United States Ex Rel. Mateski v. Raytheon Co.

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA EX REL No. 13-55341

STEVEN MATESKI,

Plaintiff-Appellant, D.C. No.

2:06-cv-03614-

v. ODW-FMO

RAYTHEON CO.,

Defendant-Appellee. OPINION

Appeal from the United States District Court

for the Central District of California

Otis D. Wright II, District Judge, Presiding

Argued and Submitted

November 2, 2015–Pasadena, California

Filed March 7, 2016

Before: Mary M. Schroeder, Harry Pregerson,

and Michelle T. Friedland, Circuit Judges.

Opinion by Judge Friedland

2 UNITED STATES EX REL MATESKI V. RAYTHEON

SUMMARY *

False Claims Act

Reversing the district court’s dismissal of Mateski’s qui

tam complaint against Raytheon Co. and remanding to the

district court for further proceedings, the panel held that the

public disclosure bar of the False Claims Act did not bar

Mateski’s lawsuit.

The panel concluded that Mateski’s allegations were not

“substantially similar” to the prior publicly disclosed reports

when viewed at the appropriate level of generality.

Mateski’s complaint alleged fraud that was different in kind

and degree from previously disclosed information about

Raytheon’s problems in performing on the contract at issue.

The panel held that because, if his allegations prove to be

true, Mateski is a relator who will have provided the

government with genuinely new and material information

about fraud, he should be allowed to move forward with his

qui tam suit.

*

This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

UNITED STATES EX REL MATESKI V. RAYTHEON 3

COUNSEL

Allan J. Graf (argued) and Dean Francis Pace, Carlsmith

Ball LLP, Los Angeles, California, for Plaintiff-Appellant.

Kimberly A. Dunne (argued), Sean A. Commons, and Brent

L. Nichols Sidley Austin LLP, Los Angeles, California.

Alan Charles Raul, Sidley Austin LLP, Washington, D.C.,

for Defendant-Appellee.

OPINION

FRIEDLAND, Circuit Judge:

Steven Mateski appeals the dismissal of his False Claims

Act suit against Raytheon Co., in which he alleged fraud in

the performance of a Government contract. Mateski argues

that the district court erred in holding that his Complaint was

based upon prior public disclosures and was thus precluded

by the public disclosure bar of the False Claims Act. We

agree. Mateski’s Complaint alleges fraud that is different in

kind and degree from the previously disclosed information

about Raytheon’s problems in performing on the contract at

issue. We therefore reverse and remand for further

proceedings.

I.

Between 1994 and 2002, the National Oceanic and

Atmospheric Administration, Department of Defense, and

NASA contracted with various companies to design and

build the National Polar-Orbiting Operational

4 UNITED STATES EX REL MATESKI V. RAYTHEON

Environmental Satellite System (“NPOESS”), a system for

collecting meteorological, oceanographic, environmental,

and climatic data. Raytheon entered a contract to design and

build a Visible Infrared Imaging Radiometer Suite

(“VIIRS”) sensor, which would be part of NPOESS.

Eventually, the Government agencies awarded a satellite

integration contract to a prime contractor, Northrop

Grumman, and incorporated previously awarded NPOESS

contracts, including Raytheon’s VIIRS contract, as

subcontracts to the prime contract.

The NPOESS project incurred many delays and cost

overruns. Beginning at least as early as 2003, VIIRS began

to attract public attention as a source of these problems. For

example, a 2004 Government Accountability Office

(“GAO”) report stated, “At present, the program office

considers the three critical sensors—VIIRS, CMIS, and

CrIS—to be key program risks because of technical

challenges that each is facing.” U.S. Gov’t Accountability

Off., GAO-04-1054, Polar-Orbiting Envtl. Satellites:

Information on Program Cost and Schedule Changes 18

(Sept. 2004). 1 A 2005 GAO statement explained that

“VIIRS sensor development issues were attributed, in part,

to [Raytheon’s] inadequate project management.” U.S.

Gov’t Accountability Off., GAO-06-249T, Polar-Orbiting

Operational Envtl. Satellites: Tech. Problems, Cost

Increases, & Schedule Delays Trigger Need for Difficult

Trade-off Decisions 18 (Nov. 2005). 2 A report from the

1

Available at http://www.gao.gov/assets/250/244364.pdf.

2

Available at http://www.gao.gov/new.items/d06249t.pdf.

UNITED STATES EX REL MATESKI V. RAYTHEON 5

Office of Inspector General at the U.S. Department of

Commerce noted that “[i]nadequate oversight, in effect,

postponed the critical evaluations and decisions needed to

replan the program’s faltering elements and contain the cost

and schedule overruns. Time and money were thus wasted

as the problems with NPOESS continued unchecked.” U.S.

Dep’t of Commerce, OIG-177794-6-0001, Nat’l Oceanic &

Atmospheric Admin.: Poor Mgmt. Oversight & Ineffective

Incentives Leave NPOESS Program Well Over Budget &

Behind Schedule 12 (May 2006). 3 A slew of news articles

also reported cost overruns and schedule delays with

NPOESS, including in Raytheon’s work on VIIRS.

Steven Mateski, an engineer who worked at Raytheon

from 1997 to 2006, was assigned to work on VIIRS

beginning in 2005. Mateski filed a complaint in June 2006

in federal district court alleging that Raytheon had violated

the False Claims Act (“FCA”), 31 U.S.C. §§ 3729–3733, by

failing to comply with numerous contractual requirements in

the development of VIIRS, fraudulently covering up areas of

noncompliance, and improperly billing the Government for

erroneous and incomplete work.

Six years after Mateski filed his initial complaint, the

United States declined to exercise its right under the FCA to

intervene in Mateski’s suit. Mateski then filed a fourth

amended complaint (“Complaint”). 4 The Complaint alleges

3

Available at https://www.oig.doc.gov/OIGPublications/OIG-17794.pdf.

4

The district court and the parties treat this as the operative complaint,

and so do we. It contains essentially the same level of detail and types

of allegations of fraud as Mateski’s original complaint.

6 UNITED STATES EX REL MATESKI V. RAYTHEON

that “[f]rom 2002 to at least 2012, Defendant [Raytheon] has

knowingly submitted false NPOESS VIIRS claims for

payment, whereby the United States Government has been

induced to pay money that it would not have paid if

Defendant [Raytheon] had disclosed the true defective

nonconformances with the NPOESS VIIRS specifications

and requirements.” As did the original complaint, this

Complaint makes numerous specific allegations, including:

creation of false waivers; improper (and forged) signoffs

certifying work performed; failure to rectify issues relating

to electrostatic discharge; cross contamination of flight and

non-flight quality materials; and use of prohibited materials

such as tin plating.

Raytheon moved to dismiss for lack of subject matter

jurisdiction. It argued that the suit was barred by

§ 3730(e)(4)(A) of the FCA, also known as the “public

disclosure bar,” which at the time of filing provided: “No

court shall have jurisdiction over an action under this section

based upon the public disclosure of allegations or

transactions.” 31 U.S.C. § 3730(e)(4)(A) (1986); United

States ex rel. Hartpence v. Kinetic Concepts, Inc., 792 F.3d

1121, 1127 (9th Cir. 2015) (en banc). 5 The district court

granted Raytheon’s motion to dismiss, explaining, “[I]t was

publicly known that there was rampant mismanagement,

deviations from protocol, and other problems with

5

In response to Raytheon’s motion to dismiss, the Government filed a

statement of interest requesting that, in the event the court “dismisses, in

whole or in part, [Mateski]’s amended complaint with prejudice to

[Mateski],” any dismissal be without prejudice to the United States’

filing of its own action or later election to intervene in the matter.

UNITED STATES EX REL MATESKI V. RAYTHEON 7

VIIRS. . . . [W]hile the public disclosures d[id] not discuss

the problems on the VIIRS program in the level of detail that

Mateski does in his [Complaint], the allegations are

nonetheless the same for the purposes of 31 U.S.C.

§ 3730(e)(4)(A).”

II.

We review de novo a district court’s dismissal for lack

of subject matter jurisdiction and its interpretation of the

False Claims Act. United States ex rel. Hartpence v. Kinetic

Concepts, 792 F.3d 1121, 1126 (9th Cir. 2015) (en banc).

We review for clear error a district court’s findings of fact

that underlie its decisions on subject matter jurisdiction. Id.

at 1126–27. Whether a particular disclosure triggers the

public disclosure bar is a mixed question of law and fact that

we review de novo. United States ex rel. Found. Aiding The

Elderly v. Horizon W., Inc., 265 F.3d 1011, 1013 (9th Cir.),

amended on denial of reh’g, 275 F.3d 1189 (9th Cir. 2001);

see also United States v. Alcan Elec. & Eng’g, Inc., 197 F.3d

1014, 1017 (9th Cir. 1999). The plaintiff “bears the burden

of establishing subject matter jurisdiction by a

preponderance of the evidence.” Alcan, 197 F.3d at 1018.

III.

The FCA prohibits “knowingly present[ing], or

caus[ing] to be presented, a false or fraudulent claim for

payment or approval; [or] knowingly mak[ing], us[ing], or

caus[ing] to be made or used, a false record or statement

material to a false or fraudulent claim” to the federal

government. 31 U.S.C. § 3729(a)(1)(A), (B). The FCA

allows private individuals, referred to as “relators,” to bring

8 UNITED STATES EX REL MATESKI V. RAYTHEON

suit on the Government’s behalf against entities that have

violated the Act’s prohibitions. 31 U.S.C. § 3730(b)(1); see

also United States ex rel. Hartpence v. Kinetic Concepts,

792 F.3d 1121, 1123 (9th Cir. 2015) (en banc). Such suits

are commonly called qui tam suits. Vt. Agency of Nat. Res.

v. United States ex rel. Stevens, 529 U.S. 765, 768 (2000)

(“Originally enacted in 1863, the False Claims Act . . . is the

most frequently used of a handful of extant laws creating a

form of civil action known as qui tam.”); see Kinetic

Concepts, 792 F.3d at 1123.

The FCA’s public disclosure bar deprives federal courts

of subject matter jurisdiction when a relator alleges fraud

that has already been publicly disclosed, unless the relator

qualifies as an “original source.” 6 Kinetic Concepts,

792 F.3d at 1123 (quoting 31 U.S.C. § 3730(e)(4)). Under

the public disclosure bar:

No court shall have jurisdiction over an

action under this section based upon the

public disclosure of allegations or

transactions . . . unless the action is brought

by the Attorney General or the person

6

An “‘original source’ means an individual who has direct and

independent knowledge of the information on which the allegations are

based and has voluntarily provided the information to the Government

before filing an action under this section which is based on the

information.” 31 U.S.C. § 3730(e)(4)(B) (1986). We need not decide

whether Mateski qualifies as an original source because this case does

not turn on the original source exception.

UNITED STATES EX REL MATESKI V. RAYTHEON 9

bringing the action is an original source of

the information.

31 U.S.C. § 3730(e)(4)(A) (1986) (emphases added). 7

The public disclosure bar is intended to encourage suits

by whistle-blowers with genuinely valuable information,

while discouraging litigation by plaintiffs who have no

significant information of their own to contribute. See

Graham Cty. Soil & Water Conservation Dist. v. United

States ex rel. Wilson, 559 U.S. 280, 294–95 (2010). A prior

version of the FCA had attempted to achieve a similar goal

by banning “qui tam actions based on information already in

the Government’s possession.” Id. at 294. Congress decided

that provision “thwarted a significant number of potentially

7

In 2010, the Affordable Care Act replaced the 1986 version of

31 U.S.C. § 3730(e)(4)(A) with new language, changing “based upon”

to “substantially the same.” See 31 U.S.C. § 3730(e)(4)(A) (2010) (“The

court shall dismiss an action or claim under this section, unless opposed

by the Government, if substantially the same allegations or transactions

as alleged in the action or claim were publicly disclosed.”); see also

United States ex rel. Bogina v. Medline Indus., Inc., 809 F.3d 365, 368

(7th Cir. 2016) (explaining that the 2010 amendment replacing the

“based upon” language “was not a significant change, [because] both

formulas [were] aimed at barring ‘“me too” private litigation [that]

would divert funds from the Treasury’ to bounty seekers whose efforts

had duplicated those of the government or an earlier bounty seeker.”)

(third alteration in original) (quoting United States ex rel. Goldberg v.

Rush Univ. Med. Ctr., 680 F.3d 933, 934 (7th Cir. 2012)). Given that

Mateski’s suit was filed in 2006, the prior version of the statute governs

here, see Graham Cty. Soil & Water Conservation Dist. v. United States

ex rel. Wilson, 559 U.S. 280, 283 n.1 (2010), though our analysis of the

issue of substantial similarity would be the same under either version.

10 UNITED STATES EX REL MATESKI V. RAYTHEON

valuable claims. Rather than simply repeal [it], however,

Congress replaced it [in 1986] with the public disclosure bar

in an effort to strike a balance between encouraging private

persons to root out fraud and stifling parasitic lawsuits.” Id.

at 294–95. 8

“The public disclosure bar is triggered if three things are

true: (1) the disclosure at issue occurred through one of the

channels specified in the statute; (2) the disclosure was

‘public’; and (3) the relator’s action is ‘based upon’ the

allegations or transactions publicly disclosed.” Malhotra v.

Steinberg, 770 F.3d 853, 858 (9th Cir. 2014) (quoting

31 U.S.C. § 3730(e)(4)(A) (1986)). It is undisputed that the

first two elements of this test are satisfied in this case. The

statements Raytheon relies upon in invoking the bar

occurred through the channels specified in the statute—news

8

Although this general purpose is well established, the legislative

history does not reveal anything more specific about Congress’s intent

behind the 1986 public disclosure bar. See Graham, 559 U.S. at 295

(noting that “[h]ow exactly § 3730(e)(4) came to strike this balance in

the way it did is a matter of considerable uncertainty”). The Court

explained, “‘One difficulty in interpreting the 1986 amendments is that

Congress was never completely clear about what kind of parasitic suits

it was attempting to avoid’ . . . . Because Section 3730(e)(4) was drafted

subsequent to the completion of the House and Senate Committee reports

on the proposed False Claims Act Amendments, those reports, which

contained discussion of altogether different bars, cannot be used in

interpreting it.” Id. at 296 n.15 (quoting United States ex rel. Stinson,

Lyons, Gerlin & Bustamante, P.A. v. Prudential Ins., 944 F.2d 1149,

1163 (3d Cir. 1991) (Scirica, J., dissenting)). The Court further

explained that “[t]he House and Senate Judiciary Committees each

reported bills that contained very different public disclosure bars from

the one that emerged in the Statutes at Large.” Id. at 295.

UNITED STATES EX REL MATESKI V. RAYTHEON 11

media, congressional hearings, and GAO reports—all of

which were public. See United States ex rel. Found. Aiding

the Elderly v. Horizon W., Inc., 265 F.3d 1011, 1014 (9th

Cir.), amended on denial of reh’g, 275 F.3d 1189 (9th Cir.

2001) (explaining that “[p]ublic disclosure can occur in one

of only three categories of public fora: (1) in a ‘criminal,

civil, or administrative hearing;’ (2) in a ‘congressional,

administrative, or Government Accounting Office report,

hearing, audit, or investigation;’ or (3) in the ‘news media.’”)

(quoting A-1 Ambulance Serv., Inc. v. California, 202 F.3d

1238, 1243 (9th Cir. 2000)).

The dispute in this case is thus about whether Mateski’s

action is “‘based upon’ the allegations or transactions

publicly disclosed.” Malhotra, 770 F.3d at 858 (quoting

31 U.S.C. § 3730(e)(4)(A) (1986)). This depends on:

(A) whether the publicly available information about

Raytheon’s work on VIIRS contained an “allegation or

transaction” of fraud; and, if so, (B) whether Mateski’s

Complaint was “based upon” said “allegation or

transaction.” See United States ex rel. Zizic v.

Q2Administrators, LLC, 728 F.3d 228, 235 (3d Cir. 2013).

We address these issues in turn.

A.

The False Claims Act’s public disclosure bar uses the

terms “allegations” and “transactions” without defining

either term. 31 U.S.C. § 3730(e)(4)(A). Courts have

interpreted “allegation” to refer to a direct claim of fraud,

and “transaction” to refer to facts from which fraud can be

inferred. See, e.g., Zizic, 728 F.3d at 235–36 (“An allegation

of fraud is an explicit accusation of wrongdoing. A

12 UNITED STATES EX REL MATESKI V. RAYTHEON

transaction warranting an inference of fraud is one that is

composed of a misrepresented state of facts plus the actual

state of facts.”) (citation omitted); United States ex rel.

Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645, 653–54

(D.C. Cir. 1994) (defining “allegation” as a direct claim of

fraud and “transaction” as a combination of facts from which

“readers or listeners may infer” fraud).

For purposes of the public disclosure bar, we have held

that “[t]he substance of the disclosure . . . need not contain

an explicit ‘allegation’ of fraud, so long as the material

elements of the allegedly fraudulent ‘transaction’ are

disclosed in the public domain.” Found. Aiding, 265 F.3d at

1014; see also A-1 Ambulance Serv., 202 F.3d at 1243. 9 We

have explained:

[I]f X + Y = Z, Z represents the allegation of

fraud and X and Y represent its essential

elements. In order to disclose the fraudulent

transaction publicly, the combination of X

and Y must be revealed, from which readers

9

The Supreme Court has noted, “The phrase ‘allegations or

transactions’ in § 3730(e)(4)(A) additionally suggests a wide-reaching

public disclosure bar. Congress covered not only the disclosure of

‘allegations’ but also ‘transactions,’ a term that courts have recognized

as having a broad meaning.” Schindler Elevator Corp. v. United States

ex rel. Kirk, 563 U.S. 401, 408 (2011). Although the Court did not

further elaborate on the type of “broad meaning” it intended, the Court’s

statement supports reading the “transactions” portion of the public

disclosure bar inclusively, as we did in Foundation Aiding, 265 F.3d

1011.

UNITED STATES EX REL MATESKI V. RAYTHEON 13

or listeners may infer Z, i.e., the conclusion

that fraud has been committed.

Found. Aiding, 265 F.3d at 1015 (alteration in original)

(quoting Springfield Terminal, 14 F.3d at 654). We have

further explained that, “in a fraud case, X and Y inevitably

stand for but two elements: ‘a misrepresented state of facts

and a true state of facts.’” Id. (quoting Springfield Terminal,

14 F.3d at 654). “[I]n order to invoke the jurisdictional bar,

a defendant must show ‘that the transaction . . . [is] one in

which a set of misrepresented facts has been submitted to the

government.’” Id. at 1016–17 (first alteration in original)

(quoting United States ex rel. Dunleavy v. Cty. of Del.,

123 F.3d 734, 741 (3d Cir. 1997), abrogated on other

grounds by Graham Cty., 559 U.S. 280 (2010)).

Applying the foregoing principles here, we find no

allegation of fraud because the publicly disclosed

information does not contain “an explicit accusation of

wrongdoing.” Zizic, 728 F.3d at 236. 10 Although the public

reports described delays and incompetence, none explicitly

asserted deception by Raytheon.

Whether the public reports described a “transaction”

within the meaning of the public disclosure bar is less clear.

10

Counsel for Raytheon submitted a letter after oral argument

suggesting that a particular exchange between a member of Congress and

an individual from the Office of the Inspector General constituted a

“public disclosure” of fraud. But the colloquy in question conveyed

exactly the opposite. The Office of the Inspector General explained

therein that no indicators of fraud had been found. Hearing on the

Inspector Gen. Report on NOAA Weather Satellites Before the H. Comm.

on Science, 109th Cong. 66–67 (2006).

14 UNITED STATES EX REL MATESKI V. RAYTHEON

Many of the public documents Raytheon supplied to the

district court described management and engineering

problems with the VIIRS project—thus presenting a “true”

state of facts. A November 2005 GAO statement is the most

specific public statement Raytheon identifies in this respect.

It provides:

Problems involving multiple levels of

management—including subcontractor,

contractor, program office, and executive

leadership—have played a role in bringing

the NPOESS program to its current state. As

noted earlier, VIIRS sensor development

issues were attributed, in part, to the

subcontractor’s inadequate project

management. Specifically, after a series of

technical problems, internal review teams

sent by the prime contractor and the program

office found that the VIIRS subcontractor had

deviated from a number of contract,

management, and policy directives set out by

the main office and that both management

and process engineering were inadequate.

Neither the contractor nor the program office

recognized the underlying problems in time

to fix them. After these issues were

identified, the subcontractor’s management

team was replaced. Further, in January 2005,

the NPOESS Executive Committee (Excom)

called for an independent review of the

VIIRS problems. This independent review,

delivered in August 2005, reported that the

program management office did not have the

UNITED STATES EX REL MATESKI V. RAYTHEON 15

technical system engineering support it

needed to effectively manage the contractor,

among other things.

U.S. Gov’t Accountability Off., GAO-06-249T, Polar-

Orbiting Operational Envtl. Satellites: Tech. Problems, Cost

Increases, & Schedule Delays Trigger Need for Difficult

Trade-off Decisions 18 (Nov. 2005) (emphasis added). 11

While we are therefore satisfied that these reports

describe a “true” state of facts, whether we can glean a

“misrepresented” state of facts is a closer question. Reading

between the lines of the publicly disclosed information, we

possibly could infer that Raytheon falsely represented to the

Government that all was well with VIIRS. Potentially

supporting this inference is the fact that, even as the

problems with VIIRS continued, the public statements

suggest that Raytheon continued to be paid for its work. For

example, an Office of the Inspector General report triggered

by cost overruns noted that “VIIRS itself was 12 percent

11

See also, e.g., U.S. Dep’t of Commerce, OIG-177794-6-0001, Nat’l

Oceanic and Atmospheric Admin.: Poor Mgmt. Oversight & Ineffective

Incentives Leave NPOESS Program Well Over Budget & Behind

Schedule 8 (May 2006) (noting that an independent review team had

found that the “internal processes of the VIIRS subcontractor were

inadequate and not being followed, and the subcontractor’s management

communication and oversight were poor”); id. at 10 (“[M]onthly status

reports repeatedly described the problems with VIIRS, as well as the

actions being taken to solve them, and consistently noted that VIIRS was

causing the majority of the constantly growing cost and schedule

overruns.”).

16 UNITED STATES EX REL MATESKI V. RAYTHEON

behind schedule and approximately 30 percent over budget.

Nevertheless, the contractor received 92 percent of available

award fees.” 12 U.S. Dep’t of Commerce, OIG-177794-6-

0001, Nat’l Oceanic & Atmospheric Admin.: Poor Mgmt.

Oversight & Ineffective Incentives Leave NPOESS Program

Well Over Budget & Behind Schedule iii (May 2006). The

Inspector General’s report concluded that “[t]ime and money

were . . . wasted as the problems with NPOESS continued

unchecked.” Id.

Applying our X+Y=Z equation, arguably [Raytheon’s

contract deviations] + [the Government’s continued

payments to Raytheon] = the plausible inference that

[Raytheon was continuing to bill the Federal Government

and represent that all was well despite its failure to follow

contract and policy directives]. On the other hand, the

information in the public reports may come closer to

suggesting breach of contract than fraud. Cf. Cafasso,

United States ex rel. v. Gen. Dynamics C4 Sys., Inc.,

637 F.3d 1047, 1057–58 (9th Cir. 2011) (explaining that

generally “breach of contract claims are not the same as

fraudulent conduct claims, and the normal run of contractual

disputes are not cognizable under the [FCA,]” and that

“unsavory conduct is not, without more, actionable under the

FCA.”) (alteration in original) (quoting United States ex rel.

Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370, 383

(4th Cir. 2008)). Ultimately, we believe it is arguable that a

“transaction” was publicly disclosed, but we decline to

12

Although “contractor” may have referred to the prime contractor,

Northrop Grumman, it is fair to infer that the subcontractor Raytheon

was also continuing to be paid.

UNITED STATES EX REL MATESKI V. RAYTHEON 17

definitively answer that question because doing so is

unnecessary to the resolution of this case. Even assuming

that the public reports disclosed a “transaction,” the public

disclosure bar does not deprive the district court of

jurisdiction—because, as we next explain, when we examine

the public statements most likely to constitute a transaction

and compare them to Mateski’s Complaint, we find that the

Complaint is not “based upon” those statements. 13

B.

Under our case law, for a relator’s allegations to be

“based upon” a prior public disclosure, “the publicly

disclosed facts need not be identical with, but only

substantially similar to, the relator’s allegations.” United

States ex rel. Meyer v. Horizon Health Corp., 565 F.3d 1195,

1199 (9th Cir. 2009), overruled on other grounds by Kinetic

Concepts, 792 F.3d at 1128 n.6; see also Malhotra, 770 F.3d

13

The Seventh Circuit used a similar approach in United States ex rel.

Baltazar v. Warden, 635 F.3d 866 (7th Cir. 2011), declining to answer

the question whether the publicly disclosed information included

“allegations or transactions” within the meaning of the public disclosure

bar. Id. at 869. The Seventh Circuit explained that its conclusion that

Baltazar’s suit was not “based upon” the published reports “ma[de] it

unnecessary to decide whether those reports disclosed the ‘allegations or

transactions’ underlying the suit.” Id. The Seventh Circuit noted that

this allowed it to avoid answering “a more difficult” question, because

whether there was an allegation or transaction depended on whether the

court “underst[ood] the reports to allege widespread fraud (that is,

intentional deceit) or only errors: fraud is actionable under the False

Claims Act, while negligent errors are not.” Id.

18 UNITED STATES EX REL MATESKI V. RAYTHEON

at 858 (“[T]he phrase ‘based upon’ in § 3730(e)(4)(A)

means ‘substantially similar to,’ not ‘derived from.’”)

(quoting Meyer, 565 F.3d at 1199). 14

1.

Although “substantially similar” is a phrase that appears

frequently in our FCA decisions, we have never had

occasion to articulate an approach to evaluating whether two

sets of allegations are similar enough to qualify as

“substantially similar” under the public disclosure bar. Our

prior cases fall at the far ends of the similarity spectrum—on

one end are cases finding substantial similarity because the

allegations in the qui tam complaint were virtually identical

to prior public disclosures, and on the other end are cases

finding no similarity because the allegations in the qui tam

complaint were completely different from prior disclosures.

Mateski’s case falls between these two extremes. If

considered at a high level of generality, Mateski’s Complaint

and the public reports both discuss problems with VIIRS. If

considered at a more granular level, the allegations in

Mateski’s Complaint discuss specific issues found nowhere

in the publicly disclosed information. This case therefore

requires us to at least partially fill the gap left by our prior

decisions.

United States v. Alcan Electrical & Engineering, Inc.,

197 F.3d 1014 (9th Cir. 1999), is an example of a case on the

virtually-identical end of the spectrum. In Alcan, we

14

This substantial similarity concept has now been codified in the 2010

version of the FCA. See supra n.7.

UNITED STATES EX REL MATESKI V. RAYTHEON 19

explained that an FCA complaint was substantially similar

to an earlier publicly filed complaint because there was no

difference in the substance of the fraud alleged in the two.

The only difference was that the earlier complaint described

the defendant in a fairly identifiable way but without actually

using the defendant’s name, whereas the later complaint

added the defendant’s name specifically. Id. at 1018–19.

On the other end of the spectrum, we have found no

substantial similarity when the prior public statements

disclosed nothing about the fraud alleged in the later qui tam

complaint. In Foundation Aiding, for example, we

concluded that an earlier complaint alleged “a very different

problem—asbestos contamination—than the one alleged” in

the relator’s complaint about receiving Medicaid and

Medicare payments for care not actually provided. 265 F.3d

at 1013, 1016. Thus, “the allegations contained [in the

earlier complaint] completely failed to disclose anything

remotely similar to the fraud alleged” in the complaint at

issue. Id. at 1016.

In our prior cases, we sometimes have asked whether the

Government was on notice to investigate the fraud before the

relator filed his complaint—which is another way of

thinking about substantial similarity. But our cases

discussing notice to the Government also fall at the same far

ends of the similarity spectrum, so they likewise do not

clarify the level of similarity required. In Alcan, for

example, we noted that the Tenth Circuit in United States ex

rel. Fine v. Sandia Corp., 70 F.3d 568 (10th Cir. 1995), had

found that the “the prior public disclosures contained enough

information to enable the government to pursue an

investigation against [the defendant].” 197 F.3d at 1019.

20 UNITED STATES EX REL MATESKI V. RAYTHEON

We explained that “the instant case is similar to Sandia, in

that the government, as regulator and owner, presumably

would have ready access to documents identifying [the

wrongdoers].” Id. We then concluded that “[t]his ready

access makes it highly likely that the government could

easily identify the [wrongdoers] at issue.” Id. In contrast, in

Foundation Aiding, we observed that “it is impossible to say

that the evidence and information in the possession of the

United States at the time the False Claims Act suit was

brought was sufficient to enable it adequately to investigate

the case and to make a decision whether to prosecute.”

265 F.3d at 1016 (alteration omitted) (quoting United States

ex rel. Joseph v. Cannon, 642 F.2d 1373, 1377 (D.C. Cir.

1981)).

Because the allegations in Alcan were virtually identical

to prior public statements, and the allegations in Foundation

Aiding were completely different from prior public

statements, these conclusions were inevitable. These cases’

alternative articulation of the “substantially similar”

inquiry—asking whether the Government was on notice—

therefore leaves the same gap identified above.

Raytheon has pointed to nothing in this circuit’s case law

to help guide us in filling that gap. Raytheon relies upon

Wang v. FMC Corp., 975 F.2d 1412 (9th Cir. 1992),

overruled on other grounds by Kinetic Concepts, 792 F.3d

1121, to support its argument that the public disclosures

were “substantially similar” to Mateski’s allegations. Wang,

however, is inapposite because we never addressed whether

Wang’s complaint was substantially similar to allegations or

transactions that were previously disclosed. Rather, in

resolving the case based upon whether Wang qualified as an

UNITED STATES EX REL MATESKI V. RAYTHEON 21

original source, we specifically explained that “the necessary

premise of the [district] court’s ruling is that Wang’s

allegation of fraud [about a military vehicle] had been

publicly disclosed before Wang brought his suit. Wang has

never disputed, and his arguments appear to accept, that his

allegation had been publicly disclosed.” Id. at 1417

(emphasis added). We touched briefly on the similarity of

the prior disclosure but did so while emphasizing that the

issue was not contested:

It is true that Wang’s allegation about [a

military vehicle] is supported by a few factual

assertions never before publicly disclosed;

but “fairly characterized” the allegation

repeats what the public already knows: that

serious problems existed with the [vehicle’s]

transmission. The district court characterized

Wang’s allegation and most of his

information as a rehash of what already had

been publicly disclosed. Wang does not

dispute this characterization, and it finds

support in the record.

Id. (emphasis added) (citation omitted) (quoting United

States ex rel. Dick v. Long Island Lighting Co., 912 F.2d 13,

14 (2d Cir. 1990)).

Mateski’s case falls between the poles created by our

prior precedent, because whether his Complaint is

substantially similar to prior public reports depends on the

level of generality at which the comparison is made. This

case therefore requires us to address for the first time

whether we should approach the substantial similarity

question at a high or low level of generality, and accordingly

22 UNITED STATES EX REL MATESKI V. RAYTHEON

whether a complaint that is similar only at a high level of

generality triggers the public disclosure bar.

2.

The Seventh Circuit appears to be the only circuit to have

focused on this level-of-generality question, developing its

response over the course of three key cases. In United States

ex rel. Baltazar v. Warden, 635 F.3d 866 (7th Cir. 2011), the

relator, a chiropractor, had filed suit alleging that her former

employer had submitted fraudulent bills to the Medicare and

Medicaid programs by adding services that had not been

performed and by “upcoding.” Id. at 866–67. 15 Applying

the public disclosure bar, the district court dismissed the

complaint based on the existence of an earlier public report

that alleged that “57% of chiropractors’ claims (in a sample

of 400) were for services not covered by the Medicare

program, and another 16% were for covered services that

had been miscoded.” Id. at 867. The Seventh Circuit

reversed, holding that the district court had erred when it

concluded that the report “establishe[d] such prevalent

fraud” “that it [is] unnecessary to give private relators a piece

of the action in order to locate wrongdoers.” Id. The court

explained that the relator’s suit “supplied vital facts that

were not in the public domain” because it alleged “that [the

defendant] not only was submitting false claims but also was

submitting them knowing them to be false, and thus was

15

The court explained that the process known as “upcoding” consists

of changing the billing codes for services that have been performed to

reflect procedures that would fetch higher reimbursement. Id. at 866–

67.

UNITED STATES EX REL MATESKI V. RAYTHEON 23

committing fraud.” Id. at 869. The court concluded that

“[the relator’s] suit is ‘based on’ those defendant-specific

facts, not on the public information that false or mistaken

claims are common.” Id. (emphasis added).

A year later, in United States ex rel. Goldberg v. Rush

University Medical Center, 680 F.3d 933 (7th Cir. 2012), the

Seventh Circuit again reversed a district court’s dismissal

pursuant to the public disclosure bar, finding no substantial

similarity because the earlier public disclosure failed to

identify the precise type of hospital-billing deceit alleged in

the later qui tam complaint. There, a GAO report and several

public audits had indicated that teaching hospitals were often

receiving double compensation for procedures performed by

residents. The Seventh Circuit explained that Medicare pays

teaching hospitals for work by residents on a fee-for-service

basis only when a teaching physician supervises the

residents. Id. at 933–34. “Technically[, those] payments are

for the services rendered by the teacher,” and the cost of

educating residents is reimbursed through government

grants instead of through payments for specific services. Id.

Nevertheless, many teaching hospitals, according to the

GAO report, were billing on a fee-for-service basis for

unsupervised services that the residents performed on their

own, and then also receiving the teaching grants. Id. at 934.

The Goldberg relators’ complaint alleged a somewhat

different billing issue—that a particular university had

allowed teaching physicians to supervise multiple operations

simultaneously and then had sought Medicare

reimbursement for all of the procedures by certifying that

they had all been supervised. Id. at 935. The relators alleged

fraud on the basis that regulations permit Medicare

24 UNITED STATES EX REL MATESKI V. RAYTHEON

reimbursement only when the teaching physician is “present

during all critical portions of the procedure and immediately

available to furnish services during the entire service or

procedure,” and that the double booking of the teaching

physicians at this university meant that they were not

“present” and “available” as the regulations required. Id.

(quoting 42 C.F.R. § 415.172(a)(1)).

The Seventh Circuit concluded in Goldberg that

“[relators] allege a kind of deceit that the GAO report does

not attribute to any teaching hospital,” and that the public

disclosure bar therefore did not apply. Id. at 936.

Importantly, the court explained, “Unless we understand the

‘unsupervised services’ conclusion of the GAO report . . . at

the highest level of generality—as covering all ways that

supervision could be missing or inadequate—the allegations

of these relators are not ‘substantially similar.’” Id.

Referencing Baltazar, the court concluded that “boosting the

level of generality in order to wipe out qui tam suits that rest

on genuinely new and material information is not sound.”

Id.

Most recently, in Leveski v. ITT Educational Services,

Inc., 719 F.3d 818 (7th Cir. 2013), the Seventh Circuit

examined whether a qui tam complaint was substantially

similar to a prior complaint that had been publicly filed. “To

be sure,” the court explained, “Leveski’s case looks similar

to the [earlier] Graves case at first blush. The relators in both

cases are former employees of ITT—and even held the same

job title. The relators in both cases also allege that ITT

violated the incentive compensation provision of the [Higher

Education Act].” Id. at 832. That, however, was where the

similarities ended. Id. The court explained that “[t]he details

UNITED STATES EX REL MATESKI V. RAYTHEON 25

of how ITT allegedly violated the [Act] are quite different in

Leveski’s case than they were in Graves. Unlike the Graves

relators, who alleged a more rudimentary scheme by ITT to

violate the [Act’s] incentive compensation provision,

Leveski alleges a more sophisticated, second-generation

method of violating the [Act].” Id. Addressing the question

of “whether Leveski’s allegations are different enough from

the Graves allegations to bring her suit outside the public

disclosure bar,” the Seventh Circuit held:

A review of our recent case law leads us to

the conclusion that they are different enough.

Indeed, Leveski’s allegations against ITT are

only similar to the Graves allegations when

viewed at the highest level of generality. But

in the last few years, we have indicated on

more than one occasion that viewing FCA

claims “at the highest level of generality . . .

in order to wipe out qui tam suits that rest on

genuinely new and material information is

not sound.”

Id. at 831 (alteration in original) (emphasis added) (quoting

Goldberg, 680 F.3d at 936).

We find the reasoning of these cases persuasive, and we

believe that the Seventh Circuit’s approach effectuates the

purpose of the public disclosure bar by “strik[ing] a balance

between encouraging private persons to root out fraud and

stifling parasitic lawsuits.” Schindler Elevator Corp. v.

United States ex rel. Kirk, 563 U.S. 401, 413 (2011) (quoting

Graham Cty., 559 U.S. at 295). Allowing a public document

describing “problems”—or even some generalized fraud in

a massive project or across a swath of an industry—to bar all

26 UNITED STATES EX REL MATESKI V. RAYTHEON

FCA suits identifying specific instances of fraud in that

project or industry would deprive the Government of

information that could lead to recovery of misspent

Government funds and prevention of further fraud. We

believe that adopting the Seventh Circuit’s approach

therefore brings us closer to “the golden mean between

adequate incentives for whistle-blowing insiders with

genuinely valuable information and discouragement of

opportunistic plaintiffs who have no significant information

to contribute of their own.” Graham Cty., 559 U.S. at 294

(quoting Springfield Terminal, 14 F.3d at 649).

3.

Raytheon argues that a subset of qui tam cases, which

employ the phrase “quick trigger” to describe the substantial

similarity inquiry, counsel against our adoption of the

Seventh Circuit’s approach. Raytheon’s argument fails.

Specifically, Raytheon points to our footnote in Hagood

v. Sonoma County Water Agency, 81 F.3d 1465 (9th Cir.

1996), stating that “[t]he original source test is often treated

as the focus of the jurisdictional inquiry, with courts treating

the ‘based upon public disclosure’ step as a ‘quick trigger to

get to the more exacting original source inquiry.’” Id. at

1476 n.18 (quoting Cooper v. Blue Cross & Blue Shield of

Fla., Inc., 19 F.3d 562, 568 n.10 (11th Cir. 1994)). Raytheon

suggests that this means the public disclosure bar should turn

on the “original source” inquiry, and that “based upon”

should be only a superficial inquiry at a high level of

generality. Our decision in Hagood did not, however, rely

upon (or even analyze) this “quick trigger” notion because

the footnote followed our conclusion that the prior public

UNITED STATES EX REL MATESKI V. RAYTHEON 27

“filings may be enough to constitute public disclosure of

the” fraud alleged in the qui tam complaint at issue. Id. at

1475. Rather than analyze substantial similarity, we skipped

directly to finding that Hagood clearly qualified as an

original source. As such, Hagood could avoid the public

disclosure bar even if the allegations were substantially

similar. The “quick trigger” language Raytheon emphasizes

was therefore not an operative concept in Hagood at all, let

alone one that requires viewing complaints at only a high

level of generality.

Raytheon emphasizes that other circuits also have

incorporated the phrase “quick trigger,” but the cases that

include this language have not used it to avoid a full

substantial similarity analysis. In United States ex rel.

Boothe v. Sun Healthcare Group, Inc., 496 F.3d 1169 (10th

Cir. 2007), for example, despite including the quick trigger

language, the court conducted “[a] side-by-side comparison

of the first three allegations of Ms. Boothe’s complaint with

those contained in prior qui tam actions,” to find that “the

fraudulent schemes alleged are materially identical.” Id. at

1174. In United States ex rel. Osheroff v. Humana Inc.,

776 F.3d 805 (11th Cir. 2015), the Eleventh Circuit also

recently quoted the “quick trigger” language, stating, “We

have described the [based upon] test as a ‘[] quick trigger to

get to the more exacting original source inquiry.’” Id. at 814

(quoting Cooper, 19 F.3d at 568 n.10). Osheroff ultimately

held, however, that the “significant overlap between

[relator’s] allegations and the public disclosures [wa]s

sufficient to show that the disclosed information form[ed]

the basis of this lawsuit and [wa]s substantially similar to the

allegations in the complaint.” Id. Whatever work the “quick

trigger” characterization may have done in Osheroff, nothing

28 UNITED STATES EX REL MATESKI V. RAYTHEON

in the court’s analysis suggested that the “quick trigger”

concept overrides the need to analyze with some specificity

the similarity between the allegations in a qui tam complaint

and prior public disclosures. Raytheon’s reliance on this

language is thus to no avail.

IV.

Heeding the Seventh Circuit’s warning against reading

qui tam complaints at only the “highest level of generality,”

Leveski v. ITT Educ. Servs., Inc., 719 F.3d 818, 831 (7th Cir.

2013), we now reverse the district court’s dismissal of this

case because Mateski’s Complaint alleges fraud that is

different in kind and in degree from the previously disclosed

information about VIIRS. See Hagood v. Sonoma Cty.

Water Agency, 81 F.3d 1465, 1475 (9th Cir. 1996)

(examining whether, “fairly characterized,” the allegations

in a relator’s complaint “repeat[] what the public already

knows”) (quoting Wang v. FMC Corp., 975 F.2d 1412, 1417

(9th Cir. 1992), overruled on other grounds by United States

ex rel. Hartpence v. Kinetic Concepts, Inc., 792 F.3d 1121

(9th Cir. 2015) (en banc)). Although prior public reports had

described general problems with Raytheon’s work on

VIIRS, none provided specific examples or the level of detail

offered by Mateski.

A few examples from Mateski’s lengthy Complaint

suffice to demonstrate that his allegations are vastly more

precise than the prior public reports about the problems with

VIIRS. For instance, Mateski alleges numerous particular

false waivers of VIIRS specifications and requirements. He

also describes false and inappropriate signoffs and

certifications in violation of the Program Quality

UNITED STATES EX REL MATESKI V. RAYTHEON 29

Requirements, including “obvious forged signoffs” by

Raytheon VIIRS operators. Mateski further details

Raytheon’s alleged substitution of “reduced Special Test

Requirements . . . in lieu of specified testing,” which he

claims “compromise[d] the NPOESS/VIIRS Unit/System

integrity and mission assurance.”

With respect to materials used in the VIIRS project,

Mateski alleges the “use of Prohibited Materials (pure Tin),

use of Prohibited Metallic materials known to cause

corrosion . . . when used together, use of Debris shedding

locking fasteners (locking Heli-Coils), [and] use of

Prohibited Materials and processes selected (Electro-

deposited Nickel plating).” Mateski draws particular

attention to problems with the J7 Power Connector, which

he claims “[wa]s wired with forbidden (‘D & E’) materials

of pure Tin plated wire.” He further alleges that “Raytheon

. . . falsely stated . . . that the pure Tin plated wire would be

acceptable for flight use despite the failure to pot the J7

Power Connector.”

Mateski also alleges numerous problems related to

electrostatic discharge (“ESD”), asserting, for example, that

Raytheon failed to maintain ESD protection of VIIRS flight

hardware; and that certain cables were constructed using

“hot plastics,” which are “ESD unapproved materials . . .

capable of building and storing excessive electrical charges.”

In contrast to these specific allegations, the prior public

reports presented by Raytheon merely allege general

problems involving mismanagement, technical difficulties,

and noncompliance with contract and policy directives.

Indeed, Raytheon’s own description of how these

30 UNITED STATES EX REL MATESKI V. RAYTHEON

disclosures characterized the “problems” in general terms—

“numerous, major, profound, serious, severe, significant,

systemic, worsening, costing billions of dollars, and

resulting in decreased functionality”—supports reading the

prior disclosures as revealing only very generalized

problems with VIIRS.

Even if, as Raytheon argues, the prior public reports

provided “enough information to . . . pursue an

investigation” into some fraud, and even though the

Government did in fact undertake some investigation of

VIIRS, the prior reports could not have alerted the

Government to the specific areas of fraud alleged by

Mateski. The practical consequence of adopting the Seventh

Circuit’s approach to defining substantial similarity is to

allow relators who provide the Government with genuinely

new and material information of fraud to move forward with

their qui tam suits. Mateski is such a relator.

V.

Finally, Raytheon suggests that even if Mateski’s

Complaint contains some new allegations, the public

disclosure bar applies because the Complaint is at least

“partly based upon” the prior public reports about VIIRS.

We disagree.

It is true that numerous cases from other circuits have

indicated that, if a qui tam action is even “partly based upon”

publicly disclosed allegations or transactions, it is “based

upon”’ those allegations or transactions for purposes of the

public disclosure bar. See, e.g., United States ex rel. Heath

v. Wis. Bell, Inc., 760 F.3d 688, 691 (7th Cir. 2014); Glaser

UNITED STATES EX REL MATESKI V. RAYTHEON 31

v. Wound Care Consultants, Inc., 570 F.3d 907, 920–21 (7th

Cir. 2009); United States ex rel. Poteet v. Medtronic, Inc.,

552 F.3d 503, 514 (6th Cir. 2009).

Even were we to adopt this “partly based upon” concept,

it would not help Raytheon. To the extent these cases utilize

this “partly based upon” concept to reach their holdings at

all, 16 we understand them to still require that some of the

relator’s allegations be substantially similar to prior public

disclosures. In Poteet, for example, the Sixth Circuit

explained that “[d]espite the presence of one major

allegation that was not made in the [earlier] complaint . . .

the primary focus of Poteet’s complaint is the same . . .

illegal kickback scheme [that was] described in [the earlier]

complaint.” 552 F.3d at 514. There was no question in

Poteet that some of the allegations in the complaint that the

Sixth Circuit held were precluded by the public disclosure

bar were substantially similar to those already disclosed.

552 F.3d at 515 n.7 (“[A]t least some parts of Poteet’s

complaint are clearly ‘based upon’ the [earlier] complaint.”).

Likewise, in Glaser, the Seventh Circuit held that it was

“true that Glaser’s complaint add[ed] a few allegations”

previously public, but that was not enough to avoid the

16

Some cases quote the “partly based upon” language but then do not

rely upon that concept in their analysis. For example, in United States

ex rel. Heath v. Wisconsin Bell, Inc., 760 F.3d 688 (7th Cir. 2014), the

court quoted “partly based upon,” but then held that the public disclosure

bar did not apply because the earlier public statements had not revealed

any of the key components of the fraud alleged in the subsequent qui tam

complaint. Id. at 691–92. Thus, its ultimate conclusion does not appear

to have depended at all on the “partly based upon” concept.

32 UNITED STATES EX REL MATESKI V. RAYTHEON

public disclosure bar “because the allegations in Glaser’s

complaint (or most of them) were substantially similar to

publicly disclosed allegations.” 570 F.3d at 920–21

(emphasis added).

Because, as we have explained above, none of Mateski’s

allegations are “substantially similar” to the prior public

reports when viewed at the appropriate level of generality,

the “partly based upon” cases are of no assistance to

Raytheon.

VI.

Mateski’s allegations differ in both degree and kind from

the very general previously disclosed information about

problems with VIIRS. As such, if his allegations prove to be

true, Mateski will undoubtedly have been one of those

“whistle-blowing insiders with genuinely valuable

information,” rather than an “opportunistic plaintiff[] who

ha[s] no significant information to contribute.” Graham Cty.

Soil & Water Conservation Dist. v. United States ex rel.

Wilson, 559 U.S. 280, 294 (2010) (quoting United States ex

rel. Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645, 649

(D.C. Cir. 1994)).

For the foregoing reasons, we REVERSE and

REMAND.