US ex rel. Ahumada v. NISH, No. 13-1672 (4th Cir. 2014)
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Relator filed a qui tam action under the False Claims Act (FCA), 31 U.S.C. 3729 et seq., alleging that his former employer, NCED, along with other defendants, defrauded the government through various schemes in connection with contracts pursuant to the Javits-Wagner-O'Day Act, 41 U.S.C. 8501 et seq. After NCED and its former CEO settled, the district court dismissed relator's claims against the remaining defendants. The court held that the public-disclosure bar deprived the district court of jurisdiction over relator's claims against Defendants NISH, Green Bay, IPC, and Smurfit. With respect to these defendants, the district court properly determined that relator's proposed amendments to his first amended complaint were futile. The court held that relator's second amended complaint failed to adequately plead an FCA claim against Defendant Weyerhaeuser. Accordingly, the court affirmed the judgment of the district court.
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PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 13-1672 UNITED STATES EX REL. MIKE AHUMADA, Plaintiff Appellant, and ERIC H. HOLDER, JR., Attorney General, Plaintiff, v. NISH; GREEN BAY PACKAGING INC.; INTERNATIONAL PAPER COMPANY, INCORPORATED; SMURFIT STONE CONTAINER CORPORATION; WEYERHAEUSER COMPANY, Defendant Appellees, and NATIONAL CENTER FOR EMPLOYMENT OF THE DISABLED, now known as ReadyOne Industries; BOB JONES, a/k/a Robert E. Jones; DOES 1 100, Defendants. Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria. Claude M. Hilton, Senior District Judge. (1:06-cv-00713-CMH-TCB) Argued: March 20, 2014 Decided: June 23, 2014 Before NIEMEYER and DIAZ, Circuit Judges, and HAMILTON, Senior Circuit Judge. Affirmed by published opinion. Judge Diaz wrote the opinion, in which Judge Niemeyer and Senior Judge Hamilton joined. ARGUED: Martin E. Restituyo, LAW OFFICES OF MARTIN E. RESTITUYO, New York, New York, for Appellant. Robert Carton Weaver, Jr., GARVEY SCHUBERT BARER, Portland, Oregon; Matthew Allen Fitzgerald, MCGUIREWOODS, LLP, Richmond, Virginia, for Appellees. ON BRIEF: Victor M. Glasberg, VICTOR M. GLASBERG & ASSOCIATES, Alexandria, Virginia; Mark C. Rifkin, WOLF HALDENSTEIN ADLER FREEMAN & HERZ LLP, New York, New York, for Appellant. Charles William McIntyre, Jr., Franklin Darley Annand, Washington, D.C., Jeremy S. Byrum, MCGUIREWOODS, LLP, Richmond, Virginia; Seth A. Rosenthal, Washington, D.C., Michael Wayne Robinson, VENABLE, LLP, Tysons Corner, Virginia; John Francis Henault, Jr., PERKINS COIE, LLP, Washington, D.C.; Paul H. Trinchero, Benjamin J. Lambiotte, GARVEY SCHUBERT BARER, Portland, Oregon; Lynn F. Jacob, WILLIAMS MULLEN, P.C., Richmond, Virginia, for Appellees. 2 DIAZ, Circuit Judge: Mike Ahumada, as relator, filed this qui tam action on behalf of the United States under the False Claims Act ( FCA ), 31 U.S.C. §§ 3729 et seq. In his first amended complaint, Ahumada alleges that his former employer, the National Center for Employment of the Disabled ( NCED ), along with other defendants, defrauded the government through various schemes in connection with contracts pursuant to the Javits-Wagner-O Day Act, 41 U.S.C. §§ 8501 et seq. Specifically, Ahumada alleges that suppliers and regulations and NCED nonprofit conspired to skirt with its applicable an overseeing overcharge the government. After NCED and its former CEO settled, the district court dismissed Ahumada s claims against the remaining defendants. held that the FCA s public-disclosure bar precluded It subject- matter jurisdiction and that Ahumada had not stated any viable claims. Ahumada now appeals that dismissal, as well as the district court s denial of his motion for leave to file a second amended complaint. For the reasons that follow, we affirm. I. A. From February to July of 2004, NCED employed Ahumada as a Vice President and General Manager. 3 NCED, a nonprofit corporation, produces a number of products--including military apparel and corrugated boxes--that it sells to agencies of the U.S. government. These sales occur pursuant to contracts under the Javits-Wagner-O Day Act. The Javits-Wagner-O Day Act establishes a government contracting program (the JWOD program ) to promote employment and training opportunities for persons who are blind or have other severe disabilities. 41 C.F.R. § 51-1.1(a). To that effect, the Act created the Committee for Purchase from People who are makes Blind services Severely maintains and or a eligible agencies. for Disabled procurement purchase (the Committee ), list from 41 U.S.C. §§ 8502, 8503. of products qualified which and nonprofit If [a]n entity of the Federal Government intend[s] to procure a product or service on the procurement list, it must do so from such a nonprofit at a market price established by the Committee. qualify for participation in the program, Id. § 8504. a nonprofit To must certify, on an annual basis, that it employs blind or other severely disabled individuals for at least 75 percent of the hours of direct labor required for the production or provision of the products and services. To Committee coordinate appointed the the Id. § 8501(6)(C). participation National of Industries nonprofits, for the the Severely Handicapped ( NISH ) to serve as the JWOD program s central 4 nonprofit agency. responsible for See id. § 8503(c). [e]valuat[ing] the In this role, NISH was qualifications of other nonprofits that sought to participate in the program, and for assigning them contracts in a fair and equitable manner. C.F.R. §§ 51-3.2(b), monitor[ing] the 51-3.4. NISH participating was also nonprofits 41 charged ensure to with their compliance with the statutory and regulatory requirements [of] the program. Id. § 51-3.2(j). Beginning in October 2005--about eight months before Ahumada filed his initial complaint in this case--The Oregonian, a Portland-based describing newspaper, questionable published practices a series within articles JWOD the of program. Among other issues, the articles alleged that NCED was receiving payment on requisite JWOD contracts percentage of despite disabled failing to workers. employ The the articles attributed at least some of the problems in the program to lax oversight by NISH. The El Paso Times published the first in a similar series of articles that November. Its articles reported that the Committee had begun investigating NCED for its perceived lack of compliance with JWOD labor requirements. alleged that certain NCED suppliers, The articles further including International Paper Co. ( IPC ), Green Bay Packaging, Inc., and Smurfit-Stone Container Corp., helped NCED skirt JWOD regulations by providing 5 NCED with finished products rather than component parts. C.F.R. § 51-4.4(d) (prohibiting JWOD-participating See 41 nonprofits from subcontract[ing] the entire production process for all or a portion of an order without the Committee s prior approval ). The articles reported that NCED then resold these products to the government under the pretense that entirely by disabled NCED employees. they were produced The allegations reported in the two newspapers were also the subject of a television documentary. In the wake of this publicity, the FBI launched a criminal investigation that resulted in the indictments of three NCED executives. former fraud Bob Jones and Patrick Woods--NCED s former CEO and Board and President--ultimately embezzlement charges. pleaded In 2010, guilty a to jury various convicted NCED s former COO, Ernie Lopez, of making false statements and conspiracy to defraud the government. B. On June 20, 2006, Ahumada filed this qui tam suit under the FCA against NCED, Jones, and one-hundred John Doe defendants in the U.S. District Court for the Eastern District of Virginia. The complaint alleged that, between 1999 and 2006, Jones and NCED engaged in a series of schemes to defraud the government, primarily by receiving payments on JWOD failing to comply with JWOD regulations. 6 contracts despite Ahumada later filed a first amended represented complaint its alleging compliance that with NCED: (1) JWOD s falsely disabled-labor requirements; (2) falsely represented that it produced certain products it sold to the government; and (3) overcharged the government. The first amended complaint also named several additional defendants, including NISH and four NCED suppliers: IPC, Green Bay, Smurfit, and Weyerhaeuser Co. (collectively, the supplier defendants ). complying with Ahumada alleged that NISH knew that NCED was not JWOD requirements but continued contracts to improve NISH s own bottom line. to assign it He also alleged that the supplier defendants conspired with NCED and facilitated its fraud by issuing artificially inflated invoices, and, later, providing rebates; falsely billing NCED for raw materials despite actually providing finished or nearly finished products; and falsely stamping finished manufacturing certificate. products with NCED s box According to Ahumada, the supplier defendants engaged in this conduct while knowing--and attempting to conceal--that NCED was not complying with JWOD regulations. Per its statutory mandate, the United States intervened in Ahumada s suit with respect to defendants NCED and Jones. See 31 the U.S.C. government intervene § 3730(b)(2). Both eventually and The United States chose the claims against NISH with Ahumada. respect to 7 settled with not and to the supplier defendants, and those parties moved to dismiss Ahumada s suit. In support of their motions to dismiss, NISH supplier defendants advanced two primary arguments. argued that the district court lacked and the First, they subject-matter jurisdiction pursuant to the FCA s public-disclosure bar. 31 U.S.C. § 3730(e)(4)(A) subject-matter (2006). jurisdiction disclosed allegations source. Id. over unless Second, This claims the they provision based relator argued an the publicly original first complaint suffered from various pleading defects. Ahumada moved for leave to file a precludes upon is that See proposed amended In response, second amended complaint. The district dismiss. court granted the defendants motions to See United States ex rel. Ahumada v. Nat l Ctr. for Emp t of the Disabled, No. 1:06-cv-713, 2013 WL 2322836 (E.D. Va. May 22, 2013). The court held that the first amended complaint was devoid of any particularized facts and therefore failed to plead fraud with the particularity required by Federal Rule of Civil Procedure 9(b). Id. at *3-*4. Specifically, it did not identify the who, what, when, where and how of the alleged false claims. omitted). The court complaint s general[] Id. also and at *3 held (internal that conclusory 8 the quotation first marks amended allegations were insufficient because they adequately alleged neither scienter- an essential element of elements of a conspiracy. any FCA claim --nor the specific Id. at *4. As an alternative basis for dismissal, the court held that the public-disclosure jurisdiction. bar deprived it of subject-matter In the court s view, [t]he allegations [in the first amended complaint] clearly track the news media stories [which] appear[] to be the basis of [Ahumada s] claim. *6. Furthermore, the court held that Ahumada Id. at had not established that he was an original source --so as to avoid the public-disclosure bar--because he failed to demonstrate that he possessed direct and independent knowledge of the information underlying the allegations. Id. Finally, the district court denied Ahumada leave to amend. It explained that the proposed amendments fail[ed] to cure the deficiencies . . . in the [first amended complaint] and were therefore futile. Id. at *7. Because [t]he specific details added to the [second amended complaint] [were] all information that c[ould] determined be that found the public disclosure. new in the pleading public was domain, likewise the based court upon a Id. Ahumada appealed, and we exercise jurisdiction pursuant to 28 U.S.C. § 1291. 9 II. Although Ahumada nominally challenges the district court s order dismissing the first amended complaint, his arguments on appeal center second. on the sufficiency of the allegations in the In essence, rather than directly challenge the district court s dismissal of the first amended complaint, Ahumada argues that the district court should have granted him leave to amend, which he contends would jurisdictional defects. have cured any pleading or We thus consider the issues presented by this appeal solely through the prism of Ahumada s proposed second amended whether the complaint, district ultimately court erred in seeking to concluding determine that it was futile. Generally, we review a district court s denial of a motion for leave to amend for abuse of discretion. See US Airline Pilots Ass n v. Awappa, LLC, 615 F.3d 312, 320 (4th Cir. 2010). But where, as here, the district court denied such a motion on grounds of futility, we employ the same standard apply to our review of a motion to dismiss. that would See Pollard v. Pollard, 325 F. App x 270, 272 (4th Cir. 2009); see also Platten v. HG Bermuda Exempted Ltd., 437 F.3d 118, 132 (1st Cir. 2006). Thus, we review de novo the district court s legal conclusion that Ahumada s proposed amendments fail[ed] to cure the deficiencies . . . in the [first amended complaint] : namely, 10 that the complaint failed to state a claim on which relief could be granted and failed to overcome the FCA s public-disclosure bar. 1 See Ahumada, 2013 WL 2322836, at *7. III. We first consider whether the FCA s public-disclosure bar rendered the second amended subject-matter jurisdiction. complaint futile by precluding We hold that the public-disclosure bar deprived the district court of jurisdiction over the claims against all of the appellees except Weyerhaeuser. A. At the time Ahumada filed this action, the FCA s publicdisclosure bar provided that [n]o court shall have jurisdiction over an action under [the FCA] based upon the public disclosure of allegations or transactions . . . unless . . . the person bringing the action is an original source of the information. 2 31 U.S.C. § 3730(e)(4)(A) (2006). Qualifying public disclosures 1 We review any factual findings underlying the district court s analysis of the public-disclosure bar--a jurisdictional defense--for clear error. See United States ex rel. Rostholder v. Omnicare, Inc., 745 F.3d 694, 699 (4th Cir. 2014). 2 Congress amended the public-disclosure bar in 2010, but those amendments are not retroactive. The prior version of the statute applies to this action because it was filed before the amendments enactment. See United States ex rel. May v. Purdue Pharma L.P., 737 F.3d 908, 915-16 (4th Cir. 2013) (citing Graham Cnty. Soil & Water Cons. Dist. v. United States ex rel. Wilson, 559 U.S. 280, 283 n.1 (2010)). 11 include those from the news media or a criminal, civil, or administrative hearing, among others. Id. Once a defendant files a motion to dismiss based on the public-disclosure bar, the relator bears the burden of proving by a preponderance of the evidence that the bar does not apply. See United States ex rel. Vuyyuru v. Jadhav, 555 F.3d 337, 348 (4th Cir. 2009). Under this Court s precedent, a qui tam action is based upon publicly disclosed allegations only if the qui tam plaintiff s allegations were actually derived from the public disclosure itself. United Omnicare, Inc., 745 F.3d quotation marks omitted). States 694, 699 This ex (4th rel. Rostholder Cir. stands 2014) in contrast v. (internal to the broader tests applied by our sister circuits, which generally consider allegations to be based upon a public disclosure if they were supported by or substantially similar to fraud that had been publicly disclosed. United States ex rel. May v. Purdue Pharma L.P., 737 F.3d 908, 918 (4th Cir. 2013); see also United States ex rel. Ondis v. City of Woonsocket, 587 F.3d 49, 57 (1st Cir. 2009) ( [T]he Fourth Circuit [is] alone among the courts of appeals in favoring a narrow reading of the based upon language. ). encompasses actions Notably, even the partly derived from--public disclosures. 51 (emphasis added). 12 public-disclosure based upon --i.e., bar partly See Vuyyuru, 555 F.3d at 350- We easily conclude that Ahumada s allegations are at least partly based upon public disclosures. otherwise in sentence that his opening his brief, action is Ahumada barely argues stating not based in just upon a single any public disclosure because the only evidence in the record . . . is that Ahumada has relied only upon his own personal knowledge. Appellant s Br. at 17. To the contrary, however, the second amended complaint itself plainly relies on public disclosures. It explicitly references reporting from The Oregonian and El Paso Times, and many of Ahumada s allegations appear to have been lifted almost verbatim from the various articles. 3 See Ahumada, the 2013 essential citations WL 2322836, allegations to testimony at *6. constitute from the Moreover, little Lopez several more trial. than of direct Because that information, at a minimum, appears to actually derive from public disclosures, see Rostholder, 745 F.3d at 699, we have no reason to disturb the district 3 court s factual finding that Ahumada asserts that the references to the two newspapers are inconsequential because he was in fact the newspapers source. But even if this is true, he does not seem to have been their only source. In any event, Ahumada s repeated reliance on testimony from the Lopez trial (at which Ahumada did not testify) is alone sufficient for us to conclude that the allegations in the second amended complaint are at least partly based upon a public disclosure. 13 public disclosures at least partly form the basis of [Ahumada] s claim, see Ahumada, 2013 WL 2322836, at *6. B. Even though disclosures, his Ahumada action partly based nevertheless may is avoid upon the public public- disclosure bar if he is an original source of the allegations. See 31 U.S.C. § 3730(e)(4)(A) (2006); see also Rockwell Int l Corp. v. United States, 549 U.S. 457, 467 (2007) (describing original-source status disclosure bar). as an exception to the public- To qualify as an original source, a relator must establish that he (1) has direct and independent knowledge of the information on which the allegations are based ; and (2) has voluntarily provided the before filing [the] action. information to the Government 31 U.S.C. § 3730(e)(4)(B) (2006). 1. Considering the second requirement first, we conclude that Ahumada has allegations adequately to the established government prior that to he filing reported suit. In his an affidavit he submitted in response to the defendants motions to dismiss, Ahumada averred that, around January 2006, he met with FBI agent Steve Chambers and told him everything [he] knew about all of the defendants. J.A. 578. Similarly, the second amended complaint itself alleges that, in an April 2006 meeting with Chambers and agent Tom Murray, Ahumada described in detail 14 the various schemes taking place at NCED that were being used to defraud the government. Id. at 232. Rather than question the truth of these statements, NISH and the supplier defendants object that they do not establish that [Ahumada] discussed any allegations against NISH or any specific [supplier defendant] with the FBI. 4 27 n.8 (emphasis added). has not shown, with the Appellees Br. at Similarly, they argue that Ahumada requisite particularity, that he informed the government about his specific allegations against the remaining defendants. Id. at 28 (emphasis added). We think this asks too much. not satisfy the We agree that a relator may original-source exception s reporting requirement through an ambiguous assertion that leaves open to question whether the plaintiff actually reported information relating to any particular claim or concerning any particular defendant. But that is not the case here. 4 Ahumada s affidavit NISH and the supplier defendants also note that any 2006 conversations with the FBI post-dated the publication of the initial reports in The Oregonian and El Paso Times. But a relator s report to the government need only occur before [he] fil[ed] [the] action, not before the public disclosure. See 31 U.S.C. § 3730(e)(4)(B); see also United States ex rel. Siller v. Becton Dickinson & Co., 21 F.3d 1339, 1351 (4th Cir. 1994) (stating that the relator must provide the information to the government before filing his qui tam action (emphasis omitted)). But see U.S. ex rel. McKenzie v. BellSouth Telecomms., Inc., 123 F.3d 935, 942 (6th Cir. 1997) ( [A] relator must inform the government of the alleged fraud before the information has been publicly disclosed. ). 15 specifically states that he told the FBI everything [he] knew about all of the defendants. J.A. 578 (emphasis added). Read in conjunction with the second amended complaint s allegations (which of course name the defendants and outline in detail what Ahumada knew), we find nothing ambiguous about this statement. Requiring more would prove needlessly duplicative. 2. Whether Ahumada has satisfied the original-source exception s direct and independent knowledge requirement is a more complicated question. Under our case law, a relator s knowledge is direct if he acquired it through his own efforts, without an intervening agency, and it is independent dependent on public disclosure. if the knowledge is not Grayson v. Adv. Mgmt. Tech., Inc., 221 F.3d 580, 583 (4th Cir. 2000). To establish that his knowledge meets this standard, a relator must allege specific facts--as opposed to mere conclusions--showing exactly how and when he obtained it. See United States ex rel. Hafter v. Spectrum Emergency Care, Inc., 190 F.3d 1156, 1162 (10th Cir. 1999). A mere assertion of [direct and independent] knowledge, without adequate basis in fact and unsupported proof, will not establish jurisdiction. by competent Id. at 1163. In applying these standards, we note that the originalsource exception does not permit 16 . . . claim smuggling. Rockwell Int l, 549 U.S. at 476. In other words, the fact that a relator is an original source with respect to some claim does not confer jurisdiction in gross over all of his claims. Id. (emphasis added). For this reason, we separately address the source of Ahumada s knowledge with respect to his claims against each defendant. a. NISH In his second amended complaint, Ahumada alleges that NISH facilitated NCED s fraud by ignoring NCED s lack of compliance with JWOD regulations. According to the complaint, NISH representatives toured NCED facilities on three occasions (in 1999, 2002, and 2005), and these visits would have disclosed and did disclose that NCED did not employ significant numbers of severely disabled individuals. J.A. 250. Nevertheless, the complaint alleges, NISH did not bar NCED from participating in the JWOD program. Instead, NISH continued to certify NCED s compliance with JWOD labor requirements each and every year. Id. Meanwhile, NISH s own revenues increased by at least 86 percent. Accordingly, the second amended complaint concludes, NISH aided NCED in wrongfully profit[ing] from the United States. Id. at 253. Even assuming these allegations are true, Ahumada has not established that they are based on his direct and independent knowledge. Ahumada worked at NCED for only six months in 2004, 17 so it is far from clear how he gained direct knowledge of the NISH visits in 1999, 2002, and 2005. Ahumada has offered no explanation for how he learned of these events. But nearly all of the information appears in public disclosures. Indeed, the second amended complaint itself explicitly cites testimony from the Lopez trial for at least one of its allegations against NISH. Accordingly, without any other explanation from Ahumada, we conclude that his knowledge necessarily derives disclosures or some other intervening agency. F.3d at 583. from public Grayson, 221 The allegations against NISH therefore do not avoid the public-disclosure bar. b. Green Bay So too with the claims against Green Bay. Ahumada s allegation against Green Bay is The substance of that it produced complete and nearly complete products for NCED in violation of NCED s obligation to produce such products itself. 257. See J.A. According to the second amended complaint, Green Bay was aware that NCED s governments contracts required direct labor by disabled employees, yet it sold NCED the finished products anyway. See id. at 256-57. As Ahumada forthrightly acknowledges, however, NCED did not place orders with Green Bay until terminated from employment by NCED. 18 after [Ahumada Id. (emphasis added). was] To support his allegation finished products, that Ahumada from the Lopez trial. Green cites Bay provided publicly disclosed NCED with testimony See id. at 257 ( Jose Rosales, Sales Representative for Green Bay, testified at the criminal trial of Ernie Lopez that commencing in February 2006, NCED ordered a million postal sleeves from Green Bay. ). Accordingly, we conclude that Ahumada is not an original source with respect to the claims against Green Bay. c. IPC In contrast to Green Bay, IPC was already making containers for NCED at the time Ahumada began working there. Id. at 258. According to the second amended complaint, these containers came from IPC s San Antonio plant, rather than its El Paso plant, because the general manager of the El Paso plant refused to go along with the illegal scheme of manufacturing boxes that were supposed to be made by disabled individuals. Id. Thus, Ahumada asserts, IPC unquestionably knew that NCED was participating in the JWOD program . . . and that NCED was not meeting the JWOD requirement. Id. To be sure, this allegation comes closer than the previous ones to establishing Ahumada s direct and independent knowledge. But it nevertheless falls short of the mark. To support his assertion that IPC unquestionably knew of NCED s wrongdoing-the scienter element of the FCA claim--Ahumada states that he 19 was told that [IPC s] General Manager . . . refused to go along with the illegal scheme. not state who told him Id. (emphasis added). this information--whether party or an employee of IPC itself. Med. Coll., 252 F.3d 118, But he does 121 (2d some third See United States v. N.Y. Cir. 2001) (per curiam) (noting that a relator is not an original source if a third party is the source of the core information on which the qui tam complaint is omitted)). based (internal quotation marks and emphasis He thus has not established that his knowledge was direct, rather than derived from an intervening agency. See Grayson, 221 F.3d at 583. Ahumada invoices also for alleges 226,701 that IPC complete GSA submitted boxes in to NCED eleven September and October of 2004, after Ahumada informed an IPC representative of NCED s fraudulent alleges, were conduct. stamped J.A. with 258. NCED s These [box boxes, Ahumada manufacturing certificate], falsely making it appear that the boxe[s] were manufactured by NCED in compliance with the JWOD . . . labor requirements. Id. But Ahumada offers no basis on which he could have known such detailed information directly. In fact, because the invoices Ahumada cites were issued after he left NCED in July 2004, this information almost certainly derives from public disclosures or some other intervening agency. Cf. Rockwell Int l, 549 U.S. at 475 (concluding that the relator did 20 not possess direct and independent knowledge [b]ecause [he] was no longer employed by [the defendant] at the time the alleged fraud occurred). Likely confirming as much, the same page of the second amended complaint explicitly cites testimony from the Lopez trial. In sum, because Ahumada has not established that his allegations against IPC are based on his direct and independent knowledge, he does not qualify as an original source. d. Smurfit Ahumada s allegations against Smurfit are much like those against Green Bay: Ahumada alleges that Smurfit began filling large orders for complete or nearly complete containers only [a]fter [Ahumada] was terminated by NCED. added). Paragraph 145 of the second J.A. 260 (emphasis amended complaint does further allege that, after Ahumada was terminated, he informed Smurfit representatives of NCED s illegal conduct. provides knew that Smurfit continued to make complete containers for NCED. See id. no explanation for how Ahumada But it again directly Moreover, the next paragraph of the complaint again cites testimony from the Lopez trial, strongly suggesting that this public disclosure was in fact the source of Ahumada s knowledge. Ahumada is therefore not an original source with respect to the Smurfit allegations either. e. Weyerhaeuser 21 Ahumada s primary allegation against Weyerhaeuser is that, during the time that Ahumada worked at NCED, it provided NCED with raw sheets as well as complete or nearly complete boxes. Id. at 261. According to the second amended complaint, Ahumada met with Steve Cartmill, a Weyerhaeuser sales manager, on many occasions during this period and took him on tours of the NCED facility. Id. On these tours, Cartmill allegedly saw that NCED failed to employ a sufficient number of disabled workers. complaint further alleges that Cartmill told Ahumada The that Weyerhaeuser was issuing artificially inflated invoices to NCED and later providing rebates, and that NCED had requested Weyerhaeuser to bill for raw sheets rather than complete boxes it actually asserts that provided. Based Weyerhaeuser the Government. on these allegations, facilitate[d] NCED s Ahumada defrauding of Id. at 262. Thus, in contrast to many of the allegations against the other defendants, Weyerhaeuser Ahumada allegations employment with NCED. learned directly the facts through the underlying the course his of See United States ex rel. Barajas v. Northrop Corp., 5 F.3d 407, 411 (9th Cir. 1993) (finding that the relator s knowledge was direct and independent because he acquired it during the course of his employment ). To be sure, the information Ahumada alleges he learned from Cartmill might in some sense be characterized as secondhand. 22 But Cartmill was an employee of Weyerhaeuser itself, not an intervening agency or third party. See Grayson, 221 F.3d at 583 (emphasis added); see also N.Y. Med. Coll., 252 F.3d at 121. And, as further support for his original-source status, Ahumada alleges that he independently confirmed what Cartmill told him about Weyerhaeuser s billing practices through his own inquiry with NCED s Controller. Because Ahumada s knowledge derived from an admission the defendant made to him during the course of Ahumada s employment-an admission Ahumada then confirmed through his own efforts -we believe it is sufficiently direct to satisfy the originalsource exception. 5 See Grayson, 221 F.3d at 583; see also United States ex rel. Devlin v. California, 84 F.3d 358, 360 (9th Cir. 1996) (explaining independent if he that a relator s discovered the knowledge information allegations . . . through his own labor ). district court did not lack subject-matter is direct and underlying his Accordingly, the jurisdiction over Ahumada s claims against Weyerhaeuser. 5 Although the second amended complaint again refers to testimony from the Lopez trial, it notes only that the testimony corroborated Ahumada s allegations against Weyerhaeuser. J.A. 261. In other words, the allegations neither derive from the testimony nor directly rely on it. In any event, Ahumada accused Weyerhaeuser of wrongdoing before the Lopez trial began. And no other public disclosure in the record even mentions Weyerhaeuser. 23 C. To deprives summarize, the we district hold that court of the public-disclosure jurisdiction over claims against NISH, Green Bay, IPC, and Smurfit. to those that defendants, Ahumada s the proposed complaint were futile. district court amendments to Ahumada s With respect correctly his bar determined first amended Because the public-disclosure bar does not preclude jurisdiction over the claims against Weyerhaeuser, however, we must also consider the separate question of whether those claims were adequately pleaded. IV. A. As relevant here, 6 Ahumada asserts claims against Weyerhaeuser pursuant to three separate provisions of the FCA-specifically, those imposing liability against a person who: (1) knowingly presents, or causes to be presented, [to the government] a false or fraudulent claim for payment or approval; 6 Ahumada also asserted a claim against Weyerhaeuser for socalled reverse false claims. See 31 U.S.C. § 3729(a)(7) (2006). But by failing to discuss that claim in his brief, Ahumada has effectively abandoned it on appeal. See United States v. Al-Hamdi, 356 F.3d 564, 571 n.8 (4th Cir. 2004) ( [C]ontentions not raised in the argument section of the opening brief are abandoned. ). As Ahumada s brief also neglects to mention the one-hundred John Doe defendants, his claims against them are likewise abandoned. 24 (2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government; [and] (3) conspires to defraud the Government by getting a false or fraudulent claim allowed or paid. 31 U.S.C. § 3729(a) (2006). 7 Under the first two of these provisions, we have held that a relator must plausibly allege four distinct elements: (1) there was a false statement or fraudulent course of conduct; (2) made or carried out with the requisite scienter; (3) involved a made claim that to was the material; government and for (4) that payment. 8 7 Amendments to the FCA enacted in 2009 slightly alter the text of each of these provisions, and the second amended complaint cites the amended versions. Like the 2010 amendments, however, the 2009 amendments are generally not retroactive. See Fraud Enforcement and Recovery Act of 2009, Pub. L. No. 111-21, § 4(f), 123 Stat. 1617, 1625 ( The amendments made by this section shall take effect on the date of enactment . . . and shall apply to conduct on or after the date of enactment . . . . ). That said, the changes to § 3729(a)(2), specifically, apply to all claims under the False Claims Act . . . pending on or after [June 7, 2008]. See id. § 4(f)(1). And a circuit split has arisen over whether claims . . . pending, in this context, refers to underlying claims for payment from the government or the legal claims presented in the action itself. See, e.g., Sanders v. Allison Engine Co., 703 F.3d 930, 940 (6th Cir. 2012), cert. denied, 133 S. Ct. 2855 (collecting cases on both sides of the split). We need not address that issue here, however, because the changes to the text do not affect our analysis of the adequacy of Ahumada s allegations. 8 We have previously framed the fourth element as requiring proof that that the false statement caused the government to (Continued) 25 Rostholder, 745 F.3d at 700 & n.6 (internal quotation marks and alterations omitted). To plead a claim for an FCA conspiracy, the relator must allege that the conspirators agreed that [a] false record or statement would have a material effect on the Government s decision to pay [a] false or fraudulent claim. Allison Engine Co. v. United States ex rel. Sanders, 553 U.S. 662, 673 (2008). In alleging these elements, the complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted). But allegations of fraud must also meet the more stringent particularity requirement of Federal Rule of Civil Procedure 9(b). To satisfy Rule 9(b), an FCA plaintiff must, at a minimum, describe the time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what he obtained thereby. United States ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d pay out money. See, e.g., Rostholder, 745 F.3d at 700 & n.6 (emphasis added). While this formulation remains accurate with respect to § 3729(a)(1), the Supreme Court clarified in Allison Engine Co. v. United States ex rel. Sanders that § 3729(a)(2) merely requires proof that the defendant made a false . . . statement for the purpose of getting a false or fraudulent claim paid or approved by the Government. 553 U.S. 662, 671 (2008) (internal quotation marks omitted). 26 370, 379 (4th Cir. 2008) (internal quotation marks omitted). More precisely, the complaint must allege the who, what, when, where and how of the alleged fraud. marks omitted). Id. (internal quotation Requiring such particularized pleading, we have explained, prevent[s] frivolous suits, . . . eliminat[es] fraud actions in which all the facts are learned after discovery, and . . . protect[s] reputation. defendants from harm to their goodwill and United States ex rel. Nathan v. Takeda Pharm. N. Am., Inc., 707 F.3d 451, 456 (4th Cir. 2013), cert. denied, 134 S. Ct. 1759 (2014) (internal quotation marks omitted). B. Applying those standards here, we conclude that Ahumada has failed to plead viable FCA claims against Weyerhaeuser. Ahumada essentially alleges that Weyerhaeuser participated in two separate schemes to defraud the government. 9 First, he alleges that Weyerhaeuser provided NCED with . . . complete or 9 The second amended complaint also contains certain undifferentiated allegations against the [supplier] defendants as a group. But because Rule 9(b) requires a relator to plead FCA claims with particularity--including by identifying the who[ ] . . . of the alleged fraud --we consider only the Weyerhaeuser-specific allegations here. See Wilson, 525 F.3d at 379; see also, e.g., Arnlund v. Smith, 210 F. Supp. 2d 755, 760 (E.D. Va. 2002) ( A plaintiff must identify, with particularity, each individual defendant s culpable conduct; defendants cannot be grouped together without specification of which defendant committed which wrong. (alterations and internal quotation marks omitted)). 27 nearly complete boxes, notwithstanding the fact that NCED had JWOD contracts to produce such boxes itself. J.A. 261-62. Second, he alleges that Weyerhaeuser provided inflated invoices to NCED and later issued rebates to NCED or its then-CEO, Jones, for the amount in excess [of] the actual price. Id. at 262. Neither of these allegations passes muster. With respect to the production allegation, we fail to see how Weyerhaeuser selling complete boxes to NCED, without more, constitutes a fraudulent course of conduct. 745 F.3d at 700. See Rostholder, There is nothing inherently fraudulent about producing a particular product and selling it to a customer. And while it is true that applicable JWOD regulations prohibited NCED from subcontract[ing] the entire production process for . . . an order without the Committee s prior approval, see 41 C.F.R. § 51-4.4(d), we have held that the FCA cannot be used as a regulatory-compliance fraudulent conduct mechanism directed at in the the absence of . . . federal government, contains no Rostholder, 745 F.3d at 702-03. Ahumada s second amended complaint specific allegation that NCED ever falsely represented to the government that it Ahumada produced does Weyerhaeuser the allege customer boxes that Weyerhaeuser an service NCED provided. representative manager to bill Although asked NCED for a raw sheets instead of the completed boxes, Ahumada does not further 28 allege that Weyerhaeuser actually complied with that request. See J.A. 261-62. Nor does Ahumada allege that Weyerhaeuser, specifically, falsely stamped products it produced with NCED s box manufacturing other certificate. Thus, fraudulent course well-pleaded in the of absence conduct of or any false statement, the production allegation does not state a viable claim for a violation of the FCA. Ahumada s allegation regarding the rebate scheme fares no better. This allegation (which comprises just a single sentence in the second amended complaint) is utterly devoid of specifics. Among other deficiencies, it offers no information regarding who at Weyerhaeuser was involved in the scheme, what Weyerhaeuser gained from participating, or when the scheme took place. Nor does the the rebates complaint offer themselves--for even a example, general an description estimation rebates Weyerhaeuser issued or in what amounts. such specifics, the rebate allegation does not of of how many Without any satisfy Rule 9(b). Finally, we reject Ahumada s argument that he adequately pleaded a claim for conspiracy to defraud the government. 31 U.S.C. § 3729(a)(3) (2006). See To state a claim for conspiracy under the FCA, a relator must do more than simply show that the alleged conspirators agreed to make a false record or statement; the relator must also show that 29 the conspirators had the purpose of getting the false record or statement to bring about the Government s payment of a false or fraudulent claim. Allison Engine, 553 U.S. at 672-73. Neither the production allegation nor the rebate allegation establishes a claim for an FCA conspiracy. Ahumada adequately allege that In neither case does Weyerhaeuser acted with the purpose of defrauding the government. 10 And, to the extent that these all, allegations plead agreements at Ahumada does not identify who at Weyerhaeuser entered them, when he or she did so, or what Weyerhaeuser sought to gain. The conspiracy claim therefore fails to meet even the basic plausibility standard of Rule 8(a), much less requirement of Rule 9(b). the more stringent particularity Cf. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007) ( [A] conclusory allegation of agreement at some unidentified point does not supply facts adequate to show illegality. ). In sum, we hold that Ahumada s second amended complaint fails to adequately plead any FCA claim against Weyerhaeuser. 10 As a coda to his allegations against Weyerhaeuser, Ahumada asserts that Weyerhaeuser participated in the above schemes to facilitate NCED s defrauding of the Government. J.A. 262. But he pleads no particular factual allegations to support this conclusion. This statement, accordingly, does not satisfy the purpose requirement articulated in Allison Engine. See Iqbal, 556 U.S. at 678 (stating that a complaint must offer more than naked assertion[s] devoid of further factual enhancement (internal quotation marks omitted)). 30 In conjunction with our previous determination that the district court lacked subject-matter jurisdiction over the claims against the other Ahumada s appellees, attempt to we agree amend with his the district pleading was court futile. that The district court therefore did not err in denying Ahumada leave to amend and dismissing his action. V. For the reasons given, we affirm the district court s judgment. AFFIRMED 31
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