Little v. Shell Exploration & Prod. Co.

• Citation: 690 F.3d 282
• Decision Date: 31 July 2012
• Docket Number: No. 11–20320.,11–20320.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)
• Parties: Randall L. LITTLE, bringing this action on behalf of the United States Government; Joel F. Arnold, bringing this action on behalf of the United States Government, Plaintiffs–Appellants, v. SHELL EXPLORATION & PRODUCTION COMPANY; Shell Deepwater Development Systems, Inc.; Shell Offshore, Inc., Defendants–Appellees.

690 F.3d 282

Randall L. LITTLE, bringing this action on behalf of the United States Government; Joel F. Arnold, bringing this action on behalf of the United States Government, Plaintiffs–Appellants,

v.SHELL EXPLORATION & PRODUCTION COMPANY; Shell Deepwater Development Systems, Inc.; Shell Offshore, Inc., Defendants–Appellees.

No. 11–20320.

United States Court of Appeals, Fifth Circuit.

July 31, 2012.

Sean Connelly (argued), Eric Fisher, Lindsay Ann Unruh, Reilly Pozner, L.L.P., Richard C. LaFond, Law Office of Richard C. LaFond, P.C., Denver, CO, Leif Alexander Olson, Welsh & Chapoton L.L.P., Houston, TX, Michael Steven Porter, Wheat Ridge, CO, for Plaintiffs–Appellants.

Daniel Mead McClure (argued), Matthew Alexander Dekovich, Fulbright & Jaworski, L.L.P., Houston, TX, Nancy Lee Pell, Atty. Gen., Fulbright & Jaworski, L.L.P., Washington, DC, Gregory A. McKenzie, Edmond, OK, for Defendants–Appellees.

Charles Wylie Scarborough (argued), U.S. Dept. of Justice, Civ. Div., App. Staff, Washington, DC, for United States of America, Amicus Curiae.

Appeal from the United States District Court for the Southern District of Texas.

Before SMITH, GARZA and SOUTHWICK, Circuit Judges.

LESLIE H. SOUTHWICK, Circuit Judge:

This case presents an issue of first impression for our court. Is a federal employee, even one whose job it is to investigate fraud, a “person” under the False Claims Act such that he may maintain a qui tam action? We disagree with the district court and conclude that there is no basis to except such an employee from personhood. A second question is whether the Act's “public disclosure bar” is an impediment to this suit. The district court determined that this bar applied but used an overly broad conception of the bar. We REVERSE and REMAND for further proceedings consistent with this opinion.

FACTUAL AND PROCEDURAL HISTORY

In early 2006, relators Randall Little and Joel Arnold filed two qui tam suits against Shell in the Western District of Oklahoma. They alleged that Shell had defrauded the U.S. Department of the Interior of at least $19 million. Specifically, they charged that from October 2001 through 2005, Shell had deprived the United States of royalties by taking unauthorized deductions for expenses to gather and store oil on twelve of its offshore drilling platforms.

At the time their suits were filed, Little was a Senior Auditor and Arnold a Supervisory Auditor for the Minerals Management Service (MMS), an agency within the Department of the Interior that administered Shell's leases.¹ Part of MMS's mission was to uncover theft or fraud in the royalty programs. Little reported the information he uncovered to Arnold, his immediate supervisor, and the two furnished it to their mutual superior, Lonnie Kimball. It is undisputed that the Shell allegations came to light during the course of their official duties and that reporting their findings to Kimball was a job requirement. It is also undisputed that this information was conveyed before the filings of the qui tam actions. To their knowledge, neither MMS nor any other federal agency has ever acted on this information.

Special procedures apply to qui tam suits under the False Claims Act. They are suits brought “for the person and for the United States Government.” 31 U.S.C. § 3730(b)(1). Before a defendant is served, the relator must provide the complaint and “substantially all material evidence and information” he has to the United States. § 3730(b)(2). The case remains under seal for 60 days. The government may intervene in the litigation and then prosecute the action itself, or move to have it dismissed. § 3730(c)(2)(A). The court may grant dismissal “notwithstanding the objections” of relators. Id. Should the government intervene and continue the suit, the relators receive between 10 and 25 percent of any judgment, whereas their share rises to between 25 and 30 percent if the United States declines participation. § 3730(d)(1), (2).

These procedures were followed. After the government notified the court it did not wish to intervene, the court ordered the case to be unsealed and the defendants to be served. The cases were transferred from Oklahoma to the Southern District of Texas on March 2, 2007, and consolidated there by the parties' joint request. See 28 U.S.C. § 1404(a); Fed.R.Civ.P. 42(a).

In April 2011, the district court granted summary judgment to Shell on the ground that two distinct False Claims Act provisions prohibited the suit: Section 3730(b)(1), describing who may bring suit, and the public disclosure bar contained in Section 3730(e)(4)(A), (B). Relators timely appeal. As amicus curiae, the United States urges us to construe the False Claims Act as barring suits by government employees who discover wrongdoing in the scope of their official duties.

DISCUSSION

I. Constitutional Standing

We first address the government's claim that there is no Article III jurisdiction. Though raised for the first time on appeal, a legitimate question about jurisdiction must be answered no matter when it is first asked. Arena v. Graybar Elec. Co., 669 F.3d 214, 223 (5th Cir.2012).

A plaintiff ordinarily must show (1) an injury in fact, (2) that the injury is fairly traceable to the challenged conduct, and (3) that a victory in litigation will likely redress the injury. See Adar v. Smith, 639 F.3d 146, 150 (5th Cir.) (en banc), cert. denied, ––– U.S. ––––, 132 S.Ct. 400, 181 L.Ed.2d 257 (2011). It is settled that qui tam relators who are not federal employees have constitutional standing. Vt. Agency of Natural Res. v. United States ex rel. Stevens, 529 U.S. 765, 773–74, 120 S.Ct. 1858, 146 L.Ed.2d 836 (2000). Standing exists because “a qui tam relator is, in effect, suing as a partial assignee of the United States['s]” claim for damages. Stevens, 529 U.S. at 773 n. 4, 120 S.Ct. 1858.

Article III grants judicial power over the “Cases” and “Controversies” that were the traditional concern of the courts in England. Id. at 774, 120 S.Ct. 1858. There was a “long tradition of qui tam actions in England and the American Colonies.” Id. We have interpreted Stevens to hold “that the history of qui tam was ‘well nigh conclusive’ with respect to resolving the question of whether qui tam relators filing suit under the [False Claims Act] have Article III standing.” Riley v. St. Luke's Episcopal Hosp., 252 F.3d 749, 752 (5th Cir.2001) (en banc).

The government distinguishes Stevens, which involved relators who were not federal employees, by arguing employee-relators might not be able to retain their litigation awards.² It contends that the prospect of not retaining damages undercuts Stevens's rationale. Even assuming a federal employee may not retain his award, a subsequent decision clarifies that there nonetheless would be standing. In that decision, the Supreme Court fully embraced the concept that an “assignee can sue based on his assignor's injuries.” Sprint Commc'ns Co. v. APCC Servs., Inc., 554 U.S. 269, 286, 128 S.Ct. 2531, 171 L.Ed.2d 424 (2008). In rejecting the claim that not benefitting from litigation proceeds creates a redressability problem, the court held that the inquiry focuses “on whether the injury that a plaintiff alleges is likely to be redressed through the litigation—not on what the plaintiff ultimately intends to do with the money he recovers.” Id. at 287, 128 S.Ct. 2531.

Thus, claims by federal-employee relators can create a case or controversy. We now must determine whether the False Claims Act allows such claims.

II. Who May Bring a False Claims Act Qui Tam Action?

The district court granted summary judgment, which is proper if there are no genuine disputes of material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). Our review is de novo, with the evidence being viewed in the light most favorable to the non-movants. United States ex rel. Jamison v. McKesson Corp., 649 F.3d 322, 326 (5th Cir.2011).

The position advocated by Shell and the United States is expressly contrary to the holdings of the Eleventh Circuit and the en banc Tenth Circuit. United States ex rel. Williams v. NEC Corp., 931 F.2d 1493, 1501–02 (11th Cir.1991); United States ex rel. Holmes v. Consumer Ins. Grp., 318 F.3d 1199, 1208–12 (10th Cir.2003). Adopting that position would also create tension with the en banc Ninth Circuit and the Sixth Circuit. United States ex rel. Fine v. Chevron U.S.A., Inc., 72 F.3d 740, 743–44 & n. 5 (9th Cir.1995); United States ex rel. Burns v. A.D. Roe Co., 186 F.3d 717, 722 & n. 5 (6th Cir.1999). The First Circuit, though, has taken the position that at least some federal employees may not be qui tam claimants. United States ex rel. LeBlanc v. Raytheon Co., 913 F.2d 17, 19–20 (1st Cir.1990).³ Though we apply our own judgment to every case, we customarily are “chary to create a circuit split.” Alfaro v. Comm'r, 349 F.3d 225, 229 (5th Cir.2003). There is something of a split already, though.

A. Statutory Text

The place to start in deciding whether these parties can bring this claim is the text of the False Claims Act. Med. Ctr. Pharmacy v. Mukasey, 536 F.3d 383, 394 (5th Cir.2008). The key provision states this:

(b) Actions by private persons.—(1) A person may bring a civil action for a violation of section 3729 for the person and for the United States Government. The action shall be brought in the name of the Government. The action may be dismissed only if the court and the Attorney General give written consent to the dismissal and their reasons for consenting.

31 U.S.C. § 3730(b)(1) (2006). When a provision is unambiguous and “the statutory scheme is coherent and consistent,” there is no need for further inquiry as to meaning. Schindler Elevator Corp. v. United States ex rel. Kirk, ––– U.S. ––––, 131 S.Ct. 1885, 1893, 179 L.Ed.2d 825 (2011) (quotation marks and citation omitted).

“A person” may bring suit, suggesting that any person may do so. See Stevens, 529 U.S. at 783 n. 12, 120 S.Ct. 1858....