United States ex rel. Wilson v. Graham Cnty. Soil & Water Conservation Dist.

• Decision Date: 03 February 2015
• Docket Number: No. 13–2345.,13–2345.
• Citation: 777 F.3d 691
• Court: U.S. Court of Appeals — Fourth Circuit
• Parties: UNITED STATES of America ex rel. Karen T. WILSON, Plaintiff–Appellant, v. GRAHAM COUNTY SOIL & WATER CONSERVATION DISTRICT; Cherokee County Soil & Water Conservation District; Richard Greene, in his individual capacity; William Timpson, in his individual capacity; Keith Orr, in his individual and official capacities; Raymond Williams, in his individual capacity; Dale Wiggins, in his individual capacity; Gerald Phillips, in his individual capacity; Allen Dehart, in his individual capacity; Lloyd Millsaps, in his official capacity; Billy Brown, in his individual capacity; Lynn Cody, in his individual capacity; Bill Tipton, in his official capacity; C.B. Newton, in his individual capacity; Eddie Wood, in his individual capacity; Graham County, Defendants–Appellees, and Graham County Board of County Commissioners; Cherokee County Board of County Commissioners; Cherie Greene; Ricky Stiles; Betty Jean Orr; Joyce Lane; Jimmy Orr; Jerry Williams, in his individual capacity; Eugene Morrow; Charles Lane; Charles Laney; George Postell; Lloyd Kissleburg; Ted Orr; Bernice Orr; John Doe, Jr.; John Doe Corporation; Governmental Entities, 1–99, Defendants.

777 F.3d 691

UNITED STATES of America ex rel. Karen T. WILSON, Plaintiff–Appellant,

v. GRAHAM COUNTY SOIL & WATER CONSERVATION DISTRICT; Cherokee County Soil & Water Conservation District; Richard Greene, in his individual capacity; William Timpson, in his individual capacity; Keith Orr, in his individual and official capacities; Raymond Williams, in his individual capacity; Dale Wiggins, in his individual capacity; Gerald Phillips, in his individual capacity; Allen Dehart, in his individual capacity; Lloyd Millsaps, in his official capacity; Billy Brown, in his individual capacity; Lynn Cody, in his individual capacity; Bill Tipton, in his official capacity; C.B. Newton, in his individual capacity; Eddie Wood, in his individual capacity; Graham County, Defendants–Appellees,andGraham County Board of County Commissioners; Cherokee County Board of County Commissioners; Cherie Greene; Ricky Stiles; Betty Jean Orr; Joyce Lane; Jimmy Orr; Jerry Williams, in his individual capacity; Eugene Morrow; Charles Lane; Charles Laney; George Postell; Lloyd Kissleburg; Ted Orr; Bernice Orr; John Doe, Jr.; John Doe Corporation; Governmental Entities, 1–99, Defendants.

No. 13–2345.

United States Court of Appeals, Fourth Circuit.

Argued: Dec. 9, 2014.

Decided: Feb. 3, 2015.

Mark Tucker Hurt, Abingdon, Virginia, for Appellant. Sean Francis Perrin, Womble Carlyle Sandridge & Rice, PLLC, Charlotte, North Carolina, for Appellees Raymond Williams, Dale Wiggins, Lynn Cody, and Graham County. Martin McCracken, North Carolina Department of Justice, Raleigh, North Carolina, for Appellees Graham County Soil & Water Conservation District, Cherokee County Soil & Water Conservation District, Gerald Phillips, Allen Dehart, Lloyd Millsaps, Bill Tipton, C.B. Newton, and Eddie Wood.

Before MOTZ and KING, Circuit Judges, and ARENDA L. WRIGHT ALLEN, United States District Judge for the Eastern District of Virginia, sitting by designation.

Reversed by published opinion. Judge MOTZ wrote the opinion, in which Judge KING and Judge ALLEN joined.

DIANA GRIBBON MOTZ, Circuit Judge:

A long and winding road has brought this False Claims Act (FCA) case to us on appeal a third time. After two trips to the Supreme Court, Relator Karen Wilson now appeals the district court's dismissal of her qui tam action for lack of jurisdiction pursuant to the FCA's public disclosure bar. For the reasons that follow, we reverse.

I.

We need only briefly recount the factual and procedural history. Fuller accounts of each can be found in Graham Cnty. Soil & Water Conservation Dist. v. United States ex rel. Wilson, 559 U.S. 280, 130 S.Ct. 1396, 176 L.Ed.2d 225 (2010), and United States ex rel. Wilson v. Graham Cnty. Soil & Water Conservation Dist., 528 F.3d 292 (4th Cir.2008).

When a February 1995 storm caused significant flooding and erosion in parts of western North Carolina, the United States Department of Agriculture (USDA) agreed to help the affected counties cover the costs of cleanup and recovery through the Emergency Watershed Protection Program (“EWP Program”). See generally7 C.F.R. §§ 624.1–624.11. Jointly administered by the National Resources Conservation Service (NRCS) and the United States Forest Service, the EWP Program provides financial assistance to eligible states and political subdivisions “to relieve imminent hazards ... created by a natural disaster that causes a sudden impairment of a watershed.” Id. § 624.2.

North Carolina's Graham and Cherokee Counties applied for storm relief under the EWP Program and each was deemed eligible to receive federal funding. As required, each county entered into a “Cooperative Agreement” with NRCS, see id. § 624.8(c), agreeing to perform or contract out the necessary recovery work. NRCS then agreed to reimburse the counties for most of the total cost. In each county, responsibility for the EWP Program fell to the respective Soil and Water Conservation District (SWCD), a local special-purpose government entity. Both the Graham County SWCD and the Cherokee County SWCD hired independent contractors to complete the required cleanup and remediation.

Appellant, Relator Karen Wilson, worked at the Graham County SWCD as a part-time secretary from 1993 until 1997. Soon after Graham County received approval for the EWP Program, Wilson began to suspect fraud in its implementation, not only by her colleagues at the SWCD, but also by NRCS officials who oversaw the Program. In December 1995, Wilson wrote a letter to USDA Special Agent Richard Gallo outlining her concerns. According to Wilson's letter, two NRCS employees, H. Richard Greene and William Timpson, had agreed with the independent contractors to front the cost of supplies in exchange for a share of the ultimate profits. Wilson's letter also indicated that the Graham County SWCD had chosen as its “independent” contractor Keith Orr, who was a salaried SWCD employee and so ineligible to work on the contract. In addition, Wilson told Gallo, the Graham County SWCD was at that time “being audited by county auditors.”

Four months later, in April 1996, those auditors formalized their findings in an “Agreed Upon Procedures Report” (“the Audit Report”) detailing several problems with the Graham County SWCD's handling of the EWP program. The Audit Report characterized Orr's hiring as a likely “violation of the County's code of conduct,” and pointed to a lack of proper documentation surrounding both the bidding and the invoicing of the EWP contracts. An accompanying cover letter indicated that Graham County received four copies of the Audit Report, two for the County's own records, and one each “for the Graham County Soil & Water Conservation District and ... the U.S. Department of Agriculture, should you be required to distribute copies to them.” In the cover letter, the independent accounting firm responsible for the Audit Report also reported sending one copy to the North Carolina Local Government Commission and one to the North Carolina Division of Soil and Water Conservation.

The Audit Report failed to put an end to Wilson's suspicions. In November 1996, she made a written statement to another USDA Special Agent, A. Kenneth Golec, not only reiterating and expanding on some of her earlier allegations, but also raising new ones—notably that Richard Greene had stolen logs intended for use in the rebuilding efforts. The allegations against Greene proved well-founded. In August 1997, Special Agent Golec completed a Report of Investigation (“USDA Report”) that concluded Greene had “received payment by checks issued in his name from a lumber mill for the delivery of trees removed from the Emergency Watershed Program (EWP), sites he represented.” The cover page of the USDA Report included a distribution list to certain state and federal law enforcement agencies and a warning that it was “not to be distributed outside your agency ... without prior clearance from the Office of Inspector General, USDA.”

In 2001, Wilson filed suit under the FCA's qui tam provision, alleging that fraudulent invoices were submitted to the federal government under the EWP Program in both Graham and Cherokee Counties. In 2006, Wilson filed her third amended complaint—the operative pleading for this appeal—in which she named as defendants Graham County, the Graham County SWCD, and the Cherokee County SWCD, along with several individuals, including Orr, Greene, and Timpson. Although the intervening years, and decisions of both this court and the Supreme Court, have eliminated several of Wilson's claims for relief, her core FCA claims pertaining to the EWP Program in both counties survived until the district court dismissed them in the order from which Wilson now appeals.

II.

In its qui tam provision, the False Claims Act permits private citizens (known as relators) to bring suit on behalf of the United States “to recover from those persons who make false or fraudulent claims for payment to the United States.” Graham Cnty., 559 U.S. at 283, 130 S.Ct. 1396 (citing 31 U.S.C. §§ 3279–3733 (2006)).

The statute's earlier version, which applies to this appeal, contains a jurisdiction-stripping provision:

No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions ... in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation ... unless the action is brought by the Attorney General or the person bringing the action is an original source.

31 U.S.C. § 3730(e)(4)(A) (2006). This provision, known as the public disclosure bar, is designed to strike a balance between empowering the public to expose fraud on the one hand, and “preventing ‘parasitic’ actions” on the other. United States ex rel. Siller v. Becton Dickinson & Co., 21 F.3d 1339, 1348 (4th Cir.1994) (citation omitted). In short, it mandates the dismissal of claims brought by a relator if those claims are based on a public disclosure, unless the relator qualifies as an original source.¹

We asked the district court on remand to make the factual findings necessary to apply this statutory scheme. Pursuant to this directive, the court considered (1) whether any relevant audits, reports, hearings, or investigations had been publicly disclosed; (2) whether Wilson based her claims on any such public disclosures; and (3) if so, whether Wilson was nonetheless an original source of those claims. See United States ex rel. Wilson v. Graham Cnty. Soil & Water Conservation Dist., 976 F.Supp.2d 755, 760 (W.D.N.C.2013), on remand from,399 Fed.Appx. 774 (4th Cir.2010). Reaching all three questions, the court concluded that both the Audit Report and the USDA Report had been publicly disclosed, that Wilson based her claims on these reports, and that she was not an original source of any of those claims. Id. at 770, 772–73, 776. The district court therefore dismissed Wilson's action in its entirety, holding that the public disclosure bar deprived it of...