In re Natural Gas Royalties Qui Tam Litigation
| Decision Date | 20 October 2006 |
| Docket Number | No. 99-MD-1293-D.,99-MD-1293-D. |
| Citation | 467 F.Supp.2d 1117 |
| Parties | In re: NATURAL GAS ROYALTIES QUI TAM LITIGATION |
| Court | U.S. District Court — District of Wyoming |
Bradley C. Weber, J. Robert Beatty, Locke Liddell & Sapp, Dallas, TX, Amanda Newton, Raymond B. Hunldns, Jones Jones Vines & Hunldns, Wheatland, WY, Edward A. Dauer, Denver, CO, Edwin Taylor Grauke, Ilona L. Dotterrer, Michael W. Coriden, Roger A. Jatco, Samuel Yahn, Grynberg Petroleum Company, Greenwood Village, CO, Josephine T. Porter, Albuquerque, NM, Michael S. Porter, Law Firm of Michael S. Porter, Wheat Ridge, CO, David Boies, Boies Schiller & Flexner, Armonk, NY, for Jack J. Grynberg.
Daniel M. McClure, Fulbright & Jarowski LLP, Houston, TX, for Shell Oil Company, Shell Land & Energy Company, Shell Offshore, Inc., Shell Pipe Line Corporation and Shell Western E&P, Inc.
L. Poe Leggette, Nancy L. Pell, Fulbright & Jaworski LLP, Washington, DC, for Kerr-McGee Corporation, Kerr-McGee " Refining Corporation, and Oryx Energy Company.
This matter comes before the Court on the Report and Recommendations of Special Master on: (A) Coordinated Defendants' Motion to Dismiss for Lack of Subject Matter Jurisdiction; (B) Arco's, Unocal's and Dauphin's Motion and Brief on Jurisdiction; (C) Moving 1997 Defendants' Memorandum to Dismiss Relator's Complaints for Lack of Subject Matter Jurisdiction; and (D) Relator's Cross Motion for Summary Judgment with Authority Pursuant to Fed.R.Civ.P. 56, on Issue of Public Disclosure Under' 31 U.S.C. § 3729 et seq. The Court, having considered the briefs and materials in support of the. Special Master's recommendations and the objections thereto, having heard oral argument of counsel, and being otherwise fully advised, FINDS and ODERS as follows:
BACKGROUND
As set forth in the Special Master's Report, the subject motions are directed at 73 cases filed under the qui tam provisions of the False Claims Act by Relator Jack J. Grynberg, in which he accuses over 300 gas pipelines and other gas measurers of mismeasuring gas produced from federal and/or Indian lands ("the 1997 qui tam cases"). Beginning in June of 1997, Relator commenced filing the instant qui tam suits in Federal District Courts in Colorado, Wyoming, Oklahoma, Louisiana, Texas, Michigan, California, and New Mexico. In October of 1999, the Judicial Panel on Multidistrict Litigation transferred 66 cases to this Court for coordinated or consolidated pretrial proceedings. Subsequently, additional cases were transferred, bringing the total now pending to 73. The complaints in each of these cases asserts that all of the Defendants named therein employ a series of mismeasurement techniques that allows them to knowingly underreport or cause others to underreport the heating content and volume of gas, and that this conduct has resulted in an underpayment of federal royalties over a 10 — year period. Relator's complaints are brought under the "reverse false claim" provision contained in 31 U.S.C. § 3729(a)(7).
In April of 1995, Relator filed a qui tam action in the United States District Court for the District of Columbia against forty-four defendants, alleging that they had defrauded the federal government by underpaying royalties on gas purchased from federally owned or Indian lands. Relator asserted that the underpayments were the result of mismeasurement of gas volume and improper analysis of gas, heating content. The 1995 Qui Tam Complaint identified a number of mismeasurement techniques, and asserted that each of the defendants employed one or more of them.
Relator amended the 1995 Qui Tam Complaint to add defendants and mismeasurement techniques. An Amended Complaint filed on December 7, 1995, and a Second Amended Complaint, filed on May 13, 1996, each named several new defendants, ultimately bringing the total number of defendants sued in the 1995 action to 70. On March 27, 1997, United States District Judge Thomas F. Hogan dismissed the 1995 qui tam action without prejudice for failure to plead fraud with particularity and for improper joinder of parties. There were 63 defendants in the 1995 qui tam action at the time the order of dismissal was entered.
The bulk of the allegations in the qui tam actions currently pending before this Court accuse the named Defendants in each case of knowingly utilizing specifically identified techniques to measure gas volume and analyze gas heating content in a manner that produces an artificially low wellhead price. Because federal royalties are based on the wellhead price, the use of these mismeasurement techniques also allegedly results in an underpayment of royalties to the United States. The Special Master found that twenty of the alleged mismeasurement techniques are common to all 73 cases, while other mismeasurement practices are case specific. Each Complaint asserts that each of the named Defendants utilized each of the mismeasurement techniques identified therein. A few of the cases name only one Defendant. The rest identify multiple Defendants that are alleged to be affiliated companies acting in concert through the same employees and personnel:
Following a massive and complex discovery process limited to jurisdictional issues, the parties filed the instant motions, accompanied by hundreds of pages of briefs and thousands of pages of exhibits. The Special Master heard two full days of oral argument. The Defendants' motions to dismiss contend that Relator has failed to comply with the qui tam jurisdictional provisions contained in 31 U.S.C. § 3730(e)(4). Specifically, Defendants argue that Relator's 1997 Qui Tam Complaints are based upon public disclosures of allegations or transactions from one of the sources listed in § 3730(e)(4)(A), and that he is not an original source, as that term is defined in 31 U.S.C. § 3730(e)(4)(B). Additionally, the Defendants assert that Relator has failed to comply with and/or violated the disclosure and seal provisions of 31 U.S.C. § 3730(b)(2). Relator's cross-motion contends that there are no material issues of fact in dispute and that Relator has met the requirements of § 3730(e)(4) as a matter of law.
Section 3730(e)(4) of the False Claims Act provides:
(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.
The Special Master reviewed the various categories of documents proffered by Defendants as constituting public disclosures. He first determined that numerous documents from the technical literature on gas measurement were not public disclosures within the statute's meaning. Though the articles did indicate that commonly employed methods of measurement were not the most accurate, the Special Master rejected them as qualifying public disclosures because the documents did not place anyone's conduct "in a questioning light" and/or did not "disclose any transaction in which the representations of any particular gas measurer were different than the true facts." (Report at 1156.) Similarly, he declined to accept as public disclosures the documents related to a 1988-89 investigation by the United States Senate into gas mismeasurement on federal and Indian lands because they named only "Koch Oil" (Report at 1157), a company already dismissed from these proceedings. "The fact that these documents, while noting widespread fraud, specifically identify only one company" was "central" to his conclusion. Id. After reviewing case law from various circuits, the Special Master determined that, "generally speaking, public disclosure of widespread wrongdoing in an industry does not trigger the statutory public disclosure bar as to, every industry member." (Report at 1162.)
The Special Master then turned to whether documents from Relator's 1995 qui tam. litigation ("1995 Qui Tam Action Documents")1 met the statutory requirements for public disclosures. He determined that these documents do qualify as public disclosures from one of the listed sources, rejecting Relator's assertion that such a finding would undermine the policies underlying the FCA. The Special Master further found that the nature of the dismissal of Relator's 1995 qui tam case has no bearing upon the question of whether the pleadings and orders entered therein constitute public disclosures of allegations or transactions under § 3730(e)(4)(A).
Having determined that the 1995 Qui Tam Action Documents are public disclosures of allegations or transactions from one of the sources listed in the FCA, the Special Master next addressed the question of whether and to what extent Relator's 1997 qui tam cases are based upon those public disclosures. He found that "if the gist of the fraudulent scheme has been publicly disclosed in a source listed in § 3730(e)(4)(A), a subsequent qui tam action alleging a substantially identical fraudulent scheme against the same or related defendants is barred unless the relator qualifies as an original source." (Report at 1166.) The Special Master concluded that, at least as to...
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