Opinion
No. 3:90-CV-0607-P.
May 13, 1999
MEMORANDUM OPINION AND ORDER
Richardson, an ex-employee of Defendant E-Systems, has brought this qui tam action alleging violations of the False Claims Act, 31 U.S.C. § 3701. Richardson's original complaint was filed under seal on March 16, 1990. The government chose not to intervene in 1993. When served with the unsealed complaint, E-Systems successfully challenged its lack of specificity under Rule 9. Richardson's Amended Complaint was filed on June 28, 1996. E-Systems has moved to dismiss the amended complaint for lack of subject matter jurisdiction on the basis that, contrary to statutory jurisdictional prerequisites, the action is based upon publicly disclosed allegations and transactions for which Richardson is not the original source. Richardson responds by arguing that the public disclosures occurred after Richardson filed his original complaint, that Richardson's action is not "based upon" such disclosures, and that, in any event, Richardson is the original source of the disclosed information. E-System's reply shows that the amended complaint includes allegations/transactions not embraced by the original complaint which are based upon public disclosures that predate its filing. E-Systems also provides Richardson's deposition testimony establishing that he is not the original source of most of the allegations in the amended complaint. Because the law requires dismissal of an action which is based even only partly upon publicly disclosed information for which the plaintiff is not the original source, E-Systems argues that the Court lacks subject matter jurisdiction and must dismiss the action.
THE LAW
The False Claims Act states that:
No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.31 U.S.C. § 3730(e)(4)(A). The Fifth Circuit directs this Court to determine (1) whether there has been a "public disclosure" of the allegations or transactions; (2) whether the qui tam action is "based on" such publicly disclosed allegations; and (3) if so, whether the relator is the "original source" of the information.Federal Recovery Servs. v. United States, 72 F.3d 447, 450 (5th Cir. 1995). When the answers to the first and second question are "yes" and "no" to the third, the Court lacks subject matter jurisdiction. Id. This jurisdictional bar "precludes [qui tam] suits based in any part on publicly disclosed information," not only those based "solely" on such information. Id. at 451 (emphasis added); United States ex rel. Cooper v. Blue Cross Blue Shield of Florida, 19 F.3d 562, 567 (11th Cir. 1994);United States ex rel. Precision Co. v. Koch Indus., Inc., 971 F.2d 548, 552-53 (10th Cir. 1992). See also United States ex rel. Kreindler Kreindler v. United Technologies Corp., 985 F.2d 1148, 1159 (2d Cir.), cert. denied, 508 U.S. 973 (1993).
Public Disclosures
E-Systems shows that most of the allegations/transactions in ¶ 14 of the amended complaint were publicly disclosed in civil discovery and pleadings filed in Texas state court in 1993 and 1994, well before being added to this action. The filing of civil pleadings and discovery undeniably constitute public disclosure under the Act. Federal Recovery Servs., 72 F.3d 450;United States ex rel. Ramseyer v. Century Healthcare Corp., 90 F.3d 1514, 1519 n. 3 (10th Cir. 1996); United States ex rel. Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645, 652 (D.C. Cir. 1994). Likewise, disclosure of discovery material to a party who is not under any court-imposed limitation as to its use is a public disclosure under the Act. United States ex rel. Stinson, Lyons, Gerlin Bustamante v. Prudential Ins. Co., 944 F.2d 1149, 1158-60 (3rd Cir. 1991).
Specifically, the allegations in paragraph 14j concerning concealment of defects in circuit boards for the ERV 118 Project were specifically disclosed in pleadings and/or discovery responses in Bowen v. E-Systems, Inc., No. 93-8631 in the 14th Judicial District Court of Dallas County prior to their inclusion in the amended complaint. The same allegations were previously disclosed in discovery in Sams v. E-Systems, Inc., No. 93-03983-M in 298th Judicial District Court of Dallas County.
Moreover, E-Systems shows that the allegations in ¶ 14j were found in an administrative report prepared by a federal agency, which was attached to interrogatory responses in one of the state court actions. According to the Act, an administrative report is a public disclosure, particularly when it has been released to someone in the public. United States ex rel. Fine v. MK-Ferguson Co., 99 F.3d 1538, 1544-45 (10th Cir. 1996). The same allegations were also disclosed in investigative reports released to the plaintiff in one of the state actions by the Air Force's Office of Special Investigations and the Department of Defense Inspector General (DoD-IG) pursuant to an FOIA request. As such, they have been publicly disclosed. United States ex rel. Eitel v. Reagan, 898 F. Supp. 734, 740 (D. Or. 1995);United States ex rel. Burns v. A.D. Roe Co., Inc., 919 F. Supp. 255, 257 (W.D. Ky. 1996). In addition, certain allegations in ¶ 14j were disclosed in a General Accounting Office report issued prior to the filing of the amended complaint. The same is a public disclosure under the express terms of the Act.
Specifically, the allegations were contained in the DCMDS-GDG Compliance Review of the 27 Aug. 90 Agreement Between the Department of the Army and E-Systems, Inc., dated April 15, 1994.
Specifically, the allegations were disclosed in Report No. GAO/OSI-96-6 at 14-17, May 16, 1996.
Allegations in ¶ 141 that E-Systems charged the government twice for over 130,000 excess parts (once when manufactured and again when later purchased on other contracts) were disclosed in the DCMDC-GDG Compliance Review, constituting public disclosure both as part of civil litigation (included in discovery) and as an administrative report. Moreover, the allegations were the subject of an article published in the Dallas Morning News in 1994. According to the plain language of the Act, the same constitutes public disclosure.
Gregg Jones, Pentagon: E-Systems Broke Pact, Dallas Morning News, July 10, 1994, at 1, 27A.
Allegations in ¶ 14m that E-Systems inflated its bids on government contracts by 20% were first disclosed in deposition testimony in a state court action in 1994 and again through the release under the FOIA of Air Force investigative reports discussing alleged bid inflation, and in the DoD-IG investigative reports released to Richardson under the FOIA. Documents released in response to a FOIA request, even one made by a qui tam plaintiff, are publicly disclosed under the Act. Burns, 919 F. Supp. at 257; Eitel, 898 F. Supp. at 740.
Deposition of Lewis Sams, Vol. II, 791-94, filed in Sams v. E-Systems, No. 93-03983-M supra.
Letter, Batten to Gaswirth, March 21, 1995 and attached Air Force Case Status Reports.
Bates Nos. RICH-P-00450 to 00452.
Finally, allegations in ¶ 14f that E-Systems employees were required to mischarge their work by recording their time to one contract while working on another had been publicly disclosed at least twice in DoD-IG investigative reports released under the FOIA. "Based Upon"
Mem. Re: Gaswirth FOIA request from Dulacki, April 12, 1996 and DoD-IG Report No. 9311077W-11-JUN-93-30DA-E3BY, June 11, 1993 at 1-2; Letter, Dulacki to Richardson, March 27, 1996 and DoD-IG Investigative Report No. 9311077W-11-JUN-93-30DA-E3BY/Z, January 25, 1994 at 2.
To be based upon a public disclosure, an action need not actually be derived from the publicly disclosed allegations or transactions. Findley, 105 F.3d at 682. Rather, "based upon" is properly understood to mean "supported by," and this element is met where a substantial identity exists between the relator's allegations and the public disclosures. Id. at 681-85;Cooper, 19 F.3d at 567; Precision, 971 F.2d at 552-54. A comparison of Plaintiff's Amended Complaint and the evidence supplied in regard to the public disclosures indicates clearly that substantial identity exists between the allegation in ¶ s 14j, 1, m f and the public disclosures. As a result, the Court is convinced that the allegations are "based upon" the disclosures as defined by law.
Original Source
To qualify as an original source, Richardson must establish that his knowledge of the publicly disclosed information is (1) direct and independent; and (2) that he voluntarily provided the information to the government before filing suit. United States ex rel. Devlin v. State of California, 84 F.3d 358, 361 n. 5 (9th Cir.), cert. denied, 117 S.Ct. 361 (1996); United States ex rel. Barth v. Ridgedale Elec., Inc., 44 F.3d 699, 703 (8th Cir. 1995). "Direct knowledge" has been defined as knowledge marked by the absence of an intervening agency, or unmediated by anything but the plaintiff's own labor. United States ex rel. Koerner v. Crescent City E.M.S., Inc., 946 F. Supp. 447, 452. (E.D. La. 1996). A relator is said to have direct knowledge when he saw it with his own eyes. Id. And knowledge is "independent" when the relator had evidence of the fraud prior to its public disclosure. Devlin, 84 F.3d at 361 n. 5. Collateral research and investigations do not establish direct and independent knowledge of the information on which the allegations are based. Barth, 44 F.3d at 703. See also Federal Recovery Servs., 72 F.3d at 451-52. While Richardson's response states that he is the original source for the investigative reports, his deposition testimony indicates that he has no first-hand knowledge of allegations in ¶ s 14j and m, or the exhibits [the reports] he attaches to his amended complaint. Instead, his knowledge is second-hand — insufficient under the Act. Barth, 44 F.3d at 703; Devlin, 84 F.3d at 362. Moreover, E-Systems argues that the reports themselves, in light of Richardson's admission that he ceased working for E-Systems after November 25, 1987, indicate that Richardson cannot be the source of the information for the investigative reports. Similarly, some of the reports identify sources as being employees with job titles different from those held by Richardson while employed.
Dep. of Richardson at 956/1-4, 22-25; 967/10-11; 966/11-15; 969/11-12, 15-22; 960/7-12; 947/3-8; 949/22-950/15; 700/4-7; 642/1-7; 656/2-9; 637/5-18; 749/2-6; 1136/24-1137/7; 667/22-25; 671/15-21; 1123/6-9; 679/7-14; 699/13-19; 700/4-7; 1127/22-1128/10; 1128/16-19; 985/16-17; 992/14-21; 900/5-12; 907/14-19; 900/7-12; 660/5-14; 660/23-661/3; 615/2-10; 616/2-6.
CONCLUSION
Subject matter jurisdiction is lacking in this action because a substantial part of it is based upon publicly disclosed information for which Richardson is not the original source. Because the law directs that a qui tam plaintiff may not bring an action which is, even in part, based on such information, this case is dismissed. While E-Systems requests a dismissal with prejudice, because the Court lacks subject matter jurisdiction, the dismissal is without prejudice. Creations Unltd., Inc. v. McCain, 112 F.3d 814, 816 (5th Cir. 1997).
SO ORDERED.