United States v. Kellogg
3:23-cv-00118
S.D. Cal.Mar 24, 2025Background
- La Jolla Beach and Tennis Club Partners L.P. (the "Club") is a private, members-only club in California, managed by La Jolla Beach & Tennis Club, Inc., with William J. Kellogg as CEO.
- The Club obtained two Paycheck Protection Program (PPP) loans during the COVID-19 pandemic.
- PPP loan eligibility rules excluded private clubs that limit membership for non-capacity reasons from receiving loans.
- Plaintiff Relator LLC filed a qui tam action, alleging defendants obtained PPP loans in violation of the False Claims Act (FCA) by certifying eligibility while being ineligible as an exclusive club.
- Information regarding Defendants' PPP loans and the club's exclusive status was publicly available on federal websites and in news media prior to the filing of the suit.
- DOJ declined to intervene; the court granted Defendants' motion to dismiss based on the FCA's public disclosure bar after multiple amended complaints.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether public disclosure bar applies | Information not substantially similar or enhanced by new facts | All material facts were already publicly disclosed | Bar applies; claims are based on public disclosures |
| Whether Relator is an original source | Relator has new information from former club finance director | Relator adds no materially new information | Not an original source; no material addition |
| Sufficiency of FCA claim under Rule 12(b)(6) | Factual allegations support plausible FCA claim | Facts insufficient/duplicative of public disclosures | Did not reach; dismissed on public disclosure grounds |
| Leave to further amend | Sought leave to amend if dismissed | Amendments would be futile | Dismissed without leave to amend |
Key Cases Cited
- Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035 (9th Cir. 2010) (standard for dismissal under Rule 12(b)(6): no cognizable legal theory or insufficient facts)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for pleadings in federal court)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (must plead sufficient facts to state a plausible claim)
- Sprewell v. Golden State Warriors, 266 F.3d 979 (9th Cir. 2001) (court not required to accept conclusory allegations)
- Moss v. U.S. Secret Serv., 572 F.3d 962 (9th Cir. 2009) (plausibility standard for complaints)
- United States v. Allergan, Inc., 46 F.4th 991 (9th Cir. 2022) (FCA public disclosure bar and original source exception)
- United States ex rel. Solis v. Millennium Pharms., Inc., 885 F.3d 623 (9th Cir. 2018) (framework for applying public disclosure bar)
- Mateski v. Raytheon Co., 816 F.3d 565 (9th Cir. 2016) (formula for analyzing substantial similarity under public disclosure bar)
- Amphastar Pharms. Inc. v. Aventis Pharma SA, 856 F.3d 696 (9th Cir. 2017) (public disclosure need not include every detail to bar suit)