Memorandum and Order — United States ex rel. Berkley v. Ocean State, LLC (D.R.I.)

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U.S. District Court for the District of Rhode Island · No. 1:20-cv-00538-JJM-PAS · Doc. 106 · 2025-09-26 · Docket on CourtListener

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UNITED STATES DISTRICT COURT 
FOR THE DISTRICT OF RHODE ISLAND 
 
UNITED STATES OF AMERICA, ex 
rel. JAMES R. BERKLEY, 
Plaintiff, 
v. 
OCEAN STATE, LLC; NEW HARBOR 
CAPITAL FUND, LP; NEW HARBOR 
CAPITAL FUND II LP; NEW 
HARBOR CAPITAL MANAGEMENT 
LP; BLUEPRINT TEST 
PREPARATION, LLC; and FYZICAL 
ACQUISITION HOLDINGS, LLC, 
Defendants. 
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C.A. No. 20-cv-538-JJM-PAS 
 
MEMORANDUM AND ORDER 
JOHN J. MCCONNELL, JR., Chief Judge, United States District Court. 
Under the qui tam provisions of the False Claims Act (“FCA”), 31 U.S.C. 
§ 3730, Relator James R. Berkley filed this lawsuit against Defendants Ocean State, 
LLC, Blueprint Test Preparation, LLC, Fyzical Acquisition Holdings, LLC (“PPP 
Recipients”), New Harbor Capital Fund LP, New Harbor Capital II LP, and New 
Harbor Capital Management LP (“New Harbor”),  alleging that they violated the FCA 
by applying for and receiving Paycheck Protection Program (“PPP”)1 funds, and 
 
1 In response to the COVID-19 pandemic, Congress passed the Coronavirus 
Aid, Relief, and Economic Security Act (“CARES Act”).  This law, among other things, 
established the Paycheck Protection Program that allowed small businesses 
adversely affected by COVID-19 to apply for and receive a loan to pay for, among 
other things, payroll costs.  Various regulations and restrictions applied to PPP 
applicants and recipients including those that relate to the size of the company (the 
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getting loan forgiveness on those loans, when they knew they did not qualify.  
Defendants moved to dismiss the case, which the Court denied.  Now, with the record 
fully developed and Mr. Berkley’s allegations tested during discovery, he filed a 
Motion for Partial Summary Judgment and Defendants filed a Motion for Summary 
Judgment.  ECF Nos. 64, 75.  Because the Court finds that discovery has not borne 
out Mr. Berkley’s allegations made to defeat the public disclosure bar, it GRANTS 
Defendants’ motion based on that FCA provision.  ECF No. 75.  The Court DENIES 
Mr. Berkley’s Partial Motion for Summary Judgment.  ECF No. 64. 
I. 
BACKGROUND 
The facts here are extensive so the Court will only recount those facts that are 
relevant to the disposition of this case.  
This lawsuit is against six companies.  The PPP Recipients applied for and 
received PPP loans and loan forgiveness.  The three New Harbor Defendants are 
private equity firms and the management company that employs the people who 
manage the investments.  None of these entities applied for or received PPP loans.   
Mr. Berkley’s initial dispute here had nothing to do with the loans the PPP 
Recipients ultimately sought.  It started with his broken-down landlord-tenant 
relationship with Ocean State.  When the COVID-19 pandemic hit businesses across 
the globe, Ocean State’s CEO, John Roselli emailed its landlords, including 
Mr. Berkley, notifying them that Ocean State believed it would not be able to pay its 
 
affiliation requirement) and whether the loan is necessary (the necessity 
requirement). 
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rent.  Mr. Berkley spoke with Mr. Roselli after this email and suggested that Ocean 
State get the rent money from New Harbor; he believed that New Harbor’s controlling 
investment in Ocean State would require New Harbor to step in to make the 
payments.  Mr. Roselli made it clear that that was not going to happen.   
To pressure Ocean State to settle the rent dispute, Mr. Berkley alleged that he 
began investigating its PPP loan applications.  His investigation included reading 
publicly available information and speaking with Ocean State employees and others 
with knowledge of the fraud.  Along with this information, his professed expertise in 
private equity allowed him to, mosaic-style, discern the PPP Recipients’ knowingly 
fraudulent loan applications and New Harbor’s complicity and encouragement in the 
fraud.   
Mr. Berkley filed a complaint under the FCA’s qui tam provision, which 
encourages private citizens, often whistleblowers with insider information, to come 
forward with claims of fraud on the government.  Mr. Berkley amended it twice so 
the Second Amended Complaint (“Complaint”) is the operative one.  ECF No. 28.  In 
that Complaint, Mr. Berkley alleged that the PPP Recipients committed fraud 
because they falsely certified that they met the CARES Act’s affiliation and necessity 
requirements–essentially he asserted that Ocean State, Blueprint, and Fyzical did 
not meet the size requirement and they had plenty of funds available to them via New 
Harbor, a well-capitalized private equity firm, so they did not qualify for a PPP loan.  
He alleged that New Harbor’s liability is rooted in its ability to direct and control the 
PPP Recipients’ actions.   
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All Defendants moved to dismiss his Complaint on the grounds that it was 
barred by the public disclosure provision and on substance for failure to state a claim.  
ECF No. 29.  The Court denied the motion, finding Mr. Berkley’s allegations, taken 
as true, were enough to confer jurisdiction and state a claim.  ECF No. 33.  
Specifically, the Court determined that Mr. Berkley’s allegations that his 
investigation of the fraud and professed expertise in private equity were sufficient to 
find that the public disclosure bar did not apply on the face of the Complaint.2  Now 
that discovery is completed, Defendants move for summary judgment and 
Mr. Berkley moves for partial summary judgment.  Defendants raise the public 
disclosure bar again, arguing that discovery has not borne the fruit Mr. Berkley 
promised in opposing that bar at the motion to dismiss stage.3     
II. 
STANDARD OF REVIEW 
A party is entitled to summary judgment if the movant shows there is “no 
genuine dispute as to any material fact and the movant is entitled to judgment as a 
matter of law.”  Fed. R. Civ. P. 56.  A party can show a genuine dispute by citing to 
 
2 At the time of the motion to dismiss, the parties mainly focused the Court on 
the Daily Beast article that discussed the appropriateness of other companies, not 
Defendants, filing PPP applications when they may not have met the SBA 
requirements.  The information both parties invoke here comes from the Small 
Business Administration (“SBA”) PPP loan data, New Harbor’s website, press 
releases issued by New Harbor and republished by third-party news source websites, 
and a Daily Beast article.   
3 These motions also argue that there are no disputes of material fact—
Mr. Berkley argues that the undisputed evidence shows that he has met the elements 
of his FCA claims and damages and Defendants counter that the undisputed evidence 
shows that he has not, or at the very least, argues that there are disputes particularly 
as to scienter, that a jury should decide. 
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materials in the record, including “depositions, documents, electronically stored 
information, affidavits or declarations, stipulations ... admissions, interrogatory 
answers, or other materials,” or by showing that the materials cited either do not 
establish a genuine dispute or are not supported by admissible evidence.  Id.  
Summary judgment is mandated against a party who, given adequate time for 
discovery, “fails to make a showing sufficient to establish the existence of an element 
essential to that party’s case ... on which that party will bear the burden of proof at 
trial.”  Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).  A complete failure of proof 
of an essential element shows that there is “no genuine issue as to any material fact” 
because if one element fails, all other facts are rendered irrelevant; it entitles the 
moving party to “judgment as a matter of law” because, by definition, the nonmoving 
party cannot carry their burden at trial.  Id. at 323. 
III. 
DISCUSSION 
Because Defendants argue that the public disclosure bar should be applied 
here and an answer in the affirmative would deprive this Court of subject matter 
jurisdiction, the Court will address that argument first. 
The FCA contains qui tam provisions that encourage private citizens to come 
forward with claims of fraud on the government.  “The FCA allows private persons, 
called relators, to bring qui tam actions on behalf of the United States against persons 
or entities who knowingly submit false claims to the federal government.”  United 
States ex rel. Ondis v. City of Woonsocket, 587 F.3d 49, 53 (1st Cir. 2009) (citing 31 
U.S.C. § 3730(b)(1)).  The United States can decide to prosecute the case, but if it 
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declines to do so, “the relator may pursue the action on its behalf.”  Id. (citing 
§ 3730(b)(4)).  “Either way, the relator is eligible to collect a portion of any damages 
awarded.”  Id. (citing § 3730(d)).   
Because of this potential financial reward, the FCA contains conditions to limit 
or block a qui tam action “to walk a fine line between encouraging whistle-blowing 
and discouraging opportunistic behavior.”  United States ex rel. Duxbury v. Ortho 
Biotech Prods., L.P., 719 F.3d 31, 33 (1st Cir. 2013) (citations omitted).  The public 
disclosure bar is one such condition; the statute provides that such action should be 
dismissed “if substantially the same allegations or transactions” “were publicly 
disclosed in a Federal criminal, civil, or administrative hearing,”; “in a congressional, 
Government Accountability Office or other Federal report, hearing, audit, or 
investigation, or from the news media, unless the action is brought by the Attorney 
General or the person bringing the action is an original source of the information.”  
31 U.S.C. § 3730(e)(4)(A).  The “bar is designed to foreclose qui tam actions in which 
a relator, instead of plowing new ground, attempts to free-ride by merely 
repastinating previously disclosed badges of fraud.”  Ondis, 587 F.3d at 53. 
Public disclosure occurs when allegations of fraud are placed in the public 
domain.  In analyzing whether this bar applies here, the Court must undertake a 
three-part inquiry.  The Court asks: “(1) whether there has been a prior, public 
disclosure of fraud; (2) whether that prior disclosure of fraud emanated from a source 
specified in the statute’s public disclosure provision; and (3) whether the relator’s qui 
tam action is ‘based upon’ that prior disclosure of fraud.”  United States ex rel. Poteet 
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v. Bahler Med., Inc., 619 F.3d 104, 109 (1st Cir. 2010).  If the undisputed record 
evidence here militates three “yes” answers, then the public disclosure bar applies, 
and this Court does not have jurisdiction unless the relator is the “original source” 
under 31 U.S.C. § 3730(e)(4)(B).  Id.4   
A. 
Disclosure  
Defendants argue that the essential elements of Mr. Berkley’s claims–that 1) 
each PPP Recipient applied for a PPP loan and certified their applications, 2) New 
Harbor invested in those businesses, making them affiliates as defined in the CARES 
Act, and 3) the information that New Harbor and the PPP Recipients had a certain 
number of employees and New Harbor’s funds held assets under management such 
that they could not meet the affiliation and necessity requirements could be found in 
publicly available sources.  Mr. Berkley argues that Defendants have not identified a 
single source of alleged public disclosure of the fraud. 
 To be a relevant disclosure, it “must present either a direct allegation of fraud, 
or else both a misrepresented state of facts and a true state of facts such that the 
recipient may infer fraud.  The misrepresented facts and the true facts may also 
appear in several separate disclosures that combine to create an inference of fraud.”  
United States ex rel. Conrad v. Abbott Lab’ys, Inc., Civil Action No. 02-11738-RWZ, 
2013 WL 682740, at *3 (D. Mass. Feb. 25, 2013) (citing Poteet, 619 F.3d at 110, 110 
n. 6).  In this case, Defendants argue that the misrepresented state of facts (that the 
 
4 Mr. Berkley does not allege or argue that he qualifies as an “original source” 
of the fraud so the Court will not elaborate on the applicability of that exception.  
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PPP Recipients falsely certified compliance with the size and necessity requirements 
and falsely submitted claims for loan forgiveness) and the true facts (detailed 
corporate information about each PPP Recipient such as the number of employees 
and its relationship with New Harbor) were all publicly available in the identified 
sources. 
 To start, it is undisputed that, before he set out to file his case, Mr. Berkley 
had no documents from the PPP Recipients related to the loans, never spoke with any 
of their employees about the applications or any potential fraudulent scheme, did not 
work for any of the Defendants, and had no private information about New Harbor’s 
assets under management or fee structure.  Moreover, the essential elements of his 
FCA claim were all publicly available.  Each PPP Recipient applied for a loan and 
completed the certifications.  In July 2020, the Department of the Treasury published 
the PPP loan data and Mr. Berkley acknowledged that “[t]he fact that the three 
portfolio companies applied for PPP loans is something [he] learned from going to the 
[Treasury] website.”  ECF No. 78 ¶ 202.  The day after he learned this information, 
he emailed Mr. Roselli related to the rent dispute, noting that Ocean State took PPP 
money.  As to the element of whether Defendants falsely certified that they met the 
size, affiliation, and necessity requirements, the PPP Recipients’ and New Harbor’s 
employee counts and assets were publicly disclosed on ZoomInfo web pages, which 
Mr. Berkley relied on in alleging fraud in his original complaint.  See ECF No. 1 at 30-
31.   
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As to New Harbor’s role, Mr. Berkley testified that the “fact that New Harbor 
had an investment [in] Ocean State. . . was publicly available in the news media at 
the time [he] filed this lawsuit.”  ECF No. 78 ¶ 215.  And documents produced during 
discovery show that it was publicly known that New Harbor invested in each PPP 
Recipient, making the companies affiliates.  See id. ¶¶ 20, 67, 114.  New Harbor’s 
assets were published in the Wall Street Journal and other news media sources 
published before Mr. Berkley filed his Complaint.  Id. ¶ 212.  And he confirmed that 
he saw those public sources, testifying that he “learned about” New Harbor’s “assets 
under management” by “going online” where it was “publicly available.”  Id. ¶ 213. 
The contradiction of PPP Recipients’ certifications of size, necessity, and 
affiliation in their publicly available PPP applications and the true facts of their 
company data and affiliations with private equity and New Harbor, was publicly 
available such that it could “lead to a plausible inference of fraud.”  Ondis, 587 F.3d 
at 54.  Even if “a person studying all of these sources would likely need substantial 
expertise in the field in order to find the alleged discrepancy[,] [] the only question is 
whether the material facts exposing the alleged fraud are already in the public 
domain, not whether they are difficult to recognize.”  Conrad, 2013 WL 682740, at *4 
(citing Ondis, 587 F.3d at 59–60).  Thus, the Court finds that the first element of the 
public disclosure bar has been met. 
B. 
Source 
Statutorily articulated sources are (1) “criminal, civil, or administrative 
hearing[s],” (2) “congressional, administrative, or Government Accounting Office 
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report[s], 
hearing[s], 
audit[s], 
or 
investigation[s],” 
or 
(3) 
“from 
the news media.”  Poteet, 619 F.3d at 113 (quoting Graham Cnty. Soil & Water 
Conservation Dist. v. U.S. ex rel. Wilson, 559 U.S. 280, 285-86 (2010)).  The 
information both parties invoke here comes from the Small Business Administration 
(“SBA”) PPP loan data, New Harbor’s website, New Harbor’s press releases issued 
and then republished by third-party news source websites, and a Daily Beast article.  
The Court determined on Defendants’ motion to dismiss that these are all appropriate 
statutory sources, so this element is satisfied.   
C. 
Basis 
The Court’s decision declining to dismiss this case based on the public 
disclosure bar was rooted in Mr. Berkley’s allegations that his investigation and 
expertise in private equity formed the basis for his claim, not information in the 
public.  United States ex rel. Berkley v. Ocean State, LLC, C.A. No. 20-cv-538-JJM-
PAS, 2023 WL 3203641, at *5 (D.R.I. May 2, 2023).  The Court relied on his assertions 
that he conducted his own research leading him to draw inferences of fraud that the 
government could not see and of which it was not put on notice.  He alleged that he 
detected “Defendants’ alleged role in defrauding the government through his own 
investigation and knowledge” and “that he was only able to discern the fraud through 
his ‘experience and knowledge of the private equity fund model and compensation 
structure, coupled with his investigation and analysis into New Harbor Capital and 
its portfolio companies.’” Id. (quoting ECF No. 28 ¶ 160.)  Mr. Berkley now argues 
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that he discovered the fraud through a “mosaic theory”5 where he gathered seemingly 
innocuous pieces of public and nonpublic information from various sources and 
formed fraud allegations that were materially advanced through his independent 
analysis, application of industry knowledge, and direct communications with 
Mr. Roselli and other insiders.  Discovery has not borne this out. 
An action is considered “based upon” previous public disclosures if “the 
relator’s allegations are substantially similar to allegations or transactions already 
in the public domain at the time he brings his qui tam action.”  Ondis, 587 F.3d at 58. 
A complaint “is based on public disclosures for FCA purposes if the facts publicly 
available to [relator] could have been synthesized to form the same inference” as 
alleged in the complaint.  United States ex rel. Solomon v. Lockheed Martin Corp., 
878 F.3d 139, 145 (5th Cir. 2017) (citing United States ex rel. Jamison v. McKesson 
Corp., 649 F.3d 322, 331 (5th Cir. 2011)).   
The undisputed facts in the record show that Mr. Berkley’s fraud claims 
against these Defendants are substantially like transactions appearing in the public 
 
5 There is some debate over whether either party is attempting to apply the 
original source exception standard here when Mr. Berkley asserts that he has not 
invoked that exception.  The Court believes, based on its reading of the briefs and 
case law, that confusion results from Mr. Berkley’s mosaic theory because he is 
essentially arguing that he cobbled together the fraud from public sources that he 
investigated, along with his expertise.  This is irrelevant because Mr. Berkley does 
not claim he is an original source but the Court notes that the First Circuit has 
declined to “join other circuits in holding that discovery and synthesis of information 
from different public sources during the course of an independent investigation can 
result in original sourcing[.]”  U.S. ex rel. Est. of Cunningham v. Millennium Lab’ys 
of Cal., Inc., 713 F.3d 662, 674–75 (1st Cir. 2013). 
  
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domain.  The public disclosures of PPP Recipients’ applications revealed the 
information underlying the fraudulent scheme Mr. Berkley alleged, including 
employee counts, affiliation with a private equity firm, New Harbor’s assets under 
management, and other public documents and websites confirming their eligibility 
(or ineligibility) for PPP loans and forgiveness.  He admitted that he found out that 
the PPP Recipients applied for PPP loans through the Department of the Treasury’s 
website and researched New Harbor’s assets under management, including its 
investments in the PPP Recipients by visiting public websites.  ECF No. 78 ¶¶ 199-
218.   
And as for his assertion that his Complaint was based on his experience with 
private equity, he conceded that his experience only informed his “allegation that 
New Harbor could have made cash available to the portfolio companies.”  ECF No. 78 
¶ 230.  But he also noted that to conclude this, he relied on two publicly disclosed 
facts: that New Harbor had assets and an equity investment in each PPP Recipient.  
Mr. Berkley also admitted that private equity structure and  “[t]he fact that a private 
equity sponsor can inject liquidity, can provide cash … to its portfolio companies” is 
“general industry knowledge.”  ECF No. 78 ¶¶ 231-234.   
As to whether his investigation led to discovery of the fraud, Mr. Berkley said 
in his Complaint that he communicated with numerous Ocean State employees but 
admitted during discovery that his only contact with six out of eleven individuals he 
named as sources was that they were copied on the email that Mr. Roselli sent to all 
Ocean State’s landlords about its inability to make rent.  Id. ¶ 226.  For example, 
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Ocean State physician Dr. Rocco Andreozzi testified that he never heard of 
Mr. Berkley.  Id. ¶ 229.  Of the others he said he spoke with, he testified that he did 
not know if any of them had any involvement with Ocean State’s PPP application.  
That was confirmed by Ocean State physician Dr. Scott Wilson and two other Ocean 
State employees, Dina D’Alfonso and Julie D’Alesandro, who testified that they did 
not share any information with him.  Id. ¶¶ 221, 225.  Thus, it is undisputed that 
Mr. Berkley’s investigation aimed at getting insider information from Ocean State 
employees bore no fruit.  
“To achieve its real purpose, the FCA should reward only those who come 
forward with original, direct, and independent knowledge of a fraud.”  Ondis, 587 
F.3d at 58 (citations omitted).  “Under that interpretation, the FCA’s real purpose is 
to reward whistleblowers with first-hand knowledge, not hard work and expertise.”  
Conrad, 2013 WL 682740, at *7.  Mr. Berkley’s mosaic-building fraud claims created 
using tiles gathered from the public domain does not adhere to Congress’ intent in 
passing the FCA.  Therefore, the third and final element of the public disclosure 
inquiry is satisfied. 
IV. 
CONCLUSION 
The Court concludes that, on the full summary judgment record, the three 
aspects of the public disclosure inquiry are met here.  The essential facts giving rise 
to an inference of fraud were publicly disclosed, the disclosure was through qualified 
sources according to the statute, and Mr. Berkley’s FCA action is based on those 
public disclosures.  There was no dispute that Mr. Berkley was not an original source 
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under the public disclosure provision.  Thus, the Court lacks subject matter 
jurisdiction, see Poteet, 619 F.3d at 109–110; Ondis, 587 F.3d at 53, and can go no 
further.   
The Court GRANTS Defendants’ Motion for Summary Judgment.  ECF No. 75.  
The Court DENIES Mr. Berkley’s Motion for Partial Summary Judgment.  ECF 
No. 64. 
 
IT IS SO ORDERED. 
 
John J. McConnell, Jr. 
_________________________________ 
John J. McConnell, Jr. 
Chief Judge 
United States District Court 
 
September 26, 2025 
 
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