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Cause of Action v. Chicago Transit Authority

United States Court of Appeals, Seventh Circuit

February 29, 2016

CAUSE OF ACTION, Plaintiff-Appellant,
v.
CHICAGO TRANSIT AUTHORITY, an Illinois municipal corporation, Defendant-Appellee

Argued September 10, 2015

Page 268

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 1:12-cv-09673 -- Robert M. Dow, Jr., Judge.

For Cause of Action, Plaintiff - Appellant: Daniel Z. Epstein, Attorney, David Fischer, Attorney, Cause of Action, Washington, DC.

For CHICAGO TRANSIT AUTHORITY, an Illinois municipal corporation, Defendant - Appellee: Rachel L. Kaplan, Attorney, Chicago Transit Authority, Law Department, Chicago, IL.

Before FLAUM, RIPPLE, and SYKES, Circuit Judges.

OPINION

Page 269

Ripple, Circuit Judge.

Cause of Action, a nonprofit government watchdog organization, brought this action against the Chicago Transit Authority (" CTA" ) under the qui tam provision of the False Claims Act (" FCA" or " Act" ), 31 U.S.C. § 3730. Cause of Action alleged that, for several decades, the CTA had been misreporting fraudulently transit data to the Federal Transit Administration (" FTA" ) in order to secure inflated federal grant allocations. The district court dismissed the action, holding that it lacked subject matter jurisdiction over Cause of Action's FCA claims because its allegations of wrongdoing had been publicly disclosed at the time the action was filed. We agree that the allegations had been publicly disclosed and therefore affirm the judgment of the district court.

I

BACKGROUND

A.

Under the Urbanized Area Formula Program (" UAFP" ), 49 U.S.C. § 5307, the FTA administers grant funding to large urban transit programs for " operating costs of equipment and facilities for use in public transportation." Id. § 5307(a)(1)(D). The statute requires grant recipients to submit " financial, operating, and asset condition information" about their transit systems to the National Transit Database (" NTD" ). Id. § 5335(a)-(c). The agency then apportions grants based, in part, on the number of Vehicle Revenue Miles (" VRM" ) reported to the NTD by the transit program. Id. § 5336(c)(1)(A)(i). According to the NTD, VRM accrue while a vehicle is " in revenue service," those miles for which a " vehicle is available to the general public and there is an expectation of carrying passengers." Nat'l Transit Database, 2006 Urbanized Area Reporting Manual, Glossary 384, 396 (2006), available at http://www.ntdprogram.gov/ntdprogram/pubs/ARM/2006/pdf/2006_Reporting_Manual_Glossary.pdf. Socalled " deadhead miles" --miles accumulated while a vehicle is out of revenue service--specifically are excluded from the VRM calculation. Id. at 352, 396.

The CTA is a municipal corporation providing public transportation services in the greater Chicago area; it receives federal grant funding through the UAFP. In 2005, the Illinois House of Representatives adopted Resolution Numbers 479 and 650, which, among other matters, directed the Illinois Auditor General (" IL-AG" ) to conduct a performance audit of the CTA. During the course of this audit, Thomas Rubin, a subcontractor on the IL-AG audit team, helped prepare a twenty-five page report titled " Chicago Transit Authority Overre-porting of Motor Bus Vehicle Revenue Miles," which examined in detail the CTA's VRM reporting practices (" Technical Report" ).[1] Mr. Rubin's Technical Report concluded that the CTA, from possibly as

Page 270

early as 1986, had been overstating its VRM when making its annual certifications to the NTD and, consequently, had received higher than justified UAFP grant disbursements. The Technical Report recommended that the CTA inform the FTA of the situation and become compliant by revising its reporting methodology.

In March 2007, the IL-AG released its final performance audit report (" Audit Report" ). On page seventy-two of the Audit Report, the IL-AG explained that its review, which included the Technical Report, had " raised questions about the accuracy of [the] CTA's reporting of revenue vehicle hours and miles" and concluded, based on the " clear[]...differences in reported hourly values for [the] CTA and the peer group," that the " CTA may [have been] ...


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