996 F. Supp. 2d 861
N.D. Cal.2013Background
- Relator John C. Prather, former Deputy Attorney General heading New York's Organized Crime Task Force, filed a qui tam False Claims Act (FCA) suit (filed 2009, amended) alleging major telecom carriers overcharged federal and state law‑enforcement agencies for electronic surveillance (wiretap provisioning) in violation of CALEA pricing limits.
- DOJ, FBI, and DEA filed a Joint Petition to the FCC on March 10, 2004 raising similar concerns about carriers passing CALEA implementation costs to law enforcement; the FCC solicited comments on CALEA.
- Prather provided an affidavit supporting the New York Attorney General’s April 12, 2004 official comment to the FCC describing his view that carriers’ charges had “skyrocketed” and were “exorbitant.”
- Defendants moved to dismiss the First Amended Complaint for lack of subject‑matter jurisdiction under the FCA public‑disclosure bar (31 U.S.C. § 3730(e)(4)), and alternatively under Rules 12(b)(6) and 9(b).
- The court evaluated whether Prather qualified as an "original source" (direct and independent knowledge; voluntary disclosure to the government before filing; participation in the public disclosure) and whether the 2010 FCA amendments apply to this 2009 action.
- The court concluded the 2010 FCA amendments do not apply retroactively and found Prather was not an original source, so it dismissed the FCA claim for lack of subject‑matter jurisdiction and dismissed all state law claims without prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 2010 FCA amendment (public‑disclosure/affirmative defense) applies | Prather: the change making public disclosure an affirmative defense is jurisdictional and should apply (shifting burden). | Defendants: 2010 amendment is substantive and does not apply to suits filed before amendment. | Court: 2010 amendment does not apply to this 2009 case (follow Supreme Court precedent). |
| Whether Prather is an "original source" (direct & independent knowledge) | Prather: his decades prosecutorial experience, review of fee schedules/invoices, budgeting, and participation in network upgrades gave him direct knowledge that charges were unreasonable/overcharged. | Defendants: his knowledge is secondhand, speculative, based on few invoices and opinion, not direct proof of fraud. | Court: Held Prather lacked direct knowledge of fraud; his observations were conjectural and insufficient. |
| Whether Prather's disclosure to the government was voluntary | Prather: he voluntarily submitted affidavit out of moral obligation and to assist AG's comments. | Defendants: disclosure was prompted by the FCC request and by his superiors; reporting was within job duties and thus not voluntary. | Court: Held disclosure was not voluntary — it was made in his official capacity in response to the FCC request and at the Attorney General’s behest. |
| Whether Prather had a hand in the original public disclosure | Prather: his affidavit supported AG comments to FCC. | Defendants: DOJ/other agencies had already publicly raised similar allegations (Joint Petition) before Prather's affidavit. | Court: Held DOJ’s March 10, 2004 Joint Petition publicly disclosed materially similar allegations before Prather’s April 12, 2004 affidavit; Prather had no hand in original public disclosure. |
Key Cases Cited
- Graham Cnty. Soil & Water Conservation Dist. v. U.S. ex rel. Wilson, 559 U.S. 280 (2010) (retroactivity: 2010 FCA amendments do not apply to pending qui tam suits)
- Hughes Aircraft Co. v. United States ex rel. Schumer, 520 U.S. 939 (1997) (distinguishing jurisdictional versus substantive amendments and presumption against retroactivity)
- United States v. Alcan Elec. & Eng'g, Inc., 197 F.3d 1014 (9th Cir. 1999) (relator bears burden to establish subject‑matter jurisdiction by preponderance)
- United States ex rel. Biddle v. Bd. of Trustees of Leland Stanford, Jr. Univ., 161 F.3d 533 (9th Cir. 1998) (employee disclosures made as part of job duties are not voluntary for original‑source purposes)
- United States ex rel. Aflatooni v. Kitsap Physicians Servs., 163 F.3d 516 (9th Cir. 1999) (speculation and circumstantial patterns insufficient to show direct knowledge of fraud)
- United States ex rel. Meyer v. Horizon Health Corp., 565 F.3d 1195 (9th Cir. 2009) (defining direct and independent knowledge for original‑source inquiry)
- Wang v. FMC Corp., 975 F.2d 1412 (9th Cir. 1992) (courts must resolve public‑disclosure jurisdictional bar before reaching merits)
- United States v. Johnson Controls, Inc., 457 F.3d 1009 (9th Cir. 2006) (elements of original‑source status summarized)