US v. Rockwell Intern. Corp., 87-C-766.

• Decision Date: 07 February 1990
• Docket Number: No. 87-C-766.,87-C-766.
• Citation: 730 F. Supp. 1031
• Parties: UNITED STATES of America, et al., Plaintiffs, v. ROCKWELL INTERNATIONAL CORPORATION, et al., Defendants.
• Court: U.S. District Court — District of Colorado

730 F. Supp. 1031

UNITED STATES of America, et al., Plaintiffs, v. ROCKWELL INTERNATIONAL CORPORATION, et al., Defendants.

No. 87-C-766.

United States District Court, D. Colorado.

February 7, 1990.

H. Anthony Ruckel, Denver, Colo., John R. Phillips, Los Angeles, Cal., J. Greg Whitehair, Asst. U.S. Atty., Denver, Colo., and Michael F. Hertz, Dept. of Justice, Washington, D.C., for plaintiffs.

Robert Youle, Denver, Colo., for defendant Rockwell Intern. Corp.

James Martin, Denver, Colo., for defendants Lawrence Livermore National Laboratory, A. Carl Haussmann and John L. Emmett.

Joseph Saint-Veltri, Denver, Colo., for defendant Warren Rooker.

ORDER

CARRIGAN, District Judge.

Plaintiffs, as relators, David Navarette Sr. and Taxpayers Against Fraud ("TAF"), a non-profit corporation, have commenced this suit under the qui tam provisions of the False Claims Act, 31 U.S.C. § 3730(b) et seq., which, under appropriate circumstances permit private citizens to prosecute civil actions in the name of the United States. Plaintiffs seek damages and civil penalties arising from the defendants' alleged false statements and claims made in violation of the False Claims Act ("FCA").

Defendants are Rockwell International Corporation ("Rockwell"); Warren Rooker ("Rooker"), a former Rockwell employee; the Lawrence Livermore National Laboratory ("LLNL or Livermore"); A. Carl Haussmann ("Haussmann"), and John L. Emmett ("Emmett").

At all times relevant to the complaint's allegations, Rockwell operated the Rocky Flats Plant located in Jefferson County, Colorado, under a contract with the United States Department of Energy ("DOE"). Rocky Flats primarily is, and has been, engaged in the design, manufacture, and assembly of nuclear weapons components. Defendant Rooker, from 1968 until September 1985, was in charge of the Rocky Flats Future Systems Department, first as an employee of Dow Chemical Company, then as a Rockwell employee. Defendant Livermore is a federally owned facility, operated and managed by the Regents of the University of California ("Regents"), engaged in research and related activities involving nuclear energy. Defendants Haussmann and Emmett were employed by the Regents as Associate Directors of Livermore. I shall refer to these latter defendants collectively as the "Livermore defendants."

Plaintiff Navarette has been employed by Rockwell at Rocky Flats since August 1975. Plaintiffs assert in paragraph 18 of their complaint that between 1975 and 1985,

"Navarette witnessed the design and production of thousands of completely unauthorized personal items, the labor, materials, handling and shipping costs of which were fraudulently charged to United States government contracts held by defendants Rockwell and Livermore for the design and/or production of weapons systems or components thereof. Complaint, ¶ 18."

Plaintiffs further contend that in early 1985, Navarette reported these activities to Rockwell personnel, prompting an extensive investigation by the DOE and the Federal Bureau of Investigation from June through December 1985. In December 1985, the United States Attorney for the District of Colorado sought seventeen criminal indictments regarding this alleged fraudulent activity but none were returned by the grand jury.

Plaintiffs filed this qui tam action on May 22, 1987, asserting that Rockwell, Rooker and the Livermore defendants violated the FCA by submitting false claims to the federal government for the production of thousands of personal items and unauthorized momentos and memorabilia at Rocky Flats. The United States has not sought to intervene as a plaintiff in this suit.

Rockwell has filed a motion to dismiss on the ground that the court lacks subject jurisdiction over this action. In addition, Rockwell has filed a motion for partial summary judgment, a supplemental motion for partial summary judgment, and a motion to strike exhibits. The Livermore defendants have filed a motion to dismiss, a motion for partial summary judgment, and a motion to strike.

Plaintiffs have responded by opposing all motions. The United States has filed briefs as amicus curiae addressing certain issues raised in the other briefs.

The parties have fully briefed the issues, filing over 325 pages of legal memoranda, and oral argument would not materially assist my decision. Jurisdiction is based on 28 U.S.C. § 1331 and 31 U.S.C. § 3729.

I. Rockwell's Motion to Dismiss.

Pursuant to 31 U.S.C. § 3730(b), a person may bring a civil action for violation of the FCA "for the person and for the United States Government." During the time of the alleged fraudulent activity described in the complaint, 1975 through 1985, the FCA further provided as follows:

"Unless the Government proceeds with the action, the court shall dismiss an action brought by the person on discovering the action is based on evidence or information the Government had when the action was brought. (Emphasis added)." § 3730(b)(4).

Rockwell contends that because the government was fully aware of the essential information upon which the plaintiffs have predicated this qui tam suit when filed, § 3730(b)(4) requires dismissal of this litigation.

In their responsive brief, the plaintiffs concede that the government was fully aware of the facts underlying the complaint when it was filed in May 1985. Plaintiffs emphasize, however, that the FCA was amended, effective October 27, 1986, and the amendments deleted this jurisdictional provision. See False Claims Amendment Act of 1986, P.L. 99-562, 100 Stat. 3153, codified at 31 U.S.C. §§ 3729-3733. The FCA now bars any action based on publicly available information, "unless the action is brought by the Attorney General or the person bringing the action is an original source of the information." § 3730(e)(4)(A). According to the plaintiffs, the FCA, as amended, applies because the instant litigation was commenced May 22, 1987, even though the defendants' allegedly fraudulent activities pre-date the 1986 FCA amendments.

As the parties have framed the issue, the question before the court is whether the FCA, as amended in 1986, should be given retrospective application. If the answer is yes, then the court has subject matter jurisdiction over this action.

In its motion to dismiss, the defendant Rockwell contends that the 1986 amendments to the FCA made substantive changes in the FCA's provisions and that retroactive application would be unfair because the amendments have expanded the Act's scope of liability. Rockwell relies primarily on United States ex rel. Henry Boisvert v. FMC Corp., Slip Op. C-86-20613 (N.D.Cal. Sept. 8, 1987) where the federal district court refused to apply the 1986 amendments to the FCA retroactively because they affected substantive legal rights, and dismissed the qui tam suit. Boisvert is distinguishable, however, since the qui tam suit there was filed prior to the 1986 amendments. The instant case was filed after the effective date of the 1986 amendments, although admittedly it involves conduct that occurred prior to the amendments' enactment.

The parties have supplemented their briefs with several recent cases that have addressed the retroactive application issue. In United States ex rel. McCoy v. California Medical Review, Inc., 723 F.Supp. 1363, 1368 (N.D.Cal.1989), the court observed that ten of the fourteen district courts that have dealt with the issue have concluded that the 1986 amendments should be applied retroactively. These courts have applied the rationale of Bradley v. Richmond School Board, 416 U.S. 696, 94 S.Ct. 2006, 40 L.Ed.2d 476 (1974).

Bradley teaches that "a court is to apply the law in effect at the time it renders its decision unless doing so would result in manifest injustice or there is a statutory direction or legislative history to the contrary." Id. at 711, 94 S.Ct. at 2016.

Neither the amendments' legislative history nor the amendments themselves contain any statement regarding whether retroactive or prospective application is proper. Applying Bradley, supra, the court must examine three factors: (1) the nature and identity of the parties; (2) the nature of the parties' rights; and (3) the nature of the impact of the change in the law on those rights. Id. at 717, 94 S.Ct. at 2019.

As to the first factor, the instant action, filed by a private person and a non-profit corporation, concerns matters important to the public interest. As recognized in United States v. Hill, 676 F.Supp. 1158 (N.D. Fla.1987), the critical national concern of eliminating government fraud is the focus of the FCA and its recent amendments. Based on these considerations, analysis of the first Brady factor supports retroactive application of the 1986 amendments.

Analysis of the second and third prongs of Brady, supra, the nature of the parties' rights and the nature of the impact of the changes in the law on these rights, necessitates a discussion of certain changes effected by the 1986 amendments. The FCA now allows for greater damages treble instead of double damages and higher fines ($5,000 to $10,000 per violation instead of $2,000). Although the requirement that a false claim be "knowingly" presented has not changed, the term "knowingly" is now more broadly defined to mean that a person:

"(1) has actual knowledge of the information;

(2) acts in deliberate ignorance of the truth or falsity of the information; or

(3) acts in reckless disregard of the truth or falsity of the information,

and no proof of specific intent to defraud is required." § 3729(b).

Several courts that have considered the issue have concluded that these changes have not altered underlying requirements for liability and thus, do not affect a defendant's substantive rights. See United States v. Pani, 717 F.Supp. 1013 (S.D.N.Y. 1989); United States v. Oakwood Downriver Medical Center, 687 F.Supp. 302 (E.D. Mich.1988); United States v. Ettrick Wood Products, Inc., 683 F.Supp. 1262 (W.D.Wis. 1988); and Gravitt v....