United States District Court, N.D. Illinois
April 27, 2004.
UNITED STATES OF AMERICA, ex rel., DIMITRI YANNACOPOLOUS, Relator-Plaintiff
GENERAL DYNAMICS and LOCKHEED MARTIN CORPORATION, Defendants
The opinion of the court was delivered by: ROBERT GETTLEMAN, District Judge
MEMORANDUM OPINION AND ORDER
In his second amended complaint, relator-plaintiff, Dimitri
Yannacopolous ("relator"), a former General Dynamics employee, alleges
that defendants General Dynamics and Lockheed Martin Corporation ("GD"
and "Lockheed") violated the False Claims Act, 31 U.S.C. § 3279
("FCA") by submitting false claims in connection with F-16 fighter
aircraft sales to Greece. Defendants, in separate motions, have moved to
dismiss the second amended complaint, arguing: (1) the complaint should
be dismissed pursuant to Fed.R.Civ.P. 12(b)(1) or, alternatively,
Fed.R.Civ.P. 12(b)(6);*fn1 and (2) plaintiff fails to plead fraud
with particularly as required by Fed.R.Civ.P. 9(b).*fn2 For the
reasons stated below, the court denies defendants' motions to dismiss in
their entirety. FACTS*fn3
According to plaintiff's' second amended complaint, relator is a Greek
citizen and consultant. During all times relevant to this action,
defendant GD, through its Fort Worth Division, was the leading U.S.
contractor in the development, manufacture, assembly and sales of F-16
fighter aircraft and support services to the U.S. and foreign
governments. In 1978, the Greek government began "shopping" for fighter
jets, ultimately electing to purchase 40 F-16s. In 1985, Greece signed a
letter of intent ("LOI") to purchase 40 F-16s from GD. GD and Greece
entered into a final contract in January 1987. Defendant Lockheed
purchased the Fort Worth Division from GD effective at the end of
February 1993, and is alleged by relator to be GD's successor in interest
to all of GD's F-16 business, including the Greek contract.
Pursuant to a 1979 written consulting agreement with GD, relator
assisted GD in its efforts to persuade the Greek government to select the
F-16. That agreement expired in October 1983, and was not renewed. After
1983, relator had no further involvement in efforts to sell the F-16 to
U.S. taxpayer funds financed the F-16 sales. The Foreign Military Sales
Financing Program ("FMS") established by the Arms Control Export Act,
22 U.S.C. § 2751 (the "Act") authorizes sales of American military
equipment from the U.S. Government to foreign allies. The Act allows the
U.S. to provide loans, subsidized loans and grant funds to foreign allies
so that they can purchase American military equipment directly from the
manufacturer. Using FMS funds, the Greek government purchased the F-16s
directly from GD. Pursuant to the Act, GD submitted the LOI to the Defense Security
Assistance Agency ("DSAA")*fn4 for approval of the contract terms. In
February 1986, GD submitted a signed contractor's certification to the
DSAA. As a manufacturer selling military equipment to a foreign
government under the FMS program, GD was required to meet certification
requirements, guidelines and restrictions as monitored by the DSAA. GD
was also required to submit the final contract for DSAA approval. GD was
further required to provide Greece with DSAA invoices, quarterly waybills
and DD250*fn5 forms for each payment claim. In turn, DSAA relied on
those documents when releasing FMS funds. GD began receiving FMS funds as
soon as the LOI and mutually agreed draft contract received U.S.
Government approval in April 1986. The contract was finalized in January
1987, and contained 11 contract line items ("CLINs") that specified the
price for each part of the contract (airframe, spare parts, post-sale
maintenance, etc.) After the final contract, GD (then Lockheed) submitted
at least seven contract modifications stating adjustments to the CLINs.
Relator alleges that GD engaged in various fraudulent conduct to obtain
the F-16 contract with Greece.*fn6 However, that initial fraud is not
the subject of this suit. The initial fraud was the subject of Greek proceedings commenced in 1989 when a new political
party took control. The new party was in opposition to the party that
held control during the F-16 negotiations. In parliamentary and criminal
proceedings ("the Greek Proceedings"), the new Greek government
investigated allegations that it was duped into overpaying for the F-16s,
The Greek Proceedings were well publicized in Greece, but minimally
reported in the U.S. The Greek Proceedings contained no allegations of
fraud committed against the U.S. government, and were conducted under
seal and, of course, in Greek. In 1992, the Greek Proceedings concluded
with a determination that no wrongdoing occurred in connection with the
sale. Thereafter, Greece purchased more F-16s from GD.
Approximately six months after the Greek Proceedings commenced, in
1989, relator sued GD in the United States District Court for the
District of Columbia, later transferred to the Eastern District of
Missouri. No. 91-324C-8 (DJS); aff'd Yannacopolous v. General
Dynamics Corp., 75 F.3d 1298 (8th Cir. 1996). In that suit
("Yannacopolous I"), relator alleged: (1) a personal claim for
approximately $50,000,000 in commissions from the F-16 sale; and (2)
three RICO counts. Relator partially supported his RICO counts with facts
relating to the F-16 fraud scheme alleged in the Greek Proceedings. In
the course of the Yannacopolous I proceedings, and pursuant to
the Freedom of Information Act ("FOIA"), relator obtained much
information regarding GD's F-16 sales. In August 1994, the court granted
GD's motion for summary judgment on relator's RICO counts, finding that
he was not directly injured by the alleged fraud. In November, the court
ruled against relator on his remaining claims.
The fraud alleged in the instant suit differs from the fraud alleged in
the Greek Proceedings and Yannacopolous I, by alleging
overbilling subsequent to the initial contract, and by naming the U.S. (not Greece) as the victim. Due to various
overtoiling strategies and improper conduct in making FMS claims, relator
alleges that defendants defrauded the U.S. government of hundreds of
millions of dollars. The Greek Proceedings and Yannacopolous I
focused on facts pertaining to the initial F-16G bait and switch
allegations as affecting Greece, not to subsequent fraudulent activity
alleged in relator1's second amended complaint that affected the U.S.
On April 23, 2003, relator filed his second amended complaint against
defendants, seeking: damages in an amount equal to three times the amount
of damages sustained by the U.S. Government; a civil penalty for each
violation of 31 U.S.C. § 3729; the maximum award allowed by
31 U.S.C. § 3730(d); attorneys' fees, costs and expenses; and prejudgment and
post-judgment interest.*fn7 Relator's Second Amended Complaint contains
seven counts of FCA violations through submissions of false claims.
In Count I, relator claims that GD knowingly submitted false records,
statements and claims to the DS AA, collecting at least $24,000,000 of
excess, fraudulently-obtained funds in connection with the F-16 airframe.
In Count II, relator claims that GD knowingly submitted false records,
statements and claims to the DSAA, collecting $52,100,000 of excess and
fraudulently obtained funds in connection with depot-level maintenance,
ln Count III, relator claims that GD knowingly submitted false records,
statements and claims to the DSAA to collect $47,693,487 of excess and
fraudulently obtained funds in connection with co-production that was
never performed (allegedly, GD capitalized a Greek business entity known
as HBDIC to co-produce F-16 parts, although no co-production was
In Count IV, relator claims that Lockheed knowingly submitted false
records, statements and claims to the DS AA to collect $54,000,000 for
Integrated Electronic Measure Counter work, but that only $11,000,000 of
that work was actually performed. Count V alleges that GD knowingly
submitted false records, statements, and claims to collect excess and
inflated amounts of $45,000,000 and $6,000,000. In Count VI, relator
claims that GD failed to disclose to the U.S. Government that it deleted
a price adjustment schedule between the LOI and final contract dates. By
failing to make the adjustments, GD knowingly submitted false documents,
including inflated quarterly progress payment invoices, that withheld
between $156,642,328 and $220,996,120 of excess funds owed to the U.S.
In Count VII, relator alleges that Lockheed modified the contract to
include a $29 million charge owed to the U.S. Government for recoupment
of certain funds from Greece, but that Lockheed returned the money
above-the-line, thus inflating the contract and price and not really
returning the $29 million. Further, relator alleges that Lockheed kept
the one-time recoupment cost above-the-line in subsequent years, thus
inflating the overall contract price.
I. FED. R. Civ. P. 9(b)
Defendants have moved pursuant to Fed.R.Civ.P. 9(b), arguing that
relator fails to plead fraud with particularity. False Claims Act
complaints must be pled with particularity. United States ex rel.
Garst v. Lockheed-Martin Corp., 328 F.3d 374, 375-377 (7th Cir.
2003); United States ex rel. Robinson v. Northrop Corp.,
149 F.R.D. 142, 144-145 (N.D. Ill. 1993). Three primary policies support Rule 9(b)'s requirement that fraud be pled
with particularity: "(1) protecting a defendant's reputation from harm;
(2) minimizing' strike suits' and `fishing expeditions'; and (3) providing
notice of the claim to the adverse party." Jepson. Inc, v. Makita
Corp., 34 F.3d 1321, 1327 (7th Cir. 1994)(quoting Vicom. Inc, v.
Harbridge Merchant Servs., Inc., 20 F.3d 771, 777 (7th Cir. 1994). To
satisfy these policies, Rule 9(b) requires that "the `circumstances' must
be pleaded in detail. This means the who, what, when, where, and how: the
first paragraph of any newspaper story." DiLeo v. Ernst &
Young, 901 F.2d 624, 627 (7th Cir. 1990). Rule 9(b) does not require
that plaintiff explain his entire case, only that he state the actions
that allegedly constitute fraud. Midwest Commerce Banking Co. v.
Elkhart Citv Ctr., 4 F.3d 521, 524 (7th Cir. 1993).
Defendants argue that relator failed to plead the "who, what, when,
where and how" of the alleged fraudulent claims. In arguing a failure to
plead "who," defendants note relator's failure to identify the specific
employees of GD or Lockheed responsible for inflating claims. Those
details, however, are in the exclusive possession of defendants, and
relator need not allege them under Rule 9(b). See Winthrop Resources
Corp. v. Lacrad Int'l Corp., 2002 WL 24248, *2 (N.D. Ill.
2002)(citing Corley v. Rosewood Care Ctr., Inc.,
142 F.3d 1041, 1051 (7th Cir. 1998)). Relator ceased working for GD
in 1983 and never consulted with Lockheed. It is not possible for
relator to know beyond mere speculation "who" was responsible for
the alleged fraudulent claims because that is inside information
within defendants' exclusive control.
Defendants argue that relator fails to plead "what" fraudulent activity
occurred, because relator's allegations do not cite "actual `false
claims'" and thus cannot support an inference of fraud. Relator
sufficiently pleads numerous allegations of "what" defendants did to
defraud the United States. Each of the seven counts alleges inflated charges to
the U.S. Government. Obviously, overbilling a client for products and
services that were never delivered or performed may constitute fraudulent
Next, defendants argue that relator fails to identify the specific
dates "when" the fraudulent activity occurred. Defendants focus on the
dates of specific claims, whereas relator focuses on the dates of
activity that allegedly caused the claims to be fraudulent. Relator
pleads specific dates regarding contract submissions and modifications,
as well as specific timeframes during which defendants submitted
allegedly fraudulent quarterly invoices for payment. The complaint thus
sufficiently informs defendants when the fraudulent activity occurred.
Requiring greater specificity of claim dates is unnecessary.
Defendants rely on Garst v. Lockheed Integrated Solutions
Co., 158 F. Supp.2d 816, 821 (N.D. Ill. 2001), in which the district
court dismissed the complaint for, among other things, failing to plead
specific dates. After the dismissal, plaintiff amended his complaint, but
the court again dismissed, with prejudice, for, among other things,
failing to plead specific dates. Garst v. Lockheed-Martin
Corp., 2002 U.S. Dist. LEXIS 14307, *8-10 (N.D. Ill. 2002). The
Seventh Circuit's affirming opinion, however, clearly shows that the
plaintiff's complaints were deeply flawed for each factor of the "who,
what, when, where and how" requirements, not just lack of specific dates.
Garst v. Lockheed-Martin Corp., 158 F. Supp.2d at 822-23;
U.S, v. Lockheed-Martin Corp., 328 F.3d 374 at 376-379 (7th
Defendants' reliance on Midwest Grinding Co., Inc, v. Spitz,
976 F.2d 1016, 1020 (7th Cir. 1992), is also misplaced because, in the
instant case, unlike in Midwest, defendants, rather than
plaintiff's, are in possession of the actual claims alleged to be false.
In Midwest, it was the plaintiff's that had access to the allegedly fraudulent invoices.
"Midwest, not the defendants, had peculiar access to the invoices on
which the undercharging scheme was based: Spitz sent those invoices while
employed at Midwest and Midwest presumably retained those business
records." Id. at 1020. In the instant case, relator's
relationship with GD ended long before any claims were submitted.
Consequently, his knowledge of specific dates is limited, although he has
nonetheless pled some such dates. Accordingly, relator's complaint
sufficiently pleads "when" the allegedly fraudulent claims occurred.
Defendants also argue that relator insufficiently pleads "where" the
alleged false claims were made. Relator pleads that the false claims were
made in essentially three places: CD's various facilities, Greek
Government facilities, and U.S. Government facilities (specifically the
DS AA). Any greater specificity in the complaint would undermine the
purpose of Fed.R.Civ.P. 8 notice pleading, which must be read in
conjunction with Rule 9(b). Garst, 328 F.3d at 376. Length and
grueling exaction is not the purpose of Rule 9(b). Id. If
anything, relator's complaint is longer and more detailed than Rule 9(b)
requires. The 7th Circuit analogized the Rule 9(b) "who, what, when,
where and how" requirement to the information contained in the "first
paragraph of a newspaper story." DiLeo, 901 F.2d at 627. The
first paragraph of a newspaper story is short and to the point. Relator's
complaint also cuts to the point. The policies of Rule 9(b) are served
because defendants have sufficient notice of the fraud alleged against
them and relator alleges enough particular facts to foreclose fears of
a fishing expedition. Consequently, the second amended complaint alleges
FCA fraud with sufficient particularity as required by Rule 9(b). II. FED. R. Civ. P. 12(b)(1) FED. R. Civ. P. 12(b)(6)
FED. R. Civ. P. 56
Defendants have also moved to dismiss relator's second amended
complaint pursuant to Fed.R.Civ.P. 12(b)(1) for lack of subject matter
jurisdiction or, alternatively, Fed.R.Civ.P. 12(b)(6), for failure to
state a claim upon which relief can be granted. In support of their
jurisdictional motion, defendants argue that relator cannot prove by a
preponderance of the evidence that the court has jurisdiction under FCA
§§ 3730(e)(4)(A)&(B), which provide:
(A) 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
[General] Accounting Office report, hearing,
audit, or investigation, or from the news media,
unless tie action is brought by the Attorney
General or the person bringing the action is an
original source of the information.
(B) For purposes of this paragraph, "original
source" means an individual who has direct and
independent knowledge of the information on which
the allegations are based and has voluntarily
provided the information to the Government before
filing an action under this section which is based
on the information.
Defendants' reliance on Rule 12(b)(1) is misplaced. Sections
3730(e)(4)(A)&(B) are matters of substantive law, not a
"jurisdictional bar" as suggested by some courts. United States
ex rel. Feingold v. AdminaStar Fed., Inc., 324 F.3d 492
, 494-95 (7th
Cir. 2003)(citing Hughes Aircraft Co. v. United States, 520
U.S, 939, 950-51 (1997).*fn8
See also. United States ex rel. Fallon
v. Accudyne Corp., 97 F.3d 937, 940-941 (7th Cir. 1996)(stating,"t
§ 3730(e)(4)(A)&(B) [do] not curtail the categories of disputes
that may be resolved (a real `jurisdictional' limit) but instead
determines who may speak for the United States on a subject, and who if
anyone gets a financial reward. `Jurisdiction' is a notoriously plastic
term."). In § 3730 actions, subject matter jurisdiction is actually conferred
by §§ 1331,1345, and 3732(a) rather than § 3730(e)(4)(A)&(B).
Id. at 941. Accordingly, the court has subject matter
jurisdiction over the dispute.
In support of their Rule 12(b)(6) motion, defendants argue that relator
fails to satisfy the requirements of § 3730(e)(4) because: (1) his
suit is based on public disclosures of the instant allegations or
transactions; and (2) he is not an "original source" of the information
contained in the public disclosures.
31 U.S.C. § 3730(e)(4)(A)&(B). In support of their motion,
defendants attached numerous exhibits that contain matters outside the
pleadings which the court cannot consider under Rule 12(b). Rule 12(b)
If, on a motion asserting the defense number (6)
to dismiss for failure of the pleading to state a
claim upon which relief can be granted, matters
outside the pleading are presented to and not
excluded by the court, the motion shall be treated
as one for summary judgment and disposed of as
provided in Rule 56, and all parties shall be
given reasonable opportunity to present all
materials made pertinent to such a motion by Rule
Whether to convert a Rule 12(b)(6) motion into a motion for summary
judgment, as allowed by Rule 12(b), is a matter of discretion for the
court. Levenstein v. Salafsky, 164 F.3d 345
, 347-48 (7th Cir.
1998). All parties agree, however, to conversion to a motion for summary
judgment under Rule 56 and disclaim the need for further discovery.
Accordingly, the court construes the Rule 12(b)(6) motion as a motion for
Under Fed.R.Civ.P. 56, a movant is entitled to summary judgment when
the "pleadings, depositions, answers to interrogatories, and admissions
on file, together with the affidavits" show there is no genuine issue of
material fact and the movant is entitled to judgment as a matter of law.
Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett,
477 U.S. 317, 322 (1986). When considering a motion for summary judgment, the court draws all
reasonable inferences in the light most favorable to the non-moving
party. Fisher v. Transco. Services-Milwaukee. Inc.,
979 F.2d 1239, 1242 (7th Cir. 1992).
Defendants argue that relator has not produced facts that show a
genuine issue regarding whether: (1) there have been public disclosures;
(2) relator's allegations are based upon public disclosures; and (3)
relator is an original source of the public disclosures. Defendants argue
that relator cannot rest on his pleadings, but must affirmatively produce
evidence to create a genuine issue of material fact. Defendants ignore
the first step in a motion for summary judgment, however: the movant must
persuade the court that there is no genuine issue of material fact.
Celotex, 477 U.S. at 322, 325 (following Adickes v.
Kress, 398 U.S. 144, 157 (1970)). Defendants fail to carry that
burden of persuasion.
A. PUBLIC DISCLOSURES
The question is whether relator bases his action "upon the public
disclosure of allegations or transactions in a criminal, civil or
administrative hearing, in a congressional, administrative, or Government
[General] Accounting Office report, hearing, audit, or investigation, or
from the news media." § 3730(e)(4)(A). The question is best broken
into subquestions: (1) Does relator's case involve public disclosures?
(2) If yes, do those public disclosures disclose the allegations or
transactions of the instant case? (3) If yes, does relator base his cause
of action on those public disclosures?*fn9 1. The Greek Proceedings
Defendants argue that the Greek Proceedings were "public disclosures"
of the "allegations or transactions" in the instant case. Relator
disagrees, arguing that: (1) foreign proceedings, especially those
conducted under seal, cannot be public disclosures; and (2) the
allegations or transactions in the instant case were not actually
publicly disclosed by the Greek Proceedings.
The court agrees that the Greek Proceedings are not public disclosures.
Although no court has yet decided whether foreign proceedings can be
public disclosures, § 3730(e)(4)(A) does not include such proceedings
within the statutory list. The statute refers to various actions that can
result in public disclosure, but the list, other than news media, "refers
exclusively to federal sources of information." United States ex
rel. Garibaldi v. Orleans Parish School Board 21 F. Supp.2d 607, 615
(E.D.La. 1998): United States ex rel. Dunleaw v. County of
Delaware, 123 F.3d 734, 744 (3rd Cir. 1997). Even assuming that a
"proceeding" is within the FCA as a "hearing" or "investigation," foreign
proceedings are excluded from the statutory definition's exclusive list.
To interpret the statute to cover foreign proceedings (and by extension
any foreign "report, hearing, audit, or investigation") would create too
large a shield for multinational corporations accused of defrauding the
U.S. Government. Such an accused corporation could avoid FCA prosecution,
even in the absence of any disclosure to the U.S. government, by arguing
that a foreign government investigated the matter. Foreign governments,
whose interests may be adverse to the United States, cannot be allowed so
to affect our rule of law.
Language barriers are another obvious reason that foreign proceedings
cannot reasonably be a public disclosure of information. The FCA is
concerned with disclosure to the American public. United States ex rel. Lamers v. Citv of Green
Sav. 998 F. Supp. 971, 978 (E.D. Wis. 1998). Few Americans speak,
read or write Greek. Consequently, any information divulged in the Greek
Proceedings was not realistically disclosed publicly for purposes of
§ 3730(e)(4)(A), which can reasonably refer only to the American
public. The American public, confronted with the text of the Greek
Proceedings, would finally get the rare chance to aptly and appropriately
exclaim, "It's Greek to me." Thus, information disclosed in a foreign
language cannot be considered a public disclosure to the American
public*fn10 because such information is incomprehensible to
English-speaking Americans, does not prompt American public inquiry, and
does not remotely ensure U.S. Government inquiry. Further, the Greek
Proceedings were conducted under seal, thus rendering any information
divulged therein publicly unavailable, even to the Greek-speaking
Defendants also argue that the allegations or transactions in the Greek
Proceedings and the instant case both involve the F-16G contract and the
alleged bait and switch fraud scheme. The allegations or transactions of
the instant case, however, involve defendants overbilling the U.S.
government through false claims subsequent to the initial contract. Those
subsequent overbilling allegations and transactions did not exist at the
time of, and thus were not discussed or resolved in, the Greek
Proceedings. Even if the Greek Proceedings had been public disclosures,
for the allegations or transactions of the instant case to be disclosed,
all of the critical and essential elements that compose that fraud must appear in the
disclosure. Feingold 324 F.3d at 496. Defendants admit that
relator names the U.S. Government as a new victim in the instant suit,
while only the Greek government was an alleged victim in the Greek
Proceedings. Because defendants do not contest that, even if the Greek
Proceedings constituted a public disclosure (which it was not) an issue
of fact would exist whether the Greek Proceedings were public disclosures
of the allegations or transactions in the instant case.
2. News Articles
Defendants argue that various news articles, both Greek and American,
that reported on the Greek Proceedings and underlying F-16 contract
constitute public disclosures of the "allegations or transactions" in the
instant case. Relator disagrees, arguing that: (1) foreign news articles
are not public disclosures under § 3730(e)(4)(A); and (2) neither the
Greek nor American news articles disclosed the overtoiling allegations or
transactions in the instant case.
Most of the news articles involved are Greek language reports, although
defendants provide two American newspaper articles that briefly mention
the Greek Proceedings and F-16 fraud allegedly perpetrated against the
Greek government, but those articles do not mention specific information
regarding the instant "allegations or transactions." No court has decided
whether foreign news articles are included within § 3740(e)(4)(A)'s
definition of "news media"; however, because the FCA excludes foreign
proceedings from its definition, (he same exclusion should apply to
foreign news media, at the very least foreign-language news media. There
is no public disclosure to the American public when information is
divulged in a foreign publication, especially if published in a foreign
language. In this case, publication in Greek-language news media did not
publicly disclose information to the American public. Moreover, even if the Greek articles had been public disclosures,
neither the Greek nor American articles disclose the "allegations or
transactions" in the instant case. The newspaper articles are not public
disclosures of the instant U.S.-focused overbilling "allegations or
transactions" because the "allegations or transactions" reported by those
articles pertained to the alleged bait and switch fraud scheme and the
Greek government. Additionally, because relator states, without
contradiction, that he never saw the articles prior to commencing this
action, he could not have based the instant suit on those reports.
Consequently, defendants have failed to establish that the news reports
contained the "allegations or transactions" underlying the instant case.
3. FOIA Requests
Defendants argue that information relator obtained about the Greek
Proceedings pursuant to FOIA requests during Yannacopolous I
constitutes public disclosure of the "allegations or transactions" in the
instant case. Relator disagrees, although in somewhat roundabout fashion,
arguing that: (1) the FOIA requests are not "public disclosures" because
they were obtained in discovery during Yannacopolous I and not
filed with that court; and (2) the FOIA requests do not disclose the
"allegations or transactions" of the instant case.
The majority of circuit courts confronted with this issue have held
that information divulged in a FOIA request becomes a public disclosure
upon receipt of that information by the requesting party. United
States ex rel. Schumer v. Hughes Aircraft Co., 63 F.3d 1512, 1519-20
(9th Cir. 1995) vac'd on other grounds 520 U.S. 939 (1997).
United States ex rel. Mistick PBT v. Hous. Auth, of the Citv of
Pittsburgh, 186 F.3d 376, 383-84 (3rd Cir. 1999); United States
v. A.D. Roe Co., 186 F.3d 717, 723-24 (6th Cit. 1999). To fit under
§ 3730(e)(4)(A)'s list, the FOIA information is considered an "administrative report."
Mistick, 186 F.3d at 383-84. A minority view holds that FOIA
information is not a "public disclosure" because it is excluded from
§ 3730(e)(4)(A)'s list. This court regards this view as consistent
with the legislative intent in enacting the 1986 amendments to the FCA.
145 Cong. Rec. E1546-01 (1999)(statement of Rep. Howard Herman and Sen.
Charles Grassley, the principal House and Senate sponsors of the 1986
Amendments, that they do not view FOIA requests as public
In an unpublished opinion, citation to which is disfavored, the Fourth
Circuit held that FOIA information does not amount to a "public
disclosure" because it is not expressed in § 3730(e)(4)(A). The Fourth
Circuit's 2001 opinion is the most recent circuit court opinion on the
matter. U.S. ex rel. Bondy v. Consumer Health Found., 2001 U.S.
App. LEXIS 24238 (4th Cir. 2001). The Seventh Circuit has not directly
decided the issue of whether information produced pursuant to FOIA
requests are "public disclosures," although it did affirm a district
court that held that FOIA requests are "public disclosures."
Lamers, 998 F. Supp. at 979, aff'd on other grounds
168 F.3d 1013 (7th Cir. 1999). In affirming Lamers, however,
the Seventh Circuit never mentioned the FOIA, stating, "In the case
before us, all the facts on which Mr. Lamers based his fraud claim were
publicly disclosed when the media covered the FTA's 1995 administrative
decision." Id. at 1017. The Seventh Circuit affirmed
Lamers because of "news media" public disclosures, not on FOIA grounds. Id.
Consequently, the issue has yet to be decided in the Seventh Circuit.
The FOIA issue falls between competing policy tensions in the FCA. On
one hand, the FCA encourages "whistle blowing," whether by an insider or
outsider. Misrick PBT, 186 F.3d at 400 (3rd Cir. 1999)(Becker,
CJ. dissenting)(citing S. Rep. No. 99-345, at 1-8, 23-24 (1986), reprinted
in 1986 U.S.C.C.A.N. 5266, 5266-73, 5288-89). Since it is difficult for
the government to investigate completely all potentially fraudulent
claims, allowing an individual to investigate such claims promotes
recovery of government funds. Id. On the other hand, the FCA is
concerned with strike suits, especially those where an individual
rehashes existing claims or investigations already in possession of the
government. Id. Congress enacted the 1986 amendments to better
balance the two tensions in light of a Seventh Circuit opinion that
barred Wisconsin from acting as a qui tarn plaintiff in a Medicare fraud
case because Wisconsin previously disclosed the information to the U.S.
Government as required under the pre-1986 FCA. United States ex rel.
Wisconsin v. Dean, 729 F.2d 1100, 1103-04,1106-07 (7th Cir. 1984).
After the U.S. Government declined to intervene, the public disclosure
bar prevented Wisconsin from litigating the case merely because the
information was in federal possession, despite the fact that the federal
government possessed the information only because Wisconsin supplied it.
The 1986 amendments responded to Dean by amending the public
disclosure bar to apply not to material in possession of the government,
but to material actually disclosed to the public by the government The
overall purpose of the 1986 Amendments was to focus the public disclosure
bar towards information that the public knew, not towards information
that the government knew. Lamers, 998 F. Supp., at 978. The glaring
flaw in the dominant view (FOIA material is publicly disclosed as soon as
the requesting party receives it) is that the public is not informed of
the contents of the FOIA material by transmission to a private party.
Only the requesting party knows about it. By deeming the material a
"public disclosure" upon receipt by the requesting party, the incentive
for a person to investigate fraud against the government would be
destroyed, because any FOIA request would inevitably become a public
disclosure under the FCA. Practically, this approach is no different from
the pre-1986 approach (all information in possession of the government is
a "public disclosure") because members of the public still cannot
actually use that FOIA information in an FCA claim. Receipt would bar use
of the information, thus destroying the incentive to investigate. Thus,
if receipt of FOIA material would bar a relator's claim, then every
corporation would be well-advised to request as much FOIA material as
possible. If the corporation was later named a defendant in a FCA action,
then anything in the FOIA, request would be a public disclosure merely
because the defendant asked for it in a FOIA request Certainly, the FCA
was not intended to insulate corporations in this manner.
In light of the purpose of the 1986 Amendments that public
investigation and public knowledge are integral to the FCA, this court
holds that an FCA action based on FOIA material is not barred unless the
material has actually been disclosed to the public. Mere disclosure to
the requesting party is not disclosure to the public.
Moreover, because the 1986 Amendments to § 3730(e)(4)(A) did not
textually include FOIA information among the list of disclosures
considered public, FOIA information is not encompassed by the public
disclosure bar. For information to be a "public disclosure" it must be
enumerated in § 3730(e)(4). Dunleavy, 123 F.3d at 744;
United States ex rel. Williams v. NEC Corp., 931 F.2d 1493, 1499-1500 (11th Cir. 1991);
Garibaldi, 21 F. Supp.2d at 614. Consequently, for this
additional reason, relator's FOIA material is not barred by the "public
disclosure" exclusion of § 3730(e)(4)(A).
Even if relator's FOIA material had been a "public disclosure,"
moreover, defendants fail to persuade the court that those documents
reveal the essential elements of relator's current fraud allegations. GD
argues in its reply that "the State Department was well aware of the
allegations of fraud in connection with the Greek Government's purchase
of the F-16." As support, GD attaches State Department documents
requested and received by relator under FOIA. The State Department
documents, however, do not disclose the essential elements of the instant
overbilling allegations, but reference only the bait and switch
allegations of the Greek Proceedings. Even if the State Department was
aware of those bait and switch allegations, there is nothing in the FOIA
documents that discloses the instant overbilling allegations, nor, for
that matter, the false claim transactions. The contract referred to in
the State Department documents may disclose the initial terms but,
without relator's allegations of subsequent fraud, one cannot reasonably
infer subsequent overbilling to the U.S. Government's detriment, nor can
one infer subsequent overbilling from the Greek allegations discussed and
refuted in the FOIA State Department documents.
4. Yannacopolous I
Defendants also argue the prior proceedings in Yannacopolous
I, which involved a claim for commissions and three RICO counts,
publicly disclosed the "allegations or transactions" of the instant case.
Defendants argue that the core operative facts surrounding the F-16G bait
and switch were disclosed in the prior "civil hearing," and that those
facts make up the "allegations or transactions" in the instant case. Relator argues that: (1) any
information obtained via discovery, yet not filed with the court, is not
a "public disclosure"; and (2) the information in Yannacopolous
I, even if a "public disclosure," did not disclose the "allegations
or transactions" of the instant action.
It is indisputable that Yannacopolous I is a "civil hearing"
within the meaning of § 3730(e)(4)(A), but not so clear that the
allegations or transactions in the instant case were disclosed in that
suit. Documents produced during discovery, but not filed with the court,
are not available to the public and are thus not "public disclosures"
under § 3730(e)(4)(A). United States ex rel. Mathews v. Bank of
Farmington, 166 F.3d 853, 860 (7th Cir. 1999). Conversely, documents
filed with the court are "public disclosures" in a "civil hearing," thus
prompting the initial question whether relator filed any discovery
documents in Yannacopolous I that disclosed the "allegations or
transactions" of the instant case.
Defendants argue that the essential elements of relator's second
amended complaint were publicly disclosed in Yannacopolous I.
For example, defendants point out that GD filed a motion in
Yannacopolous I to exclude evidence related to the Greek
Proceedings, including background to the Greek Proceedings. Defendant
argues that any allegations related to the Greek Proceedings involve the
same core of operative facts as the instant case, and thus any "public
disclosures" referencing the Greek Proceedings constitutes a "public
disclosure" of those facts. Defendants state that both cases involve the
"same core of operative facts (sale of the F-16 to Greece) and the same
fraud (overcharging and cheating on offsets)," and argue that the only
new allegation is fraud against the U.S. Government. The court disagrees. Although anything filed in Yannacopolous I constitutes a
"public disclosure," Mathews, 166 F.3d at 860, nothing
defendant references publicly disclosed the instant "allegations or
transactions." The instant suit alleges overbilling that occurred after
the fraud alleged in the Greek Proceedings. Thus, the allegations of the
instant complaint reference an entirely different time period and
different fraudulent activity. The instant allegations also allege an
entirely new victim, the U.S. Government.
Defendants argue that the U.S. Government had notice of the instant
allegations because of the publicly disclosed documents that pertain to
the Greek Proceedings filed in Yannacopolous I. Those documents
merely show that the U.S. Government had notice that the Greek
Proceedings determined that GD committed no bait and switch fraud in
relation to the initial contract. Those documents do not show that the
U.S. Government, or, more importantly, the American public, had notice
that defendants allegedly committed fraud subsequent to those
Proceedings, nor do those documents show that the U.S. was a victim of
any fraud. If anything, those documents show that there was no victim in
an initial bait and switch because those allegations were dismissed. What
occurred after the refuted bait and switch fraud allegations is the
subject of the instant case. Defendants fail to persuade the court that
the instant "allegations or transactions" were disclosed in
For the reasons stated above, neither the Greek Proceedings, news
media, FOIA materials, nor Yannacopolous I publicly disclosed
the instant "allegations or transactions."
B. ORIGINAL SOURCE
Moreover, even if relator based his action on "public disclosures," the
court concludes that there are contested issues of fact whether relator
is an original source of "the information on which the allegations are based," and whether relator had "direct
and independent knowledge" of the allegations in the instant case, and
consequently whether relator is excepted from § 3730(e)(4)(A).
Defendants argue that relator bases his entire suit upon public
disclosures and lacks any direct and independent knowledge of the
allegations contained in his complaint. Defendants argue that relator's
relationship with GD ended in 1983, and that relator subsequently
obtained his information through various public disclosures. Despite
defendants' contention, an independent investigation can form the basis
of "direct and independent" knowledge within the statutory definition.
See United States ex rel. Barajas v. Northrop Corp.,
5 F.3d 407, 410 (9th Cir. 1993)(citing 132 Cong. Rec. 20536 (Aug. 11
1986)(demonstrating legislative intent to allow a relator to base
allegations on public information assembled by him).
Defendants rely on Feingold, 324 F.3d at 497, to disparage
the independent investigation argument, but Feingold does not
foreclose the possibility of a future relator successfully developing
"direct and independent knowledge" through such an investigation. The
Feingold court cited Mathews, 166 F.3d at 865, for
its holding regarding an "original source," but offered little
elaboration on "original source" determinations. Feingold, 324
F.3d at 497. A fuIl reading of Mathews shows a Seventh Circuit view that
"in an exceptionally or unusually complicated allegation of fraud each
piece of the information may be publicly disclosed, yet the fraud itself
may remain hidden until some perspicacious plaintiff puts it in
perspective. We acknowledge that in such a case, a plaintiff might be an
original source even though her knowledge of every isolated element of
the fraud is based upon public disclosures." Mathews, 166 F.3d
at 864. See also Kennard v. Comstock Resources. Inc., 2004 WL
723249 (10th Cir. 2004)(independent probe of public documents qualifies qui tam relator as original source).
In both Fejngold and Mathews the alleged fraud was "a
simple affair," thus precluding those plaintiff's from invoking their
independent investigations as the basis for their "direct and independent
knowledge." Id. Here, the fraud alleged is quite complex,
involving various schemes acted on an international stage over portions
of four decades.
Relator argues that, but for his independent investigation, the
U.S.-focused information on which the instant allegations are based would
never have been disclosed. Relator thus claims to be an "original
source." Essentially, relator argues that the allegations regarding fraud
against the U.S. government would not have been possible without his
investigation. Defendants doubt that relator conducted any independent
investigation, assuming that the allegations of fraud were based entirely
on public disclosures.
Relator's argument that fraud against the United States would not have
been alleged without his investigation is, however, more than a
"conclusory assertion." Feingold, 324 F.3d at 497. The supposed
public disclosures show an absence of facts regarding fraud perpetrated
against the U.S.*fn12 Even if relator based the second amended complaint
on publicly disclosed material, the trier of fact could reasonably decide
that he was an "original source" because he discovered and synthesized
that information during an independent investigation. CONCLUSION
For the reasons stated herein, defendants' motions to dismiss and
motion for summary judgment are denied. This matter is set for a report
on status on May 13, 2004, at 9:00 a.m.