United States ex rel. Harper v. Muskingum Watershed Conservancy Dist.
| Decision Date | 15 September 2017 |
| Docket Number | CASE NO. 5:15-cv-1608 |
| Parties | UNITED STATES OF AMERICA, ex rel., LEATRA HARPER, et al., RELATORS, v. MUSKINGUM WATERSHED CONSERVANCY DISTRICT, RESPONDENT. |
| Court | U.S. District Court — Northern District of Ohio |
MEMORANDUM OPINION
Before the Court is the motion of respondent Muskingum Watershed Conservancy District ("respondent" or "MWCD") to dismiss this qui tam action, pursuant to Fed. R. Civ. P. 12(b)(6). (Doc. No. 17 ["MTD"].) Relators Leatra Harper, Steven Jansto, and Leslie Harper (collectively "relators") oppose the motion (Doc. No. 20 ["MTD Opp'n"]), and respondent has replied. (Doc. No. 21 ["MTD Reply"].) The Court permitted, and the parties have filed, supplemental briefing. (Doc. No. 24 ["Relators' Suppl."]; Doc. No. 25 ["Respondent's Suppl."].) Because the doctrine of res judicata bars relators' claims, as more fully explained below, respondent's motion is granted and this case is dismissed.
The background facts set forth herein are taken from relators' first amended complaint ("FAC"). Where appropriate, these facts are supplemented by reference to the documents attached to and referenced by relators' amended pleading, or otherwise by matters for which the Court may take judicial notice. Relators Leatra Harper and Steven Jansto "own property abutting Seneca Lake" in Ohio. (Doc. No. 11 (FAC) ¶ 51.) MWCD "is a political subdivision of Ohio" that was "organized in 1933 to reduce the effects of flooding and conserve water for beneficial public uses under the Ohio Revised Code Chapter 6101 (commonly called the Conservancy Act)." (Id. ¶ 6.) "The MWCD has jurisdiction in an 18-county area of Ohio including Ashland, Belmont, Carroll, Coshocton, Guernsey, Holmes, Harrison, Knox, Licking, Morgan, Muskingum, Noble, Richland, Stark, Summit, Tuscarawas, Wayne and Washington counties." (Id.)
This is not the first time that the parties have been embroiled in litigation. Indeed, the primary impetus for respondent's motion is its belief that this action is virtually identical to a prior qui tam action filed by relators in this Court. Because an understanding of this prior litigation is critical to the analysis of respondent's dispositive motion, the Court begins with a discussion of relators' 2013 federal action.
On September 27, 2013, relators filed a federal qui tam action under the False Claims Act ("FCA"), 31 U.S.C. § 3729.2 (U.S. ex rel. Harper v. Muskingum Watershed Conservancy Dist., Case No. 5:13-cv-2145 (N.D. Ohio) ("Harper I")). The first amended complaint referenced a 1949 deed that was issued by the federal government, deeding to MWCD certain land in Ohio, including land abutting Seneca Lake in Guernsey and Noble Counties. (Harper I, Doc. No. 8(First Amended Complaint ["FAC"]) ¶¶ 7-8; Harper I, Doc. No. 8-1 ["Deed"].) The deed provided that MWCD would retain ownership of the property "so long as said described lands shall be held and utilized for recreation, conservation and reservoir development purposes[.]" (Harper I, FAC ¶ 9; Harper I, Deed at 1323.) The Deed also contained a reverter clause providing that title to the property would revert back to the federal government if MWCD alienated the property by ceasing to use the lands for the stated purposes of recreation, conservation, and reservoir development. (Harper I, Deed at 132-33; FAC ¶ 9.)
The focal point of Harper I was four leases MWCD entered into between June 2011 and April 2014 conveying gas and mineral rights to various energy businesses for the purpose of conducting horizontal hydraulic fracturing ("fracking"). (Harper I, FAC ¶¶ 10-13.) The leases all involved property that was subject to the Deed. It was relators' position that MWCD alienated the deeded property by entering into the aforementioned gas and oil leases (and, in doing so, ceasing to use the property for its stated purpose), thereby triggering the reverter clause and entitling the federal government to immediate possession of the lands. (Id. ¶¶ 16-19.) Relators maintained that, by failing to return the property, and by retaining the proceeds from the fracking leases, MWCD had violated the FCA. Relators brought a possession claim under 31 U.S.C. § 3729(a)(1)(D), and a reverse false claim under 31 U.S.C. § 3729(a)(1)(G).
The government declined to intervene, and the Court ordered the complaint unsealed andserved upon MWCD. On November 25, 2015, the Court issued a memorandum opinion dismissing Harper I upon respondent's motion to dismiss. (Harper I, Doc. No. 24 ["MO"].) The Court found that relators' claims were precluded by the FCA's public disclosure bar, and further determined that the claims failed to meet the pleading requirements of Rule 8(a) and 9(b) of the Federal Rules of Civil Procedure. (Id. at 470-71.) As to the prior finding, the Court held that relators were not the original source of the information supporting the action because the complaint allegations were the subject of prior public disclosures in the media. (Id. at 461-65.) As to the latter, the Court held that relators failed to come forward with factual allegations that MWCD knowingly concealed or improperly avoided an obligation to return the deeded property to the federal government. In other words, relators failed to plead facts that would have elevated their simple breach of contract allegations to the level of actionable fraud under the FCA. (Id. at 468-70.)
On November 21, 2016, the Sixth Circuit affirmed this Court's dismissal. See U.S. ex rel. Harper v. Muskingum Watershed Conservancy Dist., 842 F.3d 430 (6th Cir. 2016). Focusing on Rule 8(a)'s pleading requirements, the court of appeals held that relators' claims failed to support the scienter required to state reverse false and conversion claims under the FCA. Id. at 436-39. The Sixth Circuit denied relators' request for en banc rehearing on January 24, 2017. Relators have sought certiorari review before the United States Supreme Court. (Harper I, Doc. No. 48 ()).
While Harper I was still pending, on August 12, 2015, relators filed the present action (hereinafter referred to as "Harper II." Like Harper I, the relevant pleading in Harper II allegesthat MWCD has violated the FCA and purports to set forth a possession claim under 31 U.S.C. § 3729(a)(1)(D) and reverse false claim under § 3729(a)(1)(G). Also like Harper I, the present FAC highlights the four fracking leases entered into by MWCD between June 2011 and April 2014. (Harper II, FAC ¶¶ 25-28.) Further, as was the case in Harper I, the relators allege that, following the execution of these leases, the MWCD wrongfully and knowingly concealed and failed to transfer the subject property to the federal government and impermissibly withheld the proceeds from the leases. (Id. ¶¶ 30, 32-33.)
According to relators, that is where the similarities between the two litigations end. While relators asserted in Harper I that the leases triggered the reverter clause in the deed, in Harper II relators premise liability on the Flood Control Act of 1939 ("the 1939 Act"). The FAC explains that in 1934 MWCD entered into an agreement with the United States government to construct dams and reservoirs in MWCD's jurisdiction ("the MWCD Project"). (Harper II, FAC ¶ 7.) The 1939 Act declared the MWCD Project "to be a flood control project for purposes of the Flood Control Acts of 1938 and 1936[.]" (Id. ¶ 8, citing record.) The 1939 Act permitted the federal government to acquire all property and right-of-way accesses necessary to fulfill the purposes of the legislation. (Id. ¶ 9.)
After passage of the 1939 Act, a representative of the Army Corps of Engineers met with MWCD to discuss the transfer of the property. (Id. ¶ 12, citing record.) MWCD ultimately declined to transfer the property, relying on an opinion from the Ohio Attorney General that MWCD was not authorized to transfer the property if doing so would prevent it from performing its charter purposes. (Id. ¶¶ 13-15.) When MWCD entered into the fracking leases in 2011-2014, however, (Id. ¶ 30.)
The FAC alleges that, aware of its obligation to transfer the property under the 1939 Act, MWCD knowingly failed to satisfy its transfer obligations and unlawfully retained income derived from the leases. (Id. ¶¶ 31-33.) The FAC further alleges that from 2012 MWCD has "sold water belonging to the United States" and has unlawfully retained the proceeds from these sales. (Id. ¶ 34.) Relators seek to recover an amount equal to three times the damages the United States has sustained, in addition to a civil penalty for each alleged violation of 31 U.S.C. § 3729, costs and reasonable attorney's fees. (Id. at 259-60.)
The United States declined to intervene and, on May 16, 2016, the Court ordered the complaint unsealed and served upon MWCD. (Doc. No. 4 (Election to Decline Intervention); Doc. No. 5 (Order of Unsealing).) After the pleadings were amended, MWCD moved to dismiss the FAC. Respondent's motion is fully briefed and ripe for resolution.
A motion to dismiss under Rule 12(b)(6) tests the sufficiency of the pleading. Davis H. Elliot Co., Inc. v. Caribbean Util. Co., Ltd., 513 F.2d 1176, 1182 (6th Cir. 1975). All allegations of fact by the non-moving party are accepted as true and construed in the light most favorable to that party. See Grindstaff v. Green, 133 F.3d416, 421 (6th Cir. 1998) (citing Meador v. Cabinet for Human Res., 902 F.2d 474, 475 (6th Cir. 1990)). The Court, however, "need not accept as true legal conclusions or unwarranted factual inferences." Mixon v. Ohio, 193 F.3d 389, 400 (6th...
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