Legal Case Summary

The next case, a nice, safe, department of transportation versus CMC engineering. Mr. Pashinsky? No, Mr. Scarborough. Mr. Scarborough from the Department of Justice for the United States. The Court granted special leave for Amicus to appear at the oral argument and we appreciate that. This case involves allegations that various defendants violated the False Claims Act by falsifying their credentials and bribing officials at the Pennsylvania Department of Transportation in order to obtain federal highway funds. The District Court held that the complaint failed to state a claim under the False Claims Act because it believed that the false claims submitted to the Penn Dott had no economic impact on the federal government, even though it's undisputed in this case, that 80% of the funding on these projects that are an issue comes from the federal government. The District Court based this holding on its belief that the federal highway administration, which provides these funds, provides them to Penn Dott in a block grant, rather than reimbursing Penn Dott after contractors submit claims to Penn Dott. What happens if the funding is already made, isn't it? The federal government has given Penn Dott X number of dollars and then the claim is submitted to Penn Dott. No, Your Honor, that's the misapprehensive that the District Court was operating. The funds under the scheme, and I've gone at great lengths to sort of understand this with our federal highway program, people, the scheme obligates certain funds, funds are sort of allocated out to various states, and then projects are sort of certified and funds are obligated. There's a pool created. No money actually changes hands to the Penn Dott at that point, but Penn Dott essentially has sort of a line of credit that they can draw upon at that point. Then when claims are submitted by contractors on those projects, to Penn Dott, Penn Dott turns around and submits electronic requests for reimbursement to the federal highway administration on a weekly or monthly basis, and in those electronic requests repayments certifies that all applicable state and federal laws are submitted. So the federal government gets to review each of those claims presented. I don't mean to overstate the level of review that the federal government obviously there's thousands of claims submitted in sort of bulk packaging, but there is a general certification made by Penn Dott that applicable state and federal laws are being complied with. Certainly, prohibitions against bribery, conflict of interest, those sorts of things, the kinds of violations that are alleged in the complaint. All right, so the state agency has rules that it applies and determines whether the claim is legitimate or not. Well, they're not just state agency rules, they're also federal rules. The federal government obviously is not going to reimburse contractors or reimbursement states, but the state government's in the captain's chair as far as the claims are concerned. As an initial matter, yes, Your Honor, but the state does turn around and pass the claims back on up the chain to the federal government, and that's what Alison Engin, we now need to see the federal government engage any review process of the claims? Again, it's difficult to say as a categorical matter that the federal government goes over these with a fine-toothed comb, but there is auditing periodically. And it's one of these situations where when you begin to see problems, the auditing becomes more serious

. You look at the claims more closely. But in any right, the friends are not released from the federal government until the claim is presented. That's correct. And that's why we say that as a factual matter, this case states a claim under the Alison Engin standard in the sense that the claims are submitted from Pendat to the federal government. They are requesting payment or approval of the claim as, you know, the Alison Engin case now as explained in the book. Let me just ask you a question about the federal government's position on this case. And I understand the federal claims statute, but at first you indicated some entity of the federal government, I don't know if it's your division or not, said you were not going to intervene in the case. You then submitted two statements of interest. The second statement of interest finally clarified the funding strength, explaining the situation, explained. But in that statement of interest, you said you take no position on the case, as to how the case was disposed of by the district court. Well, you took no position on the merits of the motion that was before the district court. Well, and that's sort of standard in it. Okay, that's standard. Okay. Now, you're here as an amicus. You're here as an amicus. Has your position on this case changed since out the Supreme Court's decision and Alison Engin? Well, I mean, the first part of the argument in our green grief that we filed with this court has been superseded by Alison Engin. Alison Engin, we lost in the Supreme Court. We lost it. Our initial position was that the timing of the way the funder just figured it out. I guess my point here arguing much more vigorously than what the federal government was doing with this case when it was before Judge Lancaster. Well, let me explain. I guess I'm asking you to explain why

. Sure. I will explain why because Alison Engin is an important decision and clarifying the standards by which you can continue to have false claims act liability in situations where there is a federal grantee. The State Transportation Agency here administering federal funds is a very important issue to the federal government post Alison Engin. And the most important thing about this case is that as a factual matter, the federal highway funding scheme operates in a way that you can make sufficient allegations that a defendant who bribes that entity or submits, you know, false credentials to that entity intends to get a false claim paid or approved by the government as required by Alison Engin. It doesn't make it harder. I'm not sure that it doesn't make it harder, Your Honor, where the normal operation of the scheme is that the gatekeeper to the federal government funds, the pendats of the world, turns around and submits the claims to the federal government. That's what the Supreme Court was concerned with in Alison Engin, that there be some sort of passing the claim forward. And what the Supreme Court was concerned with there is limiting the false claims act liability of the initial person dealing with the pendats of the world to the natural, ordinary and probable consequences of its fraud. Now in a program that is undisputed, where 80% of the money comes from the federal government and the normal operation of the program is that pendats turns around and electronically goes to the federal government and says, give me money, it's sort of the natural, ordinary, probable consequences. Yes, you can be on the hook when you commit fraud that the government cares about, obviously, private. Does it matter that the party is involved in Alison, where private individuals are supposed to hear or to government agency? No, I don't think so at all. No consequence whatsoever. What matters is what the Supreme Court was concerned about is the person who is unwittingly dealing with an entity that gets some amount of money from the federal government. Now if you see there are a lot of people standing in line and far more today than there were three months ago saying, give me money. Okay, and the federal government's hand and I lot more money today than they were three or four months ago. Absolutely. But the issue here is whether or not when Congress passed the False Claims Act, they intended grantees of the federal government under circumstances such as this to be able to use the False Claims Act. I'm actually the issue here. Absolutely, that is the issue and that's why we're here because this is this sort of funding issue, the way the funding mechanism works at the back end has become a much more critical issue after Alison engine. And we want to make sure that the court, you know, whether it affirms or reverses in this particular case based on the pleadings, what we want to make sure is the court doesn't say anything categorical about it. Does this case does Alice, does the Supreme Court decision in Alison engine, which obviously came after Judge Lancaster's decision in Arnold? Does that decision in and of itself require us to send this case back to have the district court analyze the motion to dismiss under the Alison engine analysis? I think that would be the preferable result here on because it does Alison engine require that. I'm not sure that Alison engine requires that. It's notable that the Supreme Court in Alison engine did remand for further proceedings consistent with its opinion

. I mean, there was Alison engine in the Sixth Circuit. There was the Totten case in the DC Circuit. There was a circuit split. It's been a state of confusion basically on how much you have to allege, you know, how the federal funds are distributed to the federal grantee. There's been a big dispute in the circuit. It's a lot of litigation about that. So I think the preferable course, yes, now that we know what Alison engine requires to be alleged would be to send this case back. I'm sure you're going to hear from Defense Council that that's, you know, the Third, Fourth, or Fifth, by the way. However, there is significant intervening case law and, you know, to some extent it seems justified to send it back and sort of have a clean slate. What we care about and why we're here and, you know, wanted to participate in the argument is that a message from a ferning this case might be construed by the Defense Bar or other entities as well because of the way the funding scheme works in the federal highway funding funding situation. You know, you can defraud the pendats of the world with impunity without facing false claims act liability. That is simply not right, even under Alison engine because there is a representment of claims to the government. And we want to make absolutely clear the court understands that's the way the funding scheme works. So, Mr. Scarborough, when the Supreme Court says that a plaintiff must prove that the defendant intended that the false statement would be material to the government's decision to pay the claim, when Judge Elena Castro says the statement has to be presented to the federal government. This decision says, pendat is okay if the intent is at the federal government pay the claim. I'm sorry, pendat, pendat is not. Well, Judge Elena Castro said that the claim has to be presented directly to the federal government. Well, is it? That's why I was saying that. I think he was focused on the economic impact of the federal government and his theory of the case, if I may be so bold, was that the funds here have already been given in a block grant. And that's why we said in our statement and interest below and again here, that's not right. They've been obligated but they haven't been given. The money had already been paid

. I think that was his view. That seemed to be his view. And that's not the way the scheme operates. And you can tell that he was resisting the government coming in. He was basically saying, accusing the government of coming in too late with this information. If the payment had not already been made, it would have been all right to make the presentment of the claim to the pendat. I didn't follow that. Well, you said that Judge Elena Castro ruled the way he did because the federal government's payment had already been made. That was his misapprehension of the scheme. And my question was, if it had not already been paid, it would have been okay to present the false claim to Pennsylvania Department of Transportation. That- Allison Engin makes it difficult to pursue claims of fraud in cases such as Totten itself where there has been a block grant allotment of the federal money. And Allison Engin makes it clear that there's a difference between a false claim submitted to someone who's going to distribute federal funds and a false claim in which there's going to be a claim presented to the government. And what we're trying to make clear is this is the latter case. This is a case in which, you know, under the normal operation of the scheme, the pendat turns around and submits the claim. So presenting the claim, the false claim to Pennsylvania Department of Transportation in itself is not a problem. Well, what Allison Engin makes clear is whether it is actionable under the false claims act depends upon whether that claim is passed through to the federal government or not. And our point is, in this case, it is. There's a sufficient factual basis for making those allegations. And that's why we think the case should be sent back so those allegations can properly be made. Thank you. Thank you very much. Thank you very much. Mr

. Przyski. Mr. Przyski, not the preempt, what you were going to say, but the follow-up with where Mr. Scarborough was. Wasn't the real problem with this case. The fact that at the time Judge Lancaster ruled the complaint, the amended second amended complaint. In other words, the third crack at this that was beforehand still had not adequately explained the funding stream. That certainly isn't that the real crux of this case. I don't think it's the crux of the case. I think it was the crux of the case for Judge Lancaster. Who isn't that all we really have before us is whether or not Judge Lancaster was correct when he granted the motion to dismiss. Well, yes, you do have that. But the complaint was sufficient, first of all. Second of all, we do have to go to that. How was it complaints sufficient? It seems to be very clear to me that the second amended complaint, in other words, the third try. Correct. The third try still did not contain other than the words and the US being added from first amended complaint to second come to second complaint. It still did not contain the information that you subsequently had produced for you under the second statement of interest filed by the federal government. As a preliminary matter, I cannot emphasize how difficult it was in this case to try to track the case. I can't understand. I'm not sure I understand that. I can't understand that record and from the point of historical perspective on a personal level. This is in a really complicated issue

. You made it complicated in this case. The funding was complicated and we had filed numerous right to no request, F O I A request, to try to get the details on how exactly the funding stream worked. And we, at some point, were being different information. And what we were pleading from Penn dot and we were having trouble with where to send the F O I A request to the federal government because they were bouncing telling us we'd send it one place and they would say this isn't the right agency. You had your clients, Mr. Arnold, work for Penn. He worked for Penn dot but he did not track the funding in the way the money flow. I have a hard time understanding that. I think you understand why I have a hard time understanding that. But I mean the... But Allison, I... Okay. This is a review of a decision on a motion to dismiss. Right. And the crux of this may come down to whether or not Judge Lancaster abused his discretion in denying you the right to amend the complaint a third time. And if we focus on Judge Lancaster's decision, then we must also focus on his deviation from the controlling standard of review on a motion to dismiss. Because on the motion to dismiss, as long as there were factual allegations concerning the essential elements of each claim, the complaint should not have been dismissed. But what.

.. Are you content with the current second amended complaint? I would prefer to amend it again, especially after Allison mentioned, emphasized as your honor was asking Mr. Scarborough, the importance of the intent to defraud which was first announced by Judge Lancaster. And I would like to say that as a member of the Supreme Court, as an element of an A2 claim in the Allison Engine Company, Judge Lancaster did not have the benefit of that. So I think a remand would be necessary as a result of Allison Engine. But if I can go back to the standard of review, Judge Lancaster's decision expressly states that he was dismissing because Mr. Arnold failed to establish certain facts. And Judge Lancaster, if you review his opinion closely, viewed this as a presentment case. But what facts did he fail to establish? Well, what Judge Lancaster said he failed to establish was that there was... ...failed to establish that there was a presentment or that there was a false statement made to get a false claim approved or paid. And that is just... He didn't have to establish that. He had to alleged it. And if we look at the complaint, the complaint includes sufficient allegations of the necessary elements. For example, each of the appellees are identified with contract numbers in which fraudulent and falsely inflated qualifications for inspectors and consultants were submitted, which leads to higher bills. So we have the exact contracts

. Mr. Arnold had performed a review of his own, which included five of the nine appellees. And he identified where the fraud took place, where the false claims took place. Second, right? But Judge Lancaster didn't really get into the merits of the contentions, did he? I'm sorry. It was a 12b... 6. 12b6? Yes. ...sufficiency of the complaint. Right. He never really got into where the accusations were true or false, did he? Except that he said that they failed to establish it, which in fly... It explicitly means he didn't prove it occurred, but he didn't have to prove it occurred. So in addition to alleging that there was the fraud, the complaint specifically alleges that false statements were made with the specific intent to defraud the United States and to obtain federal funds. So even under the Alice in Engine, additional component of intent, that intent is pleaded in the second amended complaint. The closed allegations sufficiently support the pleading of a representant to the federal government. Well, it's not the brief presentment, it's the intent that that specifically beats the element of intent. Did you have to include who, what? I'm sorry

. Who, what, when, and where? No, under this Court's precedent, under 9j, all we had to alleged was a description of the nature and subject of the alleged misrepresentations. And that we did. We alleged that the appellaries were submitting falsely inflated qualifications in order to defraud the government by being able to submit higher bills. And we also alleged that there were certain Penda officials who were acquiescing to the scheme because they were the recipients of inappropriate gifts and drives from various appellaries. That they were in on the scheme. So these are things that are alleged in the second amended complaint, but I would also maintain that the second amendment, amended complaint, does include an allegation of pre-sentment. And that would appear in various paragraphs. If you look at paragraphs 56, 66, 76, 84, and others where it is alleged that the federal government did have to come in and make a review of the data or the project before a final payment was made. And at page 31 of our initial brief, we cite a to a manual in which it specifically states that it's a federal manual that a final review by the federal government was required before final payment was made. Mr. Prasadski, your red light is on here. Okay, I have reserved one minute for rebuttal. Thank you very much. Good morning, Your Honor. Great. On behalf of the police. Good morning. I have nine minutes, Mr. Ebbkin. My co-counsel will address the issue of the original source. And if necessary, Mr. Palla will join him. We'll try and pay homage to, and do justice to the World 28

. We'll just split up the time appropriately. I must say I am joined in the government's desire to clarify the standards of what must be shown under Alison Engen. And I am in fact surprised that he has only stated half of what the holding of that case is. Alison Engen does not require remand, and let's talk about why. Alison Engen, in its first paragraph of the holding, talked about the intent of the maker of the statement. But if you read on in the opinion, what Alison Engen really goes to is causation. It shows that the false statement must have an impact on the federal government's decision to pay. There must be a causal link. It requires a nexus, if you will. The issue of presentment or representment, whether it's through a state agency such as PennDOT, or the type of independent quasi-governmental agency such as Amtrak, or even a private contractor such as in the Alison Engen case, as long as the claim gets to the federal government at some point, we don't quarrel with the application of the false claim. Does it presentment of a claim? Trigger payment? The presentment of the claim under Alison Engen is just the first part. If what the defendant, sorry, what the relator has to alleged, in order to make out a false claims act delegation, is that the alleged false or fraudulent statement is made, quote, to get the federal government to pay the claim. And I can direct the court exactly to that language. In the opinion, just above the, just below capital letter C in that opinion, it says if the subcontractor or another defendant makes a false statement to a private entity, and does not intend the government to rely on that false statement as a condition of payment, the statement is not made with the purpose of inducing payment of a false claim by the government, the federal government. In such a situation that direct the link between the false statement and the government, that is the federal government's decision to pay or approve a false claim, is too attenuated to establish liability. And what Mr. Scarborough did not address was that regardless of when the claim gets to the government, whether it's after as Judge Lancaster wrote, or now, not the fourth or the fifth bite of the apple as the government and related took in their appellate briefs. But now even today, Mr. Scarborough is coming with additional allegations. This is the first time we've heard of a general certification by Pendot in its, quote, electronic request to reimbursement that they pled for the first time in their second grief to this court on page 14. We've never heard that about a general certification by Pendot. But it still doesn't go to the fact that they haven't alleged in their first complaint, in their first amended complaint, in their second amended complaint, in all the briefs they filed, and what Mr. Scarborough has gotten up here today and said that any of the alleged false or fraudulent statements by the appellees or in any way communicated, let alone caused the payment, caused the federal government to get the claim paid. Are you suggesting that the government has to know that the claim is false? I'm suggesting that the government has to know whatever the statement is that the related alleged is false. The government has to know that the statement that the related makes is false. Perhaps I didn't say that correctly. I think that's what you just said. What the government has to know is the statement, whatever statement it is that the related alleges is false. The federal government at the time it makes its payment on the claim, has to be aware of that statement. Where of the statement? Obviously, if the government knows its false, it's not going to make a payment. Obviously, and I didn't mean to it for that. If I went that far, I apologize. What the case really says is that it's an implied certification case. Here, in this case, what they alleged, not that work wasn't done or wasn't done appropriately, but that some of the people who did it, and we're going back now prior to September of 2000, they were not properly certified to do the job that they claim they did. That's a misrepresentation. That's what the later is saying in this case. That is what they say is the claim that is being filed at the government paid, and that's wrong. Why isn't that sufficient under Allison? It's not sufficient under Allison because they never alleged, except in paragraph 47, which the district court deals with in footnote 3, and I think we've all read that. And I think the court was rightfully suspect of the disingenuousness of her later, where they took out the word by extension representation to Penn.and by extension, USDOT and the First Amendment complaint, by the time you get to the Second Amendment complaint, they take out the troublesome word by extension. That's the only point in their complaint that comes close to alleging the logic the required causal link, the Nexus. What, Mr. Scarford, everyone? Mr. Grille, as to the..

. Are you suggesting that the government has to know that the claim is false? I'm suggesting that the government has to know whatever the statement is that the related alleged is false. The government has to know that the statement that the related makes is false. Perhaps I didn't say that correctly. I think that's what you just said. What the government has to know is the statement, whatever statement it is that the related alleges is false. The federal government at the time it makes its payment on the claim, has to be aware of that statement. Where of the statement? Obviously, if the government knows its false, it's not going to make a payment. Obviously, and I didn't mean to it for that. If I went that far, I apologize. What the case really says is that it's an implied certification case. Here, in this case, what they alleged, not that work wasn't done or wasn't done appropriately, but that some of the people who did it, and we're going back now prior to September of 2000, they were not properly certified to do the job that they claim they did. That's a misrepresentation. That's what the later is saying in this case. That is what they say is the claim that is being filed at the government paid, and that's wrong. Why isn't that sufficient under Allison? It's not sufficient under Allison because they never alleged, except in paragraph 47, which the district court deals with in footnote 3, and I think we've all read that. And I think the court was rightfully suspect of the disingenuousness of her later, where they took out the word by extension representation to Penn.and by extension, USDOT and the First Amendment complaint, by the time you get to the Second Amendment complaint, they take out the troublesome word by extension. That's the only point in their complaint that comes close to alleging the logic the required causal link, the Nexus. What, Mr. Scarford, everyone? Mr. Grille, as to the... You'll agree, will you know, at the district court, when the district court analyzed this rule on the motion, assumed for purposes of their decision that Penn.had received the money in a lump sum. I could see that that... You can see that. That the district court believed that. Okay, in light of Allison engine, isn't the fact that the district court believed that, whether you want to say they believed it based on the three complaints, the Second Amendment complaint in front of them, whether they misinterpreted what was in front of them, under Allison engine, isn't that enough to send this matter back for the court to re-evaluate the complaint based on the Allison engine decision? You're on... You're on our... I don't believe that. The timing is almost irrelevant based on what they've alleged in their three complaints, two briefs, and now their statement before this court. Let me direct the court to a decision that was handed down on December 18th in the Fifth Circuit. I cited the district court opinion below in my materials, it's called Grafisada. Case just became available, I understand electronically, in West Law over the weekend. It was a very similar case where the underlying district court opinion was made on presentment grounds. And with the benefit of the Allison engine case, the Fifth Circuit looked at the complaint and said, wait a minute, we're not going to send this back, we're not going to waste the district court's time, because based on all of the allegations they've made in the number of different complaints before the court, in that case, it would be futile. It would be futile because of two things. Number one, 9B. And all the issues Judge Fuentes, you have those in mind that time placed the manner, despite his 37 years of working for Penn Dott, despite all the experience with the government and the time they put into this, from 2000 or 2001, when he conducted what he says were his audits, 2003 when he files the claim, 25 months of investigation by the government while the complaint is under seal, the three different iterations of the complaint that were filed

. You'll agree, will you know, at the district court, when the district court analyzed this rule on the motion, assumed for purposes of their decision that Penn.had received the money in a lump sum. I could see that that... You can see that. That the district court believed that. Okay, in light of Allison engine, isn't the fact that the district court believed that, whether you want to say they believed it based on the three complaints, the Second Amendment complaint in front of them, whether they misinterpreted what was in front of them, under Allison engine, isn't that enough to send this matter back for the court to re-evaluate the complaint based on the Allison engine decision? You're on... You're on our... I don't believe that. The timing is almost irrelevant based on what they've alleged in their three complaints, two briefs, and now their statement before this court. Let me direct the court to a decision that was handed down on December 18th in the Fifth Circuit. I cited the district court opinion below in my materials, it's called Grafisada. Case just became available, I understand electronically, in West Law over the weekend. It was a very similar case where the underlying district court opinion was made on presentment grounds. And with the benefit of the Allison engine case, the Fifth Circuit looked at the complaint and said, wait a minute, we're not going to send this back, we're not going to waste the district court's time, because based on all of the allegations they've made in the number of different complaints before the court, in that case, it would be futile. It would be futile because of two things. Number one, 9B. And all the issues Judge Fuentes, you have those in mind that time placed the manner, despite his 37 years of working for Penn Dott, despite all the experience with the government and the time they put into this, from 2000 or 2001, when he conducted what he says were his audits, 2003 when he files the claim, 25 months of investigation by the government while the complaint is under seal, the three different iterations of the complaint that were filed. He never makes a motion, by the way, to the district court under Rule 7, under Rule 59, under Rule 60, as the Mackineter case says he should have done to ask for leave to amend. He's never asked for leave to amend. He's never asked to go back to the district court and amend this complaint. What Rafi Zada said was that 9B is, makes this court able to look at the complaint and say there is not a single false claim to any government agency, not the federal government, not Penn Dott, there is not a single false claim that they alleged. All they alleged is an elaborate violation of a regulatory scheme. They never point to a specific claim and they admit that. They'll never be able to point to a specific claim and this court should not make the district court go through that exercise. Did they not assert that they had filed claims for payments from individuals who were not properly credentialed to receive those payments? They made one bald, I think the site from Anton is one naked bald assertion of fact that is really a legal conclusion. We may disagree with it. Isn't that in essence a false claim? Well, isn't the district court the party, the entity with the best opportunity to judge and wouldn't this court have to overrule the district court, reverse the district court on an issue purely abuse of discretion standard, not having anything to do with Alice in Engine or later case law or the later amendments, the later additions that the government made. I think Mr. Pishinsky was saying that the court was holding the related to a higher standard of proof requiring that they establish a point that they simply assert it as in the complaint. I've read that opinion by Judge Langcaster and all of the cases that Judge Langcaster cites in that opinion are pleading cases. And he uses the term establish with reference to the pleading. I think he really, I think Mr. Pishinsky in his heart of hearts knows that Judge Langcaster has not converted this rule 12b motion into a summary judgment motion under rule 56. I think it's just the choice of the language and I don't think this court should put too much credit in that. Good point to end on. Thank you very much. Thank you, Raoul. Mr. Revkin. Good morning, may it please the court, John Epkin on behalf of the Appleese

. He never makes a motion, by the way, to the district court under Rule 7, under Rule 59, under Rule 60, as the Mackineter case says he should have done to ask for leave to amend. He's never asked for leave to amend. He's never asked to go back to the district court and amend this complaint. What Rafi Zada said was that 9B is, makes this court able to look at the complaint and say there is not a single false claim to any government agency, not the federal government, not Penn Dott, there is not a single false claim that they alleged. All they alleged is an elaborate violation of a regulatory scheme. They never point to a specific claim and they admit that. They'll never be able to point to a specific claim and this court should not make the district court go through that exercise. Did they not assert that they had filed claims for payments from individuals who were not properly credentialed to receive those payments? They made one bald, I think the site from Anton is one naked bald assertion of fact that is really a legal conclusion. We may disagree with it. Isn't that in essence a false claim? Well, isn't the district court the party, the entity with the best opportunity to judge and wouldn't this court have to overrule the district court, reverse the district court on an issue purely abuse of discretion standard, not having anything to do with Alice in Engine or later case law or the later amendments, the later additions that the government made. I think Mr. Pishinsky was saying that the court was holding the related to a higher standard of proof requiring that they establish a point that they simply assert it as in the complaint. I've read that opinion by Judge Langcaster and all of the cases that Judge Langcaster cites in that opinion are pleading cases. And he uses the term establish with reference to the pleading. I think he really, I think Mr. Pishinsky in his heart of hearts knows that Judge Langcaster has not converted this rule 12b motion into a summary judgment motion under rule 56. I think it's just the choice of the language and I don't think this court should put too much credit in that. Good point to end on. Thank you very much. Thank you, Raoul. Mr. Revkin. Good morning, may it please the court, John Epkin on behalf of the Appleese. I'll devote my time to the original source argument, which is implicated where as here the lawsuit is based upon publicly disclosed information. And I won't belabor the public disclosure component of this jurisdictional test because a pellant conceded at the district court level that this action is in fact based upon publicly disclosed information. Needless to say, this judicial mission is binding not just at the district court level, but throughout the course of this appeal as well. So given that admission subject matter exists over this lawsuit only if the appellant is an original source of the information that gives rise to his suit. Original source of statute totally defined as one who possesses direct and independent knowledge of the publicly disclosed information that gives rise to the suit. And in addition, the person with direct and independent knowledge must disclose that information to the government prior to filing suit. And so I'm going to focus on the first part of the original source test, which is direct knowledge. Direct knowledge is defined as knowledge marked by an absence of an intervening instrumentality or influence and the information must be obtained by the related own efforts not by the labor of others. So the problem that a pellant has in this case is that he can't meet that definition. And the reason is that he never personally audited. Mr. Ebbken, since the district court did not decide this case on that issue, is there nothing to record for us to decide this alternative argument? I would submit your honor that there is. And the reason is that where would it be? Appellant attached to his first amendment to complaint as exhibit a 216 pages of documents that he characterizes as the summon substance of his personal audits. Not one line of those 216 pages even mentions Kimball and most of the other Appellees before the court today, let alone their billing practices under the Attitude Contract. And so the upshot is he concedes that he has no personal knowledge of any information having to do with Kimball and other Appellees. And in recognition of that point, what he does is he suggests that the fact that he audited certain parties in this case caused Pendot in turn to conduct separate audits of different parties in this case. And beyond that, the Appellant says that Pendot's independent audits in which the Appellant admittedly played no role whatsoever triggered certain of the Appellees including Kimball to commission themselves independent audits. All of the information that the Appellant has on Kimball is based upon the results of an independent audit performed by young oaks. The audit was in no way related or ordered or supervised or participated in by the Appellant. And I think the short answer is there's no possible way that the Appellant can have direct knowledge with respect to a party that he never audited or otherwise investigated. And I think that there are several cases mainly from outside of the third circuit that speak to this issue. I'll just briefly address a few of them. Advanced Sciences from the Ten Circuit involves a related who suspected fraud being perpetrated by a third party

. I'll devote my time to the original source argument, which is implicated where as here the lawsuit is based upon publicly disclosed information. And I won't belabor the public disclosure component of this jurisdictional test because a pellant conceded at the district court level that this action is in fact based upon publicly disclosed information. Needless to say, this judicial mission is binding not just at the district court level, but throughout the course of this appeal as well. So given that admission subject matter exists over this lawsuit only if the appellant is an original source of the information that gives rise to his suit. Original source of statute totally defined as one who possesses direct and independent knowledge of the publicly disclosed information that gives rise to the suit. And in addition, the person with direct and independent knowledge must disclose that information to the government prior to filing suit. And so I'm going to focus on the first part of the original source test, which is direct knowledge. Direct knowledge is defined as knowledge marked by an absence of an intervening instrumentality or influence and the information must be obtained by the related own efforts not by the labor of others. So the problem that a pellant has in this case is that he can't meet that definition. And the reason is that he never personally audited. Mr. Ebbken, since the district court did not decide this case on that issue, is there nothing to record for us to decide this alternative argument? I would submit your honor that there is. And the reason is that where would it be? Appellant attached to his first amendment to complaint as exhibit a 216 pages of documents that he characterizes as the summon substance of his personal audits. Not one line of those 216 pages even mentions Kimball and most of the other Appellees before the court today, let alone their billing practices under the Attitude Contract. And so the upshot is he concedes that he has no personal knowledge of any information having to do with Kimball and other Appellees. And in recognition of that point, what he does is he suggests that the fact that he audited certain parties in this case caused Pendot in turn to conduct separate audits of different parties in this case. And beyond that, the Appellant says that Pendot's independent audits in which the Appellant admittedly played no role whatsoever triggered certain of the Appellees including Kimball to commission themselves independent audits. All of the information that the Appellant has on Kimball is based upon the results of an independent audit performed by young oaks. The audit was in no way related or ordered or supervised or participated in by the Appellant. And I think the short answer is there's no possible way that the Appellant can have direct knowledge with respect to a party that he never audited or otherwise investigated. And I think that there are several cases mainly from outside of the third circuit that speak to this issue. I'll just briefly address a few of them. Advanced Sciences from the Ten Circuit involves a related who suspected fraud being perpetrated by a third party. The related ordered his subordinates to conduct an audit of that third party. And then this related subsequently reviewed the results of his subordinates audit. When the related filed suit against the third party that was audited, the Ten Circuit found that even though he instigated the audit supervised the results and had to perform my subordinates, the fact that he in no way personally participated in the audit meant that he could not possibly be an original source. And that's the Ten Circuit. The Ninth Circuit reaches a similar result in CL1 versus CLA. In that case, the Relator allegedly discovered fraud being perpetrated by Packard Bell against the computer. And this scheme allegedly was that Packard Bell was selling used computers to the government at new computer prices. The government was the related disclose that information to the government which provoked the government to investigate Packard Bell and other similar companies companies such as Z-Neth. So the initial point. Yeah, so long story short, when the Relator sued Z-Neth, the Ninth Circuit held that even though the Relator had direct knowledge of the exact same scheme perpetrated by Packard Bell, that did not give him direct knowledge with respect to another defendant, even though that defendant allegedly participated in the exact same scheme. Thank you. Mr. Holland. Good morning, Your Honors. May I please the Court, John F. Holland on behalf of the PLEC MC Engineering and Birdman Anthony Associates. When I address something, you said Judge Fisher, which is this issue of an additional ground for affirming the District Court and its dismissal with respect to original source and whether there's enough in the record. And I think as Mr. Rebkin said, all we have to do here is look at the complaint. The complaint talks about two kinds of audits. They talk about the Arnold audits, which are supposedly attached to the complaint. And then they talk about the Penn. audits that were done by the Comptroller's Office

. The related ordered his subordinates to conduct an audit of that third party. And then this related subsequently reviewed the results of his subordinates audit. When the related filed suit against the third party that was audited, the Ten Circuit found that even though he instigated the audit supervised the results and had to perform my subordinates, the fact that he in no way personally participated in the audit meant that he could not possibly be an original source. And that's the Ten Circuit. The Ninth Circuit reaches a similar result in CL1 versus CLA. In that case, the Relator allegedly discovered fraud being perpetrated by Packard Bell against the computer. And this scheme allegedly was that Packard Bell was selling used computers to the government at new computer prices. The government was the related disclose that information to the government which provoked the government to investigate Packard Bell and other similar companies companies such as Z-Neth. So the initial point. Yeah, so long story short, when the Relator sued Z-Neth, the Ninth Circuit held that even though the Relator had direct knowledge of the exact same scheme perpetrated by Packard Bell, that did not give him direct knowledge with respect to another defendant, even though that defendant allegedly participated in the exact same scheme. Thank you. Mr. Holland. Good morning, Your Honors. May I please the Court, John F. Holland on behalf of the PLEC MC Engineering and Birdman Anthony Associates. When I address something, you said Judge Fisher, which is this issue of an additional ground for affirming the District Court and its dismissal with respect to original source and whether there's enough in the record. And I think as Mr. Rebkin said, all we have to do here is look at the complaint. The complaint talks about two kinds of audits. They talk about the Arnold audits, which are supposedly attached to the complaint. And then they talk about the Penn. audits that were done by the Comptroller's Office. Most of the allegations in this complaint are based upon what the Comptroller's Office allegedly found or didn't find. So we hear a lot even from the government about bribery and gift giving and things like that. But when you sit down and you look at these complaints, you'll find there's not a single allegation about bribery or gift giving with respect to CMC or Erdman Anthony. When you look at the 214 pages that are supposed to comprise the Arnold audits, you won't find a single page that relates to Erdman Anthony. In fact, when you look at the first amended complaint, you won't even see Erdman Anthony listed in the caption. It's just a John Doe. So it's pretty clear that the Relator, Mr. Arnold, can have absolutely no director independent knowledge with respect to Erdman Anthony. And we can just look at his complaint and see that there's nothing there with respect to it. With respect to my other client, CMC engineering, it's a little bit different. He references one contract that he says that he looked at with respect to CMC. And he attaches something in his exhibit age, which is supposed to be a false claim. Now we talk about what Alice and Engine requires in terms of false claim. And it's something that you are going to submit with the intention that the government would rely upon it and pay something that otherwise shouldn't pay. What is it that Mr. Arnold attaches to his complaint as the audit? It is at my supplemental appendix AA2. And it's a memo from Mr. Arnold to his superior that says, Hey, there's a resume attached here of W. Stein 3 back in 2000. I told you that his relevant experience had showed up and other things. And his resume is so vague that you cannot make a rudimentary evaluation. That's what he says is resume so vague. You can't make a rudimentary evaluation

. Most of the allegations in this complaint are based upon what the Comptroller's Office allegedly found or didn't find. So we hear a lot even from the government about bribery and gift giving and things like that. But when you sit down and you look at these complaints, you'll find there's not a single allegation about bribery or gift giving with respect to CMC or Erdman Anthony. When you look at the 214 pages that are supposed to comprise the Arnold audits, you won't find a single page that relates to Erdman Anthony. In fact, when you look at the first amended complaint, you won't even see Erdman Anthony listed in the caption. It's just a John Doe. So it's pretty clear that the Relator, Mr. Arnold, can have absolutely no director independent knowledge with respect to Erdman Anthony. And we can just look at his complaint and see that there's nothing there with respect to it. With respect to my other client, CMC engineering, it's a little bit different. He references one contract that he says that he looked at with respect to CMC. And he attaches something in his exhibit age, which is supposed to be a false claim. Now we talk about what Alice and Engine requires in terms of false claim. And it's something that you are going to submit with the intention that the government would rely upon it and pay something that otherwise shouldn't pay. What is it that Mr. Arnold attaches to his complaint as the audit? It is at my supplemental appendix AA2. And it's a memo from Mr. Arnold to his superior that says, Hey, there's a resume attached here of W. Stein 3 back in 2000. I told you that his relevant experience had showed up and other things. And his resume is so vague that you cannot make a rudimentary evaluation. That's what he says is resume so vague. You can't make a rudimentary evaluation. That is not a false claim. That's not a misleading claim. What's interesting is we also have what he attaches as the audit from Penn dot with respect to CMC. That's also in the supplemental appendix. And when you look at pages, we see what the Penn dot audit did with respect to Mr. Stein. They found absolutely nothing wrong with respect to Mr. Stein. So in the documents that are attached to the complaint, we see that there is not a single false claim alleged with respect to CMC of which the plaintiff is the original source. And that's an alternative ground for this court to find there's no jurisdiction and no reason to send this back for anything further. Thank you, Mr. Holley. Mr. Praschinski. I have a reserve one minute for rebuckle. Mr. Scarborough is asked may it be possible for us to each have one minute. All right, one minute. We'll hold you to the one minute. Okay, Mr. Scarborough. The basis on which the district court decided the case is that there is no economic harm to the government because it believed this was a block grant scheme. There's no dispute that that's wrong

. That is not a false claim. That's not a misleading claim. What's interesting is we also have what he attaches as the audit from Penn dot with respect to CMC. That's also in the supplemental appendix. And when you look at pages, we see what the Penn dot audit did with respect to Mr. Stein. They found absolutely nothing wrong with respect to Mr. Stein. So in the documents that are attached to the complaint, we see that there is not a single false claim alleged with respect to CMC of which the plaintiff is the original source. And that's an alternative ground for this court to find there's no jurisdiction and no reason to send this back for anything further. Thank you, Mr. Holley. Mr. Praschinski. I have a reserve one minute for rebuckle. Mr. Scarborough is asked may it be possible for us to each have one minute. All right, one minute. We'll hold you to the one minute. Okay, Mr. Scarborough. The basis on which the district court decided the case is that there is no economic harm to the government because it believed this was a block grant scheme. There's no dispute that that's wrong. There should be a remand on that basis so the case can go back for Alice and engine. Mr. Grille got up and talked a lot about what is in essence a materiality type of thing. Would the government care about the false statements made to the gatekeeper of the federal funds? And the answer is of course absolutely. But that's not the basis on which the district court got rid of the case. That's an argument you would make at some regurgiment. That's a later stage of the case. The case should go back for proper pleadings under the Alice and engine standard. Thank you. Mr. Fisher. Very quickly. I want to make one point with respect to the public disclosure argument that was made by a police counsel. Mr. Ecken pointed the court to cases from other jurisdictions. I would prefer that this court look at its own precedent in the case of US. Exerald Dunlathy versus Delaware County in which this court specifically held that outside audit such as the one performed by Penn dot unless they're performed by a federal agency are not public disclosures under the meaning of the federal false claims act statute. The third circuits analysis and decision in Dunlathy was recently adopted by the fourth circuit in the Wilson case which is cited in our reply brief. You think it's okay that we address the original source issue. I had initially argued in my reply brief that I think that any issue not addressed by the district court should be remanded to the district court initially. But since the appellate said brief those issues I felt compelled to present some argument. Finally someone I don't remember which judge asked if this was an abuse of discretion issue for Judge Lancaster. The answer is no

. There should be a remand on that basis so the case can go back for Alice and engine. Mr. Grille got up and talked a lot about what is in essence a materiality type of thing. Would the government care about the false statements made to the gatekeeper of the federal funds? And the answer is of course absolutely. But that's not the basis on which the district court got rid of the case. That's an argument you would make at some regurgiment. That's a later stage of the case. The case should go back for proper pleadings under the Alice and engine standard. Thank you. Mr. Fisher. Very quickly. I want to make one point with respect to the public disclosure argument that was made by a police counsel. Mr. Ecken pointed the court to cases from other jurisdictions. I would prefer that this court look at its own precedent in the case of US. Exerald Dunlathy versus Delaware County in which this court specifically held that outside audit such as the one performed by Penn dot unless they're performed by a federal agency are not public disclosures under the meaning of the federal false claims act statute. The third circuits analysis and decision in Dunlathy was recently adopted by the fourth circuit in the Wilson case which is cited in our reply brief. You think it's okay that we address the original source issue. I had initially argued in my reply brief that I think that any issue not addressed by the district court should be remanded to the district court initially. But since the appellate said brief those issues I felt compelled to present some argument. Finally someone I don't remember which judge asked if this was an abuse of discretion issue for Judge Lancaster. The answer is no. Since it's a rule 12 motion this court conducts the no for review is the appropriate standard of review. Thank you. Thank you. Thank you. Would we be reviewing Judge Lancaster's decision not to allow you to amend your complaint? Yes. I apologize. The discretion standard. Yes. The dismissal is the denoubo. The right to amend this an abuse of discretion. The discretion. Yes. Okay. And then the applicant's in case this court addressed a false claims that case where the plaintiff re-later was on his third amended complaint. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you very much.

The next case, a nice, safe, department of transportation versus CMC engineering. Mr. Pashinsky? No, Mr. Scarborough. Mr. Scarborough from the Department of Justice for the United States. The Court granted special leave for Amicus to appear at the oral argument and we appreciate that. This case involves allegations that various defendants violated the False Claims Act by falsifying their credentials and bribing officials at the Pennsylvania Department of Transportation in order to obtain federal highway funds. The District Court held that the complaint failed to state a claim under the False Claims Act because it believed that the false claims submitted to the Penn Dott had no economic impact on the federal government, even though it's undisputed in this case, that 80% of the funding on these projects that are an issue comes from the federal government. The District Court based this holding on its belief that the federal highway administration, which provides these funds, provides them to Penn Dott in a block grant, rather than reimbursing Penn Dott after contractors submit claims to Penn Dott. What happens if the funding is already made, isn't it? The federal government has given Penn Dott X number of dollars and then the claim is submitted to Penn Dott. No, Your Honor, that's the misapprehensive that the District Court was operating. The funds under the scheme, and I've gone at great lengths to sort of understand this with our federal highway program, people, the scheme obligates certain funds, funds are sort of allocated out to various states, and then projects are sort of certified and funds are obligated. There's a pool created. No money actually changes hands to the Penn Dott at that point, but Penn Dott essentially has sort of a line of credit that they can draw upon at that point. Then when claims are submitted by contractors on those projects, to Penn Dott, Penn Dott turns around and submits electronic requests for reimbursement to the federal highway administration on a weekly or monthly basis, and in those electronic requests repayments certifies that all applicable state and federal laws are submitted. So the federal government gets to review each of those claims presented. I don't mean to overstate the level of review that the federal government obviously there's thousands of claims submitted in sort of bulk packaging, but there is a general certification made by Penn Dott that applicable state and federal laws are being complied with. Certainly, prohibitions against bribery, conflict of interest, those sorts of things, the kinds of violations that are alleged in the complaint. All right, so the state agency has rules that it applies and determines whether the claim is legitimate or not. Well, they're not just state agency rules, they're also federal rules. The federal government obviously is not going to reimburse contractors or reimbursement states, but the state government's in the captain's chair as far as the claims are concerned. As an initial matter, yes, Your Honor, but the state does turn around and pass the claims back on up the chain to the federal government, and that's what Alison Engin, we now need to see the federal government engage any review process of the claims? Again, it's difficult to say as a categorical matter that the federal government goes over these with a fine-toothed comb, but there is auditing periodically. And it's one of these situations where when you begin to see problems, the auditing becomes more serious. You look at the claims more closely. But in any right, the friends are not released from the federal government until the claim is presented. That's correct. And that's why we say that as a factual matter, this case states a claim under the Alison Engin standard in the sense that the claims are submitted from Pendat to the federal government. They are requesting payment or approval of the claim as, you know, the Alison Engin case now as explained in the book. Let me just ask you a question about the federal government's position on this case. And I understand the federal claims statute, but at first you indicated some entity of the federal government, I don't know if it's your division or not, said you were not going to intervene in the case. You then submitted two statements of interest. The second statement of interest finally clarified the funding strength, explaining the situation, explained. But in that statement of interest, you said you take no position on the case, as to how the case was disposed of by the district court. Well, you took no position on the merits of the motion that was before the district court. Well, and that's sort of standard in it. Okay, that's standard. Okay. Now, you're here as an amicus. You're here as an amicus. Has your position on this case changed since out the Supreme Court's decision and Alison Engin? Well, I mean, the first part of the argument in our green grief that we filed with this court has been superseded by Alison Engin. Alison Engin, we lost in the Supreme Court. We lost it. Our initial position was that the timing of the way the funder just figured it out. I guess my point here arguing much more vigorously than what the federal government was doing with this case when it was before Judge Lancaster. Well, let me explain. I guess I'm asking you to explain why. Sure. I will explain why because Alison Engin is an important decision and clarifying the standards by which you can continue to have false claims act liability in situations where there is a federal grantee. The State Transportation Agency here administering federal funds is a very important issue to the federal government post Alison Engin. And the most important thing about this case is that as a factual matter, the federal highway funding scheme operates in a way that you can make sufficient allegations that a defendant who bribes that entity or submits, you know, false credentials to that entity intends to get a false claim paid or approved by the government as required by Alison Engin. It doesn't make it harder. I'm not sure that it doesn't make it harder, Your Honor, where the normal operation of the scheme is that the gatekeeper to the federal government funds, the pendats of the world, turns around and submits the claims to the federal government. That's what the Supreme Court was concerned with in Alison Engin, that there be some sort of passing the claim forward. And what the Supreme Court was concerned with there is limiting the false claims act liability of the initial person dealing with the pendats of the world to the natural, ordinary and probable consequences of its fraud. Now in a program that is undisputed, where 80% of the money comes from the federal government and the normal operation of the program is that pendats turns around and electronically goes to the federal government and says, give me money, it's sort of the natural, ordinary, probable consequences. Yes, you can be on the hook when you commit fraud that the government cares about, obviously, private. Does it matter that the party is involved in Alison, where private individuals are supposed to hear or to government agency? No, I don't think so at all. No consequence whatsoever. What matters is what the Supreme Court was concerned about is the person who is unwittingly dealing with an entity that gets some amount of money from the federal government. Now if you see there are a lot of people standing in line and far more today than there were three months ago saying, give me money. Okay, and the federal government's hand and I lot more money today than they were three or four months ago. Absolutely. But the issue here is whether or not when Congress passed the False Claims Act, they intended grantees of the federal government under circumstances such as this to be able to use the False Claims Act. I'm actually the issue here. Absolutely, that is the issue and that's why we're here because this is this sort of funding issue, the way the funding mechanism works at the back end has become a much more critical issue after Alison engine. And we want to make sure that the court, you know, whether it affirms or reverses in this particular case based on the pleadings, what we want to make sure is the court doesn't say anything categorical about it. Does this case does Alice, does the Supreme Court decision in Alison engine, which obviously came after Judge Lancaster's decision in Arnold? Does that decision in and of itself require us to send this case back to have the district court analyze the motion to dismiss under the Alison engine analysis? I think that would be the preferable result here on because it does Alison engine require that. I'm not sure that Alison engine requires that. It's notable that the Supreme Court in Alison engine did remand for further proceedings consistent with its opinion. I mean, there was Alison engine in the Sixth Circuit. There was the Totten case in the DC Circuit. There was a circuit split. It's been a state of confusion basically on how much you have to allege, you know, how the federal funds are distributed to the federal grantee. There's been a big dispute in the circuit. It's a lot of litigation about that. So I think the preferable course, yes, now that we know what Alison engine requires to be alleged would be to send this case back. I'm sure you're going to hear from Defense Council that that's, you know, the Third, Fourth, or Fifth, by the way. However, there is significant intervening case law and, you know, to some extent it seems justified to send it back and sort of have a clean slate. What we care about and why we're here and, you know, wanted to participate in the argument is that a message from a ferning this case might be construed by the Defense Bar or other entities as well because of the way the funding scheme works in the federal highway funding funding situation. You know, you can defraud the pendats of the world with impunity without facing false claims act liability. That is simply not right, even under Alison engine because there is a representment of claims to the government. And we want to make absolutely clear the court understands that's the way the funding scheme works. So, Mr. Scarborough, when the Supreme Court says that a plaintiff must prove that the defendant intended that the false statement would be material to the government's decision to pay the claim, when Judge Elena Castro says the statement has to be presented to the federal government. This decision says, pendat is okay if the intent is at the federal government pay the claim. I'm sorry, pendat, pendat is not. Well, Judge Elena Castro said that the claim has to be presented directly to the federal government. Well, is it? That's why I was saying that. I think he was focused on the economic impact of the federal government and his theory of the case, if I may be so bold, was that the funds here have already been given in a block grant. And that's why we said in our statement and interest below and again here, that's not right. They've been obligated but they haven't been given. The money had already been paid. I think that was his view. That seemed to be his view. And that's not the way the scheme operates. And you can tell that he was resisting the government coming in. He was basically saying, accusing the government of coming in too late with this information. If the payment had not already been made, it would have been all right to make the presentment of the claim to the pendat. I didn't follow that. Well, you said that Judge Elena Castro ruled the way he did because the federal government's payment had already been made. That was his misapprehension of the scheme. And my question was, if it had not already been paid, it would have been okay to present the false claim to Pennsylvania Department of Transportation. That- Allison Engin makes it difficult to pursue claims of fraud in cases such as Totten itself where there has been a block grant allotment of the federal money. And Allison Engin makes it clear that there's a difference between a false claim submitted to someone who's going to distribute federal funds and a false claim in which there's going to be a claim presented to the government. And what we're trying to make clear is this is the latter case. This is a case in which, you know, under the normal operation of the scheme, the pendat turns around and submits the claim. So presenting the claim, the false claim to Pennsylvania Department of Transportation in itself is not a problem. Well, what Allison Engin makes clear is whether it is actionable under the false claims act depends upon whether that claim is passed through to the federal government or not. And our point is, in this case, it is. There's a sufficient factual basis for making those allegations. And that's why we think the case should be sent back so those allegations can properly be made. Thank you. Thank you very much. Thank you very much. Mr. Przyski. Mr. Przyski, not the preempt, what you were going to say, but the follow-up with where Mr. Scarborough was. Wasn't the real problem with this case. The fact that at the time Judge Lancaster ruled the complaint, the amended second amended complaint. In other words, the third crack at this that was beforehand still had not adequately explained the funding stream. That certainly isn't that the real crux of this case. I don't think it's the crux of the case. I think it was the crux of the case for Judge Lancaster. Who isn't that all we really have before us is whether or not Judge Lancaster was correct when he granted the motion to dismiss. Well, yes, you do have that. But the complaint was sufficient, first of all. Second of all, we do have to go to that. How was it complaints sufficient? It seems to be very clear to me that the second amended complaint, in other words, the third try. Correct. The third try still did not contain other than the words and the US being added from first amended complaint to second come to second complaint. It still did not contain the information that you subsequently had produced for you under the second statement of interest filed by the federal government. As a preliminary matter, I cannot emphasize how difficult it was in this case to try to track the case. I can't understand. I'm not sure I understand that. I can't understand that record and from the point of historical perspective on a personal level. This is in a really complicated issue. You made it complicated in this case. The funding was complicated and we had filed numerous right to no request, F O I A request, to try to get the details on how exactly the funding stream worked. And we, at some point, were being different information. And what we were pleading from Penn dot and we were having trouble with where to send the F O I A request to the federal government because they were bouncing telling us we'd send it one place and they would say this isn't the right agency. You had your clients, Mr. Arnold, work for Penn. He worked for Penn dot but he did not track the funding in the way the money flow. I have a hard time understanding that. I think you understand why I have a hard time understanding that. But I mean the... But Allison, I... Okay. This is a review of a decision on a motion to dismiss. Right. And the crux of this may come down to whether or not Judge Lancaster abused his discretion in denying you the right to amend the complaint a third time. And if we focus on Judge Lancaster's decision, then we must also focus on his deviation from the controlling standard of review on a motion to dismiss. Because on the motion to dismiss, as long as there were factual allegations concerning the essential elements of each claim, the complaint should not have been dismissed. But what... Are you content with the current second amended complaint? I would prefer to amend it again, especially after Allison mentioned, emphasized as your honor was asking Mr. Scarborough, the importance of the intent to defraud which was first announced by Judge Lancaster. And I would like to say that as a member of the Supreme Court, as an element of an A2 claim in the Allison Engine Company, Judge Lancaster did not have the benefit of that. So I think a remand would be necessary as a result of Allison Engine. But if I can go back to the standard of review, Judge Lancaster's decision expressly states that he was dismissing because Mr. Arnold failed to establish certain facts. And Judge Lancaster, if you review his opinion closely, viewed this as a presentment case. But what facts did he fail to establish? Well, what Judge Lancaster said he failed to establish was that there was... ...failed to establish that there was a presentment or that there was a false statement made to get a false claim approved or paid. And that is just... He didn't have to establish that. He had to alleged it. And if we look at the complaint, the complaint includes sufficient allegations of the necessary elements. For example, each of the appellees are identified with contract numbers in which fraudulent and falsely inflated qualifications for inspectors and consultants were submitted, which leads to higher bills. So we have the exact contracts. Mr. Arnold had performed a review of his own, which included five of the nine appellees. And he identified where the fraud took place, where the false claims took place. Second, right? But Judge Lancaster didn't really get into the merits of the contentions, did he? I'm sorry. It was a 12b... 6. 12b6? Yes. ...sufficiency of the complaint. Right. He never really got into where the accusations were true or false, did he? Except that he said that they failed to establish it, which in fly... It explicitly means he didn't prove it occurred, but he didn't have to prove it occurred. So in addition to alleging that there was the fraud, the complaint specifically alleges that false statements were made with the specific intent to defraud the United States and to obtain federal funds. So even under the Alice in Engine, additional component of intent, that intent is pleaded in the second amended complaint. The closed allegations sufficiently support the pleading of a representant to the federal government. Well, it's not the brief presentment, it's the intent that that specifically beats the element of intent. Did you have to include who, what? I'm sorry. Who, what, when, and where? No, under this Court's precedent, under 9j, all we had to alleged was a description of the nature and subject of the alleged misrepresentations. And that we did. We alleged that the appellaries were submitting falsely inflated qualifications in order to defraud the government by being able to submit higher bills. And we also alleged that there were certain Penda officials who were acquiescing to the scheme because they were the recipients of inappropriate gifts and drives from various appellaries. That they were in on the scheme. So these are things that are alleged in the second amended complaint, but I would also maintain that the second amendment, amended complaint, does include an allegation of pre-sentment. And that would appear in various paragraphs. If you look at paragraphs 56, 66, 76, 84, and others where it is alleged that the federal government did have to come in and make a review of the data or the project before a final payment was made. And at page 31 of our initial brief, we cite a to a manual in which it specifically states that it's a federal manual that a final review by the federal government was required before final payment was made. Mr. Prasadski, your red light is on here. Okay, I have reserved one minute for rebuttal. Thank you very much. Good morning, Your Honor. Great. On behalf of the police. Good morning. I have nine minutes, Mr. Ebbkin. My co-counsel will address the issue of the original source. And if necessary, Mr. Palla will join him. We'll try and pay homage to, and do justice to the World 28. We'll just split up the time appropriately. I must say I am joined in the government's desire to clarify the standards of what must be shown under Alison Engen. And I am in fact surprised that he has only stated half of what the holding of that case is. Alison Engen does not require remand, and let's talk about why. Alison Engen, in its first paragraph of the holding, talked about the intent of the maker of the statement. But if you read on in the opinion, what Alison Engen really goes to is causation. It shows that the false statement must have an impact on the federal government's decision to pay. There must be a causal link. It requires a nexus, if you will. The issue of presentment or representment, whether it's through a state agency such as PennDOT, or the type of independent quasi-governmental agency such as Amtrak, or even a private contractor such as in the Alison Engen case, as long as the claim gets to the federal government at some point, we don't quarrel with the application of the false claim. Does it presentment of a claim? Trigger payment? The presentment of the claim under Alison Engen is just the first part. If what the defendant, sorry, what the relator has to alleged, in order to make out a false claims act delegation, is that the alleged false or fraudulent statement is made, quote, to get the federal government to pay the claim. And I can direct the court exactly to that language. In the opinion, just above the, just below capital letter C in that opinion, it says if the subcontractor or another defendant makes a false statement to a private entity, and does not intend the government to rely on that false statement as a condition of payment, the statement is not made with the purpose of inducing payment of a false claim by the government, the federal government. In such a situation that direct the link between the false statement and the government, that is the federal government's decision to pay or approve a false claim, is too attenuated to establish liability. And what Mr. Scarborough did not address was that regardless of when the claim gets to the government, whether it's after as Judge Lancaster wrote, or now, not the fourth or the fifth bite of the apple as the government and related took in their appellate briefs. But now even today, Mr. Scarborough is coming with additional allegations. This is the first time we've heard of a general certification by Pendot in its, quote, electronic request to reimbursement that they pled for the first time in their second grief to this court on page 14. We've never heard that about a general certification by Pendot. But it still doesn't go to the fact that they haven't alleged in their first complaint, in their first amended complaint, in their second amended complaint, in all the briefs they filed, and what Mr. Scarborough has gotten up here today and said that any of the alleged false or fraudulent statements by the appellees or in any way communicated, let alone caused the payment, caused the federal government to get the claim paid. Are you suggesting that the government has to know that the claim is false? I'm suggesting that the government has to know whatever the statement is that the related alleged is false. The government has to know that the statement that the related makes is false. Perhaps I didn't say that correctly. I think that's what you just said. What the government has to know is the statement, whatever statement it is that the related alleges is false. The federal government at the time it makes its payment on the claim, has to be aware of that statement. Where of the statement? Obviously, if the government knows its false, it's not going to make a payment. Obviously, and I didn't mean to it for that. If I went that far, I apologize. What the case really says is that it's an implied certification case. Here, in this case, what they alleged, not that work wasn't done or wasn't done appropriately, but that some of the people who did it, and we're going back now prior to September of 2000, they were not properly certified to do the job that they claim they did. That's a misrepresentation. That's what the later is saying in this case. That is what they say is the claim that is being filed at the government paid, and that's wrong. Why isn't that sufficient under Allison? It's not sufficient under Allison because they never alleged, except in paragraph 47, which the district court deals with in footnote 3, and I think we've all read that. And I think the court was rightfully suspect of the disingenuousness of her later, where they took out the word by extension representation to Penn.and by extension, USDOT and the First Amendment complaint, by the time you get to the Second Amendment complaint, they take out the troublesome word by extension. That's the only point in their complaint that comes close to alleging the logic the required causal link, the Nexus. What, Mr. Scarford, everyone? Mr. Grille, as to the... You'll agree, will you know, at the district court, when the district court analyzed this rule on the motion, assumed for purposes of their decision that Penn.had received the money in a lump sum. I could see that that... You can see that. That the district court believed that. Okay, in light of Allison engine, isn't the fact that the district court believed that, whether you want to say they believed it based on the three complaints, the Second Amendment complaint in front of them, whether they misinterpreted what was in front of them, under Allison engine, isn't that enough to send this matter back for the court to re-evaluate the complaint based on the Allison engine decision? You're on... You're on our... I don't believe that. The timing is almost irrelevant based on what they've alleged in their three complaints, two briefs, and now their statement before this court. Let me direct the court to a decision that was handed down on December 18th in the Fifth Circuit. I cited the district court opinion below in my materials, it's called Grafisada. Case just became available, I understand electronically, in West Law over the weekend. It was a very similar case where the underlying district court opinion was made on presentment grounds. And with the benefit of the Allison engine case, the Fifth Circuit looked at the complaint and said, wait a minute, we're not going to send this back, we're not going to waste the district court's time, because based on all of the allegations they've made in the number of different complaints before the court, in that case, it would be futile. It would be futile because of two things. Number one, 9B. And all the issues Judge Fuentes, you have those in mind that time placed the manner, despite his 37 years of working for Penn Dott, despite all the experience with the government and the time they put into this, from 2000 or 2001, when he conducted what he says were his audits, 2003 when he files the claim, 25 months of investigation by the government while the complaint is under seal, the three different iterations of the complaint that were filed. He never makes a motion, by the way, to the district court under Rule 7, under Rule 59, under Rule 60, as the Mackineter case says he should have done to ask for leave to amend. He's never asked for leave to amend. He's never asked to go back to the district court and amend this complaint. What Rafi Zada said was that 9B is, makes this court able to look at the complaint and say there is not a single false claim to any government agency, not the federal government, not Penn Dott, there is not a single false claim that they alleged. All they alleged is an elaborate violation of a regulatory scheme. They never point to a specific claim and they admit that. They'll never be able to point to a specific claim and this court should not make the district court go through that exercise. Did they not assert that they had filed claims for payments from individuals who were not properly credentialed to receive those payments? They made one bald, I think the site from Anton is one naked bald assertion of fact that is really a legal conclusion. We may disagree with it. Isn't that in essence a false claim? Well, isn't the district court the party, the entity with the best opportunity to judge and wouldn't this court have to overrule the district court, reverse the district court on an issue purely abuse of discretion standard, not having anything to do with Alice in Engine or later case law or the later amendments, the later additions that the government made. I think Mr. Pishinsky was saying that the court was holding the related to a higher standard of proof requiring that they establish a point that they simply assert it as in the complaint. I've read that opinion by Judge Langcaster and all of the cases that Judge Langcaster cites in that opinion are pleading cases. And he uses the term establish with reference to the pleading. I think he really, I think Mr. Pishinsky in his heart of hearts knows that Judge Langcaster has not converted this rule 12b motion into a summary judgment motion under rule 56. I think it's just the choice of the language and I don't think this court should put too much credit in that. Good point to end on. Thank you very much. Thank you, Raoul. Mr. Revkin. Good morning, may it please the court, John Epkin on behalf of the Appleese. I'll devote my time to the original source argument, which is implicated where as here the lawsuit is based upon publicly disclosed information. And I won't belabor the public disclosure component of this jurisdictional test because a pellant conceded at the district court level that this action is in fact based upon publicly disclosed information. Needless to say, this judicial mission is binding not just at the district court level, but throughout the course of this appeal as well. So given that admission subject matter exists over this lawsuit only if the appellant is an original source of the information that gives rise to his suit. Original source of statute totally defined as one who possesses direct and independent knowledge of the publicly disclosed information that gives rise to the suit. And in addition, the person with direct and independent knowledge must disclose that information to the government prior to filing suit. And so I'm going to focus on the first part of the original source test, which is direct knowledge. Direct knowledge is defined as knowledge marked by an absence of an intervening instrumentality or influence and the information must be obtained by the related own efforts not by the labor of others. So the problem that a pellant has in this case is that he can't meet that definition. And the reason is that he never personally audited. Mr. Ebbken, since the district court did not decide this case on that issue, is there nothing to record for us to decide this alternative argument? I would submit your honor that there is. And the reason is that where would it be? Appellant attached to his first amendment to complaint as exhibit a 216 pages of documents that he characterizes as the summon substance of his personal audits. Not one line of those 216 pages even mentions Kimball and most of the other Appellees before the court today, let alone their billing practices under the Attitude Contract. And so the upshot is he concedes that he has no personal knowledge of any information having to do with Kimball and other Appellees. And in recognition of that point, what he does is he suggests that the fact that he audited certain parties in this case caused Pendot in turn to conduct separate audits of different parties in this case. And beyond that, the Appellant says that Pendot's independent audits in which the Appellant admittedly played no role whatsoever triggered certain of the Appellees including Kimball to commission themselves independent audits. All of the information that the Appellant has on Kimball is based upon the results of an independent audit performed by young oaks. The audit was in no way related or ordered or supervised or participated in by the Appellant. And I think the short answer is there's no possible way that the Appellant can have direct knowledge with respect to a party that he never audited or otherwise investigated. And I think that there are several cases mainly from outside of the third circuit that speak to this issue. I'll just briefly address a few of them. Advanced Sciences from the Ten Circuit involves a related who suspected fraud being perpetrated by a third party. The related ordered his subordinates to conduct an audit of that third party. And then this related subsequently reviewed the results of his subordinates audit. When the related filed suit against the third party that was audited, the Ten Circuit found that even though he instigated the audit supervised the results and had to perform my subordinates, the fact that he in no way personally participated in the audit meant that he could not possibly be an original source. And that's the Ten Circuit. The Ninth Circuit reaches a similar result in CL1 versus CLA. In that case, the Relator allegedly discovered fraud being perpetrated by Packard Bell against the computer. And this scheme allegedly was that Packard Bell was selling used computers to the government at new computer prices. The government was the related disclose that information to the government which provoked the government to investigate Packard Bell and other similar companies companies such as Z-Neth. So the initial point. Yeah, so long story short, when the Relator sued Z-Neth, the Ninth Circuit held that even though the Relator had direct knowledge of the exact same scheme perpetrated by Packard Bell, that did not give him direct knowledge with respect to another defendant, even though that defendant allegedly participated in the exact same scheme. Thank you. Mr. Holland. Good morning, Your Honors. May I please the Court, John F. Holland on behalf of the PLEC MC Engineering and Birdman Anthony Associates. When I address something, you said Judge Fisher, which is this issue of an additional ground for affirming the District Court and its dismissal with respect to original source and whether there's enough in the record. And I think as Mr. Rebkin said, all we have to do here is look at the complaint. The complaint talks about two kinds of audits. They talk about the Arnold audits, which are supposedly attached to the complaint. And then they talk about the Penn. audits that were done by the Comptroller's Office. Most of the allegations in this complaint are based upon what the Comptroller's Office allegedly found or didn't find. So we hear a lot even from the government about bribery and gift giving and things like that. But when you sit down and you look at these complaints, you'll find there's not a single allegation about bribery or gift giving with respect to CMC or Erdman Anthony. When you look at the 214 pages that are supposed to comprise the Arnold audits, you won't find a single page that relates to Erdman Anthony. In fact, when you look at the first amended complaint, you won't even see Erdman Anthony listed in the caption. It's just a John Doe. So it's pretty clear that the Relator, Mr. Arnold, can have absolutely no director independent knowledge with respect to Erdman Anthony. And we can just look at his complaint and see that there's nothing there with respect to it. With respect to my other client, CMC engineering, it's a little bit different. He references one contract that he says that he looked at with respect to CMC. And he attaches something in his exhibit age, which is supposed to be a false claim. Now we talk about what Alice and Engine requires in terms of false claim. And it's something that you are going to submit with the intention that the government would rely upon it and pay something that otherwise shouldn't pay. What is it that Mr. Arnold attaches to his complaint as the audit? It is at my supplemental appendix AA2. And it's a memo from Mr. Arnold to his superior that says, Hey, there's a resume attached here of W. Stein 3 back in 2000. I told you that his relevant experience had showed up and other things. And his resume is so vague that you cannot make a rudimentary evaluation. That's what he says is resume so vague. You can't make a rudimentary evaluation. That is not a false claim. That's not a misleading claim. What's interesting is we also have what he attaches as the audit from Penn dot with respect to CMC. That's also in the supplemental appendix. And when you look at pages, we see what the Penn dot audit did with respect to Mr. Stein. They found absolutely nothing wrong with respect to Mr. Stein. So in the documents that are attached to the complaint, we see that there is not a single false claim alleged with respect to CMC of which the plaintiff is the original source. And that's an alternative ground for this court to find there's no jurisdiction and no reason to send this back for anything further. Thank you, Mr. Holley. Mr. Praschinski. I have a reserve one minute for rebuckle. Mr. Scarborough is asked may it be possible for us to each have one minute. All right, one minute. We'll hold you to the one minute. Okay, Mr. Scarborough. The basis on which the district court decided the case is that there is no economic harm to the government because it believed this was a block grant scheme. There's no dispute that that's wrong. There should be a remand on that basis so the case can go back for Alice and engine. Mr. Grille got up and talked a lot about what is in essence a materiality type of thing. Would the government care about the false statements made to the gatekeeper of the federal funds? And the answer is of course absolutely. But that's not the basis on which the district court got rid of the case. That's an argument you would make at some regurgiment. That's a later stage of the case. The case should go back for proper pleadings under the Alice and engine standard. Thank you. Mr. Fisher. Very quickly. I want to make one point with respect to the public disclosure argument that was made by a police counsel. Mr. Ecken pointed the court to cases from other jurisdictions. I would prefer that this court look at its own precedent in the case of US. Exerald Dunlathy versus Delaware County in which this court specifically held that outside audit such as the one performed by Penn dot unless they're performed by a federal agency are not public disclosures under the meaning of the federal false claims act statute. The third circuits analysis and decision in Dunlathy was recently adopted by the fourth circuit in the Wilson case which is cited in our reply brief. You think it's okay that we address the original source issue. I had initially argued in my reply brief that I think that any issue not addressed by the district court should be remanded to the district court initially. But since the appellate said brief those issues I felt compelled to present some argument. Finally someone I don't remember which judge asked if this was an abuse of discretion issue for Judge Lancaster. The answer is no. Since it's a rule 12 motion this court conducts the no for review is the appropriate standard of review. Thank you. Thank you. Thank you. Would we be reviewing Judge Lancaster's decision not to allow you to amend your complaint? Yes. I apologize. The discretion standard. Yes. The dismissal is the denoubo. The right to amend this an abuse of discretion. The discretion. Yes. Okay. And then the applicant's in case this court addressed a false claims that case where the plaintiff re-later was on his third amended complaint. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you very much