Doc. No. 5 Opening Brief and Required Short Appendix of Plaintiff-Appellant Cause of Action 4813-7242-7042 v.1

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No. 15-1143
IN THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT
________________________
UNITED STATES OF AMERICA, ex rel. CAUSE OF ACTION,
Plaintiff-Appellant,
v.
CHICAGO TRANSIT AUTHORITY,
Defendant-Appellee.
________________________
On Appeal from the United States District Court for
the Northern District of Illinois, Eastern Division
Case No. 12-cv-9673
The Honorable Robert M. Dow, Jr., Presiding
________________________
Opening Brief and Required Short Appendix
of Plaintiff-Appellant Cause of Action
________________________
DANIEL Z. EPSTEIN
PRASHANT K. KHETAN
LAURA N. BEGUN
CAUSE OF ACTION INSTITUTE
1919 Pennsylvania Ave., NW
Suite 650
Washington, D.C. 20006
(202) 499-4232
Dated: March 4, 2015
Counsel for Cause of Action
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CIRCUIT RULE 26.1 AMENDED DISCLOSURE STATEMENT

Appellate Court No: 15-1143
Short Caption: Cause of Action, Plaintiff-Appellant v. Chicago Transit Authority, DefendantAppellee
1. The full name of every party that the attorney represents in the case:
Cause of Action Institute, a 501(c)(3) organization, d/b/a Cause of Action.
2. The names of all law firms whose partners or associates have appeared for the party in
the case (including proceedings in the district court or before an administrative agency)
or are expected to appear for the party in this court:
The Law Offices of William B. Kohn
3. If the party or amicus is a corporation:
i) Identify all its parent corporations, if any; and
None.
ii) list any publicly held company that owns 10% or more of the partys or amicus stock:
None.
Attorney's Signature:
/s/ Prashant K. Khetan
Attorney's Printed Name:
Prashant K. Khetan
Date: March 4, 2015
Counsel of Record for the above listed parties pursuant to Circuit Rule 3(d). Yes X
Address:

Suite 650
Washington, DC 20006
Phone:
(202) 499-4232
E-Mail:
prashant.khetan@causeofaction.org
Fax: (202) 330-5842
No ___
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TABLE OF CONTENTS
TABLE OF AUTHORITIES .......................................................................................................... ii
INTRODUCTION .......................................................................................................................... 1
STATEMENT OF JURISDICTION............................................................................................... 3
ISSUE PRESENTED ...................................................................................................................... 3
STATEMENT OF THE CASE....................................................................................................... 3
STATEMENT OF FACTS ............................................................................................................. 4
A.
Background ............................................................................................................. 4
B.
Reporting Chronology ............................................................................................ 6
C.
The District Court Case .......................................................................................... 8
SUMMARY OF ARGUMENT ...................................................................................................... 8

ARGUMENT ................................................................................................................................ 10
I.
Standard of Review. .......................................................................................................... 10
II.
The Public Disclosure Bar Does Not Apply In This Case. ............................................... 11
A.
B.
C.
III.
Construction Should Be Anchored In Statutory Text. .......................................... 12

1.
Bank of Farmington Should Not Control.................................................. 14
2.
If The Court Applies Bank of Farmington, It Also Must Apply Glaser... 16
Neither The Audit Report, Nor The Memo, Nor FTAs Letter, Is A Public
Disclosure. ........................................................................................................... 18
1.
The Audit Report was not a public disclosure. ......................................... 18
2.
The Memo was not a public disclosure..................................................... 20
3.
The FTA letter was not a public disclosure. ............................................. 22
4.
None of the documents cited by the District Court qualify under the
statutory test for methods of public disclosure. ........................................ 23
FTAs Letter Is Not Substantially Similar To The Complaint ............................. 24
Cause Of Action Is An Original Source. .......................................................................... 26
CONCLUSION ............................................................................................................................. 28
CERTIFICATE OF COMPLIANCE
STATEMENT PURSUANT TO CIRCUIT RULE 30(d)
STATEMENT REGARDING ORAL ARGUMENT
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TABLE OF AUTHORITIES
CASES
Connecticut Natl Bank v. Germain, 503 U.S. 249 (1992) ....................................................... 9, 14
*Cook County v. United States ex rel. Chandler, 538 U.S. 119 (2003) ................................ passim
*Glaser v. Wound Care Consultants, Inc., 570 F.3d 907
(7th Cir. 2009) .................................................................................................................... passim
Gold v. Morrison-Knudsen, Inc., 68 F.3d 1475 (2d Cir. 1995) .................................................... 17
Graham County Soil & Water Conservation Dist., 559 U.S. 280 (2010) ........................ 10, 14, 23
Hensen v. CSC Credit Servs., 29 F.3d 280 (7th Cir. 1994) ............................................................ 7
MD Mall Assocs., LLP v. CSX Transp., Inc., 715 F.3d 479 (3d. Cir. 2013)................................. 26
Meade v. Moraine Valley Cmty. College, 770 F.3d 680 (7th Cir. 2014) ...................................... 10
*Schindler Elevator Corp. v. United States ex rel. Kirk, 131 S. Ct. 1885
(2011) ................................................................................................................................. passim
Singleton v. Wulff, 428 U.S. 106 (1976) ....................................................................................... 26
Smith v. Freeman, 892 F.2d 331 (3d Cir. 1989) ........................................................................... 26
*United States ex rel. Absher v. Momence Meadows Nursing Ctr., Inc., 764 F.3d 699
(7th Cir. 2014) .................................................................................................................... passim
United States ex rel. Beauchamp v. Academi Training Ctr., Inc., 933 F. Supp. 2d 825
(E.D. Va. 2013) ......................................................................................................................... 14
United States ex rel. Davis v. Prince, 753 F. Supp. 2d 569 (E.D. Va. 2011) ............................... 17
*United States ex rel. Feingold v. AdminaStar Fed., Inc., 324 F.3d 492
(7th Cir. 2003) .................................................................................................................... passim
Authorities upon which we chiefly rely are marked with asterisks.
ii
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United States ex rel. Findley v. FPC-Boron Employees Club, 105 F.3d 675
(D.C. Cir. 1997)......................................................................................................................... 17
United States ex rel. Gear v. Emergency Med. Assocs. of Ill., Inc., 436 F.3d 726
(7th Cir. 2006) ........................................................................................................................... 17
United States ex rel. Fowler v. Caremark RX, L.L.C., 496 F.3d 730 (7th Cir. 2007) .................. 13
United States ex rel. Gross v. Aids Research Alliance-Chicago, 415 F.3d 601
(7th Cir. 2005) ........................................................................................................................... 17
United States ex rel. Heath v. Wis. Bell, Inc., 760 F.3d 688 (7th Cir. 2014) .................... 20, 25, 26
United States ex rel. Mistick PBT v. Housing Auth., 186 F.3d 376 (3d. Cir. 1999) ............... 13, 17
United States ex rel. Reagan v. E. Tex. Med. Ctr. Regl Healthcare Sys., 274 F. Supp. 2d 824
(S.D. Tex. 2002) ........................................................................................................................ 14
United States ex rel. Rost v. Pfizer, Inc., 507 F.3d 720 (1st Cir. 2007) .................................. 14, 15
United States ex rel. Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645 (D.C. Cir. 1994) . 19, 22
United States ex rel. Williams v. NEC Corp., 931 F.2d 1493 (11th Cir. 1991) ............................ 16
United States ex rel. Yannacopolous v.Gen. Dynamics, 315 F. Supp. 22 939 (N.D. Ill 2004) .... 16
*United States v. Bank of Farmington, 166 F.3d 853 (7th Cir. 1999) ................................... passim
Webb v. City of Phila., 562 F.3d 256 (3d Cir. 2009) .................................................................... 26
*Yates v. United States, No. 13-7451, 2015 U.S. LEXIS 1503
(U.S. Feb. 25, 2015) ................................................................................................ 10, 11, 13, 23
STATUTES
28 U.S.C. 1291 ............................................................................................................................. 3
28 U.S.C. 1331 ............................................................................................................................. 3
28 U.S.C. 1345 ............................................................................................................................. 3
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31 U.S.C. 3729 ............................................................................................................................. 1

31 U.S.C. 3730(e)(4) ........................................................................................................... passim
31 U.S.C. 3730(e)(4)(A) ...................................................................................................... 11, 12
31 U.S.C. 3730(e)(4)(A) (1986) ................................................................................ 9, 11, 12, 23
31 U.S.C. 3730(e)(4) (1986) ........................................................................................................ 9
31 U.S.C. 3370(e)(4) (2010) .................................................................................................. 9, 25
31 U.S.C. 3730(e)(4)(A) (2010) ...................................................................................... 9, 12, 23
31 U.S.C. 3730(e)(4)(B) ............................................................................................................ 26
31 U.S.C. 3732(a) ........................................................................................................................ 3
49 U.S.C. 5307 ......................................................................................................................... 3, 4
49 U.S.C. 5335(b) ........................................................................................................................ 4
49 U.S.C. 5336(a)(2) .................................................................................................................... 4
49 U.S.C. 5336(c)(1)(A)(i) .......................................................................................................... 4
REGULATIONS
49 C.F.R. 1.73 ............................................................................................................................ 20
OTHER AUTHORITIES
Fed. R. Civ. P. 12(b)(1)................................................................................................................. 10
Fed. R. Civ. P. 12(b)(6)................................................................................................................. 10
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Dept of Transp. Office of Inspector Gen., FTAs National Transit Database: Data Used for
Allocating Transit Grants Were Generally Supported (No. MH-2014-117), 16 (2014),
available at https://www.oig.dot.gov/sites/default/files/NTD%20Final%20Report.pdf ............ 7
Fed. Transit Admit., Appendix B, FTA Certifications and Assurances (2010), available at
http://www.dot.ca.gov/hq/tpp/offices/orip/owp/index_files/Updated_10-11_Certs/
FTA_Cert_10-11.pdf ........................................................................................................... 20, 21
Fed. Transit Admin., 2006 Urbanized Area Reporting Manual 396 (2006) (NTD Manual),
available at http://www.ntdprogram.gov/ntdprogram/pubs/ARM/2006_Reporting_Manual_
Glossary.pdf ................................................................................................................................ 5
FTA Circular, Urbanized Area Formula Program: Program Guidance and Application
Instructions II-6 II-7 (Jan. 16, 2014), available at http://www.fta.dot.gov/documents/
FINAL_FTA_circular9030.1E.pdf...................................................................................... 20, 27
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INTRODUCTION
Congress passed the False Claims Act, 31 U.S.C. 3729, et seq. (FCA), to stop fraud
against federal taxpayers. The core question here is whether this law also applies to the Chicago
Transit Authority (CTA).
Between at least reporting years 2001 and 2010, Defendant-Appellee CTA fraudulently
billed and collected approximately $2.6 million to $5.5 million per year in federal funds from the
Department of Transportation (DOT), paid through the Federal Transit Administration
(FTA). CTA defrauded federal taxpayers by charging non-revenue motor bus miles as
revenue miles. CTA charged federal taxpayers for approximately 98.2% of its bus miles,
while the nations eighteen other large bus operators charged for only approximately 83.5%.
By 2007, an independent auditor named Thomas A. Rubin, who had been working on a
team auditing CTA for the State of Illinois Auditor General, discovered that CTA had been
overstating revenue miles by a significant amount. Rubin wrote a memorandum
documenting CTAs overreporting. Rubins memorandum recommended, in part, that CTA
recalculate revenue miles for past years and report revenue miles in a compliant manner going
forward.
At that time, CTA did not correct its past reports nor change its reporting practices.
Further, the Auditor General did not report the matter and buried precisely two sentences about it
on page 72 of its lengthy audit report, issued in March 2007. During this time, Ray LaHood
(former Illinois congressman who chaired the committee that, in part, funded CTA) was U.S.
Secretary of Transportation, Robert Rivkin (former CTA General Counsel) was DOT General
Counsel, and Valerie Jarrett (former CTA board Chairwoman) was Senior Advisor to the
President.
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Plaintiff-Appellant Cause of Action is an independent non-profit, non-partisan

government oversight group. It obtained information about CTAs fraud from Rubin and
commenced an investigation. On March 28, 2012, it requested then-Acting Associate Attorney
General Tony West to investigate CTAs fraud. It advised Mr. West that between the reporting
years 1982 and 2010, CTA knowingly defrauded taxpayers by gaming federal transportation
grant funding.
On April, 27, 2012, FTA advised CTA to change its billing practices, but allowed it to
keep its misbegotten gains. The pending lawsuit ensued.
The District Court erred on the facts and misapplied the law in dismissing Cause of
Actions complaint. To begin with, FTAs letter, cited by the District Court as grounds for
dismissal, was issued after Cause of Action notified the Department of Justice (DOJ) of CTAs
fraud. And, the District Court wrongly conflated the DOT Office of the Inspector General with
FTA, suggesting significant confusion regarding federal agency structure and organization.
Controlling and persuasive authorities hold that CTAs fraud was not publicly
disclosed under the False Claims Act. There are no facts suggesting that FTA was contacted or
notified about allegations of fraud. Only by resurrecting the congressionally excised
government knowledge bar may Cause of Actions case be dismissed, which it should not (for
the reasons discussed below).
Cause of Action brought new information to the table, commencing this action before any
evidence of fraud was made public or any action taken against CTA for its fraud. The District
Court deviated from plain statutory text and evident legislative intent, wrongly leaving the
taxpayers without any remedy for fraud and abuse. Finally, this case is clearly a matter of
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significant public interest and it should be treated accordingly for all purposes. For all of these
reasons, the ruling below should be reversed.
STATEMENT OF JURISDICTION
The District Court had jurisdiction over Cause of Actions FCA lawsuit under 28 U.S.C.
1331, 1345, and 31 U.S.C. 3732(a). It granted CTAs motion to dismiss on October 20,
2014, entering final judgment on December 23, 2014. SA-12; SA-13. 1 Cause of Action timely
filed its Notice of Appeal on January 22, 2015. DR70. This Court has jurisdiction under 28
U.S.C. 1291.
ISSUE PRESENTED
Whether 31 U.S.C. 3730(e)(4) bars this action?
STATEMENT OF THE CASE
This case concerns CTAs false claims between reporting years 2001 and 2010 for
federal highway funds under the Urbanized Area Formula Program, 49 U.S.C. 5307 (UAFP).
JA-2 6-9. UAFP funds are disbursed through a grant formula that pays for vehicle revenue
miles (VRM) that are reported to the National Transit Database (NTD). JA-2 3. The
federal government does not pay for deadhead miles that a vehicle travels when out of revenue
service. JA-2 40. CTA, however, knowingly reported deadhead miles as VRM and thus
defrauded the federal government. JA-2 9, 39.
Cause of Action is a government oversight group with independent and additional
knowledge of the fraud perpetrated by CTA. JA-3, 4 13, 15; JA-4 19. On March 28, 2012,
Cause of Action notified DOJ of CTAs fraud. DR3 Ex. 5. On May 8, 2012, Cause of Action
Citations are as follows: SA__ for page numbers of the Short Appendix pursuant to Cir. R.
30(a); JA__ for page numbers of the separate Stipulated Joint Appendix pursuant to Cir. R.
30(e); and DR__ for the docket number of the District Court record.
3
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sued CTA in the District Court for the District of Maryland. JA-1. On November 28, 2013, the
case was transferred to the District Court for the Northern District of Illinois. DR18.
On October 20, 2014, the District Court issued a Memorandum Opinion and Order
(Opinion), granting CTAs motion to dismiss, and holding that the suit was barred under 31
U.S.C. 3730(e)(4) because the allegations [of fraud] were publicly disclosed when Cause of
Action filed the complaint and because Cause of Action was not an original source. SA-12.
STATEMENT OF FACTS
This case concerns CTAs false claims for federal highway funds under UAFP between
reporting years 2001 and 2010. JA-2 6-9.
A.
Background
FTA is an agency within the DOT that administers formula grants for transit systems
under UAFP. JA-34. In general, UAFP provides federal grant monies to fund the capital and
operating expenses of transit programs in urbanized areas, such as Chicago. 49 U.S.C. 5307;
JA-1 2.
Grant recipients are required by statute to submit data regarding their transit systems to
NTD and to certify that such information is correct. 49 U.S.C. 5335(b); JA-2 3-5. FTA
uses the data to apportion over $5 billion each year in grant funds for transit agencies in
urbanized areas. See What is the NTD Program?, Natl Transit Database, Fed. Transit Admin.,
http://www.ntdprogram.gov/ntdprogram/ntd.htm (last visited March 4, 2015). The portion of
allocated grant funds that each area is entitled to receive depends, in part, on the ratio between its
total bus vehicle revenue miles operated in or directly serving the urbanized area divided by the
total bus vehicle revenue miles attributable to all areas. 49 U.S.C. 5336(c)(1)(A)(i); see also
id. 5336(a)(2). For example, as a result of the total number of VRM that CTA reported in
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2004, each mile was worth thirty-eight cents ($0.38) in UAFP funding. DR3 Ex. 3 at 1. An
entity that reports more VRM receives more money. JA-35.
At all relevant times, FTA defined VRM as [t]he miles that vehicles are scheduled to or
actually travel while in revenue service. Fed. Transit Admin., 2006 Urbanized Area Reporting
Manual 396 (2006) (NTD Manual), available at http://www.ntdprogram.gov/ntdprogram/pubs/
ARM/2006/pdf/2006_Reporting_Manual_Glossary.pdf (emphasis added). This definition
includes layover and recovery time, but specifically excludes deadhead. Id. Deadhead miles are
defined as the miles a vehicle travels when out of revenue service. Id. at 352.
Revenue Service is defined as the time when a vehicle is available to the general
public and there is an expectation of carrying passengers. NTD Manual at 384. Revenue
Service also includes layover and recovery time and excludes deadhead. Id. Bus is defined
as a transit mode comprised of rubber-tired passenger vehicles operating on fixed routes and
schedules over roadways. Id. at 348 (emphasis added).
Taken together, these definitions require that for bus mileage to constitute VRM, two
conditions must exist: (1) the bus must be driven on a fixed route and schedule; and (2) the bus
must be available to the public with an expectation of carrying passengers. JA-36.
Each fiscal year, a transportation provider submits a certification of data, including that
years VRM, to NTD for UAFP funding. JA-2 3. In this case, CTAs president provided the
requisite certifications. JA-2 5. At all relevant times, CTA knowingly over-reported VRM by
counting deadhead miles as VRM, which defrauded the federal government. JA-2 6, 9. For
example, CTAs deadhead ratio for the 2004 reporting year was 1.8%, while its peers reported
ratios ranging from 11.9% to 23.3%. DR3 Ex. 3 at 19. For the 2004 reporting year, the
additional UAFP funding CTA received through over-reporting VRM ranges from
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approximately $2.6 to $5.5 million. DR3 Ex. 3 at 25. Between 1999 and 2004, CTAs peer
group typically claimed payment for 87% of total bus miles in a given year, but CTA typically
claimed payment for 99% of total bus miles. JA-8 42-43.
From reporting year 2001 to 2010, CTA claimed payment for 95% to 99% of total bus
miles. JA-5 26 JA-6 35. Given the estimated financial impact range for 2004, it is
reasonable to infer that CTA received excess grant funding for the 2001 to 2010 reporting years
in the range of $26 million to $55 million.2
B.
Reporting Chronology
In 2006 and 2007, the Illinois Office of the Auditor General (IL-OAG) contracted for
an audit of CTA. JA-6 JA-7 36; DR3 Ex. 4. Rubin is a certified public accountant licensed
in California and was a subcontractor on the audit team. DR3 Ex. 2 2-3. Rubin discovered
CTA was wrongfully over-reporting VRM and, therefore, receiving more grant funds than it was
entitled to receive. JA-7 37. He prepared a 25-page memorandum entitled Chicago Transit
Authority Overreporting of Motor Bus Vehicle Revenue Miles (the Memo) recommending
that CTA self-report to FTA. DR3 Ex. 3 at 1, 4. The Memo also recommended that CTA
recalculate revenue miles for past years and report revenue miles in a compliant manner going
forward. DR3 Ex. 3 at 1.
CTA did not submit a copy of the Memo to FTA, but did have discussions with FTA
regarding its reporting data. DR3 Ex.3 at 13. CTA did not recalculate its past reports of revenue
miles or change how it did business in response to the Memo. JA-8 45.
CTA reported a ratio of deadhead miles between 1.4% and 2.0% every year since 1986 (the
year for which the 1984 reporting data would have been used to allocate UAFP funds), indicating
a potential for over-reporting VRM and excess UAFP funds for many more years than in Cause
of Actions complaint. DR3 Ex.3 at 25. CTA may have wrongfully taken well over $150
million in federal taxpayer funds. JA-49.
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On information and belief, IL-OAG did not report CTA. JA-8 53. Instead, the ILOAG Audit Report issued in March 2007 (the Audit Report) said only that [o]ur review
raised questions about the accuracy of CTAs reporting of revenue vehicle hours and miles.
CTA may be incorrectly reporting deadhead hours/miles as revenue hours/miles. DR3 Ex. 4 at
72 (emphasis added). It made no fraud claim, focusing instead on total vehicle hours and
vehicle miles . . . in the assessment of service efficiency to cover CTA. DR3 Ex. 4 at 72
(emphasis added).
In 2009, Rubin sent the Memo to DOTs Office of the Inspector General (DOT-OIG).
DR3 Ex. 2 8. DOT-OIG apparently took no action at that time. The Memo did not charge
CTA with fraud. 3 Notably, former CTA General Counsel Robert Rivkin was Department of
Transportation General Counsel and former CTA board Chairwoman Valerie Jarrett was Senior
Advisor to the President during this time. JA-48, 49.
Cause of Action privately received the Audit Report, the Memo and a sworn statement
by Rubin. JA-9 56-59. This included independent and additional information about CTAs
fraud. JA-3 15; JA-4 19. Cause of Action commenced an investigation. On March 28, 2012,
Cause of Action requested that DOJ investigate the fraud. DR3 Ex. 5.
On April 27, 2012, FTA sent CTA a letter noting an in-depth review involving CTAs
reporting of VRM to NTD. JA-54, 55. The letter stated that CTA should revise its data for the
See Dept of Transp. Office of Inspector Gen., FTAs National Transit Database: Data Used for
Allocating Transit Grants Were Generally Supported (No. MH-2014-117), 16 (2014), available
at https://www.oig.dot.gov/sites/default/files/NTD%20Final%20Report.pdf ([A] 2011 OIG
hotline complaint alleged that CTA overstated its vehicle revenue miles and hours in the NTD.
In response, FTA directed CTA to stop including the miles that buses travel from the bus depot
to the established route. Based on FTAs actions, OIG closed the complaint in June 2012.). As
a matter of public record, the Court may take judicial notice of a September 16, 2014
government report on the origin of DOT-OIGs 2011 review of CTA. Hensen v. CSC Credit
Servs., 29 F.3d 280, 284 (7th Cir. 1994).
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2011 Report Year, but FTA will not, however, require CTA to revise its annual NTD Reports
from prior years. JA-54. FTA did not allege fraud or request reimbursement.
C.
The District Court Case
On May 8, 2012, Cause of Action sued CTA pursuant to the FCA under seal in the
District Court for the District of Maryland. JA-1. The case was transferred to the District Court
for the Northern District of Illinois on November 28, 2013. DR18. On December 18, 2013, DOJ
filed a Notice of Election to Decline Intervention. DR27. The case was unsealed on December
20, 2013. DR29.
On March 13, 2014, CTA filed a motion to dismiss (the Motion). JA-15 (memorandum
in support). On May 22, 2014, Cause of Action filed its opposition. JA-28. On June 30, 2014,
CTA filed its reply. JA-56. On October 20, 2014, the District Court granted CTAs Motion.
SA-12. On December 23, 2013, the District Court entered final judgment. SA-13. This appeal
followed.
SUMMARY OF ARGUMENT
Properly construed, 31 U.S.C. 3730(e)(4) does not bar this case.
The District Court cited three public disclosures to justify its application of the
statutory bar: (1) the Audit Report (FCA 1986 amendments); (2) the Memo (FCA 1986
amendments); and (3) FTAs letter to CTA (FCA 1986 and 2010 amendments). 4 SA-9, 10.
However, the Audit Report and the Memo did not contain allegations of fraud and did not occur
The Opinion reflects some confusion about the underlying circumstances. It refers to the
federal DOT-OIG as having responsibility for the claim in question. SA-11. But this is not
accurate the FTA, not the DOT-OIG, was the authority responsible for the matter. See infra
Argument, III.
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in a statutory report, audit, or investigation. 31 U.S.C. 3730(e)(4) (1986). 5 Also, the Memo
was not public. See id. Similarly, FTAs letter to CTA was not public, did not contain
allegations of fraud, and was not part of an investigation. 31 U.S.C. 3730(e)(4) (2010); 31
U.S.C. 3730(e)(4) (1986). Finally, Cause of Actions complaint was not substantially similar
to FTAs letter because Cause of Actions claims relied on information obtained prior to, and
independently from, FTAs letter. 31 U.S.C. 3730(e)(4) (2010); 31 U.S.C. 3730(e)(4)
(1986).
Section 3730(e)(4) bars suits only when the allegations of fraud or the essential elements
of fraud have been publicly disclosed. United States ex rel. Absher v. Momence Meadows
Nursing Ctr., Inc., 764 F.3d 699, 707 (7th Cir. 2014). Publicly disclosed means placed in the
public domain. United States ex rel. Feingold v. AdminaStar Fed., Inc., 324 F.3d 492, 495 (7th
Cir. 2003). None of these documents meet this test.
Deviation from the statutory text, through a judicially-created competent public official
bar (see United States v. Bank of Farmington, 166 F.3d 853, 861 (7th Cir. 1999)), has created
doctrinal confusion. Thus, the District Court improperly conflated relevant [government]
authority with public domain (see SA-8 (citations omitted)), effectively, and wrongly,
redrafting 3730(e)(4). See Connecticut Natl Bank v. Germain, 503 U.S. 249, 254 (1992)
(stating Congress says in a statute what it means and means in a statute what is says there).
Consequently, this case presents an unique opportunity for the Court to clarify its authorities by
holding the public disclosure bar inapplicable here.
The Audit Report and Memo are not public disclosures under the 2010 amendments. 31
U.S.C. 3730(e)(4) (2010). Only federal reports, hearings, audits or investigations now qualify.
Id.
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Finally, if, and only if, this Court determines that a public disclosure occurred, then it
should hold that Cause of Action is an original source. DR3 Ex. 5.
ARGUMENT
I.
Standard of Review.
The Court reviews de novo challenges made pursuant to FCAs public disclosure bar and
to Fed. R. Civ. P. 12(b)(6) dismissal. Absher, 764 F.3d at 707; Meade v. Moraine Valley Cmty.
College, 770 F.3d 680, 684 (7th Cir. 2014). 6 The complaint should be construed and all
reasonable inferences drawn in Cause of Actions favor. Meade, 770 F.3d at 682.
This case turns on the appropriate construction of 3730(e)(4) and whether the
government knowledge bar that Congress excised from the FCA in 1986 is to be resurrected
by an unrestrained construction of the term public to mean the government itself. See SA-8
(citations omitted) (construing public domain to mean a government official). Statutory text is
the touchstone and the construction must fit Congressional context and intent. See, e.g., Yates v.
United States, No. 13-7451, 2015 U.S. LEXIS 1503, at *15 (U.S. Feb. 25, 2015); Graham
County Soil & Water Conservation Dist., 559 U.S. 280, 294-95 (2010). When Congress has not
defined a statutory term, the Court should generally apply its ordinary meaning. See, e.g., Yates,
2015 U.S. LEXIS 1503, at *40 (Kagen, J., dissenting); Schindler Elevator Corp. v. United States
ex rel. Kirk, 131 S. Ct. 1885, 1891 (2011). Congress intended 3730(e)(4) to allow private
parties to sue even based on information already in the governments possession and it must be
It is unclear whether the District Courts dismissal was under Fed. R. Civ. P. 12(b)(1) or Rule
12(b)(6). SA-4, 5, 6. CTA originally styled its Motion as a Rule 12(b)(1) motion for lack of
subject matter jurisdiction. JA-15. Cause of Action argued that CTAs Motion should have been
brought under Rule 12(b)(6) for failure to state a claim. JA-46, 47. In reply, CTA agreed with
Cause of Action. JA-66. Rule 12(b)(6) should control here. United States ex rel. Feingold v.
AdminaStar Fed., Inc., 324 F.3d 492, 494 (7th Cir. 2003).
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construed accordingly. Cook County v. United States ex rel. Chandler, 538 U.S. 119, 133 (2003)
(stating statutory purpose of 1986 amendments); cf. Yates, 2015 U.S. LEXIS 1503, at *15.
II.
The Public Disclosure Bar Does Not Apply In This Case.

Cause of Action alleges fraud between reporting years 2001 and 2010. JA-11 66; JA-
12 71. The 1986 FCA applies to reporting years 2001 through 2008. 7 JA-11 66. The 2010
FCA applies to reporting years 2009 through 2010. 8 JA-12 71.
The 1986 public disclosure bar provides:
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.SC. 3730(e)(4)(A) (1986). It was enacted to make FCA a more useful tool against
fraud and thus Congress repealed the government knowledge bar and allowed private parties to
sue even based on information already in the Governments possession. Cook County, 538 U.S.
at 133 (internal citations omitted).
In 2010, Congress amended this section to provide:
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.
The complaint incorrectly identifies the reporting years for Count I as 2001-2007. The correct
reporting years under Count I are 2001-2008.
8
The complaint incorrectly identifies the reporting years for Count II as 2008-2010. The correct
reporting years under Count II are 2009-2010.
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31 U.S.C. 3730(e)(4)(A) (2010). 9

Thus, the Courts first inquiry is whether allegations have been publicly disclosed in a
report, hearing, audit or investigation. 10 31 U.S.C. 3730(e)(4)(A). This case therefore turns in
large part on the Courts construction of the term public disclosure. If the plain language and
Congressional intent control, then the term public will be given its ordinary meaning and the
ruling below reversed. 11
A. Construction Should Be Anchored In Statutory Text.
This Circuits public disclosure authorities are detached from the plain statutory text.
The cases find public disclosure when allegations of fraud are in the public domain, or
disclosed to a competent public official, or when the government has commenced an
The 2010 amendments revised the bar to apply only to actions that are substantially similar to
publicly disclosed allegations in the specified federal contexts. The 2010 amendments also
changed language barring actions that were based upon public disclosures to bar actions
containing substantially the same allegations or transactions as publicly disclosed information.
Compare 31 U.S.C. 3730(e)(4)(A) (1986), with 31 U.S.C. 3730(e)(4)(A) (2010). Further, the
2010 amendments changed the 1986 language from no court shall have jurisdiction to the
court shall dismiss. Id.
10
If the Court finds a public disclosure, the Court must then determine whether Cause of
Actions claims are substantially similar to publicly disclosed allegations. 31 U.S.C.
3730(e)(4). They are not. Cause of Action alleges wrongdoing materially different from any
information evidenced by the purported public disclosures. Moreover, even if the Court finds a
public disclosure and that Cause of Actions complaint is substantially similar to that public
disclosure, this lawsuit can still proceed because Cause of Action is an original source. Id.
11
The District Court incorrectly found that Cause of Action did not contest CTAs argument that
allegations were publicly disclosed under the 1986 amendments to the FCA via the Audit Report
and the Memo. SA-7, 10. In fact, Cause of Action advanced a jurisdictional argument
challenging CTAs argument. JA-39, 46, 47. The District Court did not rule on Cause of
Actions jurisdictional arguments and, thus, this Court should reject the District Courts findings
of waiver. Also, Cause of Action did not waive CTAs arguments regarding whether Cause of
Actions claims are substantially similar to the information in FTAs letter. The District Court
found that Relater did not respond to Defendants argument that the complaint allegations are
substantially the same as the Technical Report [i.e. Memo] and the Auditor Generals Report.
SA-7. It did not find this with respect to FTAs letter. And, if the Court resolves either of the
first two inquiries in Cause of Actions favor, it need never reach the original source question,
which Cause of Action clearly was. See infra Argument, III.
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investigation. 12 Absher, 764 F.3d at 708 (public disclosure occurs when allegations of fraud are
in the governments possession or the public domain). But presence in the public domain is the
only appropriate test. 13 See Cook County, 538 U.S. at 133; Feingold, 324 F.3d at 495.
In Feingold, this Court defined public to mean accessible to or shared by all members
of the community. 14 324 F.3d at 495. The notion that disclosure to a government official and
not by one constitutes public disclosure is unsupported by plain language, statutory context, or
legislative history. Cf. Cook County, 538 U.S. at 133. If Congress had desired the statutory bar
to include cases in which the government received notice of fraud but did nothing, as here, then
it would have written the statute accordingly. Id.; Bank of Farmington, 166 F.3d at 860
(statutory language must ordinarily be regarded as conclusive and the Court cannot distort the
12
Compare Bank of Farmington, 166 F.3d at 861, with United States ex rel. Feingold v.
AdminaStar Fed., Inc., 324 F.3d 492, 495-96 (7th Cir. 2003), Absher, 764 F.3d at 707-08, Glaser
v. Wound Care Consultants, Inc., 570 F.3d 907, 913 (7th Cir. 2009), and United States ex rel.
Fowler v. Caremark RX, L.L.C., 496 F.3d 730, 736-37 (7th Cir. 2007).
13
Permitting a construction that authorizes reviewing courts to engage in a game of Whack-AMole to select among multiple definitions barring an otherwise viable claim frustrates
Congressional intent, which is to encourage legitimate whistleblowing and lawsuits to stop
fraudulent claims. Yates, 2015 U.S. LEXIS 1503, at *61 (Kagen, J., dissenting) (a statutes
meaning should not hinge on an odd game of Mad Libs); Cook County v. United States ex rel.
Chandler, 538 U.S. 119, 133 (2003) (noting Congresss concern with pervasive fraud and
enhanced incentives for relators to bring suit). Under this approach, there is a possibility that a
public disclosure occurs if facts of fraud are not in the public domain, but a competent public
official is aware of them; as well as if the facts are in the public domain, but no competent public
official is aware of them. Similarly, public disclosure can occur if a government official fails to
take action to investigate the fraudulent information brought to its attention and available in the
public domain. Such a construction should not be countenanced.
14
Feingold found that Healthcare Financing Administration (HCFA) statistical reports
obtained by the relator were public disclosures. 324 F.3d at 496. Although the Feingold court
did not specify how the relator obtained the HCFA statistical reports, the Court cited to a Third
Circuit case where agency reports were obtained via the Freedom of Information Act (FOIA).
Id. (citing United States ex rel. Mistick PBT v. Housing Auth., 186 F.3d 376, 383 (3d. Cir.
1999)). In Mistick, the Third Circuit noted that the central purpose of FOIA is to ensure that
government activities are opened to the sharp eye of public scrutiny. 186 F.3d at 383. Feingold
therefore establishes that a public disclosure means that members of the public (i.e., relators)
cannot bring FCA suits concerning information released by the government and available to the
general public.
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ordinary meaning of the words and . . . read into the statute provisions that Congress did not
enact). Congress says what it means in a statute. Connecticut Natl Bank, 503 U.S. at 254.
1.
Bank of Farmington Should Not Control.
This Court should not apply the 1999 Bank of Farmington competent public official
standard here for it cannot be reconciled with statutory text. This holding is an outlier that
contradicts controlling Supreme Court authority and persuasive sister circuit court cases. 15 See,
e.g., Cook County, 538 U.S. at 133; United States ex rel. Rost v. Pfizer, Inc., 507 F.3d 720, 730
(1st Cir. 2007); see also Graham County, 559 U.S. at 294-95 (rejecting reinstitution of the
government knowledge bar); United States ex rel. Beauchamp v. Academi Training Ctr., Inc.,
933 F. Supp. 2d 825, 844 (E.D. Va. 2013) ([T]o date no other circuit has followed [Bank of
Farmington], and instead, circuits that have addressed this issue have uniformly held that merely
providing information to a public official is not a public disclosure.). 16
In Rost, the First Circuit thoroughly demolished the rationale for the judicially-created
competent public official bar. 507 F.3d at 720. That court concluded that disclosure to the
appropriate investigatory official would be to reinstate exactly what Congress eliminated -- the
government knowledge bar. Id. at 730. There is no support in either the language or the
15
In Feingold, the Court found that administrative reports substantiating fraud were in the public
domain. 324 F.3d at 496. This rule aligns with other circuits: statutory interpretation leads us
to join two of our sister circuits in holding that a public disclosure exists under 3730(e)(4)(A)
when the critical elements exposing the transaction as fraudulent are placed in the public
domain. Id. at 495. The doctrinal problem has arisen because this Court has adopted the public
domain standard but failed to expressly reject the competent public official standard in Bank of
Farmington, used by the District Court to bar Cause of Actions case. SA-10, 11. These rules,
however, are mutually incompatible. Compare Feingold, 324 F.3d at 495 (public disclosure
depends on looking at the plain meaning of public which is accessible to or shared by all
members of the community), with Bank of Farmington, 166 F.3d at 861 (Disclosure to an
official authorized to act for or to represent the community on behalf of government can be
understood as public disclosure.).
16
But see United States ex rel. Reagan v. E. Tex. Med. Ctr. Regl Healthcare Sys., 274 F. Supp.
2d 824, 850 (S.D. Tex. 2002), affd, 384 F.3d 168 (5th Cir. 2004).
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history of the statute for such a reading which would create a new exclusion not articulated in
the text. Id. In fact, the competent public official standard is contrary to . . . Congressional
intent which was to use the requirement of public disclosure, to help keep the government
honest[.]17
This Court already acknowledges that disclosures by the government are public
disclosures. See, e.g., Feingold, 324 F.3d at 496. But, the idea that disclosure to the government
meets the statutory test is simply a bridge too far. See 31 U.S.C. 3730(e)(4); Cook County, 538
U.S. at 133.
Long ago, the Eleventh Circuit expressly (and properly) rejected disclosure to the
government as grounds for the bar, instead insisting that disclosure must be by the government in
one of the statutorily enumerated ways. As it explained:
A plain reading of this language reveals that congressional, administrative or
Government Accounting Office modifies report, hearing, audit or investigation. Any
other reading of that phrase would be illogical. Because Williamss report on bidding
practices was not issued by Congress, an administrative agency, or out of the Government
Accounting Office . . . it is not a public disclosure within the meaning of section
3730(e)(4)(A).
17
The First Circuit explained how the competent public standard recreates problems Congress
eliminated in 1986:
[I]t fails to further Congresss purpose of discouraging parasitic qui tam actions.
If information that could form the basis of a qui tam action is kept confidential
and confined to a limited circle of government officials, there is no real danger
that a private citizen who does not have direct and independent knowledge of
that information will bring an opportunistic qui tam suit based upon the
information in the governments possession.
Rost, 507 F.3d at 730 (internal citations omitted). Rost is consistent with Feingold because both
cases acknowledge that a public disclosure can occur where the government itself makes
information it has received available to the public in Rost via FOIA responses and in Feingold
via HCFA agency reports. Here, however, the government has made nothing available to Cause
of Action or the public.
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United States ex rel. Williams v. NEC Corp., 931 F.2d 1493, 1500 (11th Cir. 1991) (emphasis
added). The statutory list of disclosure methods, after all, refers to disclosures in a government
context and that are, by their nature, open to the public. 18 Disclosures to the government that are
never made public cannot, by definition, be publicly disclosed. See 31 U.S.C. 3730(e)(4).
This Court has clarified these issues once before with respect to the based upon
analysis of the public disclosure bar and, to the extent necessary, should do so again here with
respect to the competent public official standard. 19
2.
If The Court Applies Bank of Farmington, It Also Must Apply Glaser.
In Glaser, this Court clarified that mere government awareness is not enough. 570 F.3d
at 913-14. Instead, some action must be taken to investigate the allegations. Id.
This is not a case where the government was simply aware of Wound Cares billing
practices. Rather, the appropriate entity responsible for investigating claims of Medicare
abuse had knowledge of possible improprieties with Wound Cares billing practices and
was actively investigating those allegations and recovering funds . . . CMSs
communications with Wound Care indicate that it had commenced an investigation by
March 2005 designed to recover money Wound Care should not have received.
Id. (emphasis added). 20
18
FCA uses the words in following the words public disclosure of allegations or transactions
(1986 amendments) or were publicly disclosed (2010 amendments) to delineate the methods
by which public disclosure can occur. The list of disclosure sources in the public disclosure bar
is exclusive. United States ex rel. Yannacopolous v. Gen. Dynamics, 315 F. Supp. 22 939, 951
(N.D. Ill 2004) (For information to be a public disclosure it must be enumerated in
3730(e)(4).). Defining public disclosures as allegations released by the government would
serve a well-recognized purpose of the public disclosure bar, to strike a balance between
encouraging private persons to root out fraud and stifling parasitic lawsuits. Schindler Elevator,
131 S. Ct. at 1894.
19
In Glaser, this Court reversed itself on how to interpret whether claims in a relators complaint
are based upon publicly disclosed information. The Court acknowledged that it is out of step
with the approach taken by eight other circuits and that [w]e have overruled our prior decisions
when our position remains a minority one among other circuits. 570 F.3d at 915.
20
In this case, by contrast, the government has done nothing to recover the money that CTA
should not have received. This fact, and this fact alone, should be enough to prevent the public
disclosure bar.
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The idea that public disclosure occurs whenever a government agency discovers fraud
may be afoot simply does not stand up. Contra Feingold, 324 F.3d at 496. Feingold cites a
Third Circuit case, United States ex rel. Mistick PBT v. Housing Auth., 186 F.3d 376, 383 (3d
Cir. 1999), and a Second Circuit case, Gold v. Morrison-Knudsen, Inc., 68 F.3d 1475, 1477 (2d
Cir. 1995). However, Mistick found that an agencys report prepared in response to a FOIA
request was publicly disclosed, not that the mere receipt of the request and the subsequent search
for documents constituted disclosure. 186 F.3d at 383. Gold found a public disclosure existed
when an administrative report prepared by a contractor for a federal agency was part of the
public record. 68 F.3d at 1476.
Feingolds rule has no basis in either Mistick, Gold or any other circuits precedent. In
fact, there are only three cases in any federal appeals court that use the term fraud may be
afoot for deciphering public disclosure under the False Claims Act Glaser and the case cited
by Glaser: Feingold.
The other public disclosure cases cited by Glaser are instructive. Public disclosure
occurred when the General Accounting Office publicly issued a report to Congress (United
States ex rel. Gear v. Emergency Med. Assocs. of Ill., Inc., 436 F.3d 726, 728 (7th Cir. 2006)),
the Federal Drug Administration sent a federal grantee a warning letter temporarily suspending
its participation (United States ex rel. Gross v. Aids Research Alliance-Chicago, 415 F.3d 601,
603-05 (7th Cir. 2005)), and the Senate issued report language on amendments (United States ex
rel. Findley v. FPC-Boron Employees Club, 105 F.3d 675, 685 (D.C. Cir. 1997)). See United
States ex rel. Davis v. Prince, 753 F. Supp. 2d 569, 580 (E.D. Va. 2011) ([T]he Seventh Circuit
and the D.C. Circuit have both concluded that a public disclosure occurs when allegations of
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fraud are placed in the public domain.). Read in context, these cases support Cause of
Actions interpretation of the public disclosure bar.
B.
Neither The Audit Report, Nor The Memo, Nor FTAs Letter, Is A Public
Disclosure.
None of the disclosures in this case trigger the 3730(e)(4) bar, even under the
erroneous Bank of Farmington standard.
The District Court relied on Feingold to inform its understanding of public disclosure.
SA-8, 11. This is why Cause of Action focused on effective public disclosure in the District
Court: not to force a strained reading of the statute but instead to better reflect statutory text.
Glaser recognized that the relevant authority must know that there has been a false claim against
the government, not simply that there were reporting inaccuracies of potentially valid claims, as
FTA claimed here. JA-54, 55. Therefore, disclosure to a government official is not enough.
1.
The Audit Report was not a public disclosure.
The Audit Report is not a public disclosure. It stated: Our review raised questions about
the accuracy of CTAs reporting of revenue vehicle hours and miles. CTA may be incorrectly
reporting some deadhead hours/miles as revenue hours/miles[.] DR3 Ex. 4 at 72. On this
information alone, the District Court determined that the Audit Report qualifies as a public
disclosure as it indicates that a responsible authority was alerted that fraud may be afoot.
SA-11 (citing Feingold, 324 F.3d at 496).
The Audit Report, however, does not discuss how or why CTAs reporting was
inaccurate and does not show that IL-OAG even considered the possibility of fraud. Instead, it
shows IL-OAG was aware that CTA reported an usually high percentage of revenue miles. DR3
Ex. 4 at 72. The critical fact that this inaccurate reporting over a period of years was a
potential fraud on federal taxpayers was missing. Absher, 764 F.3d at 708. Yet, the District
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Court took a giant and unsubstantiated leap and held that the Audit Report was disclosure of a
false claim to a responsible authority and, therefore, the 3730(e)(4) bar applies. SA-11.
In Absher, this Court specifically concluded that the statutory bar applies only if the
relevant public disclosure includes the essential elements of fraud . . . providing a basis for the
inference that fraud has been committed. 764 F.3d at 708 (quoting United States ex rel.
Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645, 654 (D.C. Cir. 1994)). Thus, the Court
found that the government survey reports did not bar FCA claims because they did not disclose
both a misrepresented statement of facts and a true statement of facts. Absher, 764 F.3d. at 709;
see also Feingold, 324 F.3d at 495 (holding that a public disclosure exists when the critical
elements exposing the transaction as fraudulent are placed in the public domain).
The Audit Report, on its own, does not disclose allegations about a false claim to a public
official, does not indicate that the relevant authority was made aware that fraud may be afoot,
and does not evidence an investigation. Feingold, 324 F.3d at 496; Glaser, 570 F.3d at 913.
The District Court therefore misapplied Feingold and Glaser. In Feingold, the
administrative report at issue actually contained the critical information substantiating fraud,
whereas the Audit Report here finds nothing of the sort. DR3 Ex. 4. Furthermore, the Audit
Report reflects no action. Even assuming the Audit Report reflects knowledge of fraud, Glaser
requires more than mere official awareness of wrongdoing. 570 F.3d at 913. Instead, active
investigation is required. Id. The Audit Report indicates that questions were raised but nothing
more was done. 21 DR3 Ex. 4 at 72.
21
The District Court failed to make any findings required by Absher. It only found that [a]
short section of this lengthy document indicates that the CTA may have been incorrectly
reporting deadhead miles as revenue miles, but concluded this was enough to trigger the bar.
SA-3; SA-11. The Audit Report does not discuss CTAs inaccurate reporting and it is
unreasonable to infer any element of fraud from a disclosure stating that questions were raised
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Moreover, the public disclosure bar does not apply where the public information, viewed
in a vacuum, fails to establish fraudulent behavior. United States ex rel. Heath v. Wis. Bell, Inc.,
760 F.3d 688, 691 (7th Cir. 2014). The Audit Report was in the public domain. Feingold, 324
F.3d at 495. But, allegations of fraud were not made and the Audit Report failed to report any
government action. Therefore, the District Court erred. Absher, 764 F.3d at 707; Glaser, 570
F.3d at 914; Feingold, 324 F.3d at 496.
2.
The Memo was not a public disclosure.
The Memo was not a public disclosure. First, until Cause of Actions complaint was
unsealed, the Memo was never in the public domain or publicly disclosed under the common
meaning of the term. Therefore, the statutory bar does not apply.
Second, the District Court wrongly found that because Rubin sent the Memo to DOTOIG in 2009, it was publicly disclosed. SA-11. Even if the Memo had alleged fraud, there is
absolutely no evidence in the record that it had anything to do with FTAs actions in 2012 as the
responsible authority. 22
about the accuracy of CTAs reporting of VRM. The Audit Report does not contain a true
statement of facts and a misrepresented statement of facts. Absher, 764 F.3d at 709. It does not
report facts showing scienter. Id. at 709 n.10. Therefore, the District Court had no basis to find
that the Audit Report publicly disclosed possible fraud.
22
It appears that the District Court misapprehended the DOT-OIGs role in this matter. While
the Inspector General is authorized to conduct investigations and reports relating to the
administration of the programs and operations of the Department, 49 C.F.R. 1.73, it was not
the relevant authority for reporting allegations about CTAs fraud. See FTA Circular, Urbanized
Area Formula Program: Program Guidance and Application Instructions II-6 II-7 (Jan. 16,
2014), available at http://www.fta.dot.gov/documents/FINAL_FTA_circular9030.1E.pdf
(Congress has charged FTA with conducting reviews of recipients or requiring that recipients
have independent audits conducted on their programs to determine whether the recipients have
met the programs requirements and certifications.). Additionally, grant applicants
acknowledged to FTA, not DOT-OIG, that the provisions of the Program Fraud Civil Remedies
Act of 1986, 31 U.S.C. 3801 et seq., as implementing Program Fraud Civil Remedies, 49 CFR
part 31, apply to any certification, assurance or submission made to FTA. See Fed. Transit
Admit., Appendix B, FTA Certifications and Assurances (2010), available at
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Third, the District Court misapplied Glaser by failing to find that an investigation
followed presentation of the Memo to IL-OAG, but holding that the Memo was publicly
disclosed information. 570 F.3d at 913-14. At most, Rubins presentation of the Memo to ILOAG and/or DOT-OIG is a mere governmental awareness of wrongdoing, which is
insufficient. Id. at 913.
Fourth, the District Court again failed to properly apply Absher. The District Courts
findings do not support its conclusion that Rubins disclosure of his findings during the Illinois
performance audit comes within the scope of 3730 (e)(4)(A)(1986). SA-11. It found that
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
Administrations (FTA) National Transit Database (NTDB) regulations, are not properly so
classed. SA-2, 3. It is not reasonable to infer the critical elements of fraud from this.
Absher, 764 F.3d at 708.
The District Court also acknowledged that the Memo 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. SA-3. The District Court found that CTA did not report the issue to
FTA. SA-3. CTA did not revise its reporting in response to the Memo. Again, it is not
reasonable to conclude that allegations of fraud exist based on a finding that CTA did not follow
all of the recommendations in the Memo. The District Courts factual findings are simply
unrelated to its conclusion.
http://www.dot.ca.gov/hq/tpp/offices/orip/owp/index_files/Updated_10-11_Certs/FTA_Cert_1011.pdf.
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The FTA letter was not a public disclosure.
The FTA letter was not a public disclosure triggering the statutory bar.
First, FTAs letter was not a public disclosure under plain statutory text. Information
can be publicly disclosed and in the public domain if it is accessible to or shared by all members
of the community, i.e., any person other than the very person who received the information.
Feingold, 324 F.3d at 495 (citation omitted); see also Quinn, 14 F.3d at 652-53. The letter was
not.
Second, the District Court relied exclusively on Glaser, yet that case is factually
distinguishable. Glaser found public disclosure when CMS sent a letter . . . demanding
repayment for [defendants] improper use of [the doctors] billing code. 570 F.3d at 913. The
letter from the government to the defendant indicated that it had commenced an investigation by
March 2005 designed to recover money Wound Care should not have received. Id. at 914.
FTAs letter, however, disclaimed any claim on fund recovery and avoided any findings of
wrongdoing. JA-54, 55. Yet, the District Court concluded that because FTA determined that
the CTA needed to revise its data for the 2011 reporting year . . . [its] actions amount to precisely
the type of active investigation that the Seventh Circuit identified in Glaser. SA-9.
Third, the requisite Absher findings are missing. The District Court only found that the
letter discussed the inaccurate reporting of revenue miles and requested that CTA revise the
reporting of revenue miles for reporting year 2011. SA-9. The District Court noted that FTA
determined that the revision was necessary to ensure the application of a consistent definition of
revenue service across all transit systems. SA-10. However, FTAs letter does not reference
wrongdoing. Disclosures concerning inaccurate reporting are not equivalent to allegations
of fraud. Absher, 764 F.3d at 709; Glaser, 570 F.3d at 913. It is not reasonable to infer any
element of fraud from a letter stating that only one year of data revisions were necessary,
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especially one that does not specify a true statement of facts and a misrepresented statement of
facts. Absher, 764 F.3d at 709. FTAs letter does not contain the element of scienter. Id. at 709
n.10.
4.
None of the documents cited by the District Court qualify under the
statutory test for methods of public disclosure.
The FCA enumerates the specific channels by which public disclosure can occur in
3730(e)(4)(A), including in a report, hearing, audit, or investigation. 31 U.S.C.
3730(e)(4)(A) (1986). 23 These terms are not specifically defined and, therefore, should be
given their ordinary meaning, consistent with the relevant statutory context and intent. 24 See,
e.g., Yates, 2015 U.S. LEXIS 1503, at *15; Graham County, 559 U.S. at 294-95.
The Audit Report may qualify as either a government report or an audit in the public
domain. But, it did not include the Memo or the requisite facts and information of fraud, and
could not have been a public disclosure. See Schindler Elevator, 131 S. Ct. at 1893; Absher, 764
F.3d at 708.
The Memo is neither a report nor an audit. Given its treatment by CTA and ILOAG, it amounted to miscellaneous material prepared in connection with the Audit Report. The
District Court cited Bank of Farmington to support its holding that the Memo is a public
disclosure. SA-11. Bank of Farmington does not stand for the proposition cited. There, the
Court found that a disclosure occurred in a conversation that was pursuant to an administrative
investigation and reasoned that investigations may be informal or casual inquiries so long as
23
In 2010, Congress revised the bar to apply only in the same contexts (though federal). 31
U.S.C. 3730(e)(4)(A) (2010).
24
In Feingold, the Court found that statistical reports issued by the HCFA were reports within
the meaning of the FCA. 324 F.3d at 496. The Supreme Court held that a report carries its
ordinary meaning, it must be governmental, and it includes a federal agencys written response
to a FOIA request and the records attached to that response. Schindler Elevator, 131 S. Ct. at
1893.
23
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they are undertaken by authorized officials with official purposes. 166 F.3d at 862. In contrast,
Rubins presentation of the Memo to IL-OAG was not requested by IL-OAG and the information
was all but ignored. In any event, the Memo was never distributed to the public. See Schindler
Elevator, 131 S. Ct. at 1893. Therefore, it was not a statutory report.
FTAs letter refers to an in-depth review, but even if it had been put into the public
domain (which it was not), it was not a statutory investigation as the District Court found.
FTAs supposed investigation failed to identify either a claim of error by or overpayment to
CTA. The letter states FTA conducted an in-depth review, an initial inquiry, and a study
[of the] situation, JA-55, and the District Court relied on Glaser to support its conclusion that
this letter met the statutory text. SA-9. However, Glaser is inapposite because an actual
investigation to recover funds was underway in that case and no such investigation to recover
funds occurred here.
Also, the District Court stated that CTAs inaccurate reporting was publicly disclosed in
the FTAs investigation by the time the complaint was filed in May 2012. SA-10. This
conclusion is problematic for at least two reasons. First, as noted, disclosures concerning
inaccurate reporting are not equivalent to allegations of fraud. Second, Cause of Action
gave notice of the fraud to DOJ before the FTA letter was issued. DR3 Ex. 5. Because Cause of
Actions allegations were not based upon allegations of fraud (of which there were none) in
either the Audit Report or Memo, and there was no public disclosure by the federal government
in a hearing, audit, or investigation before Cause of Action gave notice of fraud, Cause of
Actions complaint cannot be barred.
C.
FTAs Letter Is Not Substantially Similar To The Complaint.
Even if the Court determines that FTAs letter publicly disclosed fraud, to apply the
statutory bar, the Court also must find that Cause of Actions claims were substantially similar.
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31 U.S.C. 3730(e)(4) (2010); Glaser, 570 F.3d at 920. 25 Cause of Actions complaint is not
substantially similar to FTAs letter (nor based upon it) and thus the bar should not apply.
FTAs letter only required CTA to revise data for reporting year 2011. JA-54. It did not
acknowledge, suggest, or even consider that CTA defrauded the taxpayer, and no one reading
FTAs letter would have suspected that it did. However, Cause of Actions complaint:
Alleged fraud for the years between 2001 and 2010. 26 JA-11 66; JA-12 71.
Asserted that CTA knowingly used different and noncompliant definitions for
reporting between the years 2001 and 2010. JA-2 6.
Asserted that CTA knowingly submitted false claims to the government. JA-2 8.
Asserted that Cause of Action relied on information obtained from Rubin, as reflected
in his affidavit dated March 22, 2012. JA-9 55-58.
Glaser does not control here. Cause of Actions complaint does not merely add
specificity to the information in FTAs letter instead, it contains very different information.
And, it would have been impossible for Cause of Actions complaint to add specificity to FTAs
25
The 2010 amendments to the FCA explicitly state this standard; thus, Glaser is consistent with
claims arising under the 2010 amendments to the FCA. In Glaser, the Court applied the bar
because these allegations of wrongdoing are virtually identical--they pertain to the same entity
and describe the same fraudulent conduct[.] 570 F.3d at 920. The Glaser court found that the
relators complaint merely added specificity to most of the allegations already detailed in
publicly disclosed allegations. Id. Then, in Wisconsin Bell, this Court further explained the
substantially similar standard articulated in Glaser. 760 F.3d at 691-92. The Court
acknowledged that Glaser held that based upon does not mean solely based upon and that an
action even partly based upon public information triggers the bar. Id. at 691. Yet, the bar did
not apply in Wisconsin Bell because the relators allegations required independent investigation
and analysis to reveal any fraudulent behavior. Id. In finding that the relator brought
genuinely new and material information to the governments attention, it reasoned that,
although the relators allegations relied in part on a publicly available agreement, [n]o one
could view the agreement in a vacuum and realize fraud was at hand. Id. The relators prior
knowledge of the rates being charged to other similarly situated entities was necessary to
understand the significance of the public agreement. Id. at 692.
26
See supra notes 7 and 8 with respect to the correct reporting years for Counts I and II.
25
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April 27, 2012 letter because, even if that letter had been in the public domain the very day it
was sent (which it was not), all of the information in Cause of Actions May 9, 2012 complaint
was already referenced in its March 28, 2012 letter to DOJ. DR3 Ex. 5. Wisconsin Bell ought to
control here and, therefore, the statutory bar should not apply.
III.
Cause Of Action Is An Original Source.

If, and only if, this Court finds that public disclosure occurred here and that Cause of
Actions complaint is substantially similar to the publicly disclosed information, then it must
determine whether Cause of Action was an original source. 27 An original source is someone
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. 31 U.S.C. 3730(e)(4)(B). To show
direct knowledge of the fraud, a relator usually must establish that knowledge of the
wrongdoing was based on investigative efforts and not derived from the knowledge of others.
Glaser, 570 F.3d at 917.
The District Court erred in finding that the allegations in the complaint were conclusory
and insufficient to support qualification as an original source. SA-8. Cause of Action properly
27
The District Court ruled that Cause of Action waived this issue. SA-8. However, waiver is a
discretionary doctrine, particularly where, as here, a court is presented with a strictly legal
question or when manifest injustice would otherwise result. See Singleton v. Wulff, 428 U.S.
106, 121 (1976); Smith v. Freeman, 892 F.2d 331, 337 n.12 (3d Cir. 1989) (discussing cases).
Numerous cases hold that the doctrine may be relaxed whenever the public interest so warrants.
See Webb v. City of Phila., 562 F.3d 256, 263 (3d Cir. 2009) (noting that waiver rule serves
several important judicial interests, protecting litigants from unfair surprise, promoting the
finality of judgments and conserving judicial resources, but may be relaxed where the issues
resolution is of public importance). For example, the Third Circuit held that a case dealing with
the relative rights of railroads and property owners was of public importance and accordingly
decline[d] to apply the general rule of waiver in [that] case. MD Mall Assocs., LLP v. CSX
Transp., Inc., 715 F.3d 479, 486 (3d. Cir. 2013). The case at bar implicates the critical public
interest in stopping fraud on the government and taxpayers. In such circumstances, the Court
should decline to apply the waiver doctrine.
26
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alleged its independent investigation in its complaint. JA-3 15; JA-4 19. The complaint
included Cause of Actions letter to DOJ requesting an investigation, which was based on Cause
of Actions witness interview and direct knowledge of CTAs fraud. DR3 Ex. 5; Glaser, 570
F.3d at 917. Cause of Action also highlighted its independent investigation in its opposition
brief. JA-48.
Congress specifically required FTA to conduct audits and investigations of grantees
under UAFP. See FTA Circular, Urbanized Area Formula Program: Program Guidance and
Application Instructions II-6 II-7 (Jan. 16, 2014), available at http://www.fta.dot.gov/
documents/FINAL_FTA_circular9030.1E.pdf (Congress has charged FTA with conducting
reviews of recipients or requiring that recipients have independent audits conducted on their
programs to determine whether the recipients have met the programs requirements and
certifications.). No fact in the record even suggests that Rubin (or anyone else) ever alerted
FTA of CTAs fraud. In fact, the record establishes that the first time CTAs fraud was disclosed
to a proper federal authority was on March 28, 2012, when Cause of Action requested DOJ to
open an investigation. DR3 Ex. 5. Again, this letter predates FTAs April 27, 2012 letter to
CTA. Compare DR3 Ex. 5, with JA-54.
Under the Supreme Courts decision in Schindler Elevator, Cause of Action was an
original source of fraud whose information was based upon independent knowledge, was not
publicly disclosed before Cause of Actions complaint was filed, and which Cause of Action was
the first to disclose to the proper federal authority. The factual record before this Court, in
addition to clearly articulated legal principles and common sense, warrant reversal of the District
Courts ruling.
27
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CONCLUSION
31 U.S.C. 3730(e)(4) does not bar this case. An Order vacating the Opinion, and
remanding this action to the District Court to proceed on the merits, should issue.
Dated: March 4, 2015
Respectfully submitted,
/s/ Prashant K. Khetan______________
DANIEL Z. EPSTEIN
PRASHANT K. KHETAN
LAURA N. BEGUN
Suite 650
(202) 499-4232
Counsel for Plaintiff-Appellant
28
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CERTIFICATE OF COMPLIANCE
1.
This brief complies with the type-volume limitation of Fed. R. App. P.
32(a)(7)(B) because this brief contains 12,010 words, as determined by the word-count function
of Microsoft Word 2010, excluding the parts of the brief exempted by Fed. R. App. P.
32(a)(7)(B)(iii); and
2.
This brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5), as
modified by Cir. R. 32(b), and the type style requirements of Fed. R. App. P. 32(a)(6) because
this brief has been prepared in a proportionally spaced typeface using Microsoft Word 2010 in
12 point Times New Roman font.
/s/ Prashant K. Khetan________
PRASHANT K. KHETAN
Suite 650
(202) 499-4232
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STATEMENT PURSUANT TO CIRCUIT RULE 30(D)

All of the materials required by Cir. R. 30(a) are included in the Short Appendix
submitted with Plaintiff-Appellants Opening Brief. There are no materials required by Cir. R.
30(b). The parties include additional materials in a separate Stipulated Joint Appendix pursuant
to Cir. R. 30(e).
PRASHANT K. KHETAN
Suite 650
(202) 499-4232
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STATEMENT REGARDING ORAL ARGUMENT

Pursuant to Cir. R. 34(f), Cause of Action hereby requests oral argument. Oral argument
is appropriate because the issue raised presents a conflict between this Courts construction of
the FCAs public disclosure bar and statutory language, as well as a conflict with sister circuit
courts and inconsistency between circuit authorities. Moreover, the issues raised here are of
public importance indeed, the case involves potential fraud of millions of taxpayer dollars.
Finally, the facts are complex enough that oral argument would be beneficial.

PRASHANT K. KHETAN
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(202) 499-4232
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No. 15-1143
IN THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT
________________________
UNITED STATES OF AMERICA, ex rel. CAUSE OF ACTION,
Plaintiff-Appellant,
v.
Defendant-Appellee.
________________________
On Appeal from the United States District Court for
the Northern District of Illinois, Eastern Division
Case No. 12-cv-9673
The Honorable Robert M. Dow, Jr., Presiding
________________________
Short Appendix
________________________
DANIEL Z. EPSTEIN
PRASHANT K. KHETAN
LAURA N. BEGUN
Suite 650
(202) 499-4232
March 4, 2015
Counsel for Cause of Action
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TABLE OF CONTENTS
Documents submitted with Cause of Actions Opening Brief:
1. Memorandum Opinion and Order
DR61 (October 20, 2014)......SA-1
2. Judgment in a Civil Case
DR69 (December 23, 2014)....SA-13
Case: 1:12-cv-09673 Document #: 61 Filed: 10/20/14 Page 1 of 12 PageID #:685

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
UNITED STATES OF AMERICA, ex rel.
CAUSE OF ACTION
Plaintiff-Relator,
v.
Defendant.
)
)
)
)
)
)
)
)
)
)
Case No. 12 CV 9673

Judge Robert M. Dow, Jr.
MEMORANDUM OPINION AND ORDER

This matter is before the Court on Defendant Chicago Transit Authoritys motion to
dismiss [42] Plaintiff-Relators 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, Defendants motion is
granted. The case is set for status hearing on 11/06/14 at 9:00 a.m.
I.
Factual and Procedural Background1

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
1
The Courts summary of the facts is drawn from Relators complaint. For purposes of Defendants
motion to dismiss, the Court assumes as true all well-pleaded allegations set forth therein. See
Killingsworth v. HSBC Bank Nevada, N.A., 507 F.3d 614, 618 (7th Cir. 2007); Apex Digital, Inc. v. Sears,
Roebuck & Co., 572 F.3d 440, 44344 (7th Cir. 2009).
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Chicago Transit Authority (CTA or Defendant). Relator alleges that the CTA intentionally
caused the government 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 CTAs 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 CTAs overstatement of revenue miles was uncovered during a 200607
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 Administrations (FTA) National Transit
2
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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. 5153. 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 CTAs performance was released in March
2007 by the Illinois Auditor General (Auditor Generals Report). A short section of this
lengthy document indicates that the CTA may have been incorrectly reporting deadhead miles as
revenue miles. See Auditor Generals Report 72, Compl., Ex. 4 (Our review raised questions
about the accuracy of CTAs 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 Generals Report, and Rubins 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 so-called public disclosure barbecause 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
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the FTA conducted an in-depth review of the CTAs 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, Relators Oppn, Ex. 1. The letter further states,
however, that the FTA will not require the CTA to revise its data for prior years. See id.
II.
Legal Standards
Defendant styled its motion as one under Federal Rule of Civil Procedure 12(b)(1) and
argued that the Court lacks subject matter jurisdiction under the FCAs public disclosure bar.
See 3730(e)(4)(A). Relator contends that the motion should have been brought pursuant to
Rule 12(b)(6), for failure to state a claim, because 3730(e)(4)(A) is not jurisdictional.
Defendant apparently agrees, and subsequently requested that the Court treat its motion as one
pursuant to Rule 12(b)(6). See Def.s Reply 11.
The confusion regarding the applicable Rule of Civil Procedure that governs Defendants
motion stems from the fact that two different versions of 3730(e)(4)(A) are at issue. The 1986
version states: No court shall have jurisdiction over an action under this section based upon the
public disclosure of allegations * * * unless * * * the person bringing the action is an original
source of the
information.
3730(e)(4)(A) (emphasis added).
This is a jurisdictional
requirement. See U.S. ex rel. Absher v. Momence Meadows Nursing Center, Inc., -- F.3d. --,
2014 WL 4092258, *4 (7th Cir. Aug. 20, 2014) (citing Rockwell Intl Corp. v. United States, 549
U.S. 457, 46770 (2007)). In 2010, the FCA was amended and the phrase no court shall have
jurisdiction was replaced with the phrase [t]he court shall dismiss an action or claim under
this section[.] 3730(e)(4)(A) (emphasis added). Following the amendment, the Seventh
Circuit questioned whether 3730(e)(4)(A) (2010) should be treated as jurisdictional. See
Absher, -- F.3d at *4 (explaining that it is no longer clear that Rockwells holding is still good
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law as the Supreme Courts reasoning was based on the fact that, at the time, 3730(e)(4)
contained the language [n]o court shall have jurisdiction over an action under this section[.] )
(internal quotations omitted). Regardless of whether the 2010 version of the public disclosure
bar is deemed substantive or jurisdictional, the Courts disposition of Defendants motion is the
same.2 The pertinent legal standards under Rules 12(b)(1) and 12(b)(6) are discussed below.
Under Rule 12(b)(6), a motion to dismiss tests the sufficiency of the complaint, not the
merits of the case. Gibson v. City of Chi., 910 F.2d 1510, 1520 (7th Cir. 1990). In reviewing a
motion to dismiss under Rule 12(b)(6), the Court takes as true all factual allegations in a
plaintiffs complaint and draws all reasonable inferences in its favor. Killingsworth, 507 F.3d at
618. To survive a Rule 12(b)(6) motion to dismiss, the claim first must comply with Rule 8(a)
by providing a short and plain statement of the claim showing that the pleader is entitled to
relief (Fed. R. Civ. P. 8(a)(2)), such that the defendant is given fair notice of what the * * *
claim is and the grounds upon which it rests. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). Second, the factual allegations in the
claim must be sufficient to raise the possibility of relief above the speculative level, assuming
that all of the allegations in the complaint are true. E.E.O.C. v. Concentra Health Servs., Inc.,
496 F.3d 773, 776 (7th Cir. 2007) (quoting Twombly, 550 U.S. at 555). A pleading that offers
labels and conclusions or a formulaic recitation of the elements of a cause of action will not
do. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555). However,
[s]pecific facts are not necessary; the statement need only give the defendant fair notice of what
Because the 2010 amendments are not retroactive, the applicable version of 3730(e)(4) is the one that
was in force when the events underlying th[e] suit took place. Leveski v. ITT Education. Servs., 719
F.3d 818, 828 (7th Cir. 2013) (internal quotations omitted). Accordingly, the 1986 version applies to
allegedly fraudulent reporting that occurred before March 23, 2010, and the 2010 version applies to
fraudulent reporting that occurred thereafter. See id.
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the * * * claim is and the grounds upon which it rests. Erickson v. Pardus, 551 U.S. 89, 93
(2007) (citing Twombly, 550 U.S. at 555) (ellipsis in original). The Court reads the complaint
and assesses its plausibility as a whole. See Atkins v. City of Chi., 631 F.3d 823, 832 (7th Cir.
2011).
The standard that the Court applies to a Rule 12(b)(1) motion to dismiss for lack of
subject matter jurisdiction depends on the purpose of the motion. See Apex Digital, Inc. v. Sears,
Roebuck & Co., 572 F.3d 440, 44344 (7th Cir. 2009); United Phosphorus, Ltd. v. Angus Chem.
Co., 332 F.3d 942, 946 (7th Cir. 2003) (en banc), overruled on other grounds by MinnChem,
Inc. v. Agrium, Inc., 683 F.3d 845 (7th Cir. 2012). If a defendant challenges the sufficiency of
the allegations regarding subject matter jurisdiction (as is the case here), the Court accepts all
well-pleaded factual allegations as true and draw all reasonable inferences in favor of the
plaintiff. See Apex Digital, 572 F.3d at 44344; United Phosphorus, 322 F.3d at 946. Where
jurisdiction is in question, the party asserting a right to a federal forum has the burden of proof,
regardless of who raised the jurisdictional challenge. Craig v. Ontario Corp., 543 F.3d 872,
876 (7th Cir. 2008); see also Reed v. Illinois, 2014 WL 917270, at *2 (N.D. Ill. Mar. 10, 2014).
III.
Analysis
Relators allegations of fraudulent revenue mile reporting are based on the Technical
Report and the Auditor Generals Report. See Compl. (attaching as exhibits the reports and
Rubins affidavit). Defendant argues that the reports qualify as public disclosures and require
dismissal of the complaint because Relator is not an original source of the information. Under
3730(e)(4)(A), a case is barred if substantially the same3 allegations or transactions as alleged in
The 1986 version of this provision deprives the court of jurisdiction over an action that is based upon
the public disclosure of the allegations. See 3730(e)(4)(A) (1986) (emphasis added). The Seventh
Circuit interpreted based upon to mean substantially similar to the allegations already in the public
domain. See Glaser v. Wound Care Consultants, Inc., 570 F.3d 907, 910 (7th Cir. 2009). Thus, the 2010
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the action or claim were publicly disclosed * * * unless * * * the person bringing the action is an
original source of the information. This provision is meant to deter parasitic qui tam actions.
Glaser, 570 F.3d at 913. [W]here a public disclosure has occurred, that authority is already in a
position to vindicate societys interests, and a qui tam action would serve no purpose. Id. at 913
(internal citations and quotations omitted). Accordingly, once information becomes public, only
the Attorney General and an original source relator may represent the United States. Id. at 913.
The 1986 version of the statute defines an original source as 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. 3730(e)(4)(B).
Under the amended version, a relator must establish either (1) that prior to a public disclosure he
voluntarily disclosed to the Government the information on which the allegations or transactions
in a claim are based, or (2) that he has knowledge that is independent of and materially adds to
the publicly disclosed allegations or transactions and has voluntarily provided the information to
the government before filing an action. 3730(e)(4)(B).
Courts conduct a three-step inquiry to determine whether a suit may be maintained under
3730(e)(4). See Glaser, 570 F.3d at 913. First, the court asks whether the allegations have
been publicly disclosed. Id. If so, it next asks whether the lawsuit is based upon (i.e. is
substantially the same as) those publicly disclosed allegations. See id. If it is, the court
determines whether the relator is an original source of the information upon which its lawsuit is
based. Id.
Here, however, the only issue in dispute is whether Relators allegations were publicly
disclosed. Relator did not respond to Defendants argument that the complaint allegations are
substantially the same as the Technical Report and the Auditor Generals Report, nor did Relator
amendments expressly incorporate the Seventh Circuit standard. Leveski, 719 F.3d at 828, n.1.
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contest Defendants assertion that it does not qualify as an original source. See Relators Oppn.
Relator has accordingly conceded these points. See Bonte v. U.S. Bank, N.A., 624 F.3d 461, 466
(7th Cir. 2010) (Failure to respond to an argument * * * results in waiver and a partys
silence in response to an argument leads to the conclusion that a point is conceded).
Additionally, while the complaint alleges in conclusory fashion that Relator is an original source,
see Compl. 15, 19, it provides no factual allegations in support and thus fails to sufficiently
allege that it qualifies. Accordingly, the Court turns to whether there was a public disclosure by
the time that Relator filed its complaint in May 2012.
[T]he function of a public disclosure is to bring to the attention of the relevant authority
that there has been a false claim against the government. U.S. ex rel. Feingold v. AdminaStar
Fed., Inc., 324 F.3d 492, 495 (7th Cir. 2003). The Seventh Circuit has explained that a qui tam
action serves no purpose when the relevant authority is already in a position to vindicate
societys interest. See, e.g., Glaser, 570 F.3d at 913; Feingold, 324 F.3d at 495. A public
disclosure thus occurs when the critical elements exposing the transaction as fraudulent are
placed in the public domain. Glaser, 670 F.3d at 913 (quoting Feingold, 324 F.3d at 495).
Both versions of 3730(e)(4) contain three categories of disclosures that preclude a
relator from maintaining a claim. (At issue here is the second disclosure category.). The 1986
version provides for dismissal if the action is based upon disclosure of allegations or
transactions:
[1] in a criminal, civil, or administrative hearing,
[2] in a congressional, administrative, or Government Accounting Office report,
hearing, audit, or investigation, or
[3] from the news media[].
3730(e)(4)(A) (1986) (Arabic numerals added). Under the 2010 version, a claim must be
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dismissed if allegations 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[.]
3730(e)(4)(A) (emphasis added). In short, whereas the 1986 version of the statute included
disclosures made in state and local contexts, see Graham Cnty Soil and Water Conservation Dist.
v. U.S. ex rel. Wilson, 559 U.S. 280, 301 (2010), the amended version is limited to disclosures in
federal contexts. As discussed earlier, the 1986 version of the statute applies to allegations of
fraud that occurred before March 23, 2010, and the 2010 version applies to events thereafter.4
For the reasons that follow, public disclosures have occurred that bar this action.
First, under both versions of the statute, the allegations in the complaint were publicly
disclosed in a federal investigation, see 3730(e)(4)(A)(ii), when the Federal Transit
Administration sent its letter to the CTA discussing the inaccurate reporting of revenue miles and
requesting that the CTA revise the reporting of revenue miles for reporting year 2011. See
Glaser, 570 F.3d at 91314. In Glaser, allegations of improper Medicaid billing were publicly
disclosed after a federal Medicare and Medicaid agency sent a letter to the defendant requesting
repayment for improper use of billings codes. See id. Like the letter in Glaser, the FTA Letter
indicates an active investigation by federal authorities to recover funds that Defendant should not
have received. See id. This is sufficient to trigger the public disclosure bar because:
the purpose of a public disclosure is to alert the responsible authority that fraud
4
Relator urges the Court to apply the 2010 amendments retroactively for various reasons. Relators
Oppn at 8. Seventh Circuit and Supreme Court precedent on this very topic preclude the Court from
doing so. See U.S. ex rel. Health v. Wisconsin Bell, Inc., 760 F.3d 688, 690, n.1 (7th Cir. 2014) ([T]he
amendment [to the public disclosure provision] was not retroactive.) (citing Graham Cnty, 559 U.S. at
283, n.1).
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may be afoot, and that purpose is served where that authority itself issued
[documents] containing information that substantiates an allegation of fraud. This
is not a case where the government was simply aware of [defendants] billing
practices. Rather, the appropriate entity responsible for investigating claims of
Medicare abuse had knowledge of possible improprieties with [defendants]
billing practices and was actively investigating those allegations and recovering
funds.
Id. at 914 (internal quotations and citations omitted).
Here, the complaint alleges that Thomas Rubin, a member of the Illinois audit team,
alerted the Department of Transportation to the CTAs inaccurate reporting in 2009. See Rubin
Aff., Compl., Ex. 2; Compl. 54. At some point, the Federal Transit Administration began an
in-depth review, of the CTAs reporting practices. See FTA Letter, Relators Oppn, Ex. 1.
As part of its investigation, the FTA asked the CTA for various information and received an
October 2011 memorandum from the CTA as well as detailed data on the patterns and blocks
used by CTA to schedule its buses, which the FTA studied and analyzed. See id. After its
review, the FTA determined that the CTA needed to revise its data for the 2011 reporting year to
ensure the application of a consistent definition of revenue service across all transit
systems[.] See id. Such actions amount to precisely the type of active investigation that the
Seventh Circuit identified in Glaser. See 570 F.3d at 914. Accordingly the CTAs inaccurate
reporting was publicly disclosed in the FTAs investigation by the time the complaint was filed
in May 2012.
As to the Illinois Auditor Generals Report and Rubins Technical Report, Relator does
not contest that they qualify as disclosures under the 1986 version of 3730(e)(4). As discussed
earlier, the purpose behind a public disclosure is to bring a false claim to the attention of the
relevant authorities. Accordingly, a disclosure to a public official with direct responsibility for
the allegations at issue qualifies under 3730(a)(4)(e). See U.S. v. Bank of Farmington, 166
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F.3d 853, 861 (7th Cir. 1999). Likewise, administrative reports that contain information that
substantiates allegations of fraud are public disclosures.
See Feingold, 324 F.3d at 496
(Administrative reports are publicly disclosed because, by their very nature, they establish the
relevant agencys awareness of the information in those reports.).
Here, the complaint alleges that Rubin told the Department of Transportation Office of
Inspector General about the inaccurate reporting and presented the office with a copy of the
Technical Report. Given that the Inspector General is charged with investigating fraud, see 5
U.S.C. App. 3, 2, and thus has responsibility for the claim in question, Rubins disclosure of
his findings during the Illinois performance audit comes within the scope of 3730(e)(4)(A)
(1986). See Bank of Farmington, 166 F.3d at 861. The Illinois Auditor Generals Report, which
discusses the CTAs inaccurate reporting, also qualifies as a public disclosure as it indicates that
a responsible authority was alerted that fraud may be afoot. See Feingold, 324 F.3d at 496.
Not contesting that the reports in fact qualify, Relator instead contends that the Court
should constru[e] an effectiveness requirement from the disclosure bar and find that without
effective public disclosure * * * the public disclosure bar is rendered inert. Relators Oppn at
15. Relator argues that it should be allowed to pursue the case because the governments failure
to intervene was unwise and may reflect improprieties or bad faith on the part of government
officials.
See id. at 1517.
Relator cites no case law in support ofwhat it termsan
alternative interpretation of the FCA. See id. at 1519. Relator rather points only to the
history of the FCA and the fact that two people who formerly worked for the CTA now work in
the White House and for the Department of Transportation. See id. at 1617.
In the face of ample Seventh Circuit precedent interpreting public disclosure, the Court
cannot entertain Relators argument that it should import an additional requirement that is not
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present in the statute. See e.g., Feingold, 324 F.3d at 49596 (interpreting 3730(e)(4)(A) and
holding that a public disclosure is effectuated when the critical elements exposing the
transaction as fraudulent are placed in the public domain, which includes the responsible
authority issuing information that substantiates an allegation of fraud).
Accordingly, Relators action is barred under both versions of 3730(e)(4) because the
allegations were publicly disclosed when Relator filed its complaint.
IV.
Conclusion
For the foregoing reasons, Defendants motion to dismiss [42] is granted. Relators
complaint [3] is dismissed. The case is set for status hearing on 11/06/14 at 9:00 a.m. at which
time the Court will discuss with counsel whether entry of a final judgment is appropriate at this
time.
Dated: October 20, 2014
_____________________________
Robert M. Dow, Jr.
United States District Judge
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IN THE UNITED STATES DISTRICT COURT
FOR THE
NORTHERN DISTRICT OF ILLINOIS
Cause of Action ,
Plaintiff(s),
Case No. 12 cv 9673
Judge Robert M. Dow
v.
Chicago Transit Authority,
Defendant(s).
JUDGMENT IN A CIVIL CASE

Judgment is hereby entered (check appropriate box):
in favor of plaintiff(s)
and against defendant(s)
in the amount of $
,
which
includes
prejudgment interest.
does not include prejudgment interest.
Post-judgment interest accrues on that amount at the rate provided by law from the date of this judgment.
Plaintiff(s) shall recover costs from defendant(s).
in favor of defendant(s) Chicago Transit Authority

and against plaintiff(s) Cause of Action
.
Defendant(s) shall recover costs from plaintiff(s).
other:
This action was (check one):
tried by a jury with Judge
presiding, and the jury has rendered a verdict.
tried by Judge
without a jury and the above decision was reached.
decided by Judge Robert M. Dow on a motion to dismiss for lack of jurisdiction [42].
Date: 12/23/2014
Thomas G. Bruton, Clerk of Court

/s/ Theresa Kinney , Deputy Clerk
SA-13
Case: 15-1143
Document: 5
Filed: 03/04/2015
Pages: 54
CERTIFICATE OF SERVICE
I hereby certify that on this 4th day of March 2015, I electronically filed the foregoing
Opening Brief of Plaintiff-Appellant Cause of Action and Short Appendix with the Clerk of the
Court for the United States Court of Appeals for the Seventh Circuit using the CM/ECF system.
I certify that all participants in the case are registered CM/ECF users and that service will be
accomplished by the CM/ECF system.

PRASHANT K. KHETAN
Suite 650
(202) 499-4232

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Doc. No. 5 Opening Brief and Required Short Appendix of Plaintiff-Appellant Cause of Action 4813-7242-7042 v.1

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Case: 15-1143

IN THE UNITED STATES COURT OF APPEALS

Counsel for Cause of Action

CIRCUIT RULE 26.1 AMENDED DISCLOSURE STATEMENT

/s/ Prashant K. Khetan

Attorney's Printed Name:

Date: March 4, 2015

1919 Pennsylvania Ave., NW

Fax: (202) 330-5842

Reporting Chronology ............................................................................................ 6

The District Court Case .......................................................................................... 8

SUMMARY OF ARGUMENT ...................................................................................................... 8

Standard of Review. .......................................................................................................... 10

Construction Should Be Anchored In Statutory Text. .......................................... 12

Bank of Farmington Should Not Control.................................................. 14

If The Court Applies Bank of Farmington, It Also Must Apply Glaser... 16

The Audit Report was not a public disclosure. ......................................... 18

The Memo was not a public disclosure..................................................... 20

The FTA letter was not a public disclosure. ............................................. 22

FTAs Letter Is Not Substantially Similar To The Complaint ............................. 24

Cause Of Action Is An Original Source. .......................................................................... 26

31 U.S.C. 3729 ............................................................................................................................. 1

Plaintiff-Appellant Cause of Action is an independent non-profit, non-partisan

The District Court Case

The Public Disclosure Bar Does Not Apply In This Case.

31 U.S.C. 3730(e)(4)(A) (2010). 9

Bank of Farmington Should Not Control.

If The Court Applies Bank of Farmington, It Also Must Apply Glaser.

The Audit Report was not a public disclosure.

The Memo was not a public disclosure.

The FTA letter was not a public disclosure.

FTAs Letter Is Not Substantially Similar To The Complaint.

Cause Of Action Is An Original Source.

This brief complies with the type-volume limitation of Fed. R. App. P.

STATEMENT PURSUANT TO CIRCUIT RULE 30(D)

STATEMENT REGARDING ORAL ARGUMENT

/s/ Prashant K. Khetan________

IN THE UNITED STATES COURT OF APPEALS

Counsel for Cause of Action

Case: 1:12-cv-09673 Document #: 61 Filed: 10/20/14 Page 1 of 12 PageID #:685

IN THE UNITED STATES DISTRICT COURT

Case No. 12 CV 9673

MEMORANDUM OPINION AND ORDER

Factual and Procedural Background1

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Two reports discussing the

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3730(e)(4)(A) (emphasis added).

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dismissed if allegations were publicly disclosed:

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See Feingold, 324 F.3d at 496

See id. at 1517.

Relator cites no case law in support ofwhat it termsan

Case: 1:12-cv-09673 Document #: 61 Filed: 10/20/14 Page 12 of 12 PageID #:696

Dated: October 20, 2014

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JUDGMENT IN A CIVIL CASE