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United States ex rel. Harper v. Muskingum Watershed Conservancy District

United States Court of Appeals, Sixth Circuit

November 21, 2016

United States of America ex rel. Leatra Harper, Steven Jansto, and Leslie Harper, Relators-Appellants,
v.
Muskingum Watershed Conservancy District, Defendant-Appellee.

         Appeal from the United States District Court for the Northern District of Ohio at Akron. No. 5:13-cv-02145-Sara E. Lioi, District Judge.

          Thomas W. Connors, BLACK, MCCUSKEY, SOUERS & ARBAUGH, Canton, Ohio, Warner Mendenhall, Akron, Ohio, for Appellants.

          Peter D. Welin, O. Judson Scheaf III, MCDONALD HOPKINS LLC, Columbus, Ohio, for Appellee.

          Before: GUY, BOGGS, and MOORE, Circuit Judges.

          OPINION

          BOGGS, Circuit Judge.

         In 1949, the United States deeded a large parcel of land in Ohio to the Muskingum Watershed Conservancy District ("MWCD"), a state entity responsible for controlling flooding in eastern Ohio. The deed provided that the land would revert to the United States if MWCD alienated or attempted to alienate it, or if MWCD stopped using the land for recreation, conservation, or reservoir-development purposes. MWCD subsequently sold rights to conduct hydraulic fracturing ("fracking") operations on the land. Three Ohio residents opposed to fracking discovered the deed restrictions and, operating on the theory that MWCD's sale of fracking rights triggered the reversion clause in the deed, filed an action against MWCD under the False Claims Act, alleging that MWCD was knowingly withholding United States property from the federal government. The district court granted MWCD's motion to dismiss. The relators appealed. For the reasons given below, we affirm the judgment of the district court.

         I

         The False Claims Act ("FCA"), 31 U.S.C. § 3729, imposes civil liability on any person who fraudulently-or, under certain circumstances, knowingly-deprives the United States of property. Id. § 3729(a)(1). As the Act's name suggests, liability under the Act often arises for the submission of false claims to the government. Id. § 3729(a)(1)(A)-(B); United States ex rel. Matheny v. Medco Health Sols., Inc., 671 F.3d 1217, 1222 (11th Cir. 2012). But two of the Act's provisions also penalize the improper retention of government property: First, the "reverse-false-claim" provision of the FCA provides for fines and treble damages against anyone who "knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government." 31 U.S.C. § 3729(a)(1)(G), (a)(2). Second, under the FCA's "conversion" provision, those same penalties also apply to anyone who "has possession, custody, or control of property or money used, or to be used, by the Government and knowingly delivers, or causes to be delivered, less than all of that money or property." Id. § 3729(a)(1)(D).

         In order to promote enforcement of the FCA, Congress created a qui tam provision, under which whistleblowers-called "relators"-may bring civil actions on behalf of the government for alleged FCA violations. Id. § 3730(b); Walburn v. Lockheed Martin Corp., 431 F.3d 966, 970 (6th Cir. 2005). If a relator is successful in recovering money for the government, she may retain up to twenty-five percent of the proceeds, as well as reasonable expenses, attorney's fees, and costs. 31 U.S.C. § 3730(d)(1). However, Congress was aware that the qui tam provision could encourage "opportunistic plaintiffs" to bring "parasitic lawsuits whereby would-be relators merely feed off a previous disclosure of fraud." Walburn, 431 F.3d at 970. In an effort to stop such "opportunistic suits, on the one hand, and encourage citizens to act as whistleblowers, on the other, " United States ex rel. LaCorte v. Smith Kline Beecham Clinical Labs., Inc., 149 F.3d 227, 233 (3d Cir. 1998), Congress placed a number of limitations on qui tam actions under the FCA, among which is the public-disclosure bar, a requirement that courts "shall dismiss an[y] [qui tam] action or claim" under the FCA if:

         substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed-

(i) in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party;

         (ii) in a congressional, Government Accountability Office, or other Federal report, hearing, audit, or investigation; or

(iii) from the news media, unless the . . . person bringing the action is an original source of the information.

31 U.S.C. § 3730(e)(4)(A).

         This qui tam action arises under the FCA's reverse-false-claim and conversion provisions. In 1933, the State of Ohio organized the Muskingum Watershed Conservancy District and empowered it to control flooding in Ohio's Muskingum River Watershed. Sixteen years later, the federal government granted MWCD several large parcels of land in central and southeastern Ohio. The deed to the land provided that if MWCD "shall cease using said lands" for recreation, conservation, and reservoir development, or if MWCD "alienate[s] or attempt[s] to alienate any part or parts thereof, the title to said lands shall revert to and revest in the United States."

         Five years ago, MWCD began negotiating several lease agreements to grant private firms the right to develop subsurface oil and gas reserves on the land that it received from the United States in 1949. MWCD issued several press releases and held public hearings about the proposed leases, which local newspapers covered extensively. MWCD also posted the lease documents to its website, and ultimately executed several leases between 2011 and 2014.

         Relators Leatra Harper, Leslie Harper, and Steven Jansto, who opposed MWCD's plans to allow fracking in the Muskingum River Watershed, discovered the restrictions in MWCD's deed. Reasoning that MWCD's efforts to lease fracking rights represented an "attempt to alienate" the land that triggered the reverter clause in the deed or, in the alternative, that the land was no longer being used for "recreation, conservation, and reservoir development" as the deed required, the relators concluded that MWCD was improperly in possession of United States property and filed a suit on behalf of the United States under the FCA's reverse-false-claim and conversion provisions.

         After considering whether to involve itself in the action, the United States declined to intervene. The relators then amended their complaint, and MWCD moved to dismiss. In addition to filing a motion in opposition, the relators moved the court for leave to amend their complaint for a second time "to add allegations relevant to issues raised by [MWCD] in [its] motion to ...


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