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holding that "by its terms, § 3730(b) applies only to the complaint and not to any amended complaint"
Summary of this case from United States v. Freed, Kleinberg, Nussbaum, Festa & Kronberg M.D., LLPOpinion
NO. CV-07-0213-LRS.
November 18, 2010
ORDER GRANTING MOTION FOR EXTENSION OF TIME AND DENYING MOTION TO DISMISS
BEFORE THE COURT is the Plaintiffs' Motion to Continue and to Amend Scheduling Order, Ct. Rec. 34, and Defendants' Motion to Dismiss Thomas Wander and Jane Doe Wander, Ct. Rec. 37, both motions being filed on September 27, 2010 and noted without oral argument for October 29, 2010.
I. BRIEF BACKGROUND
Plaintiff, Michael Stewart, brought this present action under 31 U.S.C. § 3729, False Claims Against the United States. The Original Complaint against Altech Services, Inc. was filed on July 3, 2007 (Ct. Recs. 1-3). That Complaint was sealed by this Court pursuant to 31 U.S.C. § 3730(2) while the government conducted its review. The Government declined to proceed with the case against Altech Services, Inc. and on January 20, 2010 Defendant, Altech, filed its answer in this matter and the case commenced (Ct. Rec. 21). On September 22, 2009, Plaintiff Michael Stewart amended his complaint to add personally named Defendants, Thomas Wander and Jane Doe Wander, to the suit (Ct. Rec. 18). Mr. and Mrs. Wander were served on August 22, 2010 in Oklahoma.
A. MOTION TO CONTINUE
Plaintiff Relator Michael Stewart asserts that he is taking his obligation to represent the government's interests seriously. However, in order to do so, Mr. Stewart indicates it has taken more time than anticipated gather and process the information on this very complex claim. Because progress has been slower than expected, Plaintiff is asking for a twelve month continuance. Initially, Defendants opposed the continuance, but has since withdrawn the objection. The Court herein finds good cause to grant the continuance.
B. MOTION TO DISMISS
Defendants, Thomas and Jane Doe Wander, now move this Court to dismiss this action against them pursuant to Fed.R.Civ.P. 12(b)(1) and (2) alleging lack of subject matter jurisdiction and lack of personal jurisdiction. More specifically, Defendants argue that Plaintiff has attempted to initiate a new lawsuit against a new, originally unnamed party by adding Defendant(s) without following the applicable statute. To allow the Plaintiff to add additional Defendants which amounts to initiating a new case, without properly adhering to the requirements of the statute 31 U.S.C. § 3729 et.seq. By amending its Complaint, Defendants argue, Plaintiff removes the protection of the Government investigation from the process which the statute is intended to provide.
Plaintiff responds that in United States ex rel. Lujan v. Hughes Aircraft Co., 67 F.3d 242, 245 (9th Cir. 1995), the Ninth Circuit held that the False Claims Act does not contain a provision that authorizes dismissal as a sanction for disclosures in violation of the seal requirement. Plaintiff cites Lujan as establishing the principle that the sealing "requirements of § 3730(b)(2) are not jurisdictional, and violation of those requirements does not per se require dismissal of the qui tam complaint."
Plaintiff likens the instant case to United States ex rel. Branch Consultants, L.L.C. v. Allstate Ins., 668 F. Supp. 2d 780,803, (E.D. La. 2009). Plaintiff explains that the Relator's first complaint pleads the conduct of Altech and the underlying facts resulting in the false claims action. Plaintiff argues Stewart properly filed the action under seal and brought the false claims to the attention of the government. The government met with Stewart who described in detail the false claims and following a lengthy period of investigation, the government elected to allow Stewart to pursue the case. Plaintiff asserts that the addition of Thomas Wander as a defendant does not present any new information or additional allegations of misconduct and as such, the government was not prejudiced by the amended complaint. Plaintiff concludes that Stewart complied with the requirements under 31 U.S.C. § 3730 and did not violate the statute by filing an amended complaint. Plaintiff concludes that 31 U.S.C. § 3730 is not jurisdictional and it merely safeguards the government's right to intervene in any false claim action.
In reply, Defendants argue that the instant case involves a situation where a party was added who was not properly before the court when the complaint was sealed and being reviewed by the Government. This fact sets it apart from cases cited by Plaintiff allowing an amended complaint adding claims to parties already properly before the court. Defendants explain that the interests that must be balanced are: 1) to encourage more of this private litigation; while 2) still allowing the Government to fully evaluate the claims. Defendants argue that the Government cannot fully evaluate these types of claims when the proper defendants are not involved in the process.
The Court finds that failure to comply with the seal provisions of § 3730(b)(2) are not jurisdictional, and violation of those requirements does not per se require dismissal of the qui tam complaint. U.S. ex rel. Lujan v. Hughes Aircraft Co., 67 F.3d 242 (9th Cir. 1995). No provision of the False Claims Act explicitly authorizes dismissal as a sanction for disclosures in violation of the seal requirement. Further, the Court finds defendants' argument lacks merit because by its terms, § 3730(b)(2) applies only to the complaint and not to any amended complaint. See Wisz ex rel. U.S. v. C/HCA Development, Inc., 31 F.Supp.2d 1068, 1068-69 (N.D.Ill. 1998). In U.S. ex rel. Milam v. Regents of University of California, 912 F.Supp. 868, 889-90 (D.Md. 1995), the relator's amended complaint added defendants but was not filed under seal or in camera. The Milam court rejected the defendant's argument that plaintiff failed to comply with § 3730(b)(2) and held that "[the relator] followed the requirements of § 3730(b)(2) when filing the initial complaint. Neither the statute nor any relevant case law imposed upon [the relator] the duty to file any amendments to that complaint in camera and under seal." Id. at 890.
II. CONCLUSION
This Court does not find appropriate authority, given the facts presently before the Court, to dismiss the defendants Thomas Wander and Jane Doe Wander named in the amended complaint. The Court takes into account the unopposed requested year-long continuance, defendants' failure to demonstrate undue hardship, actual harm or prejudice to the government caused by Plaintiff's failure to seal the amended complaint, and absence of bad faith or willfulness on the part of Plaintiff. The addition of Thomas Wander as a defendant does not present any new information or additional allegations of misconduct and as such the Court denies Defendants' motion to dismiss.
Accordingly,
IT IS ORDERED that:
1. The Plaintiffs' Motion to Continue and to Amend Scheduling Order, Ct. Rec. 34, is GRANTED. Although Defendants initially opposed the motion, their objection was withdrawn on October 29, 2010 (Ct. Rec. 50). The motion requests that the currently scheduled trial be continued. The currently scheduled trial date of March 14, 2011 is VACATED. The parties are directed to submit a Joint Status Certificate indicating agreed upon new dates for trial and other deadlines the parties desire to continue. After the Court receives the Joint Status Certificate it will set a telephonic scheduling conference.
2. Defendants' Motion to Dismiss Thomas Wander and Jane Doe Wander, Ct. Rec. 37, is DENIED.
The District Court Executive is directed to file this Order and provide copies to counsel and pro se Defendant.
DATED this 18th day of November, 2010.