Opinion
Civil No. 01-6145
October 28, 2002
O R D E R
Now on this 28 day of October, 2002, comes on for consideration United States' Motion For Reconsideration (document #41), and from that motion, and the response thereto, the Court finds and orders as follows:
1. On July 29, 2002, following a hearing at which both parties were represented by counsel, the Court entered an Order resolving Defendant St. Joseph's Regional Health Center's Motion To Dismiss (document #14). Based on the facts before it, the Court found that this case falls within the rule announced in Biby v. Kansas City Life Insurance Co. , 629 F.2d 1289 (8th Cir. 1980) ("Some measure of good faith expectation of proceeding in the court in which the complaint is filed is essential to tolling the statutes of limitations"). The effect of the July 29 Order was to eliminate plaintiff's False Claims Act claims and quasi-contract claims which arose before May 11, 1995, and to completely eliminate plaintiff's fraud claims.
2. Plaintiff now asks the Court to reconsider its ruling, arguing that it understood the hearing to relate only to whether defendant had sufficient minimum contacts with Pennsylvania to support personal jurisdiction there. The Court finds this to be a good and sufficient reason to grant reconsideration, and has now fully reconsidered the matter in light of the briefing supplied by plaintiff, and the defendant's response thereto.
3. Plaintiff contends that the Court's July 29, 2002, ruling was in error for the following reasons:
(a) The transfer of a case from one district to another does not place the parties in any different position with regard to the applicable statutes of limitation than existed at the time of initial filing.
(b) Both relator and plaintiff, acting in good faith, evidenced an intent to proceed with this action in the United States District Court for the Eastern District of Pennsylvania, and therefore Biby is not applicable.
(c) The Pennsylvania court approved each procedural step taken while the case was pending in that jurisdiction, and this Court should not call those steps into question.
(d) Plaintiff will be severely prejudiced by the Court's ruling, whereas defendant will suffer no prejudice from a contrary ruling.
The Court will examine each of these propositions in turn.
4. Plaintiff first contends that the transfer of a case from one district to another does not place the parties in any different position with regard to the applicable statutes of limitation than existed at the time of initial filing, arguing that the federal transfer statute, 28 U.S.C. § 1406(a), was specifically designed to avoid dismissals that would result in a plaintiff losing a significant part of its cause of action. This proposition is a correct statement of the law, given ordinary circumstances, but it ignores the holding in Biby . Furthermore, the Court does not believe that Biby contradicts or undermines the holding in Goldlawr, Inc. v. Heiman , 369 U.S. 463 (1962), upon which plaintiff relies.
In Goldlawr, the Supreme Court found that the court in which an action was filed could transfer that case to a court in a proper venue, regardless of whether the first court had proper venue or even personal jurisdiction over the defendant. The Court noted therein the underlying basis for 28 U.S.C. § 1406, to-wit:
The problem which gave rise to the enactment of the section was that of avoiding the injustice which had often resulted to plaintiffs from dismissal of their actions merely because they had made an erroneous guess with regard to the existence of some elusive fact of the kind upon which venue provisions often turn. Indeed, this case is itself a typical example of the problem sought to be avoided, for dismissal here would have resulted in plaintiff's losing a substantial part of its cause of action under the statute of limitations merely because it made a mistake in thinking that the respondent corporations could be 'found' or that they 'transact * * * business' in the Eastern District of Pennsylvania.
Fleshing out this statement, the opinion went on to stress that § 1406 was "in accord with the general purpose which has prompted many of the procedural changes of the past few years — that of removing whatever obstacles may impede an expeditious and orderly adjudication of cases and controversies on their merits," and that a transfer would be appropriate "in order that the plaintiff not be penalized by what the late Judge Parker aptly characterized as 'time-consuming and justice-defeating technicalities'." In the case at bar, however, if plaintiff were allowed the benefit of § 1406, the ironic result would be just the opposite. The expeditious adjudication of plaintiff's claims would have been impeded and delayed by time-consuming and — if justice delayed is indeed justice denied — justice-defeating technicalities. The plaintiff thus relies on Goldlawr to achieve that which Goldlawr sought to avoid.
Cases decided in this Circuit subsequent to Goldlawr reinforce the Court's conclusion that it was not the intent of Goldlawr to toll the statute of limitations by a mere filing after which the claim was allowed to lie fallow indefinitely. In Moore Company of Sikeston Mo. v. Sid Richardson Carbon Gasoline Company , 347 F.2d 921 (8th Cir. 1965), the Eighth Circuit took up the issue of whether the mere filing of a complaint in a federal question case would suffice to toll the statute of limitations, or whether reasonable diligence in obtaining service was also required. The Court there held that mere filing would suffice, but the case turned on the fact that under the then-current version of F.R.C.P. 4(a), the clerk of court would issue summons and deliver it to the federal marshal for service — reducing the chances of a lack of reasonable diligence in obtaining service and proceeding with the action — and on the availability of F.R.C.P. 41(b) to a defendant as to whom diligent prosecution did not occur. Under the current version of F.R.C.P. 4, the plaintiff is responsible for service of process, and a party not served — such as defendant in the case at bar — would not be in a position to utilize F.R.C.P. 41(b) to advance the case and reach resolution of the claims against it.
In Biby , the Eighth Circuit held that "[s]ome measure of good faith expectation of proceeding in the court in which the complaint is filed is essential to tolling the statutes of limitations." It found a lack of good faith where the plaintiff knew there was doubt that jurisdiction could be obtained over the defendants in the California court; made no effort to serve the defendants in California; and obtained an ex parte order to transfer the case to Arkansas. Biby is still good law in this Circuit, and the Court recently clarified that it is the lack of intent of the plaintiff to proceed in the initial forum that triggers Biby . In Chandler v. Roy , 272 F.3d 1057 (8th Cir. 2001), an erroneous choice of forum did not trigger Biby because the plaintiff wanted her case heard in the initial forum; served the defendants there; never requested a change of venue; and opposed a motion to dismiss for lack of jurisdiction.
When the Court considers Goldlawr, Moore, Biby , and Chandler , it concludes that an error in selecting the forum, where the defendant can obtain corrective action within a reasonable period of time, does not affect the statute of limitations, even if the selection of the forum was unreasonable. However, where a plaintiff deliberately selects an improper forum; makes no effort to serve the defendant in that forum so that the defendant cannot seek to correct the error; makes the transfer request itself — ex parte — for its own purposes; and never had any intention of prosecuting the claim in the forum of filing, there is no analytical basis for the filing to toll the statute of limitations.
Plaintiff's statement that "the existence of the seal prohibited both the United States and the relator from serving St. Joseph's with the complaint until the district court lifted the seal for the purpose" ignores the fact that, but for the repeated requests of the government to continue the seal, it would have been lifted after only sixty (60) days. 31 U.S.C. § 3730(b).
it is the lack of intent to proceed in the forum that is relevant — not the intent to evade the statute of limitations — therefore, plaintiff's attempt to distinguish Biby because the relator filed its claim two years before the statute would expire is unavailing.
5. Plaintiff contends that both it and the relator acted in good faith and evidenced a genuine intent to proceed with this action in Pennsylvania, making Biby inapplicable. For example, it contends that Pennsylvania was a proper venue under the False Claims Act because such an action may be brought where any one of multiple defendants resides. This argument was resolved against plaintiff in the Court's earlier ruling: there is no allegation of a conspiracy or connection between the defendants in this case and therefore no basis for application of the multiple-defendant venue provision. The argument brought forth now, that "there is no reason to think that at the time the complaint was filed that such a connection might not have existed," does not alter the Court's conclusion on this issue. Such an argument is mere speculation.
This argument tends to support the Court's belief that the filing and continuation of the Pennsylvania action was a procedural ploy. Plaintiff contends that it reserves the right to allege that the conduct of defendant was a result of "system-wide practices" at the Sisters of Mercy chain of hospitals — until "after obtaining discovery in this case relating to St. Joseph's conduct." If the government — armed with its investigative powers and the procedural tools of the FCA — was not able to resolve that question between February of 1996 and May of 2001, the Court doubts that a further reservation of rights to pursue the matter would be likely to see any success.
Plaintiff also contends that its conduct during the pendency of the Pennsylvania case evinced an intention to proceed with the action against defendant there. It states that "during the time that the complaint was pending in [Pennsylvania], the United States dutifully investigated the claims against each of the defendants in the action, and periodically updated the Pennsylvania court on the status of its investigations." Since the Pennsylvania case is under seal, this statement amounts to nothing more than an assertion of counsel, and the evidence that is available to this Court contradicts it. It appears the government has yet to determine whether defendant acted alone or in concert with other hospitals within its own corporate chain. In addition, the parties have asked this Court not to set this matter down for trial until at least September 1, 2003 — over two years after it was transferred to Arkansas.
The government also makes the surprising assertion that it "proceeded with the case as it was filed by relator in an efficient and streamlined fashion." Such assertions of diligence on the part of the government lack support in the record reviewed by this Court.
6. The plaintiff also argues that the Pennsylvania Court approved each procedural step taken while its claim against defendant lay in that jurisdiction and, therefore, this Court should not call those steps into question. Biby supplies the answer to this argument. Neither the validity of the transfer order nor the appropriateness of the multiple extensions granted by the Pennsylvania Court are under review here. This Court assumes that the Pennsylvania Court made correct decisions based on the information then before it. However, the limitations issue and the constraints of Biby raised here by defendant were not — and could not have been — raised in either of the Pennsylvania actions because defendant was never afforded an opportunity to participate in the ex parte proceedings there.
7. Finally, plaintiff argues that it will be severely prejudiced by the Court's ruling, whereas defendant will suffer no prejudice from a contrary ruling. The Court does not agree. Statutes of limitation exist to protect defendants from stale claims, lost evidence, and disappearing witnesses. While it is true, as argued by plaintiff, that such statutes may be outweighed where the interests of justice require vindication of the plaintiff's rights, the justifications alluded to in the case cited by plaintiff involved situations in which (1) a defendant misled a plaintiff into believing he had more time to bring suit; (2) war prevented a plaintiff from bringing suit; and (3) where in past cases defendant had waived venue objections, leading plaintiff to believe they would be waived again, then raised such objections after the statute of limitations had expired so that the case could not be transferred. Burnett v. New York Central Railroad Company , 380 U.S. 424 (1965). Nothing similar obtains in the instant case. Instead, it appears this matter was completely within the control of plaintiff and relator — where and when to file the complaint, how long to investigate, when and whether to intervene, and when to request severance and transfer. Here, defendant was powerless to act until it was served.
Plaintiff also suggests that defendant knew in March, 1998, that it was being investigated for the violations alleged in this case and, therefore, the statute of limitations does not present a problem, citing 15 Wright, Miller Cooper, Federal Practice Procedure 2d , § 1501. That commentary suggests that no limitations problem should arise from the addition of a new plaintiff where "defendant is fully apprised of a claim arising from specified conduct and has prepared to defend the action." Plaintiff contends that the service of a subpoena for the medical records and claims at issue in this case meets this test. The Court does not agree. The mere requirement to produce records, without more, cannot be considered as notice of a claim arising from specific conduct and preparation to defend that claim. Plaintiff admits that defendant was not shown a copy of the Complaint until the summer of 2000.
Had this matter become a case involving defendant at an earlier time, defendant could have taken steps to avoid problems such as lost evidence and disappearing witnesses. Without being made a party, mere awareness of the investigation would not have enabled it to preserve the testimony of witnesses by depositions; to compel production of documents; or to seek to prevent destruction of documents in the hands of third parties over whom it had no control. Those are the types of actions that can only be taken within the context of litigation, and the inability to take them is, in the Court's opinion, prejudicial to defendant.
8. Having considered the arguments raised by plaintiff in its Motion For Reconsideration, the Court finds no reason to alter or amend the Order entered on July 29, 2002.
IT IS THEREFORE ORDERED that the United States' Motion For Reconsideration is granted. IT IS FURTHER ORDERED that, upon reconsideration, the Court finds no reason to alter or amend the Order entered July 29, 2002, and the directives of that Order shall remain in full force and effect.