United States v. Puchalski
906 F. Supp. 2d 451
D.S.C.2012Background
- Relators Battiata and Raybon bring FCA qui tam action on United States' behalf and move to dismiss seven counterclaims by Puchalski and SC ENT.
- Defendants' counterclaims include four that are plead as dependent on FCA liability (breach of fiduciary duty, indemnification, unjust enrichment, payment under mistake of fact) and three alleged as independent damages (malicious prosecution, tortious interference, abuse of process).
- Facts cited: Battiata and Raybon formerly employed by SC ENT; defendants allege confidential documents were taken or mishandled and that relators pursued this action to harass; revelation of timing around settlement and termination.
- Court flags that the dependent counterclaims seek indemnity/contribution; independent-damages claims depend on FCA liability but may be subject to pleading defects.
- Court analyzes authority from Mortgages, Madden, Lash, and Miller to distinguish dependent vs independent damages and to determine viability of counterclaims in a FCA action.
- Court grants the motion to dismiss; the fifth through seventh counterclaims are dismissed with prejudice; the first through fourth counterclaims are dismissed without prejudice to amendment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether fourth through seventh counterclaims are permissible in a FCA action | Battiata/Motion: no right to indemnity/contribution under FCA; Mortgages, Madden, Lash control | Defendants contend some counterclaims may seek independent damages not barred by Mortgages/Madden/Lash | Dismissed; dependent-damages claims barred; independent-damages claims rejected due to pleading defects |
| Whether the counterclaims for independent damages are precluded until FCA liability is determined | Relators should be presumed liable or not before allowing independent damages | Independent damages may be pursued regardless of FCA liability if properly pleaded | Court declines Madden/Lash route to bar independent damages; dismisses as to the present motion |
| Whether the first through third counterclaims (malicious prosecution, tortious interference, abuse of process) are adequately pled | Plaintiffs argue these claims seek independent damages and are not dependent on FCA liability | Claims lack specificity and do not plead facts showing actual interference or improper process | Dismissed without prejudice for amendment due to pleading deficiencies |
| Whether leave to amend should be granted for Defendants to cure pleading defects | No material defects should be cured; no amendment requested or possible under current record | Defendants may amend to plead independent damages with greater particularity | Leave to amend granted conditionally; amendments must plead independent damages with sufficient specificity |
Key Cases Cited
- Mortgages, Inc. v. United States Dist. Court, 934 F.2d 209 (9th Cir.1991) (indemnity/contribution rights not available against qui tam relators under FCA)
- United States ex rel. Madden v. General Dynamics Corp., 4 F.3d 827 (9th Cir.1993) (distinguishes independent damages from dependent damages; procedural due process concerns)
- Cell Therapeutics, Inc. v. Lash Group, Inc., 586 F.3d 1204 (9th Cir.2009) (limns Madden/Lash framework for third-party claims and independent vs dependent damages)
- U.S. ex rel. Miller v. Bill Harbert International Const., Inc., 505 F. Supp. 2d 20 (D.D.C.2007) (rules for FCA counterclaims: no dependent damages; permits independent damages with caveats)
- Zahodnick v. International Business Machines Corp., 135 F.3d 911 (4th Cir.1997) (allows counterclaim in retaliation FCA actions brought in individual capacity, not relator actions)