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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),
UNITED STATES OF AMERICA, CACI INT'L INC., CACI SYSTEMS INTEGRATION, INC., AND CACI, INC. &MDASH; 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
Pentagen Technologies International Limited. ("Pentagen") and Russell
D. Varnado ("Varnado") (collectively "plaintiffs") filed the instant
action alleging violations of 31 U.S.C. § 3729-33, (2001) (the "False
Claims Act" or the "FCA") and abuse of process against defendants United
States of America ("United States") and E.F. Brasseur ("Brasseur")
(collectively "the Government defendants"), CACI Int'l, Inc., CACI
Systems Integration, Inc., and CACI, Inc.-Federal (collectively "CACI"),
and various other individual corporations, attorneys, and law firms. On
October 6, 1998, defendants submitted motions to dismiss. The CACI
defendants also filed a motion for sanctions against Pentagen and its
counsel of record, Joel Z. Robinson ("Mr. Robinson" or "plaintiffs'
counsel"), pursuant to Rule 11 of the Federal Rules of Civil Procedure
and 28 U.S.C. § 1927 (2001), and sought an injunction pursuant to
28 U.S.C. § 1651(a) (2001), preventing Pentagen from filing further
litigation. By Memorandum Opinion and Order dated June 29, 2000, the
Court granted defendants' motion to dismiss and requested a response from
plaintiffs with respect to the sanctions motion. The Court hereby grants
CACI defendants' request for sanctions, in part, and directs the CACI
defendants to submit detailed affidavits outlining its costs and expenses
in defending against this action.
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
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
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)
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 ...