Opinion
01 Civ. 3078 (SHS)
March 26, 2002
OPINION AND ORDER
Pentagen Technologies International, Ltd. brings this action for conversion and breach of a constructive trust against the United States pursuant to the Federal Tort Claims Act, alleging that agents of the U.S. government unlawfully deprived it of certain computer software. The government moves to dismiss the complaint pursuant to Fed.R.Civ.P. 12 (b)(1) and 12(b)(6), and additionally moves for an injunction pursuant to 28 U.S.C. § 1651 barring plaintiff from filing further actions without leave of court.
Because Pentagen failed to exhaust the administrative procedures mandated by the Federal Tort Claims Act prior to commencing this action, the complaint must be dismissed for lack of subject matter jurisdiction. In addition, because this action is barred by the doctrines of res judicata and issue preclusion, the complaint must be dismissed for failure to state a claim upon which relief can be granted. Last, the government's motion for injunctive relief is denied as moot on the grounds that such an injunction already exists.
I. BACKGROUND
A. The Complaint
According to the complaint, from 1986 to 1990 Pentagen was developing highly advanced computer programming software known as Mentix. In March 1990, Pentagen demonstrated the Mentix product to CACI International, Inc. ("CACI"), an experienced government contractor. (Compl. ¶ 7.) The U.S. Army Materiel Command (the "Army") conducted a test of Mentix in early 1990, after which it returned the product to Pentagen, allegedly with favorable comments. Pentagen then began negotiations with CACI to enter into an agreement for those entities to provide Mentix to the Army. (Id. ¶ 18.)
In August 1990, prior to the completion of the Mentix product, "armed personnel" contracted by Runaway Development Corp. S.A. allegedly seized "computers containing the only development copies of the Tangible Technology including the source code of Mentix." A dispute between Pentagen and Runaway over the ownership of Mentix then ensued. (Id. ¶ 11.)
Shortly after the seizure, Runaway entered into an agreement with CACI to market computer software involving the Mentix system to the Army. In September 1991, plaintiff advised the Army of the ownership dispute, and the Army ceased any further involvement with Mentix. (Id. ¶ 17.) In January 1992, CACI returned its copy of Mentix to Runaway. Thereafter, CACI entered into an agreement with International Business Machines Corporation ("IBM"). In 1993, CACI, IBM and others were awarded a multimillion dollar contract (the "SBIS contract") to modernize the Army's information management systems. (Id. ¶ 18.)
Pentagen claims that the present suit stems from evidence obtained in an April 2000 deposition of government employee Edward Brasseur that the Army had conducted "two evaluations of Mentix (not just one)" and that the test results were closer to the Army's desired results than it had previously stated. (Id. ¶ 51.) Plaintiff contends that, given the government's "concealment" of this "Secret Test," it therefore follows that "the MENTIX product (or a pseudo-product similar to it)" had been offered to the government on the SBIS contract subsequently awarded to IBM and CACI. (Id. ¶ 56.)
B. Prior Actions
The present complaint is the latest in a seemingly endless series of lawsuits Pentagen has initiated in response to its failure to license its Mentix software to the U.S. Army. While the entire history of plaintiff's litigation is beyond the scope of the present opinion, the most relevant decisions are described below.
Pentagen first revealed its appetite for multiple lawsuits in 1993, when it filed parallel actions against CACI in New York state and federal courts. See Pentagen Technologies Int'l, Ltd. v. CACI Int'l Inc., Nos. 93 Civ. 8512, 94 Civ. 0441 and 94 Civ. 8164, 1996 WL 435157, at *4-*5 (S.D.N.Y. Aug. 2, 1996). CACI removed the state action to federal court, and the two cases were consolidated before Judge Michael B. Mukasey (the "New York action"). In the New York action, Pentagen asserted ten federal and state law claims against CACI, including copyright and trademark infringement, fraud, conversion, and misappropriation of property.
While the New York action was pending, CACI sued Pentagen in the U.S. District Court for the Eastern District of Virginia, seeking a declaratory judgment that its marketing of computer software to the Army did not infringe Pentagen's Mentix trademark or copyright. CACI Int'l Inc. v. Pentagen Technologies Int'l. Ltd., No. CIV.A.93-1631-A, 1994 WL 1752376 (E.D. Va. June 16, 1994), aff'd per curiam, 70 F.3d 111 (4th Cir. 1995) (the "Virginia action"). It further sought damages for breach of contract, tortious interference with its contract with the Army, and defamation. The court granted summary judgment for CACI on the copyright and trademark claims and found Pentagen liable for tortious interference and defamation. The court found that CACI had returned its copy of Mentix a month before the government began to solicit proposals for the SBIS project and noted that there was no evidence that CACI created a product substantially similar to Mentix, or that Mentix could fulfill the SBIS specifications. See 1994 WL 1752376 at *4
Shortly after losing in the Virginia district court, Pentagen sued one of CACI's officers in New York Supreme Court. That suit was subsequently removed to federal court and consolidated with the pending New York action. See 1996 WL 435157 at *7, In August 1996, Judge Mukasey found that Pentagen's claims of copyright and trademark infringement in the New York action were the same claims that had been decided in the Virginia action and were therefore barred by the doctrine of res judicata. Id. at *9. He also determined that the state law claims were not barred by res judicata because CACI impliedly agreed to litigate those claims in another forum when it declined to seek declaratory judgment on the state claims in the Virginia action. Id. at * 10.
Judge Mukasey dismissed Pentagen's conversion claim, however, holding that it was preempted by the Copyright Act of 1976, which bars state law claims that are qualitatively equivalent to a copyright infringement claim. Id. at *13, The court concluded that Pentagen's claim for conversion based on CACI's alleged marketing of Mentix to the Army was qualitatively equivalent to its claim for copyright infringement "because that claim arises from the improper and unauthorized use of Pentagen's intellectual property, a copyrighted work." Id. at *14. The court further held that Pentagen's claim for conversion based on the physical taking of its computer hardware and software was not preempted, but failed on substantive grounds. Id.
Undeterred, Pentagen next filed suit in the U.S. Court of Federal Claims, seeking damages for copyright infringement by the United States pursuant to 28 U.S.C. § 1498 (b). See Pentagen Technologies Int'l Ltd. v. United States, 175 F.3d 1003 (Fed. dir. 1999) (the "Court of Federal Claims action"). Pentagen alleged that the government owed it compensation for an unauthorized technical evaluation of Mentix conducted in July 1991. That court dismissed Pentagen's complaint because the alleged infringement occurred more than five years before the complaint was filed, two years after the statute of limitations had expired. See id. at 1004. The court also rejected Pentagen's attempt to invoke the doctrine of equitable tolling to keep its claim alive. The U.S. Court of Appeals for the Federal Circuit upheld that determination. Id. at 1004.
In Pentagen Technologies Int'l. Ltd. v. United States, 103 F. Supp.2d 232 (S.D.N.Y. 2000), Pentagen brought yet another action against the United States and various private parties, alleging violations of the Federal False Claims Act and abuse of process. Judge John Sprizzo dismissed the action and denied Pentagen's motion for leave to file a second amended complaint based on "new evidence" obtained in the Brasseur deposition on the grounds that the motion was futile. Id. at 237-238. In November 2001 — after this action was commenced — Judge Sprizzo entered Rule 11 sanctions against Pentagen's attorney and granted an injunction pursuant to 28 U.S.C. § 1651 (a) barring Pentagen from filing further litigation without permission of the court. See Pentagen Technologies Int'l. Ltd. v. United States, 172 F. Supp.2d 464, 473-74 (S.D.N.Y. 2001).
II. DISCUSSION
A. Motion to Dismiss the Complaint for Lack of Subject Matter Jurisdiction
The government contends that the complaint should be dismissed for lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1) because Pentagen failed to exhaust the available administrative remedies as required by the Federal Tort Claims Act ("FTCA"), 28 U.S.C. § 2671 et seq.
Section 2675(a) of Title 28 provides as follows:
An action shall not be instituted upon a claim against the United States for money damages for . . . loss of property . . . caused by the negligent or wrongful act or omission of any employee of the Government while acting within the scope of his office or employment, unless the claimant shall have first presented the claim to the appropriate Federal agency and his claim shall have been finally denied by the agency in writing and sent by certified or registered mail. The failure of an agency to make final disposition of a claim within six months after it is filed shall, at the option of the claimant any time thereafter, be deemed a final denial of the claim for purposes of this section.
Where a plaintiff fails to meet these requirements, the court must dismiss the claim for lack of subject matter jurisdiction. See McNeil v. United States, 508 U.S. 106, 113 (1993). The requirement that the claimant "shall . . . present the claim to the appropriate Federal agency" is jurisdictional and cannot be waived. Keene Corp. v. United States, 700 F.2d 836, *841 (2d Cir. 1983). "Moreover, because the FTCA constitutes a waiver of sovereign immunity, the procedures set forth in Section 2675 must be adhered to strictly." Id. The plaintiff has the burden of establishing that an administrative claim was filed. Di Lorenzo v. United States, 496 F. Supp. 79, 84 (S.D.N.Y. 1980).
The government maintains that Pentagen did not file an administrative tort claim with the Army or Department of Defense prior to initiating this lawsuit. (See Declaration of Joseph H. Rouse ¶ 2.) Plaintiff does not contest this assertion, instead responding that exhaustion of administrative remedies is "a non-issue here" because the government had actual notice of the claim. (Pl's Mem. at 20.) Pentagen's complaint indicates that on March 22, 2001 it "wrote to the U.S. formally demanding the immediate return of the property . . . and claiming all damages arising therefrom, and requesting a response by close of business March 29, 2001." (Compl. ¶ 60.)
Pentagen's arguments are unavailing. The FTCA's presentment requirement requires more than that the government have knowledge of a potential lawsuit. A notice of claim "must provide enough information to permit the agency to conduct an investigation and to estimate the claim's worth."Romulus v. United States, 160 F.3d 131, 132 (2d Cir. 1998). Generally this requires a demand for damages in a sum certain. See 28 C.F.R. § 14.2 (a); Johnson v. Smithsonian Inst., 189 F.3d 180, 190 (2d Cir. 1999) (letters that did not include a claim for a sum certain did not constitute administrative claim); Di Lorenzo, 496 F. Supp. at 84 (sum certain requirement "has been very strictly construed" and "various letters, memoranda and written complaints" did not exhaust FTCA administrative remedies); Keene Corp., 700 F.2d at *841-*842 ("the statement of damages in any Notice of Claim must contain a sum certain").
There is no indication that Pentagen's letter of March 22, 2001 included a claim for damages in a sum certain. Further, even if the letter did meet the standards for an administrative claim — which it does not — the instant action is not timely. Plaintiff filed the present complaint on April 11, 2001, less than one month after the March 22 letter. Pursuant to 28 U.S.C. § 2675, a plaintiff may file suit only if the relevant government agency fails to respond to the administrative complaint "within six months after [the claim] is filed" and suit may be filed only after the six month period has run. Pentagen failed to follow that procedure and the government's motion to dismiss for lack of subject matter jurisdiction is therefore granted.
B. Defendant's Motion to Dismiss the Complaint for Failure to State a Claim
As an alternate ground for dismissal, the government contends that the complaint fails to state a claim upon which relief can be granted because it is barred by the doctrines of claim preclusion and issue preclusion.
1. Claim Preclusion
The doctrine of res judicata, or claim preclusion, prevents parties from relitigating a claim that has already been decided. It "ensures the finality of decisions." Brown v. Felsen, 442 U.S. 127, 131 (1979) (superseded on other grounds by the Bankruptcy Code). Pursuant to that doctrine, "a final judgment on the merits bars further claims by parties or their privies based on the same cause of action." Montana v. United States, 440 U.S. 147, 153 (1979). In other words, the doctrine requires a party to bring in one litigation all its claims arising from a particular transaction. See Pentagen Technologies Int'l, Ltd. v. CACI Int'l Inc., 1996 WL 435157 at *7 Thus, res judicata "encourages reliance on judicial decisions, bars vexatious litigation, and frees the courts to resolve other disputes." Brown, 442 U.S. at 131.
To dismiss a claim on res judicata grounds the party asserting claim preclusion must establish that four conditions are met: "1) the prior decision was a final judgment on the merits; 2) the litigants were the same parties; 3) the prior court was of competent jurisdiction; and 4) the causes of action were the same." Corbett v. MacDonald Moving Servs., Inc., 124 F.3d 82, 87-88 (2d Cir. 1997).
In the Court of Federal Claims action, Pentagen sued the United States for copyright infringement, claiming that the government owed it compensation for an unauthorized technical evaluation of Mentix that allegedly occurred in 1991. The Court of Federal Claims dismissed Pentagen's claims as barred by the three-year statute of limitations for copyright infringement by the federal government, and the U.S. Court of Appeals for the Federal Circuit affirmed that determination. See 175 F.3d at 1006.
An action dismissing a claim on statute of limitations grounds is a final decision on the merits unless it is specifically stated to be without prejudice. See Fed.R.Civ.P. 41(b); Plaut v. Spendthrift Farm, Inc., 514 U.S. 211, 228 (1995); PRC Harris, Inc. v. Boeing Co., 700 F.2d 894, 896 (2d Cir. 1983). Pentagen does not contest that the Court of Federal Claims properly had jurisdiction over the action before it and that the parties were identical. Accordingly, the present action is barred by res judicata if it is the same claim.
In determining whether two causes of action are identical, the court examines whether "the same transaction or connected series of transactions is at issue, whether the same evidence is needed to support both claims, and whether the facts essential to the second were present in the first." Prime Mgmt. Co. v. Steinegger, 904 F.2d 811, 816 (2d Cir. 1990) (quoting N.L.R.B. v. United Technologies Corp., 706 F.2d 1254, 1260 (2d Cir. 1983)). See also, Interoceanica Corp. v. Sound Pilots. Inc., 107 F.3d 86, 91 (2d Cir. 1997); Flaherty v. Lang, 199 F.3d 607, 616 (2d Cir. 1999) (res judicata bars any claim relating to the same "set of operative facts").
Plaintiff attempts to distinguish the present complaint from the Court of Federal Claims action in the following manner:
[T]his present action seeks the physical return of hitherto unknown and concealed Tangible Technology and damages resulting from the Defendant's unlawful efforts undertaken to unlawfully conceal the Secret Test, and/or to reveal to the undisputed owner of the property, the last known location of the software used in the Secret Test, as demanded in March 2001. Unlike the Court of Federal Claims Action, this present action seeks no damages for the copyright infringement resulting from the Secret Test.
(Compl. ¶ 49.)
Despite Pentagen's attempt to characterize the latest claim as new, it arises from the same set of operative facts as the Court of Federal Claims action. Both that action and this relate to the government's allegedly improper possession and use of plaintiffs' software prior to awarding the SBIS contract to CACI in 1993. In the Court of Federal Claims action, Pentagen alleged that the government conducted an unauthorized test of the Mentix product in 1991. Here, plaintiff claims that the government conducted two tests. Although plaintiff has not pleaded the date of the alleged "Secret Test," the present claim involves the same series of transactions — the government's unauthorized testing of the Mentix product in the early 1990s — as the Court of Federal Claims action, whether the government conducted two tests or one. Similarly, any request for the physical return of the software used in the government's test arises from the same transaction, and Pentagen cannot raise the claim now after failing to do so in the Court of Federal Claims action. See Brown, 442 U.S. at 131.
Accordingly, the doctrine of res judicata, or claim preclusion, bars this action.
2. Issue Preclusion
Pentagen's suit is also barred by the doctrine of issue preclusion. Issue preclusion prohibits relitigation of an issue where the following conditions are met: "(1) the issues in both proceedings must be identical, (2) the issue in the prior proceeding must have been actually litigated and actually decided, (3) there must have been a full and fair opportunity for litigation in the prior proceeding, and (4) the issue previously litigated must have been necessary to support a valid and final judgment on the merits." Levy v. Kosher Overseers Assoc. of America, Inc., 104 F.3d 38, 41 (2d Cir. 1997) (citations omitted).
The present complaint alleges, in essence, that the government obtained software including or relating to the Mentix software from CACI that CACI had obtained from Runaway, which in turn had unlawfully acquired it from plaintiff. It has already been decided that Pentagen has no conversion claim relating to CACI's marketing of the Mentix software to the government. See Pentagen Technologies Int'l. Ltd. v. CACI Int'l. Inc., 1996 WL 435157 at *14. In that case, Judge Mukasey determined that Pentagen's conversion claim against CACI was qualitatively identical to a copyright infringement claim, which had already been decided against Pentagen in the Virginia action. Because it has been decided that Pentagen has no claim for conversion or copyright infringement against CACI in relation to CACI's marketing of software to the government, Pentagen is barred from asserting claims against the government arising from the same transaction. Pentagen has had more than a full and fair opportunity to litigate the legality of CACI's marketing of software to the government.
Plaintiffs' claims of new evidence — the Brasseur deposition — do not permit it to escape the preclusive effect of prior judgments. In Pentagen Technologies Int'l, Ltd. v. United States, 103 F. Supp. 2d at 238, Judge Sprizzo specifically considered that same deposition when determining whether to grant Pentagen's motion for leave to file a second amended complaint. Judge Sprizzo denied the motion on the grounds that amending the complaint would be "futile," since the "new evidence . . . does not provide any basis for relief from judgment" in the Virginia action.
Accordingly, the doctrine of issue preclusion bars this action as well.
C. Defendant's Motion to Enjoin Plaintiff from Filing Further Actions
The government seeks an injunction pursuant to 28 U.S.C. § 1651 preventing plaintiff from filing further actions without leave of the court. Judge Sprizzo granted an identical motion in Pentagen Technologies Int'l, Ltd. v. United States, 172 F. Supp. 2 d at 474, subsequent to the commencement of this action, and that injunction remains in effect. The government's motion for an injunction is therefore denied as moot.
III. CONCLUSION
For the reasons set forth above, defendant's motion to dismiss the claim for lack of subject matter jurisdiction, or, in the alternative for failure to state a claim, is granted. Defendant's motion for an injunction barring plaintiff from filing further actions without leave of the court is denied because such an injunction has already issued against plaintiff.