Cause of Action v. Chicago Transit Authority , 815 F.3d 267 ( 2016 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 15-1143
CAUSE OF ACTION,
Plaintiff-Appellant,
v.
CHICAGO TRANSIT AUTHORITY, an
Illinois municipal corporation,
Defendant-Appellee.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:12-cv-09673 — Robert M. Dow, Jr., Judge.
____________________
ARGUED SEPTEMBER 10, 2015 — DECIDED FEBRUARY 29, 2016
____________________
Before FLAUM, RIPPLE, and SYKES, Circuit Judges.
RIPPLE, Circuit Judge. Cause of Action, a nonprofit govern-
ment watchdog organization, brought this action against the
Chicago Transit Authority (“CTA”) under the qui tam provi-
sion of the False Claims Act (“FCA” or “Act”), 31 U.S.C.
§ 3730. Cause of Action alleged that, for several decades, the
CTA had been misreporting fraudulently transit data to the
2 No. 15-1143
Federal Transit Administration (“FTA”) in order to secure in-
flated federal grant allocations. The district court dismissed
the action, holding that it lacked subject matter jurisdiction
over Cause of Action’s FCA claims because its allegations of
wrongdoing had been publicly disclosed at the time the action
was filed. We agree that the allegations had been publicly dis-
closed and therefore affirm the judgment of the district court.
I
BACKGROUND
A.
Under the Urbanized Area Formula Program (“UAFP”),
49 U.S.C. § 5307, the FTA administers grant funding to large
urban transit programs for “operating costs of equipment and
facilities for use in public transportation.” Id. § 5307(a)(1)(D).
The statute requires grant recipients to submit “financial, op-
erating, and asset condition information” about their transit
systems to the National Transit Database (“NTD”). Id.
§ 5335(a)–(c). The agency then apportions grants based, in
part, on the number of Vehicle Revenue Miles (“VRM”) re-
ported to the NTD by the transit program. Id.
§ 5336(c)(1)(A)(i). According to the NTD, VRM accrue while a
vehicle is “in revenue service,” those miles for which a “vehi-
cle is available to the general public and there is an expecta-
tion of carrying passengers.” Nat’l Transit Database, 2006 Ur-
banized Area Reporting Manual, Glossary 384, 396 (2006),
available at http://www.ntdprogram.gov/ntdprogram/pubs/
ARM/2006/pdf/2006_Reporting_Manual_Glossary.pdf. So-
called “deadhead miles”—miles accumulated while a vehicle
No. 15-1143 3
is out of revenue service—specifically are excluded from the
VRM calculation. Id. at 352, 396.
The CTA is a municipal corporation providing public
transportation services in the greater Chicago area; it receives
federal grant funding through the UAFP. In 2005, the Illinois
House of Representatives adopted Resolution Numbers 479
and 650, which, among other matters, directed the Illinois Au-
ditor General (“IL-AG”) to conduct a performance audit of the
CTA. During the course of this audit, Thomas Rubin, a sub-
contractor on the IL-AG audit team, helped prepare a twenty-
five page report titled “Chicago Transit Authority Overre-
porting of Motor Bus Vehicle Revenue Miles,” which exam-
ined in detail the CTA’s VRM reporting practices (“Technical
1
Report”). Mr. Rubin’s Technical Report concluded that the
CTA, from possibly as early as 1986, had been overstating its
VRM when making its annual certifications to the NTD and,
consequently, had received higher than justified UAFP grant
disbursements. The Technical Report recommended that the
CTA inform the FTA of the situation and become compliant
by revising its reporting methodology.
In March 2007, the IL-AG released its final performance
audit report (“Audit Report”). On page seventy-two of the
Audit Report, the IL-AG explained that its review, which in-
cluded the Technical Report, had “raised questions about the
accuracy of [the] CTA’s reporting of revenue vehicle hours
and miles” and concluded, based on the “clear[]…differences
in reported hourly values for [the] CTA and the peer group,”
1 R.3-3.
4 No. 15-1143
that the “CTA may [have been] incorrectly reporting some
2
deadhead hours/miles as revenue hours/miles.”
In 2009, Mr. Rubin notified the Department of Transporta-
tion Office of Inspector General (“DOT-OIG”) of the CTA’s
misreporting and provided it with a copy of his Technical Re-
port. Mr. Rubin also provided copies of the Technical Report,
the Audit Report, and a sworn affidavit to Cause of Action.
On March 28, 2012, Cause of Action sent a letter to the Depart-
ment of Justice requesting an investigation into the CTA’s re-
porting practices.
Approximately one month later, on April 27, 2012, the
FTA sent a letter to the CTA explaining that the FTA had con-
ducted an “in-depth review” of the CTA’s reporting of VRM
3
data (“FTA Letter”). The FTA Letter indicated that the CTA
2 R.3-4 at 126.
3 The FTA Letter to the CTA states in full:
The Federal Transit Administration (FTA) has conducted an
in-depth review regarding the way in which Vehicle Revenue
Miles (VRM) and Vehicle Revenue Hours (VRH) are reported
to the National Transit Database (NTD) by the Chicago
Transit Authority (CTA). As a result of our review, CTA
should revise its data for the 2011 Report Year to reflect the
definition of “revenue service” in the NTD Reporting Manual
and should continue to follow the definition of “revenue ser-
vice” from the NTD Reporting Manual for future report years.
The FTA will not, however, require CTA to revise its annual
NTD Reports from prior years.
The initial inquiry was made regarding CTA’s relatively low
percentage of “deadhead” mileage compared to other large
transit agencies. In your October 2011 memorandum you
No. 15-1143 5
stated that efficient scheduling practices, the convenient loca-
tion of CTA bus garages, and frequent midday bus service ex-
plained the high VRM reported to the NTD. You also noted
that CTA cannot speak for the scheduling or reporting prac-
tices of other transit agencies.
To further study this situation, we asked you to send FTA de-
tailed data on the patterns and blocks used by CTA to sched-
ule its buses. FTA selected 10 bus trip blocks from this data
for analysis. Upon selecting the data set, FTA mapped each
trip from the pull-out from the bus garage, through the reve-
nue service trip, and then to the return pull-in to the bus gar-
age. In 7 of the 10 bus blocks analyzed, FTA found that the
bus left the garage, traveled a short distance on one bus route
(recorded as “revenue service”), and then moved to the pri-
mary bus route, which the bus served for the bulk of the block.
FTA appreciates CTA’s efforts to operate transit service as ef-
ficiently as possible and to minimize “deadhead” time in fa-
vor of revenue service. However, FTA’s funding formulas
rely upon applying a consistent definition of “revenue ser-
vice” across all transit systems in the country in order to en-
sure a fair and equitable distribution of formula funds.
As such, FTA established the following three-part definition
of revenue service in its 2011 NTD Urbanized Area Reporting
Manual (page 212): (1) that the service must be advertised as
being available to the general public; (2) there must be a
marked stop that is advertised in the schedule; and; (3) there
must be an indication on the bus (e.g., head sign, window
board) that the bus is in revenue service.
Using the data you provided (see enclosure), FTA examined
CTA’s published schedules and found that each bus that ar-
rived at the primary route was reflected on the schedules.
FTA did not, however, find the bus routing between the gar-
age and the primary route to be included on the published
6 No. 15-1143
had cooperated in the review by providing detailed data on
the patterns and blocks it used to schedule its buses. It then
directed the CTA to revise its VRM data for reporting year
2011 and for future years but did not require the CTA to revise
any VRM data for prior years.
B.
Cause of Action brought this qui tam action under the FCA
in the United States District Court for the District of Maryland
in May 2012. In its complaint, Cause of Action alleged two
counts of fraudulent conduct by the CTA based on its inaccu-
rate VRM reporting and sought damages, a declaratory judg-
ment, and injunctive relief. Cause of Action attached to its
complaint the Technical Report, the Audit Report, and
Mr. Rubin’s affidavit. The federal court in Maryland trans-
ferred the case to the Northern District of Illinois. The United
States then declined to intervene, and the complaint was un-
sealed.
The CTA then moved for dismissal on the ground that
Cause of Action had failed to establish subject matter jurisdic-
tion under the FCA’s public-disclosure bar, 31 U.S.C.
§ 3730(e)(4). That section withdraws jurisdiction over qui tam
actions based on allegations that already have been disclosed
schedules. Therefore, although buses traveling on this sec-
ondary route between the garage and the primary route may
stop at marked bus stops and may indicate “revenue service”
on their head signs, this travel does not meet the NTD defini-
tion of “revenue service.”
R.55-1 at 2–3.
No. 15-1143 7
publicly through certain enumerated sources unless the rela-
tor is an original source of the information. In opposing the
motion to dismiss, Cause of Action contended that the public-
disclosure bar had not been triggered and that, in any case,
§ 3730(e)(4) no longer constitutes a jurisdictional hurdle be-
cause a 2010 amendment had replaced the phrase “no court
shall have jurisdiction” with the phrase “[t]he court shall dis-
4
miss.” In reply, the CTA conceded that, in light of the 2010
amendments, the correct approach would be for the court to
treat its motion as a Rule 12(b)(6) motion to dismiss for failure
to state a claim.
The district court did not decide whether the 2010 version
of § 3730(e)(4) was jurisdictional or substantive. It held that,
under either standard, dismissal was appropriate. Turning to
the applicability of the public-disclosure bar, the court first
noted that the sole issue in dispute was whether the allega-
tions in the complaint had been publicly disclosed; Cause of
Action had waived any argument under the statute that its
allegations were not substantially similar to the disclosures or
that it qualified as an original source. The court then con-
cluded that Cause of Action’s allegations had been publicly
disclosed in the FTA Letter as well as in the Technical and
Audit Reports, and that, consequently, its qui tam suit was
5
precluded by the public-disclosure bar.
4 R.55 at 14–15.
5 As we note later, in this case, we must apply the earlier version of
§ 3730(e)(4)(A). See infra note 14. We therefore need not determine whether
the new language of the 2010 amendment is jurisdictional. We note that
the circuits that have had to determine whether the new statutory lan-
guage is jurisdictional have held that the language of the 2010 amendment
8 No. 15-1143
II
DISCUSSION
The applicable standard of review is not in dispute. Alt-
hough the district court did not specify whether it dismissed
Cause of Action’s complaint under Federal Rule of Civil Pro-
cedure 12(b)(1) or 12(b)(6), in either case, “[w]e review de novo
challenges made pursuant to the FCA’s bars.” United States ex
rel. Absher v. Momence Meadows Nursing Ctr., Inc., 764 F.3d 699,
707 (7th Cir. 2014).
A.
First enacted in 1863 to combat rampant fraud and
price-gouging in Civil War defense contracts, the FCA ena-
bles the United States Government to recover losses sustained
as the result of fraud committed against it. The Act imposes
liability upon any person who “knowingly presents, or causes
to be presented, a false or fraudulent claim for payment or
approval” to the Government. 31 U.S.C. § 3729(a)(1). The stat-
ute makes civil penalties and treble damages available as rem-
edies. See id. The FCA further contemplates that “[t]he Attor-
ney General diligently shall investigate a violation under sec-
tion 3729,” and, if substantiated, “may bring a civil ac-
tion…against the person” directly in the name of the United
States. Id. § 3730(a). From its inception, however, the FCA also
is not jurisdictional. See United States ex rel. Moore & Co., P.A. v. Majestic
Blue Fisheries, LLC, No. 14-4292, 2016 WL 386087, at *5 (3d Cir. Feb. 2, 2016)
(“[W]e conclude that the amended bar is not jurisdictional.”); United States
ex rel. Osheroff v. Humana, Inc., 776 F.3d 805, 810 (11th Cir. 2015) (same);
United States ex rel. May v. Purdue Pharma L.P., 737 F.3d 908, 916 (4th Cir.
2013) (same).
No. 15-1143 9
has contained a so-called qui tam provision, which permits a
private party, known as a “relator,” to bring a civil action al-
leging fraud against the Government on its own behalf as well
as on behalf of the United States. See id. § 3730(b)(1). If the
claim is proven, the relator receives a percentage of the recov-
ery. See id. § 3730(d).
In its initial form, the FCA “did not limit the sources from
which a relator could acquire the information to bring a qui
tam action.” Graham Cty. Soil & Water Conservation Dist. v.
United States ex rel. Wilson, 559 U.S. 280, 293–94 (2010). Conse-
quently, relators were not obligated to supply any new infor-
mation before filing a complaint under the FCA. Yet, “[d]es-
pite this invitation for abuse, the qui tam provisions were used
sparingly during their first half-century.” United States ex rel.
Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645, 649 (D.C. Cir.
1994). With the proliferation of New Deal and World War II
government contracts, however, came both an increase in
fraud and a corresponding surge in qui tam litigation. Id. And
due to the liberality of the provisions then in effect, individu-
als who had played no part in uncovering a fraud were free
to bring “parasitic” lawsuits based on information that was
entirely the product of the Government’s own investigation.
See United States ex rel. Marcus v. Hess, 317 U.S. 537, 545–46
(1943) (upholding relator’s recovery in qui tam suit based
solely on information contained in a criminal indictment to
which it had not contributed). Such purely duplicative litiga-
tion “not only diminished the government’s ultimate recov-
ery without contributing any new information,” but also “put
pressure on the government to make hasty decisions regard-
ing whether to prosecute civil actions.” United States ex rel.
Findley v. FPC-Boron Emps.’ Club, 105 F.3d 675, 680 (D.C. Cir.
1997).
10 No. 15-1143
Responding to this opportunism, Congress amended the
qui tam provisions in 1943 “to preclude qui tam actions ‘based
upon evidence or information in the possession of the United
States, or any agency, officer or employee thereof, at the time
such suit was brought.’” Graham Cty., 559 U.S. at 294 (quoting
Act of Dec. 23, 1943, Pub. L. No. 213, 57 Stat. 608, 609 (codified
at 31 U.S.C. § 232(C)(1946))). This broadly worded “govern-
ment-knowledge” bar, however, overcorrected for its prede-
cessor, stymying the qui tam provision’s enforcement by de-
priving courts of jurisdiction over otherwise meritorious
suits. See, e.g., United States ex rel. Wisconsin v. Dean, 729 F.2d
1100, 1106–07 (7th Cir. 1984) (precluding State of Wisconsin
from bringing qui tam action because the state already had re-
ported the alleged fraud to the federal government, as re-
quired by statute). “[O]nce the United States learned of a false
claim, only the Government could assert its rights under the
FCA against the false claimant.” Hughes Aircraft Co. v. United
States ex rel. Schumer, 520 U.S. 939, 949 (1997) (internal quota-
tion marks omitted). As a result, “the volume and efficacy of
qui tam litigation dwindled.” Graham Cty., 559 U.S. at 294.
In 1986, Congress again overhauled the Act in order “to
encourage any individual knowing of Government fraud to
bring that information forward.” S. Rep. No. 99-345, at 2
(1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5266–67. On the
whole, the 1986 reforms were meant to broaden the qui tam
provisions in order to encourage private individuals to dis-
close fraudulent conduct. See id. at 6–8. As the legislative his-
tory indicates, however, this time Congress also “sought to
resolve a tension between…encouraging people to come for-
ward with information and…preventing ‘parasitic’ lawsuits.”
False Claims Act Implementation: Hearing Before the Subcomm. on
Admin. Law and Gov’t Relations of the H. Comm. on the Judiciary,
No. 15-1143 11
101st Cong. 5 (1990) (statement of co-sponsor Sen. Grassley);
accord Springfield Terminal, 14 F.3d at 649 (noting that Con-
gress sought “the golden mean between adequate incentives
for whistle-blowing insiders with genuinely valuable infor-
mation and discouragement of opportunistic plaintiffs who
have no significant information to contribute of their own”).
Accordingly, the 1986 amendments repealed the govern-
ment-knowledge bar and replaced it with the more circum-
scribed public-disclosure bar to qui tam jurisdiction:
No court shall have jurisdiction over an action
under this section based upon the public disclo-
sure of allegations or transactions in a criminal,
civil, or administrative hearing, in a congres-
sional, administrative, or Government Account-
ing Office report, hearing, audit, or investiga-
tion, or from the news media, unless the action
is brought by the Attorney General or the per-
son bringing the action is an original source of
the information.
31 U.S.C. § 3730(e)(4)(A) (1994) (footnote omitted). The 1986
statute defined an “original source” as someone possessing
“direct and independent knowledge” of the alleged wrong-
doing who “voluntarily provided the information to the Gov-
6
ernment before filing an action.” Id. § 3730(e)(4)(B).
6Congress revised the public-disclosure bar again in 2010 as a part of the
Patient Protection and Affordable Care Act. Pub. L. No. 111–148,
§ 10104(j)(2), 124 Stat. 119, 901–02 (2010). Our cases hold that the 2010
changes to § 3730(e)(4)(A) are not retroactive and therefore the applicable
version of subsection (A) is the one that was “in force when the events
underlying th[e] suit took place.” United States ex rel. Goldberg v. Rush Univ.
12 No. 15-1143
B.
To determine if an action is barred under § 3730(e)(4), we
engage in a three-step analysis. See, e.g., Glaser v. Wound Care
Consultants, Inc., 570 F.3d 907, 913 (7th Cir. 2009). We first ex-
amine whether the allegations in the complaint have been
“publicly disclosed” through one of the enumerated channels.
Id. If so, we then determine whether the relator’s lawsuit is
“based upon,” i.e., “substantially similar to,” those publicly
disclosed allegations. Id. at 913, 920. If it is, the public-disclo-
sure bar precludes the action unless “the relator is an ‘original
source’ of the information upon which [the] lawsuit is based.”
Id. at 913. The relator bears the burden of proof at each step of
the analysis. Id.
1.
Under the first step of the § 3730(e)(4) framework, the al-
legations in a complaint are publicly disclosed “when the crit-
ical elements exposing the transaction as fraudulent are
placed in the public domain.” United States ex rel. Feingold v.
AdminaStar Fed., Inc., 324 F.3d 492, 495 (7th Cir. 2003). This
definition presents two distinct issues: whether the relevant
information was “placed in the public domain,” and, if so,
Med. Ctr., 680 F.3d 933, 934 (7th Cir. 2012) (citing Graham Cty. Soil & Water
Conservation Dist. v. United States ex rel. Wilson, 559 U.S. 280, 283 n.1 (2010)).
However, Congress’s modification of the “original source” definition in
subsection (B) “is a clarifying rather than a substantive amendment” and
thus is “not subject to a retroactivity bar.” United States ex rel. Bogina v.
Medline Indus., Inc., 809 F.3d 365, 369 (7th Cir. 2016). We discuss the spe-
cific applications of these amendments as they arise in our analysis.
No. 15-1143 13
whether it contained the “critical elements exposing the trans-
action as fraudulent.” Id.
a.
We turn first to the language “in the public domain.” In
construing this phrase, we have recognized the uncontrover-
sial proposition that material is in the public domain when
the information is open or manifest to the public at large. Id.
(defining “public” as “accessible to or shared by all members
of the community” (quoting Webster’s Ninth New Collegiate
Dictionary 952 (1987))); see United States v. Bank of Farmington,
166 F.3d 853, 860 (7th Cir. 1999) (“A plain and ordinary mean-
ing of ‘public’ is ‘open to general observation, sight, or cogni-
tion,…manifest, not concealed’; that of ‘disclosure’ is ‘open-
ing up to view, revelation, discovery, exposure.’” (citation
omitted) (quoting 12 Oxford English Dictionary 780 (2d ed.
1989); 4 id. at 738)). For instance, the critical elements of a
fraud “[c]learly” entered the public domain through a series
of government audits that were covered by the news media,
United States ex rel. Gear v. Emergency Med. Assocs. of Ill., Inc.,
436 F.3d 726, 728–29 (7th Cir. 2006), but not through unfiled
discovery materials that were merely “potentially accessible
to the public,” Bank of Farmington, 166 F.3d at 860.
Beyond revelation to the general public, however, we fur-
ther have recognized that the phrase “in the public domain”
has an alternative meaning: where the “facts disclosing the
fraud itself are in the government’s possession.” Absher, 764
F.3d at 708. In United States v. Bank of Farmington, 166 F.3d 853
(7th Cir. 1999), we explained that “[t]he point of public disclo-
sure of a false claim against the government is to bring it to
14 No. 15-1143
the attention of the authorities, not merely to educate and en-
lighten the public at large about the dangers of misappropri-
ation of their tax money.” Id. at 861. This purpose, we noted,
was in accord with “a standard meaning of ‘public,’ which
can also be defined as ‘authorized by, acting for, or represent-
ing the community.’” Id. (quoting 12 Oxford English Diction-
ary 779 (2d ed. 1989)). We therefore held that the “[d]isclosure
of information to a competent public official…[is a] public
disclosure within the meaning of § 3730(e)(4)(A) when the
disclosure is made to one who has managerial responsibility
for the very claims being made” because “disclosure to the
public official responsible for the claim effectuates the pur-
pose of disclosure to the public at large.” Id.
Since Bank of Farmington, we have embraced the proposi-
tion that because “the purpose of a public disclosure is to alert
the responsible authority that fraud may be afoot,” the Gov-
ernment’s possession of the information exposing a fraud is
alone sufficient to trigger the public-disclosure bar. Glaser, 570
F.3d at 914 (quoting Feingold, 324 F.3d at 496). Building on this
rationale, we held in Feingold that administrative reports con-
taining the critical elements of fraud, when generated by the
responsible authority itself, “are publicly disclosed because,
by their very nature, they establish the relevant agency’s
awareness of the information in those reports.” 324 F.3d at
496. Six years after Feingold, we invoked Bank of Farmington
again, this time in the context of an administrative investiga-
tion. Glaser, 570 F.3d at 913–14. In Glaser v. Wound Care Con-
sultants, Inc., 570 F.3d 907 (7th Cir. 2009), the qui tam relator
alleged that the defendant, a wound-care services provider,
had been allowing its nurse practitioner to bill Medicare at a
higher rate by representing that the practitioner’s services
were “incident to” the services of a physician when, in reality,
No. 15-1143 15
they were provided without supervision. Id. at 911. Prior to
the filing of the complaint, however, the Centers for Medicare
& Medicaid Services (“CMS”) had discovered the defendant’s
billing irregularities during a routine audit and begun “peri-
odically sen[ding] letters asking [the defendant] to repay
funds it received at the higher doctor’s rate.” Id. Based on the
CMS’s letters to the defendant, we determined that the re-
sponsible authorities possessed more than “mere…awareness
of wrongdoing,” which alone would have been insufficient to
establish a public disclosure. Id. at 913–14 (citing Bank of Farm-
ington, 166 F.3d at 860 n.5). Rather, the communications indi-
cated that CMS “had knowledge of possible improprie-
ties…and was actively investigating those allegations and re-
covering funds.” Id. at 914. We held therefore that “the critical
elements exposing the transaction as fraudulent [had been]
placed in the public domain, and therefore the allegations at
the heart of [the relator’s] lawsuit were publicly disclosed by
the time her complaint was filed.” Id. (first alteration in origi-
nal) (citation omitted) (internal quotation marks omitted).
With this precedent in mind, we examine first whether the
FTA Letter was publicly disclosed within the meaning of the
7
statute. The district court, relying on our decision in Glaser,
held that the review described in the FTA Letter “amount[s]
to precisely the type of active investigation that the Seventh
Circuit identified in Glaser. Accordingly the CTA’s inaccurate
7 The federal administrative investigation described in the FTA Letter
qualifies as an eligible source of disclosure under both the 1986 and 2010
versions of the public-disclosure bar. See Graham Cty., 559 U.S. at 283 (in-
terpreting the 1986 version); § 3730(e)(4)(A) (2012) (limiting the public-dis-
closure bar to federal sources).
16 No. 15-1143
reporting was publicly disclosed in the FTA’s investigation by
8
the time the complaint was filed in May 2012.” Cause of Ac-
tion attempts to distinguish Glaser by asserting that “[i]n this
case, by contrast, the government has done nothing to recover
the money that [the] CTA should not have received. This fact,
and this fact alone, should be enough to prevent the public
9
disclosure bar.”
The distinction that Cause of Action identifies is not rele-
vant to our analysis. In Glaser, we were clear that “mere gov-
ernmental awareness of wrongdoing does not mean a public
disclosure occurred.” 570 F.3d at 913. There, the CMS’s letters
were significant because they indicated that the responsible
authority had proceeded beyond mere “knowledge of possi-
ble improprieties” to the point of “actively investigating those
allegations,” which placed them in the public domain. Id. at
914. Here, like in Glaser, the FTA, as the responsible authority,
was not “simply aware” of the misreporting. Id. The FTA Let-
ter specifically references the agency’s “in-depth review” of
the CTA’s reporting practices, facilitated at least in part by the
CTA’s cooperation, and describes in some detail the results of
10
the inquiry. There is no support in either the FCA or our case
law for attaching jurisdictional significance to the outcome of
an administrative investigation beyond its undertaking.
Thus, under our precedents, the FTA Letter was “placed in
the public domain” when it was sent to the CTA. Feingold, 324
F.3d at 495.
8 R.61 at 10 (citation omitted).
9 Appellant’s Br. 16 n.20.
10 R.55-1 at 2–3.
No. 15-1143 17
Some of our sister circuits have criticized our reading of
this term. In their view, “a ‘public disclosure’ requires that
there be some act of disclosure to the public outside of the gov-
ernment.” United States ex rel. Rost v. Pfizer, Inc., 507 F.3d 720,
11
728 (1st Cir. 2007) (emphasis added). These courts rely pri-
marily on the text of § 3730(e)(4)(A). A disclosure, they ex-
plain, requires both “an affirmative act” and a “recipient…to
whom the information is revealed.” United States ex rel. Wilson
v. Graham Cty. Soil & Water Conservation Dist., 777 F.3d 691,
696 (4th Cir. 2015). That recipient, they maintain, is the public.
11 See also United States v. Chattanooga-Hamilton Cty. Hosp. Auth., 782 F.3d
260, 268 (6th Cir. 2015) (rejecting Bank of Farmington and holding that
Ҥ 3730(e)(4) requires some affirmative act of disclosure to the public out-
side the government”); United States ex rel. Wilson v. Graham Cty. Soil &
Water Conservation Dist., 777 F.3d 691, 697 (4th Cir. 2015) (“Today we too
reject the Seventh Circuit’s view, holding instead that a public disclosure
requires that there be some act of disclosure outside of the government.” (em-
phasis in original) (internal quotation marks omitted)); United States ex rel.
Oliver v. Philip Morris USA Inc., 763 F.3d 36, 42 (D.C. Cir. 2014) (“The plain
text of the public disclosure bar delineates three channels through which
information can be made public for purposes of invoking the bar.…The
government’s own, internal awareness of the information is not one such
channel.”); United States ex rel. Meyer v. Horizon Health Corp., 565 F.3d 1195,
1201 (9th Cir. 2009) (“[E]ven when the government has the information, it
is not publicly disclosed under the Act until it is actually disclosed to the
public.”); United States ex rel. Maxwell v. Kerr-McGee Oil & Gas Corp., 540
F.3d 1180, 1186 (10th Cir. 2008) (“Interpreting the FCA to establish release
of information into the public domain as the trigger to remove subject mat-
ter jurisdiction fits with the purposes of the Act and the 1986 amend-
ments.”); United States ex rel. Williams v. NEC Corp., 931 F.2d 1493, 1496 n.7
(11th Cir. 1991) (“Even if a government investigation was pending at the
time [the relator] filed his qui tam complaint, such fact would not jurisdic-
tionally bar [the FCA claim].”).
18 No. 15-1143
And because “the Government is not the equivalent of the
public,” the phrase must be read to mean that “only disclo-
sures made to the public at large or to the public domain
ha[ve] jurisdictional significance.” Id. at 696–97 (internal quo-
tation marks omitted). Otherwise, “[i]f providing information
to the government were enough to trigger the bar, the phrase
‘public disclosure’ would be superfluous.” Rost, 507 F.3d at
12
729.
Our sister circuits also emphasize the congressional intent
behind replacing the broad Government-knowledge bar with
the more precise public-disclosure bar. “As a result of that
change, the inquiry shifted from whether the relevant infor-
mation was known to the government to whether that infor-
mation was publicly disclosed in one of the channels specified
by the statute.” United States ex rel. Oliver v. Philip Morris USA
Inc., 763 F.3d 36, 42 (D.C. Cir. 2014). Thus, to credit the Gov-
ernment’s internal knowledge alone as sufficient to withdraw
jurisdiction, as our case law permits, is to “essentially rein-
state a jurisdictional bar Congress expressly eliminated.” Id.;
accord Rost, 507 F.3d at 729–30. Moreover, according to these
courts, requiring outward disclosure helps to strike the bal-
ance sought by Congress between encouraging private citi-
zens with first-hand knowledge to step forward while dis-
couraging opportunistic plaintiffs from capitalizing on public
information generated by others. United States ex rel. Maxwell
v. Kerr-McGee Oil & Gas Corp., 540 F.3d 1180, 1186 (10th Cir.
12 Several of these cases also emphasize the use of the word “Government”
elsewhere in the FCA. See Chattanooga-Hamilton, 782 F.3d at 268; United
States ex rel. Rost v. Pfizer, Inc., 507 F.3d 720, 729 (1st Cir. 2007) (“The statute
itself uses the term ‘Government’ numerous times and does not once
equate the government with the public.”).
No. 15-1143 19
2008); Springfield Terminal, 14 F.3d at 653 (“If [information is]
not yet in the public eye, no rational purpose is served—and
no ‘parasitism’ deterred—by preventing a qui tam plaintiff
from bringing suit based on [its] contents.”). Finally, several
courts have noted that our “interpretation is also contrary to
another legislative purpose reflected in the 1986 amendments:
it was the Congressional intent, through the requirement of
public disclosure, to help keep the government honest in its
investigations and settlements with industry. Once allega-
tions are made public, the government can be forced to act by
public pressure.” Rost, 507 F.3d at 730; accord Maxwell, 540
F.3d at 1186.
There is significant force in the position of the other cir-
cuits. If the FTA letter were the only document before us in
this case, respect for the position of the other circuits would
warrant in-depth reconsideration of our precedent. However,
we need not address squarely the correctness of Bank of Farm-
ington today because, as Cause of Action concedes, the Audit
Report was “in the public domain” at the time the complaint
13
was filed.
13Appellant’s Br. 20 (“The Audit Report was in the public domain.”). We
note that during oral argument, counsel for the CTA informed us that the
Audit Report was made available online. A brief internet search revealed
that the Audit Report was posted on the Illinois Auditor General website,
which contains a database of reports dating back to 1974. Performance Au-
dit: Mass Transit Agencies of Northeastern Illinois, Illinois Auditor Gen-
eral (March 2007), http://www.auditor.illinois.gov/audit-reports/Perfor-
mance-Special-Multi/Performance-Audits/07-Mass-Transit-NE-IL-Perf-
Main-Report.pdf. Moreover, according to the website, “[c]opies of all au-
dits are made available to members of the Legislature, the Governor,
agency management, the media, and the public,” and “[a]udit reports are
20 No. 15-1143
b.
14
Because the Audit Report was in the public domain at
the time Cause of Action filed its complaint, we examine
reviewed by the Legislative Audit Commission in a public hearing” dur-
ing which “[t]estimony is taken from the agency regarding the audit find-
ings and the plans the agency has for corrective action.” Description, Illi-
nois Auditor General, http://www.auditor.illinois.gov/About/descrip-
tion.asp (last visited Feb. 18, 2016). Although unnecessary in light of Cause
of Action’s admission, “[w]e may take judicial notice of matters of public
record.” Laborers’ Pension Fund v. Blackmore Sewer Constr., Inc., 298 F.3d
600, 607 (7th Cir. 2002) (taking judicial notice of the ownership of a bank
from FDIC website); accord LaBella Winnetka, Inc. v. Vill. of Winnetka, 628
F.3d 937, 944 n.3 (7th Cir. 2010) (taking judicial notice of information on
Village of Winnetka’s website); Denius v. Dunlap, 330 F.3d 919, 926 (7th
Cir. 2003) (taking judicial notice of military personnel records from Na-
tional Personnel Records Center website).
14 At first glance, relying on the Audit Report (a state document) as the
source of disclosure for data submitted after the effective date of the 2010
amendments (here, reporting years 2009 and 2010) might seem problem-
atic because the 2010 iteration limits public disclosure to federal sources.
See 31 U.S.C. § 3730(e)(4)(A) (2012). Although we apply the version of sub-
section (A) that was “in force when th[e] events underlying the suit took
place,” Goldberg, 680 F.3d at 934; accord Bogina, 809 F.3d at 369; see also
Hughes Aircraft Co. v. United States ex rel. Schumer, 520 U.S. 939, 948 (1997)
(noting that the amendment in question “eliminate[d] a defense to a qui
tam suit—prior disclosure to the Government—and therefore change[d]
the substance of the existing cause of action for qui tam defendants by at-
taching a new disability, in respect to transactions or considerations al-
ready past” (alteration omitted) (internal quotation marks omitted)), we
do not think that, here, it is necessary or appropriate to characterize the
2009 and 2010 reporting years as discrete events. Rather, they are part of
the CTA’s continuing practice of counting non-revenue miles. As we ex-
plain, the Audit Report provided notice of the CTA’s continuing practice
prior to the enactment of the 2010 amendments. Cf. Bogina, 809 F.3d at 370
No. 15-1143 21
whether that document contained “the critical elements ex-
posing the transaction as fraudulent.” Feingold, 324 F.3d at
495; see United States ex rel. Found. Aiding the Elderly v. Horizon
W. Inc., 265 F.3d 1011, 1014 (9th Cir. 2001) (“[W]e…determine
whether the content of the disclosure consisted of the allega-
tions or transactions giving rise to the relators’ claim, as op-
posed to mere information.” (internal quotation marks omit-
ted)). Section 3730(e)(4) withdraws subject matter jurisdiction
“only when either the allegation of fraud or the critical ele-
ments of the fraudulent transaction themselves…already
have been publically disclosed.” Absher, 764 F.3d at 708 (em-
phasis in original) (internal quotation marks omitted). Thus,
in the absence of an explicit allegation of fraud, the public-
disclosure bar “may still apply so long as…facts establishing
the essential elements of fraud—and, consequently, provid-
ing a basis for the inference that fraud has been committed—
are in the government’s possession or the public domain.” Id.
(internal quotation marks omitted).
Absher is the only case in which we have addressed di-
rectly the quantum and quality of factual content necessary to
expose a transaction as fraudulent and thus trigger the public-
disclosure bar. In that case, two former employees of Mo-
mence Meadows Nursing Center, Inc. (“Momence”) brought
a qui tam action alleging that the nursing facility had “know-
ingly submitted thousands of false claims to the Medicare and
(applying public-disclosure bar where “[t]he government was…on notice
of the possibility of a broader bribe-kickback scheme before [the relator]
sued”); Glaser, 570 F.3d at 909 (applying public-disclosure bar where “the
government was already aware of the possible improprieties in [the de-
fendant’s] billing practices”).
22 No. 15-1143
Medicaid programs in violation of the FCA.” Id. at 704 (inter-
nal quotation marks omitted). On appeal, Momence main-
tained that § 3730(e)(4) deprived the district court of jurisdic-
tion because “the relators’ FCA claims were based extensively
upon incidents of non-compliant care documented in govern-
ment survey reports,” which, according to Momence,
“tend[ed] to establish one of the essential elements of fraud—
namely, that Momence provided non-compliant care to its
residents.” Id. at 708. Rejecting Momence’s argument, we held
that, although the survey reports did disclose that Momence
had, on certain occasions, failed to comply with the required
standard of patient care, “the surveys did not disclose facts
establishing that Momence misrepresented the standard of
care in submitting claims for payment to the government.” Id.
at 708–09. It “is not enough,” we explained, that “as soon as
the government learned that Momence was providing non-
compliant care, it necessarily knew that at least some of Mo-
mence’s claims for payment were for the provision of non-
compliant care.” Id. at 709 n.10. Rather, “[t]he government
must also have access to facts disclosing that [the defendant]
had the scienter required by the FCA.” Id. Because the FCA
imposes liability upon “any person who…knowingly presents,
or causes to be presented, a false or fraudulent claim for pay-
ment or approval,” 31 U.S.C. § 3729(a)(1)(A) (emphasis
added), the dispositive question is whether the information
disclosed in the Audit Report provides a sufficient basis from
which to infer that the CTA “knowingly” sought UAFP grant
funding from the FTA on a false basis.
Relying on Absher, Cause of Action now contends that it
would be “unreasonable to infer” from the Audit Report that
No. 15-1143 23
15
the CTA possessed the scienter required by the FCA. We dis-
agree. In Absher, the facts in the public domain were govern-
ment survey reports detailing instances of Momence’s non-
compliant care. We rejected the proposition that these regula-
tory violations necessarily implied that Momence knowingly
misrepresented the level of care it provided when it submitted
claims for reimbursement. Absher, 764 F.3d at 709 n.10. We
held that the public-disclosure bar removes jurisdiction only
where one can infer, as a direct and logical consequence of the
disclosed information, that the defendant knowingly—as op-
posed to negligently—submitted a false set of facts to the
Government. However, it does not necessarily withdraw ju-
risdiction over cases where, in order to infer the presence of
scienter, one must disregard an equally plausible inference
that the defendant was merely mistaken and thus lacked the
knowledge required by the FCA. See United States ex rel.
Baltazar v. Warden, 635 F.3d 866, 867 (7th Cir. 2011)
(“[A]lthough bills for services never performed likely reflect
fraud, miscoded bills need not; the errors may have been
caused by negligence rather than fraud (which means inten-
tional deceit).”). Absher presented the latter scenario; the reg-
ulatory scheme required Momence to make qualitative judg-
ments about its “compl[iance] with a wide variety of regula-
tions and standards of care.” 764 F.3d at 703. Thus, one could
no sooner have inferred from the regulatory violations that
Momence knowingly misrepresented its level of care in seeking
reimbursement than one could have inferred that Momence
15 Appellant’s Br. 19 n.21.
24 No. 15-1143
mistakenly believed that it was compliant and then later was
16
found to have violated the standard of care.
Here, by contrast, the Audit Report provided a sufficient
basis to infer directly that the CTA knew it was presenting a
false set of facts to the Government. Unlike Absher, the regu-
latory scheme here does not involve any qualitative judg-
ments. The CTA is required by statute to submit its transit
data to the NTD annually in order to secure grant funding un-
der the UAFP. See 49 U.S.C. § 5335(b). The statute and the ap-
plicable NTD regulations permit the CTA to receive UAFP
grants from the FTA for VRM (vehicle revenue miles). See id.
§ 5336(c)(1)(A)(i). The definition of VRM explicitly excludes
deadhead miles. Nat’l Transit Database, 2006 Urbanized Area
Reporting Manual, Glossary 384, 396 (2006), available at
http://www.ntdprogram.gov/ntdprogram/pubs/ARM/2006/
pdf/2006_Reporting_Manual_Glossary.pdf. The Audit Re-
port disclosed that the CTA was reporting VRM data to the
NTD that was considerably and consistently higher than that
of its peer group. The Audit Report disclosed further that the
IL-AG suspected that the CTA was incorrectly classifying
deadhead miles as VRM, a direct contravention of the NTD
definitions that would necessarily increase the CTA’s UAFP
grant allocations. From this report, one could infer that the
CTA was knowingly misrepresenting deadhead miles as
VRM in its NTD reporting data and thus committing fraud
16 See United States ex rel. Bellevue v. Universal Health Servs. of Hartgrove Inc.,
No. 11 C 5314, 2015 WL 1915493, at *6–7 (N.D. Ill. Apr. 24, 2015) (distin-
guishing Absher based on the qualitative nature of the judgments in-
volved).
No. 15-1143 25
17
against the FTA, rendering a qui tam suit unnecessary. Be-
cause the NTD regulations specifically proscribe the classifi-
cation of deadhead miles as VRM, it was not equally plausible
to infer from the Audit Report that the CTA mistakenly be-
lieved otherwise. Indeed, Cause of Action’s theory of the case
is that the CTA could not have acted negligently in overstat-
ing its VRM because “[w]hen [the] CTA certified its VRM data
18
it included miles that were plainly not allowable.”
17 At oral argument, counsel for Cause of Action also contended that the
Audit Report could not have provided a sufficient basis to infer fraud be-
cause although it detailed the VRM reporting data it did not reference the
relevant FTA funding program. In this context, we do not believe that it is
necessary for a disclosure to specifically reference a particular program in
order for the federal government to infer that it is being defrauded. See
Bogina, 809 F.3d at 370 (applying public-disclosure bar to allegations of
fraud involving government health care programs other than those spe-
cifically referenced in the public disclosure). In any event, the Audit Re-
port specifically references the CTA’s “grant revenue from the FTA Sec-
tion 5307 program.” R.3-4 at 343.
18 R.55 at 4. We note that the cases on which United States ex rel. Absher v.
Momence Meadows Nursing Ctr., Inc., 764 F.3d 699 (7th Cir. 2014) relied did
not expressly require facts disclosing scienter as an essential element
providing for the inference of fraud. Those cases held that the inference of
fraud “requires recognition of two elements: a misrepresented state of
facts and a true state of facts.” Springfield Terminal, 14 F.3d at 655 (emphasis
in original); accord Horizon W. Inc., 265 F.3d at 1015. Moreover, they ex-
plained that “[k]nowledge of the allegedly misrepresented state of af-
fairs—which does not necessarily entail knowledge of the fact of misrep-
resentation—is always in the possession of the government.” Springfield
Terminal, 14 F.3d at 656 (emphasis in original). Under this reasoning, the
present case remains distinguishable from Absher. In Absher, the Govern-
ment had knowledge of the allegedly misrepresented state of affairs,
namely the facially valid reimbursement claims. 764 F.3d at 708–09. The
26 No. 15-1143
2.
Having determined that the allegations in Cause of Ac-
tion’s complaint were publicly disclosed in the Audit Report,
we proceed to the second step of the § 3730(e)(4) analysis and
ask whether Cause of Action’s lawsuit is “based upon” those
19
public disclosures. “[A] relator’s FCA complaint is ‘based
upon’ publicly disclosed allegations or transactions when the
allegations in the relator’s complaint are substantially similar to
publicly disclosed allegations.” Glaser, 570 F.3d at 920 (em-
20
phasis added). We have cautioned against “viewing FCA
Government did not, however, know of the true state of facts, i.e., that the
claims were for non-compliant care, nor did the survey reports provide
such knowledge. Id. at 709. Here, by contrast, the Government had
knowledge of both elements. Like Absher, it had knowledge of the alleg-
edly misrepresented VRM because the data had already been submitted
to the NTD. Unlike Absher, the Government also had knowledge of the
true state of facts, i.e., that the VRM reporting was improperly inflated,
because the Audit Report disclosed that the CTA’s data was considerably
and consistently higher than its peer group and that the IL-AG suspected
that the CTA was incorrectly classifying deadhead miles as VRM.
19 Although the district court concluded that Cause of Action waived ar-
gument under the second and third prongs of the analysis, these are mat-
ters of law that have been fully briefed and argued and that we review de
novo. We therefore exercise our discretion to address them in order to pro-
vide a complete analysis. See Amcast Indus. Corp. v. Detrex Corp., 2 F.3d 746,
749–50 (7th Cir. 1993) (resolving issue not raised in district court where
issue was fully briefed and argued and involved a “pure issue of statutory
interpretation, as to which the district judge’s view…could have no effect
on our review”).
20The 1986 version of the public-disclosure bar precluded qui tam actions
that were “based upon the public disclosure” of the allegations. See
No. 15-1143 27
claims at the highest level of generality…in order to wipe out
qui tam suits.” Leveski v. ITT Educ. Servs., Inc., 719 F.3d 818, 831
(7th Cir. 2013) (internal quotation marks omitted). Neverthe-
less, in order to avoid the public-disclosure bar, it is essential
that a relator present “genuinely new and material infor-
mation” beyond what has been publicly disclosed. United
States ex rel. Goldberg v. Rush Univ. Med. Ctr., 680 F.3d 933, 935–
36 (7th Cir. 2012) (holding that allegations not substantially
similar because they “allege[d] a [different] kind of deceit”);
accord United States ex rel. Heath v. Wis. Bell, Inc., 760 F.3d 688,
691 (7th Cir. 2014) (holding that allegations not substantially
similar because they “required independent investigation
and analysis to reveal any fraudulent behavior”); Leveski, 719
F.3d at 829–33 (holding that allegations not substantially sim-
ilar because they covered an entirely different time period, in-
cluded wrongdoing by a separate department, pertained to a
more sophisticated scheme, and named specific individuals);
Baltazar, 635 F.3d at 867–69 (holding that allegations not sub-
stantially similar because relator “supplied vital facts that
were not in the public domain”).
Cause of Action’s allegations are substantially the same as
§ 3730(e)(4)(A). This court interpreted “based upon” to mean “substan-
tially similar to” the publicly disclosed allegations. See Glaser, 570 F.3d at
920. When Congress revised § 3730(e)(4)(A) to its current form in 2010, it
“expressly incorporate[d]” our interpretation. Leveski v. ITT Educ. Servs.,
Inc., 719 F.3d 818, 828 n.1 (7th Cir. 2013); see 31 U.S.C. § 3730(e)(4)(A) (2012)
(requiring courts to dismiss qui tam actions where “substantially the same
allegations or transactions as alleged in the action or claim were publicly
disclosed”). Our analysis in this step is therefore the same under either
version of the statute. See Bogina, 809 F.3d at 368 (describing this shift in
language as “not a significant change, both formulas being aimed at bar-
ring ‘me too’ private litigation” (internal quotation marks omitted)).
28 No. 15-1143
the information disclosed in the Audit Report. Its complaint
provides only two additional pieces of information. First,
Cause of Action alleges throughout that the CTA knowingly
misreported its VRM data to the NTD. Importantly, though,
this particular claim is not based on Cause of Action’s direct
knowledge of the CTA’s scienter or lack thereof. Rather, it is
an inference drawn from the available facts, and, as discussed
above, the Government was in an identical position to infer
scienter from the publicly disclosed Audit Report. See United
States ex rel. Bellevue v. Universal Health Servs. of Hartgrove Inc.,
No. 11 C 5314, 2015 WL 1915493, at *7 (N.D. Ill. Apr. 24, 2015).
Second, Cause of Action emphasizes that, although the Audit
Report analyzed the CTA’s transit data for only the years 1999
through 2004, its complaint alleges misreporting that spans a
broader timeframe. In this context at least, the allegation of a
longer time span does not warrant our characterizing Cause
of Action’s allegations as not substantially similar to the con-
21
tinuing practice disclosed in the Audit Report. In Glaser, we
held that the allegations of overbilling in the relator’s com-
plaint were “virtually identical” to the wrongdoing that was
the subject of the CMS investigation because “they per-
tain[ed] to the same entity and describe[d] the same fraudu-
lent conduct.” 570 F.3d at 920. Although the complaint
“add[ed] a few allegations not covered by CMS’s investiga-
tion,” these additions were insufficient to avoid the public-
disclosure bar. Id. A “qui tam action even partly based upon
publicly disclosed allegations or transactions,” we explained,
“is nonetheless ‘based upon’ such allegations or transac-
tions.” Id. Here, as in Glaser, Cause of Action’s allegations per-
21 See supra note 14.
No. 15-1143 29
tain to the same entity (the CTA) and describe the same alleg-
edly fraudulent conduct (misreporting deadhead miles as
VRM to the NTD) as the publicly disclosed information. With-
out more, we do not believe Cause of Action has presented
“genuinely new and material information.” Goldberg, 680 F.3d
at 936.
Cause of Action urges, however, that our decision in
United States ex rel. Heath v. Wisconsin Bell, Inc., 760 F.3d 688
(7th Cir. 2014), requires a different result. In that case, an au-
ditor retained by several Wisconsin school districts to audit
telecommunications bills brought a qui tam action alleging
that defendant Wisconsin Bell was “fraudulently over-
charg[ing] school districts, libraries and the United States for
telecommunication services.” 760 F.3d at 690. These allega-
tions were based on the relator’s “extensive review of the
charges administered by Wisconsin Bell,” and comparisons of
the rates paid by the schools to one another and to a publicly
available service agreement between Wisconsin Bell and the
state. Id. at 689, 692. We held that the public-disclosure bar
was not triggered because the relator’s allegations “required
independent investigation and analysis to reveal any fraudu-
lent behavior.” Id. at 691; see also United States ex rel. Lamers v.
City of Green Bay, 168 F.3d 1013, 1017 (1999) (holding public-
disclosure bar did not apply where relator “walked the
streets” as a “private investigator” observing the school bus
operations at issue).
The present case, however, is markedly different from
Heath. Here, Cause of Action has not conducted any inde-
pendent investigation or analysis to reveal the fraud it alleges.
Mr. Rubin, the author of the Technical Report, provided the
details of the CTA’s inaccurate reporting to Cause of Action,
30 No. 15-1143
who in turn styled them as a complaint with references to the
statutes and regulations that support its legal theory of fraud.
Because that is the extent of Cause of Action’s contribution,
“the allegations in [its] complaint are substantially similar to
publicly disclosed allegations.” Glaser, 570 F.3d at 920; see also
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 par-
ticular fraud, rather than merely background information
which enables a putative relator to understand the signifi-
cance of a publicly disclosed transaction or allegation.”).
3.
Cause of Action could still avoid the public-disclosure bar
if it were able to establish that it is “an ‘original source’ of the
information upon which the allegations in [its] complaint
were based.” Glaser, 570 F.3d at 921. To do so, Cause of Action
would have to show that it “has knowledge that is independ-
ent of and materially adds to the publicly disclosed allega-
tions or transactions” and “has voluntarily provided the in-
formation to the Government before filing [its] action.”
22
31 U.S.C. § 3730(e)(4)(B) (2012). Cause of Action voluntarily
provided the relevant information to the Government when
it notified the Department of Justice of the CTA’s misreport-
ing in March 2012 before filing suit several months later.
However, its knowledge of the CTA’s alleged wrongdoing is
22 Because the 2010 amendment to § 3730(e)(4)(B) is “not subject to a ret-
roactivity bar,” it applies “regardless of when a person claiming to be an
original source acquired his knowledge.” Bogina, 809 F.3d at 368–69. We
therefore use the new statutory language in this step of our analysis.
No. 15-1143 31
neither independent of nor materially adds to the publicly
disclosed Audit Report.
First, Cause of Action has not established that its
knowledge is independent of the publicly disclosed infor-
mation. To satisfy this requirement, a relator’s knowledge of
the alleged wrongdoing must not “derive[] from or depend[]
upon” the public disclosure. Bank of Farmington, 166 F.3d at
864. Instead, the relator must be “someone who would have
learned of the allegation or transactions independently of the
public disclosure.” Id. at 865; compare Glaser, 570 F.3d at 921
(holding relator was not an original source where her “only
knowledge that [the defendant]’s billing practices were im-
proper came from [her attorney], with whom [she] had no
prior relationship and who contacted her out of the blue”),
with Leveski, 719 F.3d at 837 (holding relator was an original
source where knowledge was “personal and specific to her; it
[wa]s not second- or third-hand evidence learned from an-
other source”). Here, Cause of Action has maintained
throughout that it was not until Mr. Rubin provided his Tech-
nical Report, the Audit Report, and an affidavit that Cause of
Action learned of the CTA’s misreporting. Had it not been for
Mr. Rubin’s overture, there is no reason to believe that Cause
of Action would have ever learned of the wrongdoing it now
alleges. Second, because Cause of Action’s allegations are
substantially similar to those contained in the Audit Report,
its information has not “materially add[ed]” to the public dis-
closure. 31 U.S.C. § 3730(e)(4)(B) (2012).
Cause of Action therefore is not an original source of the
allegations in its complaint within the meaning of
§ 3730(e)(4)(B).
32 No. 15-1143
Conclusion
The allegations in this case fall within the public-disclo-
sure bar to the qui tam statute, and, therefore, the district court
properly dismissed the complaint. The judgment of the dis-
trict court is affirmed.
AFFIRMED