U.S. ex rel. Barajas v. Northrop Corp.

Decision Date12 June 1998
Docket NumberNo. 96-55349,96-55349
Citation147 F.3d 905
Parties42 Cont.Cas.Fed. (CCH) P 77,321, 98 Cal. Daily Op. Serv. 4494, 98 Daily Journal D.A.R. 6188 UNITED STATES of America, ex rel., Leocadio BARAJAS, Plaintiff-Appellant, v. NORTHROP CORPORATION, Defendant-Appellee.
CourtU.S. Court of Appeals — Ninth Circuit

Donald R. Warren (briefed), Monaghan & Warren, San Diego, CA, and Phillip E. Benson (briefed and argued) and Linda R. MacLean (briefed), Law Offices of Phillip E. Benson, Newport Beach, CA, for Plaintiff-Appellant.

Richard A. Sauber (briefed and argued), Carleton K. Montgomery (briefed), and Douglas W. Baruch (briefed), Fried, Frank, Harris, Shriver & Jacobson, Washington, DC, for Defendant-Appellee.

Frank D. Kortum, Assistant United States Attorney, Nora M. Manella, United States Attorney, Leon W. Wiedman, Chief, Civil Division, Howard F. Daniels, Chief, Civil Fraud Division, for the United States.

Appeal from the United States District Court for the Central District of California; David V. Kenyon, District Judge, Presiding. D.C. No. CV-87-07288-DVK.

Before: BROWNING and KLEINFELD, Circuit Judges, MERHIGE, * District Judge.

KLEINFELD, Circuit Judge:

This is a qui tam case raising a question of whether the relator can proceed after the government has settled.


The government bought cruise missiles from Boeing. A division of Northrop was at relevant times manufacturing a navigational guidance device for the missiles. The missiles are designed to be carried under the wings of B-52 or B-1 bombers, dropped from the wings as the planes fly, and then to fly independently toward their targets at low altitudes. The part at issue, a "flight data transmitter" manufactured by Northrop, consisted substantially of three gyroscopes, an accelerometer, and electronic components enclosed in a box. Fluid is used to damp movement inside the box. The fluid is supposed to stay sufficiently liquid to perform its damping function down to 65 degrees below zero Fahrenheit, according to the contract specifications. The missiles were of course manufactured for supply to the United States, which paid for them.

Two things are alleged to have been false about Northrop's claims for payment for the flight data transmitters. One is that the required tests were not performed, and the certifications that they had been were false. That has been established by evidence. Barajas was largely responsible for faking the tests, and has testified that he did so, and Northrop has pleaded guilty to a crime on account of his falsifications when he was its employee. Northrop and the government settled the qui tam case, based on the fraudulent certifications of tests, and it was dismissed. Northrop paid the government $8 million to settle the civil case, on top of $17 million in fines and penalties in the criminal case. Barajas was awarded $864,000 of the $8 million settlement, as relator.

The second alleged fraud is that the fluid would gum up at 50? below zero Fahrenheit instead of 65? below, a very material difference from the contract specification of 65? below in subarctic winter conditions where temperatures between those two figures are not uncommon. This second falsehood, that the damping fluid freezes at 50? below, has never been proved, although Northrop was indicted for it. Northrop pleaded guilty only to the false claims, not the bad fluid. The government and Northrop settled the qui tam case based on the false claims alone.

Barajas testified that he thought the flight data transmitters were all fine, and passed the tests whenever the tests were honestly performed. He testified that among the reasons he faked the tests was that the flight data transmitters always passed, so he thought the tests were a waste of time. Barajas read about the tendency of the fluid to gum up in the cold in a newspaper, which reported a story based on the indictment. But he has never proved that it does, because his case was dismissed on the theory that his claim would be barred regardless. In this decision, we assume for purposes of analysis that the fluid does gum up at 50 below, but we do not know that and it has never been proved.

The qui tam statute provides that if the action was brought "by a person who planned and initiated" the fraud against the government, then the court "may ... reduce the share" he receives as relator, or shall dismiss him with no share if he is convicted of a crime in connection with the wrongdoing. Thus the statute has the peculiarity that a person may, as an employee of a government contractor, cause his employer to unknowingly defraud the government, and then as a relator, become wealthy based on his own dishonesty as an employee. Barajas was not convicted of a crime for his fraud, but he was responsible for the fraudulent certifications that the flight data transmitters had been tested, upon which his qui tam action was based.

Because of this statutory peculiarity, the district court held extensive evidentiary hearings to determine how much to award Barajas, and made findings of fact. The court found that Barajas systematically faked many of the tests. Barajas was one of two people principally responsible for testing the flight data transmitters, and "admitted that beginning in 1983 he began to systematically fake many of the FDT test results by recording made up numbers on the test charts These facts are amplified from what we understood in the earlier appeal, U.S. ex rel. Barajas v. Northrop Corp., 5 F.3d 407, 408 (9th Cir.1993), because the ligation has proceeded further in district court and there was an evidentiary hearing and findings of fact.

                rather than actually performing the required series of tests."   Barajas was told by his supervisors to falsify some test results on an intermediate test, but nobody ever told him to falsify any of the final tests.  He testified that he falsified many final acceptance tests "on his own initiative due to the time pressure to complete his work and his belief that the [test] equipment provided by Northrop was faulty."   The tests Barajas faked entirely on his own initiative accounted for two thirds of the settlement.  He did not tell his supervisors that he was falsifying the final acceptance tests.  The district judge found that Barajas " 'planned and initiated' the violations of the acceptance tests he committed."   The district judge found that low quality testing equipment, a lax atmosphere at Northrop, and instructions by supervisors to falsify some intermediate tests, encouraged Barajas to commit his fraud.  The judge found some mitigation of Barajas's wrongdoing because "Barajas seems to have had legitimate doubts about the utility of performing the Acceptance Test, since the FDTs appear never to have failed."   Thus Barajas skipped the testing and filled in fake numbers, not because he thought the fluid would gum up in temperatures warmer than specified, but because he thought the guidance systems were always up to specification so it was a waste of time to do the testing work

After getting fired, Barajas sued Northrop under the qui tam provisions of the False Claims Act. The government investigated and elected to take over the action, pursuant to 31 U.S.C. § 3730(b)(4)(A). The government's amended complaint alleged that Northrop had falsified test results and falsely claimed that required tests had not been performed, so its claims for payment were false. The government's amended complaint did not allege that the fluid would freeze at a warmer temperature than specified, just that the tests had been faked.

Six months after it took over the civil case, the government indicted Northrop for criminal violations of the False Claims Act. The indictment, unlike the civil complaint, alleged that the damping fluid would freeze at temperatures warmer than specified, as well as that tests were faked. Northrop pleaded guilty and admitted that the tests had been faked, but Northrop did not admit that the fluid would freeze above the specified temperature. The government accepted its plea agreement on this basis, and Northrop was penalized $17 million.

In the civil case, Barajas successfully moved to sever and pursue separately his damping fluid claims, which the government elected not to pursue. Barajas's amended complaint alleged both that the damping fluid froze at too high a temperature and that the tests were faked.

Barajas, the government, and Northrop settled. The government sought to limit Barajas's qui tam relator's share of the settlement to a minimal amount, because he had planned and initiated the fraudulent tests that were the basis of the recovery. Its challenge to Barajas's legitimacy as a qui tam relator occasioned the evidentiary hearing described above.

The government used an ordinary broad form release. The government released Northrop from "any and all ... claims under the False Claims Act." It is unquestioned in this litigation that the government itself is barred by its release from pursuing any claim based on the alleged tendency of the damping fluid to gum up at 50? below, because it expressly released those claims and its case was dismissed with prejudice. But Barajas's release reserved whatever right he had to pursue a qui tam action based on that inadequacy of the fluid:

Qui tam plaintiffs agree to dismiss with prejudice all portions of the original complaint and the First Amended and Severed Qui tam Complaint ... except for the claims based on the allegations that the DC-200 damping fluid used in the [transmitters] did not meet Air Force cold temperature performance requirements.

Northrop did not concede that there were any such claims or that if there were, Barajas After the settlement, the district court dismissed Barajas's action on the ground that he was not the "original source" of the damping fluid allegations, because they were publicly disclosed in the indictment that preceded his complaint...

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