United States Ex Rel. Little v. Shell Exploration & Production Co.

Case: 14-20156 Document: 00512945301 Page: 1 Date Filed: 02/23/2015

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit

FILED
February 23, 2015
No. 14-20156 Lyle W. Cayce
Clerk

UNITED STATES OF AMERICA, ex rel; RANDALL L. LITTLE; JOEL F.
ARNOLD,

Plaintiffs-Appellants,
v.

SHELL EXPLORATION; PRODUCTION COMPANY; SHELL DEEPWATER
DEVELOPMENT SYSTEMS, INCORPORATED; SHELL OFFSHORE,
INCORPORATED,

Defendants-Appellees.

Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:07-CV-871

Before DAVIS, WIENER, and HAYNES, Circuit Judges.
W. EUGENE DAVIS, Circuit Judge: *
In this case under the False Claims Act (“FCA”), 31 U.S.C. § 3729 et seq.,
we previously reversed the district court’s grant of summary judgment in favor
of Defendants-Appellees Shell Exploration & Production Company, Shell
Deepwater Development Systems, Inc., and Shell Offshore, Inc. (collectively
“Shell”). 1 Relevant to this appeal, we concluded in our earlier opinion that the

* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.

1 See Little v. Shell Exploration & Prod. Co., 690 F.3d 282 (5th Cir. 2012).
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No. 14-20156
district court had “applied an overly broad definition of [public] disclosure” to
determine that the fraudulent scheme alleged by Relators-Appellants Randall
F. Little and Joel F. Arnold (“Relators”) was barred because of previous public
disclosures, primarily regulatory proceedings and lawsuits. We remanded the
case for the district court to apply the more narrow standards set out in our
opinion. 2 On remand, Shell filed a re-urged motion for summary judgment,
which the district court granted nearly one year later in a five-page opinion. 3
Relators appeal from the district court’s final judgment dismissing their
claims with prejudice. 4 For the reasons set out below, we conclude that there
is no evidence of public disclosure, so we reverse the district court’s judgment,
remand this action, and direct the Chief Judge of the Southern District of
Texas to reassign the case to a different district judge.
I. FACTS
In the prior appeal, we set out the basic facts as follows:
In early 2006, relators Randall Little and Joel Arnold
filed two qui tam suits against Shell in the Western
District of Oklahoma. They alleged that Shell had
defrauded the U.S. Department of the Interior of at
least $19 million. Specifically, they charged that from
October 2001 through 2005, Shell had deprived the
United States of royalties by taking unauthorized
deductions for expenses to gather and store oil on
twelve of its offshore drilling platforms.

At the time their suits were filed, Little was a Senior
Auditor and Arnold a Supervisory Auditor for the
Minerals Management Service (MMS), an agency
within the Department of the Interior that

2 Id. at 293-94.
3 Little v. Shell Exploration & Prod. Co., No. CIV.A. H-07-871, 2014 WL 869326 (S.D.
Tex. Mar. 5, 2014) (hereinafter “Second District Court Opinion”).
4 The district court had federal question jurisdiction under 28 U.S.C. §§ 1331 and

1345, and we have jurisdiction over this appeal from a final judgment under 28 U.S.C. § 1291.

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administered Shell’s leases. . . .

The cases were transferred from Oklahoma to the
Southern District of Texas on March 2, 2007, and
consolidated there by the parties’ joint request. See 28
U.S.C. § 1404(a); Fed. R. Civ. P. 42(a).

In April 2011, the district court granted summary
judgment to Shell on the ground that two distinct
False Claims Act provisions prohibited the suit:
Section 3730(b)(1), describing who may bring suit, and
the public disclosure bar contained in Section
3730(e)(4)(A), (B). 5

We reversed on both grounds. First, we concluded that the FCA did not
prohibit government employees from filing qui tam actions. 6 Second, we
concluded that the district court erred by applying an overly broad standard
for “public disclosure” and remanded for a redetermination. 7 Because this
appeal largely concerns whether the district court failed to follow our mandate
on remand with respect to the public disclosure issue, it is worth setting out
the previous panel’s analysis of this issue under 31 U.S.C. § 3730(e)(4), starting
with the public disclosure bar itself:
(4)(A) No court shall have jurisdiction over an action
under this section based upon the public disclosure of
allegations or transactions in a criminal, civil, or
administrative hearing, in a congressional,
administrative, or Government Accounting Office
report, hearing, audit, or investigation, or from the
news media, unless the action is brought by the
Attorney General or the person bringing the action is
an original source of the information.

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

5 Little, 690 F.3d at 284-85 (footnote omitted).
6 Id. at 286-92.
7 Id. at 294.

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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. 8

We explained that, “[o]n summary judgment, the opposing party must
first identify ‘public documents that could plausibly contain allegations or
transactions upon which the relator’s action is based.’” 9 If such putative
disclosures are identified, “the relator must put forth ‘evidence sufficient to
show that there is a genuine issue of material fact as to whether his action was
based on those public disclosures.’” 10
In its motion for summary judgment, Shell designated
five categories of evidence: (1) civil proceedings, (2)
news media accounts, (3) two published articles, (4)
certain communications between the company and
MMS, and (5) a 2002–2003 audit. This is the full
universe of materials appropriately under
consideration. See id. On appeal, the parties’ chief
focus has been category one. Specifically it consists of
three prior False Claims Act cases, as well as several
administrative decisions. 11

We noted that, if Relators were correct that the fourth and fifth categories
(certain communications and an audit) had never been publicly disseminated,
“then they would not be proper subjects for analysis.” 12 We also concluded that
Relators cannot be original sources for purposes of the public disclosure bar,

8 31 U.S.C. § 3730(e)(4) (2006).
9 690 F.3d at 292 (quoting U.S. ex rel. Jamison v. McKesson Corp., 649 F.3d 322, 327
(5th Cir. 2011)).
10 Id. (quoting McKesson, 649 F.3d at 327).
11 Id.
12 Id. at 292 (citing United States ex rel. Reagan v. E. Tex. Med. Ctr., 384 F.3d 168,

175-76 (5th Cir. 2004), and Webster’s Third New International Dictionary 1836 (1993)
(defining “public” as “exposed to general view”)).

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before we moved on to the central questions, which remain at issue in this
appeal:
The remaining questions thus are “1) whether there
has been a ‘public disclosure’ of allegations or
transactions, [and] 2) whether the qui tam action is
‘based upon’ such publicly disclosed allegations.”
McKesson, 649 F.3d at 327 (quotation marks and
citation omitted). We have held that “the publicly
disclosed allegations or transactions need only be as
broad and as detailed as those in the relator’s
complaint.” Id. In McKesson, we found sources such as
a restatement of the applicable law and “general
statements that [a type of] fraud is ‘proliferating’“
inadequate to trigger the disclosure bar on their own.
Id. at 329–30. The bar applied only because the
complaint at issue “described various fraudulent
schemes only generally” and was devoid of “particular
allegations against any defendant.” Id. at 328, 330–
31. 13

We found that the district court had failed to examine Relators’
complaint at the appropriate level of detail:
By contrast, the complaint here identifies Shell by
name, gives a specific time period, and offers details
about the scheme. When specifics are alleged, it is
crucial to consider whether the disclosures correspond
in scope and breadth. A guiding query is whether “one
could have produced the substance of the complaint
merely by synthesizing the public disclosures’
description” of a scheme. Id. at 331. Correlation in
detail is not the only question. It can be that
disclosures “provide[] specific details about the
fraudulent scheme and the types of actors involved in
it” such that the defendant’s misconduct would have
been readily identifiable. Id. at 329–30 (discussing In
re Natural Gas Royalties, 562 F.3d 1032, 1039 (10th

13 Id. at 293.

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Cir. 2009), while cautioning to use its reasoning
sparingly).

At an “irreducible minimum,” we explained, “the disclosures [must]
furnish evidence of the fraudulent scheme alleged,” and we characterized the
alleged scheme at issue in this case as “a willful violation of MMS rules and
guidelines in order to deduct the costs of gathering (or upstream costs) from
royalty-in-kind payments.” 14 We concluded that the district court failed to
apply these standards:
In granting summary judgment, the district court
relied on similarities between what was publicly
disclosed and what was stated in the complaint:

For an action to be based on public
disclosure, the disclosure and the factual
basis of the suit need not be identical.
Rather, the public disclosure must have
been sufficient for the government to find
related frauds, even though the
circumstances of the transactions may
differ.

Little and Arnold say that Shell
fraudulently deducted oil transportation
costs on the Mineral Management
Service’s Form 2014s for specific oil leases
from October 2001 through December
2005. The record shows that the earlier,
notorious claims are parallel to the
auditors’ suit. Little and Arnold complain
by merely applying public information—in
both senses—to specific leases that they
investigated for the government.

Little and Arnold admit as much in their

14 Id. (citing United States ex rel. Maxwell v. Kerr-McGee Oil & Gas Corp., 540 F.3d
1180, 1187 (10th Cir. 2008)).

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response to Shell: “The cases listed by
Shell identify wrongful acts committed by
several petroleum companies, in different
time periods, on different leases, and for
different products.” Changing 2005 to
2006, carbon dioxide to gas, on-shore to
off-shore, tract A to tract B, and Shell for
Exxon do[es] not change the mechanism of
the fraud or the obviousness that the
question would potentially apply to every
operator of a federal lease. Lower payment
of royalties are identical from deducting
transportation costs.

The district court’s ultimate conclusion about public
disclosure could be correct, but the court applied an
overly broad definition of such disclosure. The district
court’s listing of what had to be changed from the
publicly disclosed information to what is in the
complaint cuts against the conclusion that the
complaint is based on the disclosures. It is not
apparent from the district court’s analysis that Little
and Arnold “could have produced the substance of the
complaint merely by synthesizing the public
disclosures’ description of” the scheme. McKesson, 649
F.3d at 331. 15

Given these deficiencies, we remanded for the district court “to
reexamine the summary judgment evidence” and address specific issues:
The district court should determine whether the public
disclosures identified in the motion for summary
judgment reveal either (i) that Shell was deducting
gathering expenses prohibited by program
regulations, or (ii) that this type of fraud was so
pervasive in the industry that the company’s scheme,
as alleged, would have been easily identified. 16

15 Id. at 293-94.
16 Id. at 294 (citing McKesson, 649 F.3d at 329).

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We remanded in 2012, and Shell filed a renewed motion for summary
judgment on March 29, 2013, which remained on the docket for nearly a year
before the district court again granted summary judgment, dismissing all of
the relators’ claims with prejudice. The court’s five-page opinion on summary
judgment again found that Relators’ claims were precluded by the public
disclosure bar. 17 Relators appealed, contending that the district court ignored
the Fifth Circuit’s mandate on remand and erred in dismissing their claim on
summary judgment. They also seek to have the case reassigned to a different
district judge.
II. LAW AND ANALYSIS
A. The District Court Disregarded Our Mandate.
Relators contend that the district court disregarded our mandate on
remand and erred in granting summary judgment on the public disclosure
issue. We agree.
In its opinion on remand, the district court never cited our previous
opinion, and the only reference to it is found at the end of the Background
section:
In 2011, this court dismissed [Relators’] claims,
holding that government auditors cannot sue as
“private persons” under the False Claims Act. On
appeal, that part of this court’s decision was reversed.
On remand, the remaining issue is whether this suit
is barred because the claims were based on public
information. 18

That passage does not make clear that we also vacated the district court’s
dismissal based on the public disclosure issue and explained the legal

17 See Second District Court Opinion.
18 Id. at *1.

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standards that the district court should apply on remand.
In its analysis, the district court did not apply the more exacting legal
standards we required on remand, such as the requirement that “the publicly
disclosed allegations or transactions need only be as broad and as detailed as
those in the relator’s complaint” and the determination of “whether the
disclosures correspond in scope and breadth” to the allegations in the
complaint. 19 It also failed to address the specific questions we remanded for it
to address: “whether the public disclosures identified in the motion for
summary judgment reveal either (i) that Shell was deducting gathering
expenses prohibited by program regulations, or (ii) that this type of fraud was
so pervasive in the industry that the company’s scheme, as alleged, would have
been easily identified.” 20
Not only did the district court fail to follow these explicit instructions,
but the analysis set out in its short opinion is so broad, conclusory, and
unsupported by the summary judgment record that we are compelled to
conclude it did not comply with our instructions.
B. The District Court Erred In Granting Summary Judgment
In Favor Of Shell.
Our analysis does not end there. As we noted in our previous opinion,
the public disclosure bar is a jurisdictional challenge to an FCA claim, which
“is necessarily intertwined with the merits and is, therefore, properly treated
as a motion for summary judgment. We review a summary judgment de novo,
applying the same standard as the district court.” 21 We conclude that the
district court would have found no public disclosure and therefore would have

19 Little, 690 F.3d at 293 (quoting McKesson, 649 F.3d at 327).
20 Id. at 294 (citing McKesson, 649 F.3d at 329).
21 McKesson, 649 F.3d at 326 (internal quotation marks and citations omitted).

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denied Shell’s motion for summary judgment if it had followed our mandate.
In just over two pages, the district court separated its analysis of the
alleged public disclosures into four sections: public debate, administrative
disclosure, judicial disclosure, and government investigation. The district court
concluded that there were public disclosures in the first three categories and
reasoned that the non-public disclosures in the government investigation were
still somehow relevant to the public disclosure analysis. The district court
erred with respect to all four categories.
1. Public Debate

The district court’s entire analysis of this category is as follows:
In 1998, the United States elicited comments to clarify
the distinction between gathering and transportation.
Shell told the Minerals Management Service that it
should be able to deduct “gathering”—the cost of
moving oil to a central accumulation or treatment
station—as transportation. It also attended
conferences about classifying gathering and
transportation.

Arnold and Little say that debates before the agency’s
ruling did not disclose Shell’s later decision to deduct
its gathering as transportation. When considered in
combination with the other disclosures, it did,
however, alert the public that Shell was in a position
to deduct these costs and that it wanted to deduct
them. This disclosure alone would have allowed
anybody to write Arnold and Little’s speculative
petition, hoping discovery would confirm their
hunch. 22

This conclusion is based on a misinterpretation of the summary judgment
record and the law.

22 Second District Court Opinion at *2.

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During the public comment period in question, Shell argued that the
rules for classification of gathering costs versus transportation costs should be
changed, but MMS rejected the proposed changes and kept the language of the
rule the same, providing some additional guidance. Essentially, the district
court concluded that because Shell participated in the regulatory process in a
lawful manner to try to change the rules in its favor, the public should have
been on notice that Shell intended to act unlawfully with respect to the
resulting regulations, which remained unchanged. 23
The district court’s conclusion is incorrect. We must determine whether
there were “public disclosure of allegations or transactions” of fraud. 24 Shell’s
declaring its desire to change the law through the regulatory process was
neither an allegation nor an actual transaction of fraud. Announcing a desire
to change regulations through legal means cannot shield a party (through the
public disclosure bar) from liability for later actual fraud. Neither the district
court nor Shell has cited any legal authority for that proposition, and our
research discloses none. In sum, Shell’s ordinary participation in the
regulatory process does not constitute a public disclosure of later fraudulent
behavior.
2. Administrative Disclosure

With respect to administrative disclosure, the district court focused on
certain reports which MMS disclosed in 2002:
Shell has produced agency reports that disclose the
practice that Arnold and Little pleaded. In 2002, the
Minerals Management Service disclosed reports
showing that Shell told the United States that it

23 We recognize that, at this stage, the allegations of Shell’s fraud are just that,
allegations, so our references to Shell’s “fraud” should not be taken as a comment on the
ultimate merits of this case.
24 31 U.S.C. § 3730(e)(4) (2006).

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considered gathering transportation. The same papers
also clarified the agency’s position on what constitutes
transportation.

In 1997, the Interior Board of Land Appeals—an
administrative body that hears appeals from the
Minerals Management Service—allowed Shell to
deduct the cost of upgrading its platform to store
transportation equipment. Shell then told the agency
that it intended to deduct these capital expenses.

Arnold and Little say that this did not disclose Shell’s
deduction of gathering expenses. This was not the only
part of the practice that Arnold and Little pleaded.
They also said that Shell was improperly deducting
capital costs to improve its platforms. Because of the
1997 appeal, that practice was entirely within the
public domain. 25

The district court substantially mischaracterized Shell’s supposed
administrative disclosure. Its broad characterization of the reports disclosed in
2002 is problematic because MMS apparently disclosed a number of things in
response to a 2002 Freedom of Information Act (“FOIA”) request, including:
• the public rulemaking record for the proposed rule change discussed
above;

• an October 1999 letter to MMS in which Shell’s attorney informed
MMS that it planned to deduct transportation allowances for capital
costs consistent with a 1997 administrative decision concerning the
Auger deepwater platform, Shell Offshore Inc., 142 IBLA 71, 1997 WL
816169 (1997) (discussed below); and

• correspondence between Shell and MMS regarding the Mars
administrative decision regarding deduction of costs for subsea
movement from the Mars deepwater platform to the royalty
measurement point (discussed below).

25 Second District Court Opinion at *2.

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We have already addressed the first item, the public rulemaking record.
The correspondence from Shell to MMS regarding the Auger and Mars
decisions does not support the district court’s broad characterization that
“Shell told the United States that it considered gathering transportation.” 26
Those administrative decisions are factually inapposite to the claims asserted
by Relators in this case.
a) Relators’ Claims

At this point, it is worth examining Relators’ claims in more detail. This
consolidated case includes two complaints concerning a total of twelve discrete
leases: six leases in the first complaint, filed on February 15, 2006, and six in
the second, filed on March 14, 2006. As background, the complaints explain
that under 30 C.F.R. § 206.101, gathering costs are those concerned with the
“movement of lease production to a central accumulation or treatment point on
the lease, unit, or communitized area, or to a central accumulation or
treatment point off the lease, unit, or communitized area that BLS or MMS
approves for onshore and offshore leases, respectively.” The complaints refer
to this accumulation or treatment point as the “custody transfer point.”
The complaints allege that the federal lessee is generally responsible for
all costs of moving the oil to the custody transfer point at no cost to the
government, i.e., without deducting the gathering costs. If the oil must travel
beyond that to market, the lessee may deduct the costs associated with that
additional movement, called “transportation costs,” from the royalties.
All the leases at issue here specified that Shell was to provide a
marketable product on or immediately adjacent to the lease area at no cost to
the United States. The six leases at issue in the February 2006 complaint also

26 Id.

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provided that the government had the option to require delivery “at a more
convenient point closer to shore or on shore, in which event the lessee shall be
entitled to reimbursement for the reasonable cost of transporting the royalty
substance to such delivery point.” That alternative provision is irrelevant here
because Relators claim that for each of the twelve leases at issue, the custody
transfer point was located either on the same lease or on an adjacent lease, and
therefore all costs were non-deductible gathering costs under the lease
language and applicable law.
Both of the administrative decisions at issue on summary judgment, the
Auger and Mars decisions, 27 concerned facts substantially different from the
fraudulent scheme alleged by Relators.
b) Auger Administrative Decision

Some background to the Auger decision is necessary: Federal regulations
allow certain capital costs to be deducted from royalties owed to the
government, specifically “costs for depreciable fixed assets (including costs of
delivery and installation of capital equipment) which are an integral part of
the transportation system.” 28 All other capital costs (such as those typically
associated with a drilling platform) are non-deductible because, like gathering
costs, they are incidental to getting the oil to a marketable state.
Shell kicked off the Auger administrative process by requesting that
MMS allow it to deduct a portion of the capital costs of a floating production
platform as transportation costs in moving the minerals to an onshore
market. 29 Shell was already deducting transportation costs relating to other

27 In its opinion, the district court was apparently referring to the Auger decision, but
the Mars decision was also part of the summary judgment record, and Shell relied on it in
this appeal.
28 See 30 C.F.R. § 206.156(a) (1997) (now 30 C.F.R. § 1206.157(b)(2)).
29 See generally Shell Offshore Inc., 142 IBLA 71, 1997 WL 816169 (1997)

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parts of the transportation system, such as the gas line running from the
platform and the compressor, but Shell argued that a portion of the platform
construction cost was attributable to transportation and should therefore be
deductible.
MMS refused to allow the deduction, analogizing to Phillips Petroleum
Co., 109 IBLA 4 (1989), and The Texas Co., 64 Interior Dec. 76 (1957), which
decisions disallowed gathering costs because “the cost of gathering the gas from
the wells and transporting it to the point of sale in the field is deemed to be one
of the ordinary incidents of lease operation.” 30 Shell argued that the Auger
platform was not a typical production platform whose sole functions involved
production and gathering. Rather, Shell had needed to build the platform so
large precisely so it could accommodate machinery used to transport the
minerals to shore, and it should be able to include that additional portion of
the platform cost associated with the transportation function in its allowable
transportation costs. On appeal, the Interior Board of Land Appeals (“IBLA”)
agreed with Shell.
The IBLA concluded that the issue was ultimately a question of fact. The
parties agreed that “costs are allowable if they are attributable to an integral
part of a transportation system,” such as the gas line running from the
platform, the compressor, and associated equipment, all of which had already
been subject to cost deductions. 31 It also noted that it was agreed “that the
Auger platform would have been smaller and less costly by a specifically
calculated amount if the compressor and other transportation machinery were
not required to be there.” 32 Although “MMS has not allocated drilling platform

30 Id. at 73 (quoting The Texas Co., 64 Interior Dec. at 80).
31 Id. at 74.
32 Id.

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costs to transportation in the past, there is no showing that any prior drilling
platform, in addition to providing a place to drill, also needed to be constructed
and designed specifically to support an associated transport facility.” 33 The
IBLA distinguished this situation from the ones presented in Phillips and The
Texas Co. because “the floating platform described by Shell’s engineers is a
construction that is clearly not one of the ordinary incidents of lease operation.
It is a complex and unusual structure that must be evaluated for what it is.” 34
The word “integral,” used by the MMS rule defining
allowable capital costs, is an adjective modifying the
phrase “part of the transportation system.” . . . Given
the facts of this case, it is an inescapable conclusion
that the cost of building additional buoyancy capacity
to carry the transportation equipment fixed to the
Auger platform was incurred for transportation
purposes, and that the augmented platform buoyancy
is an integral part of the Auger gas transportation
system, the other parts of which have already been
approved for allowance by MMS. Under the cited rules
and consistent with prior cases cited by both parties,
Shell is entitled to include the cost expended on the
Auger platform needed to buoy the compressor and
other transportation equipment as a reasonable actual
transportation cost under 30 C.F.R. § 206.157(b)(2). 35

In other words, the Auger decision was premised on the fact that a
portion of the Auger platform was necessary to transport the minerals to shore,
and that portion of the platform’s capital cost integral to transportation was
deductible, to the extent other transportation costs were deductible. The IBLA
distinguished the Auger platform’s additional transportation functions from
the typical (nondeductible) production and gathering costs associated with

33 Id.
34 Id.
35 Id.

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platforms.
What the Auger decision means is that if Shell is already deducting
transportation expenses as allowed for moving minerals to market, it may also
deduct the portion of the capital costs of constructing a platform if that portion
is required for the transportation. The Auger decision does not say that Shell
may recharacterize gathering costs as transportation costs.
This action is premised on Relators’ assertion that it was impossible for
Shell to incur any transportation costs because the oil was required to be
delivered in kind at no cost to the government at the custody transfer point on
or adjacent to each lease at issue. The Auger decision specifically distinguished
the additional (deductible) transportation functions of the Auger platform from
the traditional production and gathering functions of a platform, which remain
nondeductible. Because the Auger decision only concerns properly deductible
transportation costs, it is irrelevant to the claims presented here.
The district court apparently found it significant that, following the 1997
Auger decision, Shell’s attorney wrote a letter to MMS advising it that “[b]ased
upon the previous Auger decisions of [MMS] and the IBLA, Shell intends to
take transportation allowances consistent with decisions rendered in that
matter.” Because the Auger decision did not concern the fraudulent scheme
alleged by Relators in this case, this letter showing Shell’s intention to act
consistent with the decision does not have anything to do with the scheme at
issue here. The district court found the letter significant only because the court
summarized Auger (without naming or citing it) at far too high a level of
generality, in direct violation of our previous opinion. We conclude that the
Auger decision was not a public disclosure of the scheme at issue here.

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c) Mars Administrative Decision

The district court did not mention the Mars administrative decision, but
Shell referred to it before the district court and on appeal. With respect to the
Mars proceeding, Shell was producing gas in marketable quantity at the MC
807 platform. MMS issued an order approving commingling the MC 807 block
with the WD 143 platform. That would mean that WD 143 would be set as the
royalty measurement settlement point, and Shell would be required to move
its gas approximately 60 miles from MC 807 to WD 143. Shell believed that,
given the 60-mile distance and the fact that the gas was already of marketable
quality at MC 807, it was more appropriately characterized as transportation
and not gathering, but it wanted to secure MMS’s approval to take the
transportation deduction.
In an August 25, 1999 letter from Shell to MMS, Shell clarified what it
was asking:
To clarify what Shell is requesting, we are seeking a
decision . . . only on whether the pipeline running from
Mississippi Canyon 807 (MC 807) TLP at Mars to the
West Delta 143 (WD 143) platform is eligible for
transportation allowance. No request has been made
to MMS for an MMS declaration on any line moving
from a well in one of the Mars Units to the TLP at MC
807.

That correspondence is irrelevant to this case because in the present
situation, the minerals were not moved a great distance away; indeed, Relators
specifically alleged that the minerals were produced on or adjacent to the
custody transfer point, so Shell was not entitled to deduct them as
transportation costs under the leases and applicable regulations. As the
excerpt above shows, Shell specified that it was not requesting that gathering
costs from the Mars leases to MC 807 be deducted. Thus, the Mars

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No. 14-20156
administrative decision does not constitute a public disclosure either.
d) Conclusion

In sum, neither the district court nor Shell pointed to any administrative
disclosure relevant to the scheme alleged by Relators. The district court’s and
Shell’s characterizations of the administrative proceedings were not only
overly broad but fundamentally incorrect. The Auger and Mars administrative
decisions do not concern the type of fraudulent scheme alleged by Relators and
therefore do not constitute public disclosures.
3. Judicial Disclosure

The district court also found that the fraud asserted by Relators was
publicly disclosed in three previous lawsuits:
Three previous cases publicize Shell’s deduction of
gathering costs as transportation. In 1997, it was
accused of wrongfully deducting its cost to transport
gas from leases in the Gulf of Mexico. Although this
case concerned mis-measurement of gas, it did alert
the public about Shell’s transportation deductions.

In a 2003 case, the relator accused Shell of
fraudulently deducting transportation costs. Arnold
and Little say that this only concerned costs incurred
before 1988. The 2003 petition describes, however, the
vast majority of the scheme to which Arnold and Little
object. Although it concerned different leases, the 2003
case disclosed the mechanics of Shell’s general
practice.

In 2001, Shell settled a case about underpaid royalties
from leases in the Gulf of Mexico. The court made the
settlement agreement part of the record, which
preserved for later litigation the exact scheme that
Arnold and Little pleaded. This disclosed the existence
of potential claims about Shell’s calculation of
transportation expenses for oil from the Gulf of

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Mexico. 36

None of the three cited cases constitute a public disclosure of the fraudulent
scheme alleged in this case.
a) Wright

In Wright, the relator argued that, for federal leases issued prior to
March 1, 1988, neither the leases nor the applicable statutes and regulations
permitted any costs to be deducted from the royalties owed to the government.
The arguments were primarily based on the language of those pre-1988 leases
and old statutory and regulatory law. 37 Concerning leases issued after March
1, 1988 (like the ones at issue in this case), the relator in Wright argued that
statutory law still forbade the deduction of transportation costs,
notwithstanding regulations and lease language. 38
Wright is a very broad and complicated case that the district court
mischaracterized by oversimplifying it. While it is technically true that “the
relator accused Shell of fraudulently deducting transportation costs,” 39 the
Wright relator accused nearly fifty defendants of violating the law by taking
any deduction on any federal lease at any time. The relator also covered many
other types of leases than the ones at issue here. The complaint alleged at least
four violations on each monthly form submitted in connection with “some

36 Second District Court Opinion at *2 (footnotes omitted). In a footnote, the court
cited only to the docket information, not to any particular record entry, for the three cases on
which it relied: Wright v. Chevron (No. 5:03–cv–264); United States ex rel. Johnson v. Shell
(9:96–cv–66); Grynberg v. Shell Oil Co. (No. 2:97–cv–2357). Id. at n.7.
37 See, e.g., Fourth Amended Original Complaint at ¶¶ 65-84, Wright v. Chevron USA,

Inc., No. 5:03CV264 (E.D. Tex. Mar. 4, 2004), ECF No. 465 (asserting the applicability of the
1979 version of MMS regulations to the claims presented, which all concerned pre-1988
leases).
38 See id. ¶¶ 222-228 (claiming that all deductions for transportation costs remain

forbidden under two statutes).
39 Second District Court Opinion at *3.

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25,000 or more separate producing federal and tribal Indian leases.” 40
Wright concerned whether or not any and all deductions from royalties
on federal leases were contrary to statute and thus barred forever. The instant
case concerns whether or not Shell fraudulently deducted gathering costs as
transportation costs in violation of clear law and lease terms to the contrary.
Examining the Wright allegations at the level of specificity we required on
remand, it is clear that Wright does not disclose the fraudulent scheme alleged
here and therefore was not a public disclosure. 41
b) Johnson and the 2001 Settlement Agreement

Johnson is not even superficially similar to this case, either in terms of
the fraudulent scheme or the time period. Johnson concerned an alleged
scheme occurring from 1988 through 1998 whereby Shell and others
fraudulently misreported the market value of offshore oil to pay reduced
royalties, in part by misrepresenting to MMS the amount of arm’s-length
purchases taking place at Shell’s posted prices, and without regard to whether
Shell’s posted prices were equivalent to competitors’ prices. 42
The Tenth Circuit addressed a similar public disclosure argument
concerning Johnson in United States ex rel. Maxwell v. Kerr-McGee Oil & Gas
Corp., 540 F.3d 1180 (10th Cir. 2008):
Kerr-McGee’s final argument is that the information
upon which Mr. Maxwell’s suit was based was publicly
disclosed in the course of the litigation and settlement
of United States ex rel. Johnson v. Shell Oil Co., 33 F.
Supp. 2d 528 (E.D. Tex. 1999). Johnson was a federal

40 See Fourth Amended Original Complaint, supra note 36, ¶¶ 107-109.
41 The district court stated, “Although it concerned different leases, the 2003 case
disclosed the mechanics of Shell’s general practice,” Second District Court Opinion at *2,
which is the same type of overgeneralization that we cautioned against using on remand.
42 See Complaint of the United States of America, United States ex rel. Johnson v.

Shell Oil Co., No. 9.96CV66 (E.D. Tex. Mar. 18, 1998), ECF No. 63.

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qui tam action filed against Kerr-McGee [and Shell]
for the alleged fraudulent underpayment of royalties
on federal leases covering a period from 1988 through
1998.

. . . We conclude that because Mr. Maxwell’s suit is
based upon conduct occurring after the period of time
covered in the Johnson litigation and a distinct
fraudulent scheme, Mr. Maxwell’s allegations are not
“based upon” that suit. Although we have held that a
subsequent lawsuit can be “based upon” allegations
made in a prior lawsuit even when the two suits cover
different periods of time, the “essential claim[s]” must
be substantially “similar.” The publicly filed
documents in Johnson make no mention of Texon or
the oil-for-services exchange practices at issue here.
Although the Johnson settlement did include some
Texon contracts, those contracts were not publicly
available. The general allegation that Kerr-McGee
was involved in fraudulent underpayment of royalties
for offshore oil leases is not sufficiently specific to
constitute a public disclosure because it is not in itself
“enough information to discover related frauds,” such
as the fraud underlying Mr. Maxwell’s suit. 43

The scheme alleged in this case is also sufficiently different from the scheme
at issue in Johnson to escape the public disclosure bar.
There is no summary judgment evidence to support the district court’s
conclusion that the 2001 settlement agreement in Johnson “preserved for later
litigation the exact scheme that Arnold and Little pleaded.” 44 The evidence on
which Shell relied is the following passage in the Johnson settlement
agreement:
17. The parties agree that specifically excluded from

43 540 F.3d at 1186-87 (citations omitted).
44 Second District Court Opinion at *2.

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the scope and terms of this Agreement are:

***

(m) Shell’s transportation allowances which
have not been filed for the leases listed in
Exhibit F [including one lease at issue in this
suit]; provided, however, that nothing in this
Settlement Agreement shall preclude the
Secretary from asserting any claims, actions,
lawsuits, judgments, demands, fees, obligations,
late payment interest, audits and restructured
accountings, civil monetary penalties, or other
liabilities in connection with any such
transportation allowances.

That clause does not set out the specifics of any fraudulent scheme, much less
the one at issue here. Because the scheme alleged in Johnson was unlike the
scheme alleged in this case, and thus was not itself a public disclosure, we
conclude that the vague clause in the settlement agreement also was not a
public disclosure.
c) Grynberg

Grynberg concerned mismeasurement of gas and the overestimation of
otherwise allowable transportation costs, 45 not the wrongful reclassification of
non-deductible gathering costs as deductible transportation costs at issue in
this case. It is irrelevant to the scheme at issue in this case and therefore was
not a public disclosure.
d) Conclusion

Examining the three cases cited by the district court at the appropriate
level of specificity given the details set out in the complaints in this case, we

45 Complaint, United States ex rel. Grynberg v. Shell Oil Co., No. 97-2357 (E.D. La.
July 29, 1997), ECF No. 1.

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conclude that Relators could not have synthesized the allegations in their
complaints based on those sources. The cases are simply too factually and
legally dissimilar to constitute public disclosures of the fraudulent scheme
alleged in this case.
4. Government Investigation

In our previous opinion, we noted that Shell had designated five
categories of evidence, including a 2002-2003 audit as the fifth category. 46 We
explained: “Relators contend that the information in categories four and five
was never disseminated into the public domain. If true, then they would not be
proper subjects for analysis.” 47
Despite that very clear statement, the district court reasoned on remand:
Between 2002 and 2005–the years directly preceding
the beginning of this lawsuit—the United States
investigated Shell for taking the potentially improper
deductions that Arnold and Little pleaded. The
auditors say that this is irrelevant because it was not
a public investigation. It does, however, show that the
other public disclosures—from lawsuits,
administrative investigations, and public debate—
were sufficient to alert the government about the
possibility of fraud. 48

The district court disregarded the law of the case. It should not have analyzed
those non-public disclosures in connection with the public disclosure bar.
5. Conclusion

The court summarized its reasoning as follows:
Arnold and Little object to each public disclosure
separately. Even if their objections were persuasive in

46 690 F.3d at 292.
47 Id. at 292 (citing Reagan, 384 F.3d at 175-76, and Webster’s Third New
International Dictionary 1836 (1993) (defining “public” as “exposed to general view”)).
48 Second District Court Opinion at *3.

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isolation, the disclosures considered together are
sufficient to bar this lawsuit. The public and the
government knew that Shell was in a position to
deduct these costs, had deducted them in the past,
wanted to deduct them again, and was likely
deducting them in 2006 and 2007. . . .

Because Joel F. Arnold and Randall L. Little’s
complaint could have been easily produced by
synthesizing the public descriptions of the scheme,
they will take nothing from Shell Exploration &
Production Company, Shell Deepwater Development
Systems, Inc., and Shell Offshore, Inc. 49

As shown above, the district court erred with respect to every category of
supposed public disclosures. Shell has not pointed to a single public disclosure
of the fraudulent scheme alleged in this case, and there is therefore no basis
for applying the public disclosure bar. We therefore reverse the judgment of
the district court.
C. This Case Should Be Reassigned To A Different District
Judge.
This Circuit applies two different tests in deciding whether to reassign a
case, as we discussed in In re DaimlerChrysler Corp., 294 F.3d 697 (5th Cir.
2002):
We have the power, on remand, to reassign a case to
another judge. See Johnson v. Sawyer, 120 F.3d 1307,
1333 (5th Cir. 1997) (citing, in part, 28 U.S.C. § 2106
(“[A] court of appellate jurisdiction may ... require such
further proceedings to be had as may be just under the
circumstances.”)). However, this is an “extraordinary”
power that is “rarely invoked.” Id. (quoting In Re John
H. McBryde, 117 F.3d 208, 228–29 (5th Cir. 1997)).

Other circuits have adopted two different tests to

49 Id.

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determine when a case should be reassigned to a
different judge on remand. Our circuit has declined to
decide which test we will use, and instead has
employed both tests. Before the second test was
adopted by some circuits, we cited to the original (first)
test and applied it in our opinions. The first test,
adopted by the Second, Sixth and Ninth Circuits, is as
follows:

Absent evidence of personal bias by the
trial judge, appellate courts consider three
factors in deciding whether to remand a
case to a different judge: (1) whether the
original judge would reasonably be
expected upon remand to have substantial
difficulty in putting out of his or her mind
previously-expressed views or findings
determined to be erroneous or based on
evidence that must be rejected, (2)
whether reassignment is advisable to
preserve the appearance of justice, and (3)
whether reassignment would entail waste
and duplication out of proportion to any
gain in preserving the appearance of
fairness.

Simon v. City of Clute, 825 F.2d 940, 943–44 (5th Cir.
1987) (footnote omitted) . . . . However, the District of
Columbia, Third, and Eleventh Circuits have used a
more lenient test. For example, the D.C. Circuit has
said that it will invoke the reassignment power when
the facts “might reasonably cause an objective
observer to question [the judge’s] impartiality.” United
States v. Microsoft Corp., 56 F.3d 1448, 1463 (D.C. Cir.
1995) . . . ; see also Haines v. Liggett Group, Inc., 975
F.2d 81, 98 (3d Cir.1992) (purpose of reassignment is
“to avoid both bias and the appearance of bias”),
United States v. Torkington, 874 F.2d 1441, 1446 (11th
Cir. 1989) (“Reassignment is appropriate where the
trial judge has engaged in conduct that gives rise to

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the appearance of impropriety or a lack of impartiality
in the mind of a reasonable member of the public.”).

This circuit has since cited both tests and used them
both in deciding questions of reassignment, while
expressly declining to adopt one test or the other. See,
e.g., United States v. Winters, 174 F.3d 478, 487–88
(5th Cir. 1999); Johnson, 120 F.3d at 1333. We find
that both tests are met here. 50

In DaimlerChrysler, we reassigned the case based on hostility and lack
of impartiality:
We find it necessary to order this and subsequent
cases reassigned because of the hostility demonstrated
toward the defendants in the district court’s response
to the petitions for writ of mandamus. Although it is
certainly true that the district court agreed to abide by
any ruling that this court makes, the failure of the
district court to address our earlier opinion on this
matter, and the court’s response to the mandamus
petition, convinces us that, notwithstanding all good
faith efforts on the part of the district court, it would
be exceedingly difficult for the district court to regain
some impartiality in this case. 51

In Latiolais v. Cravins, 574 F. App’x 429 (5th Cir. 2014), we reassigned
a case based on the fact that apparently “it would be exceedingly difficult for
[the presiding judge] to put aside the views he expressed about the evidence
against Cravins that we deem substantial.” Among other things, the judge
commented at trial that “[t]here is no way on God’s green earth that there has
been any testimony that should hold Donald Cravins into this case. There was
none. It was—it is not there. It’s not there. It’s clearly not there. I heard no

50 294 F.3d at 700-01.
51 Id. at 701.

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evidence, whatsoever. . . .” 52 We found that the reassignment would reduce
waste rather than create it because of the existing judge’s apparent bias.
In the prior appeal, we declined to have this case reassigned to a different
judge on remand. 53 The circumstances are now different because the district
judge disregarded our clear mandate and failed to apply the legal standards
we established in our opinion for public disclosure and to address the specific
questions we set out in that opinion. Facing a lengthy and detailed summary
judgment record, the district judge issued a five-page opinion with few
citations to either record evidence or relevant legal authority—not surprising
given that neither the summary judgment evidence nor the law support the
conclusions he reached. The opinion consists almost entirely of conclusory
statements. The district judge reached the same conclusion he reached in his
previous opinion by employing the same overly broad reasoning that we
rejected before.
We conclude under both tests set out above that this case should be
reassigned to a different district judge. Under the first test, we conclude that
(1) we reasonably expect that the current judge would have “substantial
difficulty” in setting aside his previously-expressed views, given that he failed
to follow our previous mandate and applied reasoning we rejected in the
previous appeal to reach the same erroneous conclusion; (2) reassignment
would be advisable to preserve the appearance of justice, given the long delays,
repeated errors, and cursory reasoning in the district court’s opinions to date;
and (3) reassignment would not create “waste and duplication out of proportion
to any gain in preserving the appearance of fairness,” given that this case has
now sat for more than eight years without progressing past the public

52 574 F. App’x at 437.
53 690 F.3d at 294.

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disclosure jurisdictional challenge. 54 In this case, as in Latiolais, reassignment
to a different judge should offer a reduction in waste because if we were simply
to remand, we could reasonably expect more appeals of this nature.
Under the second test, for the same reasons, we conclude that the current
district judge’s treatment of this case “might reasonably cause an objective
observer to question [the judge’s] impartiality.” 55
Accordingly, this case should be and will be reassigned to a different
district judge.
III. CONCLUSION
For the reasons set out above, we VACATE the district court’s judgment,
REMAND this action for further proceedings consistent with this opinion, and
DIRECT the Chief Judge of the Southern District of Texas to reassign the case
to a different district judge.

54 DaimlerChrysler, 294 F.3d at 700-01 (quoting Simon, 825 F.2d at 943–44).
55 Id. at 701 (quoting Microsoft, 56 F.3d at 1463).

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