MEAD GRUVER Associated Press Writer | Posted: Wednesday, April 7, 2004 12:00 am
CHEYENNE - A judge should not have dismissed a lawsuit alleging that an oil company underpaid gas royalties near the Wind River Indian Reservation, a federal appeals court ruled.
The 10th Circuit Court of Appeals in Denver held on Monday that Don Kennard and Harrold Wright are justified in suing Comstock Resources, Inc., and other companies because of Kennard's and Wright's firsthand familiarity with the case - and despite a similar lawsuit that preceded their lawsuit by a day.
The case was sent back to the U.S. District Court of Wyoming.
At the same time, the three-judge panel said they could not rule on the plaintiffs' claim that an attorney for one of the reservation's tribes stole information from them to file the first lawsuit.
"We are constrained by the law as it is written," explained the ruling written by Judge Monroe McKay.
Kennard and Wright sued under the False Claims Act after the operator on Wright's property sold its lease interests to Comstock and Wright's royalty payments dropped dramatically.
Wright suspected Comstock was underpaying the tribe as well as himself. He consulted with Kennard, who researched public records and found that the American Indian leases might have expired.
Wright and Kennard concluded that Comstock was knowingly underpaying royalties to the tribe. They worked with attorneys to draft a complaint and invited the tribe to join the lawsuit, but the tribe declined.
On Oct. 21, 1998, the relators - the term for "plaintiffs" under the False Claims Act - sent a required disclosure statement to the federal government, which oversees royalty payments for American Indian tribes.
Five days later, one of the attorneys who had been working with Kennard and Wright filed suit on behalf of the tribe. That pre-empted their lawsuit by a day.
Federal law prohibits lawsuits to be based solely on information that has been made public, with the goal of preventing a lot of lawsuits on the same topic. The appeals court determined that the filing of the lawsuit on behalf of the tribe made the information public.
Exceptions are made for lawsuits filed by an "original source" of information in a case or the U.S. attorney general. The appellate court determined that Kennard and Wright are original sources and may file suit.
"Relators were not just assemblers of information. This case would not exist but for Relators sniffing it out," the ruling said.
"Through discovery and deduction, Relators ferreted out the alleged fraud in this case and must, therefore, qualify as an original source."