Rosenberg v. JPMorgan Chase & Co. ( 2021 )

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SJC-12973
JOHAN ROSENBERG1 vs. JPMORGAN CHASE & CO. & others.2
Suffolk. January 6, 2021. - May 11, 2021.
Present: Budd, C.J., Gaziano, Lowy, Cypher, Wendlandt,
& Georges, JJ.
Massachusetts False Claims Act. Fraud. Bonds. Practice,
Civil, Motion to dismiss. Statute, Construction.
Civil action commenced in the Superior Court Department on
October 23, 2014.
A motion to dismiss, filed on June 5, 2019, was heard by
Mitchell H. Kaplan, J.
The Supreme Judicial Court on its own initiative
transferred the case from the Appeals Court.
1 On behalf of the Commonwealth.
2 JPMorgan Chase Bank, N.A.; J.P. Morgan Securities LLC;
JPMorgan Securities, Inc.; Citigroup, Inc.; Citigroup Global
Markets Inc.; Citibank N.A.; Citigroup Financial Products Inc.;
Citigroup Global Markets Holdings Inc.; Bank of America
Corporation; Bank of America N.A.; Merrill Lynch, Pierce, Fenner
& Smith Incorporated; Morgan Stanley; Morgan Stanley Smith
Barney LLC; Morgan Stanley & Co. LLC; Morgan Stanley Capital
Group Inc.; Morgan Stanley Bank, N.A.; and Morgan Stanley
Capital Services Inc.
2
Tejinder Singh, of Maryland, for the plaintiff.
Robert N. Hochman, of Illinois (David G. Jorgensen & Holly
A. Harrison, of Illinois, Susanna Buergel, of New York, Matthew
D. Benedetto, of California, Paul J. Murphy, Carol A. Starkey,
Megan E. Barriger, & Kathryn L. Alessi also present) for the
defendants.
The following submitted briefs for amici curiae:
Ben Robbins & Martin J. Newhouse for New England Legal
Foundation.
Ian D. Roffman, Thomas J. Carey, Jr., & David K. Bastian
for Greater Boston Chamber of Commerce.
Sheri Littlefield, of New York, Patrick T. Egan, Justin N.
Saif, & Corey W. Silva for CFA Institute.
Jacklyn DeMar, of the District of Columbia, & Sonya A. Rao
for Taxpayers Against Fraud Education.
WENDLANDT, J. The Massachusetts False Claims Act, G. L.
c. 12, §§ 5A-5O (MFCA), authorizes a private party to bring an
action alleging that a person has committed a fraud on the
Commonwealth in connection with a claim for payment under a
government program. Such an action may be a valuable tool to
shine a light on fraudulent behavior that otherwise might remain
undiscovered. In return, the private party (known as a
"relator") is rewarded a portion of the recovery from the
misfeasors. Where the essential features of an individual's
purported chicanery already have been illuminated, by contrast,
affording a private party an incentive to bring suit is
unwarranted, as it would add nothing to the Commonwealth's
knowledge; in such circumstances, the MFCA prohibits such suits
unless the Commonwealth intervenes. Specifically, the MFCA
contains a public disclosure bar that generally requires
3
dismissal of an action "if substantially the same allegations or
transactions as alleged in the action . . . [previously have
been] publicly disclosed" through certain enumerated sources.
G. L. c. 12, § 5G (c). Applying this public disclosure bar to
the complaint at issue here, a Superior Court judge dismissed
the complaint. Because the complaint rested on information that
already had been exposed to the light of day, we affirm.3
1. Background. We recite the facts as set forth in the
complaint, viewing all of the allegations as true and drawing
all reasonable inferences in the plaintiff relator's favor. See
Magliacane v. Gardner, 483 Mass. 842, 844 (2020), citing Revere
v. Massachusetts Gaming Comm'n, 476 Mass. 591, 595 (2017).
a. Relator's claims. The relator, Johan Rosenberg,
commenced this action on behalf of the Commonwealth against the
defendants -– certain financial institutions and their
subsidiaries, see note 2, supra -- alleging that the defendants
collectively engaged in and conspired to engage in fraud in
connection with resetting interest rates for certain municipal
bonds, referred to as variable rate demand obligations (VRDOs).
VRDOs are long-term, tax-exempt, variable rate bonds. The
3 We recognize the amicus briefs submitted by CFA Institute
and Taxpayers Against Fraud Education Fund in support of the
plaintiff, and the amicus briefs submitted by the Greater Boston
Chamber of Commerce and the New England Legal Foundation in
support of the defendants.
4
Commonwealth and its subdivisions4 issue VRDOs to finance long-
term public projects or infrastructure, such as airports, ports,
roads and bridges, and affordable housing. Because interest
rates on the bonds are reset on a periodic basis, often weekly,
by the remarketing agent, the bonds allow issuers, like the
Commonwealth, to borrow money for long periods of time while
paying short-term interest rates. The Commonwealth retained the
defendants as remarketing agents to perform the requisite
periodic resetting of the VRDO interest rates. According to the
complaint, the contracts between the Commonwealth and the
defendants required that the defendants "actively and
individually market and price these bonds at the lowest possible
interest rates" that would permit the sale of the VRDOs on a
given rate determination date.5
4 For simplicity, in our discussion of the MFCA, our
references to the Commonwealth also will include its
subdivisions.
5 The relator frequently summarizes the defendants'
obligation as to obtain "the lowest possible interest rate"; the
obligation, as set forth in the official statements for the
VRDOs, however, is that defendants were "required to determine
the applicable rate of interest that, in its judgment, is the
lowest rate that would permit the sale of the [VRDO] bearing
interest at the Weekly Rate at par plus accrued interest, if
any, on and as of the Rate Determination Date. The interest
rate will reflect, among other factors, the level of market
demand for the [VRDO] (including whether the Remarketing Agent
is willing to purchase [the VRDO] for its own account)."
Likewise, the model disclosure obligations, for which the
relator argues the defendants were responsible, were "to set the
interest rate at the rate necessary, in its judgment, as the
5
The relator maintains that the defendants did not perform
these services as promised; instead, the defendants engaged in a
rate setting scheme, which he refers to as "robo-resetting,"
whereby the defendants "mechanically set the rates en masse
without any consideration of the individual characteristics of
the bonds, the associated market conditions[,] or investor
demand." The relator, who states that he has over twenty years
of experience in advising municipalities on issuing securities,
asserts that he confirmed his suspicions of this "bucket" rate-
setting scheme through a forensic analysis of published interest
rate data for these types of bonds. The interest rates for
VRDOs are published daily on a publicly available website,
Electronic Municipal Market Access (EMMA).6 The relator's
analysis revealed that, for certain groups of VRDOs,7 the
lowest rate that permits the sale of the VRDOs at [one hundred
percent] of their principal amount (par) on the interest reset
date." In our analysis of the claims regarding the "lowest
interest rate," we rely upon this contractual explanation of the
defendants' responsibilities.
6 EMMA is the "official repository for information on all
municipal bonds." It is a freely accessible, public website and
"serves as the venue for public access to variable rate security
information, transaction data, primary market disclosures and
continuing disclosures . . . , as well as market statistics and
investor education."
7 For example, the relator explains that, "with respect to
the 1,083 VRDOs in [one bank's] largest bucket, 941 of them had
the identical interest rate change (at least [eighty percent] of
the time) for a full year." Moreover, he argues, his analysis
6
interest rates moved in lock step; the relator labels these
groups "buckets"8 of VRDOs. This collective interest rate
setting, he maintains, had no business justification, and
demonstrates a lack of individualized judgment as to the lowest
interest rate that would permit the sale of a given VRDO at the
time the interest rate was reset. He argues that this
collective rate setting thereby resulted in "artificially high
interest rates on Massachusetts VRDOs," and violated the
defendants' obligations to the Commonwealth to market the VRDOs
at the lowest interest rate that would permit sale on a given
rate determination date. Thus, the relator contends, the
defendants fraudulently collected fees for services as
remarketing agents that they did not perform.
The relator argues that the defendants also benefited in
another manner from their approach to resetting interest rates.
Specifically, the artificially high interest rates resulting
from the defendants' scheme caused VRDO investors to hold the
bonds rather than to exercise their "put" options. A put option
allows an investor in a VRDO to redeem the VRDO at face value
showed that the VRDO rates moved together across institutions,
suggesting collusion among the defendants.
8 The relator identified a particular VRDO as falling into a
bucket if, for eighty percent of the time over a period of
twenty-six weeks, the change in its interest rate was identical
to that of other interest rate changes of VRDOs in the bucket.
7
plus interest earned. When a put option is exercised, a
remarketing agent becomes responsible for reselling the redeemed
securities to new investors. If a remarketing agent is unable
to find another investor, a liquidity provider must step in and
purchase the VRDO from the redeeming investor. For this reason,
VRDOs are backed by liquidity agreements, often letters of
credit, to finance redemptions where no new investor is found.
The same financial institution (here, the defendants) may serve
as both the remarketing agent and the issuer of the letter of
credit for a particular VRDO. According to the complaint, the
defendants were paid fees by the Commonwealth to provide letter
of credit services. By setting the interest rates for VRDOs
artificially high, the defendants assured that the holders of
the bonds would not exercise their put options and the
defendants would not have to find other investors to purchase
the bonds or to buy the bonds themselves.
As a result of these actions, the relator contends, the
defendants collected millions of dollars in fees from the
Commonwealth for remarketing services that they did not provide.
He maintains that the defendants also extracted millions of
dollars in fees as liquidity providers even though the chance of
needing to draw on the letters of credit services was very low
("rarely, if ever, called upon") because bond holders were
unlikely to exercise their put options in view of the
8
artificially high interest rates. Because the interest rates
were artificially high, the relator asserts, the Commonwealth
paid extra interest on its VRDOs (some of which were owned by
the defendants).9
b. Procedural history. The relator filed his initial
complaint in 2014; the Commonwealth declined to intervene.10 In
2017, the relator filed an amended complaint, and, in 2019, he
filed a second amended complaint, now at issue before us.
9 The complaint asserts that VRDO investors "typically" are
tax-exempt money market funds, which the defendants "in many
instances own or manage."
10The relator also has commenced similar suits in other
jurisdictions, including Illinois, California, and New York.
While in Massachusetts the relator is proceeding as an
individual, in other jurisdictions he has brought suit through
Edelweiss Fund, LLC. See State ex rel. Edelweiss Fund, LLC vs.
JP Morgan Chase & Co., Cal. Super. Ct., No. CGC-14-540777, slip
op. at 1, 11-12 (San Francisco County Aug. 7, 2019) (Edelweiss
Fund) (denying defendants demurrer on ground that under
California precedent no public disclosure occurred); State ex
rel. Edelweiss Fund LLC vs. JPMorgan Chase & Co., Ill. Cir. Ct.,
No. 2017-L-000289, slip op. at 1, 12 (Cook County Feb. 1, 2019)
(denying defendants' motion to dismiss on ground that relator
was original source); State ex rel. Edelweiss Fund, LLC vs.
JPMorgan Chase & Co., Supreme Ct. of N.Y., No. 100559/2014 (N.Y.
County Mar. 27, 2020), aff'd, 189 A.D.3d 723 (N.Y. 2020)
(denying defendants' motions to dismiss for failure to state
claim with requisite particularity, and not reaching whether
case should be dismissed pursuant to public disclosure bar,
noting that State Attorney General asserted it would exercise
State's right to object to dismissal under public disclosure
bar). See notes 23 & 31, infra.
9
The defendants filed a joint motion to dismiss, which the
Commonwealth did not oppose. The judge allowed the motion,11 and
the relator appealed. We then transferred the appeal to this
court on our own motion.
2. Discussion. a. Standard of review. We review the
allowance of a motion to dismiss de novo. Goodwin v. Lee Pub.
Sch., 475 Mass. 280, 284 (2016), citing Curtis v. Herb Chambers
I-95, Inc., 458 Mass. 674, 676 (2011). We "accept as true the
factual allegations in the complaint and the attached exhibits,
draw all reasonable inferences in the [relator's] favor, and
determine whether the allegations 'plausibly suggest' that the
[relator] is entitled to relief on that legal claim." Buffalo-
Water 1, LLC v. Fidelity Real Estate Co., 481 Mass. 13, 17
(2018). See Revere, 476 Mass. at 595. "[M]atters of public
record, orders, items appearing in the record of the case, and
exhibits attached to the complaint, also may be taken into
account" (quotation and citation omitted). Iannacchino v. Ford
Motor Co., 451 Mass. 623, 631 n.14 (2008). See Golchin v.
Liberty Mut. Ins. Co., 460 Mass. 222, 224 (2011), S.C., 466
Mass. 156 (2013), quoting Marram v. Kobrick Offshore Fund, Ltd.,
442 Mass. 43, 45 n.4 (2004) ("Where . . . the [relator] had
11 As did the motion judge, because of the result we reach,
we do not address the other arguments raised by the defendants
in support of their motion to dismiss.
10
notice of [the extrinsic] documents and relied on them in
framing the complaint, the attachment of such documents to a
motion to dismiss does not convert the motion to one for summary
judgment . . .").
In their motion to dismiss, the defendants argued that
dismissal was required pursuant to the public disclosure bar of
the MFCA because the transactions at issue previously had been
disclosed to the public through news media and the relator was
not an original source of the information concerning the fraud.
This motion requires construction of the public disclosure bar,
a matter of statutory interpretation that we review de novo.
See Ortiz v. Examworks, Inc., 470 Mass. 784, 788 (2015), citing
Commerce Ins. Co. v. Commissioner of Ins., 447 Mass. 478, 481
(2006).
b. Statutory background. The MFCA prohibits making
fraudulent claims against the Commonwealth and its
municipalities. See G. L. c. 12, §§ 5A-5O. The statute also
permits enforcement of that prohibition by means of qui tam
actions, in which "[a]n individual, hereafter referred to as a
relator, may bring a civil action . . . on behalf of the relator
and the [C]ommonwealth or any political subdivision thereof."
G. L. c. 12, §§ 5A, 5C (2). The Commonwealth may intervene and
take over the case. G. L. c. 12, §§ 5C (3), 5D. Successful
11
relators are awarded a percentage of the funds recovered by the
Commonwealth. G. L. c. 12, § 5F.
Qui tam actions have the "salutary purpose of encouraging
the disclosure of fraudulent schemes." See United States ex.
rel. Winkelman v. CVS Caremark Corp., 827 F.3d 201, 206 (1st
Cir. 2016) (Winkelman). At the same time, "this statutory
paradigm . . . creates perverse incentives for opportunists to
seek compensation based on fraud already apparent from
information in the public domain." Id. As does its
counterpart, the Federal False Claims Act, 31 U.S.C.
§ 3730(e)(4)(A) (FFCA), the MFCA therefore includes a "public
disclosure bar," G. L. c. 12, § 5G (c), which provides:12
"The court shall dismiss an action or claim pursuant to
[G. L. c. 12, §§ 5A-5O], inclusive, unless opposed by the
[C]ommonwealth or any political subdivision thereof, if
substantially the same allegations or transactions as
alleged in the action or claim were publicly disclosed:
(1) in a Massachusetts criminal, civil or administrative
hearing in which the [C]ommonwealth is a party; (2) in a
Massachusetts legislative, administrative, auditor's or
inspector general's report, hearing, audit or
investigation; or (3) from the news media, unless the
action is brought by the attorney general, or the relator
is an original source of the information."
12Because the MFCA mirrors the FFCA, we look to Federal
decisions for guidance in analyzing the MFCA. See Packaging
Indus. Group, Inc. v. Cheney, 380 Mass. 609, 611 (1980) ("Where
the Legislature in enacting a statute follows a Federal statute,
we follow the adjudged construction of the Federal statute by
the Federal courts").
12
The bar seeks to prevent "parasitic" suits, United States ex
rel. Ondis v. Woonsocket, 587 F.3d 49, 53 (1st Cir. 2009)
(Ondis), where a relator, "instead of plowing new ground,
attempts to free-ride by merely repastinating previously
disclosed badges of fraud," id., citing United States ex rel.
Duxbury v. Ortho Biotech Prods., L.P., 579 F.3d 13, 26-27 (1st
Cir. 2009), cert. denied, 561 U.S. 1005 (2010).
Where, as here, the Commonwealth chooses not to intervene,
a multipart inquiry governs whether the public disclosure bar
applies.13 "The first three parts of this inquiry ask:
(1) whether there has been a prior, public disclosure of fraud;
(2) whether that prior disclosure of fraud emanated from a
source specified in the statute's public disclosure provision;
and (3) whether the relator's qui tam action is [substantially
the same as] that prior disclosure of fraud." United States ex
rel. Poteet v. Bahler Med., Inc., 619 F.3d 104, 109 (1st Cir.
2010) (Poteet). See United States ex rel. Reed v. KeyPoint
Gov't Solutions, 923 F.3d 729, 741 (10th Cir. 2019) (Reed);
Ondis, 587 F.3d at 53. Where "all three questions are answered
in the affirmative, the public disclosure bar applies unless the
13The Attorney General's decision not to intervene in this
case distinguishes it from the parallel litigation in New York.
See Edelweiss Fund, LLC, Supreme Ct. of N.Y., No. 100559/2014,
supra; note 10, supra.
13
relator qualifies under the 'original source' exception."14
Poteet, supra at 109-110, quoting Ondis, supra at 53-54.
c. Application of the public disclosure bar. i. Prior
public disclosure. We first consider whether the allegations or
transactions identified in the complaint previously had been
publicly disclosed at the time the complaint was filed. See
Winkelman, 827 F.3d at 208. As discussed, a prior public
disclosure occurs when the essential elements exposing the fraud
are in the public domain. Poteet, 619 F.3d at 110. The
disclosure must constitute either (a) a direct allegation of
fraud or (b) a transaction from which readers or listeners may
infer fraud. Id. See United States ex rel. Springfield
Terminal Ry. Co. v. Quinn, 14 F.3d 645, 654 (D.C. Cir. 1994)
(Springfield). Here, the defendants argued only that the latter
theory was applicable, contending that the critical elements of
the purported fraudulent transactions were in the public domain.
Thus, to prevail on their motion to dismiss, the defendants must
14 Pursuant to G. L. c. 12, § 5A, an "original source" is
"an individual who: (1) prior to a public disclosure under
paragraph (3) of [§] 5G, has voluntarily disclosed to the
[C]ommonwealth or any political subdivision thereof the
information on which allegations or transactions in a claim
are based; or (2) has knowledge that is independent of and
materially adds to the publicly-disclosed allegations or
transactions, and who has voluntarily provided the
information to the [C]ommonwealth or any political
subdivision thereof before filing a false claims actions."
14
show a disclosure of the two critical elements of the
transactions; specifically, the defendants must establish that
"both [the] misrepresented state of facts and [the] true state
of facts so that the listener or reader may infer fraud" were in
the public domain when the intervener filed his claims. Poteet,
supra. See Winkelman, supra; Springfield, supra ("[I]f X + Y =
Z, Z represents the allegation of fraud and X and Y represent
its essential elements. In order to disclose the fraudulent
transaction publicly, the combination of X and Y must be
revealed, from which readers or listeners may infer Z, i.e., the
conclusion that fraud has been committed").
A. Misrepresented state of facts. According to the
complaint, the asserted misrepresented state of facts comprised
the defendants' representations that they would comply with
their obligations as remarketing agents, as set forth in their
agreements with the Commonwealth. Specifically, the relator
alleges that the defendants misrepresented that they would
"determine the applicable rate of interest that, in [their]
judgment, is the lowest rate that would permit the sale of the
[VRDOs] bearing interest at the applicable interest rate at par
plus accrued interest, if any, on and as of the applicable Rate
Determination Date."15 See, e.g., Winkelman, 827 F.3d at 209
15The "Rate Determination Date" is the date that the
interest rate is reset.
15
(purported misrepresented state of facts comprised defendants'
asserted compliance with requirement in Federal regulation that
pharmacies charge generic drug prices equal to lowest prices
charged to customers when in fact charged price was higher);
Ondis, 587 F.3d at 52, 54 (asserted misrepresentation was
statements in city's Federal grant applications that it would
promote development of public housing when it planned to
discourage such development).
The defendants' representations that they would comply with
the obligations in their agreements with the VRDO issuers are
set forth in several publicly available sources, including
Municipal Securities Rulemaking Board (MSRB)16 rules that address
remarketing agents' duties to VRDO issuers; Securities Industry
Financial Markets Association (SIFMA)17 model disclosures; and
the remarketing agreements, including remarketing circulars and
16The MSRB is "a Congressionally-chartered, self-regulatory
organization governed by a [twenty-one]-member board of
directors that has a majority of public members, in addition to
representatives of regulated entities. The MSRB is subject to
oversight by the Securities and Exchange Commission (SEC)."
17The SIFMA model disclosures set forth the disclosures
that SIFMA advises remarketing agents to make to VRDO issuers in
order to comply with the obligation to deal fairly and honestly
with issuers under MSRB Rule G-17. In relevant part, the model
disclosures provide that a remarketing agent is "required to set
the interest rate at the rate necessary, in its judgment, as the
lowest rate that permits the sale of the VRDOs at [one hundred
percent] of their principal amount (par) on the interest reset
date."
16
official statements, reached between the defendants and the
Commonwealth. See Poteet, 619 F.3d at 110, citing United States
ex rel. Maxwell v. Kerr–McGee Oil & Gas Corp., 540 F.3d 1180,
1185 (10th Cir. 2008) (disclosure "is 'public' if it is
generally available to the public"). These sources disclose
that the defendants undertook (purportedly falsely) to comply
with their obligations to obtain the lowest possible interest
rates that would have permitted a sale on the market on a given
rate determination date. Thus, the defendants have shown a
prior public disclosure of the misrepresented state of facts
alleged in the complaint.
B. True state of facts. Accordingly, we turn to whether
the second element of fraud was disclosed, namely, whether there
was a public disclosure of the "true state of facts so that the
listener or reader may infer fraud." See Poteet, 619 F.3d
at 110. The truth, according to the complaint, was that the
defendants did not obtain the lowest interest rates that would
have permitted the sale of the VRDOs, and instead "engaged in a
practice of setting their VRDO rates mechanically and
collectively, without any consideration of the unique attributes
of each particular bond." See, e.g., Winkelman, 827 F.3d at 209
(true state of affairs was that defendant was not in fact
billing correctly); Ondis, 587 F.3d at 52, 54 (true state of
affairs was city's plan to oppose public housing while obtaining
17
grants for its purported public housing projects on
representation that it would promote public housing).
The information reflecting this asserted truth was
discernable through the published EMMA data18 available to the
public via the Internet. Indeed, the relator used the same data
as that disclosed on the EMMA website to conclude that the
defendants were not setting the lowest interest rates on the
VRDOs because, his analysis showed, they were grouping unrelated
bonds rather than setting the rate for each bond individually.
See Winkleman, 827 F.3d at 209 ("Enough was revealed in
the . . . disclosures to put the government on notice of the
potential fraud without the aid of these relators"). Contrary
to the relator's contention, neither the need to perform
analysis on the publicly available information nor the benefit
of his expertise renders the true state of affairs hidden. See
Poteet, 619 F.3d at 111 ("If the materials necessary to ground
an inference of fraud are generally available to the
public, . . . there is nothing to prevent the government from
detecting it. Concomitantly, the likelihood of parasitic qui
tam actions in such circumstances is high, providing a reason
for the public disclosure bar"); United States ex rel. Findley
v. FPC–Boron Employees' Club, 105 F.3d 675, 688 (D.C. Cir.),
18EMMA is a free, open-access website that publishes
information on all municipal bonds. See note 6, supra.
18
cert. denied, 522 U.S. 865 (1997) (Findley), citing Springfield,
14 F.3d at 655 ("[I]f a relator merely uses his or her unique
expertise or training to conclude that the material elements
already in the public domain constitute a false claim, then a
qui tam action cannot proceed"). "[T]he only question is
whether the material facts exposing the alleged fraud are
already in the public domain, not whether they are difficult to
recognize." United States ex rel. Conrad vs. Abbott Lab., Inc.,
U.S. Dist. Ct., No. 02-11738-RWZ (D. Mass. Feb. 25, 2013),
citing Ondis, 587 F.3d at 59-60. Thus, it suffices that other
members of the public, albeit with sufficient expertise and
after having conducted some analysis, could have identified the
true state of affairs by conducting the same data-crunching
exercise as did the relator, using the data publicly available
on the EMMA website. See Findley, supra, citing Springfield,
supra.ii. Statutorily enumerated sources. Having determined
that there was a public disclosure of the essential elements of
the fraud, we turn to consider the second prong of the public
disclosure bar: whether the prior disclosure "emanated from a
source specified in the statute's public disclosure provision."
Poteet, 619 F.3d at 109. "By its plain terms, the public
disclosure bar applies to some methods of public disclosure and
not to others." Schindler Elevator Corp. v. United States ex
19
rel. Kirk, 563 U.S. 401, 414 (2011) (Schindler). Specifically,
we must decide whether the forum in which the public disclosure
was made falls within any of three sources enumerated in the
statute -- (1) "a Massachusetts criminal, civil or
administrative hearing in which the [C]ommonwealth is a party";
(2) "a Massachusetts legislative, administrative, auditor's or
inspector general's report, hearing, audit or investigation"; or
(3) "the news media." See G. L. c. 12, § 5G (c). We turn to
consider each of the critical elements of the public disclosure
set forth under the first prong of the public disclosure bar
test -- first, the misrepresented state of affairs and, second,
the true state of the facts.
A. Source of public disclosure of misrepresented state of
affairs. According to the complaint, the first publicly
disclosed element of the asserted fraud -- namely, the
misrepresentation that the defendants would undertake to obtain
the lowest interest rates that, in their judgment, would permit
the sale of the VRDOs -- was disclosed in the governing
remarketing agreements, including in the official statements.19
19 As defined by the MSRB, an official statement is
"[a] document prepared by or on behalf of the issuer of
municipal securities in connection with a primary offering
that discloses material information on the offering of such
securities. Official statements typically include
information regarding the purposes of the issue, how the
securities will be repaid, and the financial and economic
20
These official statements comprise Massachusetts "reports,"20 one
of the statutorily enumerated sources.
B. Source of public disclosure of the true state of
affairs. The second publicly disclosed element of the fraud --
namely, the assertion that the defendants were not obtaining the
lowest interest rate that would permit the sale of the VRDOs,
and instead were remarketing the bonds en masse in a way that
did not obtain the lowest rates -– was disclosed on the EMMA
website. The defendants argue that EMMA constitutes "news
media," the third enumerated source in the MFCA. The relator
contends that because EMMA does not have editorial content,
narrative, exposition, or analysis of the financial data it
reports, it cannot constitute news media.
characteristics of the issuer, conduit borrower or other
obligated person with respect to the offered securities.
Investors and market intermediaries may use this
information to evaluate the credit quality of the
securities and potential risks of the primary offering."
See MSRB, Glossary of Municipal Securities Terms, http://msrb
.org/Glossary/Definition/OFFICIAL-STATEMENT-_OS_.aspx.
20 A report is "something that gives information."
Schindler, 563 U.S. at 407 (responses to Freedom of Information
Act requests are reports). See Ondis, 587 F.3d at 56. Each
VRDO's official statement details the terms of the VRDO and
enumerates the remarketing agents' obligations; thus, the
official statements constitute something that gives information.
Further, official statements are prepared on behalf of the
issuer.
21
"A fundamental principle of statutory interpretation 'is
that a statute must be interpreted according to the intent of
the Legislature ascertained from all its words construed by the
ordinary and approved usage of the language, considered in
connection with the cause of its enactment, the mischief or
imperfection to be remedied and the main object to be
accomplished, to the end that the purpose of its framers may be
effectuated." Harvard Crimson, Inc. v. President & Fellows of
Harvard College, 445 Mass. 745, 749 (2006), quoting Hanlon v.
Rollins, 286 Mass. 444, 447 (1934). See Sullivan v. Brookline,
435 Mass. 353, 360 (2001). If the meaning of the "statutory
language is clear and unambiguous, our inquiry ends."
Commonwealth v. Garvey, 477 Mass. 59, 62 (2017).
Where, as here, a statutory term is undefined, we look to
its ordinary meaning. See Ten Local Citizens Group v. New
England Wind, LLC, 457 Mass. 222, 229 (2010). See Schindler,
563 U.S. at 407 (enumerated sources in FFCA take "ordinary
meaning" of words). In ordinary usage, "news" is defined as
(1) "a report of a recent event; intelligence; information";
(2) "the presentation of a report on recent or new events in a
newspaper or other periodical or on radio or television"; and
(3) "such reports taken collectively; information reported."
Webster's New Universal Unabridged Dictionary 1295 (2003).
"Media" is defined as "[t]he means of communication, as radio
22
and television, newspapers, and magazines, that reach or
influence people widely." Id. at 1193. Thus, the ordinary
meaning of the words "news media" is quite broad and includes
information shared through means of communication that reach or
influence people widely. See United States ex rel. Osheroff v.
Humana, Inc., 776 F.3d 805, 813 (11th Cir. 2015) (Osheroff)
(court determined that "news media" includes newspaper articles
and advertisements of clinical services).
Considering the public disclosure bar in the context of the
statute as a whole confirms that "news media" is a broad
category, albeit not unlimited. See Schindler, 563 U.S. at 408("to determine the meaning of one word in the public disclosure
bar, we [also] must consider the provision's 'entire text,' read
as an 'integrated whole'" [citation omitted]). On the one hand,
unlike the other two sources of public disclosures in the MFCA,
Massachusetts government reports and hearings, the term "news
media" is not limited to Massachusetts-based knowledge. On the
other hand, construing "news media" as a broad catch-all would
eviscerate the plain language of the public disclosure bar,
which applies only to disclosures from three enumerated sources.
See id. at 414.
Because the breadth of the term "news media" –- in
particular, whether it covers a publicly available website like
EMMA -- is ambiguous based on the statutory language and the
23
statutory scheme as a whole, "we turn to the history of the
statute" to assist us in discerning the Legislature's intent in
using these words. See Commonwealth v. Hamilton, 459 Mass. 422,
433 (2011). The history of the FFCA21 reflects decades of
adjustments to the limitations on qui tam suits in "an effort to
strike a balance between encouraging private persons to root out
fraud and stifling parasitic lawsuits." Schindler, 563 U.S.
at 413, quoting Graham County Soil & Water Conservation Dist. v.
United States ex rel. Wilson, 559 U.S. 280, 295 (2010). The
MFCA, originally enacted in 2000, largely has tracked the
developments of the FFCA, including amendments in 2012 to follow
the Federal amendments of 2010. See St. 2000, c. 159, § 18,
inserting G. L. c. 12, §§ 5A-5O (originating as 2000 House Doc.
21 "As originally enacted in 1863, the [FFCA] placed no
restriction on the sources from which a qui tam relator could
acquire information on which to base a lawsuit." Schindler, 563
U.S. at 412. See Graham County Soil & Water Conservation Dist.
v. United States ex rel. Wilson, 559 U.S. 280, 294–295 (2010);
id. at 294, citing United States ex rel. Marcus v. Hess, 317
U.S. 537, 545-548 (1943) (upholding "relator's recovery even
though he had discovered the fraud by reading a [F]ederal
criminal indictment -- a quintessential 'parasitic' suit").
Since then, Congress has revised the FFCA and the public
disclosure ban several times, including most recently in 2009
and 2010, to balance the two statutory purposes of encouraging
the disclosure of fraud while at the same time discouraging
parasitic suits. See Fraud Enforcement and Recovery Act of
2009, Pub. L. No. 111-21, § 4, 123 Stat. 1617 (2009); Patient
Protection and Affordable Care Act, Pub. L. No. 111-148, § 1313,
124 Stat. 184 (2010); Dodd-Frank Wall Street Reform and Consumer
Protection Act, Pub. L. No. 111-203, § 3301, 124 Stat. 2079(2010).
24
No. 5100); St. 2012, c. 139, § 22-34, amending G. L. c. 12,
§§ 5A-5C, 5F, 5G, 5I-5K, 5N. See also Makalusky, Blowing the
Whistle on the Need to Clarify and Correct the Massachusetts
False Claims Act, 94 Mass. L. Rev. 41, 41 (2012). These changes
made the public disclosure bar at the same time both more and
less exacting. Thus, the MFCA, as with the FFCA, reflects the
Legislature's efforts to balance the promotion of qui tam
actions while also discouraging parasitic suits. This
legislative history further demonstrates the Legislature's
intent that "news media" be given a broad but balanced
construction. See Hamilton, 459 Mass. at 433.
Thus, "news media" is broad enough to encompass the many
ways in which people in the modern world obtain financial news,
including from publicly available websites on the Internet.
See, e.g., United States ex rel. Repko vs. Guthrie Clinic, P.C.,
U.S. Dist. Ct., No. 3:04CV1556 (M.D. Pa. Sept. 1, 2011), aff'd,
490 Fed. Appx. 502 (3d Cir. Aug. 1, 2012) (online commercial
financial software and Internet programs providing summaries or
analysis of trends in market transactions were news media
because "[t]hough they are not traditional news sources, they
serve the same purpose as newspapers or radio broadcasts, to
provide the general public with access to information").22
22Neither the plain meaning of "news media" nor the
legislative history of the MFCA supports the relator's
25
As discussed, see note 6, supra, EMMA is the "official
repository for information on all municipal bonds." It provides
updates to bond market information by means of the Internet. It
is publicly available and widely disseminated. "The EMMA
website was established to increase the transparency of the
municipal securities market by providing free public access to
municipal securities disclosures and data. EMMA provides
investors, [S]tate and local governments and other market
participants with key information and tools to put that
information into context." EMMA, Overview, https://emma.msrb
.org/AboutEmma/Overview [https://perma.cc/F78C-KQ8X]. In this
respect, EMMA is much like traditional news sources that report
market data and fall within the scope of the term. See Poteet,
619 F.3d at 110 (national newspaper falls within definition of
contention that "news media" is limited to sources with
editorial analysis. Compare United States ex rel. Kraxberger v.
Kansas City Power & Light Co., 756 F.3d, 1075, 1079-1080 (8th
Cir. 2014) (Kraxberger) (publicly available website that
disseminates information, even simply by reproducing it verbatim
in transcript without commentary, was news media). Moreover,
contrary to the relator's argument, the niche nature of the
municipal bond rates published on the EMMA website does not
exclude it from the broad scope of the meaning of news media.
See United States ex rel. Alcohol Found., Inc. v. Kalmanovitz
Charitable Found., Inc., 186 F. Supp. 2d 458, 463 (S.D.N.Y.),
aff'd, 53 Fed. Appx. 153 (2d Cir. 2002), cert. denied, 540 U.S.
949 (2003) (that "the ordinary meaning of the statutory term
'news media,' would encompass the publication of information in
scholarly or scientific periodicals" is "[n]o different from
newspaper reporters, [whose] scholarly and scientific authors
also disseminate information to the public in a periodic
manner").
26
news media). Accordingly, we conclude that the term "news
media" in the public disclosure bar includes within its scope
the EMMA website, which consists of publicly accessible
financial data.23 See Osheroff, 776 F.3d at 813 ("Because the
term 'news media' has a broad sweep, we conclude that the
newspaper advertisements and the clinics' publicly available
websites, which are intended to disseminate information about
the clinics' programs, qualify as news media for purposes of the
public disclosure provision").24
23We note that, in parallel litigation, the Superior Court
of California determined that EMMA was not news media for
purposes of the public disclosure bar under the California false
claims act. See Edelweiss Fund, Cal. Super. Ct., No. CGC-14-
540777, supra at 8-9, citing State ex rel. Bartlett v. Miller,
243 Cal. App. 4th 1398, 1414 (2016); note 10, supra. There,
unlike here, the court was bound by State appellate precedent
that summarily held, without reference to the plain meaning of
the words "news media," the statutory scheme as a whole, or the
legislative history, that the Securities and Exchange Commission
online database Electronic Data Gathering, Analysis, and
Retrieval (EDGAR) was not news media; the Superior Court then
analogized EMMA to the EDGAR database. See Edelweiss Fund, Cal.
Super. Ct., No. CGC-14-540777, supra at 7-9.
24We need not address the question whether all public
websites are encompassed within the meaning of "news media."
See Osheroff, 776 F.3d at 813 (publicly available websites
intended to disseminate information qualify as "news media" for
purposes of public disclosure); Kraxberger, 756 F.3d at 1078–
1079 (transcript that was publicly available on website was
considered disclosed through news media); United States ex rel.
Green v. Service Contract Educ. & Training Trust Fund, 843 F.
Supp. 2d 20, 32 (D.D.C. 2012) (collecting cases; "courts that
have considered the issue have construed the term to include
readily accessible websites"). Compare United States ex rel.
Hong v. Newport Sensors, Inc., 728 Fed. Appx. 660, 662-663 (9th
Cir. 2018) (declining to hold that most public websites
27
iii. Disclosure of substantially the same allegations or
transactions. The third prong of the public disclosure inquiry
is whether the public disclosure includes "substantially the
same allegations or transactions as alleged in the action or
claim." See G. L. c. 12, § 5G (c).25 "[W]e must compare the
substance of the prior disclosures with the substance of the
relator's complaint." Poteet, 619 F.3d at 114. "The operative
question is whether the public disclosures were sufficient to
set the government 'on the trail of the alleged fraud without
generally fall within category of news media); United States ex
rel. Integra Med Analytics LLC vs. Providence Health & Servs.,
U.S. Dist. Ct., CV 17-1694 PSG (SSx) (C.D. Cal. July 16, 2019)
("applying the news media provision to anything ever published
publicly on the [I]nternet is contrary to the ordinary meaning
of the term 'news media' and has the potential to eviscerate the
balance Congress struck between encouraging private parties to
bring forth evidence of fraud and preventing parasitic suits").
25 The 2010 and 2012 amendments to the FFCA and the MFCA,
respectively, amended the public disclosure bar from precluding
claims "based upon" public disclosure to banning those
"substantially the same" as the assertions already publicly
disclosed. This change codified then-existing Federal
jurisprudence that interpreted "based upon" to mean
"substantially the same." See Bellevue v. Universal Health
Servs. of Hartgrove, Inc., 867 F.3d 712, 718 (7th Cir. 2017),
cert. denied, 138 S. Ct. 1284 (2018) (amendment "expressly
incorporates the 'substantially similar' standard in accordance
with the interpretation of this circuit and most other
circuits"). Therefore, in considering whether the claims at
issue are substantially the same, we rely on cases both before
and after these amendments. See Reed, 923 F.3d at 743-744 ("the
2010 amendment confirms the vitality of our pre-2010 standard");
United States ex rel. Mateski v. Raytheon Co., 816 F.3d 565, 569
n.7 (9th Cir. 2016) ("our analysis of the issue of substantial
similarity would be the same under either version [of the
provision establishing the public disclosure bar]").
28
[the relator's] assistance.'" Reed, 923 F.3d at 744, quoting
United States ex rel. Fine v. Sandia Corp., 70 F.3d 568, 571
(10th Cir. 1995). "'Substantially the same' . . . connotes a
standard that requires only the essentials of the relator's
allegations to be identical to or of an identical type as those
disclosed publicly." Reed, supra at 748 n.12. See United
States ex rel. Boothe v. Sun Healthcare Group, Inc., 496 F.3d
1169, 1174 (10th Cir. 2007) ("complete identity of allegations"
is unnecessary; it is enough for "essence" of relator's
allegations to be "'derived from' a prior public disclosure").
A "complaint that targets a scheme previously revealed through
public disclosures is barred even if it offers greater detail
about the underlying conduct." Winkelman, 827 F.3d at 210,
citing Poteet, 619 F.3d at 115.
As discussed, the complaint at issue here relies upon the
defendants' obligations, disclosed in the official statements,
and the interest rates, which are disclosed on EMMA, and which
the relator analyzed to reveal the asserted failure of the
defendants to meet their obligation individually to set interest
rates for each VRDO. The relator contends that these are not
substantially the same as his allegations because, he asserts,
the rates were set through a mechanical, algorithmic approach
that the relator has coined "robo-resetting." Yet defining
"how" the rates were set does not change the essential shared
29
substance between the public disclosures and the complaint. The
crux of the alleged fraud is the failure individually to set
rates and instead setting rates by grouping disparate VRDOs, a
conclusion deciphered and decipherable from the public
disclosures of the rates themselves. See Repko, U.S. Dist. Ct.,
No. 3:04CV1556 (M.D. Pa.), supra ("though not identical to [the]
relator's complaint, the information publicly disclosed is
substantially similar to the complaint"). In sum, the publicly
disclosed information was sufficient to put the Commonwealth "on
the trail of the alleged fraud" without the relator's
assistance. See Reed, 923 F.3d at 744, citing Fine, 70 F.3d at
571.
d. Original source exception. Because the public
disclosure bar is applicable in this case, the complaint must be
dismissed unless the relator was an "original source." See
Poteet, 619 F.3d at 109-110; Springfield, 14 F.3d at 656.
General Laws c. 12, § 5A, defines two types of relators who may
qualify as original sources:
"an individual who: (1) prior to a public disclosure under
paragraph (3) of [§] 5G, has voluntarily disclosed to the
[C]ommonwealth or any political subdivision thereof the
information on which allegations or transactions in a claim
are based; or (2) has knowledge that is independent of and
materially adds to the publicly-disclosed allegations or
transactions, and who has voluntarily provided the
30
information to the [C]ommonwealth or any political
subdivision thereof before filing a false claims actions."26
The relator argues that he qualifies as the second type of
original source because, he contends, he has knowledge that both
is "independent of" and "materially adds" to the publicly
disclosed allegations or transactions.
The independent source exception is a "narrow category."
See Winkelman, 827 F.3d at 211. The relator contends that his
knowledge is "independent of" EMMA because the complaint does
not allege that he relied on that website to obtain the data
underlying his analysis; it suffices to defeat the defendants'
motion, he argues, that the complaint alleges that his forensic
analysis also used nonpublic, proprietary sources
notwithstanding that the same data were available from EMMA.
26 Prior to the 2012 amendments to the MFCA, an original
source was required to have direct and independent knowledge.
See G. L. c. 12, § 5A, inserted by St. 2000, c. 159, § 18
(original source was defined "as individual who has direct and
independent knowledge of the information on which the
allegations are based and has voluntarily provided the
information to the attorney general, without public disclosure,
before filing an action"). Thereafter, original sources need
not have direct knowledge, but, rather, must have knowledge that
"is independent of and materially adds to the publicly-disclosed
allegations or transactions." See G. L. c. 12, § 5A. The
change makes it more feasible for relators who are not insiders
to bring suit. See United States ex rel. Hagerty v. Cyberonics
Inc., 95 F. Supp. 3d 240, 261-262 (D. Mass. 2015), aff'd, 844
F.3d 26 (1st Cir. 2016); Makalusky, Blowing the Whistle on the
Need to Clarify and Correct the Massachusetts False Claims Act,
94 Mass. L. Rev. 41, 59 (2012).
31
The relator cites no authority for the proposition that a
relator may take advantage of the original source exception by
using a nonpublic source to access the exact same data readily
available from public sources. To the contrary, "when a
relator's qui tam action is based solely on material elements
already in the public domain, that relator is not an original
source." Kennard v. Comstock Resources, Inc., 363 F.3d 1039,
1045 (10th Cir. 2004), cert. denied, 545 U.S. 1139 (2005). See
United States ex rel. Fried v. West Indep. Sch. Dist., 527 F.3d
439, 443 (5th Cir. 2008) (Fried) (relator did not satisfy
independent knowledge requirement despite his independent
"sleuthing" that confirmed precise information already publicly
disclosed through congressional investigation). Contrast United
States ex rel. Hagerty v. Cyberonics Inc., 95 F. Supp. 3d 240,
260 (D. Mass. 2015), aff'd, 844 F.3d 26 (1st Cir. 2016) (relator
satisfied independent knowledge requirement where he was source
of information, later publicized in government report, regarding
defendants' fraudulent sales practices). Nothing in the
legislative history suggests a legislative intent to expand the
scope of the original source exception as the relator suggests.
Indeed, the history of the public disclosure bar, which exhibits
a careful balance between encouraging individuals with
previously unknown information to come forward and discouraging
parasitic suits that add little to the information already in
32
the public domain, see note 21, supra, supports the opposite
conclusion.
The EMMA website publicly reported the same data upon which
the relator relied, and the relator's analysis depended entirely
on the interest rate data, which were available on EMMA. Thus,
the relator's analysis cannot be said to be "independent of" the
publicly disclosed transaction discussed supra.27 See Ondis, 587
F.3d at 59 ("Virtually by definition, a relator whose knowledge
is dependent upon the public disclosure of allegedly fraudulent
transactions cannot be said to have independent knowledge of the
fraud"). Although the relator asserts that he spent
considerable time analyzing the publicly available data to
confirm his suspicions that the defendants were committing
fraud, and that his endeavor was aided by his expertise in the
field, this does not suffice to render his knowledge independent
27The relator also argues that his knowledge was
independent because it was based on "interviews with witnesses
and industry participants." In his complaint, however, the
relator alleges that he conducted one interview with a single
employee of one of the defendants; the motion judge correctly
concluded that this interview was irrelevant to the relator's
theory of fraud, as it did not concern the defendants' conduct
as remarketing agents. On appeal, the relator asserts that he
conducted "additional private interviews," but as these
interviews are not mentioned in the complaint (and also are not
in the record before us), they do not constitute independent
knowledge.
33
of the publicly disclosed transactions.28 See id. at 59-60,
citing Fried, 527 F.3d at 443 ("Expertise that enables a relator
to understand the significance of publicly disclosed
information, without more, is insufficient to qualify him [or
her] as an original source"); United States ex rel. Doghramji
vs. Community Health Sys., Inc., U.S. Dist. Ct., Nos. 3:11 C
442, 3:14 C 2160, 3:15 C 110, 3:14 C 2195 (M.D. Tenn. Apr. 1,
2020) (performing "unique statistical analysis," even if "proven
helpful," cannot survive public disclosure bar).29
The relator also argues that he materially added to the
public disclosures because his investigation revealed the robo-
resetting scheme -– that is, a mechanical, algorithmic approach
to resetting rates. A relator "materially adds" to the public
disclosure when his knowledge "is sufficiently important to
influence the behavior of the recipient." Winkelman, 827 F.3d
at 211. See United States ex rel. Advocates for Basic Legal
Equality, Inc. v. U.S. Bank, N.A., 816 F.3d 428, 431 (6th Cir.
2016), cert. denied, 137 S. Ct. 2180 (2017) ("Materiality in
28The relator argues that the motion judge erred in relying
on cases decided before the amendment to the public disclosure
bar in 2010, see note 25, supra. Because the "independent"
requirement was retained, however, preamendment cases analyzing
this prong remain instructive.
29The relator's assertions regarding collusion, which are
based on the same analysis, similarly fail to qualify as
"independent of" the publicly disclosed transactions. See
Ondis, 587 F.3d at 59.
34
this setting requires the claimant to show it had information
'[o]f such a nature that knowledge of the item would affect a
person's decision-making,' is 'significant,' or is 'essential'"
[citation omitted]).30
30The relator points to the arguably broader standard for
materiality set forth in United States ex rel. Moore & Co. v.
Majestic Blue Fisheries, LLC, 812 F.3d 294, 307 (3d Cir. 2016)
(Moore), where the United States Court of Appeals for the Third
Circuit applied the pleading requirement of Fed. R. Civ. P. 9(b)
to hold that a relator's information "materially adds" when it
"adds in a significant way to the essential factual background:
'the who, what, when, where and how of the events at issue'"
(citation omitted). Like the United States Courts of Appeals
for the Sixth and Tenth Circuits, we decline to adopt this
standard.
Instead, we agree with the United States Court of Appeals
for the First Circuit that whether a relator's knowledge
"materially adds" to the publicly disclosed information depends
on "whether a piece of information is sufficiently important to
influence the behavior of the recipient." Winkelman, 827 F.3d
at 211, citing Universal Health Servs., Inc. v. United States ex
rel. Escobar, 136 S. Ct. 1989, 2004 (2016). See United States
v. Medtronic, Inc., 327 F. Supp. 3d 831, 851 (E.D. Pa. 2018)
(contrasting Moore's "relatively broad definition of
materiality" with Winkelman's "narrower definition"). See also
United States ex rel. Maur v. Hage-Korban, 981 F.3d 516, 528
(6th Cir. 2020) (citing Winkelman standard); Reed, 923 F.3d
at 758-759 (expressing concern that Moore's broader standard
could "swallow the public disclosure bar" and instead following
principles set forth in Winkelman). The Winkelman standard is
tied to the plain and ordinary meaning of the term "materially
adds." Winkelman, supra. See Ten Local Citizens Group v. New
England Wind, LLC, 457 Mass. 222, 229 (2010). We do not
determine that details regarding the who, what, when, where, and
how of the events at issue required by rule 9(b) would never
suffice such that a relator "materially added" to the public
disclosure, see Reed, supra at 758 (determination depended on
facts and circumstances of particular case), but the fact that a
complaint meets the particularized pleading requirements for
fraud, alone, is unlikely to do so.
35
Here, the explanation that the defendants used "robo-
resetting" in order to avoid their obligations to set the
interest rates for each VRDO individually was not material in
the sense required by the MFCA; the salient information was that
the defendants promised they would reset rates individually and
failed to do so. How the defendants conducted the fraud --
purportedly in order to discourage holders of VRDOs from selling
those bonds -- here through what the relator coins "robo-
resetting," is a detail that would not influence the behavior of
a recipient who already was armed with the knowledge of the
salient elements of the fraud.31 See, e.g., Osheroff, 776 F.3d
at 815 (addition of details on type of free services clinics
were providing, i.e., manner in which fraud was committed, did
not materially add to public information). See also Reed, 923
F.3d at 758 (whether "the . . . [question] how [the fraud was
31Because we follow the standard set forth in Winkelman,
827 F.3d at 208-209, 211, we depart from the Illinois Circuit
Court, which, in parallel litigation involving the same parties
as in this case, determined that it could not "conclude that the
'original source' exception does not apply because nothing in
the available raw data indicate fraudulent conduct by the
defendants as alleged." See note 10, supra. The court focused
on the relator's allegation concerning the defendants' use of an
"algorithmic mechanical system" -- the how -- which it stated
was not disclosed by the raw data. Therefore, the court
concluded, the relator had knowledge that was independent of,
and materially added to, the publicly disclosed information.
Although the court did not cite Moore, its reasoning is
consistent with that standard, by contrast to the narrower
Winkelman standard that we adopt here.
36
perpetrated] actually should be considered sufficiently
significant or important to affect the government's actions
regarding the fraudulent scheme" depends on facts and
circumstances of case).32
While the manner in which a defendant accomplished a
particular fraud might aid the Commonwealth in its efforts to
avert similar fraudulent schemes in the future, or might be
material in some other circumstances, the allegation that the
defendants used a mechanical, algorithmic mechanism here does
nothing to bring to the Commonwealth's attention the existence
of the purported fraud, namely, the defendants' asserted failure
to set interest rates to the lowest rates the market would bear.
Thus, the relator does not qualify as an "original source" for
purposes of the MFCA's exception to the public disclosure bar.
Judgment affirmed.
32The relator's assertion of collusion also did not
materially add to the public discourse because it lacked detail
beyond his assertion that the defendants must have colluded in
order for the interest rates to have changed as they did. The
only addition beyond this deduction from the data -- the single
interview -- was not relevant to the purported fraud, see note
27, supra, and, in the relator's words, merely "confirmed" the
patterns he already had discerned from the data. Compare Reed,
587 F.3d at 761-762 (relator materially added to public
disclosure on issue of scienter where her "complaint offer[ed]
pages of details describing how [company's] managers knowingly
schemed to defraud the government by covering up systemic
violations").