The U.S. Court of Appeals for the Ninth Circuit has ruled to revive a decade-old qui tam complaint filed by a former Raytheon Co. engineer who claims Raytheon cheated on a $1 billion government contract from 14 years ago by billing for erroneous and incomplete work for sensors used on satellites.
Background of Raytheon, Mateski, and the NPOESS Project
By way of background, between 1994 and 2002, the National Oceanic and Atmospheric Administration (“NOAA”), Department of Defense, and NASA contracted with various companies to design and build the National Polar-Orbiting Operational Environmental Satellite System (“NPOESS”). Raytheon was one of the various companies that entered into a contract with aforementioned governmental entities. Raytheon contracted to design and build a Visible Infrared Imaging Radiometer Suite (“VIIRS”) sensor, which would ultimately be a part of the NPOESS.
The NPOESS project suffered from several delays and cost overruns from its inception. Beginning as early as 2003, VIIRS began to attract public attention as a source of the delays and cost overruns. A 2004 Government Accountability Office (“GAO”) report said virtually the same thing, as did a 2005 GAO statement. Likewise, a report from the Office of the Inspector General at the U.S. Department of Commerce also detailed to delays and cost overruns on the NPOESS project. The problems were also reported on by several news sources.
Mateski Files Qui Tam Complaint Alleging Raytheon had Violated the FCA
Steven Mateski, an engineer who worked at Raytheon from 1997 to 2006, was assigned to work on VIIRS in 2005. In June 2006, Mateski filed a qui tam complaint in federal district court alleging that Raytheon had violated the FCA. Mateski alleged that Raytheon had violated the FCA by failing to comply with numerous contractual requirements in the development of VIIRS, fraudulently covering up areas of noncompliance, and improperly billing the Government for erroneous and incomplete work.
U.S. Government Declines to Intervene in Mateski’s Qui Tam Suit
Six years after Mateski filed his initial qui tam complaint, the U.S. declined to exercise its right under the FCA to intervene in Mateski’s suit. Mateski subsequently filed a fourth amended qui tam complaint, which alleged that “[f]rom 2002 to at least 2012, Defendant [Raytheon] has knowingly submitted false NPOESS VIIRS claims for payment, whereby the United States Government has been induced to pay money that it would not have paid if Defendant [Raytheon] had disclosed the true defective nonconformances with the NPOESS VIIRS specifications and requirements.” As did the original qui tam complaint, the fourth amended qui tam complaint made numerous specific allegations, including: creation of false waivers; improper (and forged) signoffs certifying work performed; failure to rectify issues relating to electrostatic discharge; cross contamination of flight and non-flight quality materials; and use of prohibited materials such as tin plating.
Raytheon Successfully Moves to Dismiss Mateski’s Qui Tam Complaint
Raytheon responded by moving to dismiss Mateski’s fourth amended qui tam complaint for lack of subject matter jurisdiction. Raytheon argued that the suit was barred by the FCA on the grounds that the information set forth by Mateski was already known to the public (“public disclosure bar”).
The lower district court agreed with Raytheon’s position, dismissing Mateski’s claims for lack of subject matter jurisdiction. The court said:
[I]t was publicly known that there was rampant mismanagement, deviations from protocol, and other problems with VIIRS. . . . [W]hile the public disclosures d[id] not discuss the problems on the VIIRS program in the level of detail that Mateski does in his [Complaint], the allegations are nonetheless the same for the purposes of 31 U.S.C. § 3730(e)(4)(A).9th Circuit Reverses District Court’s Decision, Reviving Mateski’s Qui Tam Complaint
On appeal, by a 3-0 vote, the Ninth Circuit held that Mateski could pursue claims that Raytheon violated the federal False Claims Act (“FCA”) for at least a decade starting in 2002, overturning the district court’s decision.
The court’s opinion sets forth that Mateski’s disclosures were not “substantially similar” to prior publicly disclosed problems in developing the NPOESS. Specifically, the Ninth Circuit said, “If his allegations prove to be true, Mateski will undoubtedly have been one of those whistle-blowing insiders with genuinely valuable information, rather than an opportunistic plaintiff who has no significant information to contribute.”
The Ninth Circuit said that “[t]he public disclosure bar is intended to encourage suits by whistle-blowers with genuinely valuable information, while discouraging litigation by plaintiffs who have no significant information of their own to contribute.” The court also explained that “[t]he public disclosure bar is triggered if three things are true: (1) the disclosure at issue occurred through one of the channels specified in the statute; (2) the disclosure was ‘public’; and (3) the relator’s action is ‘based upon’ the allegations or transactions publicly disclosed.”
The Ninth Circuit held that Mateski’s disclosures amounted to disclosure of a “transaction” as defined by the statute, and that those disclosures were made publicly. Next, the court turned to the issue of “substantial similarity,” and what the appropriate level of generality is required to trigger the public disclosure bar. There, the court, borrowing from Seventh Circuit precedent, held that “we now reverse the district court’s dismissal of this case because Mateski’s Complaint alleges fraud that is different in kind and in degree from the previously disclosed information about VIIRS.” Or in other words, “[a]lthough prior public reports had described general problems with Raytheon’s work on VIIRS, none provided specific examples or the level of detail offered by Mateski.”
Finally, the Ninth Circuit rejected Raytheon’s claim that Mateski’s claims should be barred because his disclosures were “partly based upon” the prior public reports about VIIRS.” The court supported its conclusion by reasoning that “[b]ecause … none of Mateski’s allegations are ‘substantially similar’ to the prior public reports when viewed at the appropriate level of generality, the ‘partly based upon’ cases are of no assistance to Raytheon.”
Raytheon Confident it Will Prevail When Case Returns to Trial Court
Raytheon said in an e-mailed statement that it remains confident it will prevail again when the case returns to the trial court.
“Raytheon maintained an open and transparent relationship with the government throughout our development of this key global technology,” according to the statement. “The VIIRS sensor is deployed and is providing valuable weather forecasting capabilities.
Major Takeaways
The major takeaway from the Ninth Circuit’s opinion is that even if a relator’s disclosure is similar in kind to already available public disclosures, it may survive the public disclosure barred under the FCA if the disclosure “alleges fraud that is different in kind and in degree from the previously disclosed information[.]” Put differently, a relator’s statements may not be found to be “substantially similar” when viewed through the “appropriate level of generality.” The Ninth Circuit heeded the Seventh Circuit’s warning against reading qui tam complaints at only the “highest level of generality,” finding that Mateski’s qui tam complaint alleged several examples of fraud that were found nowhere in the publicly disclosed information about the NPOESS project, which allowed his claims to go forward.
Contact our Whistleblower Attorney Team Today
If your or someone you know has information regarding possible violations of the FCA, please contact our whistleblower attorney team for a consultation. Under the FCA, a relator is entitled to receive between 15 and 25 percent of the amount recovered by the government in a qui tam actiom. However, if the government does not intervene in a qui tam action, a relator is entitled to receive between 25 and 30 percent of whatever is recovered. If a qui tam action is successful, a relator is also entitled to legal fees and other expenses. The FCA also bars an employer from retaliating against an employee for disclosing possible misconduct, and provides a mechanism by which an employee may seek relief for any retaliation.
You can contact us via email at kporter@chrisjen.com, by phone at (801) 323-5000, or by filling out our online form.
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Copyright 2016