In Re Natural Gas Royalties Qui Tam Litigation

FILED
United States Court of Appeals
Tenth Circuit

May 14, 2009
PUBLISH Elisabeth A. Shumaker
Clerk of Court
UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

In re: NATURAL GAS ROYALTIES Lead Case
QUI TAM LITIGATION (CO2 Pursuant to Consolidated Order:
Appeals). Case No. 08-8004
__________________________

JACK J. GRYNBERG, ex rel. United
States,

Plaintiff - Appellant,
Consolidated Appeals:
v. Case Nos. 08-8008, 08-8010, 08-8011,
08-8012
EXXON COMPANY, USA;
ATLANTIC RICHFIELD COMPANY;
VASTAR RESOURCES, INC.; ARCO
OIL AND GAS COMPANY;
VASTAR GAS MARKETING, INC.;
ARCO PIPE LINE COMPANY;
ARCO PERMIAN, d/b/a Atlantic
Richfield Company; NATURAL GAS
PIPELINE COMPANY OF
AMERICA; STINGRAY PIPELINE
COMPANY; OCCIDENTAL OIL
AND GAS CORPORATION;
MIDCON CORP.; MIDCON GAS
SERVICES CORP.; OCCIDENTAL
ENERGY VENTURES CORP.;
MIDCON TEXAS PIPELINE
OPERATOR, INC.; PLACID OIL
COMPANY; OXY USA INC.;
MIDCON MARKETING CORP.,
CROSS TIMBERS OIL COMPANY;
CROSS TIMBERS OPERATING
COMPANY; CROSS TIMBERS
ENERGY SERVICES, INC.;
 RINGWOOD GATHERING
COMPANY; TIMBERLAND
GATHERING & PROCESSING
COMPANY,

Defendants - Appellees.

ORDER

Before MURPHY, McKAY and McCONNELL, Circuit Judges.

These matters are before the court on the appellees’ Unopposed Motion To

Recall Mandate For Correction of Errors In Panel Decision. Upon consideration,

the request is granted. The mandate issued originally on April 8, 2009 is recalled.

The Clerk of Court is directed to file the amended opinion attached to, and

incorporated in, this order. That decision shall reissue nunc pro tunc to March 17,

2009, the original filing date. The newly recalled mandate shall reissue forthwith

upon filing of the amended decision.

Entered for the Court

Elisabeth A. Shumaker
Clerk of Court

-2-
 FILED
United States Court of Appeals
Tenth Circuit

March 17, 2009
PUBLISH Elisabeth A. Shumaker
Clerk of Court
UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

In re: NATURAL GAS ROYALTIES Lead Case
QUI TAM LITIGATION (CO2 Pursuant to Consolidated Order:
Appeals). Case No. 08-8004
__________________________

JACK J. GRYNBERG, ex rel. United
States,

Plaintiff - Appellant,
Consolidated Appeals:
v. Case Nos. 08-8008, 08-8010, 08-8011,
08-8012
EXXON COMPANY, USA;
ATLANTIC RICHFIELD COMPANY;
VASTAR RESOURCES, INC.; ARCO
OIL AND GAS COMPANY;
VASTAR GAS MARKETING, INC.;
ARCO PIPE LINE COMPANY;
ARCO PERMIAN, d/b/a Atlantic
Richfield Company; NATURAL GAS
PIPELINE COMPANY OF
AMERICA; STINGRAY PIPELINE
COMPANY; OCCIDENTAL OIL
AND GAS CORPORATION;
MIDCON CORP.; MIDCON GAS
SERVICES CORP.; OCCIDENTAL
ENERGY VENTURES CORP.;
MIDCON TEXAS PIPELINE
OPERATOR, INC.; PLACID OIL
COMPANY; OXY USA INC.;
MIDCON MARKETING CORP.,
CROSS TIMBERS OIL COMPANY;
CROSS TIMBERS OPERATING
COMPANY; CROSS TIMBERS
ENERGY SERVICES, INC.;
 RINGWOOD GATHERING
COMPANY; TIMBERLAND
GATHERING & PROCESSING
COMPANY,

Defendants - Appellees.

APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF WYOMING
(D.C. Nos. 99-MD-1293-WFD, 99-MD-1621-WFD, 99-MD-1665-WFD,
99-MD-1668-WFD, 99-MD-1672-WFD)

Elizabeth L. Harris, (Jeffrey A. Chase, with her on the briefs), Jacobs Chase Frick
Kleinkopf & Kelley, LLC, Denver, Colorado, for Plaintiff-Appellant.

John F. Shepherd, (Elizabeth A. Phelan, Holland & Hart, LLP, Denver, Colorado,
Robert S. Salcido, Akin, Gump, Strauss, Hauer & Feld, LLP, Washington, D.C.,
Taylor F. Snelling, ExxonMobil Corporation, Houston, Texas, for appellee Exxon
Company, USA; M. Benjamin Singletary and Dennis Cameron, Gable & Gotwals,
Tulsa, Oklahoma, for Oxy-USA, Inc.; Robin F. Fields and Charles B. Williams,
Conner & Winters, Oklahoma City, Oklahoma, for Cross Timbers Operating
Company, et al.; Charles L. Kaiser and Charles A. Breer, Davis Graham &
Stubbs, LLP, Denver, Colorado, for ARCO Oil and Gas Co., et al.; Donald I.
Schultz, Schultz & Belcher, LLP, Cheyenne, Wyoming, for Liason Counsel, with
him on the brief) Holland & Hart, LLP, Denver, Colorado, for Coordinated
Defendants-Appellees.

Before MURPHY, McKAY and McCONNELL, Circuit Judges.

McCONNELL, Circuit Judge.

In 1997 and 1998, relator Jack Grynberg brought a number of qui tam suits

against natural gas pipeline companies and their affiliates for alleged

-2-
underpayment of royalties in violation of 31 U.S.C. § 3729(a)(7) of the False

Claims Act (“FCA”). 1 Seven of these suits alleged that the defendants had

underpaid royalties on the carbon dioxide (“CO 2”) they produced from federal and

Indian lands by paying based on an artificially deflated value rather than the

actual market value of CO 2. The district court found these suits jurisdictionally

barred by the first-to-file rule of 31 U.S.C. § 3730(b)(5) because a 1996 suit had

alleged the same essential facts. That prior suit had named as defendants two of

Mr. Grynberg’s current defendants, mentioned three of the current defendants by

name but without joining them as parties, 2 and had not mentioned two of the

current defendants at all. The district court held that a prior action does not have

to be against a party in order to bar a subsequent action under the first-to-file bar,

so long as the party is “readily identifiable” from the prior action. Mr. Grynberg

appeals the district court’s dismissal only with regard to the four defendants who

were not parties to the prior action. We reverse.

I. Background

1
Of the six related appeals originally filed and consolidated by this court,
the parties stipulated to voluntarily dismissed two of those appeals during the
course of appellate proceedings. The dismissed appeals were: 08-8007 and 08-
8009.
2
One of these defendants was Amerada Hess. While the defendants’ motion
for dismissal was pending in the district court, Mr. Grynberg settled and released
all of his claims against Amerada Hess. That claim is not currently on appeal.

-3-
 Mr. Grynberg filed numerous qui tam suits against natural gas pipeline

companies and their various parents, subsidiaries, and affiliates in 1997 and 1998,

alleging a variety of ways in which these companies had allegedly underpaid

natural gas royalties owed to the federal government. Mr. Grynberg’s primary

claims alleged underreporting of the heating content and volume of natural gas

through various mismeasurement techniques. 3 Seven of his claims, however,

concerned the production of CO 2, in which Mr. Grynberg alleged that the

companies underpaid royalties not by underreporting the volume of CO 2 but by

undervaluing its worth. These “CO 2 Claims” were brought against Mobil

Exploration & Producing U.S., Inc. (“Mobil”); Shell Land and Energy Co. and

Shell Western E&P, Inc. (collectively, “Shell”); Exxon Co., USA (“Exxon”);

Amerada Hess Corp. (“Amerada Hess”); ARCO Oil & Gas Co. and ARCO

Permian, d/b/a Atlantic Richfield Co. (collectively, “ARCO”); Oxy-USA; and

Cross Timbers Operating Co. (“Cross Timbers”). The complaints against each

defendant included an allegation virtually identical to this one, from the Exxon

complaint:

Defendant Exxon Company, U.S.A. produces carbon dioxide from at
least the Royalty Properties attached at Exhibit “C.” Under
applicable law, Defendant must pay royalties based upon the fair

3
The district court found that Mr. Grynberg’s claims alleging the
mismeasurement of heating content and volume were jurisdictionally barred by
the public disclosure rule of § 3730(e)(4). Those dismissals are the subject of a
separate appeal. See In re Natural Gas Royalties Qui Tam Litigation, No. 06-
8099.

-4-
 market value of the carbon dioxide so produced. Defendant
knowingly underpays royalties by paying based upon an assumed
value of the carbon dioxide which is significantly below its true fair
market value. Purely by way of example, carbon dioxide is presently
sold for $2.87 per MCF on the open market; yet Defendant pays
royalties based upon a value of less than one-fifth that price.

Exxon Am. Compl. ¶ 55.

Mr. Grynberg’s CO 2 claims were similar to those in another qui tam action

filed by a different relator the previous year. In CO 2 Claims Coalition v. Shell

Oil Co. et al., No. 96-Z-2451 (D. Colo.), a coalition of royalty owners, small

share working interest owners, and taxing authorities brought suit under the False

Claims Act against Shell and Mobil, alleging that those companies had controlled

and depressed the wellhead price of CO 2 produced from the McElmo Dome field

in southwest Colorado (the “Coalition complaint”). As small share working

interest owners of the CO 2 produced at the McElmo Dome field, the Coalition

plaintiffs could not sell their CO 2 independently, but instead entered into

contracts with the large share working interest owners at the field, Shell and

Mobil. Shell and Mobil would then pay the plaintiffs a royalty on all CO 2 sales

based on the wellhead price of CO 2. The royalties they owed the federal

government were likewise based on these underlying agreements.

Shell and Mobil, however, were not only producers of CO 2, but also

consumers of that very gas, using it in their production of crude oil. In their

vertically-integrated operations, Shell and Mobil would transport the CO 2 from

-5-
the McElmo Dome field to their oil fields in west Texas, using a pipeline jointly

owned by both companies. According to the Coalition complaint, this enabled

Shell and Mobil to depress the wellhead price of CO 2 in a number of ways:

Whereas a producer of CO 2 would normally have an interest in demanding the

highest price possible, because Shell and Mobil were also the consumers of that

CO 2, they preferred a lower wellhead price so that they could shift the profits to

the oil side of the operation and avoid paying higher royalties. The price they

based the royalty payments on failed to include the in kind value that Shell and

Mobil were receiving. Furthermore, because they owned the pipeline, they could

artificially inflate the transportation costs; because the wellhead price is

calculated as the delivered price minus the pipeline tariff, this would further

reduce the royalties they had to pay.

Although the Coalition complaint brought actual claims against only Shell

and Mobil, it identified four other major oil companies that owned working

interests in the McElmo Dome field, including present-defendant ARCO. In

addition, it identified Exxon, ARCO, Amerada Hess, and others as initiating

similar CO 2 projects in the Sheep Mountain and Bravo Dome fields. The

Coalition plaintiffs also brought an antitrust claim against Shell and Mobil,

alleging that they had conspired with other oil companies to fix the price of CO 2.

It specifically identified Exxon, ARCO, and Amerada Hess as companies who had

a level of control over production and transportation at the Bravo Dome field that

-6-
would allow them to effect a similar pricing scheme there. The complaint did

not, however, assert an actual antitrust claim against anyone but Shell and Mobil.

When Mr. Grynberg filed his 1997 qui tam suits against Shell, Mobil,

Exxon, ARCO, Amerada Hess, Oxy-USA, and Cross Timbers, the defendants

moved for dismissal under the first-to-file rule of § 3730(b)(5). That provision

states:

When a person brings an action under this subsection, no person other
than the Government may intervene or bring a related action based on
the facts underlying the pending action.

31 U.S.C. § 3730(b)(5). According to the defendants, Mr. Grynberg’s current qui

tam action was a “related action based on the facts underlying the pending

action,” that pending action being the Coalition claims. Mr. Grynberg argued that

to the extent his current action advanced claims against parties who were not

named in the Coalition complaint or involved different oil fields, such as Sheep

Mountain and Bravo Dome, they are unrelated to the Coalition complaint and not

jurisdictionally barred under the first-to-file rule.

The Special Master found that the undervaluation claims against Shell and

Mobil were premised on the same underlying conduct that the Coalition complaint

was based on, and that Mr. Gryberg’s complaints against Shell and Mobil had

“fail[ed] to allege a different type of wrongdoing, based on different material

facts than those alleged in the Coalition Complaint.” Rep. & Rec. 13. This was

so even though Mr. Grynberg’s allegations of fraud extended beyond the McElmo

-7-
Dome field. Id. The Special Master found the claims against Exxon, ARCO, and

Amerada Hess more difficult, as the Coalition complaint had not brought claims

against those defendants. Nonetheless, the Special Master found that those

defendants “were specifically identified in the Coalition Complaint, and were

accused of being participants in a conspiracy to depress the price of CO 2 by

setting an assumed value that was significantly below its actual fair market

value,” id. at 14, which “placed the government on notice of the essential facts of

the fraudulent scheme, the participants therein, and the geographic locations

where the scheme was utilized.” Id. at 15. The Special Master did not, however,

recommend dismissal of the suits against Oxy-USA and Cross Timbers, because

the Coalition complaint never mentioned those parties by name or description.

Id.

The district court accepted the Special Master’s recommendation in part

and rejected it in part, finding that the first-to-file bar applied not only to Shell,

Mobil, Exxon, ARCO, and Amerada Hess, but also to Oxy-USA and Cross

Timbers. It found that by alleging facts that suggested fraud in the Bravo Dome

field, the Coalition complaint had put the government on notice that Oxy-USA

and Cross Timbers, who operated in that field, were involved in similar

wrongdoing. “As companies owing royalty obligations to the United States on the

production of CO 2,” the district court said, “all potential participants in the

conspiratorial scheme are readily identifiable by the government.” Dist. Ct. Op. 7

-8-
(emphasis added). By using the readily identifiable standard to determine which

suits were barred by the first-to-file rule, the court found that all of the CO 2

defendants fell under the rule’s reach.

Mr. Grynberg has not appealed the dismissal of his claims against Shell and

Mobil, who were named as parties in the Coalition complaint, or against Amerada

Hess, but has appealed the dismissal of his claims against the other defendants.

He argues that the district court erred in using a “readily identifiable” standard

and that the first-to-file bar should not apply when the current defendants were

not parties to the pending action.

II. Analysis

A. Role of Jurisdictional Bars in the False Claims Act

Section 3730(b)(1) of the False Claims Act gives a private citizen the right

to bring a cause of action on behalf of the United States government; in return,

the citizen recovers a portion of the damages for himself. This encourages

citizens who know of fraud against the government to bring that fraud to light and

assist in enforcement, but also carries with it the risk of parasitic suits brought by

relators who add little in value but siphon off part of the government’s recovery

(or, in the case of a meritless claim that the government has chosen not to pursue,

perhaps to coerce a settlement through the threat of expensive litigation).

Congress has therefore included a number of provisions that “further[] the golden

mean between adequate incentives for whistle-blowing insiders with genuinely

-9-
valuable information and discouragement of opportunistic plaintiffs who have no

significant information to contribute of their own.” United States ex rel. Maxwell

v. Kerr-McGee Oil & Gas Corp., 540 F.3d 1180, 1184 (10th Cir. 2008); see also

United States ex rel. Precision Co. v. Koch Indus., Inc., 971 F.2d 548, 552 (10th

Cir. 1992) (“Section 3730–Civil actions for false claims, has two basic goals: 1)

to encourage private citizens with first-hand knowledge to expose fraud; and 2) to

avoid civil actions by opportunists attempting to capitalize on public information

without seriously contributing to the disclosure of the fraud.”).

One such provision is the public disclosure bar of 31 U.S.C. §

3730(e)(4)(A), which removes jurisdiction over an action “based upon the public

disclosure of allegations or transactions in a criminal, civil, or administrative

hearing, in a congressional, administrative, or [GAO] report, hearing, audit, or

investigation, or from the news media.” The public disclosure bar has an

exception for when “the person bringing the action is an original source of the

information.” Id. To qualify as an original source, the individual must have

“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)(B). The public disclosure bar is thus chiefly designed to separate

the opportunistic relator from the relator who has genuine, useful information that

the government lacks. With this in mind, we have held that a disclosure need not

-10-
identify a defendant by name to trigger the public disclosure bar, so long as the

disclosures are “sufficient to set the government on the trail of the fraud as to

[the] Defendants.” In re Natural Gas Royalties Qui Tam Litigation, No. 06-8099,

at 15; see also United States ex rel. Fine v. Sandia Corp., 70 F.3d 568, 571 (10th

Cir. 1995). If the government can “readily identify” the defendant from the

public disclosure, then the bar is triggered unless the plaintiff can show he is an

original source. In re Natural Gas Royalties Qui Tam Litigation, No. 06-8099, at

7.

Although the district court dismissed Mr. Grynberg’s mismeasurement

claims under the public disclosure bar, it applied a different bar—the first-to-file

provision of § 3730(b)(5)—to his CO 2 claims. We have described this provision,

like the public disclosure bar, as functioning to weed out parasitic claims. See

Grynberg v. Koch Gateway Pipeline Co., 390 F.3d 1276, 1279 (10th Cir. 2004)

(“Once the government is put on notice of its potential fraud claim, the purpose

behind allowing qui tam litigation is satisfied.”). But we have also recognized its

additional purpose of creating an incentive for relators with valuable information

to file—and file quickly. See id. (“Further, original qui tam relators would be

less likely to act on the government’s behalf if they had to share in their recovery

with third parties who do no more than tack on additional factual allegations to

the same essential claim.”); see also Wisconsin v. Amgen, Inc., 516 F.3d 530, 532

(7th Cir. 2008) (“Congress didn’t want these bounty hunters piling into the first-

-11-
filed suit and fighting over the division of the spoils, or, to the same end, bringing

separate such suits.”); Campbell v. Redding Med. Center, 421 F.3d 817, 821 (9th

Cir. 2005) (“This is the first-to-file bar, which encourages prompt disclosure of

fraud by creating a race to the courthouse among those with knowledge of

fraud.”). The first-to-file bar thus functions both to eliminate parasitic plaintiffs

who piggyback off the claims of a prior relator, and to encourage legitimate

relators to file quickly by protecting the spoils of the first to bring a claim.

B. Text of § 3730(b)(5)

According to the defendants, we need look no further than the text of the

statute to see that two claims need not involve the same parties in order to apply

the first-to-file bar. Section 3730(b)(5), they say, prohibits “related action[s]

based on the facts underlying the pending action” (emphasis added). The focus is

on the facts, not the parties. If Congress wanted to bar suits only when the parties

were identical, defendants say, it would have barred claims based on pending

actions “in which the defendant is already a party.” Cf. 31 U.S.C. § 3730(e)(3)

(barring actions “based upon allegations or transactions which are the subject of a

civil suit or an administrative civil money penalty proceeding in which the

Government is already a party”) (emphasis added).

The statute’s use of the word “facts” rather than “parties,” however, does

not inevitably lead to the conclusion that a pending suit against one party can bar

suit against a different party. The identity of a defendant is a fact. To fall under

-12-
the first-to-file bar, however, an action need not mirror every fact in the pending

claim. In determining whether a qui tam action is a “related action based on the

facts underlying the pending action,” we have adopted an “essential claim” or

“same material elements” standard. Grynberg, 390 F.3d at 1279; see also United

States ex rel. Hampton v. Columbia/HCA Healthcare Corp., 318 F.3d 214, 217–18

(D.C. Cir. 2003). The question is whether the “fact” of a party’s identity is a

“material element” necessary to consider the two actions as stating the same

“essential claim.”

The defendant’s identity is a material element of a fraud claim. Two

complaints can allege the very same scheme to defraud the very same victim, but

they are not the same claim unless they share common defendants. Multiple

parties can defraud the government through identical schemes. While we might

consider a complaint that alleges an additional method of defrauding the

government to state the same essential claim, we would not consider a complaint

against an entirely different defendant to be stating the same claim. There is a

difference between a relator who simply tacks on an additional piece of evidence

(a secret memo admitting to the fraudulent scheme, for instance) and a relator

who alleges a scheme committed by a different party. The former might make it

easier to prove a material element of the fraud and might even be the difference

between success at trial or failure, but the latter asserts a different claim, seeking

distinct damages arising out of a separate injury caused by another party. The

-13-
identity of a defendant constitutes a material element of a fraud claim, which,

under our “same material elements” standard, brings it under the statutory

definition of “facts” upon which the action is based.

The defendants note that we have applied the first-to-file bar when two

actions did not name the same defendant, but instead named different members of

the same corporate family. Grynberg, 390 F.3d at 1280 n.4; see also United

States ex rel. Hampton v. Columbia/HCA Healthcare Corp., 318 F.3d 214, 218

(D.C. Cir. 2003). When defendants are part of the same corporate family,

however, they will often be jointly liable for the same underlying conduct. Cases

involving parents, subsidiaries, and other corporate affiliates might therefore

require deviations from the general requirement that claims must share common

defendants in order to trigger the first-to-file bar. See United States ex rel.

Branch Consultants v. Allstate Ins. Co., --- F.3d ----, 2009 WL 388947, at *8 (5th

Cir. Feb. 18, 2009) (holding that § 3730(b)(5) did not bar suit against unnamed,

unrelated defendants, and distinguishing Hampton and Grynberg on the grounds

that those defendants were corporate affiliates). As none of the present

defendants are affiliated with Mobil or Shell, we need not address the full

contours of § 3730(b)(5) in that unique situation.

C. Structure of FCA

-14-
 Looking at the first-to-file bar in the context of the larger FCA shows how

odd a notice-based “readily identifiable” standard would be. That standard, after

all, is how we judge whether the public disclosure bar of § 3730(e)(4) has been

triggered. Even without the first-to-file bar, a qui tam complaint filed by a

different relator would qualify as a public disclosure and would bar suit against a

defendant who, though not named in the complaint, was nonetheless implicated in

the fraud. The public disclosure bar already removes jurisdiction from suits

brought by relators who simply feed off another relator’s complaint and offer no

useful information to government officials who should already be on notice of the

fraud. Applying that standard to the first-to-file bar will do no more to weed out

opportunistic relators than the public disclosure bar already does.

What that standard would do if applied in the first-to-file bar context,

however, is bar some legitimate relators who are the original source of the

information. Congress carefully calibrated § 3730(e)(4) so that it excludes

relators when publicly disclosed information was already sufficient to put the

government on the trail of the fraud, but then retains jurisdiction for those relators

whose suits were based on their own direct or independent knowledge. This

original source exception acknowledges that not every relator whose suit would

be barred by the public disclosure bar is a parasite. Often, the suit is the result of

their own independent information. Allowing an original source to bring an

action even when the government should be on notice of the fraud serves the

-15-
purposes of the FCA by increasing valid enforcement actions. The government

could lack the resources (or, indeed, the political will) to pursue a claim, even if

it has been set on its trail. The government might lack sufficient evidence of its

own to win in court. In these cases, qui tam suits provide a valuable way to deter

false claims and compensate the government for its lost revenue. So long as the

relator can meet the original source standard of § 3730(e)(4)(B), he can proceed

with his suit and further the goal of citizen-assisted enforcement.

The first-to-file bar, in contrast, lacks an original source exception. If we

broadened the first-to-file bar to reach all pending actions that would qualify as

public disclosures, we would obliterate the original source exception whenever

the public disclosure is a pending qui tam suit. Congress specifically identified

allegations disclosed in civil hearings as public disclosures that are subject to the

original source exception. To remove the original source exception whenever the

civil hearing is the result of a qui tam suit would remove jurisdiction from a

significant swath of non-opportunistic claims. We would lose the value of valid

enforcement action in the process, and false claims would go unremedied.

Requiring a common identity between defendants when applying the first-

to-file bar makes more sense within the overall structure of the FCA. While the

bar does eliminate opportunistic relators, most of these relators would be

eliminated by the public disclosure bar anyway. Its true value lies in protecting

the recovery of the first relator who files, even when other legitimate relators

-16-
might exist with direct and independent knowledge of their own. This maintains

the monetary incentive to bring a qui tam action by avoiding division of the

spoils. It also encourages a relator to hurry up and file. When the pending action

is against an entirely different defendant, however, the two relators are not

fighting over the same spoils. The first relator’s recovery remains unaffected

whether the second relator files or not. If that second relator brings nothing to the

table that the first suit had not already offered, then his suit will be barred under

the public disclosure bar; otherwise, the purposes of the FCA are best vindicated

by allowing his suit to proceed.

The fact that § 3730(b)(5) applies only when another qui tam action is

“pending” makes a notice-based standard even more dubious. If the first-to-file

bar had been meant simply as a more draconian public disclosure bar, Congress

would not have limited it to “pending” actions. While filing the complaint might

put the government on notice, and while the government might remain on notice

while the action is pending, the government does not cease to be on notice when a

relator withdraws his claim or a court dismisses it. And yet, if that prior claim is

no longer pending, the first-to-file bar no longer applies. The “pending”

requirement much more effectively vindicates the goal of encouraging relators to

file; it protects the potential award of a relator while his claim remains viable,

but, when he drops his action another relator who qualifies as an original source

-17-
may pursue his own.

The disparate methodologies that courts use to analyze the two bars shows

a further difference. The first-to-file bar is designed to be quickly and easily

determinable, simply requiring a side-by-side comparison of the complaints. See

Grynberg, 390 F.3d at 1279; United States ex rel. LaCorte v. SmithKline Beecham

Clinical Labs., Inc., 149 F.3d 227, 235 n.6 (3d Cir. 1998) (“Because we may

decide whether the later complaints allege the same material elements as claims in

the original lawsuits simply by comparing the original and later complaints,

further factual development is unnecessary.”). The public disclosure bar, in

contrast, will often require the court to look beyond the face of the public

disclosure itself. When a court determines whether a disclosure was sufficient to

put the government on the trail of the fraud, it considers not only what was said in

the disclosure, but also whether the government had the ability to then investigate

the potential fraud. The nature of the relationship between the government and

the defendants, the level of oversight exercised by the government, and the

number of potential wrongdoers will be relevant to the government’s ability to

uncover the fraud and will rarely be evident on the face of the disclosure itself.

See, e.g., In re Natural Gas Royalties Qui Tam Litigation, No. 06-8099, at 14–15.

If we were to adopt the same notice-based standard for the first-to-file bar that we

use for the public disclosure bar, we would also have to change the way courts

examine first-to-file challenges. Doing so would add cost and time to what

-18-
should be a straightforward process.

III. Conclusion

While the allegations in the Coalition complaint might have been sufficient

to put the government on notice of the fraud that Mr. Grynberg alleges against

Exxon, ARCO, Oxy-USA, and Cross Timbers, that complaint did not name any of

these parties as defendants. This is so even though the Coalition complaint

specifically identified Exxon and Arco, for without naming them as defendants,

the two actions cannot be said to state the same essential claim. Mr. Grynberg’s

current claims might have trouble surmounting § 3730(e)(4)’s public disclosure

bar, but they are not barred by § 3730(b)(5)’s first-to-file bar. We REVERSE the

district court’s dismissal for lack of jurisdiction as to Exxon, ARCO, Oxy-USA,

and Cross Timbers, and REMAND for further proceedings not inconsistent with

this opinion.

-19-