Ninth Circuit Court of Appeals Rules that Army Audit Agency and Government Accountability Office Reports Were Not “Public Disclosures” Under FCA’s Public Disclosure Bar


In Berg v. Honeywell Int’l, Inc., No. 11-35001, 2012 U.S. App. LEXIS 25897 (9th Cir. Dec. 19, 2012), the Ninth Circuit Court of Appeals ruled that the term “public disclosures” in the pre-2010 False Claims Act (FCA), 31 U.S.C. §§ 3729 et seq., does not include  reports prepared on behalf of the Army Audit Agency (AAA) that have never been disclosed pursuant to FOIA, or reports  issued by the Government Accountability Office (GAO) that lack the specificity required for the government to pursue a FCA investigation.

Allegations and Procedural History: The relators brought an FCA action alleging that Honeywell International, Inc., and Honeywell, Inc., defrauded the Government on energy performance savings contracts.  The defendants moved to dismiss the action based on the public disclosure bar in the FCA, 31 U.S.C. § 3730(e)(4)(A).  The district court dismissed the action, and the Ninth Circuit reversed, holding that the AAA and GAO reports at issue did not constitute “public disclosures.”

Ruling on Whether the Reports Constituted “Public Disclosures” Under FCA:  The pre-2010, public disclosure bar precludes a FCA suit when there has been “(1) a ‘public disclosure’ (2) of ‘allegations or transactions’ (3) in one of the three fora articulated in the statute (4) and the relator’s action [was] based upon that public disclosure.”  Berg, 2012 U.S. App. LEXIS 25897, at *3 (applying version of public disclosure bar in effect before amendments made by the Patient Protection and Affordable Care Act of 2010).  The threshold issue for the Ninth Circuit in Berg was whether the government reports at issue constituted “public disclosures.”

The Ninth Circuit held that the AAA reports were not public disclosures because, although potentially available under FOIA, they had not been requested or received by a member of the public.  Although the Government had disclosed the AAA reports to a private company hired by the Government to audit certain contracts, the AAA reports were not public disclosures because the company was acting on behalf of the Government and did not have an incentive to disclose what it learned through the audits.  Id. at *4 (analogizing the facts to United States ex rel. Schumer v. Hughes Aircraft Co., 63 F.3d 1512, 1520 (9th Cir. 1995), vacated on other grounds, 520 U.S.939 (1997), and distinguishing the facts from Seal 1 v. Seal A, 255 F.3d 1154, 1161-62 (9th Cir. 2001)).

The court further held that the public GAO report was not a FCA “public disclosure” because it “did not contain sufficient information to enable the government to pursue an investigation against” the defendants.  Id. at *6.  Although the GAO report disclosed “generally” that some contractors performing some of the 254 energy performance savings contracts in effect between 1999 and 2004 had committed the type of fraud alleged by the relators, “the report did not disclose the names of any contractors or specify any locations where an [energy performance savings contract] may have involved fraud.”  Id. at *5-*6. According to the Ninth Circuit, the Government lacked sufficient information to investigate “[b]ecause of the large number of [energy performance savings contracts] granted and the GAO report’s lack of specificity.”  Id. at *6.