Janio R. Sanchez v. Javier Abuabara, Sr., et al
Filing
48
ORDER granting in part and denying in part 40 Motion to Dismiss. Signed by Senior Judge Paul C. Huck on 6/4/2012.(jpt)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO.: 10-61673-CIV-HUCK/BANDSTRA
UNITED STATES OF AMERICA,
ex rel. SANCHEZ,
Plaintiff,
v.
JAVIER ABUABARA, SR.,
JAVIER ABUABARA, JR.,
JHURY ABUABARA, and
READIX, INC.,
Defendants.
_____________________________/
ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANTS’ MOTION TO DISMISS RELATOR’S COMPLAINT
This matter is before the Court on the Javier Abuabara, Sr.’s (“Senior”), Javier Abuabara,
Jr.’s (“Junior”), Jhury Abuabara’s (“Jhury”), and Readix, Inc.’s (“Readix”) (collectively,
“Defendants”) Motion to Dismiss the Amended Complaint (D.E. #37) of Qui Tam Plaintiff and
Relator Janio R. Sanchez (“Relator”) for (1) lack of subject matter jurisdiction under Fed. R. Civ.
P. 12(b)(1) by virtue of the Public Disclosure Bar of the False Claims Act, and (2) failure to state
a claim for which relief can be granted and failure to state fraud with sufficient particularity
under Fed. R. Civ. P. 12(b)(6) and 9(b) (the “Motion to Dismiss”) (D.E. #40). For the reasons
stated below, Defendant’s Motion to Dismiss with respect to lack of subject matter jurisdiction is
DENIED. For the reasons stated by this Court at the oral argument held on June 1, 2012,
Defendants’ Motion to Dismiss with respect to failure to state a claim for which relief can be
granted and failure to state fraud with sufficient particularity is GRANTED with leave to amend
one last time. If Relator seeks to amend his Amended Complaint, Relator must file such Second
Amended Complaint with this Court on or before July 9, 2012.
1
I.
BACKGROUND
In his Amended Complaint, Relator alleges that Defendants fraudulently induced
agencies of the federal government (the Department of Defense and the Army) to award
Defendants a contract for the testing of telecommunications to be used by American troops on
the battlefield through false representations about Readix’s financial solvency (the “financial
solvency claim allegations”) and ability to perform the work, including representations that
Readix would employ the services of certain key personnel (the “bait-and-switch claim
allegations”), in violation of Section 3729(a)(1)(A)-(C) of the False Claims Act. See Am.
Compl. p. 1-2 and ¶¶107-130.
In their Motion to Dismiss, Defendants claim that this Court should dismiss Relator’s
Amended Complaint for lack of subject matter jurisdiction under Fed. R. Civ. P. 12(b)(1) by
virtue of the Public Disclosure Bar of the False Claims Act.
II.
LEGAL ANALYSIS
Defendants argue that Relator's claims are barred under the Public Disclosure Bar, 31
U.S.C. § 3730(e)(4), because substantially the same allegations or transactions as alleged in the
Amended Complaint were publicly disclosed in correspondence between George Tzanateus (a
private citizen) and Christie P. Martinez (a government employee) and Relator cannot establish
that he is an “original source” of the publicly disclosed information.
The Public Disclosure Bar directs the Court to “dismiss an action or claim under this
section, unless opposed by the Government, if substantially the same allegations or transactions
as alleged in the action or claim were publicly disclosed—(i) in a Federal criminal, civil, or
administrative hearing in which the Government or its agent is a party; (ii) in a congressional,
Government Accountability Office, or other Federal report, hearing, audit, or investigation; or
(iii) from the news media, unless the action is brought by the Attorney General or the person
bringing the action is an original source.” 31 U.S.C. § 3730(e)(4).
At the outset, the Court observes that Congress’s recent amendments to the Public
Disclosure Bar under the 2010 health care reform law have “broadened the ability of relators to
commence qui tam lawsuits under the Act enormously.” See Beverly Cohen, KABOOM! The
Explosion of Qui Tam False Claims Under the Health Reform Law, 116 Penn. St. L. Rev. 1, 79
(2011). Among other changes, Congress eliminated an absolute jurisdictional bar in favor of a
2
jurisdictional bar that can be lifted by government discretion. See the Patient Protection and
Affordable Care Act, P.L. 111-148, Title X, Subtitle A, § 10104(j)(2), 124 Stat. 901 (Mar. 23,
2010).1 At the oral argument held before this Court on June 1, 2012, James Alan Weinkle, a
representative of the United States Attorney’s Office, confirmed that the government would not
oppose a subject matter jurisdiction dismissal if the Public Disclosure Bar was otherwise
satisfied.
In determining whether a public disclosure divests the court of subject matter jurisdiction,
the 11th Circuit, under the prior version of the statute, applied a three-part inquiry: "(1) have the
allegations made by the plaintiff been publicly disclosed; (2) if so, is the disclosed information
the basis of the plaintiff's suit; (3) if yes, is the plaintiff an 'original source' of that information."
Battle v. Bd. of Regents, 468 F.3d 755, 762 (11th Cir. Ga. 2006) (citing Cooper v. Blue Cross
and Blue Shield of Florida, Inc., 19 F.3d 562, 565 n.4 (11th Cir. 1994)). While the structure of
this inquiry remains good law, its content has been significantly altered by the recent health care
reform amendments. Since the 11th Circuit has not yet rearticulated this inquiry in light of the
amendments, this Court will do so where necessary in each part that follows.
a. Have the Allegations Made by the Relator Been Publicly Disclosed?
The first part of the inquiry asks whether the allegations made by the Relator have been
public disclosed. To be publicly disclosed, Congress has set forth an enumerated list of channels
through which public disclosure may occur. Since the Defendants claim the public disclosure
bar is satisfied by virtue of a Federal report or investigation – channels enumerated both pre- and
post-health care reform – the recent amendments have no bearing on this part of the inquiry.2
1
The U.S. Supreme Court has indicated that the amendments to the Patient Protection and
Affordable Care Act are not applicable to pending cases and therefore, in Schindler, applied the
language of the statute as it existed when the suit was filed. See Schindler Elevator Corp. v. U.S.
ex rel. Kirk, 131 S. Ct. 1885, 1889 (2011). Since the suit in this case was filed many months
after the Act was signed into law, this Court will apply the amended language. The parties agree
that the amended version of the Public Disclosure Bar is applicable.
2
Under prior law, this list implicitly included actions based on publicly available information in
state or local government reports. See Graham County Soil & Water Conservation Dist. v.
United States ex rel. Wilson, 130 S. Ct. 1396, 1411 (U.S. 2010) (“Today's ruling merely confirms
that disclosures made in one type of context – a state or local report, audit, or investigation – may
trigger the public disclosure bar.”) Under the amendments, this holding has been legislatively
3
Specifically, Defendants claim that the August 2010 correspondence between Tzanateus
and Martinez is either a Federal report or a Federal investigation. In Schindler, the U.S. Supreme
Court was clear that the term “report” should be given its “broad ordinary meaning.” Schindler,
131 S. Ct. at 1891. The Court found that a report is “something that gives information” or a
“notification.” Id. The Court also found that the three adjectives preceding the term “report,”
which were “congressional, administrative or Government Accountability Office” (and are now
“congressional, Government Accountability Office or other Federal”) “tell us nothing more than
that a ‘report’ must be governmental.” Id. at 1892.
Here, both the Tzanateus and Martinez letters unquestionably give information. Both
letters are thus “reports” under the broad definition adopted by the U.S. Supreme Court. Since
Martinez is an officer at the Department of the Army, a federal government agency, her report is
a “Federal report.” By contrast, the Tzanateus letter, standing alone, is a private report.3 Given
that the Martinez letter only alludes to the allegations made in the Tzanateus letter, Defendants
would urge this Court to treat the correspondence together.4 In other words, the Tzanateus letter
would become a Federal report simply by being referenced in the Martinez letter. Here, there
appears to be a circuit split. The Seventh Circuit has held that “[d]isclosure to an official
authorized to act for or to represent the community on behalf of government can be understood
as public disclosure.” United States v. Bank of Farmington, 166 F.3d 853, 861 (7th Cir.1999).
The Ninth Circuit, by contrast, considered and rejected the view of the 7th Circuit. See United
States of America, ex rel. Sean McCurdy, v. General Dynamics National Steel and Shipbuilding
(NASSCO), 2010 WL 3463675 at *2 (S.D.Cal., Aug. 31, 2010) citing U.S. ex rel. Meyer v.
Horizon Health Corp., 565 F.3d 1195, 1201, n.3 (9th Cir. 2009). This Court adopts the view of
the Ninth Circuit and finds that the Tzanateus letter does not become a Federal Report by virtue
of the Martinez letter.
overruled. Now, only Federal – as opposed to state and local – disclosures are barred. Private
(non-governmental) disclosures were never barred.
3
It is clear that the Tzanateus letter, standing letter, may not be viewed as a “Federal
investigation.”
4
It is noteworthy that not only did the Martinez letter not adopt by reference the Tzanateus
allegations, but it refuted them.
4
b. Does the Disclosed Information Contain Substantially the Same Allegations or
Transactions as Alleged in Plaintiff’s Complaint?
The second part of the 11th Circuit’s inquiry asked whether the disclosed information was
the basis of the plaintiff's suit. This inquiry derived from the statutory language that “[n]o court
shall have jurisdiction over an action under this section based upon the public disclosure of
allegations or transactions in [an enumerated list] (emphasis added).” See 31 USC § 3730, 99
P.L. 562, 100 Stat. 3157 (Oct. 27, 1986). Under the new amendments, however, Congress
replaced the “based upon” language with the “substantially the same” language in order to
resolve a circuit split. See U.S. ex rel. Black v. Health & Hosp. Corp. of Marion County, 2011
WL 1161737, *6 (D.Md. Mar. 28, 2011). The 11th Circuit had previously interpreted “based
upon” to mean “supported by,” which represented a higher hurdle for relators than the Public
Disclosure Bar in other circuits. Cooper, 19 F.3d at 567.5 Under this interpretation, if a
complaint was based, even if in part, on allegations or transactions that were publicly disclosed,
the whistleblower’s suit would be precluded. See id. The 11th Circuit recognized, however, that
had Congress said “solely based on” rather than “based on,” its jurisdiction would be expanded.
Id. In light of the recent amendments which limit the Public Disclosure Bar to only those
disclosures that are “substantially the same” rather than “based upon,” it follows that Congress
has now expanded the Court’s jurisdiction by lowering the Public Disclosure Bar. Accordingly,
the second part of the inquiry should now ask whether the disclosed information contains
substantially the same allegations or transactions as alleged in the Relator’s complaint.
Here, the Court need only inquire whether the Martinez letter contained substantially the
same allegations or transactions as alleged in the Relator’s Amended Complaint since the Court
has already found that the Tzanateus letter is not a Federal report. At the oral argument held
before this Court on June 1, 2012, counsel for Defendants properly conceded that both the
5
It is notable that other circuits were critical of the 11th Circuit’s interpretation. See, e.g., United
States ex rel. Siller v. Becton Dickinson & Co. by & Through its Microbiology Sys. Div., 21 F.3d
1339, 1349 (4th Cir. 1994) (“The Precision decision, for example, baldly asserts that "as a matter
of common usage, the phrase 'based upon' is properly understood to mean 'supported by.'" 971
F.2d at 552. We are unfamiliar with any usage, let alone a common one or a dictionary
definition, that suggests that "based upon" can mean "supported by.").
5
Tzanateus and Martinez letters did not contain the financial solvency claim allegations.
Therefore, the financial solvency claim was not publicly disclosed. With respect to the “bait and
switch” claim allegations, the Court finds that the Martinez letter did not contain them. The
11th Circuit has held that the public disclosure of allegations that the defendant “actually
engaged in wrongdoing” is necessary before invoking the public disclosure bar. See Cooper, 19
F.3d at 567. The Martinez letter does not suggest that Defendants engaged in wrongdoing. In
fact, it refutes this proposition. It therefore does not contain substantially the same allegations or
transactions of wrongdoing as set forth in Relator’s action. Accordingly, the elements of the
Public Disclosure Bar are not satisfied and the third prong need not be considered. Thus,
Defendant’s Motion to Dismiss is DENIED insofar as it relates to lack of subject matter
jurisdiction under Fed. R. Civ. P. 12(b)(1).
III.
CONCLUSION
For the reasons set forth above, Defendant’s Motion to Dismiss with respect to lack of
subject matter jurisdiction is DENIED. For the reasons stated by this Court at the oral argument
held on June 1, 2012, Defendants’ Motion to Dismiss with respect to failure to state a claim for
which relief can be granted and failure to state fraud with sufficient particularity is GRANTED
with leave to amend one last time. If Relator seeks to amend his Amended Complaint, Relator
must file such Second Amended Complaint with this Court on or before July 9, 2012.
DONE AND ORDERED in Chambers, Miami, Florida, June 4, 2012.
______________________
Paul C. Huck
United States District Judge
Copies furnished to:
All counsel of record
6
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?