United States v. Va. Res. Auth.
| Decision Date | 15 April 2014 |
| Docket Number | Civil Action No. 5:13cv00045 |
| Court | U.S. District Court — Western District of Virginia |
| Parties | UNITED STATES OF AMERICA, ex. rel. Mark W. Prince, Plaintiffs, v. VIRGINIA RESOURCES AUTHORITY, et al., Defendants. |
By: Michael F. Urbanski
United States District Judge
This qui tam action is presently before the court on defendant Virginia Resources Authority's ("VRA") Motion to Dismiss for Failure to State a Claim and for Lack of Jurisdiction. Dkt. No. 16. A hearing was held on February 6, 2014. At the hearing, the court granted VRA leave to file within fourteen (14) days any response to the Memorandum of Law filed by the relator, Mark W. Prince ("Prince"), on the morning of the hearing. The court further granted VRA leave to supplement its pleadings, within fourteen (14) days, to elaborate on the similarities between the allegations in this action and those made by Prince in numerous prior state court lawsuits. VRA filed its supplemental briefing on February 21, 2014. Dkt. No. 30. On March 16, 2014, Prince filed a response to VRA's supplemental briefing, and then filed additional evidence on March 23, 2014. Dkt. Nos. 31 & 32. On April 4, 2014, the court entered an oral Order directing the parties to refrain from any further filings. Dkt. No. 33. The matter is thus ripe for adjudication. For the reasons stated herein, the court will GRANT VRA's motion to dismiss and DISMISS the remainder of the case for failure to prosecute pursuant to Federal Rule of Civil Procedure 41(b).
Prince alleges, on behalf of the United States, that VRA and others violated the False Claims Act ("FCA"), 31 U.S.C. §§ 3729-3733 et seq., by knowingly presenting, or causing to be presented, a false or fraudulent claim for payment or approval related to federal subsidies and tax exempt status for certain bonds through the Build America Bonds ("BAB") program. See 31 U.S.C. § 3729(a)(1)(A) (). Prince asserts that the bonds were issued in violation of Article VII of the Virginia Constitution and that the defendants falsely claimed that the bonds were legally issued in the course of participating in the BAB program. See Am. Compl. ¶¶ 54-55, 111, 115, Dkt. No. 11.1
VRA advances three arguments in support of its motion to dismiss. First, it argues that this court lacks jurisdiction under the Rooker-Feldman doctrine because of the numerous prior lawsuits filed by Prince in state court. Specifically, VRA argues that these state court rulings establish that the defendants, including VRA, did not issue the bonds illegally. Second, it argues that Prince's claims are barred by claim and/or issue preclusion for the same reason. Third, VRA claims that it both possesses sovereign immunity and is not a "person" subject to suit under the FCA because it is an arm of the Commonwealth of Virginia.
As set forth below, this case does not fall within Rooker-Feldman's narrow jurisdictional bar. Instead, this matter is governed by Virginia preclusion law. Because the critical legal issue — the legality of the bonds issued by VRA and others — has already been decided in previous litigationbetween Prince and VRA, Prince's claims are barred by issue preclusion, also known as collateral estoppel. As such, the court need not address whether VRA is an arm of the Commonwealth.
"Under the Rooker—Feldman doctrine, a 'party losing in state court is barred from seeking what in substance would be appellate review of the state judgment in a United States district court.'" Smalley v. Shapiro & Burson, LLP, 526 F. App'x 231, 235 (4th Cir. 2013) (unpublished) (quoting Johnson v. De Grandy, 512 U.S. 997, 1005-06 (1994)).2 In other words, the doctrine "bar[s] the federal courts from exercising jurisdiction in 'cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments.'" Stratton v. Mecklenburg Cnty. Dep't of Soc. Servs., 521 F. App'x 278, 288-89 (4th Cir. 2013) (unpublished) (quoting Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 283 (2005)). The basis of the doctrine is 29 U.S.C. § 1257, in which Congress vests the Supreme Court with exclusive jurisdiction to review state court decisions on issues of federal law.3 The Rooker-Feldman doctrine is a "corollary" to this rule, as it prohibits lower federal courts from exercising such appellate jurisdiction over state court actions. Adkins v. Rumsfeld, 464 F.3d 456, 463 (4th Cir. 2006) (citing Lance v. Dennis, 546 U.S. 459, 463 (2006)).
It is plain that Prince's suit in this case is not effectively an appeal of the state court judgments cited by VRA. By alleging that VRA violated the FCA, Prince is not seeking "to overturn [an] injurious state-court judgment." Skinner v. Switzer, 131 S. Ct. 1289, 1297 (2011); Saudi Basic, 544 U.S. at 291-92. His FCA claim is not based on the earlier state court rulings, but on the allegedactions of the defendants. While it is true that there are overlapping issues of fact and law between these state court suits and this one, that it is insufficient to invoke the jurisdictional limitation of the Rooker-Feldman doctrine.
It has been repeatedly and emphatically emphasized by higher courts that Rooker-Feldman is a narrow doctrine. See Skinner, 131 S. Ct. at 1297 (); see also Saudi Basic, 544 U.S. at 284 (); Adkins, 464 F.3d at 463 (citing Lance, 546 U.S. at 463) ( that the Supreme Court "has recently underscored that Rooker-Feldman is a 'narrow doctrine.'"). Rooker-Feldman "does not otherwise override or supplant preclusion doctrine or augment the circumscribed doctrines that allow federal courts to stay or dismiss proceedings in deference to state-court actions." Saudi Basic, 544 U.S. at 284. The significant overlap between the factual and legal questions presented in this action and Prince's previous state-court lawsuits presents is an issue of preclusion (discussed below) — not of jurisdiction.
[T]he Rooker-Feldman doctrine does not stop a district court from exercising subject-matter jurisdiction simply because a party attempts to litigate in federal court a matter previously litigated in state court. If a federal plaintiff presents some independent claim, albeit one that denies a legal conclusion that a state court has reached in a case to which he was a party, then there is jurisdiction and state law determines whether the defendant prevails under principles of preclusion.
Davani v. Virginia Dep't of Transp., 434 F.3d 712, 718 (4th Cir. 2006) (emphasis original) (internal alterations omitted) (quoting Saudi Basic, 544 U.S. at 293). Prince's FCA claim that VRA violated 31 U.S.C. § 3729(a)(1)(A) is just such an independent claim.
VRA argues that it significant that Prince did not file this federal action until there was "a known unsatisfactory outcome" in state court. Suppl. Mem. of Law, Dkt. No 30, at 4. The timing of the filing, however, is immaterial, because where "a federal plaintiff presents an independent claim, it is not an impediment to the exercise of federal jurisdiction that the same or a relatedquestion was earlier aired between the parties in state court." Skinner v. Switzer, 131 S. Ct. 1289, 1297 (2011) (internal quotation marks and alterations omitted) (quoting Saudi Basic, 544 U.S. at 29293). In short, nothing in the Rooker-Feldman doctrine deprives this court of jurisdiction in this matter.
While the Fourth Circuit has applied the Rooker-Feldman doctrine in two recent unpublished decisions, those cases are distinguishable. In Stratton v. Mecklenburg County Department of Social Services, 521 F. App'x 278, the Fourth Circuit found that the plaintiffs were effectively seeking to overturn various state court ruling regarding the termination of the parental rights of two of the plaintiffs. Thus, a favorable ruling in Stratton would have effectively reversed the state court rulings. Here, a holding that VRA violated the FCA would not have the effect of undoing the state court holdings on Prince's state-law claims, even if the judgments would be inconsistent.
In Smalley v. Shapiro & Burson, LLP, 526 F. App'x 231, the Fourth Circuit held that the plaintiffs RICO and pendant state-law claims alleging a "robo-signing" scheme in state foreclosure proceedings were barred by Rooker-Feldman. The Smalley Court found that although a favorable judgment in federal court would not "undo" the foreclosure holdings, it would "in essence, hold that the state court judgments which affirmed the legal fees and commissions and held the allegedly false affidavits sufficient to warrant foreclosure was in error." Id. at 236. In other words, a favorable judgment in the federal action would have reversed the state court rulings as to legal fees and commissions. As such, the Fourth Circuit found that the federal suit raised claims that were "inextricably intertwined" with the state court decisions such that Rooker-Feldman applied.
Smalley is not controlling in this case. Smalley represents a highly extreme and unique scenario in which part of the relief awarded by the state court — legal fees and commissions — would have been negated by a favorable judgment in the federal action, such that the federal action wasinextricably intertwined with the prior state court action even where it would not "undo" it directly. That scenario is not present here. A favorable judgment on Prince's independent federal claim would have no impact on any component of the state court judgments as to Prince's state law claims. Mo...
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