United States v. Carranza

• Decision Date: 14 February 2022
• Docket Number: 1:20-cv-05396 (GHW) (SDA)
• Parties: United States of America and the States of the United States, ex rel. Patrick Donohue, Plaintiff, v. Richard Carranza et al., Defendants.
• Court: U.S. District Court — Southern District of New York

United States of America and the States of the United States, ex rel. Patrick Donohue, Plaintiff, v. Richard Carranza et al., Defendants.

No. 1:20-cv-05396 (GHW) (SDA)

United States District Court, S.D. New York

February 14, 2022

OPINION AND ORDER

STEWART D. AARON, UNITED STATES MAGISTRATE JUDGE

Pending before the Court is a motion by Defendants Loudoun County Public School District and Scott A. Ziegler (the “Loudoun Defendants”), pursuant to Rules 12(b)(2), 12(b)(3) and 12(b)(6) of the Federal Rules of Civil Procedure, to dismiss the claims of Plaintiff-Relator Patrick Donohue (“Plaintiff”) in his Second Amended Complaint against the Loudoun Defendants for lack of personal jurisdiction, improper venue and failure to state a claim.^[1] (Loudoun Defs.' Not. of Mot., ECF No 68.) For the reasons set forth below, the Loudoun Defendants' motion to dismiss is DENIED, Plaintiff's claims against the Loudoun Defendants are severed and the Clerk of Court is directed to transfer the severed claims to the Clerk of the U.S. District Court for the Eastern District of Virginia, pursuant to 28 U.S.C. § 1406(a).

BACKGROUND

In this qui tam action, Plaintiff alleges violations of the False Claims Act (“FCA”), 31 U.S.C. § 3730 and corresponding state false claim statutes, against the Chancellor of the New York City Department of Education (“NYCDOE”), two departments of education, and various school districts and their superintendents across nine states, including the Loudoun Defendants in Virginia.^[2] (See SAC ¶¶ 21-66.) Plaintiff alleges that, in the wake of pandemic-related school building closures, the defendants provided remote services (via telehealth and/or telephone) to students with disabilities, contrary to Medicaid and Individuals with Disabilities Education Act (the “IDEA”) requirements, and then submitted false claims for reimbursement for such services, thereby depriving their students of a free, appropriate public education (“FAPE”). (See id. ¶¶ 12; Pl.'s Opp. Mem., ECF No. 74, at 1-2.)

On December 27, 2021, the Loudoun Defendants filed their motion to dismiss. (See Loudoun Defs.' Not. of Mot.) On January 18, 2022, Plaintiff filed a memorandum of law in opposition. (See Pl.'s Opp. Mem.) On January 25 2022, the Loudoun Defendants filed a letter reply in further support of their motion to dismiss. (See Loudoun Defs.' Reply, ECF No. 75.) On January 29, 2022, the Loudoun Defendants' motion to dismiss was referred on consent of the parties to the undersigned for disposition. (See Order of Ref., ECF No. 81.)

DISCUSSION

The Loudoun Defendants' motion is based upon the defenses of lack of personal jurisdiction, improper venue and failure to state a claim upon which relief can be granted. (See Loudoun Defs.' Mem. at 12.) The Second Circuit has held that consideration of personal jurisdiction and venue should precede consideration of whether a complaint adequately states a claim for relief. See Arrowsmith v. United Press Int'l, 320 F.2d 219, 221 (2d Cir. 1963) (noting that “[a] dismissal for lack of jurisdiction or improper venue does not preclude a subsequent action in an appropriate forum, whereas a dismissal for failure to state a claim upon which relief can be granted is with prejudice”). “The question of personal jurisdiction, which goes to the court's power to exercise control over the parties is typically decided in advance of venue, which is primarily a matter of choosing a convenient forum.” Leroy v. Great Western United Corp., 443 U.S. 173, 180 (1979). However, because “neither personal jurisdiction nor venue is fundamentally preliminary in the sense that subject-matter jurisdiction is, . . . when there is a sound prudential justification for doing so, . . . a court may reverse the normal order of considering personal jurisdiction and venue.”^[3] Id.

In the present case, the Court finds that prudential considerations favor evaluating the issue of venue first for two principal reasons. As an initial matter, it is clear that venue does not exist in this Court. Furthermore, since (as set forth below) the Court has decided to transfer venue with respect to the claims against the Loudoun Defendants to the U.S. District Court for the Eastern District of Virginia where personal jurisdiction exists over the Loudoun Defendants, it is “prudentially appropriate to address venue first since a decision to transfer . . . render[s] personal jurisdiction analysis with respect to [the Southern District] irrelevant.”^[4] Everlast World's Boxing, 928 F.Supp.2d at 741 (quoting Basile v. Walt Disney Co., 717 F.Supp.2d 381, 385-86 (S.D.N.Y. 2010)).

I. Venue-Related Legal Standards

“On a motion to dismiss for improper venue under Rule 12(b)(3), the burden of proof lies with the plaintiff to show that venue is proper.” Detroit Coffee Co., LLC v. Soup for You, LLC, No. 16-CV-09875 (JPO), 2018 WL 941747, at *1 (S.D.N.Y. Feb. 16, 2018) (internal quotations omitted). “Where no evidentiary hearing has been held, ‘the plaintiff need only make a prima facie showing of [venue].'” Del Toro v. Novus Equities, LLC, No. 20-CV-01002 (NSR), 2021 WL 5567618, at *2 (S.D.N.Y. Nov. 29, 2021) (citing Gulf Ins. Co. v. Glasbrenner, 417 F.3d 353, 355 (2d Cir. 2005)).

“[T]he general federal venue provisions [are] set out in 28 U.S.C. § 1391.” U.S. ex rel. Thistlethwaite v. Dowty Woodville Polymer, Ltd., 110 F.3d 861, 864 (2d Cir. 1997). That statute provides, in relevant part, that venue is proper in “(1) a judicial district in which any defendant resides, if all defendants are residents of the State in which the district is located; (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated; or (3) if there is no district in which an action may otherwise be brought as provided in this section, any judicial district in which any defendant is subject to the court's personal jurisdiction with respect to such action.” See 28 U.S.C. § 1391(b).

“Specific procedural provisions in substantive federal statutes sometimes have their own . . . venue provisions.” Thistlethwaite, 110 F.3d at 864. As relevant here, the FCA has its own venue provision, i.e., 31 U.S.C. § 3732(a). See id. at 866 (“the substance and structure of § 3732(a) indicate clearly that that provision governs venue”). Section 3732(a) provides, in relevant part, as follows: “Any action under section 3730 may be brought in any judicial district in which the defendant or, in the case of multiple defendants, any one defendant can be found, resides, transacts business, or in which any act proscribed by section 3729 occurred.” 31 U.S.C. § 3732(a).

If a case is filed in the wrong district, a court “shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought” 28 U.S.C. § 1406(a). The decision of whether to dismiss or transfer lies within the broad discretion of the district court. See Meserole St. Recycling, Inc. v. CSX Transp., Inc., No. 06-CV-04652 (CBA), 2007 WL 2891424, at *4 (E.D.N.Y. Sept. 28, 2007). “When determining whether transfer pursuant to Section 1406(a) is appropriate, a court may take into account the ultimate goal of the ‘expeditious and orderly adjudication of cases and controversies on their merits.'” Id. (quoting Goldlawr, Inc. v. Heinman, 369 U.S. 463, 466-67 (1962)).

The district court may exercise the discretion to transfer a case even if a defendant has not requested transfer. See Holey Soles Holdings, Ltd. v. Foam Creations, Inc., No. 05-CV-06939 (MBM), 2006 WL 1147963, at *9 (S.D.N.Y. May 1, 2006) (“A court may transfer a case pursuant to 28 U.S.C. § 1406(a) sua sponte even if the defendant moves only to dismiss.” (citing Concession Consultants, Inc. v. Mirisch, 355 F.2d 369, 372 n.3 (2d Cir. 1966))).

II. Analysis

Plaintiff argues that venue is proper in this Court based upon 31 U.S.C. § 3732(a). (See Pl.'s Opp. Mem. at 6-7.) Under that statute, where there are multiple defendants, an FCA case may be brought in any judicial district where “any one defendant can be found.” See 31 U.S.C. § 3732(a). Although Porter and the NYCDOE are defendants and can be found in this District, as the Loudoun Defendants note in their motion (see Loudoun Defs.' Mem. at 17-18), Section 3732(a) is constrained by Rule 20 of the Federal Rules of Civil Procedure, which governs permissive joinder. Since the Loudoun Defendants were not properly joined in this action with Porter and the NYCDOE, venue for claims against the Loudoun Defendants cannot be predicated upon the presence of Porter and the NYCDOE in this District.

Under Rule 20, persons may be joined in one action as defendants if:

(A) any right to relief is asserted against them jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences; and

(B) any question of law or fact common to all defendants will arise in the action.

Fed. R. Civ. P. 20(a)(2). Both of these elements are required for proper joinder. See Deskovic v. City of Peekskill, 673 F.Supp.2d 154, 159 (S.D.N.Y. 2009).

Rule 21 of the Federal Rules of Civil Procedure provides: “On motion or on its own, the court may at any time, on just terms, add or drop a party. The court may also sever any claim against a party.” Fed.R.Civ.P. 21. “If a court concludes that defendants have been improperly joined under Rule 20, it has broad discretion under Rule 21 to sever parties or claims from the action.” Kalie v. Bank of Am. Corp., 297 F.R.D. 552, 557 (S.D.N.Y. 2013) (citation omitted).

In their motion, the Loudoun Defendants assert that they were improperly joined to the action by Plaintiff b...