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Costner v. URS Consultants, Inc.

Citation: 28 ELR 21493
No. 97-4310, 153 F.3d 667/47 ERC 1129/(8th Cir., 08/17/1998)

The court affirms in part and reverses in part a district court decision holding that environmental groups could bring False Claims Act (FCA) claims against contractors at a Superfund site in Arkansas. In a qui tam action brought on behalf of the United States, environmental groups allege that the contractors engaged in a pattern of knowingly submitting false claims for payments of funds under their contracts to perform hazardous waste treatment and disposal services at the site. The court first holds that the claims are not precluded on grounds of res judicata and are sufficient to survive a motion to dismiss on jurisdictional grounds. The environmental groups' previous litigation against the contractors 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 at the site. In this case, the wrong the groups seek to redress is the alleged submission of false claims for the payment of funds, a claim based on economic injury to the federal government. Although both claims have their genesis in the site cleanup, they are independent of each other and seek to redress different injuries resulting from distinct conduct.

The court next holds that the groups' present suit does not constitute a Comprehensive Environmental Response, Compensation, and Liability Act § 113(h)-barred challenge to remedial action at the site. The groups seek neither review of nor injunction against any remedial activity on the site. Instead, they allege fraud and seek civil penalties on behalf of the United States. Resolution of this suit in the groups' favor would not involve altering the terms of the cleanup order, but would result only in financial penalties for alleged fraud regarding payments sought and received for past completed work. Thus, the complaint does not seek to interfere with the remediation process ongoing at the site, nor is the suit directly related to the goals of the cleanup itself. The court also holds that the present claim is not barred by FCA § 3730(e)(3). The present allegations have never before been the subject of an FCA suit or any other suit or proceeding brought by the government or anyone else. 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 § 3730(e)(3).

The court then holds that the district court erred in denying the contractors' motions to dismiss the groups' complaint to the extent that it alleged the knowing submission of false claims for payment from a private trust fund underwritten by the site owner. Only those actions by the claimant that have the purpose and effect of causing the United States to pay out money it is not obligated to pay, or those actions that intentionally deprive the United States of money it is lawfully due, are properly considered claims within the meaning of the FCA. None of the money in the private trust fund, long since depleted, was provided by the United States. Any allegedly false claims for payment made by the contractors to the private trust fund had no nexus to the United States. Thus, the FCA has no application in such circumstances. Last, the court holds that the district court did not err in denying defendants' motions to dismiss to the extent that the groups alleged the knowing submission of false claims for payment to the U.S. Environmental Protection Agency from the federal Superfund.

[Decisions related to this litigation are published at 23 ELR 20807 and 21280.]

Counsel for Plaintiffs
Gregory Ferguson
Law Offices of Gregory Ferguson
600 W. 4th St., N. Little Rock AR 72114
(501) 374-3535

Counsel for Defendants
Mary Bosco
Patton & Boggs
2550 M St. NW, Washington DC 20037
(202) 457-6000

Before Murphy and Doty,1 JJ.