Opinion ID: 3031341
Heading Depth: 3
Heading Rank: 2

Heading: The FCA’s Jurisdictional Bar

Text: 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 25 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
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 19 To 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 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: 20 Congress 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 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 28 “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. 29 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). 21 A 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
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 22 Atkinson 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 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 32 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. 33 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. 34 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 35 § 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). 23 Although 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 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 37 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.
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).
Based on Penn Ship’s BAFO 38 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 . 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 39 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 40 of the Complaint.24
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 24 Atkinson 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). 25 Atkinson alleges that in the event of Penn Ship’s default the Trust Indenture contained a roughly two-week “window” in 41 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, 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. 26 The metes and bounds of the covered property were set forth in the Trust Indenture itself. 42 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 43 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 27 Atkinson 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. 28 Atkinson argues that this count is justiciable as an act in furtherance of the conspiracy alleged in count one. Because we 44
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 have held that the conspiracy count is not viable, Atkinson’s attempt to bootstrap this allegation into that claim is unavailing. 29 A 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 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
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 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. 30 Atkinson’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. 31 Atkinson did not amend his seventh count after it was dismissed from the Second Amended Complaint. Therefore, we will not review it here. 46 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 32 As 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 is no jurisdiction to hear these claims under § 3730(e)(4)(A).33
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 33 Atkinson, 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. 34 Modification 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 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 49 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 50 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
§§ 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 35 Again, 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 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 52 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 36 In 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 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
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 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 38 As 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 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).