F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
FEB 9 2005
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
DAVID E. RIDENOUR; JEFFREY B.
PETERS; MARK GRAF,
Plaintiffs-Appellants,
UNITED STATES OF AMERICA, ex
rel.,
Plaintiff-Appellee,
v. No. 01-1510
KAISER-HILL COMPANY, L.L.C.,
and Statutory Agent: Corporation
Services Company; WACKENHUT
SERVICES LIMITED LIABILITY
COMPANY, and Statutory Agent:
James A. Dierker; EG&G ROCKY
FLATS, INC., and Statutory Agent:
C.T. Corporation,
Defendants-Appellees.
Appeal from the United States District Court
for the District of Colorado
(D.C. No. 97-WM-2191)
Wilbert Benjamin Markovits of Markovits and Greiwe Co., L.P.A., Cincinnati,
Ohio, (Phyllis E. Brown of Copeland & Brown Co., L.P.A., Cincinnati, Ohio;
Louise Roselle of Waite, Schneider, Bayless & Chesley Co., L.P.A., of
Cincinnati, Ohio; and James J. Christoph of McCormick & Christoph, P.C.,
Boulder, Colorado, with him on the briefs) for Plaintiffs-Appellants.
Douglas N. Letter, Appellate Litigation Counsel, (Robert D. McCallum, Jr.,
Assistant Attorney General, and John W. Suthers, United States Attorney, with
him on the brief) Department of Justice, Washington, D.C., for Plaintiff-Appellee.
Gail D. Zirkelbach and Michael D. Schag of McKenna Long & Aldridge, L.L.P.,
Denver, Colorado; Gregory Kellam Scott of Kaiser-Hill Company, L.L.C.,
Golden, Colorado; Thomas J. Heiden of Miller, Canfield, Paddock & Stone,
P.L.C., Grand Rapids, Michigan, on the briefs for Defendant-Appellee Kaiser-Hill
Company, LLC.
Richard J. Webber of Arent Fox Kintner Plotkin & Kahn, P.L.L.C., Washington,
D.C.; Dennis W. Brown and Stacy A. Carpenter of Baldwin & Brown, P.C.,
Denver, Colorado, on the brief for Defendant-Appellee Wackenhut Services
Limited Liability Company.
John T. Boese and Michael J. Anstett of Fried, Frank, Harris, Shriver & Jacobson,
Washington, D.C.; and F. Gregory McKenna and Alan Epstein of Hall & Evans,
L.L.C., Denver, Colorado, on the brief for Defendant-Appellee EG&G Rocky
Flats, Inc.
Before KELLY and O’BRIEN, Circuit Judges and EAGAN 1, District Judge.
O’BRIEN, Circuit Judge.
This is a qui tam action, 2 filed under the False Claims Act (FCA), 31
1
The Honorable Claire V. Eagan, U.S. District Judge, Northern District of
Oklahoma, sitting by designation.
2
The Latin phrase “qui tam” is an abbreviation for “qui tam pro domino
rege quam pro se ipso in hac parte sequitur,” meaning, “who as well for the king
as for himself sues in this matter.” Black’s Law Dictionary 1262 (7th ed. 1999).
-2-
U.S.C. § 3729. David E. Ridenour, Jeffrey B. Peters, and Mark Graf (Relators)
contend Appellees, security providers 3 at Rocky Flats Nuclear Weapons Plant
(Rocky Flats), conspired to present for payment, knowingly presented, and were
paid for, false claims for deficient, defective, or non-existent security measures,
in violation of 31 U.S.C. § 3729(a)(1), (a)(2) and (a)(3). After declining to
intervene, the Government filed a motion to dismiss the action, which the district
court granted. United States ex rel. Ridenour v. Kaiser-Hill Co., L.L.C., 174 F.
Supp.2d 1147 (D. Colo. 2001). Relators appeal.
Relators present several issues on appeal: (1) whether the district court
applied the correct standard of review in granting the Government’s motion to
dismiss; (2) whether it erred in finding the Government met its burdens under the
applied standard; (3) whether it erred in denying Relators’ request to conduct
certain discovery in preparation for hearing on the Government’s motion to
dismiss, their request to subpoena the Government’s person most knowledgeable
about the decision to seek dismissal, and their request to inquire at the hearing
into the reasons underlying the dismissal decision; and (4) whether it erred in
allowing the Government to present evidence refuting certain of the Relators’
allegations where the parties had stipulated Relators’ claim had merit. We
3
Kaiser-Hill Company, L.L.C.; Wackenhut Services, L.L.C.; EG&G Rocky
Flats, Inc.
-3-
exercise jurisdiction pursuant to 28 U.S.C. § 1291 4 and affirm.
FACTUAL BACKGROUND
The Department of Energy (DOE) operated Rocky Flats 5 as a nuclear
weapons manufacturing facility from 1953 through 1992. Rocky Flats is located
near Golden, Colorado. In 1989, the Environmental Protection Agency (EPA)
designated the by-then radiologically-contaminated facility a CERCLA 6
Superfund 7 site. The site is to be decontaminated and closed by 2006.
4
Originally, the district court only dismissed with prejudice Relators’ two
counts brought under 31 U.S.C. § 3729(a)(1), (a)(2) and (a)(3). The court
dismissed without prejudice their constructive discharge claim in violation of 31
U.S.C. § 3730(h). Relators filed their appeal before the resolution of this third
claim. To cure this jurisdictional defect, they voluntarily dismissed with
prejudice the constructive discharge claim. Because all claims that were
presented to the district court are resolved, we have jurisdiction to hear this
appeal.
5
Rocky Flats and its operators have been involved in several other actions
before us, dealing in some manner with nuclear contamination problems. See
United States ex rel. Stone v. Rockwell Int’l Corp., 282 F.3d 787 (10th Cir. 2002)
(qui tam action charging environmental violations); Brever v. Rockwell Int’l
Corp., 40 F.3d 1119 (10th Cir. 1994) (employees alleged retaliation for
cooperating with the FBI in its investigation of environmental crimes); Building
& Const. Dept. v. Rockwell Int’l Corp., 7 F.3d 1487 (10th Cir. 1993) (employees
presented medical monitoring claim for exposure to unsafe levels of radioactive
and hazardous substances); McKay v. United States, 703 F.2d 464 (10th Cir.
1983) (land owners adjacent to Rocky Flats sued for damage to property caused
by nuclear contaminants).
6
CERCLA is the acronym for the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601, et seq.
7
Sites listed as CERCLA priority are entitled to EPA cleanup funding
under a general federal fund for hazardous waste management. 42 U.S.C. § 9611;
-4-
Between 1989 and 1995, EG&G Rocky Flats, Inc., was the primary
contractor with DOE for management and operations at Rocky Flats, which
included security. During these same years, Wackenhut Services, L.L.C.,
contracted directly with the DOE to provide security at the site. In 1995, the
DOE awarded Kaiser-Hill Co., L.L.C., the environmental cleanup contract at
Rocky Flats. Since 1995, Kaiser-Hill has subcontracted the security portion of its
contract to Wackenhut.
Relators performed security work at Rocky Flats, and each Relator
independently voiced his concern about what he perceived as weak security. They
ultimately filed suit as qui tam relators under the FCA on October 8, 1997,
alleging EG&G, Wackenhut, and Kaiser-Hill were paid for security measures they
either did not provide or provided below acceptable levels. At the time of the
filing, Rocky Flats housed more than fourteen tons of weapons grade plutonium
and six tons of highly enriched uranium. The Government requested and received
several time extensions from the district court, totaling two years, in which it
investigated the merits of the qui tam action. Pursuant to 31 U.S.C. § 3730(b)(2)
and (b)(3), the case remained under seal during this investigation. Ultimately, the
Government declined to intervene and the case was unsealed on December 14,
1999.
26 U.S.C. § 9507.
-5-
On April 13, 2000, the Government requested the DOE be added to the
certificate of service to be kept aware of the progress of the suit. The
Government became concerned about the handling of classified information and
filed a status report concerning this issue on July 5, 2000. At a hearing on
Defendants-Appellees’ motion to stay proceedings pending the Government’s
resolution of classified information, the Government announced it would file a
motion to dismiss, which it did on August 21, 2000.
The Government argued its motion to dismiss should be granted because
the lawsuit would delay the cleanup and closure of Rocky Flats, as well as
compromise national security interests by risking inadvertent disclosure of
classified information. Relators opposed dismissal, claiming the Government was
seeking dismissal for fraudulent and arbitrary and capricious reasons and the
reasons for dismissal were not rationally related to a legitimate government
purpose. They also argued the Government could not seek to dismiss the action
without first intervening under 31 U.S.C. § 3730(c)(3). Relators sought discovery
regarding the Government’s stated reasons for dismissal and endeavored to
subpoena the “most knowledgeable” government witness regarding the
Government’s reasons for dismissal. (Appellants’ Br. at 2.) The district court
denied these requests. After a five-day evidentiary hearing conducted pursuant to
31 U.S.C. § 3730(c)(2)(A), in which the Government stipulated for purposes of
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the hearing that the Relators’ claims were meritorious, the magistrate
recommended the Government’s motion to dismiss be granted. The district court
adopted the recommendation and dismissed with prejudice the claims considered
in this appeal.
DISCUSSION
I. FCA claims
We review de novo the district court’s interpretation of the FCA and its
determination of what standard to apply to the Government when it moves to
dismiss a qui tam action. See Foutz v. United States, 72 F.3d 802, 804 (10th Cir.
1995) (construction of federal statutes reviewed de novo). We review the district
court’s dismissal of a qui tam action with prejudice for abuse of discretion.
Stone, 282 F.3d at 809.
A. The FCA’s Purposes and Provisions
The purpose of the FCA “is to enhance the Government’s ability to recover
losses sustained as a result of fraud against the Government.” S. Rep. No. 99-
345, at 1 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5266. It empowers a
private individual (a relator) to bring a civil claim on his or her own behalf, and
on behalf of the Government, against a person or company who knowingly
presents a false claim to the Government for payment. 31 U.S.C. §§ 3729(a),
3730(a) and (b)(1). The relator can only dismiss the action upon written consent
-7-
of the court and the Attorney General. 8 § 3730(b)(1). Amended in 1986, the most
substantial modifications to the FCA created an increased incentive for private
individuals to bring qui tam suits and granted the Government greater control
over these privately brought actions. Congress increased the relator’s incentive 9
to bring qui tam actions by guaranteeing them a percentage of the recovery if the
action is successful, and slightly increasing their maximum potential recovery. S.
Rep. No. 99-345, at 27 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5292.
Relators are entitled to fifteen to twenty-five percent of the proceeds of the action
or settlement of the claim if the Government intervenes. § 3730(d)(1). If the
8
Even where the Government has declined to intervene, relators are
required to obtain government approval prior to entering a settlement or
voluntarily dismissing the action. See Searcy v. Philips Electronics N. Amer.
Corp., 117 F.3d 154, 155 (5th Cir. 1997); United States v. Health Possibilities,
P.S.C., 207 F.3d 335, 339 (6th Cir. 2000) (section 3730(b)(1) provides the
Government with an absolute veto of any proposed qui tam settlement because the
plain language of the statute does not limit this right). But see United States ex
rel. Hullinger v. Hercules, Inc., 80 F. Supp.2d 1234, 1240 (D. Utah 1999)
(limiting relator’s obligation to seek government approval of a settlement to the
initial sixty days plus extensions); United States ex rel. Stinson, Lyons, Gerlin &
Bustamante, P.A. v. Provident Life & Accident Ins. Co., 811 F. Supp. 346, 347
(E.D. Tenn. 1992).
9
The increased incentives to private individuals have proven effective at
helping the Government recover substantial sums of fraudulently obtained
payments. From the effective date of the 1986 amendments to 2002, more than
3,000 qui tam cases were filed, resulting in nearly $5 billion in recovered monies
from settlements and awards. Gregory G. Brooker, The False Claims Act:
Congress Giveth and the Courts Taketh Away, 25 Hamline L. Rev. 373, 382-84
(Spring 2002). In just one fiscal year, from October 1, 2000, to September 30,
2001, relators received more than $210 million as part of their statutory share of
the settlements and awards. Id. at 383 n.72.
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Government declines intervention, relators receive twenty-five to thirty percent.
§ 3730(d)(2). Relators are also given certain guarantees of involvement: if the
Government proceeds with the action, the relators have the right to continue as a
party, § 3730(c)(1); if the Government moves to dismiss the claim over relators’
objections, they are entitled to a hearing, § 3730(c)(2)(A); and if the Government
settles the claim, relators are entitled to judicial determination, via a hearing, that
the Government’s proposed settlement is fair, adequate, and reasonable,
§ 3730(c)(2)(B). S. Rep. 99-345, at 25-26 (1986), reprinted in 1986
U.S.C.C.A.N. 5266, 5290-91. See also Vermont Agency of Natural Res. v. United
States ex rel. Stevens, 529 U.S. 765, 772 (2000) (Stevens, J., dissenting). These
hearings, however, are only to be granted if relators can show a “substantial and
particularized need for a hearing.” 10 S. Rep. 99-345, at 26 (1986), reprinted in
1986 U.S.C.C.A.N. 5266, 5291.
Through the 1986 amendments, Congress granted the Government
additional opportunities to intervene and increased its power to control qui tam
10
It is not clear whether in practice this notice and hearing
requirement has amounted to much of a hurdle for the
government. However, we note that Congress
apparently intended that the provision authorizing
relators to formally object to any motions to dismiss or
proposed settlements between the government and
defendant should not pose a significant burden for the
government or courts.
United States ex rel. Kelly v. Boeing Co., 9 F.3d 743, 754 n.11 (9th Cir. 1993).
-9-
actions. Under the old Act, the Government only had the initial sixty days in
which to decide to intervene. The 1986 amendments allow the Government to
obtain extensions beyond the initial sixty days in which to investigate the claims,
and even if the Government initially declines to intervene, it can intervene later,
at any time, upon a showing of good cause. S. Rep. 99-345 at 26-27 (1986),
reprinted in 1986 U.S.C.C.A.N. 5266, 5291-92; 31 U.S.C. § 3730(b)(3) and
(c)(3).
The FCA prescribes the process for a qui tam action. After the relator files,
the complaint remains under seal for at least sixty days, plus any extensions,
during which time the Government has the opportunity to investigate the claim
and determine whether it wants to intervene. § 3730(b)(2) and (3). After the
Government intervenes or declines to intervene, the complaint is unsealed and
served on the defendant. § 3730(b)(3). If the Government intervenes, whether
initially or later under § 3730(c)(3), it takes over the primary responsibility of
prosecuting the action and is not bound by the relator’s acts. § 3730(c)(1). If the
Government intervenes, the relator retains the right to continue as a party, subject
to certain limitations. Id. Not only may the Government limit a relator’s
involvement, it may also stay discovery, or pursue alternate remedies against the
defendant. § 3730(c)(2)(C), (c)(2)(D), (c)(4), and (c)(5). If the Government
declines to intervene in the action, the relators have the right to conduct the
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action, subject, however, to possible future intervention by the Government upon
a showing of good cause. § 3730(c)(3). The Government can dismiss or settle
the action despite the relator’s objections. § 3730(c)(2)(A) and (c)(2)(B).
B. Intervention
At the outset, we consider Relators’ argument that the Government must
intervene under § 3730(c)(3) before moving to dismiss under § 3730(c)(2)(A). 11
The magistrate determined the FCA did not contain this requirement. The district
court disagreed. Nonetheless, it construed the Government’s motion to dismiss as
including an implied motion to intervene, and identified as good cause for the
motion the intent of the Government to dismiss the case. 12 We decline to construe
11
This argument relates to our consideration of the correct standard of
review for dismissal as follows. The Relators contend we should apply a good
cause standard to the Government’s motion to dismiss because this is the standard
for late intervention. As they put it,
It is impossible to analyze whether there is “good cause” for late
intervention without also analyzing whether there is “good cause” for
the dismissal that prompts the intervention. The False Claims Act’s
“good cause” provision should be interpreted to require a
meaningful, probing and substantive review of the government’s
decision to seek dismissal.
(Appellants’ Br. at 11.) Thus, in aid of resolving the issue of the correct standard
of review to apply to the Government’s dismissal, we first consider whether the
Government must intervene under § 3730(c)(3) before moving to dismiss under §
3730(c)(2)(A).
12
“Having decided . . . that the government may move to dismiss a
meritorious case in which it initially declined to participate, it is an unavoidable
conclusion that the movant has good cause to intervene to exercise that right.”
(Appellants’ Br., Tab D at 5.)
-11-
the FCA as requiring intervention for cause before dismissal because a plain
reading of the statute does not require it, canons of statutory construction do not
support such a result, and in our view, such a reading would render the FCA
constitutionally infirm.
The FCA provides “[t]he Government may dismiss the action
notwithstanding the objections of the person initiating the action if the person has
been notified by the Government of the filing of the motion and the court has
provided the person with an opportunity for a hearing on the motion.” 31 U.S.C.
§ 3730(c)(2)(A). In interpreting this provision, we rely on a longstanding canon
of statutory construction which we recently revisited in NISH v. Rumsfeld:
As a general rule, statutory language is to be interpreted according to
the common meaning of the terms employed. Our analysis of
statutory construction must begin with the language of the statute
itself, and [absent] a clearly expressed legislative intention to the
contrary, that language must ordinarily be regarded as conclusive.
348 F.3d 1263, 1268 (10th Cir. 2003) (quotation marks, citations and alteration
omitted). Applying this canon, we identify nothing in the language of §
3730(c)(2)(A) to suggest the authority of the Government to dismiss a qui tam
action is dependent upon prior intervention in the case. Nor can we identify
legislative intent to the contrary. In fact, the Senate report incident to passage of
the measure spelled out the purpose of late intervention.
Under current law, the Government is barred from reentering the
litigation once it has declined to intervene during this initial period.
-12-
The Committee recognizes that this limited opportunity for
Government involvement could in some cases work to the detriment
of the Government's interests. Conceivably, new evidence
discovered after the first 60 days of the litigation could escalate the
magnitude or complexity of the fraud, causing the Government to
reevaluate its initial assessment or making it difficult for the qui tam
relator to litigate alone. In those situations where new and
significant evidence is found and the Government can show 'good
cause' for intervening, paragraph (2) provides that the court may
allow the Government to take over the suit.
S. Rep. 99-345, at 26-27 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5291-92.
This language clearly suggests the purpose of late intervention is to pursue
litigation, not dismiss it.
The D.C. Circuit has recently held the Government need not first intervene
in a qui tam action before moving to dismiss it. Although the case concerned a
government motion to dismiss during the seal period, the court’s reasoning
applies with equal force to a motion to dismiss filed after the seal period:
[Section] 3730(b)(2) makes intervention necessary only if the
government wishes to “proceed with the action.” Ending the case by
dismissing it is not proceeding with the action; to “proceed with the
action” means, in the False Claims Act, that the case will go forward
with the government running the litigation.
Swift v. United States, 318 F.3d 250, 251 (D.C. Cir.), cert. denied, 539 U.S. 944
(2003). 13 As we just noted, the purpose of late intervention, as with intervention
13
The Swift court suggested the justification for dismissal would
necessarily provide the good cause for intervention:
In any event, the question whether the False Claims Act requires the
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in the seal period, is to proceed with the action. Other courts have agreed in dicta
that prior intervention is not necessary to enable a government motion to dismiss.
See Juliano v. Fed. Asset Disposition Ass’n, 736 F. Supp. 348, 351 (D. D.C.
1990), aff’d, 959 F.2d 1101 (D.C. Cir. 1992); Kelly, 9 F.3d at 753 n.10; United
States ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., 151 F.3d 1139,
1145 (9th Cir. 1998); United States ex rel. Friedman v. Rite Aid Corp., 152 F.
Supp.2d 766, 772 (E.D. Pa. 2001).
Our holding comports with constitutional concerns as well. As the
Supreme Court has instructed, “it is a cardinal principle of statutory interpretation
. . . that when an Act of Congress raises a serious doubt as to its constitutionality,
[we] will first ascertain whether a construction of the statute is fairly possible by
which the question may be avoided.” Zadvydas v. Davis, 533 U.S. 678, 689
(2001) (quotation marks omitted). The constitutionality of the FCA has been
challenged several times under the claim it violates the separation of powers
doctrine inherent in the Take Care Clause. 14 In this case, we examine whether the
government to intervene before dismissing an action is largely
academic. As Swift conceded at oral argument, if there were such a
requirement, we could construe the government's motion to dismiss
as including a motion to intervene, a motion the district court granted
by ordering dismissal.
318 F.3d at 252.
14
The Executive Branch is entrusted with the duty to “take Care that the
Laws be faithfully executed . . . .” U.S. Const., art. II, § 3.
-14-
Government would be unconstitutionally hamstrung by a requirement, as urged by
Relators, to intervene with a showing of good cause before moving to dismiss a
qui tam action.
In a case where the Government successfully intervened upon a showing of
good cause, we have previously held the qui tam provisions are constitutional
under the Take Care Clause. Stone, 282 F.3d at 807. We expressly reserved the
question of whether the qui tam provisions would pass constitutional muster if the
Government was denied intervention for cause. Id. at 806 n.6. Stone cited
favorably to decisions of other circuits that have uniformly held the FCA is
constitutionally sound as long as it is interpreted as vesting in the Executive
Branch sufficient control over qui tam actions so there is no violation of its duty
to enforce the laws of the land. The Fifth Circuit has stated the Government
retains sufficient control of a qui tam action to save the FCA from being
unconstitutional because the Government can veto settlements without
intervening, and it “retains the unilateral power to dismiss an action
notwithstanding the objections of the person.” Riley v. St. Luke’s Episcopal
Hosp., 252 F.3d 749, 753 (5th Cir. 2001) (en banc) (quotation marks omitted).
The Ninth Circuit has concluded the FCA does not violate the doctrine of
separation of powers because the Government retains sufficient control over qui
tam actions, including the power “albeit somewhat qualified, to end qui tam
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litigation.” Kelly, 9 F.3d at 754. These limitations to which the Kelly court refers
are the FCA requirements to give the relator notice and a hearing. Id. at 753.
The Sixth Circuit has also concluded the FCA scheme embraces sufficient
provisions to assure the freedom of the Government to control a qui tam action.
United States ex rel. Taxpayers Against Fraud v. General Elec. Co., 41 F.3d
1032, 1041 (6th Cir. 1994). See also Stevens, 529 U.S. at 801 (history of qui tam
action in England and America sufficient to establish it does not implicate Take
Care Clause).
Although the qui tam provisions have thus far withstood constitutional
challenge, we conclude that to condition the Government’s right to move to
dismiss an action in which it did not initially intervene upon a requirement of late
intervention tied to a showing of good cause would place the FCA on
constitutionally unsteady ground. Because we are to interpret statutes in a manner
that renders them constitutionally valid, Zadvydas, 533 U.S. at 689, we should
avoid an interpretation that unnecessarily binds the Government. Therefore, we
conclude that the Government, in a case in which it has declined to intervene in
the seal period, is not required to intervene with a showing of good cause under §
3730(c)(3) before moving to dismiss the action under § 3730(c)(2)(A). Nor do we
engraft a good cause requirement on a government motion to dismiss.
C. Dismissal
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We turn now to the correct standard of review of a government motion to
dismiss a qui tam action under 31 U.S.C. § 3730(c)(2)(A). Although the Act
itself is silent as to the standard of review of a motion to dismiss, the Senate
Report incident to passage of this section explained its purpose:
[W]hen the Government takes over a privately initiated action, the
individual who brought the suit will be served, upon request, with
copies of all pleadings filed as well as deposition transcripts.
Additionally, the person who brought the action may formally object
to any motions to dismiss or proposed settlements between the
Government and the defendant.
Any objections filed by the qui tam plaintiff may be
accompanied by a petition for an evidentiary hearing on those
objections. The Committee does not intend, however, that
evidentiary hearings be granted as a matter of right. We recognize
that an automatic right could provoke unnecessary litigation delays.
Rather, evidentiary hearings should be granted when the qui tam
relator shows a 'substantial and particularized need' for a hearing.
Such a showing could be made if the relator presents a colorable
claim that the settlement or dismissal is unreasonable in light of
existing evidence, that the Government has not fully investigated the
allegations, or that the Government's decision was based on arbitrary
and improper considerations.
S. Rep. 99-345, at 26 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5291. 15
15
In Swift, the D.C. Circuit discounted this language insofar as it might
illuminate the standard of review of a government motion to dismiss a qui tam
action in which it had not intervened because the language related to an earlier
version of § 3730(c)(2)(A) that was not enacted. 318 F.3d at 253. The earlier
version permitted a relator to object to government dismissal only in cases in
which the Government had intervened. Id. Notwithstanding this distinction, we
consider the language of the Senate report instructive on the standard of review of
a government motion to dismiss a qui tam action whether or not the Government
has previously intervened.
-17-
In Swift, the D.C. Circuit considered the standard to apply to a government
motion to dismiss a qui tam action where the Government has not previously
intervened and the defendant has not yet been served. 318 F.3d at 251. In its
view, the Government’s decision to dismiss is nearly unreviewable. 16 Section
3730(c)(2)(A)’s “opportunity for a hearing” language is simply intended to
provide a forum for the relator to try to convince the Government not to dismiss
the case. Id. at 253. The court reserved deciding the correct standard to apply in
instances where the defendant was already served. Id. at 252-53. Because the
case we review is one in which the defendants were served, and because under
these circumstances we construe the hearing language of § 3730(c)(2)(A) to
impart more substantive rights for a relator, we look to the Ninth Circuit for
guidance.
The Ninth Circuit took up the standard of review of a government motion to
dismiss a qui tam action in Sequoia v. Baird-Neece, 151 F.3d 1139. In that case,
relators filed thirty-four qui tam actions against entities involved in the citrus
industry, alleging violations of citrus fruit marketing orders promulgated by the
Secretary of Agriculture. Id. at 1141. The Government elected to intervene in
only ten of these actions. Id. at 1142. Five years after the initial filing of the qui
16
The Swift court indicated there might be exceptions to unfettered
government discretion to dismiss a qui tam action as, for example, where fraud on
the court is alleged. 318 F. 3d at 253.
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tam actions, the Government moved to intervene in the remaining cases under §
3730(c)(3), upon showing good cause. Id. The Government declared it would
litigate the qui tam actions if settlement could not be reached. Id. A year later,
the Government announced its intent to withdraw from the qui tam cases. Id.
Later still, the Government moved to dismiss the cases under § 3730(c)(2)(A),
over relators’ objections. Id. For purposes of the motion to dismiss, the
Government, as in this case, conceded the relators’ claims were meritorious. Id.
at 1143.
The Ninth Circuit established the following standard for testing whether
dismissal by the Government is appropriate: “(1) identification of a valid
government purpose; and (2) a rational relation between dismissal and
accomplishment of the purpose.” Id. at 1145 (quotation marks omitted). If the
Government satisfies this two-step test, “the burden switches to the relator to
demonstrate that dismissal is fraudulent, arbitrary and capricious, or illegal.” Id.
(quotation marks omitted). The district court here applied this standard, and we
adopt it. In our view, it recognizes the constitutional prerogative of the
Government under the Take Care Clause, comports with legislative history, and
protects the rights of relators to judicial review of a government motion to
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dismiss. 17
We next examine whether the district court erred in finding the Government
met the standard set in Sequoia v. Baird-Neece, and in dismissing with prejudice
the Relators’ action. After an exhaustive review of the record, we conclude the
court did not abuse its discretion in dismissing the qui tam action.
1. Rational Relation to Valid Government Purpose
The Government argues that protecting classified information from
disclosure and the timely closing of the contaminated Rocky Flats facility 18 are
valid governmental purposes supporting its motion to dismiss the qui tam action.
Relators agree. Where the parties part company, however, is on the question of
whether dismissal of the action bears a rational relation to the stated objectives.
Based on evidence adduced at the five-day evidentiary hearing, the district court,
adopting the recommendation of the magistrate, concluded that it does. We
concur.
17
We do not decide at this time whether § 3730(c)(2)(A) gives the
judiciary the right to pass judgment on the Government’s decision to dismiss an
action where the defendant has not been served and where the Government did
not intervene in the action, facts of the sort presented in Swift.
18
Rocky Flats houses radiological and chemical contaminants that pose a
risk to public safety and the environment. It is scheduled to close in December
2006, and clean-up is currently in progress. A closure delay would cost
approximately one million dollars a day and expose area residents to continued
health and environmental risks. In excess of two and a half million people live
within a fifty-mile radius of Rocky Flats.
-20-
The Government demonstrated that classified documents required in the
litigation 19 would present a risk of inadvertent disclosure, implicating national
security. The degree to which classified documents could be declassified or
redacted was unknown. However, anyone handling classified information would
need a security clearance. The magistrate judge found that the risk of inadvertent
disclosure of classified information was greatest where much classified
information was involved in the litigation; the risk lessened where classified
information could be declassified or redacted. In the court’s view, the risk of
inadvertent disclosure, even if theoretically minimal, as the Relators argued, was
sufficient to justify dismissal of the action. As the Sequoia test instructs, to
establish a rational relation to a valid governmental purpose, “[t]here need not be
a tight fitting relationship between the two; it is enough that there are plausible,
or arguable, reasons supporting the agency decision.” United States ex. rel.
Sequoia Orange Co. v. Sunland Packing House Co., 912 F. Supp. 1325, 1341
(E.D. Ca. 1995) (quotation marks omitted). The Government met the test here.
The Government also demonstrated the litigation would delay the clean-up
and closure of Rocky Flats by diverting the focus of security planners and
management from the clean-up effort, by requiring the reassignment of personnel
19
The Government estimates litigation would require review of thousands
of classified documents; Relators claim this estimate is highly exaggerated.
-21-
from the project to a review of classified documents for declassification or
redaction in aid of litigation, and by placing an added financial burden on the
project through a requirement to shift funds from clean-up to litigation. The
Relators argued that many of their claims could have been determined without a
significant diversion of resources by the Government. The magistrate concluded
that while the evidence of diversion of resources from the clean-up effort to
litigation was not “concrete” (Appellants’ Br., Tab I at 21), it sufficiently
established the likelihood of some diversion of resources, and “any diversion of
personnel attention away from the closure project would negatively impact the
closure schedule.” 20 (Id. at 22) Once again, the Government satisfied the Sequoia
test by advancing a “plausible, or arguable” reason for the dismissal. Id.
2. Arbitrary and Capricious
Once the Government meets its burden of establishing a rational
relationship between dismissal of a qui tam action and a valid government
purpose, the “burden switches to the relator to demonstrate that dismissal is
fraudulent, arbitrary and capricious, or illegal.” Sequoia v. Baird-Neece, 151 F.3d
at 1145 (quotation marks omitted). Relators’ principal argument is that the
20
The district court took into account a rational cost/benefit analysis
conducted by the Government establishing that the benefits that might be obtained
by successful prosecution of the qui tam action were outweighed by the risk the
litigation would divert resources from the clean-up effort and delay closure of
Rocky Flats.
-22-
Government’s motion to dismiss was fraudulent because it was motivated by a
desire to spare DOE embarrassment over security lapses at Rocky Flats. 21 They
contend a revolving door of employment between the DOE and its contractors at
Rocky Flats fostered a climate of cover-up of security violations at the facility,
including misuse of classification of documents in aid of the cover-up, and
inspired both the DOE and its contractors to prevail upon the Department of
Justice to dismiss the qui tam action. The district court found that while there
was evidence of innocent cross-employment between the DOE and its contractors,
there was no evidence that either the DOE or any of its contractors prevailed upon
the Department of Justice to dismiss the action for improper purposes. In fact,
there was no evidence the Department of Justice exercised anything other than its
independent judgment in deciding to dismiss the case. While the evidence
suggested vigorous disagreement over security at Rocky Flats, the court declined
to construe this as evidence that the Government’s decision to dismiss was in aid
of a cover-up. In fact, as the court noted, the alleged security deficiencies were
reported to the Secretary of Energy, Congress and the press, and led to an
21
Relators offered additional evidence of an arbitrary and capricious
decision to dismiss: the Government waited until eight months after the seal
period to move to dismiss, even though the reasons it offered for dismissal were
known to it when the complaint was filed; and the Government did not dismiss a
similar case. The district court concluded these allegations, while true, did not,
without more, demonstrate the decision to dismiss was arbitrary and capricious.
-23-
investigation by the DOE Inspector General. In all of this heat, the district court
found no light. Neither do we. The district court correctly concluded the
Relators failed to meet their burden to show the Government’s motion to dismiss
was fraudulent, arbitrary and capricious, or illegal.
II. Discovery and Other Rulings in Limine
In preparation for the hearing on the Government’s motion to dismiss, the
magistrate stayed discovery. The district court approved the stay. We review
discovery rulings for an abuse of discretion. Motley v. Marathon Oil Co., 71 F.3d
1547, 1550 (10th Cir. 1995), cert. denied, 517 U.S. 1190 (1996). The discovery
Relators wanted to conduct would have involved classified documents. Thus,
discovery would have allowed what the Government was trying to avoid in
moving to dismiss the action: divulging classified information. Furthermore, the
Relators sought through discovery to challenge the Government’s motivation
behind the dismissal. 22 The magistrate denied the requested discovery on the
grounds it would reach classified information and was irrelevant to the question
of whether the proposed dismissal was rationally related to a valid governmental
22
Relators sought to depose “the Government personnel whose affidavits
were attached in support of the United States Motion to Dismiss, Government
personnel with primary involvement in the United States decision to decline
intervention, and Government personnel with primary involvement in the United
States decision to file the Government’s motion to dismiss.” (Appellants’ App.,
Vol. III at 779.)
-24-
purpose. The court limited Relators’ proof to their own witnesses and documents
and cross-examination of government witnesses.
We expect the district court to exercise its discretion in determining when
and how to limit discovery. Clearly, the district court did not abuse its discretion
in this case in limiting discovery so as to avoid revelation of classified
information, particularly when this was one of the very purposes behind the
Government’s motion to dismiss. Neither, for the reasons we next discuss in
relation to the deliberative process privilege, did it err in denying inquiry into the
Government’s subjective motivation behind its dismissal.
Ruling in limine, the magistrate quashed the Relators’ subpoena of the
Government’s person most knowledgeable about its motion to dismiss. 23
Furthermore, she indicated she would apply the deliberative process privilege at
the hearing to any communications between government agents that were pre-
decisional or deliberative relative to the motion to dismiss. Relators object to
both rulings as a bar to what they claim is a legitimate inquiry into the subjective
motivation of the Government in filing its motion to dismiss. We review a
decision to quash a subpoena and evidentiary rulings of the trial court for abuse
of discretion. Heat & Control, Inc. v. Hester Indus., Inc., 785 F.2d 1017, 1022
23
Relators issued a subpoena under Fed. R. Civ. P. 30(b)(6) for the
testimony of the “person most knowledgeable” about the Government’s motion to
dismiss.
-25-
(Fed. Cir. 1986) (quash subpoena); Faulkner v. Super Valu Stores, Inc., 3 F.3d
1419, 1433 (10th Cir. 1993) (evidentiary ruling).
The magistrate was correct to quash the subpoena for the Government’s
person most knowledgeable about its motion to dismiss for the plain reason that
Fed. R. Civ. P. 30(b)(6), the provision under which the subpoena issued,
authorizes a subpoena for deposition, and not in-court testimony. As to the
deliberative process privilege, it
“rests on the obvious realization that officials will not communicate
candidly among themselves if each remark is a potential item of
discovery and front page news, and its object is to enhance the
quality of agency decisions by protecting open and frank discussion
among those who make them within the Government.”
Casad v. U.S. Dep’t of Health & Human Servs., 301 F.3d 1247, 1251 (10th Cir.
2002) (quoting U.S. Dep’t of Interior v. Klamath Water Users Protective Ass’n,
532 U.S. 1, 8-9 (2001) (quotations and citations omitted)). Relators argue the
Government should not be allowed the protection of the deliberative process
privilege because they seek to establish the Government’s motivation, for which
the privilege is unavailable. They rely on In re: Subpoena Duces Tecum Served
on the Office of the Comptroller of the Currency, 156 F.3d 1279 (D.C. Cir. 1998).
The unavailability of the privilege in that case, however, did not extend to
inquiries into the Government’s subjective motivation for a decision. Id. at 1280.
“When a party challenges agency action as arbitrary and capricious the
-26-
reasonableness of the agency’s action is judged in accordance with its stated
reasons. Agency deliberations not part of the record are deemed immaterial.” Id.
at 1279 (citation omitted). Therefore, the district court was correct to apply the
deliberative process privilege.
III. Stipulation of Facts
Prior to the evidentiary hearing on the motion to dismiss, the Government
agreed to stipulate, for purposes of the hearing, that Relators’ claims of security
deficiencies at Rocky Flats had merit. Relators quibble that the district court
erred in allowing the Government to present evidence refuting certain of the
Relators’ factual allegations. We review the lower court’s decision to admit,
exclude, limit or refuse to limit the scope of the evidence for abuse of discretion.
McCue v. State of Kansas, Dept. of Human Res., 165 F.3d 784, 788 (10th Cir.
1999).
Relators list only two examples of statements they believe challenged the
merits of their claims. In one, a Government witness expressed doubts the
Relators would win anything in the lawsuit. He felt the nuclear material at Rocky
Flats was secure. He believed the potential benefits of prosecuting the lawsuit
were outweighed by the benefits of timely closure of the facility. In the same
vein, the Government argued in closing that it preferred timely closure to the
uncertain benefits at the end of a lawsuit. We first note that a stipulation to the
-27-
merit of a claim does not translate into automatic recovery on the claim.
Therefore, it was fair for the Government to weigh potential benefits from the
lawsuit against the perceived benefits of terminating the action immediately.
Next, Relators do not explain, nor can we understand, how the Government
statements they cite negate the stipulation that there were security deficiencies at
Rocky Flats. Finally, Relators provide no authority to support their contention
that when parties stipulate that one side’s claim has merit for purposes of
streamlining a hearing, the opposing party is prevented from presenting evidence
pertaining to the very questions for which the hearing is being conducted.
Because Relators failed to cite to legal authority regarding this argument, and
because we find this argument completely lacks merit, it fails. F.D.I.C. v.
Schuchmann, 235 F.3d 1217, 1230 (10th Cir. 2000).
CONCLUSION
We hold the FCA does not require the Government to intervene prior to
moving to dismiss a qui tam action, we adopt the Sequoia standard for reviewing
the Government’s motion to dismiss, and we find it has met its burden under
Sequoia v. Baird-Neece. We also hold the district court did not abuse its
discretion in its rulings in discovery or in limine. We AFFIRM the decision of
the district court.
-28-
No. 01-1510, Ridenour v. Kaiser-Hill Co., L.L.C.,
EAGAN, J., dissenting in part and concurring in part and in the result.
I dissent only on the basis of the majority’s determination that the FCA
does not require the Government to intervene prior to moving to dismiss a qui tam
action. In my view, where the Government has declined to intervene during the
sixty-day seal period, it is required to intervene upon a showing of good cause
under 31 U.S.C. § 3730(c)(3) before moving to dismiss the action. I believe a
plain reading of the statute requires it, canons of statutory construction support
such a result, and such a reading does not render the FCA unconstitutionally
infirm.
The majority’s focus on the provision of the statute which permits the
Government to dismiss a qui tam action, 31 U.S.C. § 3730(c)(2)(A), disregards
the surrounding provisions and the context in which the dismissal provision
appears. Subsection (c)(2) relates to (c)(1), which provides:
If the Government proceeds with the action, it shall have the primary
responsibility for prosecuting the action, and shall not be bound by
an act of the person bringing the action. Such person shall have the
right to continue as a party to the action subject to the limitations
set forth in paragraph (2).
31 U.S.C. § 3730(c)(1)(emphasis added). Thus, subsection (c)(2) contains
limitations applicable only to subsection (c)(1), the provision relating to the
Government’s election to proceed with the action. By their terms, subsections
(c)(1) and (c)(2) do not apply where the government elects not to proceed during
the seal period. Subsection (c)(3), however, relates to the Government’s election
not to proceed, as here. It provides, in relevant part:
If the Government elects not to proceed with the action, the person
who initiated the action shall have the right to conduct the action. . . .
When a person proceeds with the action, the court, without limiting
the status and rights of the person initiating the action, may
nevertheless permit the Government to intervene at a later date upon
a showing of good cause.
Id., § 3730(c)(3). This is the subsection which provides for late intervention by
the Government after an initial determination not to proceed.
In effect, the majority’s reading of the statute eviscerates the provision
addressing late intervention. Familiar canons of statutory construction direct the
court to avoid such an interpretation. E.g., Oxy USA, Inc. v. Babbitt, 268 F.3d
1001, 1006 (10th Cir. 2001) (“We must avoid, whenever possible, a statutory
interpretation that would ‘render superfluous other provisions in the same
enactment.’” (quoting Freytag v. Commissioner of Internal Revenue, 501 U.S.
868, 877 (1991)); New Mexico Cattle Growers Ass’n v. United States Fish and
Wildlife Serv., 248 F.3d 1277, 1285 (10th Cir. 2001) (“We will not construe a
statute in a way that renders words or phrases meaningless, redundant, or
superfluous.” (quoting Bridger Coal Co./Pac. Minerals, Inc. v. Director, Office of
Workers’ Compensation Programs, 927 F.2d 1150, 1153 (10th Cir.1991)).
Congress clearly intended to provide for late intervention by the Government.
-2-
Further, this court has long acknowledged: “The plainness or ambiguity of
statutory language is determined by reference to the language itself, the specific
context in which that language is used, and the broader context of the statute as a
whole.” In re Wise, 346 F.3d 1239, 1241 (10th Cir. 2003) (quoting Robinson v.
Shell Oil Co., 519 U.S. 337, 341, (1997)); see Ferroni v. Teamsters, Chauffeurs &
Warehousemen Local No. 222, 297 F.3d 1146, 1151 (10th Cir. 2002) (citations
omitted) (“To determine the plain meaning of the statute, we must consider the
statute as a whole.”); Wyoming v. United States, 279 F.3d 1214, 1230 (10th Cir.
2002) (To construe legislation, the court examines “the purpose, structure, and
legislative history of the entire statute.” (quoting California v. Federal Energy
Regulatory Comm’n, 495 U.S. 490, 504 (1990)); In re Overland Park Financial
Corp., 236 F.3d 1246, 1252 (10th Cir. 2001) (“When interpreting statutory
language, this court ‘must look to the particular statutory language at issue, as
well as the language and design of the statute as a whole.’”) (citation omitted.);
United States v. Nichols, 184 F.3d 1169, 1171 (10th Cir. 1999) (“When
interpreting statutory language, however, appellate courts must examine the ...
language in context, not in isolation.”). Here, the context, design, and structure
of the statute as a whole indicate that the government has unfettered discretion to
dismiss if it intervenes within the sixty-day seal period, but not after.
-3-
The legislative history cited by the majority speaks to the circumstances of
this case: “In those situations where new and significant evidence is found and
the Government can show ‘good cause’ for intervening, paragraph (2) provides
that the court may allow the Government to take over the suit.” S. Rep. 99-345,
at 26-27 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5292. This legislative
history relates to the section of the amendment which became subsection (c)(3) of
the statute. The legislative history is clear that late intervention requires good
cause and even suggests that it requires new and significant evidence. Contrary
to the conclusion of the majority, taking over the suit does not mean that
intervention under subsection (c)(3) is permitted only if the government plans to
proceed. Such is too expansive a reading of the legislative history. It does mean
taking control of the action -- which inherently includes the ability to seek
dismissal.
Examination of the statutory language in context and in light of the
legislative history does not place the FCA on unsteady constitutional ground. The
Take Care Clause of the United States Constitution entrusts the Executive Branch
with the duty to “take Care that the Laws be faithfully executed . . . .” U.S. Const.
art. II, § 3. The FCA vests in the Executive Branch sufficient control over qui
tam actions; I do not read it to vest the Executive Branch with absolute control
where the Executive Branch effectively abdicates its duty to control the litigation
-4-
by failing to intervene initially within the seal period or to show good cause for
late intervention. The Government is not bound unnecessarily by a requirement to
intervene with a showing of good cause before moving to dismiss a qui tam
action.
To the extent the Government’s motion to dismiss can be construed as an
implied motion to intervene, the issue becomes, then, whether the Government
showed good cause for intervention. The district court found that mere intent of
the Government to dismiss the case constitutes good cause. Such finding
effectively eliminates the need to intervene at all, a finding which, again, renders
the FCA’s late intervention provision superfluous. I therefore disagree with the
district court as to what constitutes good cause. In my view, the Government did
show good cause by demonstrating that the lawsuit would compromise national
security interests and delay the cleanup and closure of Rocky Flats.
I recognize that there is persuasive authority from other jurisdictions to
support the majority’s conclusion as to intervention, but I believe that those
courts have engaged in iconoclastic statutory construction to reach that
conclusion. As the majority acknowledges, the decision in Swift v. United States,
318 F.3d 250, 251 (D.C. Cir.), cert. denied, 539 U.S. 944 (2003), concerned a
government motion to dismiss during the seal period, and the language in other
cases occurs in dicta, Kelly, 9 F.3d at 753 n.10; United States ex rel. Friedman v.
-5-
Rite Aid Corp., 152 F. Supp. 2d 766, 772 (E.D. Pa. 2001); Juliano v. Fed. Asset
Disposition Ass’n , 736 F. Supp. 348, 351 (D.D.C. 1990), or simply ignores the
language in 31 U.S.C. § 3730(c)(3) that the court may permit late intervention
“without limiting the status and rights of the person initiating the action.” See
Sequoia, 151 F.3d at 1145 (9th Cir. 1998). The Juliano court recognized that
subsection (c)(2)(A), “by its placement in the statute, appears to pertain to actions
in which the government has already intervened,” but reasoned that the
“distinction is not crucial.” 736 F. Supp. at 351. In my opinion, the distinction is
crucial. If Congress intended the construction placed upon the statute by these
courts, it would have chosen an alternative placement or omitted the limitations
present in the statutory language.
The majority declined to “engraft a good cause requirement on a
government motion to dismiss.” Maj. Op. 17. I believe that its holding as to
intervention essentially engrafts the Sequoia standard on a government motion to
intervene after the seal period, and that such action contravenes the express
language of the statute, as well as Congressional intent. For these reasons, I
respectfully dissent. However, I concur in the result because, here, the
Government has shown good cause to intervene under 31 U.S.C. § 3730(c)(3), as
the district court found, and the reasons for intervention support dismissal under
any standard.
-6-
Ridenour v. Kaiser-Hill Co.
Court: Court of Appeals for the Tenth Circuit
Date filed: 2005-02-09
Citations: 397 F.3d 925
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