Opinion
00 Civ. 6167 (DAB)
July 10, 2001
Joel Z. Robinson Co., Attorney for Relators.
Mary Jo White, United States Attorney for the S.D. of New York by Robert W. Sadowski Attorney for the United States defendants.
MEMORANDUM ORDER OPINION
Pentagen Technologies Int'l Ltd., ("Pentagen"), and Russell D. Varnado ("Varnado") (collectively "Plaintiffs" or "Relators") commenced the above entitled qui tam action on August 17, 2000, pursuant to 31 U.S.C, § 3729-33 ("False Claims Act" or "Act"), and against defendants United States of America ("United States"), E. F. Brasseur ("Brasseur") (collectively the "United States defendants"), CACI International Inc. ("CACI International"), CACI Systems Integration, Inc. ("CACI Systems"), CACI, Inc.-Federal ("CACI Federal") (collectively "CACI"), International Business Machines Corporation ("IBM"), Lockheed Martin Corporation ("Lockheed Martin"), AT T Company ("AT T"), PRC Inc. ("PRC"), I-Net Inc. ("I-Net"), Statistica Inc. ("Statistica"); Express Company Secretaries Limited ("Express"), Jordans Jordan Sons Limited ("Jordan"), Jordan Group LTD ("Jordan Group"), Steptoe and Johnson ("Steptoe"), J. William Koegel, Jr., Esq. ("Koegel"), Davies Arnold Cooper ("Davies"), George Menzies, Esq. ("Menzies"), Fried, Frank, Harris, Shriver Jacobson ("Fried Frank"), John T. Boese ("Boese"), John A. Borek ("Borek"), LeBoeuf, Lamb, Greene, Macrae ("LeBouf"), James F. Johnson, IV ("Johnson"), Donald J. Greene ("Greene"), Nicholas D. Rochez ("Rochez"), Owens Davis P.C. ("Owens"), and James M. Davis ("Davis") (collectively "non-United States defendants"). On October 20, 2000, the Government filed its Notice of Election to Decline Intervention ("Declination"), dated October 18, 2000, pursuant to 31 U.S.C. § 3730(b)(4)(B). On October 26, 2000 the Relators informed the Court that they opposed the Government's Declination. (See Relators' Oct. 26, 2000, Letter.) Relators submitted their formal application to this Court Opposing the Government's Declination on November 1, 2000. (See Relators' Nov. 1, 2000, Mem. Law.) Relators also requested, inter alia, that this Court appoint an independent investigator to investigate Relators' qui tam claims. Id. In response to the Relators' formal application, the Government moved to dismiss the Relators' Complaint pursuant to 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. In its Motion to Dismiss the Government argues that (1) the doctrine of res judicata bars the claims against all Defendants; (2) the Relators' request that the Court appoint an independent investigator in this action is meritless; and (3) the Court should enjoin the Relators from filing any new actions relating to the subject matter of this suit.
Relators have also filed two Rule 11 motions seeking sanctions against the Government for alleged misrepresentations and meritless arguments contained in its submissions to this Court.
I. BACKGROUND
The above-captioned civil action, like many actions filed before it, results from Pentagen's failure to secure a software contract from the Department of Defense. In this District alone, Relators have filed three other actions alleging violations of the False Claims Act. These qui tam suits all originate from the same factual nucleus. See Pentagen V ,Pentagen VI, Pentagen IX ,
Civil actions filed in the United States that stem from Pentagen's failure to obtain a Government contract include, but are not limited to:Pentagen Technologies Int'l Ltd. v. CACI Int'l Inc., No. 94 Civ. 0441 (N.Y.Sup.Ct. filed July, 1993, removed to S.D.N.Y. Jan. 26, 1994) ("Pentagen I"); Pentagen Technologies Int'l Ltd. v. CACI Int'l Inc., No. 93 Civ. 8512 (S.D.N.Y. filed Dec. 10, 1993) ("Pentagen II"); CACI Int'l v. Pentagen Technologies Int'l Ltd., No. 93-1631-A (E.D. Va. filed June 16, 1994) ("Pentagen III"); Pentagen Technologies Int'l, Ltd. v. J. P. London, No. 94 Civ. 8164 (N.Y.Sup.Ct. filed Sept. 1994, removed to S.D.N.Y. Nov. 10, 1994) ("Pentagen IV"); United States ex rel. Pentagen Technologies Int'l Ltd. v. CACI Int'l Inc., No. 94 Civ. 2925, 1996 WL 11299 (S.D.N.Y. Jan. 4, 1996) ("Pentagen V"); United States ex rel. Pentagen Technologies Int'l Ltd. v. CACI Int'l Inc., No. 96 Civ. 7827, 1997 WL 473549 (S.D.N.Y. Aug. 18, 1997) ("Pentagen VI"); Pentagen Technologies Int'l Ltd. v. United States, No. 97-245 (Fed.Cl.), aff'd, 175 F.3d 1003 (Fed. Cir. 1999) ("Pentagen VII"); Pentagen Technologies Int'l, Ltd. v. Comm. on Appropriations of the United States House of Representatives, No. CIV. A. 98-47, 20 F. Supp.2d 41 (D.D.C. 1998) ("Pentagen VIII"); Pentagen Technologies Int'l Ltd. v. United States, No. 98 Civ. 1090, 103 F. Supp.2d 232 (S.D.N.Y. 2000) ("Pentagen IX").
Relator Varnado was not a party to Pentagen V.
Although Relators did not initiate Pentagen IX as a False Claims Act case, the court in Pentagen IX "liberally construe[d] the complaint to include a False Claims Act violation." Pentagen IX, 103 F. Supp.2d at 234 n. 4.
In sum, Relators complain that various Defendants misappropriated, or facilitated others in the misappropriation of a version of Pentagen's MENTIX software. (See Compl. ¶¶ 29-101.) According to the Relators, use of the MENTIX software would have allowed the Government to modernize quickly its various software applications. (See Compl. ¶¶ 29, 30.) The Government contracts targeted by Pentagen, however, were awarded to other parties.
The prolix Complaint filed in this action provides an historical account of Relators' attempts to prosecute their various actions. To date, Relators' attempts to pursue relief under the qui tam provisions of the False Claims Act have yet to bear fruit. Pentagen alleged in its first qui tam action that various defendants violated the False Claims Act by, inter alia, "marketing and conspiring to deliver the MENTIX software to the AMC for payment without informing the AMC that MENTIX was subject to an ownership dispute during the alleged timeframe," (the "AMC contract"), Pentagen V, 1996 WL 11299, at *3, and by entering into and then failing to perform a contract that required the use of the MENTIX software, (the "SBIS contract"), Pentagen V, 1996 WL 11299, at *9. Judge Carter dismissed the claims against the defendants for lack of subject matter jurisdiction, as Pentagen was unable to demonstrate that it was the "original source" of the publicly disclosed information that served as the basis for its complaint. Pentagen V, 1996 WL 11299, at *8, *12. Relators, in their second qui tam action, Pentagen VI, again "alleg[ed] that the defendants had submitted false claims to the United States arising out of two contracts." Pentagen VI, 1997 WL 473549, at *1. Judge Sweet dismissed the Relators' suit on the same grounds Judge Carter relied upon in Pentagen V. Plaintiffs' motion for reargument was denied. See United States ex rel. Pentagen Technologies Int'l Ltd. v. CACI Int'l Inc., No. 96 Civ. 7827, 1997 WL 724553 (S.D.N.Y. Nov. 19, 1997), aff'd, 172 F.3d 39, 1999 WL 55259 (2d Cir. 1999). Relators' thirdqui tam action, the most relevant to the claims that the Relators seek to raise here, alleges that the defendants engaged in "litigation misconduct," in violation of state law and the False Claims Act. Pentagen IX, 103 F. Supp.2d at 234. In Pentagen IX the Relators claimed that the United States defendants improperly:
In fact, with respect to one of the claims the court stated that Judge Carter's decision regarding jurisdiction, barred, under the doctrine of res judicata, relitigation of that issue. Pentagen IV, 1997 WL 473549, at *7 ("[res judicata] does preclude relitigation of the issues determined in ruling on the jurisdiction question" (quoting 18 Wright, Miller, Cooper Federal Practice and Procedure: Jurisdiction, § 4436 at 340-41(1981)).
(1) filed an amicus curiae brief in the first qui tam action; (2) colluded with non-performing government contractor defendants in their defense of the first and second qui tam action; (3) prohibited plaintiffs from meeting with members of the Executive Branch to assist them in their prosecution of the first and second qui tam actions; and (4) permitted defendant Brasseur, a Government employee, to meet with defendant contractors and provide a witness statement ("the Brasseur statement") for use in related litigation proceedings pending in the United Kingdom ("the U.K. Proceeding").Id. at 234-35.
Relators alleged the other defendants named in the amended complaint "colluded with the United States in preparing the aforementioned amicus curiae brief and the Brasseur statement, and in otherwise seeking the United States' assistance in preparing for their defense of the qui tam actions." Id. at 235. With respect to the Relators' claims against the United States defendants, the court in Pentagen IX held that "plaintiffs' claims under the False Claims Act must be dismissed [since] the United States has never waived its sovereign immunity with respect to such suits." Id. at 236. The claims against the other defendants, were likewise dismissed as "no private right of action for litigation misconduct during the pendency of a qui tam action" exists under the Act. Id. at 236. During the time the motions to dismiss in Pentagen IX were sub judice, the Relators sought leave to file a second amended complaint. Their request was denied since alleging "the federal claims asserted by such complaint would be futile." Id. at 237. In substance, the claim against the Government contained in the Complaint filed in this action and made pursuant to the Act, differs imperceptibly from the second amended complaint the Court denied Relators leave to file in Pentagen IX. In addition, little difference exists in the claims asserted against E. F. Brasseur in the proposed second amended complaint presented to the court in Pentagen IX and the Complaint filed in this action. The Relators moved for reconsideration of the Opinion and Order reported at 103 F. Supp.2d 232. The Relators' request was denied in a Summary Order dated, July 19, 2000. (See Govt.'s Mem. Law, Ex. C.)
The second amended complaint is attached as Exhibit B to the Government's Notice of Motion. In Paragraph 41 the Relators state their claims against the Government pursuant to the False Claims Act:
In knowingly undertaking the conduct alleged in ¶¶ 26B, 26G. 30, 30A, 30B, 31, 31A, 31B, 32, 32A, 32C, 32d 34, 34A, 34B, 34C, 34D, 35, 36, 36A, 36D, 36E, 36F, 36G, 36H, [sic] 37A, 38, 39, 40, 40A, 40B, 40D, and 40H, including but not limited to the failing to produce documents commanded to be delivered in the 1994 Subpoenas, in denying documents in May 1995, in filing the amicus curiae brief in the circumstances set out herein; in secretly colluding with non-performing government contractors from time to time thereafter, at a time when the non-performing contractors were the subject of an action under 31 U.S.C. § 3729 et seq. so as to defeat, obstruct, handicap and hinder the activities of each of the relators and to assist Defendants, in prohibiting plaintiffs from meeting with members of the Executive Branch for the purpose to investigate and conduct an action under 31 U.S.C. § 3729 et seq.; in preparing a false and misleading Witness Statement for use against a relators [sic] in an unrelated action; in permitting the non performing contractors to met [sic] with a member of the Executive Branch and obtain a false and misleading witness statement for use in the U.K. Action intended to defeat proceedings of a relator; all acts having been committed after Government has declined to intervene in an action under 31 U.S.C. § 3729 et seq., the Government, for the purpose of defeating plaintiffs' valid lawsuits, has committed acts in violation of 31 U.S.C. § 3730, has committed a Fraud on the Court and has abused the process of the courts and defeated the purpose of the Act.
(Govt's Notice of Motion, Ex. B, second amended complaint ¶ 41.)
Even the mistakes denoted in paragraph 41 of the second amended complaint filed in Pentagen IX, quoted supra at n. 5, are contained in the Complaint filed in this action. Besides the renumbering of internal paragraphs, the only difference that exists between paragraph 41 of the second amended complaint filed in Pentagen IX and paragraph 102 of the Complaint filed in this action may be found at the end of each of the respective paragraphs. Compare Govt.'s Notice of Motion, Ex. B, second amended complaint ¶ 41 ("the Government, for the purpose of defeating plaintiffs' valid suits, has committed acts in violation of 31 U.S.C. § 3730, has committed a Fraud on the Court and has abused the process of the courts and defeated the purpose of the Act") with Complaint ¶ 102 ("the Government, for the purpose of defeating the plaintiffs' valid lawsuits, has committed acts in violation of 31 U.S.C. § 3729 and have [sic] committed overt acts to enable the Second Defendants to commit breaches of the False Claims Act set out herein").
II. DISCUSSION
A. The False Claims Act
The qui tam provisions of the False Claims Act permit private parties to bring suits on behalf of the United States to enforce the Act's prohibitions against the submission of false claims to the Government. 31 U.S.C. § 3730(b)(1). If a qui tam action has been brought, the United States must be given the opportunity to intervene and take control of the action. To inform the Government's decision whether or not to intervene, the Act requires that the relator serve the Government with a "copy of the complaint and Written disclosure of substantially all material evidence and information the person possesses." 31 U.S.C. § 3720(b)(2). The complaint must be filed in camera and is to remain under seal for at least 60 days. Id. The seal may be extended provided that the Government demonstrates good cause. 31 U.S.C. § 3730(b)(2). Further, the complaint shall not be served on the defendants until the court so orders. 31 U.S.C. § 3730(b)(2). After the Government receives the complaint and the material evidence it has 60 days to intervene in the relator's action. Id. Before the expiration of the 60 day period including any extensions granted by the court, the Government must either proceed with the action, or notify the court that it declines to do so. 31 U.S.C. § 3730(b)(4).
If the Government intervenes, and takes control of the action, the qui tam relator may continue as a party except that the Government may (1) dismiss the action over the objection of the person initiating the action as long as that person has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion, 31 U.S.C. § 3730(c)(2)(A), (2) settle the action notwithstanding the objections of the person initiating the action, as long as "the court determines, after a hearing, that the proposed settlement is fair, adequate, and reasonable under all the circumstances, 31 U.S.C. § 3730(c)(2)(B), or (3) seek to limit the involvement of the person initiating the, action, 31 U.S.C. § 3730(c)(2)(C)-(D). Where the Government moves to dismiss, the court need not determine that the Government's decision is reasonable. United States ex rel. Stevens v. State of Vermont Agency of Natural Res., 162 F.3d 195, 201 (2d Cir. 1998), rev'd on other grounds, 529 U.S. 765(2000), (citing United States ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., 151 F.3d 1139, 1145 (9th Cir. 1998) (stating that the standard applied by the district court to evaluate the government's decision to dismiss a qui tam suit, including a meritorious one, i.e., that the decision is supported by a `valid government purpose' that is not arbitrary or irrational and has some rational relation to the dismissal, was a reasonable one)).
If the Government elects not to proceed with the action, it may request copies of all the pleadings filed in the action and may, upon a showing of good cause, intervene at a later date. 31 U.S.C. § 3730(c)(3). However even where the Government decides not to intervene, it may still move to dismiss the relator's suit. See United States Department of Defense v. CACI Int'l Inc., 953 F. Supp. 74, 77 (S.D.N.Y. 1995); see also Hughes Aircraft Co. v. United States ex rel. Schumer, 520 U.S. 939, 943 n. 2 (1997) (suggesting that the government need not intervene in order to move to dismiss the action); Riley v. St. Luke's Episcopal Hospital, No. 97-20948, 2001 WL 568727, at *3 (5th Cir. May 25, 2001) (stating that "the government retains the unilateral power to dismiss an action" (citing Searcy v. Philips Electronics N. Am. Corp., 117 F.3d 154, 160 (5th Cir. 1997)); see, e.g., United States ex rel. Sequoia Orange Co., 151 F.3d at 1145 ("§ 3730(c)(2)(A) may permit the government to dismiss a qui tam action without actually intervening in the case at all." (citing United States ex rel. Kelly v. Boeing Co., 9 F.3d 743, 753 n. 10 (9th Cir. 1993))).
B. Appointing an Independent Investigator
Relators contend that Government employees were "so deeply involved" in alleged misconduct, (Relators' Nov. 1, 2000, Mem. Law at 3-4.), that the Attorney General is unable to discharge the § 3730 duty to diligently investigate the False Claims Act violations contained in the Complaint. In particular, Relators assert that the United States participated in the suppression of evidence relevant to the Relators' claims. (Relators' Nov. 1, 2000, Mem. Law at 5.) Relators also allege other improper conduct by Defendants in support of their request. (Id. at 6-9) This allegedly improper conduct includes various violations of criminal statutes, and "litigation misconduct." However, despite the variety of alleged misconduct cited by the Relators, the causes of action alleged against every Defendant in this action is premised solely upon the False Claims Act, 31 U.S.C. § 3729-33.
According to the Relators, the Government employees, referred to as the "Executive Group," are named in paragraph 48 of the Complaint. This paragraph, however, names no such employees, and is totally unrelated to the point for which it is cited.
This Court notes that this argument contradicts Relators' earlier position contained in Relators' Oct 26, 2000, Letter at 1, where Relators argue that it is inappropriate for the "Government" to be involved in any decision making process required in this case. As will be explained in greater detail infra, Relators now argue that it is appropriate for the Government, which includes this Court, to be involved in the decision to intervene, but that it is not appropriate for the Attorney General to be so involved.
Relators do not specify which of the Defendants named in the Complaint participated in the complained of misconduct.
Although Relators argue that Judge Sprizzo in Pentagen IX, 103 F. Supp.2d 232, "labeled the Attorney General's conduct as `Litigation Misconduct,'" (Relators' Nov. 1, 2000, Mem. Law at 8), a closer reading of the case suggests something altogether different. First, Judge Sprizzo dismissed the False Claims Act violations against the United States defendants since the United States has never waived its immunity with respect to such suits. Id. at 236. Then, turning to the claims alleged against the other defendants, Judge Sprizzo characterized the allegations as amounting to "litigation misconduct" and then dismissed these claims since the False Claims Act "provides no private right of action for litigation misconduct during the pendency of a qui tam action." Id. Nowhere does Judge Sprizzo suggest that any defendant actually engaged in litigation misconduct.
To resolve the conflict Relators perceive to exist between the Attorney General's duty to investigate their claims while at the same time representing the United States and E. F. Brasseur as Defendants, Relators request that the Court appoint an independent investigator to investigate the False Claims Act violations contained in the Complaint.
The False Claims Act does not provide for the participation or appointment of an independent investigator in qui tam actions. 31 U.S.C. § 3729-33. Relators admit as much and state that there exists no case on point that supports their request for the appointment of an independent investigator. Nevertheless, Relators propose that this Court appoint the independent investigator to discharge, pursuant to a Court Order, the Attorney General's duty to "diligently investigate" the False Claims Act violations alleged in the Complaint.
In support of their request Relators make a statutory argument that seeks to attach great significance to the Congressional decision to use both "Attorney General" and the "United States Government" in various provisions of the Act itself. Specifically, Relators argue § 3730(a), the section of the Act which requires the Attorney General "diligently. investigate violations under section 3729," does not address the Attorney General's right to become involved in qui tam actions under § 3730(b). (Relators' Nov. 1, 2000, Mem. Law at 12.) The Relators then suggest that since § 3730(b) places its primary obligations on the "United States Government" and the "Government," while limiting the obligations of the Attorney General to consenting to dismissals of False Claims Act suits, the Act contemplates that other branches of the Government will inform the Government's decision whether or not to intervene. (Id.) Thus, Relators conclude that they have the right to petition this Court to ensure that the Government faithfully, and without any conflict of interest, executes its duty to investigate Relators' claims. Relators also argue that this Court may rely on its inherent powers to appoint an independent investigator to assist in the determination to intervene, thus limiting the statutory duties Congress has placed upon the Attorney General. (Id. at 17.)
This Court finds the Relators' statutory argument unavailing. As an initial matter "it is an elemental canon of statutory construction that where a statute expressly provides a particular remedy or remedies, a court must be chary of reading others into it." Pentagen IX, 103 F. Supp.2d at 237 (internal quotations omitted) (quoting Meghrig v. KFC Western, Inc., 516 U.S. 479, 488(1996). Additionally, while the Attorney General is required to investigate alleged False Claims Act violations before the Government decides whether or not to intervene, it is clear that Congress did not intent its use of "Government" in 31 U.S.C. § 3730 to include the court. 31 U.S.C. § 3730(b)(4) provides that "the Government shall — (B) notify the court that it declines to take over the action, in which case the person bringing the action shall have the right to conduct the action." The above-quoted language of the Act illustrates that Congress intended the Government simply to relay its intention regarding the decision to intervene to the court, not for the court to participate in that determination.
Although courts are available to litigants seeking to enforce, interpret, and apply the law, this Court rejects Relators' invitation to take the extraordinary step of interjecting itself into the elaborate procedures established by Congress to resolve and litigate qui tam actions. Further, the plain reading of the statute suggests that any investigation triggered by alleged False Claims Act violations is to be conducted by the Attorney General: "The Attorney General diligently shall investigate a violation under section 3729." 31 U.S.C. § 3730(a). This provision applies whether the action is instituted first by the Government or by a private person pursuant to § 3730(b), since the cause of action always arises under 31 U.S.C. § 3729. See 31 U.S.C. § 3730(b) (providing private person the opportunity to bring a civil action for a violation of § 3729).
The primary cases cited by the Relators, which are easily distinguishable from the case at bar, do not convince this Court to utilized its inherent powers to appoint an independent investigator in this case. For example, Relators rely on Young v. United States ex rel. Vuitton et Fils S.A., 481 U.S. 787, for the proposition that in appropriate circumstances district courts may limit the role of the Attorney General. However, as even Relators acknowledge, Young addresses a district court's authority to appoint a private attorney to prosecute criminal contempt. As the Supreme Court explained in Young, Rule 42(b) of the Federal Rules of Criminal Procedure, the provision that governs contempt proceedings, requires that "when a private prosecutor is appointed, sufficient notice must be provided that the contempt proceeding is criminal in nature." Young, 481 U.S. at 794. The Rule 42(b) presumption that private attorneys may be used to prosecute contempt actions originates from the need of the court "to vindicate its own authority without complete dependence on other Branches." Young, 481 U.S. at 796. Here, there is no indication in the Act that the Attorney General's role may be limited in any way, nor is the appointment necessary for this court "to vindicate its own authority." The other case upon which Relators primarily rely, Favell v. United States, 27 Fed. Cl. 724(1992), does not apply to the facts of this case. The court in Favell stated that "if . . . an agency of the executive branch, including the Department of Justice, were to be adjudicated by a federal court to have flagrantly violated or abused the due process rights guaranteed under the Constitution, . . . our constitutional form of government must provide for and allow a remedy." Id. at 750 (emphasis added). However, in this case there has been no adjudication by a federal court that any agency of the executive branch violated or abused Relators' due process rights.
Furthermore, the "sixty-day sealing period, in conjunction with the requirement that the government, but not the defendants, be served, was `intended to allow the Government an adequate opportunity to fully evaluate the private enforcement suit and determine both if that suit involves matters the Government is already investigating and whether it is in the Government's interest to intervene and take over the civil action.'" United State's ex rel. Pilon v. Martin Marietta Corp., 60 F.3d 995, 998-99 (2d, Cir. 1995) (quoting S.Rep. No. 345, 99th Cong., 2d Sess. 24, reprinted in U.S.C.C.A.N. 5266, 5289). Congress thus, did not intend to limit the Government's investigation to the merits of the suit. The Government must also determine whether it is currently involved in investigating the claims in the Complaint. In addition, the Government must make the subjective determination of whether pursuing the suit is in the "Government's interest." Such determinations, are best left to the Government and not to an independent investigator appointed by this Court.
Moreover, the Relators' argument for the appointment of an independent investigator rests heavily upon the perceived conflict of interest resulting from the Attorney General's duty to represent the Government as plaintiff and defendant in this case. The Relators have manufactured this conflict. After Pentagen IX, 103 F. Supp.2d 232, Relators were well aware that claims against the United States defendants pursuant to 31 U.S.C. § 3730 are improper since "the United States has never waived its sovereign immunity with respect to [False Claims Act] suits."Id. at 236. Relators may not name the United States, and a government employee as defendants and then assert that an alleged conflict prevents the Attorney General from discharging its duty to diligently investigate the § 3729 violations alleged in the Complaint.
What's more, this Court notes that the appointment of an independent investigator to assist in the intervention decision would not cure the perceived conflict Relators seek to remedy. Even if an independent investigator were to recommend that the Government intervene, the litigation would still be conducted by the Government, and the Government would still have the right to seek dismissal of the action.
Accordingly, and for all of the foregoing reasons the Relator's request for the appointment of an independent investigator is DENIED.
C. Government's Motion to Dismiss the Complaint.
The Government argues that the Relators' claims against all Defendants are barred by the doctrine of res judicata. In response, the Relators argue that the Government may not bring a motion to dismiss at this stage in the litigation, and that the doctrine does not operate to bar the claims Relators allege in their Complaint. As an initial matter, the False Claims Act allegations contained against the United States defendants must be dismissed as the "United States has never waived its sovereign immunity with respect to such suits." Pentagen IX, 103 F. Supp. 2 d at 236. Accordingly, the claims against the United States defendants are DISMISSED with prejudice. The question for this Court then becomes whether' the Government may seek to dismiss the Complaint against the other Defendants at this stage in the litigation.
1. Relators' Procedural Challenge to the Government's Motion to Dismiss
The Relators argue that the Government may not, after the filing of its Declination, seek to dismiss the Relators' action. However, as stated earlier, the Government may move to dismiss the complaint even after it has declined to intervene. The Act provides that "[t]he Government may dismiss the action notwithstanding the objections of the person initiating the action." 31 U.S.C. § 3730(c)(2)(A). Before the Government may move to dismiss the action, however, the person initiating the action must be notified by the Government of the filing of its motion to dismiss, and the court must provide the person with an opportunity for a hearing on the motion. 31 U.S.C. § 3730(c)(2)(A).
Moreover, the Relators opposed the Government's Declination, effectively preventing any operative effect the Declination would otherwise have since the Relators' Opposition required the Court to first resolve the Relators' challenge to the Government's decision not to intervene.
While the Second Circuit has yet to establish a standard to be applied' when evaluating the Government's Motion to Dismiss a qui tam action pursuant to 31 U.S.C. § 3730(c)(2)(A), it has, however, stated that "the court, need not, in order to dismiss, determine that the government's decision is reasonable." United States ex rel. Stevens, 162 F.3d 195, 201 (emphasis added), rev'd on other grounds, 529 U.S. 765(2000), (citingUnited States ex rel. Sequoia Orange, 151 F.3d at 1145). In this case, the Government argues that the Relators' claims are barred by res judicata. With the decision to base its Motion to Dismiss on the legal doctrine of res judicata, the Government has taken a position that is inherently reasonable. Furthermore, the application of res judicata is an argument available to each Defendant if served with the Complaint. The Relators are not prejudiced in any way by this Court deciding the application of the doctrine now as opposed to after the non-United States defendants have been served with the Complaint. Thus, following the Second Circuit's pronouncement that district courts need not find the Government's decision to be reasonable, should the doctrine of res judicata apply to bar the Realtors' claims, no hearing shall be conducted.
In the alternative, although not required by the Act, this Court permitted Relators to formally Oppose the Government's Motion to Dismiss. This Court's consideration of the arguments raised in the Relators' Opposition has provided the Relators with an opportunity to be heard on the Government's Motion.
2. The Merits of the Government's Motion
The Government seeks to use the res judicata effect of Judge Sprizzo's decision in Pentagen IX to bar the Relators' claims in this action. Relators argue that res judicata does not apply because the claims raised in this action are new claims.
"The doctrine of res judicata, or claim preclusion, holds that a final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action." Monahan v. New York City Dep't of Corrections, 214 F.3d 275, 284 (2d Cir. 2000) (internal quotation marks omitted). Put another way, "upon a final judgment on the merits parties to a suit are barred, as to every matter that was offered and received to sustain or defeat a cause of action, as well as to any other matter that the parties had a full and fair opportunity to offer for that purpose." Manhattan Eye Ear Throat Hosp. v. NLRB, 942 F.2d 151, 155-56 (2d Cir. 1991) (emphasis added) (citing Montana v. United States, 440 U.S. 147, 153(1979). "Whether or not the first judgment will have preclusive effect depends in part on whether the same transactions [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."Monahan, 214 F.3d at 285 (internal quotations omitted) (quoting NLRB v. United Technologies Corp., 706 F.2d 1254, 1260 (2d Cir. 1983). "`Transaction' must be given a flexible, commonsense construction that recognizes the reality of the situation." Id. at 289 (internal quotations omitted) (citing Interoceanica Corp. v. Sound Pilots, Inc., 107 F.3d 86, 91 (2d Cir. 1997). Even claims based upon different legal theories are barred provided that they arise from the same transaction or occurrence.See Woods v. Dunlop Tire Corp., 972 F.2d 36, 39 (2d. Cir. 1992).
The first amended complaint ("initial complaint") that the Relators filed in Pentagen IX, named as defendants the United States, Brasseur, CACI, IBM, Lockheed Martin, AT T, PRC, I-Net, Statistica, Express, Jordan, Jordan Group, Steptoe, Koegel, Davies, and Menzies. Furthermore, the initial complaint relates to the same transactions and events that are the subject matter of this litigation. In Pentagen IX the Relators complained that the above-named defendants acted inappropriately during the course of litigating various actions initiated by the Relators. The section of the original complaint filed in Pentagen IX entitled "Factual Basis of Claim," is nearly identical to the "Factual Basis of Claim" section contained in the Complaint filed in this action. Judge Sprizzo dismissed the Relators' claims in Pentagen IX. Since the Relators seek to sue the same parties in this action, and since the claims relate to the same transactions and events as the claims in Pentagen IX, Relators' claims are barred by the doctrine of res judicata.
Judge Sprizzo, however, not only dismissed, with prejudice, Relators' claims against the defendants named in the initial complaint, Pentagen IX, 103 F. Supp.2d at 234, he also denied the Relators leave to file a second amended complaint since "the federal claims asserted by such complaint would be futile." Id. at 237. The second amended complaint, in addition to containing claims against the defendants named in the initial complaint, also alleged claims against new defendants. The Government also seeks to dismiss the claims the Relators allege against these Defendants.
Fried Frank, Boise, Borek, LeBoeuf, Johnson, Greene, and Rochez are the Defendants named in the second amended complaint which were not included in the initial complaint filed in Pentagen IX.
In the "typical situation where claim preclusion would apply after a denial of leave to amend . . . the plaintiff is seeking to add additional claims against the same defendant and leave to amend is denied without reaching the merits of the claim." Northern Assurance Co. of America v. Square D Co., 201 F.3d 84, 87 (2d Cir. 2000). The Second Circuit explained that the decision to deny leave to amend "is not necessary for claim preclusion to apply." Id. at 88. Instead, the claim preclusion that follows from the denial of an amended complaint is usually based upon "the requirement that the plaintiff must bring all claims at once against the same defendant relating to the same transaction or event." Id. This Court, however, does not believe that the situation with which it is confronted constitutes the "typical situation" where claim preclusion applies. In denying leave to file the second amended complaint, Judge Sprizzo examined its contents and determined that both the reworded claims against the defendants named in the initial complaint and the new claims alleged against the new defendants were "futile." See id. at 237; see, e.g., Foman v. Davis, 371 U.S. 178, 230(1962) (stating that leave to amend is properly denied if proposed amendment would be futile). By explicitly relying on his earlier dismissal of the Relators' False Claims Act causes of action, Judge Sprizzo in Pentagen IX, addressed the claims contained in the second amended complaint on their merits. See Pentagen IX, 103 F. Supp.2d at 237 ("Initially, plaintiffs' claims under the False Claims Act must be dismissed for the reasons stated above."); see generally Health-Chem Corp. v. Baker, 915 F.2d 805, 810 (2d Cir. 1990) (affirming denial of leave to amend when "there is no merit in the proposed amendments"); O'Conner v. Viacom, Inc., No. 93 Civ. 2399, 1994 WL 273378, at *1 (S.D.N.Y. June 17, 1994) ("If a complaint, as amended, could not withstand a motion to dismiss, the amendment would be futile and leave to amend need not be granted." (citing Halpert v. Wertheim Co., 81 F.R.D. 734, 735 (S.D.N.Y. 1979)). Accordingly, the denial of the proposed amendment in Pentagen IX precludes the Relators from attempting to raise in this action claims which were already found to be futile. As such, the claims against Fried Frank, Boise, Borek, LeBoeuf, Johnson, Greene and Rochez are DISMISSED with prejudice.
The only claims that remain in this action are those the Relators allege against Defendants Owens and Davis. The factual allegations against these Defendants are contained in paragraphs 54 and 97 of the Complaint. In paragraph 54, the Relators allege that Steptoe's New York agent, Owens Davis and Davis sent a letter to Judge Carter and to Relators containing a request to consolidate the case before Judge Carter, (Docket No. 94. Civ. 2925), with other cases involving CACI and Pentagen (the "Request"). The Plaintiffs further allege that the Request was initiated by an attorney at Steptoe and faxed to the Government in draft form. In paragraph 97 Relators allege (1) that Defendants Owens and Davis filed a pleading in Pentagen IX that sought to "obstruct the commencement of this action," (2) that Pentagen alerted Owens and Davis to "misleading aspects of the pleadings," and (3) that Owens and Davis should have known that the continuing use of these pleadings "amounted to knowingly obstruct[ionist] conduct, intended to handicap a relator under the False Claims Act and to assist the defendants." (Compl. ¶ 97.) Relators also allege that Owens and Davis met with other Defendants and assisted in filing misleading pleadings in the New York federal courts. (Compl. ¶ 110.) This Court views the claims against Owens and Davis contained in this Complaint as the same type of "litigation misconduct" claim that the court in Pentagen IX dismissed because the False Claims Act provides for no such private right of action. Accordingly, Relators' claims against Owens and Davis are hereby DISMISSED with prejudice.
Relators allege that Owens is a law firm that has represented the CACI defendants "in several New York legal actions out of which this action arises," and that Davis is a partner of the firm who has filed appearances in the New York actions. (Compl. ¶ 18.)
Finally, this Court notes that the Relators, through the filing of this action, have sought indirectly to accomplish what was denied directly by Judge Sprizzo in Pentagen IX. Courts view such pusillanimous attempts to circumvent judicial rulings with a jaundiced eye. See United Stated v. McGann, 951 F. Supp. 372 (E.D.N.Y. 1997). Such disregard for the decision in Pentagen IX provides, perhaps, yet another basis for granting the Government's Motion in this case.
D. Request for an Injunction
The Government has also requested that this Court enjoin the Relators from filing any new action relating to the subject matter of this suit. In their Opposition, the Relators state that this issue is currently sub judice before Judge Sprizzo. Accordingly, the Government's request is DENIED without prejudice at this time.
E. Relators' Request for Rule 11 Sanctions Against the Government
The Relators have submitted two separate motions in support of their request that this Court impose sanctions upon the Government under Rule 11 of the Federal Rules of Civil Procedure. The Court has reviewed the Relators' requests and find them to be without merit. Accordingly, the Relators' requests for sanctions are DENIED.
III. CONCLUSION
For all the foregoing reasons, Relators' Complaint is DISMISSED with prejudice; the Court declines to impose Rule 11 sanctions upon the Government; and the Government's request for an injunction is DENIED without prejudice at this time. The Clerk of the Court is hereby Ordered to remove the Complaint from under seal and to close the Docket in this matter.
SO ORDERED.