Transcript

IN THE SUPREME COURT OF THE UNITED STATES

ROCKWELL INTERNATIONAL CORP., ET AL., Petitioners v. UNITED STATES, ET AL.

Washington, D.C.

Tuesday, December 5, 2006

The above-entitled matter came on for oral argument before the Supreme Court of the United States at 11:09 a.m.

APPEARANCES: MAUREEN E. MAHONEY, ESQ., Washington, D.C.; on behalf of Petitioners. MARIA T. VULLO, ESQ., New York, N.Y.; on behalf of Respondent Stone MALCOLM L. STEWART, ESQ., Assistant to the Solicitor General, Department of Justice, Washington, D.C.; on behalf of Respondent United States

P R O C E E D I N G S

(11:09 a.m.)

CHIEF JUSTICE ROBERTS: We will hear argument next in 05-1272, Rockwell International Corporation versus United States. Ms. Mahoney.

ORAL ARGUMENT OF MAUREEN E. MAHONEY

ON BEHALF OF PETITIONERS

MS. MAHONEY: Mr. Chief Justice, and may it please the Court:

The Tenth Circuit in this case correctly held that Stone could not share in the award given by the jury unless he was an original source of pondcrete allegations. But it then went on to find that he was an original source based upon a misinterpretation of the core requirements of the statutory definition.

JUSTICE SCALIA: Ms. Mahoney, let me ask you a question. Am I wrong about this? It seems to me that if he was not an original source, not only shouldn't he get any money, but neither should the government. Isn't that the way the statute reads?

MS. MAHONEY: Your Honor, that is one possible interpretation of the statute.

JUSTICE SCALIA: How is there any other possible one? It says there's no jurisdiction in this situation.

MS. MAHONEY: I think the way that the courts have handled it below is that it says that there's no jurisdiction unless it is a claim brought by a relator who is an original source or if it's brought by the United States. And if the relator drops out, I think courts deem it to at that point be viewed as a claim brought by the United States. It's sort of a retroactive amendment of the pleadings.

JUSTICE SCALIA: It's not brought by the United States as long as he's still there.

MS. MAHONEY: That's correct.

JUSTICE SCALIA: That's your argument.

MS. MAHONEY: Well, it can't be, Your Honor, because under the statutory terms, under section 3720(a) the Attorney General has the authority to bring a claim on behalf of the United States. There is no authority for the United States to bring a claim on behalf of the relator. Instead there is a second type of claim under section 3730, and that's a section (b), which authorizes a relator to bring a claim on behalf of himself and the United States.

Similarly, Your Honor, if you look at the provisions in section (d), which authorize an award to a relator, it requires that the action be one brought under section (b), that is in other words it be an action brought by the relator which the United States then proceeds on for (d)(1).

JUSTICE SCALIA: I guess it really depends on whether you think the language "if the Government proceeds with an action" is equivalent to the Government's bringing the action.

MS. MAHONEY: Well, I don't think it can be, Your Honor, because if you look at the language throughout these sections, it differentiates between two kinds of actions, actions brought by the United States or the Attorney General and actions brought by the relator. And it is only an action brought by the relator under section (b) that authorizes an award under section (d). And it consistently talks about that.

What they're really arguing, Your Honor, is that --

JUSTICE SCALIA: Well, wait. It says under 3, what is it, (c)(3) I guess, if the elects not to proceed with the action, the person who initiated the action shall have the right to conduct the action. Now, that suggests that if the Government intervenes the Government is proceeding with the action, right?

MS. MAHONEY: That's correct.

JUSTICE SCALIA: But you say that's different from the Government bringing the action.

MS. MAHONEY: Absolutely. If you look at, if you look at the language in section (d), for instance, it says if the government proceeds with an action brought by a person under section, subsection (b). In other words, it has to be an action under subsection (b) in order to authorize an award at all. The Government has -- has authority under subsection (a) to bring an action, but it has no authority to bring it on behalf of the relator.

The statute consistently uses these same terms, and this Court in Graham County, which was a decision dealing with the statute of limitations, actually described this section in the same way, saying that there are two kinds of actions, those that are brought by the Attorney General under subsection (a) and those that are brought by a relator under subsection (b), which the United States can then proceed with.

What the relator is really arguing here is that if you look at the -- at subsection (e)(4), they're adding a phrase that's not there. They're saying that there's no jurisdiction over an action under this section if it is brought by the Attorney General or brought by a relator who is an original source or the United States intervenes and proceeds with the action. And that's not in here.

JUSTICE SCALIA: You're being very picky-picky with this text, considering that you're willing to swallow whole the notion that so long as the -- so long as the original party, so long as the non-government plaintiff drops out, all of a sudden it become as action brought by the United States. That's a very, very expansive notion of what "brought by the United States" means.

What I'm saying is or, to put it another way, if you take your picky-picky notion of being brought by the United States, to be logical about it you must reach the conclusion that if you defeat the private plaintiff under -- under he's not original source, the whole thing is thrown out, not just his recovery but the Government's recovery.

MS. MAHONEY: Your Honor, of course that would be great for Rockwell, and so --

JUSTICE SCALIA: I know, but it would be so extreme that we're not likely to buy it.

MS. MAHONEY: Well, we don't argue for that because I think that the Court has said that the Government's intervention does not cure defects with respect to the relator, and therefore, if the relator didn't have -- that -- doesn't have standing -- you know, part of this goes to the issue of the Stevens assignment. If they don't have an assignment, then they don't even have standing to be in the action, they have no right to recover.

And so if you're correct that it can't be cured, in effect, through a procedure like, say, 28 U.S.C. section 1553, which allows amendments to defective jurisdictional allegations where I think that, while the courts don't technically require it, they could say that really this, while it was pled as a section (b) action, when the relator drops out we could treat it as a section (a) action, because --

JUSTICE GINSBURG: Otherwise, the Attorney General could just bring it all over again, a fresh complaint, and that would be wasted motion?

MS. MAHONEY: That's correct, Your Honor. I think it is a pragmatic rule. But again, if the rule is that they lose as well, then so be it. The fact is this statute uses the term that is used in section (a), which is "brought by the United States." And it makes perfect sense because otherwise think of what the consequences are if the relator can simply copy an indictment, file a complaint, and say -- and the Government intervenes because it's a major action, and then they say, aha, you're stuck with me because you've intervened and now there's jurisdiction and there's no problem, I don't have to be an original source.

JUSTICE SCALIA: They don't have to give them any money, though. The court doesn't have to.

MS. MAHONEY: Your Honor, I think that you could say that they don't have to give them money.

JUSTICE SCALIA: But you'd then have to pay his attorneys' fees. That's what really this is about, isn't it?

MS. MAHONEY: Well, it is about that, but we don't have to pay his attorneys' fees, Your Honor, if he doesn't get a share, because the way that section (d) is written is it says that a relator who is paid a share of the proceeds shall also be entitled to attorneys' fees. So this is not just an issue between the United States and Stone. The statute controls the award of fees based upon whether he's entitled to a share. So even if this weren't an issue of jurisdiction, if he's not entitled to a share under a section (d)(1), then he's also not entitled to attorneys' fees. And therefore, we would win. He would still need to -- whether it's a jurisdictional rule or a substantive rule, if he's not an original source he's out.

But the share is not the only issue that makes the Government's -- or that makes Stone's argument implausible here. That is that once the relator is in the action, the United States can't get them out of the action. Even if they don't have to pay them money, under subsection (c) they have a whole range of rights to participate in the action. They can't dismiss the relator. So it makes no sense to read this statute to say that someone who copies an indictment, files a complaint, the Government intervenes, they're in there forever. It instead makes much more sense to read the terms the way they're used elsewhere in the statute, to mean that there is only jurisdiction if it is a section (a) claim brought by the United States on behalf of itself or if it is a section b) claim by a relator that is an original source. That's what makes sense of the statute as a whole.

If I could turn to the issue of whether or not the Tenth Circuit correctly held that Stone had direct and independent knowledge of the information on which his allegations were based. It bears emphasis that every act that he had to prove in order to recover on the pondcrete allegations -- whether they're measured at the beginning of the case or the end of the case doesn't matter -- every single act occurred after he left the plaintiff, after he had left his job. And we can see that from the outset of the case. If you look at his Responses to Interrogatories at JA-189 to 190, he identifies the factual basis for the pondcrete allegations that he is asserting. And that factual basis is described he is asserting and that factual basis is described as Rockwell's knowing storage of pondcrete on outdoor pads at the plant in violation of RCRA with false certification from 1987 to 1989.

Now, he left his job in March of 1986. How could he possibly have direct and independent knowledge of those predicate acts?

JUSTICE KENNEDY: Well, suppose a company has a plan to defraud the Government and it use a certain chemical mix to save money and that's what the real fraud is. And it puts it in place and it puts it in place in 1988. And the -- and it has just two containers full of this. And the relator knows about it. The relator then quits. Then for 10 years the company does the same thing, following the same patterns, same method, same improper formula.

And he then rings -- he then brings this to the attention of the Government in the proper way and files a suit. He cannot recover for the later action which was the same pattern, practice?

MS. MAHONEY: Perhaps, Your Honor, in certain circumstances. I think the key question is what's the standard, and he has to have substantial knowledge about core fraudulent acts. And it may be reasonable in your hypothetical or some others to infer that he knew plenty about this fraudulent conduct and had plenty of reason to conclude that it was continuing on.

But here, Your Honor, nothing of the kind happened. He didn't know about any fraudulent conduct pertaining to pondcrete before he left. And In fact, his allegations start in 1987. He does not say that there were pondcrete violations before then and indeed there were not.

The reason there weren't is because when he was at the plant Rockwell was producing hard pondcrete, hard pondcrete, and it wasn't storing it on site, it was shipping it to Nevada. So he couldn't -- and it wasn't even clear that it was subject to RCRA because DOE didn't enter into a RCRA compliance agreement until after he left.

He also concedes in his deposition that he was not, except with one exception -- he was not aware of any time when Rockwell affirmatively represented that it was in compliance with environmental safety and health provisions when it was not. That's JA-106. So he didn't -- unlike your hypothetical, he didn't know anything about there being a pondcrete fraud prior to the time of his departure and doesn't even allege one. Instead, what the Tenth Circuit rested upon was the fact that he had reviewed a design for making pondcrete 5 years -- in fact, not for making pondcrete; it was actually a design for removing sludge from the ponds -- 5 years before any of the events at issue here, and he said he predicted there would be a design problem.

CHIEF JUSTICE ROBERTS: It wouldn't have to have anything to do with pondcrete at all. The statute just says the information on which his allegations are based. They don't say the allegations that eventually give rise to a recovery.

MS. MAHONEY: Your Honor, every court that has considered that question has said that it has to be analyzed on what they call a claim by claim basis. Let me explain the reason. First of all, let me explain what they mean by claim by claim. They really mean a factual theory of falsity, and that it has to be done on a claim by claim basis, and here's why --

JUSTICE SCALIA: Factual theory of falsity, that doesn't mean anything to me.

MS. MAHONEY: A theory of falsity. In other words, a claim, what is called a claim in these cases in the claim by claim analysis is a theory of falsity. In other words, it's why were -- why was the fraudulent claim false? Because there may be a certification, for instance, of compliance with let's say all laws and there could be five different, completely different fact patterns as to why that was false, and the damages might be completely differ as well.

So all of the courts have said that's really the way that FCA cases are litigated, that's really what we call a claim.

And then, moving back, if you didn't do it on a claim by claim basis, you would allow a relator to copy an indictment that he knows nothing about, come to court, file it, add one theory that he does know about, an overcharge for five dollars on a hammer, say that, I'm now entitled to proceed on the whole thing and if the Government doesn't intervene I get a minimum of 25 percent of the --

CHIEF JUSTICE ROBERTS: That's one way to look at it. Another way would be you would allow a relator in a situation who alleges a particular fraud that causes the government to examine the books and uncovers a different fraud to recover on that basis. It's an unusual situation to have a jurisdictional prerequisite determined only after the case is over.

MS. MAHONEY: But, Your Honor, it doesn't have to be determined after the case is over. These inquiries should -- it should have been determined here as well at the very outset of the case. And it was. It was just determined wrong.

We do not have to show that it was wrong at the end of the trial in order to prevail in this case. It was wrong at the beginning. The interrogatories --

CHIEF JUSTICE ROBERTS: If you only show that it's wrong at the end, you still say that they should be thrown out.

MS. MAHONEY: Yes, we do, Your Honor but it is not by any means necessary to the outcome in this case. And the reason why I think that you do have to at least allow for the possibility of looking at the end of the case, whether there is jurisdiction or not, is because of the nature of this particular jurisdictional bar. This is a jurisdictional bar that turns on the nature of the allegations at issue in the case.

Much like -- I think the Foreign Sovereign Immunities Act is a perfect example because it too talks about jurisdiction being predicated on, for instance, commercial -- claims that are based upon commercial activity. Suppose that the plaintiff at the outset of the case when the 12(b)(1) motion is filed posits one theory of the case that involves a predicate commercial act. But when it gets to trial he's abandoned that theory and now he doesn't have any commercial act. Surely the Court would say you have to satisfy jurisdiction over the theory that has actually gone to trial.

This statute is very much the same. And it should not be read in a way that allows relators to simply disguise the true basis of their claims, hide the relevance of the public information, and then just shift gears when you get to trial.

But here again, if we just look at the very beginning of the case, he does identify in those interrogatory responses, for instance, what the factual basis for the pondcrete allegations are. All that factual basis is all identified as -- as core acts that occurred after he left the plant. So we can look back in this case and say that the trial court erred at the outset by not dismissing this portion of his claim as well as, in fact, should have dismissed the whole thing, Your Honor.

CHIEF JUSTICE ROBERTS: Well, his allegation was that this, the design is not going to work.

MS. MAHONEY: But Your Honor --

CHIEF JUSTICE ROBERTS: That's not an allegation that's -- I mean, it is either true or it's not true. The fact that you find out after he's left, after he's been terminated, that it doesn't work, I don't see how that should affect the validity of his allegations.

MS. MAHONEY: Because, Your Honor, this, this is a statute about fraud. It's not a statute that's violated because Rockwell may have had a suboptimal pipe. That's not, that's not even the RCRA violation. That's not -- and it is certainly not a False Claims Act violation. They weren't selling pondcrete to the United States. He didn't know about a plan to defraud the United States.

CHIEF JUSTICE ROBERTS: They were certifying their compliance with the applicable laws --

MS. MAHONEY: At that, at the time --

CHIEF JUSTICE ROBERTS: -- based upon their pondcrete design.

MS. MAHONEY: At the time that he was there that was not actually -- he didn't even allege that he knew they were doing that with respect to pondcrete. He didn't allege that there were any problems with respect to the pondcrete production or, or certifications during his tenure. From -- they began producing pondcrete in 1985, Your Honor. And there were no problems that were alleged with respect to that pondcrete. His claim by his own admission starts in 1987, after he was gone. And again, the mere fact that there may have been a defective pipe wouldn't establish the RCRA violation, because what they had to show by their owning pleading here was that they were storing it on site, that it was actually leaking, and, of course, the mere fact there may have been a problem with the pipe doesn't mean it is actually going to leak, because they can fix it in a variety of ways. They can add more cement, they can put it in metal containers, they can do a myriad of things.

He didn't even say he knew know that there was a plan to not remedy and problems in the design that he had identified if and when there became a problem with it.

JUSTICE SCALIA: Am, am I correct that they were, in fact, using that same pipe or that same pipe system during a period when perfectly fine cement blocks were being produced?

MS. MAHONEY: We think that's correct, Your Honor.

JUSTICE SCALIA: Is that true, is that conceded?

MS. MAHONEY: Well, I think that it's conceded that -- well, their own counsels told the jury that they were making it wrong, they weren't adding enough cement, that that was the reason that it was failing; and the Government told the jury that they were making it fine until they reduced the ratio of cement. So yes, I think it is correct that it has been conceded at trial that the system was working fine as long as they were adding enough cement.

But instead what happens after he left --

CHIEF JUSTICE ROBERTS: The whole purpose, the whole purpose of this legislation is to ferret out fraud on the Government. I mean, if he makes an allegation that this design is not going to work, the pondcrete is not going to work, and the Government, prompted by his lawsuit, investigates it and finds out that because of human error they're not making it the right way, even if the design does work, he get no credit for that?

MS. MAHONEY: Well, Your Honor, the statute isn't written in that way. But let me also call your attention to some facts. And that is that a year before he brought this claim --

CHIEF JUSTICE ROBERTS: Well, what about the hypothetical? Are you suggesting that in a situation like that -- -we'll talk about whether the facts comport with it later -- but in a situation like that, he's not entitled to share in the recovery that the Government eventually receives?

MS. MAHONEY: If -- the mere fact that he is a trigger for the Government discovery of a different problem, no, that is not a basis for recovery. The statute says that if there has been a public disclosure, if -- let's assume there was a public disclosure. If there's no public disclosure it is no problem. He can bring whatever claim he wants. He doesn't have to have direct knowledge of it. Bit if there has been a public disclosures at that point he has to have direct knowledge of the information on which the allegations are based. And that has to be a substantial standard. Direct knowledge is one of the key things that the Tenth Circuit just did not --

CHIEF JUSTICE ROBERTS: You would, you would change that to say direct knowledge of the information not on which the allegations are based, but on which recovery is eventually -- eventually ordered?

MS. MAHONEY: On which the allegations of the claim is based. In other words, it, it's not -- it has to be -- and the Government says this as well -- they say under that Section D(1), the relator isn't entitled to share in the proceeds of anything that the jury gives. The relator is only entitled to share in the proceeds of a claim for which they were an original source or for which they brought the -- brought the action under, under Section B.

Sometimes the Government intervenes and adds its own claims not on behalf of the relator, because it doesn't have authority on behalf of the relator, and it takes the position, I think correctly, that the relator isn't entitled to a share in those circumstances.

And Your Honor, this -- the courts have identified all the ways in which this statute doesn't make any sense if it is looked at on --

CHIEF JUSTICE ROBERTS: Identified them all?

MS. MAHONEY: -- on a global basis. Excuse me?

CHIEF JUSTICE ROBERTS: They've identified them all already? (Laughter.)

MS. MAHONEY: No, I don't think they have identified them all. But I --

JUSTICE SCALIA: You may find another one.

MS. MAHONEY: I, I would also -- again, it would allow the relator to get, you know, a share of, when the Government doesn't intervene, a minimum of 25 percent of a billion dollar recovery after a public disclosure that he knew nothing about, if he just knew one little piece after separate theory of fraud.

JUSTICE GINSBURG: But the theory is not necessarily bad. The, the relator has to cooperate with the Government, ideally he should. And if the Government said we prefer a variance of your theory, and the relator said fine, "I don't want to put competing theories before the jury, so I'll surrender my first theory and go with the Government's," why should the relator be penalized for that good litigation practice? It doesn't necessarily mean that the original complaint is no good or even that it might not have been proved, if the Government had preferred another route.

MS. MAHONEY: Well it there, if there's a minor variation, you know, something like that, I certainly don't think that disqualifies the relator from, from being an original source. And again, here he wasn't an original source even under his own theory at the outset of the case.

What happened at trial is the one little thing that he knew or claimed to know, his prediction that a pipe would have a problem five years before, was dropped completely from the case. So he went from being a relator who knew something very small about the case or about the theories to nothing at all. It was never good enough, but certainly once, once that theory was -- once that piece of information dropped out, it just demonstrated, it just highlights that he's not an original source.

And Your Honor, here it wasn't just that they didn't want to use that bit of evidence. It was actually inconsistent with the theory that they, that they pressed with the jury. They said the equipment was fine. Rockwell was making pondcrete just fine from 1985 forward until it stopped adding the cement.

And that's what they -- that's the theory they went with. But again, measure it at the outset of the case, and he still wasn't an original source.

If I could save the remainder of my time?

JUSTICE STEVENS: May I ask just one quick question?

MS. MAHONEY: Yes, Your Honor.

JUSTICE STEVENS: What was the public disclosure of the claim that ultimately prevailed?

MS. MAHONEY: The public -- there -- the public disclosure was in 19 -- it can be from several pieces. But in 1988, there were widely covered stories of the fact that pondcrete was being stored at Rocky Flats on outdoor pads, that it was leaking and that the reason it was occurring was because the employees had reduced the ratio of cement. And then you couple that with the disclosure

JUSTICE STEVENS: And the public disclosure was made in the newspapers rather than in an official Government proceeding?

MS. MAHONEY: That's correct. It was in the newspapers. But it was definitely covered, Your Honor. And that was more than a year before he brought his action. And then in addition, there were disclosures of allegations of performance bonuses being paid based upon falsified evaluations. That's JA 143.

Thank you.

CHIEF JUSTICE ROBERTS: Thank you, Ms. Mahoney.

Ms. Vullo.

ORAL ARGUMENT OF MARIA T. VULLO,

ON BEHALF OF RESPONDENT STONE

MS. VULLO: Mr. Chief Justice, and may it please the Court.

The Court should affirm the decision of the Court of Appeals because as the Government recognizes, Mr. Stone is an original source. And it is important to the look at the statute and its purpose. The original source provision is intended to determine who may bring a claim on behalf of the United States Government. And the recovery provision, 3730(d)(1), determines how much if anything a relator may share in the Government's recovery. In this case, whether where the Government fully supports the relator, I would submit that the interests of the statute and the interests of the United States are fully satisfied.

And that is because Mr. Stone is the paradigm not parasitic relator. He had knowledge firsthand from his six years at Rockwell of a pattern, Justice Kennedy, a pattern of criminal conduct and a pattern of Rockwell concealing that information.

JUSTICE SCALIA: Unfortunately, it was not the criminal conduct that was ultimately -- it was not the manner of criminal conduct that was ultimately the basis on which the Government proceeded? He knew about this bad pipe, right? Or he said that this was a bad pipe system? He didn't say anything as I understand it about their not adding enough cement which is the theory that went to the jury.

MS. VULLO: Justice Scalia, I would beg to differ on that. Mr. Stone in his affidavit at 179 in the joint appendix and also in his disclosure statement, which is at 29 -- I'm sorry, 174 and 175 of the joint appendix, and the disclosure statement at 290, what he described was a defective design of the system for taking the sludge out of the pond. And what he specifically said -- and this is very important -- what he specifically said was when you took the sludge out of the ponds in that manner, it was going to have too much liquid, and it was going to lead to deterioration of the environment. He said that in the very beginning of the case. And at trial, what the testimony was -- and I would direct the Court to Mr. Freibach's testimony at joint appendix 522, as well as at the trial transcript at 987, the issue there was the variability of the sludge which may have caused greater inspections and may have required additional cement.

And what is very important is even Mr. Freibach who is the first foreman, on whom petitioners rely, he testified that during his tenure, the variation of the sludge required between 200 and 350 pounds of cement. That's at the trial transcript at 987 and the joint appendix at 522.

JUSTICE SCALIA: Yeah. Let me -- let me look at what -- let me look at 175. This is, this what he says. "After careful study, I concluded that the suggested process" -- this means of piping the sludge out -- "would result in an unstable mixture that would later deteriorate and cause unwanted release of toxic wastes to the environment. I also noted based on my analysis of chemical processes at Rocky Flats that that the sludge and liquid present in the -- present in the evaporation ponds contained some of the most toxic and radioactive substances at Rocky Flats."

I mean, that's all very good, but it has nothing to do with what this company was convicted of, which is not -- cutting down on the amount of cement it was adding.

MS. VULLO: That's --

JUSTICE SCALIA: During a certain period after this it was creating perfectly good blocks by adding more cement. Then they got a new manager who said let's use less cement. And that's when they started producing the defective blocks. It has nothing to do with his allegations.

MS. VULLO: Justice Scalia, two important points. First is that neither the criminal conviction nor the jury's verdict determined the cause of insolidity. The issue in the criminal case and the issue in the False Claims Act case as to pondcrete was that the pondcrete was insolid and they were lying to the -- the Government about that.

JUSTICE SCALIA: And why did the government claim it was insolid? What was the claim made for -- as to the reason for the insolidity?

MS. VULLO: Your Honor, one of the pieces of evidence -- and I would -- out of 55 witnesses and 500 documents, was that there were certain people who were using too little cement. There was also evidence --

JUSTICE SOUTER: No, but was the reason they were using too little cement, the reason that there was a variation in the amount of liquid being taken out with the sludge as you've described to us that he had claimed, or was the reason simply that there was a kind of standard ratio of cement to sludge and that standard ratio was not followed in the later cases?

In other words, is it because there was such a tremendous variation in the liquid in the sludge or simply because there was a standard formula having no particular relationship to the liquid in the sludge, and they simply didn't follow the standard formula? I thought the government's theory was the latter, and if it was the latter, it has nothing to do with the claim that he was making that there was too much variation in the amount of liquid in the sludge.

MS. VULLO: That's not correct, Justice Souter. The reason for the variation and the need for additional cement was because the sludge had variations and there was too much liquid in it, which was precisely what Mr. Stone said. And every one of the witnesses testified to huge variation of the liquid content in the sludge which required more cement, and even the amount of cement that was required was very variable.

JUSTICE SOUTER: But if they had followed the formula that they followed at the beginning, isn't it true that there's no evidence that even these variations in the liquid in the sludge would have resulted in instable or insolid pondcrete?

MS. VULLO: No. That's not correct, Justice Souter. In fact, there was no particular ratio that had to be followed of cement to sludge. There was testimony that different individuals who worked on the pondcrete used different amounts of cement. And as I said --

JUSTICE SOUTER: This was truly even before the troubles started, even before the insolid pondcrete?

MR. STEWART: Yes, Your Honor. Yes, Justice Souter. Mr. Freibach, who was the earlier foreman, testified that under his watch, he needed between 250 and 300 pounds of cement, and that there was a constant inconsistency in the sludge content coming out of the ponds.

JUSTICE SCALIA: Was -- here's an easy question. Was this evidence that we read, his testimony from 175 of the joint appendix, was that introduced at the trial?

MS. VULLO: Mr. Stone did not testify at trial.

JUSTICE SCALIA: Was this evidence introduced from some other source? Was the jury told there was this piping that was taking out too much liquid with the sludge? Was the jury told that?

MS. VULLO: The jury -- Mr. Freibach described the process. We did not get into the engineering detail, Your Honor, of it.

JUSTICE SCALIA: So his central allegation was not even placed before the jury?

MS. VULLO: Your Honor, I would submit to you, Justice Scalia, that that wasn't required. What we needed to prove --

CHIEF JUSTICE ROBERTS: But it is worse than that, though.

This information was not even provided to the government, which the statute requires. He not only has to have direct and independent knowledge, he has to voluntarily provide that to the government. And I understand that the Tenth Circuit, to have relied solely on the document at joint appendix page 605, that's the only thing he provided to the government. And all it says is that this design will not work. There are a lot of things that don't work, but that doesn't mean there's fraud on the government. You don't know if they're going to fix it, they're going to change it, use a different design, not make a claim based on that design. Why is that enough to satisfy the statute?

MS. VULLO: Mr. Chief Justice, the voluntarily provides prong requires the relator to be honest and truthful and submit all the information he has. And Mr. Stone did that and the government has never said otherwise. In fact, he met with the FBI agent --

CHIEF JUSTICE ROBERTS: But he has to -- if the information that he provides isn't direct and independent information of the allegations, it would seem that the statute is not satisfied.

MS. VULLO: That is correct, Your Honor, but Mr. Stone did have direct and independent knowledge of his allegations. And I'd like to go back to the discussion with petitioner's counsel as to the jurisdictional petition in this statute. There is no question that --

CHIEF JUSTICE ROBERTS: I don't want to get off my question here but did you -- do you agree that this page JA 605 was the only information that he provided to the government?

MS. VULLO: No, Your Honor.

CHIEF JUSTICE ROBERTS: Well, maybe I'd better phrase it differently. Do you agree that that is the only information on which the Tenth Circuit relied?

MS. VULLO: That, the Tenth Circuit did rely on that document and did not consider any other information as a result of its ruling with respect to that document. The Tenth Circuit also had before it the awards fee documents which Mr. Stone provided to the government, and those are at joint appendix 247 to 249. It also had Mr. Stone's affidavit when he testified in his affidavit as to his meetings with the government, and also had additional affidavits --

CHIEF JUSTICE ROBERTS: Well, but this -- he has to provide this information before filing an action.

MS. VULLO: That's correct, Your Honor. And his affidavit describes his meetings with the FBI and EPA beginning in 1986, and that's at joint appendix 180 through 181.

JUSTICE STEVENS: I have a question.

MS. VULLO: Yes, Justice Stevens.

JUSTICE STEVENS: As I understand the statute, you his the first prong. It has to be an action based on public disclosure of information, which you agree it was; is that right?

MS. VULLO: Justice Stevens, we in the courts below agreed for purposes of the original source provision that there was a public disclosure. I think what's important following up on the question --

JUSTICE STEVENS: You agree that it's within 4(a), that it was an action based on a public disclosure of information disclosed in newspapers; is that right?

MS. VULLO: In newspapers and also the criminal investigation, but I think what's important is that the standard that Rockwell seeks to have this Court adopt would actually require such a great level of specificity that is not in the public disclosure at all. And I think, Justice Stevens, you asked that precise question. The public disclosure was very general. And the Tenth Circuit --

JUSTICE STEVENS: I am asking you, really what I'm seeking to find out is what is the scope of the public disclosure that everyone agrees was made? Was it all newspapers?

MS. VULLO: It was newspapers, and the FBI agents' search warrant affidavit was also publicly disclosed prior to Mr. Stone's filing of the action.

JUSTICE STEVENS: If it was publicly disclosed in the newspapers, does that fit into one of the categories of public disclosure mentioned in 4(a)?

MS. VULLO: Yes. It says news reports in that provision of the statute.

JUSTICE STEVENS: And everybody agrees on what those news reports contained?

MS. VULLO: Well, I'm not sure what Rockwell agrees, but I could tell Your Honor what I believe those news reports said, and they said that there were environmental violations. There were some news reports in June of 1988 about a spill on the pondcrete pads. Not a single one of the news reports about the spill on the pondcrete pads described at all any false claim or false statement, and neither did the agents' search warrant affidavit.

JUSTICE STEVENS: So you're saying that the original source of the information was published?

MS. VULLO: I don't believe that that's the appropriate test. It's not before this Court, but I believe that the direct and independent knowledge requirement is information on which the allegations are based, and the allegations refer to Mr. Stone's allegations at the commencement of the action. After all, it's a jurisdictional provision, and it should be determined at the outset of the action.

CHIEF JUSTICE ROBERTS: I would have thought the allegations referred to the public disclosure. It talks about public disclosure of allegations, and then says he has to have direct and independent knowledge of the allegations. So I would assume that's the important linkage.

MS. VULLO: Mr. Chief Justice, there is a split in the circuits on that issue. The issue was not decided by the Court of Appeals and as I understand even Rockwell's position, that is not Rockwell's position, that Rockwell's position is like our position, that it's information in the allegations of the complaint.

But I would submit that that would make no difference in this case because Mr. Stone's knowledge is direct and independent of the information in his complaint as well as the information in the public disclosure. And what is important is that Rockwell is asking this Court to adopt the quick trigger that the Court of Appeals adopted because that was the Tenth Circuit's law on public disclosure. Yet in this case, say that Mr. Stone's direct and independent knowledge has to be very, very specific. It has to be of the particular false statements, and that would eviscerate the entire original source rule.

And if I could just get to the point of the jurisdictional issue and why Rockwell's position as to the trial evidence is wrong, it's wrong for two reasons. The first is that the statute speaks in terms of allegations. It does not speak in terms of evidence. In fact, in the provision E.2, which is a provision regarding bringing claims against members of the judiciary and members of Congress, Congress said information or evidence, but in this provision E.4, Congress only said information. So looking at the trial evidence would be wrong by virtue of the plain language of the statute.

It also would be wrong as, Mr. Chief Justice, you pointed out. Since 1824, I believe this Court has held that jurisdiction is determined at the time of commencement as of the state of things at that time. And as, Justice Ginsburg, you pointed out, it would be an inappropriate rule to say that if the government decides to refine the allegation, after all, it is still a concrete allegation.

JUSTICE SCALIA: We've also said that jurisdiction must be maintained throughout the case. Something like standing. We say standing is examined throughout the trial. There's an easier standard at the beginning, and then for the complaint; and then for a motion to dismiss, a somewhat higher standard; and finally, if the facts of -- involving standing are tried, there's the highest standard at the end of the trial.

I mean, it seems to me jurisdiction has to be assured throughout.

MS. VULLO: Justice Scalia, I think this is a jurisdictional provision that Congress created. We're not talking about the Federal question jurisdictional statute. But in this provision, just like in the Clean Water Act in the Walton case, the statute uses the word allegations. As in that case, the statute used the word alleged. And the Court held very clearly that you look at it as of commencement.

Now it might be a different case if we had a federal question case and the relator or the plaintiff withdrew the Federal claim. Then there would be a loss of jurisdiction. Here of course, the amended complaint satisfied jurisdiction when the government adopted the relator's claim.

Thank you.

CHIEF JUSTICE ROBERTS: Thank you, Ms. Vullo.

Mr. Stewart?

ORAL ARGUMENT OF MALCOLM L. STEWART

ON BEHALF OF RESPONDENT UNITED STATES

MR. STEWART: Thank you, Mr. Chief Justice, and may it please the Court:

One of the features of this case that may appear anomalous is the fact that the government is aligned with Stone. That is, it's Rockwell's position that the entire recovery in this case should go to the United States. It is Stone's position that the recovery should be shared with the relator, and the government agrees with Stone.

It might be natural for the Court to wonder, why would it be in the government's interest to advocate that a share of the money damages in this case should be given to a private party. And the reason is that the government believes that there are three systemic government interests that are implicated by this case and that would be endangered if Rockwell's position prevailed.

First, in our view, Stone is precisely the type of relator that Congress intended to encourage. Stone was somebody who had substantial firsthand knowledge of Rockwell's environmental practices and of its billing practices, and moreover, Stone was somebody who didn't conceal his information from the government.

JUSTICE SCALIA: Well, that's all very nice, but Congress didn't leave it up to you to decide who ought to get rewarded or not. It laid down some textual conditions in the statute. And unless they are complied with, the fact that you think this is the kind of person you think ought to get the money is really totally irrelevant.

MR. STEWART: We agree. And as to Stone's original complaint, the statute frames the inquiry as whether Stone has direct and independent knowledge of the information on which the allegations were based. And we agree with Rockwell and with Stone that that refers to the allegations in his complaint.

Now the allegations were fairly generalized. They didn't refer specifically to pondcrete, and they covered a wide range of time, from 1980 through to the present, which was 1989 as of the filing of the complaint. Stone subsequently submitted a lengthy affidavit in which he explained what led him to the conclusion that Rockwell was engaged in a systematic practice of violating the environmental laws and misrepresenting the nature of its compliance to the government. That information --

JUSTICE ALITO: What if the defect that he identified turns out to be entirely different? What if there is no dispute, it's completely different from the defects that led to the false claims on which there were recovery?

MR. STEWART: I mean, there certainly could be a situation in which the government intervenes in a suit but files what can be regarded as a substantially different claim. For instance, if the government had intervened in this suit and had claimed that Rockwell's requests for payment were fraudulent because Rockwell had misrepresented its compliance with the anti-discrimination laws, that would be an example of a fundamentally different fraudulent scheme and --

JUSTICE SCALIA: Let's take this case. Did the government use any of the evidence that Stone produced? Did it introduce that affidavit which said the pipe wasn't working right? Was that part of the evidence?

MR. STEWART: It didn't introduce the engineering report. And I do want to focus on --

JUSTICE SCALIA: Well, what else had he provided beyond -- did you use anything that came from him?

MR. STEWART: He had provided substantial information about a pattern of concealment of environmental violations generally. That at least to some extent was responsible for an FBI investigation which uncovered further --

JUSTICE SCALIA: But did you use at trial anything that he provided you?

MR. STEWART: We proved essentially the state of affairs that he predicted would occur.

JUSTICE SCALIA: Did you use anything he provided you in order to prove it?

MR. STEWART: I'm not aware of anything that --

JUSTICE SCALIA: No, neither am I.

MR. STEWART: But nevertheless, the relator had direct and independent knowledge of the information on which his allegations were based.

And I'd like to focus on this question of the cause of the insolidity of the pondcrete because I think to regard that as the theory of the government's liability really reflects a misunderstanding of the False Claims Act. For purposes of the False Claims Act counts in this case, it was sufficient for the government to prove that the pondcrete in fact failed, leaked hazardous substances into the environment, that Rockwell was aware that the pondcrete was failing, and that Rockwell nevertheless continued to represent that it was in compliance with the environmental laws.

For purposes of proving those allegations, it was not necessary for the Government to offer any hypothesis as to why the pondcrete failed. It would have been sufficient to prove that the pondcrete failed and that Rockwell knew about it. In fact, I wouldn't encourage the Court to read the whole trial transcript, but I think if the Court reads the plaintiff's statement of claims, which is about 30 pages of the joint appendix beginning at JA-463, that summarizes the events that Rockwell -- I mean, I'm sorry, that Stone and the United States intended to prove at trial, and by far the predominant focus is on the fact of pondcrete failures and Rockwell's awareness that they had -- that pondcrete had failed.

There were a couple of paragraphs in those 30 pages that alluded to the supposition that the cause of the failure was inadequate cement content. There were also isolated references to that theory at trial. But to characterize that as the theory of liability I think would be a misconception. The Government didn't have to persuade the jury one way or the other as to why the pondcrete failed.

JUSTICE SCALIA: How is it possible to say that he had direct knowledge of events that occurred after he had left Rockwell? I mean, all of this failure occurred after he was gone.

MR. STEWART: But again --

JUSTICE SCALIA: Not only not because of this pipe thing that he predicted would cause a failure, not only it was not because of that. But he was gone.

MR. STEWART: Again, the statute doesn't require direct and independent knowledge of the fraud. It requires direct and independent knowledge of the information on which the allegations were based.

JUSTICE SCALIA: That's right. And how would he know except from published report that these blocks were failing?

MR. STEWART: His basis for making that prediction was that he believed that the process would malfunction. He was also aware --

JUSTICE SCALIA: But prediction is not knowledge. Prediction is not direct knowledge.

MR. STEWART: I think independent of whether there had every been a public disclosure, it would have been open to Rockwell to argue in response to the original complaint that Stone couldn't consistent with Rule 11 make allegations as to what had happened at the plant after he left because he no longer had an evidentiary basis for doing so. Rockwell could have made that argument, again regardless of whether a public disclosure had occurred, and the question whether it is a permissible inference for a plaintiff to say, I saw them committing systematic environmental violations while I was there and I inferred that the same thing would go on after I left -- the question that's a permissible inference for a plaintiff in a Federal civil action to make is a question to be decided under the Federal Rules of Civil Procedure. The public disclosure provision serves a different purpose entirely. It's designed for those cases in which the relator has sufficient information to file a complaint that complies with the federal rules of similar procedure, but that information overlaps substantially with information in the public domain.

JUSTICE SCALIA: And his sufficient information you assert is his prediction that these blocks would fail for a reason that turned out not to be the reason for their failure. That is what you say is his direct knowledge.

MR. STEWART: That knowledge, but I think it's also important to recognize that the original complaint was not focused on pondcrete specifically. The original complaint alleged more generally that Rockwell was engaged in widespread environmental safety and health violations and was consistently misrepresenting to the Government that it was in compliance and -- even though it knew that it was not doing so.

JUSTICE SCALIA: So you think relators can get part of the Government's recovery even where their initial allegations before the Government intervenes have nothing whatever to do with the reason the Government is ultimately giving money? You think they are still entitled to a piece of the pie?

MR. STEWART: I guess I would -- I would disagree with the premise that his reasons had nothing whatever to do with why the Government is getting money. Again to return to the hypothetical I suggested earlier, if the Government then filed --

JUSTICE SCALIA: So you don't believe that, then. You think that indeed the reason the Government was given the money has to be connected with, with his allegations? Right?

MR. STEWART: It has to be connected with his allegations. And certainly, if you look at the theory of liability that prevailed at trial, namely that pondcrete blocks were leaking hazardous substances into the environment and Rockwell was nevertheless asking for Government funds based on misrepresentations that it was in compliance, if you look at that theory of liability and then examine Stone's original complaint, clearly that theory is logically encompassed within the more generalized --

CHIEF JUSTICE ROBERTS: What do you mean by connected? Is it -- I got -- I'm getting the sense that you think it's enough that he says, look, Rockwell is just lying to the Government in this area, and you say well -- what if what if you added a count in your complaint when you intervene on tax fraud? You found out also that they didn't pay taxes. Would he be able to recover for that, because, you know, if they're going to lie about pondcrete they're going to lie about taxes. Is that sufficiently connected?

MR. STEWART: No, and I think I would put that with the hypothetical that I offered about the Government adding a claim that Rockwell had misrepresented its compliance with the antidiscrimination laws. And I think there won't be a clear dividing line, but I think this is a line that courts have to draw for other purposes as well.

CHIEF JUSTICE ROBERTS: And it doesn't matter to you if he just, if he's completely wrong? Let's say he says -- you have special interrogatories to the jury and his allegation has always been the pondcrete's going to fail because you're putting in the wrong kind of cement. And it turns out it has nothing to do with that at all. The jury says, no, that's not the reason it failed, it failed for another reason. Is that a sufficient connection?

MR. STEWART: I think we would -- I think there could still be a sufficient connection even if his reason for thinking the pondcrete failed, they all turned out to be correct. And again, we would emphasize that that's particularly so here because the reason for the pondcrete failure was not an element of the claim. I mean, imagine if this case had been tried to the jury and there had been an established rule in place that if the pondcrete was shown to have failed because of a defect in the machinery, Stone would get a share, but if it was shown to have failed because the human operator added too little cement Stone wouldn't get a share. If that had been the rule there would have been a clear potential for disharmony between the Government and the relator. It would have raised exactly the specter that Justice Ginsburg alluded to, where the Government prefers to emphasize one view of the facts rather than another and the defendant is getting in the way by suggesting that the relator will be deprived of a share.

JUSTICE SCALIA: Try this hypothetical. The relator says: I know that they've been cheating the Government because I, I observed the president of the company going into a meeting with the chief engineer and another person, and at that meeting I suspect they were devising this scheme to defraud the Government.

It turns out there was indeed a scheme to defraud the Government, but that meeting never occurred. It wasn't the president of the company who went into the meeting. It was Charlie Chaplin. And the facts are totally, totally wrong. Does he get money?

MR. STEWART: Well, I think --

JUSTICE SCALIA: Does he get money just because he came out with the same charge that the Government ultimately proves? Simply because he said the company is guilty of cheating the Government, even though the facts on which he bases it are entirely wrong?

MR. STEWART: I mean, I need to know more about the hypothetical, but my initial reaction is that that's a complaint that's easily dismissed based on Rule 11, leaving aside the question of any public disclosure. And I can imagine extreme hypotheticals --

JUSTICE SCALIA: Well, assume one that just gets over the line.

MR. STEWART: I think if the complaint just gets over the line, that is if the evidence in the relator's possession is just barely good enough to sustain the allegation of fraud or at least to allow the suit to go forward, there's no reason to read the public disclosure --

JUSTICE SCALIA: It turns out to be entirely wrong. Turns out to be entirely wrong, so that the only reason he believed this company was defrauding the Government was absolutely wrong.

MR. STEWART: I think we would still want to compare the nature of the fraud that the Government alleged with the nature of the fraud that the relator alleged. And obviously this is a question in which the Court is going to have to balance competing interests. It's possible to come up with hypotheticals in which it seems as though the relator has no equitable entitlement to a share. The two things we want to emphasize are, first, in terms of the way that the lawsuit progresses even when the Government doesn't intervene, relators once they file suit, if they are allowed to proceed on their own, they presumably can take advantage of all of the rules of civil procedure. And those include the discovery provisions of the Federal Rules.

And it would obviously be self-defeating to tell the relator: You can invoke discovery and you can learn relevant information from the defendant, but if you didn't know it already you can't use it at trial, because if you use something that you didn't have direct and independent knowledge of before the complaint was filed and it turns out to be persuasive to the jury you can be kicked for not being an original source.

I don't think Congress can be said to have had that intention.

Second, in cases where the Government and the relator intervenes -- where the Government intervenes in the a relator's suit and the two prosecute the suit together, we would want the Court to avoid a rule that would create artificial disincentives to cooperation between the two plaintiffs. And the idea that relatively minor variations in factual assertions that are ultimately not necessary to the establishment of False Claims Act liability, if those carried the day then relators in future circumstances would have a strong disincentive to accede to the Government's request that one view of the evidence be emphasized rather than another.

If the Court has nothing, no further questions --

JUSTICE GINSBURG: Explain why it would be a minor variation if what he has identified as a defect in the pipe system and what turns out to be the situation that was covered up is the inadequate cement that caused the loss?

MR. STEWART: It's a minor variation in the sense that it's not relevant to the defendant's ultimate liability. That is, if we had proved that the pondcrete leaked hazardous substances into the environment and that Rockwell knew that it was having that effect and that it nevertheless represented to the Government it was in compliance, that would be enough to establish the knowing submission of a false claim even if we had no idea what was the reason for the pondcrete failure.

And even if Rockwell had taken the most Herculean measures to produce good pondcrete and had not departed from standards of care in any respect, if nevertheless they knew that the pondcrete was in fact failing despite their best efforts and they represented that it was succeeding, they would be liable under the False Claims Act.

JUSTICE STEVENS: May I ask this question: Supposing he is the only source of the information that's publicly disclosed on which precipitated the filing of the complaint, and after the complaint is filed discovery reveals other violations of law on which the Government prevails, but they do not prevail on the theory of the original complaint. Would he be -- come within the statute or without? The statute focuses on the information that gave rise to the suit, not on what's found by way of discovery.

MR. STEWART: I mean, my instinct would be that probably he could still recover. I think the question then would boil down to whether the discovery responses are themselves public disclosures such that they would trigger a new original source.

JUSTICE STEVENS: Assuming we only look at the public information at the time the complaint is filed.

MR. STEWART: I mean, probably that question would raise no public disclosure issue to begin with, because if there had been no -- at least if there had been no public disclosure of the fraudulent conduct that was revealed through discovery, there would be no need for him to satisfy the original source test with respect to those new allegations.

CHIEF JUSTICE ROBERTS: Thank you, Mr. Stewart.

Ms. Mahoney, you have 4 minutes remaining.

REBUTTAL ARGUMENT OF MAUREEN E. MAHONEY

ON BEHALF OF THE PETITIONER

MS. MAHONEY: I would like to first just address, the Government's suggested that he could be an original source because he had knowledge of false representations and concealments derived throughout his employment. I just want to emphasize that the Tenth Circuit did not rely on that theory, said that he did not have to have knowledge of any fraudulent acts. It was just enough that he knew something that might be relevant to the proof of an environmental violation. And the reason that the Tenth Circuit said that was because Stone had conceded in his deposition at pages JA-106 and 112 that he did not know about any false representations and he did not know whether DOE was aware of any of the environmental problems.

JUSTICE SCALIA: What is your response to the Government's assertion, which seems to me quite true, that in order to -- in order to prevail it did not have to show why these blocks were not solidified?

MS. MAHONEY: I think what --

JUSTICE SCALIA: It just had to show that they weren't. So it doesn't matter whether they were using his theory or too little cement. It doesn't matter.

MS. MAHONEY: Your Honor, the point is that Mr. Stone wasn't there when the manufacturing problems occurred, so he didn't actually have direct knowledge that pondcrete was leaking. That's the real point. What they're really saying is that his theory about why it might leak some day didn't turn out to be important to the gravamen of the claim. This is a fraud claim. He didn't know anything about fraud and he couldn't have known they were leaking at the time, 5 years later because he wasn't there.

And the statute requires direct knowledge. The Government's suggestion that somehow Rule 11 will be the basis on which we can sort out who's an original source and who's not strikes me as rather odd. First of all, nothing hardly ever gets dismissed on Rule 11 grounds. And this is a jurisdictional statute that requires direct knowledge. A relator could read an indictment and satisfy Rule 10 just by copying the allegations. Does that count?

I think that direct knowledge means there can't be undue conjecture. The only thing that he said he knew, even though it wasn't the gravamen of the claim, was clearly based upon conjecture, a belief that in his opinion this pipe would not work.

And then when we get to the trial, there were 55 witnesses. Stone had not identified a single one of them as a person with relevant knowledge at the outset of the case when he answered his interrogatory responses. In addition, every person -- no person he identified testified at the case. He identified four documents that he said were key. None of them were introduced. He knew nothing about what went to trial. In addition, I'd like to focus on the "voluntarily provide". That is a separate ground for reversal in this case, and would emphasize that the Tenth Circuit said the engineering order that refers to removal of sludge and says in my opinion this won't work, that's all it says -- the Tenth Circuit says that's fine. The district court made a factual finding that Stone had not communicated his concerns to the Government about pondcrete, saltcrete, or spray irrigation, the three theories issues at issue at trial here.

JUSTICE GINSBURG: There were other documents. He said there were other documents and the district court said sorry, you came up with that too late, I'm not going to look at the other documents.

MS. MAHONEY: Your Honor, what they're referring to is the affidavit, I think. He filed an affidavit at the outset of the case when Rockwell filed the motion to dismiss and then tried to do a new one 10 years later that was rejected.

Thank you very much.

CHIEF JUSTICE ROBERTS: Thank you Ms. Mahoney.

The case is submitted. (Whereupon, at 12:11 p.m., the case in the above-entitled matter was submitted.)