Petition for Writ of Certiorari — Rockwell Intern. Corp. v. United States

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Supreme Court, U.S.

FILED

0 051272 APR1 4 2006

No. OFFICE OF THE CLERK

Ini the

Supreme Court of the Gnited States

ROCKWELL INTERNATIONAL CORP. AND BOEING NORTH

AMERICAN, INC.,

PETITIONERS,

UNITED STATES OF AMERICA AND UNITED STATES OF

AMERICA EX REL. JAMES S. STONE,

RESPONDENTS.

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE TENTH

CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

CHRISTOPHER J. KOENIGS MAUREEN E. MAHONEY

MICHAEL B. CARROLL Counsel of Record

SHERMAN & HOWARD MATTHEW K. ROSKOSKI

L.L.C. LATHAM & WATKINS LLP

633 17" STREET, SUITE 555 11" STREET, N.W.

3000 : SUITE 1000

DENVER, CO 80202 WASHINGTON, DC 20004

(303) 297-2900 (202) 637-2200

QUESTIONS PRESENTED

k 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)?

2. Whether the judgment must be reversed because the

qui tam provisions of the False Claims Act, 31 U.S.C. §§

- 3729-33, either on their face or as applied in this case, violate

the Appointments and Take Care Clauses of Article II of the

United States Constitution?

RULE 29.6 STATEMENT

Petitioner Rockwell International Corp. was renamed

Boeing North American, Inc. Petitioner Boeing North

American, Inc. has since been merged into The Boeing

Company. State Street Bank and Trust Company

beneficially owns 10% or more of The Boeing Company’s

stock.

TABLE OF CONTENTS

Page

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CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED .............sssssssssesssssessessessssseees 1

STATEMENT OF THE CASL..............c:cssssssosssssssssscesssssssseseses 1

REASONS FOR GRANTING THE WRIT...........csccsseeseeees 13

I. THE TENTH CIRCUIT’S JUDGMENT

DEEPENS AN EXISTING CIRCUIT SPLIT

AND EFFECTIVELY EVISCERATES

A. The Tenth Circuit’s Interpretation Of

The Governing Standard Conflicts With

The Interpretations Adopted By The

Third, Eighth, Ninth, Eleventh, And

Be Ci ctenestencenernminimmennnamnmmnnte 14

B. There Is No Reason To Defer Review.................. 22

Il. THIS COURT SHOULD GRANT

CERTIORARI TO DECIDE THE QUESTION

RESERVED IN STEVENS—WHETHER

THE QUI TAM PROVISIONS OF THE

FALSE CLAIMS ACT VIOLATE ARTICLE

A. The Qui Tam Provisions Of The False

Claims Act Violate The Appointments

TABLE OF CONTENTS—Continued

B. The Qui Tam Provisions Of The False

Claims Act Violate The Take Care

TABLE OF AUTHORITIES

Page(s)

CASES

Auffmordt v. Hedden,

EBT US. BID (1GBD) cocecccrecsececevserscssssecceosees patemensennienmabaneies 26

Buckley v. Valeo,

GG UBB, 1 CRIED ccccccccecscsscssecersvesscscssescsscssesssetonts 14, 24, 26, 30

Comstock Resources, Inc. v. Kennard,

BBS &. OC. BRB F CBB) a cccsccsescccnsscesccscsvenccssscescvsssocsnsseosmectesees 22

Cooper v. Blue Cross & Blue Shield of Florida,

Inc., 19 F.3d 562 (11th Cir. 1994) ......cssessssreserseesereees 16, 17

Edmond v. United States,

520 U.S. 651 (1997)......csccecsrcerersscsessoeoes seennecinsieiimeaeaandislen 26

Gravitt v. General Electric Co.,

680 F. Supp. 1162 (S.D. Ohio 1988)........:ssssesersereersereenes 29

Hughes Aircraft Co. v. United States ex rel.

Schumer, 520 U.S. 9B9 (1997).....crccccsccsrccsesscsssscsssscssesseroesees 28

Marsh v. Chambers,

GBB UBB. FEB CRB IBD scccocccccsnsscescecsasereseorssscvscvessessescsmsasvioisnsnees 30

Minnesota Association of Nurse Anesthetists v.

Allina Health System Corp.,

276 F.3d 1082 (8th Cir. 2002) .......... erscssserssssersscseesserees 20, 23

Morrison v. Olson,

4BT USD. G6 (BGI ccccccccsscsccscccesccssccsssessosessesiessnssenens 14, 27, 29

Nixon v. Administrator of General Services,

438 US. GBB (1077) q.cccccescecccosssssccrscesrsoserssssesosnsssassonsssosssessees 27

TABLE OF AUTHORITIES—Continued

Page(s.

Riley v. St. Luke's Episcopal Hospital,

252 F.3d 749 (Sth Cir. 2001) .........cccccccccscereesereresees 27, 28, 3(

Saudi Arabia v. Nelson,

re ee i rccreenntsenesetnscsrementpnnememnnen 13, 14

Seal 1 v. Seal A,

255 F.3d 1154 (Sth Cir. 2001)...........ccscscscecsscereesesereessees 18, 1¢

United States v. Bank of Farmington,

166 F.3d 853 (7th Cir. 1999)..........c.cccssererserersrcereecessees 23, 24

United States v. Germaine,

99 U.S. 508 (1879)....... saupensmateatintpmamnnenmennneementenansinns 26

United States ex rel. Aflatooni v. Kitsap

Physicians Services, 163 F.3d 516

ET 1é

United States ex rel. Barajas v. Northrop _— ¥

EE: CITI eccencteanesnseenscntennssentuqneemeneeneneensnneans 23

United States ex rel. Burr v. Blue Cross & Blue

Shield of Florida, Inc., 882 F. Supp. 166

Se Re SatIIITt Nicininceiestasctaceseteenemnedeinseseememsemmemmmasemmcemanes 29

United States ex rel. Coughlin v. IBM,

992 F. Supp. 137 (N.D.N.Y. 1998)..........ccccccccsserescerseceseresees 29

United States ex rel. Dick v. Long Island Lighting

Co., 912 F.2d 18 (2d Cir. 1900).......c.cscescececsesesssersesereeseseseeees 23

United States ex rel. Findley v. FPC-Boron

Employees‘ Club, 105 F.3d 675

re ey Si ecrrceneiscsnsonscesnsesnseenenssscenecntennscesseremensenes 23, 24

Vii

TABLE OF AUTHORITIES—Continued

-Page(s)

United States ex rel. Grayson v. Advanced

Management Technology, Inc., 221 F.3d 580

ee 23

United States ex rel. Hafter v. Spectrum

Emergency Care, Inc., 190 F.3d 1156

oo: | sepummmenennanel 23

United States ex rel. Kelly v. Boeing Co., 9 F.3d 743

United States ex rel. Laird v. Lockheed Martin

Engineering & Science Services Co.,

336 F.3d 346 (Sth Cir. 2008) ...........ccssssssessersesssesserenenses 23

United States ex rel. McKenzie v. BellSouth

Telecommunications, 123 F.3d 935

aI CEI ctersiecneeensnntisinneitciennsesinemnneninsieaemasnnntialeaitins 23, 24

United States ex rel. Mistick PBT v. Housing

Authority of the City of sient 186 F.3d 376

oo: fo sconmmemnensnens 15, 16, 17, 23

United States ex rel. Redeere v. Arkansas,

154 F.3d 865 (Sth Cir. 199B)..........r.ccreccsssssserecsssesesesseseeseeee 27

United States ex rel. Siller v. Becton Dickinson &

Co., B1 PB 1SBD (otha Clr. 19D 6) ..cccccccccccescccccscccccesescsceseccses 24

United States ex rel. Springfield Terminal Railway

Co. v. Quinn, 14 F.3d 645 (D.C. Cir. 1994) ........... 19, 20, 21

United States ex rel. Stinson v. Prudential

Insurance Co., 944 F.2d 1149 (3d Cir. 1991) .............. 16, 28

TABLE OF AUTHORITIES—Continued

Page(s

United States ex rel. Taxpayers Against Fraud v.

General Electric Co., 41 F.3d 1032 (6th Cir. 1994)........... 2

United States ex rel. Waris v. Staff Builders, Inc.,

No. CIV. A. 96-1969, 1999 WL. ee Pa.

Oct. 4, 1999).... -_ olin 1

Vermont Agency of Natural Resources v. United

States ex rel. Stevens, 529 U.S. 765 (2000)... 14, 2¢

Walz v. Tax Commission of City of New York,

397 U.S. 664 (1970)... seusansenseneneDeaseneemRsneneSnapanenne® 3(

Wang ex rel. United States v. FMC Corp.,

975 F.2d 1412 (9th Cir. 1992).........00sssenereee —_ 2

FEDERAL STATUTES

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LEGISLATIVE MATERIALS

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H.R. Rep. No. 99-060 (1986) ........ccssccssscssssssssessusssnseesesssnserseeess 2)

S. Rep. No. 345, 99th Cong., 2d Sess.

(1986), reprinted in 1986 U.S.C.C.A.N. 5266 .........00+ 28, 3(

TABLE OF AUTHORITIES—Continued

Page(s)

OTHER AUTHORITY

42 Op. Off. Legal Counsel 207 (1989) ............. 25, 26, 28, 29, 30

Brief for the United States as Amicus Curiae,

Comstock Res., Inc. v. Kennard, 543 U.S. 923

IID NIIIT TTT ctesesniicensnisinpnsiinnticnstiniii atin nat acacinmecmiiniaanetal 23

John T. Boese, 1 Civil False Claims and Qui Tam

a iaincrncistenrtitcnnsiiisinsiainttiiennansiininnintes 13, 22

OPINIONS BELOW

The opinion of the Tenth Circuit affirming in part and

ordering limited remand (Pet. App. 1-48a) is reported at 282

F.3d 787. The opinion of the Tenth Circuit affirming after

limited remand (Pet. App. 49-55a) is unreported, but is

available at 92 Fed. Appx. 708. The order of the Tenth

Circuit denying rehearing and rehearing en banc (Pet. App.

56-57a) is unreported.

JURISDICTION

The Tenth Circuit denied rehearing and rehearing en

banc on January 4, 2006. Pet. App. 56-57a. The jurisdiction

of this Court is invoked under 28 U.S.C. § 1254(1).

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

The Appendix (Pet. App. 77-82a) reproduces the

relevant text of 31 U.S.C. § 3730 and Article II of the United

States Constitution.

STATEMENT OF THE CASE

This is a gui tam action brought under the False Claims

Act (“FCA”), 31 U.S.C. §§ 3729-33, by James S. Stone, a

former employee at the Rocky Flats nuclear weapons plant

in Golden, Colorado. Rockwell International Corporation

(“Rockwell”)! operated Rocky Flats for the Department of

Energy (“DOE”), and the jury found that Rockwell secured

some payments from DOE in violation of the FCA. As the

case comes to this Court, there is no dispute that Stone’s

complaint was based on information that had been

previously disclosed to the public, and that the qui tam

provisions of the FCA accordingly barred Stone’s claims

unless he qualified as an “original source” within the

meaning of 31 U.S.C. §3730(e)(4). The Tenth Circuit’s

holding that Stone was authorized to maintain the action

rested on an interpretation of the original source rule that

1 In 1996, The Boeing Company acquired Rockwell and changed its

name to Boeing North American, Inc. Thereafter the contract between

Rockwell and DOE for management of Rocky Flats was amended to

reflect the contractor’s name change.

departs from the text of the statute and conflicts with the

legal standards adopted in five other circuits.

The FCA defines an “original source” as “an individual

who has direct and independent knowledge of the

information on which the allegations are based and has

voluntarily provided the information to the Government

before filing” the qui tam action. 31 U.S.C. § 3730(e)(4)(B).

Stone faced a serious obstacle in establishing any first-hand

knowledge of the fraud at issue because his employment was

terminated more than a year before the events that gave

rise to the jury’s finding of liability. Pet. App. 46a (Briscoe,

J. concurring in part, dissenting in part). But the Court of

Appeals interpreted the statute to mean that a relator needs

only to have some background “knowledge ‘underlying or

supporting’ the fraud allegation.” Pet. App. 20-21a.

Applying that standard, it made no difference that Stone

did not even claim to have direct knowledge of the only false

statements and environmental violations that he actually

sought to prove at trial. As Judge Briscoe explained, the

“direct and independent knowledge possessed by” the

relator in this case was so tangential that it “could have

been omitted entirely at trial without affecting the

outcome.” Pet. App. 48a. Indeed, it was. Stone did not

testify, and the document he highlighted as demonstrating

his “original” information was never even introduced into

evidence. Stone could not have recovered under the legal

standards applied in other circuits and this Court should

grant review to resolve this important circuit split.

This Court should also grant review to resolve whether

the qui tam provisions of the FCA violate Article II. Both

the Appointments Clause and the Take Care Clause kar

Stone from litigating on behalf of the United States.

Procedural History

Stone was employed at Rockwell as an engineer until his

employment was terminated in March of 1986. Pet. App. 3a.

Two years after his departure, newspapers published

detailed reports concerning environmental compliance

problems at Rocky Flats associated with a solidified waste

called “pondcrete.” Pet. App. 60a.2 In May of 1988, several

insolid pondcrete blocks were discovered on an outdoor pad

where they were stored. Tr. 601-02, 631-32, 1124-25.3 This

prompted a canvass revealing “several thousand boxes” of

insolid pondcrete. Tr. 636-38, 784-86.

In June of the following year, the Federal Bureau of

Investigation (“FBI”) executed a search warrant at Rocky

Flats, and one month later, Stone filed his gui tam suit. Pet.

App. 4a. Stone’s complaint was scattershot, covering a

broad range of issues and “contain[ing] little or no

specification of the statements he believed were false.” CA

App. at 0921; see also Pet. App. 4-5a. At the conclusion of

the Government’s investigation, Rockwell pled guilty to ten

environmental violations. Pet. App. 6-7a.

When Stone filed his complaint in 1989, he provided the

Government with a statement that disclosed “substantially

all [of his] material evidence and information,” as mandated

by 31 U.S.C. § 3730(b)(2). Pet. App. 6a; CA App. 0522. The

United States thereafter examined all “the evidence in [its]

files,” CA App. at 0916, and found no “indication that

Rockwell had made misrepresentations to DOE, or

concealed its conduct from DOE, or otherwise committed

fraud or submitted false statements to DOE.” CA App. at

0921; see also id. at 0920, 0913 (Government “unable to

ascertain that Mr. Stone had a viable False Claims Act

case”). Accordingly, the Government filed a notice in March

of 1992 declining to intervene. Pet. App. 6a.

In November of 1995, based on information discovered in

a separate case, CA App. 0903-04, 0923-37, the Government

2 Pondcrete is formed by mixing “sludge and liquids retrieved from ...

solar ponds” with Portland cement. Tr. 982. Glen Sjoblom, an expert

with high-level experience at EPA, testified that this methodology “was

generally accepted” as the proper way to handle such wastes, and was

used by at least seven other DOE facilities. Tr. 4731, 4739.

3 The trial transcript is cited herein as “Tr.” The Appellant's

Appendix before the Tenth Circuit is cited herein as “CA App.”

Appellee/Cross-Appellant James S. Stone’s Supplemental Appendix

before the Tenth Circuit is cited herein as “SA.”

decided to intervene and, together with Stone, filed ar

Amended Complaint. Pet. App. 8-9a. The Amended

Complaint asserted an FCA count based on the theory that

Rockwell secured payments from DOE by making

misstatements relating to and concealing problems with

pondcrete. CA App. 0980-95.4 Stone, but not the United

States, asserted another FCA count charging concealment

of plutonium contamination. Pet. App. 8-9a; CA App. 0998-

1004. The district court ordered a separate trial on Stone’s

plutonium claim, Pet. App. 9a, which has not yet been

scheduled. The pondcrete claim was tried to a jury. Id.

Stone never testified at trial. On the verdict form, the jury

was asked to determine liability under the FCA by

answering questions corresponding to ten different claims

for payment submitted between October 1, 1986 and

December 30, 1989. Jd. The answers established that the

jury found that Rockwell violated the FCA with respect tc

three claims submitted between April 1987 and September

1988, but not with respect to the seven remaining claims.

CA App. 1119-20.5 The court entered judgment for both

plaintiffs in the amount of $4,172,327.40. CA App. 1569.6

Proceedings Related To The Original Source Rule

Rockwell moved to dismiss Stone’s claims under Section

3730(e)(4). CA App. 0116-35. Newspaper articles published

4 The Amended Complaint also charged concealment of “saltcrete” and

“spray irrigation” problems. CA App. 0980-91. Counts II-V asserted

various common law and contract claims. Pet. App. 8a.

5 For all periods covering spray irrigation, the jury found for

Rockwell. Pet. App. 50a. Stone conceded he was not an original source as

to saitcrete. Jd. Stone’s right to remain in the case, accordingly, turned

on his origiral source status as to ponderete. Jd. at 50-5la. The jury

found that Rockwell did not breach its contract with DOE, and the court

dismissed the remaining non-FCA claims with prejudice. /d. at 9-10a.

6 The district court deferred Stone’s motion for attorneys’ fees pending

appeal. Pet. App. 9a & n.2. Reversal of the judgment would, at a

minimum, foreclose Stone’s claim for over $10 million in attorneys’ fees as

a prevailing party. See 31 U.S.C. § 3730(d)(1) (prevailing party “shall”

receive fees and costs).

before Stone filed his complaint in 1989 had alleged false

statements and concealment of a wide range of

environmental violations at Rocky Flats. CA App. 0232-52.

Based on this record evidence, the district court squarely

held that Stone’s claims were based on “incidents that were

widely covered in the news media,” and that Stone could

only proceed if he “satisflied] the ‘original source’

requirement.” Pet. App. 60a. Stone did not challenge that

finding on appeal.

The original source rule requires a relator both to know

of and to disclose to the Government “the information on

which the allegations are based.” 31 U.S.C. § 3730(e)(4)(B).

The district court held that Stone had satisfied his burden of

proof but did not make any findings regarding Stone’s direct

knowledge about pondcrete.? The district court instead

relied on Stone’s awareness that Rockwell’s compensation

was tied in part to environmental compliance and on his

allegation that he was generally “instructed not to divulge

environmental ... problems to the DOE.” Pet. App. 6la.

The Tenth Circuit held that Stone had met his burden of

proving that he was an original source of the claims that

succeeded at trial because he knew and _ disclosed

background information to the Government concerning

pondcrete. Pet. App. 20a.

As described below, the Courts of Appeals are divided

on the statutory standards for determining what a relator

must know and disclose to the Government. Two circuits

require knowledge of the fraudulent statement; two others

require knowledge sufficient to show that the statement is

false; and one evaluates whether the relator’s information

proximately caused the discovery of the frand. In order to

assess whether Stone could have prevailed under these

7 Rockwell renewed its motion after the jury verdict, and argued that

Stone failed to prove that he was an original source with respect to his

pondcrete allegations. Pet. App. 9a; CA App. 1153-54. The district court

adhered to the prior ruling and denied Rockwell’s motion with no findings

specific to pondcrete. Pet. App. 14a, 64-65a, 67a.

standards, what Stone knew and disclosed to the

Government, as well as the basis of Stone’s claims, is

summarized as follows.

1. Stone sought to prove his direct and independent

knowledge through three documents: an affidavit filed with

the district court, the Confidential Disclosure Statement he

provided to the Government, and a one-page Engineering

Order, dated 1982. Pet. App. at 17-20a. The Tenth Circuit

relied on these documents to show that Stone had reviewec

“a design for the process and mechanical system intended tc

be used for removing sludge from” the solar evaporatior

ponds and predicted “that the piping system would not

properly remove the sludge and would lead to an inadequate

mixture of sludge/waste and cement such that the

‘pondcrete’ blocks would rapidly disintegrate.” CA App.

0509; Pet. App. 19a. Stone handwrote on the 1982

Engineering Order “{tJhis design will not work in my

opinion. I suggest that a pilot operation be designed tc

simplify and optimize each phase of the operation.” Pet.

App. 18a; CA App. 0439. The Court of Appeals construed

this annotation as explicitly “articulating (Stone’s] beliet

that the proposed design for making pondcrete was flawed.”

Pet. App. 18a.8 This information, in turn, was found to

“support[{]” Stone’s allegation that Rockwell “ultimate[ly]”

made false statements about pondcrete some five years

after he reviewed the Order. Pet. App. 21a.

The Court of Appeals further held that the 1982

Engineering Order, entitled “Solar Evap. Pond Sludge

Removal,” alone sufficed to “to carry Stone’s burden” of

establishing that he “voluntarily provided [his direct and

8 Although Stone’s affidavit includes general statements that “the

design proposed by Rockwell management for making pondcrete” was

defective, the only specific defect identified was the system for piping

sludge from the solar ponds. CA App. 0298. Moreover, Stone’s

Confidential Disclosure Statement, which by its own terms and by

statutory mandate included “substantially all material evidence and

information” Stone possessed, see 31 U.S.C. § 3730(b)(2); Pet. App. 6a; CA

App. 0522, only described a defect in the piping system. CA App. 0509-10.

independent] information to the Government,” within the

meaning of Section 3730(e)(4)(B). Pet. App. 52a; CA App.

0439.9 The Order was buried in 2,300 pages Stone produced

to the FBI, and the 302 reports memorializing Stone’s

meetings with the FBI make no mention of either pondcrete

or the Engineering Order. Pet. App. 73a; CA App. 0306,

0439.

2. Although the Tenth Circuit relied on Stone’s

information about predicted defects in the piping as the

“bas[is}” of Stone’s FCA claims, Stone never actually

advanced that theory as a basis for liability in the case.

(And the Tenth Circuit made no finding that he did.) The

Amended Complaint did not allege that known defects in the

piping system caused the blocks to fail. CA App. 0980-85.

Nor did Stone’s Statement of Claims. That filing listed “the

facts establishing [Plaintiffs’] entitlement to a judgment in

their favor,” and asserted that Rockwell knew pondcrete

was insolid because Rockwell employees “reduce[ed] the

amount of cement added to the blocks.” CA App. at 1080,

1084 (emphasis added).!° Although the Statement of Claims

also mentioned peripheral factors such as “inadequate

process controls and inadequate inspection procedures,” it

alleged that the reduction in cement was the “major

9 Finding on appeal that the record contained insufficient “specific and

pertinent findings-of-fact” to “support a conclusion whether the required

disclosure was or was not made,” the Tenth Circuit remanded for the

limited purpose of determining whether Stone “satisfied the pre-filing

disclosure prong.” Pet. App. 22-23a. On remand, the district court found

that Stone had timely submitted the 1982 Engineering Order to the

government, but also found that the Order was insufficient because it did

not mention pondcrete. Pet. App. 72-74a. The Tenth Circuit held that its

earlier statement—that the 1982 Engineering Order “was explicit in

articulating [Stone’s] belief that the proposed design for making

pondcrete was flawed”—bound the district court as law of the case. Pet.

App. 51-52a.

10 The evidence at trial demonstrated that in the winter of 1986—more

than eight months after Stone left Rocky Flats—a new foreman took over

pondcrete production and substantially reduced the average quantity of

cement used in the mix. Tr. 980-82, 1002-03, 1041, 1108-09.

contributor to the existence of insufficiently solid pondcrete

blocks”—and never mentioned the defective “piping” that

Stone relied upon to establish his status as an original

source. CA App. at 1080, 1084 (emphasis added).

Nor did Stone introduce any evidence of defects in the

piping system at trial. Instead, the evidence centered on

Rockwell’s decision to reduce the amount of cement—

conduct that was specifically discussed in newspaper articles

upon which, inter alia, the district court relied in finding

that Stone’s action was based upon allegations that had been

publicly disclosed.!1_ The evidence established that sludge

and cement were not mixed in the piping system Stone

critiqued, but rather in a “pug mill” that was not installed

until 1985—three years after Stone made his prediction. Tr.

983-85; CA App. 1661. Not only did plaintiffs tell the jury

that reductions in the amount of cement used caused the

solidification problem, Tr. 5079, 5128, 5135, 5144, 5161, they

affirmatively told the jury that the pondcrete system itself

was not the cause. In closing, the Government told the jury

that the first foreman to manufacture pondcrete at Rocky

Flats “was able to get concrete hard pondcrete blocks using

the same methods” that later foremen “used with the

exception of one thing, and that is the reduction of cement.”

Tr. 5177. And Stone did not even contest Rockwell’s

assertion on appeal that Stone “presented no evidence

whatever about the piping that transmitted sludge from the

solar ponds to the holding tank.” Appellants’ Opening Brief

at 37 (Feb. 7, 2000). |

3. As these facts make clear, the district court did not

find that Stone had direct and independent knowledge of

any false statements actually made by Rockwell. Nor did

the Tenth C_rcuit purport to find any evidence in the record

1 Newspaper articles detailed not only the spill in 1988, but also the

conclusion that “the ratio of concrete to waste was apparently altered,”

from “about 3.5 pounds of cement to 1 gallon of the sludge” to “closer to

1.8 pounds of cement to 1 gallon of sludge,” thereby causing the spill. CA

App. 889-38, 889-39, 889-40, 1342-45.

that Stone knew of the actual false statements—instead, the

Tenth Circuit held as a matter of law that a relator need not

know of “the actual act of fraud.” Pet. App. 21a. And the

record contained ample evidence that Stone did not know of

any actual fraudulent statements. Plaintiffs told the jury

that “the three years that are important to this case” were

1987-89—-years when Stone never set foot inside Rocky

Flats. Tr. 209; CA App. 0290-310; Pet. App. 3a. All of the

environmental violations and concomitant false claims

alleged by plaintiffs took place long after Stone’s

employment with Rocky Flats ended. Pet. App. 46a

(Briscoe, J. concurring in part, dissenting in part). Although

Stone asserted that Rockwell supervisors ordered him not

to “discuss[] any environmental problems at Rocky Flats

with the DOE,” Pet. App. 19-20a, this statement was

allegedly made in 1981—six years before the alleged

concealments at issue in this case—at an isolated meeting

with three individuals who appear to have had nothing to do

with pondcrete (none of them was even mentioned at trial).

Moreover, Stone admitted that he did not know of any

documents containing false statements, nor of any persons

who had concealed environmental issues or made false

statements. CA App. 0225-26, 0230-31. When asked in his

deposition for instances in which Rockwell misstated or

concealed its compliance with environmental requirements,

Stone described a single incident involving a cooling tower,

and “[could not] remember any” others. CA App. 0230.

4. The district court also did not find that Stone had

direct and independent knowledge that pondcrete blocks

stored at Rocky Flats were actually insolid. Stone could not

have known whether the pondcrete blocks stored at Rocky

Flats between April 1987 and September 19:8 were solid

because he had left Rocky Flats before those blocks were

manufactured. Pet. App. 46a (Briscoe, J. concurring in part,

dissenting in part). Nor could he have known that Rockwell

would use an inadequate ratio of concrete—the alleged

cause of the insolid pondcrete—because that did not occur

until there was a personnel change months after Stone’s

departure. /d.; Tr. 1002-03, 1108-09. The Court of Appeals

held that Stone satisfied the original source rule based or

his prediction “that a defective pondcrete manufacturing

process would be employed.” Pet. App. 2la (emphasis

added). And the Court of Appeals deemed “immaterial” the

fact that Stone never even tried to prove at trial that his

prediction was the actual cause of “solidity defects in the

pondcrete blocks.” /d.

5. The district court also made no finding that Stone

proximately caused the Government’s discovery of the

alleged false claims. Nor did the Tenth Circuit. Although

the Court of Appeals stated that Agent Lipsky used

“information he had learned from Stone,” Pet. App. 4a, tc

secure a search warrant, there was no evidence or finding

that the information was central to the Government’s

discovery of the pondcrete problems. Agent Lipsky’s 302

reports show that Stone focused on incineration charges,

which Lipsky repeated in his affidavit. CA App. 145, 458,

461-62, 469, 778-87. The Government later determined that

the incineration charges were meritless. CA App. 788, 803-

04. And Lipsky relied far more heavily on information

drawn from other informants, public records, and the

Government’s own independent investigations. See Lipsky

Aff. 44 1.4, 1.20, 6.3, 7.20-22, 8, attached to Defendant’s

Motion in Limine (Nov. 10, 1997). Moreover, the record

demonstrates that the Government did not, at the time,

view Stone as a whistleblower. In a statement after the

FBI raid, the United States Attorney who led the

investigation said that the Rocky Flats case was unusual

because “at no time ... did any knowledgeable ‘insider’ come

forward.” CA App. 0832. “Almost always,” he explained,

“someone eventually ‘cracks’ and steps forward to provide

an ‘insider’s’ cooperation. That simply did not happen here.”

Id. Instead, the Government discovered the facts through

its own efforts, “stringing together thousands of documents

to create inferences of criminality.” Jd. The day after the

raid, newspapers reported that an unnamed DOJ source said

“(njo ‘whistle blower’ was involved” and “the investigation

didn’t result from any ‘single ... source.”” CA App. 0234.

The DOJ attorney who led the plea bargain negotiations

later told Congress that “candidly ... in the criminal

investigation we found the information that [Stone] supplied

to have very limited usefulness.” Additional Record on

Remand filed April 24, 2002, Tab 3(A), at 267)2 In

discovery, Stone identified 48 individuals wit? relevant

knowledge, CA App. 1232-80, not one of whom testified at

trial. Of the 55 witnesses who did testify, none even

mentioned Stone’s name.

Proceedings On Appeal

1. The Tenth Circuit affirmed, holding “that Stone has

adequately established himself as having direct and

independent knowledge of his allegation that Rockwell

manufactured insolid pondcrete.” Pet. App. 22a. The Tenth

Circuit analyzed Section 3730(e)(4) as merely requiring

relators to know facts “underlying or supporting” the “fraud

allegations contained in the plaintiffs qui tam complaint.”

Pet. App. 2la. The Tenth Circuit expressly held that a

relator need not have direct and independent knowledge of

“the actual submission of inaccurate claims.” Pet. App. 21a.

Moreover, the Tenth Circuit did not require that a relator

have direct and independent knowledge of facts sufficient to

prove that claims submitted by a defendant were inaccurate.

Instead, the Tenth Circuit found that Stone qualified as an

original source based merely on his prediction that Rockwell

“would be using a defective process for manufacturing

pondcrete,” irrespective of whether the problem Stone

12 Although the Government advised the district court that it would

“not challenge Mr. Stone’s status pursuant to 31 U.S.C. § 3730(e)(4),” SA

26, it had previously advised the district court that Stone’s statement of

“all material evidence and information” in his possession was insufficient

to demonstrate a viable FCA claim. CA App. 0903-04, 0913, 0916, 0920-21,

0923-37. In support of its motion to intervene, the Government advised

the district court that discovery elicited by the Government in a separate

action, principally testimony from other Rocky Flats employees “obtained

{by the government] for the first time subsequent to March 1992,” was

what revealed an FCA claim. CA App. at 0926-32, 0936.

predicted “actually caused the production of malformed

blocks.” Pet. App. 21-22a (emphasis added).

Judge Briscoe concurred in part and dissented in part.

Pet. App. 44a. Characterizing the majority’s rule as

requiring only “background knowledge,” id., she noted that

“there is mo evidence that [Stone] directly and

independently knew about the actual problems that arose

with the pondcrete after it was produced or Rockwell's

efforts to conceal those problems from the DOE. Indeed,

Stone was terminated from his employment with Rockwell

well before either event occurred.” Id. at 46a (emphasis

added). And Stone’s predictions were insufficient, in Judge

Briscoe’s view, because “it is not Rockwell’s decision to go

forward with the proposed manufacturing process that gave

rise to the ... FCA claims. Rather, [those] claims are based

on Rockwell’s concealment of actual problems that arose

after the manufacturing process began.” Jd. at 47a & n.2.

As evidence of Stone’s ignorance, Judge Briscoe pointed out

that “the direct and independent knowledge possessed by

Stone could have been omitted entirely at trial without

affecting the outcome.” Jd. at 48a. Because Stone “lacked

direct and independent knowledge of any of the essential

elements” of his FCA claims, she concluded, he could not

qualify as an original source. Jd. at 47a.

2. With respect to Article II,!° the Tenth Circuit

reasoned that the Appointments Clause imposes only

“procedural requirements” governing the appointment of

officers, and that because Stone did not draw “a government

salary” he was not an “officer.” Jd. at 24-26a. With respect

to the Take Care Clause, the Tenth Circuit held that the

Executive retzins sufficient control to avoid constitutional

infirmity wher::, as here, the Government was permitted to

13 Rockwell raised its Article II arguments in its Answer, CA App.

1460, and again in a motion to dismiss after the jury’s verdict. CA App.

1459-71. In its motion, Rockwell sought dismissal of all of Stone’s claims.

CA App. 1460, 1471. The district court denied that motion in its entirety.

Pet. App. 67a.

intervene. Jd. at 26-29a.

3. Rockwell twice petitioned for rehearing en banc. In

response to Rockwell’s first petition, the panel granted

rehearing and remanded for further fact finding. Pet. App.

49a. Rockwell’s second petition was denied by an evenly

divided vote, with Chief Judge Tacha, Judge Kelly, Judge

Briscoe, Judge O’Brien, and-Judge McConnell voting for en

banc. Pet. App. 57a.

REASONS FOR GRANTING THE WRIT

The Tenth Circuit’s decision deepens an existing circuit

split regarding the proper interpretation of the original

source rule, conflicts with this Court’s reading of similar

statutory language, and effectively eviscerates the

jurisdictional bar of Section 3730(e)(4). The statute

expressly requires a relator to be the original source of the

factual information on which the FCA allegations are

“based.” As this Court held in Saudi Arabia v. Nelson, 507

U.S. 349, 351 (1993), when construing the same term in the

Foreign Sovereign Immunities Act, the “basis” of an action

refers to “the ‘gravamen’ of the complaint,” meaning “those

elements of a claim that, if proven, would entitle a plaintiff

to relief under his theory of the case.” /d. at 356-57. And

there can be no doubt that the “gravamen” of an FCA claim

consists of allegations that the defendant knowingly made >

statements or claims that did not reflect the true state of

affairs. See, e.g., John T. Boese, 1 Civil False Claims and

Qui Tam Actions § 2.03[B] (3d ed. 2006). An FCA claim

accordingly could not possibly be “based” on the relator’s

information, within the ordinary meaning of that term,

unless the relator had “direct and independent knowledge”

of the false claims made by the defendant. In the Tenth

Circuit, however, a relator need only know background

information “underlying or supporting” the fraud allegation,

and the relator’s “information” can even be wrong and

irrelevant. Pet. App. 21a. That view cannot be reconciled

with Nelson, where this Court squarely rejected the view

that a claim could be “based” on acts that only had some

causal “connection with, or relation to” the elements of the

claim. 507 U.S. at 357-58. And it conflicts with the

standards adopted by five other circuits. This Court shoulc

grant review to resolve a deep and well-developed circuit

split, and to prevent an expansion of the qui tam provisions

that is unsupported by the text of the FCA.

Independently, this Court should grant review to decide

whether the qui tam provisions violate Article II of the

Constitution. This Court reserved that question in Vermont

Agency of Natural Resources v. United States ex rel.

Stevens, 529 U.S. 765 (2000), and it is time to resolve it. By

vesting the authority to initiate and maintain litigation on

behalf of the United States with a self-appointed relator, the

FCA violates the Appointments Clause as construed by this

Court in Buckley v. Valeo, 424 U.S. 1 (1976). And by vesting

such discretion in a relator whom the Executive cannot

dismiss, the FCA violates the Take Care clause as construed

by this Court in Morrison v. Olson, 487 U.S. 654 (1988).

I. THE TENTH CIRCUITS JUDGMENT

DEEPENS AN EXISTING CIRCUIT SPLIT

AND EFFECTIVELY EVISCERATES

§ 3730(e)(4)

A. The Tenth Circuit’s Interpretation Of The

Governing Standard Conflicts With The

Interpretations Adopted By The Third,

Eighth, Ninth, Eleventh, And D.C. Circuits

The lower courts are in deep disarray on the question of

how to define the nature and quantum of “knowledge” a qui

tam relator must possess in order to qualify as an “original

source” of the “information” that forms the “bas[is}” for the

claims at issue. The Third and Eleventh Circuits require

relators to know of an actual false statement to the

Government. The Ninth Circuit requires relators to know of ~

a false statement or at least to have been a proximate cause

of the Government’s discovery of a false statement. And the

Eighth and D.C. Cirev'ts require relators to know the actual

facts that made a statement false. Stone would not have

qualified as an original source in any of these circuits. But

the Tenth Circuit only requires a relator to know

background information “underlying or supporting” his

supposition that a defendant might have engaged in fraud,

even if the relator pursues a different theory at trial.

1. In United States ex rel. Mistick PBT v. Housing

Authority of the City of Pittsburgh, 186 F.3d 376 (3d Cir.

1999) (Alito, J.), the Third Circuit held that an “original

source” is one who knows of the alleged fraud. Mistick was

a construction company that remediated lead-based paint

pursuant to specifications issued by the Pittsburgh Housing

Authority. Jd. at 379. The Housing Authority’s

specification required use of a product called “Glid-Wall,”

manufactured by Glidden, to cover the lead paint. Jd.

Glidden, however, “had begun recommending against the

use of [Glid-Wall] for this purpose some time earlier.” Id.

Mistick’s qui tam action charged the Housing Authority

with concealing this information from HUD, in order to

procure additional remediation funds from HUD when Glid-

Wall failed. /d. at 381-82.

Mistick was an insider for much of the relevant conduct.

Mistick was the “general contractor for-alt of’ the work at

issue and company representatives attended a meeting with

the-Housing Authority when Glidden disclosed that Glid-

Wall was unsuitable for this purpose. /d. at 379. Mistick

also undertook its own independent investigation. Jd. at

381. Nevertheless, the Third Circuit found that Mistick did

not qualify as an original source because it did not know

“that the Authority had made the alleged

misrepresentations to HUD.” /d. at 388. The Third Circuit

held that, to be an “original source,” a relator must have

“direct and independent knowledge’ of the most critical

element of its claims, viz.,” the misrepresentation itself. Id.

Construing a prior decision that held “‘it is not necessary for

a relator to have all the relevant information in order to

qualify,” the court concluded that “a relator cannot be said

to have ‘direct and independent knowledge of the

information upon which [its fraud] allegations are based,’ 31

U.S.C. § 3730(e)(4)(B), if the relator has no direct and

independent knowledge of the allegedly fraudulent

statements.” Id. at 389 (quoting United States ex rel

Stinson v. Prudential Ins. Co., 944 F.2d 1149 (3d Cir

1991)).14 |

The Eleventh Circuit has adopted a_ simila

interpretation. In Cooper v. Blue Cross & Blue Shield o,

Florida, Inc., 19 F.3d 562, 564-65 (11th Cir. 1994), the qu:

tam relator charged that an insurance compan)

systematically charged Medicare for claims that Medicare

had no obligation to pay. The relator held a policy with Blue

Cross, had himself been subject to the challenged practice

and knew that his own medical bills had been forwarded t«

Medicare for payment in violation of the law. Jd. at 564-65

The Eleventh Circuit held Cooper to be an original source

because his “information is potentially specific, direct

evidence of fraudulent activity.” Jd. at 568 n.12. The

Eleventh Circuit distinguished Cooper from a relator whc

possessed mere “background information which enables hin

to understand the significance of a more general public

disclosure.” Jd. (citing Stinson, 944 F.2d at 1160).

The Tenth Circuit’s decision irreconcilably conflicts wit!

Mistick and Cooper. The Tenth Circuit rejected as “flawed’

Rockwell’s argument that “a relator must have direct anc

independent knowledge of the actual fraudulent submissior

14 Stone argued below that he would qualify as an original source ir

the Third Circuit under Stinson. See, ¢.g., Appellee/Cross-Appellan’

James S. Stone’s Opening/Response Brief at 45 (Mar. 17, 2000). Mistich

demonstrates Stone’s error. Moreover, Stinson made clear that a “relatoi

must possess substantive information about the particular fraud rathe:

than merely background information which enables a putative relator t

understand the significance of a publicly disclosed transaction 01

allegation.” 944 F 2d at 1160 (emphasis added). And district courts

within the Third Circuit have applied Mistick and Stinson to disqualif)

relators who “have direct and independent knowledge of some of the

elements of” their claim but not “the most critical elements.” See, e.g

United States ex rel. Waris v. Staff Builders, Inc., No. CIV. A. 96-1969

1999 WL 788766 at *1-2, *8 (E.D. Pa. Oct. 4, 1999) (relator not origina

source, even though he saw false invoices and inferred they would bi

submitted for reimbursement by Medicare, because “the mere existencc

of a false invoice is insufficient to make out a claim of fraud”).

to the government.” Pet. App. 20a. While Mistick required

a relator to know of “the allegedly fraudulent statements,”

186 F.3d at 389, and Cooper requires “specific, direct

evidence of fraudulent activity,” 19 F.3d at 568 n.12, the

Tenth Circuit held that a “relator need not ... have in his

possession knowledge of the actwal fraudulent conduct

itself; knowledge ‘underlying or supporting’ the fraud

allegation is sufficient.” Pet. App. 21a. And Stone could not

have prevailed under Mistick or Cooper. As Judge Briscoe

observed in dissent, “Stone lacked direct and independent

knowledge of any of the essential elements of the” FCA

claim. Pet. App. 47a (Briscoe, J. concurring in part,

dissenting in part). Stone at most had the “background

information” that Cooper found inadequate.!> “[T]here is no

evidence” that Stone knew that Rockwell concealed

ponderete problems from DOE or claimed payment for

environmental compliance it had not achieved. Jd. at 46a.

Indeed, Stone left Rocky Flats before any such

misrepresentations occurred. Id. As Judge Briscoe noted,

“the direct and independent knowledge possessed by Stone

could have been omitted entirely at trial without affecting

the outcome of the” FCA claims, id. at 48a, and in fact Stone

did not testify at trial nor was his 1982 Engineering Order

introduced into evidence. Moreover, because Section

15 Stone argued below that his general knowledge of the DOE award

fee process, coupled with a single incident in 1981 in which his Rockwell

superiors told him not to discuss environmental problems with DOE,

allowed him to infer that Rockwell submitted false claims to DOE in 1987-

88. See Appellee/Cross-Appellant James S. Stone’s Opening/Response

Brief at 41-43, 47 (Mar. 17, 2000). The Tenth Circuit did not adopt this

theory, and held that Stone did not need to know of ‘the actual

submission of inaccurate claims by Rockwell to DOE.” Pet. App. 21a.

Stone’s inference would not satisfy Mistick in any event. The relator in

Mistick attended the meeting where Glidden told the government

contractor that the specified product would fail, and Mistick knew that

HUD was reimbursing lead paint remediation work. 186 F.3d at 379. The

fact that the relator in Mistick could draw an inference that the product

defects had not been disclosed to HUD was insufficient. And Stone’s own

knowledge fel) far short of Mistick’s.

3720(e)(4)(B) requires a relator both to know of and to

disclose “the information. on which the allegations are

based,” the Tenth Circuit diverged from the Third and

Eleventh Circuits when it held that disclosure of Stone’s

1982 Engineering Order sufficed to “carry Stone’s burden”

on voluntary disclosure. Pet. App. 52a. The Engineering

Order nowhere identified or even predicted any fraudulent

statements.

Stone's inability to direct the Government's attention to

his pondcrete information further demonstrates his lack of

sufficient knowledge. If Stone had understood the

pondcrete issue at the time, he would have been able to

explain it to Agent Lipsky, yet Agent Lipsky's 302s make no

mention of pondcrete. Pet. App. 73a. Stone also would have

been able to explain the significance of the engineering

order—yet no evidence suggests he did so. Jd. Stone, of

course, bore the burden of proof to establish that he was an

“original source.” Pet. App. 12a.

2. The Ninth Circuit also requires a relator to have

“firsthand knowledge of the alleged fraud.” United States

ex rel. Aflatooni v. Kitsap Physicians Servs., 163 F.3d 516,

525 (9th Cir. 1998). The Ninth Circuit does not permit a

relator to qualify merely based on “speculation or

conjecture” that a defendant might have committed fraud.

Id. at 526. Stone’s prediction that the pondcrete design he

reviewed would fail is precisely the sort of “speculation or

conjecture” that does not suffice in the Ninth Circuit. See

Pet. App. 47a (Briscoe, J. concurring in part, dissenting in

part) (citing Aflatooni to demonstrate that “although Stone

predicted that problems would occur with the production of

pondcrete, and perhaps may have speculated that Rockwell

would conceal any such problems from the government,” he

did not qualify as an original source). Stone conceded that

he lacked direct and independent knowledge of fraudulent

statements. CA App. 0225-26, 0230-31.

The Ninth Circuit recognizes a limited exception where

a relator “trigger[s]” a Government investigation that

uncovers the fraud. See Seal 1 v. Seal A, 255 F.3d 1154, 1162

(9th Cir. 2001). A relator’s status as an original source

under this exception is governed by proximate cause

concepts: “(1) the degree to which the relator’s information

helped uncover the later allegations; (2) the degree to which

other private actors helped uncover those allegations; (3)

the degree to which the government played a role in

uncovering those allegations; and (4) whether the later

allegations are brought against the same entity as the

earlier allegations.” Jd. at 1163. In Seal 1, the Ninth Circuit

disqualified a relator who triggered a government

investigation because “others provided substantial

assistance to the government along the way” and the

Government itself “played a significant role in uncovering

the allegations.” /d. at 1163.

The very same analysis would have disqualified Stone.

First, the Tenth Circuit did not apply the Seal 1 factors and

the district court did not—indeed, could not—make the

findings necessary for Stone to prevail under Seal 1. Stone

never proved that he triggered the investigation that

uncovered the pondcrete problems—quite to the contrary,

contemporaneous newspaper coverage showed that

Rockwell reported its pondcrete spill, triggering a state and

federal investigation. CA App. 889-38, 889-39, 889-40, 1342-

45. Moreover, other private entities (Rockwell itself, local

newspapers, and other unnamed informants) provided

substantial assistance to the Government. And the

Government played a significant role as well. See Additional

Record on Remand at tab 3(A), filed April 24, 2002; CA App.

0832; Lipsky Aff. 4 1.4, 1.20, 6.3, 7.20-22, 8, attached to

Defendant’s Motion in Limine, Nov. 10, 1997. On such facts,

Seal 1 also would have barred Stone’s claim had this case

been litigated in the Ninth Circuit.

3. The D.C. and Eighth Circuits do not require relators

to know of the fraudulent statements—instead, they only

require knowledge of facts sufficient to show that

statements made to the Government were false. In United

States ex rel. Springfield Terminal Railway Co. v. Quinn,

14 F.3d 645, 647 (D.C. Cir. 1994), the D.C. Circuit held that

an “original source” is one who has direct and independen’

knowledge of an essential element of the fraud: Quinn wa:

an arbitrator, appointed by the National Mediation Board t«

resolve a labor dispute involving Springfield. Upor

reviewing Quinn’s time vouchers, Springfield realized tha!

“Quinn had no arbitral function to perform on several of the

days for which he sought pay.” Jd. Springfield brought <

qui tam action, charging Quinn with false billing claims. /d

The D.C. Circuit interpreted the statutory language t«

require “direct and independent knowledge of” one of the

“essential element[s] of the underlying fraud transaction.’

Id. at 657. Applying that standard, the Court held that

Springfield was an original source because it “had direct anc

independent knowledge of essential information” sufficient

to establish the core element of falsity. Id.

The Eighth Circuit adopted the same interpretation o:

the statute in Minnesota Association of Nurse Anesthetist:

v. Allina Health System Corp., 276 F.3d 1032 (8th Cir. 2002)

Anesthetists brought a qui tam claim, charging that

anesthesiologists were improperly billing Medicare for work

performed by anesthetists. Jd. at 1050. The Eighth Circuit

held that a relator must have “direct knowledge of the true

state of the facts.” The anesthetists qualified, because they

had themselves performed the work for which the

anesthesiologists billed, and had had directly observec

“anesthesiologist{s} filling out forms used for billing.” Jd.

The standard adopted in this case irreconcilably conflicts

with Springfield and Nurse Anesthetists. The Tenth Circuit

did not even purport to find that Stone had direct

knowledge of essential information sufficient to establish the

element of: falsity, as required in the D.C. and Eighth

Circuits. That is precisely why Judge Briscoe dissented.

See Pet. App. 47a (Stone “lacked direct and independent

knowledge of any of the essential elements” of his FCA

claims). As the Tenth Circuit’s analysis makes plain, Stone’s

knowledge was hardly “essential” to the proof of his

claims—the standard used to assess the sufficiency ol

knowledge in Springfield. 14 F.3d at 647. Indeed, the

majority did not quarrel with Judge Briscoe’s observation

that Stone’s information “could have been omitted entirely

at trial without affecting the outcome of the” FCA “claims.”

Pet. App. 48a. And the Tenth Circuit squarely held that

Stone’s speculation about design flaws in the pondcrete

system was sufficient, regardless of whether those alleged -

flaws “actually caused the production of , malformed

pondcrete blocks.” Pet. App. 22a. The Tenth Circuit’s

holding that Stone’s production of his 1982 Engineering

Order met his burden of voluntary disclosure, Pet. App. 52a,

also conflicts with the law of the D.C. and Eighth Circuits.

If a relator must know an “essential element of the

underlying fraud transaction,” Springfield, 14 F.3d at 657,

then he also must adequately disclose an essential element.

Stone did neither.

4. Instead of any of these approaches, the Tenth Circuit

adopted a rule divorced from the statutory text that

disserves the intended function of the original source rule.

Congress sought to incentivize “whistle-blowing insiders

with genuinely valuable information,” Springfield, 14 F.3d

at 649, 2.e., the “private individuals who are aware of fraud

being perpetrated against the Government.” H.R. Rep. No.

99-660, at 23 (1986). But the Tenth Circuit now permits

relators to qualify without actually knowing of any fraud, or

even having any accurate knowledge about the defendant’s

underlying conduct, Pet. App. 20-22a, and without disclosing

information evidencing actual fraud or the true state of

affairs at the time the statements were made. Pet. App. 52-

53a. The statutory requirement that a relator must “have

direct and independent knowledge of the information” that

forms the “bas[is]” for the fraud claim cannot reasonaly be

read to allow relators to drain millions of dollars froma the

federal treasury based only on speculation about the future.

In addition, the relator here was allowed to establish

liability by relying on the facts that were publicly

disclosed—the change in the cement/sludge ratio—even

though Stone never even claimed to have direct and

independent knowledge of those facts. Congress surely did

not intend to permit relators to rely on one set of facts tc

establish their status as an original source and then turr

around and rely on different facts derived from public

sources to prove their claim. Yet the Tenth Circuit’s loose

legal standard permitted that very type of bait and switch ir

this case.

Not only does the Tenth Circuit’s rule allow relators tc

siphon away the Government’s recovery, it also eviscerates

Section 3730(e)(4)’s function as a bulwark against abusive

qui tam lawsuits. Qui tam lawsuits are regularly brought

by disgruntled ex-employees. Boese, 1 Civil False Claims

and Qui Tam Actions § 4.01[B}[2]. And “[mJore and more

qui tam cases are being brought by a defendant’s competitor

[or] employees of the defendant’s competitors.” Jd. at

§ 4.01[B][3]. The potential for abuse in each situation is

obvious. Properly construed, Section 3730(e)(4) would serve

as a bar to abusive qui tam suits, by requiring relators tc

actually know about fraud. The Tenth Circuit’s rule merely)

requires speculative beliefs “underlying or supporting” the

view that fraud may have occurred. The Tenth Circuit’s

decision thus gives vindictive ex-employees or unscrupulous

business competitors license to use the FCA, and a lawsuit

in the name of the United States, merely “to gain <

competitive advantage over the defendant.” /d.

B. There Is No Reason To Defer Review

The issues presented here have been analyzed in the

Courts of Appeals for over a decade, and clear conflicting

positions have been staked out by the Third, Eighth, Ninth

Tenth, Eleventh, and D.C. Circuits. This Court can thus

interpret the original source rule with the benefit o:

considerable analysis from the courts below, a developec

record, and with an awareness of the wide range of fact

patterns to which the FCA and the original source rule car

be applied. And the issues raised in this case strike at the

very core of the original source rule. This Court recentl)

denied a petition that focused solely on the meaning of the

words “direct” and “independent” in Section 3730(e)(4)(B)

See, e.g., Comstock Res., Inc. v. Kennard, 12° S. Ct. 295%

(2005). This case goes further, including the antecedent

question of “what the relator must know firsthand.” Brief

for the United States as Amicus Curiae at 12-13, Comstock

Res., Inc. v. Kennard, 543 U.S. 923 (2004) (No. 04-165)

(emphasis in original). Analysis of the words “direct” and

“independent” alone will be of limited significance because

most if not all relators will have firsthand knowledge of

something related to their claims.

Finally, further percolation promises only to increase

confusion in the lower courts. Section 3730(e)(4) has given

rise to at least two other circuit splits. The circuits are

divided on the question of whether the phrase “the

information on which the allegations are based” in Section

3730(e)(4)(B) refers to the allegations in the relator’s

complaint,/6 or the allegations in the public disclosure.!7 If

this Court were to hold the latter, Stone would not qualify

as an original source. See Pet. App. 46a (Briscoe, J.

concurring in part, dissenting in part); CA App. 0889-38 to

40, 0892, 1343-45. The circuits are also split on the voluntary

disclosure prong of Section 3730(e)(4)(B), with some holding

that a relator must have been a source of information to the

entity that made the public disclosure,!8 others holding that

the relator must have provided his information to the

16 See United States ex rel. Dick v. Long Island Lighting Co., 912 F.2d

13, 16 (2d Cir. 1990); Mistick, 186 F.3d at 388-89; United States v. Bank of

Farmington, 166 F.3d 853, 864-65 (7th Cir. 1999); United States ex rel.

Barajas v. Northrop Corp., 5 F.3d 407, 409 (9th Cir. 1993); United States

ex rel. Hafter v. Spectrum Emergency Care, Inc., 190 F.3d 1156, 1162

(10th Cir. 1999).

17 United States ex rel. Grayson v. Advanced Mgmt. Tech., Inc., 221

F.3d 580, 583 (4th Cir. 2000); United States ex rel. Laird v. Lockheed

Martin Eng’g & Sci. Serv. Co., 336 F.3d 346, 353-54 (5th Cir. 2003)

(acknowledging circuit split); United States ex rel. McKenzie v. BellSouth

Telecoms., 123 F.3d 935, 943 (6th Cir. 1997); Nurse Anesthetists, 276 F.3d

at 1048; United States ex rel. Findley v. FPC-Boron Employees’ Club,

105 F.3d 675, 690 (D.C. Cir. 1997).

18 Dick, 912 F.2d at 16 (2d Cir. 1990); Wang ex rel. United States v.

FMC Corp., 975 F.2d 1412, 1418 (9th Cir. 1992).

Government prior to the public disclosure,!9 and still other:

holding that the relator need only disclose his information t«

the Government prior to filing his complaint.2° In th

process of resolving the question presented in this case, thi:

Court would invariably provide guidance that would hel;

clarify this confused body of law.

II. THIS COURT SHOULD GRANT CERTIORAR.

TO DECIDE THE QUESTION. RESERVED I}

STEVENS—WHETHER THE QUI TAs

PROVISIONS OF THE FALSE CLAIMS AC’

VIOLATE ARTICLE II

In Vermont Agency of Natural Resources v. Unitec

States ex rel. Stevens, 529 U.S. 765, 778 n.8 (2000), this Cour

reserved “the question whether qui tam suits violate Article

II, in particular the Appointments Clause of §2 and the

‘take care’ Clause of § 3.” This case presents that question

which this Court should grant review to resolve.

A. The Qui Tam Provisions Of The False Claim:

Act Violate The Appointments Clause

Section 3730(b) authorizes qui tam relators to bring civi

actions “for the United States Government.” 31 U.S.C

§ 3730(b). But in Buckley v. Valeo, 424 U.S. 1, 140 (1976)

this Court unequivocally held that the Appointments Claus«

of the Constitution prohibits the vesting of “primary

responsibility for conducting civil litigation ... fo

vindicating public rights” in persons not appointed in the

manner prescribed by that Clause. The qui tam provision:

of the FCA do precisely what Buckley forbids. Section 373(

provides that if the Government intervenes, “it shall have

the primary responsibility for prosecuting the action.” 3)

U.S:C. § 3730 (c)(1). But, in every case, the statute vests ir

the relator “the right to conduct the action” unless and unti

the Government intervenes. 31 U.S.C. §3730 (c)(3)

19 McKenzie, 123 F.3d at 942 (6th Cir. 1997); Findley, 105 F.3d at 690.

20 Bank of Farmington, 166 F.3d at 865; United States ex rel. Siller v

Becton Dickinson & Co., 21 F.3d 1339, 1352 (4th Cir. 1994).

Assistant Attorney General William P. Barr determined in

1996 that these provisions “plainly violate the Appointments

Clause.” 42 Op. Off. Legal Counsel 207, 221 (1989) (“Barr

Op.”), superseded by 20 Op. Off. Legal Counsel 124 (1996)

(Dellinger, W.). The Tenth Circuit disagreed, taking refuge

in empty formalism by arguing that because relators do not

collect a Government paycheck or receive the other benefits

of office, they are not officers. Pet. App. 24-26a. That

analysis directly contravenes Buckley, and strips the

Appointments Clause of its structural significance.

In this case, Stone exercised primary responsibility for

conducting civil litigation on behalf of the United States. He

arrogated to himself the authority to file on behalf of the

United States, without the advice and consent required by

the Appointments Clause. Initiating qui tam suits can

prematurely disclose criminal investigations, complicate

plea agreements, cut off informal dispute resolution, and

otherwise complicate the Executive’s litigation strategy.

See Barr Op. at 217. And here, the Government did not

intervene for six years, leaving Stone with primary

responsibility for the litigation for over half a decade. Pet.

App. 6-8a. Even after intervening, the Executive expressly

elected not to support Stone’s plutonium claim—but Stone

was permitted to pursue it nonetheless. Jd. at 8-9a.*!

Moreover, even on their joint claims, Stone effectively led

the litigation—deposing and examining almost half of the

witnesses and driving the pre- and post-trial motions

practice. Stone thus exercised the function of an officer of

the United States.

The Tenth Circuit ignored these trenchant facts,

reasoning that the Appointments Clause merely sets forth

“procedural requirements” that “only apply to the

appointment of officers.” Pet. App. 25a. In so doing, the

21 Rockwell's Article II motion covered all of Stone’s claim. CA App.

1460, 1471. The motion was denied in toto. Pet. App. 67a.

Tenth Circuit misinterpreted the governing law.22 The

Appointments Clause has a substantive role to play i

“prevent[ing] congressional encroachment upon thé

Executive and Judicial Branches” and in “ensur[{ing] publi:

accountability.” Edmond v. United States, 520 U.S. 651

659-60 (1997). It “is more than a matter of ‘etiquette oi

protocol” but rather “is among the significant structura

safeguards of the constitutional scheme.” Jd. at 659 (quoting

Buckley, 424 U.S. at 125). The rationale for the

Appointments Clause is not simply to make sure tha

federal salaries and benefits are not paid to the wrong

parties—it is to protect the separation of powers and t

ensure Government accountability by regulating who ma)

exercise significant governmental authority. See Buckley

424 US. at 126; Edmond, 520 U.S. at 659-62. The qui tan

statute “allows Congress to circumvent” the check of ar

accountable Executive “and have its laws enforced directly

by its own private bounty hunters.” Barr Op. at 211.

Having recognized the obvious—that qui tam relator:

do not draw a federal paycheck—the Tenth Circuit was thu:

obliged to determine whether a relator was constitutionall)

permitted to prosecute FCA claims on behalf of the Unitec

States. Had it carried the analysis to its completion as

required under Buckley and Edmond, the Tenth Circuit

would have been compelled to hold that the FCA’s qui tan

provisions violate the Appointment Clause. Not only does

the Tenth Circuit’s decision directly conflict with Buckley, it

invites end-runs around the Appointments Clause by the

simple expedient of withholding federal paychecks anc

benefits from those to whom Congress purports to delegate

22 The Tenth Circuit’s reliance on United States v. Germaine, 99 U.S

508, 511-12 (1879), and Auffmordt v. Hedden, 137 U.S. 310, 327 (1890)

stood Buckley on its head. Germaine and Auffmordt held that a person’:

status may be discerned by examining such factors as “tenure, duration

emolument, and duties.” 99 U.S. at 511-12. But Buckley instructs that i

is precisely because relators are not officers that they may not exercise

“significant authority” to litigate on behalf of the United States. Buckley

424 U.S. at 126, 140.

executive power. See Riley v. St. Luke’s Episcopal Hosp.,

252 F.3d 749, 768 (5th Cir. 2001) (en banc) (Smith, J.,

dissenting). Other circuits have made the same error.”

This Court should grant review to resolve the conflict with

Buckley and Edmond, and to restore the integrity of the

Appointments Clause.

B. The Qui Tam Provisions Of The False Claims

Act Violate The Take Care Clause

Morrison v. Olson, 487 U.S. 654 (1988), instructs that the

President must retain substantial control over any person

charged with executive functions. Like the Appointments

Clause, the Take Care Clause serves the values of

separation of powers and-public accountability and prohibits

Congress from insulating any aspect of executive authority

from the President’s control. See Nixon v. Adm’r of Gen.

Servs., 433 U.S. 425, 443 (1977). The touchstone inquiry is

whether the Executive Branch retains “sufficient control

over [the person] to ensure that the President is able to

perform his constitutionally assigned duties.” Morrison, 487

U.S. at 696. The qui tam provisions of the FCA violate

these principles, creating “self-appointed ‘ad hoc deputies’

who are largely beyond the supervision of the United States

and for whose actions the United States is not accountable.”

United States ex rel. Rodgers v. Arkansas, 154 F.3d 865, 869

(8th Cir. 1998) (Panner, J., dissenting). The Tenth Circuit,

however, held that because the Executive was permitted to

intervene (six years into the litigation), the Take Care

Clause was satisfied. Pet. App. 26-27a.24 In this respect,

the Tenth Circuit’s judgment conflicts with Morrison.

A qui tam relator exercises significant executive

authority by initiating and maintaining litigation on behalf

23 Riley, 252 F.3d at 757-58; United States ex rel. Taxpayers Against

Fraud v. Gen. Elec. Co., 41 F.3d 1032, 1041 (6th Cir. 1994); United States

ex rel. Kelly v. Boeing Co., 9 F.3d 743, 758 n.21 (9th Cir. 1993).

24 Three other circuits have also concluded that the qui tam provisions

of the FCA comport with the Take Care Clause. Riley, 252 F.3d 749;

Taxpayers Against Fraud, 41 F.3d 1032; Kelly, 9 F.3d 743.

of the United States. Initiating suit on behalf of the Unitec

States is entirely under the relator’s control: the Executive

has no say in choosing the relator, in drafting the complaint

in selecting the venue, or in deciding the appropriate time t«

file. See 31 U.S.C. § 3730(b)(1), (2). Such timing and tactica

decisions, however, are core questions of prosecutoria

discretion. See Barr. Op. at 217-18 (giving examples of case:

in which Executive was concretely injured by prematur:

initiation of suit by qui tam relators); see also Stinson, 94

F.2d at 1164 (Scirica, J. dissenting). Under the FCA, a qu

tam relator can act where the Executive has chosen not to

with no duty to “follow Department of Justice (“DOJ”

policies” and “no fiduciary or other duties to” the Unitec

States. Riley, 252 F.3d at 761-62 (Smith, J. dissenting).

If, as happened here for six years, the Government doe:

not intervene, then the relator retains unbridled discretior

to make every litigation decision in his best interest:

without regard to the public interest. See 31 U.S.C

§ 3730(c)(3); Hughes Aircraft Co. v. United States ex rel

Schumer, 520 U.S. 939, 949 (1997) (““[Q]ui tam relators ar«

... motivated primarily by monetary reward rather than the

public good ... [and] are thus less likely ... to forego ar

action arguably based on mere technical noncompliance ..

that involved no real harm to the public fisc.”); Barr Op. a’

220 (qui tam suits interfere with government contracting

decisions); id. at 219 (relator incentivized to trade

concessions on qui tam claims for concessions on his

personal claims, “since he receives only a fraction of an)

payment” made pursuant to qui tam claims).

Even where the Executive intervenes, the relato:

remains a party with autonomy to act contrary to the

Executive’s litigation strategy. Sev 31 U.S.C. § 3730(c)(1)

see S. Rep. No. 345, 99th Cong., 2d Sess., at 25-26 (1986)

reprinted in 1986 U.S.C.C.A.N. 5266, 5290-91 (qui tan

plaintiffs intended to act “as a check that the Governmen'

does not neglect evidence, cause undue delay, or drop a false

claims case without legitimate reason.”). As the Ban

Opinion noted, relators often exercise this power “in way:

adverse to the government’s interest.” Barr. Opp. at 218.

Here, Stone continued to press a claim the Executive

disapproved. Pet. App. 8-9a. While the Executive may

petition for restrictions on the relator, he cannot oust the

relator altogether without dismissing the entire action. 31

U.S.C. § 3730(c)(1-2(A)); Barr Op. at 219. And the

Executive may not prevent the relator from objecting to the

settlement or dismissal of the complaint. See 31 U.S.C.

§ 3730(c)(2); Barr Op. at 219. These restrictions are far from

trivial—in several reported cases, a relator’s objections to a

proposed settlement created enormous obstacles for the

Executive to carry out its objectives. See, e.g., United

States ex rel. Coughlin v. IBM, 992 F. Supp. 137, 142

(N.D.N.Y. 1998); United States ex rel. Burr v. Blue Cross &

Blue Shield of Fla., Inc., 882 F. Supp. 166, 169 (M.D. Fla.

1995). And in at least one instance, the Court rejected the

Government’s proposed settlement based upon the

objections of the relator. See Gravitt v. Gen. Elec. Co., 680

F. Supp. 1162 (S.D. Ohio 1988); Barr Op. at 219.

None of the features that saved the Ethics _in

Government Act are present here. The independent counsel

provisions authorized the Government to remove counsel for

“good cause,” see Morrison, 487 U.S. at 696, whereas the

FCA does not permit the Executive to remove a relator

without dismissing the entire action. The decision whether

to appoint an independent counsel was committed to the

Attorney General’s “unreviewable discretion,” see id.,

whereas a relator appoints himself without any obligation

even to consult the Executive first. An independent

counsel’s jurisdiction was “defined with reference to the

facts submitted by the Attorney General,” id., whereas the

relator may assert any allegations he chooses and pursu:

any course in the litigation that he best sees fit. Finally, an

independent counsel was required to abide by DOJ policies,

see id., whereas a relator is not.

These intrusions upon Executive authority are no

accident. Congress candidly viewed qui tam actions as “a

critically needed supplement—and prod—to Government

prosecution,” where the Executive had “not done ar

acceptable job of prosecuting defense contractor fraud.” 132

Cong. Rec. at H6482 (daily ed. Sept. 9, 1986) (statement oi

Rep. Berman); see also S. Rep. No. 345 at 25-26. The Tentr

Circuit’s disposition of this issue conflicts with Morrison

and this Court should grant review to resolve the

constitutional issues it left open in Stevens.2®

CONCLUSION

The petition for certiorari should be granted.

25 The historical evidence considered by the Stevens majority as

relevant to the Article III issue does not control the analysis here.

Article III’s reference to “cases” and “controversies” is understood tc

refer to actions “of the sort traditionally amenable to, and resolved by the

judicial process,” making history more relevant to the standing issue. /d.

at 766 (emphasis added). The prosecutorial authority of the Executive

branch is not similarly tied to a historical referent. Moreover, the “early

qui tam statutes required a citizen to have suffered some private injury

before he could sue on behalf of the government—unlike the FCA, which

allows suit based solely on injury to the government.” Riley, 252 F.3d at

773 & n.35 (Smith, J. dissenting) (collecting statutes). That distinction is

more central to the Article II analysis than it was to standing, because

bringing “suit based solely on injury to the government” is a defining

characteristic of the Executive branch. Buckley, 424 U.S. at 140. In any

event, as this Court has repeatedly held, “no one acquires a vested or

protected right in violation of the Constitution by long use, even when

that span of time covers our entire national existence and indeed predates

it.” Walz v. Tax Comm'n of City of New York, 397 U.S. 664, 678 (1970);

see also Marsh v. Chambers, 463 U.S. 783, 790 (1983); Barr Op. at 233-38

(history does not validate the gui tam provisions of the FCA).

Respectfully submitted,

CHRISTOPHER J. KOENIGS MAUREEN E. MAHONEY

MICHAEL B. CARROLL Counsel of Record

SHERMAN & HOWARDL.L.C. MATTHEW K. ROSKOSKI

633 17™ STREET, SUITE 3000 LATHAM & WATKINS LLP

DENVER, CO 80202 555 11™ STREET, N.W.

(303) 297-2900 SUITE 1000

WASHINGTON, DC 20004

(202) 637-2200

APPENDIX

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UNITED STATES COURT OF APPEALS,

TENTH CIRCUIT.

UNITED STATES OF AMERICA, EX REL. JAMES S.

STONE, AND UNITED STATES OF AMERICA,

PLAINTIFFS-APPELLEES AND CROSS-APPELLANTS,

Vv.

ROCKWELL INTERNATIONAL CORP., AND

BOEING NORTH AMERICAN, INC.,

DEFENDANTS-APPELLANTS AND CROSS-APPELLEES.

AMERICAN HOSPITAL ASSOCIATION,

NATIONAL DEFENSE INDUSTRIAL

ASSOCIATION,

ELECTRONIC INDUSTRIES ALLIANCE, AMICI

CURIAE.

NOS. 99-1351, 99-1352, 99-1353.

MARCH 4, 2002.

Before BRISCOE, HOLLOWAY and POLITZ, Circuit

Judges.

ORDER ON REHEARING

HOLLOWAY, Circuit Judge.

The petition for rehearing en bane of Defendants-

Appellants Rockwell International Corp. and Boeing North

American, Inc., was circulated to the members of the panel

and all circuit judges of the court in regular service. There

having been no request for a poll on the suggestion of

rehearing en banc, that suggestion is denied.

The petition for rehearing by the panel has been

considered by the panel and it has been determined that

rehearing is granted for the limited purpose of modifying

the opinion and ordering a limited remand to the district

court as provided herein. The limited remand to the district

court is for the purpose of that court making findings of fact

‘The Honorable Henry A. Politz, United States Circuit Judge for the

Fifth Circuit, sitting by designation.

and conclusions concerning the issue of disclosure prior tc

filing of this action in accordance with the False Claims Act

concerning the saltcrete, pondcrete and irrigation matters

and any further proceedings in the district court which the

District Judge deems necessary in connection therewith.

Upon completion of those proceedings, a supplementa

record will be transmitted to this court containing the

additional findings and conclusions made on this limitec

remand, and this court will otherwise retain jurisdiction 0:

this cause. See Penteco Corp. Limited Partnership v. Union

Gas System, Inc., 929 F.2d 1519, 1522 (10th Cir. 1991). Or

all other issues except that requiring the additional factua

findings and conclusions on the saltcrete, pondcrete anc

irrigation matters, the rulings made previously in our

opinion are undisturbed. Upon receipt of the supplementa

record of the proceedings below, final disposition of these

appeals will be made.

The -court’s opinion as modified on rehearing by the

panel is being filed along with this order.

APPEAL FROM THE UNITED STATES DISTRICT

COURT FOR THE DISTRICT OF COLORADO

(D.C. NO. 89-M-1154)

This appeal comes to us from the latest round of

litigation arising from environmental violations that

occurred during the 1980s at the Rocky Flats nuclear

weapons plant (“Rocky Flats”), near Golden, Colorado

Previously, we considered related appeals in United States

ex rel. Stone v. Rockwell Int’l Corp., No. 94-634 (10th Cir.)

United States v. Rockwell Int'l Corp., No. 96-1530, 124 F.3¢

1194 (10th Cir. 1997); United States ex rel. Stone v. Rockweli

Int’l Corp., No. 97-1015 (10th Cir.); In re Special ‘Grana

Jury, 143 F.3d 565 (10th Cir. 1998); United States ex rel.

Stone v. Rockwell Int’l Corp., No. 98-1283 (10th Cir.); and

United States ex rel. Stone v. Rockwell Int’l Corp., 173 F.3¢

757 (10th Cir. 1999). The instant appeal concerns False

Claims Act claims, 31 U.S.C. § § 3729 et seq. (FCA), brought

by the Government and James S. Stone, a qui tam relator,

against Rockwell International Corporation and Boeing

North American, Inc. (“Rockwell”), as well as breach of

contract and common law fraud claims brought by the

Government alone. After careful consideration, on

rehearing by the panel we make a limited remand for

further findings and conclusions and affirm the remaining

rulings.

From 1975 through 1989 Rockwell operated the Rocky

Flats facility for the Department of Energy (“DOE”) under

a Management and Operating contract. Under this

arrangement, Rockwell was compensated on a “cost-plus”

fee basis, whereby Rockwell was reimbursed by DOE for

“allowable costs” incurred in operating the plant and, once

per year, received a “base fee” calculated at a pre-

determined percentage of the overall value of the contract.

In addition, the most significant portion of Rockwell’s

compensation for its management of Rocky Flats came in

the form of an “award fee,” a bonus paid every six months.

The amount of this bonus was based on DOE’s evaluation of

Rockwell’s performance in such areas as_ general

management, production, and (critically for purposes of this

appeal) environmental, safety and health operations.

James Stone began working at Rocky Flats as a

Principal Engineer in the Facilities, Engineering and

Construction Division, on November 10, 1980. He was

promoted to the position of Lead Principal Engineer for

Rocky Flats’ Utility Design Department, Facilities

Engineering Division, where he worked until March 1986,

when he was laid off.

On June 25, 1987, after he had been laid off by Rockwell,

Stone informed Special Agent Jon S. Lipsky of the Federal

Bureau of Investigations about environmental crimes that

had allegedly occurred at Rocky Flats during Stone’s tenure

there. Explaining to Agent Lipsky that he had had

“unlimited access” at Rocky Flats, Stone related a variety o

allegations, including, inter alia, that contrary to public

knowledge, Rocky Flats accepted hazardous and nuclea

waste from other DOE facilities; that Rockwell employee:

were “forbidden from discussing any controversies in front

of a DOE employee”; that although Rocky Flats’ fluid bec

incinerators failed testing in 1981, the pilot incineraton

remained on line and was used to incinerate wastes dail)

since 1981, including plutonium wastes which were then sent

out for burial; that Rockwell distilled and fractionatec

various oils and solvents although the wastes were gearec

for incineration; that Stone believed that the ground wate

was contaminated from previous waste burial and lanc

application, and that hazardous waste lagoons tended t«

overflow during and after “a good rain,” causing hazardous

wastes to be discharged without first being treated. I] App

at 457-59.

Using the information he had learned from Stone, Agent

Lipsky sought and received a search warrant to searct

Rocky Flats. III App. at 778-787 (Lipsky Affidavit)

Pursuant to this search warrant, on June 6, 1989, seventy

five FBI and EPA agents conducted a search of Rock)

Flats. Three days after Rocky Flats had been searched

Agent Lipsky’s affidavit was unsealed, prompting intens«

media coverage of the environmental violations allegec

therein. See, e.g., Bruce Finley & Thomas Graf, “Rock

Flats illegally burned, dumped waste, U.S. claims,” Denvei

Post, June 10, 1989; Sue Lindsay & Janet Day, “FBI: Flats

burned waste secretly,” Rocky Mountain News, June 10

1989.

Availing himself of the qui tam provision of the Fals«

Claims Act, 31 U.S.C. §3730(b)(1) (“A person may bring :«

civil action for a violation of section 3729 for the person anc

for the United States government. The action shall be

brought in the name of the Government.”), on July 5, 1988

Stone filed the complaint that forms the basis for this

appeal. The complaint, filed in camera and under seal,

stated an FCA claim alleging that Rockwell, while managing

Rocky Flats, concealed environmental, safety, and health

problems from DOE throughout the 1980s. I App. at 81. It

alleged that from at least as early as November 1980,

Rockwell had been legally required to comply with certain

federal and state regulations, statutes, laws, and

agreements, including, inter alia: DOE Order 5483.1, as

superseded by 5483.1A, for Occupational Safety and Health

Program for Government Owned Contractor-Operated

facilities; DOE Order 6430.1, the DOE General Design

Criteria Manual, and DOE Order 5480.2; Colorado statutes,

including Hazardous Substances, Colo.Rev.Stat. § § 25-5-501

et seq., the Air Quality Control Program, Colo.Rev.Stat.

§ §25-7-101 et seg., Asbestos Control, Colo.Rev.Stat.

§ § 25-7-501 et seg., the Colorado Hazardous Waste Act,

Colo.Rev.Stat. § § 25-15-101 et seg., the Water Quality

Control Act, Colo.Rev.Stat. § § 25-8-201 et seq., Radiation

Control, Colo.Rev.Stat. § §25-11-101 et seq., Hazardous

Substance Incidents, Colo.Rev.Stat. § § 29-22- 101 et seq.,

and other specific provisions defining prohibited acts and

reporting requirements with respect to hazardous

substances, including, Colo.Rev.Stat. § § 25-5-503, 25-8-506

& 608, 25-15-08, 309, 310, 29-22-101 & 108; federal statutes,

including the Occupational Safety and Health Act, 29 U.S.C.

§ § 651 et seq., the Atomic Energy Act of 1954, as amended,

42 U.S.C. § § 2011 et seq., the Energy Reorganization Act of

1974, 42 US.C. § $5801 et seqg., the Water Pollution

Prevention and Control Act, 33 U.S.C. § § 1251 et seq., the

Clean Air Act, 42 U.S.C. § §7401 et seqg., the Resource

Conservation and Recovery Act, 42 U.S.C. § § 6901 et seq.,

‘the Safe Drinking Water Act, 42 U.S.C. § § 300f et seq., and

federal regulations applicable or enacted under these

statutes. I App. at 87-89.

Stone alleged that Rockwell committed numerous

violations of the above stated laws and regulations in

connection with its operation of Rocky Flats, and that “ijn

order to induce the government to make payments or

approvals,” Rockwell violated § 3729(a) of the FCA by, inter

alia, knowingly presenting or causing to be presented to an

officer or employee of the United States government, false

and fraudulent claims for payment or approval, including

requests or statements for payment, statements for.

reimbursement of costs, and applications for bonuses in

connection with or under the Rockwell-DOE contracts; and

knowingly making, using, or causing to be made or used,

false records or statements intended to obtain approval and

payment of these monies. I App. at 89-90. .

In compliance with § 3730(b)(2) of the FCA, Stone filed

his complaint in camera and provided to the Government a

disclosure statement relating “substantially all material -

evidence and information” related to his claim in his

possession. The relevant portions of this Disclosure

Statement are discussed in Part II, infra. II App. at 491

(Plaintiff's Confidential Disclosure Statement of Material

Evidence and Information). The United States, however,

gave notice declining to intervene in the action, though it

reserved the right to intervene at a later date upon a

showing of good cause. I App. at 114-15.

While Stone’s FCA claim was proceeding, in March 1992,

in the culmination of a separate criminal investigation into

Rockwell’s management of Rocky Flats, Rockwell-and the

United States entered into a plea agreement under which

Rockwell pled guilty to ten environmental violations. VI

App. at 1861. Specifically, Rockwell’s plea admitted

knowing storage of mixed hazardous wastes (pondcrete and

saltcrete), in violation of the Resource Conservation and

Recovery Act (RCRA), 42 U.S.C. § 6928(d)(2)(C); knowing

storage of mixed hazardous wastes (pondcrete and saltcrete)

without a permit or interim status, in violation of the

RCRA, 42 U.S.C. § 6928(d)(2)(A); knowing treatment and

storage of mixed hazardous wastes (concentrated salt brine)

without a permit or interim status, in violation of RCRA, 42

U.S.C. § 6928(d)(2)(A); knowing storage of mixed hazardous

wastes (vacuum filter sludge) without a permit or interim

status, in violation of the RCRA, 42 U.S.C. § 6928(d)(2)(A);

negligent violation of the Clean Water Act (CWA) permit

conditions (industrial wastes to the sewage treatment

plant), in violation of the CWA, 33 U.S.C. § 1319(c)(1)(A);

negligent violation of CWA permit conditions (BOD

violations, March 1988), in violation of the CWA, 33 U.S.C.

§ 1319(c)(1)(A); negligent violation of the CWA permit

conditions (BOD/Fecal Coliform violations, April 1988), in

violation of the CWA, 33 U.S.C. § 1319(c)(1)(A); negligent

violation of CWA permit conditions (BOD violations, May

1988), in violation of 33 U.S.C. § 1319(c)(1)(A); knowing

violation of CWA permit conditions (spray irrigation), in

violation of the CWA, 33 U.S.C. §1319(c)(2)(A); and

negligent violation of CWA permit conditions (chromic acid

spill), in violation of the CWA, 33 U.S.C. § 1319(c)(1)(A). As

part of its plea, Rockwell agreed to pay $18,500,000 in fines.

VI App. at 1861-63.

The FCA specifies that courts lack jurisdiction over

FCA claims based on public information unless “the person

bringing the action is an original source of the information.”

31 U.S.C. § 3730(e)(4)(A) (“No court shall have jurisdiction

over an action under this section based upon the public

disclosure of allegations or transactions...unless the action is

brought by the Attorney General or the person bringing the

action is an original source of the information.”). The FCA

defines an “original source” as “an individual who has direct

and independent knowledge of the information on which the

allegations are based and has voluntarily provided the

information to the Government before filing an action under

this section which is based on the information.” 31 U.S.C.

§ 3730(e)(4)(B). In December 1992, Rockwell filed a motion

to dismiss Stone’s complaint for lack of subject maver

jurisdiction on the ground that Stone failed to satisfy the

FCA’s requirement that he be an “original source.”

In response, on February 27, 1993, Stone submitted ar

additional affidavit and attached to it his original Disclosure

Statement. We discuss the relevant portions of this

affidavit in Part II, infra. On February 2, 1994 the tria

judge denied Rockwell’s motion to dismiss, finding that “Mr

Stone had direct and independent knowledge that

Rockwell’s compensation was linked to its compliance witt

environmental, health and safety regulations and that it

allegedly concealed its deficient performance so that it

would continue to receive payments.” IV App. at 893-96.

On November 14, 1995, the United States moved tc

intervene with respect to some, but not all of Stone’s FCA

allegations, and on November 19, 1996, the trial court

granted { 1e motion to intervene. [V App. at 900 (The

Government’s Motion For Leave to Intervene); id. at 964

(Memorandum Opinion and Order).

On December 20, 1996, in response to a suggestion fror

the trial judge,’ the United States and Stone (“Plaintiffs”.

filed an amended complaint stating six counts against

Rockwell. [V App. at 972. Count One stated a claim unde

the FCA, 31 U.S.C. § 3729(a)(1) & (2), brought by both the

United States and Stone. IV App. at 995. Counts Twe

through Five stated claims for common law fraud, breach o:

contract, payment by mistake of fact, and unjust

enrichment, and were brought by the United States alone

Id. at 996-1003. In Count Six, Stone (but not the Unitec

States), asserted an additional FCA claim alleging that

Rockwell knowingly presented or caused to be presented tc

' After the United States intervened, the trial judge suggested that ar

amended complaint be filed to clarify the focus of the claims. Supp.App

at 88-89 (“Now, I have noted, as already has been described, that there

are sort of six areas, or the scope of claims that Mr. Stone has presently ir

the pleadings has six different areas of interest, whereas the governmen’

has talked about three apparently so far. So that’s the stuff that need:

clarification in the amended complaint....”).

the Gevernment false or fraudulent claims for money or

property. Jd. at 1004. The trial judge subsequently ordered

that a separate trial be held on this claim. VI App. at 1621.

A jury trial was held on Counts One through Five. The

main issue at trial was whether Rockwell concealed from

DOE environmental, safety, and health problems related to

the processing and storage of saltcrete and pondcrete, two

forms of processed toxic waste. Regarding the FCA claims,

the jury was given a verdict form that asked it to answer

the question: “Did the plaintiffs prove by a preponderance

of the evidence that the defendant Rockwell International

Corporation violated the False Claims Act to get one or

more of the following claims under the Department of

Energy Rockwell contracts paid or approved?” IV App. at

1119. The verdict form required the jury to answer that

question for each of ten six-month periods, running from

October 1, 1986, through December 30, 1989, each

corresponding to an “Award Fee Period” or a period for

which Rockwell received “Vouchers Accounting for Net

Expenditures Accrued.” Jd. at 1119-20.

On April 1, 1999, the jury returned verdicts for Rockwell

on the breach of contract claim and on seven of the ten FCA

claims. However, the jury found for the Plaintiffs on the

three remaining FCA claims and awarded $1,390,775.80 in

damages. /d. After the jury verdict, when the Plaintiffs

tendered a proposed form of judgment that included Stone

as a party in whose favor judgment should be entered,

Rockwell filed a post-trial memorandum arguing that Stone

was not an “original source” for his amended FCA claims

and thus was not entitled to judgment being entered in his

favor or tw recover attorney’s fees and expenses. In

response, the trial judge found that Stone was an original

source.’

* The trial judge noted, however, that Rockwell could appeal that

determination; thus, when Stone filed motions seeking attorney’s fees and

expenses, the trial judge reserved ruling until after appeals on the

—

10a

On May 13, 1999, the district court dismissed with

prejudice the United States’ claims for common law fraud,

payment by mistake of fact, and unjust enrichment, his

order stating:

At a hearing held on May 7, 1999, based on all of the

evidence received at trial, the court ruled that, as a

matter of law, judgment should enter for the .

defendants on the equitable claims of the United

States for unjust enrichment and recovery of

payments made by mistake because the remedy

would be inconsistent with the jury verdict for the

defendants on the claim for breach of contract. The

court also ruled that judgment should enter for

defendants, as a matter of law, under Fed.R.Civ.P.

50(a) on the claim of the United States for damages

for common law fraud, a claim that was not submitted —

to the jury because the government withdrew it. In

the alternative, considering the oral motion to

withdraw as a motion under Fed.R.Civ.P. 41(a)(2),

the court orders that dismissal of the claim must be

with prejudice.

Accordingly, on June 10, 1999, the district court entered

judgment in favor of the Plaintiffs on the three FCA claims

in the amount of $4,172,327 (awarding three times the

amount awarded by the jury pursuant to 31 U.S.C.

§ 3729(a)). The court also awarded the United States a

$15,000 civil penalty. Although one of Stone’s FCA claims

against Rockwell had yet to be tried, the district court

certified its judgment on the jury verdict under

Fed.R.Civ.P. 54(b).

Rockwell then filed this appeal, arguing that: (1) the

trial court erred in finding that Stone was an “original

source” of the information on which his FCA allegations

grounds that an appeal “may well affect the determination of these

motions.” VI App. at 1570 (Order Reserving Ruling On Motions For Fees

and Expenses).

lla

were based; (2) qui tam relators do not have standing under

Article III of the U.S. Constitution; (3) the FCA’s qui tam

provisions violate the Take Care and Appointments Clauses

of Article II of the Constitution; and (4) the trial court erred

in instructing the jury that DOE employees’ knowledge of

the facts allegedly concealed from the DOE was relevant to

the FCA claims only if such employees had “authority to

act” under the Government’s contracts with Rockwell. The

Plaintiffs filed cross-appeals, Stone arguing that a new trial

is required to award further damages under the FCA, and

the Government arguing that: (1) the district court erred in

failing to instruct the jury that Rockwell breached its

contract with DOE; and (2) the district court erred in

dismissing with prejudice its common law fraud action.

Rockwell’s first claim of error is that the trial court

erred in ruling that Stone was an “original source” of the

information on which his FCA allegations were based.

The FCA specifies that courts do not have jurisdiction over

claims based on publicly disclosed information “unless the

action is brought by the Attorney General,” or as applies

here, “the person bringing the action is an original source of

the information.” 31 U.S.C. §3730(e)(4)(A) (emphasis

added). An “original source” is defined as one who “has

direct and independent knowledge of the information on

which the allegations are based and has voluntarily provided

the information to the Government before filing an action

under this section which is based on the information.” Jd. at

§ 3730(e)(4)(B). Rocxwell challenges as error the district

*31 U.S.C. § 3730(e)(4)(A) provides in full:

No court shall have jurisdiction over an action under this section based

upon public disclosure of allegations or transactions in a criminal, civil, or

administrative hearing, in a congressional, administrative, or Government

Accounting Office report, hearing, audit, or investigation, or from the

news media, unless the action is brought by the Attorney General or the

person bringing the action is an original source of the information.

12a

court’s determination (made by two judges, once in 1994 and

again in 1999), that Stone was an “original source” of the

information on which his FCA claims were based.

Because this involves a question of subject matter

jurisdiction, we conduct our review de novo. United States

ex rel. Hafter v. Spectrum Emergency Care, Inc., 190 F.3d

1156, 1160 (10th Cir. 1999) (“This court...reviews issues o!

subject matter jurisdiction de novo.”) (citing United States.

ex rel. Precision Co. v. Koch Indus., Inc., 971 F.2d 548, 551

(10th Cir. 1992)). Since Rockwell has challenged the court’s

jurisdiction, the burden is on Stone to show, by z

preponderance of the evidence, that jurisdiction exists. /d.

Stone must therefore sustain “the burden of alleging the

facts essential to show jurisdiction and supporting those

facts- with competent proof.” /d. (internal quotations

omitted). “Mere conclusory allegations of jurisdiction are

not enough.” Jd. (quoting Penteco Corp. Ltd. Partnership v.

Union Gas Sys. Inc., 929 F.2d 1519, 1521 (10th Cir. 1991)).

As an initial matter, we must consider Stone’s

contention that once the Government intervenes, as

happened here, the trial court’s jurisdiction is conclusively

established and the original source requirement ceases tc

operate, on the theory that the case may proceed by virtue

of the Government’s presence in the litigation. We disagree

Intervention by the United States into a qui tam suit does

not automatically endow the court with subject matter

jurisdiction over both the claims by the United States anc

by the relator. We agree with the Fifth Circuit’s persuasive

analysis which rejected a relator’s attempt “to end-run the

‘original source’ inquiry by arguing that the United States

intervention in the action cured any jurisdictional defect.’

That court held, and we agree, that in these circumstances

[sluch intervention does not.. confer subject matter

jurisdiction over the relator’s claims. Such a reading

of the jurisdictional bar of 31 U.S.C. § 3730(e)(4)

13a

ignores the False Claims Act’s goal of preventing

parasitic suits based on information discovered by

others. Indeed, under [plaintiffs] interpretation, the

United States’ intervention would cure the

jurisdictional defects in all suits, even those brought

by individuals who discovered the defendant’s fraud

by reading about it in the morning paper. The

legislative history and policy behind the Act refute

such a reading.

Federal Recovery Services, Inc. v. United States, 72 F.3d

447, 452 (5th Cir. 1995); see also Eitel v. United States, 242

F.3d 381 (9th Cir., 2000) (“Whether or not the government

proceeds with this action [the relator] cannot because he is

not an original source.”).

Accordingly, we turn to the merits of whether Stone

sufficiently demonstrated himself to be an original source of

his allegations against Rockwell.

On two occasions Rockwell challenged Stone’s status as

an original source: first, in a Fed.R.Civ.P. 12(b)(1) motion to

dismiss for lack of subject matter jurisdiction in 1994, and

then again in May 1999, after the jury had returned a

verdict for the plaintiffs. Both times the court ruled that

Stone was an original source.

On the first occasion the trial judge, Judge Carrigan,

though acknowledging that Stone had conceded that he

could identify neither the individuals who had allegedly

falsely told the Government that Rockwell was in

compliance with environmental, health, and safety laws, nor

the specifi: documents containing these alleged

misrepresentations, ruled that Stone nonetheless qualified

as an original source. IV App. at 892-94 (Order at 3-4).

Judge Carrigan based his ruling on his finding that Stone’s

duties at Rocky Flats included “plant-wide troubleshooting

through which he_ gained knowledge of various

environmental, health and safety problems,” and that Stone

l4a

had been “informed that Rockwell’s compensation was

based on compliance with applicable environmental, health

and safety regulations.” Jd. at 893. Further, Judge

Carrigan found that Stone had been instructed by Rockwell

“not to divulge environmental, health and safety problems

to the DOE.” Jd. Consequently, the judge ruled that given

these findings,

there is evidence that Mr. Stone had direct and

independent knowledge that Rockwell’s

compensation was linked to its compliance with

environmental, health and safety regulations and

‘that it allegedly concealed its deficient performance

so that it would continue to receive payments. The

fact that Mr. Stone was not aware of the specific

persons or documents involved does not erase this

knowledge.

Id. at 893-94. Accordingly, Judge Carrigan concluded

that Stone possessed “direct and independent knowledge” of

the information on which his allegations were based. Order

at 4-5. Judge Carrigan denied Rockwell’s motion to dismiss

for lack of subject matter jurisdiction. Jd. at 6-7.

In April 1999, a jury returned a verdict for plaintiffs on

these claims of violation of the False Claims Act, awarding

compensatory damages of $1,390,775 on those claims. The

jury found for the defendant on the seven other False

Claims Act claims and on the Government claim for breach

of contract. The case was then before Chief Judge Matsch,

and he adhered to Judge Carrigan’s ruling that Stone was a

proper qui tam relator and also to his rejection of the

challenge to the constitutionality of he qui tam statute.

* Judge Carrigan found that Stone had been given “a document stating

that ‘DOE will not even consider an award fee if we do not perform at

least at a satisfactory level in all 37 FPAs,’ including Nuclear Materials

Management, Waste Management, Health Protection, Industrial Safety

and Environmental Protection.” Order at 4.

15a

As noted, to qualify as an original source a relator must

establish (1) that he possessed direct and independent

knowledge of the information on which his claim is based,

and (2) that he voluntarily conveyed the information to the

Government prior to filing suit. 31 U.S.C. § 3730(e)(4)(B).

Rockwell challenges the sufficiency of Stone’s showing on

both these requirements. |

We have explained that for purpoces of determining

whether a relator qualifies as an original source, the FCA’s

direct and independent knowledge requirement is properly

construed to mean that the knowledge possessed by the

relator must be “marked by the absence of an intervening

agency...[and] unmediated by anything but the relator’s

own labor.” United States ex rel. Hafter v. Spectrum

Emergency Care, 190 F.3d 1156, 1162 (10th Cir. 1999)

(quoting United States v. MK-Ferguson Co., 99 F.3d 1538,

1547 (10th Cir. 1996)) (alternations in original). In other

words, “direct knowledge is knowledge gained by the

relator’s own efforts and not acquired from the labors of

others,” while independent knowledge means that “the

relator’s knowledge must not be derivative of the

information of others, even if those others may qualify as

original sources.” United States ex rel. Fine v. Advanced

Sciences, Inc., 99 F.3d 1000, 1006-07 (10th Cir. 1996)

(citation omitted).

United States ex rel. Hafter v. Spectrum Emergency

Care is our most recent and fullest discussion of what is

required for a relator to demonstrate direct and

independent knowledge. Hafter concerned an appeal from

the district court’s grant of a motion to dismiss for lack of

subject matter jurisdiction because the relator allegedly was

not an original source. 190 F.3d at 1157-58. The relator had

served as both an emergency room physician under an

independent contract with Texas Emergency Room

Services, P.A., an outside organization contracted to staff

l6a

the Emergency Room at the Dallas/Fort Worth Medical

Center, and as a medical director responsible for

supervising emergency room services and physicians. After

the Medical Center had terminated Texas Services’

contract, the relator’s own contract with Texas Services was

terminated. Soon thereafter, he was contacted by an

attorney researching a medical malpractice case. During

their interview, the relator told the attorney about alleged

mismanagement of the emergency room, who then used this

new information to amend his malpractice complaint to

include alleged violations of the Texas Medical Practices

Act.

Approximately one year after the filing of this suit, the

relator filed his own qui tam suit alleging false and

fraudulent Medicare, Medicaid and/or Champus

reimbursement claims to the Government. When the

defendant moved to dismiss for lack of subject matter

jurisdiction, the district court ruled that because the

information underlying his complaint had been publicly

disclosed in the earlier suit brought by the attorney who had

contacted the relator, the court could have jurisdiction only

if the relator qualified as an original source. Finding that he

failed to meet the dual requirements imposed on the relator,

the district court granted the motion to dismiss.

On appeal, we focused our inquiry on determining

whether the relator had the requisite direct and

independent knowledge. We determined that the burden

was on the relator to demonstrate that he had discovered

the information on which his allegations were based through

his “own efforts and not by the labors of éthers,;” and that

his “information was not derivative of others.” Hafter, 190

F.3d at 1162. On the facts presented by the relator, we held

that he failed to satisfy this burden. We characterized his

complaint, which merely stated that he had “direct and

independent knowledge of the information upon which this

suit is based,” as stating only an “unsupported, conclusory

17a

allegation” and ruled that it was insufficient to establish

jurisdiction. /d. Likewise, we found that the relator’s

memorandum submitted in response to the motion to

dismiss was equally deficient. Because a “mere assertion of

knowledge, without adequate basis in fact and unsupported

by competent proof is insufficient to establish jurisdiction,”

we held that such “equivocal statements” were inadequate

to satisfy the direct and independent knowledge element for

an original source. Jd. at 1163 (citing Wenz v. Memery

Crystal, 55 F.3d 1503, 1508-09 (10th Cir. 1995)).

Notwithstanding Rockwell’s claim that Stone’s evidence

of his direct and independent knowledge is inadequate to

satisfy the specificity we required in Hafter, we believe that

Stone has adduced sufficient competent proof to establish

that he had direct and independent knowledge of the

information on which his FCA claim was based. Unlike in

Hafter, where the relator could muster only a conclusory

submission to the court that he had direct and independent

knowledge which was devoid of specifics, here review of the

record convinces us that Stone has been specific and

detailed in showing how he obtained, through his own

efforts and not through the labors of others, direct and

independent knowledge that Rockwell’s designs for

manufacturing pondcrete blocks would result in the release

of toxic waste. Stone supplied the district court with an

affidavit detailing his duties and responsibilities at Rocky

Flats and describing his observations there that

underpinned his FCA action. Stone averred that he

commenced employment with Rockwell at Rocky Flats on

November 10, 1£80, as a Principal Engineer in the Facilities,

Engineering and Construction Division, and that he was

subsequently promoted to Lead Principal Engineer for

Rocky Flats’ Utility Design Department, Facilities

Engineering Division, where he continued to serve until his

employment was terminated on March 17, 1986. Stone

averred that his duties at Rocky Flats included plant-wide

18a

“troubleshooting” and reviewing designs and existing

operations for safety and cost effectiveness. II App.at 291.

In this affidavit Stone further averred that in the course

of his work at Rocky Flats, he was assigned to a project

addressing the manufacturing process for pondcrete, a

mixture of cement and sludge and liquid from evaporation

ponds containing toxic industrial wastes. As part of his

assignment, Stone averred that he “studied aspects of the

design proposed by Rockwell management for making

pondcrete,” and that he “concluded that the suggested

process would result in an unstable mixture that would

later deteriorate and cause unwanted release of toxic wastes

to the environment.” Id. at 298 (emphasis added).

Stone’s affidavit states that he communicated his

concerns about the pondcrete manufacturing process to

Rockwell’s management in an October 13, 1982

“Engineering Order,” which he attached as an exhibit to his

affidavit. This Engineering Order was explicit in

articulating his belief that the proposed design for making

pondcrete was flawed: “This design will not work in my

opinion. I suggest that a pilot operation be designed to

simplify and optimize each phase of the operation ....” Id. at

439 (Engineering Order). Despite this warning, Rockwell

went forward and manufactured pondcrete using the

allegedly deficient procedure.

Nor is Stone’s affidavit the only document that

establishes that he possessed direct and independent

knowledge of alleged pondcrete manufacturing deficiencies.

We also find it significant that Stone in a July 5, 1989,

confidential disclosure statenent provided to the

Government detailed how he became aware of Rockwell’s

* Stone also averred that he had noted, based on his “knowledge of the

chemical processes at Rocky Flats, that the sludge and liquid present in

the evaporation ponds contained some of the most toxic and radioactive

substances at Rocky Flats, which made the unstable nature of the

pondcrete particularly hazardous.”

19a

allegedly faulty process for manufacturing pondcrete. In a

section of this statement entitled “Analysis of pondcrete

method for drainage of solar evaporation ponds,” Stone

Solar evaporation ponds have, for some time, been

used to treat...hazardous wastes. Mr. Stone

reviewed a design for the process and mechanical

system intended to be used for removing sludge from

these ponds. The system was proposed by a Mr.

Leon Fong. Based on Mr. Stone’s years of

experience in the handling of sewage and sludge, he

immediately recognized that the design could not

work and would lead to serious problems. For

example, the system was designed to remove sludge

from the pond and mix that sludge with cement in

order to create blocks of “pondcrete” for disposal use.

Mr. Stone foresaw that the piping system would not

properly remove the sludge and would lead to an

inadequate mixture of sludge/waste and cement such

that the “pondcrete” blocks would rapidly

disintegrate thus creating additional contamination

problems.

II App. at 509 (Plaintiffs Confidential Disclosure

Statement of Material Evidence and Information) (emphasis

added).

Moreover in his disclosure statement Stone described

how Rockwell forbade him from discussing any

e: » nmental problems at Rocky Flats with the DOE.

' about September 1981, three managers, William

Nichol, Sam Cerise and Robert Jensen, met with Mr.

Stone regarding the communication with DOE. In

that meeting, Mr. Nichol expressly told Mr. Stone

that he did not want any government agency

learning anything about problems or conditions that

Mr. Stone may become aware of in connection with

his employment at Rocky Flats. Mr. Nichol ordered

20a

Mr. Stone, in particular, not to communicate with the

DOE regarding such matters, or with any

government agency at all. Further, Mr. Stone was

told that if he violated this gag order, he would be

fired. Mr. Stone’s request that this order be put in

writing was refused.

Id. at 496 (emphasis added).

We believe that the information is sufficiently specific to

satisfy the standard set out in the FCA and in our opinions.

Stone clearly articulated in his affidavit and disclosure

statement that he learned the facts underlying his claim by

reviewing Rockwell’s plans for producing pondcrete. We

thus are convinced that he sufficiently alleged “specific

facts~as opposed to mere conclusions-showing exactly how

and when he...obtained direct and independent knowledge

of the fraudulent acts alleged in the complaint and

support[ed] those allegations with competent proof,” and

that this knowledge was discovered though his own labor.

Hafter, 190 F.3d at 1162.

We are not persuaded by Rockwell’s arguments to the

contrary, which are permeated by a flawed understanding of

the FCA’s definition of direct and independent knowledge.

The underlying assumption of Rockwell’s arguments is that

a relator must have direct and independent knowledge of

the actual fraudulent submission to the government.

Rockwell thus argues that to establish himself as an original

source, Stone needed to have had direct and independent

knowledge of the specific documents that informed DOE

that Rocky Flats was in compliance with environmental,

health and safety laws, as well as the specific: individuals

who submitted those inaccurate claims.

The plain text of the FCA, however, belies this

interpretation; the FCA is clear that for a relator to be an

original source he need only possess “direct and

independent knowledge of the information on which the

allegations are based.” 31 U.S.C. § 3730(e)(4)(B). In Hafter,

2la

we explained that the phrase “information on which the

allegations are based” means “the information underlying or

supporting the fraud allegations contained in the plaintiffs

qui tam complaint.” Hafter, 190 F.3d at 1162 (emphasis

added). We thus drew a distinction between the actual act

of fraud, i.e. the actual submission of inaccurate claims by

Rockwell to DOE, and the facts underlying or which give

rise to the fraud, i.e. the environmental, health and safety

violations themselves. The relator need not, as Rockwell

says, have in his possession knowledge of the actual

fraudulent conduct itself; knowledge “underlying or

supporting” the fraud allegation is sufficient. /d. Thus, we

are persuaded that Stone’s knowledge that a defective

pondcrete manufacturing process would be employed,

gained from his review of Rockwell’s plans, constitutes

knowledge of information “underlying or supporting” his

allegation concerning Rockwell’s alleged ultimate fraudulent

activity (the submission of claims to the DOE falsely stating

that Rocky Flats was in compliance with environmental,

health and safety laws).

For the same reasons, we are not persuaded by

Rockwell’s argument that Stone could not be an original

source for the pondcrete claim because he no longer worked

at Rocky Flats when the manufacture of pondcrete blocks

commenced. The 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 e had direct and independent knowledge

of the informatiun underlying his claim, in this case

Rockwell’s awareness that it would be using a defective

process for manufacturing pondcrete.

Nor do we find persuasive Rockwell’s argument that

Stone could not have had direct and independent knowledge

of the information on which his pondcrete claim was based

22a

because, Rockwell asserts, it is “preposterous” to think that

the alleged defects in design Stone identified in his review of

the designs later caused solidity defects in the pondcrete

blocks. Appellant’s Opening Brief at 37. Rockwell’s

objection does not carry weight; whether the alleged design

flaws noted by Stone in his Engineering Report actually

caused the production of malformed pondcrete blocks is

immaterial. For a relator to be properly qualified as an

original source, he must have had direct and independent

knowledge of the information on which his claim is based.

But whether that claim is ultimately flawed on the merits is

an analytically distinct question from the one mandated by

the FCA for establishing jurisdiction. It is for the finder of

fact to determine whether the plaintiff's theory has merit; to

satisfy the direct and independent prong of the original

source test, the relator need only show that hé possessed

direct and independent knowledge of the information upon

which his claim is based, not that his claim is factually

correct.

Therefore, we hold that Stone has adequately

established himself as having direct and independent

knowledge of his allegation that Rockwell manufactured

insolid pondcrete (which Rockwell concealed from the

Government).

On reconsideration of the second prong of the original

source test-which requires that Stone have voluntarily

provided the information underlying his pondcrete claim, his

saltcrete claim and his irrigation claim to the United States

before filing suit-the court finds chat tie record does not

reveal specific and pertinent findings-of-tact by either of the

judges who considered the pre-filing disclosure issue to

support a conclusion whether the required disclosure was or

was not made. While there is considerable material in our

record on this issue, this appellate court should not perform

23a

—

the fact-finding function reserved for the district courts. See

Davis v. United States, 192 F.3d 951, 961 (10th Cir. 1999).

Accordingly, this court hereby directs that there be a

limited remand to the district court for the purpose of

findings and conclusions being made to ascertain whether

the required pre-litigation disclosure to the Government

was made, and for any further proceedings by any hearings

that the district court shall find proper and necessary on this

issue. We therefore make a limited remand for further

proceedings in accord with this order, further findings,

conclusions and a further ruling on the jurisdictional issue,

which shall be certified as a supplemental record to this

court; otherwise this court will retain jurisdiction of these

appeals.

III

Rockwell presents a number of constitutional challenges

to qui tam actions under the FCA, arguing that qui tam

relators lack Article III standing, that the FCA’s qui tam

provisions violate the Appointments Clause of Article II,

and that they also violate the Take Care Clause of Article II.

We review de novo challenges to the constitutionality of a

statute. United States v. Hampshire, 95 F.3d 999, 1001

(10th Cir. 1996); United States v. Bolton, 68 F.3d 396, 398

(10th Cir. 1995).

Standing

Rockwell’s challenge to the Article III standing of

relators is easily disposed of. Recently, in Vermont Agency

of Natural Resources v. United States ex rel. Stevens, 529

U.S. 765, 120 S.Ct. 1858, 146 L.Ed.2d 836 (2000), the

Supreme Court held that relators do have standing to

litigate qui tam claims. Id. at 1865 (“We think this history

well nigh conclusive with respect to the question before us

here: whether qui tam actions were ‘cases and

controversies of the sort traditionally amenable to, and

resolved by, the judicial process.’ When combined with the

24a

theoretical justification for relator standing...it leaves no

room for doubt that a qui tam relator under the FCA has

Article III standing.”) (quoting Steel Co. v. Citizens for a

Better Environment, 523 U.S. 83, 102, 118 S.Ct. 1003, 140

L.Ed.2d 210 (1998)). Therefore, we are obliged to reject

Rockwell’s contention that qui tam relators lack Article III

standing.

The Stevens Court, however, was careful to specify that

it was expressing no opinion concerning other constitutional

challenges to qui tam actions, namely whether they violate

the Take Care and Appointment Clauses of Article II. Jd. at

1865 n. 8 (“[W]e express no view on the question whether

qui tam suits violate Article II, in particular the

Appointments Clause of § 2 and the ‘take Care’ Clause of

§3.”). Accordingly, we turn now to these remaining

arguments. :

The Appointments Clause

Rockwell argues that the FCA’s qui tam provisions

violate Article II’s Appointments Clause, which states in

part that the President shall nominate and “by and with the

Advice and Consent of the Senate, shall appoint...all other

Officers of the United States, whose Appointments are not

herein otherwise provided for, and which shali be

established by Law; but the Congress may by law vest the

Appointment of such inferior Officers, as they think proper,

in the President alone, in the Courts of Law, or in the Heads

of Departments.” U.S. Const. art. II, § 2, el. 2.

By making this distinction, the Constitution establishes

a bifurcated system of appointments: principal officers are

appointed by the President with the “Advice and Consent of

the Senate,” while Congress may vest the appointment of

“inferior Officers” in “the President alone, in Courts of Law,

or in the Heads of Departments.” Edmond v. United States,

520 U.S. 651, 117 S.Ct. 1573, 137 L.Ed.2d 917 (quoting

Article 11). Rockwell suggests that the FCA’s enforcement

25a

scheme permits private relators to “appoint themselves as

prosecutors” and thus runs afoul of the requirements of the

Appointments Clause because, according to Rockwell,

Buckley v. Valeo, 424 U.S. 1, 126, 96 S.Ct. 612, 46 L.Ed.2d

659 (1976), mandates that only a properly appointed “Officer

of the United States” may conduct litigation on behalf of the

United States, and that relators are not appointed by any of

the sanctioned methods of appointing officers. Appellant’s

Opening Brief at 48.

We are not persuaded that Buckley suggests that we

should find an Appointments Clause violation here. The

procedural requirements of the Appointments Clause only

apply to the appointment of officers. Thus, the threshold

question that we face is whether qui tam relators are

“officers” for purposes of Article II. We conclude that they

are not; gui tam relators do not serve in any office of the

United States. There is no legislatively created office of

informer or relator under the FCA. Relators are not

entitled to the benefits of officeholders, such as drawing a

government salary. And they are not subject to the

requirement, noted long ago by the Supreme Court, that the

definition of an officer “embraces the ideas of tenure,

duration, emolument, and duties, and the latter were

continuing and permanent, not occasional or temporary.”

United States v. Germaine, 99 U.S. 508, 511-12, 25 L.Ed. 482

(1878); see also Auffmordt v. Hedden, 137 U.S. 310, 327, 11

S.Ct. 103, 34 L.Ed. 674 (1890) (“His position is without

tenure, duration, continuing emolument, or continuous

duties, and he acts only occasionally and temporarily.

Therefore, he is not an ‘officer’ within the meaning of the

clause of the constitution referred to.”).

We therefore conclude that Rockwell construes Buckley

too broadly: that opinion held that “any appointee

exercising significant authority pursuant to the laws of the

United States is an ‘Officer of the United States,’ and must,

therefore, be appointed in the manner prescribed by § 2,

26a

cl.2, of that Article.” Buckley, 424 U.S. at 126, 96 S.Ct. 612.

The Court was clear, however, that this definition of an

officer of the United States should be construed in

conformity with its prior Germaine and Auffmordt opinions,

which the Buckley Court extensively quoted with approval.

Id. at 124-25 & n. 162, 96 S.Ct. 612. Since qui tam reiators

do not meet these requirements, quoted supra, we, like the

other circuits that have considered the question, hold that

the FCA’s qui tam provisions do not contravene the

Appointments Clause. See Riley v. St. Luke’s Episcopal

Hosp., 252 F.3d 749, 757-58 (5th Cir.2001) (en banc); United

States ex rel. Taxpayers Against Fraud v. General Electric

Corp., 41 F.3d 1082, 1041 (6th Cir. 1994); United States ex.

rel. Kelly v. Boeing Co., 9 F.3d 743, 759 (9th Cir. 1993).

The Take Care Clause

We now direct our attention to Rockwell’s argument

that the FCA’s qui tam provisions violate Article II's Take

Care Clause, which establishes that the Executive is the

branch of government which “shall take Care that the laws

be faithfully executed.” U.S. Const., art. II, §3. Rockwell

contends that the FCA interferes with the Executive

‘Branch’s constitutionally assigned duty to enforce the

nation’s laws by conferring law enforcement powers on

politically unaccountable private relators who are not

subject to control by that Branch of the Government and

who are motivated solely by private financial interests that.

may be inimical to the Government’s interests. See

Appellant’s Opening Brief at 46.

On the facts of this case, we are not persuaded that a

constitutional violation has occurred. Rockwell argues that

the qui tam provisions run afoul of Morrison, v. Olson, 487

U.S. 654, 108 S.Ct. 2597, 101 L.Ed.2d 569 (1988), which

established that congressional action must leave the

Executive Branch with sufficient “control” over its litigation

so as to “ensure that the President is able to perform his

27a

constitutionally assigned duties.” Morrison, 487 U.S. at 696,

108 S.Ct. 2597. Rockwell contends that application of the

FCA’s qui tam provisions violate the Morrison test because

the Executive has no power to remove the relator from the

lawsuit (31 U.S.C. §3730(c)(3)); the Executive cannot

control the breadth of the relator’s claims (31 U.S.C.

§ 3730(c)(3)); if the Executive seeks to intervene after

initially declining to do so (as happened here) it may

intervene only if the court finds “good cause” for such

intervention, and even then the Executive cannot limit the

relator’s “status and rights” (31 U.S.C. § 3730Q(c)(3)); and if

the Executive is allowed to intervene after initially

declining to do so, itis barred from dismissing the relator’s

claims, and is thereby stripped of any power to terminate

qui tam actions under those circumstances (31 U.S.C.

§ 3730(c)(3)).

We are not persuaded that in the circumstances of this

case, the separation of powers, as embodied in the Take

Care Clause, has been transgressed. The Government

sought, and was granted permission, to intervene.

Consequently, the Government was a full and active

participant in the litigation as it jointly prosecuted the case

with Stone. Given that the Government was permitted to

intervene, we remain unconvinced by Rockwell’s contention

that the presence of a qui tam relator in the litigation so

hindered the Government’s prosecutorial discretion as to

deprive the Government of its ability to perform its

constitutionally assigned responsibilities. Morrison, 487

U.S. at 695-96, 108 S.Ct. 2597.

~~ li,

* We express no opinion regarding whether the FCA’s qui tam

provisions violate the separation of powers or the Take Care Clause in

circumstances other than those presented in this case, i.e. if the

Government had sought permission to intervene, but was denied

intervention by the district court, or if the Government desired to remove

the relator from the action but was prevented from doing so by

application of the statute.

28a

Accordingly, we agree with the Fifth, Sixth, and Ninth

Circuits, and hold that at least where the Government

intervenes, the qui tam provisions of the FCA do not violate

the separation of powers by transgression of the Take Care

Clause. Riley, 252 F.3d at 753-57 (“[TJhe qui tam portions of

the FCA do not violate the constitutional doctrine of

separation of power by impinging upon the Executive's

constitutional duty to take care that the laws are faithfully

executed under Article II of the Constitution.”); Taxpayers

Against Fraud, 41 F.3d at 1041 (“The qui tam provisions

adopted by Congress do not contradict the constitutional

principle of separation of powers.”); Boeing, 9 F.3d at 755

(“(TJhe Executive Branch exercises at least an equivalent

amount of control over qui tam relators as it does over

independent counsels. Thus, the FCA gives the Attorney

General sufficient means of controlling or supervising

relators to satisfy separation of powers concerns.”) (footnote

omitted).

We have examined relevant opinions of the Fifth, Sixth

and Ninth Circuits and are persuaded that at least where

the Government is permitted to intervene and does so, the

qui tam provisions of the FCA do not violate the Take Care

Clause provisions of Article II and their separation of

powers principles. We have earlier discussed these

decisions in Part II B in connection with the Appointments

Clause and there held that the FCA qui tam provisions do

not contravene that clause. We now focus on the Take Care

Clause of Article II.

In Riley v. St. Luke’s Episcopal Hospital, 252 F.3d 749,

753-57 (5th Cir.2001) (en banc), the Fifth Circuit upheld the

FCA qui tam provisions against Take Care objections

where the Government chooses to intervene and does so.

Riley noted that the Executive retains significant control

over litigation pursued under the FCA by a qui tam relator,

id., including power to veto settlements for example. The

Fifth Circuit concluded that the qui tam portions of the

29a

FCA do not violate constitutional principles of separation of

powers by impinging on the Executive’s constitutional duty

to take care that the laws are faithfully executed under

Article II of the Constitution. 252 F.3d at 757.

The Sixth and Ninth Circuits expressed similar views.

In United States ex rel. Taxpayers Against Fraud v.

General Electric Co., 41 F.3d 1032 (6th Cir. 1994), a similar

Take Care objection was made to the constitutionality of the

FCA’s qui tam provisions. The Sixth Circuit rejected the

objections, agreeing with the Ninth Circuit’s ruling in

United States ex rel. Kelly v. Boeing Co., 9 F.3d 743 (9th Cir.

1993), cert. denied, 510 U.S. 1140, 114 S.Ct. 1125, 127

L.Ed.2d 433 (1994). The Sixth Circuit explained that the qui

tam provisions do not contravene the constitutional

principle of separation of powers; that the statute was

crafted with particular care to maintain the primacy of the

Executive Branch in prosecuting false-claims actions, even

where the relator has initiated the process; and that indeed,

if the Government decides not to intervene in a relator’s

case (which is not the case here) it may still require the

relator to inform it of developments, among other things.

Thus, the Sixth Circuit concluded that “the Executive

Branch retains ‘sufficient control’ over the relator’s conduct

to insure that the President is able to perform his

constitutionally assigned dut[y].” Taxpayers, 41 F.3d at

1041 (citing Morrison v. Olson, 487 U.S. 654, 696, 108 S.Ct.

2597, 101 L.Ed.2d 569 (1988)).

In sum, we hold that the qui tam provisions of the FCA

do not violate the Take Care Clause protective provisions of

Article II in the circumstances of this case where the

Government intervened.

Both Stone and the Government argue that a new trial is

required to award damages to compensate for costs incurred

in the repair of damage caused by the faulty pondcrete

blocks. They contend this is made necessary by the trial

30a

court’s erroneous refusal to grant their motion for a new

trial on damages because the jury’s damage award was

improperly influenced by allegedly irrelevant and

prejudicial testimony.

In his instructions to the jury, the trial judge charged

that damages in the form of compensation for pondcrete

repair costs should be awarded if they were incurred

“because of” Rockwell’s FCA violations. Plaintiffs contend

that despite this instruction, the jury, though it found

Rockwell liable, failed to compensate the Government for

repair costs. Plaintiffs arrive at this conclusion from the fact

that the jury award amounted to only $1,390,775.80 in

damages~an amount exactly equal to ten percent of the fees

paid by the Department of Energy to Rockwell during the

period for which the jury found Rockwell liable. Plaintiffs

contend that since during this relevant period “waste

management” had a ten percent weight in the formula for

calculating Rockwell’s renumeration from the Department

of Energy, the jury must have compensated the

Government for its waste management fees only, and

therefore wrongly excluded from its award the pondcrete

repair costs.’

Plaintiffs argue that the jury’s decision not to include

pondcrete repair costs in its award of damages can only be

explained by the jury having credited the “improperly

admitted” testimony of defense expert witness Glen

Sjoblom, who testified that the Department of Energy had

reimbursed contractors for repair costs at other facilities.

This testimony was improper, Plaintiffs maintain, because it

addressed whether repair costs were reimbursable under

the DOE-Rockwell contract, an issue that they contend is

unrelated to the FCA claim and which the jury was not

permitted to decide because “allowable” costs by contract

’ Plaintiffs maintain that Rockwell’s own expert testified that if

Rockwell were to be found liable, the Government would be entitled to at

least $302,000 for pondcrete repair costs. IX App. at 4663.

3la

are not non-recoverable as damages resulting from an FCA

violation.

Plaintiffs’ claim of error is predicated on the assumption

that the jury calculated its award of damages in an

impermissible manner. Our holding in Midwest

Underground Storage, Inc. v. Porter, 717 F.2d 493, 500-502

(10th Cir. 1983), however, establishes that such an

assumption is not to be lightly made. In Midwest, we

considered whether the district court should have granted a

new trial based on a jury’s award of damages in the amount

of $3,911,637, a figure equaling the exact amount claimed by

the plaintiff for “product shortage,” a damage item that was

contingent upon a finding that the defendant was liable on a

counterclaim. However, even though the jury denied the

counterclaim, it nonetheless awarded that exact amount.

Despite this remarkable coincidence, we held that the

defendant was not entitled to a new trial:

While the likelihood of a coincidence in numbers may

be very small, the possibility of the special

attractiveness of $3,911,637 as a consciously selected

damage award appears to us to be a distinct

possibility. The jury had before it exhibit 104, which

displayed a variety of numbers, including the

$3,911,637 figure. Exhibit 104 also contained a

damage figure for some of the state law claims which,

when added with other figures of damage the jury

could award, would come close to the $3,911,637

figure. The second plausible explanation is that the

jury was confused... The first explanation would

require that we uphold the award, the second that we

reverse and remand for a new trial.... Given this

choice between a possible proper determination of a

figure and a possible instance of jury confusion, we

‘cannot freely exercise our own judgment as to the

most plausible.... It is well settled that a verdict will

32a

not be upset on the basis of speculation as to the

manner in which the jurors arrived at it.

Id. at 501.

The issue in Midwest is legally indistinguishable from

the one presented here. Accordingly, we hold that the

district court did not abuse its discretion in denying

Plaintiffs’ motion for a new trial.

The Government argues that the trial judge erred by

dismissing with prejudice its claim for common law fraud.

We note that during trial the judge expressed concern that

the common law fraud claim could confuse the jury. VIII

App. at 35, 70, Proceedings of March 16, 1999. On March 23,

1999, the Government moved to dismiss the fraud claim. IX

App. at 4514. The Government’s motion to dismiss was

silent as to whether the dismissal would be with or without

prejudice. However, in his Order for Entry of Final

Judgment, the judge specified that the dismissal was with

prejudice. See Order for Entry of Final Judgment Pursuant

to Rule 54(b), at 2. The Government now argues that the

court erred by dismissing the claim with prejudice.

We review the trial judge’s dismissal with prejudice for

an abuse of discretion: Ohlander v. Larson, 114 F.3d 1531,

1536-37 (10th Cir. 1997). Our review of the record convinces

us that the trial judge did not abuse his discretion in stating

the dismissal was with prejudice. Although the Government

suggests that it was blind-sided by what it characterizes as a

completely unexpected decision by the trial judge to dismiss

the fraud claim with prejudice, we think the circumstances

of the trial judge’s ruling show otherwise.

On March 16, 1999, the fifteenth day of trial (the trial

lasted twenty-five days), the trial judge informed counsel

that he had decided not to submit the common law fraud

claim to the jury because in his view the DOE’s conduct

made it ineligible for rescission, the remedy for fraud. The

trial judge plainly told counsel: “Well I’m not going to

33a

~ submit that claim. I don’t think this is a rescission case. I

think they’ve waived that remedy by their conduct after they

knew what they knew.” VIII App. at 3569 (emphasis added).

Our review of the record convinces us that counsel for

the Government recognized that the trial judge would not

submit the fraud claim to the jury because counsel’s

response to the trial judge was to ask that before the judge

made a formal ruling, the Government be permitted to brief

the issue: “I think that we would like-I would ask that we

be permitted to submit something in writing to Your Honor

before you make a final...ruling on that.” Jd. at 3569-70. The

trial judge granted the Government permission to do so. Jd.

at 3570. In this same exchange, the judge said he did not

know “why you’ve got a common law fraud claim in this

case. You're just confusing the case, and you're going to

confuse the jury and that doesn’t help you. But that’s your

call.” VIII App. at 3570.

There is no indication in the record that the Government

made any written submission. However, seven days later,

on March 23, 1999, counsel for the Government announced in

court that he was moving to dismiss the common law fraud

claim. He stated: “I do have authorization from my office to

move to dismiss the common law [fraud] claim, and I’m

doing so.” IX App. at 4514. Government counsel made no

comment indicating that the dismissal was with or without

prejudice. The judge accepted the Government’s statement

about dismissal, saying “All right,” and adding, “So that it

would be breach of contract and false claims...I think that

will help in clarifying the issues,” to which Rockwell’s

counsel agreed. Jd.

On May 13, 1999, the judge entered an “Order For Entry

Of Final Judgment Pursuant to Rule 54(b).” That order

recited the returning of jury verdicts on April 1, 1999, for

the plaintiffs on three FCA claims, findings for the

defendant on the other seven FCA claims, and on the

34a

Government’s claim for breach of contract. The order

further stated that the court

also ruled that judgment should enter for the

defendants, as a matter of law, under Fed.R.Civ.P.

50(a) on the claim of the United States for damages

for common law fraud, a claim that was not submitted

to the jury because the Government withdrew it. In

the alternative, considering the oral motion to

withdraw as a motion under Fed.R.Civ.P. 41(a)(2),

- the court orders that dismissal of the claim must be

with prejudice.

Order at 1-2.’

We find no error in the judge’s interpretation of the

Government’s oral motion to dismiss as abandoning the

common law fraud claim. Rule 41(a)(2) provides that after a

defendant has filed an answer, a plaintiff may voluntarily

dismiss a claim only upon an order of the court. Ohlander,

114 F.3d at 1536-37. The rule also provides that “[uJnless

otherwise specified in the order, a dismissal under this

paragraph is without prejudice.” Fed.R.Civ.P. 41(a)(2). But

a plaintiff may voluntarily dismiss his action “so long as the

defendant is not hurt,” and the court’s consent to voluntary

dismissal may be conditioned “upon such terms and

conditions as the court deems proper.” Marlow v. Winston

& Strawn, 19 F.3d 300, 303 (7th Cir. 1994) (quoting McCall-

Bey v. Franzen, 777 F.2d 1178, 1184 (7th Cir. 1985)).

Typically, “a court imposes as a term and condition of

dismissal [without prejudice] that plaintiff pay the

defendant the expenses he has incurred in defending the

* Thus, the trial judge ruled first that judgment should be entered for

Rockwell on the common law fraud claim as a matter of law under

Fed.R.Civ.P. 50(a), and then alternatively that considering the oral

motion to withdraw as a motion under Fed.R.Civ.P. 41(a)(2), the judge

ordered that dismissal of the claim “must be with prejudice.” See Order

for Entry of Final Judgment, at 2. Because we hold that the trial court did

not abuse its discretion in dismissing the claim with prejudice, we need

not address whether the court erred in its Rule 50(a) ruling.

35a

suit, which usually includes reasonable attorney’s fees.”

Marlow, 19 F.3d at 303 (citing 5 Moore’s Federal Practice,

q 41.06 at 41-81 to 41-86 (1993)).

The Government relies, inter alia, on United States v.

One Tract of Real Property, 95 F.3d 422 (6th Cir. 1996),

arguing that the trial judge was obliged to give notice to the

plaintiff of his insistence that the dismissal be with prejudice

so as to permit withdrawal of the motion to dismiss. Jd. at

426. The Sixth Circuit noted three factors to be considered

in determining whether a trial judge abused his discretion

by a dismissal with prejudice “in response to a plaintiff's

request for dismissal without prejudice.” Jd. at 425. Those

factors were stated as: the judge giving notice of his

intention to dismiss with prejudice; affording an opportunity

to be heard in opposition to dismissal with prejudice; and

giving the plaintiff an opportunity to withdraw the request

for dismissal and proceed with the litigation. Jd. at- 425-26

(citing Jaramillo v. Burkhart, 59 F.3d 78 (8th Cir. 1995);

Marlow v. Winston & Strawn, 19 F.3d 300 (7th Cir. 1994);

Andes v. Versant Corp., 788 F.2d 1033 (4th Cir. 1986)). We

are impressed by these factors and opinions, with which we

do not disagree. However, on careful consideration of the

record in this instant case, we are persuaded that we are

presented with a materially different case.

Unlike One Tract, Jaramillo, Marlow, and Andes, in

each of which the plaintiff said the dismissal would be

without prejudice, in the instant case the Government made

no such statement in its motion (“I do have authorization

from my office to move to dismiss the common law [fraud]

claim, and I’m doing so now,” IX App. at 4514). On the other

hand there was no statement the dismissal was with

prejudice. We must therefore determine whether the judge

abused his discretion, in the circumstances, by saying in the

Order that “dismissal of the claim must be with prejudice.”

Order at 2.

36a

In a similar controversy, the Seventh Circuit said the

appellate court’s task is to determine whether the

interpretation by the trial judge was an abuse of discretion.

See Babcock v. McDaniel, 148 F.3d 797, 799 (7th Cir. 1998)

(where the plaintiff's motion to dismiss “did not speak to the

issue of prejudice at all,” the district judge was “required to

interpret [the motion] one way or the other, and our task in

reviewing the district court’s decision is to détermine

whether the interpretation adopted by the district court

was an abuse of discretion”). Given the context in which the

Government’s motion to dismiss was made here in

proceedings on March 23, 1999 (IX App. at 4514), a week

after the judge announced on March 16, 1999, that he was

not going to submit the common law fraud claim to the jury

(VIII App. at 3569), we are persuaded there was no abuse ol

discretion in ordering that the dismissal “must be with

prejudice.” Order at 2.

In these circumstances, we are persuaded that the judge

did not abuse his discretion by providing that the dismissa’

must be with prejudice.

To establish a violation of the FCA, the plaintiff must

show that the defendant presented a claim to the

Government knowing it was false or fraudulent. Unitec

States ex rel. Aakhus v. Dyncorp, 136 F.3d 676, 682 (10tI

Cir. 1998). The defendant, however, may be able to cast

doubt on whether he “knowingly” submitted a false claim by

showing that the Government itself was already aware o

the facts underlying the FCA claim when the allegedly

fraudulent claim was submitted. United States ex rel

Butler v. Hughes Helicopters, Inc., 71 F.3d 321, 326-27 (9tt

Cir. 1995). |

Rockwell now claims that it tried to do this by

presenting evidence purporting to show that certain mic

and low-level] DOE employees believed that Rockwell hac

not misled them. Rockwell thus argues that the trial judg:

37a

erred in his instructions on the intent requirement by

instructing the jury that when assessing whether the

plaintiffs had shown that Rockwell had “knowingly”

submitted false claims, they should consider “all direct and

circumstantial evidence, if any, concerning whether one or

more government employees with authority to act under the

Rockwell contracts with DOE knew the relevant facts

concerning pondcrete, saltcrete and spray irrigation, and the

costs incurred related to those activities.” IX App. at 5294.

Rockwell claims that this instruction limited the pool of

Government officials to DOE “contracting officers” only, and

thus precluded the jury from considering any knowledge

obtained by mid and lower-level DOE employees.

Consequently, Rockwell contends that the jury was

improperly prohibited from considering probative evidence

that mid-level and lower-level DOE employees were aware

of the information that Rockwell had allegedly concealed.’

The instruction at issue is set out in the margin.”

* Stone argues that we should not consider this challenge to the jury

instructions because Rockwell did not object to the proposed instruction

at trial and thus did not preserve the issue for appellate review. We do

not agree, and are convinced that the issue was properly preserved.

After informing the jury that in order for Rockwell to be liable for a

FCA violation, the plaintiffs must establish that “Rockwell knew that the

statements it made or used or caused to be made or used were false,” the

judge instructed the jury that Defendant claims that the government,

through various employees of the Department of nergy, had prior

knowledge of facts relating to the false statements that defendant

allegedly made concerning pondcrete, saltcrete and spray irrigation

operations at Rocky Flats. The government denies the existence of such

prior knowledge. In considering whether Rockwell knowingly made any

false statements, you must co sider all direct and circumstantial

evidence, if any, concerning whether one or more government employees

with authority to act under the Rockwell contracts with DOE knew the

relevant facts concerning pondcrete, saltcrete and spray irrigation, and

the costs incurred relating to those activities.

Government knowledge may negate the intent by defendant required

to establish a violation of the False Claims Act. If you find that

government employees with authority to act under the contracts knew

the relevant facts, then you may consider it in determining whether

38a

We conduct our review de novo to determine whether,

as a whole, the jury instructions correctly stated the

governing law and provided the jury with an ample

understanding of the issues and applicable standards.

Brown v. Gray, 227 F.3d 1278, 1291 (10th Cir. 2000) (citing

United States v. Jackson, 213 F.3d 1269, 1290 (10th Cir.

2000)).

We are convinced that the judge’s jury instructions on

the intent requirement were not in error. Notwithstanding

Rockwell’s assertions to the contrary, the trial judge did not

instruct the jury that they could only consider the

knowledge of the DOE’s “contracting officers.” Rather, the

judge worded his instructions broadly, charging the jury

that they could consider the knowledge of all “government

employees with authority to act under the contract.” Thus,

it is clear from the plain language of the instructions that

the judge did not limit the relevant pool of DOE employees

to “contracting officers”; nor has Rockwell articulated any

argument that persuades us that the phrase “government

employees with authority to act under the contract” is

synonymous with “contracting officers.”" Consequently,

there is nothing in the instructions indicating that the jury

was under the impression that they were prohibited from

considering Rockwell’s evidence that mid and lower-level

DOE employees knew of the environmental, health and

safety violations at Rocky Flats.

Rockwell knowingly presented a false statement as to those facts. IX

App. at 5292-94.

" Indeed, the contract between Rockwell and the DOE defines a

“Contracting Officer” as “a person with the authority to enter into,

administer, and/or terminate contracts and make related determinations

and findings. The term includes certain authorized representatives of the

Contracting Officer acting within the limits of their authority as

delegated by the Contracting Officer.” VI App. at 1669. Tus, the phrase

“government employees with authority to act under the contract”

appears to encompass a broader range of individuals than does the

contract’s quite narrow definition of a “Contracting Officer.”

39a

Accordingly, we hold that the trial judge did not err in

his jury instructions on the intent requirement.”

Vil

The Government’s breach of contract theory was based

on the argument tha. Rockwell’s failure to operate the

Rocky Flats facility in compliance with applicable

environmental laws represented a breach of contract. To

this end, the trial judge instructed the jury:

The government also alleges that defendant breached

the DOE/Rockwell contract through operational

failures relating to defendant’s production, handling

and storage of pondcrete and saltcrete at Rocky

Flats. Defendant denies the government’s

allegations.

For the government to recover on its claim for

breach of express contract relating to alleged

operational failures, you must find the government

has proven ail of the following by a preponderance of

the evidence.

One, defendant failed to use its best efforts in its

production, handling or storage of pondcrete and

saltcrete.

Two, such operational failures resulted from willful

misconduct or lack of good faith on the part of the

plant manager, Mr. Sanchini, or those Rockwell

* We are convinced that our decision is consistent with the Ninth

Circuit’s opinion in United States ex rel. Butler v. Hughes Helicopters,

Inc., 71 F.3d 321 (9th Cir. 1995), which Rockwell relies upon. Butler

rejected the argument that for purposes of determining whether the

defendant “knowingly” submitted a false claim to the Government, only

contracting officers’ knowledge is relevant. Instead, the court held that

the knowledge of government “technical representatives” may also be

considered.

Because, as discussed above, we find no evidence in the instant case

that the jury was instructed to restrict their consideration exclusively to

contracting officers, there is no contradiction between Butler and our

holding here.

40a

managerial employees responsible to Mr. Sanchini,

thereby breaching the contract.

And, three, resulting damage to the ney

caused by the breach of contract.

IX App. at 5299-300 (emphasis added).

Then, the judge re-emphasized to the jury that it could

not find Rockwell liable if it found that Rockwell had used

its “best efforts” to comply with its obligations under the

contract:

Under the terms of both the 1986 and 1989

DOE/Rockwell contracts, defendant was obliged only

to use its best efforts to comply with its

responsibilities under the contract. Jf the defendant

used its best efforts to perform its contractual

obligations, then defendant was entitled to receive or

retain its costs for what it did in relation to the

contract, and the government may not recover on its

claim for breach of contract, despite the failure, if

any, of defendant to meet the contractual

requirements.

Id. at 5300 (emphasis added).

The Government now argues that the district court

erred both by instructing the jury on “best efforts” and by

failing to instruct the jury to find Rockwell liable for breach

of contract. It contends that because Rockwell’s contract

with DOE imposed a duty on Rockwell to comply with all

applicable environmental laws, including the Resource

Conservation and Recovery Act, 42 U.S.C. §§ 6901-6992,

Rockwell’s guilty plea to violations of that statute

conclusively establishes that;it breached its duties under the

contract and that it could not re-litigate that issue.” See

* For its argument in the nature of collateral estoppel, the Government

points to the “Ples Agreement and Statement of Factual Basis” entered

in United States v. Rockwell Int'l Corp., No. 92-CR-107, District of

Colorado, a document which was admitted in evidencé in the instant civil

action as Plaintiff's Ex. 1. VI App. at 1861-92.

4la

Reply Br. for Appellee/Cross Appellant the United States,

at 6 (citing United States v. Broce, 488 U.S. 563, 569, 109

S.Ct. 757, 102 L.Ed.2d 927 (1989)). The Government thus

argues that the judge “improperly added an_ intent

requirement to the elements of a breach of contract claim”

and should have instructed the jury to find that Rockwell

breached its contract with DOE.

We are persuaded that the judge did not err in his

instructions. We are convinced that both the text of the

contracts and relevant case law establish that the “best

efforts” instruction was correct. In the section of the

contracts entitled “Scope of Work,” it was provided:

The Contractor shall, in accordance with the

provisions of this contract, wse its best efforts to

manage, staff, maintain, and operate the Rocky Flats ~

Plant within available funds so as to carry on in an

efficient manner all necessary and related services

and operations for the purpose of developing and

producing (at such rates, and in conformance with

such specifications, as the Contracting Officer may

direct in writing from time to time) weapons

components, assemblies, and ancillary equipment and

for performing related services and operations within

the time scales requested by the Contracting Officer.

VI App. at 1708 (Appendix B to Contract, at 1) (emphasis

added).

We are convinced that this language resolves the

question of whether the judge was correct in instructing the

jury that Rockwell owed to the DOE only its “best efforts.”

Moreover, our review of relevant case law confirms that the

trial judge did not err in his instructions on this point. For

instance, McDonnell Douglas Corp. v. United States, 37

Fed. Cl. 295 (1997), involved an action brought in the United

States Court of Federal Claims by defense contractors for

equitable adjustment and conversion of termination for

default, to one for convenience of the Government. Jd. In

42a

determining the rights of the contractors and _ the

Government, the trial judge said that the “best efforts”

standard summarizes the basic nature of the cost-

reimbursement contract, and that such a contract merely

requires the contractor to use its best efforts to provide the

goods or services at the stated price. Jd. at 298 (citing

General Dynamics Corp. v. United States, 229 Ct.Cl. 399,

671 F.2d 474 (1982)}. The judge concluded that “(i]f, despite

its best efforts, the contractor cannot meet its contractual

requirements, the government has obtained precisely what

it bargained for, namely the contractor’s best efforts....”

McDonnell Douglas, 37 Fed. Cl. at 298.

Although the Government, in developing its collateral

estoppel theory, relies on Sell v. United States, 336 F.2d 467,

475 (10th Cir. 1964), and United States v. Rivera Ramos, 856

F.2d 420, 420 (1st Cir. 1988), cert. denied, 493 U.S. 837, 110

S.Ct. 118, 107 L.Ed.2d 79 (1989), we are not persuaded. In

Sell, this court stated that findings in a criminal case were

admissible in the civil case at issue under res judicata or

estoppel by judgment principles, “insofar as such findings

determined issues identical to both cases.” Sell, 336 F.2d at

475 (emphasis added, footnote omitted). We feel, however,

that the issue of fact about making “best efforts” here to

comply with the contractual duty is not the same as the fact

issues determined by the guilty plea in the criminal case.

Consequently, although Rockwell did previously plead

guilty to violating the Resource Conservation and Recovery

Act,“ we are convinced that this plea did not, as the

Government contends, preclude the jury from finding that

* Specifically, in Count One of the plea agreement, Rockwell pleaded

guilty to “Knowing Storage Of Mixed Hazardous Wastes (Pondcrete and

Salterete) in Violation of RCRA Requirements, 42 U.S.C.

§ 6928(d)(2)(C)”; and in Count Two, Rockwell pleaded guilty to “Knowing

Storage Of Mixed Hazardous Wastes (Pondcrete and Saltcrete) without a

Permit or Interim Status, in Violation of RCRA, 42 U.S.C.

§ 6928(d)(2)(A).” See note 17, supra.

43a

Rockwell engaged in its best efforts and thus that it

complied with its obligations under the contract.

After careful consideration of this issue, we are of the

opinion that a reasonable jury could find (and in this case,

did find) that a defendant who violated applicable laws

nonetheless used its best efforts to fulfill its obligations

under the contract, and thus find that no breach occurred.”

Accordingly, we hold that the trial judge did-not err by not

instructing the jury to find that Rockwell breached its

contract with the DOE.

VIII

In sum, we are persuaded that the rulings of the district

court should be a-firmed on all issues except the issue of

pre-filing disclosure discussed in Part II E. As to that issue

only, the cause is remanded to the district court for the

limited purpose of determining whether Mr. Stone satisfied

the pre-filing disclosure prong of the “original source” test

in compliance with the statute which requires the qui tam

relator to have voluntarily provided the information before

filing suit. See United States ex rel. King v. Hillcrest Health

Center, 264 F.3d 1271, 1280 (10th Cir.2001).

As the Supreme Court made clear in Vermont Agency of

Natural Resources v. United States ex rel. Stevens, 529 U.S.

765, 120 S.Ct. 1858, 146 L.Ed.2d 836 (2000), qui tam relators

do not lack Article III standing. The FCA’s qui tam

provisions do not violate Article Il’s Appointments Clause,

nor its Take Care Clause, at least where the Government

intervenes. The court did not abuse its discretion in denying

the Plaintiffs’ motion for a new trial for damages. Nor did it

abuse its discretion in providing that the Government’s

dismissal of its common law fraud claim must be with

prejudice. Finally, the court did not err in its jury

instructions concerning either the knowledge of DOE

Of course, a jury could also find that the defendant did not use its best

efforts, and thus that it breached its contract.

44a

officials or whether the contract obligated Rockwell only to

use its “best efforts.”

Accordingly, we affirm in part and remand for the

limited purposes we note. This court will retain

jurisdiction of these appeals pending the district court’s

proceedings and further ruling on the pre-filing disclosure

requirement, following which a supplemental record shall be

certified to this court for final disposition.

If the trial judge finds there was no proper pre-litigation

disclosure to the Government by Stone, the judgment for

the Government will be modified

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