Opinion ID: 661450
Heading Depth: 3
Heading Rank: 2

Heading: Based upon ... allegations or transactions

Text: 24 A finding that the filed discovery material was publicly disclosed, however, does not by any means end the inquiry. The jurisdictional provision bars only those qui tam actions that are based upon the public disclosure of allegations or transactions. 31 U.S.C. Sec. 3730(e)(4)(A). Congress did not prescribe by mathematical formulae the quantum or centrality of nonpublic information that must be in the hands of the qui tam relator in order for suits to proceed. When, as here, some information relied upon by the qui tam plaintiff is undeniably in the public domain, the task of ensuring that qui tam suits are limited to those in which the relator has contributed significant independent information can prove tricky. 25 We find, however, that in the context of this case the district court's interpretation of based upon the public disclosure of allegations or transactions erected too high a threshold for the qui tam plaintiff. In dismissing Springfield's suit, the district court assumed without analysis that the pay vouchers and telephone records disclosed during discovery constituted allegations or transactions within the meaning of the jurisdictional bar. We disagree with that assumption. As the Ninth Circuit recently recognized, Courts sometimes speak loosely of barring a qui tam suit because it is based on 'publicly disclosed information.' But 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) (citing United States ex rel. Dick v. Long Island Lighting Co., 912 F.2d 13, 17 (2d Cir.1990); Houck v. Folding Carton Admin. Committee, 881 F.2d 494, 504 (7th Cir.1989), cert. denied, 494 U.S. 1026, 110 S.Ct. 1471, 108 L.Ed.2d 609 (1990)). We too find a distinction between allegations or transactions and ordinary information as a matter of common usage and sound interpretation of the FCA. The pay vouchers and telephone records disclosed during discovery--the only public information considered by the district court--were not in and of themselves sufficient to constitute allegations or transactions of fraudulent conduct within the meaning of the FCA jurisdictional bar. 7 26 Both plain meaning and a consideration of the aims of the statute direct this conclusion. The legislative history is admittedly silent with regard to the significance Congress attached to its choice of words in this much-amended section. 8 However, in common parlance, the term allegation connotes a conclusory [304 U.S.App.D.C. 356] statement implying the existence of provable supporting facts. See WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY 55 (1976). The term transaction suggests an exchange between two parties or things that reciprocally affect or influence one another. See id. at 2425. On the basis of plain meaning, and at the risk of belabored illustration, if 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. The language employed in Sec. 3730(e)(4)(A) suggests that Congress sought to prohibit qui tam actions only when either the allegation of fraud or the critical elements of the fraudulent transaction themselves were in the public domain. 27 Our reading, however, does not rest on plain meaning alone. In determining the meaning of the statute, we look not only to the particular statutory language, but to the design of the statute as a whole and to its object and policy. Crandon v. United States, 494 U.S. 152, 158, 110 S.Ct. 997, 1001, 108 L.Ed.2d 132 (1990). Many potentially valuable qui tam suits would be aborted prematurely by a reading of the jurisdictional provision that barred suits when the only publicly disclosed information was itself innocuous. In terms of the mathematical illustration, when X by itself is in the public domain, and its presence is essential but not sufficient to suggest fraud, the public fisc only suffers when the whistle-blower's suit is banned. When X and Y surface publicly, or when Z is broadcast, however, there is little need for qui tam actions, which would tend to be suits that the government presumably has chosen not to pursue or which might decrease the government's recovery in suits it has chosen to pursue. 9 The cogent analysis in United States ex rel. Joseph v. Cannon, 642 F.2d 1373 (D.C.Cir.1981), cert. denied, 455 U.S. 999, 102 S.Ct. 1630, 71 L.Ed.2d 865 (1982), construing the pre-1986 qui tam provisions, is instructive in illuminating this tension: 28 To require that the evidence and information possessed by the United States be a mirror image of that in the hands of the qui tam plaintiff would virtually eliminate the bar. On the other hand, to permit the bar to be invoked when the United States possesses only rumors while the qui tam plaintiff has evidence and information would be to permit the bar to repeal effectively much of the False Claims Act. Between these extremes lies the answer. 29 More precisely, the answer rests in that area where it is possible to say that the evidence and information in the possession of the United States at the time the False Claims Act suit was brought was sufficient to enable it adequately to investigate the case and to make a decision whether to prosecute. 30 The question, properly, then, is whether the information conveyed [to the government] could have formed the basis for a governmental decision on prosecution, or could at least have alerted law-enforcement authorities to the likelihood of wrongdoing.... 31 Id. at 1377 (quoting Pettis ex rel. United States v. Morrison-Knudsen Co., 577 F.2d 668, 674 (9th Cir.1978)). We believe that Congress, by its careful choice of terminology in the 1986 amendments, navigated between the two extremes recognized in Cannon to create a standard under which qui tam actions are barred only when enough information exists in the public domain to expose the fraudulent transaction (the combination of X and Y), or the allegation of fraud (Z). When either of these conditions is satisfied, the government itself presumably can bring an action under the FCA and there is no place in the enforcement scheme for qui tam suits. 32 Section 3730(e)(4)(A)'s bar focuses more on the quantum of information already [304 U.S.App.D.C. 357] in the public sphere than on the amount or quality of information brought forward by the qui tam plaintiff. Nonetheless, the based upon ... allegations or transactions prohibition has certain additional consequences for the plaintiff's case. Obviously, if the elements of the fraudulent transaction (X + Y) are already public, plaintiff's additional information, even if nonpublic, cannot suffice to surmount the jurisdictional hurdles. Thus, a qui tam action cannot be sustained where all of the material elements of the fraudulent transaction are already in the public domain and the qui tam relator comes forward with additional evidence incriminating the defendant. See United States ex rel. Precision Co. v. Koch Indus., Inc., 971 F.2d 548, 552-53 (10th Cir.1992), cert. denied, --- U.S. ----, 113 S.Ct. 1364, 122 L.Ed.2d 742 (1993). Similarly, there may be situations in which all of the critical elements of fraud have been publicly disclosed, but in a form not accessible to most people, i.e., engineering blueprints on file with a public agency. Expertise in the field of engineering would not in itself give a qui tam plaintiff the basis for suit when all the material elements of fraud are publicly available, though not readily comprehensible to nonexperts. See United States ex rel. Stinson, Lyons, Gerlin & Bustamante, P.A. v. Prudential Ins. Co., 944 F.2d 1149, 1160 (3d Cir.1991) ([T]he relator must possess substantive information about the particular fraud, rather than merely background information which enables a putative relator to understand the significance of a publicly disclosed transaction or allegation.). However, where only one element of the fraudulent transaction is in the public domain (e.g., X), the qui tam plaintiff may mount a case by coming forward with either the additional elements necessary to state a case of fraud (e.g., Y) or allegations of fraud itself (e.g., Z). 10 33 The parties in this case do not dispute either the amount or nature of evidence disclosed in discovery or the fact that Springfield relied in part upon this evidence--pay vouchers and telephone records--in formulating its complaint. Resolution of the allegations or transactions issue thus does not turn on a determination of fact which only a fact-finder could make but which has not been made. See United States v. Garrett, 720 F.2d 705, 710 (D.C.Cir.1983) (citation omitted), cert. denied, 465 U.S. 1037, 104 S.Ct. 1311, 79 L.Ed.2d 708 (1984). Instead, this case asks us to review legal conclusions pertaining to the allegations or transactions language that the district court drew from undisputed facts. In such circumstances we engage in independent review of the legal sufficiency of the district court's views and of its application of the law to undisputed facts. See Herbert v. National Academy of Sciences, 974 F.2d 192, 197 (D.C.Cir.1992); Hohri v. United States, 782 F.2d 227, 241 (D.C.Cir.1986), rev'd on other grounds, 482 U.S. 64, 107 S.Ct. 2246, 96 L.Ed.2d 51 (1987); cf. Auerbach v. Sverdrup Corp., 829 F.2d 175, 181 (D.C.Cir.1987) (ordering remand where additional facts could be introduced and inferences drawn by trial court), cert. denied, 485 U.S. 905, 108 S.Ct. 1075, 99 L.Ed.2d 234 (1988). 34 Turning then to the case at hand, we conclude that the information disclosed via discovery cannot rise to the level of allegations or transactions so as to prevent the exercise of jurisdiction. Fraud requires recognition of two elements: a misrepresented state of facts and a true state of facts. The presence of one or the other in the public domain, but not both, cannot be expected to set government investigators on the trail of fraud. In pertinent part, liability under the FCA is triggered when a person knowingly presents, or causes to be presented, to an officer or employee of the United States Government or a member of the Armed Forces of the United States a false or fraudulent claim for payment or approval, 31 U.S.C. Sec. 3729(a)(1) (emphasis added), or knowingly makes, uses or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the [304 U.S.App.D.C. 358] Government, 31 U.S.C. Sec. 3729(a)(2) (emphasis added). Knowledge of the allegedly misrepresented state of affairs--which does not necessarily entail knowledge of the fact of misrepresentation--is always in the possession of the government. Just so here. Publication of the facially valid pay vouchers, already in the government's pocket, cannot by itself be sufficient to defeat qui tam jurisdiction. Indeed, the entire qui tam regime is premised on the idea that the government's knowledge of misrepresented claims against the federal fisc (without knowledge that they are misrepresented) does not in itself translate into effective enforcement of the laws against fraud. See S.REP. No. 345, 99th Cong., 2d Sess., at 2, reprinted in 1986 U.S.C.C.A.N. at 5267 ([O]nly a coordinated effort of both the Government and the citizenry will decrease this wave of defrauding public funds.). 35 Nor does the additional presence of publicly disclosed telephone records alter the calculus here. The telephone records did not suggest any misrepresentation on Quinn's part in submitting pay vouchers. At most, the records provided a convenient vehicle by which Springfield, already suspicious because of its personal experience with the arbitration, could pursue its independent investigation. Recognizing that the task of determining whether allegations or transactions have been public[ly] disclos[ed] will never be cut-and-dried, we nonetheless are confident in this case that the information put in the public domain by the discovery filing did not present so clear or substantial an indication of foul play as to qualify as either an allegation of fraud or a fraudulent transaction upon which a qui tam suit could be based. 11