No False Claim Where Relator Merely Analyzes or Interprets Publicly Available Data

The Massachusetts Superior Court recently held that a qui tam relator’s analysis of publicly available information was subject to the public disclosure bar and that, no matter how involved or expert that analysis was, the relator was not the original source of the information alleged in the complaint.  Thus, in Commonwealth ex rel. Johan Rosenberg v. JPMorgan Chase & Co., et al., SUCV2014-03323, Judge Kaplan, sitting in the Business Litigation Session, dismissed the complaint.  This decision has important implications for companies defending against False Claims Act allegations in Massachusetts state courts, which are now explicitly aligned with federal courts in barring complaints that merely analyze and interpret publicly available information.

In the JPMorgan Chase case, the relator alleged fraud and collusion among a number of banks in their capacities as remarketing agents (“RMAs”) for variable rate demand obligations (“VRDOs”), which are form of bond issued by the Commonwealth.  The alleged false statements concerned the RMAs’ failure “to actively and individually reset and remarket VRDOs at the lowest possible [interest] rates.”

As the bases for these allegations, the relator relied on sources that included rules of the Municipal Securities Rulemaking Board, model disclosures and indices from the Securities Industry and Financial Markets Association, remarketing agreements between the defendants and the Commonwealth, and official statements for each bond posted to the Electronic Municipal Market Access website.  He spent more than 1,000 hours on the forensic analysis, which ultimately included over five million data points and over 20,000 Committee on Uniform Securities Identifications Procedures.

While no doubt an extensive analysis, the Court was express about what was not included as the bases for the relator’s allegations—namely, anything non-public (and the Court rejected the relator’s contention that having to pay for access to certain information made it non-public).  Relying on a string of federal cases holding the same, the Court was clear: “The fact that the relator may have some specialized knowledge or background concerning the municipal bond industry and spent a thousand hours dissecting public information does not, in itself, allow him to file and prosecute a qui tam action.”

The decision underscores the “original source” requirement of the False Claims Act (both state and federal) that the relator sets forth allegations “prior to a public disclosure” or “has knowledge that is independent of and materially adds to the publicly-disclosed allegations or transactions.”  Where the relator in JPMorgan did nothing, there can be no actionable claim.

Going forward, companies defending against False Claims Act counts should parse the allegations closely for any indicators that the relator is relying on publicly available information or is otherwise not the original source.

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