U.S. ex rel. McGough v. Covington Technologies Co.
| Decision Date | 24 June 1992 |
| Docket Number | No. 91-55306,91-55306 |
| Citation | 967 F.2d 1391 |
| Parties | , 23 Fed.R.Serv.3d 56, 38 Cont.Cas.Fed. (CCH) P 76,352 UNITED STATES of America, ex rel., Thomas McGOUGH, and William Toth, in their own behalf, Plaintiff-Appellant, v. COVINGTON TECHNOLOGIES COMPANY, d/b/a Covington Constructors; S.L.S. Construction Company, d/b/a Pacific Construction Company, and Industrial Indemnity, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Russell B. Kinner, U.S. Dept. of Justice, Washington, D.C., for plaintiff-appellant.
Michael T. Lowe, Costa Mesa, Cal., for defendants-appellees.
Appeal from the United States District Court for the Central District of California.
Before: PREGERSON, D.W. NELSON and THOMPSON, Circuit Judges.
OVERVIEW
This action was brought by individuals acting as qui tam plaintiffs on behalf of the United States under the False Claims Act, 31 U.S.C. §§ 3729-3733. The government initially declined to take over the action, as authorized by 31 U.S.C. § 3730(b)(2)-(4).
During the trial and despite the government's objection, the district court approved a stipulation between the qui tam plaintiffs and Industrial Indemnity, the insurer of defendant S.L.S. Construction Company, and dismissed the action with prejudice as to Industrial Indemnity. After final judgment was entered against the remaining defendant, the government moved to intervene for the purpose of appealing Industrial Indemnity's dismissal. That motion was denied.
The government appeals the denial of its motion to intervene. On the merits of its appeal, the government challenges the district court's dismissal of its claims against Industrial Indemnity with prejudice. We have jurisdiction under 28 U.S.C. § 1291. We reverse and remand this case to the district court for further proceedings.
The False Claims Act creates a dual enforcement scheme. Both private persons and the government may bring suit for violation of 31 U.S.C. § 3729. Such private persons, referred to as "qui tam plaintiffs," may initiate the suit and share in a resulting recovery. 31 U.S.C. § 3730(b)(1).
When an action is brought by qui tam plaintiffs, the government has the option, within 60 days after receipt of the complaint, to proceed with the action. 31 U.S.C. § 3730(b)(2). If the government decides not to proceed with the action, the qui tam plaintiffs who filed the action may proceed with it. 31 U.S.C. § 3730(b)(4)(B). Should the government later decide to proceed with the action, the court may allow it to intervene upon a showing of good cause. 31 U.S.C. § 3730(c)(3).
Here, the qui tam plaintiffs are former employees of S.L.S. Construction Company, dba Pacific Construction Company (SLS), and Covington Constructors, a subsidiary of Covington Technologies. This action, designated Sylvester II, 1 arose from a bid that SLS (a small business) had submitted on a small business set-aside contract for construction of unaccompanied enlisted personnel housing (UEPH contract) at Industrial Indemnity, as surety for SLS, issued the necessary performance and payment bonds for the project. The complaint alleged that Industrial Indemnity knew about the relationship between SLS and Covington, but failed to disclose this information to the Department of the Navy or the government.
Camp Pendleton, California. The complaint alleged that SLS and Covington (a large business) had made false claims regarding their contractual relationship. The complaint further alleged that based on the terms of their contractual relationship, SLS and Covington would have been ineligible to bid on the UEPH contract
The complaint in Sylvester II was kept under seal until May 26, 1987, when the government initially declined to proceed with the action. 31 U.S.C. § 3730(b)(2).
The qui tam plaintiffs filed a second qui tam action against the same defendants (Sylvester III ). In that action, they alleged similar false statements in violation of 31 U.S.C. § 3729 relating to nine other contracts that SLS and Covington had previously teamed on. Sylvester III was unsealed on December 12, 1989, after the government elected to intervene and proceed with that action. 31 U.S.C. § 3730(b)(2).
Pursuant to the Central District of California's Local Rule 4.3.1, both parties filed a notice in Sylvester III that Sylvester II was a related case. In February 1990, the government moved to consolidate Sylvester II and Sylvester III, in accordance with Fed.R.Civ.P. 42(a). The district court denied this motion.
Sylvester II went to trial in July 1990. During the trial, the qui tam plaintiffs and Industrial Indemnity agreed to a stipulation dismissing the claims against Industrial Indemnity, with prejudice. On July 9, 1990, the district court approved the stipulation "that Plaintiffs will dismiss their action with prejudice against Defendant Industrial Indemnity."
The government asserts it did not learn of Industrial Indemnity's dismissal until July 30, 1990, and that it was unaware of the settlement negotiations between the qui tam plaintiffs and Industrial Indemnity. Industrial Indemnity disputes this. It asserts that the attorney for the qui tam plaintiffs assured Industrial Indemnity's trial counsel that the government was aware of the settlement negotiations and the government's consent to the dismissal was "not a problem." Industrial Indemnity acknowledges it made no inquiry of the government.
On August 2, 1990, three days after learning that the action had been dismissed with prejudice as to Industrial Indemnity, the government filed its objection to the dismissal: "[T]he Attorney General objects to dismissing that claim with prejudice, but consent will be given to dismissing that claim without prejudice to the government pursuing that claim." On September 24, 1990, the district court granted Industrial Indemnity's motion to confirm its dismissal with prejudice, effectively overruling the government's objection.
At the conclusion of the trial in Sylvester II, judgment was entered on December 4, 1990 against the sole remaining defendant, Covington Technologies. On December 27, 1990 the government moved to intervene as a matter of right for the purpose of appealing the district court's dismissal of Industrial Indemnity with prejudice. The government argued that intervention was necessary because the voluntary dismissal of Industrial Indemnity with prejudice in Sylvester II could impair the government's ability to litigate its claims in Sylvester III and to raise affirmative defenses in another lawsuit pending in the claims court. 2 The court denied the motion. This appeal followed.
The district court's denial of a party's motion to intervene as a matter of
right is reviewed de novo, except for the issue of timeliness, which is reviewed for abuse of discretion. County of Orange v. Air California, 799 F.2d 535, 537 (9th Cir.1986), cert. denied, 480 U.S. 946, 107 S.Ct. 1605, 94 L.Ed.2d 791 (1987).
We have adopted a four-part test to resolve applications for intervention of right under Fed.R.Civ.P. 24(a)(2): 3
An order granting intervention as of right is appropriate if (1) the applicant's motion is timely; (2) the applicant has asserted an interest relating to the property or transaction which is the subject of the action; (3) the applicant is so situated that without intervention the disposition may, as a practical matter, impair or impede its ability to protect that interest; and (4) the applicant's interest is not adequately represented by the existing parties.
Air California, 799 F.2d at 537. This test essentially mirrors the language of Fed.R.Civ.P. 24(a)(2). Generally, Rule 24(a)(2) is construed broadly in favor of proposed intervenors and "we are guided primarily by practical considerations." United States v. Stringfellow, 783 F.2d 821, 826 (9th Cir.1986) (citation omitted), vacated on other grounds, 480 U.S. 370, 107 S.Ct. 1177, 94 L.Ed.2d 389 (1987).
The district court did not address the timeliness of the government's motion to intervene. Had it done so, we would review that determination for abuse of discretion. Air California, 799 F.2d at 537. The record is complete, however, and it is plain from the record that the government's motion was not untimely. It is also plain that had the district court denied the motion on the ground of untimeliness it would have abused its discretion. Under these circumstances, it would be a waste of judicial resources to remand the timeliness issue to the district court for its initial consideration. Accordingly, we decide the issue. Cf. United States v. Hendricks, 743 F.2d 653, 656 (9th Cir.1984), cert. denied, 470 U.S. 1006, 105 S.Ct. 1362, 84 L.Ed.2d 382 (1985) ().
In determining whether a motion to intervene is timely, we evaluate three factors:
(1) the stage of the proceeding at which an applicant seeks to intervene; (2) the prejudice to other parties; and (3) the reason for and length of the delay.
Air California, 799 F.2d at 537 (citing United States v. Oregon, 745 F.2d 550, 552 (9th Cir.1984)).
The government initially declined to intervene. Later, it moved to intervene after Industrial Indemnity and SLS had been dismissed with prejudice, and after judgment had been entered against the sole remaining defendant, Covington Technologies.
The "general rule [is] that a post-judgment motion to intervene is timely if filed within the time allowed for the filing of an appeal." Yniguez v. Arizona, 939 F.2d 727, 734 (9th Cir.1991). In Yniguez, we cited with approval the district court's discussion Although post-judgment motions to intervene are...
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