Opinion
A general contractor removed a subcontractor from a public works project when it learned the subcontractor was unlicensed, lied about its references, and could not secure bonds for its work. The general contractor substituted other subcontractors to complete the project. The general contractor sued the subcontractor to recover as damages the amount paid to complete the work above the amount bid by the unlicensed subcontractor. The subcontractor cross-complained upon allegations that it and other subcontractors were substituted in violation of the Public Contract Code, which sets forth requirements for the substitution of subcontractors on a public works project. The court found the subcontractor liable for fraud in its bid submission and rejected claims of improper substitution of subcontractors. The general contractor was awarded damages.
I. FACTS
In May 1999, general contractor West Bay Builders, Inc. (West Bay), prepared a bid for a public work, the construction of the Meadows Middle School (the Project), for the San Ramon Valley School District (District). As required by the Public Contract Code, West Bay’s bid listed subcontractors that promised to perform work valued at greater than 0.5 percent of the prime contract bid. (Pub. Contract Code, § 4104, subd. (a).) Typically, subcontractor bids are received on the day the prime contract bid is due for submission to the public entity and are sometimes received by the general contractor just minutes before the prime contract bid is due. West Bay followed industry practice in submitting its bid to the District. West Bay stationed a bid runner at the place specified for submitting the bid and telephoned last-minute changes to the bid runner. The bid runner’s job was to make the changes to the bid and hand-deliver West Bay’s bid to the District’s representative responsible for receiving bids.
West Bay received bids from various subcontractors to perform different portions of work on the Project. Project specifications included divisions that
Standard Metal Fabrication is a related business entity to Standard Elevator Company, Inc., the qui tarn plaintiff here. Plaintiff Standard Elevator Company denies this on appeal, but in its original complaint filed in this CFCA action, plaintiff denominated itself “Standard Elevator Company, Inc. a California Corporation, doing business as Standard Metal Fabrication.” It was averred in the original complaint that Standard Elevator Company, Inc., “sometimes does business under the duly registered business name of Standard Metal Fabrication.” Similarly, in prior litigation, Standard Metal Fabrication’s principal asserted that Standard Metal Fabrication is “merely a fictitious business name” for Standard Elevator Company. Standard Metal Fabrication and Standard Elevator Company may be treated interchangeably for our purposes here, and will henceforth be referred to as “Standard” in this opinion.
West Bay hurriedly incorporated Standard’s subcontract bid into its prime contract bid, called the bid runner to cross out Stockton Iron Works, Dura Fence, and JD2, and to insert Standard in their stead and to lower West Bay’s overall bid price. With less than one minute before West Bay’s bid was due, the bid runner changed West Bay’s overall bid price, crossed out Stockton Iron Works, and inserted Standard. Inadvertently, the bid mnner did not cross
The District informed West Bay that it was the apparent low bidder. On May 17, 1999, four days after bid opening, West Bay wrote a letter to the District informing it of its inadvertent clerical error in listing Dura Fence and JD2 as subcontractors for the same work being performed by Standard. On May 19, 1999, two days later, the District approved West Bay’s bid and awarded the Project contract to it.
West Bay later learned that Standard, the listed subcontractor on division 5 metalwork, was unlicensed, lied about its references, and could not secure bonds for its work. At West Bay’s request, the District approved removal of Standard and substitution of another subcontractor. West Bay also made other subcontractor substitutions during Project construction.
In December 2000, West Bay sued Standard and its principal to recover as damages the amount West Bay had to pay to complete the steelwork above the amount bid by Standard. During discovery, Standard reviewed about 30 boxes of West Bay’s documents and job files, and learned that West Bay had made a number of subcontractor substitutions on the Project. Standard filed a cross-complaint claiming that West Bay did not comply with the Public Contract Code in substituting Standard and other metalwork subcontractors on the Project. A five-day bench trial was held. The District’s director of facilities during Project construction was called at trial to testify about the substitution of Standard. In May 2004, following the conclusion of trial, the court issued a statement of decision rejecting Standard’s claim of improper substitution, finding Standard liable for fraud and promissory estoppel in the submission of its subcontractor bid, and awarding damages to West Bay. Final judgment against Standard was filed in September 2004. In March 2005, Standard filed an unsuccessful motion for new trial. Standard later appealed. In a case screening form filed on appeal, Standard stated that West Bay illegally substituted subcontractors in violation of the Public Contract Code. Standard stated that it sought “[Reversal of trial court’s decision; right to prosecute cross-complaint, [and] False Claim case.” Standard’s appeal was subsequently dismissed as untimely.
In March 2005, in addition to filing a motion for new trial seeking to overturn West Bay’s judgment against it, Standard also filed this lawsuit against West Bay. Standard was represented by the same attorney in both actions. The CFCA case was initially filed under seal, and not served until August 2005. With appeal pending in West Bay’s action against Standard and Standard’s CFCA action still under seal, Standard wrote to West Bay offering
The CECA action proceeded. Standard alleges in the CECA action, as it did in the prior proceeding it lost, that West Bay’s subcontractor substitutions violated the Public Contract Code. Standard maintains that those alleged Public Contract Code violations constitute violations of the CECA because West Bay certified that it was in compliance with the Public Contract Code in submitting payment claims on the Project. (Gov. Code, § 12651, subd. (a)(1), (2), (8).) Standard sued both West Bay and its principal, Paul Brian Thomson (collectively, West Bay). The California Attorney General and the District declined to participate in the action. An amended complaint and second amended complaint were filed. West Bay answered the operative second amended complaint in January 2008.
West Bay filed a motion for summary judgment in May 2008. West Bay presented several grounds for its motion, one of which was that Standard was relying upon information publicly disclosed in prior litigation. The prior litigation was West Bay’s lawsuit against Standard (with cross-complaint) and a plaster subcontractor’s lawsuit for payment against West Bay and the District, M. Perez Co., Inc. v. West Bay Builders, Inc. (Super. Ct. Contra Costa County, No. C01-02005).
West Bay filed a separate motion for attorney fees. West Bay claimed entitlement to fees under the CFCA, which then provided: “the court may award to the defendant its reasonable attorney’s fees and expenses against the party that proceeded with the action if the defendant prevails in the action and the court finds that the claim was clearly frivolous, clearly vexatious, or brought solely for purposes of harassment.” (Gov. Code, former § 12652, subd. (g)(9).)
Standard filed a timely appeal from the judgment, and a timely appeal from the postjudgment fee award. The parties completed briefing on appeal in early 2011.
A. General Principles of the CFCA
The CFCA permits the recovery of civil penalties and treble damages from any person who knowingly presents a false claim for payment to the state or a political subdivision. (Gov. Code, § 12651, subd. (a)(1).) The CFCA was enacted in 1987 and was modeled on the federal False Claims Act (31 U.S.C. § 3729 et seq.) (FFCA).
A CFCA action may be initiated by any person, as a qui tam plaintiff, in the name of the state or political subdivision whose funds are involved.
Under California law, there are currently two models for interpretation and application of the public disclosure bar. The first model, advocated by Standard, was presented in City of Hawthorne ex rel. Wohlner v. H&C Disposal Co. (2003)
The second model for interpretation and application of the public disclosure bar, advocated by West Bay, is provided in Grayson, supra,
We believe the Grayson approach is better reasoned. Two points bear emphasis. First, Wohlner relied heavily upon an earlier case narrowly construing an Insurance Code qui tam provision, with purposes distinct from the CFCA. (Wohlner, supra, 109 Cal.App.4th at pp. 1680-1683, citing People ex rel. Allstate Ins. Co. v. Weitzman, supra,
B. Summary judgment was properly granted
The standard of review after a trial court grants summary judgment is well established. On appeal from a grant of summary judgment, we exercise our
Summary judgment was properly granted because the allegations and transactions described in Standard’s CECA complaint are substantially similar to information publicly disclosed in prior lawsuits. Standard’s operative second amended complaint alleged that the Public Contract Code requires general contractors bidding on public works projects to list the names of and portions of work to be performed by subcontractors performing any work exceeding 0.5 percent in value of the amount of the general contractor’s total bid price and to use the listed subcontractors unless substitution is properly approved by the public entity. (Pub. Contract Code, § 4100 et seq.) Standard alleges that West Bay violated these Public Contract Code requirements in substituting subcontractors for Standard and others without obtaining valid District approval. Standard further alleges that West Bay’s “application for and receipt of progress payments and final payments for the PROJECT expressly and impliedly represented and certified to the District that [West Bay] had fully complied with the Public Contract Code,” which representations and certifications were false. Standard claims that West Bay’s conduct constituted violation of the CECA under three statutory provisions: (1) knowingly presenting a false claim for payment (Gov. Code, § 12651, subd. (a)(1)); (2) knowingly making or using a false record or statement material to a false claim (Gov. Code, § 12651, subd. (a)(2)); and (3) being the beneficiary of an inadvertent submission of a false claim, subsequently discovering the falsity of the claim, and failing to disclose the false claim to the government (Gov. Code, § 12651, subd. (a)(8)).
The allegations described in Standard’s CECA complaint are substantially similar to information publicly disclosed in prior civil hearings. “ ‘Any information disclosed through civil litigation and on file with the clerk’s office should be considered a public disclosure of allegations in a civil hearing for the purposes of [the FFCA]’ and ‘ [t]his includes civil complaints’.” (U.S. ex rel. Reagan v. East Texas Medical Center Regional Healthcare System (5th Cir. 2004)
The prior civil hearings included a plaster subcontractor’s lawsuit against West Bay and the District for nonpayment that alerted the District to the fact that an unlisted subcontractor performed substantial work on the Project. More importantly, the information was disclosed in Standard’s own cross-complaint against West Bay in prior litigation, other documents filed in that civil proceeding, trial testimony in open court, and documents filed on appeal.
The substantial similarity between information publicly disclosed in the prior lawsuit between West Bay and Standard, and the allegations of the current CECA complaint, is apparent. In the prior cross-complaint, Standard stated three causes of action, including “violation of public contract code.” Standard’s closing trial brief filed with the court asserted that there were improper substitutions of subcontractors, both itself and others. Standard’s brief in that prior litigation also specifically asserted violations of the Public Contract Code in West Bay’s substitution of subcontractors. A District representative testified at trial about subcontractor substitutions and said he approved the substitution of other subcontractors for Standard because Standard was unlicensed. The court found that Standard’s “claim [that it was] not properly substituted off the job has . . . not been substantiated.” In a case screening form filed on appeal, Standard stated that West Bay illegally substituted subcontractors in violation of the Public Contract Code. Standard later acknowledged, in a proposed stipulation to stay the CECA action, that the damages action and the CECA action present the same or similar issues.
The allegations made by Standard in this CECA action are indeed substantially similar to the allegations made in prior litigation; in fact, they are nearly identical. When pleading its CECA action, Standard has simply expanded the number of subcontractors West Bay is alleged to have improperly substituted in violation of the Public Contract Code. This minor variation does not detract from the critical fact that alleged Public Contract Code violations in West Bay’s substitution of subcontractors on the Project were publicly disclosed. Standard’s allegations in its CECA complaint are substantially similar to those already in the public domain so that the publicly available information was sufficient to place the government on notice of the alleged
Standard attempts to do so by arguing that, even if its allegations that West Bay knowingly submitted false claims or statements (Gov. Code, § 12651, subd. (a)(1), (2)) are barred, its allegations that West Bay was the beneficiary of an inadvertent submission of a false claim and never disclosed the later-learned falsity of the claim (Gov. Code, § 12651, subd. (a)(8)) are not barred. The argument is untenable. Although Standard asserts violations of several separate provisions of the CECA, all violations rest on the same material allegations—that West Bay wrongfully obtained District funds after illegally substituting subcontractors on the Project.
Standard’s qui tam CECA action was “based upon the public disclosure of allegations or transactions” in a civil hearing and thus barred unless Standard was an original source of the information. (Gov. Code, § 12652, subd. (d)(3)(A).) The bar is interposed even though Standard made the public disclosure in the prior litigation. “[A] qui tam complaint filed after allegations have been publicly disclosed is, by definition, ‘based upon’ the publicly disclosed information, even if the plaintiff made the disclosure.” (U.S. v. Alcan Electrical & Engineering, Inc. (9th Cir. 1999)
The trial court also properly awarded West Bay attorney fees incurred in defending against Standard’s frivolous and harassing lawsuit. (Gov. Code, former § 12652, subd. (g)(9).) The CFCA, as currently enacted, provides: “the court may award to the defendant its reasonable attorney’s fees and expenses against the party that proceeded with the action if the defendant prevails in the action and the court finds that the claim was clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment.” (Gov. Code, § 12652, subd. (g)(9).) At the time relevant here, the statute allowed fees if the claim was brought solely, rather than primarily, for purposes of harassment. (Gov. Code, former § 12652, subd. (g)(9); Historical and Statutory Notes, 32E pt. 1 West's Ann. Gov. Code (2011 ed.) foll. § 12652, pp. 391-392; Stats. 2009, ch. 277, § 3.) The court found Standard’s claim to be clearly frivolous and brought solely for purposes of harassment. The court assessed fees at $201,483.75. Standard argues that the fee award is unsupported by the law and facts and that the amount is excessive.
As a preliminary matter, Standard argues that the court had no subject matter jurisdiction over the case and thus no jurisdiction to award attorney fees. The argument is based on the phrasing of Government Code section 12652, subdivision (d)(3)(A), which states that “[n]o court shall have jurisdiction . . .” over a CECA action based upon the public disclosure of allegations or transactions in specified sources. Appellant Standard reasons that if the court had no jurisdiction over the action because of the public disclosure bar, then it had no jurisdiction to award fees. Standard acknowledges, however, that the CECA public disclosure bar may be better understood as the trial court understood it—as a provision denying standing to assert a cause of action rather than as a provision denying subject matter jurisdiction in the fundamental sense. The public disclosure bar of CFCA’s federal counterpart, the FFCA, is jurisdictional in the fundamental sense. (Rockwell Int'l Corp. v. United States (2007)
In a related argument, Standard maintains that West Bay was not a prevailing party eligible for fees because the action was effectively dismissed for lack of subject matter jurisdiction rather than adjudicated on the merits. But full adjudication on the merits is not necessary to achieving prevailing party status for purposes of a fee award. The general statutory definition of a prevailing party includes “a defendant in whose favor a dismissal is entered, a defendant where neither plaintiff nor defendant obtains any relief, and a defendant as against those plaintiffs who do not recover any relief against that defendant.” (Code Civ. Proc., § 1032, subd. (a)(4).) The federal courts also provide helpful guidance here. Federal courts interpreting analogous provisions in the FFCA have held that dismissal of a qui tarn plaintiff’s suit under the public disclosure bar “ ‘materially alters the legal relationship between the parties’ ” to the benefit of the defendant, rendering the defendant a prevailing party eligible for attorney fees. (Atkinson, supra, 528 F.Supp.2d at pp. 541-543; accord, Grynberg, supra,
Standard next argues that the trial court’s finding that West Bay is a prevailing party for purposes of awarding attorney fees is inconsistent with another judge’s finding in separate litigation between the parties that this CFCA action was not pursued to a favorable termination for purposes of a malicious prosecution action. The argument requires explanation. As we noted earlier, West Bay sued Standard and others for malicious prosecution after judgment in West Bay’s favor was entered but before an award of fees. The court struck the complaint because the suit arose from protected speech and petitioning activity, and plaintiff could not show a probability of prevailing on the claim. (Code Civ. Proc., § 425.16.) On the latter point, the court noted that a malicious prosecution action requires a favorable termination on the merits and found that the underlying CFCA action was not resolved on the merits because the case was resolved under the public disclosure bar, and West Bay’s innocence was never adjudicated. Standard argues that an award of fees to West Bay as a prevailing party is inconsistent with this other judge’s finding that West Bay did not obtain a favorable termination sufficient to support a malicious prosecution action.
Having found that West Bay is a prevailing party eligible for fees, the next question presented on this appeal is factual: was Standard’s claim clearly frivolous or brought solely for purposes of harassment? The trial court found Standard’s claim clearly frivolous because “the same or substantially similar allegations and transactions relied upon by [Standard] in the [CECA] action were raised in the prior” actions, including allegations of violations of the Public Contract Code that Standard itself made (and lost) in a prior cross-complaint. (Capitalization altered.) The court noted that Standard had previously acknowledged the similarity of the allegations between the prior action and this CECA action when it filed a case screening form in the appeal of the damages action. Despite that acknowledgment, which implicated the public disclosure bar, Standard continued to prosecute its CECA action. The trial court stated: “on this record, it can objectively be said that [Standard’s] qui tam claim had no reasonable chance of success and that any reasonable attorney would conclude that the action was ‘totally and completely without merit.’ ” (Capitalization altered.) The court also found that Standard’s CECA claim was brought solely for purposes of harassment. The court found that Standard “is seeking to redress private grievances against [West Bay] resulting from [West Bay’s] successful conduct in delisting [Standard] from the construction project, and in response to [West Bay’s] substantial verdict . . . against [Standard] for breach of that contract.”
Government Code former section 12652, subdivision (g)(9) permitted a prevailing defendant in a CECA suit to recover attorney fees if the claim “was clearly frivolous, clearly vexatious,” or brought solely (now, primarily) “for purposes of harassment.” A parallel federal statute, the FFCA, contains
A claim is clearly frivolous if it is “ ‘utterly lacking in legal merit and evidentiary support.’ ” (Atkinson, supra,
The court did not abuse its discretion in finding Standard’s CFCA claim to be clearly frivolous. Application of the public disclosure bar was patent. This is not a case where a qui tam plaintiff brought a CFCA action only to discover later that similar allegations had been made in a hearing or a news account of which the plaintiff was not aware. Here, Standard itself alleged illegal substitution of subcontractors on the Project in violation of the Public Contract Code in a publicly filed cross-complaint against West Bay and, when it lost that action, repeated those same allegations in this CFCA action. As noted earlier, “a qui tam complaint filed after allegations have been publicly disclosed is, by definition, ‘based upon’ the publicly disclosed information, even if the plaintiff made the disclosure.” (U.S. v. Alcan Electrical & Engineering, Inc., supra,
There is also strong evidence that Standard’s CFCA claim was brought solely for purposes of harassment. As noted above, the trial court found that Standard “is seeking to redress private grievances against [West Bay] resulting from [West Bay’s] successful conduct in delisting [Standard] from the construction project, and in response to [West Bay’s] substantial verdict . . . against [Standard] for breach of that contract.” The record supports that finding.
It will be recalled that West Bay removed Standard as a subcontractor from the Project when it learned that Standard was unlicensed, lied about its references, and could not secure bonds for its work. West Bay substituted other subcontractors to complete the Project and sued Standard to recover as damages the amount paid to complete the work above the amount bid by Standard. Standard cross-complained upon allegations that it and other subcontractors were substituted in violation of the Public Contract Code. The court found Standard liable for fraud, negligent misrepresentation, and promissory estoppel, and awarded West Bay damages of $119,901 plus prejudgment interest.
III. DISPOSITION
The judgment is affirmed. The postjudgment order awarding respondent attorney fees is affirmed. Respondent shall recover costs incurred on each appeal upon timely application in the trial court. (Cal. Rules of Court, rule 8.278(c)(1).)
Ruvolo, P. J., and Rivera, J., concurred.
A petition for a rehearing was denied August 15, 2011, and appellant’s petition for review by the Supreme Court was denied October 12, 2011, S196056.
Notes
The parties have slowed our review by failing to follow proper appellate procedure. Appellant’s opening brief fails to include any summary of facts. (Cal. Rules of Court, rule 8.204(a)(2)(C); Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs (The Rutter Group 2010) ¶¶ 9:126 to 9:127, p. 9-36 (rev. # 1, 2006).) Respondent’s brief fails to support its factual statements with citation to the volume and page number of the record where the matter appears. (Cal. Rules of Court, rule 8.204(a)(1)(C).) General citation to the statements of undisputed material facts is inadequate. (Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs, supra, ¶ 9:39.5, p. 9-13 (rev. # 1, 2008).) A citation to the supporting evidence is required, especially where, as here, some of the facts were disputed below. Respondent provides no citations to the supporting evidence and, in some instances (such as fact No. 50), omits the supporting evidence from the record. We have ignored all assertions of fact unsupported by the record.
In prior litigation between the parties, Nari Ramchandani, the principal of Standard Metal Fabrication and Standard Elevator Company, not only maintained that Standard Metal Fabrication was a fictitious business name for Standard Elevator Company, but also maintained that Standard Elevator Company’s general building contractor license effectively licensed Standard Metal Fabrication as well—and authorized Standard Metal Fabrication to perform structural steelwork in the construction of a school for which a specialty license is required. Moreover, Standard Metal Fabrication filed a case screening form with this court during prior litigation between the parties under the name “Standard Elevator Company, Inc., dba Standard Metal Fabrication.” Despite plaintiff’s affirmative representations equating Standard Elevator Company and Standard Metal Fabrication, in both this and prior litigation, plaintiff Standard Elevator Company states in its brief on appeal that defendant West Bay has tried to “mislead” the court by the “deceptive artifice” of equating the two business entities. To the contrary, it appears that it is plaintiff who has tried to mislead this court.
Standard argues on appeal that West Bay suffered a default when West Bay failed to answer. Standard is mistaken. Standard requested entry of default on the original complaint, but that complaint was superseded by an amended complaint before entry of default was requested. Standard also argues that West Bay failed to raise the public disclosure bar as an affirmative defense in its answer. Standard presents no legal authority to support its claim that the matter must be pleaded as an affirmative defense. Nor did Standard sufficiently argue the claim in the trial court, thus forfeiting the claim on appeal.
A case management statement in the plaster subcontractor litigation mentions several other cases concerning the Project, but the nature of the allegations in those cases is not developed in the record.
The court’s summary judgment order sufficiently stated the reasons for its determination. (Code Civ. Proc., § 437c, subd. (g).) We reject Standard’s claim to the contrary.
The statute now allows fees if a claim is brought “primarily,” rather than “solely,” for purposes of harassment. (Stats. 2009, ch. 277, § 3.) We apply the “solely” standard applicable at the time fees were awarded here.
There is additional litigation between the parties. In January 2009, after judgment in West Bay’s favor was entered but before an award of fees, West Bay sued Standard, Standard’s principal, Nari Ramchandani, and Standard’s attorney, George Wolff, for malicious prosecution in bringing this CFCA case. The court refused to stay the case pending resolution of this appeal, and struck the malicious prosecution complaint because the suit arose from protected petitioning activity, and plaintiff could not show a probability of prevailing on the claim. (Code Civ. Proc., § 425.16.) On the latter point, the court noted that a malicious prosecution action requires a favorable termination on the merits and found that the underlying CFCA action was not resolved on the merits because the case was resolved under the public disclosure bar, and West Bay’s guilt or innocence was never adjudicated. The malicious prosecution case was the subject of a separate appeal in this court. (West Bay Builders, Inc. v. Standard Elevator Co. (July 22, 2011, A126187) [nonpub. opn.].)
Standard’s unopposed request for judicial notice of the legislative history of the CFCA is granted.
“The term ‘qui tam’ comes from the Latin expression ‘qui tam pro domino rege quam pro se ipso in hac parte sequitur,’ which means, ‘who pursues this action on our Lord the King’s behalf as well as his own’.” (People ex rel. Allstate Ins. Co. v. Weitzman (2003)
West Bay argues that it is also entitled to summary judgment on other grounds that were not addressed by the trial court, and Standard has responded to those arguments. Such argument is unnecessary. If an appellate court wishes to affirm an order granting summary judgment on a ground not relied upon by the trial court, it asks the parties for supplemental
The federal statute reads: “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.” (31 U.S.C. § 3730(d)(4).)
There is some confusion in the record as to the amount of damages but $119,901 appears to be the correct amount.