2007 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

1-12-2007

USA ex rel Atkinson v. PA Shipbuilding Co

Precedential or Non-Precedential: Precedential

Docket No. 04-3374

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

__________ 

No. 04-3374

 

UNITED STATES OF AMERICA, ex rel.,

PAUL E. ATKINSON; EUGENE SCHORSCH

 v.

PA. SHIPBUILDING CO.; FIRST FIDELITY BANK, N.A.;

SUN SHIP, INC.

 Paul E. Atkinson,

 Appellant.

 

Appeal from the United States District Court

for the Eastern District of Pennsylvania

(D.C. Civil Action No. 94-cv-07316)

District Judge: Honorable William H. Yohn, Jr.

 

Argued on November 15, 2005
2

Before: FUENTES, BECKER*, and ROTH**, Circuit Judges

(Opinion filed: January 12, 2007 )

John G. Harkins, Jr., Esquire (Argued)

Eleanor M. Illoway, Esquire

David W. Engstrom, Esquire

Harkins Cunningham

2005 Market Street

2800 One Commerce Square

Philadelphia, PA 19103

Counsel for Appellee Sun Ship Inc.

_________________

*This case was argued before the panel of Judges

Fuentes, Becker and Roth. Judge Becker died on May 19,

2006, before the filing of the Opinion. The decision is filed

by a quorum of the panel. 28 USC § 46(d)

**Judge Roth assumed senior status on May 31, 2006.
3

Thomas H. Lee, II, Esquire (Argued)

Veronica B. Rice, Esq.

Dechert LLP

1717 Arch Street

4000 Bell Atlantic Tower

Philadelphia, PA 19103

Joseph O. Click, Esquire

Blank Rome LLP

600 New Hampshire Avenue, N.W., Suite 1100

Washington, DC 20037

Counsel for Appellee PA Shipbuilding Co.

Joseph G. DeRespino, Esquire (Argued)

Robert J. Dougher, Esquire

DeRespino & Dougher

1818 Market Street, Suite 2910

Philadelphia, PA 19103

Counsel for Appellee Fidelity Bank

William N. France, Esquire (Argued)

Healy & Baillie LLP

61 Broadway

New York, NY 10006-2701

Counsel for Appellant
 1

Qui tam actions have a long history and were used in

England before the foundation of this country. “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.”

Vermont Agency of Natural Res. v. United States ex rel.

Stevens, 529 U.S. 765, 759, n.1, 120 S. Ct. 1858, 146 L. Ed. 2d

836 (2000). 

 2

31 U.S.C. §§ 3729(a)(2)-(4), and (7) impose liability on a

person or entity who does any of the following:

(2) knowingly makes, uses, or causes to be made

or used, a false record or statement to get a false

or fraudulent claim paid or a p p r o v e d b y t h e

government;

(3) conspires to defraud the Government by

4

 

OPINION

 

ROTH, Circuit Judge:

Paul Atkinson claims that certain companies conspired to

and did defraud the United States Navy in connection with a

contract to build oil tankers. Atkinson brought a qui tam action1

under the False Claims Act (“FCA” or “the Act”), 31 U.S.C. §§

3729-33,2

 alleging both false claims and “reverse” false claims.
getting a false orfraudulent claim allowed or paid;

(4) has possession, custody, or control of property

or money used, or to be used, by the Government

and, intending to defraud the Government or

willfully to conceal the property, delivers, or

causes to be delivered, less property than the

amount for which the person 

receives a certificate or receipt; [or]

. . .

(7) knowingly makes, uses, or causes to be made or used,

a false record or statement to conceal, avoid, or decrease an

obligation to pay or transmit money or property to the

Government . . ..

 3

The original contract called for the construction of nine

Oilers at cost of several hundred million dollars. The final

5

Following submission of the Third Amended Complaint, the

District Court dismissed all of the claims, relying on both

jurisdictional and substantive deficiencies. While we will affirm

the District Court, we do so for different reasons. 

I. Factual Background

Plaintiff/relator Paul Atkinson brought this action based

on fraud allegedly perpetrated on the Navy by Sun Ship Inc.,

Pennsylvania Shipbuilding Co., and First Fidelity Bank, N.A.

(Fidelity), in connection with the construction of Henry J. Kaiser

class Oiler ships.3

 Detailing the alleged fraud requires
contract between the Navy and Penn Ship called for the

construction of two Oilers, and the Navy subsequently exercised

a contract option for Penn Ship to construct an additional two

Oilers. 

 4

 United States ex rel. Dunleavy v. County of Del., 123 F.3d

734, 736 n.2 (3d Cir. 1997) (recognizing 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.”) 

6

discussing both Penn Ship’s corporate history and the events

leading up to the Oiler contract. Although we decide this case

on jurisdictional grounds, we will set forth the facts as Atkinson

has alleged them.4

 

In 1980, Sun Ship decided to get out of the shipbuilding

business. This enabled Sun Ship’s parent company, Sun Co., to

record a large loss reserve from which it was able to obtain a

substantial tax benefit provided it did not go back into the

shipbuilding business. However, Sun Ship had outstanding

obligations which it could not discontinue without incurring

large contractual liability. Accordingly, Sun Ship decided to

continue to build ships via nominally independent companies.

This enabled Sun Co. to obtain the tax benefit without breaching

any of its contractual obligations.

In accordance with this plan, Sun Ship sold the Chester

Shipyard in Chester, Pennsylvania, to three companies

controlled by Edward E. Paden, Chairman of Levingston

Shipbuilding Co. Atkinson alleges that Levingston was not
7

financially sound at the time of sale and that Paden sought Sun

Ship’s help in obtaining Navy work for Levingston prior to the

announcement of the deal. Sun Ship and Levingston allegedly

agreed that Sun Ship would assist Levingston’s pursuit of Navy

contracts and that Levingston would take over Sun Ship’s

existing shipbuilding operations and perform Sun Ship’s

backlog of shipbuilding obligations. The sales agreement

provided that three separate Paden companies would take title

to the Chester Shipyard. Only one of those companies, Penn

Ship, is a party to the current suit. The sales contract contained

restrictive covenants that prevented Penn Ship from guarantying

Levingston’s obligations, making loans to Levingston, or

investing in Levingston. The purpose of these restrictions,

according to Atkinson, was to ensure Sun Company’s tax writeoff.

Two years later, Paden sold a controlling share of his

ownership in Capital Marine Corporation (CMC), the corporate

parent of Paden’s companies including Levingston, to City

Capital Corp., controlled by Thomas C. Weller, Jr., Leland

Moore, and Ronald J. Stevens. The Navy solicited bids for oil

tankers in 1984. According to Atkinson, Penn Ship and Sun

Ship acted together in an effort to misrepresent Penn Ship’s

financial condition to enable it to obtain the Oiler contract. This

was accomplished by the use of allegedly false financial

statements that concealed the fact that Penn Ship, despite the

restrictive covenants in the sales agreement between Sun Co.

and Paden, was propping up Levingston financially. A possible

Levingston bankruptcy could have impeded Penn Ship’s ability

to fulfill the Navy contract because Levingston held a lease on

a floating drydock at the Chester Shipyard – an essential piece
 5

Demanding a performance bond after a bid is accepted is a

significant enough change in the solicitation to require

rebidding. 

 6

Because Penn Ship proposed the Trust Indenture, the Navy

did not have to re-solicit bids. 

8

of equipment for building the Oilers. If creditors foreclosed on

the drydock, Penn Ship would be unable to continue

construction. 

On December 21, 1984, Penn Ship submitted a Best and

Final Offer (BAFO) to build the ships. Of the five bids the

Navy received, Penn Ship’s was by far the lowest. In part, this

was the result of Penn Ship’s failure to include the cost of

architectural and naval drawings necessary for completion of the

project. 

Although the Navy’s solicitation offer was silent as to

performance guarantees, after the Navy had accepted Penn

Ship’s bid, it asked Penn Ship to provide security against

reprocurement costs in the event of default. This posed a

problem for both the Navy and Penn Ship because requiring a

performance bond would have necessitated a new solicitation of

offers.5

 To avoid this, Thomas Weller, Chairman of Penn Ship,

sent a letter to the Navy suggesting a Trust Indenture.6

 The

Navy was to be the beneficiary of a trust, the assets of which

were to be security interests in most of the Chester Shipyard

property. Fidelity was to be appointed trustee. 

The letter contained three statements that Atkinson
9

alleges were false: first, that significant cost overruns were

highly unlikely; second, that the Trust Indenture was

irrevocable; and, third, that the Trust assets would consist of a

security interest in the entire Penn Ship facility at Chester. 

On March 26, 1985, the Navy accepted the Trust

Indenture. Under its terms, Penn Ship was to record the security

instruments comprising the res of the trust. Penn Ship failed to

perform this obligation, and the interests were never recorded.

Fidelity, the trustee, never sought to ensure that Penn Ship

recorded the security interests, did not record them itself, and

never informed the Navy of Penn Ship’s failure to record. Penn

Ship and the Navy entered into the Oiler contract on May 6,

1985. Despite the original solicitation offer, the final contract

called for the construction of only two Oilers with an option,

which the Navy later exercised, for two more. 

Near the end of 1987, Penn Ship informed the Navy that

it was having trouble paying subcontractors. In the spring of

1989, Penn Ship reported that it had reached a tentative

agreement with Avondale Industries, Inc., to take over

construction of the two additional Oilers ordered pursuant to the

contract option. In June of 1989, the Navy signed Modification

05, which deleted the option Oilers from its contract with Penn

Ship. The Navy renegotiated with Avondale for construction of

the two option ships. In addition, Modification 05 changed

Penn Ship’s compensation structure from a cost reimbursement

incentive price plan to a fixed price contract for $331,400,000.

In January 1989, the Navy and Penn Ship agreed to

Modification 11, which permitted the Navy to make advance

payments to Penn Ship of up to seventeen million dollars and
 7

The Navy advanced $10 million pursuant to Modification

11.

10

provided that the drydock would act as security.7 

After Modification 11 became effective, Penn Ship told

the Navy that it was unable to perform the contract. In late

August 1989, the Navy and Penn Ship signed Modification 17

(the Default Modification), which stipulated that Penn Ship was

in default and provided that the contract would be transferred to

another company for completion. The Trust Indenture was

terminated and Penn Ship was released from liability under the

contract, except for certain reprocurement costs and other

liabilities. To secure these liabilities, the Navy obtained an

additional two million dollar security interest in the floating

drydock, a subordinated mortgage on some real estate that was

mortgaged under the Trust Indenture, and a preferred mortgage

on a floating derrick. The purpose of these interests was to

encourage Penn Ship to use its best efforts to sell collateral so

that some of those funds could be applied to Penn Ship’s

reprocurement obligations. 

Atkinson claims that Penn Ship did not use its best efforts

to sell the collateral and, in any event, Penn Ship was

unsuccessful in doing so. After the period for the sale of

collateral had expired, Penn Ship sold the derrick to Maritime

Capital Corp (MCC), a corporation controlled by the Thomas

Weller family of corporations. In its offer of sale to MCC, Penn

Ship incorrectly asserted that title to the derrick was free and

clear of encumbrances. This claim was false because of Penn

Ship’s obligations to the Navy. MCC then sold the derrick to
 8

FCA procedure requires relators to allow the government to

take over suits. 31 U.S.C. §§ 3730(a)-(b). If the government

declines to intervene, the relator can proceed as the plaintiff on

the government’s behalf. Id. 

11

Donjon Marine Co., Inc., a good faith purchaser for value with

no notice of the Navy’s unrecorded security interest. This bill

of sale also asserted that MCC owned the derrick free of

encumbrances.

On January 13, 1992, Penn Ship and the Navy entered

into Modification 20, which released Penn Ship from all of its

contractual obligations under the Oiler contract. The two ships

under the original contract were never finished and are now

worth only their scrap value, approximately two million dollars.

II. Procedural History

In 1992, Atkinson and then co-relator Eugene Schorsch

brought their first qui tam action based on the circumstances

described above. That action was amended once and then

dismissed without prejudice. 

Atkinson and Schorsch filed this, their second qui tam

action, under seal on December 5, 1994. On June 5, 1997, corelators filed an amended complaint adding Sun Ship as a

defendant. The next day the government declined to intervene.8

Sun Ship and Fidelity filed separate motions to dismiss.

On December 14, 1998, the District Court placed the action on

the special management track, denied without prejudice the
 9

Schorsch officially withdrew from the case by Stipulation

and Order dated June 21, 1999.

12

motions to dismiss, and ordered the co-relators to file a second

amended complaint. Only Atkinson was named as a relator in

the Second Amended Complaint.9

 The defendants then moved

to dismiss the Second Amended Complaint for failure to state a

claim under FED. R. CIV. P. 12(b)(6) and for failure to plead

fraud with particularity as required by FED. R. CIV. P. 9(b). 

The District Court dismissed all of Atkinson’s claims

against Fidelity and Sun Ship and some of his claims against

Penn Ship. Proceeding claim by claim, the District Court

conducted a thorough analysis of all fourteen counts presented

in the Second Amended Complaint. The District Court

concluded that many of Atkinson’s counts were insufficiently

particular under Rule 9(b) or simply failed to state a claim under

Rule 12(b)(6) because, for example, they omitted a required

element of a cause of action. All of the dismissals were without

prejudice to allow Atkinson to file yet another amended

complaint. The District Court cautioned Atkinson that

amendments beyond that were unlikely to be permitted. 

Atkinson then filed the Third Amended Complaint which

set forth twelve distinct counts and abandoned some counts

asserted in the Second Amended Complaint. Only Penn Ship

and Fidelity were named as defendants. They moved to dismiss

under FED. R. CIV. P. 12(b)(1) for lack of subject matter

jurisdiction and under FED.R.CIV.P.12(b)(6) for failure to state

a claim. 
 10For a more detailed discussion of the history of the FCA’s

jurisdictional requirements see Part IV.B.1.

13

The District Court turned its attention first to jurisdiction.

As required by Gould Electronics Inc. v. United States, 220 F.3d

169, 176 (3d Cir. 2000), the District Court determined that it

was dealing with a factual rather than facial challenge to

jurisdiction because “it concerns not an alleged pleading

deficiency, but rather the actual failure of relator’s claims to

comport with the jurisdictional prerequisites contained in 31

U.S.C. § 3730(e)(4).” United States ex rel. Atkinson v. Pa.

Shipbuilding, 255 F. Supp. 2d 351, 362 (E.D. Pa. 2002). This

conclusion permitted the District Court to “consider and weigh

evidence outside the pleadings to determine if it [had]

jurisdiction.” Id. (quoting Gould Elecs. Inc., 220 F.3d at 176).

The District Court then concluded that the pre-1986

version of the FCA’s jurisdictional bar applied to the portion of

Atkinson’s complaint that was derived from events that occurred

prior to the 1986 amendment to the FCA’s jurisdictional

provisions. Id. at 364-67 (citing United States ex rel. Stinson,

Lyons, Gerlin & Bustamante v. Prudential Ins. Co., 944 F.2d

1149, 1153-54 (3d Cir. 1991)).10 The pre-1986 version of the

FCA precluded federal jurisdiction when the relator’s claims

were based on allegations or transactions that had been publicly

disclosed or were based on evidence possessed by the

government at the time that the action was brought. Because the

government had in its possession information regarding the pre1986 claims at the time of the suit’s inception, that portion of the

complaint was disallowed. Id. at 366-67. 
 11In conducting its inquiry pursuant to FED. R. CIV. P.

12(b)(1), the District Court declined to consider amendments to

counts that it did not dismiss from the Second Amended

Complaint because Atkinson was not given leave to amend the

non-dismissed counts, nor did he obtain consent to do so from

the adverse parties. FED.R.CIV.P. 15. Atkinson claims that the

District Court’s decision not to permit amendment was an abuse

of discretion. We address and reject that argument in part

IV.B.2.c.

14

The District Court next turned to the defendants’ primary

jurisdictional argument under 31 U.S.C. § 3730, which, as we

will discuss in more detail below, precludes the federal courts

from exercising jurisdiction over a qui tam action when a

complaint is based on material that is publicly disclosed under

31 U.S.C. § 3730(e)(4)(A) unless the relator is an “original

source” of the information under 31 U.S.C. § 3730(e)(4)(B).11

Proceeding claim by claim under the rubric set forth in

Dunleavy, 123 F.3d at 740, and United States ex rel. Springfield

Terminal Railway Co. v. Quinn, 14 F.3d 645, 654 (D.C. Cir.

1994), the District Court determined that all of Atkinson’s

claims were based upon allegations or transactions that were

publicly disclosed and that Atkinson was an original source only

of the non-recording of the security interests listed in the Trust

Indenture. As to the claims that did not involve the nonrecording, the District Court concluded that it lacked jurisdiction

under 31 U.S.C. § 3730(e)(4)(A) because the information was

publicly disclosed and Atkinson was not an original source of

any of the components of the claims. For the remaining counts

that were based in part on the non-recording as well as on

another essential element that was publicly disclosed but for
 1231 U.S.C. § 3729(a)(3) provides liability for “[a]ny person

who–conspires to defraud the Government by getting a false or

fraudulent claim allowed or paid[.]” Reverse false claims are

centered around an alleged fraudulent effort to reduce a liability

owed to the government rather than to get a false or fraudulent

claim allowed or paid. 

15

which Atkinson was not an original source, the District Court

held that jurisdiction was still lacking because, under the District

Court’s reading of our decision in United States ex rel. Mistick

v. Housing Authority of the City of Pittsburgh, 186 F.3d 376 (3d

Cir. 1999), a relator must be an original source of all essential

elements of a claim to survive a jurisdictional challenge under

section 3730. 

The only claim to survive the District Court’s

jurisdictional analysis was the portion of the conspiracy claim

based exclusively on information for which the court found

Atkinson to be an original source – Penn Ship’s failure to record

and Fidelity’s failure to ensure recordation of the security

interests. As to that claim, the District Court partially granted

the defendants’ motion under Rule 12(b)(6) by dismissing the

portion of the count alleging a reverse false claim because the

District Court believed that 31 U.S.C. § 3729(a)(3) did not

support that type of action.12 Also, the District Court dismissed

the portion of the first count that was based on any activity prior

to December 4, 1988, because of the FCA’s six-year statute of

limitations. 31 U.S.C. § 3731(b)(1). 

In a later opinion, the District Court granted summary

judgment to Penn Ship and Fidelity on the sole remaining FCA
16

conspiracy claim after determining that no reasonable jury could

conclude that Penn Ship and Fidelity formed an agreement to

defraud the government. The District Court first noted that

recovery under 31 U.S.C. § 3729(a)(3) requires a plaintiff to

show (1) a conspiracy to get a false or fraudulent claim allowed

or paid and (2) an act in furtherance of the conspiracy.

Following an exhaustive review of Atkinson’s proffered

evidence, the District Court concluded that the evidence fell

short of establishing the required agreement. Atkinson filed a

motion to reconsider which was denied on September 15, 2004.

Atkinson then filed a timely notice of appeal. 

III. Jurisdiction and Standard of Review

This action was brought under the FCA, 31 U.S.C. §§

3729-33 (1988). The District Court determined that it lacked

subject matter jurisdiction under 31 U.S.C. § 3730(e)(4) over all

but a portion of the first count of the Third Amended Complaint.

The District Court then dismissed the remainder of Atkinson’s

action by way of summary judgment on July 28, 2004. We have

jurisdiction over the District Court’s final order under 28 U.S.C.

§ 1291. 

We exercise plenary review of a District Court’s

dismissal for lack of subject matter jurisdiction under the FCA.

Stinson, 944 F.2d at 1152. Because we will dismiss all of

Atkinson’s claims pursuant to the FCA’s jurisdictional bar, we

have no occasion to review the District Court’s grant of

summary judgment. 

There is disagreement among the parties as to the nature
17

of the plaintiff’s burden when faced with a Rule 12(b)(1)

challenge to jurisdiction. Under Gould Electronics Inc., 220

F.3d at 178, we must start by determining whether we are

dealing with a facial or factual attack to jurisdiction. If this is a

facial attack, the court looks only at the allegations in the

pleadings and does so in the light most favorable to the plaintiff.

Mortensen v. First Fed. Sav. & Loan Ass’n, 549 F.2d 884, 891

(3d Cir. 1977). If this is a factual attack, however, it is

permissible for a court to review evidence outside the pleadings.

Gould Elecs. Inc., 220 F.3d at 176 (citing Gotha v. United

States, 115 F.3d 176, 178-79 (3d Cir. 1997); Mortensen, 549

F.3d at 891)). The District Court held that this was a factual

challenge “as it concerns not an alleged pleading deficiency, but

rather the actual failure of relator’s claims to comport with the

jurisdictional prerequisites contained in 31 U.S.C. § 3730(e)(4).”

Atkinson, 255 F. Supp. 2d at 362. We agree. 

In the interim between the defendants’ partially

successful challenge to Atkinson’s Second Amended Complaint

and the District Court’s disposition of the defendants’ motion to

dismiss for want of jurisdiction in response to the Third

Amended Complaint, the parties conducted extensive discovery

on the jurisdictional issue. Moreover, the defendants’ challenge,

as accurately set forth by the District Court, goes to the actual

facts supporting Atkinson’s qui tam claim, not merely how those

facts were pled. Therefore, the District Court was entitled to

consider and weigh evidence outside the pleadings and properly

placed the burden of establishing jurisdiction on Atkinson.

Gould Elecs. Inc., 220 F.3d at 176-77 (citing Pension Benefit

Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d

Cir. 1993)). 
 13Atkinson cites Hughes Aircraft Co. v. United States ex rel.

Schumer, 520 U.S. 939, 951, 117 S. Ct. 1871, 138 L. Ed. 2d 135

(1997), for the proposition that the jurisdictional requirements

18

Having held that this is a factual challenge to jurisdiction,

we now turn to Atkinson’s claim that, because in his view the

substantive and jurisdictional facts are intertwined, the District

Court should have demanded less in terms of jurisdictional proof

than otherwise customary. Atkinson is correct that, where

jurisdictional and substantive facts are intertwined, we demand

less by way of jurisdictional proof for a plaintiff to survive a

Rule 12(b)(1) challenge. Gould Elecs. Inc., 220 F.3d at 178

(citing Mortensen, 549 F.2d at 891, 897-98). Defendants assert,

however, that this is not a case of intertwined facts, and,

therefore, the relaxed standard does not apply. Defendants have

the better of the argument.

Atkinson’s underlying burden to prove a substantive

violation of the FCA is in no way intertwined with his burden to

establish jurisdiction pursuant to 31 U.S.C. § 3730 and Rule

12(b)(1). The jurisdictional requirements of the FCA involve

assessing whether the allegations and transactions constituting

the bases of the claims were publicly disclosed and whether, if

they were, the relator is an original source – meaning that he has

direct and independent knowledge of the information. 31 U.S.C.

§§ 3730(e)(4)(A)-(B). If a relator gets over these hurdles, he

must then make his substantive case. This requires establishing

that the defendant submitted false claims. 31 U.S.C. §§

3729(a)(2)-(4), (7). To meet this burden, a plaintiff must put

forth proof wholly distinct from that necessary to survive a

jurisdictional challenge under §§ 3730(e)(4)(A)-(B).13 Thus, we
of the FCA affect the “substantive rights of the parties . . ..”

This, apparently, is designed to encourage us to hold that

jurisdictional and substantive facts are always intertwined under

the FCA. Hughes Aircraft Co. requires no such result. In

Hughes Aircraft Co., the Court was faced with whether the

FCA’s jurisdictional restrictions applied retroactively. Id.

Hughes Aircraft Co. had nothing to do with how a plaintiff must

go about establishing jurisdiction under the FCA. The Court’s

holding in that case in no way impacts the requirement that the

facts necessary to establish both jurisdiction and a right to

substantive relief must be intertwined before any relaxed burden

of proof applies to plaintiffs dealing with factual challenges to

jurisdiction under Rule 12(b)(1).

19

hold that the District Court applied the proper standard in

reviewing the defendants’ Rule 12(b)(1) challenge, and we will

apply the same standard in conducting our plenary review of the

jurisdictional issues.

IV. Discussion

 A. Waiver of Claims for Failure to Reassert in 

 Subsequent Pleading 

Before turning to the District Court’s jurisdictional

rulings, we must address Sun Ship’s contention that Atkinson

waived his right to appeal the District Court’s dismissal of Sun

Ship from the Second Amended Complaint by failing to replead

claims against Sun Ship in his Third Amended Complaint. We

agree with Sun Ship and hold that Atkinson has waived his right

to assert error in connection with the dismissal of his claims
 14It appears that the decision to omit Sun Ship from the Third

Amended Complaint was a strategic choice by Atkinson’s then

counsel Storch, Amini & Munves, P.C (“Storch”). At the

hearing before the District Court over Storch’s motion to

withdraw as counsel, Atkinson said that he “strongly protested

the refusal of the Storch firm to rename Sun Ship as a

[defendant] in the [Third Amended Complaint], . . . but . . .

reluctantly agreed to allow [it]” believing that Storch would

rename Sun Ship after discovery produced more evidence

implicating it in the alleged FCA violations. Letter to Judge

Yohn (Sept. 8, 2004). 

20

against Sun Ship.

In addition to naming Fidelity and Penn Ship, the Second

Amended Complaint also included claims against Sun Ship. As

discussed above, the District Court dismissed, without prejudice,

all of the claims pertaining to Sun Ship under Rules 9 and

12(b)(6). The District Court specifically granted Atkinson leave

to amend his complaint but warned him that further amendments

would probably not be permitted. When Atkinson filed his

Third Amended Complaint, he once again named Penn Ship and

Fidelity, but Sun Ship was no longer included as a party.

Indeed, when the District Court disposed of the remaining

defendants’ motions to dismiss the Third Amended Complaint,

it remarked that “Sun Ship has been dropped as a defendant.”14

Atkinson, 255 F. Supp. 3d at 361. On appeal, Atkinson now

challenges the District Court’s decision to grant Sun Ship’s

motion to dismiss even though the dismissal was without

prejudice, Atkinson did not include Sun Ship in the Third

Amended Complaint, and Atkinson did not otherwise indicate
 15Requiring a plaintiff to replead where repleading would be

futile “merely sets a trap for unsuspecting plaintiffs with no

concomitant benefit to the opposing party.” Davis v. TXO Prod.

Corp., 929 F.2d 1515, 1518 (10th Cir. 1991) (citation omitted).

 16The Ninth Circuit, which we decline to follow, has

articulated the most formalistic approach in these circumstances.

E.g., Marx v. Loral Corp., 87 F.3d 1049, 1055-56 (9th Cir.

1996). Holding fast to the general rule that “an amended

complaint ordinarily supersedes the original and renders it of no

legal effect,” International Controls Corp. v. Vesco, 556 F.2d

665, 668 (2d Cir. 1977), the Ninth Circuit has held that “all

causes of action alleged in an original complaint which are not

alleged in an amended complaint are waived.” King v. Atiyeh,

814 F.2d 565, 567 (9th Cir. 1987). 

The Tenth and Fifth Circuits take a more flexible

21

an intention to stand on his dismissed pleading as to Sun Ship.

We conclude that where, as here, it would not have been futile

to replead dismissed claims but those claims are nevertheless

omitted from an amended pleading, the right to challenge the

basis for dismissal on appeal is waived.15 

This Court has yet to articulate a rule concerning whether

the failure to include a dismissed claim in an amended pleading

constitutes a waiver of the right to challenge on appeal the basis

for the dismissal. We believe the proper rule allows plaintiffs to

appeal dismissals despite amended pleadings that omit the

dismissed claim provided repleading the particular cause of

action would have been futile.16 As far as our research suggests,
approach. “[W]hile the pleader who amends or pleads over,

waives his objections to the ruling of the court on indefiniteness,

incompleteness or insufficiency, . . . he does not waive his

exception to the ruling which strikes ‘a vital blow to a

substantial part’ of his cause of action.” Davis, 929 F.2d at 1517

(quoting Blazer v. Black, 196 F.2d 139, 143–44 (10th Cir. 1952)

(citation omitted); Wilson v. First Houston Inv. Corp., 566 F.2d

1235, 1237-38 (5th Cir. 1978)). 

22

no appellate court has yet faced the amended complaint waiver

rule where, as here, the amended complaint leaves out a

defendant rather than merely a cause of action. When a

plaintiff’s amended complaint leaves out a party previously

named in the preceding complaint, the equitable principles we

enunciate here apply even more strongly because parties that do

not appear in amended complaints have a legitimate expectation

that they are no longer involved in the litigation.

Repleading is futile when the dismissal was “on the

merits.” A dismissal is on the merits when it is with prejudice

or based on some legal barrier other than want of specificity or

particularity. In re Burlington Coat Factory Sec. Litig., 114 F.3d

1410, 1435 (3d Cir. 1997) (finding futility, in the context of

discussing leave to amend, where claims would not survive a

Rule 12(b)(6) motion “even if pled with more particularity.”).

For example, dismissals based on subject matter jurisdiction or

preemption should be understood as being on the merits. See

Joyce v. RJR Nabisco Holdings Corp., 126 F.3d 166, 173-74 (3d

Cir. 1997) (declining to find waiver where plaintiff did not file

an amended complaint following a district court’s preemption

based rejection). Repleading is futile in such cases because the
 17Sometimes deciding whether dismissal is on the merits will

require reading the district court’s dismissal order in light of the

plaintiff’s alleged litigating position. For example, in Bastian v.

Petren Resources Corp., 892 F.2d 680, 682-83 (7th Cir. 1990),

the plaintiff’s original complaint charged violations of Rule 10b5 and 18 U.S.C. §§ 1961 et. seq. (the RICO statute). The RICO

claim was dismissed with leave to amend because of a technical

pleading deficiency. The 10b-5 claim, however, had what the

district court believed to be a more serious problem: failure to

allege loss-causation. Plaintiff, however, contended that an

allegation of loss-causation was not necessary. Id. at 683.

Although the district court dismissed that claim with leave to

amend (that is, to include facts supporting loss-causation), we

considered the dismissal to have been on the merits for waiver

purposes because the pleading “error” went to the legal

requirements of a 10b-5 action. 

 18The practice of standing on a dismissed complaint for

purposes of invoking appellate review is by no means foreign to

this Court. “[A] dismissal without prejudice is not a final

23

legal inadequacy cannot be solved by providing a better factual

account of the alleged claim.17 To the extent that there is

uncertainty as to whether a dismissal is on the merits, doubts

should be resolved against the party asserting waiver.

If a party omits a claim from an amended complaint that

it would not have been futile to replead, that party can still

preserve the claim for appellate review by standing on the

dismissed claim despite leaving it out of the amended

complaint.18 We do not adopt a rigid requirement as to what a
appealable order under § 1291, unless the plaintiff can no longer

amend the complaint or unless the plaintiff declares an intention

to stand on the complaint as dismissed.” Semerenko v. Cendant

Corp., 223 F.3d 165, 172 (3d Cir. 2000) (citations omitted);

Borelli v. City of Reading, 532 F.2d 950 (3d Cir. 1976). 

24

plaintiff must do to stand on a dismissed complaint. Adding a

section to an amended pleading specifically preserving the claim

certainly suffices. Smith v. Nat’l Health Care Serv. of Peoria,

934 F.2d 95, 98 (7th Cir. 1991) (involving case where plaintiff

added a “Preserved Claims” section to his amended pleading).

It would also be acceptable for a plaintiff to file a notice with the

district court stipulating that he has decided to stand on his

previous pleading with respect to a claim or party now dropped

from the otherwise operative pleading. 

In this case, it is clear from the District Court’s opinion

that it would not have been futile to replead the claims against

Sun Ship because the dismissals were based on pleading

deficiencies rather than substantive disagreements regarding the

legal requirements of the causes of action. The District Court

specifically invited Atkinson to file an amended complaint. The

District Court dismissed count one of Atkinson’s Second

Amended Complaint because Atkinson failed to plead facts

necessary to sustain relief: “[B]ecause the complaint lacks any

allegations supporting an agreement to commit a fraudulent act

entered into by Sun Ship and any other defendant, . . . the court

will dismiss the claim for conspiracy against Sun Ship under the

FCA without prejudice.” United States ex rel. Atkinson v. Pa.

Shipbuilding Co., No. CIV.A.94-7316, 2000 WL 1207162, at

*11 (E.D. Pa. Aug. 24, 2000). Likewise, the District Court
25

dismissed counts two through four based on similar pleading

deficiencies. See, e.g., Atkinson, 2000 WL 1207162, at *14-16

(“Nowhere in the complaint is it alleged, much less with the

particularity required by Rule 9(b), how the actions of Sun Ship

caused Penn Ship to make misrepresentations to the Navy.”). 

Atkinson’s Third Amended Complaint did not name Sun

Ship as a defendant. Moreover, Atkinson never informed the

District Court or Sun Ship that he was standing on his

allegations in the Second Amended Complaint vis-à-vis Sun

Ship rather than simply dropping Sun Ship from the suit.

Atkinson filed his notice of appeal from the District Court’s

final order granting Fidelity and Penn Ship summary judgment

on August 17, 2004 – almost four years after Atkinson had filed

his Third Amended Complaint that failed to include Sun Ship as

a defendant. It would be unjust under these circumstances to

enable Atkinson to drag Sun Ship back into this case after Sun

Ship, by Atkinson’s own decision, was dropped as a defendant.

Accordingly, we hold that Atkinson has waived his right to

challenge the District Court’s grant of Sun Ship’s motion to

dismiss.

B. The FCA’s Jurisdictional Bar

The District Court dismissed a portion of count one, and

all of the remaining counts, based on the FCA’s jurisdictional

bar. 31 U.S.C. § 3730. In reaching its conclusion, the District

Court found that Atkinson’s claim was based upon allegations

or transactions that were publicly disclosed but that Atkinson

was an “original source” only of Penn Ship’s non-recording of

the security interests and Fidelity’s failure to ensure recordation
 19To the extent that the District Court’s discovery orders

affected Atkinson’s ability to formulate his claims, we find that

the District Court did not abuse its discretion in disposing of

Atkinson’s many discovery related motions. 

26

under 31 U.S.C. § 3730(e)(4)(B). For the District Court,

Atkinson’s original source status as to this fact did not preserve

those claims that relied on either element for which Atkinson

was an original source because, under our decision in Mistick,

186 F.3d 376 (3d Cir. 1999), the District Court believed that

Atkinson was required to be an original source of all essential

elements of each claim. 

Because we hold that Atkinson was not an original source

of the non-recording, we need not address whether Mistick

requires a relator to be an original source of all essential

elements of his claim. Likewise, our holding renders it

unnecessary for us to address Atkinson’s other alleged claims of

error in the District Court.19 

1. The FCA’s Jurisdictional Provisions

This Court has previously detailed the history of the FCA

and, in particular, the jurisdictional provisions of 31 U.S.C. §

3730. Dunleavy, 123 F.3d at 738; Stinson, 944 F.2d at 1152-54.

Under certain circumstances, the qui tam provisions allow

private relators to sue, on behalf of the United States, any person

or entity that submits a false claim to the Government. Hughes

Aircraft Co., 250 U.S. at 941, 117 S. Ct. 1871, 138 L. Ed. 2d

135. Before it was amended in 1986, the FCA contained very

restrictive provisions barring qui tam suits if the information on
 20Congress sought a middle-ground between a restrictive

approach that essentially eliminated the FCA’s relator

provisions and a free-for-all of parasitic suits based on publicly

available information. In 1943, the Supreme Court had held that

a relator could bring a qui tam action based solely on

information derived from a government criminal indictment.

United States ex rel. Marcus v. Hess, 317 U.S. 537, 63 S. Ct.

379, 87 L. Ed. 443 (1943). In response, Congress amended the

FCA to prohibit relator suits “based on evidence or information

the government had when the action was brought.” 31 U.S.C.

§ 3730(b)(4) (1982) (superseded). The federal courts read this

restriction broadly, going so far as to prohibit the state of

Wisconsin from bringing a qui tam suit based on evidence of

Medicaid fraud when the state was required to report the

information to the Department of Health and Human Services.

United States ex rel. Wisconsin v. Dean, 729 F.2d 1100, 1106

(7th Cir. 1984). The 1986 amendments were passed as a

response to decisions like Dean which drastically narrowed the

availability of suits by private relators. Stinson, 944 F.2d at

1153-54 (detailing the history of the FCA). As a result, the

1986 Amendments “must be analyzed in the context of [the]

twin goals of rejecting suits which the government is capable of

pursuing itself, while promoting those which the government is

not equipped to bring on its own.” Springfield Terminal, 14

F.3d at 651.

27

which they were based was already in the Government’s

possession. Mistick, 186 F.3d at 382 (citing Hughes Aircraft

Co., 250 U.S. at 941). In an effort to ease the restrictions and

“revitalize” qui tam actions,20 Congress enacted 31 U.S.C. §

3730(e)(4)(A), which provides:
28

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 [sic] 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. 

Under 31 U.S.C. § 3730(e)(4)(B) 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 on the

information.

2. Public Disclosure and Original Source Analysis

To determine whether a plaintiff is barred by the FCA’s

public disclosure provisions, we must first assess whether the

relator’s claim is based on publicly disclosed allegations or

transactions. This, in turn, requires a twofold analysis. First, we

determine whether the information was disclosed via one of the

sources listed in § 3730(e)(4)(A). Second, we decide whether

the relator’s complaint is based on those disclosures. To be

“based upon” the publicly revealed allegations or transactions

the complaint need only be “supported by” or “substantially

similar to” the disclosed allegations and transactions. Mistick,

186 F.3d at 385-88 (rejecting a rule that “based upon” means
29

“actually derived from,” because such a rule would render the

original source exception superfluous).

To aid our analysis we are guided by an algebraic

representation of the nature and extent of disclosure required to

raise the jurisdictional bar. Dunleavy, 123 F.3d at 741 (quoting

Springfield Terminal, 14 F.3d at 654). 

[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. 

Id. To draw an inference of fraud, both a misrepresented [X]

and a true [Y] state of facts must be publicly disclosed. Id. at

741. So, if either Z (fraud) or both X (misrepresented facts) and

Y (true facts) are disclosed by way of a listed source, then a

relator is barred from bringing suit under § 3730(e)(4)(A) unless

he is an original source. 

To be an original source, a relator’s knowledge must be

both direct and independent. “Independent knowledge” is

knowledge that does not depend on public disclosures. Stinson,

944 F.2d at 1160. “Direct knowledge” is knowledge obtained

without any “intervening agency, instrumentality or influence:

immediate.” Id. (quoting Webster’s Third New International

Dictionary 640 (1976)). The FCA “seeks to encourage persons

with ‘first hand knowledge of fraudulent misconduct,’ or those

‘who are either close observers or otherwise involved in the

fraudulent activity’ to come forward.” United States ex rel.
 21A determination that a public disclosure does not qualify

under § 3730(e)(4)(A), as in Dunleavy, does not always end the

inquiry. Where, as here, there is an independent basis upon

which a court finds that an element of a qui tam relator’s claim

was publicly disclosed, the question becomes whether the relator

is an original source of that element under § 3730(e)(4)(B).

Simply because a state record cannot serve as a source of

publicly disclosed allegations and transactions for purposes of

§ 3730(e)(4)(A), Dunleavy, 123 F.3d at 744-45, does not mean

that the public nature of the state record is irrelevant under the

direct and independent knowledge language of § 3730(e)(4)(B).

30

Barth v. Ridgedale Elec., Inc., 44 F.3d 699, 703 (8th Cir. 1995)

(internal citations omitted) (quoting S. Rep. No. 345 (1986),

reprinted in 1986 U.S.C.C.A.N. 5266, 5269)). 

In making our determination whether a relator is an

“original source,” we have yet to describe the proper analysis

when a relator’s claims are based in part upon public disclosures

covered by § 3730(e)(4)(A), but the relator also asserts original

source status on the basis of a review of public information that

does not qualify under that section.21 

We will apply these principles to each of Atkinson’s

claims to determine whether they are barred by §§

3730(e)(4)(A)-(B). In the process, we take this opportunity to

discuss the scope of the original source exception in cases in

which the plaintiff asserts that status based upon learning an

essential element from publicly available information that falls

outside the scope of § 3730(e)(4)(A).
 22Atkinson now asserts that Fidelity’s alleged role in the

conspiracy contained a fourth element – Fidelity’s failure to

inform the Navy that the security interests were not perfected.

Contrary to Atkinson’s assertions, the District Court was correct

to consider only the three aspects of the claim described above

because Atkinson’s own Memorandum in opposition to

defendants’ motions to dismiss did not challenge the defendants

on the ground that there was this fourth aspect to the claim. 

31

 

 a. Count One: Alleged Conspiracy Between Penn

 Ship and Fidelity in Violation of 31 U.S.C.

 §3729(a)(3)

The first count of Atkinson’s Third Amended Complaint

alleges a conspiracy between Penn Ship and Fidelity to cause

“false and fraudulent claims and reverse false claims [to be]

allowed or paid in violation of 31 U.S.C. § 3729(a)(3).”

According to Atkinson, Penn Ship’s alleged participation was its

intentional failure to record the security instruments identified

in the Trust Indenture. Fidelity’s alleged role in the conspiracy

was threefold: (1) the attempt to convince the Navy to accept a

version of the Trust Indenture that excluded a provision for

delivery of all recording documents by Fidelity to the Navy, (2)

the failure to secure recordation, and (3) the failure to sign forms

necessary to perfect the Navy’s security interest.22 
32

Atkinson conceded that the elements of the fraud theory

concerning Fidelity’s alleged role were publicly disclosed.

However, he claims that Penn Ship’s failure to record was not.

The District Court held, and we agree, that the non-recording

claim was based on public disclosures. Both the Navy’s

response to then co-relator Schorsch’s FOIA request and a

Department of Defense Office of the Inspector General Audit

Report of March 25, 1994, (DoD IG Report) constitute public

disclosures within the meaning of § 3730(e)(4)(A) and reveal

the non-recordation. Mistick, 186 F.3d at 383 (holding that a

response to a FOIA request falls within the scope of §

3730(e)(4)(A)’s “administrative . . . report” provision). 

Atkinson argues that his first allegation of the nonrecording of the security interests was in his original qui tam

action which predated the FOIA request and the DoD IG Report.

Therefore, his subsequent qui tam action cannot be “based

upon” the transactions revealed in those documents. Had

Atkinson pursued his original FCA suit, he would have a strong

argument that his claim is not “based upon” the transactions

later revealed in response to the FOIA request and DoD IG

Report. Atkinson’s previous assertion of a FCA claim does not,

however, insulate his subsequent action from normal public

disclosure analysis when the allegations in the later action are

“substantially similar to” the information revealed in the FOIA

request and the DoD IG Report. We cannot articulate it any

better than the District Court: 

Wholly beside the point, under the straightforward

Mistick analysis, is a relator’s own previous assertion of the

relevant allegation or transaction in a prior action or his previous
33

discovery of such via non-public means. While these

considerations might have precluded the application of the

public disclosure bar in the predecessor action, and although

they certainly impact the original source analysis, . . . they do

not alter the fact that the information was disclosed via a

statutorily-enumerated means prior to its assertion in this action

by relator.

Atkinson, 255 F. Supp. 2d at 373; United States ex rel.

Laird v. Lockheed Martin Eng. & Sci. Serv. Co., 336 F.3d 346,

352 n.2 (5th Cir. 2003) (reaching same conclusion) (quoting

United States ex rel. Jones v. Horizon Healthcare Corp., 160

F.3d 326, 330 (6th Cir. 1998)).

Having determined that count one is based upon the

publicly disclosed FOIA request and DoD IG Report, we must

next decide whether Atkinson is an original source. The District

Court held that Atkinson is an original source after concluding

that Schorsch obtained direct and independent evidence of the

non-recording by examining county records. Leaving aside the

issue of whether Schorsch’s knowledge can be imputed to

Atkinson under the FCA, we hold that Schorsch, and therefore

Atkinson, is not an original source of the failure to record.

 

As discussed above, an original source must have “direct

and independent knowledge of the information on which the

allegations are based . . ..” 31 U.S.C. § 3730(e)(4)(B). If a

relator’s knowledge is based solely upon public disclosures

within the meaning of § 3730(e)(4)(A), then the relator does not

have direct and independent knowledge under § 3730(e)(4)(B).

Stinson, 944 F.2d at 1160 (citing Houck ex rel. United States v.
34

Folding Admin. Comm., 881 F.2d 494, 505 (7th Cir. 1989)).

We have yet to specifically address for purposes of the original

source analysis, however, the impact of a relator’s reliance upon

information in the public domain that is not a § 3730(e)(4)(A)

public disclosure. 

In addressing this issue, we are mindful of the Springfield

Terminal approach utilized to determine whether an FCA claim

is “based upon” public disclosures. Once we determine that an

X or Y element is based upon public disclosures under §

3730(e)(4)(A), we focus on whether the relator is an original

source of the information underlying that element. If the

relator’s knowledge of the element is based solely on a §

3730(e)(4)(A) public disclosure, the relator is not an original

source. Stinson, 944 F.2d at 1160. Where, as here, the relator’s

knowledge of the element is based, in whole or part, on

information available in the public domain that is not a §

3730(e)(4)(A) public disclosure, it is the nature and extent of

reliance upon that information that determines whether the

relator is an original source. 

The Tenth Circuit Court of Appeals’ approach to

resolving original source status is informative. In Kennard v.

Comstock Resources, Inc., 363 F.3d 1039 (10th Cir. 2004),

relators brought suit under the FCA against oil and gas well

operators for alleged underpayment of royalties to Indian tribes.

After concluding that there was a prior public disclosure, the

court determined that relators were an original source. Id. The

defense argued that relators were not an original source, in part

because they relied upon public records in reaching their

conclusion that the defendants defrauded the government. Id.
35

The court refused to adopt a bright-line rule always

disqualifying relators as an original source when part of the

basis of their information is consultation of public records. Id.

at 1045. Instead, the court articulated a case-by-case approach:

[T]he degree and character of such reliance is

necessarily deserving of our attention. A mere compilation of

documents already in the public domain will not allow a relator

to qualify as an original source. However, a complete and

thorough investigation of a fraud on the Government will likely

necessarily involve some review of contracts, documents, or

other information in the public domain. It is the character of the

relator’s discovery and investigation that controls this inquiry.

Id. (emphasis added). 

We conclude that the extent of reliance on information

already in the public domain should be a consideration during

the original source inquiry, even if that information is not a

public disclosure within the meaning of § 3730(e)(4)(A). While

it is true that reliance solely on “public disclosures” under §

3730(e)(4)(A) is always insufficient under § 3730(e)(4)(B) to

confer original source status, reliance on public information that

does not qualify as a public disclosure under § 3730(e)(4)(A)

may also preclude original source status depending on the extent

of that reliance and the nature of the information in the public

domain. See Barth, 44 F.3d at 703-04 (holding that a relator did

not have direct knowledge of an alleged fraud when the

knowledge was obtained in part by review of publicly-filed

payroll records) . Thus, in deciding whether a relator’s reliance

on public records bars him from being an original source under
 23Although the FCA was most concerned with encouraging

whistle-blowing by insiders with first-hand knowledge, neither

the text of the FCA nor its legislative history suggests that noninsiders should never be able to bring qui tam actions. The

public disclosure and original source provisions provide

sufficient protection against inappropriate suits by relators

without sufficient direct and independent knowledge. 

36

§ 3730(e)(4)(B), courts should consider both “the availability of

the information and the amount of labor and deduction required

to construct the claim.” Kennard, 363 F.3d at 1046. The more

obscure the records and the more significant the investigative

input of the relator, the more likely it is that granting original

source status will fulfill the FCA’s “twin goals of rejecting suits

which the government is capable or pursuing itself, while

promoting those which the government is not equipped to bring

on its own.” Springfield Terminal, 14 F.3d at 651.

We decline to adopt a rigid rule that consultation with

public documents automatically disqualifies a relator from being

an original source. Some reliance on public records or

information is acceptable and, indeed, it is hard to imagine that

a non-insider could ever obtain original source status without at

least some consultation of publicly available information.23

United States ex rel. Grynberg v. Praxair, Inc., 389 F.3d 1038,

1053 (10th Cir. 2004). That said, courts must be mindful of

suits based only on “secondhand information, speculation,

background information or collateral research . . ..” United

States ex rel. Hafter v. Spectrum Emergency Care, Inc., 190

F.3d 1156, 1162-63 (10th Cir. 1999).
37

Applying these principles here, we hold that, under §

3730(e)(4)(B), Atkinson is not an original source of the nonrecording because his knowledge of the non-recording is not

direct and independent within the meaning of that section. Any

member of the public could have gone to a county recording

office to see if Penn Ship or Fidelity had recorded the interests

as required by the Trust Indenture. Unlike in Kennard,

Atkinson’s research did not involve “obscure” public records,

nor were the public records only a small part of the information

ultimately uncovered by his investigation. Indeed, it was only

from review of information in the public domain that Atkinson

learned of the failure to record. Looking at the two prongs of

the Kennard test, the availability of the information was high

and the amount of deduction was minimal. It takes little

sophistication to conduct a survey of public recordings to

determine the absence of a filing; anyone interested in knowing

whether Penn Ship recorded the instruments listed in the Trust

Indenture could do so. Moreover, extrapolating from the

absence of a recording to the fact that the instruments were not

recorded does not require much interpretive rigor. 

Holding that reliance on state public records can preclude

original source status under § 3730(e)(4)(B) does not run afoul

of our decision in Dunleavy that non-federal administrative

reports are not public disclosures for purposes of §

3730(e)(4)(A). Dunleavy holds that, even if there had there

been no other source of public disclosure, it would be improper

to raise the § 3730(e)(4)(A) jurisdictional bar based only upon

the county public records. Once there is an independent basis

for raising the public disclosure bar, however, the public nature

of the information upon which a relator bases his claim, even if
38

not a “public disclosure” under § 3730(e)(4)(A), is relevant in

determining whether that knowledge is direct and independent

under § 3730(e)(4)(B). Dunleavy simply had nothing to say

about the role of reliance upon information in the public domain

for purposes of the original source analysis. 

Having concluded that Atkinson’s first count is based on

publicly disclosed information both under § 3730(e)(4)(A) and

from other public records and that Atkinson is not an original

source of any of that information under § 3730(e)(4)(B), we

hold that the District Court lacked subject matter jurisdiction

over count one of his FCA claim. Thus, while the District Court

was correct to the extent it rejected the bulk of count one on

jurisdictional grounds, it was incorrect in failing to dismiss the

entire count for that reason.

 b. Counts Two and Three: Intentional Disclosure

 of False Financial Statements

Counts two and three relate to Penn Ship’s September 30,

1984, and December 31, 1984, financial statements. Atkinson

admitted that “the terms of the financial statement[s], and the

bas[e]s for concluding [their] intentional falsity, are based on

public disclosures of which Atkinson is not the original source.”

Atkinson, 255 F. Supp. 2d at 382 (quoting Relator’s Memo. At

44-45). Thus, these counts are barred by the FCA’s

jurisdictional restrictions in §§ 3730(e)(4)(A)-(B). 

 c. Count Four: Alleged Violation of § 3729(a)(2) 

 Based on Penn Ship’s BAFO
39

Atkinson attempted to amend count four following the

District Court’s partial dismissal of his Complaint under Rules

12(b)(6) and 9(b). Atkinson, 2000 WL 1207162, at *23. The

District Court, however, did not grant Atkinson leave to amend

count four, and he never sought leave to do so. Therefore, the

District Court reviewed the claim under FED.R.CIV.P. 12(b)(1)

as it was set forth in the Second Amended Complaint. 255 F.

Supp. 2d at 383. 

Atkinson now claims that it was an abuse of discretion

for the District Court to reject the Third Amended Complaint

insofar as it altered claims that the District Court did not dismiss

because Atkinson was led to believe that he would be permitted

to amend again after his claims were tested under Rule 12(b)(1).

This argument is unpersuasive. Even assuming that the District

Court’s orders were confusing with respect to how it would

dispose of defendants’ claims under Rules 12(b)(6) and

12(b)(1), if Atkinson wished to alter his non-dismissed claims,

he still needed to move for leave to amend them. FED. R. CIV.

P. 15(a) (providing that a party may amend a pleading once

prior to the filing of a responsive pleading but otherwise must

obtain leave of the court or consent of the adverse party). The

rejection of an unapproved amended complaint is not an abuse

of discretion. Kowal v. MCI Commc’ns Corp., 16 F.3d 1271,

1280 (D.C. Cir. 1994). 

However, Atkinson’s real source of consternation appears

to be a substantive one. He believes that the District Court

improperly applied Mistick in ruling on the jurisdictional

challenges. This disagreement does not cause us pause because,

in our view, the proper scope of Mistick is not before us. In any
40

event, having failed to seek leave to amend, Atkinson cannot

turn his substantive disagreement over the scope of Mistick into

an abuse of discretion on the part of the District Court. 

We now turn to count four as pled in the Second

Amended Complaint. Atkinson claims that, when Penn Ship

submitted its BAFO, it knew that it would be unable to complete

the Oiler contract for the price in the offer. As the District Court

found, count four contains two main elements. First, Penn

Ship’s BAFO was the lowest bid and set a price of $848,105,300

for nine Oilers. Second, Penn Ship knew at the time it

submitted its offer that its price was too low. 

Thus, the question is whether the allegations and

transactions underlying these essential elements were publicly

disclosed under § 3730(e)(4)(A). We conclude that they were.

A July 30, 1989, article in the Philadelphia Inquirer explicitly

referred to Penn Ship’s “low bid” as a factor leading to Penn

Ship’s failure to complete the contract. Also, the March 25,

1994, DoD IG Report stated that, “[t]he Penn Ship target costs

and price proposals were unreasonably low compared with the

other proposals.” The DoD IG Report also disclosed the amount

of the offer in the BAFO. 

Because these are public disclosures within the meaning

of § 3730(e)(4)(A) and Atkinson’s knowledge of the alleged

fraud is derived therefrom, Atkinson cannot be an original

source under § 3730(e)(4)(B). Therefore, the District Court

correctly held that it was without jurisdiction to hear this count
 24Atkinson appears to argue that this count is not susceptible

to a jurisdictional challenge because when he filed his first qui

tam action the information was not publicly disclosed. We first

note that this is factually inaccurate because Atkinson’s first

action began in 1993, some years after the article in the

Philadelphia Inquirer discussed Penn Ship’s low bid. Even

assuming, however, that Atkinson is correct that public

disclosure of the allegations or transactions did not occur until

after he filed his initial qui tam suit, it does not protect him. As

discussed above, public disclosures occurring after a FCA case

is dismissed, but before a subsequent action, can still raise the

jurisdictional restriction of § 3730(e)(4)(A). 

 25Atkinson alleges that in the event of Penn Ship’s default the

Trust Indenture contained a roughly two-week “window” in

41

of the Complaint.24 

 d. Count Five: Alleged Violation of § 3729(a)(2) 

 Based on the “Weller” Letter

Atkinson alleges that the March 15, 1985, letter from

Penn Ship to the Navy suggesting a Trust Indenture as a way to

allay the Navy’s fears concerning non-performance contained

intentional misrepresentations designed to induce the Navy into

entering into the Oiler contract with Penn Ship. The three

alleged intentional falsehoods were (1) that significant cost

overruns were highly unlikely even though Penn Ship

knowingly understated its costs of completion, (2) that the Trust

Indenture was irrevocable even though the agreement allowed

Penn Ship to take the assets out of the trust,25 and (3) that the
which Penn Ship was allowed to sell the assets constituting the

res of the trust, thereby defeating the Navy’s security interest.

Of course, the Navy signed the contract after a full review of its

terms and agreed to the window provision.

 26The metes and bounds of the covered property were set

forth in the Trust Indenture itself. 

42

trust res would consist of a security interest or mortgage in the

entire Penn Ship facility even though seven critical acres of

office space were deliberately excluded.26 

Using the formula from Springfield Terminal, we can set

up the following elements of the alleged fraud. With respect to

the first alleged falsity: X–letter states that cost overruns are

unlikely; Y–cost overruns were anticipated by Penn Ship. With

respect to the second alleged falsity: X–letter states that the

trust is irrevocable; Y–trust could be defeated by selling trust

assets. Finally, with respect to the third alleged intentional

misrepresentation: X–letter states that the trust res is composed

of the entire Chester yard; Y–trust res excluded seven critical

acres. 

Defendants argue that the X element of all three alleged

misrepresentations was publicly disclosed when the Senate

Chief Investigator provided Schorsch with the Weller letter. We

agree. Documents disclosed to the public during or following

a federal government investigation are quintessential “public

disclosures” under § 3730(e)(4)(A) (“No court shall have

jurisdiction over an action . . . based upon the public disclosure

of allegations or transactions . . . in a congressional . . . report,
43

hearing, audit, or investigation . . ..) (emphasis added). 

With respect to the alleged misrepresentation involving

the likelihood of cost overruns, defendants argue that the Y

element (Penn Ship’s knowledge that cost overruns were likely)

was publicly disclosed in the Philadelphia Inquirer article from

July 20, 1989, which referred to the low bid, and the 1994 DoD

IG Report, which stated that “[t]he Penn Ship target costs and

price proposals were unreasonably low compared with the other

proposals.” Atkinson, 255 F. Supp. 2d at 384. Both the article

and the DoD IG Report are public disclosures under § 3730

(e)(4)(A). Mistick, 186 F.3d at 383. Penn Ship and Fidelity

also argue that the Y element of the second alleged

misrepresentation (trust could be defeated by selling assets) was

publicly disclosed in the Trust Indenture itself, which was

revealed following a 1990 FOIA request. We have made clear

that government disclosures following FOIA requests are public

disclosures within the meaning of § 3730(e)(4)(A). Mistick, 186

F.3d at 382. Thus, we agree with the District Court that the Y

element of the first two instances of alleged fraudulent

misrepresentation was publicly disclosed under § 3730(e)(4)(A),

thereby precluding Atkinson from being an original source

because his knowledge of the components of the first two claims

is not direct and independent. 

Atkinson claims that the Y element of the third alleged

intentional misrepresentation (trust res excluded seven acres of

shipyard) was not publicly disclosed and, even if it was, he is an

original source. The mortgage for the shipyard contained an

explicit clause excepting certain land from the mortgage, and the

Trust Indenture and accompanying mortgage were disclosed to
 27Atkinson argues that his unique knowledge of the Chester

Yard makes him an original source. The gist of his argument is

that a common citizen would not have known the significance

of the excluded property by reading the Trust Indenture. This

argument is unpersuasive. In Springfield Terminal, the D.C.

Circuit set forth a hypothetical situation in which the critical

elements of fraud were publicly disclosed, but in a manner

inaccessible to most people, i.e., blueprints. 14 F.3d at 655.

That court held that an engineer possessing the knowledge and

skill to interpret the blueprints is not granted original source

status for that reason alone. Id. Atkinson’s ability to

“understand” the significance of the excluded acreage is no

different than the ability that any skilled surveyor would

possess. 

 28Atkinson argues that this count is justiciable as an act in

furtherance of the conspiracy alleged in count one. Because we

44

Schorsch pursuant to a FOIA request. This means that the Y

element was publicly disclosed under § 3730(e)(4)(A).

Moreover, Atkinson cannot be an original source when he

obtained his knowledge from qualifying public disclosures

under § 3730(e)(4)(A).27 Id. Thus, the allegations and

transactions of this alleged instance of fraud were publicly

disclosed and Atkinson is not an original source. 

Therefore, having found that each X and Y element of all

three purported instances of intentional misrepresentation was

publicly disclosed and that Atkinson is not an original source,

we agree with the District Court that there is no jurisdiction to

hear this count under §§ 3730(e)(4)(A)-(B).28
have held that the conspiracy count is not viable, Atkinson’s

attempt to bootstrap this allegation into that claim is unavailing.

 29A marked up working copy of the Trust Indenture showed

that a provision requiring Fidelity to ensure proper delivery of

all documents was struck out. From this, Atkinson inferred that

Fidelity convinced the Navy to strike the provision because, had

it stayed in the contract, it would have redounded to the Navy’s

benefit. This marked up version was disclosed during the course

45

 e. Count Six: Alleged Violation of § 3729(a)(2)

 by Penn Ship for Knowingly Making a False

 Misrepresentation that it Would Record 

 Security Interests Under the Trust Indenture

In his sixth count, Atkinson claims that Penn Ship

violated 31 U.S.C. § 3729(a)(2) by knowingly making false

representations that it would record the security instruments

provided in the Trust Indenture. Using the Springfield Terminal

formula, the X element is that Penn Ship represented that it

would record the Navy’s security interests. The Y element is

that Penn Ship knew that it was not going to record the interests

when it signed the Trust Indenture. The X element was publicly

disclosed when the Trust Indenture itself was produced in

response to a FOIA request. Stinson, 944 F.2d at 1160. For the

same reason, Atkinson is not an original source under §

3730(e)(4)(B) because that public disclosure provided the basis

for his knowledge. Id. The District Court held that the Y

element was also publicly disclosed29 but that Atkinson was an
of a Senate Investigation. The final Trust Indenture was

disclosed pursuant to a FOIA request. Both means of disclosure

satisfy § 3730(e)(4)(A) and thus require Atkinson to

demonstrate original source status before proceeding with the

suit. 

 30Atkinson’s argument that this count is sustainable on the

grounds that it is an action in furtherance of an underlying

conspiracy or as part of the alleged Trust Indenture fraud is

rendered moot by our decision that the District Court had no

jurisdiction over those claims. 

 31Atkinson did not amend his seventh count after it was

dismissed from the Second Amended Complaint. Therefore, we

will not review it here.

46

original source insofar as the intention not to record can be

inferred from the eventual non-recording. Atkinson, 255 F.

Supp. 2d at 391-92. As discussed above in connection with

Count 1, we disagree with the District Court’s conclusion that

Atkinson is an original source of the failure to record the

security interests. Because Atkinson is not an original source of

the Y element, there is no jurisdiction under § 3730(e)(4)(A).30

 f. Counts Eight and Nine:31 Alleged Fraudulent 

 Inducement of the Navy’s Exercise of its

 Options for a Third and Fourth Oiler

In his Second Amended Complaint, Atkinson claims that

the Navy’s exercise of the contract option to order two

additional ships under the Oiler deal was based on Penn Ship’s
 32As discussed above, we will not entertain amendments to

claims that the District Court did not dismiss from the Second

Amended Complaint because Atkinson was not granted leave to

amend and did not obtain the consent of the adverse parties.

FED R. CIV. P. 15.

47

false assertion that the BAFO was not a deliberate underbid.32

Thus, the X element is Penn Ship’s assertion that its BAFO was

a bona fide bid. The Y element is the fact that Penn Ship knew

that the BAFO was unreasonably low and deliberately misstated

project costs. We have already established that the BAFO was

publicly disclosed within the meaning of § 3730(e)(4)(A) and

that Atkinson is not an original source because Schorsch learned

of it through the public disclosure. Stinson, 944 F.2d at 1160.

Likewise, we find that the allegations and transactions

constituting the Y element were publicly disclosed. The

allegation that Penn Ship deliberately understated costs was

publicly disclosed by way of the article in the Philadelphia

Inquirer and the 1994 DoD IG Report. The allegation that Penn

Ship never intended to perfect the security interests described in

the Trust Indenture was publicly disclosed when the various

versions of the Trust Indenture were produced following FOIA

requests. 

Nor is Atkinson an original source of either the X or Y

elements because his knowledge is based solely upon §

3730(e)(4)(A) public disclosures and information otherwise in

the public domain. Stinson, 944 F.2d at 1160. Therefore, there
 33Atkinson, as he did for count six, argues that these counts

are viable as acts in furtherance of the conspiracy in count one.

Because there is no jurisdiction over count one, this argument is

unavailing. Similarly, these counts cannot survive as aspects of

the Trust Indenture fraud alleged in count six because there is no

jurisdiction over that claim.

 34Modification 05 deleted the two option Oilers from the

contract and changed Penn Ship’s reimbursement regime to a

fixed price agreement. Modification 11 provided for an advance

payment from the Navy to Penn Ship of up to $17 million to be

secured by a floating drydock. 

48

is no jurisdiction to hear these claims under § 3730(e)(4)(A).33

 g. Counts Ten and Eleven: Allegations of False 

 and Reverse False Claims Stemming From 

 Misrepresentations Regarding Contract

 Modifications

These allegations revolve around alleged implicit

representations made by Penn Ship’s President, Ronald J.

Stevens, during negotiations over Modifications 05 and 11 to the

Oiler contract.34 Atkinson asserts that Stevens impliedly

promised that Penn Ship would perform under the Modification

terms and that Penn Ship had perfected the Navy’s security

interests under the Trust Indenture. But, asserts Atkinson, Penn

Ship had no intention of performing under the Modifications and

had not recorded the security instruments. The intent not to

record is gleaned in part from the eventual failure to do so.

Atkinson also alleges that had Fidelity either recorded the
49

instruments itself or informed the Navy of their non-recordation,

the Navy would never have agreed to the Modifications. 

The District Court broke down these counts into three

separate transactions to facilitate the jurisdictional analysis

under Springfield Terminal, and we find this approach helpful.

(A) Penn Ship’s representation that it would

perform under Modifications 05 and 11:

X: Penn Ship implicitly represents that it

will perform.

Y: Penn Ship has no intention of

performing as evidenced by the failure to record.

(B) Penn Ship’s representation that it had

perfected the Navy’s security interests under the

Trust Indenture:

X: Penn Ship implicitly represents that it

has perfected the security interests.

Y: Penn Ship does not record the security

interests.

(C) Fidelity’s breach of its fiduciary duty to the

Navy:

X: Fidelity promises to serve as fiduciary
50

by agreeing to be trustee.

Y: Fidelity breaches the duty by

convincing the Navy not to insist upon a delivery

provision, failing to ensure that the instruments

are promptly and properly recorded, and by

failing to sign the financing statements. 

The X element of transactions A and B can be addressed

easily. It is the Modifications themselves that provide the basis

for inferring the existence of an implied representation, and

these were publicly disclosed within the meaning of §

3730(e)(4)(A). Atkinson contends, however, that the Y element

of transactions A and B (failure to record) was not publicly

disclosed. 

We have already addressed this argument and held, like

the District Court, that the non-recordation was publicly

disclosed under § 3730(e)(4)(A) in the response to Schorsch’s

1993 FOIA request and in the DoD IG Report. As discussed

above, we part ways with the District Court on its conclusion

that Atkinson is an original source of the non-recordation. We

hold that the District Court was without jurisdiction to hear

these counts to the extent they rely upon allegations and

transactions set forth in transactions A and B.

Turning to transaction C, both the X and Y elements of

this transaction were publicly disclosed as well. The X element,

Fidelity’s promise to serve as fiduciary, was revealed when the

Trust Indenture was turned over following a FOIA request.

Stinson, 944 F.2d at 1160. We have already established that the
 35Again, although Atkinson argues that these counts survive

as acts in furtherance of the conspiracy or Trust Indenture fraud

alleged in counts one and six respectively, our prior holdings

void these arguments. 

51

components of the Y element (Fidelity’s breach of fiduciary

duty) were publicly disclosed under § 3730(e)(4)(A) and

Atkinson does not appear to contest this assertion. Atkinson is

not an original source of the X element because he learned of it

from the Trust Indenture which was publicly disclosed for

purposes of § 3730(e)(4)(A). Likewise, for the reasons now

referred to and relied upon numerous times, Atkinson is not an

original source of Fidelity’s failure to ensure recordation by

mere virtue of the fact that he learned of the non-recordation by

examining publicly available county records. Because each

element of the C transaction is based upon public disclosures

and Atkinson is not an original source, the District Court

properly dismissed these counts under Rule 12(b)(1) for lack of

subject matter jurisdiction.35

 h. Count Twelve: Alleged Violations of 

 §§ 3729(a)(2) and Based on the

 Default Modification

The Default Modification stipulated that Penn Ship was

in default under the Oiler contract, provided for the transfer of

the two original ships to another yard, terminated the Trust

Indenture, made Penn Ship liable for certain reprocurement and

other costs, and released Penn Ship from any other liability. The

Navy received an increased security interest in the floating

drydock, another mortgage on some of the land and buildings at
52

the Chester Yard, and a preferred mortgage on a large floating

derrick. According to Atkinson, these mortgages were designed

to secure Penn Ship’s obligations to sell collateral to meet its

reprocurement obligations. Under the terms of the deal, if Penn

Ship was unable to sell within thirteen months, it would no

longer be obligated to do so and the Navy’s interests in the land

would disappear. 

Atkinson claims that, by agreeing to the terms of the

Default Modification, Penn Ship falsely represented that it

intended to fulfill its obligation to attempt to sell the land,

buildings, and derrick. To support this claim, Atkinson points

to the fact that shortly following the expiration of the thirteen

month period, Penn Ship formed MCC, to which it sold the

derrick. The essential elements of this count are

X: Penn Ship asserts that it will use its

best efforts to liquidate its interests in the covered

property.

Y: When it made that assertion, Penn Ship

had no intention of selling the assets–which is

evidenced by its sale of the assets to MCC, a

corporate entity created by Penn Ship, after the

thirteen month window expired. 

First, Atkinson claims that the allegations and

transactions that form the basis of this claim were not publicly

disclosed when he brought his first FCA claim. For the reasons

set forth above, a qui tam relator is not saved from the public

disclosure bar simply because the information was not publicly
 36In any event, having found no jurisdiction over any of

Atkinson’s claims, it does not matter which version of count

twelve we address. Because we agree with the District Court

that any “reformulation” is an impermissible amendment, we

will follow the District Court and analyze the count as

formulated in the Second Amended Complaint.

53

disclosed at the time he brought a prior, but now dismissed, qui

tam action. Atkinson, 255 F. Supp. 2d at 373; Laird, 336 F.3d

at 352 n.2. Mistick’s “substantially similar to” test forecloses

such a reading of § 3730(e)(4)(A). 186 F.3d at 385-88.

Second, Atkinson claims that because the Trust Indenture

fraud was not publicly disclosed, and the Navy’s agreement to

the Default Modification was a consequence of that fraud, count

twelve should not be dismissed. We have already stated that we

will treat Atkinson’s Second Amended Complaint as operative

for purposes of the claims not dismissed by the District Court

after it ruled on defendants’ 12(b)(6) motions. Thus, any

attempted reformulation of count twelve is unavailing as an

unacceptable modification.36 FED. R. CIV. P. 15(a). Atkinson

argues that the sale of the mortgaged assets to MCC following

the thirteen month window indicates Penn Ship’s intent not to

adhere to the terms of the Default Modification. As so

understood, the X element was publicly disclosed in the 1994

DoD IG Report and during hearings before the Senate in 1995.

The Y element (sale to MCC and then Donjon) was publicly

disclosed in a Coast Guard abstract of title given to Schorsch at

his request. This abstract constitutes an “administrative report”

under § 3730(e)(4)(A) and, in any event, was an exhibit before

the Senate during hearings regarding the propriety of the Oiler
 37 This count cannot survive as an act in furtherance of a

conspiracy or as part of the Trust Indenture fraud because there

is no jurisdiction over those claims. 

54

contract. See Mistick, 186 F.3d at 383-84 (noting that federal

government responses to citizen requests for documents

constitute reports under the FCA’s jurisdictional provisions). 

Having determined that both the X and Y elements were

publicly disclosed under § 3730(e)(4)(A), we now turn to

whether Atkinson is an original source under § 3730(e)(4)(B).

We hold that he is not. First, Atkinson’s former co-relator

Schorsch learned of the terms of the Default Modification by

way of the DoD IG Report. Assuming, arguendo, that Atkinson

can utilize Schorsch’s knowledge for purposes of achieving

original source status, DoD IG Reports are public disclosures

under § 3730(e)(4)(A), and thus Schorsch is not an original

source for purposes of § 3730(e)(4)(B). Stinson, 944 F.2d at

1160. Schorsch also learned of the sale of the derrick to MCC

by way of a qualifying public disclosure under § 3730(e)(4)(A)

because Schorsch asked the Coast Guard for an abstract of title

that revealed the derrick’s ownership history. Because the Coast

Guard’s response to Schorsch’s request constitutes a public

disclosure, Mistick, 186 F.3d at 383-84, Schorsch is not an

original source as he derived his knowledge from that document.

Therefore, the District Court correctly dismissed this

Count under Rule 12(b)(1) for a lack of subject matter

jurisdiction under the FCA.37

 i. Additional Count: Alleging Violations of §§ 
 38As with a number of previous counts, Atkinson attempted

to reformulate this count as a part of the overall Trust Indenture

fraud. Because Atkinson was not granted leave to amend this

aspect of his Second Amended Complaint, we consider the

version of this claim as written in that pleading. We reiterate,

though, that our holding that there is no jurisdiction over any of

Atkinson’s claims means that any attempt to link these claims to

a prior count is necessarily ineffectual. 

55

 3729(a)(1) and (2) Based on Biweekly Progress 

 Reports

We arrive, after a long journey, to relator’s final count

alleging violation of the FCA.38 The gist of this claim is that

Penn Ship submitted false or fraudulent progress reports and

invoices to the Navy that overstated Penn Ship’s costs. In our

now familiar Springfield Terminal algebraic representation:

X: Penn Ship submits biweekly invoices

to the Navy and represents that it has made

expenditures entitling it to reimbursement.

Y: Penn Ship had not spent the money for which it

sought compensation.

We agree with the District Court that both the X and Y

elements of this count were publicly disclosed in the 1994 DoD

IG Report, which provides:

The [DoD Inspector General’s] investigation
56

addressed allegations that Penn Ship progress

payment submissions included incurred costs for

employee payroll deductions, which Penn Ship

did not remit to the appropriate organizations in a

timely manner. Penn Ship withheld the

deductions beyond the normal 45-day billing

cycle before making payment. Penn Ship also

withheld payments to vendors while the Navy

continued to make progress payments based on

incurred costs.

 

Atkinson, 255 F. Supp. 2d at 402 (quoting DoD IG Report).

Atkinson’s knowledge of the X and Y elements is not direct and

independent within the meaning of § 3730(e)(4)(B) because he

admits that his knowledge is based on the information in the

DoD IG Report. Therefore, this claim is based upon public

disclosures under § 3730(e)(4)(A) and Atkinson is not an

original source. Accordingly, dismissal was appropriate under

FED. R. CIV. P. 12(b)(1). 

C. Conclusion

We hold that Atkinson’s FCA action must be dismissed

in its entirety under FED. R. CIV. P. 12(b)(1) for want of

jurisdiction. All of the allegations and transactions involved in

each of the counts were publicly disclosed under §

3730(e)(4)(A). Moreover, Atkinson is not an original source of

any of the allegations or transactions including the defendants’

failure to record, and failure to ensure recordation, of the

instruments named in the Trust Indenture. We conclude that a

plaintiff/relator cannot rely solely on information available in
57

the public domain to substantiate original source status under §

3730(e)(4)(B). Such a relator does not have direct and

independent knowledge of the information that forms the basis

of the FCA claim. 31 U.S.C. §§ 3730(e)(4)(A)-(B).

For the above stated reasons, we will affirm the District

Court’s order of dismissal of all counts, as applicable, of the

Second and Third Amended Complaints.