US ex rel. Beauchamp v. Academi Training Center , 816 F.3d 37 ( 2016 )


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  •                                 PUBLISHED
    UNITED STATES COURT OF APPEALS
    FOR THE FOURTH CIRCUIT
    No. 15-1148
    UNITED STATES ex rel. LYLE BEAUCHAMP; UNITED STATES ex rel.
    WARREN SHEPHERD,
    Plaintiffs – Appellants,
    v.
    ACADEMI TRAINING CENTER, LLC., f/k/a U.S. Training Center
    Inc., f/k/a USTC,
    Defendants – Appellees,
    and
    XE SERVICES LLC, f/k/a EP Investments LLC, d/b/a Blackwater
    Worldwide; U.S. TRAINING CENTER INC., (“USTC”); USTC
    HOLDINGS LLC,
    Defendants.
    Appeal from the United States District Court for the Eastern
    District of Virginia, at Alexandria.   T. S. Ellis, III, Senior
    District Judge. (1:11-cv-00371-TSE-TRJ)
    Argued:   October 29, 2015              Decided:   February 25, 2016
    Before TRAXLER, Chief Judge, and AGEE and DIAZ, Circuit Judges.
    Vacated and remanded by published opinion. Judge Agee wrote the
    opinion, in which Chief Judge Traxler and Judge Diaz joined.
    ARGUED: William Edgar Copley, III, WEISBROD MATTEIS & COPLEY
    PLLC, Washington, D.C., for Appellants.    Tara Melissa Lee, DLA
    PIPER LLP(US), Reston, Virginia, for Appellees. ON BRIEF: Janet
    L. Goetz, Susan M. Sajadi, William E. Jacobs, WEISBROD MATTEIS &
    COPLEY PLLC, Washington, D.C., for Appellants. Joseph C. Davis,
    Reston,    Virginia,   Courtney   G.    Saleski,    Philadelphia,
    Pennsylvania, Paul D. Schmitt, DLA PIPER LLP(US), Washington,
    D.C., for Appellees.
    2
    AGEE, Circuit Judge:
    Lyle     Beauchamp       and    Warren       Shepherd    (“Relators”)         filed    a
    complaint       alleging        that        Academi        Training      Center,      Inc.
    (“Academi”)         knowingly    submitted         false     claims    to    the    United
    States under the False Claims Act (“FCA”), 31 U.S.C. §§ 3729-
    3733,    in    connection       with    a    government       contract       to    provide
    security services in Iraq and Afghanistan.                         Citing the FCA’s
    public-disclosure bar, which generally prohibits FCA suits based
    on allegations that have already entered the public domain, 31
    U.S.C. § 3730(e)(4), the district court dismissed the complaint.
    The primary question presented on appeal is whether the district
    court    correctly         applied     § 3730(e)(4)         when   the      sole    public
    disclosure      it     found     preclusive,          a     magazine      article,     was
    published more than a year after Relators first pled the alleged
    fraud.        For    the    reasons     that      follow,     we   find     the    public-
    disclosure      bar    inapplicable         in    this     case.      Accordingly,         we
    vacate the judgment of the district court and remand the case
    for further proceedings.
    I.
    To place the controversy before us in context, we start
    with the relevant statutory framework.                     Enacted during the Civil
    War to prevent fraud by military contractors, the FCA imposes
    civil liability on persons who knowingly submit false claims for
    3
    goods and services to the United States.                         31 U.S.C. § 3729; see
    also U.S. ex rel. Springfield Terminal Ry. Co. v. Quinn, 
    14 F.3d 645
    , 649 (D.C. Cir. 1994) (discussing the statute’s history).
    To encourage the disclosure of fraud that might otherwise escape
    detection, the FCA permits private individuals, denominated as
    relators, to file qui tam 1 actions on behalf of the government
    and     collect     a   bounty    from       any     recovery.          See   31    U.S.C.
    § 3730(b).         The relator must file his or her complaint under
    seal    and   notify    the    government,         who     can    either   intervene      or
    allow the relator to proceed alone.                  
    Id. Although designed
        to   incentivize          whistleblowers,         the   FCA
    also seeks to prevent parasitic lawsuits based on previously
    disclosed fraud.          See U.S. ex rel. Wilson v. Graham Cty. Soil &
    Water Conservation Dist., 
    777 F.3d 691
    , 695 (4th Cir. 2015).                             To
    balance these conflicting goals, Congress has set careful limits
    on qui tam suits.          Pertinent here is the public-disclosure bar,
    which      disqualifies       private        suits       based     on   fraud      already
    disclosed in particular settings -- such as hearings, government
    reports,      or   news    reports      --       unless     the    relator    meets      the
    1
    “Qui tam” is shorthand in current legal usage for the
    Latin phrase “qui tam pro domino rege quam pro se ipso in hac
    parte sequitur,” which means “who pursues this action on our
    Lord the King’s behalf as well as his own.” Vt. Agency of Nat.
    Res. v. U.S. ex rel. Stevens, 
    529 U.S. 765
    , 768 n.1 (2000).
    4
    definition of an “original source” under the FCA.             31 U.S.C.
    § 3730(e)(4).
    Two versions of the public-disclosure bar are relevant to
    this appeal given the timeframe of the alleged underlying fraud.
    In 2007, when the alleged scheme began, the statutory limitation
    read as follows:
    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) (2005).      We interpreted this version
    of the public-disclosure bar “as a jurisdictional limitation --
    the public-disclosure bar, if applicable, divest[s] the district
    court of subject-matter jurisdiction over the action.”          U.S. ex
    rel. May v. Purdue Pharma L.P., 
    737 F.3d 908
    , 916 (4th Cir.
    2013).
    Congress amended the FCA, effective March 23, 2010, and
    revised several parts of the public-disclosure bar.       See 
    id. at 914.
      Post-amendment, the provision provides:
    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—
    5
    (i) in a Federal criminal, civil, or
    administrative hearing in which the
    Government or its agent is a party;
    (ii) in a congressional, Government
    Accountability Office, or other Federal
    report,      hearing,     audit,     or
    investigation; or
    (iii) 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) (2010).
    We   have   described    the    2010      amendments     as     “significantly
    chang[ing] the scope of the public-disclosure bar.”                          
    May, 737 F.3d at 917
    .       Among other things, the revised statute deleted
    the   “jurisdiction-removing         language           previously    contained          in
    § 3730(e)(4)      and   replaced     it   with      a    generic,     not-obviously-
    jurisdictional      phrase,”    making        it    “clear     that    the    public-
    disclosure bar is no longer a jurisdiction-removing provision.”
    
    Id. at 916.
       Post-amendment,        the      public-disclosure       bar      is    a
    grounds for dismissal -- effectively, an affirmative defense --
    rather than a jurisdictional bar.               See U.S. ex rel. Osheroff v.
    Humana, Inc., 
    776 F.3d 805
    , 810 (11th Cir. 2015) (“We conclude
    that the amended § 3730(e)(4) creates grounds for dismissal for
    failure     to    state    a    claim         rather       than      for     lack        of
    jurisdiction.”).
    6
    The amended statute also changed the required connection
    between the plaintiff’s claims and the public disclosure.                                 Under
    the prior version, a qui tam action was barred only if it was
    “based    upon”    a     qualifying         public       disclosure,        a     standard   we
    interpreted       to    mean       that    the       plaintiff      must    have    “actually
    derived” his knowledge of the fraud from the public disclosure.
    U.S. ex rel. Siller v. Becton Dickinson & Co., 
    21 F.3d 1339
    ,
    1348 (4th Cir. 1994), superseded on other grounds as recognized
    in 
    May, 737 F.3d at 917
    .                    “As amended, however, the public-
    disclosure bar no longer requires actual knowledge of the public
    disclosure,       but    instead          applies       if    substantially         the   same
    allegations or transactions were publicly disclosed.”                                
    May, 737 F.3d at 917
    . 2
    Against this backdrop, we now turn to the case before us.
    II.
    A.
    In   2005,        the    U.S.    Department         of   State       hired    Academi   to
    provide   security           services      for       officials      and    embassy    workers
    stationed     across         the     Middle      East.        The     agreement      required
    Academi’s personnel to maintain a certain degree of proficiency
    2 We have omitted internal quotation marks, alterations, and
    citations here and throughout this opinion, unless otherwise
    noted.
    7
    with    several      firearms       and   called       for     Academi       to     submit
    marksmanship scores to the State Department on a regular basis.
    Specifically,        each     security         contractor       was    required            to
    periodically qualify at a set level of proficiency with (i) the
    Glock 19 pistol, (ii) the Colt M4 rifle, (iii) the Remington 870
    shotgun, (iv) the M240 belt-fed machine gun, and (v) the M249
    belt-fed machine gun.
    Relators,    both     former    security       contractors      with       Academi,
    filed their complaint in the Eastern District of Virginia in
    April 2011.         In the initial complaint, Relators alleged that
    Academi     submitted       false     reports      and    bills       to     the        State
    Department for contractors employed in positions in which they
    did not actually work and also defrauded the State Department by
    requesting     payment       for     unissued      equipment.              The     initial
    complaint     was    filed     under      seal,    with       notification         to    the
    Government as required by the FCA.                See 31 U.S.C. § 3730(b)(2).
    Shortly thereafter, on May 24, 2011, Relators filed their
    first-amended       complaint.         Relevant       here,    Relators      added        new
    allegations of a separate fraudulent scheme that, from April
    2007 through April 2011, Academi routinely failed to qualify its
    contractors on two of the required weapons                     -- the M-240 and M-
    249 belt-fed machine guns -- and fabricated scorecards showing
    proficiency    with     these      firearms     for    submission      to    the        State
    Department.        As a result, the first-amended complaint alleged
    8
    that     Academi     fraudulently        billed     the     State        Department        for
    security    services       performed     by    contractors         who    had        not   been
    tested     for,    much    less    achieved,       the      requisite          marksmanship
    scores     (hereinafter,          the    “weapons        qualification               scheme”).
    Relators     provided       specific      dates        of    the    alleged            weapons
    qualification scheme and maintained that they, personally, were
    never certified with these weapons during their deployments.
    While Relators’ first-amended complaint remained pending,
    two former firearm instructors with Academi, Robert Winston and
    Allan     Wheeler,     contacted        Relators’      counsel          with     additional
    information about the weapons qualification scheme.                             Eventually,
    Winston and Wheeler filed a separate lawsuit against Academi
    (the     “Winston     complaint”),         alleging         they    were         wrongfully
    terminated from their employment with Academi for reporting the
    weapons    qualification       scheme     up     the    chain      of    command.           See
    Winston v. Academi Training Ctr., Inc., No. 1:12cv767, ECF No. 1
    (E.D. Va. July 12, 2012).                The Winston complaint detailed the
    State    Department       contract,      the    weapons      qualification             testing
    requirements,        and      Academi’s         failure       to        conduct         proper
    marksmanship       testing.        
    Id. Notably, however,
             the    Winston
    complaint was not filed as a qui tam action, so its allegations
    were not under seal and were thus available to the public from
    the date of its filing.
    9
    The   Winston    complaint        generated    media    attention,        and    on
    July 16, 2012, an online news publication, Wired.com, published
    a story about the case.             See Spencer Ackerman, Mercenaries Sue
    Blackwater Over Fake Gun Tests, Wired (July 16, 2012, 4:00 AM),
    http://www.wired.com/2012/07/blackwater-lawsuit/.                     The    article
    described the Winston plaintiffs’ allegations of retaliation and
    the   weapons      qualification        scheme,   specifically      explaining         how
    Academi      “falsif[ied]      dozens     of    marksmanship    tests      for    [its]
    security contractors.”            
    Id. The article
    also mentioned by name
    the Relators’ pending qui tam suit.
    Ultimately,      the      Government       declined     to    intervene         in
    Relators’     case    and   it    was    unsealed.      Relators     then    filed      a
    second-amended complaint on November 19, 2012, which became the
    operative pleading.         In addition to inserting non-qui tam claims
    that are not relevant on appeal, the second-amended complaint
    expanded the allegations as to the weapons qualification scheme
    by adding a number of paragraphs from the Winston complaint that
    further      detailed   the      State   Department     contract    and     Academi’s
    alleged failure to meet its weapons testing requirements.
    B.
    Academi moved to dismiss Relators’ qui tam claims under the
    first-to-file and public-disclosure bars, as well as for failing
    to    meet   the    pleading     requirements      of   Federal     Rule    of    Civil
    Procedure 9(b).         See Harrison v. Westinghouse Savannah River
    10
    Co., 
    176 F.3d 776
    , 783–84 (4th Cir. 1999) (explaining that suits
    brought under the FCA sound in fraud, and thus are “subject to
    Federal       Rule    of     Civil    Procedure      9(b),       which      requires         that
    claimants plead fraud with particularity”).
    The district court granted Academi’s motion.                         Specifically,
    the court rejected the weapons qualification scheme under the
    public-disclosure bar. 3             Using the post-2010 amended version of
    the FCA, the court first determined that the Wired.com article
    was    a    “public     disclosure”        as    that     term    is     defined        in    the
    statute.       U.S. ex rel. Beauchamp v. Academi Training Ctr., Inc.,
    933    F.     Supp.     2d    825,    845       (E.D.    Va.     2013).           With       that
    prerequisite established, the court then turned to the timing of
    the article’s disclosure, noting it must precede Relators’ suit
    in    order    to    function    as    a    bar.        
    Id. Because Relators
            had
    amended their complaint several times, the issue became which
    was the proper pleading for purposes of the statutory timing
    benchmark.           Citing     Rockwell        International          Corp.      v.     United
    States, 
    549 U.S. 457
    (2007), the district court determined that
    only the most recent complaint was relevant to this analysis.
    See 
    Beauchamp, 933 F. Supp. 2d at 845
    (“The public disclosure
    bar    inquiry        applies    to     ‘the       allegations         in   the        original
    3
    The district court also dismissed Relators’ other claims
    on the merits.     See 
    Beauchamp, 933 F. Supp. 2d at 841-43
    .
    Relators have not challenged those decisions in this appeal.
    11
    complaint as amended[,]’ [and thus] ‘courts look to the amended
    complaint         to       determine      jurisdiction.’”).          Observing      that
    Relators’         last      pleading      --   the    second-amended      complaint    --
    postdated the Wired.com article, the court concluded that the
    article      was       a    qualifying      public    disclosure     so   the    public-
    disclosure bar applied.               
    Id. The court
    then considered whether Relators were nonetheless
    protected under the original source exception.                       The court found
    this exception inapplicable because Relators failed to disclose
    Academi’s         fraud      to    the    government     in    accordance    with     the
    statute.      
    Id. at 845-46.
    In    light         of     those   determinations,      the   district       court
    declined to address Academi’s Rule 9(b) arguments.                          See 
    id. at 846
    n.40.         This appeal followed, and we have jurisdiction under
    28 U.S.C. § 1291.
    III.
    Relators’ appeal is limited to the weapons qualification
    scheme      and    the      district      court’s     application    of    the   public-
    disclosure bar.             They first argue that the district court erred
    when   it    found         the    Wired.com    article   was   a   qualifying     public
    12
    disclosure. 4          Relators   contend          this   story    could     not      have
    triggered      the    bar   because     it   was    published     after    the     first-
    amended   complaint         initially    alleged      the   weapons     qualification
    scheme.     On this point, they specifically dispute the district
    court’s conclusion that Rockwell “requir[ed] it to consider only
    the most recent complaint to determine when Relators alleged
    Academi’s [scheme] for purposes of § 3730(e)(4)(A).”                             Opening
    Br.   32-22.         Alternatively,      Relators     argue     that,     even   if    the
    district court was correct regarding the Wired.com article, the
    public-disclosure bar does not apply here because Relators’ suit
    falls under the original source exception. 5
    4The phrase “qualifying public disclosure” is a term of art
    used to identify a public disclosure that meets the statutory
    requirements of § 3730(e)(4)(A) and therefore triggers the bar.
    See 
    May, 737 F.3d at 919-20
    .
    5 The parties agreed below, and the district court applied,
    the post-amendment public-disclosure bar as the appropriate
    statutory framework.    Academi now contests its application in
    light of intervening precedent holding that the 2010 FCA
    amendments should not be employed retroactively.    See 
    May, 737 F.3d at 917
    -18.   Academi argues that because its alleged fraud
    spans 2010, the district court should “have split the public
    disclosure analysis between the current and former versions of
    the [public-disclosure bar] depending upon [when the] conduct
    occurred.”   Response Br. 17-18.    Academi concedes that it did
    not raise this issue below but contends we should reach it now
    by applying, in the first instance, the pre-amendment public-
    disclosure bar to the pre-March 23, 2010 allegations.
    Ordinarily, Academi’s concession would constitute waiver of
    the issue and preclude our review. See United States v. Evans,
    
    404 F.3d 227
    , 236 n.5 (4th Cir. 2005). However, we do not find
    waiver here since there could be jurisdictional implications.
    See 
    May, 737 F.3d at 916
    (“Under the prior version of the
    statute, § 3730(e)(4) operated as a jurisdictional limitation --
    (Continued)
    13
    A.
    The public-disclosure bar aims “to strike a balance between
    encouraging    private     persons    to    root   out   fraud   and    stifling
    parasitic lawsuits” in which a relator, instead of plowing new
    ground, attempts to free-ride by merely reiterating previously
    disclosed     fraudulent     acts.          Graham   Cty.     Soil      &    Water
    Conservation Dist. v. U.S. ex rel. Wilson, 
    559 U.S. 280
    , 295
    (2010).     In line with this objective, the bar applies only when
    information exposing the fraud has already entered the public
    domain prior to the relator’s suit.            
    Id. at 296
    n.16 (explaining
    that “parasitic lawsuits” arise when “those who learn of the
    fraud through public channels . . . seek remuneration although
    they contributed nothing to the exposure of the fraud”).                    Hence,
    courts    considering    whether     the    public-disclosure     bar       applies
    must resolve, among other things, when the public disclosure
    occurred in relation to the relator’s claims.               U.S. ex rel. Gear
    v. Emergency Med. Assocs. of Ill., Inc., 
    436 F.3d 726
    , 728 (7th
    the public-disclosure bar, if applicable, divested the district
    court  of   subject-matter    jurisdiction over  the  action.”).
    Nonetheless, while subject matter jurisdiction issues may exist
    in other cases regarding which version of the FCA applies, that
    distinction does not affect the resolution of this case.    Even
    conceding Academi is correct as to bifurcating the analysis of a
    claim which spans the amendment of the statute, the district
    court’s decision below was erroneous under either version of the
    public-disclosure bar.     Thus, we need delve no further into
    Academi’s arguments on this point.
    14
    Cir. 2006) (“The first issue, then, is whether the information
    on which the complaint is based was already publicly disclosed
    when [the relator] filed his complaint.”).
    The parties agree that the Wired.com article is a “public
    disclosure” as that term is statutorily defined under either the
    pre- or post-amendment version of the FCA. 6                      See Malhotra v.
    Steinberg, 
    770 F.3d 853
    , 858 (9th Cir. 2014) (“[T]he existence
    of a public disclosure is a threshold condition for application
    of the bar.”).          We also agree.          Thus, if the Wired.com article
    came later than the applicable part of Relators’ claims, the
    public-disclosure bar has no application here.
    It is undisputed that Relators initially pled the weapons
    qualification scheme in their first-amended complaint more than
    a   year     before    the   Wired.com    story.      Following    that   article,
    however,         Relators    filed   a   second-amended     complaint     that   re-
    alleged this fraud and added further detail about it gleaned
    from       the   article.      Academi     argued,    and   the   district   court
    agreed, that under the Supreme Court’s decision in Rockwell,
    6Courts have unanimously construed the term “public
    disclosure” to include websites and online articles.         See
    Schindler Elevator Corp. v. U.S. ex rel. Kirk, 
    563 U.S. 401
    , 408
    (2011)   (“The   other   sources   of   public   disclosure   in
    § 3730(e)(4)(A), especially ‘news media,’ suggest that the
    public disclosure bar provides ‘a broa[d] sweep.’”); 
    Osheroff, 776 F.3d at 813
    (concluding that newspapers and publicly
    available websites qualified as “news media” under the public
    disclosure provision).
    15
    Relators’    last   pleading     was    the       appropriate          statutory     timing
    benchmark    when     applying        the        public-disclosure            bar.       See
    Beauchamp,    933   F.   Supp.    2d    at        845.         And    because    Relators’
    second-amended      complaint    postdated          the    Wired.com          article,   the
    district    court    found     that    story       to     be    a     qualifying     public
    disclosure   that    triggered        the    bar.         
    Id. In substance,
        the
    district court concluded that the timing of Relators’ claims for
    public-disclosure bar purposes was set by the filing date of
    their most recent complaint instead of when the relevant claims
    were first alleged.
    B.
    In adopting the view that only the most recent pleading
    should control the public-disclosure bar’s timing, Academi and
    the district court misapprehend the factual and legal basis of
    the Supreme Court’s decision in Rockwell.
    In Rockwell, a nuclear weapons plant attempted to dispose
    of hazardous waste by combining it with concrete in solid blocks
    called 
    “pondcrete.” 549 U.S. at 461
    .             The Rockwell relator, a
    plant   engineer,     reviewed        the    plans        and        stated    before    the
    procedure was undertaken that it would fail because of flaws in
    the piping system.       
    Id. The plant
    later discovered that many of
    the blocks did in fact leak.                     
    Id. When this
    environmental
    violation came to light, the relator filed suit alleging that
    faulty piping was to blame and the plant’s claims for payment to
    16
    the government were therefore fraudulent under the FCA.                          
    Id. at 463.
         During     discovery,    however,       the    relator     abandoned        the
    piping-defect allegations, instead claiming for the first time a
    new theory of fraud liability: that the leak was the result of
    an improper waste mixture.            
    Id. at 465.
            The case proceeded to
    trial, and the relator prevailed on his new theory.
    The defendant subsequently moved to set aside the verdict
    under    the    public-disclosure        bar,    asserting    that    the       relevant
    fraudulent scheme (the last filed improper-waste-mixture claim)
    had    been    publically    disclosed.          
    Id. at 466.
            The   relator
    conceded that his successful claim was based on a qualifying
    public disclosure, but he argued that he nevertheless qualified
    as an “original source.”          
    Id. at 467.
             The pre-amendment public-
    disclosure bar at issue in Rockwell defined “original source” as
    an    individual     with   “direct   and       independent    knowledge         of   the
    information on which the allegations [of the FCA action] are
    based.”       
    Id. The Rockwell
    relator, however, did not contend that he had
    “direct and independent” information as an original source for
    his     successful     improper-waste-mixture           theory.       Instead,         he
    argued that he was an original source for FCA purposes based on
    his    insider      knowledge    about    the     first-pled,       but    abandoned,
    piping-system claim.            Thus, the relator argued to the Supreme
    17
    Court   that    it    should     focus    on    the    allegations       in   the   first
    complaint to determine his original source status.                       
    Id. at 473.
    The   Supreme      Court     found    the    Rockwell        relator’s       argument
    without merit, holding that the original source provision did
    not speak in terms of allegations in the original complaint,
    “but of the relator’s ‘allegations’ simpliciter.”                          
    Id. Simply put,
    the FCA inquiry went to the relevant claim before the court
    (there, the improper-waste-mixture claim), and evaluating that
    claim required review of the pleading that first raised it.
    The   Supreme       Court     thus    held       that   the       original     source
    question   required          consideration        of     “(at      a     minimum)     the
    allegations     in     the     original        complaint     as     amended.”         
    Id. Accordingly, even
    though the relator may have been an original
    source as to the piping-defect claims asserted in the original
    complaint, the Court found those allegations irrelevant because
    the relator had abandoned them in favor of a wholly different
    fraud theory.        
    Id. at 475
    (declining to “determine jurisdiction
    on the basis of whether the relator is an original source of
    information underlying allegations that he no longer makes”).
    Instead of examining the rationale of the Supreme Court’s
    decision in Rockwell, the district court mechanically applied
    the statement        that    “courts     look    to    the   amended      complaint    to
    determine jurisdiction.”           
    Id. at 474.
            As a result, the district
    court    used        Relators’     last        pleading,      the        second-amended
    18
    complaint, to determine when the weapons qualification scheme
    was   alleged     for    purposes       of    § 3730(e)(4)(A).               We    find    this
    application of Rockwell faulty, as it takes the Supreme Court’s
    words and holding wholly out of context and fails to analyze the
    public-disclosure         bar    on     the    basis       of    the       relevant       fraud
    alleged.
    The Supreme Court in Rockwell focused on the relator’s last
    pleading only because that was where the relevant fraud, the
    improper-waste-mixture theory, had been pled.                          The Court sought
    to match the relevant claim of fraud with the pleading that
    raised   it     to    determine    whether         the    relator      was    an    original
    source     as    to     that     claim.            The    Supreme      Court’s        holding
    effectively reiterated existing law in the qui tam setting, that
    judicial review is based on a claim by claim analysis.                                See In
    re Nat. Gas Royalties, 
    562 F.3d 1032
    , 1040 (10th Cir. 2009)
    (“Relator       correctly      points    out       that   we    use    a    claim-by-claim
    analysis to determine whether the allegations in a complaint
    were publicly disclosed.”).
    Here, however, the district court failed to evaluate the
    relevant fraud claim, the weapons qualification scheme, under
    the pleading that first alleged that fraud: the first-amended
    complaint.           Relators’    second-amended           complaint         merely       added
    further detail about a claim already alleged.                              On such facts,
    Rockwell does not limit our public-disclosure analysis to the
    19
    latest     pleading.          Recognizing           this   limitation,       our     sister
    circuits have been reluctant to expand Rockwell’s last-pleading
    rule as the district court did below.                        See, e.g., U.S. ex rel.
    Jamison v. McKesson Corp., 
    649 F.3d 322
    , 328 (5th Cir. 2011)
    (distinguishing Rockwell and explaining that we “look to [the
    relator’s] original complaint . . . to determine whether it was
    based on public disclosures of allegations or transactions”);
    U.S. ex rel. Branch Consultants, LLC v. Allstate Ins. Co., 782
    F.   Supp.    2d    248,     261    (E.D.      La.    2011)    (“[Rockwell]        did   not
    suggest      that    the     original      complaint         becomes    irrelevant       for
    jurisdictional purposes once an amended complaint is filed.                              To
    the contrary, the Court stated that its holding was consistent
    with ‘[t]he rule that subject-matter jurisdiction depends on the
    state of things at the time of the action brought.’”).
    Focusing       our    inquiry       on   when    the    relevant      claims    first
    appeared     in     the    case    also    aligns     with     the     public-disclosure
    bar’s purpose.            See Crandon v. United States, 
    494 U.S. 152
    , 158
    (1990) (“In determining the meaning of the statute, we look not
    only to the particular statutory language, but to the design of
    the statute as a whole and to its object and policy.”).                            We have
    consistently        observed       that    Congress’s        goal    with   the    public-
    disclosure bar was to encourage qui tam suits while preventing
    only “parasitic” claims “in which relators, rather than bringing
    to light independently-discovered information of fraud, simply
    20
    feed off of previous disclosures of government fraud.”                          
    Siller, 21 F.3d at 1347
    .          The weapons qualification scheme was pled in
    Relators’ first-amended complaint.                 It was not a new fraudulent
    scheme first introduced after the Wired.com public disclosure.
    Where    the   relevant    fraud      is   first     alleged    before    the    public
    disclosure,      as      occurred     here,     the     suit     is    plainly      not
    “parasitic.”      See Graham 
    Cty., 559 U.S. at 296
    n.16.
    We     therefore    conclude     that     the   determination       of     when    a
    plaintiff’s claims arise for purposes of the public-disclosure
    bar     is   governed     by    the    date     of     the     first     pleading       to
    particularly allege the relevant fraud and not by the timing of
    any subsequent pleading.            See U.S. ex rel. Ackley v. Int’l Bus.
    Machs. Corp., 
    76 F. Supp. 2d 654
    , 660 (D. Md. 1999) (looking to
    the   relator’s       initial   complaint       where    the     fraud     was    first
    alleged); U.S. ex rel. Adams v. Wells Fargo Bank Nat’l Ass’n,
    No. 2:11-CV-00535-RCJ-PAL, 
    2013 WL 6506732
    , at *6 (D. Nev. Dec.
    11, 2013) (same).         In Rockwell terms, the relevant fraud here is
    the weapons qualification scheme, which predated the Wired.com
    article in the first-amended complaint.                  The contrary position,
    adopted by the district court and pressed by Academi, misreads
    Rockwell and does not comport with the objectives underlying
    § 3730(e)(4)(A).         The district court thus erred in holding the
    second-amended complaint was the relevant pleading by which to
    measure the public-disclosure bar.
    21
    C.
    Academi further argues that, even if the district court
    erred in applying Rockwell, Relators’ second-amended complaint
    was “the first [pleading] that describes with specificity the
    weapons qualification scheme.”         Response Br. 28.       Consequently,
    Academi posits, the timing of the second-amended complaint still
    controls when the weapons qualification scheme was alleged.                  We
    disagree.
    In   their   first-amended   complaint,      Relators   alleged      that
    Academi did not qualify its employees on the M-240 and M-249
    belt-fed weapons as required under the government contract and
    intentionally submitted false documents to the State Department
    to conceal this failure.       See J.A. 39 (“[Academi] fraudulently
    billed their services to the Department of State, as none of the
    independent contractors [were] qualified to shoot M-240s and M-
    249s.”).      Relators   further   provided      specific   dates    on   which
    Academi falsified their weapons scores, and alleged that this
    practice occurred throughout training centers in Afghanistan and
    Iraq.      See 
    id. (“Mr. Beauchamp’s
    score cards from October 4,
    2010, April 3, 2010, July 23, 2010, . . . and April 8, 2011 are
    fraudulent.”).      These allegations were sufficient for purposes
    of   the   public-disclosure   bar.        See   United   States    v.    Triple
    Canopy, Inc., 
    775 F.3d 628
    , 636 (4th Cir. 2015) (explaining that
    a relator “pleads a false claim when [he or she] alleges that
    22
    the contractor, with the requisite scienter, made a request for
    payment under a contract and ‘withheld information about its
    noncompliance with material contractual requirements.’”).
    At bottom, the public-disclosure bar does not apply here.
    Relators sufficiently pled the weapons qualifications scheme in
    their       first-amended      complaint         that   came      well    before     the
    Wired.com article.           The district court thus wrongly concluded
    that       this   article    was    a     qualifying     public      disclosure    that
    triggered the bar.           And without a qualifying public disclosure,
    the district court erred by dismissing these claims under either
    version      of   § 3730(e)(4)(A).           See,   e.g.,      Walburn    v.    Lockheed
    Martin Corp., 
    431 F.3d 966
    , 974 (6th Cir. 2005) (observing that
    the existence of a qualifying public disclosure is a threshold
    condition for application of the bar). 7
    Having      concluded       that    no    qualifying      public    disclosure
    occurred      within   the     meaning      of   the    FCA,    we   do   not    address
    7
    To be clear, our holding today does not suggest that a
    plaintiff can raise skeletal claims of fraud and then use such a
    pleading to avoid the public-disclosure bar when he or she later
    files an amended complaint that adds necessary facts gleaned
    from the public domain.   We agree with Academi that under such
    circumstances the initial complaint should not dictate when the
    relator’s claims were first brought. Cf. United States v. Educ.
    Mgmt. LLC, No. 2:07-cv-461, 
    2014 WL 2766115
    , at *2 (W.D. Pa.
    June 18, 2014) (“[A]n amended complaint which sets forth a
    fundamentally different fraudulent scheme [does] not relate back
    in time to the original complaint.”).    Conversely, however, an
    amended complaint that merely adds detail to a previously pled
    cause of action does not reset the clock for when the relator’s
    claims were alleged. That is the circumstance in this case.
    23
    Relators’ alternative arguments that they were original sources
    of the information.          See U.S. ex rel. Holmes v. Consumer Ins.
    Grp., 
    318 F.3d 1199
    , 1208 (10th Cir. 2003) (en banc) (“[W]here,
    as here, there was no public disclosure, the . . . inquiry under
    § 3730(e)(4) ceases, regardless of whether the relator qualifies
    as an original source.”).
    IV.
    In the final portion of its brief, Academi offers several
    alternate grounds for affirmance that do not require extended
    discussion.
    First,    Academi       contends   that     the       Winston     complaint     is
    another public disclosure that preempts Relators’ claims under
    the public-disclosure bar.           We are unpersuaded.              As previously
    discussed,     the   Winston      complaint     was    filed       after     Relators’
    first-amended complaint that alleged the weapons qualification
    scheme, and therefore it does not trigger the public-disclosure
    bar for the same reasons already explained.
    Academi     next    argues     that     U.S.     ex    rel.     Davis   v.   U.S.
    Training Ctr.,       Inc.,    No.   1:08cv1244      (E.D.     Va.    filed    Dec.   1,
    2008), another FCA case filed against Academi in some of its
    prior corporate forms, also triggered the public-disclosure bar.
    The complaint in Davis was unsealed in 2010, and thus the Davis
    action undisputedly preceded the instant case.                      Nonetheless, as
    24
    the district court correctly noted, the scheme alleged in Davis
    was   that   Academi      committed     fraud      by     recruiting     persons          who
    “because of drug use and predilection for violence are . . .
    unqualified for employment in ‘shooter’ positions.”                          Beauchamp,
    933   F.   Supp.    2d    at   839.    That    fraud      claim    is   distinct          and
    unrelated to the weapons qualification scheme at issue here, and
    thus the disclosures in the Davis litigation also do not trigger
    the public-disclosure bar.            See U.S. ex rel. Found. Aiding the
    Elderly v. Horizon West, Inc., 
    265 F.3d 1011
    , 1016 (9th Cir.
    2001) (explaining that “unrelated allegations of fraud cannot
    trigger § 3730(e)(4)(A)”).
    Academi further argues that the Davis case, even if not a
    disqualifying       public     disclosure,     is    a    preclusive         first-filed
    action under the FCA’s corresponding first-to-file bar.                             See 31
    U.S.C. § 3730(b)(5).            In broad strokes, the first-to-file bar
    prohibits later-filed FCA actions while an earlier-filed case
    based on the same fraud remains pending.                     See Kellogg Brown &
    Root Servs., Inc. v. U.S. ex rel. Carter, 
    135 S. Ct. 1970
    , 1974-
    79 (2015).         Academi contends that because the Davis case was
    pending when this action was filed, the first-to-file bar must
    apply to preclude Relators’ claims.                     We again disagree.                The
    first-to-file       bar   applies     only    to    “related      actions,”         and    as
    noted,     the   fraud    claimed     here    is    not    related      to    the    fraud
    alleged in Davis.         See 
    Beauchamp, 933 F. Supp. 2d at 837-38
    .
    25
    Finally, Academi argues that Relators failed to plead the
    weapons qualification scheme with the “particularity” that Rule
    9(b)   requires    for   fraud   claims,   thus   rendering      these   claims
    deficient regardless of the foregoing.             See 
    Harrison, 176 F.3d at 783
    –84.   In light of its ruling on the public-disclosure bar,
    the district court declined to reach this alternative argument.
    
    Id. at 846
    n.40.         We deem it more appropriate to allow the
    district   court    to   consider   Academi’s     Rule    9(b)   argument,   if
    necessary, in the first instance on remand.                See Davani v. Va.
    Dep’t of Transp., 
    434 F.3d 712
    , 720 (4th Cir. 2006).
    V.
    For the foregoing reasons, we vacate the portion of the
    district     court’s       order     dismissing          Relators’       weapons
    qualification claims under the public-disclosure bar and remand
    for further proceedings consistent with this opinion.
    VACATED AND REMANDED
    26
    

Document Info

Docket Number: 15-1148

Citation Numbers: 816 F.3d 37

Filed Date: 2/25/2016

Precedential Status: Precedential

Modified Date: 1/12/2023

Authorities (16)

United States of America, Ex Rel. Mary L. Holmes, and ... , 318 F.3d 1199 ( 2003 )

In Re Natural Gas Royalties , 562 F.3d 1032 ( 2009 )

united-states-of-america-ex-rel-david-r-siller-and-united-states-of , 21 F.3d 1339 ( 1994 )

Edwin P. Harrison, and United States of America, Party in ... , 176 F.3d 776 ( 1999 )

United States v. Herbert G. Evans, Jr. , 404 F.3d 227 ( 2005 )

Mozafar H. Davani v. Virginia Department of Transportation ... , 434 F.3d 712 ( 2006 )

united-states-of-america-ex-rel-dr-brent-gear-v-emergency-medical , 436 F.3d 726 ( 2006 )

United States of America, Ex Rel. Springfield Terminal ... , 14 F.3d 645 ( 1994 )

united-states-of-america-ex-rel-foundation-aiding-the-elderly-marsha-j , 265 F.3d 1011 ( 2001 )

Crandon v. United States , 110 S. Ct. 997 ( 1990 )

Vermont Agency of Natural Resources v. United States Ex Rel.... , 120 S. Ct. 1858 ( 2000 )

Rockwell International Corp. v. United States , 127 S. Ct. 1397 ( 2007 )

Graham County Soil & Water Conservation District v. United ... , 130 S. Ct. 1396 ( 2010 )

United States Ex Rel. Ackley v. International Business ... , 76 F. Supp. 2d 654 ( 1999 )

Schindler Elevator Corp. v. United States ex rel. Kirk , 131 S. Ct. 1885 ( 2011 )

Kellogg Brown & Root Services, Inc. v. United States Ex Rel.... , 135 S. Ct. 1970 ( 2015 )

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