Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-13-35479/USCOURTS-ca9-13-35479-0/pdf.json

Parties Involved:
CH2M Hill

Carl Schroeder
Appellant
United States of America
Appellee
Washington River Protection Solution LLC

Document Text:

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

CARL SCHROEDER, United States

of America, ex. rel.,

Plaintiff-Appellant,

v.

UNITED STATES OF AMERICA,

Intervenor Plaintiff-Appellee,

v.

CH2M HILL; WASHINGTON RIVER

PROTECTION SOLUTION LLC,

Defendants.

No. 13-35479

D.C. No.

2:09-cv-05038-LRS

OPINION

Appeal from the United States District Court

for the Eastern District of Washington

Lonny R. Suko, Senior District Judge, Presiding

Argued and Submitted

April 10, 2015—Seattle, Washington

Filed July 16, 2015

Before: Michael Daly Hawkins, Johnnie B. Rawlinson,

and Consuelo M. Callahan, Circuit Judges.

Opinion by Judge Hawkins

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2 SCHROEDER V. UNITED STATES

SUMMARY*

False Claims Act

The panel affirmed the district court’s dismissal of Carl

Schroeder as qui tam relator in a qui tam suit concerning the

billing practices of a government contractor.

In an issue of first impression, the panel held that

31 U.S.C. § 3730(d)(3) of the False Claims Act requires the

dismissal of a qui tam relator convicted of the conduct giving

rise to the fraud, even if the relator only played a minor role.

COUNSEL

Jackson Schmidt (argued), Pepple Cantu Schmidt PLLC,

Seattle, Washington, for Plaintiff-Appellant.

Michael C. Ormsby, United States Attorney, Stuart F. Delery,

Assistant Attorney General, Michael S. Rabb and Robert D.

Kamenshine (argued), Attorneys, Appellate Staff, Civil

Division, Department of Justice, Washington, D.C., for

Intervenor Plaintiff-Appellee.

* This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

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SCHROEDER V. UNITED STATES 3

OPINION

HAWKINS, Circuit Judge:

Carl Schroeder (“Schroeder”) appeals his dismissal from

a qui tam suit concerning the billing practices of government

contractor CH2M Hill. The appeal turns on an issue of first

impression: Does 31 U.S.C. § 3730(d)(3) of the False Claims

Act (“FCA”) require the dismissal of a qui tam relator

convicted of the conduct giving rise to the fraud, even if he or

she only played a minor role? We hold that the statute does

require such a relator to be dismissed and affirm the district

court.

FACTUAL AND PROCEDURAL BACKGROUND

Schroeder worked for CH2M Hill, a contractor for the

U.S. Department of Energy (“DOE”) as a Radiological

Control Technician from January 2002 to February 2003 and

then again from May 2004 to October 2008. During this

time, CH2M Hill engaged in widespread fraudulent billing of

hourly work.

Schroeder, like many of his colleagues, submitted false

time cards, and, as a result, received at least $50,000 for

falsely claimed overtime hours. In April 2008, the DOE

Office of Inspector General (“OIG”) learned of the time card

fraud from an anonymous source and began investigating. 

OIG investigators interviewed Schroeder’s colleagues in

November 2008. Several of them were escorted off-site, and

supervisors informed employees that the employees were

under investigation. Schroeder admitted to over-billing

during his December 2008 interview with OIG.

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4 SCHROEDER V. UNITED STATES

Schroeder contends that he voluntarily approached OIG

and did not know he was being investigated at the time. 

These allegations are not supported by the record, particularly

the declaration of the investigation’s case agent, and were

rejected by the district court, which found that “[t]he record

indicates Mr. Schroeder did not approach investigators on his

own initiative.”

As a result of the investigation, the government filed an

information against Schroeder in September 2011, and he

pled guilty to one felony count of conspiracy to commit

fraud. The terms of the plea included a pledge to provide

substantial assistance to the government, two years of

supervised release, and a fine of $50,000.

In June 2009, after the initial interviews but prior to the

filing of charges, Schroeder filed a complaint against CH2M

Hill. Schroeder’s qui tam suit proceeded contemporaneously

with the government’s investigation.1 The United States

intervened in August 2012, and shortly thereafter moved to

dismiss Schroeder as a relator based on his felony conviction.

The district court concluded that the statute is

unambiguous and “requires dismissal from the action of a

person who has been convicted of criminal conduct arising

1

“Under 31 U.S.C. § 3730, a ‘qui tam plaintiff,’ also known as a

‘relator,’ may bring a civil action for a violation of the FCA for herself

and for the United States government, in the name of the government.” 

United States v. Johnson Controls, Inc., 457 F.3d 1009, 1011 n.2 (9th Cir.

2006). Depending on the relator’s contribution to the prosecution of the

action and whether the government intervenes, a relator may receive up

to thirty percent of the proceeds of the action or resulting settlement. See

31 U.S.C. §§ 3730(d)(1)–(2).

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SCHROEDER V. UNITED STATES 5

from his role” in the fraud that is the basis of his qui tam

action. Schroeder timely appealed.

JURISDICTION AND STANDARD OF REVIEW

Because the district court’s dismissal was a final decision

disposing of all claims, we have jurisdiction under 28 U.S.C.

§ 1291(a). The sole issue involves the district court’s

interpretation of federal law, which is reviewed de novo. 

Ileto v. Glock, Inc., 565 F.3d 1126, 1131 (9th Cir. 2009).

ANALYSIS

Section 3730(d)(3) of Title 31 of the United States Code

provides, in full:

Whether or not the Government proceeds with

the action, if the court finds that the action

was brought by a person who planned and

initiated the violation of section 3729 upon

which the action was brought, then the court

may, to the extent the court considers

appropriate, reduce the share of the proceeds

of the action which the person would

otherwise receive under paragraph (1) or (2)

of this subsection, taking into account the role

of that person in advancing the case to

litigation and any relevant circumstances

pertaining to the violation. If the person

bringing the action is convicted of criminal

conduct arising from his or her role in the

violation of section 3729, that person shall be

dismissed from the civil action and shall not

receive any share of the proceeds of the

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6 SCHROEDER V. UNITED STATES

action. Such dismissal shall not prejudice the

right of the United States to continue the

action, represented by the Department of

Justice.

31 U.S.C. § 3730(d)(3) (emphasis added).

The only dispute is whether the second sentence in this

subsection requires the dismissal of all relators convicted of

criminal conduct arising from the fraudulent conduct at issue

in the qui tam suit, particularly minor participants who

neither planned nor initiated the fraudulent scheme. The

parties do not dispute the ordinary meaning of these words,

and several courts have concluded that the provision is

mandatory. See Roberts v. Accenture, LLP, 707 F.3d 1011,

1016 (8th Cir. 2013); U.S. ex rel. Taxpayers Against Fraud v.

Gen. Elec. Co., 41 F.3d 1032, 1035 (6th Cir. 1994); U.S. ex

rel. Green v. Serv. Contract Educ. & Training Trust Fund,

843 F. Supp. 2d 20, 28 n.6 (D.D.C. 2012).

It is well established that the “starting point in discerning

congressional intent is the existing statutory text” and that

“when the statute’s language is plain, the sole function of the

courts—at least where the disposition required by the text is

not absurd—is to enforce it according to its terms.” Lamie v.

U.S. Tr., 540 U.S. 526, 534 (2004) (citations and internal

quotation marks omitted); see also McDonald v. Checks-NAdvance, Inc. (In re Ferrell), 539 F.3d 1186, 1190 n.10 (9th

Cir. 2008) (“If the statutory language is unambiguous and the

statutory scheme is ‘coherent and consistent,’ ‘[o]ur inquiry

must cease.’” (quoting Robinson v. Shell Oil, 519 U.S. 337,

340 (1997))).

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SCHROEDER V. UNITED STATES 7

Despite this plain language, our inquiry does not cease

here, because Schroeder argues that requiring the dismissal of

convicted relators who played a minor role in a fraud would

make the statutory scheme logically inconsistent and produce

an absurd result. We disagree with both components of the

argument. Applying the statute to minor participants in a

fraud does not produce an absurd or unreasonable result. The

provision states that “[i]f the person bringing the action is

convicted of criminal conduct arising from his or her role in

the violation of section 3729, that person shall be dismissed

from the civil action and shall not receive any share of the

proceeds of the action.” 31 U.S.C. § 3730(d)(3). It does not

contain an exception for minor participants, and the statute

does not indicate that it does not apply to relators like

Schroeder.

Schroeder contends that when this provision is read in

conjunction with the preceding clause, the statute produces

the absurd and logically inconsistent result of allowing the

most culpable fraud participants (planners and initiators) to

collect a reduced share of an award but bars less culpable

fraud participants (minor participants convicted of the

offense) from recovery altogether. While the two clauses

might not perfectly harmonize relator eligibility and awards

with culpability, no authority suggests that the provision

should be construed according to that criteria. As such, the

argument urges us to untenably assume the role of a

“‘superlegislature’ second-guessing the policy choices of the

other branches of government.” Christian Sci. Reading Room

Jointly Maintained v. City & Cnty. of S.F., 807 F.2d 1466,

1467 (9th Cir. 1986) (Norris, J., dissenting).

Furthermore, the relator award hierarchy chosen by

Congress may satisfy other values, such as the deterrent effect

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8 SCHROEDER V. UNITED STATES

of preventing criminally culpable individuals from gaining

from their conduct, and the investigatory benefits of actions

brought by planners and initiators who often have greater

knowledge about co-conspirators and the scope of a

fraudulent scheme. Lastly, the dichotomy drawn by

Schroeder is a false one, as the statute also requires courts to

dismiss planners and initiators convicted of fraud.

Schroeder’s next argument, that applying § 3730(d) to

minor fraud participants undermines the FCA’s purpose of

encouraging qui tam plaintiffs to help uncover fraud, is

unpersuasive for at least two reasons. First, we may not even

need to consider the statute’s purpose because “[t]here is no

need to look beyond the plain meaning in order to derive the

purpose of the statute . . . [a]t least there is no need to do so

when the result is not absurd.” Tang v. Reno, 77 F.3d 1194,

1196–97 (9th Cir. 1996) (citations and internal quotation

marks omitted). Second, regardless, analyzing the statute’s

purpose only verifies that we should not deviate from the

plain meaning.

The text of the statute leaves little doubt that the sole

purpose of the 1988 amendment that codified § 3730(d)(3)

was to restrict eligibility and reduce rewards for certain

relators. The only two elements of the amendment reduce

awards for relators who “planned and initiated” the fraud and

require dismissal of relators “convicted of criminal conduct”

arising from the violation. Schroeder’s dismissal fulfills one

of the two elements and is consistent with the statute’s

purpose.

While the purpose of the Act, as amended in 1986, was to

strengthen the federal government’s ability to “recover losses

sustained as a result of fraud” in large part by encouraging

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SCHROEDER V. UNITED STATES 9

qui tam suits, S. Rep. No. 99-345, at 1–2 (1986), a broad

congressional purpose is of limited value when the meaning

is plain and the general purpose is inconsistent with the

purpose of the particular provision.2 Further, enacting a

modest amendment restricting relator eligibility merely two

years after embracing qui tam suits is consistent with

Congress’s attempt to find a balance between “deterring

parasitic claims [and] fostering productive suits.” See

Christopher M. Alexion, Open the Door, Not the Floodgates:

Controlling Qui Tam Litigation Under the False Claims Act,

69 Wash. & Lee L. Rev. 365, 378, 403 (2012); see also U.S.

ex rel. Findley v. FPC-Boron Emps.’ Club, 105 F.3d 675, 680

(D.C. Cir. 1997), abrogated on other grounds by Rockwell

Int’l Corp. v. United States, 549 U.S. 457 (2007) (Act

ricocheted between “extreme permissiveness” and “extreme

restrictiveness”).

2 A colorable policy argument cautions that applying the statute to minor

participants convicted of fraud will alter the mix of incentives that

encourage qui tam plaintiffs to file suit. We are not insensitive to the

surge in recoveries of misused public funds that has flowed from the 1986

legislation. See Press Release, Department ofJustice, Justice Department

Recovers Nearly $6 Billion from False Claims Act Cases in Fiscal Year

2014 (Nov. 20, 2014), http://www.justice.gov/opa/pr/justice-departmentrecovers-nearly-6-billion-false-claims-act-cases-fiscal-year-2014 (last

visited Apr. 29, 2015). Nor do we ignore the original Act’s sponsor that

“setting a rogue to catch a rogue . . . is the safest and most expeditious

way I have ever discovered of bringing rogues to justice,” Cong. Globe,

37th Cong., 3d Sess. 955–56 (1863) (statement of Sen. Howard), or the

commonsense notion that bounty programs may depend in part on the

participation of co-conspirators or minor fraud participants. Yet, our duty

is to ascertain the intent of the legislature, and not to legislate, which is

what the policy argument asks of us. Congress could have allowed minor

participants convicted of fraud to be qui tamplaintiffs, but the statute does

not allow us to create such an exception.

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10 SCHROEDER V. UNITED STATES

The last argument for an alternative interpretation of the

statute is one that Schroeder did not present, yet could

constitute the most persuasive evidence in support of a

second interpretation of the statute. See Chickasaw Nation v.

United States, 534 U.S. 84, 90 (2001). Close scrutiny of the

provision’s grammar and structure might indicate that the

“criminal conduct” clause is modified by, or operates in

concert with, the “plan/initiate” clause, such that a court may

reduce a planner’s award and shall dismiss a planner

convicted of criminal conduct. This interpretation would not

result in surplusage and would give effect to each part of the

statute. Two related points suggest that Congress might have

intended the first clause to modify the second.

First, the two clauses rest within a single subparagraph of

text, indicating that Congress might have meant for them to

function together. See generally Grogan v. Garner, 498 U.S.

279, 287–88 (1991). Second, more importantly, the two

clauses describe relators using different articles. In Gale v.

First Franklin Loan Services, 701 F.3d 1240, 1246 (9th Cir.

2012), we determined that the use of a definite article

preceded by an indefinite article can be persuasive evidence

that Congress intended to link two clauses. There, in a

closely analogous interpretive scenario, our scrutiny of two

separate clauses within a single subsection, the first preceded

by an indefinite article and the second by a definite article (“a

servicer” and “the servicer”), yielded an interpretation that

“[t]he use of the definite article in referring to the servicer

only makes sense by reference to the preceding sentence.” 

Gale, 701 F.3d at 1246.

Similarly, the first clause of § 3730(d)(3) states that a

court may reduce the share of a suit “brought by a person

who planned and initiated the violation” and the following

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SCHROEDER V. UNITED STATES 11

clause that “[i]f the person bringing the action” is convicted,

the court shall dismiss him. 31 U.S.C. § 3730(d)(3)

(emphasis added). As in Gale, the use of a definite article in

the second clause could indicate that it refers to the “person”

described in the first clause. Otherwise, the statute would

have provided that “if a person” or “if any person” bringing

the action is convicted, the court shall dismiss him. See

generally Work v. U.S. ex rel. McAlester-Edwards Coal Co.,

262 U.S. 200, 208 (1923); Am. Bus Ass’n v. Slater, 231 F.3d

1, 4–5 (D.C. Cir. 2000).

The structure and grammar of the text, in light of our

decision in Gale, narrowly permits a second plausible

interpretation, see Robinson, 519 U.S. at 341 (“The plainness

or ambiguity of statutory language is determined by reference

to the language itself, the specific context in which that

language is used, and the broader context of the statute as a

whole.”), which complements Schroeder’s arguments that

Congress did not intend for courts to dismiss all minor fraud

participants as relators. Yet, the more persuasive reading of

the statute, given its plain language, logical harmony, and

consistency with the purpose of the 1988 amendment, is that

“Congress said what it meant and meant when it said.” 

United States v. Steele, 147 F.3d 1316, 1318 (11th Cir. 1998)

(citing Conn. Nat’l Bank v. Germain, 503 U.S. 249, 253–54

(1992). Thus, we need not reach the legislative history of

§ 3730(d)(3). However, even if we look to the legislative

history, Schroeder’s argument is not persuasive.

When a statute is susceptible to two or more meanings,

we may consider legislative history. See, e.g., N. Cal. River

Watch v. Wilcox, 633 F.3d 766, 773 (9th Cir. 2011) (“If the

proper interpretation is not clear from this textual analysis,

the legislative history offers valuable guidance and insight

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12 SCHROEDER V. UNITED STATES

into Congressional intent.”) (citation and internal quotation

marks omitted). But, “the plainer the language, the more

convincing contrary legislative history must be.” Church of

Scientology of Cal. v. U.S. Dep’t of Justice, 612 F.2d 417,

422 (9th Cir. 1979). In this case, the legislative history of

§ 3730(d)(3) does not provide useful guidance as to

congressional intent, nor does it constitute “convincing”

evidence that overcomes the statute’s plain language.

The legislative history provides some support for

Schroeder’s position. The two Senators that discussed the

provision indicated that it only applies in narrow

circumstances and does not cover minor participants.3

See

134 Cong. Rec. S16697-01 (Sen. DeConcini) (“I am

confident that the vast majority of private plaintiffs in false

claims actions will not be affected by this amendment

because they are not the driving force behind the false claims

activities disclosed in their lawsuits.”); id. (Sen. Grassley)

(“This amendment is intended to apply narrowly to principal

wrongdoers, such as those convicted of criminal misconduct,

and not to those qui tam plaintiffs who may have had some

more minor role in the false claims conduct.”).

Yet, the legislative history does not constitute convincing

evidence that Congress meant to exclude convicted minor

fraud participants because both Senators suggested that the

two clauses operate independently. Neither expressed that

3 The legislative history is limited, consisting in its entirety of four floor

statements. The clause is not mentioned in any committee report,

conference report, or committee hearing. See, e.g., S. Rep. No. 100-503

(1988); H.R. Rep. No. 100-610 (1988). The two House Members that

discussed the amendment did not address the criminal conviction clause. 

See 134 Cong. Rec. H10637-41 (Rep. Hughes); 134 Cong. Rec.

H10637-02 (Rep. Berman).

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SCHROEDER V. UNITED STATES 13

minor fraud participants are not covered by the criminal

conduct provision or that the first clause modifies the second. 

In addition, contrary to the strongest textual support for an

interpretation deviating from the plain meaning, both

Senators describe the “criminal conduct” clause with an

indefinite article and as applying in “any case.” Senator

DeConcini stated:

The amendment offered today provides that in

an extreme case where the private plaintiff

was a principal architect of a scheme to

defraud the Government, that plaintiff would

not be entitled to any minimum guaranteed

share of the proceeds of the action. Also, in

any case where a private plaintiff is convicted

of criminal misconduct for his or her role in

the false claims practice, the private plaintiff

will be dismissed from the action and not

entitled to any recovery.

Id. Similarly, Senator Grassley stated:

My amendment simply clarifies that in an

extreme case where the qui tam plaintiff was

a principal architect of a scheme to defraud

the Government, that plaintiff would not be

entitled to any minimum guaranteed share of

the proceeds of the action. And in any case

where a qui tam plaintiff is convicted of

criminal misconduct for his or her role in the

false claims practice, the qui tam plaintiff

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14 SCHROEDER V. UNITED STATES

must be dismissed from the action and is

entitled to zero recovery.

Id.

Thus, while the legislative history provides some support

for the notion that the sponsors did not intend for the

provision to require the dismissal of minor fraud participants,

it is not convincing enough to warrant departing from the

plain meaning. The legislative history’s inconsistency limits

its value. It provides that “in any case where a qui tam

plaintiff is convicted . . . [he] must be dismissed,” but that the

amendment is not intended to apply to “those qui tam

plaintiffs who may have had some more minor role in the

false claims conduct.” 134 Cong. Rec. S16697-01. This

evidence does not warrant a departure from the plain

meaning. See Chamber of Commerce of U.S. v. Whiting,

131 S. Ct. 1968, 1980 (2011) (Roberts, C.J.) (“Congress’s

‘authoritative statement is the statutory text, not the

legislative history.’” (quoting Exxon Mobil Corp. v.

Allapattah Servs., Inc., 545 U.S. 546, 568 (2005))).

CONCLUSION

We affirm the district court’s dismissal of Schroeder as a

qui tam relator. The grammar and structure of the provision

narrowly supports a second plausible interpretation. 

However, the text does not include an exception for minor

fraud participants, and our interpretation is consistent with the

particular purpose of the 1988 amendment. The legislative

history is too inconclusive to warrant departing from the plain

meaning.

AFFIRMED.

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