By Elizabeth DeFrance
On February 25, 2016 the Fourth Circuit Court of Appeals issued a publish opinion in the civil case, U.S. ex rel. Beauchamp v. Academi Training Center, LLC.. Plaintiffs Lyle Beauchamps and Warren Shepard (“Relators”) filed a qui tam action under the False Claims Act against Academi Training Center, LLC. (“Adademi”) and XE Services, LLC.. At issue on appeal is whether the Relators’ claims are disqualified based on the public-disclosure bar.
Academi Accused of Submitting Fabricated Documents to the State Department
The State Department hired Academi in 2005 to provide security services for government officials stationed in the Middle East. The contract required Academi’s personnel to be proficient in the use of certain firearms and to regularly submit marksmanship scores for their personnel. In April 2011, Relators, both former security contractors with Academi, filed suit under the False Claims Act alleging Academi requested payment from the State Department for unissued equipment, and submitted false reports to the State Department for contractors not actually employed in the positions billed for. In May 2011, Relators amended their complaint to include a separate allegation that Academi routinely failed to qualify their personnel on the required firearms, and submitted fabricated marksmanship scorecards to the State Department (“weapons qualification scheme”).
In 2012, while the Relators’ claim was still pending, two former Academi employees filed a separate employment suit against Academi alleging they were wrongly terminated for reporting the weapons qualification scheme to their superiors. In July 2012, the online news journal, Wired.com, published an article describing the allegations against Academi contained in the employment suit.
The Relators filed a second amended complaint in November 2012, alleging additional claims not relevant to the appeal, and supplementing the weapons qualifications scheme claims with additional facts from the employment claim.
The district court dismissed the Relators’ claim relating to the weapons qualification scheme under the public-disclosure bar. The court determined that the information the claim was based on was publicly disclosed in the Wired.com article prior to the filing of the second amended complaint.
The Timing Determination is Based on the First Pleading to Allege the Claim
The public-disclosure bar disqualifies a claim if the information on which the claim is based was publicly disclosed prior to filing the complaint. The timing inquiry for the public-disclosure bar is whether the disclosure occurred before “the date of the first pleading to particularly allege the relevant fraud and not the timing of any subsequent pleading.”
The First Amended Complaint was the Proper Subject of Inquiry
The Wired.com article was a “public disclosure” as defined under the False Claims Act. However, the proper subject of the timing inquiry is the first pleading to state the claim in question. Although additional factual allegations regarding the weapons qualification scheme were included in the second amended complaint, the weapons qualification scheme was properly pled with sufficient factual allegations in the Relators’ first amended complaint. Therefore, The first amended complaint was the proper subject of the timing inquiry. Because the first amended complaint was filed before the Wired.com article was published, the public-disclosure bar does not apply.
The Order of Dismissal was Vacated and the Case was Remanded
The district court erred in concluding that the most recent pleading was the appropriate timing benchmark, and erred in dismissing the weapons qualification claim under the public-disclosure bar. The district court’s order was vacated and the case was remanded for further proceedings.