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United States v. Spherion Corp

United States District Court, S.D. New York

March 28, 2017

THE STATE OF NEW YORK EX REL VINOD KHURANA and THE CITY OF NEW YORK EX REL VINOD KHURANA Plaintiffs,
v.
SPHERION CORP. (N/K/A SFN GROUP, INC.), Defendant.

          FOR PLAINTIFF/RELATOR VINOD KHURANA: David Kovel, Esq. David Bishop, Esq. KIRBY McINERNERY, LLP John R. Newcomer, Jr., Esq. Elaine Stromgren, Esq. Jillian Estes, Esq. JAMES HOYER, P.A.

          FOR THE CITY OF NEW YORK: Zachary W. Carter, Esq. Gail Rubin, Esq. Sabita Krishnan, Esq. Lilia Toson, Esq. CORPORATION COUNSEL OF THE CITY OF NEW YORK

          OPINION & ORDER

          JOHN F. KEENAN, UNITED STATES DISTRICT JUDGE

         Plaintiff Vinod Khurana (“Khurana”) moves the Court to award him a relator's share of the $500 million settlement that the City of New York and the Department of Justice reached with Science Applications International Corp. in connection with a March 2012 deferred prosecution agreement. The City of New York opposes the motion. The Court denies the motion because Khurana's qui tam claims have been dismissed and, thus, Khurana has failed to assert a valid qui tam action, which is a prerequisite to a relator's recovery of an alternate civil remedy under the New York State False Claims Act or an alternate action under the New York City False Claims Act.

         I. Background

         A. Procedural Background

         Familiarity with this Court's prior opinion and order, (Op. & Order, ECF No. 70 (filed Nov. 10, 2016)), is presumed, however a brief review of the history of this action is appropriate. Khurana originally filed this action under seal on March 31, 2011, in New York Supreme Court. (See Def.'s Notice of Removal Ex. A, ECF No. 1-1 at 74 (filed Aug. 20, 2015).) The essence of Khurana's original complaint is that, over the course of several years, multiple parties perpetuated a scheme to defraud the City of New York (the “City”) through the large-scale CityTime project, which aimed to automate timekeeping and payroll functions for the City. (See id.) Khurana asserted qui tam claims on behalf of the State of New York (“the State”) and the City under the New York State False Claims Act (“NYS FCA”). (See Id. at 75, 79.) Khurana also claimed retaliatory discharge under the NYS FCA and New York City False Claims Act (“NYC FCA”). (See Id. at 97.)

         On April 22, 2013, the State filed a Notice of Election in New York Supreme Court, declining to file a complaint against any of the defendants named in Khurana's action or to intervene in the action. (Id. at 103-04.) The State's Notice of Election authorized the City to intervene in Khurana's action, convert the action into a civil enforcement action, or decline to do either. (Id.) On October 14, 2013, Khurana filed an amended complaint, also under seal, in New York Supreme Court. (Id. at 36.) The amended complaint largely resembled the original.

         On March 4, 2015, the City filed under seal a Notice of Election in New York Supreme Court declining to intervene in Khurana's action or convert it to a civil enforcement action. (Id. at 106.) On July 13, 2015, Khurana filed a second amended complaint, which is the operative complaint here.[1] (“Second Amended Complaint, ” Def.'s Notice of Removal Ex. A, ECF No. 1-1 at 4.) The second amended complaint named only Spherion Corp.[2]as a defendant and added a count for false claims under the NYC FCA. (Id. ¶¶ 1, 70-73.) On August 20, 2015, Spherion removed the case to federal court on the basis of diversity. (See Def.'s Notice of Removal, ECF No. 1 (filed Aug. 20, 2015).)

         On January 8, 2016, Khurana moved for a relator's share of a $500 million settlement between the Department of Justice and Science Applications International Corporation (“SAIC”), who was named as a defendant in Khurana's original and amended complaints, but omitted from the second amended complaint. (See Pl.'s Mem. of L. in Supp. of Mot. for Relator's Share, ECF No. 48 (filed Apr. 15, 2016).) Khurana primarily relied on the NYS FCA, but also referred to the NYC FCA. (See, e.g., Id. at 18 n.78.) The motion was fully briefed on April 15, 2016.

         On November 10, 2016, the Court dismissed the qui tam claims Khurana brought under the NYS FCA and NYC FCA. (See Op. & Order, ECF No. 70 (filed Nov. 10, 2016).) As to certain of Khurana's claims, the Court held that they were precluded by the “public disclosure bar, ” which prohibits a relator from relying on publicly disclosed information when commencing a qui tam action. (See id.) As to Khurana's remaining qui tam claims, the Court held that they failed to satisfy the applicable pleading requirements. (See Id. at 35-42.) The Court did not dismiss Khurana's claims regarding retaliatory discharge.

         B. Factual Background

         The City launched the CityTime project in 1998 with the aim of automating timekeeping and payroll functions for approximately 180, 000 City employees by 2010. (Second Am. Compl. ¶ 13.) Over the course of the project, various contractors and subcontractors worked on CityTime, including SAIC and Spherion. (Id. ¶¶ 14, 15.) Spherion hired Khurana as a consultant to work on CityTime in 2004 and terminated him in 2007. (Id. ¶ 9.)

         As alleged in Khurana's second amended complaint, in late 2004, Khurana began noticing problems with the performance capabilities of CityTime software and started voicing concerns to various individuals, including employees of SAIC and Spherion. (Id. ¶¶ 29-30.) Khurana also witnessed CityTime contractors engaging in “fraudulent conduct, ” including billing for, among other things, severance packages for previously terminated employees, overtime hours incurred despite express prohibition against overtime expenditures, and one employee's personal travel expenses. (Id. ¶ 45.) Khurana alleges that from 2004 to 2007 he repeatedly informed Spherion employees that CityTime had “serious problems” and would inevitably fail, but ...


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