United States v. Record Press, Inc. , 816 F.3d 878 ( 2016 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 26, 2015 Decided March 15, 2016
No. 14-7077
UNITED STATES OF AMERICA, EX REL. BRIAN BURKE,
AND
BRIAN BURKE, RELATOR,
APPELLANT
v.
RECORD PRESS, INC.,
APPELLEE
Consolidated with 14-7078
Appeals from the United States District Court
for the District of Columbia
(No. 1:08-cv-00364)
Tyler Jay King argued the cause and filed the briefs for
appellant.
John W. Lomas Jr. argued the cause for appellee. With
him on the briefs was William T. O’Brien.
Before: SRINIVASAN, Circuit Judge, and WILLIAMS and
GINSBURG, Senior Circuit Judges.
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Opinion for the Court filed by Circuit Judge SRINIVASAN.
SRINIVASAN, Circuit Judge: Under the False Claims Act,
31 U.S.C. §§ 3729-3733, a private person can bring an action
on behalf of the government (and herself) alleging that a third
party submitted a false or fraudulent claim for payment to the
government. See generally Vt. Agency of Nat. Res. v. United
States ex rel. Stevens, 529 U.S. 765 (2000). The plaintiff is
known as a “relator,” and her action is called a “qui tam”
action. If the action succeeds, the relator can share in the
government’s recovery. 31 U.S.C. § 3730(d).
In this case, Brian Burke, the relator, brought a qui tam
action contending that a company named Record Press had
submitted a fraudulent bill for printing services to the
government. The district court granted judgment in favor of
Record Press, concluding that there was no evidence that the
company had submitted any false claims with knowledge it
was doing so, as would be required for liability under the
False Claims Act. We agree with the district court and affirm
its entry of judgment for Record Press. We remand, however,
for further proceedings on Record Press’s motion for
attorneys’ fees because the district court did not make the
findings necessary to enable us to review its grounds for
denying a fee award.
I.
In February 2008, Burke filed this qui tam action on
behalf of himself and the United States against Record Press,
a company that prints appellate briefs for the government
under a contract with the Government Printing Office (GPO).
Burke claims that Record Press violated the False Claims Act
by submitting false claims for printing services to the GPO.
The case arose after Burke lost an unrelated lawsuit against
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the government. The government served Burke with a bill of
costs for its appellate briefing, which had been printed by
Record Press. Burke then filed the instant qui tam action
alleging that Record Press had overcharged the government
for the cost of preparing the briefing.
The dispute revolved around the interpretation of a
particular line item in a longstanding contract between Record
Press and the GPO. Burke understood the contract to
contemplate a lower cost for printing services than had been
charged by Record Press to the government, and Burke
alleged that Record Press violated the False Claims Act by
“knowingly” presenting a false claim to the government. 31
U.S.C. § 3729. Neither of the two parties to the contract
(Record Press and the GPO), however, has agreed with
Burke’s understanding of their contract. Instead, they agree
that the rate charged by Record Press accurately reflected the
contract price. Accordingly, the government declined to
exercise its option under the False Claims Act to intervene in
this case. See 31 U.S.C. § 3730(b)(2).
Record Press filed a motion for summary judgment and a
motion seeking sanctions against Burke for bringing a
frivolous action. On June 24, 2009, the district court denied
both motions without prejudice. The parties ultimately agreed
to a bench trial, held on February 14, 2011. On June 12,
2013, the district court entered judgment against Burke,
concluding he failed to offer any evidence Record Press had
knowingly submitted false claims to the government. Record
Press subsequently filed a motion for attorneys’ fees, which
the district court denied. Burke now appeals the entry of
judgment against him, and Record Press cross-appeals the
denial of its motion for attorneys’ fees.
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II.
Burke argues that the district court erred in granting
judgment in favor of Record Press. We review the district
court’s legal conclusions de novo and its factual findings for
clear error. See Armstrong v. Geithner, 608 F.3d 854, 857
(D.C. Cir. 2010) (citing Massachusetts v. Microsoft Corp.,
373 F.3d 1199, 1207 (D.C. Cir. 2004)). We find no error
here.
In his complaint, Burke alleged that Record Press
violated the False Claims Act when it “knowingly presented
. . . to . . . the United States Government false or fraudulent
claims” and “knowingly made, used, or caused to be made or
used false or fraudulent records or statements” in order to
receive payment. Complaint ¶¶ 26, 28 (J.A. 6). To prove his
claims, Burke needed to show that Record Press acted
“knowingly” by either (i) having “actual knowledge of the
information,” (ii) acting “in deliberate ignorance of the truth
or falsity of the information,” or (iii) acting “in reckless
disregard of the truth or falsity of the information.” 31 U.S.C.
§ 3729(b); see United States ex rel. K & R Ltd. P’ship v.
Mass. Hous. Fin. Agency, 530 F.3d 980, 983 (D.C. Cir. 2008).
The district court found that Burke failed to show Record
Press had the requisite state of mind. Burke presents no basis
for overturning that finding, or any other ground for setting
aside the judgment against him.
Burke argues that the district court, when analyzing the
contract between Record Press and the GPO, erroneously
considered extrinsic evidence, in violation of basic principles
of contract interpretation. That argument does not get Burke
very far. This is a False Claims Act case, not a contract case.
And when resolving an action under the False Claims Act,
including one implicating a contract, the court does not
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merely interpret a contract. Rather, it examines whether a
party submitted a false claim.
Here, the district court considered testimony and
evidence indicating that the government agreed with Record
Press about the disputed contract rate. That was entirely
appropriate because the parties’ understanding of their
contract had obvious bearing on Record Press’s relevant state
of mind—viz., whether it knowingly submitted a false claim.
Cf. United States ex rel. Davis v. District of Columbia, 793
F.3d 120, 126 (D.C. Cir. 2015); United States ex rel. Bettis v.
Odebrecht Contractors of Calif., Inc., 393 F.3d 1321, 1329-30
(D.C. Cir. 2005).
Burke next challenges the district court’s reliance on the
GPO’s understanding of the contract as a misapplication of
the “government knowledge defense,” Appellant’s Br. 16,
under which governmental knowledge of the fraudulent
nature of a claim would be a defense to a False Claims Act
action, see United States ex rel. Totten v. Bombardier Corp.,
380 F.3d 488, 496 (D.C. Cir. 2004) (citing United States ex
rel. Durcholz v. FKW Inc., 189 F.3d 542, 545 (7th Cir.
1999)). This case, however, presents no occasion for
examining the government knowledge defense. Here, the
district court did not consider the government’s understanding
of the contract as part of any defense. Rather, it relied on the
government’s agreement with Record Press about the proper
understanding of the contract as evidence that there had been
no fraudulent behavior in the first place. And “the knowledge
possessed by officials of the United States may be highly
relevant” under the False Claims Act because it “may show
that the defendant did not submit its claim in deliberate
ignorance or reckless disregard of the truth.” United States ex
rel. Hagood v. Sonoma Cty. Water Agency, 929 F.2d 1416,
1421 (9th Cir. 1991).
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In short, it was fully appropriate for the district court to
consider the understanding of the parties to the contract when
assessing whether Record Press had knowingly presented
false claims to the government. See, e.g., K & R Ltd. P’ship,
530 F.3d at 984. We have also considered Burke’s various
additional arguments, none of which affords any ground for
overturning the district court’s entry of judgment against him.
III.
Record Press sought an award of attorneys’ fees under
the False Claims Act’s fee-shifting provision, 31 U.S.C. §
3730(d)(4), and also as sanctions under 28 U.S.C. § 1927.
We review the district court’s denial of fees for abuse of
discretion. See, e.g., Conservation Force v. Salazar, 699 F.3d
538, 542 (D.C. Cir. 2012); FDIC v. Bender, 182 F.3d 1, 7
(D.C. Cir. 1999).
The False Claims Act provides for a defendant’s recovery
of reasonable attorneys’ fees if the relator’s claim is “clearly
frivolous, clearly vexatious, or brought primarily for purposes
of harassment.” 31 U.S.C. § 3730(d)(4). Under Federal Rule
of Civil Procedure 54(d)(2)(C), a district court must “find the
facts and state its conclusions of law as provided in Rule
52(a)” when deciding a motion for attorneys’ fees. Here, the
district court denied Record Press’s motion for attorneys’ fees
solely on the ground that the motion marked a “new course of
litigation regarding issues wholly collateral to the qui tam
action.” J.A. 1099. But the False Claims Act itself allows for
an award of attorneys’ fees in the context of a qui tam action,
and there is thus no basis for denying fees purely on the
ground that the propriety of a fee award ostensibly reaches a
“collateral” question. Because the district court made no
relevant findings or conclusions under Rule 52(a) concerning
its rejection of a fee award under the False Claims Act’s fee-
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shifting provision, we vacate the denial of fees and remand
for the court to make the relevant findings and conclusions.
Record Press also moved for attorneys’ fees under 28
U.S.C. § 1927, which allows for the imposition of personal
liability against an attorney who “multiplies the proceedings
in any case unreasonably and vexatiously.” That provision is
unconstrained by the procedural requirements of Rule 54(d).
But when a party raises “a legitimate question” as to whether
the opposing attorney’s conduct meets the standard for an
award of fees under § 1927, a remand is appropriate if, as
here, the district court has offered no reasons for its decision
to deny sanctions. Cf. Bender, 182 F.3d at 7. Given that there
appears to be a genuine question whether the conduct of
Burke and his counsel warrants the grant of fees, see, e.g.,
United States ex rel. J. Cooper & Assocs., Inc. v. Bernard
Hodes Grp., Inc., 422 F. Supp. 2d 225, 238-39 (D.D.C. 2006),
a full explication of the basis for denying a fee award is
particularly important. Cf. Bender, 182 F.3d at 7.
Record Press urges this court directly to award it
attorneys’ fees. But because this court’s “inspection of the
cold record cannot substitute for [the district court’s] first-
hand scrutiny,” we decline to do so. Copeland v. Marshall,
641 F.2d 880, 901 (D.C. Cir. 1980). We see no reason to
disregard the general understanding that, with regard to
attorneys’ fees, a district court “‘has far better means of
knowing what is just and reasonable than an appellate court
can have.’” Id. (quoting Trustees v. Greenough, 105 U.S.
527, 537 (1882)). As a result, as with the question of fees
under the False Claims Act’s fee-shifting provision, we vacate
the denial of a fee award under § 1927 and remand to enable
the district court to explain its reasoning. See, e.g., Moore v.
CapitalCare, Inc., 461 F.3d 1, 14 (D.C. Cir. 2006); Copeland,
641 F.2d at 901 n.39.
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* * * * *
We affirm the district court’s judgment in favor of
Record Press and remand for further proceedings on Record
Press’s motion for attorneys’ fees.
So ordered.