noting that in construing the IFCA, “Illinois courts have relied on federal courts’ interpretation of the Federal False Claims Act for guidance”
How later courts described this case
- noting that in construing the IFCA, “Illinois courts have relied on federal courts’ interpretation of the Federal False Claims Act for guidance”
- “We review de novo challenges made pursuant to the FCA’s bars.” (citing United States ex rel. Feingold v. AdminaStar Fed., Inc., 324 F.3d 492, 494–95 (7th Cir. 2003))
- “In law as in life, however, the same words, placed in 14 No. 17‐1524 different contexts, sometimes mean different things.”
Written by the judges who cited it.
The opinion
In the
United States Court of Appeals
For the Seventh Circuit
No. 17‐1524
CITY OF CHICAGO,
Plaintiff‐Appellee,
EX REL. AARON M. ROSENBERG,
Plaintiff‐Appellant,
v.
REDFLEX TRAFFIC SYSTEMS, INC. and
REDFLEX HOLDINGS, LTD.,
Defendants‐Appellees.
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 15‐cv‐08271 — John J. Tharp, Judge.
ARGUED FEBRUARY 13, 2018 — DECIDED March 12, 2018
2 No. 17‐1524
Before SYKES and BARRETT, Circuit Judges, and GRIESBACH,
District Judge.*
GRIESBACH, District Judge. In this classic case of chutzpah,
Aaron Rosenberg, a former employee of Redflex Traffic
Systems, Inc. (RTSI), seeks a share of the proceeds his former
employer paid the City of Chicago to settle the case against it
arising out of the fraud Rosenberg helped perpetrate. In a
thorough decision, the district judge concluded that Rosenberg
was neither the original source of the information on which the
action was based, nor was he a volunteer within the meaning
of the Chicago false claims ordinance that authorized the
action. The district court therefore granted the defendants’
motion to dismiss Rosenberg’s claim for lack of jurisdiction
and denied Rosenberg’s request for attorney’s fees. Com‐
pounding his audacity even more, Rosenberg appeals. We now
affirm.
I. Background
RTSI, a Delaware corporation with its principal place of
business in Arizona, produces and maintains traffic safety
systems for various governmental entities. Aaron Rosenberg,
a citizen of California, was RTSI’s Vice President of Sales and
Marketing for North America. In 2003, RTSI entered into a
contract with the City of Chicago to manage the City’s digital
automated red light enforcement program (DARLEP). John
Bills, the deputy‐commissioner of the City’s Department of
Transportation at the time, was responsible for overseeing the
*
Of the Eastern District of Wisconsin, sitting by designation.
No. 17‐1524 3
City’s contract with RTSI. RTSI retained Martin O’Malley to be
its Chicago liaison for the contract.
In March 2012, the Chicago Tribune began printing a series
of articles that inquired about the relationship between RTSI
and Bills. On March 13, 2012, the Tribune explained that the
City sought bids to replace the red‐light cameras with
automated speed cameras and that Resolute Consulting LLC,
a consulting firm that worked closely with RTSI, promoted
RTSI’s bid for the project. The article reported Bills, who had
supervised RTSI’s DARLEP contract with the City, had
recently retired from his position with the City and now
worked for Resolute and the RTSI‐funded Traffic Safety
Coalition.
On October 14, 2012, the Tribune published an article
entitled “City red‐light camera vendor under scrutiny,” which
questioned the friendship of Bills and O’Malley. Its investiga‐
tion revealed that Bills had ties to O’Malley before the City
entered into the DARLEP contract with RTSI. Though RTSI
claimed it was unaware of this relationship at the time it hired
O’Malley to be its Chicago liaison, the Tribune reported it
obtained a copy of an August 2010 letter from an RTSI execu‐
tive to Redflex Holdings, Ltd. (RHL), RTSI’s Australian parent
company, which acknowledged Bills’ relationship with O’Mal‐
ley, asserted O’Malley’s role in the DARLEP contract with the
City was unnecessary, and alleged Rosenberg’s expense report
revealed RTSI had paid the tab for one of Bills’ stays at a
luxury hotel in Phoenix, Arizona in 2010. The article noted
RTSI required that Rosenberg attend anti‐bribery training but
did not report the incident to the City’s Board of Ethics. Three
days later, the Tribune reported the City removed RTSI’s bid
4 No. 17‐1524
for the new speed camera contract because it failed to report
Rosenberg’s conduct to the Board of Ethics. It revealed that the
City Office of Inspector General (OIG) sought to investigate the
allegations related to the bribery scheme.
On October 18, 2012, the OIG notified RTSI of the pending
investigation, advised RTSI that it had an obligation to cooper‐
ate, and served a request for documents on the company. RTSI
subsequently hired the law firm Sidley Austin to facilitate its
own independent investigation into the bribery allegations and
to assist the company with the OIG investigation. In the
meantime, the Tribune continued to report on the bribery
scheme. It reiterated that the City had rejected RTSI’s bid for
the new contract because it was a “non‐responsible bidder”
and noted Bills was asked to resign from his post on the Cook
County Employee Appeals Board. The Tribune reported Sidley
Austin would assist RTSI in cooperating with the OIG’s
investigation and conduct an internal investigation, and
revealed RHL filed a report with the Australian Securities
Exchange advising that it would take appropriate actions to
ensure its commitment to the highest ethical standards.
On January 31, 2013, Sidley Austin attorney Scott Lassar
met with an OIG representative to provide information about
RTSI’s relationship with Bills which included RTSI’s findings
that RTSI paid for Bills’ and O’Malley’s hotel, airfare, and golf
expenses seventeen times; that Bills initiated the bribery
scheme by offering to help RTSI secure the camera contract in
exchange for compensation; that Bills suggested RTSI hire
O’Malley to serve as the liaison for the contract and facilitate
the payments from RTSI to Bills; that RTSI paid O’Malley over
No. 17‐1524 5
$2,000,000 from 2003 to 2012; and that Network Electric was a
potential conduit for payments to Bills.
As part of the investigation, an OIG representative met with
Rosenberg, who was represented by counsel, on February 4,
2013. An attorney from Sidley Austin was also present. The
OIG advised Rosenberg that he had a duty to cooperate with
the investigation and that his statements would not be used
against him in a criminal proceeding. During the interview,
which lasted nearly a full day, Rosenberg described the bribery
scheme between RTSI and Bills. He revealed the travel and
other benefits RTSI provided to Bills, O’Malley’s involvement
as a conduit for RTSI’s payments to Bills, the communications
within RTSI about the scheme, and upper management’s
knowledge of the scheme. RTSI terminated Rosenberg’s
employment with the company on February 20, 2013.
Four days after Rosenberg’s interview, the Chicago Tribune
reported the conclusions of RTSI’s investigation. It noted the
investigation revealed company executives courted Bills with
thousands of dollars in free trips to the Super Bowl and other
events and raised questions into the company’s hiring of
O’Malley. The Tribune revealed RTSI would lose its DARLEP
contract with the City. On February 22, 2013, the Tribune
reported that RTSI terminated Rosenberg for his “dishonest
and unethical conduct” and filed a lawsuit against him in
Maricopa County, Arizona, regarding the bribery scheme. In
a March 2013 article, the Tribune disclosed that RTSI’s attor‐
neys acknowledged that it was “likely true” that its officials
intended to bribe Bills. On March 4, 2013, the Tribune noted
RHL had filed a public summary of the investigation with the
Australian Securities Exchange. The Tribune reported the
6 No. 17‐1524
scheme came under federal criminal investigation in a
March 16, 2013 article. Reports regarding the bribery scheme
continued into 2014.
On April 15, 2014, Rosenberg filed this action against RTSI
under seal pursuant to the qui tam provision of the City’s False
Claims Ordinance (FCO), Chicago Municipal Code §§ 1‐22‐010
et seq., in the Circuit Court for Cook County. Rosenberg alleged
RTSI engaged in a bribery scheme and other illegal activities to
obtain a contract with the City related to its digital automated
red‐light camera enforcement program. The City subsequently
intervened in the action, and RTSI removed the case to federal
court, asserting diversity jurisdiction under 28 U.S.C. § 1332.
The City then amended the complaint to include allegations
against RHL and supplemented the FCO claim with additional
claims under the Chicago municipal code, Illinois statutes, and
common law.
On February 16, 2016, RTSI and RHL moved to dismiss
Rosenberg as relator pursuant to Rule 12(b)(1) of the Federal
Rules of Civil Procedure. The court granted the motion and
dismissed Rosenberg as relator. The City, RTSI, and RHL
reached a settlement and moved to dismiss the lawsuit with
prejudice on February 6, 2017. Rosenberg filed a petition for an
award of a relator’s share of the settlement proceeds and
attorney’s fees for his lawyer’s contributions to the case. The
district court denied Rosenberg’s petition. Rosenberg now
appeals both district court decisions.
II. Analysis
We review the district court’s dismissal for lack of subject‐
matter jurisdiction de novo. Glaser v. Wound Care Consultants,
No. 17‐1524 7
Inc., 570 F.3d 907, 912 (7th Cir. 2009) (citing Scott v. Trump Ind.,
Inc., 337 F.3d 939, 942 (7th Cir. 2003)); see also United States ex
rel. Absher v. Momence Meadows Nursing Ctr., Inc., 764 F.3d 699,
707 (7th Cir. 2014) (“We review de novo challenges made
pursuant to the FCA’s bars.” (citing United States ex rel. Feingold
v. AdminaStar Fed., Inc., 324 F.3d 492, 494–95 (7th Cir. 2003))).
Yet, we review findings of fact considered in determining
jurisdiction only for clear error. Absher, 764 F.3d at 707 (cita‐
tions omitted).
The City’s FCO is an anti‐fraud ordinance that closely
mirrors the federal False Claims Act (FCA), 31 U.S.C.
§§ 3729 et seq. Under the ordinance, a party that engages in
fraud against the City is liable for civil penalties and treble
damages. Chi. Mun. Code § 1‐21‐010. An action may be
brought on behalf of the City by either corporation counsel or
a private person, a relator, through the FCO’s qui tam
provision. Id. § 1‐22‐030. The City may choose to intervene in
a qui tam action or allow the relator to proceed alone. If the
relator remains as a party, he is entitled to a percentage of any
proceeds or settlement that is obtained. Id. In addition, the
ordinance provides that a person who is entitled to a share of
proceeds shall also receive reasonable attorney’s fees and costs.
Id. § 1‐22‐030(d)(3). The FCO contains a public disclosure bar
to suit, which states:
No court shall have jurisdiction over an action
under this section based upon the public
disclosure of allegations or transactions in a
criminal, civil, or administrative hearing, in a
legislative, administrative, or Inspector General’s
report, hearing audit, or investigation, or from
8 No. 17‐1524
the news media, unless the action is brought by
the corporation counsel or the person bringing
the action is an original source of the
information … .”
Id. § 1‐22‐030(f).
Notwithstanding several amendments to the FCA in 2010,
the district court here, with the agreement of the parties,
looked to federal case law construing the FCA in applying the
FCO. We do as well. Given the substantive similarity between
the Illinois False Claims Act (IFCA), 740 Illinois Compiled
Statutes 175/4, and the FCA, Illinois courts have relied upon
federal cases interpreting the FCA in construing the provisions
of the IFCA. See People ex rel. Schad, Diamond & Shedden, P.C. v.
My Pillow, Inc., 82 N.E.3d 627, 632 (Ill. App. Ct. 2017) (noting
that in construing the IFCA, “Illinois courts have relied on
federal courts’ interpretation of the Federal False Claims Act
for guidance”). We are confident Illinois courts would likewise
look to federal FCA cases in interpreting the FCO.
In federal FCA cases, we apply a three‐step analysis in
determining whether the public disclosure bar prevents an
individual from acting as relator. See Cause of Action v. Chicago
Transit Auth., 815 F.3d 267, 274 (7th Cir. 2016) (citing Glaser, 570
F.3d at 913). First, the court examines whether the allegations
in the complaint have been “publicly disclosed” before the
relator filed the complaint. The court then determines whether
the relator’s lawsuit is “based upon” those publicly disclosed
allegations. If these first steps are satisfied, the public
disclosure bar applies unless the relator is an “original source”
of the information upon which the lawsuit is based. Id. The
No. 17‐1524 9
relator bears the burden of proof at each step of the analysis.
Glaser, 570 F.3d at 913 (citations omitted).
A. Public Disclosure
The court first turns to whether the information contained
in Rosenberg’s complaint was publicly disclosed. Facts are
publicly disclosed when the “critical elements exposing a
transaction as fraudulent are placed in the public domain.”
Feingold, 324 F.3d at 495. Rosenberg’s argument assumes that
the court is to consider whether the information relating to the
bribery scheme had been publicly disclosed at the time of his
February 4, 2013 interview with the OIG. But that is not the
standard. Instead, the court must consider whether the facts
Rosenberg alleged in his complaint had been publicly disclosed
at the time the complaint was filed. As the district court
thoroughly demonstrated in a chart comparing the allegations
of Rosenberg’s complaint with the publicly disclosed informa‐
tion, they were.
As early as October 2012, the Chicago Tribune published
articles relating to the bribery scheme and the relationship
between Redflex, Bills, and O’Malley. In particular, the Tribune
reported on October 14, 2012, that an RTSI executive (not
Rosenberg) had alleged two years earlier that there was an
improper relationship between Bills and O’Malley; that
O’Malley’s role as liaison between RTSI and the City was
unnecessary; that Bills began working for the RTSI‐funded
Traffic Safety Coalition after retiring from the City; and that
RTSI had paid for Bills’ stay at a luxury hotel in Phoenix,
Arizona. The Tribune also confirmed that the City’s OIG was
investigating any wrongdoing involving RTSI’s relationship
10 No. 17‐1524
with Bills. In November 2012, the Tribune remarked that RTSI
hired Sidley Austin to assist with its response to the OIG’s
investigation and to begin its own internal investigation.
Throughout 2013 and 2014, the Tribune continued to run
articles on the investigation. The Tribune articles reported that
RHL submitted a press release to the Australian Securities
Exchange on March 4, 2013, which summarized the results of
its internal investigation; that RTSI terminated Rosenberg and
other executives based on that investigation; and that RTSI
filed a lawsuit against Rosenberg in Maricopa County, Ari‐
zona, which alleged Rosenberg made inappropriate payments
on behalf of Redflex to employees or customers. In short, the
dozens of articles printed by the Tribune and RHL’s March
2013 press release placed “critical elements exposing the
transaction as fraudulent” in the public domain. Id. There is no
doubt that by April 15, 2014, the day Rosenberg filed his
complaint, the bribery scheme had been publicly disclosed.
B. Based Upon
Though the information contained in Rosenberg’s com‐
plaint was publicly disclosed, he may avoid the public disclo‐
sure bar if his action is not “based upon” those disclosures. A
relator’s complaint “is ‘based upon’ publicly disclosed allega‐
tions or transactions when the allegations in the relator’s
complaint are substantially similar to publicly disclosed
allegations.” Glaser, 570 F.3d at 920. Importantly, the question
is not whether the allegations in the relator’s complaint depend
upon or are derived from the publicly disclosed information.
Id. at 914–15. Because he had “inside knowledge” of the
bribery, Rosenberg’s allegations likely were not either depend‐
ent upon or derived from the public disclosures. But that is no
No. 17‐1524 11
longer the test. Id. at 920, overruling United States v. Bank of
Farmington, 166 F.3d 853 (7th Cir. 1999), and United States ex rel.
Fowler v. Caremark RX, L.L.C., 496 F.3d 730 (7th Cir. 2007)).
Under current law, a relator must “present ‘genuinely new
and material information’ beyond what has been publicly
disclosed.” Cause of Action, 815 F.3d at 281 (quoting United
States ex rel. Goldberg v. Rush Univ. Med. Ctr., 680 F.3d 933,
935–36 (7th Cir. 2012)). Rosenberg asserts his complaint adds
details not explicitly contained in the Tribune’s articles. But
these details alone are not enough to establish that his allega‐
tions are not substantially similar to the publicly disclosed
information. After all, Rosenberg’s complaint describes the
same bribery scheme involving Bills, O’Malley, and RTSI that
was publicly disclosed through the Tribune articles that
chronicled the events, nature, and scope of the scheme for
nearly two years. The information that may have been added
in Rosenberg’s complaint is not “genuinely new or material”
such that the complaint is not based upon the publicly dis‐
closed allegations. Goldberg, 680 F.3d at 936. It thus follows that
Rosenberg’s claim is barred unless he can show that he is an
“original source” of the information.
C. Original Source
Because the allegations contained in Rosenberg’s complaint
are substantially similar to the information already available in
the public domain at the time he filed the action, Rosenberg
may act as relator only if he is an “original source” of the
information. Glaser, 570 F.3d at 921. Under the FCO, an original
source is “an individual who has direct and independent
knowledge of the information on which the allegations are
12 No. 17‐1524
based and has voluntarily provided the information to the city
before filing an action under this section which is based on the
information.” Chi. Mun. Code § 1‐22‐030(f). The parties do not
dispute that Rosenberg had direct knowledge of the scheme
through the nature of his employment with RTSI. Therefore,
we need only address whether Rosenberg “voluntarily
provided” the information.
Although the FCO does not define the term “voluntarily,”
several courts have addressed this issue under the FCA. In
United States ex rel. Barth v. Ridgedale Electric Inc., for instance,
an electrical worker and electrical workers’ union filed a qui
tam action on behalf of the United States, alleging a federal
contractor had violated the FCA by submitting false payroll
reports to the government for a federally funded construction
project. 44 F.3d 699, 701 (8th Cir. 1995). The Eighth Circuit held
that the district court properly dismissed the action for lack of
subject matter jurisdiction because the Union did not have
direct knowledge of the false claims and the worker’s disclo‐
sure was not voluntary. The court held that the disclosure by
the worker, Barth, was not voluntary because he only pro‐
duced the information in response to discussions initiated by
a federal investigator, even though he knew about the fraudu‐
lent activities for more than two years. Id. at 704. The court
reasoned that finding Barth’s disclosure to be voluntary would
ignore the Act’s purpose, “which is to encourage private
individuals who are aware of fraud against the government to
bring such information forward at the earliest possible time
and to discourage persons with relevant information from
remaining silent.” Id. Rewarding Barth now “for merely
No. 17‐1524 13
complying with the government’s investigation,” the court
concluded, “is outside the intent of the Act.” Id.
Similarly, in United States ex rel. Paranich v. Sorgnard, the
Third Circuit held that the relator’s disclosure in response to a
subpoena was not voluntary because information “not specifi‐
cally compelled but nonetheless brought forward as a result of
the government’s pointed contact should not be deemed
‘voluntarily’ provided.” 396 F.3d 326, 341 (3d Cir. 2005). The
court acknowledged that “voluntariness” would be under‐
mined if it allowed “a relator to extract the benefit of a qui tam
action where his participation in the investigation was
precipitated by a subpoena and sustained by self‐interest, with
all indications suggesting that the relator would not have come
forward otherwise.” Id.
Rosenberg asserts these cases are distinguishable from the
instant one because he was not legally compelled or obligated
to participate in the OIG investigation, submit to an interview,
or provide any information to the City. He also argues that
because the FCO is an Illinois municipal ordinance, the court
must consult the Illinois state appellate courts to determine its
meaning. Citing Kahr v. Markland, 543 N.E.2d 579, 582 (Ill. App.
Ct. 1989), in which the Appellate Court of Illinois defined the
term “voluntary” to mean “proceeding from the will or from
one’s own choice or consent,” Rosenberg argues that his
disclosure to the OIG falls within this definition.
The definition of “voluntary” in Kahr has no application
here. The meaning of a word differs according to the context in
which it is used. See Yates v. United States, 135 S. Ct. 1074, 1082
(2015) (“In law as in life, however, the same words, placed in
14 No. 17‐1524
different contexts, sometimes mean different things.”). Kahr
dealt with a “voluntary transfer of possession” with respect to
“instruments, documents of title, chattel paper or certified
securities” under the UCC, 543 N.E.2d at 582, a context entirely
different from the FCO. To apply that definition here would
ignore the clear purpose of the FCO, “which is to encourage
private individuals who are aware of fraud against the
government to bring such information forward at the earliest
possible time and to discourage persons with relevant informa‐
tion from remaining silent.” Barth, 44 F.3d at 704. To accom‐
plish that purpose, “voluntary,” as used in the FCO, must
mean something more than the absence of physical coercion or
immediate legal compulsion.
In Glaser, we noted that the voluntary disclosure require‐
ment “is designed to reward those who come forward with
useful information and not those who provide information in
response to a governmental inquiry.” 570 F.3d at 917 (citing
Paranich, 396 F.3d at 338–41). The latter is precisely what
Rosenberg did here. Even though he was not served with a
subpoena, his disclosures to the OIG cannot be deemed
voluntary. As the district court found, his disclosures were
motivated purely by his own self‐interest. The OIG requested
Rosenberg submit for an interview and provide information in
exchange for an express immunity agreement. Having read the
writing on the wall, Rosenberg divulged information about the
bribery scheme in which he was an active and essential
participant for nearly ten years. Rosenberg did not voluntarily
initiate contact with the OIG and only provided information
once he was contacted as part of the City’s investigation. To
hold that Rosenberg’s disclosure was voluntary simply
No. 17‐1524 15
because no formal legal process required his cooperation in the
investigation would frustrate the FCO’s essential goal of
motivating true volunteers and transform the ordinance into a
vehicle for fraudsters to evade responsibility while at the same
time profiting further from their crimes. No reasonable reading
of the FCO requires such a result. Rosenberg’s disclosures were
not voluntary, and the district court correctly concluded
Rosenberg did not qualify as an original source of the
information.
D. Entitlement to Proceeds and Attorney’s Fees
Finally, Rosenberg asserts that, as the individual who
brought the action, he is entitled to a portion of the settlement
proceeds as well as attorney’s fees and costs. The FCO’s award
provision reads: “If the city proceeds with an action brought by
a person under this section, such person shall … receive at least
15 percent but not more than 25 percent of the proceeds of the
action or settlement of the claim … .” Chi. Mun. Code § 1‐22‐
030(d)(1).
But the language of the public disclosure bar is that “[n]o
court shall have jurisdiction” over an action to which the bar
applies. Id. § 1‐22‐030(f). In Rockwell Corp. v. United States, 549
U.S. 457 (2007), the Court held that “an action originally
brought by a private person, which the Attorney General has
joined, becomes an action brought by the Attorney General
once the private person has been determined to lack the
jurisdictional prerequisites for suit.” Id. at 478. Although the
16 No. 17‐1524
language expressly barring jurisdiction was removed from the
FCA by the 2010 amendments, thereby calling into question
Rockwell’s holding that the public disclosure exception to the
FCA is jurisdictional, see Cause of Action, 815 F.3d at 271 n.5, the
FCO has not been similarly amended and thus its jurisdictional
bar remains. Applying Rockwell, then, it follows that because
the City intervened in the action and Rosenberg is jurisdiction‐
ally barred from acting as relator under the public disclosure
bar, he is no longer considered the individual who brought the
action.
Rosenberg attempts to avoid Rockwell by drawing a
distinction between the relator as a party and the “person
bringing the action.” Rockwell does not apply, he argues,
because he is seeking a share of the settlement and attorney’s
fees not as a relator but as the “person bringing the action.” We
agree with the district court that the distinction Rosenberg
attempts to draw finds no support either in the holding of
Rockwell or in logic. A relator in a qui tam action is the person
bringing the action, and to adopt Rosenberg’s interpretation of
the FCO would effectively read the public disclosure bar out of
the ordinance.
Because the FCO authorizes the district court to award
Rosenberg fees and a portion of the recovery only if this is “an
action brought by” Rosenberg, his dismissal under the public
disclosure bar forecloses his claim to the benefits of the lawsuit.
The judgment of the district court is therefore AFFIRMED.