North Carolina Lawyers Weekly
U.S. ex rel. Lyle Beauchamp v. Academi Training Center LLC (Lawyers Weekly No. 001-039-16, 26 pp.) (Agee, J.) No. 15-1148, Feb. 25, 2016; USDC at Alexandria, Va. (Ellis, J.) 4th Cir.
Holding: Relators who alleged in their first-amended complaint that defendant security training company defrauded the government by falsifying weapons qualification scores for their security contractors are not barred from pursuing their False Claims Act suit by the subsequent discussion of the weapons qualifications scheme in an article in Wired.com magazine; the 4th Circuit vacates the district court’s dismissal of the suit.
The primary question here is whether the district court correctly applied 31 U.S.C. § 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. We find the public-disclosure bar inapplicable in this case. The public-disclosure bar disqualifies private suits based on fraud already disclosed in particular settings – such as hearings, government reports or news reports – unless the relator meets the definition of an “original source” under the FCA.
We have interpreted the 2007 version of the public-disclosure bar in § 3730(e)(4)(A) as a jurisdictional limitation that divests the district court of subject matter jurisdiction over the action. In the wake of a 2010 amendment, the public-disclosure bar is a ground for dismissal – effectively, an affirmative defense – rather than a jurisdictional bar. Also, the bar no longer requires actual knowledge of the public disclosure, but instead applies if substantially the same allegations or transactions were publicly disclosed.
Training Contractor
Turning to this case, in 2005, the U.S. State Department hired Academi Training Center LLC to provide security services for officials and embassy workers stationed across the Middle East. Relators, both former security contractors with Academi, filed suit in 2011, alleging 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 government by requesting payment for unissued equipment. In their first amended complaint, relators added allegations of a separate fraudulent scheme, claiming that from April 2007 through April 2011, Academi routinely failed to qualify its contractors on two required weapons – the M-240 and M-249 belt-fed machine guns – and fabricated scorecards showing proficiency with those firearms for submission to the State Department.
Two former Academi firearms instructors later filed their own lawsuit alleging they were wrongfully terminated for reporting their weapons qualification scheme up the chain of command. This complaint was not filed as a qui tam action, so its allegations were not under seal. The complaint generated media attention and Wired.com published a story about the case, which also mentioned by name relators’ pending qui tam suit.
The government declined to intervene in relators’ case; they filed a second-amended complaint in 2012, which became the operative pleading. Academi moved to dismiss relators’ qui tam claims under the first-to-file and public-disclosure bars, as well as for failure to satisfy Fed. R. Civ. P. 9(b).
Public Disclosure
The district court rejected the weapons qualification scheme under the public-disclosure bar, determining that the Wired.com article was a public disclosure. Saying relators’ last pleading – the second-amended complaint – post-dated the Wired.com article, the court concluded the article was a qualifying public disclosure so the bar applied. The court found the “original source” exception did not apply because relators failed to disclose Academi’s fraud to the government in accordance with the statute.
We agree with the parties that the Wired.com article is a public disclosure under either version of the FCA. Thus, if the Wired.com article came later than the applicable part of relators’ claims, the 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. Their second-amended complaint re-alleged this fraud and added further detail about it gleaned from the article. 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 Rockwell Int’l Corp. v. U.S., 549 U.S. 457 (2007).
Here, relators’ second-amended complaint merely added further detail about a claim already alleged. We 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. The fact that the second-amended complaint provided additional detail about this scheme did not make the timing of that complaint the controlling factor.
Vacated and remanded.
