By: Laura N. Begun
This week, Appellant Cause of Action filed a reply brief in Cause of Action v. Chicago Transit Authority, pending in the United States Court of Appeals for the Seventh Circuit.
This case arises from Cause of Action’s investigation into CTA’s long-standing practice of misreporting data used by the Federal Transit Administration to allocate federal grant funds. Cause of Action’s investigation revealed that CTA’s potentially fraudulent reporting from 1982 to 2011 allowed CTA to pocket up to $150 million in undeserved taxpayer dollars. Adding insult to injury, federal officials knew about CTA’s misreporting, yet continued to allow CTA to receive unearned grant funds year after year.
Cause of Action filed suit on behalf of taxpayers pursuant to the False Claims Act (“FCA”), which allows private citizens to sue based on fraud against the federal government. However, the lower court dismissed the case on procedural grounds, finding that the Seventh Circuit’s interpretation of the FCA prevented Cause of Action from the opportunity to prove that CTA committed fraud.
The FCA provides that a case cannot proceed if the lawsuit’s allegations are substantially the same as information that has already been publicly disclosed in a government audit, report, hearing or investigation. Cause of Action disputes that there has been a public disclosure of the information in its complaint. The documents at issue are a state audit report, a private memorandum provided to government officials, and a private letter from the Federal Transit Administration to CTA, and none contain information about a potential fraud.
On appeal, Cause of Action is asking the Seventh Circuit to overturn its interpretation of the FCA’s public disclosure bar, which allows a defendant like CTA to escape liability for knowingly submitting a false claim for federal funds if a responsible government official knew about the wrongdoing, yet did nothing to disallow the claim.
The Seventh Circuit’s interpretation improperly equates a disclosure to the government as a disclosure to the public, contrary to the plain language of the FCA and Congressional intent. This interpretation also contradicts the approach followed by a majority of circuit courts, which require a disclosure of potential fraud to the public at large.
Cause of Action requested oral argument, which the Court could schedule later this summer.