MEMORANDUM OF DECISION ON MOTION FOR RECONSIDERATION AND MOTION TO AMEND COMPLAINT
Relator Walter M. Drake has filed two motions. First, he moves for reconsideration on the Court’s prior dismissal of his third claim for relief based on the former 31 U.S.C. § 3729(a)(7) & (2) against defendant United Technologies Corporation (“UTC”) (Doc. #204). Second, he seeks leave to amend his complaint to assert a claim for recovery against UTC pursuant to 31 U.S.C. § 3729(a)(1)(B) (Doc. # 203). For the reasons which follow, the motion for reconsideration will be granted. Upon reconsideration, the Court will permit relator Drake to assert a claim under the former 31 U.S.C. § 3729(a)(2), which has been recodified as 31 U.S.C. § 3729(a)(1)(B). The motion for leave to amend the complaint will be denied as moot.
BACKGROUND
I. Allegations in the Complaint
The underlying factual allegations and the identities of the parties are set forth in the Court’s September 20, 2007 ruling as well as its previous rulings. Therefore, the Court will not repeat them here.
II. Procedural History
Relator Walter M. Drake commenced this qui tam action with the filing of a complaint under seal on June 14, 1994 (Doc. # 1). His claims were made under the False Claims Act, 31 U.S.C. §§ 3729 et seq. (“FCA”). On June 2, 1997, the United States declined to intervene (Doc. #27), and the Court ordered the complaint unsealed and served upon defendants (Doc. # 28). On July 7, 1997, Drake filed an amended complaint (Doc. #29) which was then served upon defendants.
On September 15, 1997, defendants moved pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6) to dismiss the first amended complaint (Doc. #40). Instead of filing an opposition to the motion, Drake filed a second amended complaint on December 17, 1997 (Doc. # 53). In this complaint, Drake asserted claims under (I) FCA § 3729(a)(1) & (2) against Norden; (ii) FCA § 3729(a)(7) & (2) against Nor-den; (iii) FCA § 3729(a)(7) & (2) against UTC; and (iv) FCA § 3729(a)(3) for conspiracy against Norden and UTC.
Defendants moved to dismiss the second amended complaint on January 27, 1998 (Doc. # 62). On the same day, Drake moved for partial summary judgment (Doc. # 64). Defendants opposed Drake’s motion and cross-moved for partial summary judgment (Doc. # 90). Drake asserts that prior to the Court issuing an opinion on the motion to dismiss, the parties conducted voluminous discovery.
On August 24, 2000, the Court dismissed Drake’s claim against defendant UTC under FCA § 3729(a)(2) with prejudice on the grounds that any false statements in UTC’s Disclosure Statements and Present Responsibility Agreement (“PRA”) reports were not “necessary antecedents to a claim for payment, and because the contracts did not certify that costs billed were allowable, alleged falsity contained in these docu
On July 25, 2001, the Court issued a ruling on the parties’ cross-motions for partial summary judgment, granting defendants’ motion and denying Drake’s motion (Doc. # 119). 2
On January 31, 2002, the Court issued a notice stating that “[ujnless satisfactory explanation of why [this case] should not be dismissed is submitted to the Court within twenty (20) days of the date of this notice, it will be dismissed” (Doc. # 120). 3 On February 19, 2002, Drake filed a third amended complaint (Doc. # 122). Defendants then moved to strike the third amended complaint and to dismiss the case for failure to prosecute under Federal Rule of Civil Procedure 41(b). Finding that Drake had failed to properly prosecute his case, the Court dismissed the case with prejudice on February 19, 2003. The Court noted that:
Drake’s Third Amended Complaint does lack certain indicia of substantive compliance. For example, Drake’s Third Amended Complaint so closely resembles his Second Amended Complaint with respect to those claims dismissed by the Court in its August 24, 2000 ruling that the Court questions whether Drake’s filing in response to the Rule 16 Notice sacrificed compliance with the substance of the Court’s earlier order for expediency brought on by the threat of dismissal.
Feb. 19, 2003 Ruling,
Drake subsequently moved for reconsideration under Rules 59(e) and 60(b); the Court denied Drake’s motion on June 17, 2003,
Drake appealed. On appeal, the Second Circuit Court of Appeals disagreed “that the circumstances were sufficiently egregious or that Drake’s actions were so contumacious as to warrant dismissal of his entire complaint.”
United States ex rel. Drake v. Norden Sys.,
On February 10, 2005, the Court issued an order granting defendants’ request that Drake file an amended complaint within sixty days following the close of certain limited discovery (Doc. # 165). Drake filed a fourth amended complaint on October 6, 2005 (Doc. # 167); defendants filed
The Court of Appeals subsequently reversed the Court’s dismissal, finding the sanction of dismissal to be overly harsh in this matter.
See Drake v. Norden Sys.,
Drake’s instant motions are addressed to the Court’s ruling of August 24, 2000. Specifically, Drake requests that the Court reconsider its ruling dismissing count three which alleged that UTC violated FCA § 3729(a)(7) & (2) of the FCA in light of Congress’s passage of the Fraud Enforcement and Recovery Act of 2009 (“FERA”), P.L. 111-21, § 4(a), 123 Stat. 1621 (May 20, 2009). Alternatively, Drake seeks leave to amend his complaint to assert a new claim under the revised sections of the FCA.
DISCUSSION
I. Motion for Reconsideration of the Court’s Ruling Dismissing Relator’s Claim Under Section 3729(a)(2)
A motion for reconsideration may be based solely upon “matters or controlling decisions which counsel believes the Court overlooked in the initial decision or order.” Local R. Civ. P. 7(c)(1). An intervening change in controlling law is one ground that would justify granting a motion for reconsideration.
Virgin Atl. Airways, Ltd. v. Nat’l Mediation Bd.,
Whether Drake’s claim under FCA § 3729(a)(7) & (2) can be revived depends on the resolution of two questions. First, is Drake permitted to seek reconsideration of a ruling entered ten years ago in light of Congress’s passage of a new statute? Second, do the provisions of FERA apply to this action in which the alleged conduct occurred more than fifteen years ago?
A. Reconsidering Previous Dismissal
As a threshold matter, the Court must determine whether it has the power to reinstate Drake’s claims that were originally asserted under FCA § 3729(a)(7) & (2).
Drake’s motion is made under Federal Rule of Civil Procedure 54(b), which permits the court to revise an order that adjudicates fewer than all the claims at issue at any time before entry of judgment. 4 As the Court of Appeals has stated with regard to Rule 54(b) and the “law of the case” doctrine:
As most commonly defined, the doctrine of law of the case posits that when acourt decides upon a rule of law, that decision should generally continue to govern the same issues in subsequent stages in the same case.
Arizona v. California,
The court may reconsider its ruling in light of an intervening change of controlling law.
Virgin Atl. Airways,
B. Application of FERA
The question then becomes whether FERA applies to Drake’s claim. FERA provides:
Date and Application.—The amendments made by this section shall take effect on the date of enactment of this Act [May 20, 2009] and shall apply to conduct on or after the date of enactment, except that [31 U.S.C. § 3729(a)(1)(B) ], as added by subsection (а)(1), shall take effect as if enacted on June 7, 2008, and apply to all claims under the False Claims Act (31 U.S.C. 3729 et seq.) that are pending on or after that date.
FERA § 4(f)(1).
1. Claim Under Former Section 3729(a)(7)
FCA § 3729(a)(7) was recodified as FCA § 3729(a)(1)(G).
United States ex rel. Lusby v. Rolls-Royce Corp.,
2. Claim Under FCA § 3729(a)(2)
As to Drake’s claim under FCA § 3729(a)(2), the law is less clear. Specifically, courts have disagreed on how the word “claims” should be construed in FERA § 4(f)(1), which makes FCA § 3729(a)(1)(B) applicable to “all claims under the False Claims Act ... that are pending on or after [June 7, 2008]” (emphasis added). The dispute on the definition of the word “claims” concerns whether “claims” refers to “claims” in the sense of “cases” before a court or “claims” as defined in the FCA as “any request or demand, whether under a contract or other
Courts answering this question have come out on both sides of the debate.
Compare, e.g., United States ex rel. Westrick v. Second Chance Body Armor, Inc.,
The Second Circuit Court of Appeals has recently entered the fray. In
United States ex rel. Kirk v. Schindler Elevator Corp.,
the Court of Appeals ruled, without significant discussion, that “claims” under FERA § 4(f)(1) referred to “cases.”
In 2009, Congress passed [FERA], which amended and renumbered these provisions as §§ 3729(a)(1)(A) and (a)(1)(B), respectively.... The amendment to § 3729(a)(2) ... was made retroactive to June 7, 2008, applicable to “all claims under the False Claims Act ... that [were] pending on or after that date.” Because Kirk’s claim was filed in March 2005, and was pending as of June 7, 2008, the potentially applicable provision[ ] in this case [is] ... current § 3729(a)(1)(B), establishing liability for “knowingly mak[ing], us[ing], or causing] to be made or used, a false record or statement material to a false or fraudulent claim.”
Kirk,
In this Circuit, therefore, FERA § 4(f)(1) applies to “claims” in the sense of cases before a court. Because this case was pending as of June 7, 2008, Drake may assert a cause of action under the amended FCA.
The Court is not persuaded by defendants’ argument that
Kirk
has little precedential force because the Court of Appeals’ opinion lacks indicia of a dispute as to the interpretation of FERA § 4(f)(1). Even if defendants were correct, this Court could not ignore the clear holding of the Second Circuit Court of Appeals because this
3. Application Ex Post Facto Clause
UTC argues that application of the revised FCA would violate the Ex Post Facto Clause of the Constitution. U.S. Const. art. I, § 9, cl. 3. Under the Ex Post Facto Clause, the government may not “enact a law that punishes an act that was innocent prior to the enactment....”
Hobbs v. County of Westchester,
To determine whether the Clause applies, the court must determine whether (1) the law is retrospective and applies to conduct that occurred before its enactment; and (2) the law disadvantages af-
fected parties.
United States v. Kilkenny,
The framework for our inquiry, however, is well established. We must ascertain whether the legislature meant the statute to establish ‘civil’ proceedings. If the intention of the legislature was to impose punishment, that ends the inquiry. If, however, the intention was to enact a regulatory scheme that is civil and nonpunitive, we must further examine whether the statutory scheme is so punitive either in purpose or effect as to negate the State’s intention to deem it ‘civil.’ Because we ordinarily defer to the legislature’s stated intent, only the clearest proof will suffice to override legislative intent and transform what has been denominated a civil remedy into a criminal penalty.
Smith v. Doe,
The court’s first responsibility in deciding whether the Ex Post Facto Clause applies is to determine whether Congress intended the FERA amendments to be civil or criminal in nature. This determination of the nature of the statutorily-defined punishments is initially a matter of statutory construction.
See One Lot Emerald Cut Stones v. United States,
Historically, courts examining the FCA have not found it to be punitive. In such instances, the amendments would not implicate Ex Post Facto Clause concerns. For example, the Supreme Court has held that the FCA did not implicate double jeopardy concerns under the Fifth Amendment.
See United States ex rel. Marcus v. Hess,
Courts within the Second Circuit have adhered to the idea that the FCA does not implicate constitutional protections that apply in criminal proceedings. In
United States v. Inc. Vill. of Island Park,
the court found that the Excessive Fines Clause did not apply to a judgment under the FCA because such judgment was “entirely remedial.”
To be sure, the Supreme Court has recognized the punitive nature of the FCA.
See Vt. Agency of Natural Res. v. United States ex rel. Stevens,
To begin with it is important to realize that treble damages have a compensatory side, serving remedial purposes in addition to punitive objectives. While the tipping point between pay-back and punishment defies general formulation, being dependent on the workings of a particular statute and the course of particular litigation, the facts about the FCA show that the damages multiplier has compensatory traits along with the punitive.
In addition, the FCA is a civil statute codified in title 31 of the United States Code, not a criminal statute codified in title 18. Moreover, FCA § 3730, which governs the procedures by which the Attorney General and private individuals can bring causes of action under section 3729 is titled “Civil actions for false claims.”
Finally, the legislative history of the 1986 and 2009 amendments to the FCA underscores the law as a civil statute. Congress referred to FERA as “one of the most potent civil tools” to stop fraud. S. Rep. 110-10, at 4 (2009);
see also
S. Rep. 99-345, 11, 1986 U.S.C.C.A.N. 5266, 5276 (“The statute is a remedial one. It is intended to protect the Treasury against the hungry and unscrupulous host that encompasses it on every side ....”) (citing
Marcus,
Defendants point to the decision in
United States ex rel. Sanders v. Allison Engine Co.,
in which the district court found that the FCA was so punitive as to raise ex post facto concerns.
See
(1) whether the sanction involves an affirmative disability or restraint; (2) whether it has historically been regarded as a punishment; (3) whether it comes into play only on a finding of scienter; (4) whether its operation will promote the traditional aims of punishment — retribution and deterrence; (5) whether the behavior to which it applies is already a crime; (6) whether an alternative purpose to which it may rationally be connected is assignable for it; and (7) whether it appears excessive in relation to the alternative purpose assigned. It is important to note, however, that these factors must be considered in relation to the statute on its face.
Hudson,
The district court in
Allison Engine
applied this analysis and found that four out of the seven factors weighed in favor of finding that the FCA sanctions were punitive in nature.
See Allison Engine,
a.Does FCA Involve an Affirmative Disability or Restraint?
A punishment imposes an “affirmative disability or restraint” when it approaches “the infamous punishment of imprisonment.”
Hudson,
b.Is FCA Historically Regarded As Punishment?
As discussed previously, courts have historically observed the punitive elements of the FCA. They have, however, also noted the remedial and compensatory nature of the statutory framework. Therefore, it cannot be said that FCA has been historically regarded primarily as punishment.
See Chandler,
c.Is There a Scienter Requirement?
Scienter is an element of an FCA violation.
See Palmisano,
d.Does FCA Promote Retribution and Deterrence?
Damages under the FCA are calculated to provide the government with “complete indemnity for the injuries done it.”
Marcus,
e.Is Behavior Proscribed by FCA Already a Crime?
The actions proscribed by section 3729 are also prohibited directly in the criminal law codified in title 18. Despite this, courts often review the civil law to interpret the criminal law.
See, e.g., United States v. McBride,
f.Is There an Alternative Purpose Assigned?
Courts have noted that the damages multiplier of FCA serves both compensatory and punitive purposes.
See Chandler,
g.Is FCA Excessive In Relation To Alternative Purpose?
FCA is meant to compensate the government for its financial losses. However, there are certain instances when the government is entitled to treble damages, which would certainly do more than merely compensate the government for its losses. Specifically, the FERA amendments provide for a “civil penalty of not less than $ 5,000 and not more than $ 10,000 ... plus 3 times the amount of damages which the Government sustains.” FCA § 3729(a)(1)(G). Such damages are “essentially punitive in nature.”
PacifiCare Health Systems, Inc. v. Book,
In light of the seven factors, the Court finds that the FCA is not sufficiently punitive in nature and effect so as to warrant application of the Ex Post Facto Clause. There is not present in this case the “clearest proof’ to defeat Congress’s intention to create a civil framework to prevent fraud against the government.
4. Whether Amendment to Complaint Would Be Futile
In their opposition to Drake’s motion to amend the complaint, defendants argue that Drake’s claim under FCA § 3729(a)(1)(B) should be dismissed because the proposed amendment is futile. As explained above, however, the amendment would not be futile because FCA § 3729(a)(1)(B) applies to the conduct alleged to have been committed by defendants.
Upon reconsideration of its previous ruling, the Court will permit Drake to assert a claim as to the Disclosure Statements and PRA reports under FCA § 3729(a)(1)(B) that were previously dismissed by the Court.
II. Motion for Leave to Amend Complaint
In light of the Court’s conclusion above, the Court will deny Drake’s motion for leave to amend the complaint as moot. Nonetheless, Drake is instructed to file an amended complaint in accordance with the current state of this case given the past rulings by the Court of Appeals and this Court as well as this current ruling.
CONCLUSION
For the foregoing reasons, the Court GRANTS relator Walter M. Drake’s motion to reinstate the third claim for relief (Doc. #204) and DENIES as moot Drake’s motion to amend the complaint (Doc. # 203). Drake is instructed to file an amended complaint within twenty-one days of the filing of this ruling.
RULING ON DEFENDANTS’ MOTION FOR LEAVE TO APPEAL
On August 26, 2010, the Court granted relator Walter M. Drake’s motion for reconsideration and permitted Drake to reinstate his third claim for relief (Doc. # 230). Defendants Norden Systems, Inc. and United Technologies Corporation (“UTC”) now move for leave to appeal the Court’s ruling pursuant to 28 U.S.C. § 1292(b).
BACKGROUND
The underlying facts and the identities of the parties are set forth in the Court’s August 26 ruling and the Court’s previous rulings. On September 17, defendants filed their motion (Doc. #233) arguing that an immediate appeal pursuant to 28 U.S.C. § 1292(b) of the Court’s ruling would be expedient and aid judicial economy. For the reasons that follow, the Court will deny defendants’ motion.
DISCUSSION
Appeals of interlocutory orders are controlled by 28 U.S.C. § 1292(b). A court should issue a certificate of appealability permitting an interlocutory appeal when the court is “of the opinion that [the court’s] order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation.... ” 28 U.S.C. § 1292(b).
Leave to appeal under section 1292(b) is warranted only in “exceptional circumstances sufficient to overcome the general aversion to piecemeal litigation
A “question of law” is “pure” when the reviewing court could decide it “quickly and cleanly without having to study the record.”
In re Worldcom, Inc.,
Substantial ground for a difference of opinion requires more than a claim that the court’s ruling was wrong.
Wausau Bus. Ins. Co. v. Turner Constr. Co.,
Finally, the third prong is met where an intermediate appeal would advance the ultimate termination of a litigation or if the appeal would advance the time to trial or shorten the trial.
Transport Workers Union of Am., Local 100, AFL-CIO v. New York City Transit Auth.,
Defendants seek to appeal the Court’s holding that the word “claims” under FERA § 4(f)(1) referred to cases. In so holding, the Court relied on the Second Circuit Court of Appeals’ decision in
United States ex rel. Kirk v. Schindler Elevator Corp.,
This Court believes that upon more briefing, the Court of Appeals may revisit its holding in
Kirk.
This case at
Should the Court permit defendants to appeal, a panel of the Court of Appeals would address the definition of claims and would rely on the definition set forth in
Kirk
because one panel cannot overrule the holding of a previous panel.
See United States v. Wilkerson,
The Court’s hesitancy in granting the relief requested is that the question is not dispositive of the case. Regardless of how “claims” is defined, there are other claims pending in this case that must be resolved. The interests of justice and this litigation would be better served by permitting this case to proceed before this Court and allowing defendants to appeal after resolution of the case, if appropriate.
See Koehler v. Bank of Bermuda,
CONCLUSION
For the foregoing reasons, the Court DENIES defendants’ motion for leave to appeal (Doc. # 233).
Dated at Bridgeport, Connecticut, this 21st day of October, 2010.
Notes
. This ruling is available al
United States ex rel. Drake v. Norden Systems, Inc.,
. This ruling does not appear to have been published or reported.
.The Court recognized Drake’s claim that the delay in this proceeding was due to conduct by both parties.
See
Ruling on Defendants’ Motion to Strike Plaintiff’s Third Amended Complaint and to Dismiss,
. Drake has not sought leave to file a motion for reconsideration pursuant to Local Rule of Civil Procedure 7(c)(1) outside the fourteen-day period provided in the rule. Had he so moved, the Court would have been permitted to exercise its discretion to address an untimely motion for reconsideration.
See Palmer v. Sena,