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PENTAGEN TECHNOLOGIES INT'L. LTD. v. U.S.

November 5, 2001

PENTAGEN TECHNOLOGIES INTERNATIONAL LIMITED AND RUSSELL D. VARNADO PLAINTIFF(S),
v.
UNITED STATES OF AMERICA, CACI INT'L INC., CACI SYSTEMS INTEGRATION, INC., AND CACI, INC. — FEDERAL INTERNATIONAL BUSINESS MACHINES CORPORATION, LOCKHEED MARTIN CORPORATION, AT & T COMPANY, PRC INC., I-NET INC., STATISTICA INC., EXPRESS COMPANY SECRETARIES LIMITED, JORDANS & JORDANS & SONS LIMITED, JORDANS GROUP LTD., STEPTOE & JOHNSON, AND J. WILLIAM KOEGEL, JR., ESQ., DAVIES ARNOLD & COOPER, AND GEORGE A. MENZIES, ESQ., E.F. BRASSEUR, DEFENDANT(S)



The opinion of the court was delivered by: Sprizzo, United States District Judge.

    MEMORANDUM OPINION AND ORDER

BACKGROUND

The underlying facts related to the instant matter are summarized briefly below. The Court assumes familiarity with its prior Opinion dated June 29, 2000.

On February 19, 1998, Pentagen filed this action, the ninth in a long history of litigation, alleging that Pentagen's failure to secure a software contract with the Department of Defense was due to the surreptitious conduct of defendants as well as others in stealing its so-called MENTIX software ("MENTIX"). Pentagen's first action against the CACI defendants, which alleged copyright and trademark violations of MENTIX, was removed to federal court by CACI in January, 1994. See Pentagen Techs. Int'l Ltd. v. CACI Int'l Inc., No. 94 Civ. 0441 (N.Y. Sup.Ct. filed July, 1993, removed to S.D.N.Y. Jan. 26, 1994) ("Pentagen I"). Before CACI removed Pentagen I, Pentagen filed another action in this district alleging the same copyright and trademark infringement claims detailed in the prior action. See Pentagen Techs. Int'l Ltd. v. CACI Int'l Inc., No. 93 Civ. 8512 (S.D.N.Y. filed Dec. 10, 1993) ("Pentagen II"). Pentagen I and II were merged as related actions and dismissed together along with Pentagen IV, discussed below, in an opinion by Judge Mukasey. See Pentagen Techs. Int'l Ltd. v. CACI Int'l Inc., Nos. 93 Civ. 8512, 94 Civ. 0441, 94 Civ. 8164, 1996 WL 435157 (S.D.N.Y., August 2, 1996). After Plaintiff filed Pentagen II, CACI filed suit in the United States District Court for the Eastern District of Virginia seeking a declaratory judgment that, inter alia, CACI had not infringed on any of Pentagen's copyrights and trademarks during CACI's marketing and contract work for the United States Army. See CACI Int'l v. Pentagen Techs. Int'l Ltd., No. 93-1631-A, 1994 WL 1752376 (E.D. Va. June 19, 1997) ("Pentagen III"). The district court granted defendants' motion for summary judgment on its claims for declaratory relief and denied plaintiff's motions for reconsideration and recusal.*fn1 See id. Plaintiff then appealed to the United States Court of Appeals for the Fourth Circuit, which affirmed all of the lower court's holdings. See CACI Int'l Inc. v. Pentagen Techs. Int'l Ltd., No. 93-1631-A, 1995 WL 679952 (4th Cir. 1995) (per curiam). In so doing, the Fourth Circuit included language of the district court's opinion that Pentagen had overlooked an essential element of an infringement claim: that the work was copied.'" Id. at *3 (quoting Pentagen III, 1994 WL 1752376, at *1). As to Pentagen's motion for recusal of the district judge, the court admonished plaintiffs counsel, stating that the claim was "frivolous on its face" and "reprehensible." Id. at *6 *6n.12. In a later related action, the Fourth Circuit affirmed the imposition of monetary sanctions on plaintiffs counsel for misconduct.*fn2

Ignoring the adverse judgments, Pentagen continued to file suit. See, e.g., Pentagen Techs. Int'l Ltd. v. J.P. London, No. 94 Civ. 8164r(N.Y. Sup.Ct. filed Sept. 1994, removed to S.D.N.Y. Nov. 10, 1994) ("Pentagen IV"). Judge Mukasey, who had combined and then suspended Pentagen I and II pending the outcome of Pentagen III, dismissed Pentagen I, II, and IV in part on res judicata grounds, observing that the court was presented with a "paradigm of the situation that res judicata is intended to avert and resolve." Pentagen IV, 1996 WL 435157, at *9. While Pentagen III was being litigated, Pentagen filed another suit in this district, again alleging that CACI improperly marketed Pentagen's software to the United States Army; this time, however, Pentagen brought the action under the qui tam provisions of the FCA. See Pentagen Techs. Int'l Ltd. v. CACI Int'l Inc., No. 94 Civ. 2925, 1996 WL 11299, at *3 (S.D.N.Y. Jan. 4, 1996) ("Pentagen V"). Judge Carter denied plaintiffs request for a preliminary injunction and dismissed the claims against CACI defendants for lack of subject matter jurisdiction. The court found that Pentagen failed to demonstrate — as it must in a qui tam action — that it was the "original source" of the information forming the basis of its claims. See id. at *7-8. Judge Carter observed further that the claims arose from "the same nucleus of facts as the copyright and trademark infringement claims in Pentagen III," and, while declining to impose monetary sanctions, noted that dismissal would be an "appropriate sanction" because it "dispos[ed] of the fruit of [plaintiffs] questionable efforts." Id. at *13. Judge Carter also characterized some of plaintiffs counsel's arguments as "admittedly ridiculous." Id. at *16.

Undeterred, counsel added Varnado as a plaintiff in a new action alleging the same claims as in Pentagen V but now with Varnado as the original source of the information at issue.*fn3 See United States ex. rel. Pentagen Techs. Int'l Ltd. v. CACI Int'l Inc., No. 96 Civ. 7827, 1997 WL 473549, at *8 (S.D.N.Y. Aug. 18, 1997) ("Pentagen VI"). Judge Sweet dismissed the case, inter alia, on res judicata grounds finding that except for the addition of Vamado the claims were "factually identical" to the prior action. Id. at *9-10.*fn4 Plaintiffs then appealed unsuccessfully to the United States Court of Appeals for the Second Circuit. See United States ex. rel. Pentagen Techs. Int'l Ltd. v. CACI Int'l Inc., No. 97-6326, 1999 WL 55259 (2d Cir. Feb. 5, 1999). In the course of that appeal, plaintiffs' counsel represented to the court that he would refrain from bringing any further related actions.

Thereafter, Pentagen filed two (2) more suits against the United States. The first, alleging Government infringement on Pentagen's ownership of MENTIX during the Army's evaluation of the software, was dismissed for failure to state a claim, see Pentagen Techs. Int'l Ltd. v. United States, No. 97-245 (Fed. Cir.). aff'd, 175 F.3d 1003 (Fed. Cir. 1999) ("Pentagen VII"); the second, alleging that the United States House of Representatives had reports providing evidence for plaintiffs' abuse of process claim in the instant case, was dismissed similarly and plaintiffs' motion for re-argument was denied. See Pentagen Techs. Int'l Ltd. v. Comm. On Appropriations of the United States House of Representatives, 20 F. Supp.2d 41 (D.D.C. 1998) ("Pentagen VIII").

Persisting, plaintiffs brought their third qui tam action, which is the basis for defendants' instant sanctions motion. See Pentagen Techs. Int'l Ltd. v. United States, 103 F. Supp.2d 232 (S.D.N.Y. 2000) ("Pentagen IX"). Plaintiffs alleged that defendants' behavior in litigating the first two qui tam actions constituted an abuse of process under state law and was in violation of the FCA. Specifically, Pentagen alleged that CACI colluded with the United States defendants in filing an amicus curiae brief, in meeting with a member of the Executive Branch to obtain a witness statement (the "Brasseur Statement"), and in otherwise seeking the assistance of the United States in preparing their defense. The Court held that plaintiffs' claims under the FCA must be dismissed because the United States never waived sovereign immunity in this area and the FCA does not provide for a private right of action. See Pentagen IX, 103 F. Supp.2d at 236. The Court then dismissed plaintiffs' abuse of process claim, finding that it was barred by the applicable statute of limitations. See id. at 237. Plaintiffs' also requested leave to amend the complaint a second time, but the Court denied that application because the claims asserted were without merit and because plaintiffs failed to produce any new evidence, further amending the complaint would be "futile." Id.*fn5

DISCUSSION

A. Sanctions

CACI defendants request sanctions pursuant to Rule 11 of the Federal Rules of Civil Procedure ("Rule 11") and 28 U.S.C. § 1927. The Court will address each of defendants' requests in turn.

The district court has broad discretion in determining whether to grant Rule 11 sanctions. See Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 402-05 (1990). Rule 11 sanctions are appropriate where a person signs a filing for "an improper purpose such as to delay or needlessly increase the cost of litigation," or "without a belief formed from a reasonable inquiry" that the argument is non-frivolous. Caisse Nationale de Credit Mricole-CNCA, New York Branch v. Valcorp., Inc., 28 F.3d 259, 264 (2d Cir. 1994). A filing is frivolous if it is "`clear under existing precedent that there is no chance of success and no reasonable argument to extend, modify or reverse the law as it stands.'" Simon DeBartolo Group. L.P. v. Richard E. Jacobs, Inc., 186 F.3d 157, 167 (2d Cir. 1999) (quoting Mareno v. Rowe, 910 F.2d 1043, 1047 (2d Cir. 1990)). Finally, in assessing a claim for Rule 11 sanctions, courts apply a standard of "`objective unreasonableness.'" Ted Lapidus. SA. v. Vann, 112 F.3d 91, 96 (2d Cir. 1997) (quoting United States v. Intern. Bhd. of Teamsters, 948 F.2d 1338, 1345-46 (2d Cir. 1991)).

In the instant matter, plaintiffs' counsel has failed to demonstrate that he made any reasonable inquiry before deciding to sue these prarticular defendants on the specific grounds chosen. With respect to plaintiffs' qui tam claim under the FCA, at the time of filing there existed clear, long-standing precedent establishing that the Government cannot be sued unless it has waived its sovereign immunity. See, e.g., F.D.I.C. v. Meyer, 510 U.S. 471, 475 (1994); United States v. Mitchell, 463 U.S. 206, 212 (1983); United States v. Sherwood, 312 U.S. 584, 586 (1941). Moreover, even after being given the opportunity to amend the complaint and despite a specific warning by this Court that it considered the Government immune in the context of this action, plaintiffs' counsel failed to offer any meaningful argument that the Govennent had waived its sovereign immunity.*fn6 See, Hr'g Tr. of March 19, 1999, at 47. Counsel's inclusion of the non-Government defendants in this action, specifically CACI, was also clearly improper. As this Court discussed in its previous opinion, the FCA on its face does not provide a private right of action for litigation misconduct, see 31 U.S.C. § 3730(b), nor is there any credible argument to support a claim that the Court should recognize such an implied right of action in the instant-case.*fn7 See Pentagen IX, 103 F. Supp.2d at 236-37. Moreover, plaintiffs' counsel should Given the governing statutory scheme, it is likely that any argument maintaining that the have know that his qui tam claim stood no chance of success ...


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