United States Ex Rel. Holmes v. Consumer Insurance Group

279 F.3d 1245, 2002 U.S. App. LEXIS 2576, 2002 WL 234765
CourtCourt of Appeals for the Tenth Circuit
DecidedFebruary 19, 2002
Docket01-1077
StatusPublished
Cited by11 cases

This text of 279 F.3d 1245 (United States Ex Rel. Holmes v. Consumer Insurance Group) 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
United States Ex Rel. Holmes v. Consumer Insurance Group, 279 F.3d 1245, 2002 U.S. App. LEXIS 2576, 2002 WL 234765 (10th Cir. 2002).

Opinions

TACHA, Chief Circuit Judge.

Appellant Mary L. Holmes filed this action against Consumer Insurance Group under the qui tam provision of the False Claims Act, 31 U.S.C. § 3730. The United States moved to dismiss Holmes from the suit under Federal Rule of Civil Procedure 12(b)(1). The district court granted the motion and entered judgment against Holmes pursuant to Federal Rule of Civil Procedure 54(b). Holmes appealed. We exercise jurisdiction pursuant to 28 U.S.C. § 1291 and AFFIRM.

I. Background

Mary L. Holmes is postmaster at the United States Post Office in Poncha [1247]*1247Springs, Colorado. In October of 1995, Holmes responded to an inquiry by employees of Consumer Insurance Group (“CIG”) about a bulk mailing. The CIG employees informed Holmes that CIG was receiving the per pound bulk postal rate at the post office in Howard, Colorado. After confirming this information with the postmaster in Howard, Holmes granted CIG’s request for the per pound rate. Upon further investigation, however, Holmes determined that CIG did not qualify for the rate, because the pieces in its mailings did not satisfy minimum weight requirements. Holmes therefore informed CIG that it could not take advantage of the per pound rate. She also informed the postmaster in Howard that CIG was not entitled to this rate.

Almost two years later, in August of 1997, Holmes was at the Howard post office to provide postmaster training. At that time, she asked the current postmaster whether CIG was receiving the per pound bulk rate, and she learned that it was. Holmes informed her superior and, later, the Office of the Inspector General and a postal systems coordinator (an auditor) that CIG was defrauding the Postal Service by providing false information in order to obtain a lower postal rate. The Postal Inspection Service initiated an investigation and later turned the case over to the U.S. Attorney. The government’s investigation of CIG included interviews with one current and two former CIG employees. In those interviews, the government revealed its suspicions, although it later became clear that the interviewees were already aware of the fraud. In August 1998, the Postal Service commended Holmes’s efforts with a letter of appreciation and a $500 award.

On April 2, 1999, Holmes filed suit against CIG under the False Claims Act (“FCA”). The FCA authorizes a person to bring a civil action, called a qui tarn action, against those who defraud the government. 31 U.S.C. § 3730(b). A qui tarn plaintiff, or relator, brings the action in the name of the government, and the government may elect to intervene. Id. § 3730(b)(l)-(2). The relator is entitled to a portion of the proceeds recovered in the action or settlement. Id. § 3730(d).

Following Holmes’s initiation of this case against CIG, the government moved to dismiss her for lack of subject matter jurisdiction. The government asserted that its disclosure of the fraud allegations to three current and former CIG employees during its investigation constituted “public disclosure.”1 The government further argued that Holmes was not an “original source” and therefore could not avoid the public disclosure bar.2 The district court granted the motion, but it did so without employing the public disclosure analysis. Instead, the district court concluded that the government’s ongoing investigation of the fraud allegations precluded Holmes’s suit. The district court [1248]*1248therefore dismissed Holmes from the suit. Holmes appealed.

II. Discussion

Holmes argues that the district court improperly dismissed her from the suit, because an ongoing investigation does not bar a qui tam action, and because there had been no public disclosure of the allegations or transactions at issue. We hold that the district court erred in reasoning that the government’s ongoing investigation of the fraud allegations precludes Holmes’s suit, but that its dismissal of Holmes from the case was nevertheless correct.

In our prior cases dealing with qui tam actions by current or former federal employees, the public disclosure bar precluded the action. As a result, we have not previously defined the extent to which government employees may or may not qualify as qui tam plaintiffs when the public disclosure bar does not apply. United States ex rel. Fine v. MK-Ferguson Co., 99 F.3d 1538, 1541 n. 1 (10th Cir.1996); United States ex rel. Fine v. Advanced Sciences, Inc., 99 F.3d 1000, 1003 n. 1 (10th Cir.1996). We have held that “public disclosure occurs only when the allegations or fraudulent transactions are affirmatively provided to others not previously informed thereof.” United States ex. rel. Ramseyer v. Century Healthcare Corp., 90 F.3d 1514, 1521 (10th Cir.1996). It is undisputed that the current and former employees whom the government interviewed in its investigation of CIG had prior knowledge of the fraud. The government’s disclosure of information to them was therefore not “public” within the meaning of the FCA. As a result, we cannot rely on the public disclosure bar here and must squarely address the question of federal employees’ eligibility to file qui tam suits under the FCA. Based on our examination of the statute and its purposes and federal employees’ obligations to avoid conflicts of interest, we hold that Holmes was not a proper qui tam plaintiff. A person who, pursuant to duties as a government employee, is part of an ongoing government investigation of fraud allegations may not pursue a qui tam suit based on those allegations.

The First and Eleventh Circuits have split on this question, with the First Circuit finding no jurisdiction and the Eleventh Circuit reaching the opposite result. United States ex rel. Williams v. NEC Corp., 931 F.2d 1493, 1496 n. 7, 1502 (11th Cir.1991); United States ex rel. LeBlanc v. Raytheon Co., 913 F.2d 17, 20 (1st Cir.1990). Our approach differs from that of each of these circuits, and we discuss the significant differences below.3

A. Standard of Review

The district court treated the motion to dismiss for lack of subject matter jurisdiction, Fed.R.Civ.P. 12(b)(1), as a motion to dismiss under Rule 12(b)(6). This is appropriate when the jurisdictional issue arises from the statute that creates the cause of action. Ramseyer, 90 F.3d at 1518.

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279 F.3d 1245, 2002 U.S. App. LEXIS 2576, 2002 WL 234765, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-ex-rel-holmes-v-consumer-insurance-group-ca10-2002.