John C. Prather, on behalf of himself and the United States of America, and the several states of California, Delaware, Florida, Illinois, Indiana, Massachusetts, Nevada, New Hampshire, New Jersey, New Mexico, New York, Rhode Island, Virginia, as well as the District of Columbia, Plaintiff-Appellant,
AT&T, Inc.; Cellco Partnership, dba Verizon Communications; Qwest Communications International, Inc.; Sprint Nextel Corp., Defendants-Appellees.
and Submitted September 14, 2016 San Francisco, California
from the United States District Court for the Northern
District of California No. 3:09-cv-02457-CRB, Charles R.
Breyer, District Judge, Presiding
G. Balestriere (argued) and Jillian L. McNeil, Balestriere
Fariello, New York, New York, for Plaintiff-Appellant.
E. Haddad (argued), Collin Wedel (argued), and Douglas A.
Axel, Sidley Austin LLP, Los Angeles, California, for
K. Lin, Jonathan H. Blavin, and Jerome C. Roth, Munger Tolles
& Olson LLP, San Francisco, California, for
Defendant-Appellee Cellco Partnership.
M. Roos, Kathleen M. Sullivan, and David F. Taylor, Perkins
Coie LLP, Seattle, Washington, for Defendants-
Appellees Sprint Nextel Corp. and Qwest Communications
Benjamin M. Stoll and Edward C. Barnidge, Williams &
Connolly LLP, Washington, D.C., for Defendant-Appellee Sprint
Before: Ronald M. Gould and Marsha S. Berzon, Circuit Judges,
and William K. Sessions III, [*] District Judge.
panel affirmed the district court's dismissal for lack of
subject matter jurisdiction of a qui tam action,
under the False Claims Act, brought by a longtime prosecutor,
alleging that the largest telecommunications companies in the
United States were fraudulently overcharging the federal
government for surveillance services.
public disclosure bar of the False Claims Act provides that
once allegations of fraud have entered the public domain, a
person may not bring a quit tam action unless he can
prove that he was on original source of those allegations.
panel held that the district court properly determined that
the 2010 Amendments to the False Claims Act, which
transformed the public disclosure bar from a jurisdictional
bar to an affirmative defense, did not apply to the
plaintiff's action, brought in 2009, because the
Amendments impacted the substantive rights of parties and
substantive changes are not applied retroactively.
panel held that plaintiff was not an "original
source" of the information. The panel agreed with the
district court's conclusion that plaintiff did not have
direct knowledge of fraud sufficient to qualify as an
"original source." The panel also held that
plaintiff's submissions to the Federal Communications
Commission were not "voluntarily provided" as
required by the statute, 31 U.S.C. § 3730(e)(4)(B).
panel held that the district court properly concluded it had
no discretion to exercise supplemental jurisdiction over
plaintiff's state law claims.
SESSIONS, District Judge:
Prather, a longtime state prosecutor, brought a qui
tam action alleging that the largest telecommunications
("telecom") companies in the United States were
fraudulently overcharging the federal government for
surveillance services. The district court dismissed
Prather's action under the False Claims Act's
("FCA") public disclosure bar, which states that
once allegations of fraud have entered the public domain a
person may not bring a qui tam action unless he can
prove that he was an original source of those allegations.
See 31 U.S.C. § 3730(e)(4) (2006). For the
reasons set forth below, we agree that Prather did not
qualify as an original source and affirm.
served as an attorney in state government for over thirty
years. He began his service as an Assistant Attorney General
in his native state of North Carolina, then moved to New York
and joined the office of the Manhattan District Attorney. In
1989 he became the Deputy Chief of the Frauds Bureau in that
office, and in 1992 was appointed Senior Investigative
Counsel in the Rackets Bureau. He joined the New York Office
of the Attorney General ("NYOAG") in 1999. From
2002 to 2008, Prather served as the Deputy Attorney General
in charge of the NYOAG's Organized Crime Task Force
("OCTF"). When he initiated this qui tam
action, he was serving as the Deputy Inspector General for
Investigation in the Metropolitan Transportation Authority,
Office of the Inspector General.
his many years as a government attorney, Prather supervised
hundreds of wiretaps. The OCTF alone conducted over 200
wiretaps per year. As head of the OCTF, Prather was
authorized to determine when it was necessary to seek court
permission to use wiretaps, and to personally apply for
eavesdropping warrants. He also reviewed telecom
companies' rate sheets and developed surveillance
the mid-1990s, most wiretaps required the manual
"bugging" of a phone or phone line. To bug a phone
line, law enforcement would either physically attach a device
to the phone wire or place a bug inside the phone itself. The
phone company would then set up a separate line into which
law enforcement could dial and listen to the conversations
taking place over the bugged line. The separate line was
essentially the same as any other business or residential
phone line provided by the phone company.
the emergence of cellular phones, this method of bugging
telephones was no longer effective. In 1994, Congress passed
the Communications Assistance to Law Enforcement Agencies Act
("CALEA"), authorizing the payment of $500 million
to telecom companies for investment in the hardware and
software necessary to maintain law enforcement's ability
to effectively eavesdrop despite technological developments
in telecommunications. See 47 U.S.C. §
1001-1010. Prather alleges that as a result of these
upgrades, phone companies can now, "by a simple flick of
a switch, " duplicate and forward to law enforcement
both a call's audio content and its associated
information, such as caller identification. ER 188.
the government is required to pay the telecom companies for
their assistance with eavesdropping procedures. The Omnibus
Crime Control and Safe Streets Act of 1968
("OCCSSA"), as amended, requires phone carriers to
"furnish the applicant [requesting eavesdropping]
forthwith all information, facilities, and technical
assistance necessary to accomplish the interception
unobtrusively and with a minimum of interference with the
services that such provider . . . is according the person
whose communications are to be intercepted." 18 U.S.C.
§ 2518(4). In turn, law enforcement must compensate
carriers for the "reasonable expenses incurred in
providing such facilities or assistance." Id.
OCCSSA does not define "reasonable expenses." Nor
does the more-recently enacted CALEA reference the
reimbursement provision in the OCCSSA. In 2002, the Federal
Communications Commission ("FCC") issued an Order
and Final Rule stating that "carriers can recover at
least a portion of their CALEA software and hardware costs by
charging to [law enforcement agencies], for each electronic
surveillance order authorized by the CALEA, a fee that
includes recovery of capital costs, as well as recovery of
the specific costs ...