United States Ex Rel. Grynberg v. Praxair, Inc.

FILED
United States Court of Appeals
Tenth Circuit

NOV 15 2004
PUBLISH

UNITED STATES COURT OF APPEALS PATRICK FISHER
Clerk
TENTH CIRCUIT

UNITED STATES OF AMERICA
ex rel. JACK J. GRYNBERG,

Plaintiff - Appellant and
Cross-Appellee,

v. No. 01-1214 & 01-1242

PRAXAIR, INC.,

Defendant - Appellee and
Cross-Appellant,

and

NIELSON & ASSOCIATES, INC.,

Defendant - Appellee.

UNITED STATES OF AMERICA,

Intervenor.

Appeal from the United States District Court
for the District of Colorado
(D.C. No. 98-D-16)

Edward A. Dauer (Michael S. Porter with him on the briefs), Denver, Colorado,
for Plaintiff - Appellant and Cross-Appellee Jack J. Grynberg.
Mark D. Colley (Craig A. Holman with him on the briefs), of Holland & Knight
LLP, Washington, D.C., for Defendant - Appellee and Cross-Appellant Praxair,
Inc.

Chris Edwards of Simpson, Keeler & Edwards, LLC, Cody, Wyoming, for
Defendant - Appellee Nielson & Associates, Inc.

Robert D. McCallum, Jr., Assistant Attorney General, John W. Suthers, United
States Attorney, Douglas Letter, Appellate Litigation Counsel, and Peter R. Maier,
Attorney, United States Department of Justice, Washington, D.C., filed a brief on
behalf of Intervenor United States.

Before BRISCOE, ANDERSON and O’BRIEN, Circuit Judges.

O’BRIEN, Circuit Judge.

Relator Jack J. Grynberg filed a qui tam action 1 under the False Claims Act

(FCA), 31 U.S.C. § 3729 et seq., against Defendants Nielson & Associates, Inc.

(Nielson) and Praxair, Inc. (Praxair). See United States ex rel. Grynberg v.

Praxair, Inc., 207 F.Supp.2d 1163 (D.Colo. 2001). He claimed Defendants

knowingly presented or caused to be presented false valuations of royalties owed

to the Government for carbon dioxide (CO 2) production in violation of 31 U.S.C. §

1
The Latin phrase “qui tam” is an abbreviation for “qui tam pro domino rege
quam pro se ipso in hac parte sequitur,” meaning, “who as well for the king as for
himself sues in this matter.” B LACK ’ S L AW D ICTIONARY 1262 (7th ed. 1999). An
individual bringing a qui tam action on behalf of the Government is known as a
“Relator.” Kennard v. Comstock Res., Inc., 363 F.3d 1039, 1041 (10th Cir. 2004).

2
 3729(a)(7). 2 He now appeals the district court’s grant of summary judgment in

favor of Defendants.

I. PROCEDURAL BACKGROUND

The purpose of the FCA “is to enhance the Government’s ability to recover

losses sustained as a result of fraud against the Government.” S. R EP . N O . 99-345, at

1 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5266. A private individual, the

Relator, “may bring a civil action for a violation of [31 U.S.C. § 3729] for the person

and for the United States Government . . . in the name of the Government.” 31

U.S.C. § 3730(b)(1). The Government may elect to intervene and proceed with the

action. 31 U.S.C. § 3730(b)(2). If the Government declines to intervene, the

Relator may continue the action. 31 U.S.C. § 3730(c)(3). Either way, the Relator

receives a share of any Government recovery. 31 U.S.C. § 3730(d). Pursuant to the

FCA, Grynberg’s Complaint was filed under seal and remained sealed until the

United States Department of Justice advised the district court the Government would

not intervene. See 31 U.S.C. § 3730(b)(2). At that time, the seal was lifted and an
2
Section 3729(a)(7) extends liability to any person who “knowingly makes,
uses, or causes to be made or used, a false record or statement to conceal, avoid, or
decrease an obligation to pay or transmit money or property to the Government . . .
.” 31 U.S.C. § 3729 (a)(7). “This subsection has been referred to as the ‘reverse
false claims provision’ of the FCA.” United States ex rel. Aakhus v. Dyncorp,
Inc., 136 F.3d 676, 681-82 (10th Cir. 1998) (quoting Rabushka ex rel. United
States v. Crane Co., 122 F.3d 559, 565 (8th Cir. 1997)). A reverse false claim is
documentation resulting in an underpayment to the Government, as opposed to a
false claim, generally referring to an inflated or false bill for payment from the
Government.

3
Amended Complaint was served on Nielson and Praxair.

Following discovery, Nielson and Praxair filed separate motions for summary

judgment. 3 The district court granted summary judgment on three different bases,

holding: 1) there was no evidence to suggest either Defendant made “knowingly

false” statements to the Government; 2) the court lacked subject matter jurisdiction

because the qui tam action was based on publicly disclosed allegations or

transactions; and 3) the claim was barred because it was premised on information

known to the Government prior to 1986. The district court ordered Grynberg to pay

Defendants’ costs, but left each party to bear its own attorney fees. Praxair and

Nielson sought reconsideration of the district court’s apportionment of attorney fees,

maintaining that Grynberg’s lawsuit was “clearly frivolous, clearly vexatious, or

brought primarily for purposes of harassment” under 31 U.S.C. § 3730(d)(4). The

district court denied reconsideration. Grynberg appeals the dismissal of his claim

(No. 01-1214) and Praxair cross-appeals the denial of its request for attorney fees

and expenses (No. 01-1242). 4

Grynberg claims the district court erred: (1) by applying an incorrect legal

standard in granting the motions for summary judgment; (2) in holding that Praxair

and Nielson’s candor in their communications with the Government precluded, as a

3
The district court had previously denied Defendants’ separate motions to
dismiss the Amended Complaint with prejudice.
4
Grynberg’s Notice of Appeal included several challenges to the district court’s
rulings on a protective order but he does not argue these issues on appeal.
4
matter of law, a finding that their statements were knowingly false; (3) in holding

Grynberg’s claim was jurisdictionally barred under the “public disclosure bar”; (4)

in applying the pre-1986 law precluding claims based on allegations and transactions

within the Government’s knowledge; and (5) in concluding Praxair could not be

liable because it did not submit royalty statements to the Government. 5 Exercising

jurisdiction pursuant to 28 U.S.C. § 1291, we affirm the district court’s conclusion

that Grynberg failed to establish subject matter jurisdiction. We therefore do not

reach the remainder of the issues presented in Grynberg’s appeal, No. 01-1214.

However, as to Praxair’s cross-appeal, No. 01-1242, we reverse the denial of

attorney fees and remand for proceedings consistent with this opinion.

II. FACTUAL BACKGROUND

Defendant Nielson, a small, privately held Wyoming corporation, produces

and sells oil, hydrocarbon liquids and CO 2 from the “McCallum” fields in northern

Colorado under leases with the United States Government. Defendant Praxair owns

and operates an industrial plant designed to purify and convert Nielson’s raw CO 2

into liquid suitable for beverages, food processing and other uses. The valuation

method for CO 2 royalties owed to the Government is based on an “Agreement for the

Nielson and Praxair respond to each of these arguments and further propose
5

additional reasons to affirm the district court’s judgment, including a challenge to
the constitutionality of the FCA if Grynberg’s claims are allowed to proceed. The
United States intervened solely to defend the statute’s constitutionality. Because
we affirm the district court’s decision on jurisdictional grounds, we need not reach
the constitutional issues.
5
Sale of Carbon Dioxide” (Agreement) executed in June, 1983 between Conoco, Inc.

(Conoco) (who later sold to Nielson) and Praxair’s predecessor, Liquid Carbonic

Corporation (Liquid Carbonic). The current Agreement between Nielson and Praxair

remains unchanged from the 1983 version in all relevant aspects. Grynberg alleges

Nielson and Praxair perpetuated Conoco and Liquid Carbonic’s practice of

submitting reports misstating the valuation of CO 2 production, resulting in an

underpayment of royalties owed to the Government.

A. The 1983 Agreement

The McCallum leases were originally executed between Conoco and the

federal Government for oil production. For many years, Conoco extracted and sold

oil from the McCallum production. In 1926, CO 2 was discovered during drilling.

The raw CO 2 gas, produced in conjunction with the oil, was vented to the

atmosphere. This practice was known to and approved by the federal regulatory

authorities. 6 It changed with the Agreement.

Under the Agreement, Liquid Carbonic would construct a plant to purify the

raw CO 2 gas produced and delivered by Conoco and convert it into liquid CO 2 for

food processing, beverages and other uses. Liquid Carbonic would then purchase the

finished product based on a price per ton shipped from the plant, a quantity reported

by Liquid Carbonic to Conoco each month. The base price per ton under the

The venting of CO 2 during this period is not challenged in this action.
6

6
Agreement was subject to several adjustments, including annual market price

fluctuations and monthly adjustments based on the quality of the raw CO 2 gas

delivered to the plant by Conoco. The Agreement also provided that Liquid

Carbonic would return 80% of all vent gases produced from the processing plant so

Conoco could reinject the gas. This practice was dependent on Conoco providing the

pipeline to permit the return of those gases. Conoco was to pay all royalties on the

CO 2 delivered to Liquid Carbonic.

In 1994, Nielson purchased the McCallum leases from Conoco and succeeded

Conoco as “Seller” under the Agreement. In 1996, Liquid Carbonic merged into

Praxair, making Praxair the Agreement’s “Buyer.” Neither Praxair nor Liquid

Carbonic have ever been affiliated with Nielson or Conoco, nor have they been a

party to the McCallum leases. There is no allegation or evidence of any conspiracy,

side-deal or other arrangement between the defendants. 7

B. Government Involvement

On October 22, 1984, Conoco sent a copy of the Agreement to the Department

of the Interior’s Minerals Management Service (MMS) and asked for approval of its

terms. Conoco explained it would supply the raw CO 2 for processing (from the

wellhead) and receive payment based on the price of the finished product shipped

7
Although Grynberg unsuccessfully argued to the district court the
Agreement was not an arm’s-length transaction, he has not raised this argument on
appeal.
7
from Liquid Carbonic’s plant (the plant “tailgate.”) Conoco also described its plan

to return and reinject vent gases into one of its wells but included a schematic

showing some gas would be flared.

Forewarned that Conoco was requesting a royalty valuation at Liquid

Carbonic’s plant tailgate, the MMS wrote to express its concern about the impact on

the measurement at the tailgate, as opposed to a larger volume measurement if it

were taken at the wellhead. In a letter dated March 14, 1985, the MMS wrote, “if

royalty is to be paid on the volume of gas leaving the plant, there could be

significant differences, due to plant losses, from the volumes the [wellhead]

allocation meters indicate.” (R. Vol. II, Tab 19 at 220.) Conoco responded that the

plant’s vent gas losses would diminish once operations stabilized, but tempered this

statement by advising the MMS there would continue to be unavoidable CO 2 gas loss

due to the quality of the raw CO 2 gas and the anticipated plant efficiency. Conoco

reiterated its plan to reinject some of the gas and pointed out the Agreement

provided a means to sell CO 2 reserves, where previously the gas was shut-in or

flared.

On April 4, 1985, the MMS informed Conoco “[t]he price reduction provisions

are accepted as part of the arm’s length contract” and acknowledged the arrangement

with Liquid Carbonic “created the only market for CO 2 in the area.” (R. Vol. II, Tab

21 at 22-27.) Specifically, the MMS noted that the annual variations in price

8
depended on market prices and recognized the contract provisions allowed “for

decreased prices in the event(s) any hydrocarbons . . . exceed[ed] specified levels or

if the carbon dioxide content f[e]ll below [a certain percent] of the volume of the gas

stream.” (Id. at 225-226.) However, the MMS directed that royalties must never be

based “upon less than the gross proceeds accruing to Conoco from the sale of the

CO 2.” (Id. at 224.) It precluded the deduction of processing allowances from the

gross proceeds and required royalties be paid on any additional “up-front” payments

or tax and/or royalty reimbursements. (Id. at 227.) Additionally, the MMS advised

Conoco to secure approval of its “production reporting sequence” from the Bureau of

Land Management (BLM). 8 (Id. at 223.) Despite its plans at the time of the

Agreement, Conoco never installed the piping necessary for the return and

reinjection of the gas into its well; it was vented.

The venting of the CO 2 triggered further scrutiny in November 1985. At that

time, the MMS wrote to the BLM to express its concerns regarding the results of an

audit of Conoco’s CO 2 production from the McCallum leases. The MMS informed

the BLM that the reporting forms for “the production months October 1984 through

August 1985" indicated “the majority of CO 2 production [was] being vented.” (Id.,

8
As the district court noted, “[g]enerally, the MMS is responsible for addressing
royalty calculations and payments, while the BLM addresses gas production issues,
including the location where the volume is measured for royalty purposes.” See, e.g., 30
C.F.R. §§ 206.152; 206.154(a)(1). (R. Vol. V, Tab 118 at 999.)

9
Tab 22 at 230.) It requested the BLM provide information addressing Conoco’s

authority to vent this CO 2. The BLM responded that Conoco’s gas venting was

approved in April 1980. Again recognizing that “[u]ntil recently, there ha[d] been

no market for CO 2 in the McCallum Field area,” the BLM stated it did not wish to

“refute” the 1980 approval on the basis of the current venting. (Id., Tab 23 at 243.)

In June 1987, the BLM conducted a “Production Accountability Inspection” of

Conoco’s McCallum CO 2 production. 9 The inspection included BLM review of the

Agreement and its 1985 approval, interviews of several employees to clarify

Conoco’s procedures and a review of production documentation. During three

separate visits between June and July 1987, BLM representatives inspected Conoco’s

facilities and were made aware CO 2 was either flared during natural gas production

or delivered to Liquid Carbonic’s plant, while other CO 2 was delivered to the plant

from CO 2 wells. The BLM also noted Liquid Carbonic vented gas without metering

the amount at the vent and there was “shrinkage” (i.e., other gas loss) from Conoco’s

9
The BLM annually conducts a Production Accountability Inspection of the
production activity for a given month in the McCallum fields. During these
inspections, the BLM requests and receives from Nielson (and previously Conoco)
documents reporting the actual wellhead production volumes as distinguished
from the plant “tailgate” volumes reported for royalty purposes. As described by
one BLM official, the Production Accountability Inspection is a detailed
investigation “to determine whether royalty [is] being reported accurately.” (R.
Vol. V, Tab 118 at 1001.)

10
operations. 10

In 1988, Conoco requested the BLM approve an additional supply of CO 2 to

Liquid Carbonic from a South McCallum unit well (the previous activity and

approvals all related to wells in the McCallum unit). In response to the BLM’s

follow-up to the request, Conoco again explained its production procedures,

including its practice of venting excess gas. Conoco also reiterated its measurement

practices, the volume of vented gas being the difference between volumes produced

at the wellhead and volumes measured at the Liquid Carbonic plant tailgate (i.e.,

volumes sold to Liquid Carbonic). These volumes were reported on a monthly basis

to the Colorado Oil & Gas Conservation Commission (COGC). 11 On May 18, 1989,

Conoco received BLM’s approval. Specifically, the BLM stated the “explanation of

measurement and allocation procedures for the production facilities associated with

the production of CO 2 gas from South McCallum Unit appears appropriate.” (Id.,

Tab 39 at 297.)

In 1992, Liquid Carbonic sought the BLM’s permission to construct a dry ice

10
The estimated shrinkage was questioned during the inspection and the
BLM’s concern was transmitted to Conoco by letter dated July 27, 1987. The
BLM notice stated, “[w]e will keep you informed as our consideration continues.”
(R. Vol. II, Tab 28 at 265.) There are no further documents referencing this
notation and no indication the BLM required Conoco to take any corrective action.
11
States may contract to audit royalty payments from federal leases within
the states pursuant to Section 205 of the Federal Oil and Gas Royalty Management
Act of 1982.

11
manufacturing facility at its plant. 12 Liquid Carbonic informed the BLM that its

plans included a means whereby the CO 2 vapor released from the dry ice machinery

would be piped back into the main CO 2 plant. The plan to recycle the CO 2 vapor,

however, was later abandoned as uneconomical. As was the case with the

unconstructed pipe for the return of CO 2 to Conoco’s wells, the Government became

aware the vapor from Liquid Carbonic’s dry ice plant was vented and not recycled.

Nielson purchased the McCallum and South McCallum leases from Conoco in

1994. In 1996, the MMS and BLM again inquired about Nielson’s royalty

calculation and reporting practices. In response, Nielson candidly supplied BLM

with all information requested, including a sample of the worksheet used to calculate

the gas value and volume for royalty purposes. The worksheet identified the

differences between the total wellhead production volumes and the plant tailgate

“sold” volumes reported for royalty purposes (i.e., excluding vented gas volumes)

and the calculation of price. Nielson also provided two updated schematics,

including a schematic showing the originally anticipated gas reinjection line with the

notation: “reinjection line by design currently being flared.” (Id., Tab 51 at 366.)

The other schematic, an illustration of Praxair’s plant, showed the gas vents

throughout the liquid CO 2 production and the dry ice manufacturing facility.

On August 22, 1996, the MMS issued to Conoco and Nielson an “Order to

Permission was required because the plant is on land leased from the
12

federal Government.
12
Comply” pursuant to 30 C.F.R. § 206.154, charging them with having incorrectly

reported production and royalties from the South McCallum wells. The order issued

“[b]ecause of [the] unauthorized measurement point being at the tailgate of the CO 2

plant. . . .” (Id., Tab 57 at 3910.) Nielson appealed the Order to Comply, noting its

understanding that CO 2 volume measurement at the plant tailgate had been

previously approved for the McCallum production in 1985 and the South McCallum

production in 1988. A meeting followed between representatives of BLM, Praxair,

Nielson, and Conoco. Ed Calvert, representing related companies that were

Nielson’s partners in the purchase of Conoco’s leases, was also present. At the

meeting, the BLM confirmed its prior approval of plant tailgate volume measurement

with regard to the McCallum unit, but noted approval for the South McCallum unit

was not as certain. The Government representatives suggested Nielson seek formal

BLM approval for plant tailgate measurement for both McCallum and South

McCallum CO 2 production, retroactive to November 28, 1988. Nielson complied

with the suggestion and the BLM issued its retroactive approval of the off-lease plant

tailgate measurement for CO 2 production at both units. On November 27, 1996,

MMS withdrew its Order to Comply, closed Nielson’s appeal and “determined that

Nielson & Associates, Inc., are now in regulatory compliance.” (R. Vol. III, Tab 61

at 413.)

C. Grynberg’s Investigation

13
 Jack Grynberg is a petroleum engineer who is the president and co-owner of

Grynberg Petroleum Company in Denver, Colorado. In late summer or fall of 1997,

Grynberg was researching the acquisition of a liquid CO 2 supply for use in the

recovery of an oil field. [Vol. IV, Tab 104 at 722; Vol. III, Tab 66 at 439]. Because

he thought Praxair’s prices were high, he telephoned Jim Nielson, Nielson’s

president. Although the precise conversation is disputed, Grynberg alleges Jim

Nielson complained Praxair was taking 30% of the natural CO 2 produced and using it

as part of its processing operation without payment. This statement motivated

Grynberg to conduct an investigation into the situation. As described by Grynberg,

the investigation included a subsequent conversation with Jim Williams, Nielson’s

chief operations officer, regarding the pricing arrangements between Nielson and

Praxair. Grynberg also filed a request under the Freedom of Information Act (FOIA)

to acquire a copy of the Agreement and other related documents, but his request was

denied. Unable to get direct information regarding the Agreement, Grynberg sent an

associate to research the records at the COCG office to learn the amount of Neilson’s

payments for conservation taxes on its CO 2 production. In addition, he referred to an

industry publication of gas and oil production records. Armed with this information,

he calculated Nielson’s reported payments received for CO 2 and the royalties paid to

the Government. He then determined the reasonable market value of the CO 2 by

making phone calls to end users and interviewing operators of other plants. In the

14
meantime, he directed one of his employees to take photographs of the Praxair plant

from the public county roads. That exercise revealed the vents used during

operations. His efforts culminated in the conclusion that “the volumes reported on

[Nielson’s] MMS Forms 2014 and 3160 are fraudulent and do not reflect the actual

gas production from the McCallum Fields, as required by MMS regulations.” (R.

Vol. IV, Tab 104 at 725-26.) Grynberg also credits his investigation for the

discovery that the price Praxair paid for the CO 2 was intentionally undervalued.

Although he concedes the actual numbers reported to the Government throughout the

life of the Agreement were accurate, he insists the royalty submissions were

knowingly false because Nielson and Praxair intentionally violated federal

regulations by failing to pay royalties on wellhead production and by reducing the

tailgate price through the deduction of processing costs.

III. DISCUSSION

A. Grynberg’s Appeal, No. 01-1214.

Grynberg contends the district court applied an improper standard when

granting summary judgment. He argues the court incorrectly determined his claims

were facially suspect in economic terms and, accordingly, erroneously required him

to "demonstrate a particularly compelling case in order to evade summary judgment."

(Appellant’s Brief at 19-20.) Grynberg's argument is two-pronged. First, he argues

the court's "particularly compelling" is a higher standard than announced in

15
Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574 (1986).

Second, he argues his claim is not economically suspect.

The district court based its statement that Grynberg, because of the particular

nature of his claims, would have to show a "particularly compelling case" to avoid

summary judgment on Matsushita. In Matsushita, the Court noted that, given the

requirement that, in order to avoid summary judgment, the nonmoving party must

present evidence to show a genuine issue of fact, "[i]t follows . . . that if the factual

context renders respondents' claim implausible—if the claim is one that simply makes

no economic sense— respondents must come forward with more persuasive evidence

to support their claim than would otherwise be necessary." 475 U.S. at 587. The

district court's application of the Matsushita standard here requires too much of

Grynberg. The Court in Matsushita was simply noting that, because material issues

for trial are required to be "genuine" to survive summary judgment, it was appropriate

for the court to look with skepticism at arguments which did not seem to make

economic sense, and to require that evidence supporting those arguments be more

persuasive. See id. This stops short of the district court's "particularly compelling"

standard enunciated in the case at hand.

In any event, not all of Grynberg's claims are economically suspect. Certainly,

his early claims that Nielson conspired with Praxair to sell CO 2 at a price far below

market is facially suspect in that it would make little economic sense for Nielson to

16
take such a drastically low price to save a small amount in royalties. However, by the

time of summary judgment, Nielson's claims had evolved into an argument that makes

economic sense—that Nielson sold CO 2 to Praxair at a low price to reflect the fact

that Praxair rather than Nielson was bearing the cost of processing and that Nielson

was then reporting the lower price and volume for royalty purposes when it should

have reported the higher value of the gas at the wellhead.

The district court's statement requiring Nielson to show a "particularly

compelling case" was incorrect and, thus, the standard of review applied by the

district court was technically improper. However, this error has no effect on our

review of the issue as our standard of review is de novo. See Simms v. Oklahoma ex

rel. Dep't of Mental Health & Sub. Abuse Servs., 165 F.3d 1321, 1326 (10th Cir.

1999). As a result, this court will examine the evidence produced on summary

judgment applying the correct standard mandated by Rule 56(c) and come to its own

conclusions as to whether summary judgment was proper.

“We review a grant of summary judgment de novo, employing the same legal

standard as the district court, specifically Fed.R.Civ.P. 56(c).” Morgan v. McCotter,

365 F.3d 882, 887 (10th Cir. 2004). Although the district court granted summary

judgment on several legal bases, we must begin with its conclusion that Grynberg

failed to meet the jurisdictional requirements of 31 U.S.C. § 3730(e)(4)(A)&(B).

“Questions of jurisdiction, of course, should be given priority--since if there is no

17
jurisdiction there is no authority to sit in judgment of anything else.” Vermont

Agency of Natural Res. v. United States ex rel. Stevens, 529 U.S. 765, 778 (2000); see

also United States v. Ceballos-Martinez, 371 F.3d 713, 715 (10th Cir.

2004)(“‘Jurisdiction is power to declare the law, and when it ceases to exist, the only

function remaining to the court is that of announcing the fact and dismissing the

cause.’”)(quoting Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94 (1998)).

B. Subject Matter Jurisdiction

“Satisfaction of the provisions of 31 U.S.C. § 3730(e)(4) is a question of

subject matter jurisdiction.” United States ex rel. Fine v. Advanced Sciences, Inc., 99

F.3d 1000, 1003 (10th Cir. 1996). The interpretation and application of § 3730(e)(4)

is reviewed de novo. United States ex rel. Precision Co. v. Koch Indus., Inc., 971

F.2d 548, 551 (10th Cir. 1992). Because federal courts are courts of limited

jurisdiction, “we presume no jurisdiction exists absent a showing of proof by the

party asserting federal jurisdiction.” Id. Therefore, Grynberg “bears ‘the burden of

alleging facts essential to show jurisdiction under the False Claims Act as well as

supporting those allegations by competent proof.’” United States ex rel. Holmes v.

Consumer Ins. Group, 318 F.3d 1199, 1202 (10th Cir. 2003) (en banc) (quoting

Advanced Sciences, Inc., 99 F.3d at 1004).

Section 3730(e)(4) provides:

(A) No court shall have jurisdiction over an action under this section
based upon the public disclosure of allegations or transactions in a

18
 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.

(B) For purposes of this paragraph, “original source” means an
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.

31 U.S.C. § 3730(e)(4)(A)&(B). Grynberg argues the district court erred in its

application of § 3730(e)(4) by: (1) holding the transactions on which his claim is

based were a matter of “public disclosure” at the time he filed the action; (2)

declaring he was not the “original source;” and (3) finding he failed to provide the

information to the Government before filing his action.

The jurisdictional inquiry under 31 U.S.C. § 3730(e)(4)(A)&(B) requires a

four-step analysis:

(1) whether the alleged “public disclosure” contains allegations or
transactions from one of the listed sources; (2) whether the alleged
disclosure has been made “public” within the meaning of the False
Claims Act; (3) whether the relator’s complaint is “based upon” this
public disclosure; and, if so, (4) whether the relator qualifies as an
“original source.”

Kennard, 363 F.3d at 1042 (quotations omitted). 13 This analytical framework is

Whether a “public disclosure” has occurred is a jurisdictional inquiry
13

arising out of the same statute that creates the cause of action, precipitating an
investigation necessarily intertwined with the merits. Holmes, 318 F.3d at 1203;
United States ex rel. Ramseyer v. Century Healthcare Corp., 90 F.3d 1514, 1518
(10th Cir. 1996); Holt v. United States, 46 F.3d 1000, 1003 (10th Cir. 1995).
Therefore, the district court correctly resolved this issue when determining the
19
required in all qui tam actions and does not hinge on whether the Government is

involved in an investigation of the alleged fraud. Holmes, 318 F.3d at 1204. “[T]he

point of the public disclosure test is to determine whether the qui tam lawsuit is a

parasitic one.” Id. at 1207 nn.6 & 7 (stating that a parasitic law suit occurs when the

relator uses information already in the public domain rather than information

personally obtained). “A court should address the first three public disclosure issues

first. Consideration of the fourth, ‘original source’ issue is necessary only if the

court answers the first three questions in the affirmative.” Kennard, 363 F.3d at 1042

(quotations omitted). Consequently, we first address whether Grynberg’s claim is

based on publicly disclosed allegations and transactions from a listed source. If so,

we will next consider whether Grynberg is an original source.

1) Public Disclosure

The district court held the transaction underpinning Grynberg’s allegations,

valuation at the tailgate pursuant to the terms of the Agreement, was publicly

disclosed twice. The first disclosure occurred when the MMS sent its response to

Grynberg’s FOIA request. Although it declined to send a copy of the Agreement, it

provided a portion of its 1985 letter to Conoco, triggered by Conoco’s request for

MMS approval of the 1983 Agreement. The response to Grynberg included two

pages from the seven-page letter which described the Agreement between Conoco and

motions for summary judgment rather than at the time of the motions to dismiss.
20
Liquid Carbonic. The district court found this disclosure revealed both the location at

which the royalty would be measured (the tailgate) and how the price would be

calculated (a formula based on adjusted fair market values), thus disclosing the basis

of allegedly fraudulent transactions. The second public disclosure occurred at the

1996 meeting to discuss the Order to Comply. There, the substance of the

administrative investigation was publicly disclosed to Ed Calvert, who the district

court found to be previously unconnected with the fraud. 14

We now turn to the first three steps of our inquiry to determine whether the

transaction forming the basis of Grynberg’s complaint was publicly disclosed. There

is no dispute that the excerpt from the 1985 letter is an administrative report, a source

falling squarely within those listed in § 3730(e)(4)(A). But Grynberg maintains the

MMS document does not include any allegation, nor does it include the transaction on

which he bases his claim. He argues the MMS disclosure of a mere two pages, with

the actual figures in the pricing formulas redacted, is only part of the information

necessary to describe the transaction. In his view, the disclosure is flawed because it

“contains no statement that the royalty volume was determined at the ‘tailgate rather

than wellhead;’ no statement that ‘gas valuation [was] based on the contract price

rather than higher finished product sales prices;’ and no statement of the great

14
Because we agree the MMS response to Grynberg’s request for
information was a publicly disclosed transaction, barring his claim unless he is the
original source, we need not reach his contention the district court erred in finding
Calvert a stranger to the fraud.
21
discrepancy between the contract price and the market price.” (Appellant’s Opening

Br. at 43.) He concludes a fair reading of the disclosed portion of the document,

without more, would not raise any suspicions, and therefore, it is insufficient to raise

a public disclosure bar to his claim.

Grynberg primarily relies on United States ex rel. Springfield Terminal Ry. v.

Quinn, 14 F.3d 645 (D.C. Cir. 1994), to support his position. There, Springfield and

its president, David Fink (Relators), were involved in a labor dispute in which the

National Mediation Board appointed Dr. Francis X. Quinn as an arbitrator. Id. at 647.

After reviewing Quinn’s pay vouchers, produced during the discovery phase of a

prior litigation, Relators realized that, when viewed in conjunction with their

involvement in the arbitration proceedings, it appeared Quinn had fraudulently billed

the Government for services not actually rendered in connection with the arbitration

proceedings. Id. at 647-48. After conducting further investigation, including calling

numbers found on Quinn’s telephone records, Relators unearthed Quinn’s fraudulent

activity and filed a qui tam action. Id. at 648. The district court granted Quinn’s

motion to dismiss the action because it found the suit was based on records publicly

disclosed during the prior litigation. Id.

The appeals court saw it differently. Although it readily agreed the

information was publicly disclosed within the meaning of the FCA, it held the

disclosed information did not include an “allegation” or “transaction.” Id. at 653.

22
The court identified “a distinction between ‘allegations or transactions’ and ordinary

‘information,’” reasoning the common usage of “the term ‘allegation’ connotes a

conclusory statement implying the existence of provable supporting facts” while

“[t]he term ‘transaction’ suggests an exchange between two parties or things that

reciprocally affect or influence one another.” Id. at 653-54. The court continued:

On the basis of plain meaning, and at the risk of belabored illustration, if
X + Y = Z, Z represents the allegation of fraud and X and Y represent its
essential elements. In order to disclose the fraudulent transaction
publicly, the combination of X and Y must be revealed, from which
readers or listeners may infer Z, i.e., the conclusion that fraud has been
committed. The language employed in § 3730(e)(4)(A) suggests that
Congress sought to prohibit qui tam actions only when either the
allegation of fraud or the critical elements of the fraudulent transaction
themselves were in the public domain.

Id. at 654. Thus, the court concluded the dual purpose of the FCA provision,

allowing matters protecting the public fisc to proceed while barring parasitic law

suits, is best served by applying a jurisdictional bar “only when enough information

exists in the public domain to expose the fraudulent transaction (the combination of X

and Y), or the allegation of fraud (Z). When either of these conditions is satisfied,

the government itself presumably can bring an action under the FCA and there is no

place in the enforcement scheme for qui tam suits.” Id.

We have not adopted the mathematical formula espoused by the D.C. Circuit in

Springfield and we decline to do so here. But even under Springfield’s analysis,

Grynberg fails to establish jurisdiction. Here, the uncontested evidence, including

23
averments found in Grynberg’s several affidavits, conclusively confirms the public

domain contained all the elemental aspects of the allegedly fraudulent transaction.

It is generally accepted that a response to a request under the FOIA is a public

disclosure. United States v. A.D. Roe Co., Inc., 186 F.3d 717, 723-24 (6th Cir. 1999);

United States ex rel. Schumer v. Hughes Aircraft Co., 63 F.3d 1512, 1519-20 (9th Cir.

1995), vacated on other grounds, 520 U.S. 939 (1997); see also United States ex rel.

Reagan v. East Texas Medical Ctr. Reg’l Healthcare Sys., 274 F.Supp.2d 824, 845

n.15 (S.D. Tex. 2003) (and cases cited therein). While the information provided to

Grynberg redacted the precise numbers, it revealed the existence of the Agreement,

the point of production (the wellhead), the liquification of the CO 2 through Liquid

Carbonic’s plant while Conoco still maintained possession of the gas, the purchase

point (the tailgate), and the fact the price was adjusted at the tailgate. Grynberg’s

claim that the document did not state where the royalty would be valued is

disingenuous. While the letter does not recite those facts in Grynberg’s preferred

form, it is written by the entity required to make a valuation judgment and it

identifies the purpose of the correspondence is to “approve Conoco’s ‘production

reporting sequence’ for carbon dioxide (CO 2)” and the attached “Application for the

Establishment of Royalty Values.” (R. Vol. III, Tab 64 at 427.) Further, the heading

on the pages produced identifies the remainder of the document as “Findings and

Conclusions on Valuation of CO 2.” (Id. at 428.) In this context, the document

24
identifies the tailgate as the location of pricing and the fact the price will undergo

adjustments. The only reasonable conclusion from these statements is that the royalty

will be valued at the point of sale, and such location may entail a loss of value in the

base amount used for royalty calculations.

Moreover, the information from the COGC, alleged by Grynberg to be the

information allowing him to determine pricing, volumes and royalty in the absence of

access to the Agreement, was publicly available. Further, the wellhead and tailgate

volumes Grynberg relied on to support his claims were provided by a private service

that collected, organized and reported the same information submitted by producers to

the Government. Clearly, “X” (wellhead as opposed to tailgate volumes) and “Y”

(purchase and price adjustment at the tailgate) were within the public domain.

Therefore, Grynberg’s “additional information, even if nonpublic, cannot suffice to

surmount the jurisdictional hurdles.” Springfield Terminal Ry. Co., 14 F.3d at 655.

All of the material elements of the fraudulent transaction were already in the public

domain.

Finding the transaction was publicly disclosed by a listed source, we next

consider whether Grynberg’s complaint is “based upon” this public disclosure. We

apply a “restrictive interpretation of the threshold ‘based upon’ test [finding such

interpretation] consistent with the dual purpose of the [FCA].” Precision Co., 971

F.2d at 552. “Based upon” means “supported by” and the threshold analysis is

25
“intended to be a quick trigger for the more exacting original source analysis.” Id.

(quotations omitted). Even qui tam actions only partially based upon publicly

disclosed allegations or transactions may be barred. Id. The test is whether

“substantial identity” exists between the publicly disclosed allegations or transactions

and the qui tam complaint. Id. at 553-54. A comparison of the information in the

public domain with the allegations contained in Grynberg’s Amended Complaint

leaves no question that the information disclosed by the MMS is the basis for his

claim.

The crux of Grynberg’s complaint is that Nielson and Praxair presented or

caused to be presented a reverse false claim when Nielson filed its monthly royalty

reports. He alleges the reports submitted are false because value and production are

under-reported. The under-reporting is caused by the venting of gas and subsequent

valuation at the tailgate, in violation of federal statute and regulation. Indeed, in his

disclosure to the Government, Grynberg’s total submission of evidence in support of

his allegations included the 1985 MMS letter and two memos: one written by

Grynberg approximating the operating costs for a CO 2 plant in Cortez, Colorado, and

another by his employee, comparing the prices at the Cortez plant and those at

Praxair. His assumptions deriving from this information do not change the basis for

his allegations. Accordingly, Grynberg’s complaint is based on a publicly disclosed

transaction under 31 U.S.C. § 3730(e)(4)(A), and he may proceed only if he is an

26
original source under 31 U.S.C. § 3730(e)(4)(B).

2) Original Source

In the final step of the analysis, we look to § 3730(e)(4)(B), requiring an

original source to have “direct and independent knowledge of the information on

which the allegations are based” and to have “voluntarily provided the information to

the Government” prior to filing suit. “[D]irect knowledge is knowledge gained by the

relator’s own efforts and not acquired from the labors of others.” Advanced Sciences,

Inc., 99 F.3d at 1006-07; see also United States ex rel. Fine v. MK-Ferguson Co., 99

F.3d 1538, 1548-49 (10th Cir. 1996) (citing cases). In addition, independent

knowledge cannot be “derivative of the information of others, even if those others

may qualify as original sources.” Advanced Sciences, Inc., 99 F.3d at 1007; see also

MK-Ferguson Co., 99 F.3d at 1548-49. The district court determined Grynberg was

not an original source, stating:

[he was] not an insider, did not witness any fraud. Grynberg has not
identified a single element of his “investigation” that involved anything
other than second hand information, speculation, background
information or collateral research (i.e. conversations with Nielson
officers, conversations with various third parties, telephone calls to
Praxair, FOIA requests, research at the COGCC, photographs from a
public road, review of oil and gas publications, and speculation
regarding what would have been a fair CO2 price), precisely what the
Tenth Circuit found insufficient in [United States ex rel. Hafter v.
Spectrum Emergency Care, Inc., 190 F.3d 1156, 1162-1163 (10th Cir.
1999)].

27
Grynberg, 207 F.Supp.2d at 1185. Grynberg contends the district court erred in not

crediting his discovery of facts essential to his claim in his telephone call with

Nielson. He disputes the district court’s characterization of his knowledge as “second

hand information,” maintaining his knowledge is (1) “direct” because Nielson

disclosed to him that Praxair allegedly applied a 30% volume reduction in pricing

calculations and (2) “independent” due to his extensive investigation of various

sources. As a result, he concludes he qualifies as an original source.

The burden is on Grynberg to show he is an original source. United States ex

rel. Stone v. Rockwell Int’l Corp., 282 F.3d 787, 800-02 (10th Cir. 2002). To meet

this burden, he must provide more than an “unsupported, conclusory allegation.” Id.

at 800 (quotations omitted). Grynberg is required to iterate specific facts

demonstrating his direct and independent knowledge is “marked by the absence of an

intervening agency . . . [and] unmediated by anything but [his] own labor.” Kennard,

363 F.3d at 1044 (quotations omitted).

In Kennard, we recently addressed facts somewhat similar to those before us.

There, in a qui tam action brought by two Relators, Relator Wright was a twenty-five

year owner of royalty interests in gas wells on a tract of land near a Tribal

reservation. Id. at 1040. Shortly after the operator of Wright’s property sold its lease

interests to Comstock, Wright’s royalty payments dropped dramatically. Id. This

raised Wright’s suspicions that Comstock was underpaying him and others, including

28
the Tribe. Id. at 1041. He contacted Relator Kennard and told him of his concerns.

Id. Kennard proceeded to investigate. Id. Through research that included, inter alia,

reviewing public records, the Relators concluded Comstock knew it was underpaying

royalties to the Tribe. Id. With the assistance of an attorney, they drafted a qui tam

complaint which was sent to the Government. Id. Their attorney, however, filed

another qui tam complaint on behalf of the Tribe, based on the same information, one

day before Relators filed their qui tam suit. Id. As a result, the district court

dismissed the Relators’ complaint for lack of subject matter jurisdiction pursuant to

31 U.S.C. § 3730(e)(4), concluding the basis of their claim was publicly disclosed via

the Tribe’s lawsuit and the Relators did not qualify as “an original source.” Id.

On appeal, the Relators alleged their attorney stole their information in

preparing the Tribe’s qui tam action against Comstock, and therefore, the district

court erred in applying the jurisdictional bar. We affirmed the information was

publicly disclosed under § 3730(e)(4)(A) but reversed the dismissal, holding the

Relators were “an original source” under § 3730(e)(4)(B). Id. at 1044, 1046.

We rejected Comstock’s proposed requirement that Relators must possess

knowledge of the “actual alleged fraudulent submissions to the Government” to be an

original source. Id. at 1044. Knowledge of the precise fraudulent submission to the

Government is not necessary. Id. “A relator ‘need only possess “direct and

independent knowledge of the information on which the allegations are based.”’” Id.

29
(quoting Stone, 282 F.3d at 803 and 31 U.S.C. § 3730(e)(4)(B)). We also declined to

create a restriction limiting an original source to only insiders, finding no valid

reason to do so. Id. at 1044-45.

Lastly, we refused to “adopt any bright-line rule disqualifying a relator as an

original source when the relator examines public records.” Id. at 1045. Rather, we

recognized that detailed investigations of fraud on the Government may often require

at least some reliance on public information; “[i]t is the character of the relator’s

discovery and investigation that controls this inquiry.” Id.; Compare United States ex

rel. Findley v. FPC-Boron Employees’ Club, 105 F.3d 675, 688 (D.C. Cir. 1997) (“A

relator’s ability to recognize the legal consequences of a publicly disclosed fraudulent

transaction does not alter the fact that the material elements of the violation already

have been publicly disclosed.”), with Springfield Terminal Ry. Co., 14 F.3d at 657

(“[Relator] started with innocuous public information [and] completed the equation

with information independent of any preexisting public disclosure.”).

In concluding Relators qualified as an original source, even though part of their

investigation included information in the public domain, we focused on two

significant factors. First, Relator Wright did not refer to, examine, or rely on any

public records. Kennard. 363 F.3d at 1046. Instead, he relied exclusively on his own

personal, private royalty records and statements from Comstock and other oil

companies in forming his suspicions regarding Comstock’s royalty payments. Id.

30
Second, while Relator Kennard did examine public records in the course of his

independent investigation, he did more than compile statistics. Id. Most importantly

to Grynberg’s case, Kennard “did not rely on a Government report dealing with the

allegations and transactions on which the current qui tam action is based because no

such document exist[ed].” Id. No public documents disclosed the alleged fraud. Id.

As a result, we held that “Relators ferreted out the alleged fraud in this case and must,

therefore, qualify as an original source.” Id.

Even so, “when a relator’s qui tam action is based solely on material elements

already in the public domain, that relator is not an original source.” Id. at 1045.

Unlike the Relators in Kennard, Grynberg’s knowledge is neither direct nor

independent. Grynberg cannot rely on Nielson’s alleged disclosure of a 30%

reduction of CO 2 between entry in the Praxair plant and volume measurement at the

tailgate. This knowledge was not direct because he “did not see the fraud with [his]

own eyes or obtain [his] knowledge of it through [his] own labor unmediated by

anything else . . . .” United States ex rel. Devlin v. California, 84 F.3d 358, 361 (9th

Cir. 1996). Instead, he derived it secondhand from Nielson, who had firsthand

knowledge of the alleged fraud as a result of his employment. Id. Grynberg’s

knowledge also was not independent. Unlike Kennard, he relied on a publicly

disclosed Government document revealing the transaction forming the basis of his

claim—the 1985 MMS letter, and the statistics compiled by an independent service.

31
Moreover, his investigation entailed telephone calls to gather common information,

pictures taken from a public road and the review of easily attained records. In this

case, Grynberg was not the individual who “ferreted out the alleged fraud.” Kennard,

363 F.3d at 1046. The same transaction was investigated by the MMS and BLM a

year before Grynberg brought his claim. 15

Consequently, we are led to the ineluctable conclusion that the character of

Grynberg’s discovery and investigation is insufficient to qualify him as an original

source. 16 The district court was correct in concluding it lacked jurisdiction over

Grynberg’s claim. We affirm.

C. Praxair’s Cross-Appeal, No. 01-1242.

Praxair advances two reasons for reversing the district court’s decision

releasing Grynberg from liability for Praxair’s attorney fees and costs. First, it

claims the district court erred as a matter of law when it imposed an unduly rigid

standard, measuring the frivolousness of Grynberg’s claim only as of the time of his

15
Moreover, the MMS was asked to approve a modified version of the
Agreement in 2000 after Grynberg had brought his qui tam claim. The only
substantial change between the 1983 version and the 2000 version is in the
provisions for the expiration of the Agreement. The provisions at issue here
remain unchanged. Thus, armed with all Grynberg’s allegations and evidence, the
MMS approved the modified Agreement on November 3, 2000, specifically
addressing both the tailgate measurement and the price adjustment.

Because Grynberg fails to satisfy the “direct and independent knowledge”
16

element of the “original source” analysis, we need not consider whether he
“voluntarily provided” this information to the Government as required under §
3730(e)(4)(B). MK-Ferguson Co., 99 F.3d at 1548 n.3.
32
initial complaint. Second, they argue Grynberg’s amended complaint was within the

parameters of § 3730(d)(4) of the FCA which provides for the award of attorney fees

as follows:

If the Government does not proceed with the action and the person
bringing the action conducts the action, the court may award to the
defendant its reasonable attorneys’ fees and expenses if the defendant
prevails in the action and the court finds that the claim of the person
bringing the action was clearly frivolous, clearly vexatious, or brought
primarily for purposes of harassment.

31 U.S.C. § 3730(d)(4). We review the district court’s decision to award attorney

fees for an abuse of discretion, but review de novo the district court’s application of

the legal principles underlying that decision. Nat’l Ass’n of Prof’l Baseball Leagues,

Inc. v. Very Minor Leagues, Inc., 223 F.3d 1143, 1146 (10th Cir. 2000).

The FCA does not define the terms “clearly frivolous, clearly vexatious, or

brought primarily for purposes of harassment,” but the Act’s legislative history

suggests that the standard of § 3730(d)(4) is analogous to that used for claims for

attorney fees brought under 42 U.S.C. § 1988. S. R EP . N O . 99-345, at 29 (1986)

(“[The False Claims Act] standard reflects that which is found in [§] 1988 . . . .”),

reprinted in 1986 U.S.C.C.A.N. 5266, 5294; see also Pfingston v. Ronan Eng’g Co.,

284 F.3d 999, 1006 n.4 (9th Cir. 2002); Mikes v. Straus, 274 F.3d 687, 705 (2d Cir.

2001). 17 Consequently, our precedent reviewing attorney fees under § 1988 is

17
Section 1988(b) provides in relevant part:

(b) Attorney’s fees
33
instructive.

Prior to engaging in that analysis, however, we must address, sua sponte, the

district court’s authority to award attorney fees when the underlying action has been

dismissed for lack of subject matter jurisdiction.

A. Jurisdiction to Award Attorney Fees

The Ninth Circuit holds that, in those instances where § 1983 subject matter

jurisdiction is lacking, the district court does not have the authority to impose § 1988

attorney fees for two reasons. Branson v. Nott, 62 F.3d 287, 292-93 (9th Cir. 1995).

First, citing to precedent from the Eighth and Second Circuits, the court stated:

By itself, § 1988 does not provide the district court with jurisdiction to
grant an attorney fee award where subject matter jurisdiction to hear the
underlying § 1983 claim is lacking: “section 1988 does not by its terms
confer subject matter jurisdiction upon federal courts, but rather relies
upon the provisions of other federal statutes, such as section 1983 read in
conjunction with 28 U.S.C. § 1343 (1988), . . . to confer subject matter
jurisdiction.” Keene Corp. v. Cass, 908 F.2d 293, 298 (8th Cir. 1990);
see also, W.G. ex rel. D.G. v. Senatore, 18 F.3d 60, 64 (2d Cir. 1994)
(concluding that “fee shifting provisions cannot themselves confer
subject matter jurisdiction.”); Pierre v. Jordan, 333 F.2d 951, 958 (9th
Cir. 1964) (observing that § 1988 does not establish subject matter

In any action or proceeding to enforce a provision of sections
1981, 1981a, 1982, 1983, 1985, and 1986 of this title, title IX of
Public Law 92-318 [20 U.S.C.A. § 1681 et seq.], the Religious
Freedom Restoration Act of 1993 [42 U.S.C.A. § 2000bb et
seq.], the Religious Land Use and Institutionalized Persons Act
of 2000 [42 U.S.C.A. § 2000cc et seq.], title VI of the Civil
Rights Act of 1964 [42 U.S.C.A. § 2000d et seq.], or section
13981 of this title, the court, in its discretion, may allow the
prevailing party, other than the United States, a reasonable
attorney’s fee as part of the costs . . . .

34
 jurisdiction), cert. denied, 379 U.S. 974, 85 S.Ct. 664, 13 L.Ed.2d 565
(1965). And “[w]here there is no subject matter jurisdiction to proceed
with the substantive claim, as a matter of law ‘[t]hat lack of jurisdiction
bar[s] an award of attorneys fees under section 1988.’” Senatore, 18 F.3d
at 64 (quoting Keene Corp., 908 F.2d at 298). . . .

Id. at 293. Second, even assuming jurisdiction to impose § 1988 attorney fees exists,

the court held a defendant is not a “prevailing party” when the dismissal is based on a

lack of subject matter jurisdiction. Id. (concluding § 1988 attorney fees only

available to a party who has prevailed on the merits). In

Citizens for a Better Env’t v. Steel Co., 230 F.3d 923 (7th Cir. 2000), the Seventh

Circuit reached a different conclusion. Citizens for a Better Environment (CBE)

brought suit against Steel for its failure to timely file reports pursuant to 42 U.S.C. §

11406 (a)(1), authorizing suits against hazardous chemical facilities for a facility’s

failure to submit required information. Id. at 925. After the Supreme Court

determined CBE lacked standing, on remand Steel requested an award of attorney

fees pursuant to § 11046(f). 18 Id. The district court denied Steel’s request, reasoning

that if CBE lacked standing to seek civil penalties, Steel must lack standing to seek

attorney fees. Id.

42 U.S.C. § 11046(f) provides in relevant part:
18

The court, in issuing any final order in any action brought
pursuant to this section, may award costs of litigation (including
reasonable attorney and expert witness fees) to the prevailing or
the substantially prevailing party whenever the court determines
such an award is appropriate. . . .
35
 The Seventh Circuit disagreed. The court began its analysis by noting,

“[c]ourts that lack jurisdiction with respect to one kind of decision may have it with

respect to another. A court, for example, always has jurisdiction to consider its own

jurisdiction.” Id. at 926 (citation and quotations omitted). Thus, the court framed the

question as whether an exercise of jurisdiction to award attorney fees in the absence

of subject matter jurisdiction over the underlying claim would run afoul of Article III.

Id. Holding in the negative, the court distinguished between the adjudicatory

authority governed by Article III and the legislative authority imposed by Article I.

Id. at 927. Guided largely by the Supreme Court’s decision in Willy v. Coastal Corp.,

503 U.S. 131 (1992), the Seventh Circuit acknowledged statutes such as 28 U.S.C. §§

1919 and 1447(c) 19 specifically “permit awards of litigation expenses in suits that

19
28 U.S.C. § 1919 provides:

Whenever any action or suit is dismissed in any district court,
the Court of International Trade, or the Court of Federal Claims
for want of jurisdiction, such court may order the payment of just
costs.

28 U.S.C. § 1447(c) provides in relevant part:

(c) A motion to remand the case [to the state court] on the basis
of any defect other than lack of subject matter jurisdiction must
be made within 30 days after the filing of the notice of removal
under section 1446(a). If at any time before final judgment it
appears that the district court lacks subject matter jurisdiction,
the case shall be remanded. An order remanding the case may
require payment of just costs and any actual expenses, including
attorney fees, incurred as a result of the removal. . . .

36
federal courts are not authorized to decide on the merits” and the “[u]se of this fee-

shifting power has been uncontroversial.” Id. at 927. Further, “Willy held that

attorneys’ fees may be awarded under Rule 11 even if the case never came within the

district court’s subject-matter jurisdiction.” Id. Thus, if the claim for attorney fees is

a separate “case or controversy,” the federal court may have Article III authority to

determine the matter. Id. The court then reasoned Steel’s claim for attorney fees

satisfied these requirements: Steel had suffered an injury that may be redressed by the

award of attorney fees. Id. at 926. Accordingly, the court concluded, “Article III

therefore presents no obstacle to fee-shifting, whether or not the fees were incurred in

proceedings that were cases or controversies under Article III.” Id. at 928.

The Seventh Circuit next considered whether the relevant statutory authority

authorized Steel’s recoupment of attorney fees. Finding in the affirmative, the court

analyzed the language of the statute and found Steel’s request to be within its

scope—a request for attorney fees in the “final order” resolving an “action brought

pursuant to [42 U.S.C. 11046].” Id. at 929.

As the final step in its analysis, the Seventh Circuit addressed whether Steel

could be deemed the “prevailing party” in the absence of a ruling on the merits of the

case. Id. at 929-30. The court found “[t]he alternative of limiting ‘prevailing’ to

‘prevailing on the merits’ has nothing to recommend it under either the text of the

37
statute or the considerations that lie behind fee-shifting statutes.” Id. at 930. Instead,

the court applied the “prevailing party” standard imposed on the plaintiffs in Texas

State Teachers Ass’n v. Garland Ind. Sch. Dist., 489 U.S. 782, 792-93 (1989). Id. at

929. “[A] plaintiff prevails for purposes of 42 U.S.C. § 1988 only if ‘at a minimum

... the plaintiff [can] point to a resolution of the dispute which [materially] changes

the legal relationship between itself and the defendant.’” Id. (quoting Texas State

Teachers Ass’n, 489 U.S. at 792). Assuming § 11046(f) uses “prevailing party” in the

same way, the Seventh Circuit found the dismissal of CBE’s lawsuit was a

jurisdictional victory that equaled or exceeded a victory on the merits because it

secured “a decision foreclosing any private plaintiff from suing about this delay or

any other.” Id. at 929.

We believe the Seventh Circuit takes the most thoughtful approach and will

apply its analysis for the purposes of Praxair’s request for attorney fees pursuant to

31 U.S.C. § 3730(d)(4). There is no Article III roadblock in this instance. 20 Praxair

has expended significant funds in defending this protracted litigation. It claims this

injury is the result of a frivolous lawsuit, an alleged injustice which may be redressed

by an award of attorney fees as contemplated by the statute. The district court is not

We have had but one opportunity to consider the award of attorney fees
20

under 31 U.S.C. § 3730(d)(4). In MK-Ferguson Co., we affirmed the district
court’s determination that subject matter jurisdiction was lacking as well as its
decision to deny the defendant’s request for attorney fees. 99 F.3d at 1549. We
did not reach the jurisdictional parameters of the district court’s authority to rule
on attorney fees in that case.
38
being asked to continue to consider the merits of the underlying qui tam case. Rather,

it must determine whether Grynberg’s lawsuit was or became clearly frivolous or

vexatious. Moreover, the result of the district court’s summary judgment decision

materially changed the legal relationship between Grynberg and Praxair. Grynberg’s

campaign to declare Praxair an entity “causing” a false claim to be made has reached

final resolution. As Grynberg is now prohibited from bringing further claims on

these facts, Praxair is a prevailing party. 21 Accordingly, we find subject matter

jurisdiction exists to award attorney fees and proceed to review the district court’s

denial of Praxair’s request.

B. Denial of Attorney Fees

“Under the abuse of discretion standard, the decision of a trial court will not be

disturbed unless the appellate court has a definite and firm conviction that the lower

court made a clear error of judgment or exceeded the bounds of permissible choice in

the circumstances.” MK-Ferguson Co., 99 F.3d at 1548-49 (citation and quotation

marks omitted). When determining whether a plaintiff should be ordered to pay the

defendant’s attorney fees, we apply the standard enunciated in Christiansburg

Garment Co. v. EEOC, 434 U.S. 412, 421(1978). Under this standard:

In GHK Exploration Co. v. Tenneco Oil Co., applying Oklahoma law, we
21

held the defendant was not the prevailing party because the court dismissed the
plaintiff’s claim for lack of subject matter jurisdiction rather than on the merits.
Our decision here is not constrained by the state law limitations found in GHK.
857 F.2d 1388, 1391-92 (10th Cir. 1988).

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 [t]he plaintiff’s action must be meritless in the sense that it is groundless
or without foundation. The fact that a plaintiff may ultimately lose his
case is not in itself a sufficient justification for the assessment of fees . .
. . [A] plaintiff should not be assessed his opponent’s attorney’s fees
unless a court finds that his claim was frivolous, unreasonable, or
groundless, or that the plaintiff continued to litigate after it clearly
became so. . . .

Houston v. Norton, 215 F.3d 1172, 1174 (10th Cir. 2000). 22 “[T]he term ‘vexatious’

in no way implies that the plaintiff’s subjective bad faith is a necessary prerequisite

to a fee award against him . . . . [A] district court may in its discretion award

attorney’s fees to a prevailing defendant . . . upon a finding that the plaintiff’s action

was frivolous, unreasonable, or without foundation, even though not brought in

subjective bad faith.” Christiansburg Garment Co., 434 U.S. at 421; see also

Prochaska v. Marcoux, 632 F.2d 848, 853-54 (10th Cir. 1980).

Praxair claims Grynberg’s persistence in this lawsuit was clearly frivolous after

it became apparent Praxair had no responsibility or involvement with Conoco’s

royalty payments. The district court’s order denying Praxair’s request for attorney

fees states:

The more stringent test for the recovery of attorney fees by a defendant is
22

based on the distinction between the equitable considerations adhering to the
parties. Christianburg Garment Co., 434 U.S. at 418. A prevailing plaintiff is
“the chosen instrument of Congress to vindicate a policy that Congress considered
of the highest priority” and the district court is awarding counsel’s fees “against a
violator of federal law.” Id. (quotations omitted). A successful defendant, on the
other hand, must demonstrate that the plaintiff has misused his statutory privilege
and distorted the intent of the legislation. Id. at 419-20.

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 Section 3730(d)(4) authorizes the award of attorney’s fees and expenses
“if the defendant prevails in the action and the court finds that the claim
of the person bringing the action was clearly frivolous, clearly vexatious,
or brought primarily for the purposes of harassment.” While the claims
in this case were properly dismissed on summary judgment, review of
the record in this case leaves me unable to find that Relator’s Complaint
was clearly frivolous, clearly vexatious, or brought primarily for the
purposes of harassment.

(R. Supp. App. at 95-96.) Grynberg contends we must assume the district court

considered all relevant theories because it set forth the correct standard and

referenced its review of the entire record. We disagree. The district court did not

hold a hearing on this matter and the truncated order provides no guidance as to

whether Praxair’s theory was considered.

We recognize that the Christianburg standard is “a difficult standard to meet,

to the point that rarely will a case be sufficiently frivolous to justify imposing

attorney fees on the plaintiff.” Mitchell v. City of Moore, Okla., 218 F.3d 1190, 1203

(10th Cir. 2000). However, the Supreme Court has instructed that the district court

review the entire course of the litigation in making this determination.

Christiansburg Garment Co., 434 U.S. at 421-22. In order to provide meaningful

appellate review, we require an articulation of the district court’s rationale. See

Simpson v. Lear Astronics Corp., 77 F.3d 1170, 1177 (9th Cir. 1996).

The district court made a specific factual finding that:

There is no evidence indicating any Praxair involvement in royalty
calculation, reporting and payment other than providing accurate volume
and price data to Nielson pursuant to the Agreement. Praxair has not

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 assisted Nielson in interpreting or implementing the royalty regulations.
Nor does Praxair supply any other information or assistance. Praxair
does not even receive copies of the royalty reports submitted by Nielson.

Grynberg, 207 F.Supp.2d at 1173-74. From these facts the district court rendered its

legal conclusion that:

Given that (I) the challenged royalty practices were approved both
before and after these representations, (ii) the government knew the
extent of venting based on knowledge of both wellhead and tailgate
volumes and (iii) the government approved the venting and royalty
practices even after learning that ice plant vapors were not being
recycled, there is no basis for any inference that these LCC and Praxair
statements were made for the purpose of reducing royalty obligations.
Moreover, Grynberg argues that wellhead volumes and an alternative
CO 2 market value should have been used to calculate royalties. The
wellhead measurements and the decision of what value to use when
calculating royalties were always controlled by Conoco and Nielson.
Praxair was thus totally irrelevant to the royalty underpayments that
Grynberg alleges.

Id. at 1186 (emphasis added). Because the timing of Grynberg’s discovery of these

facts is contrary to a finding that he could reasonably believe his claim against

Praxair had a scintilla of merit throughout the litigation, we must remand to the

district court for further discussion and findings. Houston, 215 F.3d at 1175;

Goichman v. City of Aspen, 859 F.2d 1466, 1471 (10th Cir. 1988).

V. CONCLUSION

Grynberg failed to establish subject matter jurisdiction under the FCA to

sustain his reverse false claim action. While the district court, nonetheless, maintains

subject matter jurisdiction to award attorney fees, the district court failed to provide

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sufficient information to afford a review of the denial of attorney fees. Accordingly,

the dismissal of Grynberg’s claim is AFFIRMED. The denial of attorney fees is

REVERSED and the case REMANDED for further proceedings consistent with this

opinion.

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