Court Opinion

ID: 32154
Source: CourtListenerOpinion
Date Created: 2010-04-25 18:50:22+00
Date Added: 2024-06-11T13:01:22.841808
License: Public Domain

United States Court of Appeals
                                                                    Fifth Circuit
                                                                 F I L E D
                       REVISED AUGUST 18, 2003                     June 24, 2003

                                                             Charles R. Fulbruge III
                IN THE UNITED STATES COURT OF APPEALS                Clerk

                        FOR THE FIFTH CIRCUIT

                        _____________________

                             No. 02-40504
                        _____________________

           UNITED STATES OF AMERICA, ex rel, PATRICIA LAIRD; ET AL

                                  Plaintiffs

           UNITED STATES OF AMERICA, ex rel, JAMES MAYFIELD

                                  Plaintiff - Appellant

           v.

           LOCKHEED MARTIN ENGINEERING AND SCIENCE SERVICES CO

                                  Defendant - Appellee

_________________________________________________________________

           Appeal from the United States District Court
                for the Southern District of Texas

_________________________________________________________________

Before KING, Chief Judge, and REAVLEY and STEWART, Circuit Judges.

KING, Chief Judge:

     James Mayfield brought a qui tam action under the False Claims

Act, 31 U.S.C. § 3729 (2000).      On a motion for summary judgment,

the district court concluded that (1) Mayfield was barred by the

doctrine of res judicata from bringing the majority of his claims

against   Lockheed,   and   (2)   the   court   lacked   subject    matter

                                    1
jurisdiction pursuant to the “public disclosure” provisions of the

False Claims Act to consider the rest of Mayfield’s claims against

Lockheed.

     In determining that Mayfield did not qualify as an “original

source” of the information publicly disclosed in his prior state

court lawsuit, the district court aligned itself with a minority of

the circuits interpreting the original source exception.      As a

matter of first impression for this court, we choose instead to

follow the majority interpretation. We thus vacate the judgment of

the district court and remand for findings under this test.     We

further hold that Mayfield’s prior state court lawsuit did not bar

him from bringing the present claims under the False Claims Act.

                                 I.

            STATEMENT OF THE FACTS AND PROCEDURAL HISTORY

     From November 1989 until his termination in March 1995, James

Mayfield was employed with Lockheed Martin Engineering & Sciences

Company (“Lockheed”).    From January 1994 until this termination,

Mayfield worked with Lockheed as its project specialist and was

responsible for, among other things, overseeing the contents,

preparation, execution and delivery of National Aeronautics and

Space Administration (“NASA”) Form 533 reports.

     Pursuant to the Engineering, Test and Analysis Contract (“ETA

Contract”) between Lockheed and NASA, Lockheed was required to file

one version of the NASA Form 533 report – the 533M report – with

                                  2
NASA on a monthly basis and another version – the 533Q report –

with NASA on a quarterly basis.            Essentially, the NASA Form 533

reports provided a basis for reporting and evaluating Lockheed’s

costs and expenses under the ETA Contract.                  The ETA Contract

explicitly provided that payment of fees to Lockheed under the

contract was contingent upon compliance with contractual provisions

controlling Lockheed’s reporting of accurate cost overruns and cost

at completion figures.

     A.   The State Court Action

     On February 17, 1995, Mayfield filed a wrongful discharge suit

in state court, alleging that Lockheed wrongfully terminated his

employment in retaliation for internally inquiring into whether an

act he was required to perform was illegal.

     As alleged in Mayfield’s first amended petition, in December

1994, Mayfield became aware (through his supervisor, Ben Carroll)

that Lockheed was knowingly failing to report excessive costs and

anticipated cost overruns under the ETA Contract as required by the

compliance provisions of the contract. After Carroll told Mayfield

that the budgets being used to complete the NASA Form 533 reports

for NASA understated the future costs of operations, Mayfield began

to inquire into the legality of this conduct.               Mayfield involved

more of his supervisors and management level employees in the

matter, but,    as   alleged,   soon       became   “the   victim   of   blatant

retaliation.”

                                       3
     In August 1996, the state district court granted summary

judgment in favor of Lockheed. Final judgment against Mayfield was

subsequently affirmed by the state court of appeals.   See Mayfield

v. Lockheed Eng’g & Scis. Co., 970 S.W.2d 185, 187-88 (Tex. App. –

Houston [14th Dist.] 1998, pet. denied) (“Mayfield I”).

     B.   The Federal Action

     On April 24, 2000, Mayfield filed a second suit against

Lockheed in federal court pursuant to the qui tam provisions of the

False Claims Act, 31 U.S.C. §§ 3729-33 (“FCA”).1

     Mayfield alleged in his first amended complaint that Lockheed

knowingly failed to report excessive costs and anticipated cost

overruns as required by the compliance provisions of the ETA

Contract and, indeed, knew that it could not perform in accordance

with the costs specified in the initial bid to NASA for the ETA

Contract but knowingly submitted a false bid for the contract

anyway.

     On February 13, 2002, the district court granted Lockheed’s

motion for summary judgment.   United States ex rel. Mayfield v.

Lockheed Martin Eng’g & Scis. Co., 186 F. Supp. 2d 711, 713 (S.D.

Tex. 2002) (“Mayfield II”).    It held that the doctrine of res

     1
          In accordance with 31 U.S.C. § 3730(b)(2), Mayfield
filed his complaint under seal and served a copy on the United
States Department of Justice. On February 22, 2001, the
Department of Justice notified the district court of its decision
to decline to intervene in the case; Mayfield thereafter
proceeded as the qui tam relator.

                                4
judicata precluded litigation of Mayfield’s FCA claims to the

extent they were based on the conduct complained of in his state

court action.       Id. at 715.         It further held that although Mayfield

was not barred by res judicata from relitigating any claims arising

out of conduct not complained of in his prior lawsuit, the court

lacked   subject      matter       jurisdiction           over    these    claims     because

Mayfield      was   not   the      “original        source”       with     respect    to    any

allegedly wrongful conduct occurring after the filing of his prior

lawsuit.

     Mayfield timely filed a notice of appeal, requesting review of

both aspects of this final judgment.

                                           II.

                                   STANDARD OF REVIEW

     By its terms, the “public disclosure” bar is jurisdictional.

Other circuit courts have specifically held that “[i]n a qui tam

suit brought under the FCA, the jurisdictional issue of ‘public

disclosure’ clearly arises out of the same statute that creates the

cause    of    action     .    .    .    Thus,       a    challenge        under     the    FCA

jurisdictional bar is necessarily intertwined with the merits” and

should be      resolved       pursuant     to      either        Federal    Rule    of     Civil

Procedure 12(b)(6) or 56.                 See, e.g., United States ex rel.

Ramseyer v. Century Healthcare Corp., 90 F.3d 1514, 1518 (10th Cir.

1996).        While     our     court     has       not    addressed        this     specific

jurisdictional        point,       we   have       previously       stated    that       “[t]he

                                               5
questions of subject matter jurisdiction and the merits will

normally be considered intertwined where the statute provides both

the basis of federal court subject matter jurisdiction and the

cause of action.” Clark v. Tarrant Cty., 798 F.2d 736, 742 (5th

Cir. 1986); see also Eubanks v. McCotter, 802 F.2d 790, 792-93 (5th

Cir. 1986) (“When the basis of federal jurisdiction is intertwined

with the plaintiff’s federal cause of action, the court should

assume jurisdiction over the case and decide the case on the

merits.”).    We see this case as presenting one such instance where

questions    of    subject      matter    jurisdiction       and   the   merits   are

intertwined because “the defendant’s challenge to the court’s

jurisdiction is also a challenge to the existence of a federal

cause of action.”         Williamson v. Tucker, 645 F.2d 404, 415-16 (5th

Cir. 1981) (citing Bell v. Hood, 327 U.S. 678 (1946)).                   The proper

course of action for the district court was thus “to find that

jurisdiction exist[ed] and deal with the merits of the case.”                     Id.

at 415.

     The district court basically followed this procedure here. It

styled    Lockheed’s        challenge     to    the    court’s     subject   matter

jurisdiction as a summary judgment motion and, presumably, utilized

this standard.          However, instead of first considering the “public

disclosure”       bar    question   (which      goes    to   the   subject   matter

jurisdiction       of     the   court),    it   first    considered      Lockheed’s

affirmative defense of res judicata. We believe the jurisdictional

                                           6
bar should have been considered by the district court before it

moved to the merits of Lockheed’s affirmative defense.               United

States ex rel. Fed. Recovery Servs., Inc. v. Crescent City E.M.S.,

72 F.3d 447, 448 (5th Cir. 1995) (“We are persuaded that . . . the

district court never had jurisdiction over [the action.]”); United

States ex rel. Minn. Ass’n of Nurse Anesthetists v. Allina Health

Sys. Corp., 276 F.3d 1032, 1040 (8th Cir. 2002) (stating, in a qui

tam case where information was allegedly publicly disclosed, that

“[a]t the threshold, we must decide whether we have subject-matter

jurisdiction over this case”).          We therefore begin our review by

addressing the FCA’s “public disclosure” bar, found at 31 U.S.C.

§ 3730(b)(4), and review the district court’s grant of summary

judgment under a de novo standard of review, using the same

standard utilized by the district court.          See Kerr v. Lyford, 17
F.3d 330, 336 (5th Cir. 1999) (holding that, under a Rule 56

standard, the record must be viewed in the light most favorable to

the non-movant).

                                   III.

                ANALYSIS OF THE PUBLIC DISCLOSURE BAR

     A.    Presentation of the Disputed Issue – Whether Mayfield is
           the “Original Source” of Information

     As   we   have   discussed   the    procedure   and   the   historical

underpinnings of the qui tam provisions of the FCA in prior

opinions, we need not repeat them here.         See Riley v. St. Luke’s

Episcopal Hosp., 252 F.3d 749, 752-53 (5th Cir. 2001) (en banc);

                                    7
Searcy v. Philips Elec. N. Am. Corp., 117 F.3d 154, 160 (5th Cir.

1997).    Suffice it to say that in certain circumstances, suits by

private parties on behalf of the United States against anyone

submitting a false claim to the government are permitted.             Hughes

Aircraft Co. v. United States ex rel. Schumer, 520 U.S. 939, 941

(1997).

     The FCA, the 1863 Civil War statute under which these suits

are permitted, has been amended only twice, once in 1943 and, more

recently, in 1986 by the Grassley Amendments.           Id.     In 1943,

interpreting the qui tam provisions as then written, the Supreme

Court stated that a private plaintiff might bring a qui tam action

even though his knowledge of fraud was gained second-hand from a

government criminal indictment.        See United States ex rel. Marcus

v. Hess, 317 U.S. 537 (1943).     In response, Congress amended the

FCA to bar a court’s jurisdiction over qui tam suits that were

“based on evidence or information the Government had when the

action    was   brought.”   31   U.S.C.     §   3730(b)(4)    (1982    ed.)

(superceded). However, this amendment led to unintended results as

it deprived potential relators who had themselves given valuable

information to the government before filing their qui tam action of

an ability to sue under the FCA.       See, e.g., United States ex rel.

Wisconsin v. Dean, 729 F.2d 1100, 1106 (7th Cir. 1984) (holding

that the district court had no jurisdiction over a qui tam action

brought by Wisconsin based on information of Medicaid fraud the

                                   8
state had uncovered because the state had reported the Medicaid

fraud to the federal government before bringing suit).

       In response, in 1986, Congress amended the Act (to its current

form).     Specifically,   it   repealed   the   “government   knowledge”

jurisdictional bar and replaced it with the “public disclosure”

bar.     See United States ex rel. Rabushka v. Crane Co., 40 F.3d
1509, 1511 (8th Cir. 1994) (discussing the purpose behind the

repeal as an accommodation of both of the FCA’s goals of promoting

private    citizen   involvement   in   exposing    fraud   against   the

government and preventing parasitic suits by opportunistic late-

comers who add nothing to the exposure of fraud).

       Under § 3730(e)(4)(A), the jurisdictional provision for qui

tam actions under the FCA now provides that:

       No court shall have jurisdiction over an action under
       this section based upon the public disclosure of
       allegations or transactions in a criminal, civil, or
       administrative     hearing,    in    a     congressional,
       administrative, or Government Accounting Office report,
       hearing, audit, or investigation, or from the news media,
       unless the action is brought by the Attorney General or
       the person bringing the action is an original source of
       the information.

31 U.S.C. § 3730(e)(4)(A) (2000).          In the related subsection

immediately following this bar, the statute further defines an

“original source” as:

       [A]n individual who has direct and independent knowledge
       of the information on which the allegations are based and
       has voluntarily provided the information to the
       Government before filing an action under this section
       which is based on the information.

                                    9
Id. § 3730(e)(4)(B).

       In Federal Recovery Services, Inc., we drew from the plain

language of § 3730(e)(4) to set forth the three questions to be

asked in a § 3730 jurisdictional inquiry as:         (1) whether there has

been       a   “public   disclosure”   of   allegations   or   transactions,

(2) whether the qui tam action is “based upon” such publicly

disclosed allegations, and (3) if so, whether the relator is the

“original source” of the information.          Fed. Recovery Servs., Inc.,
72 F.3d at 451.

       Here, Mayfield does not dispute that Mayfield I served as a

“public disclosure” of the information alleged in Mayfield II, nor

does he challenge the finding that the allegations in this case are

“based upon” the information disclosed in Mayfield I.2             Instead,

       2
          Mayfield does generally argue that the jurisdictional
bar is inapplicable here because he is the one who made the
public disclosure in the first place. However, Federal Recovery
Services discusses the public disclosure bar in the context of a
case where the information was disclosed by individuals who filed
an initial state court action before filing, as relators, their
federal qui tam action in the name of their newly filed
corporation. 72 F.3d at 448. Indeed, United States ex rel.
Jones v. Horizon Healthcare Corp., 160 F.3d 326, 330 (6th Cir.
1998), cites to this Fifth Circuit case in rejecting a similar
argument from a relator: “Because the public disclosure and the
qui tam action in this case both came from Appellant, she argues
that it is improper to consider the qui tam action ‘based upon’
the prior suit. Although Appellant’s argument has some intuitive
appeal, several courts have rejected the contention” because the
public disclosure bar is an express statutory bar to the subject
matter jurisdiction of the courts to review a case based on
information that has been publicly disclosed. Id. at 333 (citing
Federal Recovery Servs., Inc., 72 F.3d at 447). We find this
reasoning persuasive. To the extent Mayfield thus argues that
relators involved in the initial public disclosure of information
are not subject to the “public disclosure” bar, we reject the
argument.

                                       10
Mayfield contends that as the “original source” of the information,

he is saved from the jurisdictional bar.        The question before us on

appeal thus turns on the statutory construction of the “original

source” exception.

     B.    The Parameters of the “Original Source” Exception

     The statutory construction of the “original source” exception

is the subject of much disagreement amongst the courts of appeals

that have addressed it.     The exception explicitly requires the

satisfaction of a two-part test:    (1) the relator must demonstrate

that he or she has “direct and independent knowledge of the

information on which the allegations are based” and (2) the relator

must demonstrate that he or she has “voluntarily provided the

information to the Government before filing” his or her qui tam

action.   31 U.S.C. § 3730(e)(4)(B).

     Here, the district court found that:

     Mayfield clearly does not have direct knowledge of
     conduct occurring at Lockheed after he filed his state
     court action because he was laid off from Lockheed before
     that suit was filed.      As such, Mayfield is not an
     “original source” with respect to any wrongful conduct
     occurring after the filing of his prior lawsuit.

Mayfield II, 186 F. Supp. 2d at 715-16.           As developed more fully

below, we do not read the “original source” exception to the

jurisdictional bar to require that a relator have “direct” and

“independent”   knowledge   of   each   false    claim   alleged   in   his

                                  11
complaint to have been submitted by the defendant.3

      A full understanding of the distinct definitions of “direct”

knowledge and “independent” knowledge in the “original source”

definition requires an analysis of the entire phrase “direct and

independent knowledge of the information on which the allegations

are based.”      The courts of appeals are currently split regarding

whether the phrase “the information on which the allegations are

based” refers to information on which the allegations in the qui

tam relator’s complaint are based or information on which the

allegations in the public disclosure are based. The Fourth, Sixth,

Eighth and D.C. Circuits have read “information” in subsection (B)

of   the    “original   source”     definition   in    tandem    with   the   term

“information” in subsection (A) of the “public disclosure” bar

immediately preceding the “original source” definition.                       This

reading logically leads them to conclude that “information” in

subsection (B) refers to the information on which the publicly

disclosed     allegations     are   based     rather   than     the   information

contained in the relator’s qui tam complaint.                 See Minn. Ass’n of

Nurse      Anesthetists, 276 F.3d   at   1048     (“We    have   interpreted

‘independent knowledge’ to mean knowledge not derived from the

public disclosure.         The independent knowledge requirement clearly

      3
          Our interpretation of the jurisdictional bar does not
release the relator from the requirement that he plead all false
claim allegations in his qui tam complaint with particularity as
interpreted by our case law. See, e.g., United States ex rel.
Russell v. Epic Healthcare Mgmt. Group, 193 F.3d 304, 308 (5th
Cir. 1999) (discussing the particular pleading required under the
FCA). Whether Mayfield has pled his qui tam fraud allegations
with particularity is not the question before us on appeal.
                                12
serves the congressional goal of barring parasitic actions, but it

is worth noting that it does not bar actions based on old news, in

which the relator independently discovers information already known

to the public.”) (internal citations omitted); United States ex

rel. Grayson v. Advanced Mgmt. Tech. Inc., 221 F.3d 580, 583 (4th

Cir. 2000) (stating that the relators were not original sources of

information underlying the publicly disclosed allegations, not the

allegations in the qui tam complaint); United States ex rel.

Findley v. FPC-Boron Employees’ Club, 105 F.3d 675, 690 (D.C. Cir.

1997) (“[T]he allegations referred to in subparagraph (B) can only

mean those allegations publicly disclosed, since those are the only

allegations mentioned at all in section 3730(e)(4).                       Thus, an

‘original    source’    is    a    relator      with    direct   and   independent

knowledge of ‘the information’ [i.e., any essential element of the

fraud transaction] on which the [publicly disclosed] allegations

are based.”) (internal citations omitted); United States ex rel.

McKenzie v. Bellsouth Tele., Inc., 123 F.3d 935, 943 (6th Cir.

1997) (“To qualify as an original source, the relator must have

direct and independent knowledge of the information on which the

publicly disclosed allegations are based.”).

      In    contrast,   the       Third,   Ninth       and   Tenth   Circuits    have

construed “the information” in the phrase “the information on which

the allegations are based” to refer to the information contained in

the   qui   tam   complaint       filed    by   the    relator   rather   than    the

information contained in the public disclosure.                  See United States

ex rel. Hafter v. Spectrum Emergency Care, Inc., 190 F.3d 1156,

                                           13
1162   (10th   Cir.   1999)   (“To   establish    original   source     status

knowledge, a qui tam plaintiff must allege specific facts – as

opposed to mere conclusions – showing exactly how and when he or

she obtained direct and independent knowledge of the fraudulent

acts alleged in the complaint and support those allegations with

competent proof.”) (emphasis added); United States ex rel. Mistick

v. Housing Auth. of the City of Pitts., 186 F.3d 376, 388-89 (3d.

Cir. 1999) (finding that the relator was not the “original source”

because he did not have “direct and independent knowledge” of the

most critical element of his claims in the qui tam complaint);

United States ex rel. Barajas v. Northrop Corp., 5 F.3d 407 (9th

Cir. 1993) (holding that an employee of a government subcontractor

had “direct and independent knowledge” of the allegations contained

in his qui tam complaint).

       Based   on   the   district   court’s     holding   that    it   lacked

jurisdiction because Mayfield did not have “direct and independent

knowledge” of each separate NASA Form 533 submission claimed to

constitute a false claim in the Mayfield II complaint, the district

court apparently assumed the “direct and independent knowledge”

requirement was tied to the “information” contained in the qui tam

complaint rather than the “information” contained in the publicly

disclosed material. In so assuming, it, without citation, followed

the holdings of the Third, Ninth and Tenth Circuits.              We disagree

with this interpretation of § 3730(e)(4)(B).

       Looking at the “public disclosure” bar under (e)(4)(A) and the

“original source” definition under (e)(4)(B) together, it makes

                                     14
sense that the first element of the “original source” exception is

satisfied if an individual has “direct and independent knowledge”

of   the   “information”   on   which   the   allegations   in   the   public

disclosure are based.      We see no logic in interpreting the word

“information” in subparagraph (A) to refer to information publicly

disclosed and then interpreting “information” in subparagraph (B)

– a subparagraph clearly intended to define a term identified in

subparagraph (A) – to refer to each false claim alleged in the

relator’s qui tam complaint.      This construction fails to harmonize

the subparagraphs of § 3730(e)(4). See also Atl. Cleaners & Dyers,

Inc. v. United States, 286 U.S. 427, 433 (1932) (stating that

identical words used in different parts of the same statutory

section are intended to have the same meaning).        As stated by Judge

Luttig in United States ex rel. Siller v. Becton Dickinson & Co.,

21 F.3d 1339, 1352 (4th Cir. 1994):

      [T]he fact that sub-paragraph (B) refers to “the
      information on which the allegations are based” confirms
      that   the  only   possible   reference   of   the   word
      “information” in sub-paragraph (B) is to the information
      publicly disclosed – the exact same reference of the word
      in sub-paragraph (A).

Id. at 1352 (emphasis added).

      As further support that this is the construction intended by

Congress, we recognize that those courts which define “information”

to refer to allegations contained in the qui tam complaint have

difficulty     distinguishing     between     the   terms   “direct”     and

“independent” – two discrete and necessary concepts under the

“original source” definition.       See United States ex rel. Dick v.

                                    15
Long    Island     Lighting    Co.,       912 F.2d 13,    16   (2d   Cir.      1990)

(discussing the significance of the conjunction “and” in “direct

and independent” knowledge); see also McKenzie, 123 F.3d at 941

(“In construing the term ‘original source’ other courts have

‘impose[d] a conjunctive requirement – direct and independent – on

qui tam plaintiffs.’”) (quoting United States ex rel. Springfield

Terminal Ry. v. Quinn, 14 F.3d 645, 656 (D.C. Cir. 1994)).                                For

example, in Hafter, the Tenth Circuit defined “direct” knowledge to

mean “knowledge       gained       by   the     relator’s         own   efforts    and    not

acquired from the labors of others” and “independent” knowledge to

mean “knowledge not derivative of the information of others”.

Hafter, 190 F.3d at 1161.               We fail to see a distinction between

these terms as so defined.

       In contrast, those courts that define “information” to refer

to    information     publicly      disclosed          do   not     encounter      as    much

resistance in formulating distinct definitions for the two separate

terms “direct” and “independent.”                 See, e.g., Findley, 105 F.3d at

690 (“In order to be ‘direct,’ the information must be first-hand

knowledge.       In order to be ‘independent,’ the information known by

the    relator    cannot    depend      or      rely   on     public     disclosures.”);

McKenzie, 123 F.3d     at    941      (“The     word       ‘direct’    is   usually

interpreted as ‘marked by absence of intervening agency,’ while

‘independent knowledge’ is not ‘dependent on public disclosure.’”)

(internal citation omitted); Minn. Ass’n of Nurse Anesthetists, 276
F.3d at 1048-49 (defining “direct” as “unmediated by anything but

the plaintiff’s own labor” and “independent” as “knowledge not

                                             16
derived from the public disclosure”).        The (we think incorrect)

construction of “information” as referring to allegations in the

qui tam complaint renders the term “independent” meaningless, which

we are bound not to do.     See INS v. Phinpathya, 464 U.S. 183, 189

(1984); White v. Black, 190 F.3d 366, 368 (5th Cir. 1999).              For

these reasons, we read the term “information” in subsection (B) of

the “original source” definition to refer to the information on

which the publicly disclosed allegations are based rather than the

information contained in the relator’s qui tam complaint.

     As Mayfield is responsible for filing the publicly disclosed

information in Mayfield I, it is beyond dispute that dismissal on

the basis that his knowledge is not “independent” of the public

disclosure as that term is defined in § 3730(e)(4)(B) would have

been in error.   However, we believe that remand is appropriate to

allow the district court an opportunity to make factual findings

regarding whether Mayfield also satisfies the “direct” knowledge

requirement based on the construction of the statute cited above.

To aid the district court in this endeavor, prudence dictates some

discussion of the “direct” knowledge requirement.

     The courts of appeals have used varying formulations to define

the term “direct.”     See, e.g., Minn. Ass’n of Nurse Anesthetists,
276 F.3d at 1048-49 (defining “direct” as “unmediated by anything

but the plaintiff’s own labor”); Hafter, 190 F.3d at 1161 (defining

“direct” as “knowledge gained by the relator’s own efforts and not

acquired from    the   labors   of   others”);   United   States   ex   rel.

Stinson, Lyons, Gerlin Bustamante, P.A. v. Prudential Ins. Co., 944

                                     17
F.2d 1149, 1160 (3d Cir. 1991) (defining “direct” as “marked by

absence of an intervening agency, instrumentality or influence;

immediate”); Findley, 105 F.3d at 690 (defining “direct” as “first-

hand knowledge” of the information).

       We   interpret    the    term    “direct”     by     its   plain    meaning    as

knowledge derived from the source without interruption or gained by

the relator’s own efforts rather than learned second-hand through

the efforts of others. WEBSTER’S NEW INTERNATIONAL DICTIONARY 640 (3d ed.

1961).       In   so   defining,   we     note      that    Congress      plainly    and

intentionally used the phrase “an original source” rather than “the

original     source”     to    craft    the    savings       clause.       31     U.S.C.

§ 3730(e)(4)(B).         Thus, for a court in this circuit to have

jurisdiction pursuant to this exception, it is not charged with the

duty of finding “the” single one true whistleblower.                   See Stinson,
944 F.2d at 1154, 1161 (discussing the legislative history to the

1986    amendments      as    demonstrating      a    congressional        intent     to

encourage qui tam suits brought “by insiders, such as employees who

come     across   information      of    fraud       in    the    course    of    their

employment”) (citing S. Rep. No. 345 at 4, 6, reprinted in 1986

U.S.S.C.A.N. 5269, 5271). Rather, it must look to the factual

subtleties of the case before it and attempt to strike a balance

between those individuals who, with no details regarding its

whereabouts, simply stumble upon a seemingly lucrative nugget and

those actually involved in the process of unearthing important

information about a false or fraudulent claim. Compare Minn. Ass’n

of   Nurse   Anesthetists, 276 F.3d   at    1050    (finding      that    nurse

                                         18
association had “direct” knowledge that anesthesiologists routinely

submitted fraudulent bills to Medicare for anesthesia procedures

because the nurses had personal knowledge of the defendants’

alleged   false     claims       by   virtue     of   communications      with   the

defendants themselves and had seen the hospital records containing

false claims), and United States ex rel. Stone v. Rockwell Int’l

Corp., 282 F.3d 787, 802 (10th Cir. 2002) (holding that the relator

satisfied the “direct” knowledge requirement even though he no

longer worked with the defendant when the faulty pondcrete blocks

were manufactured because he learned the facts underlying his claim

while looking at the plans for production), and United States ex

rel. Cooper v. Blue Cross & Blue Shield of Fla., Inc., 19 F.3d 562,

568 (11th Cir. 1994) (holding that a relator’s knowledge of an

alleged fraud by a Medicare secondary payor was “direct” because it

was acquired through “three years of [the relator’s] own claims

processing, research, and correspondence with members of Congress

and [the Health Care Financing Admin.]”), and Wang v. FMC Corp.,

975 F.2d 1412, 1417 (9th Cir. 1992) (holding that an engineer-

relator who had been called in to study a problem with a product

had “direct” knowledge because “he saw [the problem] with                   his own

eyes” and his knowledge was “unmediated by anything but [his] own

labor”), with Grayson, 221 F.3d at 583 (finding no jurisdiction to

entertain a qui tam action brought by relator attorneys who had

represented two unsuccessful bidders in protesting the award of an

FAA   contract    because    they       “at    best   verified”   their   clients’

information      alleged    in    the    publicly     disclosed   administrative

                                          19
protest), and United States v. Alcan Elec. & Eng’g, Inc., 197 F.3d
1014, 1021 (9th Cir. 1999) (holding that a member of an electrical

workers’ union did not meet the “direct” knowledge element since

“he   never    participated     in   the    negotiating,    drafting,    or

implementation” of relevant agreements, “does not allege that he

played any role in submitting false claims to the government,” and

simply heard second-hand (as a member of the union) that the

electrical     contractors    were   submitting   false    claims   to   the

government).

      We thus remand for the district court to make factual findings

regarding the “direct” knowledge requirement of the first element.

                                     IV.

      ANALYSIS OF THE CLAIM PRECLUSIVE EFFECT OF MAYFIELD I ON
                             MAYFIELD II

      In addition to finding that Mayfield did not qualify as an

“original source” of information regarding claims submitted by

Lockheed after he was terminated, the district court held that the

doctrine of res judicata (claim preclusion) barred Mayfield from

relitigating any claims arising out of conduct complained of in his

prior state court action.        As stated, we see it beneficial to

remand this case for factual findings regarding the “direct”

knowledge requirement.        However, in the interest of judicial

efficiency,     we   now   address   the   district   court’s   conclusion

regarding Lockheed’s affirmative defense.

      Assuming without deciding that the district court would find

subject matter jurisdiction present on remand, we disagree with the

                                     20
district court’s determination that Mayfield I precludes Mayfield

from raising his qui tam claims in Mayfield II.

     When a federal court is asked to give claim preclusive effect

to a state court judgment, the federal court must determine the

preclusiveness of that state court judgment according to the

principles of claim preclusion of the state from which the judgment

was rendered.    See Semtek Int’l Inc. v. Lockheed Martin Corp., 531
U.S. 497, 508-09 (2001); Jones v. Sheehan, Young & Culp, P.C., 82
F.3d 1334, 1338 (5th Cir. 1996).        Here, because a Texas state court

rendered the judgment in Mayfield I, we must defer to Texas’s law

on claim preclusion.

            A.     The Doctrine of Claim Preclusion under Texas Law

     In Texas, “[r]es judicata or claim preclusion prevents the

relitigation of a claim or cause of action that has been finally

adjudicated, as well as related matters that, with the use of

diligence, should have been litigated in the prior suit.”           Barr v.

Resolution Trust Corp., 837 S.W.2d 627, 628 (Tex. 1992).             For a

judgment to have claim preclusive effect in a later action, the

proponent   must    demonstrate   the    existence   of   three   elements:

(1) there was a prior final judgment on the merits by a court of

competent jurisdiction, (2) identity of the parties or those in

privity with them exists between the two actions, and (3) the

second action is based on the same claims as were raised or could

have been raised in the first action.          Amstadt v. United States

Brass Corp., 919 S.W.2d 644, 652 (Tex. 1996).

            B.     Application of the Factors

                                    21
     Here, Mayfield does not contest the satisfaction of the first

element – that a prior final judgment on the merits by a court of

competent jurisdiction was rendered.       However, he maintains that

the district court erred in holding, in a footnote, that “Mayfield

and Lockheed are the only two parties before the Court” and that

because the government elected not to intervene, “the United States

is not a party to this action.”        Mayfield II, 186 F. Supp. 2d at

714 n.1 (emphasis in original).         He further contends that the

district court erred in holding that Mayfield I and Mayfield II are

based on the same claims as defined by Texas law.

          (1)   Identity of Parties

     In Texas, the “‘identity of parties’ [element] requires that

both parties to the current litigation be parties to the prior

litigation or in privity with parties to the prior litigation.”

Jones, 82 F.3d at 1341.   If a party’s interests are represented in

a prior action, the identity of parties element is satisfied.

Getty Oil Co. v. Ins. Co. of N. Am., 845 S.W.2d 794, 800 (Tex.

1992).   This satisfaction is not defeated by a change in the

capacity in which an individual sues, Freeman v. Lester Coggins

Trucking, Inc., 771 F.2d 860, 863 (5th Cir. 1985), nor is it

defeated by the inclusion of additional parties to the second suit.

Jones, 82 F.3d at 1342-43.

     The district court’s statement that the United States is not

a party in interest before the court is simply incorrect.       As we

stated in Searcy, “the United States is a real party in interest

even if it does not control the False Claims Act suit.”        Searcy,

                                  22
117 F.3d at 156.    Further, in Searcy, as well as in numerous other

cases, we detailed the mechanisms present in the qui tam framework

that enable the government to retain a tremendous amount of control

over a qui tam suit even when it chooses not to intervene.                Id.;

see also Riley, 252 F.3d at 756 & n.10; Russell, 193 F.3d at 307.

To the extent the district court held that “the United States is

not a party to this action” such that the “identity of parties”

element is even at issue, it thus erred.            As recognized by our case

law and the clear language of the statute, the suit is brought for

the   government   and    on   behalf    of   the   government,   which   will

ultimately retain the lion’s share of the proceeds and retains the

unilateral power to dismiss the case at any time notwithstanding

the objections of Mayfield and regardless of its decision not to

intervene.

      However, it would also be incorrect for us to state that

Mayfield is not a party in interest in both actions (Mayfield I

and Mayfield II).        Where an FCA suit is initiated by a private

person, as here, the text of the statute explicitly states that

although the suit is “brought in the name of the Government,” the

action is brought “for the person and for the Government.”                  31

U.S.C. § 3730(b)(1) (emphasis added); see also Russell, 193 F.3d at

306; United States ex rel. Foulds v. Tex. Tech Univ., 171 F.3d 279,

289 n.16 (5th Cir. 1999) (“Our own circuit precedent describes the

United States as ‘a’ real party in interest rather than ‘the’ real

party in interest.”); see also Vt. Agency of Natural Res. v. United

States ex rel. Stevens, 529 U.S. 765, 772-73 (2000) (stating that

                                        23
“[t]he FCA can reasonably be regarded as effecting a partial

assignment of the Government’s damages claim” and that “the statute

gives the relator himself an interest in the lawsuit, and not

merely the right to retain a fee out of the recovery”) (emphasis in

original); cf. United States ex rel. Gebert v. Transport Admin.

Serv., 260 F.3d 909, 918 (8th Cir. 2001) (holding that a bankruptcy

settlement agreement and release between putative relators, co-

shareholders and a corporation precluded subsequent qui tam claims

by the putative relators against the co-shareholder and corporation

because the FCA effectuates a partial assignment of an interest

that should have been listed as a potential claim in Schedule B).

     Mayfield brings this action on behalf of the government at his

own expense, 31 U.S.C. § 3730(f), by way of partial assignment that

enables him to recover up to 30 percent of the proceeds recovered

for the government.     Stevens, 529 U.S. at 773.           If the FCA claims

here are such that Mayfield should have (and ultimately could have)

exercised this assigned interest in Mayfield I – the inquiry

relevant   to   the   third   element    of   the   claim    preclusion   test

discussed below – we find Mayfield’s interests were sufficiently

represented in Mayfield I to satisfy the “identity of parties”

element.     This is not to say that another relator would be

precluded from bringing this suit on behalf of the United States.

It is to say that the identity of parties element as to Mayfield is

satisfied.

           (2) The Same Cause of Action

     For Mayfield I to preclude Mayfield from raising claims

                                    24
against Lockheed in Mayfield II under Texas’s doctrine of claim

preclusion, Lockheed must additionally prove an identity of claims

between the two suits.          To determine whether the same “claim” is

involved    in   two     actions,    Texas       courts    employ   the     modern

transactional test of the Restatement (Second) of Judgments, under

which a judgment in an earlier suit precludes a second action by

the   parties    and    their   privies    not    only    on   matters    actually

litigated, but also on causes of action or defenses which arise out

of the same “subject matter” and which might have been litigated in

the first suit.        Getty Oil, 845 S.W.2d at 798.

      The critical issue in determining whether the two actions

arise out of the same “subject matter” is whether they are based on

the “same nucleus of operative fact.”               Jones, 82 F.3d at 1342;

Getty Oil, 845 S.W.2d at 798.        As stated by the Texas Supreme Court

in Barr, a transaction or claim is not equivalent to a sequence of

events. 837 S.W.2d at 631.       Rather, the determination of whether

later causes of action are extinguished by an earlier action is to

be made pragmatically, giving weight to whether the facts alleged

are related in time, space, origin, or motivation, whether the

causes of action form a convenient trial unit, and whether their

treatment as a trial unit conforms to the parties’ expectations or

business understanding or usage.          Id.; see also Flores v. Edinburg

Consol. Indep. Sch. Dist., 741 F.2d 773, 779 (5th Cir. 1984) (“A

different cause of action is not merely a different theory of

recovery; it should differ in ‘the theories of recovery, the

operative facts, and the measure of recovery.’”) (citing Dobbs v.

                                      25
Navarro, 506 S.W.2d 671, 673 (Tex. Civ. App. – Houston [1st Dist.]

1974, no writ)).

      While there is factual overlap between those facts alleged in

Mayfield I and those facts alleged in Mayfield II, we do not think

the   wrongful    termination    claim       brought   by    Mayfield    in    his

individual capacity in Mayfield I, and the FCA claims brought by

Mayfield in his capacity as a relator on behalf of the United

States here would form a convenient trial unit for purposes of

claim preclusion under Texas law.            As demonstrated from the Texas

court of appeals’ opinion in Mayfield I, the subject matter of the

state court suit revolved around the central question whether a

certain exception to Texas’s doctrine of at-will employment should

be extended to situations where an employee is allegedly terminated

for inquiring into whether an act he is required to perform is

illegal    and,   if   so,   whether    Mayfield     was    terminated   for   so

inquiring.    Mayfield I, 970 S.W.2d at 187.           The terms of the ETA

Contract between Lockheed and NASA and the facts related to the

origin and formation of this contract would have been of little

value to this inquiry; indeed, the contract itself is not even

mentioned in the Mayfield I opinion.           Nor would evidence regarding

the intent of Mayfield to defraud the government have been helpful

to Mayfield’s state tort claims.              In contrast, the centerpiece

evidence in Mayfield II involves the terms of the ETA Contract and

evidence     enlightening     whether     Lockheed     intended    falsely      or

fraudulently to submit the initial bid for the ETA contract and

later falsely or fraudulently to submit NASA Form 533 reports in

                                        26
violation of the terms of this contract.

     Further, as between Mayfield I and Mayfield II, the remedies

sought and the measure of recovery for Mayfield are completely

different. In Mayfield I, Mayfield sought general damages and lost

wages, as well as mental anguish and exemplary damages, all in his

personal capacity.          In Mayfield II, Mayfield, as relator, sought

set statutory penalties under the FCA and pre- and post-judgment

interest.      Evidence related to Mayfield’s job performance record,

qualifications, future earning capacity and personal damages have

absolutely nothing to do with proof necessary for the FCA claims

alleged in Mayfield II or for the damages sought.                Moreover, as

stated, in qui tam actions, the largest portion of any recovery (at

least   70%)    goes   to    the   government,     not   Mayfield.   Finally,

Mayfield’s motivation in bringing his wrongful discharge suit in

Mayfield I is different from his motivation for bringing a qui tam

suit in Mayfield II.        In Mayfield I, he wished to be compensated or

made whole following what he saw as a wrongful discharge that was

personal. In contrast, in this case, Mayfield sues to recover from

Lockheed on behalf of the government and in the name of the

government for alleged fraud on the government through Lockheed’s

false submissions to NASA.

     In sum, while the factual underpinnings of each suit are

certainly related, we do not see convenience in trying the two

cases   together,      especially    given   the    procedural   requirements

related to filing a qui tam case under seal in order to give the

government an opportunity to intervene, 31 U.S.C. § 3730(b)(1), and

                                       27
the likely continued involvement of the government in the qui tam

suit.    See id. § 3730(b)(4)(B).   This case and the relation it has

to Mayfield’s state law claim for wrongful discharge in an at-will

employment state cannot easily be compared to those cases (cited by

Lockheed in support of its assertion that Mayfield I and Mayfield

II arise from the same subject matter) that involve relators

asserting both qui tam and retaliation claims under the retaliation

provisions of the FCA.    See, e.g., Ragsdale v. Rubbermaid, Inc.,

193 F.3d 1235, 1240-41 (11th Cir. 1999); Hindo v. Univ. of Health

Scis., 65 F.3d 608, 614-15 (7th Cir. 1995).4    In contrast to these

cases, the FCA claims and the state tort claim cannot be naturally

grouped.    Therefore, on remand, assuming the district court finds

that Mayfield satisfies the “direct” knowledge requirement, we

further hold that Mayfield’s qui tam claims are not extinguished by

the doctrine of claim preclusion.

                             CONCLUSION

     We VACATE the judgment of the district court and REMAND for

further proceedings consistent with this opinion.

     4
          A close read of the Hindo opinion reveals support for
Mayfield rather than Lockheed. There, the plaintiff medical
professor first brought an unsuccessful state court suit for
state retaliatory discharge against the defendant university.
Hindo, 65 F.3d at 610. Later, he brought qui tam claims pursuant
to the FCA (31 U.S.C. § 3729(a)) against the defendant university
for fraudulently seeking reimbursement for salaries of radiology
residents and, simultaneously, brought a retaliation claim also
pursuant to the FCA (31 U.S.C. § 3730(h)) for threatening to
terminate his tenure in retaliation for reporting the alleged
fraud. Id. The Seventh Circuit dismissed only the retaliation
claim as barred by the earlier state court suit. Id. at 614.

                                    28