U.S. ex rel. Springfield Terminal Ry. Co. v. Quinn

Decision Date08 April 1994
Docket NumberNo. 92-7157,92-7157
Citation304 App. D.C. 347,14 F.3d 645
Parties, 62 USLW 2512, 127 Lab.Cas. P 11,007, 9 Indiv.Empl.Rts.Cas. (BNA) 253 UNITED STATES of America, ex rel. SPRINGFIELD TERMINAL RAILWAY COMPANY; David A. Fink, Plaintiffs-Appellants, v. Francis X. QUINN, Defendant-Appellee.
CourtU.S. Court of Appeals — District of Columbia Circuit

Appeal from the United States District Court for the District of Columbia (Civil Action No. 91cv02081).

Catherine R. Connors, Portland, ME, argued the cause, for plaintiffs-appellants. With her on the briefs was Charles S. Einsiedler, Jr., Portland, ME.

Thomas P. Barletta, Washington, DC, argued the cause, for defendant-appellee. With him on the brief was Mary Jean Anderson, Washington, DC. Jerald S. Howe, Jr., Washington, DC, entered an appearance.

Before WALD, GINSBURG and RANDOLPH, Circuit Judges.

Opinion for the Court filed by Circuit Judge WALD.

WALD, Circuit Judge:

This case presents issues of first impression concerning the 1986 amendments to the qui tam 1 provisions of the False Claims Act, 31 U.S.C. Sec. 3729 et seq. ("FCA"). Under these provisions, private persons acting on behalf of the government may sue those who defraud the government and share in any proceeds ultimately recovered. Since 1943, the FCA has included a jurisdictional limitation on qui tam actions, the most recent form of which bars suits that are "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 person bringing the action is an original source of the information." 31 U.S.C. Sec. 3730(e)(4)(A). Springfield Terminal Railway Co. and its President, David Fink (collectively, "Springfield"), brought suit under the qui tam provisions against Dr. Francis X. Quinn, an arbitrator appointed by the National Mediation Board ("NMB") to resolve a labor dispute between Springfield and its union, alleging that Quinn had fraudulently billed the government for services not actually rendered in connection with the arbitration proceedings. The district court dismissed Springfield's action on the grounds that it violated the FCA's jurisdictional limitation, and Springfield filed this timely appeal. The central issue in the case is under what circumstances a qui tam action will be deemed to be "based upon the public disclosure of allegations or transactions" within the meaning of Sec. 3730(e)(4)(A). Because we find that the district court operated under an unduly broad reading of the jurisdictional bar, we remand this case for further proceedings.

I. BACKGROUND

This case originated as a labor dispute between Springfield, a rail common carrier, and the union representing its employees. After the parties proved unable to resolve their disagreement privately, the NMB appointed a panel of federal arbitrators pursuant to the Railway Labor Act, 45 U.S.C. Secs. 153-54 (1988) ("RLA"). An initial panel determined the dispute was properly referable to arbitration under the RLA, and a merits panel consisting of Dr. Francis X. Quinn as neutral member and one representative each from the railroad and its union began hearings in April 1988. Springfield immediately initiated an action in the United States District Court of Maine challenging the necessity for a merits panel on the grounds that the union had not satisfied all of the procedural prerequisites to federal mediation. 2 See Springfield Terminal Ry. Co. v. United Transp. Union, 767 F.Supp. 333, 335-36 (D.Me.1991). On June 13, 1988, before the district court took any action on Springfield's suit, the merits panel issued a decision in favor of the union. See Public Law Board No. 4462 Decision and Award (June 13, 1988), reprinted in Joint Appendix ("J.A.") at 86-93. The panel left to the parties the resolution of back pay issues. When the parties again were unable to reach agreement, the panel reasserted jurisdiction and issued a series of short decisions pertaining to back pay and benefits.

Springfield filed a supplemental petition in the Maine district court seeking to set aside all of the merits panel's awards. 3 In its complaints, Springfield alleged, inter alia, that both panels had misconstrued the RLA in submitting the case to arbitration, that the court rather than an arbitration board was the appropriate body to decide the dispute, that Springfield was denied due process of law because of arbitrators' ex parte communications, and that narrow judicial review of arbitral awards violated the separation of powers doctrine of the Constitution. After obtaining the arbitrators' pay vouchers through discovery and filing the relevant discovery materials with the court, Springfield appended a claim that neutral merits arbitrator Quinn had billed the government for activities unrelated to the arbitration proceedings. On cross-motions for summary judgment, the Maine district court awarded summary judgment to the union with respect to Springfield's challenges to the necessity for arbitration, but vacated the merits panel's actual awards due to the panel's reliance on an erroneous computer database version of the Federal Railroad Safety Act of 1970, 45 U.S.C. Sec. 441(b)(1). The court then remanded the case to the merits panel for redetermination of the award under the correct version of the statute without reaching the allegations pertaining to Quinn's billing. See Springfield Terminal Ry., 767 F.Supp. at 347.

In August 1991, two months after the Maine court's remand to the arbitration panel, Springfield filed this action in the United States District Court for the District of Columbia under the qui tam provisions of the FCA, 31 U.S.C. Sec. 3729 et seq. In its complaint, Springfield alleged once again that Dr. Quinn had fraudulently billed the government for days on which he had not actually worked on Springfield's dispute. Springfield contended that its suspicions first arose upon inspection of Quinn's pay vouchers, which were produced by civil discovery processes in the Maine litigation. Based upon its own involvement in the arbitration, Springfield recognized that Dr. Quinn had no arbitral function to perform on several of the days for which he sought pay. According to Springfield, it then conducted further investigation on its own, calling several of the numbers listed on Quinn's telephone records that had been disclosed during discovery. Springfield argues that it was this inquiry that brought to light fraudulent behavior on Quinn's part--revealing, for example, that he had been in Canada attending a national arbitration conference for a three-day period during which he had billed the government for services pertaining to the arbitration. As required by the FCA, 31 U.S.C. Sec. 3730(b)(2), Springfield provided the information forming the substance of its complaint to the Department of Justice, which issued notice of its declination to appear on the government's behalf on December 6, 1991.

Dr. Quinn moved to dismiss the action under the jurisdictional bar of the FCA, 31 U.S.C. Sec. 3730(e)(4)(A), which prohibits qui tam actions that are "based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing ... [unless] the person bringing the action is an original source of the information," and for a violation of FED.R.CIV.P. 9(b), which requires that averments of fraud "be stated with particularity." Bypassing the particularity charge, the district court granted Quinn's motion to dismiss for lack of subject matter jurisdiction under Sec. 3730(e)(4)(A) in July 1992. The court reasoned that Springfield's qui tam claim was "based upon" information unearthed during discovery in the Maine litigation and so fell under the "public disclosure" ban of the FCA. The court rejected Springfield's contention that the qui tam allegations were based on its first-hand knowledge of events in the arbitration proceeding and its additional investigative efforts sparked by discovery materials that were innocuous in their own right. Turning then to the "original source" exception of Sec. 3730(e)(4)(A), the court held that information obtained through discovery was of necessity obtained through an intermediary, and thus did not fall within the statutory exception. The court viewed the additional information about Quinn's activities gleaned from Springfield's own investigation as mere "background," and so did not engage in "original source" analysis with respect to it.

II. ANALYSIS
A.

This case requires us to chart the changed landscape of qui tam actions in the aftermath of the 1986 amendments to the False Claims Act. The FCA's qui tam provisions, which have existed in various incarnations since 1863, provide cash bounties in certain circumstances to private citizens who successfully bring suit against those who defraud the federal government. Qui tam provisions are designed to set up incentives to supplement government enforcement, and at their best may "compare with the ordinary methods as the enterprising privateer does to the slow-going public vessel." United States v. Griswold, 24 F. 361, 366 (D.Or.1885). On the downside, overly generous qui tam provisions present the danger of parasitic exploitation of the public coffers, as exemplified by the notorious plaintiff who copied the information on which his qui tam suit was based from the government's own criminal indictment. See United States ex rel. Marcus v. Hess, 317 U.S. 537, 63 S.Ct. 379, 87 L.Ed. 443 (1943). Seeking the golden mean between adequate incentives for whistle-blowing insiders with genuinely valuable information and discouragement of opportunistic plaintiffs who have no significant information to contribute of their own, Congress has frequently altered its course...

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