USA exr/Settlemire v. DC

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 8, 1999 Decided December 21, 1999

No. 98-7180

United States of America ex rel. Earl S. Settlemire,
Appellant

v.

The District of Columbia,
Appellee

Appeal from the United States District Court
for the District of Columbia
(No. 96cv00568)

Joyce E. Mayers argued the cause and was on the briefs
for appellant. Pamela J. Bethel entered an appearance.

Donna M. Murasky, Assistant Corporation Counsel, ar-
gued the cause for appellee. With her on the briefs were John
M. Ferren, Corporation Counsel at the time the main brief
was filed, Jo Anne Robinson and Robert R. Rigsby, Interim

Corporation Counsel at the time supplemental briefs were
filed, and Charles L. Reischel, Deputy Corporation Counsel.

Douglas N. Letter, Attorney, U.S. Department of Justice,
argued the cause for the United States as amicus curiae.
With him on the brief were David W. Ogden, Acting Assistant
Attorney General, Michael F. Hertz and David M. Gossett,
Attorneys, and Wilma A. Lewis, U.S. Attorney.

Before: Edwards, Chief Judge, Sentelle and Randolph,
Circuit Judges.

Opinion for the Court filed by Circuit Judge Sentelle.

Sentelle, Circuit Judge: Appellant-relator Earl S. Settle-
mire brought this qui tam action against the District of
Columbia, alleging that the District spent funds appropriated
by the United States for purposes other than those intended
by Congress, thereby violating the False Claims Act ("FCA"
or "Act"), 31 U.S.C. ss 3729-3733 (1994). The district court
dismissed the action for lack of subject matter jurisdiction.
We agree with the district court that Settlemire's allegations
fall within the Act's jurisdictional bar against actions based on
publicly disclosed information. See 31 U.S.C. s 3730(e)(4)(A).
Because we further hold that Settlemire has not satisfied the
original source exception to the jurisdictional bar, we affirm
the district court's dismissal of this action.

I. Background

Under the FCA, a private party may bring suit for fraud
committed against the United States. The ability to bring
such actions is limited by the "public disclosure" provision of
the Act, which divests courts of jurisdiction over claims
"based upon the public disclosure of allegations or transac-
tions" in specified types of public proceedings, "unless ... the
person bringing the action is an original source of the infor-
mation." 31 U.S.C. s 3730(e)(4)(A). An original source is a
plaintiff with "direct and independent knowledge" of the
relevant facts who has revealed his knowledge to the Govern-
ment before public disclosure and before filing suit. 31
U.S.C. s 3730(e)(4)(B); see United States ex rel. Findley v.

FPC-Boron Employees' Club, 105 F.3d 675, 690 (D.C. Cir.),
cert. denied, 118 S. Ct. 172 (1997). This creates a two-step
process in which a court decides whether the action is based
on publicly disclosed information, and if so, whether the
plaintiff may still proceed because he is an original source of
that information.

Settlemire brought suit under the FCA alleging the follow-
ing facts. In 1989, the government of the District of Colum-
bia requested federal financial assistance in order to increase
the officer strength of the Metropolitan Police Department
("MPD"). Congress subsequently enacted the District of
Columbia Police Authorization and Expansion Act of 1989,
Pub. L. No. 101-223, s 2, 103 Stat. 1901, 1901-02 ("Expansion
Act") (codified at D.C. Code Ann. s 47-3406(c) (1997 repl.)),
which authorized the appropriation of funds for fiscal years
1990 through 1994 for "salaries and expenses (including bene-
fits) of 700 additional officers and members of the Metropoli-
tan Police Department of the District of Columbia." Id.
s 2(c)(1). Under the statute, these funds were to be available
only to pay for "officers and members of the [MPD] in excess
of 4,355 officers and members (and supplies, equipment, and
protective vests for reserve officers of the [MPD])." Id.
s 2(c)(2).

Congress first appropriated funds under the Expansion Act
for fiscal year 1990, in the amount of $17,630,000. See
District of Columbia Appropriations Act, 1990, Pub. L. No.
101-168, 103 Stat. 1267, 1267-71 (1989). The Conference
Report accompanying this act recognized that it would be
impossible for the District to hire and train enough new police
officers above the 4,355 threshold to use all of the appropriat-
ed funds. See H.R. Conf. Rep. No. 101-270, at 5-6 (1989).
Thus the report stated that the "first priority" of Expansion
Act funds was for the hiring of additional officers, but provid-
ed that if the funds were not so expended, they "may be used
to purchase goods and services in the non-personal object
classes including support and other materials as well as
capital items." Id.

 A similar sequence of events occurred for fiscal year 1991.
Congress again appropriated funds, and the Conference Re-
port contained the same language. See District of Columbia
Appropriations Act of 1991, Pub. L. No. 101-518, 104 Stat.
2224, 2224-29 (1990); H.R. Conf. Rep. No. 101-958, at 10-11
(1990).1

On May 7, 1990, the District claimed that the police depart-
ment had reached a staffing level of 4,355 and began to access
the Expansion Act funds. A number of Congressional hear-
ings occurred in 1990 and 1991 which included discussions
about the use of Expansion Act funds.

First, a subcommittee of the Senate Committee on Appro-
priations held hearings on May 24, 1990. See Hearings
Before the Senate Subcomm. of the Comm. on Appropria-
tions, District of Columbia Appropriations for Fiscal Year
1991, 101st Cong. (1990). Mayor Marion S. Barry, Jr. testi-
fied as to what was happening to the Expansion Act monies.
In his submitted statement he declared: "Now that we are
able to access the $17 million we will be using some of those
funds for overtime as well as to continue the hiring of the 700
police officers." Id. at 50. During his oral testimony, he
explained why the MPD's overtime spending was over bud-
get:

Why did we spend it? Because we wanted to demon-
strate our commitment. We knew we were going to
access the $17 million. We knew it did not require a
reprogramming. Only that, as I understand it, we had to
reach a police officer level of 4,355 before we could access
the $17 million for the police department.

....

Congress gave us $17.6 million. When you take [the
District's other funds] and add it to the $17.6 million that

__________
1 The parties dispute whether funds were actually appropriated
under the Expansion Act for fiscal years 1992 and 1993, but we
need not resolve that issue. See infra n.2.

 would give us enough overtime money to finish the rest
of this year.
Id. at 68-69.

Isaac Fullwood, Jr., Chief of Police, testified to similar
effect:

We were spending that money as if we already had
access to it.

We knew that once we reached a police officer
strength of 4,355 that we would have direct access to the
funds. It was our understanding that no reprogramming
would be required. The money was virtually unencum-
bered in the way that the Congress intended us to use it,
as long as it was used specifically for law enforcement
purposes.
Id. at 71.

On May 22, 1991, a House subcommittee held budget
hearings regarding District appropriations for the 1992 fiscal
year. See Hearings Before a Subcomm. of the Comm. on
Appropriations: Subcomm. on District of Columbia Appro-
priations, Fiscal Year 1992, 102d Cong. (1991). Chairman
Julian Dixon questioned District representatives about the
use of Expansion Act funds:

When the Mayor sent up her [budget] reductions of $216
million, a major part of that was a reduction of some
$12.5 million in the police department.

From my way of looking at it, it was a reduction of
money that you had already received. Is that correct?
In other words, you got $17.6 million in fiscal year 1991
to hire additional police officers. You have that money in
your pocket, and when the Mayor sent up the budget,
she said I am going to cut $12.5 million in the police
department. My response would be that you already
have that money so you are not cutting anything--you
are just keeping our money but you are not spending it
for the purpose it was intended.
Id. at 1160.

While Expansion Act funds were being appropriated by
Congress, appellant headed the budget branch of the MPD's

Office of Finance and Resource Management. He claims that
he had access to reports that detail how the District spent
Expansion Act funds on items other than for additional
officers beyond the 4,355 threshold. He filed the instant
action in the district court on March 22, 1996 under seal, as
required by the FCA. See 31 U.S.C. s 3730(b). After the
U.S. Department of Justice notified the district court that it
did not wish to intervene, the seal was released, and the
complaint served on the District.

After discovery, both parties filed motions for summary
judgment. The District additionally moved for dismissal for
lack of subject matter jurisdiction based upon the jurisdic-
tional limitation of the FCA which bars suits based upon
publicly disclosed transactions. See 31 U.S.C. s 3730(e)(4).
The district court concluded that Settlemire's claims were
precluded by the jurisdictional bar, and that Settlemire did
not fall under the "original source" exception. Because of
these conclusions, the district court dismissed for lack of
subject matter jurisdiction. Settlemire has appealed the
dismissal.

Prior to oral argument, we requested additional briefing on
the relevance of United States ex rel. Long v. SCS Business
& Technical Inst., 173 F.3d 870 (D.C. Cir.) (holding that a
state is not a "person" subject to suit under the FCA),
supplemented by, 173 F.3d 890 (D.C. Cir.), petition for cert.
filed, 68 U.S.L.W. 3116 (U.S. Aug. 2, 1999) (No. 99-213). The
United States submitted an amicus brief and participated in
oral argument on that matter. As explained below, we do not
reach the issue.

II.

Since its original enactment in 1863, the FCA has allowed
any private party to bring suit, on behalf of the United States
government, based on that party's knowledge of fraud com-
mitted against the government. See Findley, 105 F.3d at
679-81 (reviewing the history of and amendments to the Act);
see also 31 U.S.C. s 3729(a) (defining the underlying conduct
that constitutes a false claim). As an incentive to bring such
qui tam suits, the FCA allows a plaintiff to receive a portion

of the funds that were the subject of the false claim. See 31
U.S.C. s 3730(d).

A number of amendments have been made to the Act over
the years, including the 1986 amendments, which restricted
the subject matter jurisdiction of these qui tam actions in
cases where the suit is based on publicly disclosed informa-
tion:

(A) No court shall have jurisdiction over an action under
this section based upon the public disclosure of allega-
tions or transactions in a criminal, civil, or administrative
hearing, in a congressional, administrative, or Govern-
ment Accounting Office report, hearing, audit, or investi-
gation, 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.

(B) For purposes of this paragraph, "original source"
means 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 under this section
which is based on the information.

31 U.S.C. s 3730(e)(4). Under this regime, jurisdiction is
lacking "whenever the relator files a complaint describing
allegations or transactions substantially similar to those in the
public domain, regardless of the actual source for the infor-
mation in the particular complaint." Findley, 105 F.3d at
682; see also United States ex rel. Mistick PBT v. Housing
Auth. of the City of Pittsburgh, 186 F.3d 376, 388 (3d Cir.
1999). Although a qui tam plaintiff may be able to present
"allegations or transactions" with copious detail, we inquire
only as to whether the publicly disclosed information " 'could
have formed the basis for a governmental decision on prose-
cution, or could at least have alerted law-enforcement authori-
ties to the likelihood of wrongdoing.' " United States ex rel.
Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645, 654
(D.C. Cir. 1994) (quoting United States ex rel. Joseph v.
Cannon, 642 F.2d 1373, 1377 (D.C. Cir. 1981)). We have
expressed this inquiry in a formula:

 [I]f X + Y = Z, Z represents the allegation of fraud and
X and Y represent its essential elements. In order to
disclose the fraudulent transaction publicly, the combina-
tion of X and Y must be revealed, from which readers or
listeners may infer Z, i.e., the conclusion that fraud has
been committed.

Springfield Terminal, 14 F.3d at 654.

Once it is determined that "public disclosure" has occurred,
the court considers whether the relator is an "original
source." See id. at 651. Under 31 U.S.C. s 3730(e)(4)(B),
two elements must be shown. First, the relator must show
"direct and independent knowledge of the information on
which the publicly disclosed allegations are based"; such
information must be firsthand and cannot depend on the
public disclosures. See Findley, 105 F.3d at 690. Second,
the relator must voluntarily disclose his information to the
federal Government before filing his lawsuit. Such voluntary
disclosure must occur prior to the public disclosures which
invoke the jurisdictional bar. See id.

III.

A. Public Disclosure

Settlemire asserts that the District spent Expansion Act
money for purposes other than those required by that Act.
Regardless of what other purpose the funds were spent on,
any purpose other than those required by the statute could
constitute a false claim against the government. Here how-
ever, District officials disclosed in public Congressional hear-
ings that they were using the funds for purposes beyond
those listed in the Expansion Act. Of course, their willing-
ness to disclose this information makes it appear that they
thought nothing was improper. As Chief Fullwood said, the
District believed the funds were "virtually unencumbered in
the way that the Congress intended us to use it, as long as it
was used specifically for law enforcement purposes." This
disclosure that the District was using and planned to continue
to use Expansion Act funds in ways outside the letter of the
statute, "enable[d] the government to adequately investigate

the case and to make a decision whether to prosecute,"
Findley, 105 F.3d at 688. It therefore publicly disclosed the
alleged false claims as contemplated in s 3730(e)(4)(A).

The fact that Settlemire is able to provide more specific
details about what happened to the allegedly misspent funds
does not matter. In Findley, we noted that a relator's ability
to reveal specific instances of fraud where the general prac-
tice has already been publicly disclosed is insufficient to
prevent operation of the jurisdictional bar. See Findley, 105
F.3d at 687-88. There is no requirement, as Settlemire
appears to contend, that the relevant public disclosures irre-
futably prove a case of fraud. It is sufficient that the
"publicly disclosed transaction is sufficient to raise the infer-
ence of fraud." Id. at 687.

Nor is it of any concern that the District had not accessed
all of the Expansion Act funds when the public disclosures
where made. As we held in Findley, disclosures going back
as far as forty years prior to the relator's lawsuit were
sufficient to disclose the practices which formed the basis of
the relator's suit. See id. at 685-87. Cases may arise where
disclosures of a practice are insufficient to be considered
public disclosures of later instances of fraud, as "Congress did
not prescribe by mathematical formulae the quantum or
centrality of nonpublic information that must be in the hands
of the qui tam relator in order for suits to proceed." Spring-
field Terminal, 14 F.3d at 653. But, as here, where we have
before us publicly disclosed information showing how this
same defendant intended to spend monies appropriated under
this same statute, it is clear that public disclosure under
s 3730(e)(4)(A) has occurred.2

__________
2 The parties spend a good deal of time in their briefs arguing
over which years Congress actually appropriated funds under the
Expansion Act. Settlemire claims that $93,220,000 was appropriat-
ed in total for fiscal years 1990 through 1993. The District asserts
that no funds were provided in fiscal years 1992 and 1993. Neither
dispute that funds were not appropriated in fiscal year 1994.
Settlemire correctly points out that each count of fraud alleged in a
qui tam action is considered separately under the jurisdictional bar

 B. Original Source

Although the District's practices were publicly disclosed,
that does not end our endeavor. Settlemire's action may
nonetheless proceed if he can demonstrate that he is an
"original source" of the information as defined by 31 U.S.C.
s 3730(e)(4)(B). That is, he must show that he met the
"direct and independent knowledge" requirement and volun-
tarily disclosed his information to the Government prior to
the public disclosures and the filing of his lawsuit. He has
not made such a showing.

While the District's Rule 12(b)(1) motion properly raised
the original source issue, Settlemire dwelled only on the
independent knowledge element and presented no evidence of
voluntary disclosure. Only in his reply brief before this court
did Settlemire finally address the voluntary disclosure issue,
relying on his supplemental declaration dated five days prior
to the filing of the reply brief. In the absence of extraordi-
nary circumstances, Settlemire's failure to assert sufficient
jurisdictional facts in a timely fashion means that he cannot
satisfy the requirements of 31 U.S.C. s 3730(e)(4)(B). See
District of Columbia v. Air Florida, Inc., 750 F.2d 1077, 1084
(D.C. Cir. 1984) (court need not consider issues not presented
to the district court); United States v. Whren, 111 F.3d 956,
958 (D.C. Cir. 1997) (court need not consider issues that
appellant fails to raise in opening appeal brief although issue
was raised below), cert. denied, 118 S. Ct. 1059 (1998); Na-
tional Anti-Hunger Coalition v. Executive Comm. of the
President's Private Sector Survey on Cost Control, 711 F.2d
1071, 1075 (D.C. Cir. 1983) (appellate court will generally not
consider new evidence on appeal).

__________
provision. See United States ex rel. Alexander v. Dyncorp, Inc.,
924 F. Supp. 292, 298-302 (D.D.C. 1996). However, because the
public disclosures in this case were sufficient to disclose the Dis-
trict's general practices regarding Expansion Act funds for all of
the years in question, it makes no difference whether funds were
appropriated for only two or as many as four years. This being the
case, we need not decide the issue.

 It was completely proper for Settlemire to assert below
that the jurisdictional bar did not apply because, in his view,
the public disclosures did not fall under 31 U.S.C.
s 3730(e)(4)(A). Upon losing on this ground however, Settle-
mire does not have a right to recast his claim on appeal so as
to avoid the consequences of that decision.

Settlemire moved to supplement the joint appendix at the
same time he filed his reply brief in order to provide evidence
supporting his voluntary disclosure argument. The District
opposed the motion and also moved to strike the reply brief.
We deferred consideration of these motions pending oral
argument. As additional evidence not presented to the dis-
trict court is not ordinarily considered on appeal, see Nation-
al Anti-Hunger Coalition, 711 F.2d at 1075, we will deny
Settlemire's motion to supplement. There is no need to
strike the reply brief in its entirety, so we will also deny that
motion. However, we note in passing that even if we were to
consider Settlemire's additional materials, he still does not
allege that he actually disclosed any information to the Gov-
ernment before the public disclosures occurred.

After our review of the record, we hold that Settlemire has
not proved himself to be an "original source." The district
court concluded that Settlemire did not have "direct and
independent knowledge of the information on which the alle-
gations are based." 31 U.S.C. s 3730(e)(4)(B). But as it is
patently clear that Settlemire did not present evidence of
voluntary disclosure, we affirm the district court's holding
that Settlemire cannot qualify as an original source on those
grounds alone. When the judgment of the court below is
correct as a matter of law, we may affirm on different
grounds. See, e.g., Haddon v. Walters, 43 F.3d 1488, 1491
(D.C. Cir. 1995).

C. Supplemental Issue

Because of our lack of subject matter jurisdiction over this
action, we do not proceed to the claim-for-relief question
posed by the possible application to the District of Columbia
of United States ex rel. Long v. SCS Business & Technical

Inst., 173 F.3d 870 (D.C. Cir.) (holding that a state is not a
"person" subject to suit under the FCA), supplemented by,
173 F.3d 890 (D.C. Cir.), petition for cert. filed, 68 U.S.L.W.
3116 (U.S. Aug. 2, 1999) (No. 99-213). We had ordered
additional briefing sua sponte on the relevance of Long, but
now have no occasion to address that issue and express no
opinion on its merits. See Steel Co. v. Citizens for a Better
Env't, 118 S. Ct. 1003, 1012-16 (1998); United States ex rel.
Kreindler & Kreindler v. United Technologies Corp., 985
F.2d 1148, 1155-56 (2d Cir. 1993) (holding that court should
consider 12(b)(1) jurisdictional challenges before 12(b)(6) chal-
lenges).3

IV. Conclusion

For the reasons set forth above, we conclude that the
allegations of Settlemire's complaint fall within the FCA's
jurisdictional bar against actions based on publicly disclosed
information. We further hold that Settlemire has not satis-
fied the original source exception to the jurisdictional bar.
Accordingly, the district court's dismissal of this action is

Affirmed.

__________
3 We are aware that the Supreme Court recently expanded the
scope of its review in Vermont Agency of Natural Resources v.
United States ex rel Stevens, 120 S. Ct. 523 (1999), another FCA
qui tam case, to consider whether "a private person [has] standing
under Article III to litigate claims of fraud upon the government."
As we have already disposed of this case on other jurisdictional
grounds, we do not address the issue.