U.S. ex rel. Biddle v. Board of Trustees of Leland Stanford, Jr. University

• Decision Date: 03 November 1998
• Docket Number: No. 96-16911,96-16911
• Parties: 130 Ed. Law Rep. 1093 UNITED STATES of America, ex rel., Paul BIDDLE, Plaintiff-Appellant, v. BOARD OF TRUSTEES OF THE LELAND STANFORD, JR. UNIVERSITY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 533

161 F.3d 533

130 Ed. Law Rep. 1093

UNITED STATES of America, ex rel., Paul BIDDLE, Plaintiff-Appellant, v. BOARD OF TRUSTEES OF THE LELAND STANFORD, JR. UNIVERSITY Defendant-Appellee.

No. 96-16911.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Nov. 5, 1997.

Decided May 26, 1998.

Amended Nov. 3, 1998.

Phillip E. Benson, Orange, CA, Brian J. Panish, Greene, Broillet, Taylor, Wheeler & Panish, Santa Monica, CA, Timothy M. Rastello, Walter H. Bithell and Marcy G. Glenn, Holland & Hart, LLP, Denver, CO, for plaintiff-appellant.

Debra L. Zumwalt, Kevin Fong and Patrick Dunkley, Pillsbury Madison & Sutro LLP, Palo Alto, California and J. Stephen Lawrence, Jr., Arnold & Porter, Washington, D.C., for defendant-appellee.

Appeal from the United States District Court for the Northern District of California; Ronald M. Whyte, District Judge, Presiding. D.C. No. CV-91-20618 RMW.

Before: BOOCHEVER, Senior Circuit Judge, KLEINFELD, Circuit Judge, and WILSON, District Judge. ^*

Opinion by District Judge WILSON; Dissent by Judge KLEINFELD.

ORDER

The Slip Opinion filed May 26, 1998 is amended to include Judge Kleinfeld's dissent.

OPINION

WILSON, District Judge:

Paul Biddle appeals the district court's dismissal of his cause of action for lack of subject matter jurisdiction. Biddle brought a qui tam lawsuit against the Board of Trustees of the Leland Stanford, Jr. University ("Stanford") pursuant to the False Claims Act ("FCA"), 31 U.S.C. § 3730, alleging that Stanford defrauded the United States Government. Because the district court lacks subject matter jurisdiction over Biddle's lawsuit, we affirm.

BACKGROUND

Federal government agencies regularly enter into agreements with Stanford and other universities for research and other activities to be performed by the universities. The agreements are designed to reimburse the universities for both direct and indirect costs, as well as staff benefits. Direct costs include salaries and supplies for a particular project. Indirect costs are a method to allow a university to be reimbursed for a share of its overhead, such as costs of buildings, equipment, utilities, and administrative support. The Office of Naval Research ("ONR") is responsible for setting indirect cost rates and staff benefits at Stanford. The agreements between ONR and Stanford for calculating indirect costs are called Memoranda of Understanding.

In October of 1988, Biddle was hired as Administrative Contracting Officer ("ACO") and Resident Representative for ONR at Stanford. Soon thereafter, Biddle came to believe that Stanford was overcharging the government for indirect costs. After informing his supervisors to no avail, Biddle relayed his concerns to a congressional subcommittee in the summer of 1990. As a result of Biddle's revelations, the General Accounting Office and the Defense Contract Audit Agency began an investigation of Stanford.

In September of 1990, the media began reporting on Biddle's allegations against Stanford. Biddle was interviewed by numerous newspapers and magazines, and was featured on the ABC news program "20/20." In 1991, Stanford's indirect cost rate was reduced from 76% to 55.5%.

On September 9, 1991, after more than one year of extensive media coverage of Stanford's alleged overcharges, Biddle filed a qui tam suit under the False Claims Act. Following a two-year investigation, the Department of Justice decided not to intervene in Biddle's lawsuit. Biddle's complaint was then served on Stanford. On August 30, 1995, Biddle filed his third amended complaint. Stanford moved to dismiss the complaint for lack of subject matter jurisdiction. On August 26, 1996, the district court granted Stanford's motion. Specifically, the district court held that Biddle's complaint was jurisdictionally barred because (1) it was based upon public disclosures, and (2) Biddle did not qualify as an original source of the information he provided to the government.

STANDARD OF REVIEW

The existence of subject matter jurisdiction is a question of law reviewed de novo. Ma v. Reno, 114 F.3d 128, 130 (9th Cir.1997). This court also reviews de novo the district court's conclusion that it lacks subject matter jurisdiction. H2O Houseboat Vacations, Inc. v. Hernandez, 103 F.3d 914, 916 (9th Cir.1996). In making its determination, the district court may resolve factual disputes based on the evidence presented where the jurisdictional issue is separable from the merits of the case. Rosales v. United States, 824 F.2d 799, 803 (9th Cir.1987). The district court's findings of fact relevant to its determination of subject matter jurisdiction are reviewed for clear error. Id.

DISCUSSION

Under the False Claims Act, any person who defrauds the United States Government is liable for civil penalties. 31 U.S.C. § 3729 (1994). Although the FCA requires the Attorney General to investigate possible violations, id. § 3730(a), the FCA also permits civil qui tam actions by private persons, known as relators, id. § 3730(b). In a qui tam action, the relator sues on behalf of the government as well as himself. If the relator prevails, he receives a percentage of the recovery, with the remainder being paid to the government. Congress, however, has limited the jurisdiction of courts over qui tam actions:

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 person bringing the action is an original source of the information.

Id. § 3730(e)(4)(A). "Original source" is defined as "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." Id. § 3730(e)(4)(B).

I. Were the disclosures of Stanford's alleged fraud "public disclosures" under the FCA?

Biddle first argues that the district court erred in ruling that the disclosures of Stanford's alleged fraud through governmental investigations and media reports constituted "public disclosures" under the FCA. Biddle relies on United States ex rel. Barajas v. Northrop Corp., 5 F.3d 407 (9th Cir.1993), cert. denied, 511 U.S. 1033, 114 S.Ct. 1543, 128 L.Ed.2d 195 (1994), for the proposition that if an individual provides information to the government that causes a governmental investigation, and evidence of fraud or wrongdoing is made public during the government's investigation, then allegations regarding the fraud are not treated as publicly disclosed under the FCA.

In Barajas, the plaintiff brought a qui tam suit against Northrop for fraudulent activities. Following Northrop's indictment, the plaintiff amended his complaint, adding an allegation that Northrop was using inadequate damping fluid in its flight data transmitters. The plaintiff admitted that after he left Northrop, he learned of the damping fluid problem through a newspaper article that reported on Northrop's indictment. The investigation leading up to the indictment may have been based on information that the plaintiff provided to the government. We held that a "disclosure resulting from a criminal investigation by the government based on information provided by a qui tam plaintiff" does not bar the action under § 3730(e)(4)(A). Id. at 411-12. Biddle asserts that all of the disclosures regarding Stanford's alleged fraud resulted from a governmental investigation, which was triggered when Biddle provided the government with the pertinent information. Thus, Biddle argues, the disclosures are not "public disclosures" under Barajas.

Stanford contends that this court's decision in United States ex rel. Devlin v. California, 84 F.3d 358 (9th Cir.1996), cert. denied, 519 U.S. 949, 117 S.Ct. 361, 136 L.Ed.2d 252 (1996), is controlling. In Devlin, a government employee informed the plaintiffs of alleged fraud in which the employee had participated by falsifying records. Shortly thereafter, one of the plaintiffs met a newspaper reporter and told him about the alleged fraud. The newspaper then published an article describing the allegedly fraudulent conduct. Five days after the article was published, the plaintiffs filed their qui tam action. This court held that because the action was filed after the newspaper publicly disclosed the allegations of fraud, the district court lacked subject matter jurisdiction, unless the plaintiffs were an "original source" of the information upon which the allegations were based. Id. at 359.

We believe that Devlin is dispositive, and that Biddle misreads Barajas. In Barajas, the allegations against the defendant became public because the government obtained an indictment against the defendant. The court reasoned that if the allegations in the indictment were deemed publicly disclosed, then the government could "limit the potential recovery of qui tam plaintiffs unfairly simply by initiating a criminal investigation." Barajas, 5 F.3d at 411. In contrast, Biddle himself was responsible for the story reaching the public in that he disclosed the alleged fraud to the media. For example, Biddle appeared on the news program "20/20," which aired in March of 1991. Thus, the present case is similar to Devlin, in that the relator in each case personally disclosed information to the media. The rationale of Barajas that the government should not be able to stifle a plaintiff's qui tam suit by launching a public investigation does not apply where the relator himself was involved in the public disclosure of the allegations. Therefore, we hold that the media reports of Stanford's alleged fraud were "public disclosures" within the meaning of the FCA.

II. Is Biddle's action "based upon" public disclosures?

Even though the...