UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
____________________
No. 98-40364
____________________
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
CHEVRON U.S.A., INCORPORATED; CHEVRON CORPORATION,
Defendants-Appellants.
_________________________________________________________________
Appeal from the United States District Court
for the Eastern District of Texas
_________________________________________________________________
August 24, 1999
Before JONES, DUHÉ, and BARKSDALE, Circuit Judges.
RHESA HAWKINS BARKSDALE, Circuit Judge:
Concerning the alleged underpayment of royalties to the
Government for production under federal oil and gas leases, chiefly
at issue is the authority of the Inspector General (IG) for the
Department of the Interior to subpoena documents from Chevron
(pursuant to a district court enforcement order; Chevron has
complied), Chevron having provided many of the same documents in
other contexts not only to the Department of the Interior, but also
to the Department of Justice. We AFFIRM.
I.
As an oil and gas lessee on federal and Indian lands, Chevron
(Chevron USA, Inc., and Chevron Corporation) pays the United States
royalties on its production. Chevron must report monthly
production value to the Minerals Management Service of the
Department of the Interior (MMS).
In 1996, the Interior and Justice Departments began
investigations after private qui tam plaintiffs under the False
Claims Act (FCA), 31 U.S.C. § 3730(b), alleged that Chevron, among
others, had misrepresented the value of their federal lease
production. The Department of the Interior IG issued
administrative subpoenas to Chevron for documents related to the
federal leases since 1986. The documents concerned both the value
Chevron derived from the leases and the methods it used to
calculate royalties.
Chevron objected to the subpoenas’ scope and concomitant
threat to confidential and proprietary information. In March 1997,
the IG sought enforcement by the district court. Pursuant to an
agreed order staying enforcement, the parties attempted to agree on
a protective order. Negotiations having failed, the district court
in January 1998 ordered the subpoenas enforced, but subject to an
IG-drafted protective order. (As discussed infra in parts II.A.
and C., Chevron challenges the protective order, especially its
provisions concerning confidentiality/disclosure to third parties.)
The district court and this court denied stays pending appeal.
Thereafter, Chevron complied with the subpoena.
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Meanwhile, in the FCA case, and shortly before the January
1998 subpoena enforcement order, the Department of Justice issued
Civil Investigative Demands (CIDs) for documents pertaining to
Chevron’s federal leases. The documents called for by the DOJ CIDs
and the IG administrative subpoenas were similar, but not
identical. For example, the CID called for documents dating back
to 1990; the administrative subpoenas, to 1986.
II.
A.
Because Chevron has produced the documents in response to the
IG subpoenas and DOJ CIDs, we face a threshold question of
mootness, which we must address sua sponte if necessary. E.g.,
Dailey v. Vought Aircraft Co., 141 F.3d 224, 227 (5th Cir. 1998).
“The mootness doctrine requires that the controversy posed by the
plaintiff’s complaint be ‘live’ not only at the time the plaintiff
files the complaint but also throughout the litigation process.”
Rocky v. King, 900 F.2d 864, 866 (5th Cir. 1990).
Among other things, the continuing dispute regarding the
protective order, discussed infra, keeps this a “live” controversy.
The subpoenas and CIDs cover distinct sets of documents and offer
different protections. Were we to vacate the enforcement order on
any of the grounds Chevron advances, MMS would be required to
return documents produced in response to the subpoenas, alleviating
Chevron’s concern. See In re Grand Jury Subpoena, 148 F.3d 487,
490 (5th Cir. 1998), cert. denied, 119 S.Ct. 1336 (1999) (case not
moot where court can still grant some relief by ordering documents
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returned or destroyed) (citing Church of Scientology of California
v. United States, 506 U.S. 9, 13 (1992)).
B.
A subpoena enforcement order is reviewed for abuse of
discretion. E.g., N.L.R.B. v. G.H.R. Energy Corp., 707 F.2d 110,
113 (5th Cir. 1982). “[I]t is settled that the requirements for
judicial enforcement of an administrative subpoena are minimal.”
Burlington Northern Railroad Co. v. Office of Inspector General,
Railroad Retirement Board, 983 F.2d 631, 637 (5th Cir. 1993).
Courts will enforce an administrative subpoena if it (1) is within
the agency’s statutory authority; (2) seeks information reasonably
relevant to the inquiry; (3) is not unreasonably broad or
burdensome; and (4) is not issued for an improper purpose, such as
harassment. See, e.g., id., 983 F.2d at 638.
Pursuant to the first and third of these prongs, Chevron
claims the subpoenas are outside the IG’s authority and are unduly
burdensome.
1.
Inspectors General were placed in various federal agencies and
programs by the Inspector General Act of 1978 (IGA), 5 U.S.C. app.
3. See Burlington Northern, 983 F.2d at 634. Amendments to the
Act have added them to other agencies and programs. Interior was
one of the original departments with an IG. 5 U.S.C. app. 3 §
11(2). Section 4(a) states his broad authority:
It shall be the duty and responsibility of
each Inspector General, with respect to the
establishment within which his Office is
established—
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(1) to provide policy direction for
and to conduct, supervise, and
coordinate audits and investigations
relating to the programs and
operations of such establishment;
...
(3) to recommend policies for, and
to conduct, supervise, or coordinate
other activities carried out or
financed by such establishment for
the purpose of promoting economy and
efficiency in the administration of,
or preventing and detecting fraud
and abuse in, its programs and
operations.
(Emphasis added.) Section 6(a)(4) of the IGA authorizes an IG
to require by subpena [sic] the production of
all information, documents, reports, answers,
records, accounts, papers, and other data and
documentary evidence necessary in the
performance of the functions assigned by this
Act....
a.
As discussed in Burlington Northern, 983 F.2d at 634, concern
about fraud in federal programs was one of Congress’ primary
reasons for enacting the IGA. In the light of Inspectors General
being tasked by the IGA, as quoted above, with an anti-fraud
mission, Chevron attempts to distinguish underpayment of royalties
from “fraud and abuse” in MMS programs and operations. In this
regard, it contends that only recipients of federal funds are
subject to IG oversight.
Obviously, Chevron’s receiving a federal lease (and the
concomitant oil and gas production), rather than federal funds,
makes its alleged fraud no less “fraud ... in” MMS’ program.
Needless to say, both an underpaying lessee and an overcharging
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contractor extract a benefit fraudulently disproportionate to what
is received by the Government; both fall squarely within the IG’s
statutory authority. The IGA legislative history Chevron cites
referring to government-funded projects, e.g., S. REP. NO. 95-1071,
at 27, 34, reprinted in 1978 U.S.C.C.A.N. 2676, 2702, 2709
(referring to “the way in which Federal tax dollars are spent” and
“the way federal funds are expended”) sets out a central, but not
exclusive, concern; it does not suggest a limit to such IG
activities.
b.
Burlington Northern construed the IGA, 5 U.S.C. app. 3 §
9(a)(2) (“there shall not be transferred to an Inspector General
... program operating responsibilities”) to bar IG investigations
which, “as part of a long-term, continuing plan”, perform “those
investigations or audits which are most appropriately viewed as
being within the authority of the agency itself”. Burlington
Northern, 983 F.3d at 642. There, based on the district court’s
finding that the IG investigation had such an improper purpose, our
court affirmed the district court’s refusal to enforce an IG
subpoena. Id. at 640-41.
Chevron claims that, as did the tax audits in Burlington
Northern, the subpoenas usurp MMS “program operating
responsibilities”. But, unlike the situation in Burlington
Northern, the subpoenas do not assume MMS program operating
responsibilities, because MMS continues to keep the relevant
records. The subpoenas do not displace any agency
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responsibilities; therefore, no agency functions have been
“transferred” to the IG. As our court noted recently in
distinguishing Burlington Northern,
Section 9(a)(2) prohibits the transfer of
‘program operating responsibilities,’ and not
the duplication of functions or copying of
techniques. ... In order for a transfer of
function to occur, the agency would have to
relinquish its own performance of that
function.
Winters Ranch Partnership v. Viadero, 123 F.3d 327, 334 (5th Cir.
1997). Performance of functions has not been relinquished by MMS;
accordingly, the Burlington Northern/§9(a) limit is not implicated.
c.
Chevron maintains that IG subpoenas connected with an action
under the FCA must be subject to the restrictions imposed upon DOJ
CIDs. It invites us to infer an implicit limit on the IG flowing
from the authority granted to DOJ by the FCA.
The 1986 FCA amendments, Pub. L. No. 99-562, 100 Stat. 3153
(1986), empower DOJ to issue CIDs for material or information
relevant to a false claims law investigation. See 31 U.S.C. §
3733. CIDs differ from IG subpoenas in several ways. In some ways,
they provide greater protection to the recipient than does a
subpoena. For example, § 3733(a)(2)(G) makes the Attorney
General’s CID authority nondelegable; § 3733(i)(1) requires a
single designated custodian for CID-obtained materials; § 3733(k)
exempts CID materials from the Freedom of Information Act, 5 U.S.C.
§ 552; and § 3733(i)(2)(C) allows disclosure to other agencies or
Congress only upon application to a district court and notice to
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the CID recipient. In other ways, CIDs are broader than a
subpoena. For example, § 3733(a)(1)(B) & (C) allow CIDs to seek
types of information (such as oral testimony and answers to
interrogatories) beyond that permitted an administrative subpoena.
Chevron’s claim that the FCA limits the IG is belied by the
silence in the FCA and IGA on the matter and by FCA legislative
history, which plainly contemplates cooperation in FCA cases
between an IG and DOJ. See, e.g., S. REP. NO. 99-345, at 33 (1986),
reprinted in 1986 U.S.C.C.A.N. 5266, 5298 (noting that, in FCA
cases, DOJ had historically relied on information from IGs and
criminal grand juries, and that proposed CID authority would
“supplement[] the investigative powers of the IGs” in the face of
judicial limits on DOJ use of grand jury materials) (emphasis
added).
Acknowledging this legislative history (but pointing to no
other), Chevron claims that the FCA amendment confirms prior IG
inability to investigate false claims; that, by “supplementing” IG
investigative authority, the CIDs filled a void in IG authority.
To say the least, this is a quite strained reading of “supplement”,
one belied by the explicit statement that, before the amendment, an
IG’s FCA material was available to DOJ. Chevron’s further claim
that IG authority to investigate FCA claims would render
superfluous and senseless the DOJ’s CID authority ignores both the
ways in which CIDs exceed IG subpoenas in scope and the usefulness
to the DOJ of an independent investigative authority exercisable
without IG participation.
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The FCA empowers DOJ to investigate false claims against the
Government, and the IGA empowers an IG to investigate fraud and
abuse in government programs. Obviously, investigative authority
granted by each Act overlaps. Obviously, if an IG investigation is
within statutory authority, the fact that it also involves matters
relevant to an FCA claim does not alter the propriety of the
investigation.
2.
In the last of its challenges to two of the four bases that
must be satisfied before a district court will enforce on
administrative subpoena, Chevron claims that the subpoenas are
overbroad and unduly burdensome. In the main, these contentions
restate the complaints about the lack of CID-type protections.
Chevron contends that the subpoenas are broader than a CID could
be, for instance, because they cover years outside the FCA
limitations period, or for which FCA claims are otherwise barred.
(Chevron thus ironically asserts that the subpoena is invalid both
because it covers documents not relevant to an FCA case, and also
because it covers documents which are.)
However, “a subpoena is not unreasonably burdensome unless
compliance threatens to unduly disrupt or seriously hinder normal
operations of a business”. F. T. C. v. Jim Walter Corp., 651 F.2d
251, 258 (5th Cir. 1981) (quotation omitted). While the time and
effort required to comply with the subpoena are obviously extensive
(as is the alleged fraud), Chevron offers no explanation
independent of its CID-related arguments why, relative to Chevron’s
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size, the compliance cost and effort “unduly disrupt[ed] or
seriously hinder[ed] normal operations”.
Chevron also contends that, because it has already provided
many of the same documents to MMS for regulatory audits, the IG
should not have been able to obtain them again. See United States
v. Powell, 379 U.S. 48, 57-58 (1964) (agency seeking documents must
not already have them in its possession). However, it is undisputed
that MMS has not retained those documents. Chevron’s producing
them again may have been duplicative, but this is, in part,
necessary for an independently-operating IG, consistent with the
IGA and required by Burlington Northern.
C.
Regarding the protective order, Chevron keys especially on the
confidentiality/disclosure provisions. As part of the enforcement
order, the district court found that the protective order “affords
[Chevron] adequate protection”. We review for abuse of discretion.
See Leatherman v. Tarrant County Narcotics Intelligence and
Coordination Unit, 28 F.3d 1388, 1394 (5th Cir. 1994) (protective
order under FED. R. CIV. P. 26). (Of course, an abuse of discretion
regarding the protective order would not alone compel vacating the
enforcement order, the only relief Chevron seeks.)
The protective order, supplemented by the Government’s post-
argument stipulation in our court, proscribes disclosure of any
confidential material, as designated pursuant to the protective
order, to any other person except in accordance with the procedures
set by the protective order; requires a court order for disclosure
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to a private party, with the IG being required to resist, to the
extent permitted by law, such parties’ attempts to obtain documents
(for instance, under the Freedom of Information Act), with notice
to be given pre-disclosure to Chevron; permits disclosure to other
agencies of the United States (subject to their maintaining the
protections accorded confidential materal); and, concerning a
request from Congress, permits disclosure, but Congress is to be
advised about the protective order and Chevron is to be notified,
unless Congress objects.
As with its claims of undue burden and overbreadth, Chevron’s
contentions largely restate its position regarding CIDs; it asserts
that the confidentiality provisions are less than those provided by
a CID, but points to no authority for this claimed entitlement to
greater protections. We find no abuse of discretion.
Along this line, we agree with the D.C. Circuit that an
agency’s determinations on the protections required for
confidential information are not to be lightly disregarded. See
U.S. International Trade Com'n v. Tenneco West, 822 F.2d 73, 79
(D.C. Cir. 1987) (“deference [is] due an agency in choosing its own
procedures for guarding confidentiality”); F. T. C. v. Texaco,
Inc., 555 F.2d 862, 884 n.62 (D.C. Cir. 1977) (“it is the agencies,
not the courts, which should, in the first instance, establish the
procedures for safeguarding confidentiality”) (citing FCC v.
Schreiber, 381 U.S. 279, 290-1, 295-6 (1965)).
Chevron’s primary concern is, under the protective order as
written, not being permitted to object to disclosure to third
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parties (not including Congress or any agency of the United
States). But, the Government’s post-argument stipulation has
greatly deflated, if not mooted, this sub-issue. Under protective
order ¶1, “Protected Competitive Material” (designated pursuant to
protective order-procedures) is not to “be disclosed to any other
person except in accord with [the protective order] or as may
otherwise be required by law”. As we directed at oral argument,
the Government’s post-argument submittal covers its “obligations to
preserve the confidentiality of documents obtained through [the
IG’s] subpoenas”.
Concerning the above quoted disclosure-proscription, the
Government has stipulated that it “will not disclose Protected
Competitive Material to any private party unless compelled to do so
by a judicial order entered by a court of competent jurisdiction”.
(Emphasis added.) In explaining why it has so stipulated, even
though a disclosure-order is not explicitly required by the
protective order, the Government states in its post-argument
submittal that it “construe[s] these [protective order ¶1]
provisions as barring voluntary governmental disclosure of
Protected Confidential Material to Chevron’s business competitors
or to any other private party”. In that the Government has
stipulated to no non-order disclosure, and in that, pursuant to
protective order ¶10, Chevron must be given pre-disclosure notice,
it may well be that the court considering disclosure vel non will
allow Chevron to first object. In any event, as noted, prior to
such disclosure, the Government is to resist to the extent
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permitted by law and “Chevron [is to] be given as much notice as
practical”, offering it opportunity to intervene and, inter alia,
make a reverse Freedom of Information Act claim. See Chrysler
Corp. v. Brown, 441 U.S. 281, 317-18 (1979) (allowing “reverse
FOIA” challenge under Administrative Procedures Act to disclosure
of documents).
Regarding disclosure to agencies of the United States, Chevron
concedes that sharing of information between the IG and other
agencies, such as DOJ, is contemplated in the legislative history
of CID provisions cited above, the legislative history of the IGA,
and other cases. See, e.g., S. REP. NO. 95-1071, at 6-7 (1978),
reprinted in 1978 U.S.C.C.A.N. 2676, 2681-82 (recommending
“inspector general concept” because it would “strengthen[]
cooperation between the agency and [DOJ] in investigating and
prosecuting fraud cases”); U.S. v. Educational Development Network
Corp., 884 F.2d 737, 743 n.10 (3rd Cir. 1989) (“Congress expected
cooperation between the IG and [DOJ] in investigating and
prosecuting fraud cases.”); U.S. v. Aero Mayflower Transit Co.,
Inc., 831 F.2d 1142, 1146 (D.C. Cir. 1987) (“So long as the
Inspector General's subpoenas seek information relevant to the
discharge of his duties, the exact degree of Justice Department
guidance or influence seems manifestly immaterial.”). And, for
disclosure to such agencies and Congress, the former are to
maintain the confidentiality provisions and the latter is to be
notified about those provisions (with Chevron being notified,
unless Congress objects).
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Again, there was no abuse of discretion concerning the
protective order. This is all the more so in the light of the
Government’s post-argument stipulation.
III.
For the foregoing reasons, the enforcement order is
AFFIRMED.
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United States v. Chevron U.S.A., Inc.
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