Background
Congress established the Paycheck Protection Program in March 2020 to provide emergency forgivable loans to businesses affected by COVID-19. To obtain PPP funds, applicants had to certify eligibility and intended use of proceeds. CalCon Mutual Mortgage, a mortgage lender, received and had forgiven a $4,964,200 PPP loan.
Relator alleged CalCon made multiple misrepresentations in its loan application, including: (1) CalCon was categorically ineligible as a financial business primarily engaged in lending under 13 C.F.R. § 120.110(b); (2) it falsely certified lawful use of funds; (3) it falsely certified loan necessity when its revenues and profits did not decline during the pandemic; (4) it falsified its employee headcount; and (5) its certification that the application contained no false statements was itself false.
The district court dismissed the case, finding the FCA’s public disclosure bar barred the claim because CalCon’s NAICS code (522292, indicating a lending company) was publicly disclosed on PandemicOversight.gov, a federal government website tracking PPP loans. The court also found Relator failed to plausibly allege employee fraud and denied leave to amend.
The Court’s Holding
The Ninth Circuit reversed and remanded. Although assuming without deciding that PandemicOversight.gov qualifies as a federal report, the court held the public disclosure bar did not apply. A NAICS code showing a company engages in lending does not “substantially the same” publicly disclose that the company is categorically ineligible for PPP funds because statutory exceptions exist—including for mortgage servicing companies meeting specific criteria. Relator’s allegations addressing why those exceptions do not apply (e.g., CalCon offers jumbo loans that cannot be disbursed within the required 14-day window) were not shown to be publicly disclosed on that website.
The court established a new test for “news media” under the FCA’s public disclosure bar. “News media” means methods of communication primarily used to disseminate information about recent events of public interest, not every publicly available website. Courts should consider whether the source’s primary purpose is informing the public about recent events and whether it publishes mainly about itself or third parties using editorial judgment. A company’s own website—even if publicly accessible—does not qualify as “news media” merely because information about the company appears on it. CalCon’s website was not “news media” because the amended complaint contained no allegations suggesting its primary purpose was public education about recent events or that the public reasonably would describe it as such in everyday speech.
On the employee headcount claim, the court agreed Relator’s speculation—that 432 employees could not work from a 5,000-square-foot headquarters, ignoring ten other offices and remote work—failed to state a plausible claim. However, the district court abused its discretion in denying leave to amend. One failure to cure deficiencies after a single voluntary amendment (made before receiving specific court feedback) does not establish futility; only “repeated failure” to cure previously identified deficiencies indicates amendment would be futile.
Key Takeaways
- The FCA’s public disclosure bar requires the plaintiff’s allegations and the publicly disclosed facts to be substantially similar in essential elements; a general classification or category does not bar claims based on allegations explaining why exceptions to that category do not apply.
- Company websites and self-published information, even if publicly available online, do not qualify as “news media” under the FCA unless the source primarily conveys information about recent public events with editorial judgment; mere online accessibility is insufficient.
- District courts should freely grant leave to amend dismissed FCA complaints; a single failure to cure deficiencies in a voluntary amendment prior to receiving court feedback does not demonstrate futility, and only repeated failures suggest amendment would be futile.
Why It Matters
This decision significantly narrows when the FCA’s public disclosure bar can dismiss qui tam actions, particularly in PPP fraud cases. By holding that a NAICS code alone—even on a government website—does not trigger the bar when exceptions exist, the court enables relators to proceed if they can plead facts showing the exceptions do not apply. This gives relators meaningful room to overcome the public disclosure bar in cases where the pleaded allegations add specific facts not evident from general classifications.
The court’s limiting definition of “news media” also matters broadly. As litigation increasingly involves arguments that online-available information triggers the public disclosure bar, this decision makes clear that “news media” requires both substance (conveying information about recent events) and editorial judgment (deliberate curation), not simply online presence. Finally, the reversal on amendment rights reinforces that FCA plaintiffs receive generous opportunities to correct pleading deficiencies before dismissal becomes final, particularly when they have not yet received specific judicial guidance.