Memorandum and Order — No. 1:20-cv-00538 (Dkt. 106, D.R.I.)
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A Memorandum and Order, Document 106, filed September 26, 2025 in United States of America ex rel. James R. Berkley v. Ocean State, LLC, New Harbor Capital Fund, LP and other defendants, C.A. No. 20-cv-538-JJM-PAS (Case 1:20-cv-00538-JJM-PAS), in the U.S. District Court for the District of Rhode Island, signed by Chief Judge John J. McConnell, Jr. The relator filed a qui tam action under the False Claims Act, 31 U.S.C. § 3730, alleging that the defendants applied for and received Paycheck Protection Program funds and loan forgiveness when they knew they did not qualify. The court grants the defendants' motion for summary judgment (ECF No. 75) based on the public disclosure bar, denies the relator's motion for partial summary judgment (ECF No. 64), and concludes that it lacks subject matter jurisdiction.
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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 )
C.A. No. 20-cv-538-JJM-PAS
CAPITAL FUND, LP; NEW HARBOR )
CAPITAL FUND II LP; NEW )
HARBOR CAPITAL MANAGEMENT )
LP; BLUEPRINT TEST )
PREPARATION, LLC; and FYZICAL )
ACQUISITION HOLDINGS, LLC, )
Defendants. )
)
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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