McElmurray v. Consolidated Gov't, Augusta-Richmond, 06-16493.

• Decision Date: 01 October 2007
• Docket Number: No. 06-16493.,06-16493.
• Citation: 501 F.3d 1244
• Parties: R.A. McELMURRAY, III, G. William Boyce, David L. Lewis, Plaintiffs-Appellants, United States of America, ex rel., Plaintiff, v. The CONSOLIDATED GOVERNMENT OF AUGUSTA-RICHMOND COUNTY, Defendant-Appellee, Augusta, GA, Movant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

501 F.3d 1244

R.A. McELMURRAY, III, G. William Boyce, David L. Lewis, Plaintiffs-Appellants United States of America, ex rel., Plaintiff, v. The CONSOLIDATED GOVERNMENT OF AUGUSTA-RICHMOND COUNTY, Defendant-Appellee Augusta, GA, Movant-Appellee.

No. 06-16493.

United States Court of Appeals, Eleventh Circuit.

October 1, 2007.

Craig A. Gillen, Gillen, Parker & Withers, LLC, F. Edwin Hallman, Jr., Richard Anthony Wingate, Decker, Hallman, Barber & Briggs, Atlanta, GA, for Plaintiffs-Appellants.

Carol R. Geiger, Barry J. Armstrong, Amol S. Naik, McKenna, Long & Aldridge, LLP, Atlanta, GA, for Appellees.

Appeal from the United States District Court for the Northern District of Georgia.

Before EDMONDSON, Chief Judge, and CARNES and FAY, Circuit Judges.

FAY, Circuit Judge:

Appellants R.A. McElmurray, III and G. William Boyce, two dairy farmers, and David Lewis, a Research Microbiologist ("Appellants"), filed this lawsuit pursuant to the False Claims Act ("FCA"), against Appellee, the Consolidated Government of Augusta-Richmond County ("Augusta")¹ alleging that Augusta violated the FCA by knowingly misrepresenting its compliance with state and local environmental laws in order to obtain Government loans. Appellants raise two issues. The first claim is that the district court erred by sua sponte converting Augusta's Fed.R.Civ.P. 12(b)(6) motion to dismiss for failure to state a claim into a Fed.R.Civ.P. 12(b)(1) motion for lack of subject matter jurisdiction and dismissing the lawsuit prior to any discovery. Because the district court treated the Fed.R.Civ.P. 12(b)(1) motion as a "facial" challenge to the court's jurisdiction, rather than a "factual" challenge, we affirm this portion of the district court's decision and agree that discovery was not necessary.

Appellants' next claim is that the district court erred in holding that they were not the original source of the information supporting their claim under the FCA. Because we find that Appellants' allegations of fraud on the loans that Augusta sought from the Government are based upon public documents and disclosures, we also affirm the district court's decision that Appellants were not the original source of the information as is required under the FCA.

I. FACTUAL BACKGROUND

Augusta owns and operates the Butler Creek Water Pollution Control Plant ("Butler Creek Plant") and its predecessor and now sub-component, the Messerly Wastewater Treatment Plant ("Messerly Plant") in Augusta, Georgia.² Appellants McElmurray and Boyce allowed Augusta to apply sewage sludge from the Butler Creek and Messerly Plants on their lands. They later noticed that significant adverse effects, such as excessively high mortality rates, developed in their dairy herds.

The Environmental Protection Division of the Georgia Department of Natural Resources ("Georgia EPD") regulates the volume and contents of effluent in the state from each plant by requiring them to obtain a National Pollution Discharge Elimination System ("NPDES") permit before they can discharge into public waters.³

For many years, the Messerly Plant has processed Augusta's municipal wastewater. The Messerly Plant first experienced problems with its treatment of wastewater in the 1970s, which resulted in chronic violations of its NPDES permits. By the early 1990s, a series of Georgia EPD Administrative Orders and Consent Decrees had been issued against the Messerly Plant, requiring compliance with its NPDES permits. On May 11, 1994, Augusta informed the Georgia EPD of a long term plan it was implementing in order to achieve compliance with its NPDES permits.⁴ Two years later, as part of its long term plan, Augusta had begun construction on a construed wetlands system for nitrogen removal and effluent polishing, but it was obvious to the Georgia EPD that until the wetlands were completed the Plant would continue to discharge effluent over the set limits. Therefore, the Georgia EPD established more relaxed discharge levels and in a Consent Order required Augusta to complete Phase II of the wetland system by October 1, 2000. However, Augusta failed to meet even these new, lower standards. As a result, the Georgia EPD audited the facilities during the week of December 7, 1998, and discovered that there had been little improvement at the plants since 1977,⁵ concluding that "the Butler Creek Plant is in immediate need of a strong Capital Improvement Plan that sets firm schedules for the evaluation and installation of necessary plant equipment." Exhibit 2-36 at CO 0556.⁶ In January 2001, a new NPDES permit returned the Butler Creek Plant to its pre-1998 discharge levels. Nonetheless, despite changes, the Plant violated the effluent limitations of this permit numerous times between 2001 and 2003, and as a result of these violations, was required to pay monthly fines imposed by the Georgia EPD.

Augusta not only experienced problems with the Butler Creek Plant, the Spirit Creek Plant also released effluent that was impermissibly high at least twice: in January 2002 and in September 2004.⁷ Augusta also suffered several sewer failures that resulted in unauthorized discharge of contaminants into public waters, for which it was fined in September 2002 and June 2003. See Exhibit 2-69, 2-78. In addition to the Georgia EPD, other organizations noticed Augusta's poor environmental record. Apart from Appellants' own individual lawsuits against Augusta for contaminated sludge, the Georgia Environmental Organization, Inc. brought a citizen suit against the City of Augusta, Augusta's predecessor, for violations of the Clean Water Act. See Exhibit 18.

Even with the strict monitoring and management requirements imposed on Augusta's facilities, it also failed the Georgia EPD's expectations with respect to its Industrial Pretreatment Program.⁸ After these problems became apparent in the late 1980s and early 1990s, the Georgia EPD, along with other environmental experts, turned their attention to the plants' program for disposal of sewage sludge by land application.⁹ In December 1998, when conducting an audit of the Messerly Plant, the Georgia EPD noticed that a direct relationship existed between the poor management of the Industrial Pretreatment Program at the Messerly Plant and the high concentration of contaminants in the sewage sludge the facility generated.¹⁰ Thus, the Georgia EPD concluded that the Messerly Plant's land application program was in violation of Georgia EPD regulations and the Plant's NPDES permits. After making these discoveries, the Georgia EPD recommended that "the land application program [should] be shutdown immediately and ... remain down until the Pretreatment Program has been brought up to speed." Exhibit 16 at GCL 00050. In addition, the Georgia EPD stated that "in the future, the City should not be allowed to land apply sludge" and "a reliable contract operator" should be hired instead to run the land application program. Id.

After representing to the McElmurray and Boyce families that the sewage sludge was a completely safe and beneficial fertilizer, Augusta was permitted to apply the sewage sludge from the Messerly Plant onto the families' farmlands from 1979 to 1990 and from 1986 to 1996, respectively. When Appellants noticed that significant adverse effects, such as excessively high mortality rates, developed in their dairy herds, they contacted each other and began to investigate the cause of such effects. After investigation, Appellants established that a causal link existed between the damage to their cattle farms and the applications of sewage sludge by Augusta.¹¹ Appellants filed separate lawsuits against Augusta alleging that the sewage sludge used as fertilizer on their land contained hazardous chemical wastes that resulted in the deaths of their dairy cattle.¹²

Appellants brought this claim under the FCA¹³ alleging that Augusta committed fraud in misrepresenting its compliance with environmental laws in order to receive Georgia Environmental Facilities Authority (GEFA) loans, which originated from the Environmental Protection Agency (EPA).¹⁴ Appellants claim that Augusta obtained the three GEFA loans in violation of the FCA by knowingly making false statements and false claims in the loan applications and other documents.¹⁵ Augusta filed a motion to dismiss on March 29, 2006 arguing that: (1) Appellants' claims are barred by the FCA's statute of limitations; (2) Augusta's alleged false certifications of compliance with environmental laws were not "material" to GEFA's approval of the loans; (3) Appellants' claims are based upon public disclosures and Appellants are not the original source; (4) Appellants failed to plead fraud with particularity; and (5) Appellants do not allege that the Government has suffered any cognizable damages. The district court granted Augusta's motion to dismiss based upon the third argument alone, finding that Appellants' claims were based upon public disclosures and that they were not the original source of the information on which their loans were based. This appeal followed.

II. STANDARD OF REVIEW

In reviewing the district court's decision to grant the motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(1), lack of subject matter jurisdiction, this Court reviews the legal conclusions of the district court de novo. See S.E.C. v. Mutual Benefits Corp., 408 F.3d 737, 741 (11th Cir.2005).

III. DISCUSSION

A. The District Court Did Not Err in Dismissing the Complaint for Lack of Subject Matter Jurisdiction Pursuant to Fed.R.Civ.P. 12(b)(1) Without First Permitting the Parties to Conduct Discovery.

The FCA states that "[n]o court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions ... unless ... the person bringing the action is an original source of the information." 31 U.S.C. § 3730(e)(4)(A)(West 2007). Because the district court correctly ruled that the Appellants' claims were based upon...