U.S. ex rel. Precision Co. v. Koch Industries, Inc.

• Decision Date: 27 July 1992
• Docket Number: No. 91-5062,91-5062
• Citation: 971 F.2d 548
• Parties: UNITED STATES of America, ex rel. the PRECISION COMPANY, Plaintiff-Appellant, v. KOCH INDUSTRIES, INC.; Koch Exploration Co.; Koch Pipeline, Inc.; Koch Services, Inc.; Koch Gathering Systems, Inc.; Minnesota Pipe Line Co.; Quanah Pipeline Corp.; Quivira Gas Co.; Koch Oil Co. of Texas, Inc.; Gulf Central Storage & Terminal Co. of Nebraska; Southwest Pipeline Co.; Chaparral Pipeline (NGL) Co.; Gulf Central Pipeline Co.; Kogas, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 548

971 F.2d 548

UNITED STATES of America, ex rel. the PRECISION COMPANY Plaintiff-Appellant, v. KOCH INDUSTRIES, INC.; Koch Exploration Co.; Koch Pipeline, Inc.; Koch Services, Inc.; Koch Gathering Systems, Inc.; Minnesota Pipe Line Co.; Quanah Pipeline Corp.; Quivira Gas Co.; Koch Oil Co. of Texas, Inc.; Gulf Central Storage & Terminal Co. of Nebraska; Southwest Pipeline Co.; Chaparral Pipeline (NGL) Co.; Gulf Central Pipeline Co.; Kogas, Inc., Defendants-Appellees.

No. 91-5062.

United States Court of Appeals Tenth Circuit.

July 27, 1992.

J. David Jorgenson (G.W. Turner III and P. Scott Hathaway with him, on the brief) of Conner & Winters, Tulsa, Okl., for plaintiff-appellant.

Robert L. Howard of Foulston & Siefkin, Wichita, Kan. (James M. Armstrong of Foulston & Siefkin, Wichita, Kan., Clyde A. Muchmore of Crowe & Dunlevy, Oklahoma City, Okl., with him, on the brief) for defendants-appellees.

Before BALDOCK and BRORBY, Circuit Judges, and BELOT, ^* District Judge.

BRORBY, Circuit Judge.

Precision Company (Precision) appeals the dismissal of its qui tam action for lack of subject matter jurisdiction. Fundamentally, this appeal involves the determination of circumstances under which a qui tam plaintiff must demonstrate itself to be an original source under the False Claims Act (FCA), 31 U.S.C. § 3729 et seq. (1988). Applying the plain language of relevant statutory provisions to the circumstances of this action, we conclude Precision must qualify as an original source. We further conclude Precision has failed to so qualify, and therefore affirm the district court's dismissal.

Overview

Precision filed its complaint to recover, on behalf of the United States, civil penalties and damages from Defendant companies that allegedly filed false claims with the government. The complaint was grounded upon the factual premise that Defendants, by deliberate and systematic mismeasurement, had understated to the United States the quantity of crude oil and natural gas produced from Federal and Indian lands. The complaint was grounded upon the legal premise that Defendants, by the use of under-measurements, had presented false claims to the United States. The alleged false claims represent the difference between the mineral royalties actually reported and those which Defendants should have reported.

Precision commenced this action as a qui tam plaintiff pursuant to 31 U.S.C. § 3730(b). Section 3730(b) authorizes a person to bring a civil action in the name of and on behalf of the United States against a person who has submitted a false claim to the Government as defined by 31 U.S.C. § 3729(a). However, the statute also provides that no court shall have jurisdiction over a qui tam action based upon the public disclosure of allegations or transactions unless the qui tam plaintiff is an original source of the publicly disclosed information. See 31 U.S.C. § 3730(e)(4)(A).

Defendants challenged the trial court's subject matter jurisdiction by producing evidence establishing Precision's complaint was based, at least in part, upon publicly disclosed information. The trial court ruled a qui tam plaintiff whose complaint is based in any degree upon publicly disclosed information must demonstrate it was an original source as defined by statute. The trial court then dismissed the qui tam action for lack of subject matter jurisdiction, concluding Precision was not an original source.

Precision now appeals asserting: 1) the trial court erroneously construed the applicable statute; 2) the trial court erroneously concluded Precision was not an original source; and 3) the trial court erroneously disregarded affidavits that would have established Precision's status as an original source.

Analysis

The satisfaction of 31 U.S.C. § 3730(e)(4) is, as the language indicates, an issue of subject matter jurisdiction. See United States ex rel. Dick v. Long Island Lighting Co., 912 F.2d 13, 18 (2nd Cir.1990); Houck ex rel. United States v. Folding Carton Admin. Comm., 881 F.2d 494, 503, 506 & n. 9 (7th Cir.1989), cert. denied, 494 U.S. 1026, 110 S.Ct. 1471, 108 L.Ed.2d 609 (1990); United States ex rel. LeBlanc v. Raytheon Co., 729 F.Supp. 170, 177 (D.Mass.), aff'd 913 F.2d 17 (1st Cir.1990). We review issues of subject matter jurisdiction de novo. ¹ Thomas Brooks Chartered v. Burnett, 920 F.2d 634, 641 (10th Cir.1990). Since federal courts are courts of limited jurisdiction, we presume no jurisdiction exists absent a showing of proof by the party asserting federal jurisdiction. Penteco Corp. v. Union Gas System, Inc., 929 F.2d 1519, 1521 (10th Cir.1991). Therefore, Precision, the party invoking federal jurisdiction in this case, must "allege in [its] pleading the facts essential to show jurisdiction," and "must support [those facts] by competent proof." McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 785, 80 L.Ed. 1135 (1936); see also Penteco, 929 F.2d at 1521.

I. FCA Jurisdictional Requirements

We begin our analysis with an examination of 31 U.S.C. § 3730(e)(4), which provides:

(e) Certain actions barred.--

....

(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.

"[T]he starting point for interpreting a statute is the language of the statute itself. Absent a clearly expressed legislative intention to the contrary, that language must ordinarily be regarded as conclusive." Consumer Prod. Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S.Ct. 2051, 2056, 64 L.Ed.2d 766 (1980); see also FDIC v. Canfield, 967 F.2d 443, 445, (10th Cir.1992). In other words, "[u]nless the statutory language is ambiguous or would lead to absurd results, the plain meaning of the statute must control." United States ex rel. Williams v. NEC Corp., 931 F.2d 1493, 1498 (11th Cir.1991); see also Glover Construction Co. v. Andrus, 591 F.2d 554, 559 (10th Cir.1979), aff'd 446 U.S. 608, 100 S.Ct. 1905, 64 L.Ed.2d 548 (1980).

"Based Upon"

At the threshold, the plain, unambiguous language of § 3730(e)(4)(A) states a qui tam action may be barred only if the action is "based upon" the public disclosure of "allegations or transactions." Precision would have us read this provision to apply only to actions based "solely" upon publicly disclosed information. We cannot countenance Precision's interpretation.

As a matter of common usage, the phrase "based upon" is properly understood to mean "supported by." In this context, an FCA qui tam action even partly based upon publicly disclosed allegations or transactions is nonetheless "based upon" such allegations or transactions. Congress chose not to insert the adverb "solely", and we cannot, because to do so would dramatically alter the statute's plain meaning.

Not only are we governed by the plain language of the statute, we must also be mindful that "statutes conferring jurisdiction on federal courts are to be strictly construed, and doubts resolved against federal jurisdiction." F & S Construction Co. v. Jensen, 337 F.2d 160, 161 (10th Cir.1964). To insert the term "solely" into § 3730(e)(4)(A) would impermissibly expand federal jurisdiction by allowing qui tam plaintiffs to avoid the more exacting "original source" requirement simply by asserting an additional count. In other words, with a little artful pleading, all qui tam plaintiffs could pass the jurisdictional threshold by fashioning complaints only "partly based" upon publicly disclosed allegations or transactions.

A restrictive interpretation of the threshold "based upon" test is also consistent with the dual purpose of this statute. Section 3730--Civil actions for false claims, has two basic goals: 1) to encourage private citizens with first-hand knowledge to expose fraud; and 2) to avoid civil actions by opportunists attempting to capitalize on public information without seriously contributing to the disclosure of the fraud. See United States ex rel. Stinson, Lyons, Gerlin & Bustamante, P.A. v. Prudential Ins. Co., 944 F.2d 1149, 1154 (3rd Cir.1991). Consistent with these purposes, we believe the threshold "based upon" analysis is intended to be a quick trigger for the more exacting original source analysis. Two distinct inquiries are mandated by § 3730(e)(4)(A). Initially, the court must determine whether the action is "based upon the public disclosure of allegations or transactions." If the action is "based upon the public disclosure of allegations or transactions," then the court must determine whether the plaintiff qualifies as an "original source." ² A fair reading of this statute in light of its dual purpose leads us to conclude Congress never intended a qui tam plaintiff to benefit in whole or in part upon publicly disclosed allegations or transactions unless that plaintiff can demonstrate he was an original source as defined by statute.

Finally, a more restrictive interpretation of "based upon" is consistent with practical considerations of judicial economy. It is one thing to expect the court to evaluate the quantity and quality of information in the public domain versus that possessed by the qui tam plaintiff after trial for purposes of fee determination; ³ it is quite another to expect a similar evaluation as part of a pre-trial jurisdictional inquiry. This type pre-trial inquiry would be onerous,...