Case: 20-20071 Document: 00515976898 Page: 1 Date Filed: 08/12/2021
United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
FILED
August 12, 2021
No. 20-20071 Lyle W. Cayce
Clerk
United States of America, ex rel., Stephanie Schweizer,
Plaintiff—Appellant,
versus
Canon, Incorporated; Canon Business Solutions,
Incorporated; Canon USA, Incorporated,
Defendants—Appellees.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:16-CV-582
Before Wiener, Elrod, and Higginson, Circuit Judges.
Stephen A. Higginson, Circuit Judge:
Stephanie Schweizer appeals the district court’s dismissal of her qui
tam claims under the False Claims Act (FCA), 31 U.S.C. §§ 3729–3733,
alleging that Canon1 overcharged the United States for office equipment and
provided non-compliant products. The district court dismissed Schweizer’s
1
Schweizer does not challenge the district court’s conclusion that Canon USA,
Inc.—a wholly owned subsidiary of Canon, Inc. and parent entity of Canon Business
Solutions Inc.—is the only defendant that was “served and has appeared” in this case.
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claims under the FCA’s public disclosure bar, id. § 3730(e)(4), because they
were based upon, or were substantially the same as, Schweizer’s prior FCA
suit which the government settled years earlier. We AFFIRM.
I. Background
The FCA imposes civil liability on any person who “knowingly
presents . . . a false or fraudulent claim for payment or approval,” or
“knowingly makes [or] uses . . . a false record or statement material to a false
or fraudulent claim.” 31 U.S.C. § 3729(a)(1)(A), (B). The FCA permits
private parties to enforce the statute by filing qui tam suits “in the name of
the Government,”
id. § 3730(b)(1), and incentivizes such whistleblower suits
by awarding a substantial share of the fraudulent payments that are
recovered, plus attorney’s fees and costs, id. § 3730(d).
However, the FCA limits the types of actions that private plaintiffs
can bring, including those for which the government is a party (the
“government action bar”2) or for which the allegations have already been
publicly disclosed (the “public disclosure bar”3). These limitations prevent
rewarding “parasitic” suits which “add nothing to the exposure of fraud.”
United States ex rel. Jamison v. McKesson Corp., 649 F.3d 322, 332 (5th Cir.
2011) (quoting United States ex rel. Reagan v. E. Tex. Med. Ctr. Reg’l
Healthcare Sys.,
384 F.3d 168, 174 (5th Cir. 2004)); see also Graham Cnty. Soil
& Water Conservation Dist. v. United States ex rel. Wilson,
559 U.S. 280, 294–
95 (2010) (describing Congress’ “effort to strike a balance between
encouraging private persons to root out fraud and stifling parasitic
2
“In no event may a person bring an action . . . which is based upon allegations or
transactions which are the subject of a civil suit . . . in which the Government is already a
party.” 31 U.S.C. § 3730(e)(3).
3
31 U.S.C. § 3730(e)(4). See Part III, infra.
2
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lawsuits”). At issue in this appeal is whether Schweizer’s claims against
Canon are barred by these limitations.
Schweizer filed her first FCA suit in 2006 against Océ North America
Inc. Océ sold printers, copiers, and related services to the government.
Schweizer worked as a General Services Administration (GSA) contracts
manager for Océ from November 2004 until her termination in December
2005. In that role, Schweizer alleged that she noticed “irregularities,”
including that the United States was overpaying Océ for copiers and services,
and that its products were manufactured in non-compliant countries
including China. After Schweizer tried to correct these and other noncompliance problems, Océ fired her.
Schweizer then sued Océ in the District Court for the District of
Columbia asserting FCA claims for (1) violating the contract’s “Price
Reductions Clause” because it overcharged the government for the same
products it sold to non-government customers; and (2) violating the Trade
Agreements Act (TAA) by selling products that were made in China and
other non-TAA-compliant countries.4
The government intervened and, over Schweizer’s objections, settled
the qui tam claims with Océ in 2009. Océ agreed to pay the government
$1,200,000 in exchange for release of the asserted FCA claims from April 1,
2001, to December 31, 2008.5 In 2013, the district court approved the
4
See United States ex rel. Schweizer v. Océ, N.V. et al., No. 1:06-cv-648-RCL
(D.D.C. Apr. 7, 2006). Schweizer also asserted claims for wrongful retaliation under 31
U.S.C. § 3730(h).
5
The settlement agreement’s “Covered Conduct” further specified that it
included the fraud claims arising from the three contracts Schweizer asserted in her
complaint against Océ, including the GS-25F-0060M (“60M”) contract. The agreement
also awarded 19% of the settlement amount, or $228,000, to be split between Schweizer
and her co-plaintiff as the qui tam relators.
3
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settlement and dismissed the qui tam claims against Océ.6 Prior to the Océ
action becoming final, Canon acquired Océ in 2012.
On January 5, 2016, Schweizer subsequently commenced this
action—her second FCA suit—alleging that Canon fraudulently
overcharged the government for printers, copiers, and other office
equipment, and that such products were produced in non-compliant
countries. Schweizer alleges that Canon, after it acquired Océ, continued the
fraud by (1) violating its contracts’ Price Reduction Clauses, and (2)
providing non-TAA compliant products that were manufactured in China
and other non-designated countries, in violation of the FCA, 31 U.S.C.
§ 3729(a)(1).7
Specifically, Schweizer asserts that Canon violated the terms of the
same GSA contracts alleged in her first FCA suit which Schweizer says
Canon novated after acquiring Océ, and also violated the same Price
Reduction and TAA clauses in additional contracts. For example, Schweizer
asserts that Canon novated, and continued to violate, the GS-25F-0060M
(“60M”) contract, which Schweizer asserted in her first FCA suit against
Océ, and for which the government specifically settled in 2009. She alleges
that Canon continued the fraudulent scheme “between January 2010 and
January 2016,” which includes both before and after Canon acquired Océ in
2012, and after the government settled the prior Océ action for claims
6
United States ex rel. Schweizer v. Océ N. Am., 956 F. Supp. 2d 1, 3 (D.D.C. 2013).
At first, the district court erroneously granted the settlement without conducting the
requisite fairness hearing under § 3730(c)(2)(B). See United States ex rel. Schweizer v. Océ
N.V.,
677 F.3d 1228, 1237, 1241 (D.C. Cir. 2012), rev’g
681 F. Supp. 2d 64 (D.D.C. 2010),
and rev’g
772 F. Supp. 2d 174 (D.D.C. 2011).
7
As she alleged in her complaint against Océ, Schweizer also alleges that Canon
conspired to defraud the government by making false or fraudulent claims for payment in
violation of 31 U.S.C. § 3729(a)(1)(C).
4
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between April 1, 2001, to December 31, 2008. Though Schweizer was no
longer employed with Océ or Canon since her termination in 2005, she claims
to have “reviewed the modification history of the GSA Contracts involved
here,” and based on “conversations with several Océ employees” and
“information and belief,” the production “either continued in the Océ
facilities in China and Malaysia, or were moved to the manufacturing
facilities that Canon already owned in China.”
The government declined to formally intervene in Schweizer’s
second FCA suit. Canon moved to dismiss the complaint, asserting that
Schweizer’s claims were barred by the government action and public
disclosure bars, and alternatively failed to allege fraud with particularity
under Federal Rules of Civil Procedure 12(b)(6) and 9(b). Schweizer
opposed the motion in full, and the United States filed a statement of interest
in opposition as to Canon’s interpretation of the government action bar, but
noted that “[t]he United States takes no position on any other aspect of
Canon’s Motion.”
Following further summary judgment briefing, the magistrate judge
recommended dismissing the claims because, based on the prior Océ
litigation and settlement, both the government action and public disclosure
bars applied to Schweizer’s claims against Canon. Both the United States
and Schweizer timely objected. The United States, as in its prior statement,
objected only to the government action bar, but took “no position on the
Magistrate Judge’s Memorandum and Recommendation as it relates to the
FCA’s public disclosure bar, 31 U.S.C. § 3730(e)(4), an alternative grounds
for dismissal of relator’s case.” Schweizer objected to both grounds for
dismissal.
The district judge adopted in part the magistrate judge’s
recommendation that Schweizer’s claims were publicly disclosed and
5
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therefore barred Schweizer’s complaint against Canon. However, the
district judge declined to reach whether the government action bar applied,
overruling that portion of the recommendation. The district judge also
denied Schweizer’s subsequent Rule 59(e) motion for reconsideration. This
appeal timely followed.
II. Standard of Review
We review motions for summary judgment de novo. United States ex
rel. Jamison v. McKesson Corp., 649 F.3d 322, 326 (5th Cir. 2011). A challenge
under the FCA’s public disclosure bar “is necessarily intertwined with the
merits and is, therefore, properly treated as a motion for summary
judgment.”
Id. (internal quotation marks and citation omitted). Summary
judgment is appropriate “if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a).
III. Discussion
The primary issue on appeal is whether Schweizer’s claims against
Canon were barred by the FCA’s public-disclosure provision. The current
version of the FCA’s public disclosure bar states:
(A) The court shall dismiss an action or claim under this
section, unless opposed by the Government, if substantially the
same allegations or transactions as alleged in the action or claim
were publicly disclosed--
(i) in a Federal criminal, civil, or administrative hearing
in which the Government or its agent is a party;
(ii) in a congressional, Government Accountability
Office, or other Federal report, hearing, audit, or
investigation; or
(iii) from the news media,
6
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unless the action is brought by the Attorney General or the
person bringing the action is an original source of the
information.
(B) For purposes of this paragraph, “original source” means
an individual who either (i) prior to a public disclosure under
subsection (e)(4)(a), has voluntarily disclosed to the
Government the information on which allegations or
transactions in a claim are based, or (2) [sic] who has
knowledge that is independent of and materially adds to the
publicly disclosed allegations or transactions, and who has
voluntarily provided the information to the Government before
filing an action under this section.
31 U.S.C. § 3730(e)(4) (2010).8
As a threshold matter, Schweizer argues that the public disclosure bar
cannot apply because the government objected to dismissal of Schweizer’s
claims, and thus was “opposed by the Government.” Id. § 3730(e)(4)(A).
8
This version of the public disclosure bar resulted from an amendment that
became effective on July 22, 2010. See Patient Protection and Affordable Care Act, Pub. L.
No. 111–148, 124 Stat. 119, 901, § 10104(j)(2) (Mar. 23, 2010); see also Jamison,
649 F.3d at
326 n.6. Relevant here, the prior version of the public disclosure bar applied only where
the subsequent action was “based upon the public disclosure of allegations or transactions,”
§ 3730(e)(4)(A) (2006) (emphasis added), rather than being “substantially the same
allegations or transactions,” § 3730(e)(4)(A) (2010) (emphasis added). The parties state
that this change is immaterial to resolving the present case, and we therefore need not
decide whether the amendment materially alters our public-disclosure analysis. Compare,
e.g., United States ex rel. Reed v. KeyPoint Gov’t Sols.,
923 F.3d 729, 743–44 (10th Cir. 2019)
(concluding that the amended language is consistent with the court’s prior application of
the public disclosure bar and “confirms the vitality of our pre-2010 standard”), and
id. at
744 n.6 (citing cases), with United States ex rel. May v. Purdue Pharma L.P.,
737 F.3d 908,
917 (4th Cir. 2013) (previously interpreting “based upon” to mean “that the plaintiff must
have ‘actually derived’ his knowledge of the fraud from the public disclosure,” but
concluding that “[a]s amended, however, the public-disclosure bar no longer requires
actual knowledge of the public disclosure, [and] instead applies ‘if substantially the same
allegations or transactions were publicly disclosed’” (quoting
31 U.S.C. § 3730(e)(4)(A)
(2010))). Moreover, our conclusion is the same under either version.
7
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Not so. Both of the government’s filings below expressly stated that it
opposed only the government action bar and that it took no position as to
dismissal of Schweizer’s claims under the public disclosure bar. Moreover,
as Schweizer concedes, she “has not located caselaw”—and we have
likewise found none—to support her novel interpretation that any
opposition, no matter how limited, forecloses dismissal under the public
disclosure bar.
As to whether Schweizer’s claims are barred under the FCA’s public-disclosure provision, this court traditionally applies “a three-part test, asking
‘1) whether there has been a “public disclosure” of allegations or
transactions, 2) whether the qui tam action is “based upon” such publicly
disclosed allegations, and 3) if so, whether the relator is the “original source”
of the information.’” Jamison, 649 F.3d at 327 (quoting Fed. Recovery Servs.,
Inc. v. United States,
72 F.3d 447, 450 (5th Cir. 1995)). “[C]ombining the
first two steps can be useful, because it allows the scope of the relator’s action
in step two to define the ‘allegations or transactions’ that must be publicly
disclosed in step one.” Id.9
We have previously applied the FCA’s public disclosure bar when “a
qui tam action is ‘even partly based upon public allegations or transactions’
. . . . Even if [the relator] uncovered some nuggets of new, i.e., non-public,
information, [the relator’s] claims of fraud are based at least in part on
allegations already publicly disclosed.” United States ex rel. Fried v. W. Indep.
Sch. Dist., 527 F.3d 439, 442 (5th Cir. 2008) (quoting United States ex rel. Fed.
9
On appeal, Schweizer no longer argues that she is an “original source,” and has
therefore abandoned that argument. Cinel v. Connick, 15 F.3d 1338, 1345 (5th Cir. 1994)
(“An appellant abandons all issues not raised and argued in its initial brief on appeal.”).
Thus, if Schweizer’s claims against Canon were publicly disclosed through the Océ
litigation, they are barred.
8
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Recovery Servs., Inc. v. E.M.S., Inc., 72 F.3d 447, 451 (5th Cir. 1995)). We
have also emphasized that “[a] guiding query is whether ‘one could have
produced the substance of the complaint merely by synthesizing the public
disclosures’ description’ of a scheme.” Little v. Shell Expl. & Prod. Co.,
690
F.3d 282, 293 (5th Cir. 2012) (quoting Jamison,
649 F.3d at 331).
When considering whether a relator’s action is “based upon” publicly
disclosed allegations or transactions, this court applies a two-part burden-shifting approach. First, the “defendants must first point to documents
plausibly containing allegations or transactions on which [relator’s]
complaint is based.” Jamison, 649 F.3d. at 327. Second, “to survive
summary judgment, [the relator] must produce evidence sufficient to show
that there is a genuine issue of material fact as to whether [her] action was
based on those public disclosures.”
Id. (citing Celotex Corp. v. Catrett,
477
U.S. 317, 324 (1986)).10
Before the district court, Canon pointed to documents from the Océ
litigation, including the operative Océ complaint, the district court’s 2013
order approving the Océ settlement, and news articles reporting on the
litigation. Schweizer does not challenge that these documents constitute
“public disclosures” under the statute, which include disclosures made in
either “a Federal . . . civil . . . hearing in which the Government or its agent
is a party” or “the news media.” 31 U.S.C. § 3730(e)(4)(A)(i), (iii).
We agree with both the magistrate and district judges below that
Canon satisfied its burden of showing that Schweizer’s allegations against
Canon are “based upon” the allegations and transactions asserted in the Océ
10
While Schweizer appeals the district court’s application of this burden-shifting
framework, neither party disputes that it is the proper framework for considering whether
Schweizer’s claims were publicly disclosed here.
9
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litigation. Schweizer asserts that Canon committed the same fraudulent
scheme she alleged against Océ. At least one of the contracts asserted (and
settled) against Océ—the “60M” contract—is the identical contract
asserted in her suit against Canon. Moreover, her complaint against Canon
draws largely, if not exclusively, from her complaint against Océ. At oral
argument, Schweizer’s counsel conceded that her FCA claims against Canon
involve the “same contracts” and the “same scheme” asserted in the Océ
litigation.11
Thus, the allegations against Canon are more than “even partly based
upon” the Océ allegations or transactions, Fried, 527 F.3d at 442 (internal
quotation marks and citation omitted), and “one could have produced the
substance of the [Canon] complaint merely by synthesizing the public
disclosures’ description of the [Océ] scheme,” Jamison,
649 F.3d at 331.
We next consider whether, to survive summary judgment, Schweizer
“produce[d] evidence sufficient to show that there is a genuine issue of
material fact as to whether [her] action was based on those public
disclosures.” Id. at 327. She has not.
Schweizer primarily argues that her FCA claims against Canon are not
barred because Canon is a different entity from Océ, and that it perpetuated
the fraud over a later time period and with additional contracts. In support,
she points to the Océ settlement agreement, which agreed only to settle
claims against Océ between April 2001 to December 2008; a 5-pargraph
declaration describing her role as the relator in the Océ litigation; and the
allegations in her operative complaint against Canon describing Canon’s
novation of Océ’s contracts and subsequent entry into additional contracts.
11
Schweizer’s counsel also conceded that Schweizer only broadly alleges that
Canon, like Océ, failed to comply with its government contracts.
10
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But none of this creates a genuine issue of material fact that
Schweizer’s complaint against Canon was “based upon,” or is “substantially
the same” as, the Océ litigation. Nor do allegations that Canon violated
additional GSA contracts establish otherwise. See United States ex rel.
Colquitt v. Abbott Lab’ys, 858 F.3d 365, 374 (5th Cir. 2017) (“[C]ontributing
more of the same does not change the public character of a relator’s
allegations: [Relator] ‘cannot avoid the [public disclosure] bar simply by
adding other claims that are substantively identical to those previously
disclosed.’” (quoting Fed. Recovery Servs., Inc. v. United States,
72 F.3d 447,
451 (5th Cir. 1995))); see also Jamison,
649 F.3d at 329 (noting that public
disclosures may be “sufficient” if they “‘set the government on the trail of
the fraud’ and ensure that the government will not ‘need to comb through
myriad transactions performed by various types of entities in search of
potential fraud’” (quoting In re Nat. Gas Royalties,
562 F.3d 1032, 1042–43
(10th Cir. 2009))).12
Schweizer alternatively argues that because Canon allegedly
“restarted” the fraudulent scheme, her second FCA suit “exposes a
different wrongful scheme that does not implicate the Public Disclosure
Bar.” For this point, Schweizer relies primarily on the Sixth Circuit’s
12
We also reject Schweizer’s argument that the district court erred by applying the
incorrect summary judgment standard under Jamison. The district court twice rejected
this argument, which Schweizer fails to address in her briefing let alone identify any error
on appeal. See Brinkmann v. Dallas Cnty. Deputy Sheriff Abner, 813 F.2d 744, 748 (5th Cir.
1987) (failure to identify an error in the district court’s order “is the same as if [appellant]
had not appealed that judgment”). Schweizer’s alternative argument that she was “denied
discovery” is also belied by the record: she conceded before the district court that discovery
was only necessary “to oppos[e] Canon’s motion as to the sufficiency of the pleadings,”
but that “the public-disclosure-bar and government-action-bar issues are ripe for resolution
at this time under Rule 56,” and her Rule 56(d) discovery motion was denied without
prejudice to renewal.
11
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decision in United States ex rel. Ibanez v. Bristol-Myers Squibb Co., 874 F.3d
905 (6th Cir. 2017).
In Ibanez, the relator-plaintiffs filed suit against two pharmaceutical
companies asserting FCA claims arising from their off-label promotion, and
related kickback scheme, of the antipsychotic drug Abilify. Ibanez, 874 F.3d
at 911–12. Several years earlier, the pharmaceutical companies had settled
“nearly identical allegations” and, as part of their settlements, entered into
five-year Corporate Integrity Agreements requiring them to “ensure
compliance with the FCA, the Anti-Kickback Statute, and cease off-label
promotion of Abilify.” Id. at 912. The relators—both former sales
representatives employed from 2005 to 2010—asserted that despite these
agreements in 2007 and 2008, the defendants “continued to promote Abilify
off-label and offer kickbacks to physicians who prescribed it.”
Id. The
district court dismissed the allegations under, inter alia, the public disclosure
bar because the “relators’ alleged scheme ‘closely track[s]’ the preagreement promotion scheme.”
Id. at 919 (alteration in original).
The Sixth Circuit reversed, noting that “it was error for the court to
hold that this resemblance alone called for dismissal under the public
disclosure bar.” Id. The court emphasized that “allegations that the scheme
either continued despite the agreements or was restarted after the
agreements are different.”
Id. Thus, the court concluded, “to the extent
that relators are able to describe with particularity post-agreement, improper
promotion of Abilify, the mere resemblance of those allegations to a scheme
resolved years earlier is not by itself enough to trigger the public disclosure
bar.”
Id. However, the court cautioned that its reasoning was applicable
“only to the extent that the new allegations are temporally distant from the
previously resolved conduct.”
Id. at 919 n.4.
12
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As both the magistrate judge and district judge concluded, Ibanez is
readily distinguishable. To start, Schweizer’s claims are not “temporally
distant”: the government settled with Océ in 2009 for claims spanning 2001
through 2008, and Schweizer’s claims against Canon begin the following year
in 2010. Moreover, Schweizer fails to describe with “particularity” any postsettlement fraud other than Canon’s novation of Océ’s prior contracts or
generalized allegations that Canon violated the same terms of similar, and in
at least one case, identical, contracts. See id. at 919. As the district court
emphasized, Schweizer “failed to bring forward summary judgment
evidence detailing Canon’s alleged fraudulent scheme and its scope to even
permit the [c]ourt to draw an inference of a new or continued fraud.” 13
…
For the foregoing reasons, the district court’s summary judgment
order is AFFIRMED. 14
13
Notably, too, the Ibanez relators were still employed at the defendant
pharmaceutical companies from 2005–2010, which spanned the companies’ 2007 and
2008 entry into compliance agreements as well as the alleged continued violations of the
off-label promotions scheme between 2005 and 2015. Ibanez, 874 F.3d at 911–12. By
contrast, Schweizer was only employed at Océ until 2005, well before the government
settled the FCA claims against Océ.
14
Because we affirm the dismissal of Schweizer’s claims under the public
disclosure bar, we need not reach the parties’ alternative arguments regarding the
government action bar or adequacy of the pleadings.
13
