Opinion
No. C-96-0578 VRW
March 11, 1999
ORDER
Plaintiff brings this action against his former employer as a relator under the False Claims Act ("FCA"), 31 U.S.C. § 3729-31. Swords to Ploughshares ("STP"), plaintiff's former employer, received a federal grant to provide legal representation to veterans in claims before the Court of Veteran's Appeals ("COVA"). The grant was administered by Legal Services Corporation ("LSC"). Plaintiff worked as a staff attorney for STP. He alleges in his qui tam complaint that his employers knowingly made misrepresentations to COVA and LSC in applying for the grant and in progress reports on the status of the grant. See Compl. ¶ 11, 12.
Before the court is defendants' motion for summary judgment. The court finds this motion appropriate for decision without oral argument. See Civil LR 7-1(b). The hearing scheduled for March 12, 1999, at 10:30 am is, therefore, VACATED.
Summary judgment is a method for the prompt disposition of an action in which there is no genuine issue of material fact. FRCP 56(c) provides for the granting of summary judgment where the moving party is entitled to judgment as a matter of law. The burden of establishing that there is no genuine issue of material fact lies with the moving party. Celotex Corp. v. Catrett, 477 U.S. 317, 32223 (1986). Where the nonmoving party will bear the burden of proof at trial, the moving party may meet its burden by pointing out the absence of evidence to support the nonmoving party's case. Celotex, 477 U.S. at 325. A conclusory statement asserting an absence of evidence will not suffice to meet this standard; the lack of evidence must be demonstrated. Id. at 326. Once the moving party has met its burden either by presenting evidence which, if uncontradicted, would entitle it to a directed verdict at trial or by demonstrating the lack of evidence for the nonmoving party's case, FRCP 56(e) Shifts to the nonmoving party the burden of presenting specific facts showing a genuine issue for trial. British Airways Bd. v. Boeing Co., 585 F.2d 946, 950-52 (9th Cir. 1978).
A party opposing summary judgment may not rest upon the mere allegations or denials of his pleadings. Rather, responses, either by affidavits or as otherwise provided in the rule, must set forth specific facts showing that there is a genuine issue of fact. A mere "scintilla" of evidence supporting the nonmoving party's position will not suffice. There must be enough of a showing that the jury could reasonably find for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
The question in summary judgment motions is whether reasonable minds could differ as to the import of the evidence. Eisenberg v. Insurance Co. of North America, 815 F.2d 1285, 1288 (9th Cir. 1987). "If the evidence is merely colorable * * * or is not significantly probative, summary judgment may be granted." Id. at 1288. The nonmoving party's evidence is to be taken as true and all inferences are to be drawn in the light most favorable to the nonmoving party. Eisenberg, 815 F.2d at 1289.
Defendant argues that this action is barred by a settlement and release that plaintiff executed in an earlier state court action. In its March 26, 1998, Order, the court denied defendant's motion for judgment on the pleadings based on the release because there was no evidence in the record from which the court could conclude that the conditions necessary for the release to be valid were present. In light of the evidence subsequently adduced by defendants, the court now concludes that the release entered into by plaintiff is valid and bars him from pursuing the instant claim.
In United States ex rel Green v. Northrop Corporation, 59 F.3d 953, 956 (9th Cir. 1995), the court held that a release of a qui tam claim, when entered into without the United States' knowledge or consent, and prior to the filing of an action based on that claim, is unenforceable. The relator in Green settled his state court action alleging that he was terminated for bringing to the attention of certain company officials evidence that the company had double-charged the United States Air Force for equipment procured for the B-2 bomber program. See id. At the time of the settlement, the United States had no knowledge of the relator's allegations. The court held that the release did not prevent Green from pursuing a qui tam action based on the same allegations contained in the state court complaint.
The Green court was concerned that enforcing a release under the circumstances of that case would undermine the relator's incentive under the FCA to report fraud to the government. See id. at 965. The court reasoned that because the relator is likely to retain 100 percent of the proceeds from a settlement as opposed to a statutory maximum of 30 percent of an FCA recovery, "a rational relator would be willing to accept a substantially smaller amount to settle the claim immediately than to preserve the right to eventually file a qui tam action in which the government would retain the lion's share of the proceeds." Id., at 966.
The Ninth Circuit has made clear, however, that where the government is informed of the relator's allegations and has had an opportunity to investigate them, a release entered into by the relator that covers the allegations made in a subsequent qui tam action will be enforced to bar the qui tam action. In United States ex rel Hall v. Teledyne Wah Chang Albany, 104 F.3d 230 (9th Cir. 1996), an employee settled a state court action alleging that he was terminated for bringing to the attention of company officials and the Nuclear Regulatory Commission evidence that the company was defectively manufacturing containment sheaths for nuclear fuel rods. The employee subsequently brought a qui tam action based on the same allegations. Unlike in Green, however, the relator in Hall had brought his allegations to the attention or the Nuclear Regulatory Commission and thus "the government had full knowledge of the plaintiff's charges and had investigated them before Hall and Teledyne settled" Id. at 231. The court therefore held that the rationale of Green was inapplicable and the release was enforced to bar the qui tam action.
Plaintiff testified at his deposition that late in 1993, after his termination, he spoke to LSC and COVA regarding defendants' practices that he alleges constitute false claims. See Notice of Lodgment ("NOL"), Exh. 1 at 197, 232. Plaintiff admits that during these conversations, he made nearly all of the allegations contained in the instant complaint. See id. at 197, 228-231. Even before plaintiff contacted it, LSC had begun an audit of STP that it concluded in December 1993. LSC concluded that "STP's overall efficiency and effectiveness is almost non-existent due to ineffective case work, inefficient recruitment of pro bono attorneys, and lack of mentoring, monitoring and management." NOL, Exh. 4 at 5. LSC also expressed concern that STP had not maintained proper files, kept adequate records of time spent on functions related to its grant or maintained adequate fiscal records. See id. at 7-8. On the basis of the LSC report, COVA declined to renew STP's grant, and the COVA program at STP was terminated. See Declaration of David Ewing in Support of Motion for Summary Judgment ¶ 9.
In November 1993, plaintiff filed a complaint in San Francisco Superior Court alleging that he was wrongfully terminated from his employment with STP. See Defendant's Request for Judicial Notice ("RJN"), Exh. A. In a declaration submitted in that action, plaintiff made essentially the same allegations of false statements that are described in the instant complaint. Compare RJN, Exh. B ¶¶ 4, 7, 8, 9 with Compl ¶ 11, 12, 21, 23. On October 7, 1994, after the court granted summary judgment for defendants, plaintiff agreed, in a court supervised settlement, to "a release on his complaint of all known and unknown claims arising out of his employment and these causes of action." RJN, Exh. C at 3, 4. In exchange, defendants agreed not to proceed with their cross-claim and motion for costs and to release plaintiff from any future claims. See id.
Plaintiff does not deny any of the facts as recited above. He argues that Hall is not applicable to this case because unlike in Hall, there was no express finding by the government that the defendant did not engage in any wrongdoing. A proper reading of Green and Hall reveal, however, that such an express finding is not required. What is required is that the government was aware of the allegations in the FCA complaint and had an opportunity to investigate them before plaintiff entered into the settlement. Much like the relator in Hall, plaintiff himself alerted the government to the alleged problems with STP's grant application and progress reports. LSC's investigation and the subsequent decision by COVA not to renew STP's grant demonstrate that the government had the opportunity to investigate and redress the problem.
Under these circumstances, the public policy articulated in Green of encouraging individuals to report fraud to the government does not require the court to deny effect to an otherwise binding settlement. Accordingly, plaintiff's claim is barred by his earlier settlement and defendants' motion for summary judgment (Doc. 51) is therefore GRANTED. The clerk shall enter judgment, close the file and terminate all pending motions.
IT IS SO ORDERED.
JUDGMENT
In accordance with the court's order of March 11, 1999, plaintiff's claim is barred by his earlier settlement and defendants' motion for summary judgment is therefore GRANTED. Judgment is entered in favor of defendants and against plaintiff.