6.7 PRACTICE MATTERS PRECEDING SERVICE OF THE COMPLAINT
6.701 The Disclosure Statement. The service of a pre-filing memorandum on the government is one of the unique aspects of qui tam practice. The pre-filing disclosure statement is served on the government, but not on the defendant. The purpose of the disclosure statement is for the relator to disclose all known evidence and other information that supports his or her claims.
Although a disclosure statement is required by section 8.01-216.5(B) of the Virginia Code, the provision that requires the disclosure memorandum does not, on its face, require that the disclosure be served on the government before filing under seal. Rather, it merely requires "that the complaint and written disclosure of substantially all material evidence and information the person possesses shall be served on the Commonwealth."
The longstanding practice of serving the disclosure memorandum before filing under seal is, rather, a result of the "original source" requirement found in Section 8.01-216.8. That section requires that a court dismiss any qui tam action "if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed [in a long list of public forums, such as the news media] unless the action is brought by the Attorney General or the person bringing the action is an original source of the information."
6.702 The "Original Source" Exception to the Public Disclosure Bar. Section 8.01-216.8 of the Virginia Code defines an "original source" as follows:
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For purposes of this section, "original source" means an individual (i) who either prior to a public disclosure has voluntarily disclosed to the Commonwealth the information on which the allegations or transactions in a claim are based or (ii) 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 Commonwealth before filing an action under this article.
Given the extensive list of public forums in Section 8.01-216.8, it would be impossible for any relator and his or her lawyer to know for certain whether there has been a public disclosure of the information before filing the complaint under seal. Therefore it is always wise to protect a relator's position by serving a disclosure statement before filing under seal. The disclosure statement should be served by registered mail or other verified source.
The logic underlying the public disclosure bar is easy to understand. By precluding relators from relying on publicly available information, the government encourages real insiders to come forward and at the same time discourages profiteers from filing parasitic suits. Examples of parasitic suits could be qui tam actions based on information found in a newspaper article or a criminal indictment.
Nevertheless, a person who has read something in a newspaper—but who can still add important new evidence to what was publicly disclosed—can still bring a successful qui tam claim under the right circumstances. The Fourth Circuit provided an interesting and useful discussion of this principle in United States ex rel. Beauchamp v. Academi Training Ctr., LLC. 69 The opinion is also important because it demonstrates clearly that successful qui tam claims are based on highly specific information.
Beauchamp brought a qui tam claim against his former employer alleging that Academi submitted false claims to the State Department for security contractors who did not actually perform work for the State Department and for the purchase of equipment that was not used by the State Department. Beauchamp filed his original qui tam action under seal in April of 2011; later, in May of 2011, Beauchamp amended his complaint to include new allegations about the defendant's failure to train security personnel. His
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first amended complaint included detailed, very specific allegations that defendant had falsified training records for its employees in order to make them appear qualified to operate the M-240 and M-249 belt-fed machine gun systems. Qualification with these weapon systems was a requirement for all security personnel on the contract.
While Beauchamp's qui tam complaint was pending under seal, two other former Academi employees contacted relator's counsel with additional information about the scheme. Ultimately, these two individuals elected not to bring a qui tam case, although one of them—Robert Winston—did file a wrongful termination claim under the FCA's anti-retaliation provisions. The wrongful termination complaint in Winston v. Academi Training Center, Inc., 70 which was filed in July of 2012, also contained specific details about the State Department's contract with defendants, the weapons qualification testing requirements, and Academi's failure to conduct proper marksmanship testing. Notably, because Winston's complaint was not filed under the substantive qui tam provisions, it was not filed under seal. Because it was not filed under seal, it received a certain amount of press attention including an online article published by wired.com in July of 2012. By any measure, a publicly...
