Grynberg ex rel. United States v. Pacific Gas & Electric Co.

Citations: 562 F.3d 1032; 174 Oil & Gas Rep. 136; 2009 U.S. App. LEXIS 5912Docket: Nos. 06-8099, 06-8101, 06-8102, 06-8103, 06-8104, 06-8105, 06-8106, 06-8107, 06-8108, 06-8110, 06-8111, 06-8112, 06-8120, 06-8121, 06-8123, 06-8124, 06-8125, 06-8127, 06-8129, 06-8130, 06-8131, 06-8132, 06-8133, 06-8135, 06-8136, 06-8141, 06-8145, 06-8147

Court: Court of Appeals for the Tenth Circuit; March 17, 2009; Federal Appellate Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

Relator-Appellant Jack Grynberg appealed the dismissal of multiple qui tam cases against natural gas pipeline companies, arguing that the district court erred in ruling a lack of subject matter jurisdiction under 31 U.S.C. § 3730(e)(4). The district court dismissed the cases based on publicly disclosed allegations, determining that Grynberg was not an original source of the information. Since June 1997, Grynberg had filed seventy-three lawsuits claiming the defendants underpaid royalties to the government by misreporting natural gas measurements. Following limited discovery, a special master recommended dismissing forty cases under the public disclosure bar, while allowing thirty-three cases to proceed because they did not involve publicly disclosed allegations against the defendants. The district court, however, ultimately ruled all cases were barred, stating that the public disclosures were sufficient to alert the government to the alleged fraud and that Grynberg did not qualify for the original source exception. On appeal, Grynberg contested the district court's application of the public disclosure bar and the determination regarding his original source status. The review of these jurisdictional issues is conducted de novo, applying the same legal standard as the district court. The False Claims Act permits individuals to bring actions on behalf of the government against those who knowingly falsify claims, allowing relators to share in any recovery.

The FCA aims to enhance the Government's capacity to recover losses due to fraud, balancing incentives for whistleblowers with the need to discourage opportunistic claims. A relator’s qui tam action is barred if based on publicly disclosed allegations unless they can prove original source status. The burden of proof lies with the party asserting jurisdiction when challenged. To evaluate the public disclosure bar under the FCA, three criteria must be met: 1) the public disclosure must contain allegations from specified sources; 2) it must be deemed 'public' under the FCA; and 3) the relator's complaint must be 'based upon' this disclosure. If all three criteria are satisfied, the relator must demonstrate original source status to proceed.

In this case, the district court ruled that the public disclosure bar was triggered by two sets of documents: Senate Committee documents from the 1980s revealing widespread gas mismeasurement and details from a 1995 qui tam action involving multiple defendants that was dismissed for lack of specificity. The court found that these disclosures indicated an industry-wide issue and allowed the government to identify wrongdoers, rejecting the special master's narrower interpretation requiring specific identification of defendants. On appeal, the Relator does not contest the public nature of the documents or their source classification but challenges whether his complaints were 'based upon' these prior disclosures.

The determination of whether 'substantial identity' exists between publicly disclosed allegations and a qui tam complaint is crucial. The Relator contends that certain Defendants and mismeasurement techniques were not publicly disclosed, claiming that each mismeasurement technique constitutes a distinct claim of fraud. However, the court affirms the district court's view that these techniques are interrelated components of a broader fraudulent scheme involving the mismeasurement of natural gas volume and heating content to underpay royalties. The court agrees that the district court appropriately evaluated substantial identity based on the overarching fraudulent scheme rather than individual techniques.

Additionally, the court finds that the fraudulent scheme alleged in the 1997 complaints shares substantial identity with prior public disclosures, including Senate Committee documents and a 1995 lawsuit. The court references prior case law, specifically noting that the inclusion of additional details in a qui tam complaint does not negate the public disclosure bar’s application. It also addresses the sufficiency of public disclosures related to natural gas mismeasurement from industry members in relation to Defendants not explicitly named in these disclosures. Citing the Eleventh Circuit's decision in Cooper v. Blue Cross Blue Shield of Florida, the court highlights the necessity for allegations specific to a defendant to be publicly disclosed to potentially bar the qui tam action, emphasizing the statute's intent to encourage citizen involvement in uncovering fraud.

In United States ex rel. Fine v. Sandia Corp., the court addressed a case where the relator accused Sandia Corporation of misappropriating nuclear waste funds under the False Claims Act (FCA). Although Sandia was not specifically named in prior public disclosures from a General Accounting Office report and a congressional hearing, the court determined that these disclosures triggered the public disclosure bar because they sufficiently alerted the government to the likelihood of fraud at Sandia, given that they detailed the practices of other contractors. The court distinguished this case from Cooper, emphasizing that the nature of the disclosures involved easily identifiable government-controlled laboratories, as opposed to the more complex private insurance industry. This distinction aligned with Congress's intent to prevent FCA suits that the government could pursue independently while allowing those it could not. Other circuits have adopted similar reasoning, such as in United States v. Alcan Electrical and Engineering, where a qui tam action was barred due to public disclosures that indicated a narrow class of suspected wrongdoers. Likewise, in United States ex rel. Findley v. FPC-Boron Employees’ Club, the D.C. Circuit ruled that public allegations revealing fraud by federal employees’ clubs triggered the public disclosure bar, concluding that the relator’s claims largely repeated known information. The court rejected the relator's argument for similarity to broader fraud disclosures, underscoring the distinct nature of the identifiable actors involved in the alleged misconduct.

The Senate Committee documents and the 1995 qui tam action disclosed allegations against all Defendants in the Relator’s 1997 complaints, indicating a significant percentage of industry participants were implicated in mismeasurement practices. The 1995 action broadly alleged mismeasurement by natural gas pipeline companies, suggesting that these practices likely extended beyond the named defendants. It indicated that further investigations could reveal additional companies engaged in similar fraud. Media reports reinforced the widespread nature of these allegations, providing details about the fraudulent scheme and implicated actors, which allows for a focused government investigation. Unlike vague allegations of Medicare fraud, the specific claims regarding gas measurement on federal and tribal lands enable the government to target its investigation effectively, benefiting from its existing contracts and knowledge of royalty payors involved in measuring gas. The facilities where the alleged fraud occurred are under government control, facilitating inspections and investigations. Consequently, the public disclosures were adequate to alert the government to potential fraud concerning all Defendants, triggering the public disclosure bar and potentially barring the current cases unless the Relator can prove original source status. The FCA defines an "original source" as someone with direct and independent knowledge of the information behind the allegations, who has disclosed this information to the government prior to filing a related action. The analysis will assess whether the Relator meets this original source definition and the implications of the pre-filing disclosure requirement.

In United States ex rel. King v. Hillcrest Health Center, Inc., the court addressed the pre-filing disclosure requirement essential for a relator to qualify as an original source under the False Claims Act (FCA). The court clarified that this requirement involves voluntarily providing the government with key information related to the fraud allegations before initiating a qui tam action, distinguishing it from the written disclosure mandated by 31 U.S.C. § 3730(b)(2). The purpose of this pre-filing disclosure is to encourage timely reporting of fraud while allowing the government to assess prior public disclosures and the relator's independent knowledge of the fraud. The court emphasized that a relator who withholds significant details from their disclosure cannot qualify as an original source, as this deprives the government of crucial information needed to evaluate fraud claims. The district court concluded that the relator's knowledge must stem solely from information voluntarily disclosed prior to filing, aligning with the FCA's intention to incentivize genuine whistle-blowers while preventing opportunistic claims. The ruling reinforces the importance of prompt and comprehensive disclosure to support effective government investigation and enforcement against fraud.

A relator cannot rely on information not voluntarily disclosed to the government prior to filing a qui tam lawsuit to establish original source status. The assessment of the relator’s knowledge is confined to the voluntarily provided information. To qualify as an original source, a relator must demonstrate 'direct and independent knowledge' of the fraudulent acts alleged, which requires specific factual allegations and competent proof, rather than secondhand information or speculation. Background knowledge or expertise does not suffice if the material elements of the violation have been publicly disclosed. The district court found insufficient evidence to support the relator's claims based on oral communications or documents copied by government representatives. Consequently, the assessment of the relator's knowledge will be limited to two sets of disclosure documents provided before the suit. The relator failed to disclose names of defendants in some cases and relied on industry experience and interviews, which were deemed insufficient to establish direct and independent knowledge. The court concluded that secondhand information and general references to defendants do not meet the criteria for original source status, leading to the determination that the relator did not demonstrate the required knowledge regarding the allegations in the complaints.

The special master identified three cases where Relator's claim of original source status was strongest, noting that he had limited direct and independent knowledge of some mismeasurement techniques used by the defendants. The special master examined four approaches to assess how much direct and independent information a relator must possess for their allegations to be considered 'based' on that information. He rejected an 'all or nothing' approach as too restrictive and a 'bare minimum' approach as overly lenient. The 'pick and choose' approach, which would restrict claims to those with direct knowledge while dismissing others, was deemed impractical as it would require redrafting complaints and still dismiss claims based on publicly disclosed information.

Instead, the special master advocated for a 'substantiality' standard, where the district court evaluates the relator's independent knowledge against the totality of allegations. This standard balances the need to prevent parasitism while encouraging legitimate enforcement actions and allows for some supplementation from public sources. Applying this standard, the special master concluded that Relator’s limited direct knowledge was insufficient relative to his broader allegations, failing to meet the substantiality standard. Consequently, Relator was found to lack adequate direct and independent knowledge to qualify as an original source against the defendants, leading to the affirmation of the district court's dismissal of his complaints without addressing the defendants' additional arguments regarding original source status or the written disclosure requirement under 31 U.S.C. 3730(b)(2).

The district court’s dismissal of Relator’s qui tam complaints is affirmed, and Relator’s motion to remand based on supervening law is denied. Out of seventy-three related appeals, twenty-nine were voluntarily dismissed by the appellant. Seven cases received judgments under Fed. R. Civ. P. 54(b) due to the district court's order not resolving all claims; these dismissals are not discussed in this opinion. Relator's claim that a prior qui tam action should not invoke the public disclosure bar is not properly raised on appeal and is deemed waived, with no statutory or case law basis supporting such an exception. Relator did not provide evidence to dispute the district court’s findings regarding material facts. The court concludes that the publicly disclosed documents encompass all allegations in the complaints, negating the need to explore additional potential public disclosures. Furthermore, the court rejects Relator's argument that each mismeasurement technique should be treated as a separate fraud allegation, affirming that the mismeasurement claims are interrelated. The court considers the original source status of Relator’s broad mismeasurement claim as a whole. Disputes regarding whether Relator provided documents to the government prior to filing suit will be resolved in favor of Relator for summary judgment purposes.