WILLIAM C. KOCH, JR., J., delivered the opinion of the Court, in which CORNELIA A. CLARK, C.J., JANICE M. HOLDER, GARY R. WADE, and SHARON G. LEE, JJ., joined.
This appeal involves a claim under Tennessee's False Claims Act. A local vendor of termite control services became suspicious
Knox County contracts with private vendors for termite control services at its eighty-four public schools. Prior to November 2000, Arrow Exterminators, Inc. ("Arrow") had the contract. When the contract was put out for bids in November 2000, both Environmental Termite & Pest Control, Inc. ("Environmental") and Allied Pest Control ("Allied") submitted bids for the work. The County awarded the contract to Allied and agreed to pay Allied $2.90 per linear foot treated.
After Allied won the contract, Edward Howard, Environmental's president, noticed that the County's decision to award the contract to Allied coincided with Allied's decision to hire Fred Thomas away from Arrow. Mr. Howard knew that Mr. Thomas was a close friend of Floyd Swann, a county employee involved with evaluating and awarding the termite control contract. Based on his prior dealings with both individuals, Mr. Howard became suspicious that Mr. Swann was actively directing the contracts to Mr. Thomas's employers. From his vantage point as an insider in the termite control industry in the Knoxville area, Mr. Howard also became concerned about the perfunctory manner in which the County had been reviewing the bills submitted by both Arrow and Allied for termite control services.
In December 2000, Mr. Howard's suspicions about the County's handling of the termite control contracts prompted him to look into the matter further. He retained Daniel F. McGehee, a Knoxville attorney who had performed legal work for Environmental in the past, to advise him how to proceed.
On December 13, 2000, acting on Mr. McGehee's direction, Cheri Coldwate, Environmental's
On January 25, 2001, Ms. Coldwate mailed Mr. McGehee her analysis of the data contained in the records she received from Knox County. She noted two irregularities in particular. First, she noted that the bills submitted by Arrow and Allied had not received the same level of scrutiny that Environmental's bills had received on its pest control contracts. Second, she noted that the actual number of linear feet of the County's school buildings requiring treatment and the contract price per linear foot was greatly exceeded by the amount of the bills submitted both by Arrow and by Allied. Ms. Coldwate specifically discussed the bills for services at eight different schools and stated that her analysis indicated that the vendors had overbilled the County for these services between $3,000 and $16,000 per school.
Based on the purchasing and payment records obtained from the County and on Ms. Coldwate's analysis, Mr. McGehee became convinced that Mr. Swann was paying the invoices for termite services without reviewing them and, as a result, that the County was being significantly overbilled. In January 2001, he met with the County's Director of Finance and Administration, two representatives of the County purchasing department, and two lawyers from the Office of the Knox County Law Director. Mr. McGehee informed these officials that he was acting on behalf of Environmental and that Environmental's analysis of the billing and payment records indicated that Arrow and Allied were significantly overbilling the County. Prior to their meeting with Mr. McGehee, none of the officials were aware of the possibility that the County was being overbilled for termite control services.
Following the January 2001 meeting, Mr. McGehee provided Knox County with an extensive and thoroughly documented report, including twenty-two exhibits, describing the details of Allied's and Arrow's fraudulent billing practices. The report concluded that the County began to receive fraudulent bills in 1997 and that Mr. Swann arranged to pay these bills more promptly than the bills of other vendors.
On February 8, 2001, Mr. McGehee met again with the County officials with whom he had met in January 2001. The Knox County Law Director also attended this meeting. Mr. McGehee provided the officials with copies of Environmental's detailed report. According to Mr. McGehee, the County officials "were pretty much stunned that somebody had taken the time to go back and research in such detail all of the false billings that were there."
The participants in the February 8, 2001 meeting decided not to release Environmental's detailed report. The County officials were concerned that releasing the report would draw the media's attention, and they also desired to have an opportunity to request the District Attorney General to determine whether any criminal wrongdoing had occurred.
On February 28, 2001, after consulting with the Director of Finance and Administration, Mr. McGehee informed the County's external auditor, who was auditing the County schools, of the suspected irregularities regarding the billing and payments for termite control services at the County's schools. In March 2001, the auditor informed Mr. McGehee that the scope of her audit was not broad enough to include the matter and directed him back to the County Law Director.
Following the flurry of activity in late 2000 and the first two months of 2001, the inquiry into the irregularities in the billing and payment for termite control services at the County's schools languished for more than one year. Mr. Howard became increasingly frustrated by the County officials' failure to act. Accordingly, to move the process forward, he talked with members of the Knox County Commission to apprise them of the results of Environmental's investigation into the overbilling by Arrow and Allied.
As a result of the information provided by Mr. Howard, members of the Knox County Commission called for an internal audit of the County schools. In a report released on April 9, 2003, the Knox County Department of Internal Audit found more than $270,000 of overbilling by Allied and Arrow. This audit report was the first time that the overbilling problem was made public. The audit report understandably attracted the attention of the local news media.
The Superintendent of Schools took strong issue with the audit findings. He attributed the billing problems to short-comings in the contracts and to the discretionary decisions of County purchasing employees to change the terms of the contracts to accommodate changed circumstances. He also denied that any County officials or service providers had acted improperly and insisted that no action should be taken against the termite control service providers.
The County Law Director continued to make no effort to recover the overpayments from Arrow and Allied. For his part, Mr. Howard "was absolutely furious at that point that nothing was being done.... He was livid about the fact that Knox County ... was not doing anything to recover the money." At Mr. Howard's request, Mr. McGehee met again with the County Law Director to encourage him to take steps to recover the overpayments.
Like Mr. Howard, the members of the Knox County Commission became concerned about the County Law Director's inaction. They sent a letter to the County Law Director on May 5, 2003, expressing their concerns and inquiring whether they had standing to pursue a recovery on their own.
On June 13, 2003, the Department of Audit aggressively responded to the school superintendent's criticism of the audit findings. Characterizing the superintendent's position as "somewhat puzzling," the auditor insisted that the superintendent's "response appears to be an attempt to cover up embarrassing misconduct by its employees, give tacit approval to unethical practices and further stonewall attempts to recover overpayments." In addition, the auditor asserted that "based on the questionable... response and the presence of fraud indicators (red flags) during our review, we recommend the review be expanded into a fraud investigation." The auditor also suggested that the matter
The Knox County Board of Education broke with its superintendent on June 16, 2003, by unanimously passing a resolution authorizing the County Law Director to seek reimbursement of any overpayments Arrow had received. The Board also requested the Knox County Sheriff to conduct a fraud investigation.
In a letter to Mr. McGehee dated June 17, 2003, the County Law Director stated that he planned to begin discussions with Arrow regarding reimbursement of the overpayments and that he intended to proceed with litigation if necessary. He also informed Mr. McGehee that Allied had offered to give the County a credit of over $40,000. While the County Law Director believed that this offer adequately addressed Allied's overbilling, he told Mr. McGehee that he intended to investigate further.
Despite these assurances, Mr. McGehee had little confidence that the County Law Director planned to pursue the overpayments very aggressively. Around this time, Mr. McGehee became aware of the False Claims Act that had been enacted in 2001 to authorize private citizens to file qui tam suits as a means to address fraudulent billing like that uncovered by Environmental.
On June 20, 2003, Environmental filed a qui tam action on behalf of Knox County in the Chancery Court for Knox County against Arrow and Allied. The case was filed under seal and in camera. Environmental filed a second complaint on June 24, 2003, but did not place it under seal. The County Law Director responded by filing his own suit against Arrow and Allied and by seeking dismissal of Environmental's complaint. He later changed course and filed notice in Environmental's proceeding that he intended to intervene in accordance with Tenn.Code Ann. § 4-18-104(c)(7)(B).
Environmental filed motions and briefs in response to the County's changing positions. In an effort to bring some order to the process, the trial court filed orders steering Environmental and the County to consolidate the County's lawsuit with Environmental's qui tam suit. These orders left the County in control of the consolidated suit but permitted Environmental to continue to participate in the proceeding.
After two years of litigation, the trial court conducted a judicial settlement conference on November 10, 2005. As a result of this conference, all claims involving the overpayments to Allied were settled, along with Environmental's statutory claim to a share of the settlement proceeds
Arrow and Environmental later reached an agreement with regard to the payment of Environmental's attorney's fees. Accordingly, the trial court approved the parties' various settlement agreements and noted that Environmental had reserved its rights as a qui tam plaintiff to claim a share of the settlement between the County and Arrow. The County and Environmental could not resolve their disagreement on this issue, and the litigation continued.
Knox County insisted that Environmental was not entitled to a share of its settlement with Arrow because the Sentricon installation and monitoring agreement did not constitute the "proceeds of the action or settlement of the claim" under Tenn. Code Ann. § 4-18-104(g)(2). Following a hearing on February 5, 2007, the trial court entered an order on February 6, 2007, rejecting the County's argument, and scheduled a hearing for August 8, 2007, to determine the value of the settlement and the amount of Environmental's share.
During the six months preceding this hearing, the County changed course again and decided to challenge Environmental's qualifications as a qui tam plaintiff. Thus, at the August 8, 2007 hearing, the trial court heard evidence and argument not only with regard to the value of the settlement between the County and Arrow but also with regard to Environmental's qualifications to bring a qui tam action. In an August 31, 2007 memorandum opinion, the trial court rejected the County's claim that Environmental was not qualified to bring a qui tam action. The court also determined that the value of the settlement between the County and Arrow was $255,523.07 and that Environmental was entitled to recover 28% of the value of the settlement or $71,546.26.
Environmental took issue with the amount of the qui tam award in a Tenn. R. Civ. P. 59.04 motion filed on September 25, 2007. The trial court entered an order denying Environmental's motion on December 4, 2007. Environmental filed a timely notice of appeal on December 13, 2007.
Both parties took issue with the trial court's decision, collectively presenting five issues to the Court of Appeals. The County insisted that the trial court had erred by concluding that Environmental was entitled to pursue a qui tam claim and by concluding that the Sentricon services Arrow agreed to provide the County to settle the overbilling claim were proceeds of a settlement. Environmental asserted (1) that the evidence did not support the trial court's calculation of the value of the settlement between the County and Arrow, (2) that it was entitled to more than 28% of the value of the settlement, and (3) that the trial court had erroneously required it to support its claim using a higher burden of proof than the statute required.
The Court of Appeals handed down its opinion on July 20, 2009. In re Knox Cnty., Tenn. ex rel. Envt'l Termite & Pest Control, Inc., No. E2007-02827-COA-R3-CV,
Knox County filed its application for permission to appeal on October 12, 2009, presenting only one issue—whether the lower courts erred by determining that Environmental was an original source of the information regarding the overbilling for termite services under Tenn.Code Ann. § 4-18-104(d)(3)(A) and was, therefore, qualified to recover a share of the proceeds of the settlement between Arrow and the County under the False Claims Act. All the other issues that were contested in the lower courts are not before us on this appeal.
Unless otherwise required by statute, we review a trial court's findings of fact in civil cases tried without a jury de novo based upon the record before the trial court with an accompanying presumption that the trial court made correct findings of fact unless the evidence preponderates to the contrary. Tenn. R.App. P. 13(d). We do not afford the same deference to a trial court's conclusions of law. Blackburn v. Blackburn, 270 S.W.3d 42, 47 (Tenn.2008). To the contrary, we review a trial court's decisions on questions of law de novo with no presumption of correctness. Graham v. Caples, 325 S.W.3d 578, 581 (Tenn.2010). Statutory construction and the application of a statute to the facts present questions of law which are reviewed de novo without a presumption of correctness. Gautreaux v. Internal Med. Educ. Found., Inc., 336 S.W.3d 526, 531 (Tenn.2011).
The concept of permitting private citizens to pursue claims on behalf of the
While the use of common-law qui tam suits declined in England during the Fourteenth Century, Parliament was expanding the statutory availability of these suits. Parliament enacted statutes that permitted two varieties of qui tam suits—(1) "those that allowed injured parties to sue in vindication of their own interests (as well as the Crown's)" and (2) "those that allowed informers to obtain a portion of the penalty as a bounty for their information, even if they had not suffered an injury themselves."
What began as a trickle of qui tam legislation eventually became a flood,
Colonists in the New World carried forward Parliament's practice of enacting qui tam statutes. These statutes date at least as far back as a 1692 law in New York.
From the formation of the United States, there has never been a time when there was not at least one federal qui tam law on the books.
The federal courts recognized that the False Claims Act was
United States v. Griswold, 24 F. 361, 366 (D.Or.1885); see also Hughes Aircraft Co. v. United States ex rel. Schumer, 520 U.S. 939, 949, 117 S.Ct. 1871, 138 L.Ed.2d 135 (1997); United Seniors Ass'n, Inc. v. Philip Morris USA, 500 F.3d 19, 24 (1st Cir. 2007) (characterizing the False Claims Act as being "intended to aid the government in discovering fraud and abuse `by unleashing a posse of ad hoc deputies to uncover and prosecute frauds against the government'") (quoting United States ex rel. Karvelas v. Melrose-Wakefield Hosp., 360 F.3d 220, 224 (1st Cir.2004)).
The federal courts have struggled mightily with interpreting and applying the federal False Claims Act, and the United States Congress has expressed frustration with some of these judicial interpretations. As one United States District Court has noted:
United States ex rel. Merena v. Smithkline Beecham Corp., 114 F.Supp.2d 352, 371-72 (E.D.Pa.2000). Noting the existence of the conflicting interpretations of the provisions of the False Claims Act, another United States District Court has stated that it "sympathizes with anyone litigating under the False Claims Act." United States ex rel. Montgomery v. St. Edward Mercy Med. Ctr., No. 4:05-CV-00899 GTE, 2008 WL 110858, at *3 & n. 6 (E.D.Ark. Jan. 8, 2008). The Senate Report for The False Claims Act Correction Act of 2008 similarly expressed frustration with the widely varying and errant nature of many of the judicial interpretations of the various provisions of the False Claims Act by the federal courts, including some decisions by the United States Supreme Court. See S.Rep. No. 110-507, at 9 (2008).
To a great extent, the federal courts' conflicting interpretations of the federal False Claims Act arise from the tension inherent in all qui tam suits. These proceedings must "strike a balance between encouraging private citizens to expose fraud and avoiding parasitic actions by opportunists who attempt to capitalize on public information without seriously contributing to the disclosure of the fraud." United States ex rel. Doe v. John Doe
It is the language of 31 U.S.C. § 3730(e)(4) that has become the battleground for the conflicting views regarding just how broad or narrow Congress's grant of authority for federal qui tam suits filed by private citizens is. There is little dispute that the language of this statute has
United States ex rel. Findley v. FPC-Boron Employees' Club, 105 F.3d 675, 681 (D.C.Cir.1997).
The Tennessee General Assembly has a long history of enacting statutes
We accepted Knox County's application for permission to appeal to address the question of whether the jurisdictional bar in Tenn.Code Ann. § 4-18-104(d)(3)(A) prevents Environmental from recovering as a qui tam plaintiff under the facts of this case. The parties have invited us to answer this question by venturing into the imbroglio created by the conflicting interpretations of the federal False Claims Act's jurisdictional bar. While 31 U.S.C. § 3730(e)(4) is similar, particularly in its pre-2010 amendment form, to Tenn.Code Ann. § 4-18-104(d)(3), we are disinclined to survey the conflicting federal decisions to pick out decisions that most closely
As interesting as these cases may be, they are not the proper starting point for construing Tenn.Code Ann. § 4-18-104(d)(3). We must begin with the words of the state statute. Waldschmidt v. Reassure Am. Life Ins. Co., 271 S.W.3d 173, 176 (Tenn.2008). Our goal is to ascertain and to give the fullest possible effect to the General Assembly's intent and purpose. See Auto Credit of Nashville v. Wimmer, 231 S.W.3d 896, 900 (Tenn.2007); State ex rel. Pope v. U.S. Fire Ins. Co., 145 S.W.3d 529, 534-35 (Tenn.2004). To do so, we must (1) give these words their natural and ordinary meaning, (2) consider them in the context of the entire statute, and (3) presume that the General Assembly intended that each word be given full effect. See Lanier v. Rains, 229 S.W.3d 656, 661 (Tenn.2007); State v. Flemming, 19 S.W.3d 195, 197 (Tenn.2000). When a statute's language is clear and unambiguous, we need not look beyond the statute itself, State v. Strode, 232 S.W.3d 1, 9-10 (Tenn.2007); Corum v. Holston Health & Rehab. Ctr., 104 S.W.3d 451, 454 (Tenn. 2003), but rather, we must simply enforce it as written. Wausau Ins. Co. v. Dorsett, 172 S.W.3d 538, 543 (Tenn.2005); Miller v. Childress, 21 Tenn. (2 Hum.) 319, 321-22 (1841). Thus, as Justice William Reese observed one hundred and seventy years ago, "[w]here a statute is plain and explicit in its meaning, and its enactment within the legislative competency, the duty of the courts is simple and obvious, namely, to say sic lex scripta,
The Tennessee False Claims Act provides, in part, that
Tenn.Code Ann. § 4-18-104(d)(3)(A), (B).
The pivotal issue in this case is whether Environmental qualifies as an "original source" under Tenn.Code Ann. § 4-18-104(d)(3)(A) and (B). While the exact boundaries of this statute may be somewhat indistinct, we have little difficulty in concluding under the plain language of the statute that Environmental qualifies as an "original source" for the purposes of Tennessee's False Claims Act. To be an "original source," a qui tam plaintiff must (1) have direct and independent knowledge of the information on which the allegations referenced in Tenn.Code Ann. § 4-18-104(d)(3)(A) are based, (2) voluntarily provide this information to the state or political subdivision before filing an action based on that information, and (3) the information provided by the qui tam plaintiff must have provided the basis or catalyst for the investigation, hearing, audit, or report that led to the public disclosure as described in Tenn.Code Ann. § 4-18-104(d)(3)(A). Tenn.Code Ann. § 4-18-104(d)(3)(B).
Assuming, solely for the purpose of argument, that Environmental's qui tam case is based on the April 9, 2003 audit report rather than on its own report that Mr. McGehee provided to County officials in February 2001,
Environmental's initial examination of the public records, which no County employee had undertaken, uncovered a consistent pattern of overbilling beginning in 1997. When Environmental's initial investigation was underway, there had been no public disclosure of the overbilling problem, nor had any administrative, civil, or criminal investigation or proceedings been commenced. It is undisputed that prior to receiving Environmental's February 2001 report, the overbilling uncovered by Environmental had gone entirely undetected by County employees.
While both Environmental and Knox County relied on public records in their independent investigations into the overbilling for termite services, none of the public documents turned over to Environmental during its investigation addressed
When Environmental laid out the fraudulent conduct of Arrow and Allied to the County officials in February 2001, it was Environmental, not Knox County, that had direct and independent knowledge of the overbilling practices. Based on the essentially undisputed facts of this case, Environmental did not rely on existing information from another investigation, report, hearing, or audit when it prepared its report that was presented to the County officials in February 2001.
Environmental supplied the information it had assembled to many different County officials and on many different occasions. It repeatedly urged the officials, particularly the County Law Director, to take steps to recover the County funds. It was the information provided by Environmental that triggered the internal audit that ultimately confirmed Environmental's findings. Accordingly, for the purpose of Tenn.Code Ann. § 4-18-104(d)(3)(B), it was the information provided by Environmental that provided "the basis or catalyst for the investigation, hearing, audit, or report that led to the public disclosure as described in subdivision (d)(3)(A)."
Our conclusion is bolstered by the General Assembly's directive regarding the interpretation of the False Claims Act. Tenn. Code Ann. § 4-18-107(c) states that our Act is "remedial in nature and the provisions of this chapter shall be liberally construed to effectuate its purposes." We have concluded that Environmental qualifies as a proper qui tam plaintiff under the plain language of Tenn.Code Ann. § 4-18-104(d)(3)(A). That Environmental need only surmount the lower bar of a liberally constructed reading of Tenn.Code Ann. § 4-18-104(d)(3)(A) reinforces our conclusion that the lower courts did not err in finding that Environmental qualified as an appropriate qui tam plaintiff.
The legislative history of Tennessee's False Claims Act also supports our conclusion. Representative Rob Briley, the Act's sponsor in the House of Representatives, explained that the Act would empower "do gooders," who are "trying to protect ... taxpayer dollars by identifying false claims."
This exact purpose was served in the present case. As reflected in the trial court's September 10, 2007 ruling, "[Knox] County does not maintain that it was aware of the fraud prior to the disclosure by Environmental." The trial court also found that "[t]he overwhelming proof in this case indicates that the overbilling would not have been discovered without the qui tam plaintiff's pre-litigation investigation and report to the government. Indeed, it is highly likely that the practice would continue to the present resulting in additional losses to the County." There is
For the reasons discussed above, we affirm the conclusion of the trial court and the Court of Appeals that Environmental qualifies as a proper qui tam plaintiff under the Tennessee False Claims Act. We remand this case to the trial court for further proceedings consistent with this opinion and the opinion of the Court of Appeals upon the issues not raised on appeal before this Court. We tax the costs of this appeal to Knox County for which execution, if necessary, may issue.
31 U.S.C.A. § 3730(e)(4) (2003); see also False Claims Amendment Act of 1986, Pub.L. No. 99-562, § 3 (1986).
Responding to some of the interpretive difficulties experienced by the federal courts, Congress has amended 31 U.S.C. § 3730(e)(4) which, in its current form, states that
31 U.S.C.A. § 3730(e)(4) (Oct. 2010 Supp.) (footnote omitted).
Tenn.Code Ann. § 4-18-103(a).