Carl Schroeder v. United States , 793 F.3d 1080 ( 2015 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
CARL SCHROEDER, United States No. 13-35479
of America, ex. rel.,
Plaintiff-Appellant, D.C. No.
2:09-cv-05038-LRS
v.
UNITED STATES OF AMERICA, OPINION
Intervenor Plaintiff-Appellee,
v.
CH2M HILL; WASHINGTON RIVER
PROTECTION SOLUTION LLC,
Defendants.
Appeal from the United States District Court
for the Eastern District of Washington
Lonny R. Suko, Senior District Judge, Presiding
Argued and Submitted
April 10, 2015—Seattle, Washington
Filed July 16, 2015
Before: Michael Daly Hawkins, Johnnie B. Rawlinson,
and Consuelo M. Callahan, Circuit Judges.
Opinion by Judge Hawkins
2 SCHROEDER V. UNITED STATES
SUMMARY*
False Claims Act
The panel affirmed the district court’s dismissal of Carl
Schroeder as qui tam relator in a qui tam suit concerning the
billing practices of a government contractor.
In an issue of first impression, the panel held that
31 U.S.C. § 3730(d)(3) of the False Claims Act requires the
dismissal of a qui tam relator convicted of the conduct giving
rise to the fraud, even if the relator only played a minor role.
COUNSEL
Jackson Schmidt (argued), Pepple Cantu Schmidt PLLC,
Seattle, Washington, for Plaintiff-Appellant.
Michael C. Ormsby, United States Attorney, Stuart F. Delery,
Assistant Attorney General, Michael S. Rabb and Robert D.
Kamenshine (argued), Attorneys, Appellate Staff, Civil
Division, Department of Justice, Washington, D.C., for
Intervenor Plaintiff-Appellee.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
SCHROEDER V. UNITED STATES 3
OPINION
HAWKINS, Circuit Judge:
Carl Schroeder (“Schroeder”) appeals his dismissal from
a qui tam suit concerning the billing practices of government
contractor CH2M Hill. The appeal turns on an issue of first
impression: Does 31 U.S.C. § 3730(d)(3) of the False Claims
Act (“FCA”) require the dismissal of a qui tam relator
convicted of the conduct giving rise to the fraud, even if he or
she only played a minor role? We hold that the statute does
require such a relator to be dismissed and affirm the district
court.
FACTUAL AND PROCEDURAL BACKGROUND
Schroeder worked for CH2M Hill, a contractor for the
U.S. Department of Energy (“DOE”) as a Radiological
Control Technician from January 2002 to February 2003 and
then again from May 2004 to October 2008. During this
time, CH2M Hill engaged in widespread fraudulent billing of
hourly work.
Schroeder, like many of his colleagues, submitted false
time cards, and, as a result, received at least $50,000 for
falsely claimed overtime hours. In April 2008, the DOE
Office of Inspector General (“OIG”) learned of the time card
fraud from an anonymous source and began investigating.
OIG investigators interviewed Schroeder’s colleagues in
November 2008. Several of them were escorted off-site, and
supervisors informed employees that the employees were
under investigation. Schroeder admitted to over-billing
during his December 2008 interview with OIG.
4 SCHROEDER V. UNITED STATES
Schroeder contends that he voluntarily approached OIG
and did not know he was being investigated at the time.
These allegations are not supported by the record, particularly
the declaration of the investigation’s case agent, and were
rejected by the district court, which found that “[t]he record
indicates Mr. Schroeder did not approach investigators on his
own initiative.”
As a result of the investigation, the government filed an
information against Schroeder in September 2011, and he
pled guilty to one felony count of conspiracy to commit
fraud. The terms of the plea included a pledge to provide
substantial assistance to the government, two years of
supervised release, and a fine of $50,000.
In June 2009, after the initial interviews but prior to the
filing of charges, Schroeder filed a complaint against CH2M
Hill. Schroeder’s qui tam suit proceeded contemporaneously
with the government’s investigation.1 The United States
intervened in August 2012, and shortly thereafter moved to
dismiss Schroeder as a relator based on his felony conviction.
The district court concluded that the statute is
unambiguous and “requires dismissal from the action of a
person who has been convicted of criminal conduct arising
1
“Under 31 U.S.C. § 3730, a ‘qui tam plaintiff,’ also known as a
‘relator,’ may bring a civil action for a violation of the FCA for herself
and for the United States government, in the name of the government.”
United States v. Johnson Controls, Inc., 457 F.3d 1009, 1011 n.2 (9th Cir.
2006). Depending on the relator’s contribution to the prosecution of the
action and whether the government intervenes, a relator may receive up
to thirty percent of the proceeds of the action or resulting settlement. See
31 U.S.C. §§ 3730(d)(1)–(2).
SCHROEDER V. UNITED STATES 5
from his role” in the fraud that is the basis of his qui tam
action. Schroeder timely appealed.
JURISDICTION AND STANDARD OF REVIEW
Because the district court’s dismissal was a final decision
disposing of all claims, we have jurisdiction under 28 U.S.C.
§ 1291(a). The sole issue involves the district court’s
interpretation of federal law, which is reviewed de novo.
Ileto v. Glock, Inc., 565 F.3d 1126, 1131 (9th Cir. 2009).
ANALYSIS
Section 3730(d)(3) of Title 31 of the United States Code
provides, in full:
Whether or not the Government proceeds with
the action, if the court finds that the action
was brought by a person who planned and
initiated the violation of section 3729 upon
which the action was brought, then the court
may, to the extent the court considers
appropriate, reduce the share of the proceeds
of the action which the person would
otherwise receive under paragraph (1) or (2)
of this subsection, taking into account the role
of that person in advancing the case to
litigation and any relevant circumstances
pertaining to the violation. If the person
bringing the action is convicted of criminal
conduct arising from his or her role in the
violation of section 3729, that person shall be
dismissed from the civil action and shall not
receive any share of the proceeds of the
6 SCHROEDER V. UNITED STATES
action. Such dismissal shall not prejudice the
right of the United States to continue the
action, represented by the Department of
Justice.
31 U.S.C. § 3730(d)(3) (emphasis added).
The only dispute is whether the second sentence in this
subsection requires the dismissal of all relators convicted of
criminal conduct arising from the fraudulent conduct at issue
in the qui tam suit, particularly minor participants who
neither planned nor initiated the fraudulent scheme. The
parties do not dispute the ordinary meaning of these words,
and several courts have concluded that the provision is
mandatory. See Roberts v. Accenture, LLP, 707 F.3d 1011,
1016 (8th Cir. 2013); U.S. ex rel. Taxpayers Against Fraud v.
Gen. Elec. Co., 41 F.3d 1032, 1035 (6th Cir. 1994); U.S. ex
rel. Green v. Serv. Contract Educ. & Training Trust Fund,
843 F. Supp. 2d 20, 28 n.6 (D.D.C. 2012).
It is well established that the “starting point in discerning
congressional intent is the existing statutory text” and that
“when the statute’s language is plain, the sole function of the
courts—at least where the disposition required by the text is
not absurd—is to enforce it according to its terms.” Lamie v.
U.S. Tr., 540 U.S. 526, 534 (2004) (citations and internal
quotation marks omitted); see also McDonald v. Checks-N-
Advance, Inc. (In re Ferrell), 539 F.3d 1186, 1190 n.10 (9th
Cir. 2008) (“If the statutory language is unambiguous and the
statutory scheme is ‘coherent and consistent,’ ‘[o]ur inquiry
must cease.’” (quoting Robinson v. Shell Oil, 519 U.S. 337,
340 (1997))).
SCHROEDER V. UNITED STATES 7
Despite this plain language, our inquiry does not cease
here, because Schroeder argues that requiring the dismissal of
convicted relators who played a minor role in a fraud would
make the statutory scheme logically inconsistent and produce
an absurd result. We disagree with both components of the
argument. Applying the statute to minor participants in a
fraud does not produce an absurd or unreasonable result. The
provision states that “[i]f the person bringing the action is
convicted of criminal conduct arising from his or her role in
the violation of section 3729, that person shall be dismissed
from the civil action and shall not receive any share of the
proceeds of the action.” 31 U.S.C. § 3730(d)(3). It does not
contain an exception for minor participants, and the statute
does not indicate that it does not apply to relators like
Schroeder.
Schroeder contends that when this provision is read in
conjunction with the preceding clause, the statute produces
the absurd and logically inconsistent result of allowing the
most culpable fraud participants (planners and initiators) to
collect a reduced share of an award but bars less culpable
fraud participants (minor participants convicted of the
offense) from recovery altogether. While the two clauses
might not perfectly harmonize relator eligibility and awards
with culpability, no authority suggests that the provision
should be construed according to that criteria. As such, the
argument urges us to untenably assume the role of a
“‘superlegislature’ second-guessing the policy choices of the
other branches of government.” Christian Sci. Reading Room
Jointly Maintained v. City & Cnty. of S.F., 807 F.2d 1466,
1467 (9th Cir. 1986) (Norris, J., dissenting).
Furthermore, the relator award hierarchy chosen by
Congress may satisfy other values, such as the deterrent effect
8 SCHROEDER V. UNITED STATES
of preventing criminally culpable individuals from gaining
from their conduct, and the investigatory benefits of actions
brought by planners and initiators who often have greater
knowledge about co-conspirators and the scope of a
fraudulent scheme. Lastly, the dichotomy drawn by
Schroeder is a false one, as the statute also requires courts to
dismiss planners and initiators convicted of fraud.
Schroeder’s next argument, that applying § 3730(d) to
minor fraud participants undermines the FCA’s purpose of
encouraging qui tam plaintiffs to help uncover fraud, is
unpersuasive for at least two reasons. First, we may not even
need to consider the statute’s purpose because “[t]here is no
need to look beyond the plain meaning in order to derive the
purpose of the statute . . . [a]t least there is no need to do so
when the result is not absurd.” Tang v. Reno, 77 F.3d 1194,
1196–97 (9th Cir. 1996) (citations and internal quotation
marks omitted). Second, regardless, analyzing the statute’s
purpose only verifies that we should not deviate from the
plain meaning.
The text of the statute leaves little doubt that the sole
purpose of the 1988 amendment that codified § 3730(d)(3)
was to restrict eligibility and reduce rewards for certain
relators. The only two elements of the amendment reduce
awards for relators who “planned and initiated” the fraud and
require dismissal of relators “convicted of criminal conduct”
arising from the violation. Schroeder’s dismissal fulfills one
of the two elements and is consistent with the statute’s
purpose.
While the purpose of the Act, as amended in 1986, was to
strengthen the federal government’s ability to “recover losses
sustained as a result of fraud” in large part by encouraging
SCHROEDER V. UNITED STATES 9
qui tam suits, S. Rep. No. 99-345, at 1–2 (1986), a broad
congressional purpose is of limited value when the meaning
is plain and the general purpose is inconsistent with the
purpose of the particular provision.2 Further, enacting a
modest amendment restricting relator eligibility merely two
years after embracing qui tam suits is consistent with
Congress’s attempt to find a balance between “deterring
parasitic claims [and] fostering productive suits.” See
Christopher M. Alexion, Open the Door, Not the Floodgates:
Controlling Qui Tam Litigation Under the False Claims Act,
69 Wash. & Lee L. Rev. 365, 378, 403 (2012); see also U.S.
ex rel. Findley v. FPC-Boron Emps.’ Club, 105 F.3d 675, 680
(D.C. Cir. 1997), abrogated on other grounds by Rockwell
Int’l Corp. v. United States, 549 U.S. 457 (2007) (Act
ricocheted between “extreme permissiveness” and “extreme
restrictiveness”).
2
A colorable policy argument cautions that applying the statute to minor
participants convicted of fraud will alter the mix of incentives that
encourage qui tam plaintiffs to file suit. We are not insensitive to the
surge in recoveries of misused public funds that has flowed from the 1986
legislation. See Press Release, Department of Justice, Justice Department
Recovers Nearly $6 Billion from False Claims Act Cases in Fiscal Year
2014 (Nov. 20, 2014), http://www.justice.gov/opa/pr/justice-department-
recovers-nearly-6-billion-false-claims-act-cases-fiscal-year-2014 (last
visited Apr. 29, 2015). Nor do we ignore the original Act’s sponsor that
“setting a rogue to catch a rogue . . . is the safest and most expeditious
way I have ever discovered of bringing rogues to justice,” Cong. Globe,
37th Cong., 3d Sess. 955–56 (1863) (statement of Sen. Howard), or the
commonsense notion that bounty programs may depend in part on the
participation of co-conspirators or minor fraud participants. Yet, our duty
is to ascertain the intent of the legislature, and not to legislate, which is
what the policy argument asks of us. Congress could have allowed minor
participants convicted of fraud to be qui tam plaintiffs, but the statute does
not allow us to create such an exception.
10 SCHROEDER V. UNITED STATES
The last argument for an alternative interpretation of the
statute is one that Schroeder did not present, yet could
constitute the most persuasive evidence in support of a
second interpretation of the statute. See Chickasaw Nation v.
United States, 534 U.S. 84, 90 (2001). Close scrutiny of the
provision’s grammar and structure might indicate that the
“criminal conduct” clause is modified by, or operates in
concert with, the “plan/initiate” clause, such that a court may
reduce a planner’s award and shall dismiss a planner
convicted of criminal conduct. This interpretation would not
result in surplusage and would give effect to each part of the
statute. Two related points suggest that Congress might have
intended the first clause to modify the second.
First, the two clauses rest within a single subparagraph of
text, indicating that Congress might have meant for them to
function together. See generally Grogan v. Garner, 498 U.S.
279, 287–88 (1991). Second, more importantly, the two
clauses describe relators using different articles. In Gale v.
First Franklin Loan Services, 701 F.3d 1240, 1246 (9th Cir.
2012), we determined that the use of a definite article
preceded by an indefinite article can be persuasive evidence
that Congress intended to link two clauses. There, in a
closely analogous interpretive scenario, our scrutiny of two
separate clauses within a single subsection, the first preceded
by an indefinite article and the second by a definite article (“a
servicer” and “the servicer”), yielded an interpretation that
“[t]he use of the definite article in referring to the servicer
only makes sense by reference to the preceding sentence.”
Gale, 701 F.3d at 1246.
Similarly, the first clause of § 3730(d)(3) states that a
court may reduce the share of a suit “brought by a person
who planned and initiated the violation” and the following
SCHROEDER V. UNITED STATES 11
clause that “[i]f the person bringing the action” is convicted,
the court shall dismiss him. 31 U.S.C. § 3730(d)(3)
(emphasis added). As in Gale, the use of a definite article in
the second clause could indicate that it refers to the “person”
described in the first clause. Otherwise, the statute would
have provided that “if a person” or “if any person” bringing
the action is convicted, the court shall dismiss him. See
generally Work v. U.S. ex rel. McAlester-Edwards Coal Co.,
262 U.S. 200, 208 (1923); Am. Bus Ass’n v. Slater, 231 F.3d
1, 4–5 (D.C. Cir. 2000).
The structure and grammar of the text, in light of our
decision in Gale, narrowly permits a second plausible
interpretation, see Robinson, 519 U.S. at 341 (“The plainness
or ambiguity of statutory language is determined by reference
to the language itself, the specific context in which that
language is used, and the broader context of the statute as a
whole.”), which complements Schroeder’s arguments that
Congress did not intend for courts to dismiss all minor fraud
participants as relators. Yet, the more persuasive reading of
the statute, given its plain language, logical harmony, and
consistency with the purpose of the 1988 amendment, is that
“Congress said what it meant and meant when it said.”
United States v. Steele, 147 F.3d 1316, 1318 (11th Cir. 1998)
(citing Conn. Nat’l Bank v. Germain, 503 U.S. 249, 253–54
(1992). Thus, we need not reach the legislative history of
§ 3730(d)(3). However, even if we look to the legislative
history, Schroeder’s argument is not persuasive.
When a statute is susceptible to two or more meanings,
we may consider legislative history. See, e.g., N. Cal. River
Watch v. Wilcox, 633 F.3d 766, 773 (9th Cir. 2011) (“If the
proper interpretation is not clear from this textual analysis,
the legislative history offers valuable guidance and insight
12 SCHROEDER V. UNITED STATES
into Congressional intent.”) (citation and internal quotation
marks omitted). But, “the plainer the language, the more
convincing contrary legislative history must be.” Church of
Scientology of Cal. v. U.S. Dep’t of Justice, 612 F.2d 417,
422 (9th Cir. 1979). In this case, the legislative history of
§ 3730(d)(3) does not provide useful guidance as to
congressional intent, nor does it constitute “convincing”
evidence that overcomes the statute’s plain language.
The legislative history provides some support for
Schroeder’s position. The two Senators that discussed the
provision indicated that it only applies in narrow
circumstances and does not cover minor participants.3 See
134 Cong. Rec. S16697-01 (Sen. DeConcini) (“I am
confident that the vast majority of private plaintiffs in false
claims actions will not be affected by this amendment
because they are not the driving force behind the false claims
activities disclosed in their lawsuits.”); id. (Sen. Grassley)
(“This amendment is intended to apply narrowly to principal
wrongdoers, such as those convicted of criminal misconduct,
and not to those qui tam plaintiffs who may have had some
more minor role in the false claims conduct.”).
Yet, the legislative history does not constitute convincing
evidence that Congress meant to exclude convicted minor
fraud participants because both Senators suggested that the
two clauses operate independently. Neither expressed that
3
The legislative history is limited, consisting in its entirety of four floor
statements. The clause is not mentioned in any committee report,
conference report, or committee hearing. See, e.g., S. Rep. No. 100-503
(1988); H.R. Rep. No. 100-610 (1988). The two House Members that
discussed the amendment did not address the criminal conviction clause.
See 134 Cong. Rec. H10637-41 (Rep. Hughes); 134 Cong. Rec.
H10637-02 (Rep. Berman).
SCHROEDER V. UNITED STATES 13
minor fraud participants are not covered by the criminal
conduct provision or that the first clause modifies the second.
In addition, contrary to the strongest textual support for an
interpretation deviating from the plain meaning, both
Senators describe the “criminal conduct” clause with an
indefinite article and as applying in “any case.” Senator
DeConcini stated:
The amendment offered today provides that in
an extreme case where the private plaintiff
was a principal architect of a scheme to
defraud the Government, that plaintiff would
not be entitled to any minimum guaranteed
share of the proceeds of the action. Also, in
any case where a private plaintiff is convicted
of criminal misconduct for his or her role in
the false claims practice, the private plaintiff
will be dismissed from the action and not
entitled to any recovery.
Id. Similarly, Senator Grassley stated:
My amendment simply clarifies that in an
extreme case where the qui tam plaintiff was
a principal architect of a scheme to defraud
the Government, that plaintiff would not be
entitled to any minimum guaranteed share of
the proceeds of the action. And in any case
where a qui tam plaintiff is convicted of
criminal misconduct for his or her role in the
false claims practice, the qui tam plaintiff
14 SCHROEDER V. UNITED STATES
must be dismissed from the action and is
entitled to zero recovery.
Id.
Thus, while the legislative history provides some support
for the notion that the sponsors did not intend for the
provision to require the dismissal of minor fraud participants,
it is not convincing enough to warrant departing from the
plain meaning. The legislative history’s inconsistency limits
its value. It provides that “in any case where a qui tam
plaintiff is convicted . . . [he] must be dismissed,” but that the
amendment is not intended to apply to “those qui tam
plaintiffs who may have had some more minor role in the
false claims conduct.” 134 Cong. Rec. S16697-01. This
evidence does not warrant a departure from the plain
meaning. See Chamber of Commerce of U.S. v. Whiting,
131 S. Ct. 1968, 1980 (2011) (Roberts, C.J.) (“Congress’s
‘authoritative statement is the statutory text, not the
legislative history.’” (quoting Exxon Mobil Corp. v.
Allapattah Servs., Inc., 545 U.S. 546, 568 (2005))).
CONCLUSION
We affirm the district court’s dismissal of Schroeder as a
qui tam relator. The grammar and structure of the provision
narrowly supports a second plausible interpretation.
However, the text does not include an exception for minor
fraud participants, and our interpretation is consistent with the
particular purpose of the 1988 amendment. The legislative
history is too inconclusive to warrant departing from the plain
meaning.
AFFIRMED.