Court Opinion

ID: 8407199
Source: CourtListenerOpinion
Date Created: 2022-11-01 17:00:44.478484+00
Date Added: 2024-06-11T16:47:24.983997
License: Public Domain

Appellate Case: 21-4059     Document: 010110761442   Date Filed: 11/01/2022   Page: 1
                                                                             FILED
                                                                 United States Court of Appeals
                       UNITED STATES COURT OF APPEALS                    Tenth Circuit

                              FOR THE TENTH CIRCUIT                   November 1, 2022
                          _________________________________
                                                                     Christopher M. Wolpert
                                                                         Clerk of Court
  UNITED STATES OF AMERICA ex rel.
  MARK CHRISTOPHER TRACY,

        Plaintiff - Appellant,

  v.                                                      No. 21-4059
                                                 (D.C. No. 2:14-CV-00701-JNP)
  EMIGRATION IMPROVEMENT                                    (D. Utah)
  DISTRICT, a Utah Special Service
  District; FRED A. SMOLKA, an
  individual; MICHAEL HUGHES, an
  individual, DAVID BRADFORD, an
  individual; MARK STEVENS, an
  individual; LYNN HALES, an individual;
  ERIC HAWKES, an individual;
  BARNETT INTERMOUNTAIN WATER
  CONSULTING, a Utah corporation; DON
  BARNETT, an individual; JOE SMOLKA,
  an individual; KENNETH WILDE, an
  individual; RONALD R. RASH, an
  individual; KEVIN W. BROWN, an
  individual; MICHAEL B. GEORGESON,
  an individual; THE BOYER COMPANY,
  a Utah company; CITY DEVELOPMENT,
  a Utah corporation; R. STEVE
  CREAMER, an individual; CAROLLO
  ENGINEERS, INC., a California
  professional corporation,

        Defendants - Appellees.

  –––––––––––––––––––––––––––––––––––

  UNITED STATES OF AMERICA EX.
  REL. MARK CHRISTOPHER TRACY,

        Plaintiff - Appellant,
Appellate Case: 21-4059    Document: 010110761442       Date Filed: 11/01/2022   Page: 2

  v.
                                                            No. 21-4143
  EMIGRATION IMPROVEMENT                           (D.C. No. 2:14-CV-00701-JNP)
  DISTRICT, a Utah Special Service                            (D. Utah)
  District; FRED A. SMOLKA, an
  individual; MICHAEL HUGHES, an
  individual; DAVID BRADFORD, an
  individual; MARK STEVENS, an
  individual; LYNN HALES, an individual;
  ERIC HAWKES, an individual,

        Defendants - Appellees,

  and

  BARNETT INTERMOUNTAIN WATER
  CONSULTING, a Utah corporation; DON
  BARNETT, an individual; JOE SMOLKA,
  an individual; KENNETH WILDE, an
  individual; RONALD R. RASH, an
  individual; KEVIN W. BROWN, an
  individual; MICHAEL B. GEORGESON,
  an individual; THE BOYER COMPANY,
  a Utah company; CITY DEVELOPMENT,
  a Utah corporation; R. STEVE
  CREAMER, an individual; CAROLLO
  ENGINEERS, INC., a California
  professional corporation,

        Defendants.
                          _________________________________

                              ORDER AND JUDGMENT*
                          _________________________________

        *
         After examining the briefs and appellate record, this panel has determined
 unanimously that oral argument would not materially assist in the determination of
 this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
 ordered submitted without oral argument. This order and judgment is not binding
 precedent, except under the doctrines of law of the case, res judicata, and collateral
 estoppel. It may be cited, however, for its persuasive value consistent with
 Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
                                           2
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 Before TYMKOVICH, BALDOCK, and CARSON, Circuit Judges.
                  _________________________________

       Mark Tracy, acting as a qui tam relator, brought suit on behalf of the United

 States alleging that Emigration Improvement District (the District) and various other

 defendants made false statements to obtain a federal loan for a water project in

 violation of the False Claims Act (FCA), 31 U.S.C. §§ 3729 et seq., and that after the

 loan proceeds were disbursed, the District failed to comply with conditions of the

 loan and failed to report this noncompliance to the United States government.1 In the

 operative complaint—the third amended complaint—he asserted a reverse false claim

 under § 3729(a)(1)(G) and a direct false claim under § 3729(a)(1)(A) and (B). In a

 series of orders entered over the course of the litigation, the district court dismissed

 both claims against all defendants. In Appeal No. 21-4059, Mr. Tracy appeals the

 district court’s orders dismissing his direct false claim against all defendants as

 untimely under 31 U.S.C. § 3731(b)(2). He does not appeal the order dismissing the

 reverse false claim. In Appeal No. 21-4143, Mr. Tracy appeals the district court’s

 order awarding attorneys’ fees to a subset of defendants pursuant to the FCA’s

 fee-shifting provision, 31 U.S.C. § 3730(d)(4). We procedurally consolidated

       1
         The FCA’s qui tam provisions allow an individual to sue on behalf of the
 government. 31 U.S.C. § 3730(b). Though the government may intervene and take
 over a private plaintiff’s case, id. § 3730(b)(2), it declined to do so in this case.
 Mr. Tracy thus conducted the litigation as the relator. See id. § 3730(c)(3).

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 the appeals and, exercising jurisdiction pursuant to 28 U.S.C. § 1291, we affirm

 both orders.2

                                      Background

       Our decision in Mr. Tracy’s prior appeal describes most of the factual and

 procedural background of the underlying litigation in some detail. See United States

 ex. rel. Tracy v. Emigration Improvement Dist. (Tracy I), 804 F. App’x 905, 907-09

 (10th Cir. 2020). We do not repeat that background here, other than as necessary to

 provide context for our consideration of the issues presented in this appeal.

       In Tracy I, we remanded for the district court to decide whether Mr. Tracy

 filed his complaint within the ten-year period established by § 3731(b)(2). See

 804 F. App’x at 909. Following remand, a subset of defendants—Carollo Engineers,

 Inc., the District, Michael Hughes, Mark Stevens, David Bradford, Fred Smolka,

 Lynn Hales, Eric Hawkes, and Steve Creamer—filed motions to dismiss the

 remaining claim against them pursuant to Fed. R. Civ. P. 12(b)(6) as time-barred. 3

       2
         Our caption includes a number of defendants-appellees who did not
 participate in these appeals. The Boyer Company and City Development did not
 appear in the district court or participate in the appeals, but they remain in our
 caption as appellees because although Mr. Tracy did not serve them, he did not
 voluntarily dismiss his claims against them. Barnett Intermountain Water
 Consulting, Don Barnett, Joe Smolka, Kenneth Wilde, Kevin W. Brown, and Michael
 B. Georgeson also did not participate in the appeals, but they are listed as appellees
 because although Mr. Tracy conceded that his claim against them should be
 dismissed, he retained his right to appeal that resulting dismissal order.
       3
          The moving defendants also sought dismissal on other grounds, but the
 district court did not address the alternative bases for dismissal.

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 The issue was whether the period started to run when the District filed the last claim

 for payment or on the date the government paid that claim. The parties did not

 dispute the relevant dates—according to documents attached to the third amended

 complaint, the District submitted its final request for payment on September 13,

 2004, and the government paid the claim on September 29, 2004. Mr. Tracy filed

 suit on September 26, 2014—more than ten years after the District submitted the

 final claim but less than ten years after the government paid it.

       The district court concluded that the relevant date for purposes of § 3731(b)(2)

 was the date the District submitted its final request for payment and that because

 Mr. Tracy filed suit more than ten years from that date, the claim was time-barred.

 The court thus granted the motions to dismiss and dismissed the claim against the

 moving defendants. The court then ordered Mr. Tracy to show cause why the claim

 should not also be dismissed as to the remaining defendants. He conceded that, in

 light of the court’s decision on the motions to dismiss, his claim against the

 remaining defendants should be dismissed. Accordingly, the court dismissed the

 claim against those defendants and entered judgment in favor of all defendants.

       A different subset of defendants—the District, Michael Hughes, Mark Stevens,

 David Bradford, Fred Smolka, Eric Hawkes, and Lynn Hales—then moved for

 attorneys’ fees and costs pursuant to § 3730(d)(4).4 The district court granted the

       4
        The motion also sought an award of fees against Mr. Tracy’s counsel
 pursuant to 28 U.S.C. § 1927, but the moving defendants withdrew that portion of the
 motion after they reached a settlement with counsel.

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 motion after concluding that the action was clearly vexatious and brought for the

 purpose of harassment.

                                        Discussion

        1.     Dismissal Order – Appeal No. 21-4059

        Mr. Tracy first contends that the district court erred in concluding that the

 period for filing his claim started running when the District made its final request for

 payment. He insists that his claim was timely filed because the time period did not

 begin to run until the last date the government suffered damages—the date on which

 it made the payment induced by the last false claim. We disagree.

        We review the district court’s Rule 12(b)(6) dismissal de novo. Brooks v.

 Mentor Worldwide LLC, 985 F.3d 1272, 1278 (10th Cir.), cert. denied, 142 S. Ct. 477

 (2021). “A complaint is subject to dismissal for failure to state a claim if the

 allegations, taken as true, show the plaintiff is not entitled to relief.” Jones v. Bock,

 549 U.S. 199, 215 (2007). If the allegations show that the claim is time-barred, the

 complaint is subject to dismissal for failure to state a claim. Id. We review de novo

 whether a district court properly applied a limitations period, including its

 determination of the date the period began to run. Nelson v. State Farm Mut. Auto.

 Ins. Co., 419 F.3d 1117, 1119 (10th Cir. 2005).

        Section 3731(b)(2) sets forth two limitations periods that apply to

 relator-initiated civil suits under the FCA. See Cochise Consultancy, Inc. v. United

 States ex rel. Hunt, 139 S. Ct. 1507, 1511-12 (2019). Specifically, it provides:

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            A civil action under section 3730 may not be brought . . . more
            than 3 years after the date when facts material to the right of
            action are known or reasonably should have been known by the
            official of the United States charged with responsibility to act in
            the circumstances, but in no event more than 10 years after the
            date on which the violation is committed, whichever occurs last.

 § 3731(b)(2).

        The different start dates for the two time periods is significant. The three-year

 period is a typical statute of limitations that starts to run when the government knew

 or should have known about the fraud, while the ten-year period is a statute of repose

 that places an outer limit on the otherwise applicable statute of limitations. See CTS

 Corp. v. Waldburger, 573 U.S. 1, 7-8 (2014) (discussing the difference between

 statutes of limitations and statutes of repose); Nat’l Credit Union Admin. Bd. v.

 Nomura Home Equity Loan, Inc., 764 F.3d 1199, 1211 (10th Cir. 2014) (same). As is

 the case for many repose periods, the ten-year period in § 3731(b)(2) starts running

 when a specific event occurs, not when the alleged injury occurs. See CTS Corp.,

 573 U.S. at 8 (explaining that statutes of limitations typically begin to run when a

 cause of action accrues, meaning when the alleged injury occurred or was discovered,

 while a statute of repose begins to run when a specific event occurs, often “the date

 of the last culpable act or omission of the defendant . . . , even if [the repose] period

 ends before the plaintiff has suffered a resulting injury” (internal quotation marks

 omitted)). That date is the date the “violation is committed.” § 3731(b)(2).

        The question then, is when the defendants’ alleged FCA violation was

 committed. Mr. Tracy’s claim alleged the defendants violated § 3729(a)(1)(A) and

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 (B), which impose civil liability when a person “knowingly presents, or causes to be

 presented” to the government “a false or fraudulent claim for payment or approval,”

 § 3729(a)(1)(A), or uses a false record or makes a false statement material to a false

 claim, § 3729(a)(1)(B). Liability thus stems from the act of making a false claim, not

 from the government’s payment of the claim. See United States ex rel. Sorenson v.

 Wadsworth Bros. Constr. Co., 48 F.4th 1146, 1151 (10th Cir. 2022) (“The FCA

 imposes liability for fraudulent attempts to cause the government to pay out sums of

 money.” (emphasis added) (internal quotation marks omitted)); see also Rex Trailer

 Co. v. United States, 350 U.S. 148, 152-53 & n.5 (1956) (recognizing that under a

 statute that is “essentially the equivalent” of the FCA, a contractor who submits a

 false claim for payment may be liable even if the claim did not actually induce the

 government to pay out funds or to suffer any loss).5 We thus conclude that a

 “violation is committed” for purposes of § 3731(b)(2) when the defendant submits a

 false claim, not when the government pays the claim. See Graham Cnty. Soil &

 Water Conservation Dist. v. United States ex rel. Wilson, 545 U.S. 409, 415 (2005)

 (recognizing in dicta that because § 3731(b)(1) “t[ies] the start of the time limit to the

 date on which the violation of section 3729 is committed . . . , the time limit begins to

       5
         Other circuit courts have also recognized that the FCA attaches liability to
 the claim for payment, not the government’s wrongful payment. See United States v.
 Rivera, 55 F.3d 703, 709 (1st Cir. 1995) (“[T]he statute attaches liability, not to the
 underlying fraudulent activity or to the government’s wrongful payment, but to the
 ‘claim for payment.’”); Harrison v. Westinghouse Savannah River Co., 176 F.3d 776,
 785 (4th Cir. 1999) (same).
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 run on the date the defendant submitted a false claim for payment” (internal

 quotation marks omitted)).

       In so concluding, we reject Mr. Tracy’s argument that because he sought

 actual damages, the ten-year period did not begin to run until the government paid

 the final claim. In support of that argument, he relies on Jana, Inc. v. United States,

 41 Fed. Cl. 735 (1998), in which the Court of Federal Claims reasoned that because

 § 3729 provides that a false claimant may be liable both for civil penalties and actual

 damages, the ten-year period begins to run at different times depending on the relief

 sought. See id. at 743 (holding that where a suit seeks only civil penalties, the period

 begins to run when the false claim was submitted, but where a suit seeks actual

 damages, the period begins to run when the government pays the claim). But we are

 not bound by the Court of Federal Claims’ decision or persuaded by its reasoning in

 Jana. Nothing in the statutory language suggests that Congress intended to establish

 different start-dates for the ten-year repose period depending on the relief sought.

 To the contrary, § 3731(b)(2)’s plain language provides that the clock starts ticking

 on “the date on which the violation is committed,” not when the government suffers

 damage. Mr. Tracy cites no circuit court decision that follows Jana, and we have

 found none. He also cites no authority—and we are not aware of any—holding that a

 violation is committed and the ten-year period begins to run when the defendant

 accepts payment from the government on a false claim, as opposed to when he

 “knowingly presents” such a claim to the government, § 3729(a)(1)(A), or “makes a

 false statement material” to such a claim, § 3729(a)(1)(B).

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        Because the ten-year period started to run on September 13, 2009, when the

  District submitted the last claim, and Mr. Tracy did not file suit until September 26,

  2014, we agree with the district court’s determination that his claim was time-barred.

        2.     Attorneys’ Fees Order – Appeal No. 21-4143

  A.    Legal Standards

        Under § 3730(d)(4), a court may award attorneys’ fees to the defendants in a

  qui tam action if (1) the government elected not to proceed with the action; (2) the

  defendants prevailed; and (3) the court finds that the claim was “clearly frivolous,

  clearly vexatious, or brought primarily for purposes of harassment.” Each element of

  the third prong can independently sustain an award of attorneys’ fees. See In re Nat.

  Gas Royalties Qui Tam Litig., 845 F.3d 1010, 1017 & n.5 (10th Cir. 2017)

  (upholding attorneys’ fees award based solely on finding that the relator’s claim was

  clearly frivolous and declining to address the other two elements because they were

  “not necessary to our disposition”). We review the district court’s decision to award

  attorneys’ fees for an abuse of discretion. Id. at 1017.

  B.    Additional Factual and Procedural Background

        The following additional background information provides context for our

  review of the district court’s fee order. In 2019, after entering the pre-Tracy I

  dismissal orders, the district court ordered Mr. Tracy to pay the District’s attorneys’

  fees and expenses pursuant to § 3730(d)(4). That order was based in part on

  Mr. Tracy’s having recorded a lis pendens against a portion of the District’s water

  rights, claiming they were the subject of the FCA litigation, and sending letters to the

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  District’s clients referencing the lis pendens and accusing the District of

  manipulating water rights. The district court concluded the lis pendens was a

  wrongful lien and released it. And, finding “no good faith basis for” Mr. Tracy

  having filed the wrongful lis pendens, the court determined that his recording of the

  lis pendens and his related conduct was vexatious, and awarded statutory damages

  and attorneys’ fees. Suppl. App. at 90-91. That fee order was also based on the

  court’s findings that the § 3729(a)(1)(G) claim (the reverse false claim) and some of

  Mr. Tracy’s arguments and litigation conduct vis-à-vis the statute of limitations issue

  were frivolous. Finally, the court found that overall, the action was clearly vexatious

  and “indicate[d] bad faith and a clear intent to harass,” id., because Mr. Tracy used

  the litigation to “air personal grievances . . . in pursuit of an ulterior motive, rather

  than [to] seek money damages on behalf of the United States,” id. at 91.

         In Tracy I, after vacating the order dismissing the direct file claim, we vacated

  the 2019 fee order because we could not say that the District was the prevailing party

  until the district court decided whether any alleged violation of § 3729(a)(1)(A)

  or (B) occurred less than ten years before Mr. Tracy filed his initial complaint.

  804 F. App’x at 909. We indicated that on remand the district court could enter a

  new fee order if it determined that the defendants seeking fees prevailed and that

  Mr. Tracy’s claims and litigation conduct met the § 3730(d)(4) standard. Id.

         On remand, the district court ordered Mr. Tracy to pay the attorneys’ fees and

  costs of the defendants who sought an attorneys’ fee award. Unlike the 2019 fee

  order in which the court found that aspects of the litigation satisfied each element of

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  the third prong of § 3730(d)(4), the fee order issued on remand was based only on

  findings that the action was “clearly vexatious” and “brought primarily for purposes

  of harassment.” Aplt. App. at 311. Given its earlier finding that the lis pendens was

  “unreasonable and without foundation” and had nothing to do with the issues that

  arose in Tracy I and on remand, the district court found that Mr. Tracy’s behavior

  with respect to the lis pendens was “clearly vexatious when it first occurred, and no

  subsequent developments change that finding.” Id. at 310. The court further found

  that nothing in the subsequent litigation affected its finding in the 2019 fee order that

  Mr. Tracy’s “actions indicated bad faith and a clear intent to harass.” Id. Reiterating

  some of the most egregious examples it gave in the 2019 order of Mr. Tracy’s

  “harassing behavior,” id. at 311, the court again found that he “brought this case to

  air personal grievances against Defendants in pursuit of his own ulterior motives,

  rather than to seek money damages for the United States,” id. at 310. Having found

  that his actions were clearly vexatious and brought for the purpose of harassment, the

  court awarded fees on those grounds and did not address whether his claims were

  clearly frivolous.

  C.    Analysis

        Mr. Tracy does not dispute that the first two prongs of the § 3730(d)(4) inquiry

  are satisfied here—the government declined to intervene in the action three times,

  and the defendants prevailed. But he contends that the district court abused its

  discretion in concluding that an award of fees was warranted under the third prong.

  Specifically, noting his success in Tracy I, he insists that his claims were not

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  frivolous, and he maintains that his reliance on Jana in support of his argument on

  remand was not unreasonable.

        As explained above, however, the fee order at issue here was not based on a

  finding that his claims were frivolous. Instead, it was based on findings that the

  action was clearly vexatious and brought primarily for purposes of harassment, and

  those findings were sufficient to support the fee award. See In re Nat. Gas Royalties

  Qui Tam Litig., 845 F.3d at 1017 & n.5. Mr. Tracy does not challenge those findings,

  so he has abandoned or waived any challenge he might have raised. See Tran v. Trs.

  of State Colls. in Colo., 355 F.3d 1263, 1266 (10th Cir. 2004) (“Issues not raised in

  the opening brief are deemed abandoned or waived.” (internal quotation marks

  omitted)). And because he failed to address the basis for the district court’s ruling,

  he has given us no reason to disturb it. See Nixon v. City & Cnty. of Denver, 784

  F.3d 1364, 1366, 1369 (10th Cir. 2015) (observing that “[t]he first task of an

  appellant is to explain to us why the district court’s decision was wrong,” and

  affirming where the appellate briefing “contain[ed] nary a word to challenge the basis

  of the” challenged ruling).

                                        Conclusion

        We affirm the district court’s dismissal orders and resulting judgment for

  defendants in Appeal No. 21-4059. We also affirm the district court’s attorneys’ fee

  order in Appeal No. 21-4143. We deny as moot the motion filed by Eric Hawkes,

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  Jennifer Hawkes, and Simplifi Co., in Appeal No. 21-4059 to substitute them as the

  appellants in place of Mr. Tracy and to dismiss the appeal.

                                             Entered for the Court

                                             Joel M. Carson III
                                             Circuit Judge

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