Schweizer v. Oce N v. ( 2010 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
CLERK, u,s.
FELED
fEB 2010
§ o
THE UNITED sTATEs oF AMERICA, § vrs:mcrt~o?§‘§}§lif¥l§’},i'*"
ex rel. Stephanie Schweizer et al., §
Plaintiff, §
§
v. § civil A¢cion No. 06-648 (RCL)
§
ocl?: N.v. er al., §
Defendants. §
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§
MEMoRANDUM 0PINION
Before the Court is the motion of the United States [63] to dismiss Counts l
and ll of this action and relator Stephanie Schweizer’s opposition to the proposed
settlement and motion to dismiss [78]. Upon consideration of the motion, the
opposition, the arguments of counsel, and the entire record herein, it is hereby
ORDERED that the United States’ motion to dismiss is GRANTED for the
reasons set forth in this memorandum opinion. A separate order shall issue today.
I. Background
In April 2006, Stephanie Schweizer, a contracting employee, of Océ N.V.’s
North American subsidiary filed this qui tam lawsuit alleging that Océ N.V. and
related entities had violated the False Claims Act by knowingly selling non-
compliant products to the federal government in contravention of the Trade
Agreements Act and by breaching its contract with the government guaranteeing
governmental purchasers a price equal to or less than the price paid for the same
products by non-governmental purchasers. Later that year, Ms. Schweizer and
Nancy Vee, another Océ employee, filed an amended complaint adding Ms. Vee
as a plaintiff. Initially, the United States declined to intervene in the suit. [Amd.
Compl., Dkt. 22]. Although it had not formally intervened, eventually the United
States, the relators and Océ began settlement discussions. Both Ms. Vee and the
United States reached a settlement agreement with Océ, but Ms. Schweizer was
unable to agree to the terms of the settlement. Broadly speaking, the settlement
provides that Océ will pay the United States l.2 million dollars plus interest from
the date of settlement, of which nineteen percent will be paid to Ms. Schweizer
and Ms. Vee for their share as relators. How that amount is to be split between
them is left to the discretion of this Court. In exchange, the United States has
agreed to release Océ, and a number of affiliated entities and persons, from any
civil or administrative monetary claim for the conduct at issue in the suit arising
out of the False Claims Act,l the Truth in Negotiations Act,z the Program Fraud
Civil Remedies Act,3 the Contracts Dispute Act," or any common law theory of
breach of contract, payment by mistake, unjust enrichment, or fraud. Ms. Vee has
also agreed to dismiss any civil monetary claim the United States might have
arising out of Count I and ll of the complaint under the False Claims Act. Count
III of the complaint, which is for retaliatory discharge, is unaffected by the
settlement.
‘ 31 u.s.c. §§ 3729-3733.
210 u.s.c. §zzosa; 41 U.s.c. § 2541>.
3 31 u.s.c. §§ 3801_3812.
"41U.s.c,§601erseq.
After the settlement negotiations the United States formally intervened and
moved to dismiss the case [63, 64]. Ms. Schweizer objects to the United States’
motion to dismiss and asks this Court not to approve the settlement. [78].
II. Discussion
The United States has moved to dismiss this action under Federal Rule of
Civil Procedure 4l(a) with respect to its claims and those of Ms. Vee as outlined
by the settlement agreement.The United States has also moved to dismiss Counts l
and ll of the complaint with prejudice as to Ms. Schweizer, over her objection.
The False Claims Act provides that the government may settle a qui tam
action notwithstanding the objections of the relator if the Court determines, after a
hearing, that the proposed settlement is "fair, adequate, and reasonable under all
the circumstances." 31 U.S.C. § 3730(c)(2)(B). To be effected, the settlement
requires that Count I and ll of the complaint be dismissed. Similar to the
govemment’s ability to settle over the objections of the relator, the govemment
may also dismiss a qui tam suit over the relator’s objection as long as the relator
has been notified of the motion to dismiss and given an opportunity to be heard on
the motion. Ia'. § 3730(c)(2)(A).
The Court of Appeals has held that the government has "an unfettered right
to dismiss" a qui tam suit, which means that after ensuring that section
3730(c)(2)(A)’s requirements have been met, a court has no role to play other than
summarily granting the govemment’s motion. Hoyte v. American Nal’l Rea’
Cross, 518 F.3d 6l, 65 (D.C. Cir. 2008) (quoting Swlft v. United States, 318 F.3d
250, 252 (D.C. Cir. 2003)). This is because the statute itself refers to the
govemment’s ability to dismiss the action (without mention of requiring leave of
court), Swift, 318 F.3d at 252, as well as the govemment’s nearly absolute
discretion under the Take Care Clause to bring suit in its name, z``d. at 253 (quoting
Heckley v. Chaney, 470 U.S. 82l, 831 (1985)). lndeed, in a similar context the
Court of Appeals noted that "[f]ew subjects are less adapted to judicial review
than the exercise by the Executive of his discretion in deciding when and whether
to institute criminal proceedings, or what precise charge shall be brought or
whether to dismiss a proceeding once brought." Newman v. United States, 382
F.2d 479, 480 (D.C. Cir. l967) (Burger, J.). Likewise the Court of Appeals’
decision in Hoyte places the govemment’s decision to dismiss a qui tam action
beyond judicial review. 518 F.3d at 65.
The Court of Appeals’ interpretation of the govemment’s ability to dismiss
a qui tam suit-and it is undoubtedly the correct one-is somewhat at odds with
the statute’s provision for court approval of settlement. In light of Swzft and
Hoyte, the United States argues that the proper course is for this Court to dismiss
the suit without passing on the question of the settlement’s fairness, adequacy and
reasonableness. Yet the language of section 3730(c)(2)(B) envisions an active role
for the Court in approving settlement. Unlike section 3730(c)(2)(A), which says
that "[t]he Government may dismiss the action," section 3730(c)(2)(B) conditions
the govemment’s settlement of an action on "the court determin[ing], after a
hearing, whether the proposed settlement is fair, adequate, and reasonable under
all the circumstances." Whether that section of the statute can be reconciled with
the Court of Appeals’ interpretation of section 3730(c)(2)(A) and the Take Care
Clause in Hoyle and Swzfz‘ is uncertain. lf the Government has what amounts to an
unfettered right to dismiss a case based on the Take Care Clause, is it not implicit
that they also have an unfettered right to settle a case? lndeed, it seems plausible
that the United States could very easily circumvent a court’s disapproval of a
proposed settlement merely by moving to dismiss the suit afterwards and settling
the case without the approval of the court or, as here, by structuring a proposed
settlement’s finality on the court’s dismissal of a suit rather than approval of the
settlement.
While it is incumbent upon this Court to avoid construing the statute so as
to render part of it meaningless, see Abourezk v. Reagarz, 785 F.2d 1043, 1054
(D.C. Cir. 1986), the law of this circuit has already effectively rendered 31 U.S.C.
§ 3730(c)(2)(B) a dead letter. Given the Executive’s traditional prerogative to
determine which cases will be brought in its name, and the constitutionally
necessary attendant right to dismiss those cases brought in its name that it does not
wish to pursue,5 there is no doubt that section 3730(c)(2)(B) may be circumvented
5 It is worth noting that government’s right to dismiss certain cases is not absolute. For example, Federal
Rule of Criminal Procedure 48 provides that the government may dismiss an indictment, information or
complaint only with leave of court. FED. R. CRIM. P. 48(a). lf the government moves for dismissal during
trial it also needs to obtain the consent of the defendant as well as the court’s. Id. The constitutionality of
that rule has been upheld notwithstanding the implication of the Take Care Clause. United States v.
Cowan, 524 F.2d 504, 512~13 (5th Cir. 1975). However, Rule 48’s leave of court requirement can be
distinguished from section 3730(c)(2)(A). Importantly, only the government may bring an indictment in
the first instance, see Cowan, 524 F.2d at 153, whereas the government exercises no such control over the
institution of qui tam suits. Indeed, were the government without an unfettered right to dismiss a qui tam
under the law of this Circuit. Accordingly, as the requirements of section
3730(c)(2)(A) have been met, and Ms. Schweizer has been unable to convince the
United States to withdraw its motion to dismiss, the Court will grant the United
States’ motion to dismiss Counts l and ll of the complaint with prejudice as to
both the United States and the relators without passing on the fairness of the
proposed settlement.
Even if this Court did not think its decision to overlook section
3730(c)(2)(B) were compelled by Swzft, there is still a serious question as to
whether or not section 3730(c)(2)(B) is constitutional at all. See Riley v. Sl. Luke ’s
Epz``scopal Hosp., 252 F.?)d 763 & n.l8 (5th Cir. 2001) (Smith, J., dissenting).
Although some courts have analogized section 3730(c)(2)(B) to other
provisions of federal law that require court approval of a government "settlement,"
the Court thinks that those analogies are erroneous. United States ex rel. Kelly v.
Boez'ng C0., 9 F.3d 743, 754 & n.12 (9th Cir. 1993) (citing United States ex rel
Truong v. Northrop Corp., 728 F. Supp. 615, 622 (C.D. Cal. 1989) and United
States ex rel. Stillwell v. Hughes Helicopters, Inc., 714 F. Supp. 1084, 1093 (C.D.
Cal. 1989)). For example, in Boez``ng the Ninth Circuit noted that a court must
approve the entry of a guilty plea pursuant to a plea agreement, see FED. R. CRIM.
P. 11, as well as approve the entry of a consent judgment in an antitrust case, 15
U.S.C. § 16. While these instances are similar to the Court approving a proposed
suit, it might be the case that the qui tam statute would be unconstitutional. See Riley v. St. Luke ’s
Episcopal Hosp., 252 F.3d 749, 753-54 (5th Cir. 2001) (en banc).
settlement under section 3730(c)(2)(B), they are different in one important regard.
ln each of those instances the court’s intervention is premised on what is
traditionally a judicial function-~entering judgment. Court approval of settlement,
without entry of judgment, is not wholly unknown though. See, e.g., FED. R. CIV.
P. 23(e). But as the government is not generally a plaintiff in class action cases,
separation of powers concerns are not generally implicated. However, they are
here.
ln this Court’s review it has found only two cases that explicitly reviewed
proposed qui tam settlements, and neither addressed the constitutionality of the
statute. ln Gravz'tt v. General Electrz``c, the court rejected a proposed settlement
without any discussion of whether section 3730(c)(2)(B) implicated constitutional
concerns. 680 F. Supp. 1162 (S.D. Ohio 1988). Likewise, in United States ex rel.
Nudelman v. Internatz``onal Rehabilitation Associales, the court accepted the
government’s proposed settlement without addressing constitutional concems.
Civ. Action No. 00-1837, 2006 WL 925035 (E.D. Pa. Apr. 4, 2006).
However, "[l]aw[s] that either accrete to a single Branch powers more
appropriately diffused among separate Branches or that undermine the authority
and independence of one or another coordinate Branch" violate the separation of
powers doctrine. Mz``stretta v. United States, 488 U.S. 361, 382 (1989). At issue
here is whether section 3730(c)(2)(B) undermines the authority or independence of
the Executive Branch. The Court thinks that it does.
If the qui tam statute’s is constitutionally valid because the Executive
retains substantial control over those cases brought in its name, cf Swzft, 318 F.3d
at 252, it seems clear that section § 3730(c)(2)(B) places the Judiciary in a position
where it infringes on the Executive’s ability to conduct litigation on behalf of the
United States. This is an area that has been traditionally controlled by the
Executive, and indeed is mandated by the Constitution itself. U.S. CONST. art. II,
sec. 3 ("[The President] shall take Care that the Laws be faithfully
executed . . . ."). Even were the Court to adopt an extremely deferential standard
in reviewing settlements, this might impinge on the govemment’s ability to settle a
case. All this renders the section’s constitutionality doubtful. Happily, were the
Court required to pass on this question, such a decision would not render the rest
of the statute constitutionally infirm. When a court invalidates part of a statute, it
acts with the presumption that that section may be severed. Bismullah v. Gates,
551 F.3d 1068, 1071 (D.C. Cir. 2009) (quoting Alaska Az``rlines, Inc. v. Brock, 480
U.S. 678, 684 (1987)). ln evaluating whether the section is severable a court must
consider whether the other portions of the statute are: constitutionally valid;
capable of functioning independently; and consistent with Congress’s basic intent
in enacting the statute. Ia’. (quoting United States v. Booker, 543 U.S. 220, 258~59
(2005)). Here there is no doubt that all those requirements have been satisfied and
were it necessary section 3730(c)(2)(B) could be severed.
III. Conclusion
For the foregoing reasons the United States’ motion to dismiss shall be
granted by a separate order issued today. The Court will retain jurisdiction
however over the case so that those claims under 31 U.S.C. § 3730(h) may go
forward and various matters related to the relators’ division of their award and
attorneys’ fees can be resolved.
January§, 2009 C``
RoY@E c. LAMBERTH
Chief Judge
United States District Court