[00:00:01] Speaker 00: Case number 15-7135 at L, United States of America X-Rail, Stephen Shea and Stephen M. Shea, Appellant vs. Silco Partnership, doing business as Verizon Warrants at L. Mr. Mead for the Appellant, Mr. Waxman for the Appellees. [00:00:18] Speaker 06: Mr. Meade, please, just in terms of format, why don't we have both of you in your allotted time address both the appeal and the cross-appeal, and then you'll get a rebuttal, and Mr. Waxman will get a rebuttal after that. [00:00:30] Speaker 09: Thank you, Your Honor. [00:00:31] Speaker 09: I appreciate that. [00:00:32] Speaker 09: May it please the Court, Chris Meade on behalf of Relator Stephen Shea. [00:00:37] Speaker 09: I would like to begin the first to file discussion with the plain language of four statutes at issue on principal cases we rely on in our brief. [00:00:47] Speaker 09: Let's begin with this court's decision in Brown versus Whole Foods. [00:00:53] Speaker 09: That statute said no civil action may be brought if a notice requirement had not been satisfied. [00:01:00] Speaker 09: This court, understanding that it had not been, did not treat that plain language as prohibitive and held the case in abeyance until the plaintiff could satisfy that condition. [00:01:14] Speaker 09: This court relied on the Supreme Court's decision in Oscar Mayer. [00:01:18] Speaker 09: That statute said no suit may be brought. [00:01:21] Speaker 09: And the Supreme Court held that because on the unique circumstances of that statute, it was appropriate to allow amendment or to hold the case in advance until a prerequisite to suit had been met, that it was appropriate not to dismiss there. [00:01:39] Speaker 09: The Eighth Circuit case in Wilson v. Westinghouse said no civil action may be commenced. [00:01:46] Speaker 09: Again, on the unique facts of that statute, the Eighth Circuit said not a problem. [00:01:52] Speaker 09: Finally, the First Circuit case in Guébois applied to this statute and this first-to-file issue. [00:01:58] Speaker 09: No person may bring a civil action while another case is pending. [00:02:03] Speaker 09: There are other cases we cited, such as Mathews v. Diaz, where the plain language is not quite as proscriptive, but still imposes pre-filing requirements that the courts have allowed to be met post-filing. [00:02:21] Speaker 09: There is another line of cases, McNeil and Hallstrom, the two Supreme Court cases, most importantly there. [00:02:29] Speaker 09: where there was no issue about amendment, right? [00:02:34] Speaker 09: There was no argument, as far as I can tell from reading those cases, that the plaintiff had asked for supplementation or amendment. [00:02:42] Speaker 06: So is your view that in a situation in which there's already an action that's been filed and then the second one comes along, that it would necessarily be an error for the district court to dismiss the second action under the first file doctrine? [00:02:55] Speaker 09: No, not necessarily, because there are doctrines, Your Honor, that apply in amendment or supplementation that allow discretion for a district court in the appropriate circumstances. [00:03:07] Speaker 06: What I would say is that it... But I guess what I meant, so your view is that discretionarily a district court can keep the second action on the books and then allow it. [00:03:17] Speaker 06: But I guess what I'm asking is, would it necessarily be erroneous for the district court to dismiss the second action under the first file doctrine? [00:03:26] Speaker 09: So it depends on timing. [00:03:27] Speaker 09: Perhaps I misunderstood your question. [00:03:29] Speaker 06: If the first case remains pending and the district court... Yeah, sorry, I'm talking about one where the first case is pending, and then a second action is filed, and then the first to file bar is raised, is it necessarily an error for the district court then to say, rather than just holding the second case, I'm going to dismiss the second case? [00:03:51] Speaker 09: It is what I would argue is that all of these cases, the lesson from these conflicting opinions, and maybe smarter people than I am can attempt to harmonize them. [00:04:02] Speaker 09: But I think the lesson is each statute is unique. [00:04:05] Speaker 09: So what I'd say to you, Your Honor, is no. [00:04:07] Speaker 09: I would think there might be some circumstances where holding the case in advance might be appropriate in an exercise of supplementation or amendment authority. [00:04:17] Speaker 09: For example, assume that there is public information that the first case has been declined, and I'm the lawyer for the second case, and I file a declaration saying, I've talked with the lawyer for the first case. [00:04:30] Speaker 09: He doesn't have the resources to do it. [00:04:32] Speaker 09: It's likely he'll drop things, but he hasn't made a decision yet. [00:04:35] Speaker 09: That might be an example where the court might, as this court did in Brown versus Whole Foods or another circumstance, exercise discretion because this statute is unique. [00:04:46] Speaker 09: Remember, we're not talking about a jurisdictional requirement. [00:04:50] Speaker 09: Remember that the first to file language is specifically designed to incentivize relators to come forward with information. [00:05:01] Speaker 09: The Department of Justice. [00:05:02] Speaker 05: Can I just ask a question? [00:05:03] Speaker 05: Are you aware of a case? [00:05:06] Speaker 05: where the first file case and the second file case were filed by the same person? [00:05:12] Speaker 05: Does it apply then? [00:05:13] Speaker 05: It just seems weird. [00:05:16] Speaker 09: Boy, and I was not counseled on the first round. [00:05:19] Speaker 09: And yes, I understand. [00:05:21] Speaker 09: I feel in some ways like- I'm asking who the counsel is. [00:05:23] Speaker 05: It's the same plaintiff, right? [00:05:25] Speaker 09: Right. [00:05:25] Speaker 09: So all I'm saying is, Your Honor, I was not counseled to Mr. Shea when that decision was made to file a second separate case instead of just amending the first. [00:05:34] Speaker 09: I am not aware of any other false claims at a case where that happened. [00:05:39] Speaker 05: And now, given- And they haven't raised Judicata. [00:05:43] Speaker 05: Has Judge Judicata been raised in this case? [00:05:45] Speaker 09: No, because there is none. [00:05:47] Speaker 09: So the first case, as Department of Justice rules require, they don't give you a release on something they haven't investigated and decided on. [00:05:57] Speaker 09: So the only release Verizon obtained for its $93.5 million was a release with respect to two specific contracts. [00:06:05] Speaker 09: The second case alleges 20 very different contracts involving different agencies, different sets of facts. [00:06:13] Speaker 05: And so there is... I'm just saying, one can imagine, race-judicata principles might or might not kick in when it's the same party, but it's just, for the whole purpose, first to file, it's just weird that one person is canceling out his own second case, but that may be what the statute says as well. [00:06:32] Speaker 05: I'm just, anyhow, the short answer is you're not aware of a case where this has happened. [00:06:36] Speaker 09: And just so you know, we made that argument to the first panel, and unfortunately we lost that. [00:06:41] Speaker 09: We didn't think [00:06:42] Speaker 09: that the bar should apply to the same relator. [00:06:46] Speaker 09: We lost that argument, and so we've got rule of law of the case. [00:06:53] Speaker 09: All I'd like to do with respect to the dueling plain language arguments, you've got McNeil and Hallstrom. [00:06:59] Speaker 09: And remember what those statutes are about. [00:07:02] Speaker 09: They're both about a notice and exhaustion. [00:07:06] Speaker 09: Give a government agency, in the case of McNeil, a federal tort claim. [00:07:11] Speaker 09: Does that give the Department of Justice the opportunity, the agency, the opportunity to evaluate the claim? [00:07:16] Speaker 09: Or in Hallstrom, the EPA, notice? [00:07:18] Speaker 06: So can I ask this question? [00:07:21] Speaker 06: The regime you foresee happening is one in which district courts have discretion to keep the second action alive. [00:07:29] Speaker 06: They can dismiss the second action under the first defile bar, assuming the first action is still pending, but they don't have to and they have discretion to keep them alive. [00:07:37] Speaker 06: It seems like it results in a bit of an anomalous situation because then [00:07:41] Speaker 06: which second, in the event that the first action is dealt with in a way that allows a second action to come about so you don't have a race due to Cato Bar, then you're talking about which [00:07:52] Speaker 06: person who brings the second action is going to get the benefit of it and going to get to go forward. [00:07:57] Speaker 06: And it just seems a little bit arbitrary that that's going to be determined based on whether a district court decides in its discretion to allow a second suit to survive or instead to dismiss it. [00:08:07] Speaker 09: So, Your Honor, I'd argue just the opposite. [00:08:09] Speaker 09: This is kind of how the sausage gets made in my world as a relator's counsel. [00:08:14] Speaker 09: So here's what would be really arbitrary. [00:08:17] Speaker 09: You all decide that our first case, that Shay too, is dismissed under the first to file bar with prejudice, right? [00:08:29] Speaker 09: Instead of appealing to the Supreme Court, [00:08:31] Speaker 09: We take our time, let the period for cert application pass, and think about filing a second suit. [00:08:40] Speaker 09: The day the cert deadline passes, our case is no longer pending, and somebody else jumps us. [00:08:46] Speaker 09: Somebody else gets in. [00:08:48] Speaker 09: Okay? [00:08:50] Speaker 06: Why are we dismissing the second case with prejudice? [00:08:52] Speaker 09: Well, that's what happened. [00:08:55] Speaker 06: Remember, on the- But now we know it shouldn't have been dismissed with prejudice. [00:08:59] Speaker 06: Now we know it should be. [00:09:01] Speaker 06: So just going forward, the second case won't be dismissed with prejudice. [00:09:04] Speaker 06: It would be dismissed without prejudice. [00:09:06] Speaker 06: And I guess the anomaly I see is that in some situations, a district court is going to dismiss a case without prejudice. [00:09:12] Speaker 06: In other situations, in the way you foresee the world happening, a district court is going to allow the second case to survive and then is going to hold it in abeyance or something. [00:09:21] Speaker 06: And it just seems arbitrary that the litigant who gets the relator who gets to go forward as having put the placeholder second one in is the one who happens to have the benefit of the favorable exercise of discretion by the district court. [00:09:36] Speaker 09: Now here's what's arbitrary. [00:09:37] Speaker 09: Let's assume the first filed case is dismissed and the period to appeal runs at midnight 30 days afterwards. [00:09:46] Speaker 09: somebody else beats me to the punch and files a false claims action at 1201. [00:09:52] Speaker 09: So now we're talking about there might be five relators out there who... But you could have filed a 1201 also. [00:09:58] Speaker 06: It's definitely a race to the courthouse. [00:10:01] Speaker 06: There's no doubt about it. [00:10:02] Speaker 06: It's just that everybody's on an equal footing. [00:10:04] Speaker 09: No, because, well, that is truly arbitrary. [00:10:08] Speaker 09: So who gets their papers in first compared to, hey, I brought a case that was pending while the first action was pending. [00:10:19] Speaker 09: The Department of Justice had the benefit of what I disclosed in that suit to aid it. [00:10:24] Speaker 09: in its investigation of the first suit. [00:10:27] Speaker 09: But because I filed, even earlier than those four other guys who filed at 1202 at midnight, they go first, and I'm out of luck. [00:10:37] Speaker 09: That's arbitrary. [00:10:39] Speaker 09: What's a well-ordered system is one in which the district court can evaluate the circumstances. [00:10:46] Speaker 09: Who filed when? [00:10:47] Speaker 09: What are the nature of their allegations? [00:10:49] Speaker 09: Who has the resources to go forward? [00:10:51] Speaker 09: What's fair? [00:10:52] Speaker 09: What should happen here in an orderly system? [00:10:56] Speaker 09: With all due respect, I think your proposal is the arbitrary, scared me. [00:11:01] Speaker 09: As a Relators Councilman, somebody walks in my door, I get scared. [00:11:05] Speaker 09: If I think they've got a good case, I gotta get it on file. [00:11:09] Speaker 09: Now, it is that incentive. [00:11:11] Speaker 09: Remember that, as that Relators' Council, I'm eager to get my client's case on file. [00:11:19] Speaker 09: I have no clue, usually, whether there are other cases that have been filed earlier that under seal. [00:11:25] Speaker 09: So the first to file rule has nothing in it that educates me or puts me in a position to understand that, hey, I should wait. [00:11:36] Speaker 09: I should exhaust something. [00:11:38] Speaker 09: We want the incentive for five copycat suits to be filed while the first one is under seal because DOJ gets the benefit of all that additional information. [00:11:49] Speaker 09: Those additional relators may not get a bounty because they weren't first to file, but they will have helped the Department of Justice of first to file [00:11:59] Speaker 09: purpose will be served. [00:12:02] Speaker 09: Compare that to the exhaustion cases like McNeil and Hallstrom. [00:12:06] Speaker 09: You can make the case that exhaustion, that putting a government agency on notice and letting it do its job... Let me ask you about your theory here. [00:12:15] Speaker 05: So you filed your second amended complaint. [00:12:20] Speaker 05: Is your theory that [00:12:24] Speaker 05: For statute of limitations purposes, it relates back to the original complaint in 2009, so you can go back to 2003? [00:12:32] Speaker 09: Yes, Your Honor, and that's why we're here. [00:12:35] Speaker 05: I mean, the reality... So that's something that seems odd to me, because we know that until... Verizon 1 was dismissed, I've got to make sure I get my dates right, 2011. [00:12:49] Speaker 05: It was actually a legal and factual impossibility for you to have a viable action. [00:12:56] Speaker 05: Normally when you're amending a complaint to address something, it's something that could have been addressed and fixed. [00:13:02] Speaker 05: The exhaustion issues, the things in Brown and Oscar Mayer, could have been done before the complaint was filed, just weren't. [00:13:09] Speaker 05: They were correctable. [00:13:11] Speaker 05: There's nothing you could have done factually or illegally to have a viable complaint in this case before Verizon One was dismissed. [00:13:20] Speaker 05: Is that correct? [00:13:22] Speaker 09: Technically, yes, although the circumstances of the fact that we were the plaintiff in both arguably makes it a little different. [00:13:30] Speaker 05: That may go to your discretionary argument. [00:13:34] Speaker 05: So as to that, then at a bare minimum under your theory, shouldn't the statute of limitations relation back period only relate, for your second amendment complaint, only relate back to the time of dismissal of Verizon One? [00:13:47] Speaker 05: So what justification could it possibly be for going further back? [00:13:50] Speaker 09: So I must confess, Your Honor, I'm not prepared to argue relation back or equitable tolling, which is another issue here. [00:13:56] Speaker 09: The real reason the parties are expending resources is because you are right to say there may be statute of limitations, implications from dismissing without prejudice and having us refile compared to letting us keep this suit alive. [00:14:11] Speaker 09: That's why I've spent the time to be in front of you. [00:14:13] Speaker 07: Are there any cases deciding or discussing whether [00:14:17] Speaker 07: During the period of the bar, the first to file rule, that the statute of limitations doesn't hold? [00:14:24] Speaker 09: I'm afraid, Your Honor, I haven't looked at that issue. [00:14:27] Speaker 09: I really apologize. [00:14:28] Speaker 09: I just don't know the answer. [00:14:32] Speaker 09: The obvious argument would be, Your Honor, that if the first to file rule is not jurisdictional, which we know from Heath, [00:14:40] Speaker 09: And if this is the kind of statutory regime where the unique circumstances of the statute argue for a discretionary supplementation amendment regime to allow the curing of a defect, which you point out [00:14:57] Speaker 09: If our case had been brought out from under seal while the first was pending and the defendant had the opportunity to file a motion to dismiss, arguably we wouldn't have any power to change that. [00:15:09] Speaker 09: But the same is true in terms of our power when we file. [00:15:13] Speaker 09: We have no power to know whether there's somebody else who's already brought a case and no power to therefore wait until that case has been resolved. [00:15:21] Speaker 05: It seems to me the holding in advance that happened in the other cases you have mentioned [00:15:26] Speaker 05: didn't sort of allow a gamesmanship to get around statute of limitations in the same way here. [00:15:33] Speaker 05: It really is letting you reach back further than you could as a matter of law or fact ever have been able to file a viable complaint. [00:15:40] Speaker 09: Well, so your honor, if if that [00:15:42] Speaker 09: turns out to be true, Your Honor's point about the limitations period only being applicable once the first is dismissed might apply. [00:15:51] Speaker 09: I understand your point. [00:15:53] Speaker 09: I have to leave those arguments for another day because I don't know the answer. [00:15:57] Speaker 09: But I'd also point out that the gamesmanship here is not just on one side of this podium. [00:16:05] Speaker 05: in terms of statute of limitations. [00:16:07] Speaker 05: How do you distinguish the Halston v. Tillamook case from the Supreme Court? [00:16:11] Speaker 05: How do you distinguish there where they held that this was? [00:16:15] Speaker 05: that a pre, not this, it was a different statute, but a pre, you know, a textual precondition to filing couldn't be satisfied through means of holding, I guess a stay was an issue there. [00:16:28] Speaker 09: Right, right. [00:16:28] Speaker 09: So, several ways. [00:16:30] Speaker 09: First, arguably those are jurisdictional requirements, although McNeil held that question open. [00:16:35] Speaker 09: They are situations where there was an exhaustion requirement to let a state agency do its job, which has an independent value that is different than a pending case that can get resolved while ours is under seal and still pending. [00:16:50] Speaker 09: So different statutes, different purpose, jurisdictional, and most importantly, in those cases, no suggestion that the plaintiffs had sought to amend or supplement to allege in the case that the situation had been cured. [00:17:05] Speaker 09: And because McNeil and Hallstrom didn't deal with that, I assume Your Honor's opinion in Brown v. Whole Foods made that same judgment, that McNeil and Hallstrom don't control your decision on behalf of the plaintiff there because... Oscar Mayer and Brown were both pro se plaintiffs with certain enforcing civil rights statutes. [00:17:25] Speaker 09: Right, and so that's an example of how the unique purpose of a statute and the incentives and the statutory structure taken as a whole, I think, have to be treated individually. [00:17:37] Speaker 09: And so this first-to-file bar really is designed to have the effect of causing us to hurry, right? [00:17:46] Speaker 09: The whole idea of all the [00:17:48] Speaker 09: McNeil, Hallstrom, everything else. [00:17:50] Speaker 09: The language that was talked about was, hey, do something first, don't rush to the courthouse. [00:17:56] Speaker 09: And that's the way I would distinguish literally every other case that is dealt with as compared to the first defile under the False Claims Act. [00:18:04] Speaker 09: There is no other statutory circumstance that I've seen where the language is specifically designed to tell us, hurry up and get on file. [00:18:12] Speaker 09: And under those unique circumstances, it is appropriate to hold an abeyance, because we're powerless. [00:18:18] Speaker 09: You know, we follow the incentive, we file early. [00:18:22] Speaker 09: You know, it's a different statute, and that's how I distinguish all the other cases, not just McNeil and Hallstrom. [00:18:32] Speaker 05: I guess I just need a little help understanding. [00:18:33] Speaker 05: Actually, this case is different from the prior one because I know these are different contracts and different agencies. [00:18:40] Speaker 05: My understanding is some of the charges that they allegedly made and weren't supposed to make were things like the Federal Universal Service Charge, 9-11 Charge, or not 9-11, excuse me, 9-11 Charge. [00:18:56] Speaker 05: I guess I'm really confused reading your complaint, because you quote there all kinds of contract terms that tell them that they're going to charge those charges. [00:19:05] Speaker 05: I must just be misunderstanding something. [00:19:07] Speaker 09: Well, so what we quoted in our complaint were three modifications filed by Verizon with respect to one of the 20 contracts. [00:19:17] Speaker 09: So I don't want to suggest all this language applies to all of them. [00:19:20] Speaker 09: But it is indicative of a corporate practice and a corporate intent. [00:19:23] Speaker 05: OK, but so as to those, I'm on page 12 of the complaint. [00:19:30] Speaker 05: I'm just misreading something here. [00:19:32] Speaker 05: I'm confident of it. [00:19:36] Speaker 05: You have the bolded language that says, we're going to bill the stuff that's required by law to bill to customers. [00:19:43] Speaker 05: And then it says, in addition, we're going to charge other costs that we're exposed to. [00:19:50] Speaker 05: including regulatory charge would happen to be 9-1-1, and the federal universal service charge, plain as day. [00:19:59] Speaker 05: That's exactly right. [00:20:02] Speaker 05: So what is the fraud? [00:20:03] Speaker 05: I'm sorry, I'm just misunderstanding something. [00:20:05] Speaker 05: You tell them, they told them they were going to charge them this, didn't they? [00:20:07] Speaker 05: Isn't that what this means? [00:20:08] Speaker 09: Sure, but you just read the key language. [00:20:10] Speaker 09: We're required to charge it. [00:20:12] Speaker 05: No, no, no, no. [00:20:12] Speaker 05: Then there's a next point. [00:20:15] Speaker 05: To those that were required to collect, we'll also collect charges to help defray taxes and other things. [00:20:21] Speaker 05: In addition to those that were required, we're also going to collect other things like the federal universal service charge. [00:20:27] Speaker 09: So if you look earlier in the complaint, these are firm fixed price contracts. [00:20:31] Speaker 09: Under the FAR, the price that they bid and that the price that they're charging is supposed to incorporate literally every one of those charges. [00:20:40] Speaker 09: The point we try to make when we talk about those modifications is, number one, the language that they are required by law to charge this is not true, is a false statement, it is designed to mislead. [00:20:51] Speaker 05: Okay, but if one reads, just on that, I just want to make sure I understand. [00:20:54] Speaker 05: As to that, that would seem to be at best [00:20:59] Speaker 05: a complaint that one thing was bolded and the thing where we told you were charging this was not bolded. [00:21:05] Speaker 09: And why did they do that? [00:21:07] Speaker 05: So that's your fraud? [00:21:10] Speaker 05: That they didn't bold the other one? [00:21:12] Speaker 09: No. [00:21:12] Speaker 09: It shows this is legal. [00:21:14] Speaker 09: Cover your rear end language with all due respect. [00:21:17] Speaker 09: This language shows there's a procedure, if you want to charge pricing, additional fees, under a firm fixed price contract, there's a procedure for seeking approval to do that. [00:21:30] Speaker 09: It's called a price adjustment. [00:21:33] Speaker 05: I got all that, but if I'm... This is part of the contract? [00:21:39] Speaker 05: Or something that was submitted by Verizon too? [00:21:43] Speaker 09: It was submitted, but no, it is not, it doesn't have the ability to change the terms of the contract that will allow them to bill. [00:21:51] Speaker 05: But it told the government what they were doing. [00:21:53] Speaker 09: Well, no, they didn't. [00:21:54] Speaker 09: They didn't say. [00:21:54] Speaker 09: A truthful disclosure would have been the following. [00:21:58] Speaker 09: We have a practice, we have one billing module that applies to commercial and government contracts. [00:22:03] Speaker 09: Okay? [00:22:04] Speaker 09: We bill all sorts of stuff under that module that we don't disclose to you in advance, that we describe as taxes, but which really are the price of doing business and which, under the terms of all of our contracts, we have no right to bill for. [00:22:17] Speaker 09: So... [00:22:19] Speaker 09: So they could have said, but because we'd like to get more money from you, we would like an economic price adjustment so we can charge you more money. [00:22:29] Speaker 09: That's what a truthful disclosure would have been. [00:22:32] Speaker 09: Instead, what they're doing is taking advantage of, with all due respect, a government contracting officer who gets reams of paper and has to read through and find those specific paragraphs so [00:22:45] Speaker 09: Carefully crafted by a lawyer. [00:22:46] Speaker 09: Don't get me wrong. [00:22:47] Speaker 05: That lawyer was really smart. [00:22:49] Speaker 09: That lawyer gave them an argument in front of a jury. [00:22:51] Speaker 09: See? [00:22:51] Speaker 09: We told the contracting officer exactly what we're doing. [00:22:54] Speaker 05: The point I'm trying to make is... What is this modification? [00:22:58] Speaker 05: What is the legal role of a modification? [00:23:01] Speaker 05: Is it a modification of the contract? [00:23:03] Speaker 05: I'm confessing my lack of knowledge of this whole area. [00:23:08] Speaker 09: That's fair. [00:23:09] Speaker 09: Here's the difficulty. [00:23:11] Speaker 09: Remember that no single government employee has the ability to bind the United States with respect to contracts or other actions. [00:23:19] Speaker 09: So what you've got here is the situation where, in order legally to charge more money, we contend – and you have to accept those facts as true as alleged in the complaint – we contend that [00:23:30] Speaker 09: In order to charge more money, they had to file an economic price adjustment, an application where they would tell the government what they were doing and tell the government, we're not allowed to bill for these, but we'd like to. [00:23:41] Speaker 09: Instead, they had carefully crafted language that reveals, I mean, that bolding and the way the language changed [00:23:49] Speaker 05: Is that modification a matter of public record? [00:23:52] Speaker 09: Yes. [00:23:52] Speaker 09: Yes. [00:23:53] Speaker 09: I mean, you know, I'd be hard pressed to say that, you know, the government wasn't on notice. [00:23:58] Speaker 09: I'm not sure if, I haven't thought about whether it fits the specific categories of the first to file rule, but I'm not sure I want to go there. [00:24:05] Speaker 09: But, Judge, remember this is one contract, but what it shows is [00:24:09] Speaker 09: They are not telling the truth about what they're required to charge. [00:24:13] Speaker 09: They're not telling the truth about the nature of these charges. [00:24:17] Speaker 09: And that's where the district court slightly got it wrong in terms of what Mr. Shea brought to the table. [00:24:22] Speaker 09: It's not just that he said they're billing for taxes and charges. [00:24:26] Speaker 09: It's, hey, they describe them funny. [00:24:29] Speaker 09: They describe them in a way so that a contracting officer won't figure it out. [00:24:33] Speaker 09: They describe them in a way so that Mr. Shea's commercial customers, really sophisticated folks, like the MetLife folks, [00:24:39] Speaker 09: I guarantee you, if they had a Verizon or an MCI contract and Mr. Shea was representing them, he'd get them millions of dollars back. [00:24:46] Speaker 06: So is this going to why the modification language that's in your complaint doesn't qualify as a public disclosure? [00:24:55] Speaker 06: Is that right? [00:24:56] Speaker 09: Right, exactly. [00:24:57] Speaker 09: Because of course, the false invoice that goes to the government, like in the Civil War, the false invoice for boots that weren't properly made, there's a transaction that's on the public record. [00:25:09] Speaker 09: That invoice went to the Department of the Army. [00:25:12] Speaker 09: But that invoice, nor the modifications, never told the Army. [00:25:16] Speaker 09: Those boots were made in a very shoddy way. [00:25:18] Speaker 09: And good luck to your soldiers when they start marching. [00:25:21] Speaker 09: You know, that's what makes it false. [00:25:23] Speaker 05: My question is, are there cases holding that if a company tells the government what is charging? [00:25:32] Speaker 05: I have a contract that says, don't charge X. That's what the contract says. [00:25:39] Speaker 05: But there's a modification procedure. [00:25:41] Speaker 05: And they send in a modification that says, we're going to charge X. [00:25:51] Speaker 05: And the contractor doesn't do anything about it. [00:25:55] Speaker 09: Contractor officer, right. [00:25:58] Speaker 05: I'm just going to do a simple contract that doesn't have so many letters. [00:26:00] Speaker 09: Amen. [00:26:02] Speaker 05: Is that fraud? [00:26:04] Speaker 09: As on the facts and circumstances, that's why we have district courts and juries. [00:26:08] Speaker 09: So I can see circumstances where absolutely it's not a fraud, right? [00:26:13] Speaker 09: The person who writes that modification believes in good faith. [00:26:16] Speaker 03: The more sophisticated you are, the more likely it is that you're defrauded because you have lots of layers of review. [00:26:21] Speaker 09: Um, well, no. [00:26:23] Speaker 09: Again, if those sophisticated layers of review don't reveal the problem, you know, a well-meaning corporate compliance department goes through the traps and doesn't recognize that they're overbilling, of course you're right. [00:26:37] Speaker 09: Of course it's no fraud. [00:26:39] Speaker 09: Absolutely. [00:26:40] Speaker 09: But we're here at the motion to dismiss stage where, you know, we're alleging a corporate practice of knowingly overbilling. [00:26:48] Speaker 09: Remember what Mr. Shays [00:26:50] Speaker 09: deposition testimony talks about, which is every time you pick up the phone and call Verizon, they'd immediately say, you know, we owe you money. [00:27:00] Speaker 09: It's not like, oh, this came out of the blue. [00:27:02] Speaker 09: Our compliance department had no idea. [00:27:03] Speaker 09: Come meet with us, Mr. Shea, because we had no idea this was going on. [00:27:07] Speaker 09: Instead, remember that ex-employee said we had no different billing module for the commercial thing that was ripping off all our commercial customers to the tune of $50 million that Mr. Shea recovered. [00:27:19] Speaker 09: And the government module that ripped off the government at least, well, I mean, they paid $93 million with no admission of liability with respect to two contracts. [00:27:28] Speaker 09: And so you're right, Judge. [00:27:30] Speaker 09: Facts and circumstances. [00:27:32] Speaker 09: If the contracting office are fully understood everything, and their compliance department didn't know what it was doing, and this language, although it looks suspicious to me, and I think it should look suspicious to you, and I think at the motion to dismiss stage, you have to accept the inferences in our favor. [00:27:47] Speaker 09: Of course, I'm a trial lawyer. [00:27:48] Speaker 09: We can lose. [00:27:49] Speaker 09: But that's what trials are for. [00:27:51] Speaker 09: And I can't wait. [00:27:54] Speaker 06: to talk to the folks who wrote that language, because they're lawyers. [00:27:56] Speaker 06: And this was a modification to one of the contracts? [00:27:59] Speaker 06: Exactly. [00:27:59] Speaker 06: Do we know from the complaint? [00:28:00] Speaker 06: Right. [00:28:01] Speaker 06: No. [00:28:02] Speaker 06: And whether it travels to other contracts? [00:28:03] Speaker 09: Right. [00:28:03] Speaker 09: No, we don't. [00:28:04] Speaker 09: But what we do know is it shows a corporate practice. [00:28:07] Speaker 05: This is the fraud that you, this is your allegations of fraud in the complaint. [00:28:11] Speaker 05: This outlines what your nature of the fraud that you're alleging is, right? [00:28:14] Speaker 09: It's one example. [00:28:15] Speaker 05: Well, it's all your complaint has, right? [00:28:18] Speaker 05: Well, we've got, no, that's not fair. [00:28:19] Speaker 05: With any specificity? [00:28:23] Speaker 09: I with all due respect, I disagree. [00:28:25] Speaker 09: So what the complaint alleges that Mr. Shea understood from direct knowledge. [00:28:32] Speaker 09: And here it's really important that we talk about direct knowledge because the cases on public disclosure sometimes get this a little fuzzy. [00:28:39] Speaker 09: The difference between third party [00:28:40] Speaker 09: So the idea that Mr. Shea has to be an insider at Verizon, I would suggest to you that there is no difference between Mr. Shea being employed by Verizon and seeing this practice go on versus Mr. Shea being employed by Verizon. [00:28:55] Speaker 09: being employed by customers of Verizon and getting direct admissions from company personnel and seeing with his own eyes the charges that were imposed on his commercial customers and hearing the admissions from Verizon that those charges were not justified and that they weren't turning off the billing module, right? [00:29:15] Speaker 09: That is more than just these modifications. [00:29:18] Speaker 09: It is [00:29:19] Speaker 09: exactly what you required in Heath, Your Honor. [00:29:22] Speaker 09: It is a corporate practice and policy of overcharging customers that Mr. Shea had direct knowledge of from admissions by Verizon employees, and he collected $50 million for his commercial customers as a result, and Verizon paid $93 million without admission. [00:29:39] Speaker 05: That definition of direct applies to the prior version, I guess the pre-2010 version of [00:29:47] Speaker 05: original source, which required direct and then direct fell out after 2010? [00:29:52] Speaker 09: No, direct did not fall out. [00:29:54] Speaker 05: OK. [00:29:56] Speaker 09: Well, maybe I'm wrong. [00:29:57] Speaker 05: I'm sorry. [00:29:58] Speaker 05: That's my mistake then. [00:29:59] Speaker 09: I'm grateful if counsel has corrected me. [00:30:00] Speaker 09: Forgive me. [00:30:02] Speaker 09: But. [00:30:03] Speaker 05: It did fall out. [00:30:04] Speaker 05: OK. [00:30:04] Speaker 05: Right. [00:30:04] Speaker 05: OK. [00:30:04] Speaker 05: And so we have to do a different test for original source pre-2010 and post-2010. [00:30:10] Speaker 09: Slightly different. [00:30:11] Speaker 05: And then are there cases pre-2010 saying that this type of, I heard from a Verizon employee, constitutes direct knowledge? [00:30:21] Speaker 09: Well, so I think there's very imprecise language about what constitutes direct knowledge, right? [00:30:27] Speaker 09: And that's the point I was trying to make. [00:30:29] Speaker 09: Each case is different on its own. [00:30:32] Speaker 09: You've got to read them all. [00:30:33] Speaker 09: They'll describe third party. [00:30:35] Speaker 05: What's your best case that under the pre-2010 version of the statute? [00:30:39] Speaker 05: March 2010 version of the statute, him receiving this information from a Verizon employee about, because you have to have the, we couldn't toggle it off for the government contracts. [00:30:50] Speaker 05: That was pretty critical information. [00:30:53] Speaker 05: What's your best information that he is direct for purposes, he has direct knowledge for purposes of the original source exception in that scenario? [00:31:03] Speaker 09: Well, so I guess I could start with Springfield Terminal, which you remember is the invoices, the pay vouchers from the mediator who actually wasn't working when he claimed to be billing, right? [00:31:17] Speaker 09: So remember what our client's direct knowledge is in that case. [00:31:20] Speaker 09: It's a knowledge that from participating in those mediation [00:31:25] Speaker 09: deals, what day that mediator was working. [00:31:28] Speaker 09: So as the Springfield Terminal case points out and as the... But I thought the argument here was that Mr. Shea didn't get this just by doing his job. [00:31:38] Speaker 05: He got that toggle-on, toggle-off issue because someone talked [00:31:41] Speaker 05: He couldn't observe that. [00:31:43] Speaker 05: He just couldn't know whether they turned it off for federal government contracts unless that employee came and told them. [00:31:50] Speaker 05: He couldn't sit there in the customer's offices and know, the commercial customer's offices, that they were doing the same billing to the government. [00:31:56] Speaker 09: Well, he knows because he negotiated with Verizon employees on behalf of other commercial customers, and they admitted to him that we owe you money. [00:32:03] Speaker 09: So bear that in mind. [00:32:05] Speaker 09: But I have never heard a distinction between it's not direct knowledge if I hear an employee of the defendant admit that they're billing falsely. [00:32:16] Speaker 09: I can go back to my office and find you 100 cases where the allegations are that as a relator, I was told by an employee of the company that we're ripping people off. [00:32:25] Speaker 09: That's the gold standard for a relator's complaint. [00:32:28] Speaker 09: We try to include it every chance we get. [00:32:31] Speaker 09: And I think it would be fairly absurd to suggest that the only person who can bring information to the government is someone who hasn't heard a thing but has actually read a document. [00:32:43] Speaker 09: That makes no sense at all. [00:32:45] Speaker 09: So, yeah. [00:32:50] Speaker 06: We'll give you some time and rebuttal after Mr. Wax was already here. [00:33:07] Speaker 08: May it please the Court. [00:33:08] Speaker 08: I guess before I get into my argument, let me just address a couple of [00:33:14] Speaker 08: or correct a couple of points that my friend misstated. [00:33:19] Speaker 08: Judge Millett, this is not the first, it's the second case ever in which Relator 1 and Relator 2 are the same people. [00:33:26] Speaker 08: The other case is the Carter-Kellogg-Brown and Root case that – in which the Supreme Court announced that Judge Srinivasan's [00:33:36] Speaker 08: prescient dissent in the last time we were in front of you was, in fact, correct. [00:33:41] Speaker 08: I'm not aware of any other. [00:33:42] Speaker 05: On the pending issue, right? [00:33:43] Speaker 05: Excuse me? [00:33:44] Speaker 05: Yeah, on the pendency. [00:33:44] Speaker 05: On the pendency issue. [00:33:45] Speaker 08: And on that issue, I think I just should point out that the now eight years that have been spent litigating this issue in this court could, of course, have been completely avoided in either of two ways. [00:33:59] Speaker 08: One, Mr. Shea could have amended his first complaint [00:34:06] Speaker 08: at the time he brought his second complaint, which was two and a half years before the first complaint was settled. [00:34:12] Speaker 08: Alternatively, he could have filed what's now called Verizon 2 five years ago after Verizon 1 was in fact settled and dismissed, in which case we wouldn't be here and we wouldn't have spent all this time. [00:34:29] Speaker 08: I do want to just a couple of other things to check off. [00:34:32] Speaker 08: Modifications, I'm not sure that this bears on any of the issues before the court, but modifications are binding amendments to the contract that are fully negotiated between the government and the contracting party. [00:34:48] Speaker 08: That is absolutely black letter law. [00:34:52] Speaker 05: So I get... So, and I have the same... I'm misunderstanding something, then, because I don't understand why you didn't just tell them what you were doing. [00:34:58] Speaker 08: I'm sorry? [00:35:00] Speaker 05: I just don't understand what the fraud is, because they said what they were doing. [00:35:05] Speaker 05: So, as you're... What the fraud allegations are and the complaint when the allegations are that they told them what they were doing, but they didn't do it in bold. [00:35:11] Speaker 08: So, the language that is quoted relates to one GSA contract, and I think that it is fair to say [00:35:21] Speaker 08: It certainly occurred to me that there is that flat-out contractual agreement recited in paragraphs at least 31 through 34 of the complaint that the parties agree that these charges can be charged, and that doesn't seem like fraud. [00:35:38] Speaker 08: Because this is a complaint that is otherwise, except with respect to that one contract, [00:35:48] Speaker 08: a set of bare-bones allegations about 20 different contracts between Verizon affiliates and the government that are based entirely on information that Mr. Shea found online. [00:36:02] Speaker 08: Our position on the motion to dismiss stage, whether it is appropriately adjudicated under 12b1 or 12b6, is that the first defiled bar requires that the case be dismissed. [00:36:13] Speaker 08: without prejudice, because however many times Mr. Shea amends his complaint, the fact will remain that he brought this action. [00:36:23] Speaker 05: Your position is to be dismissed with prejudice. [00:36:25] Speaker 08: Our position is that on the first defile bar, the court was correct to dismiss it without prejudice. [00:36:31] Speaker 08: The court erred in not dismissing it with prejudice on two independent grounds. [00:36:37] Speaker 08: principally the public disclosure bar, which forbids Ketam actions based on allegations or transactions of fraud that have been disclosed. [00:36:47] Speaker 08: And rarely will that bar apply more clearly than it does here, where Mr. Shea admitted that everything that he knows about the contracts and what was invoiced, he found online. [00:37:04] Speaker 06: And we think, alternatively, it should have been this. [00:37:07] Speaker 06: But that's not true of the MCI document that he had or the conversation he had with the ex-Verizon employee? [00:37:15] Speaker 08: Well, let's be clear here. [00:37:18] Speaker 08: This is an allegation that Verizon engaged in fraud with respect to 20 contracts. [00:37:26] Speaker 08: the details of which, and an admission by Mr. Shea, that he doesn't, in fact, and there are no allegations of any facts showing that any of the accused contracts actually forbade the supposedly fraudulent charges or that Verizon actually imposed any of the forbidden charges. [00:37:47] Speaker 08: Now, with respect to the two non-public things in the complaint, let's be clear, first of all, about what their significance, and second of all, how they bear on the public disclosure [00:38:03] Speaker 08: The 2004 MCI memo, and this is, of course, involving a company that no longer exists and is not any of the four defendants in this case, applied, as Mr. Shea acknowledged in his deposition, applied specifically to the FTS 2001 contract that was at issue in Shea 1. [00:38:30] Speaker 08: It didn't purport to apply to anything else. [00:38:34] Speaker 08: Now with respect to the statement recited that a Verizon employee said that they only had one billing module and it always charged these things, even with respect to the government. [00:38:48] Speaker 08: A couple of things. [00:38:49] Speaker 08: First of all, that, just to address one of Judge Millett's questions, that is not, in fact, direct knowledge. [00:38:56] Speaker 08: What Mr. Che testified was he never spoke to this Verizon employee. [00:39:01] Speaker 08: He read an interview memo conducted by somebody else we couldn't name that recited this. [00:39:10] Speaker 08: But even if it had been direct, at pages 199 to 208 of the Joint Appendix, [00:39:17] Speaker 08: Mr. Shea testified at length about the following things. [00:39:21] Speaker 08: Number one, he personally knows that Verizon has many more than one billing module. [00:39:28] Speaker 08: Number two, he personally knows that these things can be turned off. [00:39:33] Speaker 08: And he also personally knows from experience that even in circumstances in which, excuse me? [00:39:39] Speaker 01: Can we look at that for on 12b6? [00:39:41] Speaker 08: Oh, absolutely. [00:39:42] Speaker 01: I mean, excuse me? [00:39:43] Speaker 01: How can we look at that on 12b6? [00:39:46] Speaker 08: Well, we think that 12B1 applies, in which case you certainly can look at it. [00:39:50] Speaker 08: But alternatively, you should do what you did in, for example, the Fernandez case. [00:39:57] Speaker 05: Do you think 12B1 files after 2010? [00:40:01] Speaker 08: We think that both the Supreme Court and this Court have said that the pre-2010 amendments apply only to complaints that were filed after the enactment date. [00:40:14] Speaker 08: Even if that were true, they would certainly only apply to conduct that occurred after that date. [00:40:21] Speaker 08: And here, as in the Bridgepoint education case that we cited in our brief, [00:40:26] Speaker 08: the public disclosures, the defendants' entry into the contracts, and as the Bridgepoint Education Court said, the most important aspects of the alleged fraudulent activity all plainly occurred before 2010. [00:40:42] Speaker 08: We don't know much about the dates of anything because Mr. Shea can't even tell us what dates these contracts were entered into or how long they extended. [00:40:51] Speaker 05: When he gives the contract numbers in the complaint, identifies the contracts including my contract number, does that mean if someone pulls up that contract number you can tell the dates or not? [00:41:00] Speaker 08: I would presume so. [00:41:02] Speaker 05: So then we do know that the dates are effectively incorporated by reference when he includes the contract numbers? [00:41:09] Speaker 08: I suppose that's true. [00:41:11] Speaker 08: But I think the other – on the question of whether you can consider – look, the public disclosure bar always involves information that's not in the complaint. [00:41:20] Speaker 08: The complaint isn't alleging the grounds for the public disclosure bar. [00:41:24] Speaker 08: And therefore, you know, unless you think that Congress didn't want [00:41:30] Speaker 08: the public disclosure bar to be adjudicated on a dispositive motion at the outset, which can't possibly be consistent with what the bar is supposed to do, a court has to have a way to adjudicate it. [00:41:45] Speaker 08: And as this court did in the Fernandez case, [00:41:48] Speaker 08: If the court, I mean, the district judge considered it under 12B1. [00:41:53] Speaker 08: If this court concludes somehow that maybe some aspects of the fraudulent conduct might have occurred after May 23, 2010, [00:42:02] Speaker 08: you can and should consider this as a motion for summary judgment. [00:42:05] Speaker 08: I mean, the point here is, and Mr. Shea himself, I mean, in his oral argument this morning and in his papers is relying on what he said during his deposition. [00:42:17] Speaker 06: But it sounds like what you're saying about the non-public [00:42:21] Speaker 06: bits of information that are in the complaint, that the NCI document and the conversation concerning the ex-Verizon employee, that those don't do enough work for him because they're not persuasive. [00:42:33] Speaker 06: And, you know, the NCI document goes to not the particular contracts that are issued here, it goes to something else. [00:42:38] Speaker 06: But that doesn't go to whether it's germane for public disclosure purposes. [00:42:43] Speaker 06: That goes to whether he stated a claim or if he stated with sufficient particularity. [00:42:48] Speaker 06: It doesn't tell us whether or not those count for public disclosure purposes. [00:42:53] Speaker 08: The test for public disclosure purposes is the test that this court articulated and applied in staples, where the court said, quote, the public disclosure inquiry focuses not on additional incriminating information or related supplies, but instead on whether the quantum of information already in the public sphere was sufficient to set government investigators on the trail of fraud. [00:43:22] Speaker 08: This is a case in which Mr. Shea, the X and Y of the now iconic Springfield terminals case, the district court, there's really no dispute that the X, that is the contracts and the FAR regulations are publicly disclosed materials. [00:43:43] Speaker 08: And with respect to the why, what Mr. Shea alleges is that he obtained from public sources mock invoices and training materials that, quote, provided me with enough information to know which surcharges were charged. [00:44:05] Speaker 08: His testimony is on page 164 of the Joint Appendix. [00:44:09] Speaker 08: And the district judge's adaptation of adoption of that is on page 347 of the joint appendix. [00:44:15] Speaker 08: And therefore, the fact that he may have had a contract from 2004 by a different company that related to a different contract [00:44:24] Speaker 08: And a statement by an employee, a former employee, that he testified under oath he knew was incorrect on three different dimensions isn't the question. [00:44:36] Speaker 08: The question is whether what was in the public record, that is the contracts, [00:44:42] Speaker 08: and the mock invoices and training materials, which were enough to provide me with sufficient information to know which surcharges were charged, was sufficient to put a government investigator on the trail. [00:44:57] Speaker 08: And that question, it seems to me, answers itself. [00:45:00] Speaker 05: What precisely in those public documents would have put [00:45:03] Speaker 05: the government on notice that these things were being put aside, these modifications, that impermissible charges were being transmitted to the government? [00:45:13] Speaker 08: Well, you know, this yet another anomaly about this case is that Mr. Shea has not provided – we don't have – we don't know what these [00:45:26] Speaker 08: that mock invoices and training materials are, we instead have his assertion that this is what was sufficient to establish for him the information, this publicly available information was sufficient to tell him that inappropriate charges were being made. [00:45:47] Speaker 05: Well, he says, combined with this employee saying, we are doing to the government the exact same charge, we're doing to the government the exact same [00:45:56] Speaker 05: charging practices that we've been doing to commercial industry, which he knew was [00:46:01] Speaker 05: filtering through impermissible charges. [00:46:03] Speaker 05: That's why I'm trying to think. [00:46:04] Speaker 08: That nugget does seem to make some difference. [00:46:07] Speaker 08: That nugget is both wrong and irrelevant. [00:46:11] Speaker 08: It's wrong because in his deposition at the pages that I've cited, 190 to 209, he said he knew that that nugget of information was wrong. [00:46:21] Speaker 08: There were many different billing modules. [00:46:23] Speaker 08: The surcharges in taxes could be turned on and off. [00:46:27] Speaker 08: And importantly, from his own experience, [00:46:29] Speaker 08: In those instances where it hadn't been turned off, Verizon could and did credit the contracting party an equal amount. [00:46:41] Speaker 08: And so this additional fourth-hand information that he recites from some Verizon employee need not be and may not be taken as a given fact or gospel fact for purposes of the public decision. [00:46:57] Speaker 05: If he hadn't said that in his deposition, if we were just looking at the allegations of the complaint and let's say he actually interviewed the Verizon employee himself and was told [00:47:09] Speaker 05: We're charging it. [00:47:10] Speaker 05: We're passing them through, just like we did for all our commercial companies. [00:47:12] Speaker 05: We don't even have the technology to stop it. [00:47:16] Speaker 08: Would that be enough? [00:47:17] Speaker 08: What I would say there is, again, as this court determined in staples, what you look at for purposes of the public disclosure doctrine, and this has actually been recited in several different cases by this court, you look at what is publicly disclosed. [00:47:32] Speaker 08: And you ask yourself the question, was this sufficient to lead a government investigator to investigate? [00:47:41] Speaker 08: That's what the public disclosure bar is aimed at. [00:47:45] Speaker 08: Without even looking at whatever supplemental information, what Mr. Shea is saying with respect to that memo and that fourth-hand account [00:47:55] Speaker 08: is that it, quote, allowed me to search and find information about the contracts and the invoices on the public record. [00:48:06] Speaker 08: That's in his step three brief at page 43 in this court and at page 43 [00:48:14] Speaker 08: Yes, also at page 43 of his opposition to the motion to dismiss, which is document 83 in the district court's record. [00:48:24] Speaker 08: So if it was enough info, he used that information to search and find out what he found on the public record. [00:48:32] Speaker 08: what is on the public record. [00:48:35] Speaker 08: He didn't even make the allegation that has been made and held irrelevant in so many other of your cases that it's somehow his special expertise made only him available, you know, able to interpret what these things said. [00:48:48] Speaker 08: There's nothing [00:48:50] Speaker 08: Magical here, if there is x hypothesis, and it is a flawed hypothesis, a contract that says none of these things can be charged, and invoices or mock invoices that show that they are being charged, of course that's sufficient to put the government on the trail of fraud. [00:49:10] Speaker 08: That's more than sufficient. [00:49:12] Speaker 08: That is more than what was found to be sufficient in other cases that this court has decided. [00:49:18] Speaker 08: including, I think, the Oliver case that this court decided for the second time. [00:49:24] Speaker 08: Maybe all these cases are decided for the second time a couple of months ago in this court. [00:49:30] Speaker 05: Can I ask you something back on first to files? [00:49:33] Speaker 05: Hopping around, I'm sorry. [00:49:34] Speaker 05: But your theory is that it should be dismissed without prejudice. [00:49:42] Speaker 05: What is the practical difference between that type of ruling and a ruling that would say, look, he filed amended complaints after the dismissal of what I'm calling Verizon One for shorthand. [00:49:55] Speaker 05: He filed amended complaints after that. [00:49:58] Speaker 05: And if those – if relation back were necessarily [00:50:02] Speaker 05: limited for statute of limitations purposes to a time period that wouldn't have been a factual and legal impossibility for the case to have been filed or to exist. [00:50:11] Speaker 05: Is there any practical difference between those two approaches, the dismissal or looking at filing a complaint and just saying you can't reach back to times when you couldn't possibly have filed a complaint? [00:50:20] Speaker 08: So let me just so that we don't completely ignore the language of the statute. [00:50:25] Speaker 08: We think that there is no way that that interpretation can be reconciled with the text of the statute that limits when an action may be brought, which, apropos of one of Judge Randolph's questions, is the exact language that's used in the six-year statute of limitations. [00:50:42] Speaker 08: But so our principle submission is, the text requires that it be dismissed. [00:50:47] Speaker 08: And I'm happy to explain why I think this court's decision in Brown and the Supreme Court's decisions in Diaz and Oscar Mayer don't counsel a different result. [00:51:00] Speaker 08: But I understand your question to be, what's the practical significance? [00:51:04] Speaker 08: There were two practical significance [00:51:07] Speaker 08: It's an exciting. [00:51:09] Speaker 08: Significances. [00:51:11] Speaker 08: There are two respects in which it's significant. [00:51:14] Speaker 08: Unless this court holds that, OK, we're going to allow it to be amended, but we're going to call the amend. [00:51:20] Speaker 08: We're going to deem the amended complaint to be the action that is brought for purposes of applying the statute of limitations. [00:51:30] Speaker 08: And this goes to Judge Sherina Vassin's dissent the last time around, the public disclosure bar, because as [00:51:37] Speaker 08: I guess I don't need to reiterate what you explained to us before, but the public disclosure bar is the principal mechanism for addressing the phenomenon of parasitic relators. [00:51:51] Speaker 08: And the public disclosure bar takes account of [00:51:56] Speaker 08: everything that is publicly disclosed, which in this case would not only be everything that is known about these 20 contracts and invoices, but also what is known about what was alleged in Verizon One. [00:52:09] Speaker 08: And therefore, if you can somehow do this by amendment, I don't see how that squares with the language of the first to file bar. [00:52:19] Speaker 08: But if you did and said, well, we're nonetheless going to deem it to have been filed on that day, [00:52:25] Speaker 08: Mr. Shea would have whatever problems he will have under the statute of limitations, but he will have an utterly dispositive problem under the public disclosure bar because his own prior complaint will at that point finally have been publicly disclosed before his second complaint is deemed to be filed. [00:52:47] Speaker 07: But isn't he a reasonable source? [00:52:49] Speaker 08: He is under no [00:52:53] Speaker 08: version of the original source doctrine and original source. [00:52:56] Speaker 08: He's obviously not an original source of any of the contracts or the invoices on which his complaint depends. [00:53:04] Speaker 08: He is certainly not an original source of the 2001 memo written by MCI, which was provided to him by his lawyer from wherever his lawyer got it. [00:53:16] Speaker 08: And he is not an original source with respect to this supposedly faithless Verizon former employee because, as he explains under oath, [00:53:28] Speaker 08: Not only did this information come from the employee, he didn't even talk to the employee. [00:53:33] Speaker 08: He couldn't even say who the employee was or where he worked. [00:53:36] Speaker 08: All he knows is that he read some investigator's report. [00:53:40] Speaker 08: And, you know, as this court explained in the Finley versus FPC Boron case, the point of the Ketam statute [00:53:50] Speaker 08: was essentially to instantiate the recognition that it takes a thief to catch a thief. [00:53:58] Speaker 08: And therefore, original sources were people who were either co-conspirators or directly involved in the fraudulent activity so that they could explain based on their direct and independent knowledge to the government before suing what it was. [00:54:16] Speaker 08: Now, Judge Millett, just on the question of whether direct [00:54:20] Speaker 08: fell out or didn't fall out? [00:54:24] Speaker 08: Two points. [00:54:25] Speaker 08: Number one, direct was not included in the post 2010 statute, but as Judge Posner pointed out in [00:54:36] Speaker 08: United States X-Rail Bouguina versus Medline Industries, which is reported at 809 F3rd 365, that is almost certainly because independent, the meaning of the word independent already included a requirement that it be direct. [00:54:56] Speaker 08: In any event, I forgot my in any event point, and it really was the- Why he wasn't direct? [00:55:04] Speaker 05: And why he wouldn't be an original source, even if he's not direct. [00:55:09] Speaker 08: Right. [00:55:09] Speaker 08: I mean, he is not an original source of this information, whether you include it or not. [00:55:15] Speaker 08: I mean, this is even leaving aside the fact that the information that he's now claiming originality as to is information that he learned third or fourth hand, and in any event refuted under oath in his deposition. [00:55:31] Speaker 05: And then back on First Defile, sorry to keep going back, but so how do you distinguish Oscar Mayer, since there's nothing in the text there that said pro se is different or civil rights is different? [00:55:41] Speaker 08: Well, OK, I mean, I think, as I think Your Honor pointed out, in Hallstrom versus Tillamook County, the Supreme Court declined to, the majority declined to follow Oscar Mayer, principally on the ground that Oscar Mayer involved, as was also the case in Brown and in Diaz, and I can't remember what other cases my friend is relying on, pro se civil rights. [00:56:05] Speaker 05: No, no, no. [00:56:06] Speaker 05: The majority. [00:56:07] Speaker 05: in Hallstrom didn't rely on that at all. [00:56:10] Speaker 05: They said, you know, but see, not even so much as a parenthetical. [00:56:15] Speaker 05: The dissent talked about that, but the holding didn't. [00:56:17] Speaker 05: And Tillamook, and just to lay it on the line for you, Tillamook and McNeil, neither of them filed new complaints. [00:56:25] Speaker 05: Tillamook wanted to stay, and I think McNeil may want to be held in abeyance or something like that, but just hadn't done. [00:56:31] Speaker 05: And Tillamook talked about, look, no, you've got to talk, this talks about bringing an action, which means filing a complaint, which is why I'm trying to figure, so I'm trying to figure out, you said text first thing, and now you're giving me non-text. [00:56:43] Speaker 05: And then even if we're doing tax and talk about bringing an action, why isn't an amended complaint functionally? [00:56:50] Speaker 08: So I'm going to do the text, but you're absolutely right that several of these cases involve holding something in abeyance. [00:56:56] Speaker 08: That was certainly true in Diaz and Oscar Mayer. [00:57:02] Speaker 08: I think it was true in Brown. [00:57:04] Speaker 08: I confess I can't remember exactly what was requested, but I believe it was. [00:57:08] Speaker 08: The salient point, the textual point here, is that Oscar Mayer and Brown and Diaz all involved timing provisions. [00:57:19] Speaker 08: That is, they all involved something that the plaintiff had to do as a prerequisite to filing. [00:57:27] Speaker 08: And they did not involve an express prohibition against filing. [00:57:33] Speaker 08: It was all until or unless first. [00:57:36] Speaker 08: And therefore, as the Federal Circuit explained in the Central Pines case that involved 28 USC section 1500, quote, [00:57:47] Speaker 08: In instances where statutes impose a prerequisite to filing, which a plaintiff has failed to meet upon filing, a supplemental complaint may cure such a defect, citing Diaz and Black. [00:58:02] Speaker 05: I guess it doesn't, so textually, what I'm struggling with is this doesn't sound, no one may bring a related action based on [00:58:14] Speaker 05: When there's a pending action, no one may bring a related action. [00:58:17] Speaker 05: Correct. [00:58:20] Speaker 05: But over then in subsection E, we have something called certain actions barred. [00:58:27] Speaker 05: That's where public disclosure is, certain actions barred. [00:58:29] Speaker 05: That sounds like [00:58:31] Speaker 05: an upfront explicit prohibition. [00:58:33] Speaker 05: But that's not where they put first to file. [00:58:36] Speaker 05: And first to file obviously turns you on what is pending at the time. [00:58:42] Speaker 05: And if we look at the amended complaint here, there was nothing pending at the time. [00:58:45] Speaker 05: What is so prohibitory about this? [00:58:49] Speaker 08: Well, amending a complaint is not bringing an action. [00:58:52] Speaker 08: It's beyond dispute that an action is brought at the time that it is initiated. [00:58:59] Speaker 08: That, in fact, is the synonym that Congress uses in the False Claims Act. [00:59:07] Speaker 08: And that action is not broad when an existing complaint is amended. [00:59:10] Speaker 05: I'm just going textually. [00:59:11] Speaker 05: This first defile is not one of the reasons that actions are barred. [00:59:15] Speaker 05: The statutes, if I'm looking textually here, [00:59:18] Speaker 05: Because there are a lot of statutes that have a lot of things that can be called preconditions, and sometimes they seem to get, fix it later, and sometimes they don't. [00:59:27] Speaker 05: And textually, the language isn't like the things that I see in E, like the public disclosure, shall dismiss, or in no event may a person bring an action. [00:59:40] Speaker 05: That's not the type of language that we have here, so we have to give effect to that. [00:59:45] Speaker 08: I'll take one more try at convincing you. [00:59:49] Speaker 08: Yes, there are two different provisions here, the first defile bar and the public disclosure bar, that prohibit the bringing of an action [00:59:59] Speaker 08: under certain circumstances. [01:00:02] Speaker 08: They aren't circumstances in which the plaintiff himself has failed to do something in advance, such that you simply hold it, for example, in the context of a pro se civil rights plaintiff until they go ahead and do it. [01:00:17] Speaker 08: The statement that where a person brings an action under the False Claims Act, no person may bring a related action [01:00:29] Speaker 08: is an absolute express prohibition, as was the case that was at issue in Central Pines. [01:00:45] Speaker 08: And maybe even a stronger case is the 11th Circuit's en banc decision in Harris, which involved the Prison Litigation Reform Act that says, [01:00:56] Speaker 08: You know, no prisoner in custody may file a case. [01:00:59] Speaker 08: And the question was, when the prisoner was released, could he amend his complaint in order to then file it? [01:01:06] Speaker 05: And the answer was no, because this says no prisoner in... So what would happen if you had, imagine someone's first to file complaint is massive. [01:01:14] Speaker 05: It's very complicated, involves all kinds of international information, maybe some classified stuff, and it's going to take a long time for the government [01:01:23] Speaker 05: to investigate this one and it stays under seal for a long time. [01:01:28] Speaker 05: In the meantime, day two after that one is filed under seal, another key tamulator comes in with something super narrow. [01:01:36] Speaker 05: that is included within that first file complaint, but a super tiny, about one one-hundredth of that percentage of that complaint. [01:01:45] Speaker 05: And it takes the government no time at all to clear that second case, which also happens to be filed on the Rocket Dock in the Eastern District of Virginia. [01:01:53] Speaker 05: That case goes to judgment, final judgment before the first case is unsealed. [01:01:58] Speaker 05: So nobody even knows about the first one, right? [01:02:01] Speaker 05: What would happen then? [01:02:01] Speaker 05: Would it have to be vacated? [01:02:05] Speaker 05: Because you're saying it's a nullity. [01:02:06] Speaker 05: It could never have been brought. [01:02:09] Speaker 08: Let me just make sure I understand this. [01:02:10] Speaker 08: So the first one is under seal for years while the government either investigates or is trying to get around. [01:02:16] Speaker 08: And the second one actually goes to judgment because it can't. [01:02:18] Speaker 08: The second one is filed under seal. [01:02:21] Speaker 08: The government clears it. [01:02:23] Speaker 05: It doesn't take it over if it says go ahead. [01:02:25] Speaker 05: It doesn't take it over, but it can go forward. [01:02:27] Speaker 05: It can be served. [01:02:28] Speaker 08: Yes, the judgment would have to be vacated. [01:02:31] Speaker 08: Absolutely. [01:02:32] Speaker 08: And it goes exactly to the reason why we have the first to file bar, which is the first to actually file, whether the second one knows that there was another one or not, is what gives the government the information that it needs to investigate. [01:02:50] Speaker 08: The fact that somebody has a little teeny version of it that she files second [01:02:56] Speaker 08: doesn't do anything, under your hypothesis, to help the government. [01:03:00] Speaker 08: The government, on day one, already was apprised of all the information it needed to know. [01:03:05] Speaker 08: OK. [01:03:09] Speaker 06: Thank you, Mr. Watzman. [01:03:10] Speaker 06: We have rebuttals. [01:03:17] Speaker 06: We'll give you two minutes for rebuttal. [01:03:19] Speaker 06: You can, please. [01:03:25] Speaker 09: So Judge, your question was a very good one in terms of the logic involved in this jurisdictional mousetrap type stuff. [01:03:36] Speaker 09: Your question about a case that goes to judgment, that was what you emphasized in your Heath opinion. [01:03:41] Speaker 09: You were dead right, okay? [01:03:43] Speaker 09: So we're not talking about a jurisdictional statute. [01:03:47] Speaker 09: And that's why your question really puts them at the point of their logic. [01:03:53] Speaker 09: But here's another point that I'd make to you. [01:03:57] Speaker 09: The cases say repeatedly, apropos if you're looking at the language, some things are barred and no person may bring. [01:04:05] Speaker 09: what the cases say in all these contexts. [01:04:08] Speaker 09: So there have been district court cases that have read McNeil, looked at it, and said the fact that McNeil said that the statute prohibits that does not necessarily answer what is the remedy for that statutory violation, right? [01:04:22] Speaker 09: And that [01:04:23] Speaker 05: Here, I would say, that in the context of this specific statute, which is different than all others, a case can't... The problem for you is that they, under the heading E, certain actions barred, which sounds very prohibitory, they use the same, you know what, a person may not bring an action for a different provision, but they... [01:04:47] Speaker 05: It's confusing, Congress probably wasn't thinking about it at this level, but that's the type of language they use for things that are, the actions themselves that are barred. [01:04:57] Speaker 09: Right. [01:04:57] Speaker 09: And that was the same statutory language in Brown versus Whole Foods, same statutory language in Oscar Mayer, same statutory language in Williams versus Westinghouse. [01:05:07] Speaker 09: With all due respect, Verizon's counsel is wrong [01:05:10] Speaker 09: when he says that those cases don't involve prohibitory language. [01:05:14] Speaker 09: They involve precisely the same kind of proscriptive no action may be brought that this statute does. [01:05:21] Speaker 09: And so the only point I'm trying to make is each one of these statutes is unique. [01:05:26] Speaker 09: If you read McNeil and Hallstrom, they didn't just rely on plain language. [01:05:29] Speaker 09: They talked about the purpose of the prohibition. [01:05:32] Speaker 09: They talked about the reasons why it made sense. [01:05:34] Speaker 09: And there was no amendment there. [01:05:36] Speaker 09: all I'd ask you to do is look at this unique statute, because if you look at this unique statute and the incentives that the first to file bar is supposed to provide, [01:05:47] Speaker 09: it makes their argument make no sense. [01:05:49] Speaker 05: What is the problem with their position if we just have a clean rule that says once that other case is dismissed then instead of doing an amended complaint just do a new complaint. [01:05:59] Speaker 05: There's some more procedure around it and we don't know who will get their complaint in first but you filed amended complaints you could have filed new complaints. [01:06:07] Speaker 09: Well, so again, we've got the arbitrary problem in terms of timing that happens as a result of that rule. [01:06:13] Speaker 09: But remember, the incentive is we want the Department of Justice. [01:06:17] Speaker 09: The Department of Justice would love to have 10 different relators come forward with respect to the same core set of allegations against the defendant. [01:06:25] Speaker 09: They will learn more. [01:06:27] Speaker 05: And so, in terms of the incentive of the... Well, what they learn is, I mean, assume five people file and they all get one minute difference. [01:06:35] Speaker 05: They'll initially be under seal for the government to look at before anyone can file a motion dismissed on first to file. [01:06:40] Speaker 05: So, if we have arbitrariness either way this rule works, the government will have its ability to investigate, will it not? [01:06:49] Speaker 09: Sure, but the issue is if the government investigates and say for lack of resources, lack of time, they decide we're going to leave this to the relator's bar to go forward. [01:07:01] Speaker 09: What would be fair in that circumstance is for the next person who was next in line [01:07:07] Speaker 09: to get the benefit of the first-to-file incentive. [01:07:10] Speaker 09: That person acted on the incentive and filed, maybe a day late from the first one. [01:07:17] Speaker 09: It would be really unfair to say, no, no, no, nothing has effect. [01:07:23] Speaker 09: We have to wait until the first case is dissolved. [01:07:26] Speaker 09: And then, and only then, the person who files to the first minute gets in the courthouse door. [01:07:31] Speaker 09: And that is truly arbitrary. [01:07:34] Speaker 09: It creates disincentives for coming forward. [01:07:37] Speaker 09: And it just... [01:07:40] Speaker 09: It also contradicts the kind of common sense, jurisdictional issues that you were talking about in Heath. [01:07:48] Speaker 09: Common sense says there is no practical difference between dismissal without prejudice or letting the case proceed under supplemental or amended complaint. [01:07:58] Speaker 09: That's the holding of Oscar Mayer. [01:07:59] Speaker 09: It's a holding of Brown. [01:08:00] Speaker 09: It's a holding of Williams versus Westinghouse. [01:08:02] Speaker 09: And if you look at the dissent in Harris v. Garner, the 11th Circuit case about the inmate, [01:08:08] Speaker 09: The dissent is really interesting when it talks about the adoption of Rule 15D in 1963. [01:08:14] Speaker 09: It's a very smart dissent. [01:08:16] Speaker 09: It's worth your time, because it points out that it has been the subtle practice for 50 years in the United States that some jurisdictional defects can be failed, can be cured by after occurring events that are the subject of supplemental pleading. [01:08:30] Speaker 09: And that's exactly what we did. [01:08:32] Speaker 09: There was nothing pending when we filed our amended complaint. [01:08:36] Speaker 06: Okay, thank you. [01:08:37] Speaker 06: And then since we promised we'd do it, Mr. Waxman will give you two minutes for so rebuttal and then. [01:08:46] Speaker 08: Judge Millett, you're going back to your correction of me on Tillamook's treatment of Oscar Mayer. [01:08:53] Speaker 08: It is true that the way that the majority distinguished Oscar Mayer was not that it was a pro-state plaintiff. [01:08:59] Speaker 08: What distinguished it was, and I'm quoting from the language of the majority opinion, it characterized Oscar Mayer as a case where requiring dismissal and refiling, quote, would serve no purpose other than the creation of an additional procedural technicality. [01:09:15] Speaker 08: In that case, [01:09:16] Speaker 08: lodging a complaint with the state civil rights authority. [01:09:20] Speaker 08: That is, for many of the reasons we discussed during my main oral argument, not the case here. [01:09:26] Speaker 08: There are public disclosure bar and statu... You said it doesn't matter. [01:09:29] Speaker 02: Excuse me? [01:09:30] Speaker 02: Text is text, so what if there's some inconvenience? [01:09:32] Speaker 08: Well, if what you're saying is text is text, then you have to ask, I think the court will have to ask itself, how can the Supreme Court's Oscar Mayer be reconciled with the Supreme Court's later decision in Hallstrom versus Tillamook County? [01:09:46] Speaker 08: This is the way that the majority did it, Justice Marshall and Justice Brennan in dissent. [01:09:52] Speaker 08: argued that the fact that this was not a pro se plaintiff and this was a statute in which lawyers, sophisticated lawyers are involved, didn't necessarily mean that Oscar Mayer shouldn't apply. [01:10:07] Speaker 08: But the way that the majority in [01:10:10] Speaker 08: in Tillamook County reconciled the court's prior decision in Oscar Meyer was that it was a case in which it would serve absolutely no purpose because you only had to have the plaintiff file something he should have filed before. [01:10:28] Speaker 08: The only other point I'll make is this reference to what is fair to the relator's bar. [01:10:35] Speaker 08: has to be taken deeply in context. [01:10:39] Speaker 08: The point here is not whether the Relators Bar and the Relators are going to skim off 15 to 30 percent of the public's recovery from fraud. [01:10:50] Speaker 08: The question is, what is it that Congress thought should be done [01:10:56] Speaker 08: to help put government investigators on notice of the fraud that they are charged with addressing. [01:11:03] Speaker 08: And the first filed petition, and a second filed petition if the public disclosure bar doesn't bar it, is all that is, quote, fair to the relator's bar. [01:11:14] Speaker 08: Thank you. [01:11:15] Speaker 06: Thank you, counsel. [01:11:16] Speaker 06: The case is submitted.