Source: http://openjurist.org/99/f3d/1538
Timestamp: 2015-05-23 15:24:05
Document Index: 257104868

Matched Legal Cases: ['§ 3729', '§ 3730', '§ 3730', '§ 1291', '§ 7901', '§ 7901', '§ 7913', '§ 7913', '§ 3729', '§ 3730', '§ 3730']

99 F3d 1538 United States Fine v. Mk-Ferguson Company | OpenJurist
99 F. 3d 1538 - United States Fine v. Mk-Ferguson Company	Home99 f3d 1538 united states fine v. mk-ferguson company
99 F3d 1538 United States Fine v. Mk-Ferguson Company 99 F.3d 1538
65 USLW 2368, 41 Cont.Cas.Fed. (CCH) P 77,024
UNITED STATES of America, ex rel., Harold R. FINE,Plaintiff-Appellant/Cross-Appellee,v.MK-FERGUSON COMPANY, a Morrison Knudsen Company; IndustrialContractors Corporation; Morrison Knudsen Corporation,doing business as MK-Corporation Operations,Defendants-Appellees/Cross-Appellants.United States of America, Amicus Curiae.
Nos. 95-2011, 95-2021.
Duff H. Westbrook of Duff H. Westbrook, P.C., Albuquerque, NM (Maureen A. Sanders, Albuquerque, NM, with him on the brief) for Plaintiff-Appellant/Cross-Appellee.
Paul Bardacke (Kerry C. Kiernan and Peter S. Kierst with him on the briefs) of Eaves, Bardacke & Baugh, P.A., Albuquerque, NM, for Defendant-Appellee/Cross-Appellant Industrial Contractors Corporation.
William P. Snyder (John C. Burgin, Jr., with him on the brief) of Kramer, Rayson, Leake, Rodgers & Morgan, Knoxville, TN, for Defendant-Appellee/Cross-Appellant MK-Ferguson Company.
Michael F. Hertz (Barbara C. Biddle, Joan E. Hartman, and Dara A. Corrigan with him on the brief), Attorneys, Civil Division, U.S. Department of Justice, Washington, D.C., for Amicus Curiae.
This case arises under the False Claims Act, 31 U.S.C. §§ 3729-33, and specifically the qui tam provisions that allow individuals to sue on behalf of the government to recover federal monies lost as a result of false claims and fraudulent charges. The individual bringing the qui tam suit, called a relator, shares a percentage of any proceeds recovered. Id. § 3730(d).
The False Claims Act contains jurisdictional limits on those who may bring qui tam actions. It bars all qui tam suits that are based upon publicly disclosed information unless the person bringing the action is an original source of the information. Id. § 3730(e)(4)(A). The primary questions presented in this appeal are whether the relator's suit is based upon a "public disclosure" under section 3730(e)(4)(A) and, if so, whether the relator qualifies as an "original source" under section 3730(e)(4)(B).
Harold R. Fine is a former employee of the Office of the Inspector General, U.S. Department of Energy. He brought suit as the relator under the qui tam provisions of the False Claims Act against defendants MK-Ferguson Company ("MK-Ferguson") and Industrial Contractors Corporation ("Industrial Contractors"). Fine's Complaint alleges that these firms submitted false and fraudulent claims with respect to six matters involved in the remediation of residual mill tailings at a uranium mining site in Lakeview, Oregon.
The district court granted in part MK-Ferguson's motion to dismiss on the ground it lacked subject matter jurisdiction. The district court held that Fine's Complaint was based upon publicly disclosed allegations and that Fine was not an original source of these allegations.1 United States ex rel. Fine v. MK-Ferguson Co., 861 F.Supp. 1544, 1552, 1554 (D.N.M.1994). This appeal followed the district court's dismissal and its denial of the defendants' motions for attorneys' fees. Appellate jurisdiction exists pursuant to 28 U.S.C. § 1291. For the reasons set forth below, this court affirms the district court's rulings that Fine's suit is based on a public disclosure, that he does not qualify as an original source, and that an award of attorneys' fees to MK-Ferguson and Industrial Contractors is not appropriate.
Fine alleges false claims and fraudulent charges in the construction of facilities for the remediation of residual mill tailings at a uranium mining site in Lakeview, Oregon. In 1978, Congress enacted the Uranium Mill Tailings Radiation Control Act (the "Uranium Tailings Act"), Pub.L. No. 95-604, 92 Stat. 3021 (codified as amended at 42 U.S.C. §§ 7901-42), to stabilize and control mill tailings from uranium mining operations in several western states. 42 U.S.C. § 7901. The Uranium Tailings Act directs the United States Department of Energy to enter into cooperative remediation agreements with states which have designated cleanup sites. Id. § 7913. Under these agreements, the Department of Energy is responsible for 90% of the costs of the remediation, while the state is responsible for the remaining 10%. Id. §§ 7913, 7917.
The State of Oregon and the Department of Energy entered into a cooperative agreement concerning the Lakeview, Oregon, site. The Department of Energy then entered into a contract with MK-Ferguson as the prime contractor for all engineering and construction work at the Lakeview site. MK-Ferguson in turn entered into a subcontract with Industrial Contractors for all the construction work at the site. Oregon is not a party to either the prime contract between the Department of Energy and MK-Ferguson or the subcontract between MK-Ferguson and Industrial Contractors.
After commencing work at the site in June 1986, MK-Ferguson and Industrial Contractors claimed additional construction costs, explaining that site conditions were not as anticipated. Oregon, however, questioned whether some of these new costs were allowable under the contract between the Department of Energy and MK-Ferguson and the subcontract between MK-Ferguson and Industrial Contractors. Oregon conducted three separate audits on the Lakeview site and sent an audit report on the contested costs to the Department of Energy. The Oregon report focused on four cost areas: (1) unabsorbed overhead paid to Industrial Contractors when a wood-chip encapsulation cell for contaminated organic material was deleted from the project; (2) costs for work on a waste-water retention pond; (3) costs for reconstructing pads used to decontaminate trucks operated on the site and on public roads; and (4) costs associated with winter shutdowns.
As a result of the Oregon audit report, the Department of Energy undertook an investigation into the questioned costs and activities. Following a lengthy investigation by the Department of Energy, Oregon requested that an audit be performed by the Department of Energy's Office of the Inspector General. The Office of the Inspector General subcontracted the audit to ADC, Ltd., an independent firm. ADC performed the audit, wrote a draft report, and submitted it to the Office of the Inspector General.
On April 30, 1991, the Office of the Inspector General then issued a final report and audit based on ADC's audit. The final report and audit was intended to determine whether the costs of the questioned activities were: (1) allowable under the contract between the Department of Energy and MK-Ferguson, the subcontract between MK-Ferguson and Industrial Contractors, or the Uranium Tailings Act cooperative agreement between the Department of Energy and Oregon; and (2) incurred under generally accepted business practices.
The final report and audit concluded as follows: (1) that $40,168 of unearned overhead for the wood-chip encapsulation cell was unallowable under the cooperative agreement; (2) that the entire cost of the decontamination pad, $86,009, was unallowable under the subcontract between MK-Ferguson and Industrial Contractors; (3) that Oregon had a valid claim for its share of the costs of equipment standby during the winter shutdowns; and (4) that part of the cost of constructing the third waste-water retention pond, $14,690, was unreasonable.
The Department of Energy sent this final report and audit to both Oregon and MK-Ferguson officials under cover of a letter dated May 3, 1991. The cover page of the final report and audit contained no special restrictions on its availability, referring only to the general procedure for determining the release of audit reports pursuant to requests under the Freedom of Information Act. In addition, the cover letter neither imposed limitations on the public availability of the report nor restrained in any way its dissemination by Oregon.
At the time of these events, Fine was an Assistant Regional Manager, Western Region, in the Office of the Inspector General for the U.S. Department of Energy. Fine had held this position since August 1984 and was in charge of financial-related audits. Fine performed no audit work himself; rather, he supervised audit directors who in turn supervised auditors performing the actual, on-site audit work.
Fine had no involvement in the Department of Energy's initial investigation of the questioned costs at the Lakeview site and was only marginally involved in the audit ordered by the Office of the Inspector General and performed by ADC. Fine's involvement was limited to: (1) attending a preaudit conference; (2) authorizing the original direction to ADC; and (3) later helping to draft the final report and audit based on the ADC audit. Fine described his involvement at the drafting stage as converting the ADC audit into layman's language. In addition, Fine later solicited information about the alleged fraud through newspaper ads.
Fine left the Office of the Inspector General and government service on July 18, 1991. Four months later, he filed this suit in the United States District Court for the District of New Mexico under the qui tam provisions of the False Claims Act, 31 U.S.C. §§ 3729-33. In his Complaint, Fine alleges that MK-Ferguson and Industrial Contractors submitted false and fraudulent claims for cost reimbursement relating to work performed at the Lakeview site. Fine alleges wrongdoing in six different matters: (1) alleged excess costs relating to the wastewater retention pond liner, totaling $14,690; (2) costs associated with winter shutdowns for idle equipment allegedly used at other sites, totaling $127,110; (3) overhead costs for the deleted wood-chip cell, totaling $40,168; (4) reconstruction costs for the decontamination pad, totaling $86,009; (5) use of estimated rather than actual costs for equipment associated with the winter shutdowns; and (6) use of estimated rather than actual overhead rates for contract modifications. With the exception of item (6), which was ultimately dismissed with prejudice at Fine's request, each of Fine's claims of wrongdoing was addressed in the April 30, 1991, Inspector General's final report and audit.
As required by the False Claims Act, Fine filed his Complaint under seal. 31 U.S.C. § 3730(b)(2). The Complaint remained under seal while the U.S. Department of Justice considered its option to intervene. See id. The Department of Justice declined to intervene and the litigation proceeded with Fine the sole protagonist.
MK-Ferguson filed a motion to dismiss which the district court granted in part. MK-Ferguson, 861 F.Supp. at 1554. The district court resolved that counts 1-18 of Fine's Complaint, which encompass all allegations of wrongdoing excepting only that concerning the use of estimated overhead rates for contract modifications, were based upon the Inspector General's final report and audit. Id. at 1552-53. The court then concluded that the final report and audit was a public disclosure under the False Claims Act upon its referral to the State of Oregon. Id. at 1552. The district court rejected MK-Ferguson's claims that any of the three Oregon audits, the Oregon audit report issued to the Department of Energy, or the Department of Energy investigation constituted a public disclosure under the False Claims Act. Id. at 1550-52.
Continuing its analysis, the district court also held that Fine was not an original source under 31 U.S.C. § 3730(e)(4)(B). MK-Ferguson, 861 F.Supp. at 1553-54. Because Fine did not conduct any of his own investigations and his knowledge was based upon the audit prepared by ADC for the Inspector General, the district court concluded that Fine could not be considered to have "direct and independent knowledge" of the information upon which his Complaint was based. MK-Ferguson, 861 F.Supp. at 1554.
At Fine's request, the district court dismissed with prejudice his remaining claim regarding the use of estimates on contract modifications. Fine filed this appeal presenting the following issues: (1) whether the Inspector General's release of the final report and audit to Oregon is a public disclosure under the False