Argument Preview: Rockwell International v. United States on 12/5

The following argument preview was written by Christopher Egleson, an attorney with Akin Gump in Washington, DC.

On Tuesday, December 5, the Supreme Court will hear oral argument in Rockwell International v. United States (05-1272). The question presented is whether “the Tenth Circuit erred by affirming the entry of judgment in favor of a qui tam relator under the False Claims Act, based on a misinterpretation of the statutory definition of an ‘original source’ set forth in 31 U.S.C. § 3730(e)(4)?” Maureen E. Mahoney of Latham & Watkins, LLP will argue the case for the petitioner. Respondents the United States and James Stone will split their time; Maria T. Vullo of Paul, Weiss, Rifkind, Wharton & Garrison LLP will argue for James Stone, the relator in the case, and Assistant to the Solicitor General Malcolm L. Stewart will argue the case for the United States.

Rockwell arises from the qui tam provision of the False Claims Act (FCA), 31 U.S.C. § 3730. The FCA prohibits any person from “knowingly present[ing] a false or fraudulent claim for payment or approval.” The qui tam provision permits a private citizen to bring suit on behalf of the United States against persons who violate the FCA, and to keep some of the proceeds if she is successful. When a false claim has been publicized, the FCA grants jurisdiction over a suit by a qui tam relator only when that relator is an “original source” of the information on which the suit is based. An “original source” under the statute is one who has “direct and independent knowledge of the information on which the allegations are based.” An “original source” must also “voluntarily provide[] the information to the Government before filing.” The principal issue in Rockwell is the meaning of the first phrase.

Respondent James Stone was an engineer for Rockwell International (since acquired by Boeing North American, Inc.) at the Rocky Flats nuclear weapons plant in Golden, Colorado. He brought a qui tam suit against his former employer alleging that it had violated various health and safety requirements of a contract with the government. The contract involved the disposal of toxic sludge by mixing it with concrete, forming a substance known as “pondcrete.” Rockwell, Jones alleged, was skimping on the concrete it used to form the pondcrete, leaving the resulting slurry too dilute to harden.

The issue in the case arises because Stone had been laid off from the Rocky Flats plant a year before the pondcrete problem emerged. Jones learned of the specific problem no earlier than the general public did, after local media reported the discovery of thousands of leaky boxes of pondcrete the consistency of mayonnaise being stored in an outdoor lot. The media reports followed the execution of an FBI search warrant at the Rocky Flats site, the opening move in an investigation into whether Rockwell was covering up its sludgy shame while falsely certifying to the government that it was disposing of its waste in compliance with the Resource Conservation and Recovery Act, thereby improperly securing payments from the Department of Energy.

Stone did not have first-hand knowledge of the pondcrete problem. He was, however, instrumental in bringing it to light: he reported to the FBI his belief that Rockwell was committing numerous and varies environmental violations at the Rocky Flats site, and it was based in part on Stone’s information that the FBI obtained the search warrant that revealed the violations. Stone also alleged more particularly that he had been responsible for certain oversight at the Rocky Flats plant, and that he had reviewed and recommended against Rockwell’s plans to use a procedure for making its pondcrete that would not guarantee that enough concrete was added to the mixture. Rockwell ultimately used a different, but similarly deficient, procedure for mixing the pondcrete, but did not do so until after Stone left the company.

Rockwell filed a motion to dismiss for lack of jurisdiction in the district court, asserting that Stone was not an original source of the information on which the qui tam action was based. In particular, Rockwell argued that Stone was not an original source of any information related to false filings: even if he was a source of information about the environmental violations, he had no knowledge of any specific false claims that had been made to the government. The district court rejected Rockwell’s arguments, holding that Stone’s general knowledge that the company’s compensation was based in part on its compliance with applicable regulations, coupled with his knowledge that it concealed its failure to comply with those regulations, was sufficient to support his qui tam claim.

The United States eventually intervened in the case, a typical event in a qui tam suit, and as the trial progressed, the issues in the suit were narrowed. Various violations of which Stone may have had more direct knowledge fell out of the case. The pondcrete issue was one of the principal issues that remained after trial; Rockwell asked that Stone get no part of the judgment, arguing that the court had lost jurisdiction over Stone’s claims when the particular violations of which he had first-hand knowledge fell out of the case. The United States insisted (1) that Stone had been vital to the development of the case; (2) that the narrowing of the issues had been a tactical decision for which he should not suffer; and (3) that in any event Stone’s allegations had been sufficient to give the court jurisdiction over the case. The district court found it had jurisdiction and entered judgment against Rockwell.

On appeal, the Tenth Circuit upheld the district court as to most points. It held that specific knowledge of particular false filings was not required, nor was first-hand knowledge of the activity alleged to have been misrepresented. All the statute required was that the relator have direct and independent knowledge of the information underlying his claim. The court said of the particular claim at issue that “[t]he gravamen of Stone’s claim is that he learned from studying Rockwell’s plans for manufacturing pondcrete that the blocks would leak toxic waste. The fact that he was not physically present at Rocky Flats when production began is immaterial to the relevant question, which is whether he had direct and independent knowledge of the information underlying his claim, in this case Rockwell’s awareness that it would be using a defective process for manufacturing pondcrete.”

Before the Supreme Court, Rockwell argues that the Tenth Circuit standard recognizes jurisdiction in too broad a range of cases. The Tenth Circuit, Rockwell argues, allows qui tam actions where a relator only knows limited background facts “underlying or supporting” fraud allegations – a standard too broad to comport with Congress’s intent. Rockwell says that Stone had no “direct and independent knowledge” that “pondcrete was insolid, or that Rockwell had represented otherwise to DOE.” A more restrictive rule, Rockwell argues, is necessary to fend off “parasitic” suits brought by individuals who learn of wrongdoing only from publicly available sources. The Third Circuit has specifically adopted such a rule, Rockwell argues, requiring direct and independent knowledge of the false filings. As a secondary matter, Rockwell argues that Stone did not sufficiently disclose what information he had to the government, principally because his disclosures were buried in a mass of 2,300 pages and therefore did not serve the statutory purpose of conserving government resources by bringing false claims to its attention.

The Government, briefing the Court in support of Stone’s qualifications as a relator, argues in response for the more permissive interpretation of the statute adopted by the Tenth Circuit. “Although Stone did not observe the submission of false claims during his period of employment, he learned facts as a Rockwell employee from which he reasonably inferred that” Rockwell had filed false claims, the Government argues. Stone had direct and independent knowledge of the false claims because he “based his own allegations on information that he acquired as a Rockwell employee.” The fact that various of those allegations were subsequently dropped from the case, including those of which Stone did have first-hand knowledge, did not deprive the court of the jurisdiction it obtained when Stone filed his complaint. This was because, when the United States intervened in the case, its presence provided an alternative ground for jurisdiction, or because a narrower interpretation of the rule would be inconsistent with Congress’s intention to make the statute broad enough to fight fraud against the government. The narrower reading, the government urges, would frustrate cooperation between the government and qui tam relators. The government also argues that Stone sufficiently disclosed his information to the government.