U.S. ex rel. Thornton v. Science Applications
| Decision Date | 17 September 1998 |
| Docket Number | No. 3:94-CV-0749-T.,3:94-CV-0749-T. |
| Citation | 79 F.Supp.2d 655 |
| Parties | UNITED STATES of America, ex rel. Peter Jensen THORNTON, Plaintiff, v. SCIENCE APPLICATIONS INTERNATIONAL CORPORATION, et al., Defendants. |
| Court | U.S. District Court — Northern District of Texas |
Lawrence T. Bowman, Cozen & O'Connor, Dallas, TX, F. Paul Bland, Jr., Trial Lawyers for Public Justice, Washington, DC, for Peter Jensen Thornton.
Peter Jensen Thornton, Dallas, TX, pro se.
William R. Stoughton, McKenna & Cuneo, Dallas, TX, Alan I. Baron, Foley Hoag & Eliot, Washington, DC, for Science Applications Intern. Corp.
Jeffrey Scott Levinger, Carrington Coleman Sloman & Blumenthal, Dallas, TX, Roger M. Witten, Stephen F. Black, Wilmer Cutler & Pickering, Washington, DC, for Bendix Field Engineering Corp. Thomas W. Mills, Jr., Mills Presby & Associates, Dallas, TX, pro se.
ORDER AWARDING STATUTORY SHARE OF SETTLEMENT AND DENYING REQUEST FOR ATTORNEYS' FEES
Before the Court is Relator's Brief in Support of Statutory Share of Settlement and Recovery of Reasonable Attorneys' Fees and Litigation Expenses. The Government and Defendants filed briefs in opposition, and Relator has filed a response to Defendants' brief. The Court now considers the brief and the responses.
Relator Peter Jensen Thornton filed this suit under the qui tam provision of the False Claims Act, 31 U.S.C. § 3730(b), alleging misconduct on the part of private subcontractors in connection with the installation of the security system for the Western Currency Production Facility (the Facility) in Fort Worth, Texas.
The United States Department of Treasury, Bureau of Engraving and Printing, engaged the United States Army Corps of Engineers to build the Facility. The Bureau of Engraving uses the Facility to print currency. Also, the Facility houses a federal reserve vault, a plate vault, and plate-making equipment.
Defendant Science Applications International Corporation contracted with the Army Corps of Engineers to design, install, and test a state-of-the-art security system for the Facility.
Defendant Bendix Field Engineering Corporation, a Division of Allied Signal Aerospace Company, contracted with Science Applications as the first-tier subcontractor to install the electrical and electronic components for the security system.
Defendant Lloyd Electric Company, Inc., is the successor-in-interest to J.V. Clark Electric Company, Inc. Bendix engaged J.V. Electric as the second-tier subcontractor to install conduit, wire, and cabling at the Facility.
On April 19, 1994, Thornton, formerly a quality control inspector for Science Applications, filed this suit alleging that Defendants defrauded the United States and the taxpayers by submitting false claims to the Government with respect to their performance of the contract. Principally, Thornton alleges Defendants obtained performance payments by submitting false claims for uncompleted work and false reports of system tests. Also, he alleges Defendants concealed important facts about materials and labor expended on the project, falsely reported that project materials complied with contract requirements, misrepresented the project's compliance with the Buy American Act, and either overcharged for labor or charged for unnecessary labor.
On April 24, 1995, the Government intervened in the suit. See 31 U.S.C. § 3730(c)(4). The Government investigated Thornton's allegations and determined that some of them had merit. Specifically, the Government found that Science Applications and its subcontractors wrongfully billed for testing required under the contract, which, in fact, was never performed.
The Government and Defendants reached a settlement to which relator objected. Nevertheless, the Court approved the settlement on August 15, 1997. On August 25, 1997, the parties filed copies of the settlement agreement between the Government and Defendants.1
Pursuant to this Court's order, Relator, through attorney Rogge Dunn, filed the instant brief in support of Relator's share of the settlement proceeds. Additionally Dunn's brief supports awarding Relator attorneys' fees and costs.
False Claims Act qui tam Provisions
Congress enacted the False Claims Act in 1863 as a tool to combat fraud against the Government. See United States ex rel. Kelly v. Boeing Co., 9 F.3d 743, 745-46 (9th Cir.1993). The Act has particular applicability in the context of government contracting. See William E. Kovacic, Whistleblower Bounty Lawsuits as Monitoring Devices in Government Contracting, 29 Loy.L.A.L.Rev. 1799 (1996). The Act authorizes both the Attorney General and private citizens to bring civil actions for violations of § 3729 of the Act. See id. § 3730(a), (b). In 1986, Congress amended the Act to increase the financial and other incentives for private individuals to bring suit under the Act. See Boeing, 9 F.3d at 745; S.Rep. No. 99-345, at 23-24 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5288-89.
If the Government elects to proceed with the suit, it has the primary responsibility for prosecuting it and is not bound by an act of the person who first filed it. See 31 U.S.C. § 3730(c)(1). However, the person who first filed the suit may remain a party to it, subject to certain conditions. See id. The Government may settle the suit, notwithstanding the objection of the person initiating it, if the court determines, after a hearing, that the proposed settlement is fair, adequate, and reasonable under all the circumstances. See id. § 3730(c)(2)(B).
If the court determines that the settlement is fair, adequate, and reasonable, the settlement is accepted, and the qui tam plaintiff is entitled to receive a share of the settlement proceeds. The qui tam plaintiff's share should not be below 15%, nor above 25%. See 31 U.S.C. § 3730(d)(1).
Not surprisingly, Relator and the Government disagree as to the appropriate percentage Relator is entitled to in this action. Furthermore, they do not agree as to what constitutes "proceeds" within the meaning of the statute. Before addressing Relator's percentage, therefore, the Court must determine what constitutes the settlement proceeds in this action.
It is not in dispute that the settlement agreement that the Government entered into with Defendants generally consisted of three parts. The Government received a total of $230,000 in cash, Defendants waived certain claims against the Army Corp of Engineers, and the Government received access to the source code for the software provided to the Government under the contract between Science Applications and the Government. Relator contends that all three components are proceeds, and that he is entitled to a share of all three. The Government argues that Relator is only entitled to a share of the cash.
The False Claims Act does not define proceeds. The Court therefore looks to the plain meaning of the word. See e.g. Smith v. United States, 508 U.S. 223, 228, 113 S.Ct. 2050, 124 L.Ed.2d 138 (1993) (citations omitted). Regarding proceeds, Black's Law Dictionary states in part, BLACK'S LAW DICTIONARY 1204 (6th ed.1990). The United States Supreme Court also noted long ago that proceeds are not necessarily money, and that it is a word of great generality. See Phelps v. Harris, 101 U.S. 370, 380, 25 L.Ed. 855 (1879). Based on the above definition, the Court concludes that the claims abandoned by Defendants are part of the proceeds of the settlement.
The Court's conclusion is also supported by the settlement agreement itself. In the Court's order of August 15, 1997, it approved the proposed settlement agreement on the condition that the parties submit the agreement to the Court. Based on that order, the Government submitted the settlement agreement for the Court to review. The agreement provides that one of the conditions demanded by the Government and agreed to by Defendants is that each defendant "waives, releases, and promises to refrain from instituting, maintaining, or causing to be instituted or maintained any action, claim, or adjustment against the Government which it has or may have as a result of its performance under the Contract." (Notice of Filing of Settlement Agreements Ex. 1, 2, and 3.) The language of the settlement agreements supports the Court's conclusion that the claims released by Defendants are part of the proceeds received by the Government.
The Court's conclusion is also supported by the representations made to the Court. The Government submitted the settlement agreements to the Court, and in supporting the proposed settlement agreement, Defendants stated that release of the claims was a significant part of the settlement.
The Government states that even if the claims are part of the proceeds, their value is undetermined. Defendants represented to the Court that the value of the claims is $1.6 million. (Allied Signal Technical Services Corp. Reply to Relator's Objection to Proposed Settlement at 2.) The Government argues that the Court cannot rely on $1.6 million as an accurate figure because that is only what Defendants were claiming against the Government, and not necessarily what the value of the claims is. The Government argues, in essence, that the claims cannot be part of the proceeds because the value is unknown. As explained below, the Court is of the opinion that it can consider the claims as part of the proceeds without knowing the exact value.
Based on the plain meaning of the word "proceeds," the terms of the settlement agreement, and the...
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