United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 24, 2016 Decided July 25, 2017
No. 15-7135
UNITED STATES OF AMERICA, EX REL. STEPHEN SHEA,
AND
STEPHEN M. SHEA,
APPELLANT
v.
CELLCO PARTNERSHIP, DOING BUSINESS AS VERIZON
WIRELESS, ET AL.,
APPELLEES
Consolidated with 15-7136
Appeals from the United States District Court
for the District of Columbia
(No. 1:09-cv-01050)
Christopher B. Mead argued the cause for appellant/cross-
appellee. With him on the briefs were Mark London and Stuart
A. Berman.
Seth P. Waxman argued the cause for defendants-
appellees/cross-appellants. With him on the briefs were
Jonathan G. Cedarbaum and Daniel Winik.
2
John P. Elwood, Craig D. Margolis, Jeremy C. Marwell,
Kathryn Comerford Todd, and Steven P. Lehotsky were on the
brief for amicus curiae The Chamber of Commerce of the
United States of America in support of defendants-
appellee/cross-appellants.
Before: SRINIVASAN and MILLETT, Circuit Judges, and
RANDOLPH, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge SRINIVASAN.
SRINIVASAN, Circuit Judge: The False Claims Act
penalizes the knowing submission of a false or fraudulent claim
for payment to the federal government. 31 U.S.C.
§ 3729(a)(1). Rather than rely solely on federal agencies to
police fraudulent claims, Congress authorized private persons
to bring what are known as qui tam actions. In a qui tam suit,
a private party, called the relator, challenges fraudulent claims
against the government on the government’s behalf, ultimately
sharing in any recovery.
In this qui tam case, the relator is appellant Stephen M.
Shea. He alleges that Verizon Communications, Inc. violated
the False Claims Act by overbilling the government in its
telecommunications contracts. Shea filed two qui tam suits
against the company. The first ended in a settlement under
which Shea received a $20 million payout. While that suit was
pending, Shea brought a second qui tam action against Verizon,
alleging that the company’s fraud extended to twenty
additional federal contracts.
The district court held that Shea’s second suit violated the
False Claims Act’s “first-to-file” bar, 31 U.S.C. § 3730(b)(5),
which prohibits a relator from bringing any action related to a
pending qui tam suit. The district court thus dismissed Shea’s
3
second action. But because Shea’s first action had ended by
that time, such that the first-to-file bar would no longer prohibit
the filing of a new suit, the district court dismissed Shea’s
second action without prejudice to his refiling it.
Shea now appeals the dismissal of his action, contending
that the district court should have allowed him to amend the
complaint rather than require him to initiate a new suit.
Verizon cross-appeals, arguing that the district court should
have dismissed Shea’s action with prejudice, such that he could
not refile it. In support of its argument for a dismissal with
prejudice, Verizon relies on the False Claims Act’s “public
disclosure” bar, id. § 3730(e)(4), and on the pleading
requirements established by Federal Rules of Civil Procedure
8 and 9(b).
We reject both Shea’s arguments in his appeal and
Verizon’s arguments in its cross-appeal. We therefore affirm
the district court in all respects.
I.
A.
When bringing a qui tam action under the False Claims
Act, a relator need not allege a personal injury. See Vt. Agency
of Nat. Res. v. United States ex rel. Stevens, 529 U.S. 765, 772-
73 (2000). Instead, she can bring suit “to remedy an injury in
fact suffered by the United States.” Id. at 771, 774. To
encourage relators to bring suits on the government’s behalf,
Congress gave them a stake in the controversy: they can share
up to 30 percent of any proceeds ultimately recovered. 31
U.S.C. § 3730(d). The government also can elect to intervene
in, and assume control of, any qui tam action, in which event
4
the relator’s share of the recovery becomes capped at 25
percent. Id. § 3730(b)(2), (d)(1).
Over time, Congress learned that the bounty available to
qui tam relators created “the danger of parasitic exploitation of
the public coffers.” United States ex rel. Springfield Terminal
Ry. v. Quinn, 14 F.3d 645, 649 (D.C. Cir. 1994). To curtail
abusive suits, Congress established “a number of restrictions”
on qui tam actions. State Farm Fire and Cas. Co. v. United
States ex rel. Rigsby, 137 S. Ct. 436, 440 (2016); see United
States ex rel. Heath v. AT&T, Inc., 791 F.3d 112, 116 (D.C. Cir.
2015). This case involves two of those restrictions: (i) the first-
to-file bar and (ii) the public disclosure bar.
The first-to-file bar operates on the recognition that,
because relators can bring suit without having suffered a
personal injury, countless plaintiffs in theory could file a qui
tam action based on the same fraud and then share in the
proceeds. And if multiple relators could split the recovery for
the same conduct, they would have less “incentive to bring a
qui tam action in the first place.” United States ex rel. LaCorte
v. SmithKline Beecham Clinical Labs., Inc., 149 F.3d 227, 234
(3d Cir. 1998). The first-to-file bar addresses that problem. It
provides that, “[w]hen a person brings an action under [the
False Claims Act], no person other than the Government may
intervene or bring a related action based on the facts underlying
the pending action.” 31 U.S.C. § 3730(b)(5). The first-to-file
bar thereby ensures only one relator will share in the
government’s recovery and encourages prompt filing from
relators desiring to be first to the courthouse. LaCorte, 149
F.3d at 234.
The public disclosure bar similarly seeks “the golden
mean” between, on one hand, encouraging relators with
valuable information to bring suit, and, on the other hand,
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discouraging unduly “opportunistic plaintiffs.” See Graham
Cty. Soil & Water Conservation Dist. v. United States ex rel.
Wilson, 559 U.S. 280, 294 (2010) (quoting Springfield, 14 F.3d
at 649). Originally, the False Claims Act allowed qui tam
relators simply to copy information already in the public
domain. Indeed, in one landmark case, the relator parroted the
government’s own filings but still shared in the government’s
reward. See United States ex rel. Marcus v. Hess, 317 U.S.
537, 545-48 (1943). In response, Congress established what
became the public disclosure bar. The bar prohibits private
parties from bringing suit based on a fraud already disclosed
through identified public channels (unless the relator is “an
original source of the information”). 31 U.S.C.
§ 3730(e)(4)(A).
B.
In 2007, Shea filed a qui tam action against Verizon
alleging that the company had knowingly charged the General
Services Administration (GSA) for non-billable taxes and
surcharges. Shea first became suspicious of Verizon while
working as a consultant for commercial telecommunications
customers. He learned that Verizon regularly overbilled its
commercial customers for taxes, fees, and surcharges. Shea
suspected Verizon of employing the same scheme against the
government. After investigating, he allegedly confirmed that
Verizon had billed the GSA for taxes and surcharges prohibited
by its contract. The United States intervened in Shea’s action.
In February 2011, the parties settled the action without any
admission of liability by Verizon. Shea received nearly $20
million in the settlement.
Before the parties settled Shea’s first action (Verizon I),
Shea apparently deduced that Verizon had used the same
fraudulent billing scheme in twenty additional federal
6
contracts. Rather than amend his complaint, however, Shea
brought a second qui tam action against Verizon (Verizon II).
This time, the government chose not to intervene.
In 2012, the district court dismissed Shea’s second qui tam
suit with prejudice. The district court held that Verizon II was
related to Verizon I, such that the False Claims Act’s first-to-
file bar blocked the later action. Although Verizon I had ended
in a settlement the previous year, the court thought the first-
filed suit permanently barred any related suit filed while the
first action was pending.
Shea appealed, and a divided panel of this Court affirmed.
The majority and dissent agreed that Verizon II was related to
Verizon I and that the first-to-file bar thus supported a dismissal
of Verizon II. The disagreement between the majority and
dissent concerned whether the district court properly dismissed
Verizon II with prejudice, such that Shea could not refile the
action. The majority affirmed the district court’s dismissal
with prejudice because it interpreted the first-to-file bar to
apply “even if the initial action is no longer pending.” United
States ex rel. Shea v. Cellco P’ship, 748 F.3d 338, 343 (D.C.
Cir. 2014), vacated, 135 S. Ct. 2376 (2015). The dissent,
reasoning that the first-to-file bar ceases to operate once the
first-filed suit ends, believed that the dismissal of Verizon II
should have been without prejudice. Id. at 345-51 (Srinivasan,
J., concurring in part and dissenting in part).
The Supreme Court granted Shea’s petition for certiorari
and vacated this Court’s decision in light of a related case,
Kellogg Brown & Root Servs., Inc. v. United States ex rel.
Carter, 135 S. Ct. 1970 (2015). In Carter, the Supreme Court
held that “a qui tam suit under the [False Claims Act] ceases to
be ‘pending’ once it is dismissed.” Id. at 1979. As a result,
once a first-filed suit reaches completion, the first-to-file bar no
7
longer prohibits bringing a new action. Id. This Court
remanded Shea’s suit in Verizon II for further proceedings
consistent with the Supreme Court’s decision in Carter.
On remand, Verizon filed a renewed motion to dismiss.
By that point, the six-year statute of limitations had arguably
run on Shea’s allegations of fraud. He thus resisted any
dismissal of his action, even one without prejudice to his
refiling it. Instead, Shea contended he could cure the first-to-
file defect by amending his existing complaint in Verizon II.
Indeed, Shea had already amended his complaint after Verizon
I had settled. Shea argued that Verizon I no longer barred him
from pressing forward with Verizon II under his amended
complaint.
The district court disagreed. It held that “merely amending
the Complaint could [not] remedy [Shea’s] violation of the
first-to-file bar.” United States ex rel. Shea v. Verizon
Commc’ns, Inc., 160 F. Supp. 3d 16, 29-30 (D.D.C. 2015).
Rather, the court determined that Shea would need to file a new
qui tam action to proceed, and it thus dismissed his suit without
prejudice to his doing so. At the same time, the court rejected
Verizon’s motion to dismiss with prejudice under either the
public disclosure bar or Rules 8 and 9(b).
On appeal, Shea challenges the district court’s dismissal
under the first-to-file bar. Verizon cross-appeals the court’s
refusal to enter a dismissal with prejudice under the public
disclosure bar or Rules 8 and 9(b).
II.
We first address whether the district court erred in
dismissing Shea’s suit under the first-to-file bar instead of
allowing him to continue the action based on his amended
8
complaint. The first-to-file bar specifies that, when a qui tam
action is “pending,” “no person other than the Government may
intervene or bring a related action based on the [same] facts.”
31 U.S.C. § 3730(b)(5). The district court held that Shea’s
second qui tam action violated the first-to-file bar and that, to
proceed, he must file a new action. We agree.
A.
Shea does not dispute that he brought his second action,
Verizon II, while his first action, Verizon I, was pending. Nor
does he dispute that his second suit is “related” to his first
within the meaning of the first-to-file bar. We previously held
that the actions shared “the same material elements of fraud,”
Shea, 748 F.3d at 341-42 (quoting United States ex rel.
Hampton v. Columbia/HCA Healthcare Corp., 318 F.3d 214,
217 (D.C. Cir. 2003)), and Shea does not argue otherwise.
Consequently, were Verizon I still pending, we would
require the district court to dismiss the follow-on suit under the
first-to-file bar. The “general rule” is that, “if an action is
barred by the terms of a statute, it must be dismissed” rather
than left on ice. Hallstrom v. Tillamook Cty., 493 U.S. 20, 31
(1989). When a statute specifies that an “action shall not be
instituted” and the plaintiff fails “to heed that clear statutory
command,” a district court properly dismisses the suit. McNeil
v. United States, 508 U.S. 106, 107, 113 (1993). The first-to-
file bar, in specifying that “no person . . . may . . . bring a related
action” while a first-filed suit is “pending,” 31 U.S.C.
§ 3730(b)(5), manifests just such a statutory command.
The Supreme Court recently confirmed as much in Rigsby,
137 S. Ct. at 442-43. There, the Court considered a separate
provision of the False Claims Act, 31 U.S.C. § 3730(b)(2),
which requires a relator to file a qui tam action under seal. Id.
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at 439-40. The Court held that a violation of the seal
requirement did not mandate dismissal. But in doing so, the
Court contrasted the seal requirement with a “number of
provisions [in the Act] that do require, in express terms, the
dismissal of a relator’s action.” Id. at 442-43. It specifically
cited section 3730(b)(5)—the first-to-file bar—as an example
of a provision explicitly requiring dismissal. Id. In the
ordinary course, then, the existence of a pending qui tam action
should occasion the dismissal of a related action.
The only question in this case is whether the statutory
requirement to dismiss the second action falls away in
circumstances in which the action has yet to be dismissed by
the time the first-filed suit reaches completion. At that point,
we know from Carter, 135 S. Ct. at 1979, that the first-to-file
bar would no longer block initiation of a related action.
Consequently, although the first-to-file bar prohibited Shea
from bringing Verizon II at the time he filed it, the bar no longer
poses any obstacle to his refiling the action. Shea, however,
would take Carter one step further. In his view, once his first-
filed suit ended in settlement, the district court should have
allowed him to cure the first-to-file violation by amending his
existing complaint in Verizon II rather than dismissed the
action with leave to refile it.
It is true that a plaintiff can often cure a pleading defect by
amending the complaint. See Mathews v. Diaz, 426 U.S. 67,
75 n.9 (1976) (citing 28 U.S.C. § 1653). A supplemental or
amended complaint, however, could not remedy Shea’s
violation of the first-to-file bar. Shea infringed the first-to-file
bar by bringing a related action while his first-filed case
remained pending. Although Shea’s first-filed suit is no longer
pending, a supplemental complaint cannot change when Shea
brought his second action for purposes of the statutory bar.
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This Court, in another context, has drawn a similar
distinction between the complaint and the underlying action.
We explained that the dismissal of a complaint without
prejudice is non-final (and thus non-appealable) because the
plaintiff can amend his pleadings and continue the litigation.
Ciralsky v. CIA, 355 F.3d 661, 666 (D.C. Cir. 2004). Yet the
“dismissal without prejudice of an action (or ‘case’),” we held,
“is a different matter,” as it has “ended [the] suit as far as the
District Court was concerned.” Id. (emphasis in original)
(quoting United States v. Wallace & Tiernan Co., 336 U.S. 793,
794 n.1 (1949)).
In light of that distinction, the filing of an amended
complaint, while serving to modify the complaint, does not
operate to end the action and begin a new one. It thus cannot
alter when Shea brought his action—i.e., at a time when a
related suit was pending. For purposes of the first-to-file bar,
in short, Shea’s action was incurably flawed from the moment
he filed it.
An alternative understanding, as the Seventh Circuit has
reasoned, would treat the text of the first-to-file bar “as if it read
something like: While another action under this section is
pending, no person . . . may continue to prosecute a related
action.” United States ex rel. Chovanec v. Apria Healthcare
Grp. Inc., 606 F.3d 361, 362 (7th Cir. 2010) (internal quotation
mark omitted). The statute, however, expressly forbids any
person from “bring[ing]” (as opposed to “continuing”) an
“action” while the first suit is pending. Id. Shea did exactly
that, and the appropriate remedy under the False Claims Act
11
for such a violation is a dismissal (albeit one without prejudice
to his filing a new action). See Rigsby, 137 S. Ct. at 442-43.
B.
Shea seeks to resist the terms of the first-to-file bar by
arguing that dismissing his action with leave to refile it—as
opposed to allowing him to amend his existing complaint—
would elevate form over substance. The First Circuit agrees,
reasoning that dismissal in the circumstances of this case would
be a “pointless formality.” See United States ex rel. Gadbois
v. Pharmerica Corp., 809 F.3d 1, 6 (1st Cir. 2015). But see
Chovanec, 606 F.3d at 362. Respectfully, we see things
differently.
Shea’s preferred rule not only is difficult to square with the
statutory terms, but it also would give rise to anomalous
outcomes. Under Shea’s approach, if a relator brings suit while
a related action is pending, her ability to proceed with her
action upon the first-filed suit’s completion could depend on
the pure happenstance of whether the district court reached her
case while the first-filed suit remained pending.
For instance, imagine a situation in which relators A, B,
and C each file a qui tam action alleging the same fraud.
Relator A reaches the courthouse first and his action therefore
goes forward. Relator B reaches the courthouse second, but the
district court determines his suit is blocked by the first-to-file
bar and thus dismisses it per the ordinary course. See Rigsby,
137 S. Ct. at 442-43. Relator C files last, and shortly thereafter,
the first-filed action is dismissed. But suppose relator C filed
her suit so late in the game that the district court fails to dismiss
her action before dismissing the first-filed suit. Under Shea’s
proposed rule, relator C would receive a windfall: she, unlike
relator B, could simply amend her existing complaint and
12
thereby secure herself pole position in the first-to-file queue.
Relator C would jump past relator B for the opportunity to
proceed with her suit (and to share in the government’s
reward).
Congress presumably would not have intended a relator’s
fate to depend on chance considerations such as the extent of a
particular court’s backlog and the timeliness of a particular
court’s entry of a dismissal. For that reason, adhering to the
normal remedy of a dismissal for a first-to-file violation, see
id., would do more than advance a mere formality. It would
level the playing field among relators consistent with the
ordinary operation of the first-to-file bar as conceived by
Congress.
Those circumstances differ from the ones considered by
the Supreme Court in Mathews, 426 U.S. 67, on which Shea
relies. There, the Court considered a statute requiring plaintiffs
to commence civil actions within sixty days of receiving a final
agency decision. Id. at 75 (citing 42 U.S.C. § 405(g)).
Although the plaintiff initially filed his suit before seeking
relief with the agency, he filed an application with the relevant
agency while his action was pending in the district court. Id.
The Supreme Court declined to require dismissal of the suit,
noting that the complaint could still be supplemented to allege
satisfaction of that condition. Id.
In Mathews, unlike here, there was no indication that
dismissal would have served the “general purpose” of the
statutory condition. See Rigsby, 137 S. Ct. at 443. Although
the statute required the plaintiff to wait for a final agency
decision, the Court concluded that the government had waived
the exhaustion requirement by stipulating that the plaintiff’s
application to the agency would be denied. Mathews, 426 U.S.
at 76-77. It therefore did not matter when the plaintiff filed that
13
application. Here, by contrast, for the reasons explained,
adhering to the standard remedy of dismissal promotes
Congress’s contemplation of the ordinary operation of the first-
to-file queue.
Similarly, Shea misses the mark in relying on Oscar
Mayer & Co. v. Evans, 441 U.S. 750 (1979), and our decision
in Brown v. Whole Foods Market Group, 789 F.3d 146 (D.C.
Cir. 2015) (per curiam). Both decisions stayed pending actions
to allow pro se litigants to satisfy conditions precedent to
bringing suit. Evans, 441 U.S. at 764-65 & n.13; Brown, 789
F.3d at 153-54. Those cases dealt with atypical “statutory
scheme[s] in which laymen, unassisted by trained lawyers,
initiate the process.” Evans, 441 U.S. at 765 n.13 (quoting
Love v. Pullman Co., 404 U.S. 522, 527 (1972)); see Brown,
789 F.3d at 153-54. In light of the unique circumstances, those
decisions departed from the “general rule” that, “if an action is
barred by the terms of a statute, it must be dismissed.”
Hallstrom, 493 U.S. at 31. By contrast, the Supreme Court has
confirmed that the general rule of dismissal applies to
violations of the first-to-file bar. See Rigsby, 137 S. Ct. at 442-
43.
Shea argues that dismissal of his action could deter follow-
on relators with valuable information from bringing suit, as
relators might discount the probability of a reward against the
risk of a dismissal. See United States ex rel. Wood v. Allergan,
Inc., No. 10-CV-5645, 2017 WL 1233991, at *14 (S.D.N.Y.
Mar. 31, 2017). But district courts already must dismiss suits
that infringe the first-to-file bar, at least as long as the first-filed
suit remains pending. That is the very object of the bar. See
Rigsby, 137 S. Ct. at 442-43. Accordingly, any would-be
relator already faces the risk that “someone else ha[s] beaten
her to the courthouse door.” See Wood, 2017 WL 123991, at
*14.
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Moreover, relators ordinarily will be free to bring any
follow-on action after the first-filed suit ends. First-filed cases
do not last forever, and there might well be cases in which a
first-filed suit is dismissed for reasons completely independent
of the merits. The second relator can bring suit at that time and
provide the government an additional means of recovery. See
Carter, 135 S. Ct. at 1979. In the mine run of situations,
therefore, our holding will have no effect on the second relator.
Once the first-filed suit reaches completion, relators with
original information about the fraud can simply bring a new
action.
Of course, the statute of limitations can present an obstacle
to bringing a new action in certain circumstances. Here, for
instance, the six-year limitations period arguably ran on
Verizon’s alleged fraud. See 31 U.S.C. § 3731(b)(1). Thus,
the statute of limitations could block Shea or other relators
from refiling an action. Shea argues that we therefore should
allow him to proceed with his amended complaint, which he
purportedly brought after the first-filed suit terminated but
before the statute of limitations ran.
Shea’s situation, however, presents something of a
procedural oddity. The limitations period continued to run
while he was involved in protracted litigation of this case,
litigation that has reached this Court twice and the Supreme
Court once. In fact, Shea could have avoided any potential
statute of limitations problem by amending his original qui tam
action (Verizon I) to add the new allegations instead of bringing
them in a new suit. He also could have filed a new action as
soon as Verizon I settled rather than filing his amended
complaint at that time.
To be sure, there may be cases in which the statute of
limitations blocks a relator’s claim “through no fault of his
15
own.” See Wood, 2017 WL 1233991, at *14. That possibility,
though, already inheres in the False Claims Act’s design. The
government maintains an interest in enabling relators to bring
suit on its behalf, at least to the extent the government is not
already “equipped to bring [suit] on its own.” Hampton, 318
F.3d at 217 (quoting Springfield, 14 F.3d at 651). Insofar as
the statute of limitations can inhibit the vindication of that
interest, that is by congressional design: a person must file suit
either six years from when the fraud is committed or three years
after the United States knows or should know about the
material facts, whichever comes later (so long as the action is
filed within ten years of the alleged fraud). 31 U.S.C.
§ 3731(b). The government can often act on the information
before the statute of limitations has run, at least within ten years
of the violation. Once the limitations period has run, however,
Congress evidently considered the marginal value of additional
suits to be outweighed by other considerations.
We note, finally, that Shea intends to seek equitable tolling
of the limitations period if we uphold the dismissal of his
action. Courts “have long invoked . . . equitable tolling to
ameliorate the inequities that can arise from strict application
of a statute of limitations.” Chung v. U.S. Dep’t of Justice, 333
F.3d 273, 275 (D.C. Cir. 2003). While we hold that the district
court correctly dismissed Shea’s suit without prejudice under
the first-to-file bar, we express no view on the potential
applicability of equitable tolling principles if he refiles his
action.
III.
Although we uphold the dismissal of Shea’s suit without
prejudice under the first-to-file bar, Verizon asks for more. It
argues for dismissal of Shea’s action with prejudice under a
separate provision of the False Claims Act, the public
16
disclosure bar. That bar prohibits a relator from bringing suit
based on a fraud that has already been disclosed through certain
public channels, unless the relator is an “original source” of the
information. 31 U.S.C. § 3730(e)(4)(A). The district court
held that Shea did not base his allegations of fraud on publicly
available information. The court thus had no occasion to reach
the question whether Shea would qualify as an original source.
Reviewing the district court’s decision de novo, United States
ex rel. Doe v. Staples, Inc., 773 F.3d 83, 86 (D.C. Cir. 2014),
we reach the same conclusion.
At the outset, we note that the parties dispute which
version of the public disclosure bar governs. At the time Shea
filed his action in 2009, the public disclosure bar deprived
courts of jurisdiction over any action “based upon the public
disclosure of allegations or transactions” of fraud, except when
“the person bringing the action is an original source of the
information.” 31 U.S.C. § 3730(e)(4) (2006). In 2010,
Congress amended the public disclosure bar, including by
removing its express jurisdictional language. See 31 U.S.C.
§ 3730(e)(4) (2010). Verizon argues that, because the case was
brought in 2009, the pre-amendment version applies. See
Schindler Elevator Corp. v. United States ex rel. Kirk, 563 U.S.
401, 404 n.1 (2011); Graham Cty., 559 U.S. at 283 n.1; United
States ex rel. Oliver v. Philip Morris USA Inc., 763 F.3d 36, 38
n.2 (D.C. Cir. 2014) (Oliver I). Shea responds that the current,
non-jurisdictional version applies to the allegations in his
amended complaint because he filed it after the 2010
amendment. We need not resolve the dispute because, even
applying the pre-amendment version to all allegations, we hold
in Shea’s favor.
On the merits, we consider the application of the public
disclosure bar “in the context of [Congress’s] twin goals”:
“rejecting suits which the government is capable of pursuing
17
itself, while promoting those which the government is not
equipped to bring on its own.” Springfield, 14 F.3d at 651.
Shea’s suit falls in the second category. His action
“contributed significant independent information” about a
possible fraud. Id. at 653.
The public disclosure bar asks whether the relator’s
allegations are “substantially similar” to publicly available
information. United States ex rel. Davis v. District of
Columbia, 679 F.3d 832, 836 (D.C. Cir. 2012) (quoting United
States ex rel. Findley v. FPC-Boron Employees’ Club, 105 F.3d
675, 682 (D.C. Cir. 1997)). One of our foundational decisions
on the subject described the public disclosure bar in algebraic
terms. We explained that an allegation of fraud (Z) consists of
two “essential elements,” a misrepresented state of facts (X)
and a true state of facts (Y), such that X + Y = Z. Springfield,
14 F.3d at 654. If the allegation of fraud (Z) is not itself in the
public domain, then the bar applies only if both X and Y are
publicly known. Id. But while both elements must be public,
the public information need not itself prove fraud. Rather, the
information must alert the government to “the likelihood of
wrongdoing.” Id. (internal quotation marks omitted).
In Shea’s allegations of fraud, the misrepresented state of
facts (X) was that Verizon, under its contracts, would not bill
the government for certain taxes and surcharges. The true state
of facts (Y) was that Verizon nonetheless charged the
forbidden taxes and surcharges. According to Shea, Verizon’s
charges were impermissible for various reasons. In some
cases, Verizon’s contracts were firm fixed-price contracts,
which “include[d] all applicable Federal, State[,] and local
taxes and duties.” J.A. 21 (quoting 48 C.F.R. § 52.299-4(b)(1))
(internal quotation marks omitted). Shea alleged that Verizon
effectively double-billed the government by separately
charging it for fees already built in to the contract’s fixed price.
18
In other cases, Shea acknowledged that the contract allowed
Verizon to bill certain surcharges in addition to the fixed price.
In those instances, however, he claims Verizon charged the
government for taxes and surcharges beyond those allowed
under the contract.
We agree with the district court that there was sufficient
publicly disclosed information to infer X, the misrepresented
state of facts (or, at least, Shea did not supplement the publicly
available information with any of his own). To allege X, Shea
relied on public regulations governing federal contracts as well
as snippets of public contracts. From there, Shea consulted
public databases to compile the names and numbers of twenty
contracts between Verizon and the government. He then
alleged, on information and belief, that those contracts included
similar provisions disallowing certain taxes and surcharges.
Consequently, Shea added only speculation to the publicly
existing information, and we have held that a relator cannot
overcome the public disclosure bar by contributing
“speculation, background information or collateral research.”
See United States ex rel. Oliver v. Philip Morris USA, Inc., 826
F.3d 466, 479 (D.C. Cir. 2016) (Oliver II) (internal quotation
marks omitted).
But we, like the district court, reach the opposite
conclusion about the true state of facts (Y). As to that element,
Shea’s allegations rest on the following logic: if (a) Verizon
overbilled its commercial customers for certain surcharges and
taxes, and (b) Verizon used the same billing practices for the
government, then (c) Verizon must have billed the illegal
surcharges and taxes in its government contracts. At each step,
Shea based his claims on nonpublic information.
With regard to Verizon’s commercial customers, Shea’s
allegations came from his firsthand knowledge of Verizon’s
19
billing practices. His contention that Verizon used the same
practices for its government contracts likewise relied on
nonpublic sources. First, he obtained a document in 2004 from
MCI Communications, a company later acquired by Verizon.
Shea explained that the document enumerated all the taxes and
surcharges collected by Verizon in its government contract
with GSA, and he determined that the listed charges bore a very
close resemblance to the fees charged by Verizon to its
commercial customers, suggesting that Verizon passed along
the same charges to both groups. Second, Shea discussed
Verizon’s billing practices with a former (and longtime)
company employee, who reported that Verizon used the same
billing system for commercial and government customers.
According to the complaint, Verizon even lacked the ability to
selectively withhold charges generally billed to all customers.
While Shea’s central allegations about the true state of
facts came from nonpublic information, we still must ask
whether the complaint’s allegations bear a substantial
similarity to public information, including information “from
the news media.” 31 U.S.C. § 3730(e)(4) (2006). Neither party
disputes that publicly available websites can fall in that
category. Verizon also urges us to look beyond sources cited
in Shea’s complaint (as we may do when addressing a
jurisdictional issue, see Settles v. U.S. Parole Comm’n, 429
F.3d 1098, 1107 (D.C. Cir. 2005)). But even looking outside
the complaint, we conclude that publicly available information
failed to create an inference of fraud.
Verizon argues that Shea admitted in his deposition that he
found mock-up invoices for government contracts online.
Because neither Verizon nor Shea has reproduced the mock-
ups, we can rely only on Shea’s characterization of those
documents in his deposition. He stated that the mock-up
invoices were “not the actual monthly invoice[s],” but were
20
“mock-up presentations . . . used for training . . . the accounts
payable people.” J.A. 162. The mock-up invoices included a
section for surcharges and taxes but did not “get into the []
nitty-gritty.” J.A. 163. That the mock-up presentations
included a subcategory for taxes and surcharges tells us little
about whether Verizon in fact billed unlawful surcharges to the
government. It was not necessarily fraudulent for Verizon to
charge some taxes and fees to the government. The contracts
prohibited only charges built in to the contract’s fixed price, a
subject on which the mock-up invoices shed little light.
At times, Shea’s deposition suggests he saw specific taxes
and surcharges in online contracts. For example, he thought
one contract “was even more specific in terms of” surcharges
and had a “recollection of a lot of the surcharges being named
on documents.” J.A. 164. Again, however, Shea never claimed
he saw unlawful surcharges in any contract, and his statements
therefore do not indicate a “likelihood” of fraud. See
Springfield, 14 F.3d at 654.
Shea’s complaint and deposition reference other publicly
available documents, but each falls short of giving rise to an
inference of fraud. For instance, Shea’s complaint cites
Verizon’s Service Publication and Price Guide, which
allegedly “confirm[ed] the company’s practice of billing
customers for a broad range of taxes.” J.A. 47. By its own
terms, however, that guide applies only to commercial
customers. In his deposition, Shea added that he consulted
Verizon’s federal Contract User Guide, but it, too, lacks
specific information about the company’s billing practices.
Instead, the User Guide merely advertised the products and
services that Verizon offers the federal government.
Finally, Shea’s complaint highlights a series of public
modifications to one of Verizon’s contracts. The
21
modifications, in his view, show that Verizon knowingly
misled the government about charging prohibited regulatory
fees, including a surcharge known as the Federal Universal
Service Charge. The public modifications, however, in fact
undercut the notion that Verizon committed fraud. In them,
Verizon alerts the government that it would begin collecting
charges to “help defray costs of taxes and governmental
surcharges and fees imposed on us, . . . [including] a
Regulatory Charge and a Federal Universal Service Charge.”
J.A. 56. The modifications thus tend to show that Verizon
contracted with the government to charge the fees, not that it
fraudulently billed the government.
Given that little public information suggested Verizon
acted fraudulently, Verizon errs in relying on our decision in
Staples, 773 F.3d 83. There, a relator alleged that office supply
companies concealed their import of pencils from China in an
effort to avoid antidumping tariffs. Id. at 84. The parties
agreed that a public database contained the companies’
misrepresentations to the government. Id. at 86-87.
Additionally, public reports described the “giveaway
characteristics” of Chinese pencils and also revealed three of
the four principal defendants to be “possible” importers of
Chinese pencils. Id. at 86, 88. The relator merely examined
the defendants’ pencils, observed the characteristics described
in the report, and filed suit. Id. In those circumstances, the
relator’s allegations were based on public information so as to
trigger application of the public disclosure bar.
Here, by contrast, Shea supplied the missing link between
the public information and the alleged fraud. Unlike in Staples,
in which a public report identified the telltale signs of fraud,
Shea relied on nonpublic information to interpret each contract.
Without Shea’s nonpublic sources (the 2004 MCI document
and the former Verizon employee), there was insufficient
22
information to conclude Verizon employed the same billing
scheme for commercial and government contracts. When the
relator “bridge[s] the gap by [his] own efforts and experience,”
the public disclosure bar does not apply. Springfield, 14 F.3d
at 657. That is the case here.
IV.
Finally, we conclude that the district court did not abuse
its discretion in declining to dismiss Shea’s action with
prejudice under Rules 8 and 9(b). Because the district court
had already dismissed the suit without prejudice under the first-
to-file bar, it considered only whether to dismiss with prejudice
for failure to meet the pleading requirements. It declined to do
so because it found that “Shea could cure any deficiency in [the
complaint’s] factual allegations with additional consistent
allegations.” Shea, 160 F. Supp. 3d at 31.
Under Rule 8, a complaint must allege sufficient facts,
accepted as true, to state a claim plausible on its face. Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009). For allegations of fraud,
Rule 9(b) additionally requires the plaintiff to “state with
particularity the circumstances constituting fraud or mistake.”
Fed. R. Civ. P. 9(b). Together, Rules 8 and 9(b) require a
plaintiff to plead the time, place, and content of the fraud and
to identify the individuals allegedly involved. United States ex
rel. Williams v. Martin-Baker Aircraft Co., 389 F.3d 1251,
1256 (D.C. Cir. 2004).
Regardless of whether Shea’s complaint meets those
standards, we generally do not dismiss suits with prejudice for
failing to plead fraud with particularity. Firestone v. Firestone,
76 F.3d 1205, 1209 (D.C. Cir. 1996). Rather, we “almost
always” allow leave to amend. Id. (quoting Luce v. Edelstein,
802 F.2d 49, 56 (2d Cir. 1986)). A court should dismiss with
23
prejudice only if it determines the plaintiff “could not possibly
cure the deficiency” by alleging new or additional facts. Id.
(internal quotation marks omitted).
Considered in that light, the district court did not abuse its
discretion by allowing Shea to refile his action. Shea has
outlined the basic mechanics of Verizon’s alleged fraud, and
he could potentially provide more detail about the “who,”
“what,” “where,” and “when” of the fraud as to each individual
contract. See Heath, 791 F.3d at 125. Verizon counters that
Shea admitted he did not know which taxes and surcharges
each contract prohibited. Shea, though, admitted only that he
did not know each contract’s contents with certainty. And at
the pleading stage, Shea need show only a “strong inference”
of fraud. Id. at 126. At any rate, the district court correctly
noted that Federal Rule of Civil Procedure 12(d) forbids
considering facts beyond the complaint in connection with a
motion to dismiss the complaint for failure to state a claim.
And based on the face of the complaint, there was no abuse of
discretion in the district court’s conclusion that it would not be
“futile” to allow Shea to re-file. See Firestone, 76 F.3d at 1209.
Verizon, finally, suggests that we convert its motion to
dismiss into one for summary judgment. Under Rule 12(d), a
court can do so only when “[a]ll parties [are] given a reasonable
opportunity to present all the material that is pertinent to the
motion.” Fed. R. Civ. P. 12(d). The district court considered
a motion to dismiss, and there is no indication that Shea had a
reasonable opportunity to present material outside of his
complaint. We therefore decline to treat Verizon’s motion as
one for summary judgment.
24
* * * * *
For the foregoing reasons, we affirm the district court’s
dismissal without prejudice of Shea’s action under the first-to-
file bar. We also affirm the district court’s denial of Verizon’s
motion to dismiss with prejudice under the public disclosure
bar or Rules 8 or 9(b).
So ordered.