir. 1991); 2A Sutherland Statutory 

Construction § 47:16 (5th ed. 1992). The application of this 

doctrine is especially appropriate where, as here, "a word is 

capable of many meanings in order to avoid the giving of 

unintended breadth to the Acts of Congress." Jarecki, 367 

U.S. at 307. 

Our reliance upon this maxim leads to the conclusion 

that "administrative" when read with the word "report" 

refers only to those administrative reports that originate 

with the federal government. We take notice of the fact that 

Congress and the Government Accounting Office are 

entities of our federal government. We find it hard to believe 

that the drafters of this provision intended the word 

"administrative" to refer to both state and federal reports 

when it lies sandwiched between modifiers which are

unquestionably federal in character. 

Moreover, a narrow reading of the phrase "administrative 

. . . report" does not risk the arbitrary results that 

motivated our decision in Stinson. There we expressed 

concern that the crabbed interpretation of the word

"hearing" proposed by the relator might produce a situation 

where the jurisdictional question turned on whether a 

judge was present at a given deposition. Stinson, 944 F.2d 

at 1157. Here, in contrast, we have good reasons to treat 

 21 
reports made by the federal government differently from 

those produced by state or local governments or by private 

individuals. Ordinarily, the party accused of defrauding the 

federal government is in control of most of the sources of 

information that would effectively reveal wrongdoing. This 

information dynamic was, in large part, a motivating factor 

behind the 1986 amendments. Congress emphasized its

belief that "[d]etecting fraud is usually very difficult without 

the cooperation of individuals who are either close

observers or otherwise involved in the fraudulent activity." 

S. Rep. 99-345, 99th Cong., 2nd Sess. 4, reprinted in 1986 

U.S.C.C.A.N. 5269. Additionally, the Reporting Committee 

perceived the existence of "a conspiracy of silence" to 

defraud the federal government. Id. at 6, reprinted in 1986 

U.S.C.C.A.N. at 5271. 

In these circumstances, the federal government is illequipped to protect itself by having certain information in 

its possession. When, as in this case, the defrauding party 

is a local government entity required to submit reports to 

the federal government, those reports have been compiled 

and produced by a party whose principal motivation 

(assuming the truth of the fraud claim) is the elimination of 

the paper trail of fraud. If state and local government 

reports were treated as administrative reports under the 

Act, the jurisdictional bar might be invoked through 

information submitted by those bent on convincing a

federal agency that no fraud, in fact, was occurring. That 

problem is especially evident here where the County's GPR 

is the only source from which the public could have learned 

of the County's misrepresentations to the federal 

government. 

Moreover, a broad reading of "administrative reports" 

would be fundamentally inconsistent with the purpose and 

tenor of the 1986 amendments. Congress undertook the 

amending of the FCA to eliminate the draconian 

"government knowledge" standard applied since 1943. This 

standard barred all actions where it could be shown, no 

matter how attenuated the case, that the information on 

which the qui tam suit was based had passed into the 

possession of the federal government prior to the suit's 

filing. See S. Rep. No. 345, 99th Cong., 2d Sess. 10-13, 

 22 
reprinted in 1986 U.S.C.C.A.N. 5266, 5275-78 (discussing 

inter alia United States ex rel. Wisconsin v. Dean, 729 F.2d 

1100 (7th Cir. 1984), where it was held that the state of 

Wisconsin could not maintain an action based entirely on 

that state's investigations of the defendant because the 

state had conveyed the same information to federal 

agencies in routine disclosures required by federal law). 

Concerned about the "conspiracy of silence" and the

prevalence of fraud, Congress sought to reforge the balance 

between over- and under-deterrence. See S. Rep. No. 345, 

99th Cong., 2d Sess. 6, reprinted in 1986 U.S.C.C.A.N. at 

5271. The principal intent of the 1986 amendments was to 

"have the qui tam suit provision operate somewhere 

between the almost unrestrained permissiveness 

represented by the Marcus decision and . . . the 

restrictiveness of the post-1943 cases, which precluded suit 

even by original sources." Stinson, 944 F.2d at 1154. 

The expansion of the FCA's definition of "administrative 

report" to state and local government reports would in effect 

return us to the unduly restrictive "government knowledge" 

standard. There is no suggestion that HUD had any access 

to information about the misrepresented state of facts 

beyond what the County submitted in its 1992 GPR. Nor is 

there evidence of any government investigation based on 

this information prior to the airing of Dunleavy's 

allegations. Although under the Stinson standard, this 

information is potentially accessible by any citizen willing to 

proceed under the Freedom of Information Act, 5 U.S.C. 

§ 552 et seq., we cannot overlook the fact that Stinson dealt 

with information produced on the public record in 

connection with litigation while here we are concerned with 

reports that may be filed away without the receiving agency 

being put on notice that there is any reason to give them 

close attention.14 

For the above reasons, we conclude that Congress meant 

to bar reliance only on "administrative reports" originating 

with the federal government. Since the 1992 GPR was

_________________________________________________________________ 

14. We do not by this suggest that Stinson's "potential availability" 

standard never applies outside the context of litigation. We only posit the 

dangers of extending its reach to the context now before us. 

 23 
prepared by or at the behest of Delaware County, it is not 

a source of public disclosure contemplated by Congress. 

Because we have answered the first part of our inquiry in 

this manner, we do not need to go on to the issue of the 

extent of disclosure. 

III. Conclusion 

We reaffirm our holding in Stinson that "[s]ection 

3730(e)(4) applies only when information has been publicly 

disclosed through an enumerated method prior to the filing 

of a qui tam suit based on that information." 944 F.2d at 

1176. However, the facts of this case differ significantly 

from Stinson. We read 30 U.S.C. § 3730(e)(4)(A)'s reference 

to "administrative reports" as barring only those actions 

based on administrative reports that originate with the 

federal government. Because the 1992 GPR is the only 

source which would reveal that Delaware County had not 

fulfilled its reporting obligation to HUD, we must conclude 

that not all essential elements of the fraud have been 

publicly disclosed. We will, therefore, reverse the decision of 

the district court and remand this matter to it for further 

proceedings consistent with this opinion. 

A True Copy: 

Teste: 

Clerk of the United States Court of Appeals

for the Third Circuit

 24