Perry v. Pacific Martime Industries Corporation et al

Filing 72

ORDER Denying Motion for Attorney's Fees and Costs (Dkt. 68 ). Signed by Chief Judge Larry Alan Burns on 6/13/2019. (jdt)

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF CALIFORNIA
JOSEPH EARL PERRY,

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CASE NO. 13cv2599-LAB (JMA)
Plaintiff,

vs.

ORDER DENYING MOTION FOR
ATTORNEY’S FEES AND COSTS [Dkt.
68]

PACIFIC MARITIME INDUSTRIES
CORP., et al.
Defendants.
Defendants have filed a Motion for Attorney’s Fees and Costs in this qui tam action.
For the reasons below, the motion is DENIED.
Background

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Plaintiff Joseph Earl Perry brought this action in 2013 on behalf of the United States

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under the False Claims Act, 31 U.S.C. § 3729 et. seq. The gist of Perry’s claim was that

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two government contractors, Pacific Maritime Industries Corporation and Harcon

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Precision Metals, Inc., and their president, John Atkinson (collectively, “Pacific”), had tried

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to cheat the Navy on six separate contracts. In 2017, after several of Perry’s claims had

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already been dismissed, the Court granted summary judgment in favor of Pacific on his

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remaining claims. As the prevailing party, Pacific then filed this Motion for Attorneys’ Fees

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and Costs, which the Court deferred until Perry’s appeal of this Court’s decision was final.

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The Ninth Circuit affirmed the summary judgment ruling and granted Pacific’s motion to

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transfer consideration of attorneys’ fees on the appeal to this Court. This Court then

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ordered a two-phase fee application procedure, with additional briefing to determine the

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appropriate amount of fees required only if entitlement was established in the first phase.

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Dkt. 60. Here, the Court considers only whether Pacific is entitled to fees.

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Legal Standard

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In actions brought under the False Claims Act, a court may award attorneys’ fees

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against the plaintiff if “the action was clearly frivolous, clearly vexatious, or brought

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primarily for purposes of harassment.” 31 U.S.C. § 3730(d)(4). An action is “clearly

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frivolous” when the result is obvious or the arguments made are “wholly without merit.”

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Pfingston v. Ronan Eng’g Co., 284 F.3d 999, 1006 (9th Cir. 2002). Additionally, an action

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is “clearly vexatious” or “brought primarily for purposes of harassment” when the plaintiff

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pursues the litigation with an improper purpose, such as to annoy or embarrass the

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defendant. Id.

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Wary that saddling whistleblowers with attorneys’ fees will chill them from coming

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forward with evidence of corporate wrongdoing, the Ninth Circuit has expressed

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reluctance to grant such fees in the absence of “rare and special circumstances.” Id. at

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1007.

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Analysis

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Pacific does not contend Perry’s claims are vexatious or brought for the primary

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purpose of harassment, instead arguing only that Perry’s claims are clearly frivolous. But

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they are not.

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The main basis for Pacific’s argument that Perry’s claims were clearly frivolous is

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that Perry failed to present adequate documentation or witnesses to support his claims,

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and only appealed two of the six claims that were dismissed. While Perry could have

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certainly done more to help himself, it’s another thing to say his case was meritless simply

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because the evidence supporting his claims never fully materialized or because the

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eventual result was not in his favor. The Supreme Court has cautioned courts to resist

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the temptation to engage in post hoc reasoning that, because a plaintiff did not ultimately

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prevail, his action must have been unreasonable or without foundation.

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Christiansburg Garment Co. v. Equal Employment Opportunity Comm’n, 434 U.S. 412,

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See

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421-22 (1978). Since a prospective plaintiff can seldom be sure of ultimate success from

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the outset of the case, “this kind of hindsight logic could discourage all but the most airtight

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claims.” Id.

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Mindful of the Supreme Court’s admonition, the Court finds that Perry’s claims—

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as weak as they may have ultimately been—were not frivolous. Two of Perry’s claims

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failed not because his reading of the contract specifications was incorrect—indeed, in its

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summary judgment order the Court conceded that his reading may have been the better

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of the two—but because he failed to prove that Pacific knowingly misinterpreted the

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specifications. See Dkt. 54 at 4, 6. His inability to prove scienter did not undermine the

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suit as a whole and was not a “clearly frivolous” waste of time that rose to the level of a

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rare and special circumstance justifying an award of attorneys’ fees. While Perry’s claim

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was ultimately unsuccessful, it was not wholly lacking in legal merit, and doesn’t justify

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the additional penalty of attorneys’ fees. See Boyd v Accuray, Inc., 2012 WL 4936591,

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at *4 (N.D. Cal. 2012) (“[A]lthough Plaintiff's claims were insufficient to withstand summary

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judgment, they were not clearly frivolous or vexatious.”); see also United States ex rel.

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Berg v. Honeywell Int’l, Inc., 2017 WL 1843688, at *2 (D. Alaska 2017) (“The fact that this

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Court granted summary judgment in favor of Honeywell does not mean the result was

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‘obvious’ or that Relators' arguments were ‘wholly without merit.’”).

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Pacific cites only two cases—both easily distinguishable—as authority for its point.

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At the same time, Pacific glosses over the fact that nearly all Section 3730(d)(4) claims

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are resolved in favor of not imposing fees. The cases relied on by Pacific do not meet

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the high bar for “rare and special circumstances.”

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The first case, U.S. ex rel. J. Cooper & Associates, Inc. v. Bernard Hodes Group,

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Inc., 422 F. Supp. 2d 225 (D.D.C. 2006), is a district court case that wasn’t decided under

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the same “rare and special circumstances” doctrine that governs in the Ninth Circuit. But

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even applying that heightened standard, J. Cooper is easily distinguishable. The court in

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J. Cooper dismissed the case on jurisdictional grounds almost immediately, finding that

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the plaintiff was not the direct source of the whistleblower information, a prerequisite for

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bringing a qui tam action. Id. at 235-37. A reasonable plaintiff would have been aware

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of this jurisdictional requirement, making J. Cooper’s decision to file suit anyway

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sanctionable under Section 3730(d)(4).

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In United States v. Safran Group, S.A., 2018 WL 558937 (N.D. Cal. 2018), the

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other case relied on by Pacific, the court granted attorneys’ fees only for specific claims

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that were deemed to be clearly frivolous, rather than for the action as a whole. Allowing

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attorneys’ fees to be apportioned by claim is antithetical to the “rare and special

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circumstances” doctrine, greatly increases the chances that whistleblowers will be taxed

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with fees, and thus decreases the chances of them pursuing claims in the first instance.

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It will also strain judicial resources by opening up nearly every failed claim under the False

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Claims Act to the possibility of a motion for attorneys’ fees, even where many (but not all)

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of the allegations were strong. For these reasons, the Court rejects the tack followed in

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Safran Group.

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In sum, while Perry’s evidence fell short at summary judgment, it had a reasonable

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chance of success. Deeming his claims clearly frivolous is unwarranted and would likely

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discourage future whistleblowers from coming forward. Pacific’s motion is DENIED.

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IT IS SO ORDERED.
Dated: June 13, 2019
HONORABLE LARRY ALAN BURNS
Chief United States District Judge

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