Eighth Circuit affirms dismissal, summary judgment on whistleblower's case against power company

by admin | June 30th, 2014

On June 27, the Eighth Circuit Court of Appeals, in U.S. ex rel. Kraxberger v. Kansas City Power & Light affirmed the dismissal and partial summary judgment of a relator’s suit alleging fraud in convincing the General Services Administration to switch a federal building to an all-electric HVAC system.

The whistleblower worked at the federal building in question, and his father had been an employee of the GSA. The building had been heated with steam and cooled with chilled water provided by a company named Trigen-Kansas City Energy Corp. The GSA was considering an all-electric system, and the defendant, Kansas City Power & Light (KCPL), promised GSA a favorable rate – even though its rates were regulated by the Missouri Public Service Commission.

The whistleblower alleged that KCPL employed, in drafting a building life cycle cost analysis for GSA, an inflation rate for electric power lower than it had proposed to the public service commission, had fraudulently promised the GSA an “all-electric” rate that was lower than its typical rates, and had falsely certified in its bidding documents that it had paid no gratuities (in fact, it had provided tickets to sporting events and other minor gifts to government employees.

The Court first affirmed the dismissal of the case on public disclosure grounds, noting that the key documents on which the relator relied had been publicly disclosed in public service commission testimony and in response to a Freedom of Information Act (FOIA) request filed by Trigen’s counsel. (The court rejected the whistleblower’s attempt to distinguish his case from Schindler Elevator on the grounds that unlike in that case, he himself had not filed the FOIA request.) Nor did the relator qualify as an original source because even if his knowledge was independent, it did not materially add to that which was publicly disclosed, the Court reasoned.

Turning to the district court’s partial grant of summary judgment on the gratuity allegations, the Court rejected four of the relator’s contentions concerning these payments. First, although GSA could have rescinded the contract under Federal Acquisition Regulation 52.203-11, the Court noted that the whistleblower had not alleged that the GSA’s own procedures dealt inadequately with the payments. Instead, the agency knew of them and yet decided to proceed, believing that the deal was in the government’s interest.

Second and third, the Court rejected the relator’s alternative argument that under the FAR, the payments rendered the KCPL or GSA employees, respectively, de facto lobbyists, who the company failed to disclose in violation of the regulations.

Fourth, the Court rejected the whistleblower’s argument that the payments were bribes which induced the contract. To prove this, the Court reasoned, the relator had to show that the payments were material to GSA’s decision and caused the government to pay money. Instead, the Court noted, the GSA entered into the deal believing that it would save the government money.

The Court also rejected the relator’s arguments that the district court had erred procedurally. Most prominent of these contentions was his argument that KCPL had to raise public disclosure in its answer. This was at most a technical failure which did not result in unfair surprise to the relator, the Court reasoned in rejecting his objection.

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