Suppressed v. Suppressed

Filing 64

MEMORANDUM Opinion and Order Signed by the Honorable Sharon Johnson Coleman on 4/25/2013:Mailed notice(rth, )

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
THE UNITED STATES OF
AMERICA AND THE STATE OF ILLINOIS,
ex rel. KATHY PISHGHADAMIAN
Plaintiff,

)
)
)
)
)
)
)
)
)

v.
NICOR GAS, INC.
Defendant.

09-cv-298
Judge Sharon Johnson Coleman

MEMORANDUM OPINION AND ORDER
Nicor Gas, Inc. (“Nicor”) moves to dismiss the relator’s complaint for lack of subjectmatter jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1). For the following reasons, Nicor’s
motion to dismiss the relator’s claims pursuant to the public disclosure bar is granted.
Background
This qui tam action was filed by the relator, Kathy Pishghadamian (“relator”), on January
16, 2009. The complaint alleges that Nicor violated the federal False Claims Act (“FCA” or “the
Act”) and the Illinois Whistleblower Reward & Protection Act (“Whistleblower Act”) by
overcharging customers whose energy bills were paid for by government funds under state and
federal Low Income Home Energy Assistance Programs (“LIHEAP”). The relator alleges that
Nicor purposefully underestimated LIHEAP customers’ gas usage during months when the cost
of supplying gas was low and then “corrected” the bills during months where gas prices were
higher. At the time of filing, this matter was sealed while the United States and the State of
Illinois determined whether to intervene in the matter; after they declined to do so, the Court
unsealed the matter, and summons were issued to the defendant, Nicor.
Nicor moves to dismiss the relator’s complaint for lack of subject-matter jurisdiction
pursuant to Fed. R. Civ. P. 12(b)(1), failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6),
and failure to plead with the requisite particularity pursuant to Fed. R. Civ. P. 9(b). Nicor argues
that the essence of the relator’s complaint involves the alleged practice of estimated billing for
natural gas utility service and that this practice is within the exclusive jurisdiction of the Illinois
Commerce Commission (the “Commission”). Nicor argues further that the information
1

underlying the relator’s allegations were publicly disclosed prior to the filing of the complaint
and therefore the relator is not the original source as required by federal and state law. Lastly,
Nicor argues that the relator fails to plead her allegations with the requisite particularity. For the
following reasons, Nicor’s motion to dismiss the relator’s claims pursuant to the public
disclosure bar is granted.
Legal Standard
Pursuant to Fed. R. Civ. P. 12(b)(1), a court must dismiss any action for which it lacks
subject matter jurisdiction. Rule 12(b)(1) motions are premised on either facial or factual attacks
on jurisdiction. Simonian v. Oreck Corp., No. 10 C 1224, 2010 U.S. Dist. LEXIS 86832, at *3-4
(N.D. Ill. Aug. 23, 2010). If the defendant makes a factual attack on the plaintiff’s assertion of
subject matter jurisdiction, it is proper for the court to look beyond the jurisdictional allegations
in the complaint and to view whatever evidence has been submitted in response to the motion.
Id. The plaintiff must then put forth “competent proof” that the court has subject matter
jurisdiction. NLFC, Inc. v. Devcom Mid-America, Inc., 45 F.3d 231, 237 (7th Cir. 1995).
Discussion
Initially, this Court notes that because the relator does not merely allege an overcharge,
but an unlawful charge, her claims are not within the exclusive jurisdiction of the Commission.
Thomas v. Peoples Gas Light & Coke Co., 959 N.E.2d 1201, 1202 (Ill. App. Ct. 1st Dist. 2011).
Accordingly, Nicor’s arguments for dismissal of the federal claims under the Burford abstention
doctrine, the primary jurisdiction doctrine, and the filed-rate doctrine are all denied.
Even though the relator’s claims do not fall under the exclusive jurisdiction of the
Commission, qui tam actions are subject to another jurisdictional bar when a relator’s action is
“based upon the public disclosure of allegations or transactions in a criminal, civil, or
administrative hearing . . . or from the news media, unless the action is brought by the Attorney
General or the person bringing the action is an original source of the information.” 31 U.S.C. §
3730(e)(4)(A). Courts conduct a three-step inquiry to determine whether the public disclosure
bar prevents hearing a qui tam suit under the FCA. Glaser, 570 F.3d at 913. First, the court
“examines whether the relator’s allegations have been ‘publicly disclosed.’ If so, [the court]
next asks whether the lawsuit is ‘based upon’ those publicly disclosed allegations. If it is, the
court must determine whether the relator is an ‘original source’ of the information upon which
his lawsuit is based.” Id.
2

Nicor argues that the relator’s claims should be dismissed because the relator’s
allegations were publicly disclosed in: (1) a 2008 state court case; (2) an investigation of the
underestimating/overbilling scheme by the Commission; and (3) throughout the news media.
Nicor argues further that the relator is not an original source with direct and independent
knowledge of the information underlying her claims. The relator argues that her specific fraud
allegations were not publicly disclosed because the state court case, news articles, and
investigation by the Illinois Commerce Commission involved only the
underestimating/overbilling scheme, but do not lead to the conclusion that Nicor defrauded
federal or Illinois state governments.
First, “for purposes of § 3730(e)(4), a ‘public disclosure’ occurs when ‘the critical
elements exposing the transaction as fraudulent are placed in the public domain.’” Glaser, 570
F.3d at 913 (citing United States ex rel. Feingold v. AdminaStar Fed., Inc., 324 F.3d 492, 495
(7th Cir. 2003)). A public disclosure “bring[s] to the attention of the relevant authority that there
has been a false claim against the government.” Feingold, 324 F.3d at 495. Nicor argues the
relator’s fraud claims were previously disclosed in the state court case, Dikcis v. Nicor Gas
Company, No. 08 CH 18895. In Dikcis a plaintiff brought a class action alleging that Nicor
engaged in the same underestimating and corrected billing scheme alleged here. The only
distinction between the two cases is the alleged victims seeking recourse: in Dikcis the plaintiff
sought relief on his own behalf, as well as a class, for breach of contract and violations of the
Illinois Consumer Fraud Act. In the instant action the relator seeks relief on behalf of the
government for the submission of false and fraudulent claims for payment. Both cases, however,
concern the same fraudulent acts detailed in the Dikcis complaint. Accordingly, while the Dikcis
complaint did not reveal that the customers harmed included LIHEAP customers, the critical
elements exposing the transaction as fraudulent were placed in the public domain.
Next, this Court must determine whether the lawsuit is “based upon” those publicly
disclosed allegations. A relator’s complaint is “based upon” publicly disclosed allegations or
transactions when the allegations in the relator’s complaint are substantially similar to
allegations already in the public domain. Glaser, 570 F.3d at 910. Here the relator’s claims are
substantially similar to the allegations already in the public domain. Dikcis alleged that Nicor
engaged in “unfair and deceptive practices by charging consumers gas used in earlier months at

3

the higher prices” of later months. The relator here alleges that Nicor engaged in the same
practice, but that Nicor collected payments from the government.
Lastly, this Court must determine if the relator is an original source of the information.
When an FCA relator’s allegations are substantially similar to information about an alleged fraud
that is already publicly disclosed, the statute permits the relator to avoid the jurisdictional bar
only if she has “direct and independent knowledge of the information on which the allegations
are based” and “voluntarily provided the information to the Government before filing” a qui tam
action. 31 U.S.C. § 3730(e)(4)(B); see also Glaser, 570 F.3d at 910. Here, the parties dispute
whether the relator was a direct and independent source. Nicor argues that the relator lacks
direct knowledge because she only learned of the alleged fraudulent scheme from customer calls.
The relator argues that her knowledge was derived from numerous sources including her access
to Nicor’s proprietary database, interactions with Nicor management, as well as customer calls.
The relator alleges in her complaint that beginning in April 2008 she began to receive an
abnormally high volume of customer complaints concerning excessive or outrageous bills.
Although the exact timing is unclear, subsequently the relator accessed Nicor’s database and
discovered that increased profits were being generated by the corrected bills. The Dikcis case
was filed around the same time, in May of 2008. To establish independent knowledge, the
relator must be someone who would have learned of the allegation or transactions independently
of the public disclosure. Glaser, 570 F.3d at 921. Given the timing of the Dikcis disclosure, the
relator has not met her burden of proving she would have learned of the alleged fraudulent
underestimating/corrected billing scheme independently of the public disclosure.
Conclusion
The relator’s claims are dismissed in their entirety. Having found that the relator’s
claims are dismissed pursuant to the public disclosure bar, the Court need not address Nicor’s
Rule 9(b) particularity arguments.

IT IS SO ORDERED.
Date: April 25, 2013
____________________________
Sharon Johnson Coleman
United States District Judge

4