U.S. ex rel. Marcy v. Rowan Companies, Inc.

• Decision Date: 05 March 2008
• Docket Number: No. 06-31238.,06-31238.
• Citation: 520 F.3d 384
• Parties: UNITED STATES of America, ex rel., Robert Daniel MARCY, on behalf of the United States of America, c/o James Letten & John Ashcroft, Plaintiff-Appellant, v. ROWAN COMPANIES, INC.; Newfield Exploration Gulf Coast, Inc., formerly known as EEX Corporation; Newfield Exploration Co.; Remington Oil & Gas Corp., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

520 F.3d 384

UNITED STATES of America, ex rel., Robert Daniel MARCY, on behalf of the United States of America, c/o James Letten & John Ashcroft, Plaintiff-Appellant, v. ROWAN COMPANIES, INC.; Newfield Exploration Gulf Coast, Inc., formerly known as EEX Corporation; Newfield Exploration Co.; Remington Oil & Gas Corp., Defendants-Appellees.

No. 06-31238.

United States Court of Appeals, Fifth Circuit.

March 5, 2008.

David Bradley Marvel (argued), Robertson & Hollingsworth, Charleston, SC, Conlee

Schell Whiteley, Kanner & Whiteley LLC, New Orleans, LA, for Plaintiff-Appellant.

Jonathan Saul Franklin (argued), Matthew H. Kirtland, Fulbright & Jaworski, Washington, DC, Steven L. Roberts, Sutherland, Asbill & Brennan LLP, Houston, TX, for Rowan Companies, Inc.

James H. Roussel, Baker, Donelson, Bearman, Caldwell & Berkowitz, New Orleans, LA, for Newfield Exploration Gulf Coast, Inc. and Newfield Exploration Co.

Dennis N. Ryan, Mark A. Shoffner, Andrews & Kurth, Dallas, TX, C. Peck Hayne, Jr., Scott Allen O'Connor, Gordon, Arata, McCollam, Duplantis & Eagan, New Orleans, LA, for Remington Oil & Gas Corp.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before BARKSDALE, DENNIS and SOUTHWICK, Circuit Judges.

SOUTHWICK, Circuit Judge:

Robert Daniel Marcy challenges the district court's dismissal of the qui tam action that he brought on behalf of the United States under the False Claims Act. We affirm the judgment of dismissal.

FACTS

On December 2, 2003, Robert Marcy filed suit against Newfield Exploration Gulf Coast, Inc., Newfield Exploration Company, Rowan Companies, Inc., and Remington Oil and Gas Corporation ("Defendants"). Marcy alleges that, while employed on Defendants' Midland offshore drilling unit, he was ordered by Defendants to illegally dump oil, oil waste, solid waste, grease, paint, and other hazardous substances into the Gulf of Mexico at night. Marcy contends that Defendants' actions violated the Federal Water Pollution Control Act ("FWPCA") and the Act to Prevent Pollution from Ships ("APPS"), that Defendants intentionally failed to report the discharge of oil or hazardous substances as required by those two enactments, and that Defendants intentionally omitted a record of the discharges both from the "Oil Record Book" (in violation of 33 C.F.R. § 151.25) as well as from the weekly-filed Mineral Management Service activity reports, hereinafter referred to using their form number as the "MMS 133 reports" (in violation of Department of Interior regulations).

Marcy maintains that Defendants fraudulently avoided civil fines and other penalties under several statutes, including the FWPCA and the APPS, the Oil Pollution Act of 1990 ("OPA"), and the Outer Continental Shelf Lands Act ("OCSLA"). Marcy also alleges that these actions occurred in violation of the terms of the oil and gas lease granted to Defendants by the United States pursuant to OCSLA, which requires that Defendants operate in compliance with OCSLA, all other applicable statutes, and "regulations or orders intended to protect persons, property, and the environment on the Outer Continental Shelf." Finally, Marcy alleges that because Defendants breached the lease but continued operations, they fraudulently retained oil and gas, oil and gas royalties, and profits owed to the United States.

Marcy contends that the Defendants' conduct constitutes a violation of the False Claims Act. Marcy refers us to these subsections of the Act:

Any person who . . . (2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government . . . or (7) knowingly makes, uses, or causes to be made or used a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government . . . is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, plus 3 times the amount of damages which the Government sustains because of the act of that person.

31 U.S.C. §§ 3729(a)(2) and (a)(7). After investigating Marcy's allegations, the United States filed notice of its election to decline intervention.

Each Defendant filed a motion to dismiss, arguing that Marcy failed to state a claim under the False Claims Act and that he did not allege fraud with sufficient particularity under Federal Rule of Civil Procedure 9(b). The district court granted the motions to dismiss, concluding that Marcy failed to state a claim under the Act. The court declined to address the arguments regarding the particularity of the pleading. After motions for reconsideration and to amend the complaint were denied, Marcy appealed.

DISCUSSION

Marcy asserts that his complaint adequately pled his cause of action. Our review of this issue is de novo, accepting as true the factual allegations that are well-pled and construing them favorably towards the plaintiff. United States ex rel. Willard v. Humana Health Plan of Texas, 336 F.3d 375, 379 (5th Cir.2003). Those factual allegations must support a claim to relief that is plausible on its face and rises above mere speculation. In re Katrina Canal Breaches Litigation, 495 F.3d 191, 205 (5th Cir.2007).

Because the two sections of the False Claims Act that Marcy employs have different requirements, we examine each separately.

A. Section 3729(a)(2) — knowingly make false claim for payment.

The False Claims Act is the government's primary litigation tool for recovering losses sustained as the result of fraud. Avco Corp. v. United States Dep't. of Justice, 884 F.2d 621, 622 (D.C.Cir. 1989). Under Section 3729(a)(2), the Act creates liability for "[a]ny person who . . . knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government."

A threshold issue is whether any "claim" was made for purposes of Section 3729(a)(2). The Defendants, engaged in the physical extraction of natural resources belonging to the United States, did not request or demand money or property from the United States. They were taking property through their drilling operations as permitted by contract, i.e., their leases. Defendants contend that because the allegedly inaccurate Oil Record Logs and MMS 133 reports do not certify compliance with the lease, these documents could not serve as false certifications under the Act.

In response, Marcy argues that even though this is not a typical False Claims Act violation, the Act nonetheless applies. Marcy's theory is that the mineral lease was a contract in which the lessee received permission to take government property subject to the lease terms. The purpose of the weekly-submitted MMS 133 reports and the Oil Log Book was allegedly in part to assure the government of a lessee's compliance with lease terms. Marcy contends that dumping of oil and trash necessarily violates the lease and must be documented in both of these records. Because it was not, Marcy argues that Defendants falsely and impliedly certified that they were in compliance with the lease.¹ The benefit Defendants received from this false certification was maintaining the right to take the property of the United States as provided by the lease.

We do not decide whether Marcy has properly identified a claim for purposes of Section 3729(a)(2). Resolving that issue would necessarily require us to determine whether implied certifications may be claims under the Act. This Court has previously deferred that question, and we do so again today. See Willard, 336 F.3d at 381-82; United States ex rel. Stebner v. Stewart & Stephenson Servs., Inc., 144 Fed.Appx. 389, 394 (5th Cir.2005) (unpublished). Instead, we resolve this appeal based on the requirement of materiality for any claim made. A material claim is one that is required to be made in order to receive the relevant government benefit. United States v. Southland Management Corp., 326 F.3d 669, 679 (5th Cir.2003) (en banc) (Jones, J. concurring).

In a recent and similar precedent, the plaintiff filed a qui tam action against Humana Health Plan for selectively choosing participants for Humana's HMO both in violation of Humana's contract with federal agencies to provide health care services to Medicare beneficiaries as well as in violation of other federal regulations. Willard, 336 F.3d at 379. This Court dismissed the claim, noting that the plaintiff had failed to "allege facts that would show that [the government] conditioned its payment to Humana on any implied certification of compliance. . . ." Id. at 382.

We have also concluded that when "the government has conditioned payment of a claim upon a claimant's certification of compliance with, for example, a statute or regulation, a claimant submits a false or fraudulent claim when he or she falsely certifies compliance with that statute or regulation." United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 902 (5th Cir.1997). These "false certifications of compliance create liability under the FCA when certification is a prerequisite to obtaining a government benefit." Id.

Marcy contends that the Willard materiality standard does not govern, arguing instead that we should apply the standard articulated by a panel of this Court in United States v. Southland Management Corp., 288 F.3d 665 (5th Cir.), reh'g en banc granted, 307 F.3d 352 (5th Cir.2002). The initial 2002 Southland opinion determined that a violation of the Act occurred if the false certifications had a "natural tendency to influence or were capable of influencing" the decision of the governmental entity. Southland, 288 F.3d at 676. However, the Southland panel opinion upon which Marcy relies was automatically vacated when it was reheard en banc. See 5th Cir. R. 41.3; Southland, 326 F.3d at 678 n. 2 (Jones, J. concurring) (grant of en banc rehearing vacated panel decision)....