ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT [11]; DENYING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT [17]
I. INTRODUCTION
Plaintiffs seek to obtain a tax refund by characterizing their False Claims Act qui tam award as capital gains rather than ordinary income. Plaintiffs’ Complaint presents a question of first impression
II. FACTS
Plaintiff Jim Alderson was the Chief Financial Officer for the North Valley Hospital in Whitefish, Montana. Beginning in 1990, Quorum Health Group, Inc. (“Quorum”) took over management of the hospital. Quorum instructed Alderson to retain two sets of cost reports: one to submit to the federal government’s Medicare program when seeking reimbursements and another to submit to the hospital’s auditors. Quorum requested that the Medicare books contain more aggressive cost reporting in order to increase the amount of proceeds received from Medicare.
When Alderson refused to maintain the separate sets of books, he was fired. He then brought a wrongful termination action, which settled in late 1993. In the course of discovery during the wrongful termination proceedings, certain Quorum officials’ testimony suggested that Quorum was engaged in Medicare fraud.
In January 1993, Alderson filed a qui tam False Claims Act action against Quorum and related entities. The Department of Justice interviewed Alderson about the lawsuit in 1993, and ultimately decided to intervene in the action five years later. The United States then severed the actions against Quorum and its affiliate Hospital Corporation of America (“Hospital Corporation”). 1 The present lawsuit only relates to the qui tam action against Hospital Corporation.
In 1999, Alderson formed the Alderson Family Limited Partnership and transferred to the partnership 40% of his interest in the qui tam claim against Hospital Corporation. Alderson then transferred 49% shares in the Alderson Family Limited Partnership to each of his children and retained 1% shares in the Alderson Family Limited Partnership for himself and his wife. 2 In order to calculate the gift taxes owed on the transfer to the children, Alderson hired an appraiser to estimate the value of the qui tam claim. Plaintiffs submit evidence showing that the appraiser valued the claim at slightly more than $3,000,000.
In June 2003, the United States and Hospital Corporation settled the False Claims Act suit involving Medicare fraud. The district court awarded Plaintiff 16% of the settlement proceeds. Plaintiffs received a total of $27,105,035 as a result of the settlement.
After receiving these funds, all of the Plaintiffs initially reported their qui tam recovery as ordinary income. They now seek to recharacterize the income as capi *1189 tal gains. They have satisfied the procedural prerequisites for bringing the present action seeking a refund.
III. LEGAL STANDARD
The parties have filed cross-motions for summary judgment. If there were factual disputes, the taxpayer would bear the initial burden of showing that its legal contentions were supported by the evidence; following that initial showing, the burden would shift to the Government. Fed. R.Civ.P. 56(c); 26 U.S.C. § 7491;
Celotex Corp. v. Catrett,
Based on the undisputed facts stated above, the Court reaches the following legal conclusions.
A. False Claims Act
In order to fully understand the nature of Plaintiffs’ recovery under the False Claims Act, it is necessary to briefly summarize the False Claims Act’s structure and purpose.
The False Claims Act establishes liability for “[a]ny person” who “knowingly presents, or causes to be presented, to an officer or employee of the United States Government ... a false or fraudulent claim for payment or approval.”
Vermont Agency of Natural Resources v. United States ex rel. Stevens,
In a qui tarn suit, the private plaintiff (known as a “relator”) must file the suit under seal and provide the Government a copy of the pleadings and supporting evidence. Id. (citing 31 U.S.C. § 3730(b)(2)). The Government must decide whether to intervene in the action within sixty days; if the Government initially declines to intervene, it may intervene at a later time upon a showing of good cause. Id. (citing 31 U.S.C. § 3730(b)-(c)).
If the Government fails to intervene and the relator successful proceeds to judgment, the relator is entitled to receive 25 to 30 percent of the recovery (plus fees and costs) and the Government receives the remainder.
Id.
at 770,
The Supreme Court has explained that the relator obtains Article III standing because “the assignee of a claim has standing to assert the injury in fact suffered by the assignor.”
Id.
at 773,
Numerous other courts have characterized the False Claims Act’s
qui tam
provision in various ways, but the common core of their characterizations is that the relator receives a portion of the Government cause of action in exchange for the relator’s information and (in some cases) services. The Ninth Circuit has stated that the law “operate[s] as an enforceable unilateral contract” which is “accepted by the relator upon filing suit.”
United States ex rel. Kelly v. Boeing Co.,
In short, the overwhelming weight of the caselaw holds that a False Claims Act qui tam award is given in exchange for information and services.
To the extent that there is any doubt about the nature of the qui tam award, it is helpful to focus on the language of the statute, which plainly establishes that the award is a payment in exchange for the relator’s information and services. The statute provides three levels of recovery to the relator. If the qui tam suit is “based primarily on disclosures of specific information” disclosed in a government report or the news media, the relator is entitled to up to ten percent of the recovery based on “the significance of the information [provided by the relator] and the role of the [relator] in advancing the case to litigation.” 31 U.S.C. § 3730(d)(1). If the suit is based on nonpublic information and the Government intervenes, then the relator is entitled to 15 to 25 percent “depending upon the extent to which the person substantially contributed to the prosecution of the action.” Id. If the Government does not intervene and the relator is solely responsible for prosecuting the action, then the relator is entitled to recover 25 to 30 percent of the recovery. 31 U.S.C. § 3730(d)(2).
In short, the
qui tam
award — whether it is viewed as a contract between the relator and the Government, a bounty, a reward, or something different — is based entirely on the relator’s information and personal efforts. As stated by the Ninth Circuit: “the extent of the recovery is tied to the importance of the relator’s participation in the action and the relevance of the infor
*1191
mation brought forward.”
United States ex rel. Green v. Northrop Corp.,
B. Capital Gains Treatment
The parties do not dispute that the
qui tam
award is taxable income. That question appears to be settled.
See Brooks v. United States,
1. Basic Principles of Capital Gains
Half a century ago, the Supreme Court established the basic structure for determining if capital gains treatment is appropriate:
Long-established principles govern, the application of the more favorable tax rates to long-term capital gains: (1) There must be first, a ‘capital asset,’ and second, a ‘sale or exchange’ of that asset; (2) ‘capital asset’ is defined as ‘property held by the taxpayer,’ with certain exceptions not here relevant; and (3) for purposes of calculating gain, the cost or other basis of the property must be subtracted from the amount realized on the sale or exchange.
Comm’r v. Gillette Motor Transport, Inc.,
The principal concern in the present action is the second point in the list: the definition of “capital asset.” The Tax Code provides the following definition: “For purposes of this subtitle, the term ‘capital asset’ means property held by the taxpayer (whether or not connected with his trade or business).” I.R.C. § 1221(a). 3
2. The “Property” Requirement
“[T]he first step in determining whether the sale or exchange of an asset receives capital treatment is deciding whether or not the asset is property.” Scott Shimick, 4
Mertens Law of Federal Income Taxation,
§ 22:4 (May 2010 update)
(“Mertens
”). When defining the scope of the term “property,” state law is instructive but not determinative because the Tax Code is a creature of federal, not state, law.
See Miller v. Comm’r,
The leading case on this issue is
Miller v. Comm’r,
in which the Second Circuit held that “publicity rights” were not “property” and, as such, the sale of those publicity rights could not receive capital gains treatment. The case involved Glenn Miller’s widow, who had sold the rights to
*1192
produce the movie
The Glenn Miller Story
to Universal Pictures.
Id.
at 707. The court explained that “at the time of the ‘sale’ there were no clear-cut decisions protecting publicity rights of a deceased celebrity,” and there was no authority to support the proposition that “the reputation or fame of a dead person could give rise to ... ‘property rights.’ ”
Id.
at 709 (internal quotations and alterations omitted). Accordingly, the “sale” of these “rights” was not a sale of a legally recognized form of property. Rather, Universal Pictures had merely purchased a hedge against the “chance that a new theory of ‘property’ might be advanced [in the future], and that a lawsuit predicated on it might be successful.”
Id.
at 710. The court concluded: “We do not believe that for income tax computation purposes the beneficiaries of the estate of a deceased entertainer received by descent a capitalizable ‘property’ in the name, reputation, right of publicity, right of privacy or ‘public image’ of the deceased; or that in this case the petitioner, for tax purposes, owned any ‘property’ which came into existence after Glenn Miller’s death.”
Id.
at 711. Absent the exchange of any “property” interest, the payment from Universal was accordingly treated as ordinary income rather than capital gains.
Id.; see also Estate of Scharf v. Comm’r,
More recently, the Ninth Circuit has explained that, even where “property” exists, that property must have been owned by the taxpayer prior to being “sold” or “exchanged” for tax purposes.
Trantina v. United States,
In short, without any property, there can be no capital asset; and without any capital asset, there can be no capital gains.
3. The “Capital Asset” Requirement
If it is established that some form of “property” is at issue, the Court must further determine whether the property constitutes a “capital asset.”
The Supreme Court has explained that, although the Tax Code defines “capital asset” as “property held by the taxpayer,”
see
I.R.C. § 1221(a), “it is evident that not everything which can be called property in the ordinary sense and which is outside the statutory exclusions qualifies as a capital asset.”
Gillette,
Accordingly, in
Gillette,
the Court held that the taxpayer’s receipt of rent to use its business facilities was not a “capital asset” for taxation purposes. The case involved the following facts. The government had temporarily seized a motor carrier’s transportation facilities during World War Two.
Id.
at 130-31,
In applying this test, the Ninth Circuit has explained that a taxpayer’s economic opportunity costs are not an “investment of capital.” In
Trantina,
the taxpayer argued that “he made a substantial economic investment in [his employment] Agreement that increased over the years.”
*1194 In other words, in order for property to be characterized as a “capital asset,” there must first be an investment of “capital” in that asset.
4. Remaining Principles
A few additional principles must also be mentioned. A taxpayer’s sale or exchange of a
contract
is not necessarily a sale or exchange of “property.”
Trantina,
Likewise, a taxpayer’s sale or exchange of a
cause of action
is not necessarily a sale or exchange of “property.” Rather, the court must scrutinize and the “nature of the claims asserted” in the lawsuit.
Furrer,
At the heart of these conclusions are the doctrines that courts must look to the substance rather than the form of a transaction, and courts must look to the “origin of the claim” when determining how to characterize it. Courts must reject a taxpayer’s “attempted transubstantiation of income into capital” where “the essential element — the capital asset, tangible or intangible — is not present.” Id.
IV. DISCUSSION
The thrust of Plaintiffs’ argument is contained in the opening of their Motion for Summary Judgment:
Under applicable law, an exchange of secret information and know-how in return for cash or property is a capital transaction. In 1993, Alderson exchanged a capital asset in the form of information and know-how for a capital asset in the form of his qui tam claim and its corresponding contract rights. Thereafter, in 2003, Alderson (and the Alderson Family Limited Partnership) released the Claim and its corresponding contract rights for a cash relator share. This cash payment consummated the disposition of a capital asset.
(Pis.’ Mot. at 2, internal citations and abbreviations omitted).
As will be explained infra, Plaintiffs’ argument fails because its very premise— that Alderson possessed a capital asset in the form of “secret information and know-how” — is incorrect. It is true, of course, that Alderson provided information to the Government. However, that information was neither “property” nor a “capital asset” for purposes of the Tax Code. Absent any “property” that is a capital asset, there necessarily cannot be any capital gains. See I.R.C. § 1221.
A. The Parties’ Arguments
First, it is helpful to lay out the purported mechanics of the transactions at issue.
Plaintiffs assert that “Alderson possessed property in the form of: (1) information and know-how he transferred to the government in exchange for his Claim; (2) the Claim itself; and/or (3) the contract rights encompassed by the Claim.” (Pis.’ Mot. at 9 n. 15.)
Plaintiffs assert that Alderson’s first capital transaction occurred when he exchanged “secret information and know-how” to the Government in exchange for a portion of the False Claims Act recovery. (Id. at 9.) According to Plaintiffs, this “secret information” and “know-how” was a capital asset because it was valuable secret information.
Plaintiffs further argue that, once Aider-son received his portion of the qui tam claim, he still possessed a capital asset because “case law treats a cause of action or ‘chose in action’ as intangible personal property and a capital asset.” (Pis.’ Mot. *1195 at 15.) “Alderson’s [qui tam ] Claim encompassed contract rights to a relator share” of the final recovery. (Id.) These contract rights, according to Plaintiffs, were also capital assets, because “[m]any contract rights receive capital gains treatment upon their disposition.” (Id. at 16.) The final “disposition” of this contract right occurred when Plaintiffs ultimately received a 16% award from the District Court at the end of the False Claims Act litigation. (Id.)
Plaintiffs correctly point out that the relevant inquiry is to look at the “origin of the claim” to determine whether the ultimate recovery is ordinary income or capital gains.
(Id.
at 17.) Substantial caselaw supports this view.
E.g., United States v. Gilmore,
Plaintiffs’ entire line of argument rests on a shaky foundation. As described in further detail infra, Alderson’s purported “know-how” and “secret information” simply do not constitute “property” under any applicable body of law.
The Government correctly argues that “Plaintiffs’ allegations beg the question[ ]: how does an individual acquire a proprietary interest in knowledge of fraudulent and unlawful conduct[?]” (Defs.’ Mot. at 10, emphasis in original.) Likewise, the Government contends that “Alderson ... discovered illegal activity and disclosed it to obtain a handsome reward. The contention that information about illegal activity is equivalent to having knowledge of a ‘trade secret’ is wholly without merit.... Neither authority, nor logic nor common sense support the conclusion that an individual’s knowledge about illegal conduct constitutes a property interest or a capital asset.” (Defs.’ Reply at 6.)
This threshold question — -whether there is any “property”- — is central to this case. If Plaintiffs lack a property interest in the information that formed the basis of the False Claims Act claim, then Plaintiffs are necessarily prohibited from seeking capital gains treatment.
See
I.R.C. § 1221(a) (defining “capital asset” as “any property” held by the taxpayer);
see also Trantina,
B. The Nature of Property Rights
With respect to Plaintiffs’ apparent argument that information
qua
information is “property,” this argument fails. In order to possess a property right, whether tangible or intangible, a person must be able to exclude others from using or taking the purported property. As explained by the Supreme Court, “[t]he right to exclude others is generally one of the most essential sticks in the bundle of rights that are commonly characterized as property.”
Ruckelshaus v. Monsanto Co.,
This general principle is an element of all the relevant bodies of law. 5 This principle is supported by federal law as stated by the Supreme Court (which is relevant because this case involves the Internal Revenue Code), Montana (which is potentially relevant because that is where Plaintiff was employed), Florida (which is potentially relevant because that is where Hospital Corporation was located and where the False Claims Act suit was litigated) and California (which is potentially relevant because it is where Plaintiffs currently reside, see Compl. ¶ 2).
The Ninth Circuit has distilled a three-part test for determining whether a property right exists: “First, there must be an interest capable of precise definition; second, it must be capable of exclusive possession or control; and third, the putative owner must have established a legitimate claim to exclusivity.”
G.S. Rasmussen & Assocs., Inc. v. Kalitta Flying Serv., Inc.,
The Ninth Circuit’s test is consistent with the other relevant bodies of law. The
Rasmussen
three-part framework has been explicitly adopted as an accurate statement of Montana law.
Berger v. Cable News Network Inc.,
No. CV 94-46-BLG-JDS,
In other words, all of the potentially relevant bodies of law — the general common law as interpreted by the United States Supreme Court; California law as interpreted by the Ninth Circuit; Montana law as interpreted by the federal district court in that state; and Florida law as interpreted by the federal courts in that state — hold that property rights only exist if the person asserting the property right has a legitimate claim to the exclusive possession of that right and is capable of excluding others from such possession.
C. Under General Principles of Property Law, Alderson Did Not Possess a Property Right
Here, it is clear that Alderson did not have the right to exclude others from obtaining his “secret information” and “know-how.” The “secret information” and “know-how” was nothing more than the knowledge that Alderson’s employer was engaged in wrongdoing. Alderson’s “information” and “know-how” was also known by Alderson’s employer, Quorum Health Group. Indeed, Plaintiffs have introduced the undisputed fact that “Quorum’s district vice-president informed Alderson of Quorum’s policy to keep two sets of cost reports: an aggressive report to submit to Medicare for cost reimbursement; and a reserve report to submit to Quorum’s auditors.” (Pis. SUF ¶ 3.) Plaintiffs have also introduced the undisputed fact that, “[djuring discovery [in Alder-son’s 1991 wrongful termination action], Alderson deposed certain Quorum officials, whose testimony suggested improprieties in its cost reporting policies.” (Pis. SUF ¶ 6.)
In other words, Plaintiffs admit that Alderson’s valuable “information” was also known by “Quorum’s district vice president” and “certain [other] Quorum Officials.” Plaintiffs fail to introduce any evidence suggesting that Alderson knew of additional secret information beyond that which was also known by the company’s executives.
In short, Plaintiffs have failed to show that Alderson possessed exclusive information about Quorum’s wrongdoing and that he had the right to exclude other individuals from possessing such information. Alderson therefore did not possess a property right in the “know-how” and “information.”
D. Under the More Specific Rules Regarding Trade Secrets, Aider-son Did Not Possess a Property Right
Just as Plaintiffs have not identified any property right within the generally accepted definitions of property law, Plaintiffs have likewise failed to show that Alderson possessed a property right under the more specific rules regarding trade secrets.
See Ruckelshaus v. Monsanto Co.,
Plaintiffs repeatedly refer to the relevant information as “secret information and know-how,” and insist that the tax caselaw recognizes “secret information and know-how” as a capital asset. (Pis.’ Mot. at 9.) Plaintiffs are correct that the case-law recognizes certain “secret information and know-how” as a capital asset. See generally David L. Cameron & Thomas Kittlekamp, Fed. Income Taxation of Intellectual Property & Intangible Assets ¶ 4.01 (2009 supp.). Plaintiffs fail to recognize, however, that older cases discussing “secret information and know-how” were discussing the doctrines that are now codified as “trade secrets.” Plaintiffs studi *1198 ously avoided using the term “trade secret,” and they make no effort to show that their purported “secret information and know-how” satisfies any relevant body of trade secrets law. However, their arguments and citations require the Court to examine the viability of their arguments under established trade secrets doctrine.
It is important to keep in mind that modern courts no longer use Plaintiffs’ terminology of “know-how” and “secret information”; rather, these terms were used by older courts to refer to the law of trade secrets during its formative period. The modern law of “trade secrets” has solidified and superceded the former rules regarding “know-how” and “secret information.” See 1-1 Milaram on Trade Secrets § 1.01[2][a] (“[I]n 1966 the Patent Section of the American Bar Association extensively discussed a resolution to the effect that ‘the ABA favors the enactment of a uniform state law to protect against the wrongful disclosure or wrongful appropriation of trade secrets, know-how or other information maintained in confidence by another.’ ”) (quoting National Conference of Commissioners on Uniform State Laws, Recommendation re: Uniform Trade Secrets Protection Act, Feb. 17, 1968). Today, “[t]he words ‘trade secrets,’ ‘know-how,’ and ‘confidential information’ are in fact often used interchangeably, both by parties to agreements and the courts.” 1-1 Milaram on Trade Secrets § 1.01; see also Uniform Trade Secrets Act § 1 cmt. (1985 rev.) (“The words ‘method [and] technique’ [as used in the Uniform Trade Secrets Act’s definition of trade secret] are intended to include the concept of ‘know-how.’ ”) (emphasis added); Restatement (Third) of Unfair Competition § 39 cmt. d (1995) (describing “know-how” as a type of “trade secret”) (emphasis added); Black’s Law Dictionary 950, 1633 (providing cursory definition of “know-how” that cross-references the much lengthier and more elaborate definition of “trade secret”); Black’s at 881 (defining “intellectual property” as “compris[ing] primarily trademark, copyright, and patent rights, but also including] trade-secret rights, publicity rights, moral rights, and rights against unfair competition”) (emphasis added). Accordingly, the Court will address Plaintiffs’ arguments about “secret information and know-how” in accordance with trade secrets law.
Generally speaking, the law of trade secrets protects customer lists, chemical formulas, manufacturing processes, and the like — not “secret” information about an ongoing fraud.
See generally
1-1
Milaram on Trade Secrets
§ 1.09. Indeed, in the definitive trade secrets treatise (which contains more than 180 pages and 700 footnotes devoted solely to illustrating “examples of matters which do or do not qualify as trade secrets”), there is only a single case even discussing the applicability of trade secrets law to a person’s knowledge of ongoing wrongdoing.
See id.
at n. 688 (citing
KLM Royal Dutch Airlines, N.V. v. deWit,
Here, Plaintiffs have not made a prima facie showing that a trade secret exists. To the extent they argue that Alderson’s “know-how” and “information” was a trade secret, Plaintiffs use the following line of analysis: Alderson possessed information; the information was secret; he took steps to preserve its secrecy by filing the lawsuit under seal 9 ; the information was only *1199 valuable to him if it was secret (because otherwise, Alderson would be limited to a 0-10% recovery under the “public source” provision of the False Claims Act); and the information was only valuable to Hospital Corporation if it was secret (because otherwise the Government would bring a lawsuit to recover on the fraud).
Plaintiffs’ argument is misguided. Under all of the relevant bodies of law, 10 there are three basic requirements for establishing a trade secret: (1) there is information (2) which is kept secret by reasonable means and (3) derives economic value from its secrecy. See Uniform Trade Secrets Act § l(4). 11
The fundamentally important element is “secrecy” — the information must be the subject of reasonable efforts to maintain secrecy, and it must derive its economic value from that secrecy. Indeed, it is the secrecy of the information that permits it to be treated as “property,” because secrecy allows the information-holder to exclude others from using that information.
See Monsanto,
In the present case, as discussed supra, there simply was no “secrecy” regarding Quorum’s wrongdoing. Alderson was not the only person who knew about the fraudulent accounting practices: Quorum executives also knew this information. Alderson simply had no means of preventing those *1200 executives from disclosing this shared information. 12
In addition, the Court disagrees with Plaintiffs’ legal premise that a person can receive trade secret protection for information about ongoing illegal activities. A trade secret only exists if the secret-holder takes
reasonable efforts
to maintain the secrecy of the information.
See
Uniform Trade Secrets Act § (l)(4)(ii). This element simply cannot be satisfied with respect to information about ongoing illegality. There is no objectively “reasonable” method for concealing information about ongoing illegality. Courts have consistently refused to enforce post-employment confidentiality agreements that sought to prevent a former employee from revealing harmful information about the employer’s illegality.
See Lachman v. Sperry-Sun Well Surveying Co.,
Notably, this conclusion is consistent with the underlying justifications of trade secrets law, which include “[t]he maintenance of standards of commercial ethics.”
Kewanee Oil Co. v. Bicron Corp.,
In short, there was no “trade secret” because (1) as a factual matter, Alderson’s information was not secret, and (2) as a legal matter, there is no “reasonable” manner in which a person who holds information about ongoing illegality can prevent that information from being disclosed to the public, and thus such information cannot be the subject of trade secret protection.
E. SUMMARY
In short, Plaintiffs’ portion of the recovery against Hospital Corporation was not a “capital asset” for purposes of I.R.C. § 1221 because it was not “property” under any body of law. Because Alderson’s did not hold a property interest in the information he exchanged to the Government, his subsequent recovery of $27 million was not a capital gain. Alderson “simply had no property that could be sold or exchanged” for purposes of receiving capital gains treatment.
Trantina v. United States,
*1201 Accordingly, Plaintiffs’ income from the False Claims Act award was correctly characterized as ordinary income. Plaintiffs are not entitled to recharacterize their income and obtain a tax refund from the Government.
In light of the fact that Alderson did not possess any legally protectable property interest in the “information” he gave to the Government in exchange for his share of the False Claims Act cause of action, the Court refrains from discussing the parties’ remaining arguments regarding the existence of a capital asset and the timing of the sale(s) or exehange(s) of the capital asset.
Y. CONCLUSION
For the foregoing reasons, Defendant’s Motion for Summary Judgment is GRANTED and Plaintiffs’ Motion for Summary Judgment is DENIED.
IT IS SO ORDERED.
Notes
.
See United States ex rel. Alderson v. Quorum Health Group, Inc.,
. Alderson, his wife, and his children and their spouses are collectively referred to as "Plaintiffs.”
. The Tax Code’s definition of "capital asset” provides eight exceptions that are not at issue in this case. See I.R.C. § 1221(a)(l)-(8).
. Plaintiffs attempt to avoid the
Gillette
court’s narrow reading of "capital asset” by pointing to the Supreme Court’s later statement to the effect that the term “capital asset” refers to any and all property not listed in the eight statutory exclusions of I.R.C. § 1221.
See Arkansas Best Corp. v. Comm’r,
. As explained by the Second Circuit in Miller and by the author of Mertens, the Tax Code creates a federal law of "property" that is distinct from (but necessarily must refer to) state law. See Miller v. Comm'r, 299 F.2d at 708; Mertens § 22:4.
. It is especially appropriate for the Montana courts to apply California's definition of property given that both the California and Montana Civil Codes define property in the following manner: "The ownership of a thing is the right of one or more persons to possess and use it to the exclusion of others.” Cal. Civ. Code § 654; Mont.Code Ann. § 70-1-101.
. As a general matter, Florida is a common law state that has adopted the general rules of the common law and can be expected to follow the United States Supreme Court’s basic definition of "property.” See Fla. Stat. Ann. § 2.01.
.On appeal, the Eleventh Circuit summarily affirmed the District Court’s conclusion. The court stated that "PGA has a right to control its property interest in ... the compiled golf scores,” and that "[w]e agree with the district court that PGA 'has a right to sell or license its product, championship golf, and its derivative product, compiled golf scores.’ "
Morris Comms. Corp. v. PGA Tour, Inc.,
. The False Claims Act requires lawsuits to be filed under seal so that: the Government may investigate the viability of the action while deciding whether or not to intervene.
See American Civil Liberties Union v. Holder,
. A majority of jurisdictions in the United States (including California, Montana, and Florida), follow the Uniform Trades Secrets Act. See Uniform Trades Secrets Act § 1 ("Table of Jurisdictions Wherein Act Has Been Adopted”); Robert L. Haig (ed.), 8 Business and Commercial Litigation in Federal Courts, § 88:11, at 240 n. 1 (2d ed.2009 supp.) ("A majority of jurisdictions have adopted some formulation of the Uniform Trade Secrets Act.... The Uniform Act was intended to codify the basic principles of trade secret common law; therefore, legal analysis of a trade secret claim is essentially the same under the Act or the common law.”) (citations omitted).
The alternative formulation, contained in the Restatement (Third) of Unfair Competition, § 39 (1995), is similar for all material purposes. See Restatement § 39 (defining "trade secret” as "any information that can be used in the operation of a business or other enterprise and that is sufficiently valuable and secret to afford an actual or potential economic advantage over others.”).
. In full, the Uniform Trade Secrets Act § 1(4) provides: " 'Trade secret' means information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”
. To the extent that a trade secret even existed, it would appear that Quorum, not Alder-son, owned that trade secret. In the only authority on point, a New York state trial court held (in a thinly reasoned opinion) that a company’s auditor could be enjoined from disclosing information to the media about the company's "various improper payments to individuals in the United States.”
KLM Royal Dutch Airlines, N.V. v. deWit,
However, for the reasons discussed infra, this Court disagrees with the KLM Royal Dutch Airlines court’s conclusion that knowledge of wrongdoing may constitute a legally protectable trade secret.