USA. v. Hughes Aircraft Co.

• Citation: 243 F.3d 1181
• Decision Date: 22 March 2001
• Docket Number: No. 00-55328,00-55328
• Parties: (9th Cir. 2001) UNITED STATES OF AMERICA, ex rel.LINDA A. LUJAN, Plaintiffs-Appellants, v. HUGHES AIRCRAFT COMPANY, Defendant-Appellee
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1181

243 F.3d 1181 (9th Cir. 2001)

UNITED STATES OF AMERICA, ex rel.LINDA A. LUJAN, Plaintiffs-Appellants, v. HUGHES AIRCRAFT COMPANY, Defendant-Appellee.

No. 00-55328

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted February 7, 2001

Filed March 22, 2001

[Copyrighted Material Omitted] Daniel I. Davidson, Spiegel & McDiarmid, Washington, D.C., for the plaintiff-appellant.

Mark R. Troy, McKenna & Cuneo, L.L.P., Los Angeles, California, for the defendant-appellee. Amy M. Wilken, Taxpayers Against Fraud, The False Claims Act Legal Center, Washington, D.C., for the amicus.

Appeal from the United States District Court for the Central District of California Stephen V. Wilson, District Judge, Presiding. D.C. No. CV-92-01282-SVW

Before: Edward Leavy, Stephen S. Trott, and Barry G. Silverman, Circuit Judges.

SILVERMAN, Circuit Judge:

The False Claims Act (FCA) permits, in certain circumstances, suits by private parties on behalf of the United States against anyone submitting a false claim to the government. In 1986, Congress amended the FCA to include S 3730(b)(5), which provides that "[w]hen a person brings a[qui tam action], no person other than the Government may intervene or bring a related action based on the facts underlying the pending action." This appeal requires us to interpret S 3730(b)(5) for the first time. We hold thatS 3730(b)(5) establishes an exception-free, first-to-file bar. We further hold that subsequently dismissed cases constitute pending actions under S 3730(b)(5). Finally, we hold that a "material facts," not "identical facts," test should be used to determine if a "related action [is] based on the facts underlying the pending action." S 3730(b)(5). We affirm the district court's dismissal of Lujan's qui tam action for lack of subject matter jurisdiction under S 3730(b)(5).

I. Background and Proceedings

Linda Lujan and William Schumer, former Hughes Aircraft Company employees, brought separate qui tam claims alleging that Hughes fraudulently used "commonality agreements".¹ Determining whether S 3730(b)(5) bars Lujan's action necessarily involves reviewing Schumer's action.

A. United States ex rel. Schumer v. Hughes Aircraft Company

In 1989, former Hughes manager William Schumer filed aqui tam action against Hughes asserting that Hughes defrauded the United States government by entering into unauthorized and illegal commonality agreements allocating project costs over more than one subcontract. The government declined to intervene.² In May 1992, the district court found the commonality agreements proper, and granted summary judgment in favor of Hughes.

Schumer appealed and Hughes cross-appealed, arguing "that because government auditors had alleged the same mischarging prior to Schumer's filing, the action was barred under the `government knowledge' defense, 31 U.S.C. S 3730(b)(4) (1982)." While acknowledging that the 1986 amendments eliminated the government knowledge defense,³ Hughes argued that the 1986 amendments could not be applied retroactively to Hughes pre-1986 conduct. We held that the 1986 amendments applied retroactively to Hughes' pre-1986 conduct, affirmed the majority of the district court's findings, and remanded two factual issues regarding pre-1986 conduct. See United States ex rel. Schumer v. Hughes Aircraft Co., 63 F.3d 1512, 1528 (9th Cir. 1995).

The Supreme Court granted certiorari⁴ and reversed, holding that the 1986 amendments could not be applied retroactively to pre-1986 conduct. The Court declined to review the remaining issues and held that the claims should have been dismissed, because the district court did not have jurisdiction over the pre-1986 conduct due to the government knowledge exception.⁵ See Hughes Aircraft Co. v. United States ex rel. Schumer, 520 U.S. 939, 952 (1997).

B. United States ex rel. Lujan v. Hughes Aircraft Company

This is the third appeal in this case.

In February 1992, Lujan filed qui tam claims against Hughes for alleged fraud and retaliation claims for her employment termination.⁶ Lujan alleged that Hughes was engaging in fraudulent contracting practices by shifting costs from fixed-price programs to cost-plus programs. Pursuant to 31 U.S.C. S 3730(b)(2), Lujan filed her claim in camera and served it on the Government. While the qui tam claim was still under seal and before Hughes had been served with the complaint, the Los Angeles Times ran two articles reporting Lujan's qui tam claim filing. The district court held that Lujan's public disclosure of the existence and substance of her qui tam complaint violated the FCA's statutory seal provision, S 3730(b)(2), and dismissed the action.

We reversed the district court. See Lujan v. Hughes Aircraft Co. (Lujan I), 67 F.3d 242, 248 (9th Cir. 1995). We held thatthe use of dismissal as a sanction was not necessarily the appropriate remedy for Lujan's violation. See id. at 247-48. In addition, we held sua sponte that before the district court could reach the merits of Lujan's claim, it would have to determine if it had jurisdiction under S 3730(e)(4)(A), which "bars suits brought after the allegations in the complaint have been publicly disclosed, unless the relator is the`original source' of the information." Id. at 248. We noted the similarities between Lujan's complaint and the earlier filed Schumer complaint.

In March 1996, the district court found that Lujan's allegations were "substantially similar" and therefore "based upon" those publicly disclosed in Schumer:

Lujan's qui tam allegations are substantially similar to Schumer's previous claims. Lujan attempts to dis tinguish her allegations by stating that they involve mischarging within the B-2 program, while Schumer addressed cost shifting among the B-2 program and other aircrafts [F-14D, F-15 MSIP, and F-18]. How ever, upon reviewing the allegations previously brought by Schumer, the Court finds that Lujan's allegations are simply a variation on Schumer's.

Schumer's claims, like Lujan's involve the B-2 bomber system, which was a massive, billion dollar contract. With such large stakes at hand, the govern ment necessarily performed a thorough review of Schumer's claims as evidenced by the Schumer record and proceedings. Lujan now seeks to create a meaningless distinction between her claims and Schumer's in order to further the government's, and her, interests.

To give credence to Lujan's microscopically fine distinctions between her allegations and those of Schumer would do injustice to the purposes underly ing the False Claims Act. It is the harbinger, not the mimic, who is entitled to champion the govern ment's interests.

Therefore, the district court dismissed Lujan's qui tam claims, holding that the district court did not have jurisdiction to hear the case under S 3730(e)(4).

On appeal, we split Lujan's qui tam claims into two groups: preand post-1986 conduct. See United States ex rel. Lujan v. Hughes Aircraft Co. (Lujan II), 162 F.3d 1027, 1031 (9th Cir. 1998). Following Schumer, we affirmed the districtcourt's dismissal of Lujan's qui tam pre-1986 conduct claims, because the government already had knowledge of her claims.⁷ See id. We reviewed the post-1986 conduct claims to determine if there was subject matter jurisdiction under 31 U.S.C. S 3730(e)(4). We affirmed the district court's finding that Lujan and Schumer's allegations were substantially similar and therefore constituted "public disclosure" of Lujan's qui tam claims, stating:

The subject matter of Schumer's action was four defense contracts between Hughes and the United States-the F-14D Program contract ("F14 contract"), the F-15 Radar Multistage Improvement Program Contract ("F15 contract"), the F-18 Radar Upgrade Program Contract ("F18 contract"), and the B-2 Spe cial Programs Contract ("B-2 contract"). The B2 contract involved the design of an advanced radar system for that airplane. Hughes managed each of these contracts under "commonality agreements," which permit each program using a common component to share in some portion of its development and production costs.

Schumer alleged that Hughes used these common ality agreements to misbid, misallocate, and mis charge costs among the four contracts. For example, Schumer alleged that Hughes charged the develop ment of a radar signal processor to the F15 contract but then also charged these developments costs to the F14, F18, and B2 contracts.

Lujan's allegations also concern the contract to develop the B2 radar system. Lujan alleges that, between 1982 and at least 1989, Hughes routinely mischarged costs associated with the design and development of various B2 radar system contracts. She also alleges that Hughes mischarged costs on contracts involving the F14, F15, and F18 by means of the commonality agreements governing cost allo cations among the various radar system programs.

The Schumer and Lujan allegations both involve cost-sharing transactions among and within the radar system programs on four aircraft. The two claims involve the same commonality agreements and the same radar program contracts.

Lujan II, 162 F.3d at 1032-33. We then found that Lujan was an original source because she brought her allegations to the government before Schumer's allegations were publicly disclosed. Therefore, we reversed the district court's dismissal of Lujan's post-1986 claims, holding that the district court hadsubject matter jurisdiction under S 3730(e)(4)(A)'s "original source" exception.

On remand, Hughes moved to dismiss Lujan's qui tam action under the 31 U.S.C. S 3730(b)(5) first-to-file jurisdictional bar. The district court determined that Lujan II had not decided the S 3730(b)(5) issue, and then found that S 3730(b)(5) applied because Schumer was pending when Lujan filed her action. The district court reviewed (1) the prior district court findings that the allegations were substantially similar and "based upon" those publicly disclosed in Schumer's lawsuit and...