US ex rel. Mike Ahumada v. NISH

PUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 13-1672

UNITED STATES EX REL. MIKE AHUMADA,

Plaintiff – Appellant,

and

ERIC H. HOLDER, JR., Attorney General,

Plaintiff,

v.

NISH; GREEN BAY PACKAGING INC.; INTERNATIONAL PAPER
COMPANY, INCORPORATED; SMURFIT−STONE CONTAINER CORPORATION;
WEYERHAEUSER COMPANY,

Defendant – Appellees,

and

NATIONAL CENTER FOR EMPLOYMENT OF THE DISABLED, now known
as ReadyOne Industries; BOB JONES, a/k/a Robert E. Jones;
DOES 1−100,

Defendants.

Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. Claude M. Hilton, Senior
District Judge. (1:06-cv-00713-CMH-TCB)

Argued: March 20, 2014 Decided: June 23, 2014

Before NIEMEYER and DIAZ, Circuit Judges, and HAMILTON, Senior
Circuit Judge.
Affirmed by published opinion. Judge Diaz wrote the opinion, in
which Judge Niemeyer and Senior Judge Hamilton joined.

ARGUED: Martin E. Restituyo, LAW OFFICES OF MARTIN E. RESTITUYO,
New York, New York, for Appellant. Robert Carton Weaver, Jr.,
GARVEY SCHUBERT BARER, Portland, Oregon; Matthew Allen
Fitzgerald, MCGUIREWOODS, LLP, Richmond, Virginia, for
Appellees. ON BRIEF: Victor M. Glasberg, VICTOR M. GLASBERG &
ASSOCIATES, Alexandria, Virginia; Mark C. Rifkin, WOLF
HALDENSTEIN ADLER FREEMAN & HERZ LLP, New York, New York, for
Appellant. Charles William McIntyre, Jr., Franklin Darley
Annand, Washington, D.C., Jeremy S. Byrum, MCGUIREWOODS, LLP,
Richmond, Virginia; Seth A. Rosenthal, Washington, D.C., Michael
Wayne Robinson, VENABLE, LLP, Tysons Corner, Virginia; John
Francis Henault, Jr., PERKINS COIE, LLP, Washington, D.C.; Paul
H. Trinchero, Benjamin J. Lambiotte, GARVEY SCHUBERT BARER,
Portland, Oregon; Lynn F. Jacob, WILLIAMS MULLEN, P.C.,
Richmond, Virginia, for Appellees.

2
DIAZ, Circuit Judge:

Mike Ahumada, as relator, filed this qui tam action on

behalf of the United States under the False Claims Act (“FCA”),

31 U.S.C. §§ 3729 et seq. In his first amended complaint,

Ahumada alleges that his former employer, the National Center

for Employment of the Disabled (“NCED”), along with other

defendants, defrauded the government through various schemes in

connection with contracts pursuant to the Javits-Wagner-O’Day

Act, 41 U.S.C. §§ 8501 et seq. Specifically, Ahumada alleges

that NCED conspired with its suppliers and an overseeing

nonprofit to skirt applicable regulations and overcharge the

government.

After NCED and its former CEO settled, the district court

dismissed Ahumada’s claims against the remaining defendants. It

held that the FCA’s public-disclosure bar precluded subject-

matter jurisdiction and that Ahumada had not stated any viable

claims. Ahumada now appeals that dismissal, as well as the

district court’s denial of his motion for leave to file a second

amended complaint. For the reasons that follow, we affirm.

I.

A.

From February to July of 2004, NCED employed Ahumada as a

Vice President and General Manager. NCED, a nonprofit

3
corporation, produces a number of products--including military

apparel and corrugated boxes--that it sells to agencies of the

U.S. government. These sales occur pursuant to contracts under

the Javits-Wagner-O’Day Act.

The Javits-Wagner-O’Day Act establishes a government

contracting program (the “JWOD program”) to promote “employment

and training opportunities for persons who are blind or have

other severe disabilities.” 41 C.F.R. § 51-1.1(a). To that

effect, the Act created the Committee for Purchase from People

who are Blind or Severely Disabled (the “Committee”), which

makes and maintains a “procurement list” of products and

services eligible for purchase from “qualified nonprofit

agencies.” 41 U.S.C. §§ 8502, 8503. If “[a]n entity of the

Federal Government intend[s] to procure a product or service on

the procurement list,” it must do so from such a nonprofit at a

market price established by the Committee. Id. § 8504. To

qualify for participation in the program, a nonprofit must

certify, on an annual basis, that it “employs blind or other

severely disabled individuals for at least 75 percent of the

hours of direct labor required for the production or provision

of the products and services.” Id. § 8501(6)(C).

To coordinate the participation of nonprofits, the

Committee appointed the National Industries for the Severely

Handicapped (“NISH”) to serve as the JWOD program’s “central

4
nonprofit agency.” See id. § 8503(c). In this role, NISH was

responsible for “[e]valuat[ing] the qualifications” of other

nonprofits that sought to participate in the program, and for

assigning them contracts “in a fair and equitable manner.” 41

C.F.R. §§ 51-3.2(b), 51-3.4. NISH was also charged with

“monitor[ing]” the participating nonprofits to ensure their

compliance with “the statutory and regulatory requirements [of]

the program.” Id. § 51-3.2(j).

Beginning in October 2005--about eight months before

Ahumada filed his initial complaint in this case--The Oregonian,

a Portland-based newspaper, published a series of articles

describing questionable practices within the JWOD program.

Among other issues, the articles alleged that NCED was receiving

payment on JWOD contracts despite failing to employ the

requisite percentage of disabled workers. The articles

attributed at least some of the problems in the program to lax

oversight by NISH.

The El Paso Times published the first in a similar series

of articles that November. Its articles reported that the

Committee had begun investigating NCED for its perceived lack of

compliance with JWOD labor requirements. The articles further

alleged that certain NCED suppliers, including International

Paper Co. (“IPC”), Green Bay Packaging, Inc., and Smurfit-Stone

Container Corp., helped NCED skirt JWOD regulations by providing

5
NCED with finished products rather than component parts. See 41

C.F.R. § 51-4.4(d) (prohibiting JWOD-participating nonprofits

from “subcontract[ing] the entire production process for all or

a portion of an order without the Committee’s prior approval”).

The articles reported that NCED then resold these products to

the government under the pretense that they were produced

entirely by disabled NCED employees. The allegations reported

in the two newspapers were also the subject of a television

documentary.

In the wake of this publicity, the FBI launched a criminal

investigation that resulted in the indictments of three NCED

executives. Bob Jones and Patrick Woods--NCED’s former CEO and

former Board President--ultimately pleaded guilty to various

fraud and embezzlement charges. In 2010, a jury convicted

NCED’s former COO, Ernie Lopez, of making false statements and

conspiracy to defraud the government.

B.

On June 20, 2006, Ahumada filed this qui tam suit under the

FCA against NCED, Jones, and one-hundred John Doe defendants in

the U.S. District Court for the Eastern District of Virginia.

The complaint alleged that, between 1999 and 2006, Jones and

NCED engaged in a series of schemes to defraud the government,

primarily by receiving payments on JWOD contracts despite

failing to comply with JWOD regulations. Ahumada later filed a

6
first amended complaint alleging that NCED: (1) falsely

represented its compliance with JWOD’s disabled-labor

requirements; (2) falsely represented that it produced certain

products it sold to the government; and (3) overcharged the

government.

The first amended complaint also named several additional

defendants, including NISH and four NCED suppliers: IPC, Green

Bay, Smurfit, and Weyerhaeuser Co. (collectively, the “supplier

defendants”). Ahumada alleged that NISH knew that NCED was not

complying with JWOD requirements but continued to assign it

contracts to improve NISH’s own bottom line. He also alleged

that the supplier defendants conspired with NCED and facilitated

its fraud by issuing artificially inflated invoices, and, later,

providing rebates; falsely billing NCED for raw materials

despite actually providing finished or nearly finished products;

and falsely stamping finished products with NCED’s box

manufacturing certificate. According to Ahumada, the supplier

defendants engaged in this conduct while knowing--and attempting

to conceal--that NCED was not complying with JWOD regulations.

Per its statutory mandate, the United States intervened in

Ahumada’s suit with respect to defendants NCED and Jones. See

31 U.S.C. § 3730(b)(2). Both eventually settled with the

government and Ahumada. The United States chose not to

intervene with respect to the claims against NISH and the

7
supplier defendants, and those parties moved to dismiss

Ahumada’s suit.

In support of their motions to dismiss, NISH and the

supplier defendants advanced two primary arguments. First, they

argued that the district court lacked subject-matter

jurisdiction pursuant to the FCA’s “public-disclosure bar.” See

31 U.S.C. § 3730(e)(4)(A) (2006). This provision precludes

subject-matter jurisdiction over claims “based upon” publicly

disclosed allegations unless the relator is an “original

source.” Id. Second, they argued that the first amended

complaint suffered from various pleading defects. In response,

Ahumada moved for leave to file a proposed second amended

complaint.

The district court granted the defendants’ motions to

dismiss. See United States ex rel. Ahumada v. Nat’l Ctr. for

Emp’t of the Disabled, No. 1:06-cv-713, 2013 WL 2322836 (E.D.

Va. May 22, 2013). The court held that the first amended

complaint was “devoid of any particularized facts” and therefore

failed to plead fraud with the particularity required by Federal

Rule of Civil Procedure 9(b). Id. at *3-*4. Specifically, it

did not identify the “who, what, when, where and how” of the

alleged false claims. Id. at *3 (internal quotation marks

omitted). The court also held that the first amended

complaint’s “general[]” and “conclusory” allegations were

8
insufficient because they adequately alleged neither scienter--

“an essential element of any FCA claim”--nor the specific

elements of a conspiracy. Id. at *4.

As an alternative basis for dismissal, the court held that

the public-disclosure bar deprived it of subject-matter

jurisdiction. In the court’s view, “[t]he allegations [in the

first amended complaint] clearly track the news media stories

[which] appear[] to be the basis of [Ahumada’s] claim.” Id. at

*6. Furthermore, the court held that Ahumada had not

established that he was an “original source”--so as to avoid the

public-disclosure bar--because he failed to demonstrate that he

possessed “direct and independent knowledge” of the information

underlying the allegations. Id.

Finally, the district court denied Ahumada leave to amend.

It explained that the proposed amendments “fail[ed] to cure the

deficiencies . . . in the [first amended complaint]” and were

therefore futile. Id. at *7. Because “[t]he specific details

added to the [second amended complaint] [were] all information

that c[ould] be found in the public domain,” the court

determined that the new pleading was “likewise based upon a

public disclosure.” Id.

Ahumada appealed, and we exercise jurisdiction pursuant to

28 U.S.C. § 1291.

9
 II.

Although Ahumada nominally challenges the district court’s

order dismissing the first amended complaint, his arguments on

appeal center on the sufficiency of the allegations in the

second. In essence, rather than directly challenge the district

court’s dismissal of the first amended complaint, Ahumada argues

that the district court should have granted him leave to amend,

which he contends would have cured any pleading or

jurisdictional defects. We thus consider the issues presented

by this appeal solely through the prism of Ahumada’s proposed

second amended complaint, ultimately seeking to determine

whether the district court erred in concluding that it was

futile.

Generally, we review a district court’s denial of a motion

for leave to amend for abuse of discretion. See US Airline

Pilots Ass’n v. Awappa, LLC, 615 F.3d 312, 320 (4th Cir. 2010).

But where, as here, the district court denied such a motion on

grounds of futility, we employ the same standard that would

apply to our review of a motion to dismiss. See Pollard v.

Pollard, 325 F. App’x 270, 272 (4th Cir. 2009); see also Platten

v. HG Bermuda Exempted Ltd., 437 F.3d 118, 132 (1st Cir. 2006).

Thus, we review de novo the district court’s legal conclusion

that Ahumada’s proposed amendments “fail[ed] to cure the

deficiencies . . . in the [first amended complaint]”: namely,

10
that the complaint failed to state a claim on which relief could

be granted and failed to overcome the FCA’s public-disclosure

bar. 1 See Ahumada, 2013 WL 2322836, at *7.

III.

We first consider whether the FCA’s public-disclosure bar

rendered the second amended complaint futile by precluding

subject-matter jurisdiction. We hold that the public-disclosure

bar deprived the district court of jurisdiction over the claims

against all of the appellees except Weyerhaeuser.

A.

At the time Ahumada filed this action, the FCA’s public-

disclosure bar provided that “[n]o court shall have jurisdiction

over an action under [the FCA] based upon the public disclosure

of allegations or transactions . . . unless . . . the person

bringing the action is an original source of the information.” 2

31 U.S.C. § 3730(e)(4)(A) (2006). Qualifying public disclosures

1
We review any factual findings underlying the district
court’s analysis of the public-disclosure bar--a jurisdictional
defense--for clear error. See United States ex rel. Rostholder
v. Omnicare, Inc., 745 F.3d 694, 699 (4th Cir. 2014).
2
Congress amended the public-disclosure bar in 2010, but
those amendments are not retroactive. The prior version of the
statute applies to this action because it was filed before the
amendments’ enactment. See United States ex rel. May v. Purdue
Pharma L.P., 737 F.3d 908, 915-16 (4th Cir. 2013) (citing Graham
Cnty. Soil & Water Cons. Dist. v. United States ex rel. Wilson,
559 U.S. 280, 283 n.1 (2010)).

11
include those “from the news media” or “a criminal, civil, or

administrative hearing,” among others. Id. Once a defendant

files a motion to dismiss based on the public-disclosure bar,

the relator bears the burden of proving by a preponderance of

the evidence that the bar does not apply. See United States ex

rel. Vuyyuru v. Jadhav, 555 F.3d 337, 348 (4th Cir. 2009).

“Under this Court’s precedent, a qui tam action is based

upon publicly disclosed allegations only if the qui tam

plaintiff’s allegations were actually derived from the public

disclosure itself.” United States ex rel. Rostholder v.

Omnicare, Inc., 745 F.3d 694, 699 (4th Cir. 2014) (internal

quotation marks omitted). This stands in contrast to the

broader tests applied by our sister circuits, which generally

consider allegations to be “based upon” a public disclosure if

they “were ‘supported by’ or ‘substantially similar’ to fraud

that had been publicly disclosed.” United States ex rel. May v.

Purdue Pharma L.P., 737 F.3d 908, 918 (4th Cir. 2013); see also

United States ex rel. Ondis v. City of Woonsocket, 587 F.3d 49,

57 (1st Cir. 2009) (“[T]he Fourth Circuit [is] alone among the

courts of appeals in favoring a narrow reading of the ‘based

upon’ language.”). Notably, the public-disclosure bar

“encompasses actions even partly based upon”--i.e., partly

derived from--public disclosures. See Vuyyuru, 555 F.3d at 350-

51 (emphasis added).

12
 We easily conclude that Ahumada’s allegations are at least

partly based upon public disclosures. Ahumada barely argues

otherwise in his opening brief, stating in just a single

sentence that his “action is not based upon any public

disclosure” because “the only evidence in the record . . . is

that Ahumada has relied only upon his own personal knowledge.”

Appellant’s Br. at 17. To the contrary, however, the second

amended complaint itself plainly relies on public disclosures.

It explicitly references reporting from The Oregonian and El

Paso Times, and many of Ahumada’s allegations “appear to have

been lifted almost verbatim from” the various articles. 3 See

Ahumada, 2013 WL 2322836, at *6. Moreover, several of the

essential allegations constitute little more than direct

citations to testimony from the Lopez trial. Because that

information, at a minimum, appears to “actually derive” from

public disclosures, see Rostholder, 745 F.3d at 699, we have no

reason to disturb the district court’s factual finding that

3
Ahumada asserts that the references to the two newspapers
are inconsequential because he was in fact the newspapers’
source. But even if this is true, he does not seem to have been
their only source. In any event, Ahumada’s repeated reliance on
testimony from the Lopez trial (at which Ahumada did not
testify) is alone sufficient for us to conclude that the
allegations in the second amended complaint are at least partly
based upon a public disclosure.

13
public disclosures at least partly form “the basis of

[Ahumada]’s claim,” see Ahumada, 2013 WL 2322836, at *6.

B.

Even though his action is partly “based upon” public

disclosures, Ahumada may nevertheless avoid the public-

disclosure bar if he is an “original source” of the allegations.

See 31 U.S.C. § 3730(e)(4)(A) (2006); see also Rockwell Int’l

Corp. v. United States, 549 U.S. 457, 467 (2007) (describing

original-source status as an “exception” to the public-

disclosure bar). To qualify as an original source, a relator

must establish that he (1) has “direct and independent knowledge

of the information on which the allegations are based”; and (2)

“has voluntarily provided the information to the Government

before filing [the] action.” 31 U.S.C. § 3730(e)(4)(B) (2006).

1.

Considering the second requirement first, we conclude that

Ahumada has adequately established that he reported his

allegations to the government prior to filing suit. In an

affidavit he submitted in response to the defendants’ motions to

dismiss, Ahumada averred that, “around January 2006,” he met

with FBI agent Steve Chambers and “told him everything [he] knew

about all of the defendants.” J.A. 578. Similarly, the second

amended complaint itself alleges that, in an April 2006 meeting

with Chambers and agent Tom Murray, Ahumada “described in detail

14
the various schemes taking place at NCED that were being used to

defraud the government.” Id. at 232.

Rather than question the truth of these statements, NISH

and the supplier defendants object that they do not “establish

that [Ahumada] discussed any allegations against NISH or any

specific [supplier defendant] with the FBI.” 4 Appellees’ Br. at

27 n.8 (emphasis added). Similarly, they argue that “Ahumada

has not shown, with the requisite particularity, that he

informed the government about his specific allegations against

the remaining defendants.” Id. at 28 (emphasis added).

We think this asks too much. We agree that a relator may

not satisfy the original-source exception’s reporting

requirement through an ambiguous assertion that leaves open to

question whether the plaintiff actually reported information

relating to any particular claim or concerning any particular

defendant. But that is not the case here. Ahumada’s affidavit

4
NISH and the supplier defendants also note that any 2006
conversations with the FBI post-dated the publication of the
initial reports in The Oregonian and El Paso Times. But a
relator’s report to the government need only occur “before [he]
fil[ed] [the] action,” not before the public disclosure. See 31
U.S.C. § 3730(e)(4)(B); see also United States ex rel. Siller v.
Becton Dickinson & Co., 21 F.3d 1339, 1351 (4th Cir. 1994)
(stating that the relator must “provide the information to the
government before filing his qui tam action” (emphasis
omitted)). But see U.S. ex rel. McKenzie v. BellSouth
Telecomms., Inc., 123 F.3d 935, 942 (6th Cir. 1997) (“[A]
relator must inform the government of the alleged fraud before
the information has been publicly disclosed.”).

15
specifically states that he told the FBI “everything [he] knew

about all of the defendants.” J.A. 578 (emphasis added). Read

in conjunction with the second amended complaint’s allegations

(which of course name the defendants and outline in detail what

Ahumada knew), we find nothing ambiguous about this statement.

Requiring more would prove needlessly duplicative.

2.

Whether Ahumada has satisfied the original-source

exception’s “direct and independent knowledge” requirement is a

more complicated question.

Under our case law, a “relator’s knowledge is ‘direct’ if

he acquired it through his own efforts, without an intervening

agency, and it is ‘independent’ if the knowledge is not

dependent on public disclosure.” Grayson v. Adv. Mgmt. Tech.,

Inc., 221 F.3d 580, 583 (4th Cir. 2000). To establish that his

knowledge meets this standard, a relator must “allege specific

facts--as opposed to mere conclusions--showing exactly how and

when” he obtained it. See United States ex rel. Hafter v.

Spectrum Emergency Care, Inc., 190 F.3d 1156, 1162 (10th Cir.

1999). “A mere assertion of [direct and independent] knowledge,

without adequate basis in fact and unsupported by competent

proof,” will not establish jurisdiction. Id. at 1163.

In applying these standards, we note that the original-

source exception “does not permit . . . claim smuggling.”

16
Rockwell Int’l, 549 U.S. at 476. In other words, the fact that

“a relator is an original source with respect to some claim”

does not confer “jurisdiction in gross” over all of his claims.

Id. (emphasis added). For this reason, we separately address

the source of Ahumada’s knowledge with respect to his claims

against each defendant.

a. NISH

In his second amended complaint, Ahumada alleges that NISH

facilitated NCED’s fraud by ignoring NCED’s lack of compliance

with JWOD regulations. According to the complaint, NISH

representatives toured NCED facilities on three occasions (in

1999, 2002, and 2005), and these visits “would have disclosed

and did disclose that NCED did not employ significant numbers of

severely disabled individuals.” J.A. 250. Nevertheless, the

complaint alleges, NISH did not bar NCED from participating in

the JWOD program. Instead, NISH continued to certify NCED’s

compliance with JWOD labor requirements “each and every year.”

Id. Meanwhile, NISH’s own revenues increased by at least 86

percent. Accordingly, the second amended complaint concludes,

NISH “aided” NCED in “wrongfully profit[ing] from the United

States.” Id. at 253.

Even assuming these allegations are true, Ahumada has not

established that they are based on his direct and independent

knowledge. Ahumada worked at NCED for only six months in 2004,

17
so it is far from clear how he gained direct knowledge of the

NISH visits in 1999, 2002, and 2005. Ahumada has offered no

explanation for how he learned of these events. But nearly all

of the information appears in public disclosures. Indeed, the

second amended complaint itself explicitly cites testimony from

the Lopez trial for at least one of its allegations against

NISH.

Accordingly, without any other explanation from Ahumada, we

conclude that his knowledge necessarily derives from public

disclosures or some other “intervening agency.” Grayson, 221

F.3d at 583. The allegations against NISH therefore do not

avoid the public-disclosure bar.

b. Green Bay

So too with the claims against Green Bay. The substance of

Ahumada’s allegation against Green Bay is that it produced

“complete and nearly complete” products for NCED in violation of

NCED’s obligation to produce such products itself. See J.A.

257. According to the second amended complaint, Green Bay was

aware that NCED’s governments contracts “required direct labor”

by disabled employees, yet it sold NCED the finished products

anyway. See id. at 256-57.

As Ahumada forthrightly acknowledges, however, NCED did not

place orders with Green Bay until “after [Ahumada was]

terminated from employment by NCED.” Id. (emphasis added). To

18
support his allegation that Green Bay provided NCED with

finished products, Ahumada cites publicly disclosed testimony

from the Lopez trial. See id. at 257 (“Jose Rosales, Sales

Representative for Green Bay, testified at the criminal trial of

Ernie Lopez that commencing in February 2006, NCED ordered a

million postal sleeves from Green Bay.”). Accordingly, we

conclude that Ahumada is not an original source with respect to

the claims against Green Bay.

c. IPC

In contrast to Green Bay, IPC “was already making

containers for NCED” at the time Ahumada began working there.

Id. at 258. According to the second amended complaint, these

containers came from IPC’s San Antonio plant, rather than its El

Paso plant, because the general manager of the El Paso plant

“refused to go along with the illegal scheme of manufacturing

boxes that were supposed to be made by disabled individuals.”

Id. Thus, Ahumada asserts, IPC “unquestionably knew that NCED

was participating in the JWOD program . . . and that NCED was

not meeting the JWOD requirement.” Id.

To be sure, this allegation comes closer than the previous

ones to establishing Ahumada’s direct and independent knowledge.

But it nevertheless falls short of the mark. To support his

assertion that IPC “unquestionably knew” of NCED’s wrongdoing--

the scienter element of the FCA claim--Ahumada states that he

19
“was told that [IPC’s] General Manager . . . refused to go along

with the illegal scheme.” Id. (emphasis added). But he does

not state who told him this information--whether some third

party or an employee of IPC itself. See United States v. N.Y.

Med. Coll., 252 F.3d 118, 121 (2d Cir. 2001) (per curiam)

(noting that a relator is not an original source if “a third

party is the source of the core information on which the qui tam

complaint is based” (internal quotation marks and emphasis

omitted)). He thus has not established that his knowledge was

“direct,” rather than derived from an “intervening agency.” See

Grayson, 221 F.3d at 583.

Ahumada also alleges that IPC submitted to NCED eleven

invoices for “226,701 complete GSA boxes” in September and

October of 2004, after Ahumada informed an IPC representative of

NCED’s fraudulent conduct. J.A. 258. These boxes, Ahumada

alleges, “were stamped with NCED’s [box manufacturing

certificate], falsely making it appear that the boxe[s] were

manufactured by NCED in compliance with the JWOD . . . labor

requirements.” Id. But Ahumada offers no basis on which he

could have known such detailed information directly. In fact,

because the invoices Ahumada cites were issued after he left

NCED in July 2004, this information almost certainly derives

from public disclosures or some other intervening agency. Cf.

Rockwell Int’l, 549 U.S. at 475 (concluding that the relator did

20
not possess direct and independent knowledge “[b]ecause [he] was

no longer employed by [the defendant]” at the time the alleged

fraud occurred). Likely confirming as much, the same page of

the second amended complaint explicitly cites testimony from the

Lopez trial.

In sum, because Ahumada has not established that his

allegations against IPC are based on his direct and independent

knowledge, he does not qualify as an original source.

d. Smurfit

Ahumada’s allegations against Smurfit are much like those

against Green Bay: Ahumada alleges that Smurfit began filling

“large orders for complete or nearly complete containers” only

“[a]fter [Ahumada] was terminated by NCED.” J.A. 260 (emphasis

added). Paragraph 145 of the second amended complaint does

further allege that, after Ahumada was terminated, he informed

Smurfit representatives of NCED’s illegal conduct. But it again

provides no explanation for how Ahumada directly knew that

Smurfit “continued to make complete containers” for NCED. See

id. Moreover, the next paragraph of the complaint again cites

testimony from the Lopez trial, strongly suggesting that this

public disclosure was in fact the source of Ahumada’s knowledge.

Ahumada is therefore not an original source with respect to the

Smurfit allegations either.

e. Weyerhaeuser

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 Ahumada’s primary allegation against Weyerhaeuser is that,

during the time that Ahumada worked at NCED, it “provided NCED

with raw sheets as well as complete or nearly complete boxes.”

Id. at 261. According to the second amended complaint, Ahumada

met with Steve Cartmill, a Weyerhaeuser sales manager, “on many

occasions during this period” and took him on tours of the NCED

facility. Id. On these tours, Cartmill allegedly saw that NCED

failed to employ a sufficient number of disabled workers. The

complaint further alleges that Cartmill told Ahumada that

Weyerhaeuser was issuing artificially inflated invoices to NCED

and later providing rebates, and that NCED had requested

Weyerhaeuser to bill for raw sheets rather than complete boxes

it actually provided. Based on these allegations, Ahumada

asserts that Weyerhaeuser “facilitate[d] NCED’s defrauding of

the Government.” Id. at 262.

Thus, in contrast to many of the allegations against the

other defendants, Ahumada learned the facts underlying the

Weyerhaeuser allegations directly through the course of his

employment with NCED. See United States ex rel. Barajas v.

Northrop Corp., 5 F.3d 407, 411 (9th Cir. 1993) (finding that

the relator’s knowledge “was direct and independent because he

acquired it during the course of his employment”). To be sure,

the information Ahumada alleges he learned from Cartmill might

in some sense be characterized as secondhand. But Cartmill was

22
an employee of Weyerhaeuser itself, not an “intervening agency”

or “third party.” See Grayson, 221 F.3d at 583 (emphasis

added); see also N.Y. Med. Coll., 252 F.3d at 121. And, as

further support for his original-source status, Ahumada alleges

that he independently confirmed what Cartmill told him about

Weyerhaeuser’s billing practices through his own inquiry with

NCED’s Controller.

Because Ahumada’s knowledge derived from an admission the

defendant made to him during the course of Ahumada’s employment-

-an admission Ahumada then confirmed “through his own efforts”--

we believe it is sufficiently direct to satisfy the original-

source exception. 5 See Grayson, 221 F.3d at 583; see also United

States ex rel. Devlin v. California, 84 F.3d 358, 360 (9th Cir.

1996) (explaining that a relator’s knowledge is direct and

independent if he “discovered the information underlying his

allegations . . . through his own labor”). Accordingly, the

district court did not lack subject-matter jurisdiction over

Ahumada’s claims against Weyerhaeuser.

5
Although the second amended complaint again refers to
testimony from the Lopez trial, it notes only that the testimony
“corroborated” Ahumada’s allegations against Weyerhaeuser. J.A.
261. In other words, the allegations neither derive from the
testimony nor directly rely on it. In any event, Ahumada
accused Weyerhaeuser of wrongdoing before the Lopez trial began.
And no other public disclosure in the record even mentions
Weyerhaeuser.

23
 C.

To summarize, we hold that the public-disclosure bar

deprives the district court of jurisdiction over Ahumada’s

claims against NISH, Green Bay, IPC, and Smurfit. With respect

to those defendants, the district court correctly determined

that Ahumada’s proposed amendments to his first amended

complaint were futile. Because the public-disclosure bar does

not preclude jurisdiction over the claims against Weyerhaeuser,

however, we must also consider the separate question of whether

those claims were adequately pleaded.

IV.

A.

As relevant here, 6 Ahumada asserts claims against

Weyerhaeuser pursuant to three separate provisions of the FCA--

specifically, those imposing liability against a person who:

(1) knowingly presents, or causes to be presented, [to
the government] a false or fraudulent claim for
payment or approval;

6
Ahumada also asserted a claim against Weyerhaeuser for so-
called “reverse” false claims. See 31 U.S.C. § 3729(a)(7)
(2006). But by failing to discuss that claim in his brief,
Ahumada has effectively abandoned it on appeal. See United
States v. Al-Hamdi, 356 F.3d 564, 571 n.8 (4th Cir. 2004)
(“[C]ontentions not raised in the argument section of the
opening brief are abandoned.”). As Ahumada’s brief also
neglects to mention the one-hundred John Doe defendants, his
claims against them are likewise abandoned.

24
 (2) knowingly makes, uses, or causes to be made or
used, a false record or statement to get a false or
fraudulent claim paid or approved by the Government;
[and]

(3) conspires to defraud the Government by getting a
false or fraudulent claim allowed or paid.

31 U.S.C. § 3729(a) (2006). 7 Under the first two of these

provisions, we have held that a relator must “plausibly allege

four distinct elements: (1) there was a false statement or

fraudulent course of conduct; (2) made or carried out with the

requisite scienter; (3) that was material;” and (4) that

“involved a claim” made to the government for payment.” 8

7
Amendments to the FCA enacted in 2009 slightly alter the
text of each of these provisions, and the second amended
complaint cites the amended versions. Like the 2010 amendments,
however, the 2009 amendments are generally not retroactive. See
Fraud Enforcement and Recovery Act of 2009, Pub. L. No. 111-21,
§ 4(f), 123 Stat. 1617, 1625 (“The amendments made by this
section shall take effect on the date of enactment . . . and
shall apply to conduct on or after the date of enactment
. . . .”).

That said, the changes to § 3729(a)(2), specifically, apply
to “all claims under the False Claims Act . . . pending on or
after [June 7, 2008].” See id. § 4(f)(1). And a circuit split
has arisen over whether “claims . . . pending,” in this context,
refers to underlying claims for payment from the government or
the legal claims presented in the action itself. See, e.g.,
Sanders v. Allison Engine Co., 703 F.3d 930, 940 (6th Cir.
2012), cert. denied, 133 S. Ct. 2855 (collecting cases on both
sides of the split). We need not address that issue here,
however, because the changes to the text do not affect our
analysis of the adequacy of Ahumada’s allegations.
8
We have previously framed the fourth element as requiring
proof that that the false statement “caused the government to
(Continued)
25
Rostholder, 745 F.3d at 700 & n.6 (internal quotation marks and

alterations omitted). To plead a claim for an FCA conspiracy,

the relator must allege that the conspirators “agreed that [a]

false record or statement would have a material effect on the

Government’s decision to pay [a] false or fraudulent claim.”

Allison Engine Co. v. United States ex rel. Sanders, 553 U.S.

662, 673 (2008).

In alleging these elements, the complaint must “contain

sufficient factual matter, accepted as true, to state a claim to

relief that is plausible on its face.” See Ashcroft v. Iqbal,

556 U.S. 662, 678 (2009) (internal quotation marks omitted).

But allegations of fraud must also meet the more stringent

“particularity” requirement of Federal Rule of Civil Procedure

9(b). To satisfy Rule 9(b), “an FCA plaintiff must, at a

minimum, describe the time, place, and contents of the false

representations, as well as the identity of the person making

the misrepresentation and what he obtained thereby.” United

States ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d

pay out money.” See, e.g., Rostholder, 745 F.3d at 700 & n.6
(emphasis added). While this formulation remains accurate with
respect to § 3729(a)(1), the Supreme Court clarified in Allison
Engine Co. v. United States ex rel. Sanders that § 3729(a)(2)
merely requires proof that the defendant “made a false . . .
statement for the purpose of getting a false or fraudulent claim
paid or approved by the Government.” 553 U.S. 662, 671 (2008)
(internal quotation marks omitted).

26
370, 379 (4th Cir. 2008) (internal quotation marks omitted).

More precisely, the complaint must allege “the who, what, when,

where and how of the alleged fraud.” Id. (internal quotation

marks omitted). Requiring such particularized pleading, we have

explained, “prevent[s] frivolous suits, . . . eliminat[es] fraud

actions in which all the facts are learned after discovery, and

. . . protect[s] defendants from harm to their goodwill and

reputation.” United States ex rel. Nathan v. Takeda Pharm. N.

Am., Inc., 707 F.3d 451, 456 (4th Cir. 2013), cert. denied, 134

S. Ct. 1759 (2014) (internal quotation marks omitted).

B.

Applying those standards here, we conclude that Ahumada has

failed to plead viable FCA claims against Weyerhaeuser.

Ahumada essentially alleges that Weyerhaeuser participated

in two separate schemes to defraud the government. 9 First, he

alleges that Weyerhaeuser “provided NCED with . . . complete or

9
The second amended complaint also contains certain
undifferentiated allegations against “the [supplier] defendants”
as a group. But because Rule 9(b) requires a relator to plead
FCA claims with particularity--including by identifying “the
‘who[’] . . . of the alleged fraud”--we consider only the
Weyerhaeuser-specific allegations here. See Wilson, 525 F.3d at
379; see also, e.g., Arnlund v. Smith, 210 F. Supp. 2d 755, 760
(E.D. Va. 2002) (“A plaintiff must identify, with particularity,
each individual defendant’s culpable conduct; defendants cannot
be grouped together without specification of which defendant
committed which wrong.” (alterations and internal quotation
marks omitted)).

27
nearly complete boxes,” notwithstanding the fact that NCED had

JWOD contracts to produce such boxes itself. J.A. 261-62.

Second, he alleges that Weyerhaeuser provided inflated invoices

to NCED and later issued rebates to NCED or its then-CEO, Jones,

“for the amount in excess [of] the actual price.” Id. at 262.

Neither of these allegations passes muster.

With respect to the production allegation, we fail to see

how Weyerhaeuser selling complete boxes to NCED, without more,

constitutes a “fraudulent course of conduct.” See Rostholder,

745 F.3d at 700. There is nothing inherently fraudulent about

producing a particular product and selling it to a customer.

And while it is true that applicable JWOD regulations prohibited

NCED from “subcontract[ing] the entire production process for

. . . an order without the Committee’s prior approval,” see 41

C.F.R. § 51-4.4(d), we have held that the FCA cannot “be used as

a regulatory-compliance mechanism in the absence of . . .

fraudulent conduct directed at the federal government,”

Rostholder, 745 F.3d at 702-03.

Ahumada’s second amended complaint contains no specific

allegation that NCED ever falsely represented to the government

that it produced the boxes Weyerhaeuser provided. Although

Ahumada does allege that an NCED representative “asked” a

Weyerhaeuser customer service manager “to bill NCED for raw

sheets instead of the completed boxes,” Ahumada does not further

28
allege that Weyerhaeuser actually complied with that request.

See J.A. 261-62. Nor does Ahumada allege that Weyerhaeuser,

specifically, falsely stamped products it produced with NCED’s

box manufacturing certificate. Thus, in the absence of any

other well-pleaded fraudulent course of conduct or false

statement, the production allegation does not state a viable

claim for a violation of the FCA.

Ahumada’s allegation regarding the rebate scheme fares no

better. This allegation (which comprises just a single sentence

in the second amended complaint) is utterly devoid of specifics.

Among other deficiencies, it offers no information regarding who

at Weyerhaeuser was involved in the scheme, what Weyerhaeuser

gained from participating, or when the scheme took place. Nor

does the complaint offer even a general description of the

rebates themselves--for example, an estimation of how many

rebates Weyerhaeuser issued or in what amounts. Without any

such specifics, the rebate allegation does not satisfy Rule

9(b).

Finally, we reject Ahumada’s argument that he adequately

pleaded a claim for conspiracy to defraud the government. See

31 U.S.C. § 3729(a)(3) (2006). To state a claim for conspiracy

under the FCA, a relator must do more than simply show that the

alleged conspirators agreed to make a false record or statement;

the relator must also show “that the conspirators had the

29
purpose of ‘getting’ the false record or statement to bring

about the Government’s payment of a false or fraudulent claim.”

Allison Engine, 553 U.S. at 672-73.

Neither the production allegation nor the rebate allegation

establishes a claim for an FCA conspiracy. In neither case does

Ahumada adequately allege that Weyerhaeuser acted with the

purpose of defrauding the government. 10 And, to the extent that

these allegations plead agreements at all, Ahumada does not

identify who at Weyerhaeuser entered them, when he or she did

so, or what Weyerhaeuser sought to gain. The conspiracy claim

therefore fails to meet even the basic plausibility standard of

Rule 8(a), much less the more stringent particularity

requirement of Rule 9(b). Cf. Bell Atl. Corp. v. Twombly, 550

U.S. 544, 557 (2007) (“[A] conclusory allegation of agreement at

some unidentified point does not supply facts adequate to show

illegality.”).

In sum, we hold that Ahumada’s second amended complaint

fails to adequately plead any FCA claim against Weyerhaeuser.

10
As a coda to his allegations against Weyerhaeuser,
Ahumada asserts that “Weyerhaeuser participated in the above
schemes to facilitate NCED’s defrauding of the Government.”
J.A. 262. But he pleads no particular factual allegations to
support this conclusion. This statement, accordingly, does not
satisfy the “purpose” requirement articulated in Allison Engine.
See Iqbal, 556 U.S. at 678 (stating that a complaint must offer
more than “naked assertion[s] devoid of further factual
enhancement” (internal quotation marks omitted)).

30
In conjunction with our previous determination that the district

court lacked subject-matter jurisdiction over the claims against

the other appellees, we agree with the district court that

Ahumada’s attempt to amend his pleading was futile. The

district court therefore did not err in denying Ahumada leave to

amend and dismissing his action.

V.

For the reasons given, we affirm the district court’s

judgment.

AFFIRMED

31