U.S. ex rel. Laird v. Locheed Martin Engineering

• Decision Date: 24 June 2003
• Docket Number: No. 02-40504.,02-40504.
• Citation: 336 F.3d 346
• Parties: UNITED STATES of America, ex rel., Patricia LAIRD; et al., Plaintiffs, United States of America, ex rel., James Mayfield, Plaintiff-Appellant, v. LOCKHEED MARTIN ENGINEERING AND SCIENCE SERVICES CO., Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

336 F.3d 346

UNITED STATES of America, ex rel., Patricia LAIRD; et al., Plaintiffs United States of America, ex rel., James Mayfield, Plaintiff-Appellant, v. LOCKHEED MARTIN ENGINEERING AND SCIENCE SERVICES CO., Defendant-Appellee.

No. 02-40504.

United States Court of Appeals, Fifth Circuit.

June 24, 2003.

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Stephen Joseph Schecter (argued), Schecter & Associates, Charles M. Jordan, Daughtry, Scott & Jordan, Houston, TX, for Laird and Mayfield.

F. Walter Conrad, Jr., Michael L. Brem, Shelley L.Ward (argued), Baker Botts, Houston, TX, for Defendant-Appellee.

Appeal from the United States District Court for the Southern District of Texas.

Before KING, Chief Judge, and REAVLEY and STEWART, Circuit Judges.

KING, Chief Judge:

James Mayfield brought a qui tam action under the False Claims Act, 31 U.S.C. § 3729 (2000). On a motion for summary judgment, the district court concluded that (1) Mayfield was barred by the doctrine of res judicata from bringing the majority of his claims against Lockheed, and (2) the court lacked subject matter jurisdiction pursuant to the "public disclosure" provisions of the False Claims Act to consider the rest of Mayfield's claims against Lockheed.

In determining that Mayfield did not qualify as an "original source" of the information publicly disclosed in his prior state court lawsuit, the district court aligned itself with a minority of the circuits interpreting the original source exception. As a matter of first impression for this court, we choose instead to follow the majority interpretation. We thus vacate the judgment of the district court and remand for findings under this test. We further hold that Mayfield's prior state court lawsuit did not bar him from bringing the present claims under the False Claims Act.

I. STATEMENT OF THE FACTS AND PROCEDURAL HISTORY

From November 1989 until his termination in March 1995, James Mayfield was employed with Lockheed Martin Engineering & Sciences Company ("Lockheed"). From January 1994 until this termination, Mayfield worked with Lockheed as its project specialist and was responsible for, among other things, overseeing the contents, preparation, execution and delivery of National Aeronautics and Space Administration ("NASA") Form 533 reports.

Pursuant to the Engineering, Test and Analysis Contract ("ETA Contract") between Lockheed and NASA, Lockheed was required to file one version of the NASA Form 533 report — the 533M report — with NASA on a monthly basis and another version — the 533Q report — with NASA on a quarterly basis. Essentially, the NASA Form 533 reports provided a basis for reporting and evaluating Lockheed's costs and expenses under the ETA Contract. The ETA Contract explicitly provided that payment of fees to Lockheed under the contract was contingent upon compliance with contractual provisions controlling Lockheed's reporting of accurate cost overruns and cost at completion figures.

A. The State Court Action

On February 17, 1995, Mayfield filed a wrongful discharge suit in state court, alleging that Lockheed wrongfully terminated his employment in retaliation for internally inquiring into whether an act he was required to perform was illegal.

As alleged in Mayfield's first amended petition, in December 1994, Mayfield became aware (through his supervisor, Ben Carroll) that Lockheed was knowingly failing to report excessive costs and anticipated cost overruns under the ETA Contract as required by the compliance provisions of the contract. After Carroll told Mayfield that the budgets being used to complete the NASA Form 533 reports for NASA understated the future costs of operations, Mayfield began to inquire into the legality of this conduct. Mayfield involved more of his supervisors and management level employees in the matter, but, as alleged, soon became "the victim of blatant retaliation."

In August 1996, the state district court granted summary judgment in favor of Lockheed. Final judgment against Mayfield was subsequently affirmed by the state court of appeals. See Mayfield v. Lockheed Eng'g & Scis. Co., 970 S.W.2d 185, 187-88 (Tex.App.-Houston [14th Dist.] 1998, pet. denied) ("Mayfield I").

B. The Federal Action

On April 24, 2000, Mayfield filed a second suit against Lockheed in federal court pursuant to the qui tam provisions of the False Claims Act, 31 U.S.C. §§ 3729-33 ("FCA").¹

Mayfield alleged in his first amended complaint that Lockheed knowingly failed to report excessive costs and anticipated cost overruns as required by the compliance provisions of the ETA Contract and, indeed, knew that it could not perform in accordance with the costs specified in the initial bid to NASA for the ETA Contract but knowingly submitted a false bid for the contract anyway.

On February 13, 2002, the district court granted Lockheed's motion for summary judgment. United States ex rel. Mayfield v. Lockheed Martin Eng'g & Scis. Co., 186 F.Supp.2d 711, 713 (S.D.Tex.2002) ("Mayfield II"). It held that the doctrine of res judicata precluded litigation of Mayfield's FCA claims to the extent they were based on the conduct complained of in his state court action. Id. at 715. It further held that although Mayfield was not barred by res judicata from relitigating any claims arising out of conduct not complained of in his prior lawsuit, the court lacked subject matter jurisdiction over these claims because Mayfield was not the "original source" with respect to any allegedly wrongful conduct occurring after the filing of his prior lawsuit.

Mayfield timely filed a notice of appeal, requesting review of both aspects of this final judgment.

II. STANDARD OF REVIEW

By its terms, the "public disclosure" bar is jurisdictional. Other circuit courts have specifically held that "[i]n a qui tam suit brought under the FCA, the jurisdictional issue of `public disclosure' clearly arises out of the same statute that creates the cause of action ... Thus, a challenge under the FCA jurisdictional bar is necessarily intertwined with the merits" and should be resolved pursuant to either Federal Rule of Civil Procedure 12(b)(6) or 56. See, e.g., United States ex rel. Ramseyer v. Century Healthcare Corp., 90 F.3d 1514, 1518 (10th Cir.1996). While our court has not addressed this specific jurisdictional point, we have previously stated that "[t]he questions of subject matter jurisdiction and the merits will normally be considered intertwined where the statute provides both the basis of federal court subject matter jurisdiction and the cause of action." Clark v. Tarrant Cty., 798 F.2d 736, 742 (5th Cir.1986); see also Eubanks v. McCotter, 802 F.2d 790, 792-93 (5th Cir. 1986) ("When the basis of federal jurisdiction is intertwined with the plaintiff's federal cause of action, the court should assume jurisdiction over the case and decide the case on the merits."). We see this case as presenting one such instance where questions of subject matter jurisdiction and the merits are intertwined because "the defendant's challenge to the court's jurisdiction is also a challenge to the existence of a federal cause of action." Williamson v. Tucker, 645 F.2d 404, 415-16 (5th Cir.1981) (citing Bell v. Hood, 327 U.S. 678, 66 S.Ct. 773, 90 L.Ed. 939 (1946)). The proper course of action for the district court was thus "to find that jurisdiction exist[ed] and deal with the merits of the case." Id. at 415.

The district court basically followed this procedure here. It styled Lockheed's challenge to the court's subject matter jurisdiction as a summary judgment motion and, presumably, utilized this standard. However, instead of first considering the "public disclosure" bar question (which goes to the subject matter jurisdiction of the court), it first considered Lockheed's affirmative defense of res judicata. We believe the jurisdictional bar should have been considered by the district court before it moved to the merits of Lockheed's affirmative defense. United States ex rel. Fed. Recovery Servs., Inc. v. Crescent City E.M.S., 72 F.3d 447, 448 (5th Cir.1995) ("We are persuaded that ... the district court never had jurisdiction over [the action.]"); United States ex rel. Minn. Ass'n of Nurse Anesthetists v. Allina Health Sys. Corp., 276 F.3d 1032, 1040 (8th Cir. 2002) (stating, in a qui tam case where information was allegedly publicly disclosed, that "[a]t the threshold, we must decide whether we have subject-matter jurisdiction over this case"). We therefore begin our review by addressing the FCA's "public disclosure" bar, found at 31 U.S.C. § 3730(b)(4), and review the district court's grant of summary judgment under a de novo standard of review, using the same standard utilized by the district court. See Kerr v. Lyford, 171 F.3d 330, 336 (5th Cir.1999) (holding that, under a Rule 56 standard, the record must be viewed in the light most favorable to the non-movant).

III. ANALYSIS OF THE PUBLIC DISCLOSURE BAR

A. Presentation of the Disputed Issue — Whether Mayfield is the "Original Source" of Information

As we have discussed the procedure and the historical underpinnings of the qui tam provisions of the FCA in prior opinions, we need not repeat them here. See Riley v. St. Luke's Episcopal Hosp., 252 F.3d 749, 752-53 (5th Cir.2001) (en banc); Searcy v. Philips Elec. N. Am. Corp., 117 F.3d 154, 160 (5th Cir.1997). Suffice it to say that in certain circumstances, suits by private parties on behalf of the United States against anyone submitting a false claim to the government are permitted. Hughes Aircraft Co. v. United States ex rel. Schumer, 520 U.S. 939, 941, 117 S.Ct. 1871, 138 L.Ed.2d 135 (1997).

The FCA, the 1863 Civil War statute under which these suits are permitted, has been amended only twice, once in 1943 and, more recently, in 1986 by the Grassley Amendments. Id. In 1943, interpreting the qui tam provisions as then written, the Supreme Court stated that a private plaintiff might bring a qui tam action even though his...