Summary
In United States ex rel. Colunga v. Hercules Inc., 1998 WL 310481 (D.Utah 1998), the court held that Section 3731(b)(2) does apply to private relators.
Summary of this case from U.S. ex Rel. Downy v. Corning, Inc.Opinion
Case No. 89-CV-954 B.
March 6, 1998
Lon D. Packard, Ronald D. Packard, Craig H. Johnson, Von G. Packard, Packard, Packard Johnson, Salt Lake City, UT, Michael T. Thorsnes, Daral B. Mazzarella, Rhonda J. Thompson, Thorsnes, Bartolotta, McGuire Padilla, San Diego, CA, Brian W. Steffensen, Salt Lake City, UT, James S. Greenan, James M. Wagstaffe, Matthew B. Pavone, Cooper, White Cooper, San Francisco, CA, Rick J. Sutherland, Sutherland England, Salt Lake City, UT, Attorney for Plaintiffs.
Gordon Campbell, Moxley Jones Campbell, L.C., Salt Lake City, UT, Robert K. Huffman, Miller Chevalier, Washington, DC, Carlie Christensen, U.S. Attorney's Office, Salt Lake City, UT, Dennis Egan, Commercial Litigation Dept., U.S. Dept. of Justice — Civil Div., Washington, DC, Elizabeth Whitney, Parsons, Behle Latimer, Salt Lake City, UT, Attorney for Defendants.
MEMORANDUM ORDER
The defendant, Hercules Incorporated, has made a motion for partial summary judgment against the plaintiffs, United States ex rel. Katherine Colunga, contending that portions of plaintiffs' qui tam action against defendant are barred by the statute of limitations period of the False Claims Act (FCA), 31 U.S.C. § 3731(b). The plaintiff relator contends (1) she is entitled to invoke the relation back doctrine of Rule 15(c) F.R.C.P. to the claims set forth in her first and second amended complaints; (2) that the statute of limitations period runs from when a government official acquired knowledge or should have known of the alleged false claim; and (3) that neither the six or ten year limitations period of 31 U.S.C. § 3731(b) have expired on plaintiffs' claims.
Both parties have used the term "equitable tolling" in regard to 31 U.S.C. § 3731(b)(2). This is not a correct characterization of that statute. It is a carry over from the pre 1986 "equitable tolling" doctrine applied to extend the six year statute of limitations period prior to the 1986 amendments. SeeUnited States ex rel. Hyatt v. Northrop Corp., 91 F.3d 1211, 1216 (9th Cir. 1996); John T. Boese, Civil False Claims and Qui Tam Actions, p. 5-18 (1998). For this reason Hercules is in error in asserting Colunga has the burden of showing equitable tolling and claiming Colunga has not done so. The current provision of 31 U.S.C. § 3731(b)(2) is a statute of repose. Boese, supra p. 5-30. There could be equitable tolling with regard to 31 U.S.C. § 3731(b)(2) where the six year statute has expired and the three year provision is inapplicable, expired or shortened. In such circumstances, Hercules' position for equitable tolling would apply, plaintiffs would have the burden of proof to extend the period up to the ten year period of repose. "Equitable estoppel" has been asserted by plaintiffs, except plaintiff asserts "equitable estoppel" based on fraud. Plaintiffs have set forth facts in its memorandum and supporting references that could raise equitable estoppel or tolling. The evidence referred to items in the record and exhibits. (See reference pp. 2-17 in plaintiff's memorandum). Rule 56 F.R.C.P. There is a material issue of fact on equitable tolling. However, the court does not wish to suggest fraud allegations alone will invoke equitable tolling. It is unnecessary to decide the issue against defendant's motion.
The burden of proof to support the claim of a limitations bar is on the defendant which is seeking to claim the benefit of the provisions of the limitations period. The FCA, 31 U.S.C. § 3731(b), is no different than the limitations provisions of other statutes. Generally, a limitation defense is an affirmative defense and the burden of proof is on the party asserting it. e.g. Goldsmith v. Learjet, Inc., 90 F.3d 1490 (10th Cir. 1996) (applying state law); Koch v. Shell Oil Co., 52 F.3d 878 (10th Cir. 1995) (applying state law). If the statute is applicable, the burden then shifts to the plaintiff to show a basis for tolling the period. Van Buskirk v. Carey Canadian Mines Ltd., 760 F.2d 481 (3d Cir. 1985).
The plaintiffs filed the original complaint on October 24, 1989. The claims in the complaint related to a specific contract involving Pershing II missiles and deficiencies in the bellows and reinforcing fibers within the stack assemblies. The rubber components were alleged to have failed to meet proper standards and were nonconforming.
On July 18, 1991, plaintiffs filed their first amended complaint. The first amended complaint had new allegations which raised improper alodining as to Pershing II, rocket motors, Trident rocket motor, and MX rocket motors. There were allegations of deficient Manufacturing Inspection Records that went to Hercules' quality control system. The court concludes the amended complaint raised no new conduct or transaction as to the Pershing II missile motors but further amplified the deficiencies claimed as to that system. The claims as to the Trident and MX motors are outside the range of conduct, transaction, or occurrence of the first complaint.
On April 16, 1992, the plaintiff filed her second amended complaint. There were allegations of improper alodining and other problems as to several other missile systems, Titan IV, Scram II, SICBM, Delta and Pegasus. The plaintiffs added additional detail as to deficiencies in Hercules' quality control or assurance program. The deficiencies in the quality control systems of Hercules did not raise new occurrences from the first amended complaint as to Pershing II Motors, Trident, and MX Motors, but as to the newly added rocket motors and systems, an entirely different subject matter was involved. Different rocket systems became the subject of the complaint.
Relation Back Doctrine
Plaintiffs contend that under the relation back doctrine of Rule 15, F.R.C.P. their first and second amended complaints relate back to the filing of the first complaint in October, 1989. The 1989 provision of Rule 15(c) F.R.C.P. provided that "whenever the claim . . . asserted in the amended pleading arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading, the amendment relates back to the date of the original pleading." This provision was in effect when the first amended complaint was filed. In December, 1991 Rule 15(c) F.R.C.P. was amended and rearranged. First, the new rule allowed relation back if "permitted by the law that provides the statute of limitations applicable to the action . . ." That provision has no application to the FCA because it does not authorize a relation back. The 1991 amendment to Rule 15(c) contained another amendment not applicable here to changing or adding a party. The essence of the pre-1991 amendment on relation back where the same "conduct, transaction, or occurrence" as the initial complaint is involved remained the same after the 1991 amendment to 15(e). If the "same conduct" is involved in the subsequent complaint it will relate back. Patton v. Gayer, 445 F.d. 798 (10th Cir. 1971); MayCher v. Muskogee Medical Center Aux., 129 F.3d 131 (unpublished), 1997 WL 690007 (10th Cir. 1997). The standard is the same conduct, transaction or occurrence. Alexander v. Beech Aircraft, 952 F.d. 1215 (10th Cir. 1991); McHenry v. Aetna Life and Cas. Ins. Co., 930 F.d. 34, (unpublished) 1991 WL 35191 p. 2 (10th Cir. 1991). This standard can encompass an ongoing scheme to defraud. Anixter v. Dome-State Production Co., 939 F.d. 1420 (10th Cir. 1991).
It can be argued that if the relation back doctrine applied there would have been no need to seek further permission of the United States to proceed on the first amended complaint since the same subject matter encompassed in the original permission would have sufficed. See 31 U.S.C. § 3730(a), (b), (c).
Applying these standards to plaintiffs' claim that Rule 15(c)(2) F.R.C.P. allows relation back of all claims in plaintiffs' second amended complaint the court must reject that conclusion. Rather the court finds:
1. As to the Pershing II system, all claims in plaintiffs' first and second complaint relate back to October 24, 1989, because the same conduct, transaction, or occurrence plaintiff alleged or attempted to raise in the original complaint is reasonably involved.
2. As to the plaintiffs' second amended complaint, the allegations as to Trident and MX rocket motors may relate back to the date of the first amended complaint, July 18, 1991, but not to the original complaint.
3. There can be no relation back for the Titan IV, Scram II, SICBM, Delta and Pegasus systems and the limitations period as to these systems must be calculated from April 16, 1992.
31 U.S.C. § 3731(b)This court has previously ruled that 31 U.S.C. § 3731(b) has retroactive effect. The application of this provision governs, in part, the defendant's motion for summary judgment.
31 U.S.C. § 3731(b) is a complex statute setting forth three plateaus of limitation. The first is six years from the date of violation regardless of the knowledge of the relator or the government. The date of violation is the date on which the false claim is presented to the government. United States v. Rivera, 55 F.3d 703, 707 (1st Cir. 1995). The statute is a false "claim" statute and the violation is committed when the claim is presented. Smith v. United States, 287 F.2d 299, 304 (5th Cir. 1961). It has been asserted that the "majority of courts have held that the period begins to run when payment is made." Boese, supra, pp. 5-21 (1988). However, an analysis of the cases cited for the proposition do not completely support the conclusion. The statute is criminal but also with a civil remedy. For the purposes of a criminal prosecution no payment need be made. If the payment date is automatic, then that date would be the date of claim. See discussion, United States ex rel. Kreindler Kreindler v. United Technology, 985 F.2d 1148 (2d. Cir. 1993). This court rejects the contrary conclusion that the date of payment starts the violation. i.e. United States ex rel. Duvall v. Scott Aviation, 733 F. Supp. 159 (W.D.N.Y. 1990).
Hercules argues for a different triggering act. As will be seen, this argument cannot be accepted.
However, what is lacking in this motion is a clear determination of when the false claims were presented. That is essential to be able to determine the triggering date for the statute of limitations. Without the date (or dates) clearly set forth, the court cannot determine whether the limitations period has run. Defendant's motion assumes the date is from the time plaintiff Colunga had knowledge of the violation. However, when the violation occurred is the date of initial importance. That has not been shown. It is not the date when Hercules engaged in improper conduct in the performance of its quality assurance or other conduct. It is the date of presentment of the false claim. Therefore, Hercules has not proved, as is its burden, the time frame as to the triggering of the limitations period.
This issue will be considered hereinafter; but is rejected.
The second limitations plateau extends the limitation period for three years under stated circumstances. In § 3731(b) the period is extended beyond the six years to "when facts material to the action are known or reasonably known, by the official of the United States charged with responsibility to act in the circumstances." Without question Katherine A. Colunga was not an official of the United States, unless it can be said all "would be" relators are officials of the United States. Ms. Colunga's relation was as an employee of a private contractor and her expected objective loyalty would be to her employer. Hercules takes the position relying on United States ex rel. Hyatt v. Northrop Corp., supra. The position of Hyatt is erroneous and the decision appears to be a reconstruction of the statute contrary to its plain meaning and contrary to other constructions of the FCA. Hyatt is not accepted as the proper statement of law under the FCA.
Ms. Colunga is not a person "charged" with the responsibility to act in the circumstances. Hyatt ruled the qui tam plaintiff is the "only person" charged with responsibility to act. 91 F.d. 1217. The conclusion is not correct. Federal prosecutors, not private citizens, are the charged persons. Colunga had no obligation to act to pursue correction of the violation. The legislative history, S. Rep. No. 345, 99th Cong.2d Session 30; 1986 U.S. Col. Cong. Admin. News 5266, 5295 expressly address the issue and concludes:
"[The] 3 year statute of limitation does not begin to run until the material facts are known by an official within the Department of Justice with the authority to act in the circumstances." (Emphasis added). Colunga was not such a person. This is the appropriate construction of § 3731(b)(2). United States v. Macomb Contracting, 763 F. Supp. 272, 274 (D.M.D. Tenn. 1990). Other courts have applied a broader standard. United States ex rel. Kreindler Kreindler v. United Technologies Corp., 777 F. Supp. 195 aff'd 985 F.d. 1484 (supra). See Boese, supra, pp. 5-27. However, this court believes the better rule, if ambiguity exists in the language of § 3731(b), is to accept the interpretation in the Senate Report as reflecting the intention of Congress Negonsott v. Samuels, 507 U.S. 99 (1993) (In construing a statute the court's task is to give effect to the will of Congress). The intent of Congress, not judicial analysis of proper policy, must be the interpretation of the statute. Guidry v. Sheet Metal Workers Intern. Ass'n, 10 F.3d 700 (10th Cir. 1993); State of Colorado v. Idardo Min. Co., 916 F.d. 1486 (10th Cir. 1990); Aulston v. United States, 915 F.d. 584 (10th Cir. 1990).
The court referred to knowledge of high ranking military officials as sufficient. The court is concerned as to this interpretation. Department of Defense (DOD) officials often may have other concerns preventing them from being forthright in enforcing the FCA. In this case, the DOD has taken a position contrary to plaintiff. DOD officials may have different interests, such as sustaining an acquisitions contractor rather than pursuing the contractor for a FCA violation.
The court referred to knowledge of high ranking military officials as sufficient. The court is concerned as to this interpretation. Department of Defense (DOD) officials often may have other concerns preventing them from being forthright in enforcing the FCA. In this case, the DOD has taken a position contrary to plaintiff. DOD officials may have different interests, such as sustaining an acquisitions contractor rather than pursuing the contractor for a FCA violation.
In addition, the court must support the interpretation required by the plain meaning of the statute. In a statutory construction case, the beginning point must be the language of the statute,Estate of Cowart v. Nicklos Drilling Co., 505 U.S. 469 (1992). When a word is not defined by statute, the court normally construes it in accord with the "ordinary meaning." Smith v. United States, 508 U.S. 223, 228 (1993); Perrin v. United States, 444 U.S. 37, 42 (1979) (words not defined in statute should be given ordinary or common meaning); Guidry, supra. The starting point must be the statutory language. Utah Women's Clinic v. Graham, 892 F. Supp. 1379 (D. Utah 1995). Applying these principles the court must conclude the plain meaning of "official of the United States" means a person holding office of the United States and that the term "charged with the responsibility to act in the circumstances" means an official of the United States Government who has a legal obligation to act. That is not the relator in an FCA case. The relator is not an official of the United States. If a relator was an official of the United States the Appointments Clause, US Const. Cert II § 2 Cl. 2, might be violated by the statute. In regard to the appointments clause, it has been said that, "FCA qui tam relators are not appointed Officers of the United States." Blanch, The Constitutionality of the False Claims Act's Qui Tam Provisions, in Citizen Suits and Qui Tam Actions, Private Enforcement of Public Policy, National Legal Center for the Public Interest p. 89, 1996. This was the position of the Ninth Circuit in United States ex rel. Kelly v. Boeing Co., 9 F.3d 743 (9th Cir. 1993), sustaining the constitutionality of the FCA. Hyatt, supra, fails to observe the inconsistency of its approach with the Circuit's decision in Kelly.
Further, the court is not satisfied that the decision inHyatt is based on sound policy reasons, aside from any error in interpretation. The 1986 amendments to the FCA were intended to expand the resources available to the government in pursuing fraudulent procurement and acquisition activity by contractors dealing with the United States and its agencies. c.f.United States ex rel. Fine v. Sandia Corp., 70 F.3d 568, 571 (10th Cir. 1995); United States v. NEC Corp., 11 F.3d 136, 139 (11th Cir. 1993). Ever since the original act, Act of March 2, 1863, Ch. 67, 12 Stat. 696, the United States has not had the legal resources to pursue the false claims made by government contractors. The 1986 amendments sought to correct that deficiency. The Hyatt construction frustrates the congressional policy by equating the early time when a relator may have knowledge of a violation of the Act within the period for running of the statute of limitations. If the government does not find out about the misconduct and the relator, who may lack certainty of knowledge, suffer from timidity, or have only sparse economic resources is unable to proceed until a later time, the contractor may insulate itself from liability by invoking a statute of limitations. This effect could defeat 31 U.S.C. § 3731(b) and the congressional intent.
Would be whistle blowers and relators are not in the same position as government officers. They are probably unaware of the FCA requirements, whereas government officials charged to act would have the legal knowledge of how to proceed and what the FCA requires. The procedure to comply with the FCA is sophisticated. Not every attorney is versed in the process. A qui tam suit often requires resources well beyond those of the putative relator and requires an entrepreneurial lawyer. See Stuart M. Spenser,Lawsuit, (1980). Finding such a person or firm is not easy. Finally, there is nothing inappropriate about waiting to make sure that the scope and seriousness of the violation justify the conclusion that the suit should be brought and that the Attorney General will sanction the suit. 31 U.S.C. § 3730. Consequently, the construction given to § 3731(b) by the Ninth Circuit in Hyatt is not wise policy, consistent with reality, in accord with congressional intent, or consistent with the plain meaning of § 3731(b)(2). Therefore, this court will not follow Hyatt because it is believed that neither the Tenth Circuit or the Supreme Court would adopt the Hyatt position. Further, Hyatt's analysis does not withstand critical analysis. The appropriate standard for determining when the three year limitation period in § 3731(b)(2) began to run is when the Department of Justice received information as to the violation. That has not been shown in this case. Just when the three year limitations period began to run is speculative in the submissions.
The third limitations plateau is the ten year statutory period of repose. In no event does the limitations period extend beyond the ten years from the violation (time of presentment of the false claim).
The ten year period in 31 U.S.C. § 3731(b)(2) may not be extended by the circumstance of lack of knowledge of a governmental official. Independent circumstances of equitable tolling apply in any federal limitations statute, Holmberg. v. Armbrecht, 327 U.S. 393, 397 (1946); Mosley v. Pena, 100 F.3d 1515, 1518 (10th Cir. 1996) unless expressly precluded. SeeClark v. State Farm Fire Cas. Ins. Co., 54 F.3d 669 (10th Cir. 1995). However, such circumstances could not extend the limitations period beyond the express limit of ten years.
Because Hercules' motion for summary judgment is premised on an erroneous interpretation of § 3731(b) it has not carried its burden to show that any part of plaintiffs' claims are barred by the statute of limitations.
In addition, there appear to be many material factual circumstances that are disputed and which could effect the application of the limitations period of § 3731(b). These contentions should be submitted to the jury with appropriate instructions. Tiberi v. CIGNA Corp., 89 F.3d 1423 (10th Cir. 1996); United States v. Agri Services, Inc., 81 F.3d 1002, 1005 (10th Cir. 1996); Miller v. Armstrong World Industries, 949 F.2d 1088 (10th Cir. 1991); Richardson v. Frank, 975 F.2d 1433 (10th Cir. 1991). These issues of fact preclude summary judgment. Id. Therefore,
IT IS HEREBY ORDERED the motion of Hercules Incorporated for partial summary judgment based on the statute of limitations is denied.