Opinion
No. 15–P–483.
08-22-2016
Jaideep CHAWLA & others v. Javier GONZALEZ & another.
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
The plaintiff Jaideep Chawla, acting pro se, filed the instant qui tam action pursuant to the Massachusetts False Claims Act (MFCA), G.L. c. 12, § 5A et seq., against the defendants, two individuals being prosecuted by the Federal government for narcotics offenses. Pursuant to the MFCA, the plaintiff, designated as a “relator,” brought the action on behalf of the Department of Revenue (DOR), seeking the recovery of taxes due under the controlled substances tax, G.L. c. 64K (CST), on the illegal narcotics allegedly possessed by the defendants as part of their criminal enterprise. Pursuant to the latter chapter, “[a] tax shall be imposed on marihuana and controlled substances as defined in section one” at various rates. G.L. c. 64K, § 8. Section 4 of the chapter provides that “[n]o dealer shall possess any marihuana or controlled substance upon which a tax is imposed by section eight unless the tax has been paid on the marihuana or controlled substance as evidenced by a stamp or other official indicia.”
The relator's action therefore technically presents a “reverse false claim.” See Hoyte v. American Natl. Red Cross, 518 F.3d 61, 63 n. 1 (D.C.Cir.2008) (“Ordinarily under the [Federal False Claims Act], the government, or a party suing on its behalf, may recover for false claims made by the defendant to secure a payment by the government. In a reverse false claim action ..., the defendant's action does not result in improper payment by the government to the defendant, but instead results in no payment to the government when a payment is obligated”) (quotations and citations omitted). See G.L. c. 12, § 5B(9).
The matter was placed under seal for 120 days pursuant to G.L. c. 12, § 5C(3), during which time the Attorney General investigated the merits of the action. The Attorney General elected not to proceed with the action and instead moved to dismiss it under G.L. c. 12, § 5D(2), notwithstanding the objection of the plaintiff as relator. The Attorney General contended that the relator was “attempting to use the MFCA to compel payment of a state tax that, based on his mistaken view of the law, would then preclude the criminal defendants' pending federal drug prosecutions.” After hearing, a Superior Court judge allowed the motion to dismiss and denied the relator's motion to strike a supporting affidavit filed by the Attorney General. The judge ruled that the Attorney General had not violated G.L. c. 64K, § 13, by disclosing the information contained in the affidavit, which could not be construed to be information obtained from a “dealer.” The relator now appeals. We affirm.
In its memorandum of law filed in this court, the Attorney General states that the relator owns a business named Double Jeopardy, through which he voluntarily purchases tax stamps from the Department of Revenue (DOR). Pursuant to consulting agreements, he then “transfers to his drug defendant clients tax stamps ... so that those defendants can rely on those tax stamp transfers to argue for dismissal of criminal drug prosecutions on double jeopardy grounds.” In his opposition, the relator disputes these characterizations and contends that they are false and baseless. As the resolution of these conflicting assertions would have no bearing on the legal questions presented for our review, we do not seek to resolve this dispute.
Discussion. 1. Motion to dismiss. Under the MFCA, “[t]he attorney general may dismiss the action [filed by the relator] notwithstanding the objections of the relator if the relator has been notified by the attorney general of the filing of the motion and the court has provided the relator with an opportunity for a hearing on the motion.” G.L. c. 12, § 5D(2). See Scannell v. Attorney Gen., 70 Mass.App.Ct. 46, 50 (2007). The relator, who was afforded a hearing after objecting to the dismissal, contends that the motion judge erred in allowing the motion to dismiss.
As we have previously noted, “[t]here is little decisional law interpreting the MFCA, and its legislative history is scant. However, the MFCA was modeled on the similarly worded Federal False Claims Act, 31 U.S.C. §§ 3729 et seq. Therefore, we look for guidance to cases and treatises interpreting the Federal False Claims Act [FCA].” Scannell, 70 Mass.App.Ct. at 49 n. 4 (citations omitted). See Packaging Indus. Group, Inc. v. Cheney, 380 Mass. 609, 611 (1980) (“Where the Legislature in enacting a statute follows a Federal statute, we follow the adjudged construction of the Federal statute by the Federal courts”).
Federal FCA jurisprudence reflects two different standards for reviewing dismissals requested by the United States Attorney General pursuant to 31 U.S.C. § 3730(c)(2)(A), the provision analogous to G.L. c. 12, § 5D(2). Under Swift v. United States, 318 F.3d 250 (D.C.Cir.2003), in the absence of fraud on the court or other similar circumstances that might merit an exception, the decision by the executive to dismiss a qui tam FCA action is essentially unreviewable. Id. at 252 (reading the Federal statute “to give the government an unfettered right to dismiss an action”). In so concluding, the Court of Appeals for the District of Columbia Circuit departed from the analysis of the Court of Appeals for the Ninth Circuit in United States ex rel. Sequoia Orange Co. v. Baird–Neece Packing Corp., 151 F.3d 1139 (9th Cir.1998), which is more favorable to relators.
Under Sequoia, the government may dismiss even a meritorious qui tam case over the relator's objection if it identifies a valid government purpose and a rational relation between dismissal and accomplishment of the purpose. If the government satisfies this two-step test, the burden shifts to the relator to show that the decision to dismiss was fraudulent, illegal, or arbitrary and capricious. Id. at 1145, 1147 (noting that this is the same standard as that applied to determine whether executive action violates substantive due process). The Sequoia standard is therefore arguably consistent with our cases holding that “in the absence of allegations that the Attorney General acted arbitrarily and capriciously, discretionary executive decisions made by the Attorney General are beyond judicial review.” Shepard v. Attorney Gen., 409 Mass. 398, 402 (1991). See Secretary of Admin. & Fin. v. Attorney Gen., 367 Mass. 154, 159 & n. 4, 165 (1975) (Attorney General's control over litigation involving the Commonwealth and power to make policy determinations about which actions to pursue “does not include the power to act in a capricious, arbitrary or illegal manner”).
We review de novo the choice of standard for judicial review of the Attorney General's motion to dismiss. See Ridenour v. Kaiser–Hill Co., 397 F.3d 925, 930 (10th Cir.2005). However, we need not decide whether the Sequoia or the Swift standard is more appropriate. See United States ex rel. Wickliffe v. EMC Corp ., 473 Fed. Appx. 849, 853 (10th Cir.2012). While the relator's action would have little chance of survival under the Swift standard, it ultimately fares no better under Sequoia. See Sequoia, 151 F.3d at 1144 (“[T]he government's power to dismiss or settle an action is broad”). Even the relator concedes that “[t]he Commonwealth—and specifically, the [o]ffice of the Attorney General—retains enormous discretion in deciding whether or not an MFCA action will proceed.”
The Attorney General advances multiple reasons supporting her decision to dismiss the action, including the relator's pro se status. However, we need focus only on the avoidance of interference with the Attorney General's “broad discretion on criminal matters,” Shepard, 409 Mass. at 403, as, even applying Sequoia, any rational relationship to a valid purpose is sufficient. “As the Sequoia test instructs, to establish a rational relation to a valid governmental purpose, there need not be a tight fitting relationship between the two; it is enough that there are plausible, or arguable, reasons supporting the agency decision.” Ridenour, 397 F.3d at 937 (citation omitted).
a. Rational relation to valid purpose. The judge correctly concluded that the Attorney General established that the motion to dismiss was rationally related to the valid purpose of preventing interference with enforcement of criminal laws. The qui tam action could interfere with the discretion of the Attorney General and district attorneys in directing the manner in which illegal narcotics cases are prosecuted in the Commonwealth. See Secretary of Admin. & Fin., 367 Mass. at 163 n. 6, citing Commonwealth v. Tuck, 20 Pick. 356, 364 (1838), Commonwealth v. Dascalakis, 246 Mass. 12, 18 (1923), Opinion of the Justices, 354 Mass. 804, 808–809 (1968). See also Shepard, 409 Mass. at 401 (“[P]rosecutors [district attorneys and the Attorney General] have broad discretion in deciding whether to prosecute”).
It is now beyond dispute that assessment of the CST has a criminal law component that implicates prosecutorial discretion. See Commissioner of Rev. v. Mullins, 428 Mass. 406, 416–417 (1998). After Mullins, it is clear that such taxes are “considered punishment for double jeopardy purposes.” Consequently, assessment of the CST implicates the executive's prerogative with respect to prosecuting the trade in illegal narcotics. More specifically, Mullins indicates that assessment of the tax would likely preclude a subsequent State prosecution of the same conduct as a criminal offense. Decisions about how to enforce the criminal laws are within the executive's exclusive domain. See Shepard, 409 Mass. at 403 (“The decision whether to bring criminal proceedings against individuals remains in the hands of the Attorney General”).
We express no view as to the impact of Mullins on whether a qui tam action for enforcement of the CST is nonetheless subject to the MFCA's tax bar. See G.L. c. 12, § 5B(d), as amended by St.2012, c. 139, § 22.
The court in Mullins expressly avoided directly resolving this question as the taxpayer in that case received a notice of assessment after the criminal proceedings against him had commenced. 428 Mass. at 407 n. 1.
Because of its double jeopardy implications, assessment of the CST against individuals facing Federal criminal charges also may raise fairness and comity concerns best addressed, at least in the first instance as part of an MFCA suit, by the Attorney General. Under the “two-sovereignty principle,” “there is nothing unconstitutional about a State prosecution that is precisely duplicative of a prior Federal trial; and the converse is also true.” Commonwealth v. Cepulonis, 374 Mass. 487, 490 (1978), quoting from Bartkus v. Illinois, 359 U.S. 121, 134 (1959). However, despite that principle, courts have recognized the desirability of “voluntarily applying a common sense limitation, whether by judicial, prosecutorial, or legislative decision. This the Supreme Court opinions not only do not forbid, but actively encourage. And this is the path that has been followed federally, and by many States.” Cepulonis, 374 Mass. at 492, citing Bartkus, 359 U.S. at 138–139.
Thus, while the Commonwealth is not necessarily prohibited from assessing the CST despite the initiation of Federal proceedings against the defendants, prosecutorial decisionmaking has a role to play in determining whether to refrain from pursuing successive punishments.
If the Attorney General could not dismiss a qui tam action under these circumstances, private parties could use the MFCA to effectively determine who is punished by the Commonwealth for narcotics offenses, how they are punished, and, in some circumstances, how often they are punished. Such a result is surely impermissible.
b. Arbitrary and capricious. The relator has not shown that the Attorney General acted arbitrarily or capriciously in moving to dismiss the action on the basis of the legitimate interests discussed above. The relator contends that his MFCA action equally serves the Commonwealth's interest in prosecuting narcotics offenders and that it would not preclude a criminal prosecution because a CST assessment is a criminal prosecution. This semantic argument, however, is not germane to the actual issue, which is that not all “criminal prosecutions” further the same objectives and that an assessment of tax under G.L. c. 64K may preclude the Commonwealth from seeking punishment of narcotics offenses under G.L. c. 94C, which provides for incarceration and fines for offenders.
We note that, in actions the relator has filed in Federal court, he is aware that the DOR has not proactively enforced the CST against anyone since the Supreme Judicial Court's decision in Mullins. Thus it would appear that, since Mullins, the executive has balanced the potentially competing interests of collecting tax revenue from illegal drugs under G.L. c. 64K and prosecuting drug defendants under G.L. c. 94C by pursuing the latter to the exclusion of the former. The relator cannot use the MFCA to force the executive to switch its prosecutorial priorities generally or in individual cases, and the Attorney General does not act arbitrarily or capriciously in seeking to preserve that decisionmaking power for herself and the Commonwealth's district attorneys. Cf. Secretary of Admin. & Fin., 367 Mass. at 165 n. 8 (Attorney General is permitted to make litigation decisions in “the interests of a consistent legal policy for the Commonwealth”). ,
As discussed below, CST stamps are still evidently available for purchase by those who seek to voluntarily comply, or wish to purchase them for any other reason.
Of course, the Commonwealth also frequently pursues the collection of revenue from criminal drug defendants through forfeiture actions. See G.L. c. 94C, § 47(d ).
The relator contends that the CST affords no enforcement discretion to the DOR. This reading of the statute, together with the Mullins decision, would effectively render that portion of the statute unconstitutional under our doctrine of separation of powers because it would require, by legislative pronouncement, that the executive pursue assessment of the CST to the exclusion of other punishments for narcotics offenders. See art. 30 of the Massachusetts Declaration of Rights (“the legislative department shall never exercise the executive and judicial powers, or either of them”). It is well established that, where possible, we are to construe statutes to avoid not just unconstitutional results, but even grave doubts about the law's constitutionality. See, e.g., Commonwealth v. Fremont Inv. & Loan, 459 Mass. 209, 214 (2011) (construing public records law to avoid “serious constitutional questions” pursuant to art. 30). Moreover, such a result was clearly not the intent of the Legislature as it expressly included a provision that “[n]othing in this chapter shall be construed to provide immunity for a dealer from criminal prosecution pursuant to Massachusetts law.” G.L. c. 64K, § 5.
We also note that, in enacting the CST and prior to the official recognition in Mullins of its punitive nature, the Legislature indicated that assessment and collection efforts were not to be second-guessed by private citizens. See G.L. c. 64K, § 12 (“No person may bring an action to enjoin the assessment or collection of any taxes, interest or penalties imposed pursuant to this chapter”).
The judge did not abuse her discretion in allowing the motion to dismiss. Our holding does not diminish the recognition that the MFCA is an important mechanism for ferreting out fraud and recovering money for the Commonwealth's coffers. See, e.g., Scannell, 70 Mass.App.Ct. at 48 (“The MFCA encourages individuals with direct and independent knowledge of information that an entity is defrauding the Commonwealth to come forward by awarding to such individuals a percentage of the Commonwealth's recovery from the defrauding entity”); United States ex rel. Devlin v. California, 84 F.3d 358, 362 (9th Cir.1996) (discussing the “purpose of the [Federal] FCA, which aims at ferreting out fraud by encouraging persons with firsthand knowledge of alleged wrongdoing to come forward”). Our decision is not intended to discourage “whistleblowers” from acting “as private attorneys-general” in bringing qui tam suits as envisioned by the MFCA, Scannell, 70 Mass.App.Ct. at 51, but rather reflects that the Legislature has entrusted the control over such actions to the Attorney General.
2. Motion to strike. The relator contends that the Attorney General violated G.L. c. 64K, § 13, by disclosing certain information in the affidavit of DOR attorney Edward Lauper that was submitted in support of the motion to dismiss and that the affidavit should therefore have been struck. At the outset, we note that we need not resolve this argument because we agree with the judge, who noted that the “information provided by Mr. Lauper only explains that Relator's business, Double Jeopardy LLC, pays taxes for dealers and then requests that the criminal charges be dismissed on double jeopardy grounds. This information is publicly available, having been filed with courts in connection with the motions to dismiss criminal cases against various clients of Double Jeopardy.” Moreover, we have not relied on any information in the affidavit to resolve the question of the propriety of the dismissal of the action. While we thus need not consider the relator's contention of violation of G.L. c. 64K, § 13, we do note that it has no merit.
The Attorney General characterizes some of the documents appended to the Lauper affidavit as “public court documents filed by one of [r]elator's clients seeking to dismiss a criminal drug prosecution on double jeopardy grounds.”
The affidavit included the text of an unsolicited e-mail dated May 8, 2013, from an entity identifying itself as “Double Jeopardy” and requesting that the DOR issue a tax assessment to an individual facing drug charges in Brockton District Court. It further requested that the DOR then send copies of the assessment to the Brockton District Court and the Brockton police department. Attached to the e-mail was a motion to dismiss the charges against the Brockton defendant. That motion, in turn, included an affidavit signed by the relator and supported by exhibits ostensibly showing that he was the manager of Double Jeopardy, LLC, a Nevada limited liability company registered to do business in Massachusetts, and that it had transferred an unused tax stamp to the Brockton defendant as part of a consulting agreement.
The covering e-mail is signed “Best Regards, Double Jeopardy,” and nowhere mentions the relator by name.
The relator reports that Double Jeopardy, LLC, was dissolved in Nevada in June, 2014. Nothing in our analysis turns on the status of the relator's business.
The relator has not pointed to anything in the affidavit from which the judge could have concluded that the material contained therein was “obtained from a dealer” and therefore subject to the nondisclosure provisions of G.L. c. 64K, § 13. Specifically, the record before the judge did not establish that either the relator or his business met the definition of “dealer” set out in G.L. c. 64K, § 1. Although the relator and/or his company may have purchased tax stamps, such purchases alone do not transform a purchaser into a dealer. See G.L. c. 64K, § 10.
A “dealer” is defined as “a person who, in violation of Massachusetts law, manufactures, produces, ships, transports, or imports into the commonwealth or in any manner acquires or possesses more than forty grams of marihuana, or seven or more grams of a controlled substance, or ten or more dosage units of a controlled substance which is not sold by weight. A quantity of marihuana or controlled substance is measured by the weight of the substance whether pure or impure or dilute, or by dosage units when the substance is not sold by weight, in the dealer's possession. A quantity of a controlled substance is dilute if it consists of a detectable quantity of pure controlled substance and any excipients or fillers.”
We express no opinion on whether a limited liability company can be considered a “dealer” under the CST and entertain the idea here only for the sake of argument.
Moreover, even if we were to assume arguendo that purchasing CST stamps did automatically confer “dealer” status, it is evident that the relator and his business were not purporting to act in the capacity of a “dealer,” that is, in the capacity of a person who possesses any illegal controlled substances, when they requested agency action against a third party and supported that request with the information that was later included in the affidavit. Instead, the relator represented himself to be the manager of a business that was in possession of “unused Controlled Substances Tax Stamps.” The information submitted, in fact, made it clear that this business intended to use the tax stamps not for any substances in its or the relator's possession, but for substances found in the possession of a third party as part of its “consulting” business.
Finally, the May, 2013, e-mail also clearly reflects an intention that its attachments not be kept confidential as, at the time of submission, the relator and his business proposed to file documents containing that information in the publicly accessible docket of a pending criminal proceeding, and in fact may have done so. Any information the DOR obtained by virtue of this unsolicited communication was obtained outside the scope of the CST.
For similar reasons, we reject the relator's contention that, regardless of the disposition of the primary issue on appeal, the entire case must be sealed to protect the confidentiality of tax stamp information. We have already explained why the unsolicited communication with the DOR does not require protection. We further note that any additional voluntary disclosures the relator made as part of this action were made in his capacity as a would-be MFCA relator, not as a CST dealer. In contrast to information obtained from CST dealers, information obtained from relators may be disclosed by the Attorney General in court proceedings. See G.L. c. 12, § 5N(8).
We take no action on the relator's motion for judicial notice as it would not affect our resolution of this appeal.
Judgment affirmed.