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United States ex rel. Cause of Action v. Chicago Transit Authority

United States District Court, N.D. Illinois, Eastern Division

October 20, 2014


For Cause of Action, United States of America, ex rel., Plaintiff: Aram A Gavoor, LEAD ATTORNEY, Daniel Zachary Epstein, Cause of Action, Washington, DC; William Briskin Kohn, Law Offices of William B. Kohn, Chicago, IL.

For Chicago Transit Authority, an Illinois municipal corporation, Defendant: Douglas A. Henning, Chicago Transit Authority, Corporate Law and Litigation, LEAD ATTORNEY, Chicago, IL; Stephanie Hale Grelewicz, Chicago Transit Authority, Chicago, IL.

For United States of America Movant: AUSA, United States Attorney's Office (NDIL), Chicago, IL.

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Robert M. Dow, Jr., United States District Judge.

This matter is before the Court on Defendant Chicago Transit Authority's motion to dismiss [42] Plaintiff-Relator's complaint. Relator brings this qui tam action under the False Claims Act, 31 U.S.C. § 3729 et seq., alleging that Defendant submitted false and fraudulent claims to the Federal Transit Administration. For the following reasons, Defendant's motion is granted. The case is set for status hearing on 11/06/14 at 9:00 a.m.

I. Factual and Procedural Background[1]

To combat fraud against the United State government, the False Claims Act (" FCA" ) imposes civil liability on a party that presents false or fraudulent claims for payment or that uses a false record or statement material to a false or fraudulent claim. See 31 U.S.C. § 3729(a)(1)(A) & (B). Because it would be impossible for the government alone to investigate and pursue all potential FCA violations, the statute provides a qui tam enforcement mechanism and allows a private party ( i.e., a relator) to bring suit on behalf of the government. See 31 U.S.C. § 3730(b). In this case, Cause of Action (" Relator" ), a nonprofit organization, has brought suit against the Chicago Transit Authority (" CTA" or " Defendant" ). Relator alleges that the CTA intentionally caused the government

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to allocate additional transportation funds to it that were not authorized.

The CTA is a municipal corporation that provides public transportation services in the city of Chicago and its suburbs. Under 49 U.S.C. § 5307, large urban areas, including the greater Chicago area served by the CTA, are eligible for transportation funding from the federal government. Funding is determined by a grant formula that includes the number of " bus revenue vehicle miles" that are reported to the National Transit Database (" NTD" ). Compl. ¶ 2, 3. Revenue miles are defined as the miles when a " vehicle is available to the general public and there is an expectation of carrying passengers." Id. at ¶ 41. In contrast, " deadhead miles" are those in which a vehicle is out of revenue service. See id. at ¶ 40. Relator alleges that between reporting years 2001 and 2010, the CTA " knowingly used definitions of bus revenue vehicle miles and deadhead miles that are both different from and noncompliant with the definitions required under the NTD reporting manuals, NTD reporting glossary, and U.S. Department of Transportation, Federal Transit Authority (" FTA" ) circular guidance and/or regulations." Id. at ¶ 6. The CTA's improper classification of deadhead miles as revenue miles resulted in the federal government overpaying the CTA under the § 5307 formula grant program. See id. at ¶ 9.

The CTA's overstatement of revenue miles was uncovered during a 2006-07 performance audit for the State of Illinois Auditor General. Two reports discussing the inaccurate reporting were produced as a result. First, Thomas Rubin, a member of the Illinois audit team, prepared a 25-page technical report (" Technical Report" ) regarding the overstatement of revenue miles. The Technical Report states that the CTA " appears to have been improperly classifying as Vehicle Revenue Miles (VRM) and Vehicle Revenue Hours (VRH) motor bus miles and hours that, under the Federal Transit Administration's (FTA) National Transit Database (NTDB) regulations, are not properly so classed." Tech. Report 1, Compl., Ex. 3. The Report further recommends that the " CTA notify FTA of this condition, including rendering this report to FTA," and " revise its methodologies for reporting VRM and VRH to become compliant with the applicable statute and implementing regulations." Id. Rubin presented his Technical Report to the CTA and Illinois Auditor General, but they failed to inform the FTA of the issue. See Compl. ¶ ¶ 51-53. In 2009, Rubin went to the Department of Transportation Office of Inspector General to report the issue and provided the office with a copy of his report. See id. at ¶ 54; Rubin Aff. ¶ 8, Compl., Ex. 2.

Second, a final audit report discussing the CTA's performance was released in March 2007 by the Illinois Auditor General (" Auditor General's Report" ). A short section of this lengthy document indicates that the CTA may have been incorrectly reporting deadhead miles as revenue miles. See Auditor General's Report 72, Compl., Ex. 4 (" Our review raised questions about the accuracy of CTA's reporting of revenue vehicle hours and miles. CTA may be incorrectly reporting some deadhead hours/miles as revenue hours/miles[.]" ).

Relator filed suit in the District of Maryland in May 2012 and attached the Technical Report, the Auditor General's Report, and Rubin's Affidavit to its complaint. The action was transferred to the Northern District of Illinois in November 2012. After the United States declined to intervene in the action, the complaint was unsealed and Defendant filed its motion to dismiss under Federal Rule of Civil Procedure 12(b)(1). Defendant argues that the action is barred under § 3730(e)(4)--the

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so-called public disclosure bar--because the allegations in the complaint were already disclosed when the complaint was filed, and Relator is not an original source of the information. Relator filed a brief in opposition [55] and attached an April 2012 letter from the FTA to the General Manager of the CTA (" FTA Letter" ). The letter states that the FTA conducted an in-depth review of the CTA's reporting of revenue miles and that the CTA " should revise its data for the 2011 Report Year to reflect the definition of 'revenue service' in the NTD Reporting Manual[.]" FTA Letter, Relator's ...

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