U.S. ex rel. Findley v. FPC-Boron Employees' Club

• Decision Date: 18 March 1997
• Docket Number: No. 95-7189,FPC-BORON,95-7189
• Citation: 323 U.S. App. D.C. 61,105 F.3d 675
• Parties: , 65 USLW 2515, 41 Cont.Cas.Fed. (CCH) P 77,042 UNITED STATES of America, ex rel. D.J. FINDLEY, Appellant, v.EMPLOYEES' CLUB, et al., Appellees.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 675

105 F.3d 675

323 U.S.App.D.C. 61, 65 USLW 2515,

41 Cont.Cas.Fed. (CCH) P 77,042

UNITED STATES of America, ex rel. D.J. FINDLEY, Appellant, v. FPC-BORON EMPLOYEES' CLUB, et al., Appellees.

No. 95-7189.

United States Court of Appeals District of Columbia Circuit.

Argued Nov. 19, 1996.

Decided Jan. 24, 1997.

Order Denying Rehearing March 18, 1997.

Appeal from the United States District Court for the District of Columbia (No. 94cv01477).

Alan M. Grayson, McLean, VA, argued the cause and filed the briefs for appellant.

Michael L. Martinez, Washington, DC, argued the cause for appellees, with whom Lynn Estes Calkins was on the brief.

Before: WALD, WILLIAMS and TATEL, Circuit Judges.

Opinion for the Court filed by Circuit Judge WALD.

WALD, Circuit Judge:

D.J. Findley and Paul Lazerson brought this qui tam action alleging that government employees' clubs that earn revenue from vending services on federal property are violating the False Claims Act ("FCA" or "Act"), 31 U.S.C. §§ 3729-3733, by retaining monies owed to the government. The FCA permits private individuals such a cause of action against those who submit false claims to the government. Such plaintiffs are identified as relators and entitled to receive a portion of any government recovery for bringing suit.

The district court found that the practice of government employees' clubs retaining vending machine income was widely known at the time this action was brought and dismissed the case in reliance on the Act's jurisdictional bar against qui tam suits that are "based upon the public disclosure of allegations or transactions...." 31 U.S.C. § 3730(e)(4)(A). This appeal, brought solely by relator Findley, calls for a first time interpretation in this circuit of aspects of the Act's public disclosure bar that have caused splits among our sister circuits. Our analysis of the language, structure, history and purpose of the FCA supports an interpretation of the public disclosure bar that limits qui tam jurisdiction to those cases in which the relator played a role in exposing a fraud of which the public was previously unaware. Because we find that Findley is not such a relator, we affirm the district court's dismissal of this action.

I. FACTUAL BACKGROUND

Relators Findley and Lazerson learned of the circumstances underlying this suit while attending a pre-proposal conference to discuss a Bureau of Prisons ("BOP") request for proposals to service certain vending machines at Federal Prison Camp-Boron ("FPC-Boron"). At the conclusion of the conference they were handed a solicitation for services from members of the FPC-Boron Employees' Club concerning additional vending machines also located at FPC-Boron, but operated by the FPC-Boron Employees' Club rather than the BOP. The Employees' Club's machines are located in employee and visitor lounge areas at FPC-Boron. The BOP pays for the utilities used to operate the machines but, under the terms of a BOP Program Statement, the Employees' Club retains eighty-five to one hundred percent of the machines' profits.

Findley and Lazerson submitted a bid for the contract to service the Employees' Club's vending machines, but did not receive the contract. They protested to the BOP and the General Accounting Office ("GAO") regarding the propriety of the Employees' Club procuring such services, but their protests were denied. Thereafter, Findley and Lazerson filed this action against all employees' clubs of the BOP and the United States Department of Justice that earn revenue from the provision of vending services on federal property. They alleged that the vending machine revenue is used to fund social events and recreational junkets for federal employees and that the retention of the vending profits for these purposes violates a number of civil and criminal laws, including the FCA. The complaint names the Employees' Club at FPC-Boron as the representative defendant in the action. As required by the FCA, 31 U.S.C. § 3730(b)(2), relators filed their complaint under seal in order to permit the government 60 days to decide whether to intervene as plaintiff. The United States declined to intervene, and relators proceeded with the action.

The district court dismissed the complaint for lack of subject matter jurisdiction based upon a jurisdictional limitation on qui tam actions which bars suits "based upon the public disclosure of allegations or transactions," unless the relator is an "original source" of the information underlying the allegation. See 31 U.S.C. § 3730(e)(4)(A). The district court relied on a 1952 Comptroller General Opinion which questioned the legality of postal employees' clubs retaining vending revenue and on legislative history of the Randolph-Sheppard Act, 20 U.S.C. §§ 107-107f, which granted blind vendors priority in operating vending machines on federal property. These two sources were both cited inTexas State Comm'n for the Blind v. United States, 796 F.2d 400 (Fed.Cir.1986), cert. denied, 479 U.S. 1030, 107 S.Ct. 874, 93 L.Ed.2d 828 (1987), in which the Federal Circuit considered whether vending revenue secured at military exchanges was exempt from the Randolph-Sheppard Act.

The district court determined that these three public sources constituted public disclosure in a "General Accounting Office report," "congressional report," or "civil hearing" precluding qui tam jurisdiction of the practices alleged to violate the FCA because

[b]efore the filing of this action, enough information was in the public domain to expose the allegation that government employees are perpetrating a fraud upon the government by maintaining vending machines on Federal property. The government itself presumably could have brought an action against employees' clubs such as the one at FPC-Boron ... [without] a qui tam suit in the present case.

United States ex rel. Findley v. FPC-Boron Employees' Club, No. 94-1477, slip opinion ("slip op.") at 8 (D.D.C. June 30, 1995). The court concluded that "[b]ecause the information that relators bring has been a subject of discussion in Congress, in the GAO, and in the Federal courts over the past forty years, as well as appearing in publicly available BOP documents, relators cannot be considered to possess the 'independent knowledge' necessary to be an 'original source.' " Id. at 9.

Relator Findley appeals the dismissal of his qui tam claim, arguing principally that he did not learn of the Employees' Club's false claims from publicly disclosed allegations or transactions, that his complaint alleges different transactions and allegations than those in the public domain and that he qualifies as an original source who is not barred by the public disclosures. This appeal raises issues that have led to disagreement among other courts of appeals that previously have considered the public disclosure bar, the central focus of which involve the relationship a qui tam relator must have to publicly disclosed allegations or transactions in order to trigger the FCA's jurisdictional bar and in order to benefit from the exception to the bar for original sources. Any attempt to interpret the oft-amended qui tam provisions of the FCA begins with the history of the Act, which illustrates Congress' effort to navigate between several interests that, at times, appear to work at cross-purposes with each other.

II. THE DEVELOPMENT OF THE PUBLIC DISCLOSURE BAR

As enacted during the Civil War, the FCA allowed any private party to bring suit, in the name of the government, based on the individual's knowledge of fraud against the government. Act of March 2, 1863, ch. 67, § 4, 12 Stat. 698 (1863) (current version at 31 U.S.C. §§ 3729-3731). The qui tam provisions offset inadequate law enforcement resources and encouraged "a rogue to catch a rogue" by inducing informers "to betray [their] coconspirators." CONG. GLOBE, 37th Cong., 3d Sess. 955-96 (1863). The incentive to blow the whistle on fraudulent conduct was provided by the Act's provisions permitting a successful qui tam relator one-half of the recovery against the offending parties. S.REP. NO. 345, 99th Cong., 2d Sess., at 10, reprinted in 1986 U.S.C.C.A.N. 5266, 5275 ("Senate Report").

The Act was seldom utilized, however, until the 1930s and 1940s when increased government spending opened up numerous opportunities for unscrupulous government contractors to defraud the government. Qui tam litigation surged as opportunistic private litigants chased after generous cash bounties and, unhindered by any effective restrictions under the Act, often brought parasitic lawsuits copied from preexisting indictments or based upon congressional investigations. Such ill-motivated suits not only diminished the government's ultimate recovery without contributing any new information, but the rush to the courthouse put pressure on the government to make hasty decisions regarding whether to prosecute civil actions.

When the Supreme Court decided United States ex rel. Marcus v. Hess, 317 U.S. 537, 63 S.Ct. 379, 87 L.Ed. 443 (1943), permitting a qui tam suit in which the relator copied his complaint directly from a criminal fraud indictment, Congress finally took action to prevent such piggy-back lawsuits. The House of Representatives supported a bill that would have repealed altogether the qui tam provisions. The Senate's bill would have barred jurisdiction where a qui tam suit was based upon information in the government's hands, unless the relator was the source of that information. Senate Report at 12, 1986 U.S.C.C.A.N. 5277. The Senate version prevailed, but the original source provision was dropped in conference. See United States ex rel. Stinson, Lyons, Gerlin & Bustamante, P.A. v. Prudential Ins. Co., 944 F.2d 1149, 1153 (3d Cir.1991). Thus, the FCA, as amended in 1943, barred qui tam suits that were "based upon evidence or information in the possession of the United States ... at the time such suit was brought." Act of December 23, 1943, 57...