Judge Dismisses Cleanup Qui Tam Cases, but Allows for Amendments

On Tuesday, Judge James Donato of the Northern District of California issued an Order deciding multiple motions to dismiss in four related qui tam actions brought under the Federal False Claims Act. Judge Donato describes the actions as being “part of the sweeping litigation before the Court that challenges work by government contractors to remediate radiation contamination in the soil at the former Hunters Point Naval Shipyard in San Francisco.”  Judge Donato dismissed the actions in part and allowed certain relators to file an amended complaint by July 28, 2022.

Judge Donato began by summarizing the “… rather convoluted procedural history of the FCA cases…” He stated that “The Hunters Point cases are the functional equivalent of an intra-district MDL proceeding, in that the Court has related multiple complex lawsuits within the District to be managed much as an MDL case would be handled.”

There are four qui tam actions, the first one having been filed in August 2013 by Jahr and other named relators. Relator McLaughlin filed his action in April 2014, and relators Smith and Wadsworth filed their actions on the same day in March 2016.  Judge Donato did not define the roles of all the defendants, but the originally named (and apparently, those subsequently added) are entities and individuals allegedly involved in defrauding the government in connection with the Hunters Point clean up.

In January 2019 the United States filed the same complaint-in-intervention in all the actions except McLaughlin. Prior to that time, “the complaints remained sealed and inactive.” The United States “declined intervention [in McLaughlin] and the Court unsealed the case on July 1, 2019.”

Judge Donato described defendants’ motions to dismiss in response to the amended pleadings as “ a cannonade of attacks.” Although the judge considered a number of issues, his analysis of three FCA “statutory bars” in deciding the motions is of the most general interest: “(1) the first to file bar…; the government action bar…; and (3) the public disclosure bar…”.

Discussing the government action bar first, Judge Donato rejected the argument that Relators’ claims concerning the Hunters Point situation because the United States asserted such claims as intervenor. The FCA bars a qui tam action “which is based upon allegations or proceedings which are the subject of a civil suit or administrative civil money penalty proceeding in which the Government is already a party.” The Judge noted that the qui tam actions actually pre-dated government intervention by years and “appear to have been the catalysts that motivated the government to act at all,” rendering the statutory bar inapplicable.

Judge Donato next considered the first to file bar, quoting the FCA provision: “When a person brings an action under this subsection, no person other than the Government may intervene or bring a related action based upon the facts underlying the pending action.” This argument, if successful, would serve as a basis to dismiss the three actions filed after Jahr. Citing prior Ninth Circuit authority, Judge Donato stated that “related but distinct fraud claims” are not barred. The question is one of how distinct the subsequent allegations are from earlier allegations. The Judge, after a lengthy discussion of the allegations of Relators Smith, Wadsworth and McLaughlin largely in comparison to the original Jahr allegations, determined that only the McLaughlin allegations were completely barred and dismissed the third amended McLaughlin complaint.

The final FCA bar Judge Donato considered is the public disclosure bar, which provides in part that “The court shall dismiss an action or claim …, unless opposed by the Government, if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed [in various specified proceedings or the news media] unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.”

Again discussing Ninth Circuit precedent, Judge Donato examined in detail whether Relators Smith and Wadsworth’s allegations were sufficiently similar to prior public disclosures and dismissed them at least in part, albeit with the opportunity to replead in a manner consistent with Order. Judge Donato, however, dismissed the Jahr combined and consolidated complaint for pleading deficiencies unrelated to the FCA. The Judged observed that “This [the pleading deficiencies] should be readily fixable in an amended complaint.”