United States Court of Appeals
For the Eighth Circuit
___________________________
No. 13-2759
___________________________
United States ex rel. James Kraxberger
lllllllllllllllllllll Plaintiff - Appellant
v.
Kansas City Power and Light Company
lllllllllllllllllllll Defendant - Appellee
____________
Appeal from United States District Court
for the Western District of Missouri - Kansas City
____________
Submitted: April 17, 2014
Filed: June 27, 2014
____________
Before RILEY, Chief Judge, BENTON and KELLY, Circuit Judges.
____________
BENTON, Circuit Judge.
James M. Kraxberger brought a False Claims Act (FCA) qui tam action against
Kansas City Power and Light Company. KCP&L, Kraxberger claims, fraudulently
induced the General Services Administration to install an all-electric heating-and-
cooling system at the Richard Bolling Federal Building. The district court1 initially
dismissed some of Kraxberger’s claims based on the FCA’s public disclosure bar. It
granted KCP&L summary judgment on another claim. Kraxberger appeals. Having
jurisdiction under 28 U.S.C. § 1291, this court affirms.
I.
The Bolling Building was historically heated with steam, and cooled with
chilled water, provided by Trigen-Kansas City Energy Corporation. In 2005, GSA
considered installing an all-electric heating-and-cooling system from KCP&L.
KCP&L promised GSA a discounted all-electric rate. KCP&L’s electricity rates are
regulated by the Missouri Public Service Commission (PSC). As part of its proposal
to GSA, KCP&L performed a building life cycle cost (BLCC) analysis. This
analysis—delivered in February 2006—assumed a 7% increase in future rates,
although PSC testimony from January 2006 showed that KCP&L had proposed an
11.5% increase. Wooing GSA, KCP&L gave Royals and Chiefs tickets to three GSA
employees, provided benefits for some employees at a golf tournament, gave a $50
Target gift card to an employee as a wedding present, and paid some expenses on an
employee’s business trip.
Trigen responded. In an October 4, 2006 letter, it warned GSA that any
discount KCP&L offered was subject to regulation. On October 26, Trigen’s counsel
submitted a Freedom of Information Act (FOIA) request to GSA for all documents
about bids or proposals to provide services at the Bolling Building. GSA’s response
included Trigen’s letter and a document showing estimated savings from switching
to the KCP&L system.
1
The Honorable Fernando J. Gaitan, Jr., United States District Judge for the
Western District of Missouri.
-2-
Despite Trigen’s warning, a committee of 15 GSA employees chose to install
electric boilers and chillers in the Bolling Building. In 2007—at Trigen’s
urging—the PSC limited KCP&L’s all-electric rate only to customers currently
receiving the rate. The Bolling Building was excluded from the all-electric rate (the
boilers were not completely installed). KCP&L protested. At a PSC hearing in 2008,
a KCP&L manager testified that “GSA made financial decisions” based on the all-
electric rate, and that the “life-cycle-cost-analysis performed as part of GSA’s
financial decision making process used the all-electric/space-heating rate.” Both the
2006 and 2008 PSC testimony are available on the PSC website. The Bolling
Building never received the all-electric rate.
Though not a GSA employee himself, Kraxberger worked on the boilers at the
Bolling Building. He discussed KCP&L with GSA employees and contractors. His
father, a former GSA employee, gave him a copy of the Trigen letter. In 2011,
Kraxberger sued KCP&L as a qui tam relator under 31 U.S.C. §§ 3729-30, claiming
that KCP&L (1) used false projections in the BLCC analysis, (2) fraudulently
promised GSA the all-electric rate, and (3) falsely filed a certification stating that no
gratuities had been given. The district court dismissed the BLCC and false-rate
claims as publicly disclosed by the FOIA request and PSC testimony. It granted
KCP&L summary judgment on the gratuities claim, finding inapplicable the
regulations Kraxberger cites. This court reviews both the dismissal and the grant of
summary judgment de novo. See United States ex rel. Raynor v. National Rural
Utils. Coop. Fin., Corp., 690 F.3d 951, 954 (8th Cir. 2012); Wenzel v.
Missouri-American Water Co., 404 F.3d 1038, 1039 (8th Cir. 2005).
II.
The False Claims Act directs a court to “dismiss an action or claim under this
section . . . if substantially the same allegations or transactions as alleged in the action
-3-
or claim were publicly disclosed.” 31 U.S.C. § 3730(e)(4)(A).2 Public disclosure
may be through a “Federal report, hearing, audit, or investigation.” Id. A “written
agency response to a FOIA request falls within the ordinary meaning of ‘report.’”
Schindler Elevator Corp. v. United States ex rel. Kirk, 131 S. Ct. 1885, 1893 (2011).
Kraxberger argues that Schindler should be limited to FOIA requests made by the
relator himself or “disclosed in the media or otherwise.” In Schindler, the Supreme
Court disagreed: “We also are not concerned that potential defendants will now
insulate themselves from liability by making a FOIA request for incriminating
documents. This argument assumes that the public disclosure of information in a
written FOIA response forever taints that information for purposes of the public
disclosure bar. . . . [I]t may be that a relator . . . qualifies for the ‘original source’
exception.” Id. at 1895 (footnote omitted). The Trigen letter and other documents
disclosed by GSA in response to counsel’s FOIA request qualify as public disclosure
under Schindler.
Public disclosure may also be through the “the news media.” 31 U.S.C. §
3730(e)(4)(A). “News media” is not defined in the FCA, though the Supreme Court
has acknowledged the term has a “broad sweep.” See, e.g., Schindler, 131 S. Ct. at
1891 (“The other sources of public disclosure in § 3730(e)(4)(A), especially ‘news
media,’ suggest that the public disclosure bar provides ‘a broa[d] sweep.’”), quoting
Graham Cnty. Soil & Water Conservation Dist. v. United States ex rel. Wilson, 559
U.S. 280, 290 (2010) (“The ‘news media’ referenced in [the public disclosure bar]
plainly have a broa[d] sweep.”). Here, the PSC functions as a news organization for
public utilities and consumers in Missouri. The PSC maintains a “media center”
hosting press releases, webcasts of public meetings, and the “PSConnection
Magazine” (reporting news and promotions related to public utilities). See Section
386.180 RSMo (“The publications commission shall also from time to time select and
2
At Kraxberger’s urging, this court assumes, without deciding, that the current
version of the FCA applies.
-4-
designate such other works, papers or studies of the public service commission
relating to the field of public utilities regulation that may in the judgment of the
publications commission be of interest to the public and cause same to be published
in pamphlet, book, or electronic form.”). Cf. 5 U.S.C. § 552 (defining “a
representative of the news media” as “any person or entity that gathers information
of potential interest to a segment of the public, uses its editorial skills to turn the raw
materials into a distinct work, and distributes that work to an audience”). The 2006
and 2008 hearing testimony, publicly available on the website of the PSC, qualify as
disclosure through the news media. See generally United States ex rel. Doe v.
Staples, Inc., 932 F. Supp. 2d 34, 40 (D.D.C. 2013) (“Courts . . . have construed the
term ‘news media’ to include readily accessible websites.”); United States, ex rel.
Osheroff v. HealthSpring, Inc., 938 F. Supp. 2d 724, 732-33 (M.D. Tenn. 2013)
(noting that “many court[s] have held that information on readily accessible public
websites constitutes public disclosure”).
The PSC testimony and the documents in GSA’s response to counsel’s FOIA
request disclose “substantially the same” allegations as Kraxberger’s BLCC and
false-rate claims. See 31 U.S.C. § 3730(e)(4)(A). The PSC testimony shows the
11.5% proposed rate increase, GSA’s reliance on the discounted all-electric rate, and
its use of the BLCC analysis. The documents in GSA’s response to counsel’s FOIA
request show the 7% rate increase used in the BLCC analysis and warn that KCP&L’s
rates are subject to regulation. Since Kraxberger’s allegations were publicly
disclosed, Kraxberger’s claim succeeds only if he is an “original source” who has
“knowledge that is independent of and materially adds to the publicly disclosed
allegations.” 31 U.S.C. § 3730(e)(4)(B). See Minnesota Ass’n of Nurse Anesthetists
v. Allina Health Sys. Corp., 276 F.3d 1032, 1045 (8th Cir. 2002) (following the
majority view that “a qui tam suit is ‘based upon’ a public disclosure whenever the
allegations in the suit and in the disclosure are the same, ‘regardless of where the
relator obtained his information’”), quoting United States ex rel. Doe v. John Doe
Corp., 960 F.2d 318, 324 (2d Cir. 1992).
-5-
In his BLCC claim, Kraxberger alleges that KCP&L’s analysis did not include
the correct rate increase, and that GSA relied on the BLCC analysis. Both the
proposed rate increase and GSA’s reliance on the BLCC analysis were discussed in
the PSC testimony. The rate actually used in the BLCC analysis was included in
GSA’s response to counsel’s FOIA request. In his false-rate claim, Kraxberger
identifies “core material misrepresentation regarding electric rates.” He says, “Trigen
protested, in October of 2006, that KCP&L could not give the GSA . . . the rate
KCP&L was promising and explained they were regulated by the [PSC].” He notes
that “Trigen’s prophecy about the electric rates turned out to be correct.”
Kraxberger’s information about the false-rate claim is essentially the Trigen letter.
Even assuming his knowledge is independent of the PSC testimony and GSA’s
response to the FOIA request, he does not materially add to what was publicly
disclosed. See 31 U.S.C. § 3730(e)(4)(B); United States ex rel. Rabushka v. Crane
Co., 40 F.3d 1509, 1514 (8th Cir. 1994) (applying the public disclosure bar “when the
essential elements comprising that fraudulent transaction have been publicly
disclosed so as to raise a reasonable inference of fraud”).
The district court did not err in dismissing the BLCC analysis and false-rate
claims.
III.
For the gratuities given to GSA employees, Kraxberger invokes two Federal
Acquisition Regulations (FARs):
FAR § 52.203-3, 48 C.F.R. § 52.203-3, Gratuities
The right of the Contractor to proceed may be terminated by written
notice if . . . the Contractor, its agent, or another representative . . .
-6-
[o]ffered or gave a gratuity (e.g., an entertainment or gift) to an officer,
official, or employee of the Government.
FAR § 52.203-11 (2003), 48 C.F.R. § 52.203-11 (2003), Certification
and Disclosure Regarding Payments to Influence Certain Federal
Transactions
The offeror, by signing its offer, hereby certifies to the best of his or her
knowledge and belief that . . .
(1) No Federal appropriated funds have been paid or will be paid to any
person for influencing or attempting to influence an officer or employee
of any agency . . . in connection with the awarding of any Federal
contract . . . .
(2) If any funds other than Federal appropriated funds . . . have been
paid, or will be paid, to any person for influencing or attempting to
influence an officer or employee of any agency . . . in connection with
this solicitation, the offeror shall complete and submit . . . OMB
standard form LLL, Disclosure of Lobbying Activities.
Kraxberger appears to advance several liability theories: (1) the gifts are
gratuities, and GSA should have rescinded the contract under § 52.203-3, (2) the gifts
are lobbying, and KCP&L should have disclosed its employees as lobbyists under §
52.203-11, (3) the gifts are payments for lobbying, and GSA’s own employees are
lobbyists who KCP&L should have disclosed under § 52.203-11, and (4) the gifts are
bribes, and this is a “fraud-in-the-inducement” case.
First, Kraxberger raises FAR § 52.203-3 as a basis for liability. The regulation
gives GSA discretion to cancel a contract if a gratuity is given. Kraxberger believes
that GSA should have cancelled the contract, and that GSA’s decision to proceed
makes KCP&L liable under the FCA. Yet, he identifies no evidence that GSA’s own
regulatory procedures insufficiently dealt with the gratuities. GSA knew about
-7-
many—if not all—of the gratuities. It chose to proceed with the contract because it
believed the KCP&L system would save it money. See United States ex rel. Vigil v.
Nelnet, Inc., 639 F.3d 791, 799 (8th Cir. 2011) (finding that “it would ‘be curious to
read the FCA, a statute intended to protect the government’s fiscal interests, to
undermine the government’s own regulatory procedures’”), quoting United States ex
rel. Conner v. Salina Reg’l Health Ctr., Inc., 543 F.3d 1211, 1222 (10th Cir. 2008);
Francis E. Heydt Co. v. United States, 948 F.2d 672, 673-74 (10th Cir. 1991)
(discussing agency decision to cancel a contract under FAR § 52.203-3).
Second, Kraxberger claims that the gifts are lobbying, and KCP&L’s
employees are lobbyists who should have been disclosed under the § 52.203-11
certification. A false certification may support liability under the FCA. See Harrison
v. Westinghouse Savannah River Co., 176 F.3d 776, 786 (4th Cir. 1999). Yet,
Kraxberger himself cites to § 52.203-3 as the remedy for gratuities, covering both
sports tickets as “entertainment” and other gratuities as “gifts.” Even ignoring §
52.203-3, Kraxberger does not show that § 52.203-11 is relevant here. Section
52.203-11(1) does not apply since Kraxberger does not show that KCP&L used
Federal appropriated funds to purchase the gratuities or pay the employees
negotiating with GSA. See 48 C.F.R. 52.203-12 (“To the extent the Contractor can
demonstrate that the Contractor has sufficient monies, other than Federal appropriated
funds, the Government will assume that these other monies were spent for any
influencing activities that would be unallowable if paid for with Federal appropriated
funds.”). Section 52.203-11(2) does not apply since Form-LLL is for disclosing
registered lobbyists, not employees negotiating a contract. See Form SF-LLL,
Disclosure of Lobbying Activities (disclosing “the full name . . . of the lobbying
registrant under the Lobbying Disclosure Act of 1995 engaged by the reporting
entity”); 31 U.S.C. § 1352(d)(2)(A) (exempting “payments of reasonable
compensation made to regularly employed officers or employees” from lobbying
disclosure).
-8-
Third, Kraxberger argues that the gifts are payments for lobbying, making
GSA’s own employees KCP&L lobbyists who should have been disclosed under §
52.203-11. This stretches the FAR too far, making any § 52.203-3 gratuity a
payment, and any recipient a lobbyist. It requires believing that GSA’s own
employees should be considered registered lobbyists to whom Form-LLL applies, and
that KCP&L knew it was paying lobbyists and fraudulently failed to amend the §
52.203-11 certification.
Fourth, Kraxberger believes that the gifts are outright bribes and this should
be analyzed as “fraud-in-the-inducement.” This requires Kraxberger to identify
evidence showing that the gratuities were “material . . . to [GSA’s] decision” and
“caused the government to pay out money.” Harrison, 176 F.3d at 788-89 (analyzing
fraud-in-the-inducement under the FCA). Yet, Kraxberger’s evidence shows that
GSA decided to contract with KCP&L because it would save money. Indeed,
Kraxberger attempts to prove this in his BLCC and false-rate claims, arguing that the
BLCC analysis and rate promise were crucial to GSA’s decision. Even assuming that
gratuities given to several members of a 15-person committee were influential,
Kraxberger identifies no evidence that GSA’s own regulatory controls were
insufficient to deal with that influence and that GSA abused its discretion by
proceeding with the contract under § 52.203-3.
The district court did not err in granting KCP&L summary judgment on the
gratuities claim.
IV.
Kraxberger alleges several procedural errors. He claims that the district court
erred by allowing KCP&L to assert the public disclosure bar after its initial answer,
to violate the scheduling order, to submit documents with its motion to dismiss, and
to hide the intended use of these documents. This court reviews de novo the district
-9-
court’s interpretation of the Federal Rules of Civil Procedure. Kuelbs v. Hill, 615
F.3d 1037, 1041 (8th Cir. 2010). District court discovery decisions are reviewed for
abuse of discretion. Sentis Group, Inc. v. Shell Oil Co., 559 F.3d 888, 899 (8th Cir.
2009). “A district court has very wide discretion in handling pretrial discovery and
[this court is] most unlikely to fault its judgment unless, in the totality of the
circumstances, its rulings are seen to be a gross abuse of discretion resulting in
fundamental unfairness in the trial of the case.” Voegeli v. Lewis, 568 F.2d 89, 96
(8th Cir. 1977).
Kraxberger argues that KCP&L raised public disclosure as an “unfair surprise.”
Kraxberger claims it is an affirmative defense that should have been in KCP&L’s
answer. See Fed. R. Civ. P. 8(c) (“In responding to a pleading, a party must
affirmatively state any avoidance or affirmative defense.”). Kraxberger’s only
authority that a statutory direction to dismiss is an affirmative defense is United
States ex rel. Jamison v. McKesson Corp., 649 F.3d 322 (5th Cir. 2011). There, the
court considered a prior version of the FCA, where public disclosure was a
jurisdictional bar. It noted that the FCA did not place a burden on relators to “prove
a negative: that there are no public disclosures of allegations or transactions upon
which his action is based.” Jamison, 649 F.3d at 327. Here, Kraxberger was never
required to prove a negative. KCP&L raised public disclosure in a motion to dismiss.
Even if public disclosure were an affirmative defense, “technical failure to
comply with Rule 8(c) is not fatal” when the defense “is raised in the trial court in a
manner that does not result in unfair surprise.” First Union Nat’l. Bank v. Pictet
Overseas Trust Corp., Ltd., 477 F.3d 616, 622 (8th Cir. 2007), quoting Financial
Timing Publ’ns, Inc. v. Compugraphic Corp., 893 F.2d 936, 944 n.9 (8th Cir. 1990).
Here, KCP&L raised public disclosure over a month before trial was to begin. See
First Union, 477 F.3d at 623 (one month’s notice “sufficient to preclude unfair
surprise”), citing Grant v. Preferred Research, Inc., 885 F.2d 795, 797-98 (11th Cir.
1989).
-10-
According to Kraxberger, KCP&L’s motion to dismiss violated the district
court’s scheduling order. KCP&L submitted the motion to dismiss on June 20. The
scheduling order states, “All other motions, except those which, under Rule 12(h)(2)
. . . may be made at any time . . . shall be filed . . . no later than April 11.” Rule
12(h)(2) states, “Failure to state a claim upon which relief may be granted . . . may be
raised . . . at trial.” KCP&L’s motion invoking the public disclosure bar, and moving
to dismiss for failure to state a claim, was raised well before trial. The district court
did not err in considering KCP&L’s motion to dismiss.
Kraxberger contends that KCP&L abused discovery by submitting documents
in its motion to dismiss, ignoring Rule 12(d). But, in a motion to dismiss, a court may
consider “matters incorporated by reference or integral to the claim, items subject to
judicial notice, [and] matters of public record.” Miller v. Redwood Toxicology Lab.,
Inc., 688 F.3d 928, 931 n.3 (8th Cir. 2012). Since the FCA requires a court to
dismiss a claim based on public disclosure, a court necessarily considers the alleged
public documents in its dismissal. See 31 U.S.C. § 3730(e)(4). Cf. Kushner v.
Beverly Enters., Inc., 317 F.3d 820, 831 (8th Cir. 2003) (in a motion to dismiss, a
court may consider documents “alleged in [the] complaint and whose authenticity no
party questions”), quoting In re Syntex Corp. Sec. Litig., 95 F.3d 922, 926 (9th Cir.
1996); Stahl v. United States Dep’t of Agric., 327 F.3d 697, 700 (8th Cir. 2003) (“In
a case involving a contract, the court may examine the contract documents in
deciding a motion to dismiss.”). The documents KCP&L cites in its motion are
integral to the claim, subject to judicial notice, matters of public record, or evidence
of public disclosure the court properly considered under 31 U.S.C. § 3730(e)(4).
Kraxberger contends KCP&L violated the “spirit” of Rule 26 by not disclosing
documents in a FOIA request by KCP&L. Kraxberger had previously received these
documents, but complains that those he received were unredacted and not identified
as the response to a FOIA request. Kraxberger does not indicate what he would gain
by asking a witness about the FOIA request. The district court did not abuse its
-11-
discretion in considering KCP&L’s documents. See Fed. R. Civ. P. 26(e) (requiring
supplemental disclosure when “the additional or corrective information has not
otherwise been made known to the other parties during the discovery process”).
The district court did not grossly abuse its discretion or make pretrial
proceedings fundamentally unfair to Kraxberger. Voegeli, 568 F.2d at 96. On the
merits, the district court properly dismissed the BLCC and false-rate claims as
publicly disclosed. The district court correctly granted summary judgment on the
gratuities claim.
*******
The judgment is affirmed.
______________________________
-12-