Case Information
*2 Bеfore WOLLMAN and MURPHY, Circuit Judges, and DOTY, District Judge. [1]
___________
WOLLMAN, Circuit Judge.
This is a qui tam action brought on behalf of the United States by relators [2] pursuant to the False Claims Act (FCA), 31 U.S.C. §§ 3729-3733 (1983 & Supp. 1998). The complaint alleges that URS Consultants, Inc., Morrison Knudsen Corporation, and Vertac Site Contractors engaged in a pattern of knowingly submitting false claims for payment of funds under their contracts to perform hazardous waste treatment and disposal services at the Vertac Chemical Plant site in Jacksonville, Arkansas. The United States has declined to intervene. Defendants appeal from an order by the district court denying their motions to dismiss. We affirm in part, reverse in part, and remand.
I.
From 1948 to 1987, the Vertac site was home to various chemical, herbicide, and pesticide production facilities. Throughout the years, chemical waste from such [3]
*3 activity was deposited in landfills and stored in drums or barrels above ground with little or no attention to human health or environmental consequences. As a result, the site became extremely contaminated with dioxin and other highly toxic chemicals. The United States Environmental Protection Agency (EPA) has placed the site on the Superfund National Priorities List.
A.
In 1979, after the Centers for Disease Control concluded that the Vertac site
constituted a significant risk to public health, Vertac Chemical and its predecessor,
Hercules, entered into a compact with the EPA and the Arkansas Department of
Pollution Control and Ecology (the state) to take certain remedial and preventative
measures. Although Vertac Chemical substantially complied with these measures,
dioxin levels continued to rise in the environment surrounding the site, particularly in
the Rocky Branch and Bayou Meto tributaries. In 1980, a federal district court issued
a preliminary injunction ordering the company to undertake further remedial actions to
arrest leakage of toxic chemicals from its disposal sites. See United States v. Vertac
Chem. Corp.,
munitions factory. In 1948, a corporation named Reasor-Hill purchased the site and converted it to pesticide and herbicide production. In 1961, the site was purchased by Hercules, Inc., which continued production of various chemical products, including large quantities of Agent Orange, a herbicide used by the government to clear jungle undergrowth during the Vietnam war. In 1976, Hercules sold the facility to Vertac Chemical Corp. (formally known as “Transvaal, Inc.”).
Substantial cleanup began in 1987, following Vertac Chemical’s abandonment
of the site. After learning that approximately 28,000 corroding and leaking drums of
toxic waste had been left on the premises, the EPA initiated an emergency removal
action pursuant to section 9604 of the Comprehensive Environmental Response,
Compensation, and Liability Act (CERCLA), 42 U.S.C. §§ 9601-9675 (1995 & Supp.
1998). The state then negotiated a contract for on-site incineration of the waste with
MRK Incineration, Inc., which subsequently assigned the contract to Vertac Site
Contractors, a joint venture composed of MRK and MK Environmental Services, a
division of Morrison Knudsen Corp. The state facilitated payment for the project from
a trust fund that had been created as a result of negotiations involving the EPA, the
state, and Vertac Chemical. See Arkansas Peace Ctr. v. Arkansas Dep’t of Pollution
Control & Ecology,
Pursuant to the agreement, the state imposed various conditions regarding the operation of the incinerator constructed by the contractors, but certified that the contractors had demonstrated the ability to satisfy state and federal regulations. In 1991, the district court approved and entered an additional consent decree. See id. at 1219. The EPA remаined involved in the cleanup by monitoring air quality, handling and transporting the drums of waste to be incinerated by the contractors, and disposing of incinerator ash.
In 1992, after it became clear that the trust fund would not be sufficient to complete the cleanup, the EPA assumed primary responsibility for the site and approved a federal removal action using federal funds. See Arkansas Peace III, 999 [4]
F.2d at 1214. When the trust fund was depleted, the state terminated its contract with Vertac Site Contractors. Soon after, the EPA assigned general oversight authority of [5]
the site to URS Consultants, Inc. URS then entered into a contract with Vertac Site
Contractors to continue incineration activities. In 1995, the EPA transported the
remaining drums of toxic waste to a site in Kansas for incineration. Although
incineration at the Vertac site has thus ended, cleanup activities are ongoing, including
remediation of the groundwater and soil. Litigation over costs of the cleanup has
continued as well. See United States v. Vertac Chem. Corp.,
B. Throughout the years, outside parties have attempted to intervene in the Vertac site cleanup. In 1992, several environmental groups, including two of the current [6]
*6
relators, filed suit in district court alleging violation of state and federal regulations and
seeking to enjoin incineration at the site. Ultimately, the district court issued a
preliminary injunction. See Arkansas Peace Ctr. v. Arkansas Dep’t of Pollution
Control & Ecology,
We stayed the preliminary injunction pending appeal. See Arkansas Peace Ctr.
v. Arkansas Dep’t of Pollution Control,
Relators filed the current action under the FCA, alleging eight counts of knowing
submission of false claims for payment. The district court denied defendants’ motions
to dismiss on various grounds. On appeal, defendants contend that: (1) the claims are
barred under principles of res judicata; (2) the сlaims are barred by section 113(h) of
CERCLA; (3) the claims are barred by section 3730(e)(3) of the FCA; and (4) to the
extent that defendants’ alleged false claims for payment were not claims made against
the United States, they are not properly the subject of a FCA suit. Our review is de
novo. See Phillips v. Ford Motor Co.,
II.
Defendants first contend that the claims in the complaint are barred under
principles of res judicata and should therefore have been dismissed for lack of subject
matter jurisdiction under Rule 12(b)(1) of the Federal Rules of Civil Procedure. Under
the doctrine of res judicata, also known as claim preclusion, “a final judgment on the
merits bars further claims by parties or their privies based on the same cause of action.”
United States v. Gurley, 43 F.3d 1188, 1195 (8th Cir. 1994) (quoting Montana v.
United States,
should preclude relitigation of the same [jurisdiction] issue but not a second suit on the same claim even if arising out of the identical set of facts. . . . [W]here the second suit presents new theories of relief, admittedly based upon the same operative facts as alleged in the first action, it is not precluded because the first decision was not on the merits of the substantive claim.
Kulinski,
Regarding the “same claims or causes of action” element of claim preclusion, we
have stated that whether a second lawsuit is precluded turns on whether its claims arise
out of the “same nucleus of operative facts as the prior claim.” Gurley,
The Arkansas Peace litigation was an effort to prevent perceived harm to the environment and public health by seeking enforcement of state and federal environmental regulations and an injunction against waste incineration activity at the Vertac site. In this case, the wrong for which relators seek redress is the alleged submission of false сlaims for the payment of funds, a claim based upon economic injury to the federal government. Although both claims have their genesis in the Vertac site cleanup, they are independent of each other and seek to redress different injuries resulting from distinct conduct. Thus, the FCA allegations are not, as defendants assert, simply a repackaging of prior claims, but constitute a new set of charges arising from a separate “nucleus of operative facts” upon which no final judgment has been previously rendered. Therefore, the claims are not precluded on grounds of res judicata and are sufficient to survive a motion to dismiss on jurisdictional grounds.
III.
Next, the contractors contend that the district court should have dismissed the
complaint as barred under section 113(h) of CERCLA, 42 U.S.C. § 9613(h). That
section provides that “[n]o Federal court shall have jurisdiction under Federal law . . .
to review any challenges to removal or remedial action selected” by the EPA under
*10
sections 9604 or 9606(a) of the Act. 42 U.S.C. § 9613(h); see also Arkansas Peace III,
Section 113(h) рrecludes “any challenges” to CERCLA removal actions -- not
simply those brought under the provisions of CERCLA itself. Arkansas Peace III, 999
F.2d at 1217; see also Clinton County,
*11
The Ninth Circuit has indicated that lawsuits that are “directly related to the goals
of the cleanup itself” constitute challenges to removal actions that are barred by section
9613(h). McClellan,
*12
In Arkansas Peace III, we determined that plaintiffs’ claims, “although couched
in terms of a RCRA violation,” constituted a challenge to the EPA removal action so as
to invoke the section 113(h) bar.
IV.
Under the
qui tam
provisions of the False Claims Act, private persons acting on
behalf of the government may sue those who defraud the government and share in any
proceeds ultimately recovered. “The Act’s jurisdictional scheme is designed to promote
private citizen involvement in exposing fraud against the government, while at the same
time prevent parasitic suits by opportunistic late-comers who add nothing to the
exposure of the fraud.” United States ex rel. Rabushka v. Crane Co.,
property involved qualified for historic site status.
Defendants contend that the present claim is barred by section 3730(e)(3) of the FCA, which provides:
In no event may a person bring an action under subsection (b) which is based upon allegations or transactiоns which are the subject of a civil suit or an administrative civil money penalty proceeding in which the Government is already a party.
31 U.S.C. § 3730(e)(3) (Supp. 1998); see also United States ex rel. Stinson, Lyons,
Gerlin & Bustamante, P.A. v. Prudential Ins. Co.,
Defendants argue that section 3730(e)(3) bars the present suit because it is “based upon allegations or transactions” that were already the subject of previous suits and administrative proceedings in which the government has participated. In essence, they contend that the prior litigation involving challenges to the cleanup activity at the Vertac site -- litigation in which the EPA was a defendant -- invokes the section 3730(e)(3) jurisdictional bar. This argument is without merit.
In Prawer, the First Circuit rejected the argument that a
qui tam
action alleging
fraud on the part of a bank, a law firm, and an FDIC staff attorney would be barred by
the FDIC’s own collection case against the makers of promissory notes involved in a
FDIC-supervised transfer of assets between two banks.
Id. at 328 (footnote omitted).
The present suit is based upon allegations of fraud involving the submission of false claims for payment for environmental remediation work completed at the Vertac site. Such allegations or transactions have never before been the subject of a FCA suit or any other suit or proceeding brought by the government or anyone else. As in Prawer, “because this case is seeking to remedy fraud that the government has not yet attempted to remedy, it is, as a threshold matter, wholly unlike” that which Congress sought to preclude by enacting section 3730(e)(3). Id. The district court therefore properly declined to dismiss the case on this ground.
V.
Last, defendants contend that many of the allegations in relators’ complaint are not properly the subject of a False Claims Act suit, as they do not involve claims made against the United States. Thus, they argue, the district court should have granted their motion to dismiss for failure to state a claim regarding those particular allegations.
Congress enacted the FCA to protect government funds and property from
fraudulent claims. See Rainwater v. United States,
There are at least two sources of funds against which false claims are alleged to
have been made by defendants: (1) the trust fund underwritten by Vertac Chemical; and
(2) the federal Superfund under the supervision of the EPA. Relators contend that
participation by the United States in negotiations that lеd to the stipulation by which
Vertac Chemical “agreed to put up a $6.7 million trust fund, a $4 million letter of credit
for environmental cleanup of the Vertac site, and a $3.15 million disbursement from the
shareholders,” see Vertac IV,
We do not believe that the FCA has as elastic an application as relators suggest.
As defined in the FCA, a “claim”
includes any request or demand, whether under a contract or otherwise, for money or property which is made to a contractor, grantee, or other recipient if the United States Government provides any portion of the money or property which is requested or demanded, or if the Government will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded.
31 U.S.C. § 3729(c) (Supp. 1998). In United States v. McNinch, the Supreme Court
suggested that a “claim” under the FCA is a “demand for money” that induces the
government to disburse funds or “otherwise suffer immediate financial detriment.” 356
U.S. 595, 599 (1958). Subsequently, the Court indicated that the FCA “reaches beyond
‘claims’ which might be legally enforced, to all fraudulent attempts to cause the
Government to pay out sums of money.” United States v. Neifert-White Co., 390 U.S.
228, 233 (1968); see also United States v. Rivera,
None of the money in the private Vertac trust fund, long since depleted, was
provided by the United States Government. No federal funds were ever intermingled
with that fund. The United States had no access to the trust fund, nor did it have any
control over its disbursement, which was overseen by the State of Arkansas. Moreover,
no money disbursed from the private fund was ever reimbursed by the federal
government. See, e.g., United States v. O’Connell,
The FCA “attaсhes liability, not to the underlying fraudulent activity, but to the
‘claim for payment.’” United States ex rel. Hopper v. Anton,
The judgment is affirmed in part, reversed in part, and remanded for proceedings consistent with this opinion.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
Notes
[1] The HONORABLE DAVID S. DOTY, United States District Judge for the District of Minnesota, sitting by designation.
[2] Relators consist of environmental groups and private citizens, some of whom are previous employees of the defendants.
[3] The site consists of 92.7 acres and is bounded by both residential and undeveloped areas. Rocky Branch Creek flows directly through the plant site. The creek is a tributary of the Bayou Meto River, which is itself a tributary of the Arkansas River. The site was originally developed by the U.S. government in the 1930s as a
[4] The Superfund is the general federal fund for hazardous waste management under CERCLA. 42 U.S.C. § 9611. “Any site listed on the National Priorities List under CERCLA § 9605(a)(8)(B), is subject to EPA-funded cleanup activity. These EPA cleanups are financed by the Superfund, an $8.5 billion fund created by EPA taxes and fees. See 26 U.S.C. § 9507.” United States v. City and County of Denver, 100 F.3d 1509, 1511 (10th Cir. 1996).
[5] The district court subsequently rejected a claim that the United States should
itself be held liable under CERCLA for the cleanup as an “operator” or “arranger” in
the production of Agent Orange. See United States v. Vertac Chem. Corp., 841 F.
Supp. 884, 889 (E.D. Ark. 1993) (Vertac V); 42 U.S.C. § 9607(a)(2)-(3). We
affirmed. See United States v. Vertac Chem. Corp.,
[6] The activity on the Vertac site has also been the subject of various personal
injury and property actions alleging exposure to dioxin. See, e.g., O’Dell v. Hercules,
Inc.,
[7] The statute lists five exceptions, none of which have been identified by the parties as applicable in this case.
[8] Several other circuits have addressed the issue of what constitutes a challenge
under section 113(h) of CERCLA, though without identifying any particular test to be
applied in making the determination. In State of Colorado, the Tenth Circuit held that
action by the state to enforce a compliance order under its state waste management act,
issued pursuant to its EPA-delegated authority to enforce state hazardous waste laws
under the RCRA, was not a challenge to a CERCLA response action under section
113(h).