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holding that there is a rational relationship between the government's desire to conserve resources, by not monitoring a potentially meritless claim, and dismissal
Summary of this case from United States ex rel. Horsley v. Comfort Care Home Health, LLCOpinion
CIVIL ACTION NO. 1:18-CV-05482-LMM
08-16-2019
UNITED STATES of America EX REL. Marks. GRAVES, Plaintiff/Relator, v. INTERNET CORPORATION FOR ASSIGNED NAMES AND NUMBERS, INC., et al., Defendants.
Mark Stephens Graves, Atlanta, GA, pro se. Anthony Christopher DeCinque, Office of the United States Attorney-ATL600 Northern District of Georgia, Atlanta, GA, for Plaintiff.
Mark Stephens Graves, Atlanta, GA, pro se.
Anthony Christopher DeCinque, Office of the United States Attorney-ATL600 Northern District of Georgia, Atlanta, GA, for Plaintiff.
ORDER
Leigh Martin May United States District Judge This case comes before the Court on the Government's Motion to Dismiss, Dkt. No. [14], which Relator opposes. After due consideration, the Court enters the following Order.
The facts relied on in this Order are taken from the Complaint and are construed in the light most favorable to Relator as the non-moving party.
Relator brings this case on behalf of the United States alleging violations of the False Claims Act ("FCA"), 31 U.S.C. §§ 3729 et seq. Relator alleges that Defendant Internet Corporation for Assigned Names and Numbers, Inc. ("ICANN") conspired with Defendant Verisign, Inc. ("Verisign") to collect more than $590 million in fees in connection with the new generic top level domain ("new-gTLD") project, purportedly in violation of a contract between ICANN and the Government.
Although the Internet was originally a project of the Department of Defense, the Government has transferred control over many Internet functions to private third parties such as ICANN through contract. The contract at issue here is the IANA Functions Contract between ICANN and the Government, specifically the fourth iteration of that contract signed in 2006. "IANA" stands for "Internet Assigned Numbers Authority." The IANA functions are the administrative responsibilities involved in managing the Domain Name System ("DNS") of the Internet. One of the IANA functions is controlling the top-level domains of the DNS, or "TLDs," i.e., .com, .org, .gov, etc. ICANN has controlled the registry and registrar services for the DNS since 1998. Pursuant to that authority, in 2000 ICANN made a call for new gTLD proposals and accepted 47 applications from potential gTLD registry operators to instantiate and operate nearly 200 new gTLDs. Applicants had to pay $50,000 application fees to ICANN as part of this process.
Then, in 2006, the Government and ICANN entered into the underlying IANA Functions Contract at issue in this litigation. Central to the complaint here, before ICANN could collect fees from any third parties "for the functions performed under this contract," ICANN was required to "notify the Contracting Officer in writing at least sixty days prior to the fee being applied .... The Contracting Officer shall approve any fee in writing prior to the Contractor [ICANN] imposing the fee." Dkt. No. [14-2] at 4, § B.1(d). In 2012, ICANN again opened up an application submission period for a new gTLD application process called the new-gTLD project. ICANN collected more than $357 million in application fees in connection with the new-gTLD project. Additionally, ICANN. auctioned off gTLDs to the highest bidder if more than one applicant applied for the same gTLD. Net auction proceeds exceeded $233 million.
As a result of the new-gTLD program, Verisign added approximately 1,230 gTLDs to the DNS root zone, which Verisign manages under a cooperative agreement with the United States Department of Commerce's National Telecommunications and Information Administration ("NTIA"). Pursuant to that agreement, Verisign was solely responsible for adding gTLDs to the authoritative DNS root zone until 2016, when the agreement was amended to collaboratively include ICANN in the management of changes to the root zone.
Relator's claims are based on ICANN's failure to obtain a Contracting Officer's approval of the application fees or auction process, in violation of both the 2006 contract. Additionally, Relator asserts that ICANN and Verisign violated the 2006 contract and the Verisign/NTIA cooperative agreement by failing to receive the approval or delegation of NTIA, the root zone administrator, before adding the 1,230 new gTLDs to the DNS root zone. Relator further contends the 2006 IANA Functions Contract required both the fee proceeds and auction net proceeds to be transferred to the Government, although Relator does not explain which provision requires such transfer.
Finally, Relator also seeks injunctive relieve preventing the termination of the IANA Functions Contract and the Verisign cooperative agreement, because the termination of both contracts will result in the transition of key DNS managerial functions to ICANN–i.e, the permanent privatization of the IANA Functions.
The Government moved to dismiss this action pursuant to 31 U.S.C. § 373o(c)(2)(A) of the FCA. Dkt. No. [14]. If the Court grants the motion to dismiss, the Government also asks that the seal be lifted with respect to all docket entries except its investigation summary. Dkt. No. [12]. Relator opposes the motion to dismiss as well as the motion to unseal.
II. DISCUSSION
A. Motion to Dismiss
The FCA provides: "The Government may dismiss the action notwithstanding the objections of the person initiating the action if the person has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion." 31 U.S.C. § 3730(c)(2)(A). As the Government explains in its Motion, federal courts are split on the question of whether, pursuant to this provision, the Government has absolute discretion to dismiss qui tam claims or whether the Government must show that there is a "valid" and "rational" basis for the dismissal. See Dkt. No. [14-1] at 11 (citing Swift v. United States, 318 F.3d 250, 252-53 (D.C. Cir. 2003) (Government has an unfettered right to dismiss); United States ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., 151 F.3d 1139, 1145 (9th Cir. 1998) (applying rational basis review) ; Ridenour v. Kaiser-Hill Co., 397 F.3d 925, 935 (10th Cir. 2005) (following Sequoia )).
While the Eleventh Circuit has not directly decided that question, it has explained in dicta that, in contrast to seeking a settlement under the FCA, "[w]hen the government seeks to dismiss the FCA action, the statute does not prescribe a judicial determination of reasonableness[.]" United States v. Everglades Coll., Inc., 855 F.3d 1279, 1288 (11th Cir. 2017) (citing 31 U.S.C. § 3730(c)(2)(A) ). The court went on to describe the Government's "decision to dismiss the case" in a qui tam action as "a choice committed to the discretion of the Executive Branch[.]" Id.
Therefore, it is clear that the Court must at the very least give substantial deference to the Government's decision to dismiss this action. Nonetheless, the statute's requirement that the Court provide Relator "with an opportunity for a hearing on the motion" would serve no purpose if he were not, in fact, meaningfully heard. That provision thus indicates that the Government's discretion to dismiss a case is not entirely "unfettered," as the Swift court decided. In any event, the Court need not decide which standard to apply because the Government's Motion meets the less deferential rational basis review standard applied in Sequoia.
The Swift court concluded "that the function of a hearing when the relator requests one is simply to give the relator a formal opportunity to convince the government not to end the case." 318 F.3d at 253. The court also noted that the Government had conceded during oral argument that there "may be an exception for ‘fraud on the court[,]’ " but it did not decide that question. Id.
Under the rational basis review standard, the Court must engage in a two-step analysis: "(1) identification of a valid government purpose; and (2) a rational relation between dismissal and accomplishment of the purpose. If the government satisfies the two-step test, the burden switches to the relator to demonstrate that dismissal is fraudulent, arbitrary and capricious, or illegal." Sequoia, 151 F.3d at 1145 (adopting the district court's test articulated below) (quotations and citations omitted). "The standard of review is deferential to preserve the traditional authority of the executive branch to make policy choices about the litigation it pursues." United States ex rel. Sequoia Orange Co. v. Sunland Packing House Co., 912 F. Supp. 1325, 1340 (E.D. Cal. 1995). Thus, to avoid infringing on prosecutorial discretion, the Court's "limited review" of an FCA dismissal motion restricts the Court to determining whether the Government is "enforc[ing] the FCA in accordance with the intent of Congress ... that FCA claims be dismissed for legitimate government purposes, and not as a result of fraud, illegality, or lack of political will." Id.
To meet this test, the Government argues (1) the allegations in the Complaint fail to state a valid claim under the FCA; and (2) permitting this case to move forward may interfere with the Government's "long-held goal of transferring the IANA Functions to private control." Dkt. No. [14-1] at 12.
First, the Government contends the Complaint fails to state a claim because Relator's claims are based on the provision of the IANA Functions Contract barring ICANN from charging fees to third parties without written approval from the relevant government contracting officer. Dkt. No. [1-1] ¶ 32. Relator claims ICANN violated this provision by collecting more than $590 million in revenue in connection with the new-gTLD program. However, the Government avers that ICANN's development of the new-gTLD program was not one of the IANA Functions and is thus not subject to the provisions of the IANA Functions Contract. Therefore, the Government believes it would be a waste of its resources to pursue this case given the "vanishingly small" likelihood of recovering damages under Relator's claims. Dkt. No. [14-1] at 14.
Second, the Government explains it "has been working for more than twenty years to transfer control of the Internet to private hands" and that any attempt "to block or unwind that transition" by requiring ICANN to transfer its revenue from the new-gTLD project to the Government would conflict with this "long-held bipartisan policy goal." Id. at 15.
Either of the Government's proffered reasons for dismissal, standing alone, overcomes rational basis review. First, the Government has established that there is a "rational relationship" between its decision to dismiss and the "valid government purpose" of conserving its resources by not pursuing a case it believes meritless. In particular, Relator's theory of recovery is premised on 31 U.S.C. § 3729(a)(1)(G), which imposes liability on any person who "... knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government," and permits recovery of "3 times the amount of damages which the Government sustains because of the act of that person." (emphasis added). See Dkt. No. [15-1] at 9, 14-16. However, the Government takes the position in its Motion that ICANN's new-gTLD project was not an IANA function within the scope of the 2006 IANA Functions contract. Therefore, even if the Government's position is erroneous and Relator is correct that the contract required written approval before ICANN could earn revenue from the new-gTLD project, the fact of the Government's disagreement with those premises indicates the new-gTLD revenue was not "knowingly concealed" and the Government was thus not defrauded within the meaning of the FCA.
Moreover, if ICANN was prohibited by the 2006 IANA Functions contract from earning revenue from the new-gTLD project without prior approval of the Government, Relator has still failed to show how the Government sustained damages thereby. Rather, the damages in question would have been sustained by the third parties whose application fees and auction bids ICANN wrongfully obtained. Relator cites to no provision of the IANA Functions contract requiring ICANN to transfer to the Government any third-party fees it collects pursuant to its authority over the IANA Functions. Therefore, Relator has failed to state a valid FCA claim.
Second, even assuming arguendo that Relator states a valid FCA claim under the IANA Functions contract, the Government's desire not to interfere with its long-term goal of privatizing the Internet is alone sufficient to justify deference to its dismissal decision. Indeed, Relator acknowledges in his Response that the Government "correctly surmises that this case could interfere with an important government objective." Dkt. No. [15-1] at 1 (quoting Dkt. No. [14-1] at 1). Thus, the Government has satisfied the two-part rational basis test set forth in Sequoia.
Despite urging the Court to apply Sequoia, Relator contends that the Court should apply strict scrutiny because this case involves a fundamental right. Specifically, Relator contends that because this matter concerns the Government's "fraudulent managerial transfer" of the Internet to a private party, it thus implicates citizens' First Amendment rights and the Court should apply strict scrutiny to the Government's decision to dismiss. Dkt. No. [15-1] at 4. However, Relator offers no authority to support application of strict scrutiny to an FCA dismissal. Rather, as explained above, the Court must give substantial deference to the Executive Branch's decision to dismiss a case brought to defend its interests. The reason for such deference is that the Government–not citizens seeking to exercise First Amendment rights–is the real party in interest in a qui tam action. See United States ex rel. Walker v. R&F Props. of Lake County, Inc., 433 F.3d 1349, 1359 (11th Cir. 2005) ("The United States is the real party in interest in a qui tam action under the FCA even if it is not controlling the litigation."); Ragsdale v. Rubbermaid, Inc., 193 F.3d 1235, 1236 n.1 (11th Cir. 1999) ("The purpose of the [FCA] ... is to encourage private individuals who are aware of fraud being perpetrated against the government to bring such information forward."). Therefore, even if Relator's claims implicate fundamental rights of citizens, a qui tam action seeking to recover contractual damages from ICANN on behalf of the Government is not the proper vehicle for those rights to be vindicated. The claims asserted here purport to arise from contract, not the Constitution.
Finally, Relator has failed to show that the Government's decision to dismiss is arbitrary and capricious or illegal. Because the Government has given a identified a valid government purpose that is rationally related to its decision to dismiss, the Court will grant the Motion pursuant to 31 U.S.C. § 3730(c)(2)(A).
B. Motion to Lift Seal
The Government further requests that upon dismissal of the case, the Court lift the seal on all docket entries other than its investigation summary filed at Dkt. No. [12]. Dkt. No. [14-1] at 16. Relator opposes the request to lift the seal and asks that it be extended "to protect the Relator's identity" because he "fears retaliatory measures" on the Internet, which he uses to conduct business, and because he "fears possible countersuit by the Defendants in the absence of Government intervention." Dkt. No. [15-1] at 16. In the alternative, Relator asks that his name be redacted from all documents in this action. Id.
Under the FCA, only the Government may seek an extension of time during which the case remains sealed. See 31 U.S.C. § 3730(b)(3). Indeed, typically the - docket is unsealed in a qui tam case prior to the Government's motion to dismiss the action since the purpose of the initial 60-day seal is to permit the Government to decide whether to intervene. Id. § 3730(b)(2) ; see also Am. Civil Liberties Union v. Holder, 673 F.3d 245, 251 (4th Cir. 2011) ("Following intervention, the complaint is unsealed, the docket is unsealed, .... At that point, the United States may ... move to dismiss the action"). The only documents that remain under seal indefinitely are those that reveal the Government's process of investigating qui tam cases. See United States v. Aurora Diagnostics, Inc., No. 1:16-cv-21338-KMM, 2017 WL 8781118, at *2 (S.D. Fla. Aug. 30, 2017).
Relator's fear of retaliation is not sufficient reason to maintain the seal. Although the Eleventh Circuit has not ruled on this precise issue, other courts have uniformly found that fears of retaliation including interference with a relator's employment do not justify indefinitely sealing a qui tam case. See id. at *3-4 (citing United States v. King Pharm., Inc., 806 F. Supp. 2d 833 (D. Md. 2011) ); United States ex rel. Herrera v. Bon Secours Cottage Health Servs., 665 F. Supp. 2d 782 (E.D. Mich. 2008) ; United States ex rel. Permison v. Superlative Techs., Inc., 492 F. Supp. 2d 561 (E.D. Va. 2007) ). Specifically, these courts concluded that such a seal was not warranted for reasons including, but not limited to: (1) the text of the False Claims Act provides only for a 60-day seal for the Government's investigation; (2) the False Claims Act contemplates the added difficulty of the Government declining to intervene by adding a greater financial incentive for relators who continue to prosecute but does not provide for the ability to do so anonymously; and (3) fears of employment-related retaliation do not outweigh the strong presumption in favor of public access to judicial records in cases involving fraud against the Government. See id. The Court finds this reasoning persuasive.
The Court will also deny Relator's alternative request that his name be redacted pursuant to Fed. R. Civ. P. 5.2(d) for the same reasons. Further, it is unclear how Relator's identity could remain secret even if his name were redacted in the filings, given that he is the Plaintiff of record. In short, Relator's desire for permanent anonymity is not supported by the governing statutes permitting temporary sealing of qui tam cases and does not outweigh the strong presumption in favor of public access to judicial records.
III. CONCLUSION
For the foregoing reasons, the United States' Motion to Dismiss [14] and the motion to lift the seal included therein are GRANTED.
This action is DISMISSED WITH PREJUDICE with respect to Relator. The Clerk is DIRECTED to close this case.
Additionally, the Clerk is DIRECTED to lift the seal on all docket entries except Dkt. No. [12], which shall remain under seal indefinitely. IT IS SO ORDERED this 16th day of August, 2019.