Mortgages, Inc. v. U.S. Dist. Court for Dist. of Nev. (Las Vegas)

• Decision Date: 28 September 1990
• Docket Number: No. 90-70418,90-70418
• Citation: 934 F.2d 209
• Parties: MORTGAGES, INC.; John P. Mullen, Petitioners, v. UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEVADA (LAS VEGAS), Respondent, and Lawyers Title Insurance Corporation; Richard G. Messersmith; Deaun Messersmith; Douglas D. Vollmer; Deanna J. Vollmer; Gordon E. Beckstead; Camille Beckstead-Stockdale, Real Parties in Interest.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 209

934 F.2d 209

MORTGAGES, INC.; John P. Mullen, Petitioners, v. UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEVADA (LAS VEGAS), Respondent and Lawyers Title Insurance Corporation; Richard G Messersmith; Deaun Messersmith; Douglas D Vollmer; Deanna J. Vollmer; Gordon E Beckstead; Camille Beckstead-Stockdale, Real Parties in Interest.

No. 90-70418.

United States Court of Appeals, Ninth Circuit.

Submitted Sept. 28, 1990 ^*.

Decided May 24, 1991.

John Peter Lee, Theresa M. Dowling, John Peter Lee, Ltd., Las Vegas, Nev., for petitioners.

John C. Hohnhorst, Hepworth, Nungester & Felton, Twin Falls, Idaho, Gary Goodheart, Jones, Jones, Close and Brown, Monte N. Stewart, Wright and Stewart, Las Vegas, Nev., for real party in interest Lawyers Title Ins. Corp.

Michael C. Theis, U.S. Dept. of Justice, Washington, D.C., for the U.S.

James C. Tucker, Gary D. Slette, Nelson, Rosholt, Robertson, Tolman and Tucker, Twin Falls, Idaho, and John R. Lusk, Gifford and Vernon, Las Vegas, Nev., for real parties in interest Richard G. Messersmith, Deaun Messersmith, Douglas D. Vollmer, and Deanna J. Vollmer.

Lloyd J. Webb, Webb, Burton, Carlson, Pedersen and Webb, Twin Falls, Idaho, and Keith Gregory, Las Vegas, Nev., for real parties in interest Gordon E. Beckstead and Camille Beckstead-Stockdale.

Petition for Writ of Mandamus.

Before ALARCON, POOLE and NORRIS, Circuit Judges.

PER CURIAM:

Mortgages, Inc. ("Mortgages") and its president, John P. Mullen, petition this court for a writ of mandamus directing the district court to dismiss third-party complaints filed against them by defendants in an action brought under the False Claims Act, 31 U.S.C. Secs. 3729-3733 ("FCA").

The FCA provides civil penalties against a person who submits a false claim for payment to the United States. 31 U.S.C. Sec. 3729. To encourage reporting of false claims, the FCA provides that any person may commence, for the benefit of the United States, a civil action for a violation of section 3729. 31 U.S.C. Sec. 3730(b). The United States is served with a copy of the complaint, and if the government elects to proceed with the action, the originator of the suit remains as a qui tam plaintiff. 31 U.S.C. Sec. 3730(b) & (c). If the action is successful, the qui tam plaintiff is entitled to a portion of the recovery. 31 U.S.C. Sec. 3730(d).

Petitioners are qui tam plaintiffs in the FCA action below. They contend that as such, they should not be required to answer the third-party complaints filed against them. We agree. Accordingly, the petition is granted and the district court is directed to dismiss the third-party complaints filed against petitioners.

I

Mortgages is a mortgage lending company. In 1983, Mortgages accepted applications for loans insured by the Department of Housing and Urban Development ("HUD"). Defendants' applications allegedly contained false and misleading statements. Following default on the loans, HUD was required to cover several million dollars in losses. Mortgages entered into a settlement with the government whereby Mortgages agreed to indemnify the government for $437,000.

The district court action was initiated in 1988 when Mortgages filed a complaint under the FCA, offering the United States information it had obtained regarding defendants' allegedly false statements in the applications for the HUD-insured loans. The United States elected to proceed with the action; petitioners remained as qui tam plaintiffs.

Defendants then filed third-party complaints against petitioners, alleging numerous state law claims. ¹ Pursuant to each of these claims, defendants sought as relief full indemnification and/or contribution from Mortgages against any recovery or judgment in favor of the United States in the FCA action. Petitioners filed a motion to dismiss the third-party complaints. After the district court denied the motion, petitioners filed this petition for writ of mandamus and requested an emergency stay. We granted the stay and ordered a response to the petition. On September 28, 1990, we granted the petition in a brief unpublished order. We now explain our reasons for doing so.

II

Under the All Writs Act, 28 U.S.C. Sec. 1651(a), we have the power to issue the requested writ. We must nevertheless determine whether mandamus is a proper remedy here. See Valenzuela-Gonzalez v. United States District Court, 915 F.2d 1276, 1278 (9th Cir.1990).

In Bauman v. United States District Court, 557 F.2d 650, 654 (9th Cir.1977), we established five guidelines to aid in our determination of whether mandamus is appropriate in a given case:

1) whether the petitioner has no other means such as an appeal, to obtain the desired relief;

2) whether petitioner will be damaged or prejudiced in any way not correctable on appeal;

3) whether the district court is clearly erroneous as a matter of law;

4) whether the district court's order is an oft repeated error or manifests a persistent disregard of the federal rules;

5) whether the district court's order raises new and important problems or issues of first impression.

Satisfaction of all five factors is not required. See Admiral Ins. Co. v. District Court of Arizona, 881 F.2d 1486, 1491 (9th Cir.1989). The factors serve only as guidelines, a point of departure for our analysis of the propriety of mandamus relief. Id.

The first Bauman factor is satisfied here. An order denying a motion to dismiss a counterclaim is not immediately appealable. Jetco v. Jiffy Products Co., 192 F.2d 852 (9th Cir.1951). ² A party must normally await final judgment to seek review of such an order. Accordingly, only by mandamus may petitioners obtain review, prior to final judgment, of the district court's decision compelling them to answer the counterclaims.

The second Bauman factor concerns prejudice to the petitioner. Petitioners contend the district court's decision will result in delay and cause them to incur great expense. Generally, the fact that the lower court's order will result in additional cost and unreasonable delay does not demonstrate sufficient prejudice to warrant mandamus relief. In re Sugar Antitrust Litigation, 559 F.2d 481, 484 (9th Cir.1977).

The fourth and fifth factors are rarely, if ever, present at the same time. Admiral Ins., 881 F.2d at 1491. Here, although the fourth factor is absent, the fifth is present. Indeed, it is the fifth factor that drives our decision to determine this issue by mandamus. Whether a qui tam plaintiff in a FCA action should be required to answer counterclaims is a significant question of first impression. To our knowledge, no circuit court has yet addressed this issue. The two district courts that have examined this question reached the opposite result of that of the district court in the underlying action here. See United States v. Kennedy, 431 F.Supp. 877 (C.D.Cal.1977) (defendants in FCA action are not entitled to indemnification or contribution from qui tam plaintiffs); United States ex rel. Rodriguez v. Weekly Publications, Inc., 74 F.Supp. 763 (S.D.N.Y.1947) (counterclaims cannot be filed against qui tam plaintiffs).

Moreover, where the resolution of the legal questions raised in the petition will "add importantly to the efficient operation of the district courts throughout the circuit," mandamus relief may be warranted. See In re Cement Antitrust Litigation (MDL No. 296), 688 F.2d 1297, 1301 (9th Cir.1982), aff'd for absence of quorum sub nom. Arizona v. United States District Court, 459 U.S. 1191, 103 S.Ct. 1173, 75 L.Ed.2d 425 (1983). Thus, for example, review by mandamus is appropriate where the decision will clarify an issue likely to confront lower court judges in a number of suits before appellate review is possible. Id. at 1303.

Here, the issue of whether counterclaims may be filed against qui tam plaintiffs is one that may confront a number of district court judges. In 1986, Congress substantially amended the FCA with the intent of encouraging such actions. At least one commentator has indicated these amendments will result in an increased filing of FCA lawsuits. Oparil, Coming Impact of the Amended False Claims Act, 22 Akron L.Rev. 525, 560 (1989). A ruling from this court on this issue at this time will increase the efficient operation of the district courts.

The final factor we consider is the third Bauman factor: whether the district court's decision was clearly erroneous. Defendants argue they are entitled to seek indemnification or contribution from the petitioners because petitioners were responsible for the fraud visited upon the government. For the reasons set out below, we conclude that there is no right of indemnity or contribution among participants in a scheme to defraud the government in violation of the FCA. Accordingly, we conclude that the district court's denial of petitioners' motion to dismiss the counterclaims was clearly erroneous.

III

Where one or more persons have committed a fraud upon the government in violation of the FCA, each is joint and severally liable for the treble damages and statutory penalty. 31 U.S.C. Sec. 3729(a). See also United States v. Hughes, 585 F.2d 284, 286 n. 2 (7th Cir.1978); United States v. Aerodex, 469 F.2d 1003, 1012 (5th Cir.1972). For the purposes of deciding this petition, we will assume that all of the elements of typical claims for contribution or indemnification exist. Thus, we assume that the government will recover from defendants under the FCA, and that the qui tam plaintiffs bear significant responsibility for the false statements in the loan applications. Even with these assumptions, however, we find no basis for recognizing a right of contribution or indemnification in this case.

The right to contribution and indemnification are no different in principle from other implied rights of action. See Levit v. Ingersoll Rand Financial Corporation, 874 F.2d 1186, 1191 (7th Cir.1989). A defendant held liable under a federal statute has a right to contribution or...