No. C 99-3864 TEH
February 26, 2002
ORDER TO DISMISS CLAIM AGAINST THE BOARD OF REGENTS AND TRANSFER TO THE WESTERN DISTRICT OF LOUISIANA
This matter came before the Court on February 11, 2002 on Defendants' motions to dismiss and transfer. After careful consideration of the parties' written and oral arguments, this Court GRANTS Defendant Board of Regents of the University of California' s motion to dismiss and GRANTS the remaining Defendants' motions to transfer to the Western District of Louisiana.
Motion to Dismiss
Dismissal is appropriate under Rule 12(b)(6) when a plaintiff's allegations fail to state a claim upon which relief can be granted. FED. R. Civ. P. 12(b)(6). In deciding whether a case should be dismissed, a court may generally only consider the complaint and any attached exhibits that have been incorporated therein. Lucas v. Dep't of Corrections, 66 F.3d 245, 248 (9th Cir. 1995).
The court must accept as true the factual allegations of the complaint and construe those allegations in the light most favorable to the plaintiff. Zimmerman v. City of Oakland, 255 F.3d 734, 737 (9th Cir. 2000). It should not grant dismissal unless "it appears beyond a doubt that [the] plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Steckman v. Hart Brewing, Inc., 143 F.3d 1293, 1295 (9th Cir. 1998). Moreover, dismissal should be with leave to amend unless it is clear that amendment could not possibly cure the complaint's deficiencies. Id. at 1296.
Motion to Transfer
"For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." 28 U.S.C. § 1404(a). The moving party must show that the new forum is one in which the action could originally be brought. Commodity Futures Trading Comm'n v. Savage, 611 F.2d 270, 279 (9th Cir. 1979).
In ruling on a motion to transfer venue, the district court must consider each of the factors enumerated in section 1404(a): convenience of the parties, convenience of the witnesses, and the interests of justice. Los Angeles, etc. v. National Football League, 89 F.R.D. 497, 499 (C.D. Cal. 1981), aff'd, 726 F.2d 1381 (9th Cir. 1984). Additional factors to weigh in evaluating a motion to transfer include: 1) the relative case of access to sources of proof; 2) the availability of compulsory process for unwilling witnesses and the cost involved in securing willing witnesses; 4) the practical problems that make a case easier or more difficult to try in a given forum; 5) the administrative difficulties flowing from court congestion; 5) the local interest in the issue. Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834, 843 (9th Cir. 1986).
Plaintiff was the principle owner of Icon Industrial Controls Corporation (ICON) and president of the Institute for Manufacturing and Robotic Sciences (IMARS). Plaintiff claims that ICON entered into a research and development agreement with the Board of Regents of the University of California ("Board of Regents") doing business as the Lawrence Livermore National Laboratory ("Livermore Lab") to develop software code for use by the Department of Energy ("DoE") and Department of Defense ("DoD"). Plaintiff, based upon his oversight of the project, alleges that Livermore Lab and some of its employees violated the False Claims Act ("FCA") by diverting money received by DoE under the contract to other projects at Livermore Lab and intentionally misrepresenting the time and materials used. Plaintiff also alleges Livermore Lab gave him an intentionally defective version of the product developed under the contract, which caused additional overbilling. Plaintiff further alleges, in very sketchy form, a kickback scheme whereby Livermore Lab agreed to subcontract to LCMS, which was created by BioMed and Sharp solely to receive the subcontract.
A. Livermore Lab's Motion to Dismiss
The sole claim asserted against Livermore Lab and certain of its employees — all sued in their official capacity — is a claim under the FCA. They argue that the complaint must be dismissed as to them because (1) the FCA does not permit suits against a state entity, and (2) Livermore Lab is immune from this suit under the Eleventh Amendment. Because it is clear that Plaintiff's complaint against the Livermore Lab and its employees must be dismissed for the first reason, it is unnecessary to reach the Eleventh Amendment issue.
Indeed the Supreme Court has expressly held that if a case can be resolved on the first ground, the Court need not and should not reach the latter, Eleventh Amendment issue. Vermont Agency of Natural Res. v. United States ex rel. Stevens, 529 U.S. 765, 772 (2000).
Several months after Plaintiff filed the instant case, the United States Supreme Court squarely held, in Vermont Agency of Natural Res. v. United States ex rel. Stevens, 529 U.S. 765 (2000), that suits against state entities can not be brought under the FCA. This is because the FCA only permits suits against "persons," and in the context of the FCA, the term "person" does not include states or their agencies. See Stevens, 120 S.Ct. at 1871 ("the False Claims Act does not subject a State (or state agency) to liability in such actions").
The Ninth Circuit has also squarely held that the Board of Regents is an arm of the state. See Doe v. Lawrence Livermore Nat'l Laboratory, 131 F.3d 836, 837 (9th Cir. 1997) ("the University [of California] is an arm of the State of California"); Armstrong v. Meyers, 964 F.2d 948 (9th Cir. 1992) ("[t]he Regents, a corporation created by the California constitution, is an arm of the state"). Indeed, it has done so specifically in cases where, like here, the Board of Regents is sued as the operator of the Lawrence Livermore National Laboratory. See Doe v. Livermore Lab, 131 F.3d at 837.
Given that Livermore Lab is plainly a "state or state agency," Plaintiff can not bring suit against it under the FCA. Notably, another judge on this court recently dismissed an FCA case against the Board of Regents/Livermore Lab in light of Stevens because the Board of Regents is a state agency. U.S. ex rel. McVey v. Bd of Regents, 165 F. Supp.2d 1052, 1056 (N.D. Cal. 2001).
Plaintiff argues that Livermore Lab should nonetheless be considered "a person for purposes of the FCA because the First Amended Complaint alleges that Lawrence Livermore is a California Corporation." Stevens, Plaintiff emphasizes, notes that "corporations," along with various other categories, are presumptively covered by the term "person." Stevens, 120 S.Ct. at 1869 n. 14. This argument fails for two reasons.
First, it is correct that Art. 9, § 9 of the California Constitution provides that "the University of California shall constitute a public trust, to be administered by the existing corporation known as `The Regents of the University of California.'" The fact that the Constitution provides that the Regents shall operate as a corporation does not, however, alter the status of the Regents as a creation of, and arm of, the state. Indeed, in Armstrong, the Ninth Circuit readily held that the Board of Regents is an arm of the state, despite explicitly acknowledging that the Board of Regents is "a corporation created by the California constitution." Armstrong, 964 F.2d at 949-50. Second, it is clear from the context of Stevens that any presumption that corporations qualify as "persons" refers to private, not public, corporations.
Accordingly, and in light of the binding Ninth Circuit and Supreme Court authority cited above, this Court dismisses this action against the Board of Regents of the University of California, as operator of Livermore Lab, and the named individual employees of Livermore Lab.
Plaintiff does not argue that the Livermore Lab employees should be analyzed any differently than Livermore Lab. Nor, given the a ions of the complaint, does there appear to be any basis for doing so. See McVey, 165 F. Supp.2d at 1058.
B. LCMS's and BioMed's Motion to Transfer
Defendants LCMS and BioMed seek to transfer this case to the Western District of Louisiana, based on the dismissal of the claim against Livermore Lab. Both Defendants meet the statutory requirements for transfer, and the relevant factors weigh in favor of transfer as well.
1. This Case Could Have Been Brought in Transferee District.
Under Section 1404(a), the party seeking transfer must show that the proposed transferee court is one in which the case could have been originally brought. This means the Western District of Louisiana would have subject matter jurisdiction over this case, defendants would be subject to personal jurisdiction in the Western District, and venue would be proper in that district. 28 U.S.C. § 1404(a).
This case is before the court on federal question jurisdiction, based on Plaintiff's claims of violations of the FCA. Under the FCA, venue is proper "in any judicial district in which the defendant or, in the case of multiple defendants, any one defendant can be found, resides, transacts business, or in which any act proscribed by section 3729 occurred." 31 U.S.C. § 3732(a). Defendants BioMed and LCMS are non-profit corporations that maintain their principal places of business in Louisiana. Defendant Sharp maintains his residence there. Thus, the Western District of Louisiana would have personal jurisdiction over the remaining defendants and venue would be proper there.
2. Plaintiff's Choice of Forum.
Usually, a plaintiff's choice of forum is entitled to deference. Decker Coal, 805 F.2d at 843. However, if the "operative facts have not occurred within the forum and the forum has no interest in the parties or subject matter, [plaintiff's] choice is entitled to only minimal consideration." Lou v. Belzberg, 834 F.2d 730, 739 (9th Cir. 1987). Moreover, a plaintiff's choice of forum is not given substantial weight when the plaintiff is a qui tam relator, asserting the rights of the United States government. United States ex rel. LaValley v. First Nat'l Bank of Boston, 625 F. Supp. 591, 594 (D.N.H. 1985).
Plaintiff's kickback claim focuses solely on LCMS's subcontract with Livermore Lab to perform work under the Lab's government contract. While some of Livermore Lab's employees may be witnesses, and some relevant documents may exist in the Northern District of California, Plaintiff alleges no facts indicating that the events that form the basis of his claim against Defendants took place in California. That, coupled with the fact that this is a qui tam action, affords Plaintiff's preference minimal weight.
3. Transfer is more convenient to parties.
All of the remaining defendants reside in Louisiana. Plaintiff's current place of residence is not identified in the Complaint, but Plaintiff resided in Louisiana during the time he and his corporations worked on the contract at issue. Both of his corporations, ICON and IMARS, were also located in the Western District of Louisiana during the events at issue. A transfer to Louisiana would be convenient to all parties.
4. Transfer is More Convenient to Witnesses.
One of the most important factors to consider is the convenience to the witnesses, and a motion to transfer may be granted if another forum is more convenient to them. Pacific Car, 403 F.2d at 955. Courts have often assessed the convenience of witnesses by adding up the relative burdens on each side. Covenant Care, 1999 WL 760610 at *3 (district closest to the location of the majority of witnesses is the most convenient); Pacific Car and Foundry Co. v. Pence, 403 F.2d at 951 (transfer allowed because requiring witnesses to travel from mainland to Hawaii was too inconvenient).
While some witnesses are located in the Northern District, a review of the potential pool of witness suggests more are in Louisiana and/or closer to Louisiana than the Northern District. Plaintiff vaguely claims that "a substantial number of witnesses and documents abound" in the Northern District but only identifies Anthony Chargin, Robert Burleson, and Daniel Thompson, all employees of Livermore Lab, as specifically involved in the kickback scheme. In contrast, it is clear that all parties are likely witnesses and reside in Louisiana, that Defendants' employees and records are located there, and that all other witnesses aside from those associated with Livermore Lab reside on the East Coast or in the Midwest, closer to Louisiana. Overall, the convenience of witnesses favors transfer.
Notably, Plaintiff did not include a declaration in support of any factual contention. Local Rules require "[f]actual contentions made in support of or in 28 opposition to any motion must be supported by an affidavit or declaration . . ." N.D. CAL. R. 7-5(a).
5. The Interests of Justice are not Inconvenienced by Transfer.
Fairness considerations may be decisive in ruling on a transfer motion, including factors such as whether the litigation is in an early or advanced stage. Pratt v. Rowland, 769 F. Supp. 1128, 1133 (N.D. Cal. 1991) (because litigation, and a preliminary injunction, was already under way and delay would severely prejudice plaintiff, transfer was denied even though convenience factors may have supported it); Covenant Care *3 (transfer was appropriate when litigation had not progressed far, and the only inefficiency was the possible need to renotice a motion to dismiss for failure to state a claim.). Since this case is at a very early stage of the litigation, both Plaintiff's inconvenience and judicial inefficiency are minimal.
6. The Majority of the Sources of Proof are Located in Louisiana.
All of LCMS and BioMed's records are in Louisiana. It appears likely, and Plaintiff does not allege otherwise, that the records for Plaintiff's companies, ICON and IMARS, are in Louisiana. Defendants claim thousands of documents are in Louisiana. Plaintiff claims that a "substantial number" of documents are in California. However, this assertion is vague and unsupported. This factor would appear to be neutral or support transfer to Louisiana.
C. BioMed's and LCMS' Motions to Dismiss Under Rule 12(b)(6)
Because the motions to transfer should be granted, the Court declines to address BioMed and LCMS' motion to dismiss for failure to state a claim.
In light of the above, and with good cause appearing, it is hereby ORDERED that:
(A) the following defendants are dismissed with prejudice:
(1) the Board of Regents of the University of California
(2) Ronald Cochran,
(3) Anthony Chargin,
(4) Robert Burleson,
(5) Daniel Thompson,
(6) George Weinert;
(B) the Court declines to reach the remaining defendants' motions to dismiss for failure to state a claim;
(C) this case is TRANSFERRED forthwith to the Western District of Louisiana.