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United States v. L-3 Communications Eotech Inc.

United States District Court, S.D. New York

February 3, 2017




         On November 24, 2015, the United States of America (the “government”) commenced this action against Defendants L-3 Communications EOTech, Inc. (“EOTech”), L-3 Communications Corporation (“L-3”), and Paul Mangano, to recover damages and civil penalties arising out of a scheme to defraud various government agencies in connection with EOTech's sale of defective holographic weapon sights. (See Doc. No. 1.) On November 25, 2015, one day after the complaint was filed, the parties filed a stipulation of settlement and dismissal, pursuant to which Defendants agreed to pay a settlement amount of $25.6 million to resolve the government's claims against them. (Doc. No. 5.) The Court so-ordered that stipulation and closed the case. (Id.)

         Now before the Court is a motion by non-party Milton DaSilva, who had originally filed a qui tam relator complaint in April 2014 against Defendants pursuant to the False Claims Act (“FCA”), 31 U.S.C. § 3729 et seq., but voluntarily dismissed that complaint without prejudice before this action commenced. (Doc. No. 14.) DaSilva seeks a declaration that he is entitled to a share of the government's $25.6 million settlement with Defendants under Section 3730(c)(5) of the FCA, which generally entitles a relator to a share of a recovery obtained by the government through an “alternate remedy” to the action initiated by the relator. 31 U.S.C § 3730(c)(5). For the reasons set forth below, the Court denies DaSilva's motion.

         I. Background[1]

         DaSilva worked as a quality control engineer at EOTech from May 14, 2013 until June 25, 2013, when EOTech terminated his employment. (Rel. Compl. ¶¶ 45, 61.) On August 13, 2013, DaSilva, through counsel, made pre-filing disclosures to the government regarding EOTech's production and sale of defective weapon sights in violation of the FCA. (Radner Aff. ¶¶ 1, 4.) On August 22, 2013, DaSilva was convicted of unrelated criminal offenses in the State of Michigan, and his sentencing was scheduled for September 25, 2013. (Id. ¶ 7.) Instead of appearing for sentencing, however, DaSilva fled to Brazil, where he is a citizen. (Id.) As of the filing of the instant motion, DaSilva continues to reside in Brazil and remains a fugitive. (Id. ¶ 37.)

         After discussions with the government regarding his allegations against EOTech broke down (see Id. ¶¶ 8-24), DaSilva filed a qui tam complaint under seal on April 25, 2014, asserting claims under the FCA and various state statutes on behalf of himself, the United States, the State of New York, the State of California, and the City of Los Angeles (id. ¶ 26; see also Doc. Nos. 14-1, 18-3). The case was designated civil action number 14-cv-2928 and assigned to Judge Nathan. The qui tam complaint represented that DaSilva was a “resident of Michigan” and did not mention his criminal conviction or fugitive status. (Rel. Compl. ¶ 17.) Accordingly, on April 28, 2014, the government emailed DaSilva's counsel requesting his position on why DaSilva, a fugitive residing in Brazil, was listed in the qui tam complaint as a Michigan resident, and whether counsel's representation of a fugitive in a new civil matter, asserting claims on behalf of the United States, complied with the applicable rules of professional conduct. (Radner Aff. ¶ 28.) On July 8, 2014, Judge Nathan issued an order indicating that the government, in an ex parte submission, had represented that DaSilva was “wanted by Michigan authorities after fleeing to Brazil prior to sentencing for certain crimes he was convicted of in 2013” and that “counsel for Mr. DaSilva have stated their intention to withdraw and voluntarily dismiss th[e qui tam] action if Mr. DaSilva did not surrender by June 23, 2014.” (Cordaro Decl. Ex. B.) Because that date had passed, Judge Nathan's order also directed DaSilva's counsel to “submit a status letter by July 18, 2014 indicating whether Mr. DaSilva remains a fugitive and, if so, whether and when they plan to withdraw and dismiss this action.” (Id.) The order also notified counsel that failure to submit a letter by July 18 would result in dismissal of DaSilva's case. (Id.)

         On August 14, 2014, Judge Nathan issued an order explaining that she had received two letters: one from DaSilva's counsel on July 18, 2014, requesting that the court not dismiss the case “despite their earlier representation to the [g]overnment that they would voluntarily withdraw the complaint if DaSilva did not surrender to Michigan authorities by June 23, 2014” (Cordaro Decl. Ex. C), and one from the government on July 31, 2014, indicating that it would move to dismiss if DaSilva's counsel did not voluntarily dismiss their complaint (id.). Because DaSilva's counsel had “neither withdrawn their complaint nor indicated that DaSilva ha[d] surrendered, ” Judge Nathan directed the government to file its motion to dismiss by August 31, 2014. (Id.)

         On August 19, 2014, before the government moved to dismiss, DaSilva's counsel filed with the government's consent a request for voluntary dismissal without prejudice. (Id. Ex. D.) Accordingly, on September 3, 2014, after the government confirmed its consent, Judge Nathan issued an order dismissing DaSilva's qui tam action without prejudice and directing that the case remain under seal. (Id. Ex. E.)

         As noted above, on November 24, 2015, well over a year after DaSilva's complaint was dismissed without prejudice, the government initiated the instant action against EOTech, L-3, and Paul Mangano, bringing claims under the FCA and various state law theories of recovery. (Doc. No. 1.) And on November 25, 2015, one day after the complaint was filed, the parties filed a stipulation of settlement and dismissal, which this Court so-ordered, settling the government's claims for $25.6 million. (Doc. No. 5.)

         DaSilva filed the instant motion on April 14, 2016, seeking a declaration that he is entitled to a share of the government's settlement proceeds under Section 3730(c)(5) of the FCA because the settlement was an “alternate remedy” to pursuing the action initiated by DaSilva. (See Mem. at 6-7.) While the government and DaSilva dispute the extent to which the government's recovery depended on DaSilva's qui tam complaint and disclosures, those issues are not relevant to the Court's decision on the question presented by DaSilva's motion. Rather, the government argues that, because DaSilva voluntarily dismissed his qui tam action, the government's own action was not an “alternate” to pursuing DaSilva's action, and thus DaSilva has no right to share in the government's recovery. (See Opp'n at 1.) The motion was fully briefed by May 12, 2016. (Doc. No. 19.) For the reasons set forth below, the Court agrees with the government.

         II. Legal Standard

         “The FCA imposes liability on any person who, ” among other things, “‘knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval' to the U.S. government; or who ‘knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.'” United States ex rel. Polansky v. Pfizer, Inc., 822 F.3d 613, 618 (2d Cir. 2016) (quoting 31 U.S.C. § 3729(a)-(b)). “From its enactment, the FCA has encouraged private citizens to report fraud by promising a percentage of any eventual recovery.” Bishop v. Wells Fargo & Co., 823 F.3d 35, 44 (2d Cir. 2016); see also United States ex rel. Ladas v. Exelis, Inc., 824 F.3d 16, 23 (2d Cir. 2016) (“The goal of the FCA's qui tam provisions is to prevent and rectify frauds by government contractors, by incentivizing private individuals to uncover and prosecute FCA claims.” (collecting cases)). Thus, the FCA permits a private person, known as a “relator, ” to bring a qui tam action in his own name and in the name of the United States for a violation of the FCA. See 31 U.S.C. § 3730(b)(1); see also Ladas, 824 F.3d at 23 (“A person pursuing a qui tam action under the False Claims Act - the relator - asserts a claim based on a right belonging to the United States.” (citing Vt. Agency of Nat. Res. v. United States ex rel. Stevens, 529 U.S. 765, 768 n.1 (2000))).

         The FCA requires the relator to serve the government with his complaint and a “written disclosure of substantially all material evidence and informats, and within 60 days of receiving “both the complaint and the material evidence and information, ” the government “may elect to intervene and proceed with the action.” Id. “Before the expiration of the 60-day period or any extensions” of that period for good cause, the government must choose between intervening and proceeding with the qui tam action itself, or declining to intervene, in which case the relator has the right to conduct the action. Id. § 3730(b)(4).

         If the qui tam suit is successful, the relator generally may receive a portion of the recovered funds. Id. § 3730(d). If the government has intervened and taken over the action, the relator may receive 15 to 25 percent of the proceeds of the action or settlement. Id. ยง 3730(d)(1). If the government has ...

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