UNITED STATES DISTRICT COURT NORTHERN …DISCLOSURE BAR ... VIM Recycling, Inc., ... agreements to uphold certain assurances provided in the Low Income Home Energy Assistance Act of

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

THE UNITED STATES OF AMERICA and THE STATE OF ILLINOIS, ex rel. KATHY PISHGHADAMIAN, Plaintiff,

v. NICOR GAS, INC., Defendant.

)))))))))))

Case No.: 1:09–cv–00298 Judge Sharon Johnson Coleman Magistrate Judge Mary M. Rowland

PLAINTIFF-RELATOR’S OPPOSITION TO

DEFENDANT’S MOTION TO DISMISS THE COMPLAINT

Dated: December 17, 2012 Jonathan D. Karmel THE KARMEL LAW FIRM 221 North La Salle Street, Suite 1414 Chicago, IL 60601 Tel: 312-641-2910 Fax: 312-641-0781 Reuben A. Guttman (pro hac vice) GRANT & EISENHOFER, P.A. 1920 L Street, N.W. Suite 400 Washington, D.C. 20036 Tel: 202-386-9500 Fax: 202-386-9505

Michael J. Barry (pro hac vice) GRANT & EISENHOFER, P.A. 123 Justison Street Wilmington DE 19801 Tel: 302-622-7065 Fax: 302-622-7100 Shehzad F. Roopani (pro hac vice) GRANT & EISENHOFER P.A. 485 Lexington Avenue, 29th Floor New York, NY 10017 Telephone: (646) 722-8500 Facsimile: (646) 722-8501

COUNSEL FOR RELATOR

Case: 1:09-cv-00298 Document #: 44 Filed: 12/17/12 Page 1 of 21 PageID #:267

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TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES .............................................................................................................ii

PRELIMINARY STATEMENT .......................................................................................................1

FACTUAL BACKGROUND ............................................................................................................2

ARGUMENT .....................................................................................................................................3

I. THIS COURT HAS JURISDICTION OVER THE CLAIMS ASSERTED IN THE COMPLAINT ........................................................................................................................3

II. RELATOR’S COMPLAINT DOES NOT RUN AFOUL OF THE PUBLIC DISCLOSURE BAR ..............................................................................................................8

A. THE ADDITIONAL SOURCES IDENTIFIED BY NICOR DID NOT PUBLICLY DISCLOSE

NICOR’S VIOLATIONS OF THE FCA OR IWRPA ........................................................8

B. EVEN IF THIS COURT HOLDS THAT RELATOR’S CLAIMS WERE PUBLICLY

DISCLOSED WITHIN THE MEANING OF THE FCA, RELATOR QUALIFIES AS AN ORIGINAL SOURCE ................................................................................................11

III. RELATOR’S COMPLAINT SATISFIES RULE 9(B) .........................................................12

CONCLUSION ..................................................................................................................................15


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TABLE OF AUTHORITIES

Page(s) CASES

Adkins v. VIM Recycling, Inc., 644 F.3d 483 (7th Cir. Ind. 2011) ..............................................................................................5

Adrian Energy Assocs. v. Michigan Pub. Serv. Comm’n, 481 F.3d 414 (6th Cir. 2007) .....................................................................................................8

Apex Digital v. Sears, Roebuck & Co., 572 F.3d 440 (7th Cir.2009) ......................................................................................................3

Chicago & North Western Transp. Co. v. Kalo Brick & Tile Co., 450 U.S. 311 (1981) ...................................................................................................................7

Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976) ...............................................................................................................5, 8

Garst v. Lockheed-Martin, 328 F.3d 374 (7th Cir. 2003) ....................................................................................................12

Glaser v. Wound Care Consultants, Inc., 570 F.3d 907 (7th Cir. 2009) .............................................................................................10, 11

H.J., Inc. v. Northwestern Bell Tel. Co., 954 F.2d 485 (8th Cir. 1992) .....................................................................................................7

Hamilton County Emergency Comm. Dist. V. Bellsouth Telecommc’ns LLC, No. 1:11-cv-330, 2012 WL 3611885 (E.D. Tenn. Aug. 20, 2012) ...........................................5

Health Care Industry Liab. Ins. Program v. Momence Meadows Nursing Center, Inc., 566 F.3d 689 (7th Cir. 2009) .....................................................................................................7

Huon v. Johnson & Bell, Ltd., 657 F.3d 641 (7th Cir. 2011) .....................................................................................................5

Long v. Shorebank Dev. Corp., 182 F.3d 548 (7th Cir.1999) ......................................................................................................3

M/G Transp. Servs., Inc. v. Water Quality Ins. Syndicate, 234 F.3d 974 (6th Cir. 2000) .....................................................................................................7

Mason v. Medline Indus., Inc., No. 07-C-5615, 2009 WL 1438096 (N.D. Ill. May 22, 2009) .................................................12

Miller v. Herman, 600 F.3d 726 (7th Cir. 2010) .....................................................................................................3


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Mississippi Power & Light Co. v. Mississippi ex rel. Moore, 487 U.S. 354 (1988) ...............................................................................................................6, 7

Missouri Pacific R. Co. v. Stroud, 267 U.S. 404, 408 (1925) ...........................................................................................................7

Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25-26, 103 S. Ct. 927, 74 L. Ed. 2d 765 (1983)......................................................5

Natural Gas Pipeline Co. of America v. Federal Power Comm’n, 141 F.2d 27 (7th Cir. 1944) .......................................................................................................7

New Orleans Public Serv., Inc. v. Council of City of New Orleans, 491 U.S. 350 (1989) ..................................................................................................................8

Savage v. Finney, No. 12-cv-2398, 2012 WL 2374687 (N.D. Ill. June 20, 2012) .................................................4

Sheffler v. Commonwealth Edison Co., 923 N.E.2d 1259 (Ill. App. Ct. 2010) ........................................................................................6

Sun City Taxpayers’ Ass’n v. Citizens Utilities Co., 45 F.3d 58 (2d Cir. 1995) ..........................................................................................................7

U.S. ex rel. Budike v. Peco Energy, No. 07–4147 RBS, 2012 WL 4108910 (E.D. Pa. Sept. 14, 2012) .............................................5

U.S. ex rel. Fallon v. Accudyne Corp., 880 F. Supp. 636 (W.D. Wis. 1995) ..........................................................................................6

U.S. ex rel. Feingold v. Administar Fed. Inc., 324 F.3d at 442 (7th Cir. 2003) .................................................................................................9

U.S. ex rel. Grenadyor v. Ukranian Village Pharmacy, Inc., No. 09-C-7891, 2012 WL 4742827 (N.D. Ill. Sept. 5, 2012) ............................................14, 15

U.S. ex rel. Hartigan v. Palumbo Bros., Inc., 797 F. Supp. 624 (N.D. Ill. 1992) ..............................................................................................8

U.S. ex rel. Lamers v. City of Green Bay, 998 F.Supp. 971 (E.D. Wis. 1998) .....................................................................................11, 12

U.S. ex rel. Liotine v. CDW Gov’t, Inc., No. 05-33, 2009 WL 3156704 (S.D. Ill. Sept. 29, 2009) ...........................................................9

U.S. ex rel. Lusby v. Rolls-Royce Corp, 570 F.3d 849 (7th Cir. 2009) ...................................................................................................15


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U.S. ex rel. Mathews v. Bank of Farmington, 166 F.3d 853 (7th Cir. 1999) ..................................................................................................10

U.S. ex rel. Norbeck v. Basin Electric Power Cooperative, 248 F.3d 781 (8th Cir. 2001) .....................................................................................................5

U.S. ex rel. Shea v. Verizon Commc’ns., Inc., 844 F. Supp. 2d 78 (D.D.C. 2012) .............................................................................................5

U.S. ex rel. Taylor v. Gabelli, 345 F. Supp.2d 313 (S.D.N.Y. 2004) .........................................................................................5

U.S. ex rel. Yannacopoulos v. General Dynamics, 652 F.3d 818 (7th Cir. 2011) ...................................................................................................14

U.S. v. Bornstein, 423 U.S. 303 (1976) .................................................................................................................13

U.S. v. Foster Wheeler Corp., 447 F.2d 100 (2d Cir. 1971).......................................................................................................6

U.S. v. General Dynamics Corp., 19 F.3d 770 (2nd Cir. 1994).......................................................................................................6

U.S. v. Incorporated Village of Island Park, 888 F. Supp. 419 (E.D.N.Y. 1995) ............................................................................................6

STATUTES

740 ILCS 175/3 ................................................................................................................................1

740 ILCS 175/4 ............................................................................................................................3, 4

31 U.S.C. § 3729 ......................................................................................................1, 12, 13, 14, 15

31 U.S.C. § 3730 ..........................................................................................................................3, 4

31 U.S.C. § 3732 ..............................................................................................................................3

LEGISLATIVE HISTORY

S. Rep. No. 99-345, reprinted in 1986 U.S. Code Cong. And Admin. News ............................................6


PRELIMINARY STATEMENT

Nicor Gas, Inc.’s (“Nicor”) motion to dismiss ignores that Relator’s claims are based on

statutes that specifically vest jurisdiction in this Court, and not the Illinois Commerce

Commission (“ICC”). Both the Federal False Claims Act, 31 U.S.C. § 3729 (“FCA”), and the

Illinois Whistleblower Reward And Protection Act, 740 Ill. Comp. Stat 175/3 (“IWRPA”),1

require that a relator commence an action thereunder by filing a complaint, under seal, with a

court of appropriate jurisdiction. Commencing a proceeding before the ICC simply is not an

option. Moreover, while both the FCA and IWRPA provide that the government may elect to

pursue its claims before an administrative agency, the statutes do not give that option to the

defendant. Therefore, even if claims arising from the underlying fraudulent scheme, if pursued

by an individual, could possibly fall within the exclusive jurisdiction of the ICC, the claims

asserted by and on behalf of the government under these statutes fall squarely within the

jurisdiction of this Court.

Nicor’s challenge to the merits of Relator’s claims do not fare any better. The news

articles, class action complaint and private correspondence that Nicor identifies do not constitute

“public disclosure” of the fraud alleged herein as not one of those sources even mention the Low

Income Home Energy Assistance Program (“LIHEAP”) or the false certification NICOR made to

the federal and Illinois governments to participate in the LIHEAP program. But in any event,

Kathy Pishghadamian (“Ms. Pishghadamian,” or “Relator”), an employee of Nicor, is an original

source of the facts that underlie the claims, so Nicor’s reference to other sources is irrelevant.

Finally, Nicor’s argument that the Complaint lacks the specificity required under Rule

9(b) ignores the actual allegations of the Complaint. Relator alleges that to participate in

1 Throughout the brief, references to the FCA also apply to the IWRPA, unless otherwise noted. The statutes are substantially similar, at least with regard to the claims alleged by Relator.


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LIHEAP, Nicor provided specific Assurances to the government that included a representation

that it would only bill for gas used at cost. ¶44. The Complaint then provides specific examples

of where Nicor manipulated the invoices to LIHEAP recipients to charge more than the cost of

the gas used ¶¶65-72 and information based on Relator’s personal knowledge of Nicor’s

widespread practice in this regard ¶¶73-78. No more specificity is required.

FACTUAL BACKGROUND

As the largest natural gas distributor in northern Illinois, the Northern Illinois Gas

Company (“Nicor”) participates in LIHEAP. ¶42. Pursuant to LIHEAP, the Secretary of the

U.S. Department of Health and Human Services makes grants to states, including Illinois, to

assist low income households in meeting the costs of energy. ¶¶26, 31-32. Illinois also

appropriates state funds to LIHEAP pursuant to the Illinois Energy Assistance Act of 1989, as

amended. ¶33.

To participate in the LIHEAP program, Nicor provided to the government written

agreements to uphold certain assurances provided in the Low Income Home Energy Assistance

Act of 1981, as amended, and the Illinois Energy Assistance Act of 1989, as amended (the

“Assurances”). ¶42. These Assurances require, among other things, Nicor to charge a LIHEAP

eligible household, in the normal billing process, no more than the difference between the actual

cost of the home energy and the amount of the payment made by Illinois under the State Plan.

¶44. By regulation, Nicor is required to charge customers only the actual cost of gas used. ¶50.

As detailed in the Complaint, Nicor intentionally underestimated natural gas usage of

customers, including LIHEAP recipients and governmental customers, during high usage/low

cost months and then “corrected” for actual usage in later months, charging customers for

previously used gas at higher prices than prevailing. ¶¶56-62. Thus, Nicor billed customers at

prices above the cost of the gas used in violation of the Assurances and applicable regulations.


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¶63. By doing so, Nicor (1) made false statements to the government (the Assurances) to receive

payment (receipt of the LIHEAP grants), (2) held and possessed government funds intending to

defraud the government (by supplying less natural gas than customers should have received at

the prevailing price per therm when the gas was actually used), and (3) knowingly presented

false claims for payment with government funds (the fraudulent invoices).

ARGUMENT

When considering a motion to dismiss pursuant to Rule 12(b)(1) for lack of subject

matter jurisdiction, the Court must draw reasonable inferences in favor of the plaintiff, and

accept all well-pleaded allegations as true. Long v. Shorebank Dev. Corp., 182 F.3d 548, 554

(7th Cir.1999); see also Apex Digital v. Sears, Roebuck & Co., 572 F.3d 440, 443–44 (7th Cir.

2009) (labeling a motion to dismiss for lack of subject matter jurisdiction in which the court need

only look to the complaint a “facial challenge”). Likewise, a motion to dismiss under Rule

12(b)(6) must be decided based solely on the face of the complaint and any attachments that

accompanied its filing. See Miller v. Herman, 600 F.3d 726, 733 (7th Cir. 2010). Nicor’s

reliance on the documents not included with or referenced in the Complaint, including news

articles and correspondence from Nicor’s files, therefore, should be rejected.

I. THIS COURT HAS JURISDICTION OVER THE CLAIMS ASSERTED IN THE COMPLAINT

The Complaint asserts claims for civil penalties under the FCA, 31 U.S.C. § 3730(b)(1)

and the IWRPA, 740 ILCS 175/4 (b)(1). By statute, jurisdiction lies in this Court, not with the

ICC. 31 U.S.C. § 3732(a) (“Any action under section 3730 may be brought in any judicial

district in which the defendant or, in the case of multiple defendants, any one defendant can be

found, resides, transacts business, or in which any act proscribed by section 3729 occurred.”);

740 ILCS 175/4 (b)(1) (“A person may bring a civil action for a violation of Section 3 for the


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person and for the State.”) Ignoring these statutes entirely, Nicor advances several jurisdictional

arguments essentially arguing that because the ICC regulates the energy industry in Illinois, ipso

facto any claims that Nicor overcharged customers must proceed before that agency. Def. Br. at

3-8. Nicor’s arguments fail for several reasons.

Statutory claims under the both FCA and IWRPA must be brought in court, and cannot be

filed with the ICC or any other administrative agency. “[T]o maintain a qui tam action under the

FCA, a private party such as plaintiff must satisfy several procedural requirements. [She] must

first bring the action in the name of the United States government, see 31 U.S.C. § 3730(b)(1),

serve the government with ‘a copy of the complaint and written disclosure of substantially all

material evidence and information [the person] possesses,’ 31 U.S.C. § 3730(b)(2), file the

complaint in camera and under seal for sixty days, and wait for a court order before serving the

defendants, see id.” Savage v. Finney, No. 12-CV-2398, 2012 WL 2374687 (N.D. Ill. June 20,

2012) (Ex. A attached hereto) (dismissing FCA claim for failure to follow procedural

requirements). The procedural requirements of the IWRPA are identical. See 740 ILCS

175/4(b). To the extent an administrative process may be available to address the underlying

issues, both statues give the option to pursue such remedy to the State or the Federal

Government (as applicable). See 31 U.S.C. § 3730(c)(5); 740 ILCS 175/4 (c)(5) (“the

[Government/State] may elect to pursue its claim through any alternative remedy available to the

[Government/State], including any administrative proceeding to determine a civil money

penalty.”) So even if an agency proceeding was available (and it is not), by statute Nicor has no

standing to ask this Court to refer this case to the ICC.

Nicor argues that because it is a public utility that is regulated by the ICC, it cannot be

sued in court for violating the FCA or the IWRPA. Nicor’s argument does not make any sense.


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A public utility is like any other government supplier, and cannot escape liability for making

false statements to the government by simply pointing to the existence of a regulatory body. It is

well established that a public utility properly may be subject to suit for violations of the FCA.2

The suggestion that the regulatory function of the ICC somehow preempts the FCA and IWRPA

is simply incorrect.

Federal courts have a “virtually unflagging obligation . . . to exercise the jurisdiction

given them.” Adkins v. VIM Recycling, Inc., 644 F.3d 483, 496 (7th Cir. 2011) (citing Colorado

River Water Conservation Dist. v. United States, 424 U.S. 800, 814 (1976)). Because of this

“unflagging obligation,” the U.S. Supreme Court “has cautioned that the task of the district court

‘is not to find some substantial reason for the exercise of federal jurisdiction’ but instead ‘to

ascertain whether there exist ‘exceptional’ circumstances, the ‘clearest of justifications,’ . . . to

justify the surrender of that jurisdiction.” Huon v. Johnson & Bell, Ltd., 657 F.3d 641, 645 (7th

Cir. 2011) (citing Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25-26, 103

S. Ct. 927, 74 L. Ed. 2d 765 (1983)).

Nicor identifies no such “exceptional circumstances.” In U.S. ex rel. Taylor v. Gabelli,

345 F. Supp. 2d 313 (S.D.N.Y. 2004), the court considered – and rejected – the very arguments

Nicor advances here. In that case, the relator alleged that the defendant violated the FCA by

rigging the bidding process for bandwith conducted by the FCC. Noting the heavily regulated

nature of the business, as well as the FCC’s regulatory oversight responsibilities, the defendant

argued that the federal court should dismiss the FCA case to allow the FCC to address the issue.

The court denied that motion: “Courts ‘are not at liberty to pick and choose among 2 U.S. ex rel. Budike v. Peco Energy, No. 07–4147 RBS, 2012 WL 4108910 (E.D. Pa. Sept. 14, 2012) (Ex. B); U.S. ex rel. Shea v. Verizon Commc’ns., Inc., 844 F. Supp. 2d 78 (D.D.C. 2012); U.S. ex rel. Norbeck v. Basin Electric Power Cooperative, 248 F.3d 781 (8th Cir. 2001); see also Hamilton County Emergency Comm. Dist. v. Bellsouth Telecommc’ns LLC, No. 1:11-cv-330, 2012 WL 3611885 (E.D. Tenn. Aug 20, 2012) (Ex. C) (applying Tennessee False Claims Act)


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congressional enactments, and when the statutes are capable of co-existence, it is the duty of the

courts, absent a clearly expressed congressional intention to the contrary, to regard each as

effective.’” Id. at 333 (quoting U.S. v. General Dynamics Corp., 19 F.3d 770 (2d Cir. 1994)).

For this reason, “courts have been ‘reluctant to find pre-emption of the FCA even where other

laws provided close related regulation and remedies. Indeed, the legislative history indicates that

Congress specifically contemplated the use of the Act to address regulatory violations.” 3 345 F.

Supp. 2d at 334. 4 Because both the FCA and IWRPA specifically provide that the government

has the option of pursuing claims under the statutes either in court or before an administrative

agency, it cannot be said that jurisdiction over such claims falls within the “exclusive”

jurisdiction of the ICC.

For this reason, Nicor’s reliance on state court decisions defining the jurisdiction of the

ICC, such as Sheffler v. Commonwealth Edison Co., 923 N.E.2d 1259, 1270-71 (Ill. App. Ct.

2010), is wholly misplaced. Even if the ICC would have jurisdiction over claims arising from

Nicor’s underlying fraudulent scheme asserted on behalf of an individual, the entire statutory

scheme of both the FCA and the IWRPA vests jurisdiction in the courts over such claims when

pursued on behalf of the government. Moreover, at least with respect to Relator’s FCA claims,

Nicor’s suggestion that the Illinois Public Utility Act somehow deprives this Court of

jurisdiction over federal claims runs afoul of the Supremacy Clause of the United States

3 Citing U.S. ex rel. Fallon v. Accudyne Corp., 880 F. Supp. 636, 639 (W.D. Wis. 1995) (rejecting the defendant’s argument that various environmental statute’s underlying relator’s complaint were preempted by the FCA); U.S. v. General Dynamics Corp., 19 F.3d 770 (2nd Cir. 1994) (Court reversed a District Court ruling that the Anti-Kickback Act pre-empted claims under the FCA); U.S. v. Foster Wheeler Corp., 447 F.2d 100 (2d Cir. 1971) (finding that FCA claims are not preempted by the Truth-In-Negotiation Act); U.S. v. Incorporated Village of Island Park, 888 F. Supp. 419 (E.D.N.Y. 1995) (finding that FCA claims are not preempted by the Fair Housing Act). 4 See S. Rep. No. 99-345, reprinted in 1986 U.S. Code Cong. And Admin. News at 5274 (“[A] false claim [under the Act] may take many forms, the most common being a claim for goods or services not provided, or provided in violation of… statute[] or regulation.”).


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Constitution. Mississippi Power & Light Co v. Mississippi ex rel. Moore, 487 U.S. 354 (1988)

(“There ‘can be no divided authority over interstate commerce . . . the acts of Congress on that

subject are supreme and exclusive.’ Consequently, a state agency’s ‘efforts to regulate

commerce must fall when they conflict with or interfere with federal authority over the same

activity.’” (quoting Missouri Pacific R. Co. v. Stroud, 267 U.S. 404, 408 (1925); and Chicago &

North Western Transp. Co. v. Kalo Brick & Tile Co., 450 U.S. 311, 318-319 (1981)).

Both the Primary Jurisdiction Doctrine and the Filed Rate Doctrine counsel against

judicial involvement in the rate-setting process of the ICC.5 Relator’s claims do not challenge

the rates set by the ICC at all, but merely seek to establish the falsity of Nicor’s statements to the

government and its invoices through its application of the incorrect rates for gas used by

customers in prior periods when the ICC-approved rates were lower. See generally M/G Transp.

Servs., Inc. v. Water Quality Ins. Syndicate, 234 F.3d 974, 978 (6th Cir. 2000) (“An FCA action

is not converted into a Clean Water Act action simply because a violation of the Clean Water Act

is a predicate to establishing the falsity of a claim, or may be used as a measure of damages

under the FCA.”); Health Care Industry Liab. Ins. Program v. Momence Meadows Nursing

Center, Inc., 566 F.3d 689 (7th Cir. 2009) (holding that to show liability under the FCA and

IWRPA, a plaintiff need only show that the defendant falsely billed the government, not that

damages resulted from the underlying challenged conduct). The fact that liability under the FCA

5 See, e.g., Natural Gas Pipeline Co. of America v. Federal Power Comm’n, 141 F.2d 27 (7th Cir. 1944) (plaintiff argued that rate charged by utility company should be adjusted to reflect decrease in wholesale price of gas, and asked court to adjust the rate); H.J., Inc. v. Northwestern Bell Tel. Co., 954 F.2d 485 (8th Cir. 1992) (plaintiff’s claim attacked rate itself and asked court to “second-guess” the agency); Sun City Taxpayers’ Ass’n v. Citizens Utilities Co., 45 F.3d 58 (2d Cir. 1995) (plaintiff asserted that the utility company used accounting fraud to misrepresent its operating costs to the equivalent of the ICC and that this misrepresentation caused the utility rates to be increased).


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and IWRPA is premised on Nicor’s application of the incorrect rate for gas used does not

involve a challenge to ICC’s regulatory authority to set such rates.

Finally, Burford abstention has no application here. Burford counsels against federal

judicial involvement in an existing state administrative process involving state law and policy.

See Adrian Energy Assocs. v. Michigan Pub. Serv. Comm’n, 481 F.3d 414, 423 (6th Cir. 2007)

(“The fundamental concern in Burford is to prevent federal courts from bypassing a state

administrative scheme and resolving issues of state law and policy that are committed in the first

instance to expert administrative resolution.”). There also is no ongoing state or administrative

proceeding in favor of which this Court could abstain. Nicor’s reliance on U.S. ex rel. Hartigan

v. Palumbo Bros., Inc., 797 F. Supp. 624 (N.D. Ill. 1992) (which applied Colorado River, not

Burford), is thus misplaced. There, the district court dismissed without prejudice the federal

proceeding in favor of ongoing proceedings in state court and with leave to reinstate. Id.

But even if there were a preexisting regulatory process that could implicate Burford, the

doctrine is still inapplicable. Under Burford, a federal court may choose to abstain (1) in a case

that raises “difficult questions of state law” implicating significant state policies, or (2) where the

exercise of concurrent federal jurisdiction would “be disruptive of state efforts to establish a

coherent policy with respect to a matter of substantial public concern.” See New Orleans Public

Serv., Inc. v. Council of City of New Orleans, 491 U.S. 350, 361 (1989) (quoting Colorado River,

424 U.S. at 814). Neither situation applies; the FCA raises questions of federal law, not state law.

II. RELATOR’S COMPLAINT DOES NOT RUN AFOUL OF THE PUBLIC DISCLOSURE BAR

A. The Additional Sources Identified By Nicor Did Not Publicly Disclose Nicor’s Violations Of The FCA Or IWRPA

The Dikcis Complaint and news stories discussed by Defendant’s Motion fail to expose

the critical “allegations or transactions” of the false claims act violations contained in Relator’s


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Complaint and, therefore, are not “public disclosures” pursuant to the false claims acts.

Specifically, the Dikcis Complaint was brought by a single customer of Nicor based on his own

bill. He did not have knowledge of any of the widespread conduct within Nicor as detailed by

Relator based on her personal knowledge. The Dikcis complaint made no mention of Nicor

submitting any false statements to the government, its receipt of government funds, or the

manner in which Nicor knowingly caused payments to be made with government funds based on

false statements. See, Complaint Counts I-IV. To the contrary, the Dikcis complaint and news

stories essentially reveal overcharges to residential gas customers. While it is true that the Dikcis

Complaint and news stories contain some information alleged by Relator (i.e. that Nicor

employed an “underestimating/overbilling” scheme), the disclosure of the scheme -- by itself –

does not lead a reader to conclude that Nicor defrauded the federal or Illinois state governments.

U.S. ex rel. Feingold v. Administar Fed. Inc. 324 F.3d at 442, 496 (7th Cir. 2003) (“purpose of a

public disclosure is to alert the responsible authority that fraud may be afoot”).

This distinction was recognized in U.S. ex rel. Liotine v. CDW Gov’t, Inc., No. 05-33,

2009 WL 3156704, at *6 (S.D. Ill. Sept. 29, 2009) (Ex. D). There, the court held that

information contained in a university newsletter, alerting readers that “the Defendant [a shipper]

[was] overcharging the University for shipping” failed to bar the relator’s claims because the

publication did “not discuss the Defendant’s scheme to overcharge the Government or commit

the various other frauds alleged by the Plaintiff, nor … [did] it discuss an overall practice by

Defendant or industry’s scheme to overcharge the Government.”6 Id. Here, no “public source”

6 The Court also held the newsletter itself was not contemplated by the FCA as a potential source of a public disclosure. Specifically, the Court held the newsletter “was not a ‘news media’ nor did it place the ‘critical elements exposing’ the fraud in the public domain.” Id.


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identified by Nicor disclosed any effort by Nicor to defraud the government and abuse the

LIHEAP program.

Indeed, the relevant test is whether “a public disclosure ‘bring[s] to the attention of the

relevant authority that there has been a false claim against the government.” Glaser v. Wound

Care Consultants, Inc., 570 F.3d 907, 913 (7th Cir. 2009). The Court of Appeals in Glaser

explained:

The public-disclosure bar is designed to prevent lawsuits by private citizens in such situations [where the government fraud is already in the public domain] because ‘[w]here a public disclosure has occurred, that authority is already in a position to vindicate society’s interests, and a qui tam action would serve no purpose.’

Glaser, 570 F.2d at 913. Barring Relator’s claims here – where no disclosure of the false claims

act allegations were made public – would frustrate the aims of the public disclosure bar. See

U.S. ex rel. Mathews v. Bank of Farmington, 166 F.3d 853, 860-61 (7th Cir. 1999) (“the [public

disclosure] jurisdictional bar [should not be] excessively narrowly construed;” instead, it is “to

be understood in the context of the 1986 amendments, which . . . broaden the qui tam provisions,

increasing incentives for the exposure of fraud.”).

Similarly, the 2008 letter Nicor allegedly received from the ICC does not suffice to

constitute a “public disclosure” of allegations or transactions in an audit or investigation. First,

“the public official to whom the information is disclosed must be one whose duties extend to the

claim in question in some significant way.” Mathews, 166 F.3d at 861. Here, the ICC is not

charged with investigating false claims act violations. The Seventh Circuit held, “[c]learly,

however, not all disclosure to a public official is public disclosure,” explaining that if the bank’s

fraud on federal farm programs alleged by relator had been revealed to “a postal carrier or to the

Governor of Guam” it would not qualify as a public disclosure. Id.; see also, Glaser, 570 F.3d at


11

914 (public disclosure where “appropriate entity responsible for investigating claims of Medicare

abuse had knowledge of possible improprieties” alleged in relator’s complaint). Moreover, the

information contained in the 2008 letter, like the Dikcis complaint and news stories discussed

above, fails to mention, much less provide the basis for, Relator’s “allegations or transactions”

fraud against the Government.

B. Even If This Court Holds That Relator’s Claims Were Publicly Disclosed Within The Meaning of the FCA, Relator Qualifies as an Original Source

Nicor argues that Relator did not have direct knowledge of the information upon which

her allegations are based because she “only learned of the allegedly fraudulent

‘underestimating/overbilling scheme’ due to Nicor Gas customers who allegedly called to

complain.” Def. Br. at 13. This is pure fantasy. Relator specifically alleges that her knowledge

was derived from numerous aspects of her employment at Nicor, including (1) her access to

Nicor’s proprietary database; (2) her interface with Nicor management; and (3) her duties

fielding customer calls and complaints. ¶¶3, 4, 5, 7. When the Complaint was filed, Relator

had been employed by Nicor for four years. ¶7. Moreover, the analysis in Glaser actually

supports a finding by this Court that Relator has direct knowledge in this case. In Glaser, the

Seventh Circuit held that the relator did not have direct knowledge of the defendant’s fraudulent

billing practices because the only information relator possessed was based on a call she received

from an attorney “who told her that Wound Care might have improperly billed Medicaid for her

treatment.” Glaser, 570 F.3d at 909, 921. In contrast, the Relator in this case knows about the

fraudulent billing practice because she works for the company; her knowledge is therefore

“direct” because it is first-hand or “marked by absence of an intervening agency.” U.S. ex rel.

Lamers v. City of Green Bay, 998 F.Supp. 971, 982 (E.D. Wis. 1998).


12

Nicor also argues that Relator cannot qualify as an original source because she had no

knowledge that the bills were excessive or how billing should have been calculated. Again,

Nicor is wrong as the Complaint specifically alleges how the billing should have been calculated.

¶¶46-55. Relator’s knowledge of the applicable regulations is within the scope of her duties as a

customer service representative at Nicor whose job included resolving customer bills. ¶¶79, 82.

Moreover, even if the Court were to find that Relator is not an original source of some core

allegations in her Complaint (i.e. those claims related to Nicor’s submission of false claims), a

Relator “need not have direct knowledge of all of the vital ingredients in a fraudulent

transaction” but should be “aware of some essential piece of information.” Lamers, at 982.7

III. RELATOR’S COMPLAINT SATISFIES RULE 9(B)

“[I]n the context of alleged False Claims Act violations, plaintiffs must link specific

allegations of fraud to claims for government payment,” in order to meet Fed. R. Civ. P. 9(b).

Mason v. Medline Indus., Inc., No. 07 C 5615, 2009 WL 1438096 at * 2, (N.D. Ill. May 22,

2009) (Ex. E) (citing Garst v. Lockheed-Martin, 328 F.3d 374, 378 (7th Cir. 2003)). Relator’s

Complaint contains specific allegations of fraud linked to claims for government payment (i.e.

bills for payment presented to government grant recipients (LIHEAP) and government entities

such as Glenwood Medical Center).

Nicor argues that Relator’s complaint fails to meet Rule 9(b) because it does “not allege

that any specific claim was submitted to the government by Nicor Gas.” Def. Br. at 14. This

argument misapprehends the requirements for liability. Specifically, 31 U.S.C. § 3729(a)(1)

imposes liability when a party “knowingly presents, or causes to be presented, a false or

7 Should this Court determine that Relator’s claims should be barred pursuant to the public disclosure requirement, she seeks leave to conduct discovery on the issue of jurisdiction and leave to amend her complaint.


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fraudulent claim for payment or approval….” Likewise, 31 U.S.C. § 3729(a)(2) imposes liability

when a party “knowingly makes, uses, or causes to be made or used, a false record or statement.”

See e.g., U.S. v. Bornstein, 423 U.S. 303 (1976) (subcontractor caused contractor to submit false

claims to the government). With respect to LIHEAP, Relator’s claims essentially are that

Nicor’s Assurances were false, that it violated applicable regulations and false or fraudulent bills

were submitted for payment with LIHEAP funds.8 ¶¶97-99.

Nicor submitted the false written Assurances directly to a government body overseeing

the LIHEAP program. ¶¶42, 43 and Exhibit C. Moreover, Illinois state regulations, pertaining

to the sale of natural gas to all customers also prohibit Nicor from profiting on the sale of gas.

¶¶46-50. When it submitted the false Assurances, “Nicor knowingly made false statements to

the govern[ment] when it agreed to uphold certain Assurances and abide by Illinois regulations,

including a prohibition against profiting from the sale of natural gas, as preconditions to

receiving federal and state LIHEAP funds, while it was simultaneously engaged in a scheme to

overcharge customers for natural gas.” ¶97. Nicor made false statements in order to participate

in the LIHEAP program and receive the grant of government funds, and then made false

statements in invoices sent to its customers who received LIHEAP assistance in order to draw

down on the balance on each account. ¶¶97-98. Defendant would have this Court believe that

because Relator cannot specifically describe bills that were never sent to the government

8 Relator sets forth in detail Nicor’s overbilling of four LIHEAP recipients (“LIHEAP customers 1-4”). Complaint at ¶¶65-72. For each of these LIHEAP customers, Relator details the dates Nicor estimated the usage (rather than reading the meter), Nicor’s estimates of each customer’s likely usage of gas, when the meter was actually read, the price fluctuations of gas over the months included in the bill, and the “corrected” bill the customer received (showing that the then-current price per therm was applied). Id. at ¶¶65-72. Relator’s Complaint also attaches Billing Transcript Reports (“BTRs”) from Nicor’s database, showing the bills presented to LIHEAP customers 1-4, including inter alia, the invoice number, the billing cycle, amount of bill, meter dial reading, cubic feet of gas, percent of gas billed compared with the same period last, therms, and price for gas during the billing period, which are attached to the Complaint. See, Exhibits to the Complaint E-I.


14

directly, because they were not required by the LIHEAP program, her case should be dismissed.

This is absurd. Moreover, the 2009 amendments to the federal False Claims Act changed its

liability portions, including § 3729(A)(1)(B),9 which now imposes liability on a party who

“knowingly makes, uses, or causes to be made or used, a false record or statement material to a

false or fraudulent claim.” The 2009 amended FCA omits the words “to the government” and

now expands liability when the “false claims” are presented to “a contractor, grantee, or other

recipient, if the money or property is to be spent or used on the Government’s behalf or to

advance a Government program or interest.” Here, Nicor submitted false claims to LIHEAP

recipients who are undoubtedly “grantees” of money that “is to be spent or used on the

Government’s behalf or to advance a Government program or interest.”

Nicor argues that Relator’s allegations regarding state and federal government direct

consumers are not sufficient because she does not allege “how much they were billed, how much

they paid, who submitted the bills to these customers, or when the bills were sent.” Def. Br. at

14. This is not true. The government bills on their face, which were attached to Relator’s

Complaint as Exhibit M, show in the “dashboard section,” important details such as the address

to which the bill was sent, information about the “last payment” date, the “last bill” date, the

“next bill” date, the “current balance” and the “previous bill” amount. While it is true that some

of the information pertaining to the amount of gas used and price charged is not alleged by

Relator with regard to direct government purchasers (such as Glenwood Medical Center), her

claims should not be dismissed because Relator is able to demonstrate enough details of the false

claims submitted to these entities through other sources of information. U.S. ex rel. Grenadyor

v. Ukranian Village Pharmacy, Inc., No. 09 C 7891, 2012 WL 4742827 (N.D. Ill. Sept. 5, 2012)

9 Section 3729(a)(1)(B) is retroactive and covers claims pending on or after June 7, 2008. See also, U.S. ex rel. Yannacopoulos v. General Dynamics, 652 F.3d 818, 822 fn. 2 (7th Cir. 2011).


15

(Ex. F) (failure to provide details about “a single specific billing submitted to the government,”

is not fatal in the Rule 9(b)(6) context, “when sufficient other detail is supplied.”) The Court of

Appeals has acknowledged that “[w]e don’t think it essential for relator to produce the invoices

(and accompanying representations) at the outset of the suit” because “much knowledge is

inferential.” U.S. ex rel. Lusby v. Rolls-Royce Corp, 570 F.3d 849, 853-855 (7th Cir. 2009)

(overturning dismissal of qui tam claims because the inferential knowledge relator relied upon

about the submissions to the government was “plausible.”)

Nicor argues that Realtor’s claims should be dismissed because she does not allege that a

receipt or certificate was received. See 31 U.S.C.§ 3729(e)(4). Relator alleged that LIHEAP and

direct government pay customers received false or fraudulent bills, which she viewed and

attached to her Complaint, showing that these customers had paid for more gas than they

received. ¶¶65-73, 77. Relator is not required to allege that the wrong quantity of gas was

provided to meet Rule 9(b), pursuant to 31 U.S.C. § 3729(e)(4). Relator alleges not that Nicor

billed for an incorrect quantity, but that it billed too much for the quantity provided, thus, it is

still in receipt of government money and gas to which it is not entitled. ¶¶ 99-100. This is more

than sufficient. Lusby, 570 F.3d at 854-55 (“[i]t is enough to show, in detail, the nature of the

charge, so that vague and unsubstantial accusations of fraud do not lead to costly discovery”).

CONCLUSION

For the foregoing reasons, Defendants’ motion to dismiss should be denied.


16

Dated: December 17, 2012 Respectfully submitted,

/s/ Michael J. Barry

Jonathan D. Karmel THE KARMEL LAW FIRM 221 North La Salle Street, Suite 1414 Chicago, IL 60601 Tel: 312-641-2910 Fax: 312-641-0781

Michael J. Barry (pro hac vice)

GRANT & EISENHOFER P.A. 123 Justison Street Wilmington, DE 19801

Telephone: (302) 622-7000 Facsimile: (302) 622-7100

Reuben A. Guttman (pro hac vice) GRANT & EISENHOFER P.A. 1920 L Street, N.W., Suite 400 Washington, DC 20036 Telephone: (202) 386-9500 Facsimile: (202) 386-9505

Shehzad F. Roopani (pro hac vice) GRANT & EISENHOFER P.A. 485 Lexington Avenue, 29th Floor New York, NY 10017 Telephone: (646) 722-8500 Facsimile: (646) 722-8501

COUNSEL FOR RELATOR


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