5th Circuit Surpasses Its Brethren In Granting Government Employees A Green Light To Blow The Whistle

By: Douglas K. Rosenblum

On July 31, 2012, the U.S. Court of Appeals for the Fifth Circuit rendered an opinion in a case of first impression.  The Court held that a federal employee, even one whose job it is to investigate fraud, is a “person” under the False Claims Act and may maintain a qui tam action.  While other Circuits have found limited circumstances in which government employees may maintain qui tam actions under the False Claims Act, the fifth Circuit has broadened the opportunities for public servants.

Factual Background

U.S. ex rel. Little and Arnold v. Shell Exploration & Prod., et al., ____ F.3d ____, 2012 WL 3089777 (5th Cir. 2012) was initiated by whistleblowers Randall Little and Joel Arnold in early 2006.  At the time of filing, Little and Arnold were Senior Auditor and Supervisory Auditor for the Minerals Management Service (“MMS”), respectively.  Little and Arnold alleged that Shell defrauded the U.S. Department of the Interior of at least $19 million by taking unauthorized deductions for expenses to gather and store oil on twelve offshore drilling platforms.  MMS is charged with uncovering theft and fraud in royalty programs, and Little and Arnold do not dispute that their allegations against Shell came to light in the course of their official duties.  Little and Arnold reported their allegations to their supervisor, as required by their jobs.  These allegations were reported prior to the filing of their qui tam action, and neither MMS nor any other federal agency acted on the information.  The government declined to intervene in this case, and Little and Arnold proceeded on their own.

Analysis By The Court

The District Court granted summary judgment in favor of Shell, finding that the suit was prohibited by two distinct provisions of the False Claims Act.  First, the Court found that Little and Arnold were not permitted to bring suit under 31 U.S.C. § 3730(b)(1).  Second, the Court found that this suit was barred by public disclosure under 31 U.S.C. § 3730(e)(4)(A), (B).  The Court relied largely on statutory construction in finding that a government employee is a “person” under the False Claims Act.  The Court dismissed the notion that the very title of 31 U.S.C. § 3730(b), “Actions by Private Persons,” prohibits suits by government employees.  The Fifth Circuit cited Black’s Law Dictionary for the proposition that “private” can mean “belonging to an individual, as opposed to the public or the government.”  In other words, Congress used “private” in the title of subsection (b) to distinguish its provisions from those of subsection (a), “Responsibilities of the Attorney General.”

The Court similarly dismissed the argument that government employees are prohibited from acting as relators under the False Claims Act based on an excerpt of  31 U.S.C. § 3730(b)(1) stating that suits under the Act are brought “for the person and for the United States.”  Shell argued that a government employee cannot act “for the United States,” since a government employee is the United States.  The Court was unconvinced and held that a person can have two legal identities: one official and one individual.

The District Court granted summary judgment based upon five categories of publicly disclosed 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.  Although Little and Arnold argued that categories (4) and (5) were never publicly disseminated, the District Court focused on prior civil actions.  The Fifth Circuit remanded this matter for the District Court to apply a narrower definition of public disclosure.  The District Court must determine whether the publicly disclosed information revealed that (1) Shell was deducting gathering expenses prohibited by program regulations, or that (2) this type of fraud was so pervasive in the industry that the company’s scheme, as alleged, would have been easily identifiable.  The ultimate question is whether the whistleblowers could have produced the substance of the complaint merely by synthesizing the descriptions of the scheme as found in the publicly disclosed information.

Impact

Although U.S. ex rel. Little and Arnold v. Shell Exploration & Prod., et al. represents the first opinion of its kind in the Fifth Circuit, federal courts have grappled with this topic in the past.  The First Circuit has held that at least some federal employees may not be qui tam claimants.  U.S. ex rel. LeBlanc v. Raytheon Co., 913 F.2d 17, 19-20 (1st Cir. 2003).  In LeBlanc, the First Circuit held that government employees who were required, by the very description of their job, to uncover fraud could be qui tam relators.  The rationale of the First Circuit was that information possessed by those employees could not be “independent” as required by §3730(e)(4) of the Act.  In reaching a similar decision on distinct grounds, the Ninth Circuit has held that certain government employees cannot maintain qui tam actions as whistleblowers, because they could not meet the requirement that their information was provided to the government voluntarily.  U.S. ex rel. Fine v. Chevron, U.S.A., Inc., 72 F.3d 740 (9th Cir. 1995).

What makes the Fifth Circuit’s decision so important is that, absent public disclosure, any government employee can be a qui tam whistleblower regardless of his/her job description or official responsibilities.  Only time will tell whether this split between the Circuits will lead to a decision by our nation’s highest Court.

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