United States v. Chevron, U.S.A., Inc.

72 F.3d 740, 95 Cal. Daily Op. Serv. 9438

Opinions

Separate concurrence by Judge KOZINSKI in which Judge T.G. NELSON joins; separate concurrence by Judge TROTT in which Judge KOZINSKI joins; separate concurrence by Judge HAWKINS in which Judge KOZINSKI joins; • dissent by Judge LEAVY in which Judge REINHARDT joins.

CYNTHIA HOLCOMB HALL, Circuit Judge:

This is a consolidated appeal from the dismissal of two qui tam actions under the False Claims Act. The relator, Harold Fine, is a former employee of the Office of the Inspector General at the U.S. Department of Energy. He left his job and filed these, and several other, qui tam actions. Fine concedes that his actions are based upon publicly disclosed allegations and that he therefore cannot maintain the actions unless he qualifies as an “original source.”

The district court, in separate orders, dismissed both actions for lack of subject matter jurisdiction. This Court has jurisdiction pursuant to 28 U.S.C. § 1291. On appeal by Fine, a panel of this Court reversed and remanded.¹ A majority of the nonrecused active judges then "voted to rehear the case en banc.

We now affirm both dismissals because we conclude that Fine cannot be an “original source.” To qualify as an original source, one must voluntarily provide the information forming the basis of the claim to the government prior to filing suit. Fine did provide the information underlying his claims to the government prior to filing suit. He did so, however, as a part of his job responsibilities. We hold that his provision of this information to his employer' — the government — was not voluntary within the meaning of the False Claims Act; he therefore is not an original source.

I.

Harold Fine worked for almost ten years as the Assistant Manager of the Western Region Audit Office for .the Office of Audits of the Office of the Inspector General at the U.S. Department of Energy. His job required him to supervise audits that other employees had conducted, and edit audit reports that others had written. During his last four years on the job, between eighty-four and ninety-seven percent of the audit reports from the Western Region Audit Office came from employees under his supervision.

He left the job in 1992, apparently disgruntled because his supervisors either could not or would not take action against every perceived violation he brought to their attention. During the year following his retirement, Fine filed a total of seven qui tam actions under the False Claims Act, two of which are at issue here.² Two months after his retirement, he brought one action “on behalf of the United States” against Chevron, U.S.A., et al. One month later, he filed suit against the University of California and its Board of Regents.

After the government declined to intervene, the complaints were unsealed and served on the defendants. Discovery progressed apace until the defendants in both cases moved to dismiss. The district court granted both motions, concluding orally in the case against Chevron that “it makes no sense” to permit Fine to bring a qui tam action. In the case against the University of California, the court issued a published opinion, United States ex rel. Fine v. University of California, 821 F.Supp. 1356 (N.D.Cal.1993). This ruling dismissed the case against the University of California because “Mr. Fine was not an ‘original source’ and [Inspector General] auditors should be barred from bringing qui tam actions arising from [Inspector General] audits.” Id. at 1357. We review these dismissals for lack of subject matter jurisdiction de novo. United States ex rel. Schumer v. Hughes Aircraft Co., 63 F.3d 1512, 1516-17 (9th Cir.1995).

II.

Numerous of this and other courts’ opinions have rehearsed the history and purposes of the False Claims Act and its qui tam provisions. See, e.g., United States ex rel. Anderson v. Northern Telecom, Inc., 52 F.3d 810, 812-13 (9th Cir.1995); Wang ex rel. United States v. FMC Corp., 975 F.2d 1412, 1418-20 (9th Cir.1992); United States ex rel. Hagood v. Sonoma County Water Agency, 929 F.2d 1416, 1420 (9th Cir.1991). These cases support our observation that the paradigm qui tam case is one in which an insider at a private company brings an action against his own employer. In Wang, for instance, we noted that “[t]he paradigm qui tam plaintiff is the ‘whistleblowing insider.’ Qui tam suits are meant to encourage insiders privy to a fraud on the government to blow the whistle on the crime.” Wang, 975 F.2d at 1419 (quoting United States ex rel. Stinson, Lyons, Gerlin & Bustamante, P.A. v. Prudential Ins. Co., 944 F.2d 1149, 1161 (3d Cir.1991)); see, e.g., Schumer, 63 F.3d at 1515 (9th Cir.1995) (qui tam action brought by former manager at Hughes Aircraft Company); United States ex rel. Green v. Northrop Corp., 59 F.3d 953 (9th Cir.1995) (qui tam action brought by former employee of Northrop Corporation).

Legislative history also suggests that Congress envisioned only this paradigm suit when enacting the current version of the qui tam provisions. The Senate Report to the 1986 Amendments to the False Claims Act, for instance, states that “[t]he Committee’s overall intent in amending the qui tam section of the False Claims Act is to encourage more private enforcement suits.” S.Rep. No. 345, 99th Cong., 2d Sess. 23-24 (1986), U.S.Code Cong. & Admin.News 1986, pp. 5266, 5288-5289 (emphasis added). Similarly, the House Report emphasizes that “[t]he purpose of the qui tam provisions of the False Claims Act is to encourage private individuals who are aware of fraud being perpetrated against the Government to bring such information forward.” H.R.Rep. 660, 99th Cong., 2d Sess. 23 (1986) (emphasis added).

This case, in which a government employee, who bore as the “paramount responsibility of his position” the duty to disclose fraud to his supervisors, Fine, 821 F.Supp. at 1360, defies the paradigm. That this case involves application of a statute to a factual scenario Congress may never have envisioned should not give us too much pause, however. The terms of the jurisdictional provisions governing this case are, after all, “unusually precise.” Hagood, 929 F.2d at 1419. Our analysis of whether the district court had jurisdiction to hear Fine’s claims therefore begins with the “precise” language of the statute.

m.

The False Claims Act provides:

(4)(A) No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office 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.

(B) For purposes of this paragraph, “original source” means an individual who has direct and independent knowledge of the information on which the allegations are based and has voluntarily provided the information to the Government before filing an action under this section which is based on the information.

31 U.S.C. § 3730(e)(4)(A)-(B).

The parties in this case agree that Fine’s actions are based upon publicly disclosed allegations. Section 5 of the Inspector General Act of 1978 requires Inspectors General to prepare semiannual reports summarizing the activities of their offices and to furnish those reports to agency heads, Congress, and the public. See 5 U.S.C. app. 3, § 5. Fine concedes that he based his claims on reports he furnished to his superiors, the contents of which were properly disclosed to the public under the terms of the Inspector General Act. Thus, Fine can maintain this action only if he qualifies as an original source of the information, and we limit our discussion and holding to this question.

The statute provides that a relator seeking to avoid the bar against suits based on public disclosures must show both that he has “direct and independent knowledge of the information on which the allegations are based,” and that he “has voluntarily provided the information to the Government before filing an action.” 31 U.S.C. § 3730(e)(4)(B). At least two courts have addressed whether an auditor for the Office of the Inspector General can have “direct and independent knowledge.” See United States ex rel. LeBlanc v. Raytheon Co., 913 F.2d 17, 20 (1st Cir.1990), cert. denied, 499 U.S. 921, 111 S.Ct. 1312, 113 L.Ed.2d 246 (1991) (reasoning that the “fruits of [the auditor’s] effort belong to his employer,” so he could not have “independent knowledge” of the information); United States ex rel. Fine v. MK-Ferguson Co., 861 F.Supp. 1644, 1554 (D.N.M.1994) (holding that Harold Fine did not have direct and independent knowledge because he did not personally conduct the audits that led to the public disclosures).

Only the district court in this case, however, has addressed whether an employee of the Office of the Inspector General can meet the other part of the original source test, i.e., whether he can be deemed to have provided information to the government “voluntarily.” It concluded that Fine’s actions “cannot be construed as ‘voluntary’ [because they] were compelled by the nature of his employment.” Fine, 821 F.Supp. at 1360. The court’s holding rested on its finding that disclosing fraud was “the paramount responsibility of [Fine’s] position.” Id. Because we agree with the district court regarding the second part of the original source requirement, we need not discuss whether Fine’s knowledge was direct and independent.

The district court is surely correct in its conclusion that Fine was no volunteer. He was a salaried government employee, compelled to disclose fraud by the very terms of his employment.³ He no more voluntarily provided information to the government than we, as federal judges, voluntarily hear arguments and draft dispositions. Cf. LeBlanc, 913 F.2d at 20 (noting that a relator employed as a Quality Assurance Specialist for the United States Government Defenses Contract Administrative Service had the duty to uncover fraud as a condition of his employment).

Dictionary definitions of “voluntary” support this common-sense reading.⁴ Webster’s Third, for example, provides the following definition:

Acting, or done, of one’s own free will without valuable consideration; acting or done without any present legal obligation to do the thing done or any such obligation that can accrue from the existing state of affairs.

Webster’s Third New International Dictionary 2564 (1981) (definition 1(g)). Fine, by contrast, acted in exchange for valuable consideration — his salary — and under an employment-related obligation to do the very acts he claims were voluntary.

Fine nonetheless asserts that his provision of information was voluntary under the terms of the statute, and that, under the False Claims Act, the provision of information to the government is always voluntary unless compelled by subpoena. In support, he cites a single floor statement by Senator Grassley, the principal sponsor of the 1986 amendments, who stated that the voluntary disclosure requirement was intended to protect against actions in which the relator “was a source of the allegations only because the individual was subpoenaed to come forward.” 132 Cong.Rec. 20,536 (1986).

This statement does not require us to conclude that Fine’s provision of information was voluntary within the meaning of the False Claims Act. On its face, Senator Grassley’s statement does not purport to describe the only situation in which the voluntary disclosure requirement would bar a qui tam suit following a public disclosure. Moreover, a single floor statement could not convince us to adopt so tortured a construction of a commonly understood word. Cf. Chrysler Corp. v. Brown, 441 U.S. 281, 311, 99 S.Ct. 1705, 1722, 60 L.Ed.2d 208 (1979) (“The remarks of a single legislator, even the sponsor, are not controlling in analyzing legislative history.”). We therefore decline to adopt Fine’s proposed narrow construction of the voluntary provision requirement.

Fine next argues that we must construe his disclosures to be voluntary, because every federal employee labors under a duty to report fraud against the government, and we certainly cannot mean to establish a rule that would bar all federal employees from the universe of potential original sources.⁵ He directs us to a 1989 Executive Order entitled “Principles of Ethical Conduct for Government Officers and Employees.” This order establishes that “[e]mployees shall disclose waste, fraud, abuse, and corruption to appropriate authorities.” Exec.Order No. 12,674, 54 Fed.Reg. 15,159, at § 101(k) (1989). We need not decide the legal import of this order as a general matter, because the fact that Fine was employed specifically to disclose fraud is sufficient to render his disclosures nonvoluntary.

IV.

Our conclusion that Fine is not an original source may leave the underlying instances of alleged fraud unpoliced and unpunished so far as the False Claims Act is concerned. Our concern over this state of affairs is eased a bit, however, by the Government’s predictions regarding the result of a contrary ruling. The United States warns that employees of the Office of the Inspector General would have the following perverse incentives:

[T]o spend work time looking for personally remunerative cases ... rather than doing their assigned work; to conceal information about fraud from superiors and government prosecutors so that they can capitalize on it for personal gain; to race the government to the courthouse to file ongoing audit and investigatory matters as qui tam actions before those cases have been sufficiently developed by the government to justify a lawsuit, thus prematurely tipping off the target, undermining the likely effectiveness of the case, and diverting unnecessarily up to 30% of the government’s recovery to the government employee; and to use the substantial powers of the federal government conferred upon public investigators ... to advance their personal financial interests. Contractors will be deterred from cooperating with Inspector General investigations and audits because they fear, legitimately, that their confidential work papers will be appropriated by Inspector General employees for their personal use in filing qui tam actions, rather than for legitimate governmental functions. Criminal prosecutions will be seriously compromised, since IG employees are often the government’s prime witnesses in criminal and civil fraud cases, and their personal interest in the outcome of their audits and investigations will make their testimony highly impeachable. Public confidence in the integrity and impartiality of government audits and investigations will necessarily decrease.

Amicus Brief of the United States in Support of Defendants-Appellees’ Petitions for Rehearing and Suggestions for Rehearing En Banc at 8-9 (footnotes omitted).

The government’s urgings convince us that our reading of the statute — albeit against an unanticipated factual background — is a sensible one. The government employed Fine to assist in its efforts to root out, disclose, and prevent fraud, and rewarded him with a salary and benefits. The government has no further need to rouse him from slumber and embolden him to perform his job responsibilities through the possibility of an enormous monetary recovery from a qui tam action. His performance of his job responsibilities, including the provision to his superiors of the information that later formed the basis of these two suits, was not voluntary within the meaning of the False Claims Act. He therefore is not an original source. Because both of his actions are based on publicly disclosed allegations or transactions, and because Fine was not an original source, we affirm the district court’s dismissal of both suits.

THE PANEL OPINION IS VACATED; THE DISTRICT COURT’S JUDGMENT IS AFFIRMED.

1

. The panel opinion, which we hereby vacate, was reported at 39 F.3d 957 (9th Cir.1994).

2

. Fine also has filed actions against his former employer seeking documents under the Freedom of Information Act. See Fine v. United States Dep’t of Energy, 823 F.Supp. 888 (D.N.M.1993) (24-page opinion disposing of Fine's document requests relating to alleged fraud by the accounting firm Peat, Marwick); Fine v. United States Dep’t of Energy, 830 F.Supp. 570 (D.N.M.1993) (ruling on various motions involving Fine’s FOIA requests). Presumably, Fine is seeking documentation to support currently pending or yet-to-be-filed qui tam actions.

3

. Recall, in this light, that the False Claims Act provides a statutory fine of between $5,000 and $10,000 for every false claim submitted to the government, as well as triple compensatory damages. The relator is entitled to share in as much as 30% of the settlement or judgment depending on whether the United States intervenes in the action. Thus, potential recoveries for qui lam relators are staggeringly large, as well they should be for insiders in private companies who risk their jobs and reputations when they blow the whistle on their own employers. We question whether government auditors, who already receive a salary and benefits for reporting allegations of fraud, deserve or need this same incentive.

4

. We have in the past relied on common-sense definitions to parse the terms of the qui tam provisions. In Hagood, for instance, we rejected in dicta the Government's proposal that "public disclosure” occurs when "a government employee 'disclosed' to himself as a member of the public the information on which he based his suit.” Hagood, 929 F.2d at 1419. We labelled the proposition "too metaphysical a contention for the interpretation of a plain congressional enactment." Id. We similarly decline today to embark on a philosophical inquiry into the meaning of "voluntary.”

5

. In Hagood, 929 F.2d 1416, we implicitly accepted the proposition that a federal employee may bring a qui tam action. We have never addressed, however, whether federal employees might be excluded as a class from qualifying as original sources. We leave this question as well, for another day.