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APPELLANT'S PETITION FOR REHEARING EN BANC, dated January 25, 2001, NO. 99-11308, In The United States Court Of Appeals For The Fifth Circuit, Robert C. Ballew, Plaintiff-Appellant v. United States Department of Justice and United States Coast Guard, Defendant-Appellees. On Appeal from the United States District Court For the Northern District of Texas, Fort Worth Division, No. CA 4:99CV0406-Y. Respectfully submitted, Richard L. Coffman, P.C., 550 Fannin Street, Suite 1212, Beaumont, TX 77701, (409) 832-9422, (409) 832-9901 fax, Attorney For Plaintiff - Appellant Robert C. Ballew CERTIFICATE OF INTERESTED PERSONS The undersigned counsel of record certifies that the following persons have an interest in the outcome of this case:
(Signature), Richard L. Coffman, Attorney For Plaintiff-Appellant - Robert C. Ballew STATEMENT PURSUANT TO Fed. R. App. P. 35(b)(1) This action is a Fed. R. Civ. P. 60(b) ("Rule 60(b)") independent action in equity and based on the Government's ENDNOTE 1 fraud upon the court in connection with the settlement in United States ex rel. Robert C. Ballew v. Aerospatiale Helicopter Corporation and Textron Lycoming Corporation; Civil Action No. CA4-88-287-E; in the United States District Court for the Northern District of Texas (the "Underlying Qui Tam"). Ballew risked his career and reputation to file the Underlying Qui Tam, which ultimately yielded the then largest qui tam settlement in history. The Government rewarded Ballew's courage and patriotism, however, by fraudulently concealing and failing to disclose to Ballew that as part of the settlement, Aerospatiale Helicopter Corporation ("AHC") dismissed over $26 million of administrative claims that it had asserted against the Government. The Government also failed to pay to Ballew his statutory share of the value of the dismissed administrative claims. ENDNOTE 2 This case is a unique case because unlike all of the other reported cases involving Rule 60(b) independent actions, this case is an action to reopen a final judgment in a qui tam case. This action is especially unique because it involves a dispute between parties ostensibly on the same side of the docket. This case is especially egregious because it is the result of affirmative wrongful conduct by Department of Justice lawyers as officers of the court. Ballew respectfully requests a rehearing en banc, pursuant to Fed. R. App. P. 35(b)(1)(A), because the panel decision conflicts with the Rule 60(b) independent action in equity "grave miscarriage of justice" standard enunciated by the Supreme Court in United States v. Beggerly, 524 U.S. 38 (1998). Consideration by the full Court, therefore, is necessary to secure and maintain uniformity of the Supreme Court's decisions. Ballew also requests a rehearing en banc, pursuant to Fed. R. App. P. 35(b)(1)(B), because the panel decision raises the following issues of exceptional importance:
Consideration by the full Court, therefore, is necessary to secure and maintain uniformity of this Court's decisions, as well as an accurate analysis of the facts and allegations in this case. TABLE OF CONTENTS Certificate of Interested Persons - i
B. Post-filing activity in the Underlying Qui Tam - 2 C. Post-settlement revelations - 4 A. The panel decision conflicts with the Rule 60(b) independent action in equity "grave miscarriage of justice" standard enunciated in Beggerly - 6
Certificate of Service - 16 TABLE OF AUTHORITIES CASES Addington v. Farmer's Elevator Mut. Ins. Co., 650 F.2d 663 (5th Cir.), cert. denied, 454 U.S. 1098 (1981) - 13
STATUTES 31 U.S.C. § 3730(d)(1) - 11 OTHER AUTHORITIES Fed. R. App. P. 35(b)(1) - ii
STATEMENT OF THE ISSUES MERITING EN BANC CONSIDERATION 1. Whether the panel decision conflicts with the Rule 60(b) independent action in equity "grave miscarriage of justice" standard enunciated by the Supreme Court in United States v. Beggerly, 524 U.S. 38 (1998)? 2. Whether the panel decision conflicts with this Court's holding in United States ex rel. Thornton v. Science Applications International Corp., 207 F.3d 769 (5th Cir. 2000) regarding the Government's duty to advise qui tam relators of the value of all non-cash proceeds included in a qui tam settlement? 3. Whether the panel erred in holding that Ballew did not adequately plead a Rule 60(b) fraud upon the court in light of the clear language in his First Amended Complaint? COURSE OF PROCEEDINGS AND DISPOSITION OF THE CASE This case originally was filed on June 7, 1999. On August 11, 1999, the Government filed its motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(1); (b)(6). Record on Appeal at 78-122. ENDNOTE 3 In its motion to dismiss, however, the Government did not address the fact that this case is a Rule 60(b) action in equity and based on the Government's fraud upon the court. Id. Ballew alerted the district court to this fact in his response. ROA at 123-208. Nevertheless, on September 29, 1999, the district court, without hearing oral argument, dismissed the case for failure to state a claim. Rec. Ex. at Tabs C; D. Ballew's motion to reconsider subsequently was denied. Rec. Ex. at Tab E. The appeal was filed on November 17, 1999, and argued on October 2, 2000. The panel decision affirming the district court's dismissal was filed on December 15, 2000. Addendum "A." This Petition for Rehearing has resulted. STATEMENT OF FACTS ENDNOTE 4 A. Background of The Underlying Qui Tam. Ballew filed the Underlying Qui Tam on May 5, 1988. The Underlying Qui Tam arose out of (i) a contract between AHC and the United States Coast Guard (the "USCG") for the manufacture of ninety (90) "Dolphin" Short Range Recovery ("SRR") helicopters, and (ii) a subcontract between AHC and Textron Lycoming Corporation ("AVCO") under which AVCO would manufacture one hundred eighty (180) engines (the "AVCO engines") to power the SRR helicopters. As an AHC Senior Subcontract Administrator, Ballew soon discovered that the AVCO engines were grossly deficient in performance. Ballew also discovered that non-conforming parts were being incorporated into the AVCO engines, as well as being delivered as spare parts. The Underlying Qui Tam resulted. B. Post-filing activity in the Underlying Qui Tam. During May 1989, one year after the Underlying Qui Tam was filed, and unbeknownst to Ballew at that time, the Government commenced settlement discussions with AVCO and AHC. Ballew subsequently learned about the settlement discussions during September 1989, although his requests to be involved were denied. On February 6, 1990, the Government and AVCO (but not AHC) entered into a Memorandum of Understanding (the "MOU") to settle the case. ROA at 392-412. Ballew was not involved in negotiating the MOU, provided with drafts of the MOU, or provided with an official copy of the executed MOU. ENDNOTE 5 The MOU, which ultimately became the basis for the final settlement agreement between the Government and AVCO, outlined the following settlement proceeds to be paid by AVCO:
What is critical to note here is that the MOU did not outline any consideration to be paid to the Government by AHC as part of the Underlying Qui Tam settlement. Thereafter, the Government sought to secure Ballew's approval of the proposed settlement. Ballew initially did not approve of the settlement. As a result, the Government resorted to strong-arm tactics by threatening to oppose Ballew's claim for any share of the settlement, as well as seeking Ballew's dismissal as the Relator. Under threat from the Government, Ballew, on June 29, 1990, executed a Waiver and Release Agreement only with respect to his claims against AVCO. Rec. Ex. at Tab G. Ballew, however, did not dismiss any of his claims against AHC. On July 10, 1990, the Government filed its formal Notice of Intervention and Motion to Dismiss all claims against AHC and AVCO. Rec. Ex. at Tab I. The court dismissed the Underlying Qui Tam on the same day pursuant to the terms of the settlement as outlined in the MOU. Rec. Ex. at Tab J. C. Post-settlement revelations. During May 1996, when the initial six (6) year term of the PBTH contract was scheduled to expire, Ballew sent a Freedom of Information Act ("FOIA") request to the USCG for a Contract Closeout Summary. Ballew, a long time government contractor, was interested in reviewing the Contract Closeout Summary, the internal USCG contract recap document, to confirm whether the PBTH contract and Transition Period Agreement, in fact, had fixed the problems alleged in the Underlying Qui Tam. Ballew also sent a FOIA request to the United States Department of Justice ("DOJ") seeking the corresponding DOJ documents analyzing the Underlying Qui Tam settlement. Although the DOJ initially refused to send Ballew its settlement analysis, Ballew, in December 1997, finally received a packet of documents in response to his request. The DOJ documents revealed previously undisclosed information about the nature, extent and value of the Underlying Qui Tam settlement. The most pertinent document is the March 15, 1990 Memorandum written by DOJ attorney Stuart M. Gerson two months before the Underlying Qui Tam settlement was consummated. The "Gerson Memorandum" revealed, for the first time, that AHC also had given consideration to the Government to settle the Underlying Qui Tam: In addition, authority is granted to accept Textron's [AVCO's] offer to pay the Government $17 million (with interest from November 2, 1989) and other valuable consideration, and to accept Aerospatiale's offer to dismiss administrative claims against and to grant other valuable consideration to the Government, in settlement of the above-referenced suit [the Underlying Qui Tam], and to move to dismiss that suit with prejudice.
Thus, at the same time the Government was seeking to secure Ballew's concurrence with the proposed AVCO settlement, and representing to the court, Ballew and the public at large that AHC was not guilty of any misconduct, the Government knew that it would receive additional settlement proceeds from AHC in the form of the dismissed administrative claims. The Government's fraudulent concealment of these additional settlement proceeds, and failure to pay Ballew his statutory share of these proceeds, has given rise to this case. Consistent with the Gerson Memorandum, AHC and the USCG subsequently filed with the United States Department of Transportation Board of Contract Appeals a joint motion to dismiss the administrative claims. See, e.g., Rec. Ex. at Tab K. On July 24, 1990, just two weeks after the Underlying Qui Tam was dismissed, the final order dismissing AHC's administrative claims, totaling $26,440,130, was signed. Id. See also Rec. Ex. at Tabs N; O. Based on the above post-settlement revelations, which took Ballew almost ten years to piece together through relentless research, FOIA requests and FOIA request litigation, Ballew, in good faith, requested payment of his statutory share of the portion of the AHC dismissed administrative claims. Ballew's request was denied. This case has resulted. ARGUMENTS AND AUTHORITIES A. The panel decision conflicts with the Rule 60(b) independent action in equity "grave miscarriage of justice" standard enunciated in Beggerly. The Supreme Court recently underscored the special nature of the Rule 60(b) independent action in equity as a means of relief from a judgment, concluding that the remedy is available only where there has been a "grave miscarriage of justice." Beggerly, 524 U.S. at 46-47. The Supreme Court emphasized that the level of fraud or misconduct necessary to sustain an independent action under the "saving clause" of Rule 60(b) must be several notches of severity above that required for a Rule 60(b)(3) motion: Independent actions must, if Rule 60(b) is to be interpreted as a coherent whole, be reserved for those cases of "injustices which, in certain instances, are deemed sufficiently gross to demand a departure" from rigid adherence to the doctrine of res judicata. Beggerly 524 U.S. at 46 (quoting Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 244 (1944)). Notwithstanding the egregious facts in this case, the panel held that the Government's wrongful acts did not constitute a "grave miscarriage of justice." The panel principally based its decision on the following two analysis points, both of which do not take into account the plain language of the standard as applied to the facts of this case. First, the panel analogized this case to Beggerly, concluding that "Beggerly itself held that the failure of the Government to 'thoroughly search its records and make full disclosure to the Court' was insufficient to sustain a Rule 60(b) independent action." Panel decision at 7 (citing Beggerly, 524 U.S. at 47). Unlike Beggerly, however, the Government's wrongful conduct here was affirmative rather than negligent. In Beggerly, the claimants sought to set aside the settlement of a quiet title action involving a tract of land the Government sought to acquire for a new national park. 524 U.S. at 39-41. The claimants, all of whom were former owners of the land, argued that the settlement was based on the Government's representation that there were no documents in the public land records proving that the tract ever had been granted to a private landowner. Id. Twelve years after the settlement was consummated, and at their own expense, the claimants discovered the critical document in the National Archives in Washington, D.C. Id. at 41. The claimants filed their Rule 60(b) independent action to set aside the settlement alleging that the Government failed to "thoroughly search its records and make full disclosure to the court." Id. at 47. This Court agreed. The Supreme Court, however, reversed this Court's judgment, established the "grave miscarriage of justice" standard, but held that the Beggerly facts did not meet the standard. Id. The facts of this case are markedly different from the Beggerly facts. Beggerly turned on a negligent document search. Here, the Government's wrongful conduct was intentional. The same Government attorney team that negotiated the AVCO settlement negotiated the dismissal of the AHC administrative claims. The same senior Government lawyer (Stuart M. Gerson) approved them both. The Government clearly knew about the dismissed administrative claims, and the fact that their dismissal was part of the Underlying Qui Tam settlement, yet fraudulently concealed and failed to disclose this fact to Ballew or the court, and pay Ballew his statutory share. This case, in fact, is more closely aligned with Marshall v. Holmes, 141 U.S. 589 (1891), a case cited by the Supreme Court in Beggerly as an example of a "grave miscarriage of justice." In Marshall, an independent action in equity was allowed to proceed because the underlying judgment was secured using a forged document. The Government's fraudulent concealment and failure to disclose in this case absolutely parallel the affirmative action of forgery in Marshall. Second, the panel noted that Ballew "was aware of the government's negotiations over the Power by the Hour contract at the time of the settlement, and he was vigorously represented by counsel during settlement negotiations." Panel decision at 7. The implication here is that Ballew's knowledge about the settlement negotiations, coupled with his failure to challenge the settlement at the fairness hearing, negates any claim that he has suffered a "grave miscarriage of justice." This conclusion, however, is based on a misunderstanding of the facts. While Ballew was aware of the settlement negotiations, he was not told about any consideration to be paid by AHC; AVCO entered into the PBTH contract, AVCO entered into the Transition Period Agreement and AVCO made the $17 million cash payment. Moreover, the Government openly represented to the court and the media that it had determined that AHC had not "participated in [AVCO's] misconduct." ROA at 109. In short, there were no publicized settlement proceeds to be paid by AHC that Ballew could have challenged. In fact, based on the Government's affirmative misconduct, Ballew had no reason to even consider challenging the Underlying Qui Tam settlement. The panel decision also presumes that had Ballew challenged the settlement, the Government would have been forthcoming about the dismissed administrative claims. The evidence, however, is to the contrary. For example, in its briefing, and notwithstanding the plain language of the Gerson Memorandum, the Government consistently has taken the position that the dismissed administrative claims were not related in any way to the Underlying Qui Tam settlement. In fact, to this day, the Government has never addressed, much less acknowledged, the Gerson Memorandum in its trial court or appellate briefing. In short, this case is exactly the type of case involving a "grave miscarriage of justice" that the Supreme Court contemplated should be remedied by a Rule 60(b) independent action in equity.
B. The panel decision conflicts with this Court's holding in United States ex rel. Thornton v. Science Applications International, 207 F.3d 769 (5th Cir. 2000). Section 3730(d)(1) of Title 31 of the United States Code requires the Government to pay to a qui tam Relator a percentage of "the proceeds of the action or settlement of the claim, depending upon the extent to which the person substantially contributed to the prosecution of the action." The Government has absolutely no discretion in this matter. ENDNOTE 6 In Thornton, this Court held that released administrative claims may be "proceeds" for purposes of computing a relator's share of a qui tam settlement. Id. at 770-72. This Court also held that the Government has the following duty to relators regarding qui tam settlements: The government has a duty to advise the relator of the value of the settlement at the time it notifies him that it intends to settle the case, and this representation should include the government's estimate of the value of non-cash proceeds. Especially in cases such as this one, in which the face value of the defendants' [administrative] claims is significant, the government will have a rough idea of the [administrative] claims' value. Id. at 772. This did not happen here. Instead, the Government fraudulently concealed and failed to disclose to Ballew that the AHC administrative claims had been dismissed, the value of the dismissed administrative claims, and that they were part of the Underlying Qui Tam settlement. ENDNOTE 7 Ballew, therefore, should be free to litigate his Rule 60(b) independent action. C. Ballew clearly and adequately has pled a Rule 60(b) fraud upon the court in his First Amended Complaint. Fraud upon the court, if established, constitutes a grave miscarriage of justice and may serve as the foundation of a Rule 60(b) independent action. Rozier v. Ford Motor Co., 573 F.2d 1332, 1338 (5th Cir. 1978). The standard for fraud upon the court, however, is demanding: "Fraud upon the court" as distinguished from fraud on an adverse party is limited to fraud which seriously affects the integrity of the normal process of adjudication. (citations omitted). The concept of "fraud on the court" embraces "only that species of fraud which does, or attempts to, defile the court itself, or is a fraud perpetrated by officers of the court so that the judicial machinery cannot perform in the usual manner its impartial task of adjudging cases." Kupferman v. Consol. Research & Mfg. Corp., 459 F.2d 1072, 1078 (3d Cir. 1972) (citations omitted). Hadges v. Yonkers Racing Corp., 48 F.3d 1320, 1325 (2d Cir. 1995) (emphasis added). Stated another way, fraud on the court requires a "scheme by which the integrity of the judicial process has been fraudulently subverted by a deliberately planned scheme in a manner involving 'far more than an injury to a single litigant.'" Addington v. Farmer's Elevator Mut. Ins., 650 F.2d 663, 668 (5th Cir. 1981) (quoting Hazel-Atlas Glass, 322 U.S. at 245-46). In affirming the dismissal of Ballew's Rule 60(b) independent action based on a fraud upon the court, the panel held that Ballew's allegations have: [O]nly established that the Government committed fraud against him as an individual. Ballew has shown injury to himself in his capacity as a "single litigant" but this alone is not sufficient to constitute fraud upon the court. Ballew has failed to allege an attack on the integrity of the judicial process itself. By failing to plead fraud on the court, Ballew has thereby failed to assert that a grave miscarriage of justice exists. Panel decision at 9 (emphasis added). With all due respect to the panel, Ballew clearly and properly pled all of the above elements of a Rule 60(b) independent action based upon the Government's fraud upon the court in the following paragraphs in his First Amended Complaint:
6.2 By their above wrongful actions, DOJ, as officers of the court, and on behalf of the United States, deliberately planned and entered into a scheme with the USCG (and the defendants in the Underlying Qui Tam) to fraudulently subvert the judicial process by misleading the court as to the true nature, extent and value of the Underlying Qui Tam settlement proceeds and, in the process, shortchanging Ballew his statutory share of the total settlement proceeds. 6.3 The Defendants' unconscionable conduct resulted in a far greater injury than the injury suffered by Ballew. By deliberately concealing the true nature, extent and value of the Underlying Qui Tam settlement proceeds, the Defendants: 6.3 The Defendants' wrongful conduct, as set forth in Sections IV-XIV of this First Amended Complaint, corrupted the judicial process itself. Ballew brings this Rule 60(b) independent action to remedy the Defendants' egregious fraud on the court. First Amended Complaint at ¶¶ 6.2-6.4 (emphasis added). ROA at 307-08. Ballew also specifically alleged a "grave miscarriage of justice" at ¶ 5.5 of his First Amended Complaint. ROA at 306. CONCLUSION The Government's (i) fraudulent concealment and affirmative failure to disclose to Ballew and the court the nature, existence and value of the AHC dismissed administrative claims (and their inclusion in the Underlying Qui Tam settlement), (ii) failure to pay Ballew his statutory share of the value of the dismissed administrative claims, and (iii) overall shabby treatment of Ballew, a concerned citizen who initiated a case that yielded a record qui tam settlement while saving lives in the process, collectively constitute a "grave miscarriage of justice." This fact, coupled with Ballew's well-pled claim for fraud upon the court, as supplemented by the documentary evidence in the record, easily clear the Rule 12(b) hurdle. Not only has Ballew stated a claim for which relief can be granted, he has stated a claim for which relief should be granted. Ballew, therefore, respectfully requests that this Court vacate the panel decision, reverse the district court's final judgment, and remand this case to the district court with instructions to allow him to proceed with his Rule 60(b) independent action. Respectfully submitted,
CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the Appellant's Petition for Rehearing En Banc has been served on counsel for the Defendant-Appellees, as set forth below, and the Clerk of the Fifth Circuit Court of Appeals, in both paper and electronic form (pursuant to 5th Cir. R. 31.1) via overnight delivery on January ___, 2001.
David W. Ogden, Esq.
Paul E. Coggins, Esq.
ENDNOTES: 1. - The Defendant-Appellees collectively will be referred to as the Government. 2. - Ballew notes that the panel mistakenly believes that his appeal also seeks compensation for the value of the Power by the Hour contract entered into by the Government and AVCO. Panel decision at 3. See Addendum "A". While this orginally was the case, Ballew, in his Reply Brief and at oral argument, limited the scope of the appeal to his share of the value of the dismissed administrative claims. 3. - The Record on Appeal hereafter will be referred to as "ROA at ____." Record Excerpts herafter will be referred to as "Rec. Ex. at Tab ___." 4. - Unless otherwise noted, the Statement of Facts is taken from affidavits executed by Ballew. Rec. Ex. at Tabs L; M. 5. - Ballew finally secured an unofficial copy of the MOU on March 12, 1991, over a year after it was executed and nine (9) months after the Underlying Qui Tam was settled. 6. - Ballew finally argues that the mandatory language of this statute, at the very least, created a constructive trust over his share of the value of the dismissed administrative claims - especially in light of the fact that these settlement proceeds were never disclosed to him. 7. - At least one court has noted the tension between qui tam relators and the Government when it comes to calculating the relator's award: The pattern of behavior in these cases by the Department of Justice always has been a mystery. The use of a qui tam plaintiff is nothing new. ... In view of their widespread use, it is worthy of note that the Department of Justice has considered such individuals as adversaries rather than allies. This is not the first case where this Court has noted the antagonism of the Justice Department to a whistleblower. The reason continues to be unknown, but the attitude is clear. United States v. General Electric, 808 F. Supp. 580, 583-84, (S.D. Ohio 1992)(emphasis added)(citing Gravitt v. General Electric, 680 F. Supp. 1162 (S.D. Ohio 1988)).
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