Grynberg v. Praxair, Inc.

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES CO URT O F APPEALS
June 6, 2006
FO R TH E TENTH CIRCUIT Elisabeth A. Shumaker
Clerk of Court
JACK J. GRYNBERG, Named as
United States of America, ex rel.,
Plaintiff-Appellee,
No. 05-1372
v. (D.C. No. 98-CV-00016-W YD)
(D . Colo.)
PRAXAIR, IN C.,
Defendant-Appellant,
NIELSON & ASSOCIA TES, IN C.,
Defendant.
OR D ER AND JUDGM ENT *
Before BARRETT, M cKA Y, and BALDOCK , Circuit Judges.
*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument. This order and judgment is
not binding precedent, except under the doctrines of law of the case, res judicata,
and collateral estoppel. The court generally disfavors the citation of orders and
judgments; nevertheless, an order and judgment may be cited under the terms and
conditions of 10th Cir. R. 36.3.
Defendant-appellant Praxair, Inc. (Praxair) appeals the order entered by the
district court denying its motion to recover attorneys’ fees and expenses under
31 U .S.C . § 3730(d)(4). Exercising jurisdiction pursuant to 28 U.S.C. § 1291, w e
conclude that the district court did not abuse its discretion in denying Praxair’s
request for fees and expenses, and we affirm.
A. Background R egarding the Underlying Qui Tam Action.
Plaintiff-appellee Jack J. Grynberg (Grynberg) filed this qui tam action
under the False Claims Act (FCA) against Praxair and defendant Nielson &
Associates, Inc. (Nielson). Grynberg claimed that defendants knowingly
presented or caused to be presented false valuations of royalties owed to the
federal government for carbon dioxide (CO 2 ) production in violation of 31 U.S.C.
§ 3729(a)(7). 1
In a prior appeal to this court, another panel of this court affirmed the
district court’s entry of summary judgment in favor of Praxair and Nielson on all
of Grynberg’s claims. In that appeal, the panel described the factual background
of this case as follow s:
1
Section 3729(a)(7) extends liability to any person w ho “know ingly 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). “This subsection has been referred to as
the ‘reverse false claims provision’ of the FCA.” United States ex rel. Aakhus v.
Dyncorp, Inc., 136 F.3d 676, 681-82 (10th Cir. 1998) (quotation omitted).
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Defendant Nielson, a small, privately held W yoming corporation,
produces and sells oil, hydrocarbon liquids and CO 2 from the
“M cCallum” fields in northern Colorado under leases with the United
States Government. Defendant Praxair owns and operates an
industrial plant designed to purify and convert Nielson’s raw CO 2
into liquid suitable for beverages, food processing and other uses.
The valuation method for CO 2 royalties owed to the Government is
based on an “Agreement for the Sale of Carbon Dioxide”
(Agreement) executed in June, 1983 between Conoco, Inc. (Conoco)
(w ho later sold to Nielson) and Praxair’s predecessor, Liquid
Carbonic Corporation (Liquid Carbonic). The current Agreement
between Nielson and Praxair remains unchanged from the 1983
version in all relevant aspects. Grynberg alleges N ielson and Praxair
perpetuated Conoco and Liquid Carbonic’s practice of submitting
reports misstating the valuation of CO 2 production, resulting in an
underpayment of royalties owed to the Government.
United States ex rel. Grynberg v. Praxair, Inc., 389 F.3d 1038, 1042 (10th Cir.
2004), cert. denied, 125 S. Ct. 2964 (2005).
As the district court explained in its summary judgment order, “[i]n an
Amended Complaint . . ., Grynberg modified his allegations regarding gas
undervaluing practices and added allegations that gas volume was underreported.”
United States ex rel. Grynberg v. Praxair, Inc., 207 F. Supp. 2d 1163, 1165
(D. Colo. 2001). The case then proceeded as follows:
Pursuant to the [FCA], Grynberg’s Complaint was filed under seal
and remained sealed until . . . the U.S. Department of Justice advised
the Court that the Government would not intervene. . . . At that time,
the seal was lifted and the Amended Complaint was served on the
defendants.
[] A fter this Court denied M otions to Dismiss filed by both Praxair
and Nielson, the parties engaged in lengthy discovery proceedings.
Thereafter, . . . the Court heard oral argument on summary judgment
motions filed by both Praxair and Nielson. Exhaustive briefs and
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exhibit submissions by all parties [. . .] provided the Court with an
extensive factual record of the practices at issue in this case, as well
as the Government’s knowledge of and involvement in the
defendants’ activities.
Id. at 1165-66 (footnote omitted).
Based on the extensive factual record and arguments submitted by the
parties, the district court subsequently granted summary judgment in favor of
Praxair and Nielson on three different grounds, holding that: (1) Grynberg failed
to put forth evidence show ing that either defendant know ingly made false
statements to the government, id. at 1177-81; (2) Grynberg’s claims were
statutorily barred because they were based on information and conduct known to
the Government prior to 1986, id. at 1181-82; and (3) the court lacked subject
matter jurisdiction over Grynberg’s claims because his qui tam action was based
on publicly disclosed allegations or transactions and he was not an original source
of the information, id. at 1182-86.
In its summary judgment order, the district court also separately addressed
Grynberg’s claims against Praxair, concluding that “Grynberg’s claims against
Praxair must also be rejected because he has not shown that Praxair made any
false statements to reduce obligations to the U.S. government.” Id. at 1186.
Specifically, the district court made the following factual findings and legal
determinations concerning Grynberg’s claims against Praxair:
All royalty reports and payments were prepared and submitted by
Conoco and Nielson, without any involvement by Praxair [or its
predecessor, Liquid Carbonic]. Praxair’s only role was providing
accurate information (i.e. tailgate volume measurements, oxygen use
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volumes, sales price data) pursuant to [its] A greement [with
Nielson]. Because it was not the lessee, it had no royalty obligations
to the government and its economic position was fixed by the
Agreement, regardless of the royalties Conoco and Nielson paid. The
only alleged misrepresentations Grynberg assigns to Praxair and
[Liquid Carbonic] are the 1992 report that ice plant CO 2 vapor w ould
be recycled and a 1996 under estimate of CO 2 losses associated with
the plant. Given that (i) the challenged royalty practices were
approved [by the government] both before and after these
representations, (ii) the government knew the extent of venting
[losses] based on knowledge of both wellhead and tailgate volumes
and (iii) the government approved the venting and royalty practices
even after learning that ice plant vapors were not being recycled,
there is no basis for any inference that these [Liquid Carbonic] and
Praxair statements w ere made for the purpose of reducing royalty
obligations. M oreover, Grynberg argues that wellhead volumes and
an alternative CO 2 market value should have been used to calculate
royalties. The wellhead measurements and the decision of what
value to use when calculating royalties were always controlled by
Conoco and Nielson. Praxair was thus totally irrelevant to the
royalty underpayments that G rynberg alleges.
Id.As noted above, Grynberg subsequently appealed to this court, and another
panel of this court affirmed the district court’s conclusion that it lacked subject
matter jurisdiction over G rynberg’s FCA claims. See G rynberg, 389 F.3d at
1042, 1052, 1054 (holding that Grynberg’s complaint was based on publicly
disclosed information under 31 U.S.C. § 3730(e)(4)(A), and that the character of
his investigation was insufficient to qualify him as an original source of the
information under § 3730(e)(4)(B)). The panel “therefore [did] not reach the
remainder of the issues presented in Grynberg’s appeal.” Id. at 1042.
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B. Praxair’s M otion to Recover A ttorneys’ Fees and Expenses.
A defendant who is sued under the FCA may be awarded reasonable
attorneys’ fees and expenses “if the defendant prevails in the action and the court
finds that the claim of the person bringing the action was clearly frivolous, clearly
vexatious, or brought primarily for purposes of harassment.” 31 U.S.C.
§ 3730(d)(4). After the district court entered summary judgment in its favor,
Praxair filed a motion in the district court to recover its attorneys’ fees and
expenses under § 3730(d)(4), arguing that “G rynberg’s persistence in this lawsuit
was clearly frivolous after it became apparent Praxair [and Liquid Carbonic] had
no responsibility or involvement with [Nielson’s and] Conoco’s royalty
payments.” Grynberg, 389 F.3d at 1058. The district court summarily denied
Praxair’s motion, stating only that, “[w]hile the claims in this case were properly
dismissed on summary judgment, review of the record in this case leaves me
unable to find that [Grynberg’s] Complaint was clearly frivolous, clearly
vexatious, or brought primarily for the purposes of harassment.” Id. (citation
omitted).
In the prior appeal to this court, Praxair cross-appealed the denial of its
motion to recover attorneys’ fees and expenses. Id. at 1042. W ith regard to
Praxair’s cross-appeal, the panel first determined that the district court had
subject matter jurisdiction to award attorneys’ fees under § 3730(d)(4) even
though the underlying FCA action had been dismissed for lack of subject matter
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jurisdiction. Id. at 1055-58. The panel then reversed the district court’s denial of
Praxair’s motion, and the panel offered two reasons to support its reversal. First,
the panel noted that the district court “did not hold a hearing on this matter and
the truncated order provides no guidance as to whether Praxair’s theory [under
§ 3730(d)(4)] was considered.” Id. at 1058-59.
Second, after summarizing the factual findings of the district court which
demonstrated that Praxair was “irrelevant” to the alleged royalty underpayments,
the panel stated that “[b]ecause the timing of Grynberg’s discovery of these facts
is contrary to a finding that he could reasonably believe his claim against Praxair
had a scintilla of merit throughout the litigation, we must remand to the district
court for further discussion and findings.” Id. at 1059. In the “Conclusion”
section of its opinion, the panel then concluded that “the district court failed to
provide sufficient information to afford a review of the denial of attorney fees.”
Id. The panel therefore remanded the case to the district court “for further
proceedings consistent with this opinion.” Id.
C. The District Court’s Remand Decision.
After this matter was remanded to the district court, Praxair filed a renewed
motion to recover attorneys’ fees and expenses under § 3730(d)(4); 2 Grynberg
filed a response to the motion; and Praxair filed a reply. Both sides also
2
In its renewed motion, Praxair requested that the district court award it
$1,414,195.42 in attorneys’ fees and expenses. See Aplt. App. 126.
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submitted extensive documentation to the district court to support their respective
positions. In addition, the district court held a hearing on Praxair’s motion. After
considering the parties’ briefs and the arguments of counsel at the hearing, the
district court entered a written order denying Praxair’s motion.
In its order, the district court summarized the parties’ arguments and the
issues before it as follow s:
Following remand, . . . Praxair filed a second M otion to
Recover Attorneys’ Fees and Expenses asserting that “[f]rom the
outset, this action by . . . Grynberg . . . has been []clearly frivolous,
clearly vexatious, or brought primarily for the purpose of
harassment,” because Grynberg knew, even before filing suit, that
Defendant Nielson was the party responsible for measuring gas
volume and calculating royalty payments, and this knowledge was
“repeatedly ratified during discovery and pretrial proceedings.” In
response, Grynberg contends that his prefiling investigation led him
to reasonably believe that Praxair caused Nielson to calculate and
pay royalties incorrectly, and that it was not until this Court entered
summary judgment that “the factual and legal issues of whether
Praxair had assisted in a false filing were resolved.”
....
As an initial matter, the Court finds that there is nothing in the
record to suggest that Plaintiff brought this case primarily for
purposes of harassment. Therefore, the question that remains is
whether the action was brought in a way that was clearly vexatious or
clearly frivolous. Grynberg’s overall theory of the case derived from
his belief that royalties should have been paid using [Nielson’s]
wellhead volumes (gross proceeds), rather than [Praxair’s] tailgate
volumes (net proceeds after processing). As this Court found in its
Order granting summary judgment, Praxair had no royalty
obligations to the government, all royalty reports and payments were
prepared and submitted by Conoco and Nielson, and Praxair’s only
role was to provide tailgate volume measurements, oxygen use
volumes, and sales price data pursuant to its Agreement with
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Nielson. However, Grynberg’s claim against Praxair was not based
on allegations that Praxair, itself, filed false reports with the United
States, but rather that Praxair “caused” the false filings because
Nielson and Praxair acted in concert and “systematically understated
the volume and the value of the natural CO 2 gas produced from the
M cCallum Field.”
Aplt. App. at 427, 428-29.
The district court then analyzed Grynberg’s claims from two points in time,
looking first at the “time [Grynberg] filed this action,” and next at “the Summary
Judgment phase.” Id. at 429.
Grynberg contends that he based his belief that Praxair was providing
inaccurate price information to Nielson on his knowledge of CO 2
market rates, his FO IA request which stated that the government
required that all excess CO 2 be recycled (and not vented), as well as
information that Praxair was paying Nielson “roughly 10% of the
price quote Grynberg received from Praxair.” Thus, I find that at the
time he filed this action, Grynberg had sufficient facts in his
possession to state a claim against Praxair that was neither
groundless or without foundation.
At the Summary Judgment phase, Grynberg continued to assert
that royalties should have been paid on the basis of [N ielson’s]
wellhead volumes, and further claimed that the government approved
payment based on tailgate information only because of various
misrepresentations by Defendants, including Praxair’s “statement
that CO 2 vapor from the dry ice plant would be captured and recycled
and [] statements regarding the extent of CO 2 gas that would not be
included in royalty calculations as a consequence of tailgate
measurement.” Grynberg, 207 F. Supp. 2d at 1175, ¶ 50. In
deciding the M otion for Summary Judgment, the Court clearly
disagreed with the arguments made by Grynberg and found no basis
for his assertion that Praxair’s statements “were made for the purpose
of reducing royalty obligations.” Grynberg, 207 F. Supp. 2d at 1186.
However, simply because the Court ultimately concluded that
Grynberg could not show material facts in dispute, Grynberg had at
least a reasonable basis to believe that he could pursue his claim
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against Praxair and his arguments at the summary judgment phase
were not wholly without merit. Accordingly, I cannot find, based on
the record before me that Grynberg’s claims were clearly frivolous,
clearly vexatious, or brought primarily for purposes of harassment.
Id. at 429-30.
W e agree with the district court that, “at the time he filed this action,
Grynberg had sufficient facts . . . to state a claim against Praxair that was neither
groundless or without foundation.” Id. at 429. The much closer issue is whether
the same can be said of the summary judgment phase, and we address that issue
below .
D. Alleged Violation of the “M andate Rule.”
Before addressing the summary judgment evidence that was before the
district court, we need to address Praxair’s argument that the district court’s
decision on remand w as in violation of the mandate set forth in this court’s prior
opinion. See Aplt. Br. at 26-32. According to Praxair, this court’s prior opinion
established, as a matter of law , that Grynberg knew his claims w ere clearly
frivolous “once [he] discovered Praxair’s lack of involvement in royalty
calculation, reporting and payment, and its consequent irrelevance to the alleged
underpayments.” Id. at 26-27. Praxair thus argues that the only issue before the
district court on remand w as “the temporal factual determination of when
Grynberg made this discovery.” Id. at 27.
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W e disagree. “Although a district court is bound to follow the mandate,
and the mandate controls all matters within its scope, . . . a district court on
remand is free to pass upon any issue which was not expressly or impliedly
disposed of on appeal.” Proctor & Gamble Co. v. Haugen, 317 F.3d 1121, 1126
(10th Cir. 2003) (quotation omitted); see also Hicks v. Gates Rubber Co.,
928 F.2d 966, 971 (10th Cir. 1991) (noting that with a general mandate, the
district court “is free to decide anything not foreclosed by the mandate”)
(quotation omitted). Here, while this court’s prior opinion specifically noted that
“the timing of G rynberg’s discovery of [the facts enumerated herein] is contrary
to a finding that he could reasonably believe his claim against Praxair had a
scintilla of merit throughout the litigation,” Grynberg, 389 F.3d at 1059, the panel
did not explicitly limit the district court to considering only the “timing” issue on
remand. Instead, the panel remanded in general terms “for further discussion and
findings.” Id. W e therefore reject Praxair’s argument that the district court
violated this court’s mandate.
E. Analysis of the District Court’s Remand Decision.
In this court’s prior opinion, the panel set forth the standards that govern
our review in this case. First, “[w]e review the district court’s decision to aw ard
attorney fees for an abuse of discretion . . . .” Grynberg, 389 F.3d at 1055.
“Under the abuse of discretion standard, the decision of a trial court will not be
disturbed unless the appellate court has a definite and firm conviction that the
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lower court made a clear error of judgment or exceeded the bounds of permissible
choice in the circumstances.” Id. at 1058 (quotation omitted).
Second, “[w]hen determining whether a plaintiff should be ordered to pay
the defendant’s attorney fees, we apply the standard enunciated in Christiansburg
G arm ent Co. v. EEO C, 434 U.S. 412, 421 . . . (1978).” Id. Under this standard:
[t]he plaintiff’s action must be meritless in the sense that it is
groundless or without foundation. The fact that a plaintiff may
ultimately lose his case is not in itself a sufficient justification for
the assessment of fees. . . . [A ] plaintiff should not be assessed his
opponent’s attorney’s fees unless a court finds that his claim was
frivolous, unreasonable, or groundless, or that the plaintiff continued
to litigate after it clearly became so. . . .
Id. (quotation omitted).
Finally, the panel “recognize[d] that the Christiansberg standard is a
difficult standard to meet.” Id. at 1059 (quotation omitted). As a result, the panel
emphasized “that rarely will a case be sufficiently frivolous to justify imposing
attorney fees on a plaintiff.” Id. (quotation omitted).
H aving review ed the lengthy appellate briefs submitted by the parties, w e
must compliment counsel for both sides on the quality of the writing and
arguments. That said, we also note that the parties’ respective positions are
succinctly set forth in the oral arguments advanced by counsel at the hearing that
was held before the district court on remand. In particular, during the hearing,
see Aplt. App. at 338-66, counsel for Praxair argued very persuasively that
Grynberg knew from day one of this litigation that, as the district court found,
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“Praxair was . . . totally irrelevant to the [alleged] royalty underpayments.”
Grynberg, 207 F. Supp. 2d at 1186.
As the district court found, however, the summary judgment record
contains independent evidence that arguably supports Grynberg’s claim that
Praxair itself (or its predecessor, Liquid Carbonic) made misrepresentations to the
government for the purpose of understating the amount of CO 2 that was lost
during processing at its plant. See Aplt. App. at 429. Thus, even if the district
court was correct when it determined that “there is no basis for any inference that
these [Liquid Carbonic] and Praxair statements were made for the purpose of
reducing royalty obligations,” Grynberg, 207 F. Supp. 2d at 1186, the statements
arguably facilitated the alleged understating of CO 2 volume, and thereby “caused”
a reduction in N ielson’s royalty obligations.
As articulated by Grynberg’s counsel during the hearing before the district
court, see Aplt. App. at 381-93, Grynberg’s allegations concerning Praxair’s and
Liquid Carbonic’s alleged misrepresentations are based on three documents
contained in the summary judgment record, and the district court discussed each
of the documents in its summary judgment order. The first document was created
by Liquid Carbonic in 1992.
In 1992, [Liquid Carbonic] added a dry ice manufacturing facility to
its plant. Because the plant is on land leased from the Federal
government, [Liquid Carbonate] sought permission from the [Bureau
of Land M anagement] to construct that facility. In a September 1,
1992, memo, [Liquid Carbonate] advised (among other things) that
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CO 2 vapor released from the dry ice machinery would be piped back
into the main CO 2 plant. There is no evidence that this was not
[Liquid Carbonate’s] intent w hen this statement w as made. The plan
to recycle the CO 2 vapor, however, was later abandoned as
uneconomical.
Grynberg, 207 F. Supp. 2d at 1169 (emphasis added); see also Aplee. Supp. App.,
Tab 11, Att. 3.
The second document was created in October 1996 by a representative of
Nielson, and the document memorialized certain oral statements that were made
by Praxair during that time period.
On August 22, 1996, [the Department of Interior’s M inerals
M anagement Service] issued to Conoco and Nielson an “Order to
Comply” pursuant to 30 C.F.R. § 206.154, charging them with
having incorrectly reported production and royalties from M cCallum
wells. . . .
....
[] BLM representatives met subsequently with representatives of
Praxair, Nielson and Conoco. . . . BLM ’s questions and concerns
about the “tailgate” measurement of gas volumes for royalty
purposes were addressed at that meeting. In an October 21, 1996,
follow-up letter to BLM , Nielson’s Chief Operating Officer noted
that at the meeting Praxair had described the operation of its plant,
the use of CO 2 gas in its processes that result “in a 20-30%
reduction in the eventual quantity of pure CO 2 available for sale”,
and the variables that can influence the extent of the CO 2 used in the
plant processing.
Grynberg, 207 F. Supp. 2d at 1170 (emphasis added); see also Aplee. Supp. App.,
Tab 35.
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The third document was described by the district court as an “‘Extension
Agreement’ covering Nielson’s continued sale of CO 2 to Praxair from the
M cCallum fields,” Grynberg, 207 F. Supp. 2d at 1172, and it was apparently
executed in M ay 2000, see Aplee. Supp. App., Tab 37. As further described by
the district court:
Although the Extension Agreement is substantially similar to the
Agreement originally entered into between Conoco and [Liquid
Carbonic], it is modified to account for various changes in actual
practices (i.e. addition of dry ice production, reduction in returned
gas volumes, recognition of venting losses, etc.). Noting the pending
Grynberg action, Nielson asked that M M S confirm its continuing
approval of Nielson’s CO 2 production, sales and royalty activity, as
reflected in the Extension Agreement. . . . The Extension Agreement
included the following provision[]:
4.4. During the production of Finished Product, Praxair’s Plant
produces vent gases and both parties agree that under normal
operating conditions there may be significant and substantial losses
of the CO 2 stream incurred in order to produce Finished Product.
The amount of losses will vary with the composition of the CO 2
stream, but they may from time to time exceed fifty percent (50%) of
the volume of the CO 2 stream which is delivered by Seller to
Praxair’s Plant[.]
Grynberg, 207 F. Supp. 2d at 1172 (emphasis added).
Because it is undisputed that the government was eventually apprised of
and approved the C O 2 losses that were occurring during processing at Praxair’s
plant, id. at 1169-72, 1186, we agree with Praxair that these documents were
ultimately of limited value to Grynberg. On the other hand, the documents
provided at least some evidence to support Grynberg’s claim that Praxair
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facilitated Nielson’s alleged understating of CO 2 royalties by misrepresenting the
extent of the CO 2 losses that were occurring during processing at its plant.
Specifically, as found by the district court on remand, see Aplt. App. at 429-30,
these documents arguably show that Praxair or its predecessor assisted Nielson in
obtaining governmental approval for N ielson to pay royalties based on tailgate
volume information (i.e., the volume of processed CO 2 produced by Praxair or its
predecessor) by: (1) affirmatively representing that all CO 2 losses which occurred
during dry ice processing would be recycled, when that turned out not to be the
case; and (2) understating overall processing losses during the years 1996 to
2000.
As set forth above, our review of the district court’s denial of Praxair’s
request for an award of attorneys’ fees and expenses is tightly constrained by the
governing standards under § 3730(d)(4) and the abuse of discretion standard of
review. See G rynberg, 389 F.3d at 1058-59. As a result, while w e agree with
Praxair that Grynberg failed to prove that the above-referenced statements were
made with a fraudulent intent to deceive the government and thereby reduce
Nielson’s royalty obligations, we conclude that the district court did not abuse its
discretion when it determined that the claims against Praxair were not clearly
frivolous, clearly vexatious, or brought primarily for purposes of harassment.
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Accordingly, the district court’s order denying Praxair’s motion to recover
attorneys’ fees and expenses is AFFIRMED.
Entered for the Court
M onroe G. M cKay
Circuit Judge
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