United States ex rel. Klein v. Omeros Corp.

• Decision Date: 15 October 2012
• Docket Number: Case No. C09–1342–JCC.
• Citation: 897 F.Supp.2d 1058
• Parties: UNITED STATES of America, ex rel., Richard J. KLEIN, Plaintiff, v. OMEROS CORPORATION, a Washington corporation, and Gregory Demopulos, an individual, Defendants.
• Court: U.S. District Court — Western District of Washington

897 F.Supp.2d 1058

UNITED STATES of America, ex rel., Richard J. KLEIN, Plaintiff,

v.OMEROS CORPORATION, a Washington corporation, and Gregory Demopulos, an individual, Defendants.

Case No. C09–1342–JCC.

United States District Court,

W.D. Washington,

at Seattle.

Oct. 15, 2012.

Harry James Franklyn Korrell, III, Cassandra L. Kennan, Thomas A. Lemly, Minh Phung Ngo, Davis Wright Tremaine, Seattle, WA, Harold Malkin U.S. Attorney's Office, Seattle, WA, for Plaintiff.

Michael C. Theis, Aaron M. Paul, Hogan Lovells U.S. LLP, Denver, CO, Molly Aneesa Malouf, William F. Cronin, Sarah E. Tilstra, Seann C. Colgan, Corr Cronin Michelson, Seattle, WA, for Defendant.

ORDER ON PARTIES' MOTIONS FOR PARTIAL SUMMARY JUDGMENT

JOHN C. COUGHENOUR, District Judge.

This matter comes before the Court on Plaintiff's and Defendants' motions for partial summary judgment (Dkt. Nos. 296 & 304). Having thoroughly considered the parties' briefing and the relevant record, the Court finds oral argument unnecessary and hereby GRANTS summary judgment for Plaintiff Richard Klein on Defendant Gregory Demopulos' defamation counterclaim, except as to Klein's posting of a biotech article about Defendant Omeros Corporation on Yahoo! Finance's stock message board, and otherwise DENIES both parties' motions, for the reasons explained herein.

I. SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party has met this burden, the opposing party must show that there is a genuine issue of fact for trial. Id. at 331–33 & n. 3, 106 S.Ct. 2548. The Court resolves reasonable doubts as to the existence of material facts against the moving party and draws inferences in the light most favorable to the opposing party. Addisu v. Fred Meyer, Inc., 198 F.3d 1130, 1134 (9th Cir.2000).

II. QUITAM CLAIMSA. SBIR Eligibility Claim

Klein brought several qui tam claims under the False Claims Act (“FCA”) against Omeros and Dr. Demopulos. The Court previously dismissed several of them. (Dkt. No. 242.) Two remain. The first alleges that Omeros is liable under 31 U.S.C. § 3729(a)(1)-(2) for false claims submitted to the United States by Nura, Inc., a company purchased by a subsidiary of Omeros in 2006. Nura certified that it was a “small business” when it applied to transfer to itself (from a company it had purchased) a Small Business Innovation Research (“SBIR”) program grant (“the Anxiety Grant”), even though under the applicable regulations it was ineligible for the grant because it was majority-owned by venture capital firms. Klein alleges that Nura knew it was ineligible, and that Omeros is liable for Nura's false claims as Nura's successor. Klein and Omeros both move for summary judgment on this claim.

1. Statute of Limitations

Omeros argues that Klein's SBIR eligibility claim is barred by the FCA's statute of limitations. That statute provides:

A civil action under section 3730 [for false claims] may not be brought-

(1) more than 6 years after the date on which the violation of section 3729 is committed, or

(2) more than 3 years after the date when facts material to the right of action are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances, but in no event more than 10 years after the date on which the violation is committed, whichever occurs last.

31 U.S.C. § 3731(b). Omeros argues that the § 3731(b)(2) tolling provision is not available to Klein because he is not an “official of the United States,” and so § 3731(b)(1) bars Klein's claim because he filed his complaint more than six years after the latest alleged violation occurred. In United States, ex rel. Hyatt v. Northrop Corp., 91 F.3d 1211 (9th Cir.1996), the Ninth Circuit held that the § 3731(b)(2) tolling provision is available not only to the United States but also to qui tam plaintiffs like Klein, and that “as to the qui tam plaintiff, the three-year extension of the statute of limitations begins to run once [the] qui tam plaintiff knows or reasonably should have known the facts material to his right of action.” Id. at 1217–18. Omeros argues that the U.S. Supreme Court implicitly overruled Hyatt in United States, ex rel. Eisenstein v. City of New York, 556 U.S. 928, 129 S.Ct. 2230, 173 L.Ed.2d 1255 (2009). In Eisenstein, the Supreme Court held that when the United States has declined to intervene in a privately-initiated FCA action, it is not a “party” to the litigation for purposes of Federal Rule of Appellate Procedure 4(a)(1) and 28 U.S.C. § 2107, which allow sixty days to file a notice of appeal (rather than the default thirty) if one of the “parties” to the lawsuit is the United States. Id. at 937, 129 S.Ct. 2230. This is so, it held, despite the fact that the United States is the “real party in interest” to a qui tam lawsuit in which it has declined to intervene. Id. at 935, 129 S.Ct. 2230.

Eisenstein did not implicitly overrule Hyatt. To implicitly overrule a case, “the relevant court of last resort must have undercut the theory or reasoning underlying the prior circuit precedent in such a way that the cases are clearly irreconcilable.” Miller v. Gammie, 335 F.3d 889, 900 (9th Cir.2003). The Hyatt court's determination that § 3731(b)(2)'s tolling provision is available to qui tam plaintiffs did not rely on the assumption that the United States is a party to an FCA suit in which it has declined to intervene, or that the qui tam plaintiff otherwise “stands in the shoes” of the United States. Instead, it relied on the statutory language and structure of the FCA:

Section 3731(b) delineates the statute of limitations for a “civil action under section 3730.” No distinction is made between civil actions brought by the government under § 3730(a) and those brought by qui tam plaintiffs under § 3730(b). Indeed, there is nothing in the entire statute of limitations subsection which differentiates between private and government plaintiffs at all. If Congress had intended the tolling provisions of § 3731(b)(2) to apply solely to suits brought by the Attorney General, it could have easily expressed its specific intent.

91 F.3d at 1214. Thus, Eisenstein did not “undercut the theory or reasoning underlying” Hyatt.Miller, 335 F.3d at 900.Hyatt 's holding that the statutory language of the FCA evinces Congress' intent that the tolling provision apply to qui tam plaintiffs is not irreconcilable with Eisenstein 's holding that the United States is not a “party” under Rule 4(a)(1) and 28 U.S.C. § 2107 to a qui tam lawsuit in which it has declined to intervene. The statute of limitations does not bar Klein's SBIR eligibility claim.

2. Successor Liability

Klein argues that Omeros is liable for Nura's alleged false certifications through the federal common law of successor liability, and that an expanded version of such liability—traditionally applied in cases involving violations of federal labor laws-applies.

“[F]ederal law governs questions involving the rights of the United States arising under nationwide federal programs” like the FCA. United States v. Kimbell Foods, Inc., 440 U.S. 715, 726, 99 S.Ct. 1448, 59 L.Ed.2d 711 (1979). But whether, in giving content to that federal law where the statutory scheme is silent, the court should “adopt state law or [ ] fashion a nationwide federal rule is a matter of judicial policy.” Id. at 728, 99 S.Ct. 1448. The court considers (1) whether the federal program, by its very nature, requires uniformity; (2) whether application of state law would frustrate specific objectives of the federal program; and (3) whether application of a uniform federal rule would disrupt existing commercial relationships based on state law. Id. at 728–29, 99 S.Ct. 1448. “[M]atters left unaddressed in [ ] a [federal statutory] scheme are presumably left subject to the disposition provided by state law.” O'Melveny & Myers v. FDIC, 512 U.S. 79, 85, 114 S.Ct. 2048, 129 L.Ed.2d 67 (1994); see Atchison, Topeka & Santa Fe Ry. Co. v. Brown & Bryant, Inc., 159 F.3d 358, 362 (9th Cir.1997) (acknowledging “the heavy burden that a party bears in proving the need for uniformity or proving that state rules conflict with federal policy”). Here, then, the first question is whether the federal common law, or Washington's law, of successor liability applies to Klein's qui tam SBIR eligibility claim.

Klein does not address this question; rather, he assumes that federal common law applies. Meanwhile, Omeros addresses only Klein's argument that the expanded version of the federal common law of successor liability applies, without first addressing the question of whether state or federal common law applies. Fortunately, the Court need not address this question. If federal common law applies, the traditional exceptions to successor non-liability— not the expanded exception advocated by Klein—apply ( see infra ), and the traditional exceptions under federal common law are identical to those under Washington law:

[A]sset purchasers are not liable as successor corporations unless:

(1) The purchasing corporation expressly or impliedly agrees to assume the liability;

(2) The transaction amounts to a “de-facto” consolidation or merger;

(3) The purchasing corporation is merely a continuation of the selling corporation; or

(4) The transaction was fraudulently entered into in order to escape liability.Atchison, 159 F.3d at 361;see Cambridge Townhomes, LLC v. Pac. Star Roofing, Inc., 166 Wash.2d 475, 209 P.3d 863, 868 (2009) (same under Washington law).

Under the National Labor Relations Act (“NLRA”) and several other federal labor acts, courts have applied a federal common law exception to the...