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Supreme Court Decision Update - Rockwell Int’l Corp. v. U.S.

nPlant.gifToday’s other Supreme decisions is Rockwell Int’l Corp. v. U.S. (PDF of the opinion). This is a case about nuclear waste, and when someone can bring a private lawsuit on behalf of the Government under the False Claims Act.

QuizLaw Analysis: Scalia and his friends says that you can only bring such a lawsuit if you have direct and personal knowledge of the information forming the basis of your claims. But as with today’s other decision, my favorite thing about this decision a word. This time, that word is “pondcrete,” which is a block of cement mixed with toxic pond sludge. How fantastic is that?

Pondcrete? Pondcrete! And old pondcrete, at that, as The Scalia notes in the beginning of his decision: “The mixture of concrete and pond sludge that is the subject of this case has taken nearly two decades to seep, so to speak, into this Court.”

So what of this pondcrete? Rockwell International Corp. had a contract with the Department of Energy to run a nuclear weapons plant in Colorado, the Rocky Flats plant. James Stone was an engineer at that plant from 1980-1986. In 1982, he reviewed a proposal to dispose of toxic pond sludge by mixing it with cement, creating pondcrete blocks which could then easily be stored or disposed of. But he thought this process wouldn’t work - he said there was a problem with the piping system that would be used, which would result in unstable blocks that would leak toxic waste.

Rockwell went ahead with the pondcrete project anyway. After Stone was laid off, in March ‘86, Rockwell eventually learned that there were, in fact, a substantial number of “insolid” pondcrete blocks (that is, leaking blocks). The Department of Energy didn’t learn about this until 1988, however, after media reports. The Feds and EPA agents raided Rockwell in 1989, and in ‘92 Rockwell pled guilty to 10 environmental violations, including allegations about the bad pondcrete blocks, and agreed to pay $18.5 million in fines.

Meanwhile, back in 1989, Stone filed a civil qui tam lawsuit against Rockwell under the federal False Claims Act.

A “qui-what” lawsuit?Qui tam.” The Scalia explains it for us in a footnote:

Qui tam is short for “qui tam pro domino rege quam pro se ipso in hac parte sequitur,” which means “who pursues this action on our Lord the King’s behalf as well as his own.”

In other words, it’s a lawsuit filed by a private citizen on behalf of both himself and the government.

And what’s the False Claims Act? It “prohibits false or fraudulent claims for payment to the United States,” and authorizes lawsuits over such fraud to be brought by either the Attorney General or a private individual (as a qui tam suit). However, there is a limitation in the Act when the lawsuit is based on “the public disclosure of allegations or transactions…from the news media.” In that situation, the lawsuit can only be brought by the Attorney General or the person who was the “original source of the information” (that is, someone with direct knowledge and who voluntarily gave info to the government before filing the lawsuit).

So Stone filed an action under this Act, alleging that Rockwell broke all sorts of environmental laws and regulations and, in order to get paid, knowingly made false statements to the Government. There were 26 environmental and safety issues identified by Stone, one of which was the pondcrete matter. In 1996, the Government jumped into the lawsuit, and Stone and the Government filed a joint amended complaint. In that complaint, there were allegations about the leaking pondcrete blocks, however, there was no allegation that it was bad piping that caused the problem (you’ll recall that Stone predicted that it would be the piping at the root of the problem). Instead, they claimed the problem was a bad ratio of the cement and sludge mixed together to make the pondcrete.

There was a trial in 1999 and the jury found against Rockwell on the pondcrete allegations for the period of time between April 1987 and September 1988, awarding damages of almost $1.4 million (which the District Court then trippled). Rockwell then tried to have Stone’s original claims tossed out, arguing that Stone’s “claims were based on publicly disclosed allegations that Stone was not an original source.” The Court sided with Stone, however, who argued that he was an original source of the publicly disclosed allegations.

And on appeal? Well the Tenth Circuit affirmed the District Court’s decision, although it remanded so the District Court could figure out if Stone had given his inside information to the Government before filing his lawsuit, as required by the False Claims Act. The District Court found that he had given his 1982 written report to the Feds, but that this didn’t fully establish Stone’s allegations. The Court also found that Stone couldn’t prove that he had orally told the FBI all about his allegations before filing his lawsuit. This went back to the Tenth, which disagreed, and found that the 1982 report did cover everything so Stone was ok.

Are we at the Supreme Court yet? Indeed we are. We’ve got a 6-2 decision here, with the majority opinion penned by The Scalia and joined by Chief Justice Johnny and Justices Kennedy, Souter, Thomas and Alito. Justice Stevens filed a dissent, joined by Justice Ginsburg, and Justice Breyer didn’t do anything with this case.

So what’s The Scalia have to say? He starts by noting that the “original source” issue is jurisdictional. So it wouldn’t matter if Rockwell conceded, as Stone alleged, that Stone was an original source. It has to be independently determined by the court because, otherwise, the court doesn’t have jurisdiction to hear the case in the first place. So Scalia then turns to the question of whether or not Stone was, in fact, an original source.

And? Not so much, says The Scalia. The first requirement for an “original source” is that the person must have “direct and independent knowledge of the information on which the allegations are based.” The information we must look to is the information which forms the basis for the lawsuit’s allegations. The reason this is even a question is because the Act also refers to another type of information, “the information that triggered the public disclosure bar.” The distinction isn’t all that important here - what is important is simply to understand that the individual is required by the Act, as Scalia reads it, to have direct and personal knowledge of the information their lawsuit is based on.

Ok, but what allegations do we look at? That’s the right question, because the original source must have knowledge of the information “on which the allegations are based,” so we need to know which allegations are relevant. For instance, in this lawsuit, Stone’s allegations changed, so the Court needs to know where to look. Because the Act doesn’t offer any limitation or qualifier to the term “allegations,” The Scalia says he won’t infer one - so the Court should look at Stone’s allegations throughout the litigation and he “must satisfy the original-source exception through all stages of the litigation.” From a practical standpoint in future cases, this means that a court must re-evaluate its jurisdiction whenever a plaintiff’s allegations change (such as when an amended complaint is filed), to ensure that the plaintiff still qualifies as an original source (and thus, to ensure that the court itself still has jurisdiction over the case).

Just to hammer the point home, The Scalia adds:

The rule that subject-matter jurisdiction “depends on the state of things at the time of the action brought,” [citation], does not suggest a different interpretation. The state of things and the originally alleged state of things are not synonymous; demonstration that the original allegations were false will defeat jurisdiction. [citations.] So also will the withdrawal of those allegations, unless they are replaced by others that establish jurisdiction.

So we must look to the final statement of Stone’s claims which, in this case, means looking to the final pretrial order, which contains all of Stone’s claims and “superseded all prior pleadings.”

Ok, can we get to Stone’s situation already? Are you calling The Scalia long-winded?

Nah, I’m calling you long-winded! Fair enough. Ok, so Scalia says that Stone doesn’t meet this requirement, as we’ve now defined it. The only claims by Rockwell which the jury ultimately found were false were statements by Rockwell made between April 1987 and September 1988. During this time period, the only relevant environmental or safety problem Stone claimed direct and independent knowledge about was the bad pondcrete. However, he wasn’t employed at the plant by April ‘87, so he didn’t know that any of the pondcrete was insolid, that there were other problems, that there were leaks, etc. And he didn’t even know that Rockwell had made any false statements to the Feds. Instead, Stone has previously predicted that the pondcrete would be insolid. But a predication isn’t “direct and independent knowledge.”

And worse yet, his predication was wrong. He predicted the problem would be with the piping system, but the actual problem with the pondcrete was its mix ration. So even if you said a prediction of a problem should count as direct and independent knowledge, “it assuredly does not when its premise of cause and effect is wrong.”

Stone tried to argue that a separate claim, an allegation relating to a different time period about spray-irrigation, would provide jurisdiction over all his claims. Scalia says no because, even if there is jurisdiction over that single claim, the Act “does not permit jurisdiction in gross just because [an individual] is an original source with respect to some claim.” That’s “claim smuggling,” and Scalia ain’t having it.

We done yet? One more thing from Scalia. Stone tried to argue that the original-source test doesn’t matter because once the Government intervened in the case, there was an independent basis for jurisdiction at that point (because then it was as if the case had been brought by the Attorney General). Scalia says this is wrong because, under the Act, there are two distinct types of actions - those brought by a private individual and those brought by the Attorney General. When the Attorney General joins into a case brought by a private individual, as was the case here, it is only considered an action “brought” by the Attorney General when the private individual is “ousted” - either of their own volition, or upon being dismissed after a finding that the Court lacks original-source jurisdiction over them. But that didn’t happen here and, thus, the Tenth Circuit gets reversed because the District Court never had jurisdiction.

Ok, quick like - what’s in Stevens’ dissent? He doesn’t think the person bringing a qui tam lawsuit needs to have “knowledge of the actual facts underlying the allegations on which he may ultimately prevail” in order to be an original source. Instead, he thinks they simply need direct knowledge of the information underlying the publicly disclosed allegations.

In this case, as the Court points out, the fact that Rockwell was storing thousands of insolid pondcrete blocks at the Rocky Flats facility had been publicly disclosed by the news media before Stone filed this lawsuit. [citation.] In my view, the record establishes that Stone was an original source of the allegations publicly disclosed by the media in June 1989, even though he thought that the deterioration of the pondcrete blocks would be caused by poor engineering rather than a poor formula for the mixture.

Stone gave documents to the FBI and its subsequent raid was based, in part, on that information. And that should be enough.

Now there was an earlier public disclosure as well, but Stevens says the record doesn’t give us enough one way or the other to figure out if Stone was an original source there, although he thinks it is likely. So he’d vacate and remand for a determination, under his analysis, of whether Stone was, in fact, an original source.

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Comments

Too bad the person litigating does not have equal footing, other wise the defendant is given an edge. Giving edges to big corporations who cheat USA accounts seems to be the point of Scalia's opus.
Just give a person the same standard as the DOJ to litigate, but Congress likes rigged decks for corporationw to toy with people, like Jim Stone.