U.S. ex rel. Costa v. Baker & Taylor, Inc., C-95-1825-VRW.

• Decision Date: 16 January 1997
• Docket Number: No. C-95-1825-VRW.,C-95-1825-VRW.
• Citation: 955 F.Supp. 1188
• Court: U.S. District Court — Northern District of California
• Parties: UNITED STATES of America ex rel. Robert COSTA and Ronald Thornburg and State of California ex rel. Robert Costa and Ronald Thornburg, Plaintiffs, v. BAKER & TAYLOR, INC., et al., Defendants.

955 F.Supp. 1188

UNITED STATES of America ex rel. Robert COSTA and Ronald Thornburg and State of California ex rel. Robert Costa and Ronald Thornburg, Plaintiffs, v. BAKER & TAYLOR, INC., et al., Defendants.

No. C-95-1825-VRW.

United States District Court, N.D. California.

January 16, 1997.

As Amended March 28, 1997.

Gail Killefer, U.S. Attys. Office, San Francisco, CA, Diana J. Younts, U.S. Dept. of Justice, Commercial Litigation Branch Civil Div., Washington, DC, for U.S.

John R. Phillips, Peter W. Chatfield, Phillips & Cohen, San Francisco, CA, for Robert Costa and Ronald Thornburg.

Larry G. Raskin, Ca. State Atty. Gen., Sacramento, CA, for State of Cal.

ORDER

WALKER, District Judge.

Relators Robert Costa and Ronald Thornburg filed this False Claims Act case on behalf of the United States and the State of California on June 1, 1995. In their complaint, relators allege that Baker & Taylor Books ("B & T") has engaged in a practice of fraudulently overcharging institutional customers, including federally funded libraries. Pursuant to 31 U.S.C. § 3730, the complaint was filed under seal and served on the government. On August 21, 1995, the court granted the government's first request for a six-month extension of time to make its intervention determination. The court granted further six-month extensions of time on March 1, 1996, and August 6, 1996. On December 10, 1996, relators' moved to lift the seal on this case file in order to make a limited disclosure to relator Costa's employer, the City of Richmond, Virginia. Upon receipt of this motion, the court issued an order to show cause why the seal in this case should not be lifted in its entirety and the complaint served upon the defendants.

Title 31 U.S.C. § 3730(b)(2) provides that a private party bringing suit on behalf of the government should file the complaint in camera and further provides that the file is to be kept under seal for at least 60 days. The court may grant extensions of that time, at the request of the government, for good cause shown. 31 U.S.C. § 3730(b)(3). The government must elect, before the file is unsealed, whether to intervene in the action or to inform the court of its decision not to do so. 31 U.S.C. § 3730(b)(4).

When Congress amended the False Claims Act in 1986 to create the current statutory framework, it sought to foster more qui tam lawsuits. S.Rep. No. 345, 99th Cong., 2d Sess 23-24 (1986), reprinted in 1986 USCCAN 5266, 5288-89. The Justice Department had expressed concern, however, that the filing of a lawsuit by a private party might "tip off" the subject of a criminal investigation. Id. at 24, reprinted at 5289. The sixty-day period during which the complaint would be sealed was intended as a compromise, allowing the government to complete its investigation and formulate and adopt a litigation strategy without seriously injuring the interests of the defendant. Id.

There is nothing in the statute or legislative history to suggest that, in evaluating requests for such extensions, the court should disregard the interests of the defendant and the public. Defendants have a legitimate interest in building their defense while the evidence is still fresh. The public has a right to monitor the activities of government agencies and the courts.

In this case, the government appears to be fully engaged in its discovery, without giving the defendants the opportunity even to answer the complaint. The government's return to the order to show cause states that each of the defendants has been served with a subpoena, investigative interviews have been conducted with numerous current and former B & T employees and government personnel have been criss-crossing the country to conduct interviews and audits. The memorandum further suggests that the government has engaged in settlement negotiations with B & T. The defendants are proceeding in these matters based on plaintiffs' representations. They are apparently discussing the settlement of a case without knowing with certainty the allegations leveled against them. Each of the plaintiff parties has suggested that keeping the file under seal serves defendants' interests by avoiding unflattering publicity; the court is not, however, convinced that defendants' current state of ignorance is a blissful one.

It is possible that defendants wish to keep this case from the public eye, but the court must also consider the interest of the public. Court records are normally open to the public. Nixon v. Warner Communications, 435 U.S. 589, 597, 98 S.Ct. 1306, 1311, 55 L.Ed.2d 570 (1978) ("It is clear that the courts of this country recognize a general right to inspect and copy public records and documents, including judicial records and documents" (citations omitted)). One interest this access has been thought to protect is "the citizen's desire to keep a watchful eye on the workings of public agencies." Id. at 597-98, 98 S.Ct. at 1312. In this case, defendants are accused of defrauding federal, state and local agencies across the country. Many of those agencies continue to purchase books from B & T, and do so without benefit of the information developed by the government's current investigation. The proceedings of this case, therefore, fall well within the bounds of that which citizens may wish to observe.

The legislative history of the False Claims Amendments Act makes abundantly clear that Congress did not intend that the government should be allowed to prolong the period in which the file is sealed indefinitely. The Senate report states:

Subsection (b) (3) of section 3730 establishes that the Government may petition the Court for extensions of both the 60-day evaluatory period and the time during which the complaint remains under seal. Extensions will be granted, however, only upon a showing of "good cause." The Committee intends that courts weigh carefully any extensions on the period of time in which the Government has to decide whether to intervene and take over the litigation. The Committee feels that with the vast majority of cases, 60 days is an adequate amount of time to allow Government coordination, review and decision. Consequently, "good cause" would not be established merely upon a showing that the Government was overburdened and had not had a chance to address the complaint. While a pending criminal investigation of the allegations contained in the qui tam complaint will often establish "good cause" for staying the civil action, the Committee does not intend that criminal investigations be considered an automatic bar to proceeding with a civil fraud suit.

The Committee believes that if an initial stay is granted based upon the...