U.S. ex rel. Vallejo v. Investronica, Inc.

• Decision Date: 31 March 1998
• Docket Number: No. 96-CV-6575L.,96-CV-6575L.
• Citation: 2 F.Supp.2d 330
• Parties: UNITED STATES of America, ex rel. Eduardo Enriche VALLEJO, Plaintiff, v. INVESTRONICA, INC. and Investronica, S.A., Defendants.
• Court: U.S. District Court — Western District of New York

2 F.Supp.2d 330

UNITED STATES of America, ex rel. Eduardo Enriche VALLEJO, Plaintiff, v. INVESTRONICA, INC. and Investronica, S.A., Defendants.

No. 96-CV-6575L.

United States District Court, W.D. New York.

March 31, 1998.

COPYRIGHT MATERIAL OMITTED

Robert Trusiak, U.S. Attorney's Office, Buffalo, NY, Michael F. Hertz, U.S. Dept. of Justice, Washington, DC, Philip A. Shaikun, U.S. Dept. of Justice, Washington, DC, Scott Michael Moore, San Francisco, CA, for Plaintiff.

William J. Sapone, Gerald H. Kiel, MaAulay, Fisher, Nissen, Goldberg & Kiel, LLP, New York City, for Defendants.

DECISION AND ORDER

LARIMER, Chief Judge.

Plaintiff, Eduardo Enriche Vallejo ("plaintiff"), commenced this action on behalf of the United States under the qui tam provisions of the False Claims Act ("FCA"), 31 U.S.C. § 3729 et seq., against Investronica, S.A. ("S.A.") and Investronica, Inc. ("INC."). The United States declined to intervene, and plaintiff pursued this action on his own initiative, as permitted by the statute. Pending before the Court now are defendants' motion to dismiss, plaintiff's motion for an "order of no criminal contact" and for preservation of documents, and plaintiff's motion for sanctions.

FACTUAL BACKGROUND

Plaintiff is a United States citizen, residing in Madrid, Spain, and a former employee of both defendants. S.A. is a corporation organized under the laws of Spain and has its principal place of business in Madrid, Spain. INC. is a corporation organized under the laws of New Jersey and has its principal place of business in Georgia.

In his original complaint, filed December 20, 1996, plaintiff asserted two causes of action. First, plaintiff alleged that defendants routinely made false statements to the United States Government to avoid or decrease import duties, in violation of 31 U.S.C. § 3729(a)(7). Specifically, plaintiff alleged that defendants falsely undervalued the sale price of high technology fabric cutting machines imported into the United States from Spain. Further, employees traveling from Spain and entering the United States falsely informed the United States Customs Service that they did not possess any goods subject to import duties. Second, plaintiff alleged that when he complained to defendants about these false statements, which he believed to be in violation of United States law, S.A. and INC. retaliated against him, in violation of 31 U.S.C. § 3730(h).

On October 14, 1997, plaintiff filed an amended complaint. Plaintiff reiterated his two original causes of action, without change, and attempted to assert a third cause of action, arising out of defendants' alleged false statements to the United States Government to avoid paying social security taxes, in violation of 31 U.S.C. § 3729(a)(7). Eventually, plaintiff conceded that this cause of action, which involved the Internal Revenue Code, was not actionable under the FCA, and, therefore, he withdrew the claim. 31 U.S.C. § 3729(e).

Defendants move to dismiss plaintiff's amended complaint on the following grounds: (1) lack of subject matter jurisdiction; (2) lack of personal jurisdiction over S.A.; (3) insufficiency of service of process as to S.A.; (4) improper venue; (5) failure to plead averments of fraud with particularity; (6) failure to state a claim for retaliation; and (7) unclean hands.

DISCUSSION

A. Defendants' Motion to Dismiss

1. Lack of Subject Matter Jurisdiction

Defendants argue that the Court of International Trade ("CIT") has exclusive jurisdiction over plaintiff's first cause of action regarding import duties. Accordingly, defendants move to dismiss this claim, pursuant to Federal Rule of Civil Procedure 12(b)(1), for lack of subject matter jurisdiction.

Section 1331 of Title 28 provides that "district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. A district court would be divested of jurisdiction, however, if an action fell within one of several specific grants of exclusive jurisdiction to the CIT. K mart Corp. v. Cartier, Inc., 485 U.S. 176, 182-83, 108 S.Ct. 950, 99 L.Ed.2d 151 (1988). Section 1582 of Title 28 provides that the CIT "shall have exclusive jurisdiction of any civil action which arises out of an import transaction and which is commenced by the United States." 28 U.S.C. § 1582.

Defendants argue that because plaintiff brought this action solely as a relator for the Government, the real party in interest, this action was "commenced by the United States," and, therefore, is within the CIT's exclusive jurisdiction. Plaintiff responds that this action was not, in fact, "commenced by the United States." According to plaintiff, he commenced this action, as an individual person, for himself and for the Government, pursuant to § 3730(b)(1) of the FCA, which provides: "A person may bring a civil action for a violation of section 3729 for the person and for the United States Government. The action shall be brought in the name of the government." 31 U.S.C. § 3730(b)(1).

The CIT recently rejected the precise argument advanced here by the defendants. In United States ex rel. Felton v. Allflex USA Inc., 989 F.Supp. 259, (C.I.T.1997), the CIT held that it did not have jurisdiction over relator's FCA suit, which arose out of defendant's failure to pay import duties, because the action was not one "commenced by the United States." According to the CIT, the district court was the proper forum for the action.

The CIT reasoned that it was the private party who commenced the action for both himself and for the Government. The Government was simply the party "who may join and assume responsibility for the suit at a later time." Id. at 262-63. The CIT held, and I agree, that the mere fact that the United States is the real party in interest does not necessarily lead to the conclusion that the action was "commenced by the United States" for purposes of 28 U.S.C. § 1582.

Therefore, I find that this Court, and not the CIT, has jurisdiction over plaintiff's claim regarding import duties. Accordingly, defendants' motion to dismiss for lack of subject matter jurisdiction is denied.

2. Lack of Personal Jurisdiction over S.A.

Defendant S.A. moves to dismiss plaintiff's amended complaint, pursuant to Federal Rule of Civil Procedure 12(b)(2), on the ground that this Court lacks personal jurisdiction over it.¹

A plaintiff facing a Rule 12(b)(2) motion to dismiss made before any discovery has been completed need only allege facts constituting a prima facie showing of personal jurisdiction. PDK Labs, Inc. v. Friedlander, 103 F.3d 1105, 1108 (2d Cir.1997). All allegations must be construed in the light most favorable to plaintiff, and all doubts must be resolved in plaintiff's favor, notwithstanding a contrary presentation by the moving party. A.I. Trade Fin., Inc. v. Petra Bank, 989 F.2d 76, 79-80 (2d Cir.1993).

In order for personal jurisdiction to exist over a defendant, two prerequisites must be met. First, the defendant must be amenable to service of process pursuant to an applicable rule or statute. Second, plaintiffs assertion of personal jurisdiction must comport with the requirements of due process. See Metropolitan Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 567 (2d Cir. 1996).

In the instant case, the FCA provides for worldwide service of process. 31 U.S.C. § 3732(a). Therefore, the first requirement is easily met. S.A., a Spanish corporation, is amenable to service of process under the FCA.²

When a federal statute permits worldwide service of process, the relevant due process inquiry is whether defendant has "minimum contacts" with the United States as a whole, United States ex rel. Thistlethwaite v. Dowty Woodville Polymer, Ltd., 976 F.Supp. 207, 210 (S.D.N.Y.1997), "such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 85 L.Ed. 278 (1940)). "`[I]t is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the [United States], thus invoking the benefits and protections of its laws.'" Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) (quoting Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958)). In short, defendant's contacts with the forum must be such that it "should reasonably anticipate being haled into court there." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980). A defendant's minimum contacts with the forum are measured at the time the underlying claim arose and not at the time the complaint is filed. Nielsen v. Sioux Tools, Inc., 870 F.Supp. 435, 439-40 (D.Conn.1994); Tomar Elecs., Inc. v. Whelen Technologies, Inc., 819 F.Supp. 871, 876 (D.Ariz.1992).

Construing all the allegations in plaintiff's favor, I find that S.A.'s contacts with the United States, irrespective of any contacts INC. has with this forum, are more than sufficient to allow this Court to exercise personal jurisdiction over S.A. In his amended complaint, plaintiff alleges that S.A. has exported its high technology fabric cutting machines and parts from Spain into the United States for several years. Further, plaintiff submits documents evidencing S.A.'s business relationship—the exact parameters of which are unclear—with the Hickey-Freeman Company here in Rochester, New York, as well as with fifteen other United States companies. In connection with S.A.'s relationship with Hickey-Freeman, plaintiff maintains that at least two S.A. employees traveled from Spain to Rochester in June 1990 to repair equipment that had been sold to Hickey-Freeman. In connection with S.A.'s relationship with other customers, plaintiff...