The opinion
FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA, ex rel.,
Plaintiff,
and
CHARLOTTE RAE BLY-MAGEE,
Plaintiff-Appellant,
v.
No. 05-55556
BRENDA PREMO; CATHERINE
CAMPISI; JIM KAY; WARREN HAYES,
a/k/a Ronald E. Glousman, MD;
D.C. No.
CV-01-08716-DDP
KEITH S. FOSTER; EDNA LARSON; OPINION
KENNETH SMEDBERG; VERNE
ALBRIGHT; LOS ANGELES COUNTY
DEPARTMENT OF MENTAL HEALTH,
e/s/a County of Los Angeles; LOS
ANGELES COUNTY OFFICE OF
EDUCATION,
Defendants-Appellees.
Appeal from the United States District Court
for the Central District of California
Dean D. Pregerson, District Judge, Presiding
Argued and Submitted
February 13, 2006—Pasadena, California
Filed December 13, 2006
Before: William C. Canby, Jr., John T. Noonan, and
Marsha S. Berzon, Circuit Judges.
Opinion by Judge Canby
19417
19420 BLY-MAGEE v. PREMO
COUNSEL
Joseph E. Deems, Sherman Oaks, California, for the appel-
lant.
Kenneth G. Lake, Deputy Attorney General, Los Angeles,
California; Joseph L. Stark, Joseph L. Stark & Associates,
Santa Clarita, California; for the defendants-appellees.
OPINION
CANBY, Circuit Judge:
In 2001 Charlotte Bly-Magee filed this qui tam action
under the False Claims Act, 31 U.S.C. § 3729. She accuses
the California Department of Rehabilitation (“CDR”) and its
employees of defrauding the federal government. The district
court dismissed her Second Amended Complaint, without
leave to amend. The district court held that Bly-Magee had
failed to overcome the False Claims Act’s jurisdictional bar
that precludes private actions based on public disclosure of
allegations unless the relator who is bringing the action is an
original source of the information. See 31 U.S.C.
§ 3730(e)(4)(A). Bly-Magee now appeals.
BLY-MAGEE v. PREMO 19421
Background
For over a decade, Bly-Magee has been pursuing qui tam
actions against CDR. She initially suspected CDR of filing
false claims while she was serving as the executive director
of Southern California Rehabilitation Services, a non-profit
organization that receives federal and state funds to serve the
disabled. Shortly after leaving Southern California Rehabilita-
tion Services, she filed the first of three qui tam actions (“Bly-
Magee I”). The government declined to intervene in this action.1
A district court granted summary judgment against Bly-
Magee, and she did not appeal.
Despite this loss, Bly-Magee continued to investigate what
she believed was CDR’s misappropriation of federal funds. In
1997 she filed a second qui tam action (“Bly-Magee II”)
against CDR. The government again declined to intervene.
The district court dismissed the action and Bly-Magee
appealed. In a memorandum disposition filed contemporane-
ously with this opinion, we have affirmed the district court’s
dismissal of Bly-Magee II.
While Bly-Magee II was pending, Bly-Magee filed her
third qui tam suit (“Bly-Magee III”), which is the subject of
this appeal. She accuses CDR and various CDR employees of
submitting false claims stemming from an alleged “kick-
back” scheme with state agencies. The district court dismissed
the Second Amended Complaint for failure to overcome the
False Claims Act’s jurisdictional bar. Bly-Magee now seeks
review of this decision.
1
The False Claims Act provides for a private qui tam complaint, which
asserts a claim in the name of the Government, to be served on the Gov-
ernment and filed under seal for at least 60 days. During that period (or
extensions of it), the Government may elect to intervene and conduct the
litigation, or may decline and leave the conduct of the litigation to the pri-
vate relator. See 31 U.S.C. § 3730(b)(2), (3) & (4).
19422 BLY-MAGEE v. PREMO
We have jurisdiction under 29 U.S.C. § 1291 to review the
district court’s final order. We review de novo the dismissal
for lack of subject matter jurisdiction. Botsford v. Blue Cross
& Blue Shield of Mont., Inc., 314 F.3d 390, 392 (9th Cir.
2002), amended by 319 F.3d 1078 (9th Cir. 2003). We affirm
in part, reverse in part, and remand.
Discussion
1. Public Disclosure Through Bly-Magee II
[1] The False Claims Act deprives the district court of juris-
diction over a qui tam action that is based on allegations or
transactions previously publicly disclosed, unless the relator
is the original source of the allegations. 31 U.S.C.
§ 3730(e)(4)(A). More specifically, the False Claims Act pro-
vides:
No court shall have jurisdiction over an action under
this section based upon the public disclosure of alle-
gations or transactions in a criminal, civil, or admin-
istrative hearing, in a congressional, administrative,
or Government Accounting Office report, hearing,
audit, or investigation, 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.
Id. The district court lacked jurisdiction over the complaint’s
allegations of false claims that occurred on or before June
1997 because they were publicly disclosed in Bly-Magee II
and because Bly-Magee did not establish that she was the
original source of the information.2
2
Bly-Magee has the burden of establishing subject matter jurisdiction by
a preponderance of the evidence. United States ex rel. Harshman v. Alcan
Elec. & Eng’g, Inc., 197 F.3d 1014, 1018 (9th Cir. 1999).
BLY-MAGEE v. PREMO 19423
[2] In Bly-Magee II, Bly-Magee accused the defendants of
violating the False Claims Act from October 1992 to June
1997. In Bly-Magee III, she accused the defendants of similar
violations from fiscal year 1995-1996 to fiscal year 1999-
2000. Thus, there is approximately a two-year overlap
between the complaints. Both complaints allege that the
defendants violated federal procurement standards in award-
ing contracts, forced the Government to “purchase unneces-
sary and duplicative services,” gave contracts to irresponsible
parties, and falsely certified that they had conducted audits.
The allegations in Bly-Magee III that occurred during the
complaints’ overlapping time period—on or before June 1997
— were therefore publicly disclosed in Bly-Magee II. See A-
1 Ambulance Serv., Inc. v. California, 202 F.3d 1238, 1243
(9th Cir. 2000) (requiring public disclosure “of the ‘allega-
tions or transactions’ giving rise to the relator’s claim, as
opposed to ‘mere information’ ”) (internal citation omitted).
[3] Bly-Magee has not demonstrated by a preponderance of
the evidence that she was the original source of the informa-
tion upon which these allegations were based. See Harshman,
197 F.3d at 1018. Her employment at Southern California
Rehabilitation Services and her claim that she conducted her
own investigation are insufficient to show that she had direct
knowledge of a scheme to submit false claims. See 31 U.S.C.
§ 3730(e)(4)(B) (defining an “original source” as “an individ-
ual who has direct and independent knowledge of the infor-
mation on which the allegations are based . . . .”). Bly-Magee
submitted a declaration to the district court that provided a
lengthy explanation of her involvement with Southern Cali-
fornia Rehabilitation Services and her investigation, but her
recital is fatally short of specifics on the most material point:
she still failed to show direct and independent knowledge of
the information underlying her complaint. Thus, Bly-Magee
did not establish that she was the original source of the allega-
tions publicly disclosed in Bly-Magee II.
19424 BLY-MAGEE v. PREMO
2. Public Disclosure Through the California Audit
The disclosure in Bly-Magee II extended only through June
1997. There was a further public disclosure, however, of the
facts underlying the false claims that Bly-Magee alleged were
made between June 1997 and June 30, 1999. That disclosure
occurred in a published audit report produced by the Califor-
nia State Auditor and entitled “California’s Vocational Reha-
bilitation Program: Although Federal Requirements Have
Contributed to its Rising Costs, by More Effectively Manag-
ing the Program, the Department of Rehabilitation Can Better
Serve More Californians with Disabilities.” The question then
arises whether disclosure in that report, issued by a state
agency, amounts to a “public disclosure” for purposes of the
False Claim Act.
[4] Section 3730(e)(4)(A) lists the sources of public disclo-
sure that give rise to a jurisdictional bar when the relator is
not an original source of the information. The listed sources
can be divided into three categories: (1) “a criminal, civil, or
administrative hearing”; (2) “a congressional, administrative,
or Government Accounting Office report, hearing, audit, or
investigation”; and (3) “the news media.” Id. The California
audit report would appear to fall under category (2) as an “ad-
ministrative . . . report [or] audit.” Some doubt arises, how-
ever, because the other sources in category (2), such as
congressional reports or reports of the Government Account-
ing Office, refer exclusively to federal agency materials.
[5] This court has not previously addressed whether an
administrative report, audit, or investigation prepared by a
state entity (as opposed to the federal government) qualifies
as a source of public disclosure under the second category.3
Two circuits that have addressed the question have reached
3
We have held that state and local administrative hearings can qualify
as sources of public disclosure under the first category. A-1 Ambulance,
202 F.3d at 1243-44.
BLY-MAGEE v. PREMO 19425
opposite conclusions. In United States ex rel. Dunleavy v.
County of Delaware, 123 F.3d 734, 745 (3d Cir. 1997), the
Third Circuit applied the doctrine of noscitur a sociis and held
that, because the word “administrative” is placed between
“congressional” and “Government Accounting Office,” when
read with the word “report” it “refers only to those adminis-
trative reports that originate with the federal government.” Id.
In Hays v. Hoffman, 325 F.3d 982, 988 (8th Cir. 2003), the
Eighth Circuit rejected Dunleavy and concluded that Medic-
aid audits prepared by a state agency are public disclosures
within the meaning of the Act. We agree with the Eighth Cir-
cuit and now hold that the second category of sources
includes non-federal reports, audits, and investigations.4
[6] Even when it is read literally, the language of
§ 3730(e)(4)(A) does not compel a conclusion that “adminis-
trative” in category (2) means “federal administrative” — a
phrase that Congress could have used but did not. The words
“congressional” “administrative” and “Government Account-
ing Office” are separated by commas and the conjunction
“or.” Id. Accordingly, each word may be read as a separate
modifier for the nouns that follow. See generally Flora v.
United States, 362 U.S. 145, 150 (1960) (confirming that
grammar can be relevant to statutory interpretation). As long
as this reading of the plain language produces a reasonable
interpretation consistent with the rest of the statute, it should
control. See Robinson v. Shell Oil Co., 519 U.S. 337, 340
(1997) (explaining that the process of statutory interpretation
4
In holding in A-I Ambulance that category (1) included state and local
administrative hearings as sources of disclosure, we distinguished Dun-
leavy as dealing with category (2). 202 F.3d at 1244-45. We did state,
however, that Dunleavy buttressed our conclusion because one may pre-
sume that Congress intended different contexts in repeating “administra-
tive” in the two clauses. See id. at 1245. We nevertheless did not purport
to construe category (2) authoritatively in A-1 Ambulance, but simply
observed that if Dunleavy was correctly decided that circumstance would
lend additional support to the statutory interpretation adopted in A-1
Ambulance.
19426 BLY-MAGEE v. PREMO
ceases if the language is plain and “ ‘the statutory scheme is
coherent and consistent’ ”) (citation omitted).
This interpretation is consistent with our holding in A-1
Ambulance that state and local administrative hearings are
sources of public disclosure. 202 F.3d at 1244. Indeed, the
statute would seem to be inconsistent if it included state and
local administrative hearings as sources of public disclosures
and then, in the next breath, excluded state administrative
reports as sources. The purpose of requiring public disclo-
sures to come from these sources is to deter opportunistic
relators from filing qui tam suits based on information already
known to the federal government. See Wang v. FMC Corp.,
975 F.2d 1412, 1418-19 (9th Cir. 1992) (explaining the his-
tory of the 1986 amendments to the False Claims Act that cre-
ated these categories). The federal government is no less
likely to obtain information from a state administrative audit
than it is from a state administrative hearing.
[7] The likelihood that the information will be brought to
the federal government’s attention is heightened in cases like
this where the audited program is connected significantly to
federal regulations and funds. See Hays, 325 F.3d at 989 (not-
ing that a state investigation into Medicaid fraud can lead to
federal enforcement actions because Medicaid is a heavily
regulated federal program). CDR primarily administers the
Vocational Rehabilitation Program, supported by both federal
and state funds and authorized by the federal Rehabilitation
Act of 1973, 29 U.S.C. § 504, as amended 29 U.S.C. § 794.
California is required to submit annual reports to the federal
government on the administration of the program. 29 U.S.C.
§ 721(a)(15). California also must create a State Rehabilita-
tion Council, id. § 725(a)(1), that provides progress reports to
the federal government. Id. § 725(c)(2)(B). Essentially,
CDR’s operation depends on federal funding and compliance
with federal regulations. It thus is similar to the Medicaid pro-
gram in Hays. See 325 F.3d at 989 (explaining the significant
federal regulation and cooperation for Medicaid). In light of
BLY-MAGEE v. PREMO 19427
the federal government’s significant involvement with the
Vocational Rehabilitation Program, it is just as likely that the
government would become aware of fraud through a state
audit as through a state hearing.
Finally, our interpretation of § 3730(e)(4)(A) does not
create the anomalous situation feared by the court in Dun-
leavy. See 123 F.3d at 745. There, the Third Circuit expressed
concern that state and local governments that are committing
fraud might artfully craft reports or audits sufficient to consti-
tute disclosure under the False Claims Act but insufficient to
alert the federal government to the fraud. Id. The court feared
that legitimate qui tam suits thus could be barred on the
ground that the allegations were disclosed in reports or audits
produced by the entity accused of fraud. Id. This fear is
unfounded in this case because the State Auditor is an entity
independent of CDR. The fear is unfounded in general
because it is unlikely that an agency trying to cover up its
fraud would reveal the requisite “allegations or transactions”
underlying the fraud in a public document. The public disclo-
sure of “mere information” relating to the claims is insuffi-
cient to trigger a jurisdictional bar to a False Claims suit; the
“material elements of the allegedly fraudulent ‘transaction’ ”
must be disclosed. A-1 Ambulance, 202 F.3d at 1243 (quoting
Hagood v. Sonoma County Water Agency, 81 F.3d 1465, 1473
(9th Cir. 1996)). Even if such a fear were well-founded, it
would extend equally to state administrative hearings, which
can be sources of public disclosure under the first category.
Thus, the concern that doctored state reports will bar legiti-
mate qui tam actions is an insufficient basis for distinguishing
between state hearings and state audits, reports, and investiga-
tions.
In sum, our holding that the California administrative audit
is a source of public disclosure is supported by § 3730’s text,
19428 BLY-MAGEE v. PREMO
is consistent with A-1 Ambulance, and accomplishes the goals
of the jurisdictional bar.5
[8] The allegations upon which Bly-Magee’s present law-
suit is based are clearly set forth in the State Auditor’s report,
which discusses CDR’s administration until June 30, 1999.
The audit thus publicly disclosed the allegations.
[9] For the same reasons that Bly-Magee failed to establish
that she was an original source of the disclosure in Bly-Magee
II, she failed to establish that she was an original source of the
information in the State Auditor’s report. The district court
accordingly lacked jurisdiction to entertain any of Bly-
Magee’s false claims allegations relating to events occurring
on or before June 30, 1999.
3. Bly-Magee’s Allegations After June 30, 1999
[10] Bly-Magee alleges in her complaint, however, that the
false claims continued through the 1999-2000 fiscal year,
which ended June 30, 2000. We conclude, therefore, that on
the present record the district court appears to have had juris-
diction over allegations in the complaint of false claims
occurring after June 30, 1999, because they were not publicly
disclosed.
[11] We accordingly reverse the dismissal of those portions
of the complaint alleging the making of false claims after June
30, 1999. We remand for further proceedings regarding those
5
Our recent decision in United States ex rel. Haight v. Catholic Health-
care West, 445 F.3d 1147 (9th Cir. 2006), has no bearing on this holding.
In that case, we observed in a footnote that the first and second categories
in § 3730(e)(4)(A) are “a form of work product originating with the gov-
ernment” and that “[t]he contents of those sources is expected to be well-
known to the government.” Id. at 1153 n.3. Although the government at
issue in Haight was the federal government, the question of whether these
categories were limited to federal government work products was not
before the Haight panel.
BLY-MAGEE v. PREMO 19429
allegations. We note that the complaint’s allegations of false
claims made after June 30, 1999, are exceedingly general, and
our remand does not foreclose the district court from further
actions to clarify the complaint and to ensure that false claims
made after this date are indeed subjects of the complaint. We
also express no opinion regarding the sufficiency of the alle-
gations under Fed. R. Civ. P. 9(b) — a question not reached
by the district court.
Each party will bear its own costs on this appeal.
The judgment of the district court is AFFIRMED in part,
REVERSED in part, and REMANDED.