U.S. ex rel. Grynberg v. Praxair, Inc., No. 01-1214.

• Citation: 389 F.3d 1038
• Decision Date: 15 November 2004
• Docket Number: No. 01-1242.,No. 01-1214.
• Parties: UNITED STATES of America ex rel. Jack J. GRYNBERG, Plaintiff-Appellant and Cross-Appellee, v. PRAXAIR, INC., Defendant-Appellee and Cross-Appellant, and Nielson & Associates, Inc., Defendant-Appellee. United States of America, Intervenor.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

Page 1038

389 F.3d 1038

UNITED STATES of America ex rel. Jack J. GRYNBERG, Plaintiff-Appellant and Cross-Appellee, v. PRAXAIR, INC., Defendant-Appellee and Cross-Appellant, and Nielson & Associates, Inc., Defendant-Appellee United States of America, Intervenor.

No. 01-1214.

No. 01-1242.

United States Court of Appeals, Tenth Circuit.

November 15, 2004.

COPYRIGHT MATERIAL OMITTED

Edward A. Dauer (Michael S. Porter with him on the briefs), Denver, CO, for

Plaintiff-Appellant and Cross-Appellee Jack J. Grynberg.

Mark D. Colley (Craig A. Holman with him on the briefs), of Holland & Knight LLP, Washington, DC, for Defendant-Appellee and Cross-Appellant Praxair, Inc.

Chris Edwards of Simpson, Keeler & Edwards, LLC, Cody, WY, for Defendant-Appellee Nielson & Associates, Inc.

Robert D. McCallum, Jr., Assistant Attorney General, John W. Suthers, United States Attorney, Douglas Letter, Appellate Litigation Counsel, and Peter R. Maier, Attorney, United States Department of Justice, Washington, DC, filed a brief on behalf of Intervenor United States.

Before BRISCOE, ANDERSON and O'BRIEN, Circuit Judges.

O'BRIEN, Circuit Judge.

Relator Jack J. Grynberg filed a qui tam action¹ under the False Claims Act (FCA), 31 U.S.C. § 3729 et seq., against Defendants Nielson & Associates, Inc. (Nielson) and Praxair, Inc. (Praxair). See United States ex rel. Grynberg v. Praxair, Inc., 207 F.Supp.2d 1163 (D.Colo.2001). He claimed Defendants knowingly presented or caused to be presented false valuations of royalties owed to the Government for carbon dioxide (CO2) production in violation of 31 U.S.C. § 3729(a)(7).² He now appeals the district court's grant of summary judgment in favor of Defendants.

I. PROCEDURAL BACKGROUND

The purpose of the FCA "is to enhance the Government's ability to recover losses sustained as a result of fraud against the Government." S.Rep. No. 99-345, at 1 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5266. A private individual, the Relator, "may bring a civil action for a violation of [31 U.S.C. § 3729] for the person and for the United States Government ... in the name of the Government." 31 U.S.C. § 3730(b)(1). The Government may elect to intervene and proceed with the action. 31 U.S.C. § 3730(b)(2). If the Government declines to intervene, the Relator may continue the action. 31 U.S.C. § 3730(c)(3). Either way, the Relator receives a share of any Government recovery. 31 U.S.C. § 3730(d). Pursuant to the FCA, Grynberg's Complaint was filed under seal and remained sealed until the United States Department of Justice advised the district court the Government would not intervene. See 31 U.S.C. § 3730(b)(2). At that time, the seal was lifted and an Amended Complaint was served on Nielson and Praxair.

Following discovery, Nielson and Praxair filed separate motions for summary judgment.³ The district court granted summary judgment on three different bases, holding: 1) there was no evidence to suggest either Defendant made "knowingly false" statements to the Government; 2) the court lacked subject matter jurisdiction because the qui tam action was based on publicly disclosed allegations or transactions; and 3) the claim was barred because it was premised on information known to the Government prior to 1986. The district court ordered Grynberg to pay Defendants' costs, but left each party to bear its own attorney fees. Praxair and Nielson sought reconsideration of the district court's apportionment of attorney fees, maintaining that Grynberg's lawsuit was "clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment" under 31 U.S.C. § 3730(d)(4). The district court denied reconsideration. Grynberg appeals the dismissal of his claim (No. 01-1214) and Praxair cross-appeals the denial of its request for attorney fees and expenses (No. 01-1242).⁴

Grynberg claims the district court erred: (1) by applying an incorrect legal standard in granting the motions for summary judgment; (2) in holding that Praxair and Nielson's candor in their communications with the Government precluded, as a matter of law, a finding that their statements were knowingly false; (3) in holding Grynberg's claim was jurisdictionally barred under the "public disclosure bar"; (4) in applying the pre-1986 law precluding claims based on allegations and transactions within the Government's knowledge; and (5) in concluding Praxair could not be liable because it did not submit royalty statements to the Government.⁵ Exercising jurisdiction pursuant to 28 U.S.C. § 1291, we affirm the district court's conclusion that Grynberg failed to establish subject matter jurisdiction. We therefore do not reach the remainder of the issues presented in Grynberg's appeal, No. 01-1214. However, as to Praxair's cross-appeal, No. 01-1242, we reverse the denial of attorney fees and remand for proceedings consistent with this opinion.

II. FACTUAL BACKGROUND

Defendant Nielson, a small, privately held Wyoming corporation, produces and sells oil, hydrocarbon liquids and CO2 from the "McCallum" fields in northern Colorado under leases with the United States Government. Defendant Praxair owns and operates an industrial plant designed to purify and convert Nielson's raw CO2 into liquid suitable for beverages, food processing and other uses. The valuation method for CO2 royalties owed to the Government is based on an "Agreement for the Sale of Carbon Dioxide" (Agreement) executed in June, 1983 between Conoco, Inc. (Conoco) (who later sold to Nielson) and Praxair's predecessor, Liquid Carbonic Corporation (Liquid Carbonic). The current Agreement between Nielson and Praxair remains unchanged from the 1983 version in all relevant aspects. Grynberg alleges Nielson and Praxair perpetuated Conoco and Liquid Carbonic's practice of submitting reports misstating the valuation of CO2 production, resulting in an underpayment of royalties owed to the Government.

A. The 1983 Agreement

The McCallum leases were originally executed between Conoco and the federal Government for oil production. For many years, Conoco extracted and sold oil from the McCallum production. In 1926, CO2 was discovered during drilling. The raw CO2 gas, produced in conjunction with the oil, was vented to the atmosphere. This practice was known to and approved by the federal regulatory authorities.⁶ It changed with the Agreement.

Under the Agreement, Liquid Carbonic would construct a plant to purify the raw CO2 gas produced and delivered by Conoco and convert it into liquid CO2 for food processing, beverages and other uses. Liquid Carbonic would then purchase the finished product based on a price per ton shipped from the plant, a quantity reported by Liquid Carbonic to Conoco each month. The base price per ton under the Agreement was subject to several adjustments, including annual market price fluctuations and monthly adjustments based on the quality of the raw CO2 gas delivered to the plant by Conoco. The Agreement also provided that Liquid Carbonic would return 80% of all vent gases produced from the processing plant so Conoco could reinject the gas. This practice was dependent on Conoco providing the pipeline to permit the return of those gases. Conoco was to pay all royalties on the CO2 delivered to Liquid Carbonic.

In 1994, Nielson purchased the McCallum leases from Conoco and succeeded Conoco as "Seller" under the Agreement. In 1996, Liquid Carbonic merged into Praxair, making Praxair the Agreement's "Buyer." Neither Praxair nor Liquid Carbonic have ever been affiliated with Nielson or Conoco, nor have they been a party to the McCallum leases. There is no allegation or evidence of any conspiracy, side-deal or other arrangement between the defendants.⁷

B. Government Involvement

On October 22, 1984, Conoco sent a copy of the Agreement to the Department of the Interior's Minerals Management Service (MMS) and asked for approval of its terms. Conoco explained it would supply the raw CO2 for processing (from the wellhead) and receive payment based on the price of the finished product shipped from Liquid Carbonic's plant (the plant "tailgate.") Conoco also described its plan to return and reinject vent gases into one of its wells but included a schematic showing some gas would be flared.

Forewarned that Conoco was requesting a royalty valuation at Liquid Carbonic's plant tailgate, the MMS wrote to express its concern about the impact on the measurement at the tailgate, as opposed to a larger volume measurement if it were taken at the wellhead. In a letter dated March 14, 1985, the MMS wrote, "if royalty is to be paid on the volume of gas leaving the plant, there could be significant differences, due to plant losses, from the volumes the [wellhead] allocation meters indicate." (R. Vol. II, Tab 19 at 220.) Conoco responded that the plant's vent gas losses would diminish once operations stabilized, but tempered this statement by advising the MMS there would continue to be unavoidable CO2 gas loss due to the quality of the raw CO2 gas and the anticipated plant efficiency. Conoco reiterated its plan to reinject some of the gas and pointed out the Agreement provided a means to sell CO2 reserves, where previously the gas was shut-in or flared.

On April 4, 1985, the MMS informed Conoco "[t]he price reduction provisions are accepted as part of the arm's length contract" and acknowledged the arrangement with Liquid Carbonic "created the only market for CO2 in the area." (R. Vol. II, Tab 21 at 22-27.) Specifically, the MMS noted that the annual variations in price depended on market prices and recognized the contract provisions allowed "for decreased prices in the event(s) any hydrocarbons ... exceed[ed] specified levels or if the carbon dioxide content f [e]ll below [a certain percent] of the volume of the gas stream." (Id. at 225-226.) However, the MMS directed that royalties must never be based "upon less than the gross proceeds accruing to Conoco from the sale of the CO2." (Id. at 224.)...