Litigation > False Claims Act/Qui Tam Defense > State FCA Resource Center > CA Court of Appeal Finds No Public Disclosure in Case Alleging CFCA Violations
29 Jul '13

People ex. rel. Sounhein v. Big Oil & Tire Co., et al., Case No. C066021 (3d. App. Dist. July 11, 2013): In an unpublished decision filed July 11, 2013, a California Court of Appeal reversed a trial court’s dismissal of qui tam plaintiff Greg Sounhein’s complaint alleging that Big Oil & Tire Company, an owner of 13 small town gas stations along California’s north coast, violated the California False Claims Act (CFCA). The Court of Appeal held that the claimed public disclosure did not trigger the CFCA’s jurisdictional bar.

Big Oil retained Sounhein’s company, SounPacific, to perform environmental services related to cleanup of releases from underground storage tanks on Big Oil properties. The parties agreed that Big Oil would pay SounPacific for its services after Big Oil received reimbursement from the California Underground Storage Tank Cleanup Fund (Fund). California law required Big Oil to pay for the services rendered within 30 days of Big Oil’s receipt of reimbursement from the Fund. By early 2005, a Fund manager became aware that Big Oil was not reimbursing its service providers within 30 days of claim reimbursements. SounPacific began to experience cash flow problems and, in July 2008, sued Big Oil, alleging that it retained the Fund’s reimbursements and, in some instances, diverted them to pay for Big Oil’s unrelated business expenses.

The trial court held that it lacked jurisdiction because the Fund became aware of the allegations as early as 2005, three years before Sounhein filed his complaint. The Court of Appeal reversed, holding that although the allegations were publicly disclosed before Sounhein brought suit, the allegations were not disclosed in a manner specified by the statute. The CFCA bars actions based on allegations that have been publicly disclosed “in a criminal, civil, or administrative hearing, in an investigation, report, hearing, or audit conducted by or at the request of the Senate, Assembly, auditor, or governing body of a political subdivision, or by the news media.” Although the defendants asserted that the information was disclosed during the Fund’s “own auditing process[,]” the Court of Appeal found that the public disclosure did not trigger the CFCA’s jurisdictional bar because there was no evidence that the audit was conducted “at the request of the Senate, Assembly, auditor, or governing body of a political subdivision.”

The Court of Appeal’s holding is a helpful reminder that public disclosure alone does not suffice to trigger the CFCA’s jurisdictional bar; the public disclosure must fall within the types specified in the statute.