United States Ex Rel. Mateski v. Raytheon Co.

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA EX REL No. 13-55341
STEVEN MATESKI,
Plaintiff-Appellant, D.C. No.
2:06-cv-03614-
v. ODW-FMO
RAYTHEON CO.,
Defendant-Appellee. OPINION
Appeal from the United States District Court
for the Central District of California
Otis D. Wright II, District Judge, Presiding
Argued and Submitted
November 2, 2015–Pasadena, California
Filed March 7, 2016
Before: Mary M. Schroeder, Harry Pregerson,
and Michelle T. Friedland, Circuit Judges.
Opinion by Judge Friedland
2 UNITED STATES EX REL MATESKI V. RAYTHEON
SUMMARY *
False Claims Act
Reversing the district court’s dismissal of Mateski’s qui
tam complaint against Raytheon Co. and remanding to the
district court for further proceedings, the panel held that the
public disclosure bar of the False Claims Act did not bar
Mateski’s lawsuit.
The panel concluded that Mateski’s allegations were not
“substantially similar” to the prior publicly disclosed reports
when viewed at the appropriate level of generality.
Mateski’s complaint alleged fraud that was different in kind
and degree from previously disclosed information about
Raytheon’s problems in performing on the contract at issue.
The panel held that because, if his allegations prove to be
true, Mateski is a relator who will have provided the
government with genuinely new and material information
about fraud, he should be allowed to move forward with his
qui tam suit.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
UNITED STATES EX REL MATESKI V. RAYTHEON 3
COUNSEL
Allan J. Graf (argued) and Dean Francis Pace, Carlsmith
Ball LLP, Los Angeles, California, for Plaintiff-Appellant.
Kimberly A. Dunne (argued), Sean A. Commons, and Brent
L. Nichols Sidley Austin LLP, Los Angeles, California.
Alan Charles Raul, Sidley Austin LLP, Washington, D.C.,
for Defendant-Appellee.
OPINION
FRIEDLAND, Circuit Judge:
Steven Mateski appeals the dismissal of his False Claims
Act suit against Raytheon Co., in which he alleged fraud in
the performance of a Government contract. Mateski argues
that the district court erred in holding that his Complaint was
based upon prior public disclosures and was thus precluded
by the public disclosure bar of the False Claims Act. We
agree. Mateski’s Complaint alleges fraud that is different in
kind and degree from the previously disclosed information
about Raytheon’s problems in performing on the contract at
issue. We therefore reverse and remand for further
proceedings.
I.
Between 1994 and 2002, the National Oceanic and
Atmospheric Administration, Department of Defense, and
NASA contracted with various companies to design and
build the National Polar-Orbiting Operational
4 UNITED STATES EX REL MATESKI V. RAYTHEON
Environmental Satellite System (“NPOESS”), a system for
collecting meteorological, oceanographic, environmental,
and climatic data. Raytheon entered a contract to design and
build a Visible Infrared Imaging Radiometer Suite
(“VIIRS”) sensor, which would be part of NPOESS.
Eventually, the Government agencies awarded a satellite
integration contract to a prime contractor, Northrop
Grumman, and incorporated previously awarded NPOESS
contracts, including Raytheon’s VIIRS contract, as
subcontracts to the prime contract.
The NPOESS project incurred many delays and cost
overruns. Beginning at least as early as 2003, VIIRS began
to attract public attention as a source of these problems. For
example, a 2004 Government Accountability Office
(“GAO”) report stated, “At present, the program office
considers the three critical sensors—VIIRS, CMIS, and
CrIS—to be key program risks because of technical
challenges that each is facing.” U.S. Gov’t Accountability
Off., GAO-04-1054, Polar-Orbiting Envtl. Satellites:
Information on Program Cost and Schedule Changes 18
(Sept. 2004). 1 A 2005 GAO statement explained that
“VIIRS sensor development issues were attributed, in part,
to [Raytheon’s] inadequate project management.” U.S.
Gov’t Accountability Off., GAO-06-249T, Polar-Orbiting
Operational Envtl. Satellites: Tech. Problems, Cost
Increases, & Schedule Delays Trigger Need for Difficult
Trade-off Decisions 18 (Nov. 2005). 2 A report from the
1
Available at http://www.gao.gov/assets/250/244364.pdf.
2
Available at http://www.gao.gov/new.items/d06249t.pdf.
UNITED STATES EX REL MATESKI V. RAYTHEON 5
Office of Inspector General at the U.S. Department of
Commerce noted that “[i]nadequate oversight, in effect,
postponed the critical evaluations and decisions needed to
replan the program’s faltering elements and contain the cost
and schedule overruns. Time and money were thus wasted
as the problems with NPOESS continued unchecked.” U.S.
Dep’t of Commerce, OIG-177794-6-0001, Nat’l Oceanic &
Atmospheric Admin.: Poor Mgmt. Oversight & Ineffective
Incentives Leave NPOESS Program Well Over Budget &
Behind Schedule 12 (May 2006). 3 A slew of news articles
also reported cost overruns and schedule delays with
NPOESS, including in Raytheon’s work on VIIRS.
Steven Mateski, an engineer who worked at Raytheon
from 1997 to 2006, was assigned to work on VIIRS
beginning in 2005. Mateski filed a complaint in June 2006
in federal district court alleging that Raytheon had violated
the False Claims Act (“FCA”), 31 U.S.C. §§ 3729–3733, by
failing to comply with numerous contractual requirements in
the development of VIIRS, fraudulently covering up areas of
noncompliance, and improperly billing the Government for
erroneous and incomplete work.
Six years after Mateski filed his initial complaint, the
United States declined to exercise its right under the FCA to
intervene in Mateski’s suit. Mateski then filed a fourth
amended complaint (“Complaint”). 4 The Complaint alleges
3
Available at https://www.oig.doc.gov/OIGPublications/OIG-17794.pdf.
4
The district court and the parties treat this as the operative complaint,
and so do we. It contains essentially the same level of detail and types
of allegations of fraud as Mateski’s original complaint.
6 UNITED STATES EX REL MATESKI V. RAYTHEON
that “[f]rom 2002 to at least 2012, Defendant [Raytheon] has
knowingly submitted false NPOESS VIIRS claims for
payment, whereby the United States Government has been
induced to pay money that it would not have paid if
Defendant [Raytheon] had disclosed the true defective
nonconformances with the NPOESS VIIRS specifications
and requirements.” As did the original complaint, this
Complaint makes numerous specific allegations, including:
creation of false waivers; improper (and forged) signoffs
certifying work performed; failure to rectify issues relating
to electrostatic discharge; cross contamination of flight and
non-flight quality materials; and use of prohibited materials
such as tin plating.
Raytheon moved to dismiss for lack of subject matter
jurisdiction. It argued that the suit was barred by
§ 3730(e)(4)(A) of the FCA, also known as the “public
disclosure bar,” which at the time of filing provided: “No
court shall have jurisdiction over an action under this section
based upon the public disclosure of allegations or
transactions.” 31 U.S.C. § 3730(e)(4)(A) (1986); United
States ex rel. Hartpence v. Kinetic Concepts, Inc., 792 F.3d
1121, 1127 (9th Cir. 2015) (en banc). 5 The district court
granted Raytheon’s motion to dismiss, explaining, “[I]t was
publicly known that there was rampant mismanagement,
deviations from protocol, and other problems with
5
In response to Raytheon’s motion to dismiss, the Government filed a
statement of interest requesting that, in the event the court “dismisses, in
whole or in part, [Mateski]’s amended complaint with prejudice to
[Mateski],” any dismissal be without prejudice to the United States’
filing of its own action or later election to intervene in the matter.
UNITED STATES EX REL MATESKI V. RAYTHEON 7
VIIRS. . . . [W]hile the public disclosures d[id] not discuss
the problems on the VIIRS program in the level of detail that
Mateski does in his [Complaint], the allegations are
nonetheless the same for the purposes of 31 U.S.C.
§ 3730(e)(4)(A).”
II.
We review de novo a district court’s dismissal for lack
of subject matter jurisdiction and its interpretation of the
False Claims Act. United States ex rel. Hartpence v. Kinetic
Concepts, 792 F.3d 1121, 1126 (9th Cir. 2015) (en banc).
We review for clear error a district court’s findings of fact
that underlie its decisions on subject matter jurisdiction. Id.
at 1126–27. Whether a particular disclosure triggers the
public disclosure bar is a mixed question of law and fact that
we review de novo. United States ex rel. Found. Aiding The
Elderly v. Horizon W., Inc., 265 F.3d 1011, 1013 (9th Cir.),
amended on denial of reh’g, 275 F.3d 1189 (9th Cir. 2001);
see also United States v. Alcan Elec. & Eng’g, Inc., 197 F.3d
1014, 1017 (9th Cir. 1999). The plaintiff “bears the burden
of establishing subject matter jurisdiction by a
preponderance of the evidence.” Alcan, 197 F.3d at 1018.
III.
The FCA prohibits “knowingly present[ing], or
caus[ing] to be presented, a false or fraudulent claim for
payment or approval; [or] knowingly mak[ing], us[ing], or
caus[ing] to be made or used, a false record or statement
material to a false or fraudulent claim” to the federal
government. 31 U.S.C. § 3729(a)(1)(A), (B). The FCA
allows private individuals, referred to as “relators,” to bring
8 UNITED STATES EX REL MATESKI V. RAYTHEON
suit on the Government’s behalf against entities that have
violated the Act’s prohibitions. 31 U.S.C. § 3730(b)(1); see
also United States ex rel. Hartpence v. Kinetic Concepts,
792 F.3d 1121, 1123 (9th Cir. 2015) (en banc). Such suits
are commonly called qui tam suits. Vt. Agency of Nat. Res.
v. United States ex rel. Stevens, 529 U.S. 765, 768 (2000)
(“Originally enacted in 1863, the False Claims Act . . . is the
most frequently used of a handful of extant laws creating a
form of civil action known as qui tam.”); see Kinetic
Concepts, 792 F.3d at 1123.
The FCA’s public disclosure bar deprives federal courts
of subject matter jurisdiction when a relator alleges fraud
that has already been publicly disclosed, unless the relator
qualifies as an “original source.” 6 Kinetic Concepts,
792 F.3d at 1123 (quoting 31 U.S.C. § 3730(e)(4)). Under
the public disclosure bar:
No court shall have jurisdiction over an
action under this section based upon the
public disclosure of allegations or
transactions . . . unless the action is brought
by the Attorney General or the person
6
An “‘original source’ means 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.” 31 U.S.C. § 3730(e)(4)(B) (1986). We need not decide
whether Mateski qualifies as an original source because this case does
not turn on the original source exception.
UNITED STATES EX REL MATESKI V. RAYTHEON 9
bringing the action is an original source of
the information.
31 U.S.C. § 3730(e)(4)(A) (1986) (emphases added). 7
The public disclosure bar is intended to encourage suits
by whistle-blowers with genuinely valuable information,
while discouraging litigation by plaintiffs who have no
significant information of their own to contribute. See
Graham Cty. Soil & Water Conservation Dist. v. United
States ex rel. Wilson, 559 U.S. 280, 294–95 (2010). A prior
version of the FCA had attempted to achieve a similar goal
by banning “qui tam actions based on information already in
the Government’s possession.” Id. at 294. Congress decided
that provision “thwarted a significant number of potentially
7
In 2010, the Affordable Care Act replaced the 1986 version of
31 U.S.C. § 3730(e)(4)(A) with new language, changing “based upon”
to “substantially the same.” See 31 U.S.C. § 3730(e)(4)(A) (2010) (“The
court shall dismiss an action or claim under this section, unless opposed
by the Government, if substantially the same allegations or transactions
as alleged in the action or claim were publicly disclosed.”); see also
United States ex rel. Bogina v. Medline Indus., Inc., 809 F.3d 365, 368
(7th Cir. 2016) (explaining that the 2010 amendment replacing the
“based upon” language “was not a significant change, [because] both
formulas [were] aimed at barring ‘“me too” private litigation [that]
would divert funds from the Treasury’ to bounty seekers whose efforts
had duplicated those of the government or an earlier bounty seeker.”)
(third alteration in original) (quoting United States ex rel. Goldberg v.
Rush Univ. Med. Ctr., 680 F.3d 933, 934 (7th Cir. 2012)). Given that
Mateski’s suit was filed in 2006, the prior version of the statute governs
here, see Graham Cty. Soil & Water Conservation Dist. v. United States
ex rel. Wilson, 559 U.S. 280, 283 n.1 (2010), though our analysis of the
issue of substantial similarity would be the same under either version.
10 UNITED STATES EX REL MATESKI V. RAYTHEON
valuable claims. Rather than simply repeal [it], however,
Congress replaced it [in 1986] with the public disclosure bar
in an effort to strike a balance between encouraging private
persons to root out fraud and stifling parasitic lawsuits.” Id.
at 294–95. 8
“The public disclosure bar is triggered if three things are
true: (1) the disclosure at issue occurred through one of the
channels specified in the statute; (2) the disclosure was
‘public’; and (3) the relator’s action is ‘based upon’ the
allegations or transactions publicly disclosed.” Malhotra v.
Steinberg, 770 F.3d 853, 858 (9th Cir. 2014) (quoting
31 U.S.C. § 3730(e)(4)(A) (1986)). It is undisputed that the
first two elements of this test are satisfied in this case. The
statements Raytheon relies upon in invoking the bar
occurred through the channels specified in the statute—news
8
Although this general purpose is well established, the legislative
history does not reveal anything more specific about Congress’s intent
behind the 1986 public disclosure bar. See Graham, 559 U.S. at 295
(noting that “[h]ow exactly § 3730(e)(4) came to strike this balance in
the way it did is a matter of considerable uncertainty”). The Court
explained, “‘One difficulty in interpreting the 1986 amendments is that
Congress was never completely clear about what kind of parasitic suits
it was attempting to avoid’ . . . . Because Section 3730(e)(4) was drafted
subsequent to the completion of the House and Senate Committee reports
on the proposed False Claims Act Amendments, those reports, which
contained discussion of altogether different bars, cannot be used in
interpreting it.” Id. at 296 n.15 (quoting United States ex rel. Stinson,
Lyons, Gerlin & Bustamante, P.A. v. Prudential Ins., 944 F.2d 1149,
1163 (3d Cir. 1991) (Scirica, J., dissenting)). The Court further
explained that “[t]he House and Senate Judiciary Committees each
reported bills that contained very different public disclosure bars from
the one that emerged in the Statutes at Large.” Id. at 295.
 UNITED STATES EX REL MATESKI V. RAYTHEON 11
media, congressional hearings, and GAO reports—all of
which were public. See United States ex rel. Found. Aiding
the Elderly v. Horizon W., Inc., 265 F.3d 1011, 1014 (9th
Cir.), amended on denial of reh’g, 275 F.3d 1189 (9th Cir.
2001) (explaining that “[p]ublic disclosure can occur in one
of only three categories of public fora: (1) in a ‘criminal,
civil, or administrative hearing;’ (2) in a ‘congressional,
administrative, or Government Accounting Office report,
hearing, audit, or investigation;’ or (3) in the ‘news media.’”)
(quoting A-1 Ambulance Serv., Inc. v. California, 202 F.3d
1238, 1243 (9th Cir. 2000)).
The dispute in this case is thus about whether Mateski’s
action is “‘based upon’ the allegations or transactions
publicly disclosed.” Malhotra, 770 F.3d at 858 (quoting
31 U.S.C. § 3730(e)(4)(A) (1986)). This depends on:
(A) whether the publicly available information about
Raytheon’s work on VIIRS contained an “allegation or
transaction” of fraud; and, if so, (B) whether Mateski’s
Complaint was “based upon” said “allegation or
transaction.” See United States ex rel. Zizic v.
Q2Administrators, LLC, 728 F.3d 228, 235 (3d Cir. 2013).
We address these issues in turn.
A.
The False Claims Act’s public disclosure bar uses the
terms “allegations” and “transactions” without defining
either term. 31 U.S.C. § 3730(e)(4)(A). Courts have
interpreted “allegation” to refer to a direct claim of fraud,
and “transaction” to refer to facts from which fraud can be
inferred. See, e.g., Zizic, 728 F.3d at 235–36 (“An allegation
of fraud is an explicit accusation of wrongdoing. A
12 UNITED STATES EX REL MATESKI V. RAYTHEON
transaction warranting an inference of fraud is one that is
composed of a misrepresented state of facts plus the actual
state of facts.”) (citation omitted); United States ex rel.
Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645, 653–54
(D.C. Cir. 1994) (defining “allegation” as a direct claim of
fraud and “transaction” as a combination of facts from which
“readers or listeners may infer” fraud).
For purposes of the public disclosure bar, we have held
that “[t]he substance of the disclosure . . . need not contain
an explicit ‘allegation’ of fraud, so long as the material
elements of the allegedly fraudulent ‘transaction’ are
disclosed in the public domain.” Found. Aiding, 265 F.3d at
1014; see also A-1 Ambulance Serv., 202 F.3d at 1243. 9 We
have explained:
[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
9
The Supreme Court has noted, “The phrase ‘allegations or
transactions’ in § 3730(e)(4)(A) additionally suggests a wide-reaching
public disclosure bar. Congress covered not only the disclosure of
‘allegations’ but also ‘transactions,’ a term that courts have recognized
as having a broad meaning.” Schindler Elevator Corp. v. United States
ex rel. Kirk, 563 U.S. 401, 408 (2011). Although the Court did not
further elaborate on the type of “broad meaning” it intended, the Court’s
statement supports reading the “transactions” portion of the public
disclosure bar inclusively, as we did in Foundation Aiding, 265 F.3d
1011.
UNITED STATES EX REL MATESKI V. RAYTHEON 13
or listeners may infer Z, i.e., the conclusion
that fraud has been committed.
Found. Aiding, 265 F.3d at 1015 (alteration in original)
(quoting Springfield Terminal, 14 F.3d at 654). We have
further explained that, “in a fraud case, X and Y inevitably
stand for but two elements: ‘a misrepresented state of facts
and a true state of facts.’” Id. (quoting Springfield Terminal,
14 F.3d at 654). “[I]n order to invoke the jurisdictional bar,
a defendant must show ‘that the transaction . . . [is] one in
which a set of misrepresented facts has been submitted to the
government.’” Id. at 1016–17 (first alteration in original)
(quoting United States ex rel. Dunleavy v. Cty. of Del.,
123 F.3d 734, 741 (3d Cir. 1997), abrogated on other
grounds by Graham Cty., 559 U.S. 280 (2010)).
Applying the foregoing principles here, we find no
allegation of fraud because the publicly disclosed
information does not contain “an explicit accusation of
wrongdoing.” Zizic, 728 F.3d at 236. 10 Although the public
reports described delays and incompetence, none explicitly
asserted deception by Raytheon.
Whether the public reports described a “transaction”
within the meaning of the public disclosure bar is less clear.
10
Counsel for Raytheon submitted a letter after oral argument
suggesting that a particular exchange between a member of Congress and
an individual from the Office of the Inspector General constituted a
“public disclosure” of fraud. But the colloquy in question conveyed
exactly the opposite. The Office of the Inspector General explained
therein that no indicators of fraud had been found. Hearing on the
Inspector Gen. Report on NOAA Weather Satellites Before the H. Comm.
on Science, 109th Cong. 66–67 (2006).
14 UNITED STATES EX REL MATESKI V. RAYTHEON
Many of the public documents Raytheon supplied to the
district court described management and engineering
problems with the VIIRS project—thus presenting a “true”
state of facts. A November 2005 GAO statement is the most
specific public statement Raytheon identifies in this respect.
It provides:
Problems involving multiple levels of
management—including subcontractor,
contractor, program office, and executive
leadership—have played a role in bringing
the NPOESS program to its current state. As
noted earlier, VIIRS sensor development
issues were attributed, in part, to the
subcontractor’s inadequate project
management. Specifically, after a series of
technical problems, internal review teams
sent by the prime contractor and the program
office found that the VIIRS subcontractor had
deviated from a number of contract,
management, and policy directives set out by
the main office and that both management
and process engineering were inadequate.
Neither the contractor nor the program office
recognized the underlying problems in time
to fix them. After these issues were
identified, the subcontractor’s management
team was replaced. Further, in January 2005,
the NPOESS Executive Committee (Excom)
called for an independent review of the
VIIRS problems. This independent review,
delivered in August 2005, reported that the
program management office did not have the
UNITED STATES EX REL MATESKI V. RAYTHEON 15
technical system engineering support it
needed to effectively manage the contractor,
among other things.
U.S. Gov’t Accountability Off., GAO-06-249T, Polar-
Orbiting Operational Envtl. Satellites: Tech. Problems, Cost
Increases, & Schedule Delays Trigger Need for Difficult
Trade-off Decisions 18 (Nov. 2005) (emphasis added). 11
While we are therefore satisfied that these reports
describe a “true” state of facts, whether we can glean a
“misrepresented” state of facts is a closer question. Reading
between the lines of the publicly disclosed information, we
possibly could infer that Raytheon falsely represented to the
Government that all was well with VIIRS. Potentially
supporting this inference is the fact that, even as the
problems with VIIRS continued, the public statements
suggest that Raytheon continued to be paid for its work. For
example, an Office of the Inspector General report triggered
by cost overruns noted that “VIIRS itself was 12 percent
11
See also, e.g., U.S. Dep’t of Commerce, OIG-177794-6-0001, Nat’l
Oceanic and Atmospheric Admin.: Poor Mgmt. Oversight & Ineffective
Incentives Leave NPOESS Program Well Over Budget & Behind
Schedule 8 (May 2006) (noting that an independent review team had
found that the “internal processes of the VIIRS subcontractor were
inadequate and not being followed, and the subcontractor’s management
communication and oversight were poor”); id. at 10 (“[M]onthly status
reports repeatedly described the problems with VIIRS, as well as the
actions being taken to solve them, and consistently noted that VIIRS was
causing the majority of the constantly growing cost and schedule
overruns.”).
16 UNITED STATES EX REL MATESKI V. RAYTHEON
behind schedule and approximately 30 percent over budget.
Nevertheless, the contractor received 92 percent of available
award fees.” 12 U.S. Dep’t of Commerce, OIG-177794-6-
0001, Nat’l Oceanic & Atmospheric Admin.: Poor Mgmt.
Oversight & Ineffective Incentives Leave NPOESS Program
Well Over Budget & Behind Schedule iii (May 2006). The
Inspector General’s report concluded that “[t]ime and money
were . . . wasted as the problems with NPOESS continued
unchecked.” Id.
Applying our X+Y=Z equation, arguably [Raytheon’s
contract deviations] + [the Government’s continued
payments to Raytheon] = the plausible inference that
[Raytheon was continuing to bill the Federal Government
and represent that all was well despite its failure to follow
contract and policy directives]. On the other hand, the
information in the public reports may come closer to
suggesting breach of contract than fraud. Cf. Cafasso,
United States ex rel. v. Gen. Dynamics C4 Sys., Inc.,
637 F.3d 1047, 1057–58 (9th Cir. 2011) (explaining that
generally “breach of contract claims are not the same as
fraudulent conduct claims, and the normal run of contractual
disputes are not cognizable under the [FCA,]” and that
“unsavory conduct is not, without more, actionable under the
FCA.”) (alteration in original) (quoting United States ex rel.
Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370, 383
(4th Cir. 2008)). Ultimately, we believe it is arguable that a
“transaction” was publicly disclosed, but we decline to
12
Although “contractor” may have referred to the prime contractor,
Northrop Grumman, it is fair to infer that the subcontractor Raytheon
was also continuing to be paid.
UNITED STATES EX REL MATESKI V. RAYTHEON 17
definitively answer that question because doing so is
unnecessary to the resolution of this case. Even assuming
that the public reports disclosed a “transaction,” the public
disclosure bar does not deprive the district court of
jurisdiction—because, as we next explain, when we examine
the public statements most likely to constitute a transaction
and compare them to Mateski’s Complaint, we find that the
Complaint is not “based upon” those statements. 13
B.
Under our case law, for a relator’s allegations to be
“based upon” a prior public disclosure, “the publicly
disclosed facts need not be identical with, but only
substantially similar to, the relator’s allegations.” United
States ex rel. Meyer v. Horizon Health Corp., 565 F.3d 1195,
1199 (9th Cir. 2009), overruled on other grounds by Kinetic
Concepts, 792 F.3d at 1128 n.6; see also Malhotra, 770 F.3d
13
The Seventh Circuit used a similar approach in United States ex rel.
Baltazar v. Warden, 635 F.3d 866 (7th Cir. 2011), declining to answer
the question whether the publicly disclosed information included
“allegations or transactions” within the meaning of the public disclosure
bar. Id. at 869. The Seventh Circuit explained that its conclusion that
Baltazar’s suit was not “based upon” the published reports “ma[de] it
unnecessary to decide whether those reports disclosed the ‘allegations or
transactions’ underlying the suit.” Id. The Seventh Circuit noted that
this allowed it to avoid answering “a more difficult” question, because
whether there was an allegation or transaction depended on whether the
court “underst[ood] the reports to allege widespread fraud (that is,
intentional deceit) or only errors: fraud is actionable under the False
Claims Act, while negligent errors are not.” Id.
18 UNITED STATES EX REL MATESKI V. RAYTHEON
at 858 (“[T]he phrase ‘based upon’ in § 3730(e)(4)(A)
means ‘substantially similar to,’ not ‘derived from.’”)
(quoting Meyer, 565 F.3d at 1199). 14
1.
Although “substantially similar” is a phrase that appears
frequently in our FCA decisions, we have never had
occasion to articulate an approach to evaluating whether two
sets of allegations are similar enough to qualify as
“substantially similar” under the public disclosure bar. Our
prior cases fall at the far ends of the similarity spectrum—on
one end are cases finding substantial similarity because the
allegations in the qui tam complaint were virtually identical
to prior public disclosures, and on the other end are cases
finding no similarity because the allegations in the qui tam
complaint were completely different from prior disclosures.
Mateski’s case falls between these two extremes. If
considered at a high level of generality, Mateski’s Complaint
and the public reports both discuss problems with VIIRS. If
considered at a more granular level, the allegations in
Mateski’s Complaint discuss specific issues found nowhere
in the publicly disclosed information. This case therefore
requires us to at least partially fill the gap left by our prior
decisions.
United States v. Alcan Electrical & Engineering, Inc.,
197 F.3d 1014 (9th Cir. 1999), is an example of a case on the
virtually-identical end of the spectrum. In Alcan, we
14
This substantial similarity concept has now been codified in the 2010
version of the FCA. See supra n.7.
UNITED STATES EX REL MATESKI V. RAYTHEON 19
explained that an FCA complaint was substantially similar
to an earlier publicly filed complaint because there was no
difference in the substance of the fraud alleged in the two.
The only difference was that the earlier complaint described
the defendant in a fairly identifiable way but without actually
using the defendant’s name, whereas the later complaint
added the defendant’s name specifically. Id. at 1018–19.
On the other end of the spectrum, we have found no
substantial similarity when the prior public statements
disclosed nothing about the fraud alleged in the later qui tam
complaint. In Foundation Aiding, for example, we
concluded that an earlier complaint alleged “a very different
problem—asbestos contamination—than the one alleged” in
the relator’s complaint about receiving Medicaid and
Medicare payments for care not actually provided. 265 F.3d
at 1013, 1016. Thus, “the allegations contained [in the
earlier complaint] completely failed to disclose anything
remotely similar to the fraud alleged” in the complaint at
issue. Id. at 1016.
In our prior cases, we sometimes have asked whether the
Government was on notice to investigate the fraud before the
relator filed his complaint—which is another way of
thinking about substantial similarity. But our cases
discussing notice to the Government also fall at the same far
ends of the similarity spectrum, so they likewise do not
clarify the level of similarity required. In Alcan, for
example, we noted that the Tenth Circuit in United States ex
rel. Fine v. Sandia Corp., 70 F.3d 568 (10th Cir. 1995), had
found that the “the prior public disclosures contained enough
information to enable the government to pursue an
investigation against [the defendant].” 197 F.3d at 1019.
20 UNITED STATES EX REL MATESKI V. RAYTHEON
We explained that “the instant case is similar to Sandia, in
that the government, as regulator and owner, presumably
would have ready access to documents identifying [the
wrongdoers].” Id. We then concluded that “[t]his ready
access makes it highly likely that the government could
easily identify the [wrongdoers] at issue.” Id. In contrast, in
Foundation Aiding, we observed that “it is impossible to say
that the evidence and information in the possession of the
United States at the time the False Claims Act suit was
brought was sufficient to enable it adequately to investigate
the case and to make a decision whether to prosecute.”
265 F.3d at 1016 (alteration omitted) (quoting United States
ex rel. Joseph v. Cannon, 642 F.2d 1373, 1377 (D.C. Cir.
1981)).
Because the allegations in Alcan were virtually identical
to prior public statements, and the allegations in Foundation
Aiding were completely different from prior public
statements, these conclusions were inevitable. These cases’
alternative articulation of the “substantially similar”
inquiry—asking whether the Government was on notice—
therefore leaves the same gap identified above.
Raytheon has pointed to nothing in this circuit’s case law
to help guide us in filling that gap. Raytheon relies upon
Wang v. FMC Corp., 975 F.2d 1412 (9th Cir. 1992),
overruled on other grounds by Kinetic Concepts, 792 F.3d
1121, to support its argument that the public disclosures
were “substantially similar” to Mateski’s allegations. Wang,
however, is inapposite because we never addressed whether
Wang’s complaint was substantially similar to allegations or
transactions that were previously disclosed. Rather, in
resolving the case based upon whether Wang qualified as an
UNITED STATES EX REL MATESKI V. RAYTHEON 21
original source, we specifically explained that “the necessary
premise of the [district] court’s ruling is that Wang’s
allegation of fraud [about a military vehicle] had been
publicly disclosed before Wang brought his suit. Wang has
never disputed, and his arguments appear to accept, that his
allegation had been publicly disclosed.” Id. at 1417
(emphasis added). We touched briefly on the similarity of
the prior disclosure but did so while emphasizing that the
issue was not contested:
It is true that Wang’s allegation about [a
military vehicle] is supported by a few factual
assertions never before publicly disclosed;
but “fairly characterized” the allegation
repeats what the public already knows: that
serious problems existed with the [vehicle’s]
transmission. The district court characterized
Wang’s allegation and most of his
information as a rehash of what already had
been publicly disclosed. Wang does not
dispute this characterization, and it finds
support in the record.
Id. (emphasis added) (citation omitted) (quoting United
States ex rel. Dick v. Long Island Lighting Co., 912 F.2d 13,
14 (2d Cir. 1990)).
Mateski’s case falls between the poles created by our
prior precedent, because whether his Complaint is
substantially similar to prior public reports depends on the
level of generality at which the comparison is made. This
case therefore requires us to address for the first time
whether we should approach the substantial similarity
question at a high or low level of generality, and accordingly
22 UNITED STATES EX REL MATESKI V. RAYTHEON
whether a complaint that is similar only at a high level of
generality triggers the public disclosure bar.
2.
The Seventh Circuit appears to be the only circuit to have
focused on this level-of-generality question, developing its
response over the course of three key cases. In United States
ex rel. Baltazar v. Warden, 635 F.3d 866 (7th Cir. 2011), the
relator, a chiropractor, had filed suit alleging that her former
employer had submitted fraudulent bills to the Medicare and
Medicaid programs by adding services that had not been
performed and by “upcoding.” Id. at 866–67. 15 Applying
the public disclosure bar, the district court dismissed the
complaint based on the existence of an earlier public report
that alleged that “57% of chiropractors’ claims (in a sample
of 400) were for services not covered by the Medicare
program, and another 16% were for covered services that
had been miscoded.” Id. at 867. The Seventh Circuit
reversed, holding that the district court had erred when it
concluded that the report “establishe[d] such prevalent
fraud” “that it [is] unnecessary to give private relators a piece
of the action in order to locate wrongdoers.” Id. The court
explained that the relator’s suit “supplied vital facts that
were not in the public domain” because it alleged “that [the
defendant] not only was submitting false claims but also was
submitting them knowing them to be false, and thus was
15
The court explained that the process known as “upcoding” consists
of changing the billing codes for services that have been performed to
reflect procedures that would fetch higher reimbursement. Id. at 866–
67.
UNITED STATES EX REL MATESKI V. RAYTHEON 23
committing fraud.” Id. at 869. The court concluded that
“[the relator’s] suit is ‘based on’ those defendant-specific
facts, not on the public information that false or mistaken
claims are common.” Id. (emphasis added).
A year later, in United States ex rel. Goldberg v. Rush
University Medical Center, 680 F.3d 933 (7th Cir. 2012), the
Seventh Circuit again reversed a district court’s dismissal
pursuant to the public disclosure bar, finding no substantial
similarity because the earlier public disclosure failed to
identify the precise type of hospital-billing deceit alleged in
the later qui tam complaint. There, a GAO report and several
public audits had indicated that teaching hospitals were often
receiving double compensation for procedures performed by
residents. The Seventh Circuit explained that Medicare pays
teaching hospitals for work by residents on a fee-for-service
basis only when a teaching physician supervises the
residents. Id. at 933–34. “Technically[, those] payments are
for the services rendered by the teacher,” and the cost of
educating residents is reimbursed through government
grants instead of through payments for specific services. Id.
Nevertheless, many teaching hospitals, according to the
GAO report, were billing on a fee-for-service basis for
unsupervised services that the residents performed on their
own, and then also receiving the teaching grants. Id. at 934.
The Goldberg relators’ complaint alleged a somewhat
different billing issue—that a particular university had
allowed teaching physicians to supervise multiple operations
simultaneously and then had sought Medicare
reimbursement for all of the procedures by certifying that
they had all been supervised. Id. at 935. The relators alleged
fraud on the basis that regulations permit Medicare
24 UNITED STATES EX REL MATESKI V. RAYTHEON
reimbursement only when the teaching physician is “present
during all critical portions of the procedure and immediately
available to furnish services during the entire service or
procedure,” and that the double booking of the teaching
physicians at this university meant that they were not
“present” and “available” as the regulations required. Id.
(quoting 42 C.F.R. § 415.172(a)(1)).
The Seventh Circuit concluded in Goldberg that
“[relators] allege a kind of deceit that the GAO report does
not attribute to any teaching hospital,” and that the public
disclosure bar therefore did not apply. Id. at 936.
Importantly, the court explained, “Unless we understand the
‘unsupervised services’ conclusion of the GAO report . . . at
the highest level of generality—as covering all ways that
supervision could be missing or inadequate—the allegations
of these relators are not ‘substantially similar.’” Id.
Referencing Baltazar, the court concluded that “boosting the
level of generality in order to wipe out qui tam suits that rest
on genuinely new and material information is not sound.”
Id.
Most recently, in Leveski v. ITT Educational Services,
Inc., 719 F.3d 818 (7th Cir. 2013), the Seventh Circuit
examined whether a qui tam complaint was substantially
similar to a prior complaint that had been publicly filed. “To
be sure,” the court explained, “Leveski’s case looks similar
to the [earlier] Graves case at first blush. The relators in both
cases are former employees of ITT—and even held the same
job title. The relators in both cases also allege that ITT
violated the incentive compensation provision of the [Higher
Education Act].” Id. at 832. That, however, was where the
similarities ended. Id. The court explained that “[t]he details
UNITED STATES EX REL MATESKI V. RAYTHEON 25
of how ITT allegedly violated the [Act] are quite different in
Leveski’s case than they were in Graves. Unlike the Graves
relators, who alleged a more rudimentary scheme by ITT to
violate the [Act’s] incentive compensation provision,
Leveski alleges a more sophisticated, second-generation
method of violating the [Act].” Id. Addressing the question
of “whether Leveski’s allegations are different enough from
the Graves allegations to bring her suit outside the public
disclosure bar,” the Seventh Circuit held:
A review of our recent case law leads us to
the conclusion that they are different enough.
Indeed, Leveski’s allegations against ITT are
only similar to the Graves allegations when
viewed at the highest level of generality. But
in the last few years, we have indicated on
more than one occasion that viewing FCA
claims “at the highest level of generality . . .
in order to wipe out qui tam suits that rest on
genuinely new and material information is
not sound.”
Id. at 831 (alteration in original) (emphasis added) (quoting
Goldberg, 680 F.3d at 936).
We find the reasoning of these cases persuasive, and we
believe that the Seventh Circuit’s approach effectuates the
purpose of the public disclosure bar by “strik[ing] a balance
between encouraging private persons to root out fraud and
stifling parasitic lawsuits.” Schindler Elevator Corp. v.
United States ex rel. Kirk, 563 U.S. 401, 413 (2011) (quoting
Graham Cty., 559 U.S. at 295). Allowing a public document
describing “problems”—or even some generalized fraud in
a massive project or across a swath of an industry—to bar all
26 UNITED STATES EX REL MATESKI V. RAYTHEON
FCA suits identifying specific instances of fraud in that
project or industry would deprive the Government of
information that could lead to recovery of misspent
Government funds and prevention of further fraud. We
believe that adopting the Seventh Circuit’s approach
therefore brings us closer to “the golden mean between
adequate incentives for whistle-blowing insiders with
genuinely valuable information and discouragement of
opportunistic plaintiffs who have no significant information
to contribute of their own.” Graham Cty., 559 U.S. at 294
(quoting Springfield Terminal, 14 F.3d at 649).
3.
Raytheon argues that a subset of qui tam cases, which
employ the phrase “quick trigger” to describe the substantial
similarity inquiry, counsel against our adoption of the
Seventh Circuit’s approach. Raytheon’s argument fails.
Specifically, Raytheon points to our footnote in Hagood
v. Sonoma County Water Agency, 81 F.3d 1465 (9th Cir.
1996), stating that “[t]he original source test is often treated
as the focus of the jurisdictional inquiry, with courts treating
the ‘based upon public disclosure’ step as a ‘quick trigger to
get to the more exacting original source inquiry.’” Id. at
1476 n.18 (quoting Cooper v. Blue Cross & Blue Shield of
Fla., Inc., 19 F.3d 562, 568 n.10 (11th Cir. 1994)). Raytheon
suggests that this means the public disclosure bar should turn
on the “original source” inquiry, and that “based upon”
should be only a superficial inquiry at a high level of
generality. Our decision in Hagood did not, however, rely
upon (or even analyze) this “quick trigger” notion because
the footnote followed our conclusion that the prior public
UNITED STATES EX REL MATESKI V. RAYTHEON 27
“filings may be enough to constitute public disclosure of
the” fraud alleged in the qui tam complaint at issue. Id. at
1475. Rather than analyze substantial similarity, we skipped
directly to finding that Hagood clearly qualified as an
original source. As such, Hagood could avoid the public
disclosure bar even if the allegations were substantially
similar. The “quick trigger” language Raytheon emphasizes
was therefore not an operative concept in Hagood at all, let
alone one that requires viewing complaints at only a high
level of generality.
Raytheon emphasizes that other circuits also have
incorporated the phrase “quick trigger,” but the cases that
include this language have not used it to avoid a full
substantial similarity analysis. In United States ex rel.
Boothe v. Sun Healthcare Group, Inc., 496 F.3d 1169 (10th
Cir. 2007), for example, despite including the quick trigger
language, the court conducted “[a] side-by-side comparison
of the first three allegations of Ms. Boothe’s complaint with
those contained in prior qui tam actions,” to find that “the
fraudulent schemes alleged are materially identical.” Id. at
1174. In United States ex rel. Osheroff v. Humana Inc.,
776 F.3d 805 (11th Cir. 2015), the Eleventh Circuit also
recently quoted the “quick trigger” language, stating, “We
have described the [based upon] test as a ‘[] quick trigger to
get to the more exacting original source inquiry.’” Id. at 814
(quoting Cooper, 19 F.3d at 568 n.10). Osheroff ultimately
held, however, that the “significant overlap between
[relator’s] allegations and the public disclosures [wa]s
sufficient to show that the disclosed information form[ed]
the basis of this lawsuit and [wa]s substantially similar to the
allegations in the complaint.” Id. Whatever work the “quick
trigger” characterization may have done in Osheroff, nothing
28 UNITED STATES EX REL MATESKI V. RAYTHEON
in the court’s analysis suggested that the “quick trigger”
concept overrides the need to analyze with some specificity
the similarity between the allegations in a qui tam complaint
and prior public disclosures. Raytheon’s reliance on this
language is thus to no avail.
IV.
Heeding the Seventh Circuit’s warning against reading
qui tam complaints at only the “highest level of generality,”
Leveski v. ITT Educ. Servs., Inc., 719 F.3d 818, 831 (7th Cir.
2013), we now reverse the district court’s dismissal of this
case because Mateski’s Complaint alleges fraud that is
different in kind and in degree from the previously disclosed
information about VIIRS. See Hagood v. Sonoma Cty.
Water Agency, 81 F.3d 1465, 1475 (9th Cir. 1996)
(examining whether, “fairly characterized,” the allegations
in a relator’s complaint “repeat[] what the public already
knows”) (quoting Wang v. FMC Corp., 975 F.2d 1412, 1417
(9th Cir. 1992), overruled on other grounds by United States
ex rel. Hartpence v. Kinetic Concepts, Inc., 792 F.3d 1121
(9th Cir. 2015) (en banc)). Although prior public reports had
described general problems with Raytheon’s work on
VIIRS, none provided specific examples or the level of detail
offered by Mateski.
A few examples from Mateski’s lengthy Complaint
suffice to demonstrate that his allegations are vastly more
precise than the prior public reports about the problems with
VIIRS. For instance, Mateski alleges numerous particular
false waivers of VIIRS specifications and requirements. He
also describes false and inappropriate signoffs and
certifications in violation of the Program Quality
UNITED STATES EX REL MATESKI V. RAYTHEON 29
Requirements, including “obvious forged signoffs” by
Raytheon VIIRS operators. Mateski further details
Raytheon’s alleged substitution of “reduced Special Test
Requirements . . . in lieu of specified testing,” which he
claims “compromise[d] the NPOESS/VIIRS Unit/System
integrity and mission assurance.”
With respect to materials used in the VIIRS project,
Mateski alleges the “use of Prohibited Materials (pure Tin),
use of Prohibited Metallic materials known to cause
corrosion . . . when used together, use of Debris shedding
locking fasteners (locking Heli-Coils), [and] use of
Prohibited Materials and processes selected (Electro-
deposited Nickel plating).” Mateski draws particular
attention to problems with the J7 Power Connector, which
he claims “[wa]s wired with forbidden (‘D & E’) materials
of pure Tin plated wire.” He further alleges that “Raytheon
. . . falsely stated . . . that the pure Tin plated wire would be
acceptable for flight use despite the failure to pot the J7
Power Connector.”
Mateski also alleges numerous problems related to
electrostatic discharge (“ESD”), asserting, for example, that
Raytheon failed to maintain ESD protection of VIIRS flight
hardware; and that certain cables were constructed using
“hot plastics,” which are “ESD unapproved materials . . .
capable of building and storing excessive electrical charges.”
In contrast to these specific allegations, the prior public
reports presented by Raytheon merely allege general
problems involving mismanagement, technical difficulties,
and noncompliance with contract and policy directives.
Indeed, Raytheon’s own description of how these
30 UNITED STATES EX REL MATESKI V. RAYTHEON
disclosures characterized the “problems” in general terms—
“numerous, major, profound, serious, severe, significant,
systemic, worsening, costing billions of dollars, and
resulting in decreased functionality”—supports reading the
prior disclosures as revealing only very generalized
problems with VIIRS.
Even if, as Raytheon argues, the prior public reports
provided “enough information to . . . pursue an
investigation” into some fraud, and even though the
Government did in fact undertake some investigation of
VIIRS, the prior reports could not have alerted the
Government to the specific areas of fraud alleged by
Mateski. The practical consequence of adopting the Seventh
Circuit’s approach to defining substantial similarity is to
allow relators who provide the Government with genuinely
new and material information of fraud to move forward with
their qui tam suits. Mateski is such a relator.
V.
Finally, Raytheon suggests that even if Mateski’s
Complaint contains some new allegations, the public
disclosure bar applies because the Complaint is at least
“partly based upon” the prior public reports about VIIRS.
We disagree.
It is true that numerous cases from other circuits have
indicated that, if a qui tam action is even “partly based upon”
publicly disclosed allegations or transactions, it is “based
upon”’ those allegations or transactions for purposes of the
public disclosure bar. See, e.g., United States ex rel. Heath
v. Wis. Bell, Inc., 760 F.3d 688, 691 (7th Cir. 2014); Glaser
UNITED STATES EX REL MATESKI V. RAYTHEON 31
v. Wound Care Consultants, Inc., 570 F.3d 907, 920–21 (7th
Cir. 2009); United States ex rel. Poteet v. Medtronic, Inc.,
552 F.3d 503, 514 (6th Cir. 2009).
Even were we to adopt this “partly based upon” concept,
it would not help Raytheon. To the extent these cases utilize
this “partly based upon” concept to reach their holdings at
all, 16 we understand them to still require that some of the
relator’s allegations be substantially similar to prior public
disclosures. In Poteet, for example, the Sixth Circuit
explained that “[d]espite the presence of one major
allegation that was not made in the [earlier] complaint . . .
the primary focus of Poteet’s complaint is the same . . .
illegal kickback scheme [that was] described in [the earlier]
complaint.” 552 F.3d at 514. There was no question in
Poteet that some of the allegations in the complaint that the
Sixth Circuit held were precluded by the public disclosure
bar were substantially similar to those already disclosed.
552 F.3d at 515 n.7 (“[A]t least some parts of Poteet’s
complaint are clearly ‘based upon’ the [earlier] complaint.”).
Likewise, in Glaser, the Seventh Circuit held that it was
“true that Glaser’s complaint add[ed] a few allegations”
previously public, but that was not enough to avoid the
16
Some cases quote the “partly based upon” language but then do not
rely upon that concept in their analysis. For example, in United States
ex rel. Heath v. Wisconsin Bell, Inc., 760 F.3d 688 (7th Cir. 2014), the
court quoted “partly based upon,” but then held that the public disclosure
bar did not apply because the earlier public statements had not revealed
any of the key components of the fraud alleged in the subsequent qui tam
complaint. Id. at 691–92. Thus, its ultimate conclusion does not appear
to have depended at all on the “partly based upon” concept.
32 UNITED STATES EX REL MATESKI V. RAYTHEON
public disclosure bar “because the allegations in Glaser’s
complaint (or most of them) were substantially similar to
publicly disclosed allegations.” 570 F.3d at 920–21
(emphasis added).
Because, as we have explained above, none of Mateski’s
allegations are “substantially similar” to the prior public
reports when viewed at the appropriate level of generality,
the “partly based upon” cases are of no assistance to
Raytheon.
VI.
Mateski’s allegations differ in both degree and kind from
the very general previously disclosed information about
problems with VIIRS. As such, if his allegations prove to be
true, Mateski will undoubtedly have been one of those
“whistle-blowing insiders with genuinely valuable
information,” rather than an “opportunistic plaintiff[] who
ha[s] no significant information to contribute.” Graham Cty.
Soil & Water Conservation Dist. v. United States ex rel.
Wilson, 559 U.S. 280, 294 (2010) (quoting United States ex
rel. Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645, 649
(D.C. Cir. 1994)).
For the foregoing reasons, we REVERSE and
REMAND.