United States ex rel. Beauchamp v. Academi Training Ctr., LLC., 15–1148.

Decision Date25 February 2016
Docket NumberNo. 15–1148.,15–1148.
Citation816 F.3d 37
Parties UNITED STATES ex rel. Lyle BEAUCHAMP; United States ex rel. Warren Shepherd, Plaintiffs–Appellants, v. ACADEMI TRAINING CENTER, LLC., f/k/a U.S. Training Center Inc., f/k/a USTC, Defendants–Appellees, and XE Services LLC, f/k/a EP Investments LLC, d/b/a Blackwater Worldwide; U.S. Training Center Inc., ("USTC"); USTC Holdings LLC, Defendants.
CourtU.S. Court of Appeals — Fourth Circuit

ARGUED:William Edgar Copley, III, Weisbrod Matteis & Copley PLLC, Washington, D.C., for Appellants. Tara Melissa Lee, DLA Piper LLP(US), Reston, Virginia, for Appellees. ON BRIEF:Janet L. Goetz, Susan M. Sajadi, William E. Jacobs, Weisbrod Matteis & Copley PLLC, Washington, D.C., for Appellants. Joseph C. Davis, Reston, Virginia, Courtney G. Saleski, Philadelphia, Pennsylvania, Paul D. Schmitt, DLA Piper LLP(US), Washington, D.C., for Appellees.

Before TRAXLER, Chief Judge, and AGEE and DIAZ, Circuit Judges.

Vacated and remanded by published opinion. Judge AGEE

wrote the opinion, in which Chief Judge TRAXLER and Judge DIAZ joined.

AGEE

, Circuit Judge:

Lyle Beauchamp and Warren Shepherd ("Relators") filed a complaint alleging that Academi Training Center, Inc. ("Academi") knowingly submitted false claims to the United States under the False Claims Act ("FCA"), 31 U.S.C. §§ 3729

–3733, in connection with a government contract to provide security services in Iraq and Afghanistan. Citing the FCA's public-disclosure bar, which generally prohibits FCA suits based on allegations that have already entered the public domain, 31 U.S.C. § 3730(e)(4), the district court dismissed the complaint. The primary question presented on appeal is whether the district court correctly applied § 3730(e)(4)

when the sole public disclosure it found preclusive, a magazine article, was published more than a year after Relators first pled the alleged fraud. For the reasons that follow, we find the public-disclosure bar inapplicable in this case. Accordingly, we vacate the judgment of the district court and remand the case for further proceedings.

I.

To place the controversy before us in context, we start with the relevant statutory framework. Enacted during the Civil War to prevent fraud by military contractors, the FCA imposes civil liability on persons who knowingly submit false claims for goods and services to the United States. 31 U.S.C. § 3729

; see also U.S. ex rel. Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645, 649 (D.C.Cir.1994) (discussing the statute's history). To encourage the disclosure of fraud that might otherwise escape detection, the FCA permits private individuals, denominated as relators, to file qui tam1 actions on behalf of the government and collect a bounty from any recovery. See 31 U.S.C. § 3730(b). The relator must file his or her complaint under seal and notify the government, who can either intervene or allow the relator to proceed alone. Id.

Although designed to incentivize whistleblowers, the FCA also seeks to prevent parasitic lawsuits based on previously disclosed fraud. See U.S. ex rel. Wilson v. Graham Cty. Soil & Water Conservation Dist., 777 F.3d 691, 695 (4th Cir.2015)

. To balance these conflicting goals, Congress has set careful limits on qui tam suits. Pertinent here is the public-disclosure bar, which disqualifies private suits based on fraud already disclosed in particular settings—such as hearings, government reports, or news reports—unless the relator meets the definition of an "original source" under the FCA. 31 U.S.C. § 3730(e)(4).

Two versions of the public-disclosure bar are relevant to this appeal given the timeframe of the alleged underlying fraud. In 2007, when the alleged scheme began, the statutory limitation read as follows:

No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.

31 U.S.C. § 3730(e)(4)(A) (2005)

. We interpreted this version of the public-disclosure bar "as a jurisdictional limitation—the public-disclosure bar, if applicable, divest[s] the district court of subject-matter jurisdiction over the action." U.S. ex rel. May v. Purdue Pharma L.P., 737 F.3d 908, 916 (4th Cir.2013).

Congress amended the FCA, effective March 23, 2010, and revised several parts of the public-disclosure bar. See id. at 914

. Post-amendment, the provision provides:

The court shall dismiss an action or claim under this section, unless opposed by the Government, if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed—
(i) in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party;
(ii) in a congressional, Government Accountability Office, or other Federal report, hearing, audit, or investigation; or
(iii) from the news media,
unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.

31 U.S.C. § 3730(e)(4)(A) (2010)

.

We have described the 2010 amendments as "significantly chang[ing] the scope of the public-disclosure bar." May, 737 F.3d at 917

. Among other things, the revised statute deleted the "jurisdiction-removing language previously contained in § 3730(e)(4) and replaced it with a generic, not-obviously-jurisdictional phrase," making it "clear that the public-disclosure bar is no longer a jurisdiction-removing provision." Id. at 916. Post-amendment, the public-disclosure bar is a grounds for dismissal—effectively, an affirmative defense—rather than a jurisdictional bar. See U.S. ex rel. Osheroff v. Humana, Inc., 776 F.3d 805, 810 (11th Cir.2015) ("We conclude that the amended § 3730(e)(4) creates grounds for dismissal for failure to state a claim rather than for lack of jurisdiction.").

The amended statute also changed the required connection between the plaintiff's claims and the public disclosure. Under the prior version, a qui tam action was barred only if it was "based upon" a qualifying public disclosure, a standard we interpreted to mean that the plaintiff must have "actually derived" his knowledge of the fraud from the public disclosure. U.S. ex rel. Siller v. Becton Dickinson & Co., 21 F.3d 1339, 1348 (4th Cir.1994)

, superseded on other grounds as recognized in May, 737 F.3d at 917. "As amended, however, the public-disclosure bar no longer requires actual knowledge of the public disclosure, but instead applies if substantially the same allegations or transactions were publicly disclosed." May, 737 F.3d at 917.2

Against this backdrop, we now turn to the case before us.

II.
A.

In 2005, the U.S. Department of State hired Academi to provide security services for officials and embassy workers stationed across the Middle East. The agreement required Academi's personnel to maintain a certain degree of proficiency with several firearms and called for Academi to submit marksmanship scores to the State Department on a regular basis. Specifically, each security contractor was required to periodically qualify at a set level of proficiency with (i) the Glock 19 pistol, (ii) the Colt M4 rifle, (iii) the Remington 870 shotgun, (iv) the M240 belt-fed machine gun, and (v) the M249 belt-fed machine gun.

Relators, both former security contractors with Academi, filed their complaint in the Eastern District of Virginia in April 2011. In the initial complaint, Relators alleged that Academi submitted false reports and bills to the State Department for contractors employed in positions in which they did not actually work and also defrauded the State Department by requesting payment for unissued equipment. The initial complaint was filed under seal, with notification to the Government as required by the FCA. See 31 U.S.C. § 3730(b)(2)

.

Shortly thereafter, on May 24, 2011, Relators filed their first-amended complaint. Relevant here, Relators added new allegations of a separate fraudulent scheme that, from April 2007 through April 2011, Academi routinely failed to qualify its contractors on two of the required weapons—the M–240 and M–249 belt-fed machine guns—and fabricated scorecards showing proficiency with these firearms for submission to the State Department. As a result, the first-amended complaint alleged that Academi fraudulently billed the State Department for security services performed by contractors who had not been tested for, much less achieved, the requisite marksmanship scores (hereinafter, the "weapons qualification scheme"). Relators provided specific dates of the alleged weapons qualification scheme and maintained that they, personally, were never certified with these weapons during their deployments.

While Relators' first-amended complaint remained pending, two former firearm instructors with Academi, Robert Winston and Allan Wheeler, contacted Relators' counsel with additional information about the weapons qualification scheme. Eventually, Winston and Wheeler filed a separate lawsuit against Academi (the "Winston complaint"), alleging they were wrongfully terminated from their employment with Academi for reporting the weapons qualification scheme up the chain of command. See Winston v. Academi Training Ctr., Inc., No. 1:12cv767, ECF No. 1 (E.D.Va

. July 12, 2012). The Winston complaint detailed the State Department contract, the weapons qualification testing requirements, and Academi's failure to conduct proper marksmanship testing. Id. Notably, however, the Winston complaint was not filed as a qui tam action, so its allegations were not under seal and were thus available to the public from the date of its filing.

The Winston complaint generated media attention, and on July 16, 2012, an online news publication,...

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