Cheryl Nolte Barnes v. Clark County ( 2022 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS JAN 7 2022
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
CHERYL NOLTE BARNES, Qui Tam No. 21-15137
Relator; ex rel. United States of America,
D.C. No.
Plaintiff-Appellant, 2:15-cv-01621-JCM-VCF
v.
MEMORANDUM*
CLARK COUNTY, a Political Subdivision
of the State of Nevada; et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the District of Nevada
James C. Mahan, District Judge, Presiding
Argued and Submitted October 21, 2021
San Francisco, California
Before: MURGUIA, Chief Judge, and WALLACE and BEA, Circuit Judges.
The False Claims Act (“FCA”) provides that “in qui tam cases, a court may
award attorneys’ fees against the plaintiff if the ‘action was clearly frivolous,
clearly vexatious, or brought primarily for purposes of harassment.’” Pfingston v.
Ronan Eng’g Co., 284 F.3d 999, 1005 (9th Cir. 2002) (quoting 31 U.S.C.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
§ 3730(d)(4)). This court has developed a stringent test for “clearly frivolous”
actions under the FCA: “An action is ‘clearly frivolous’ when ‘the result is obvious
or the appellant’s arguments . . . are wholly without merit.’” Pfingston, 284 F.3d at
1006. Following the dismissal of Relator’s qui tam action for failure to state a
claim pursuant to Fed. R. Civ. P. 12(b)(6), the district court granted Defendants’
renewed motion for attorneys’ fees on the grounds that Relator’s “claims were
clearly frivolous” under 31 U.S.C. § 3730(d)(4). Relator appeals that decision.
We review the attorneys’ fees award for abuse of discretion1 and reverse.
I.
This is the second time we review an attorneys’ fees award in this case.2
Previously, the district court granted Defendants’ motion for attorneys’ fees on the
1
See United States ex rel. Virani v. Jerry M. Lewis Truck Parts & Equip.,
Inc., 89 F.3d 574, 576 (9th Cir. 1996) (reviewing for abuse of discretion the district
court’s order that defendant must pay attorneys’ fees to qui tam relator rather than
the law firm that represented relator), abrogation on other grounds recognized by
United States v. Kim, 806 F.3d 1161, 1173–74 (9th Cir. 2015); Alaska Right to Life
Pol. Action Comm. v. Feldman, 504 F.3d 840, 848 (9th Cir. 2007) (reviewing for
abuse of discretion the award of attorneys’ fees to a defendant for frivolous
pleading in the similar context of 42 U.S.C § 1988). Previously, we stated that the
standards governing review of sanctions under Fed. R. Civ. P. 11 “appear to be
appropriate in the review of decisions on whether to impose sanctions
under section 3730(d)(4).” Simpson v. Lear Astronics Corp., 77 F.3d 1170, 1177
(9th Cir. 1996). But the standards in Simpson are inapposite where it is not
contended that counsel violated any rule and the district court is not choosing
among Rule 11’s variety of sanctions.
2
Because the parties are familiar with the facts, we do not repeat them here,
except where necessary to provide context for our ruling.
2
grounds that it “should have been obvious to plaintiff” that most of her claims were
barred by the statute of limitations and that, as to her remaining claims, Relator
“failed to satisfy the FCA’s scienter requirement.”3 The district court reasoned that
“defendants could not have ‘knowingly misrepresented’ their positions regarding
whether [Defendants] took airspace without just compensation because the case
establishing that they did in fact do so, [McCarran Int’l Airport v. Sisolak, 137
P.3d 1110 (Nev. 2006) (“Sisolak”)], was decided after the representations were
made.”
We vacated the award because, first, we found that “the standard the district
court used to assess the timeliness of [Relator’s] claims is no longer good law.”
Second, it appeared that the “district court found that the County could not have
knowingly made false certifications because the alleged misstatements occurred
before the Nevada Supreme Court’s ruling in [Sisolak]” but “the County submitted
twenty-four grant applications [that Relator alleged contained false statements]
after Sisolak was issued.” In vacating the attorneys’ fees award of $133,896.22,
we stressed that “[t]he district court should ‘make detailed findings in support of
any award’ on remand.”
3
“[T]he essential elements of False Claims Act liability are: (1) a false
statement or fraudulent course of conduct, (2) made with scienter, (3) that was
material, causing (4) the government to pay out money or forfeit moneys due.”
United States ex rel. Campie v. Gilead Scis., Inc., 862 F.3d 890, 902 (9th Cir.
2017) (citations omitted).
3
On remand, the district court granted Defendants’ second motion for
attorneys’ fees. The district court explained that it “maintain[ed] its prior position”
that Relator’s “claims were clearly frivolous,” now on the grounds that “there was
no way that plaintiff could satisfy knowledge or materiality.” A single paragraph
constituted the “detailed findings” this court ordered the district court to make to
support a fees award, which by that time had grown to $283,251.46.
II.
Assessing the district court’s holdings regarding Relator’s allegations as to
the elements of materiality and knowledge is complicated by the fact that neither
the district court nor this court have previously analyzed Relator’s allegations as to
the element of falsity. We do so now, and interpret Relator’s amended complaint
to have alleged two theories as to Defendants’ allegedly false statements.
First, Relator alleged that Defendants falsely stated in grant applications to
the Federal Aviation Administration (“FAA”) that they had complied or would
comply with the Uniform Relocation Assistance and Real Property Acquisition
Policies Act of 1970, 42 U.S.C. § 4601 et seq. (“URA”). Relator alleged that the
URA required, that in obtaining the airspace necessary for the functioning of the
airport, Defendants would “obtain appraisals for necessary acquisitions of airspace
up to the approach surface to the required height; offer to purchase the airspace for
at least the amount of the appraisals; refrain from taking possession of the airspace
4
until purchasing it; and refrain from requiring any owner of airspace to bring a suit
in inverse condemnation due to their failure to comply with the URA.”4 Relator
alleged that Defendants took none of these steps. Instead, Relator alleged that
Defendants took airspace near runways necessary for the functioning of the airport
by passing Ordinance 1599, which became effective in 1994 and provided no
payment to landowners. Relator alleged that Defendants continued to assert in
Airport Improvement Projects (“AIP”) and Passenger Facilities Charge (“PFC”)
applications, including from 2005 onwards, that Defendants had paid just
compensation for the airspace the airport was required to possess. Relator alleged
that these representations were knowingly false because Defendants had not
compensated landowners whose property allegedly was taken by the land use
ordinance and Defendants continued to defend inverse condemnation lawsuits
brought by the landowners.
Second, Relator alleged that Defendants certified to the government that
they had complied or would comply with FAA Advisory Circulars AC 150/5300-
13 (“Airport Design Circular”) and AC 159/5190-4A (“Model Zone Ordinance
4
Relator also alleged that the FAA Model Zoning Ordinance Circular
required that Defendants “refrain from any taking without payment of just
compensation under local law.” Although the Model Zoning Ordinance Circular is
not listed on the certification attached to Relator’s amended complaint, Relator
alleged that compliance with the Airport Design Circular—which is included in the
certification—itself “requires the airport operator to comply with [the Model
Zoning Ordinance Circular].”
5
Circular”) (together, “FAA Circulars”). Relator alleged that the FAA Circulars
required Defendants to acquire certain airspace near the airport, but that
Defendants did not acquire title or easements to at least some of the airspace they
were required to obtain.5 Relator alleged that the government relied upon
Defendants’ allegedly false certification of compliance with the FAA Circulars in
both AIP and PFC applications in awarding Defendants with funding from 2005
onwards.
On appeal, Defendants contend that Relator’s allegations that Defendants
made false statements were “clearly frivolous” on the sole basis that 49 U.S.C.
§ 47106(b)(1) and the assurance statement implementing that statute did not
require Defendants to acquire any airspace. Nevertheless, Defendants failed to
demonstrate that Relator frivolously alleged that Defendants falsely certified that
they would comply with the FAA Circulars. Relator alleged that these false
5
As quoted in the amended complaint, the Airport Design Circular requires
that certain airspace “be protected by acquisition of a combination of zoning,
easements, property interests, and other means,” and that certain other “airport
elements” be “on airport property,” including “[a]reas under the 14 CFR Part 77
Subpart C airport imaginary surfaces out to where the surfaces obtain a height of at
least 35 feet (10m) above the primary surface; and . . . [a]reas, other than those
which can be adequately controlled by zoning, easements, or other means to
mitigate potential incompatible land uses.” Neither the district court nor this court
have made any findings as to whether Defendants acquired all the airspace Relator
alleged they were required to obtain due to their certification of compliance with
the FAA Circulars. Defendants do not appear to challenge Relator’s argument that
Defendants did not acquire the airspace that Relator alleged the FAA Circulars
required Defendants to obtain.
6
statements obligated Defendants to acquire and pay for certain airspace that they
did not obtain. Defendants also failed meaningfully to challenge Relator’s
allegations that Defendants falsely certified compliance with the URA. We
therefore conclude that Defendants have not established that Relator’s allegations
that Defendants made false statements was “clearly frivolous” under this court’s
stringent standard.6
III.
To establish the element of materiality, Relator was required to establish that
the government would have denied Defendants’ grant applications if the
government had known that that Defendants were not in compliance and would not
comply with the alleged requirements of the URA (including payment of just
compensation) in acquiring necessary airspace, or the alleged requirement of the
FAA Circulars to acquire certain airspace. See Universal Health Servs., Inc. v.
United States, 136 S. Ct. 1989, 2003–04 (2016).
Previously, in affirming the district court’s dismissal of Relator’s claims, we
observed that Relator’s “complaint indicates only that the FAA conditioned its
payments on the County’s compliance with a long list of statutes, regulations, and
policies.” We held that Relator failed to state a claim under the FCA because she
6
We stress that we make no holding concerning Defendants’ actual
obligations in light of their certifications to abide by the URA and FAA Circulars.
7
“has not plausibly alleged that the FAA placed significant weight on the County’s
certification of compliance with” the URA or the FAA Circulars.7
Problematically, the district court on remand cited this court’s affirmance of
the Rule 12(b)(6) dismissal of Relator’s complaint to support its holding that
Relator’s complaint was “clearly frivolous.” Rather than making “detailed
findings” to support an attorneys’ fees award as instructed, it stated only that “[t]he
record presents no apparent avenue for plaintiff to properly allege that ‘the FAA
placed significant weight on the County’s certification of compliance with’” the
FAA Circulars and the URA “as to all passenger facility charge applications and
twenty-seven grant applications identified in the complaint” and that Relator “fails
to appropriately or persuasively address these concerns.”
We have stated in similar contexts that in assessing whether an action was so
frivolous as to permit an attorneys’ fees award to the defendant “it is important that
a district court resist the understandable temptation to engage in post hoc reasoning
by concluding that, because a plaintiff did not ultimately prevail, his action must
have been unreasonable or without foundation.” C.W. v. Capistrano Unified Sch.
7
We also observed that, the County “certified its compliance with the
relevant provisions only ‘as they relate[d] to’ [each] specific application” and
therefore held that Relator failed to plead adequately the element of materiality for
the alleged misrepresentations in the AIP applications from 2005 onwards because
they did not appear to “involve projects implicating Ordinance 1599.”
8
Dist., 784 F.3d 1237, 1245 (9th Cir. 2015) (internal quotation and citation omitted)
(assessing claims under the same standard of whether “the result is obvious or the
. . . arguments of error are wholly without merit” in the context of 20 U.S.C.
§ 1415(i)(3)(B)); see also Harris v. Maricopa Cty. Superior Ct., 631 F.3d 963,
975–76 (9th Cir. 2011) (assessing claims under 41 U.S.C. § 1988). “The award of
fees under the False Claims Act is reserved for rare and special circumstances.”
Pfingston, 284 F.3d at 1006–07. And, the standard for “[d]ismissal under Rule
12(b)(6) is not the same as the standard for frivolousness.” Capistrano Unified,
784 F.3d at 1248 (citing Neitzke v. Williams, 490 U.S. 319 (1989)).
Although Relator has not “nudged [her] claims . . . across the line from
conceivable to plausible” for the purposes of defending a motion to dismiss under
Fed. R. Civ. P. 12(b)(6), Ashcroft v. Iqbal, 556 U.S. 662, 680 (2009) (quotations
omitted), this does not mean her pleading as to materiality was “clearly frivolous”
under 31 U.S.C. § 3730(d)(4). Relator did allege materiality: that Defendants
promised to comply with certain laws, regulations, and guidance to obtain grant
funding that “they would not otherwise have been able to obtain.” Moreover, it is
conceivable that the government would deny a grant application if it learned that
the applicant intended not to comply with the federal rules that the applicant
certified it would abide by in its grant application. Further, Relator’s claim is
supported by the allegation that, at least in one case, the FAA followed-up after
9
approving one of Defendants’ applications to “inquire[] whether Clark County was
properly applying its funds . . . as Clark County has represented . . . to acquire”
land near McCarran’s runway.8
We instructed the district court to make “detailed findings in support of any
award.” It did not. Moreover, we conclude that Defendants have failed to
establish that Relator’s allegations concerning the element of materiality were
“clearly frivolous.” See Pfingston, 284 F.3d at 1006. Accordingly, the district
court abused its discretion in finding that Relator’s allegations concerning
8
Defendants challenge Relator’s allegations as to the element of materiality
by arguing that in each of Defendants’ twenty-seven applications from 2005–16
(apparently all AIP applications) the County certified its compliance with the
relevant federal laws, regulations, and guidance “only ‘as they relate[d]’ to the
specific application,” and that “none of the . . . [twenty-seven payment]
applications involved airspace or Ordinance 1599.” This was also the principal
argument Defendants raised in their second motion for attorneys’ fees before the
district court. While this argument appears more apt to challenge the element of
falsity than materiality, Defendants have not established that it was “obvious” that
Relator could not prove either element. Previously we stated that Relator had not
adequately alleged that these applications implicated Ordinance 1599 under the
standard of Fed. R. Civ. P. 12(b)(6). But it is not “obvious” from the record that
Defendants have established in support of their attorneys’ fees motion that none of
the projects involved technical specifications that triggered the alleged
requirements of the FAA Circulars and URA that Defendants possess (and have
provided just compensation for) some airspace near the airport’s runways,
including the airspace under “imaginary surfaces” defined by 14 C.F.R. § 77.19.
And, if any of these projects did obligate Defendants to possess airspace near the
airport, Defendants have not established that Relator’s allegations are “wholly
without merit” that either Defendants have not acquired the airspace that they
stated they would, or Defendants took the airspace through Ordinance 1599 but
have not compensated its owners as they stated they would.
10
materiality were “clearly frivolous” because that finding was implausible and
unsupported by the record. United States v. Hinkson, 585 F.3d 1247, 1262 (9th
Cir. 2009).
IV.
To establish the element of scienter, Relator was required to establish that
Defendants knowingly, recklessly, or in deliberate ignorance made false
statements. 31 U.S.C. § 3729(b)(1)(A); Universal Health Servs., 136 S. Ct. at
1996. “Innocent mistakes, mere negligent representations and differences in
interpretations are not false certifications under the Act.” Gonzalez v. Planned
Parenthood of Los Angeles, 759 F.3d 1112, 1115 (9th Cir. 2014) (citation omitted).
The district court concluded that Relator’s pleading was “clearly frivolous”
as to the element of scienter in a single sentence: “As this court has already stated
plainly, ‘[p]laintiff’s assertion that defendants knowingly misrepresented their
positions regarding whether defendants took airspace without just compensation
does not comport with this litigation history.’” The order the district court quoted,
in which the district court granted Defendants’ motion to dismiss under the Rule
12(b)(6) standard, reasoned, in a few more words, that Relator’s arguments “boil
down to a disagreement over the proper interpretation of Sisolak and of
defendants’ duties under the law post-Sisolak,” and that Defendants could not have
11
knowingly misrepresented they did or would not commit takings because they
honestly disagreed with Relator about what Sisolak required.
The district court’s one-sentence quotation from its order granting dismissal
under the Rule 12(b)(6) standard fails to support its holding that Relator’s pleading
as to scienter was “clearly frivolous.” See Capistrano Unified, 784 F.3d at 1248.
Moreover, Defendants’ briefing—like the district court’s opinion below—
addresses scienter only as to Relator’s first theory of false statements (that
Defendants promised they did not or would not take property without
compensating its owners, but did so), but not the second (that Defendants did not
acquire all the airspace they promised they possessed or would acquire). And,
even granting the proposition that the Nevada Supreme Court’s holding in Sisolak
does not guarantee victory by other property-owners affected by Ordinance 1599
in inverse condemnation suits against Defendants, Relator’s allegation that
Defendants purposefully adopted a policy that required landowners to sue for
compensation following the passage of Ordinance 1599 is not obviously false from
the record before us. Relator alleged that Defendants promised they had paid or
would pay compensation for all airspace they acquired, not that they would
compensate property owners only after losing inverse condemnation actions.
Again, the district court did not make detailed findings in support of the
award. Moreover, we find that Defendants have failed to establish that Relator’s
12
allegations as to scienter were “clearly frivolous,” and that the district court’s
contrary finding was an abuse of discretion because it is both unsupported and
implausible. See Hinkson, 585 F.3d at 1262.
V.
For the reasons stated above, the district court’s attorneys’ fees award cannot
be affirmed. And because we find that Defendants have failed to establish that
Relator’s allegations were “clearly frivolous,” we conclude that Defendants’
second motion for attorneys’ fees should be denied.9 Accordingly, the district
court’s grant of Defendants’ second motion for attorneys’ fees is REVERSED.
9
We also reject Defendants’ contention that the record is adequate to
support a finding that Relator’s action was “clearly vexatious, or brought primarily
for purposes of harassment.”
13