Argued: January 18, 2018
Appeal
from an order of the United States District Court for the
Southern District of New York, Richard J. Sullivan,
then-District Judge, denying nonparty-movant's
motion for a declaration that he is entitled to a share of
the $25.6 million received by the United States in the
settlement of its action against the defendants under the
False Claims Act ("FCA"), 31 U.S.C. § 3729
et seq., brought after movant's voluntary
dismissal of a qui tam action, see id.
§ 3730(b), he had filed against two of the defendants.
The district court denied the motion on the ground that the
FCA does not entitle a private person to share in a recovery
obtained by the government through its pursuit of an
"alternate remedy," see id. §
3730(c)(5), in the absence of an existing qui tam
action. On appeal, movant argues principally that the
court's ruling conflicts with the language, purpose, and
legislative history of the FCA. He also contends that the
dismissal of his qui tam action was in fact not
voluntary but rather was coerced by the government. We
conclude that movant presented no viable basis for claiming
coercion and that the district court correctly ruled that he
was not entitled to share in the government's recovery in
light of his prior voluntary dismissal of his qui
tam action. See United States v. L-3 Communications
EOTech, Inc., 232 F.Supp.3d 583 (2017).
Affirmed.
JOSEPH
N. CORDARO, Assistant United States Attorney, New York, New
York (Joon H. Kim, Acting United States Attorney for the
Southern District of New York, Christopher Connolly,
Assistant United States Attorney, New York, New York, on the
brief), for Plaintiff-Appellee.
DANIEL
W. WEININGER, Southfield, Michigan, (Keith L. Altman, Excolo
Law, Southfield, Michigan, on the brief), for
Movant-Appellant.
Before: KATZMANN, Chief Judge, KEARSE and POOLER, Circuit
Judges.
KEARSE, CIRCUIT JUDGE
Movant
Milton DaSilva appeals from an order of the United States
District Court for the Southern District of New York, Richard
J. Sullivan, then-District Judge, denying his motion
for a declaration that, under the False Claims Act (or
"FCA"), 31 U.S.C. § 3729 et seq.--and
in particular under § 3730(c)(5)--he is entitled to a
share of the $25.6 million received by the United States in
settlement of the present action brought by the government
under the FCA against defendants L-3 Communications EOTech,
Inc., L-3 Communications Corporation (collectively
"EOTech"), and Paul Mangano. The district court
denied the motion on the ground that, although DaSilva had
brought a qui tam action against EOTech, he
voluntarily dismissed that action long prior to the
government's initiation of its own suit, and that given
the absence of an ongoing qui tam action he had no
entitlement under § 3730(c)(5) to a share of the
government's recovery. On appeal, DaSilva contends
principally that the court's ruling conflicts with the
language, purpose, and legislative history of the FCA. He
also argues that the court should not have viewed his
dismissal of the qui tam action as voluntary because
his attorneys contended that the dismissal was coerced by the
government. We conclude for the reasons that follow that
DaSilva presented no viable basis for claiming coercion and
that the district court correctly ruled that he was not
entitled to share in the government's recovery in light
of his voluntary dismissal of his qui tam action.
I.
BACKGROUND
The
False Claims Act, the most relevant provisions of which are
set out in greater detail in Part II below,
establishes a scheme that permits either the Attorney
General, § 3730(a), or a private party, § 3730(b),
to initiate a civil action alleging fraud on the Government.
A private enforcement action under the FCA is called a
qui tam action, with the private party referred to
as the "relator." . . . . When a relator initiates
such an action, the United States is given 60 days to review
the claim and decide whether it will "elect to intervene
and proceed with the action," §§ 3730(b)(2),
(b)(4) . . . .
If the United States intervenes, the relator has "the
right to continue as a party to the action," but the
United States acquires the "primary responsibility for
prosecuting the action." § 3730(c)(1). If the
United States declines to intervene, the relator retains
"the right to conduct the action." §
3730(c)(3).
United States ex rel. Eisenstein v. City of New
York, 556 U.S. 928, 932 (2009); see also Vermont
Agency of Natural Resources v. United States ex rel.
Stevens, 529 U.S. 765, 768 n.1 (2000) ("Qui
tam is short for the Latin phrase 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.'").
To
incentivize private persons to uncover, report, and prosecute
FCA claims for the benefit of the United States,
see, e.g., United States ex rel. Ladas
v. Exelis, Inc., 824 F.3d 16, 23 (2d Cir.
2016); United States ex rel. Dick v. Long Island Lighting
Co., 912 F.2d 13, 18 (2d Cir. 1990), the FCA provides
that if a qui tam action is successful, the relator
will generally be entitled to receive a portion of the amount
recovered from the defendants, see 31 U.S.C.
§§ 3730(d)(1)-(2) (typically 15-30% of the
proceeds, depending in part on whether the government has
intervened and taken over prosecution of the action, or
instead has declined to intervene and left prosecution to the
relator).
The
record as to the events leading to this appeal shows the
following.
A.
Events Surrounding DaSilva's 2014 Qui Tam
Action
DaSilva
was employed at EOTech as a quality control engineer from
mid-May to late June 2013. On August 13, 2013, through
attorneys then representing him in anticipation of filing a
qui tam action against EOTech, DaSilva submitted to
the United States Attorney's Office for the Southern
District of New York information alleging EOTech's
manufacture and knowing sale to the government of defective
holographic firearm sights, in violation of the FCA.
On
August 22, 2013, DaSilva was convicted in a Michigan state
court of criminal conduct that both sides agree was unrelated
to the alleged FCA violations by EOTech. DaSilva was
scheduled to be sentenced on September 25, 2013; however, he
did not appear for sentencing, having fled to Brazil.
Beginning
in mid-January 2014, Solomon M. Radner, a Michigan attorney
representing DaSilva in his criminal proceeding, had ongoing
communications with an Assistant United States Attorney
("AUSA") with regard to DaSilva's allegations
against EOTech. Radner disclosed DaSilva's fugitive
status to the AUSA, who "responded that she had to first
seek permission from her supervisors before speaking to
DaSilva because of his fugitive status." (Affidavit of
Solomon M. Radner dated April 14, 2016 ("Radner
Aff."), ¶ 9.) After the AUSA received such
permission, Radner sent DaSilva's materials to the AUSA,
and facilitated, inter alia, telephone conferences
between or among DaSilva, the AUSA, and other government
officials.
In
April 2014, DaSilva filed a qui tam complaint--under
seal and in camera, as required by 31 U.S.C. §
3730(b)(2)--in the United States District Court for the
Southern District of New York, represented by attorneys in
New York and Florida ("qui tam counsel").
The complaint alleged, inter alia, that DaSilva was
a resident of Michigan; it made no mention of his fugitive
status. The next business day, the government sent Radner an
email requesting a conference to discuss, inter
alia, the reason for characterizing DaSilva as a
resident of Michigan, when he was known to have fled the
United States, and the propriety of having claims on behalf
of the United States prosecuted by a fugitive. (See
Radner Aff. ¶ 28.)
DaSilva's
qui tam action was assigned to District Judge Alison
Nathan. On July 8, 2014, the court issued an order stating
principally as follows:
[T]he Government represents (among other things) that relator
plaintiff Milton DaSilva is currently wanted by Michigan
authorities after fleeing to Brazil prior to sentencing for
certain crimes he was convicted of in 2013. The
Government indicates that counsel for Mr. DaSilva have stated
their intention to withdraw and voluntarily dismiss this
action if Mr. DaSilva did not surrender by June 23,
2014.
Given that that date has now passed, counsel for Mr. DaSilva
are hereby instructed to submit a status letter by July 18,
2014 indicating whether Mr. DaSilva remains a fugitive and,
if so, whether and when they plan to withdraw and dismiss
this action. If counsel do not submit a letter by July 18,
the Court will dismiss this case.
District
Court Order dated July 8, 2014 ("July 2014 Order")
(emphasis added).
Following
entry of this order, both DaSilva's qui tam
counsel and the government made submissions to the district
court. DaSilva's attorneys
requested that the Court not dismiss this case on the basis
of DaSilva's fugitive status despite their earlier
representation to the Government that they would voluntarily
withdraw the complaint if DaSilva did not surrender to
Michigan authorities by June 23, 2014.
District
Court Order dated August 14, 2014 ("August 2014
Order"). The government responded and reiterated its
concern as to the propriety of having the rights of the
United States represented by a fugitive. It had cited to
DaSilva's attorneys a Michigan bar governance principle
that stated, "[a] lawyer may not aid or abet a client
who has chosen independently to become a fugitive from
justice. The lawyer may not represent the client
in collateral or unrelated matters while the lawyer knows the
client remains a fugitive," Mich. Ethics
Op. RI-160 (Apr. 14, 1993) ("Mich. Ethics Op.
RI-160" or "Michigan Ethics Opinion")
(emphasis added). The government indicated to the court
"that it would move to dismiss if qui tam counsel
refused to dismiss their complaint voluntarily." August
2014 Order.
The
court ordered that, "[s]ince qui tam counsel have
neither withdrawn their complaint nor indicated that DaSilva
has surrendered, . . . the Government may move to dismiss the
complaint by August 31, 2014." Id. Before the
government could so move, however, DaSilva's qui
tam counsel made a motion on August 19, 2014,
"request[ing] that th[e] action be voluntarily dismissed
without prejudice . . . . pursuant to Rule 41(a)(1)(A)(i) of
the Federal Rules of Civil Procedure." (Relator's
Request For Voluntary Dismissal Without Prejudice Pursuant to
Federal Rule of Civil Procedure 41(a)(1)(A)(i) ("DaSilva
Voluntary Dismissal Request") at 1.)
DaSilva's
attorneys represented that the government had stated it would
inform the court of its consent to the voluntary dismissal,
and the government promptly so notified the court. On
September 3, the court granted DaSilva's request:
In light of Relator Milton DaSilva's request on August
19, 2014 that this action be voluntarily dismissed, and the
United States's consent to voluntary dismissal on August
20, 2014, this case is dismissed without prejudice. The case
shall remain under seal.
District
Court Order dated September 3, 2014 ("September 2014
Order").
There
were no further qui tam proceedings by DaSilva.
B.
The Government's FCA Action
More
than 14 months after DaSilva's voluntary dismissal, the
government on November 24, 2015, commenced its own False
Claims Act lawsuit pursuant to 31 U.S.C. § 3730(a)--the
present action--against EOTech and Mangano. This action was
assigned to then-District Judge Sullivan. On the following
day, with the approval of the court, the parties settled the
action, with defendants agreeing, inter alia, that
EOTech would pay the government $25.6 million.
On
April 14, 2016, DaSilva filed--in the present action,
i.e., the government's § 3730(a) action
that had been settled on November 25, 2015--the motion giving
rise to this appeal. He stated that he had
"unquestionably filed a valid qui tam lawsuit that was .
. . dismissed without prejudice" "only after
intense pressure from the government." (DaSilva's
Motion To Be Declared Eligible for Share of Government's
Recovery Under the False Claims Act ("DaSilva
Eligibility Motion") at 1; see, e.g.,
id. at 4 (after "immense pressure").) He
cited the FCA provision which states, inter alia,
that "[n]otwithstanding subsection (b)"--the
section that authorizes a qui tam action--if the
government pursues an "alternate remedy available to
[it]," the person who initiated the qui tam
action "shall have the same rights in such proceeding as
such person would have had if the action had
continued under this section," 31 U.S.C. §
3730(c)(5) (emphasis added). DaSilva argued that the FCA
"contains no requirement that a relator's original
claim continue or succeed in order for the relator to share
in fruits of the alternate remedy pursued by the
Government" (DaSilva Eligibility Motion at 2) and that
he is thus entitled to a relator's share of the
government's settlement proceeds.
The
government opposed the motion, disputing, inter
alia, DaSilva's interpretation of § 3730(c)(5).
It argued that "section 3730(c)(5) unambiguously
requires a pending qui tam complaint in order for
the government to elect an 'alternate remedy,' and
for the 'alternate remedy' provision to be
triggered." (United States Memorandum of Law in
Opposition to DaSilva's Motion To Be Declared Eligible
for a Share of the Government's Recovery Under the False
Claims Act at 10.)
The
government cited authorities stating that an action that was
voluntarily dismissed without prejudice is treated as never
having been brought, and it denied that any undue pressure
had been applied to cause DaSilva to dismiss the 2014 qui
tam action. Given that such an action is brought in the
name of the United States, to remedy wrongs to the United
States, DaSilva's fugitive status--undisclosed in his
qui tam complaint, which called him a resident of
Michigan--caused the government concern for whether its
interests would be represented properly, and warranted
"inquir[y as to] whether the applicable rules of
professional responsibility permitted counsel to represent
DaSilva in his qui tam action" (id. at
16). The government stated that DaSilva's motion had not
described--and could not point to--any impropriety on the
part of the government in raising its concerns.
C.
The District Court's Denial of DaSilva's Motion
for a Share
In an
opinion dated February 3, 2017, reported at 232 F.Supp.3d
583, the district court denied DaSilva's motion to be
declared eligible to share in the government's recovery
from EOTech. The court stated that although the FCA
"generally entitles a relator to a share of a recovery
obtained by the government through an 'alternate
remedy' to the action initiated by the relator," 232
F.Supp.3d at 584, "the terms of Section 3730(c)(5)
unambiguously preclude" the award of such a share to
DaSilva, because prior to the government's bringing suit
he had voluntarily dismissed his qui tam action,
id. at 587. The court reasoned as follows:
By beginning with the phrase "[n]otwithstanding
subsection (b)," Section 3730(c)(5) makes clear that the
"alternate remedy" described in that section is
an "alternate" to the government's
options listed in Section 3730(b). Specifically, Section
3730(c)(5) governs the relator's rights when the
government "elect[s] to pursue its claim through any
alternate remedy," 31 U.S.C. § 3730(c)(5)--that is,
an "alternate" to the remedies set forth
in Section 3730(b)(4), which are limited to (a) intervening
and "proceed[ing] with the [qui tam]
action" or (b) "declin[ing] to take over the
action" and providing the relator with "the right
to conduct the action," 31 U.S.C. § 3730(b)(4).
The implication of this framework is clear: when there is
no qui tam action for the government to "take
over," the government's filing of its own action is
not an "alternate" to taking over (or not taking
over) a qui tam action.
232 F.Supp.3d at 587 (emphases ours).
The
court noted that the effect of a voluntary dismissal without
prejudice, such as DaSilva's, is to
"le[ave] the situation as if the action never had
been filed," 9 Charles Alan Wright & Arthur R.
Miller et al., Federal Practice and Procedure §
2367 (3d ed. 2016), and "render[] the proceedings a
nullity," 8 Moore's Federal ...