United States Ex Rel. Holmes v. Northrop Grumman Corp. , 642 F. App'x 373 ( 2016 )

Case: 15-60414 Document: 00513434876 Page: 1 Date Filed: 03/23/2016
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 15-60414 United States Court of Appeals
Summary Calendar Fifth Circuit
FILED
March 23, 2016
United States of America, ex rel, DONALD C. HOLMES, Lyle W. Cayce
Clerk
Plaintiff - Appellant
v.
NORTHROP GRUMMAN CORPORATION, A Delaware Corporation;
HUNTINGTON INGALLS, INCORPORATED, formerly known as Northrop
Grumman Shipbuilding,
Defendants - Appellees
Appeal from the United States District Court
for the Southern District of Mississippi
USDC No. 1:13-CV-85
Before STEWART, Chief Judge, and OWEN and COSTA, Circuit Judges.
PER CURIAM:*
Plaintiff-Appellant Donald Holmes brought this qui tam action as relator
for the Government under the False Claims Act. He appeals the district court’s
order disqualifying him from serving as a relator in the suit and dismissing the
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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case without prejudice to the Government. Because Holmes fails to raise any
arguments warranting reversal, we AFFIRM.
I. FACTUAL AND PROCEDURAL BACKGROUND
This dispute involves two underlying proceedings and a tangled array of
related actions. And, like so many cases that have appeared in our court
recently, Hurricane Katrina was the catalyst for the chain of events leading to
this appeal.
Northrop Grumman Corporation (“NGC”) 1 is a large government
contractor that, amongst other things, operates shipyards in Mississippi and
Louisiana. Northrop Grumman Risk Management, Inc., insured its parent
company, NGC, for certain losses related to those shipyards. A separate
company, Munich Re, then provided reinsurance for NGC’s covered losses. In
late 2005, NGC presented a claim under its policy with Munich Re for alleged
damages to several of its shipyards as a result of Hurricane Katrina. During
the adjustment process, Munich Re and NGC entered into a confidentiality
agreement that prohibited Munich Re and its agents from disclosing
documents and information that they received from NGC. Munich Re
ultimately initiated arbitration proceedings in London, England, to resolve
coverage disputes under the Munich Re/NGC reinsurance policy (the “London
Arbitration”). Holmes and another lawyer, Gerald Fisher, represented Munich
Re in the London Arbitration.
While the London Arbitration was pending, Munich Re submitted a
request with the United States Navy for documents relating to NGC. The Navy
agreed to release the requested documents if an enforceable protective order
was put in place. As a result, on April 6, 2010, Munich Re—represented by
1For simplicity purposes, we will refer to NGC and its subsidiaries as “NGC” with the
exception of one NGC’s subsidiaries, Northrop Grunman Risk Management, Inc.
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Holmes and Fisher—filed a complaint in the U.S. District Court for the District
of Columbia against NGC and several of its subsidiaries seeking a protective
order (the “Protective Order Litigation”). In the complaint, Holmes and Fisher
stated that they sought the relevant documents “in aid of private foreign
arbitration only” and that they were “in no way . . . attempt[ing] to usurp the
power of the arbitration tribunal” for other purposes. The complaint included
a proposed protective order, which prohibited the use of the requested
documents for any purpose outside of the London Arbitration.
On June 2, 2010, while the Protective Order Litigation was still pending,
Holmes and Fisher filed a qui tam lawsuit against NGC and others under the
False Claims Act (“FCA”). They alleged that NGC had defrauded the Navy by
using government funds allocated for expenses related to Hurricane Katrina
to cover cost overruns that had occurred before the storm. Amongst other
things, the complaint alleged that a review of the documents that they
anticipated receiving from the Navy would help prove their claim. This
complaint was filed under seal pursuant to the FCA, and the suit was later
transferred from the District of Columbia to the Southern District of
Mississippi.
On June 18, 2010, the parties in the Protective Order Litigation
stipulated to a protective order, and on June 24, 2010, the district court entered
the proposed protective order (the “Protective Order” or “Order”). The
Protective Order stated that any produced documents designated “Court
Protected Material” would “be used or disclosed solely in the [London]
Arbitration” and would “not be used in any other proceeding or for any other
purpose without further order of this Court.” The Protective Order further
required the parties to return or destroy all protected materials at the
conclusion of the London Arbitration. Despite the express terms of the
Protective Order, Holmes submitted documents he received from the Navy to
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the Department of Justice’s Civil Fraud Division and to the district court
presiding over the qui tam action.
On November 11, 2011, NGC and Munich Re settled the London
Arbitration.
On December 8, 2011, the United States officially declined to intervene
in the qui tam suit. In previous filings, the Government explained that it had
investigated the claims, and that, amongst other things, its decision not to
participate “stem[med] from serious ethical and professional responsibility
concerns arising from the particular circumstances of [the] action.” On August
18, 2012, Fisher also withdrew from the case when Holmes filed the operative
First Amended Complaint.
In October 2013, Appellees filed a motion to disqualify Holmes from
representing the United States as a qui tam relator, citing his unethical
conduct in pursuing the claim. On June 3, 2015, the district court granted the
motion and issued an order (1) disqualifying Holmes as a relator and (2)
dismissing the case with prejudice as to Holmes, but without prejudice as to
any rights of the United States. Holmes timely appealed.
II. STANDARD OF REVIEW
We review rulings on motions to disqualify for abuse of discretion.
F.D.I.C. v. U.S. Fire Ins. Co., 50 F.3d 1304, 1311 (5th Cir. 1995). Under this
standard, we review fact-findings for clear error and review de novo the district
court’s application of the relevant rules of attorney conduct. Id. This same
abuse of discretion standard applies in our review of a district court’s dismissal
of a complaint as a result of ethical violations. See Salmeron v. Enter. Recovery
Sys., Inc., 579 F.3d 787, 793 (7th Cir. 2009); see also United States v. Quest
Diagnostics Inc., 734 F.3d 154, 165–66 (2d Cir. 2013).
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III. DISCUSSION
In a thorough and detailed opinion, the district court outlined Holmes’
numerous ethical violations committed in pursuit of this qui tam action. Citing
the District of Columbia Rules of Professional Conduct, the Mississippi Rules
of Professional Conduct, and the American Bar Association’s Model Rules, 2 the
district court persuasively explained that Holmes violated no less than four
ethical duties.
The court first explained that Holmes violated his duty of loyalty by
taking a position in the qui tam suit that was contrary to the interests of his
client, Munich Re, in the London Arbitration. See ABA Model Rule 1.7(a) (“[A]
lawyer shall not represent a client if the representation involves a concurrent
conflict of interest.”). The analysis is straightforward: in the London
Arbitration, Munich Re argued that it did not owe NGC compensation for
certain losses related to Hurricane Katrina in part because the Government
had previously paid NGC compensation for those losses; Holmes then argued
in the qui tam action that the Government should not have paid all of NGC’s
claimed losses from Hurricane Katrina. 3 These two positions are clearly in
direct conflict.
2 The district court explained that these rules apply because: (1) much of Holmes’
conduct occurred while the case was pending in the U.S. District Court for the District of
Columbia, (2) the Mississippi Rules of Professional Conduct apply to litigants practicing in
federal court in Mississippi, and (3) the Fifth Circuit recognizes the ABA Model Rules as the
national standard for professional conduct. See U.S. ex rel. Holmes v. Northrop Grumman
Corp., No. 1:13CV85-HSO-RHW, 2015 WL 3504525, at *4 (S.D. Miss. June 3, 2015). There
is no material difference for purposes of this case between the three sets of rules, and
therefore our discussion centers on the ABA Model Rules, as they are the “national standards
utilized by this circuit in ruling on disqualification motions.” In re Am. Airlines, Inc., 972
F.2d 605, 610 (5th Cir. 1992).
3 Holmes argues that the qui tam action was a litigation tactic to force settlement in
the London Arbitration and that he received informed consent from Munich Re to pursue his
claim. Oddly, in support of the proposition that he disclosed conflicts issues with his client,
Holmes cites to a filing by the Government in which the Government expressed serious
“ethical and professional responsibility concerns” with Holmes’ conduct, including “a
5
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Perhaps most troubling of the violations was Holmes’ blatant disregard
for the Protective Order and his related violation of his duty of candor to the
court. There is no dispute that Holmes violated the express terms of the
Protective Order by relaying the documents he received in the Protective Order
Litigation to the Department of Justice and the district court in the qui tam
action; indeed, Holmes has conceded the point. 4 He also concedes on appeal
that he was obligated to follow the Protective Order in pursuing his qui tam
claim. 5
The district court also concluded that Holmes violated his duty of candor
during the course of the Protective Order Litigation. Holmes and Fisher told
the court in the Protective Order Litigation on April 6, 2010, that Munich Re
was seeking documents for use solely in the London Arbitration. On June 2,
2010, Holmes filed the qui tam suit, and told the court there that he expected
that the documents he received from the Navy would prove NGC’s alleged
fraud. Holmes stipulated to the Protective Order on June 18, 2010, and the
order was entered on June 24. He then promptly disclosed the documents he
potential conflict between [Holmes’] claims in this qui tam action and those of [his] insurance
company client[, Munich Re,] in its arbitration with NGC.” The Government further stated
that its communications with Munich Re did not assuage these concerns. The other evidence
that Holmes cites for this claim is limited, and indicates that he represented to Munich Re
that he was legally required to bring his qui tam suit (which he was not) and that there is no
attorney-client privilege issue (which the district court did not raise).
4 In fact, Holmes filed a motion with the U.S. District Court for the District of
Columbia to correct his violation of the Protective Order. In particular, he asked the court
for a modification of the Order to allow him to use the protected documents in the qui tam
suit and to sanction him in the amount of $1,000 for his violation. The district court denied
the motion, finding “no reason—let alone good cause—to change the terms of the original
protective order.” Munchener Ruckversicherungs-Gesellschaft Aktiengesellschaft in Munchen
v. Northrop Grumman Risk Mgmt. Inc., No. 10-551 (JEB), 2015 WL 8483241, at *6 (D.D.C.
Dec. 9, 2015).
5 The district court similarly found that Holmes’ disclosures included Munich Re’s
confidential information—obtained during the course of his representation—in violation of
his duty of confidentiality. See ABA Model Rule 1.6(a) (“A lawyer shall not reveal information
relating to the representation of a client unless the client gives informed consent . . . .”).
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received pursuant to the Protective Order to third parties in direct
contravention of the terms of the Order and his representations to the court in
the Protective Order Litigation. Later, in the operative First Amended
Complaint, Holmes stated that he had “gained access to documents and
information showing that the U.S. Government has been defrauded,” including
“documentation submitted by Northrop Grumman to the Navy.” Based on this
timeline, the district court did not clearly err in finding that Holmes violated
his duty of candor in his representations to the court in the Protective Order
Litigation. 6 See ABA Model Rule 3.3(a) (“A lawyer shall not knowingly . . .
make a false statement of fact or law to a tribunal or fail to correct a false
statement of material fact or law previously made to the tribunal by the
lawyer.”); see also ABA Model Rules 4.1(a), 8.4(c). This timeline also supports
the court’s finding that Holmes knowingly violated the Protective Order.
The district court concluded that (1) “based on the totality of the ethical
violations committed by Holmes surrounding this qui tam case, Holmes should
be disqualified from serving as relator in this case,” and (2) “merely
disqualifying Holmes from serving as relator without dismissing the case
would greatly prejudice Northrop Grumman because the case would be tried
on a record developed primarily through the fruits of Holmes’ unethical
conduct.” Citing Quest Diagnostics, 734 F.3d at 167, the district court noted
that its dismissal of the complaint was further justified by the fact that neither
the United States, as the real party in interest, nor any other relator was
foreclosed from bringing the claims.
6 Holmes claims that he was “extremely candid” with the court “about documents,
where they came from, and the fact that he needed further guidance from the District Court
as to how to deal with them.” In support he cites filings made with the district court in the
qui tam suit. This argument is, at best, misguided: he violated his duty of candor to the
court in the Protective Order Litigation in an apparent effort to gain access to the relevant
documents—his disclosures in the qui tam suit are therefore irrelevant.
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District courts are afforded discretion in penalizing ethical violations,
including disqualifying a relator and dismissing his suit in a qui tam action,
see id. at 165–69 (affirming the disqualification of relator and the dismissal of
the complaint in qui tam suit for ethical violations); Salmeron, 579 F.3d at 798(similar), and Holmes has failed to raise any competent argument as to how
the district court abused its discretion here. In his briefing before the district
court, Holmes challenged his disqualification largely based on his assertion
that ethics rules and confidentiality duties are inapplicable in FCA cases. He
now acknowledges on appeal that he is obligated to abide by his ethical
obligations as a lawyer—even in FCA cases—and that he was and is bound by
the terms of the Protective Order. 7
In addition to conceding these points of law, his brief on appeal fails to
muster a cognizable argument to bolster his position, as it lacks any
meaningful citation to legal authority, 8 and contains only sparse reference to
the record on appeal. 9 This failure is inexcusable given that Holmes is an
experienced attorney and has already been warned by the district court in this
7 See Quest Diagnostics Inc., 734 F.3d at 163 (citing Bates v. Dow Agrosciences LLC,
544 U.S. 431, 449 (2005), and holding that nothing in the FCA evinces a clear legislative
intent to preempt state statutes and rules that regulate attorneys’ disclosure of client
confidences); Holden v. Simpson Paper Co., 48 F. App’x 917, 2002 WL 31115137, at *2 (5th
Cir. Sept. 18, 2002) (“Deliberately disobeying court orders demonstrates sufficient bad faith
to justify a district court’s sanction under its inherent powers.”).
8 In his brief, Holmes’ legal citations are limited to the following: one case (in the
standard of review section); Rule 12(b)(6) (in the standard of review section); the FCA (twice,
in the jurisdiction section); and 18 U.S.C. § 4 (in the facts section). He also includes cross-
references to portions of motions that he filed in district court; however, we have previously
held that “an appellant may not incorporate by reference arguments made in the district
court.” Ctr. for Biological Diversity, Inc. v. BP Am. Prod. Co., 704 F.3d 413, 431 n.6 (5th Cir.
2013).
9 Holmes’ only meaningful citations to the record are discussed in footnotes 3 & 6,
supra.
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litigation about his failure to properly brief matters. 10 We therefore decline
the invitation to dig through Holmes’ bald assertions and marshal an
argument on his behalf; as we have previously stated, “[j]udges are not like
pigs, hunting for truffles buried in briefs.” de la O v. Hous. Auth. of City of El
Paso, 417 F.3d 495, 501 (5th Cir. 2005) (quoting United States v. Dunkel, 927
F.2d 955, 956 (7th Cir. 1991)). 11
Holmes’ remaining argument on appeal is that the district court did not
afford him an evidentiary hearing on NGC’s disqualification motion; however,
Holmes did not raise any evidentiary issues before the district court and there
is no indication that he ever requested an evidentiary hearing on the
disqualification motion. And, sure enough, he fails to cite any legal authority
on appeal supporting the position that he is entitled to a hearing. We therefore
find no reason to conclude that the district court abused its discretion in not
holding an evidentiary hearing on NGC’s motion to disqualify. See In re
Eckstein Marine Serv. L.L.C., 672 F.3d 310, 319 (5th Cir. 2012) (stating that a
10 Holmes is an experienced lawyer, having spent over forty-seven years as a
practicing attorney, including as a partner in one of this country’s largest law firms. The
district court therefore warned Holmes that, although he is appearing pro se, he “is not
automatically subject to the very liberal standards afforded to a non-attorney pro se plaintiff
because an attorney is presumed to have a knowledge of the legal system and need less
protections from the court.” See Richards v. Duke Univ., 480 F. Supp. 2d 222, 234 (D.D.C.
2007); Holtz v. Rockefeller & Co., 258 F.3d 62, 82 n.4 (2d Cir. 2001) (stating that “pro se
attorneys . . . typically cannot claim the special consideration which the courts customarily
grant to pro se parties.” (internal quotation marks omitted)). Later, the district court issued
an Order on Miscellaneous Relief, admonishing Holmes and stating: “in what appears to be
a recurring practice of the relators in this case, they cite no case law, statute, or other legal
authority indicating this Court’s power to grant such relief, nor does the Court discern any
legal basis for doing so.” The court then specifically ordered that “the relators shall refrain
from filing any further motions in this case without citations to supporting legal authority.”
11 See also United States v. Scroggins, 599 F.3d 433, 446–47 (5th Cir. 2010) (“A party
that asserts an argument on appeal, but fails to adequately brief it, is deemed to have waived
it. . . . [A]mong other requirements to properly raise an argument, a party must ordinarily
identify the relevant legal standards and any relevant Fifth Circuit cases.” (citation and
internal quotation marks omitted)).
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district court’s denial of an evidentiary hearing is reviewed for abuse of
discretion); see also United States v. Skilling, 554 F.3d 529, 568 n.63 (5th Cir.
2009), aff’d in part, vacated in part on other grounds, 561 U.S. 358 (2010)
(holding that appellant waived his argument that he was entitled to an
evidentiary hearing because the appellant failed to brief the following issues:
“When is a district court obligated to hold an evidentiary hearing? What is the
standard of review? Are there any relevant Fifth Circuit cases?”).
IV. CONCLUSION
Given Holmes’ failure to challenge the district court’s careful and well-
reasoned opinion in any meaningful way, we AFFIRM.
10