F I L E D

United States Court of Appeals

Tenth Circuit

PUBLISH

APR 5 2004

UNITED STATES COURT OF APPEALS

PATRICK FISHER

TENTH CIRCUIT

Clerk

DON C. KENNARD and HARROLD

E. WRIGHT,
v.

Plaintiffs - Appellants,

COMSTOCK RESOURCES, INC.;

COMSTOCK OIL & GAS, INC.;
BLACK STONE OIL CO.; W T
CARTER & BRO; and WILLOW
CREEK RESOURCES, INC.,

No. 03-8012

Defendants - Appellees.

_______________________________
UNITED STATES OF AMERICA and
BURLINGTON RESOURCES OIL &
GAS COMPANY LP,
Amici Curiae.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF WYOMING
(D.C. No. 01-MD-1679)
Pat S. Holloway, Dripping Springs, Texas, for Plaintiffs-Appellants.
J. Robert Beatty (W. Scott Hastings with him on the brief) of Locke, Liddell &
Sapp LLP, Dallas, Texas, for Defendants-Appellees.
Sara McLean, Attorney, Civil Division, Washington, D.C. (Robert D. McCallum,

Jr., Assistant Attorney General; Douglas N. Letter, Appellate Litigation Counsel;

Alan E. Kleinburd and Michael D. Granston, Attorneys, Civil Division,
Washington, D.C., with her on the brief), for Amicus Curiae United States.
John T. Boese, Justin J. Brookman, and Michael J. Anstett of Fried, Frank, Harris,
Shriver & Jacobson, Washington, D.C.; Donald I. Schultz, P.C., of Holland &
Hart, LLP, Cheyenne, Wyoming; Craig L. Stahl and Jeffrey T. Kuehnle of
Andrews & Kurth LLP, The Woodlands, Texas; and Laura B. Rowe of Hicks,
Thomas & Lilienstern, LLP, Houston, Texas, filed a brief for Amicus Curiae
Burlington Resources Oil & Gas Co. LP.
Before EBEL, McKAY, and LUCERO, Circuit Judges.
McKAY, Circuit Judge.

Appellant Relators Mr. Kennard and Mr. Wright brought this qui tam action
on behalf of the United States Government against Appellees Comstock Resources,
Inc., et al., (Comstock) pursuant to the False Claims Act, 31 U.S.C. 37293730 (FCA). The allegations center around oil and gas leases between
Comstock and an Indian Tribe. The Indian leases are subject to regulation by the
Secretary of the Interior who acts as a fiduciary for the Tribe. Comstock pays
royalties owed to the Tribe to the Mineral Management Service (MMS), an
agency under the Secretary. The MMS is responsible for (1) collecting royalties,
(2) ensuring the accuracy of those payments with audits, and (3) remitting the
royalty payments to the Tribe.
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Relator Wright owned royalty interests in a tract of land near the Indian
Tribes Reservation and had been receiving royalty payments for gas wells located
on the property for over twenty-five years. When the operator on Mr. Wrights
property sold its lease interests to Comstock, Mr. Wrights royalty payments
dropped dramatically. Based on this dramatic drop, Mr. Wright speculated that
Comstock was underpaying him and others in the area, including the Tribe.
Mr. Wright contacted Relator Kennard with his information. Relator
Kennard researched and investigated public records and discovered that the Indian
leases might have expired. Based on the investigation and Relators extensive oil
and gas experience, they concluded that Comstock was underpaying royalties to
the Tribe and also that Comstock knew that it was underpaying the Tribe. After
consultation with attorneys, Relators concluded that Comstock had committed
fraud and violated the FCA. The attorneys, including Mr. Sydow, began drafting a
complaint. Relators invited the Tribe to join the suit as co-Relators and the Tribe
declined.
On October 21, 1998, Relators sent the required Disclosure Statement to
the Government to which a yet-unfiled complaint was attached. On October 26,
1998, Mr. Sydow filed suit acting as the Tribes attorney instead of as Relators
attorney. The following day, Relators filed this suit alleging essentially the same
things as the Sydow Complaint. Relators allege that Mr. Sydow essentially stole
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their information in preparing the Tribes complaint.

The FCA imposes liability on any person who knowingly makes, uses, or
causes to be made or used, a false record or statement to conceal, avoid, or
decrease an obligation to pay or transmit money or property to the Government.
31 U.S.C. 3729(a)(7). Violators are liable to the United States Government for
a civil penalty of not less than $5,000 and not more than $10,000, plus 3 times the
amount of damages which the Government sustains because of the act of that
person. 31 U.S.C. 3729(a). Pursuant to 31 U.S.C. 3730, a private individual,
known as a relator, may bring a civil action for a violation of [31 U.S.C. 3729]
for the person and for the United States Government . . . in the name of the
Government. 31 U.S.C. 3730(b)(1). The relator then receives a share of any
Government recovery. 31 U.S.C. 3730(d). The relators qui tam complaint is
filed under seal and served on the Government with a written disclosure of
substantially all material evidence and information in the relators possession. 31
U.S.C. 3730(b)(2). The Government may then either choose to intervene and
take over litigation or decline to intervene, in which case the person bringing the
action shall have the right to conduct the action. 31 U.S.C. 3730(b)(2), (4).
In the instant case, the district court dismissed Relators FCA qui tam
complaint for lack of subject matter jurisdiction pursuant to 31 U.S.C.
3730(e)(4)(A) which provides:
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No court shall have jurisdiction over an action under this section

based upon the public disclosure of allegations or transactions in a
criminal, civil, or administrative hearing, in a congressional,
administrative, or Government Accounting Office report, hearing,
audit, or investigation, or from the news media, unless the action is
brought by the Attorney General or the person bringing the action is
an original source of the information.
On appeal, we are asked to decide whether the district court erred in dismissing
Relators complaint for lack of subject matter jurisdiction on grounds that (1) the
current action was barred because of a prior public disclosure and (2) Relators did
not qualify as an original source. We review de novo the district courts dismissal
of Relators FCA qui tam action for lack of subject matter jurisdiction. United
States ex rel. Ramseyer v. Century Healthcare Corp., 90 F.3d 1514, 1518 (10th
Cir. 1996) (review of the district courts dismissal under the FCA jurisdictional
bar is plenary because the jurisdictional question is necessarily intertwined with
the merits.).
Application of the 31 U.S.C. 3730(e)(4) jurisdictional bar requires a fourstep inquiry:
(1) whether the alleged public disclosure contains allegations or
transactions from one of the listed sources; (2) whether the alleged
disclosure has been made public within the meaning of the False Claims
Act; (3) whether the relators complaint is based upon this public
disclosure; and, if so, (4) whether the relator qualifies as an original
source.
United States ex rel. Hafter v. Spectrum Emergency Care, 190 F.3d 1156, 1161
(10th Cir. 1999) (quoting United States ex rel. Fine v. MK-Ferguson Co., 99 F.3d
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1538, 1544 (10th Cir. 1996). A court should address the first three public
disclosure issues first. Consideration of the fourth, original source issue is
necessary only if the court answers the first three questions in the affirmative. Id.
Therefore, we must first address whether the Sydow Complaint operated as a
public disclosure which would operate to bar the current action unless Relators are
an original source.
Relators argue strenuously that because Mr. Sydow allegedly unethically
used their information in drafting his complaint for the Tribe that this court should
not validate that fraud. However, we are constrained by the law as it is written.
The jurisdictional bar in 31 U.S.C. 3730(e)(4) does not contemplate an exception
to public disclosure unless the person is an original source. The remedy for the
alleged conversion of information in this case lies elsewhere. Section 3730(e)(4)
operates to satisfy the dual goals of avoidance of parasitism and encouragement
of legitimate citizen enforcement actions. United States ex rel. Springfield
Terminal Ry. Co. v. Quinn, 14 F.3d 645, 651 (D.C. Cir. 1994). Consistent with
these purposes, we believe the threshold based upon analysis is intended to be a
quick trigger for the more exacting original source analysis. United States ex rel.
Precision Co. v. Koch Indus., Inc., 971 F.2d 548, 552 (10th Cir. 1992). Once a
public disclosure is made, even if by somewhat nefarious means, no person other
than the Government may intervene or bring a related action based on the facts
underlying the pending action. 31 U.S.C. 3730(b)(5).
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In the instant case, the alleged public disclosure is the Sydow Complaint.
Civil hearings are specifically referenced in 31 U.S.C. 3730(e)(4)(A). Section
3730(e)(4) lists [(1)] a criminal, civil, or administrative hearing, [(2)] a
congressional, administrative, or Government Accounting Office report, hearing,
audit, or investigation, [or (3)] the news media as sources available for public
disclosure. We have repeatedly held that prior civil actions are public disclosures
under the FCA. Precision, 971 F.2d at 553-54; see also United States ex rel. King
v. Hillcrest Health Ctr., Inc., 264 F.3d 1271, 1279 (10th Cir. 2001); Hafter, 190
F.3d at 1161 n.6. Additionally, every court of appeal to have addressed the
question has held that any information disclosed through civil litigation and on file
with the clerks office should be considered a public disclosure . . . for purposes of
section 3730(e)(4)(A). Ramseyer, 90 F.3d at 1519 n.3 (quoting United States v.
Northrop Corp., 59 F.3d 953, 966 (9th Cir. 1995)) (internal quotations omitted).
The filing of the Sydow Complaint commenced a civil action on behalf of the
Tribe against Comstock. Thus, the first of the threshold inquiries, whether the
alleged public disclosure contains allegations or transactions from one of the listed
sources, is satisfied.
We must next address whether the alleged disclosure has been made public
within the meaning of the FCA. Relators argue that because the disclosure in this
case was only made to a single Government filing clerk who stamped the Sydow
Complaint, no public disclosure occurred. This argument is unpersuasive. Section
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3730(e)(4) operates as a quick trigger. Precision, 971 F.2d at 552. Once a

complaint is filed, a civil action has commenced and public disclosure has
occurred. There is no requirement that a certain number of people read or receive
the information. Relators rely on United States ex rel. Holmes v. Consumers Ins.
Group, 318 F.3d 1199, 1204-05 (10th Cir. 2003) (en banc), in which we held that
the allegations must have been made known to the public through some
affirmative act of disclosure. However, disclosure to a single filing clerk was
enough in the instant case because the filing of the civil action in itself was the
affirmative act of disclosure. It is not necessary that the filing clerk or any
member of the public read the complaint. Additionally, in Holmes we specifically
held that a public disclosure can occur to a single person. 318 F.3d at 1206 n.5.
Relators argument that providing a complaint to the Government in advance
of filing immunizes a relator from the operation of the FCAs public disclosure bar
is similarly misdirected. Section 3730(e)(4) does not contain an exception for
complying with the mandatory jurisdictional requirements of 3730(b)(2). 1
1

Section 3730(b)(2) provides:

A copy of the complaint and written disclosure of substantially
all material evidence and information the person possesses
shall be served on the Government pursuant to Rule 4(d)(4) of
the Federal Rules of Civil Procedure. The complaint shall be
filed in camera, shall remain under seal for at least 60 days,
and shall not be served on the defendant until the court so
orders. The Government may elect to intervene and proceed
(continued...)
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Additionally, disclosure to the Government through 3730(b)(2) is not a public

disclosure contemplated by 3730(e)(4). As discussed above, 3730(e)(4)
specifically lists the following sources as avenues for public disclosure: [(1)] a
criminal, civil, or administrative hearing, [(2)] a congressional, administrative, or
Government Accounting Office report, hearing, audit, or investigation, or [(3)] the
news media. [I]n order to be publicly disclosed, the allegations or transactions
upon which a qui tam suit is based must have been made known to the public
through some affirmative act of disclosure. Ramseyer, 90 F.3d at 1519 (emphasis
added). This requirement clearly contemplates that the information be in the
public domain in some capacity and the Government is not the equivalent of the
public domain.
The first two inquiries being answered in the affirmative, we then ask
whether Relators complaint is based upon the public disclosure. The test is
whether substantial identity exists between the publicly disclosed allegations and
the qui tam complaint. MK-Ferguson, 99 F.3d at 1546 (10th Cir. 1996) (quoting
Precision, 971 F.2d at 553-54). Relators have conceded that the complaints at

Id.

(...continued)
with the action within 60 days after it receives both the
complaint and the material evidence and information.
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issue are substantially similar. See Aplt. Br. at 17. 2 We find no merit in Relators
argument that because the Sydow Complaint was allegedly based solely and
exclusively on Relators information and complaint that it is impossible for
Relators complaint to be based upon the Sydow Complaint. Based upon, in 31
U.S.C. 3730(e)(4)(A), means supported by. MK-Ferguson, 99 F.3d at 1545
(quoting Precision, 971 F.2d at 552). Whether Relators qui tam complaint was
already drafted when the Sydow Complaint was filed is irrelevant. A relator need
not have learned of the basis for the qui tam action from the public disclosure for
its action to be considered based upon that public disclosure if the allegations are
substantially similar. United States ex rel. Fine v. Advanced Sciences, Inc., 99
F.3d 1000, 1006 n.4 (10th Cir. 1996) (court rejected argument that because
relators discovery of alleged fraud occurred prior to public disclosure, complaint
could not be based upon the later-occurring public disclosure); see also MKFerguson, 99 F.3d at 1546. Therefore, the first three steps of the 31 U.S.C.
3730(e)(4) jurisdictional bar are satisfied and the Sydow Complaint operated as a

Relators certainly have no quarrel with the findings of

the court below that [t]he factual situation giving rise to
the allegations is identical in each complaint[, and] the
language detailing the alleged fraud in each complaint
only varies slightly.

Aplt. Br. at 17 (quoting Aplt. App., Vol. II, at 493) (internal quotations omitted).
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public disclosure. 3
Since we hold that the Sydow Complaint was a public disclosure, we must
now address the fourth step whether Relators were an original source. Section
3730(e)(4)(B) defines original source as an individual that has direct and
independent knowledge of the information on which the allegations are based and
has voluntarily provided the information to the Government before filing an action
under this section which is based on the information. See also United States ex
rel. Stone v. Rockwell Intl Corp., 282 F.3d 787, 802-03 (10th Cir. 2002). Direct
and independent knowledge is knowledge marked by the absence of an intervening
agency . . . [and] unmediated by anything but the relators own labor. Hafter, 190
F.3d at 1162 (internal quotations and citations omitted). The burden is on the
relator to show that he is an original source. Stone, 282 F.3d at 800. To meet this
burden, a relator must provide more than an unsupported, conclusory allegation
to show that he is an original source. Id. (quoting Hafter, 190 F.3d at 1162).
Comstock argues that Relators were not an original source because: (1)
Relators did not possess substantive information about the particular fraud, (2)
they were not insiders of Comstock or the Tribe, and (3) they relied on public
records. Thus, Comstock asserts that Relators merely conducted background
There is no merit in Comstocks argument that disclosure of information to
the Tribe was a former public disclosure. Disclosures of actions that, at the time,
were not contained in any of the sources enumerated in 31 U.S.C. 3730(e)(4)(A)
are not public disclosures.
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research and relied on their own expertise to speculate that Comstock had
defrauded the Government. We will address each contention in turn.
Comstocks first assertion, that Relators did not possess information about
the particular fraud, has no basis in Tenth Circuit precedent. Knowledge of the
actual fraudulent conduct is not necessary. See Stone, 282 F.3d at 803. A relator
need only possess direct and independent knowledge of the information on which
the allegations are based. Id. (quoting 31 U.S.C. 3730(e)(4)(B)) (emphasis in
original). A relator need not . . . have in his possession knowledge of the actual
fraudulent conduct itself; knowledge underlying or supporting the fraud
allegation is sufficient. Id. (quoting Hafter, 190 F.3d at 1162). Thus, the fact
that Relators did not have knowledge of the actual alleged fraudulent submissions
to the Government cannot disqualify them as an original source.
Comstocks second contention, that Relators were not insiders of either
Comstock or the Tribe, is also without merit. Our review of the relevant case law
revealed no requirement that a relator be a corporate insider. Additionally, we can
think of no valid reason for creating such a restriction.
The third contention, that Relators relied on public records, deserves more
attention. We have not and will not adopt any bright-line rule disqualifying a
relator as an original source when the relator examines public records. However,
the degree and character of such reliance is necessarily deserving of our attention.
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A mere compilation of documents or reports already in the public domain will not
allow a relator to qualify as an original source. However, a complete and thorough
investigation of a fraud on the Government will likely necessarily involve some
review of contracts, documents, or other information in the public domain. It is
the character of the relators discovery and investigation that controls this inquiry.
On one end of the spectrum, there are several cases that define an action
based solely on the labor of others. In United States ex rel. Findley v. FPC-Boron
Employees Club, the Court of Appeals for the Federal Circuit held that [a]
relators ability to recognize the legal consequences of a publicly disclosed
fraudulent transaction does not alter the fact that the material elements of the
violation have already been publicly disclosed. 105 F.3d 675, 688 (D.C. Cir.
1997). The court further stated that [i]f a relator merely uses his or her unique
expertise or training to conclude that the material elements already in the public
domain constitute a false claim, then a qui tam action cannot proceed. Id.; see
also MK- Ferguson, 99 F.3d at 1548 (concluding plaintiff did not qualify as
original source because his complaint merely tracked an audit report; he neither
observed nor discovered the purported fraud); United States ex rel. Fine v. Sandia
Corp., 70 F.3d 568, 572 (10th Cir. 1995) (public disclosure of material elements of
fraud bars qui tam action even if disclosure itself does not allege wrongdoing
because FCA does not require allegations to have statutory basis); United States ex
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rel. Aflatooni v. Kitsap Physicians Serv., 163 F.3d 516, 526 (9th Cir. 1999)
(relator who offered only speculation and conjecture that defendant committed
alleged fraud did not qualify as original source). Thus, when a relators qui tam
action is based solely on material elements already in the public domain, that
relator is not an original source.
Similarly, in United States ex rel. Kreindler & Kreindler v. United
Technologies Corp., the Second Circuit held that an attorney who participated in
the initial litigation on which his qui tam action was based was not an original
source. 985 F.2d 1148, 1159 (2d Cir. 1993). The court stated that [t]he fact that
[the relator] conducted some collateral research and investigations[,] . . . as would
be customary in such litigation, does not establish direct and independent
knowledge of the information on which the allegations are based. Id. (internal
quotations omitted). The court further explained:
Nor does the fact that [the relators] background knowledge enabled it
to understand the significance of the information acquired . . . make
its knowledge independent of the publicly disclosed information. If
that were enough to qualify the relator as an original source then a
cryptographer who translated a ciphered document in a public court
record would be an original source, an unlikely interpretation of the
phrase.
Id. (internal quotations and citations omitted).
Our case is easily distinguished from both Findley and Kreindler. Unlike
the relator in Findley, Relators in our case did not merely attach a legal label to a
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fraud already noticed in the public domain. While relator Findleys complaint
merely echoe[d] publicly disclosed, allegedly fraudulent transactions, id.,
Relators in our case conducted their own investigation and crafted their own claim
of the fraud on the Government. Additionally, unlike the relator in Kreindler,
Relators in our case cannot be compared to mere cryptographers who translated a
document. Nor can they be compared to an attorney who took someone elses
labor and investigation and gave it legal meaning. While some of the information
discovered by Relators was in the public domain, Relators did not merely label or
translate an already publicly disclosed fraud.
On the other end of the spectrum, our case parallels the courts statement in
Springfield where [the relator] started with innocuous public information [and]
completed the equation with information independent of any preexisting public
disclosure. 14 F.3d at 657. Relator Wright did not refer to, examine, or rely on
any public records. He relied exclusively on his own personal, private royalty
records and statements from Comstock and other oil companies. He noticed that
when Comstock took over the lease on one of his properties, his royalty payments
dropped dramatically. Relator Kennard did examine public records in the course
of his independent investigation at the Railroad Commission of Texas and the
Texas General Land Office to support the discovery of the alleged fraud.
However, many investigations of fraud on the Government will necessarily involve
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a review of the relevant and publicly available Government contracts out of which
the fraud claim arises. Mr. Kennard did not merely compile statistics; he did his
own research and investigation. He did not rely on a Government report dealing
with the allegations and transactions on which the current qui tam action is based
because no such document exists.
The district court concluded that Relators have merely compiled public
information and because of their education and background were able to speculate
that [Comstock] underpaid [] royalties. Aplt. App. at 498. We disagree. In its
determination, the district court relied heavily on the fact that Relators were not
members of the Tribe or insiders of Comstock, a concern we deem irrelevant to the
current inquiry. The district court further relied on the fact that Relators used
documents already in the public domain during their investigation. However, in
the instant case, Relators claim did not derive from a third partys research and
investigation. Relators discovered the alleged fraud and Relators conducted the
investigation. Our concern discussed in Hafter of the necessity to weed out
parasitic plaintiffs who offer only secondhand information, speculation,
background information or collateral research is not implicated in this case. 190
F.3d at 1162-63. There must be some consideration to the availability of the
information and the amount of labor and deduction required to construct the claim.
Relators sorted through relatively obscure public documents and, together with
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personal royalty records, used these documents to discover and support their claim
of the alleged fraud. It is important to note that none of the public documents
disclosed the alleged fraud. It was only through independent investigation,
deduction, and effort that Relators discovered the alleged fraud. Relators ha[d]
direct and independent knowledge of the fraud allegedly committed [since they
are] the [people] responsible for ferreting it out in the first place. Holmes, 318
F.3d at 1207. Relators were not just assemblers of information. This case would
not exist but for Relators sniffing it out. Through discovery and deduction,
Relators ferreted out the alleged fraud in this case and must, therefore, qualify as
an original source.
Comstock also argues that Relators are factually incorrect in their claim of
fraud on the Government. However, whether the claim is ultimately flawed on
the merits is an analytically distinct question from the one mandated by the FCA
for establishing jurisdiction. Stone, 282 F.3d at 803. Thus, a relator need only
show that he possessed direct and independent knowledge of the information on
which his claim is based, not that his claim is factually correct. Id.
We will briefly address Comstocks alternative argument that the FCAs qui
tam provision does not authorize a relator to sue based upon losses allegedly
suffered by an Indian Tribe. This argument is unsupported by the text of 31
U.S.C. 3729(a)(7). As in all cases involving statutory construction, our starting
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point must be the language employed by Congress, . . . and we assume that the
legislative purpose is expressed by the ordinary meaning of the words used.
Holmes, 318 F.3d at 1208. Section 3729(a)(7) 4 provides that a false record or
statement to conceal, avoid, or decrease an obligation to pay or transmit money . . .
to the Government is actionable. Thus, the text broadly encompasses the fraud on

Amicus Curiae Burlington Resources Oil & Gas Co.s cites to cases
involving 3729(a)(1) are inapposite because the plain language of the statutes is
distinctly different. Section 3729(a)(1) provides:
4

Any person who . . . knowingly presents, or causes to be presented,

to an officer or employee of the United States Government or a
member of the Armed Forces of the United States a false or
fraudulent claim for payment or approval . . . is liable to the United
States Government for a civil penalty of not less than $5,000 and not
more than $10,000, plus 3 times the amount of damages which the
Government sustains because of the act of that person . . . .
Section 3729(a)(1) requires the existence of a claim. Relying mostly on the
word claim, some courts interpreting 3729(a)(1) have held that this provision
requires a showing of actual or potential loss to the Government. See, e.g.,
Hutchins v. Wilentz Goldman & Spitzer, 253 F.3d 176, 184 (3d Cir. 2001) (claims
that do not result in economic loss to Government are not within scope of
3729(a)(1)). Section 3729(a)(7), at issue in the instant case, does not encompass
a similar restriction. Instead, it provides that:
Any person who . . . knowingly makes, uses, or causes to be made or
used, a false record or statement to conceal, avoid, or decrease an
obligation to pay or transmit money or property to the Government,
is liable to the United States Government for a civil penalty of not
less than $5,000 and not more than $10,000, plus 3 times the amount
of damages which the Government sustains because of the act of that
person . . . .
(emphasis added).

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the Government that occurs when a person or entity makes a false statement to the
Government in order to decrease an obligation to transmit money to the
Government. The transmission of funds to the Government is enough; there is no
requirement in the text that the Government have an ongoing interest in the funds
or that the Government itself suffer a loss. Additionally, transmit is defined as to
cause to go or be conveyed to another person or place: SEND. Websters Third
New International Dictionary 2429 (1986). Neither the text of 3729(a)(7) nor
the definition of transmit encompasses a necessary beneficial interest in the funds
or a requirement about how the funds are to be used or disbursed. Therefore, what
the Government does with the royalties after they are deposited in the Treasury is
of no consequence in the context of a qui tam suit.
Comstocks argument that the FCA does not authorize Relators to sue on
behalf of the Tribe misstates the issue because a qui tam suit is on behalf of the
Government, not the Tribe. 5 A qui tam suit is to recover penalties for false
statements to the Government. Section 3730(b)(1) provides that a private person
may bring an action for the person and for the United States Government . . . in
the name of the Government. The fraud is that which occurs when the person or
entity makes a false statement to the Government. The fraud at issue is not that
Additionally, Comstocks argument that 31 U.S.C. 3730(e)(3) deprived
the district court of jurisdiction over this suit on behalf of the Government is
incorrect. Comstock can point to no earlier suit by the Government that would
trigger the statutory bar. The Tribe is not the equivalent of the Government.
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which occurs when the Indian Tribe receives less royalties than those which are
due pursuant to the lease. While this suit relates to leases between Comstock and
the Tribe, it is an action on behalf of Relators and the Government to redress an
alleged fraud on the Government.
The mineral royalties at issue are paid to the Mineral Management Service
of the United States Department of the Interior. Royalty payments due on Indian
leases must be paid in the time and manner as may be specified by the Secretary
[of the Department of the Interior]. 30 U.S.C. 1712(a). Royalties owed on
Indian Tribe leases must be transmitted to the MMS or such other party as may be
designated. 25 C.F.R. 211.40. Indian lessees like Comstock must report to the
MMS the amount of royalties due when they submit their royalty payments. See
30 C.F.R. 210.52; 30 U.S.C. 1713(a). The royalties paid to the MMS on Indian
leases are transferred from an MMS Treasury account to separate accounts in the
Treasury and the royalties are then disbursed to the appropriate Indian Tribe or
allottee. See 30 C.F.R. 218.51, 219.103. The MMS is required to collect
payments and to have a comprehensive . . . accounting and auditing system . . . to
accurately determine oil and gas royalties. 30 U.S.C. 1711(a).
As discussed above, Section 3729(a)(7) imposes liability for making a false
record or statement to conceal, avoid, or decrease an obligation to pay or transmit
money . . . to the Government. (emphasis added). Pursuant to 3729(a)(7),
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Relators are required to allege that Comstock had an existing, legal obligation to
pay or transmit money or property to the Government and that Comstock
submitted false statements or records to conceal, avoid, or decrease that
obligation. See United States v. Pemco Aeroplex, Inc., 195 F.3d 1234, 1236-37
(11th Cir. 1999). Comstock cannot dispute that it had a legal obligation to
transmit royalty payments to the Government. Relators have alleged that
Comstock submitted false reports to avoid its obligation. We therefore hold that
the plain language of 3729(a)(7) squarely encompasses the fraud on the
Government that occurs when a person or entity makes false statements to the
United States to avoid transmitting to the Federal Treasury royalties they owe on
Indian mineral leases.
REVERSED and REMANDED. 6

Comstocks motion for leave to file a supplemental brief in response to the

brief for the United States which was received by the court on May 7, 2003, is
GRANTED.
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