Here is a case that would scare any would-be whistleblowers. A federal appeals court in Denver ordered a whistleblower to pay $15 million to the alleged wrongdoers. Previously the trial court had sanctioned the whistleblower $16,838,279.77. This isn’t money the whistleblower gets. Instead, the courts ordered the whistleblower to pay!
Whistleblower Statute Attorney’s Fee Provision
The False Claims Act contains an attorney’s fee provision. If the whistleblower wins, the statute allows the court to award attorneys’ fees. But the statute also allows the court to award fees to the defendant if the whistleblower claim is deemed frivolous or vexatious. Awards to defendants are very rare.
31 U.S.C. §3730(d)(4) says, “If the Government does not proceed with the action and the person bringing the action conducts the action, the court may award to the defendant its reasonable attorneys’ fees and expenses if the defendant prevails in the action and the court finds that the claim of the person bringing the action was clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment.”
This is the provision used by the court in awarding almost $17 million in fees.
Grynberg Charges Over 300 Companies with Defrauding the Government
Jack Grynberg is a serial whistleblower. That means he files many cases. There is nothing wrong with doing that if the cases are legitimate. A federal judge and later a 3 judge appeals panel found they were not.
Grynberg’s ordeal started when he filed cases against over 300 natural gas companies. In each complaint, he claimed that the company didn’t pay the government enough in royalties.
The largest landowner in the United States is the government itself. When the government allows oil and gas companies to drill on public land, it asks for a royalty payment in return. The royalty is expressed as a percentage of the sales price of the product. Simple theory – if you want to exploit public resources you must pay for the privilege.
Grynberg claimed that hundreds of drilling companies were ripping off the government. Not surprisingly, most of the accused companies denied any wrongdoing. As things heated up, it appears that Grynberg may have been misleading the defendants. Ultimately, the trial court ruled his cases were frivolous.
After the ruling, many of the 300 plus named companies demanded legal fees. Because there are so many defendants, the legal fees quickly rose to well over $10 million.
Were the complaints frivolous? The appeals court thought so. They said Grynberg’s lawsuit was a “’shotgun’ pleading that fir[ed] out more than ten accusations at seventy defendants, hoping that some accusations stick on some defendants. The court criticized Mr. Grynberg’s pleading factual allegations on ‘information and belief,’ because such tactics are generally employed to mask fishing expeditions. The court described Mr. Grynberg’s overall approach as “an attempt … to shift his investigatory burden onto defendants.”
Grynberg would later file more complaints raising the total number of defendants from 70 to 300.
Since this post was originally written, Grynberg appealed the award of attorney’s fees against him. In January 2017, the 10th Circuit Court of Appeals largely upheld the attorneys’ fee award. The reasoning of the court is worth discussing.
First, the appeals court found that the complaints submitted were factually incorrect. They found exhibits attached to the complaint were “fundamentally flawed and provided no evidentiary foundation for Mr. Grynberg’s claims.”
The Appeals Court also agreed with the trial court judge who found that “Mr. Grynberg ‘proceed[ed] [with his claims] in spite of information from agency and government officials indicating his claims had no merit.’ Id. For instance, Mr. Grynberg initiated his lawsuits despite a warning from the Colorado Oil and Gas Conservation Commission—a group the district court described as having extensive public regulatory, private sector, and engineering experience—that his claims were “baseless and without merit.”
Certainly, a whistleblower being ordered to pay $16.8 million would make any would be whistleblower to think twice about blowing the whistle. Don’t worry, however.
Whistleblowers and Sanctions
Should whistleblowers be worried about sanctions? No. Here are my reasons.
First, the whistleblower here (Grynberg) had little inside information. As the court notes, the complaints were filed on little more than a hunch. Not every whistleblower case wins but it is very rare that whistleblowers are sanctioned or ordered to pay legal fees.
Second, the court’s opinion suggests that Grynberg was misleading the court. Very few whistleblowers have all the information needed. That is why the government is given a chance to investigate. Be honest and it is highly unlikely that you will face sanctions. Try “too hard” by making up missing facts and you could find yourself in serious trouble, however. Ditto if you file exhibits that are misleading or have no factual basis.
Third, if the government tells you in advance that your claim is frivolous, think long and hard before you file it. We are not saying that the government doesn’t make mistakes. They do. But when a government agency and a Justice Department prosecutor warn you that you may be wrong, you better have some good reasons why you filed. The law protects people who file in “good faith,” not people who stubbornly dig in the heels and don’t respond to prosecutors legitimate questions.
Finally, Grynberg didn’t have lawyers in his cases. Instead of hiring a lawyer who works on a contingent fee (and therefore shares the risks), he decided to pay hourly and only for those specific tasks where he thought he needed help.
Ever hear the adage, “You get what you pay for”? It’s true! We believe that had a whistleblower lawyer been involved at all stages, Grynberg wouldn’t be on the hook for $15 million. Take the cheap way out and will cost in the long run.
False Claims Act and Awards for Whistleblowers
Why did Grynberg go through the hassle?
All his cases were filed under the federal False Claims Act. That law pays whistleblowers up to 30% of whatever is collected from wrongdoers. Grynberg obviously believed that these oil and gas companies were stiffing Uncle Sam. Unfortunately, he didn’t have proof.
Under the Act, whistleblowers qualify for an award if they have inside information. The information must relate to fraud involving government funds or programs. Usually, one also must be the first to file. With the right lawyer and information, these cases do a tremendous good for society and are quite lucrative.
Interested in learning more? Visit our False Claims Act whistleblower information page or contact us directly. All inquiries are protected by the attorney – client privilege and kept confidential.
MahanyLaw – Proudly Representing Whistleblower – Over $100 Million in Awards Paid
Post script: Shortly before posting this article, the Denver Post reports that Jack Jakob Grynberg was arrested for unlawful sexual contact. From the article, it appears this is the same individual. Obviously, an arrest is not a finding of guilt. If true, however, it suggests that Mr. Grynberg is still making poor choices. We searched online in October of 2019, there is nothing we found that indicates what happened to these charges. At 84 years old, we hope he recovers from his poor choices and can live out his remaining years in peace and leave others in peace.