In re Natural Gas Royalties Qui Tam Litigation

845 F.3d 1010, 2017 WL 35710, 2017 U.S. App. LEXIS 142
CourtCourt of Appeals for the Tenth Circuit
DecidedJanuary 4, 2017
DocketLead Case No. 15-8054; No. 15-8058; 15-8059; 15-8060; 15-8062; 15-8063; 15-8066; 15-8067; 15-8068; 15-8070; 15-8071; 15-8074; 15-8075; 15-8076; 15-8077; 15-8079; 15-8080; 15-8081; 15-8082; 15-8084
StatusPublished
Cited by17 cases

This text of 845 F.3d 1010 (In re Natural Gas Royalties Qui Tam Litigation) is published on Counsel Stack Legal Research, covering Court of Appeals for the Tenth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Natural Gas Royalties Qui Tam Litigation, 845 F.3d 1010, 2017 WL 35710, 2017 U.S. App. LEXIS 142 (10th Cir. 2017).

Opinion

MATHESON, Circuit Judge.

This is the second appeal in a qui tam case lasting over 20 years and initially involving more than 300 natural gas industry defendants. The number of defendants has shrunk significantly, and the issues on this appeal present narrow questions. Specifically, Relator and Appellant Jack J. Grynberg appeals two district court orders awarding attorney fees.

First, Mr. Grynberg challenges an award of attorney fees under the False Claims Act (“FCA”) to seven defendant groups: Transwestern, KN, SourceGas, El Paso, Snyder, Agave, and Panhandle (collectively, the “FCA Appellees”). The fees concern the district court proceedings. Second, Mr. Grynberg challenges an award of attorney fees relating to the first appeal to 13 defendant groups: the seven FCA Appellees plus Apache, CenterPoint, Columbia, ConocoPhillips, Enogex and OG&E, and TransMontaigne (collectively, the “Appellate-Fee Appellees”).1 Exercising jurisdiction under 28 U.S.C. § 1291, we affirm the award of attorney fees under the FCA, and reverse the award of appellate-related attorney fees.

I. BACKGROUND

We focus on the legal and procedural background pertinent to the current appeal. The following provides an overview of the FCA, Mr. Grynberg’s complaint in his original action (“Grynberg I”), his complaints in the pending action (“Grynberg II), and additional procedural history leading to this appeal.

A. The FCA

The FCA imposes liability on any person who “knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government.” 31 U.S.C. § 3729(a)(1)(G).2 The FCA’s qui tam provisions authorize a private individual — also known as a “relator” — to bring a civil action to enforce its provisions on behalf of the government and to share in any resulting recovery. Id. § 3730(b)(1), (d). A relator is jurisdictionally barred from bringing an FCA qui tam action “if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed,” unless the relator is “an original source” of the information forming the allegations. Id. § 3730(e)(4)(A); In re Nat. Gas Royalties, 562 F.3d 1032, 1038-39 (10th Cir. 2009) (explaining the § 3730(e)(4)(A) requirements are jurisdictional).

B. Grynberg I

In 1995, Mr. Grynberg filed an action in federal district court for the District of [1014]*1014Columbia alleging 70 companies in the natural gas industry violated the FCA. United States ex rel. Grynberg v. Alaska Pipeline Co. (“Grynberg I”), No. Civ. 95-725 (TFH), 1997 WL 33763820, at *1 (D.D.C. 1997). Specifically, he accused the defendants of using 10 techniques that under-measured the gas they extracted from federal and Indian lands under lease agreements. Id. According to Mr. Grynberg, the companies’ mismeasurement of the gas caused them to underpay royalties owing to the federal government, which in turn led them to submit false royalty statements to the federal government in violation of the FCA. Id.

Sixty of the defendants filed motions to dismiss. Id. The district court granted their motions. It first held the defendants were improperly joined under Federal Rule of Civil Procedure 20, and suggested Mr. Grynberg might seek to consolidate any future complaints into a Multidistrict Litigation (“MDL”). Id. at *2.

The district court also held that Mr. Grynberg’s complaint failed to satisfy the particularized pleading requirement of Rule 9(b). Id. at *4-5. It described the complaint as a “shotgun” pleading that “fír[ed] out more than ten accusations at seventy defendants, hoping that some accusations stick on some defendants.” Id. at *4. The court criticized Mr. Grynberg’s pleading factual allegations on “information and belief,” “because such tactics are generally employed to mask fishing expeditions.” Id. The court described Mr. Gryn-berg’s overall approach as “an attempt ... to shift his investigatory burden onto defendants.” Id.

Apart from those overarching concerns, the district court identified two specific deficiencies in the complaint. First, Mr. Grynberg had “not identified] the time or place where each defendant engaged in these practices.” Id. Second, Mr. Grynberg had not specifically identified which defendant was responsible for which mismeas-urement technique, or which defendant had submitted fraudulent statements to the federal government. Id. Instead, “[a]t most, he generally allege[d] that at least one of these sixty defendants committed at least one of these ten mismeasurement practices at some time and in some place, and that at least one defendant submitted fraudulent statements based on these mis-measurements.” Id.

C. Grynberg II

Three months after Grynberg /’s dismissal, Mr. Grynberg began filing 73 separate lawsuits against more than 300 companies in the natural gas industry. The 73 complaints, which closely resemble one another, form the basis of the current case. Taking Grynberg /’s suggestion, Mr. Gryn-berg moved to consolidate the cases as an MDL, and they were eventually consolidated in federal district court for the District of Wyoming.

1. The Complaints

Grynberg II rested on the same core allegations as Grynberg I. Mr. Grynberg again sued companies in the natural gas industry. He alleged they were responsible for mismeasuring gas extracted from their leases on federal or Indian land and for underreporting, or causing others to un-derreport, their royalty payments to the federal government in violation of the FCA. The Grynberg II complaints differed from the Grynberg I complaints in four significant ways.

First, Mr. Grynberg broadened his allegations. Instead of suing 70 defendants, he sued over 300. And instead of alleging 10 mismeasurement techniques, he alleged over 20.

[1015]*1015Second, following Grynberg I’s suggestion to allege fewer facts “on information and belief,” Mr. Grynberg alleged his knowledge of the fraud stemmed from his experience as an engineer and gas producer, his conversations with defendants’ representatives, and his knowledge that gas measurers “such as Defendants routinely employ the same basic techniques for measuring gas.” See App., Vol. 2 at 295 ¶ 30.

Third, Mr. Grynberg attempted to address the Grynberg I concern that he had not previously specified which defendants engaged in which mismeasurement techniques. In Ch'ynberg II, he alleged each of the over 300 defendants had engaged in each of more than 20 mismeasuring techniques.3

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845 F.3d 1010, 2017 WL 35710, 2017 U.S. App. LEXIS 142, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-natural-gas-royalties-qui-tam-litigation-ca10-2017.