Citynet, LLC v. Frontier West Virginia, Inc., et al.

Filing 596

MEMORANDUM OPINION AND ORDER granting Frontier's 578 MOTION for partial vacatur as more fully set forth herein; directing that the 465 Memorandum Opinion and Order as to Count VII in favor of Citynet against Frontier as to liability is vacated. Signed by Senior Judge John T. Copenhaver, Jr. on 11/7/2023. (cc: counsel of record; any unrepresented parties) (lca)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF WEST VIRGINIA
AT CHARLESTON
CITYNET, LLC, on behalf of
the United States of America,
Plaintiff/Relator,
v.

Civil Action No. 2:14-cv-15947

FRONTIER WEST VIRGINIA, INC.,
a West Virginia corporation;
KENNETH ARNDT, individually;
DANA WALDO, individually;
MARK MCKENZIE, individually;
JIMMY GIANATO, individually;
and GALE GIVEN, individually,
Defendants.

MEMORANDUM OPINION AND ORDER
Pending is defendant Frontier West Virginia Inc.’s
(“Frontier”) motion for partial vacatur of summary judgment
order (ECF No. 578), filed January 19, 2023, with respect to
Count VII of the operative complaint insofar as Frontier was
found liable, which motion is unopposed by the plaintiff/relator
Citynet, LLC.

I. Background

Citynet instituted this action on May 7, 2014, with
the filing of its qui tam complaint under the False Claims Act

(“FCA”), 31 U.S.C. §§ 3729-3733.

ECF No. 1.

Pursuant to 31

U.S.C. § 3730(b)(2), Citynet’s qui tam complaint was filed in
camera, sealed, and served on the United States but not the
defendants.

ECF Nos. 2-3.

The United States then moved for

several extensions under 31 U.S.C. § 3730(b)(3) while it decided
whether to intervene and conduct the action on its own behalf.
See ECF Nos. 4-26.

On June 17, 2016, the United States declined

to intervene, ECF No. 27, and on June 28, 2016, the qui tam
complaint was unsealed, ECF No. 28.
On July 18, 2016, Citynet filed the first amended qui
tam complaint.

First Am. Compl., ECF No. 30.

Therein, Citynet

alleged that the Executive Office of West Virginia (“WVEO”)
received $126,323,296 in federal grant money from the American
Recovery and Reinvestment Act’s Broadband Technology
Opportunities Program “to build a[n open-access] middle-mile
[broadband internet] network” in West Virginia.

Id. ¶¶ 1-2. 1

Citynet averred that the WVEO and Frontier agreed that “Frontier
would serve as a ‘sub-recipient’ of the grant to establish a
middle-mile broadband network to over 1,000 points of interest

1

“Middle mile” is a category of internet infrastructure
comprising the fiber optic lines that link the larger “backbone”
fiber optic lines to “last mile” lines that connect to the end
consumer. See Inquiry Concerning the Deployment of Advanced
Telecommunications Capability, 15 FCC Rcd. 20913, 20922-23
(2000).
2

throughout West Virginia.”

Id. ¶ 71; see also id. ¶¶ 69-74.

Citynet alleged that Frontier; Frontier employees and defendants
Kenneth Arndt, Dana Waldo, and Mark McKenzie; and West Virginia
state employees and defendants Gale Given and Jimmy Gianato,
individually, defrauded the United States in connection with the
grant application and implementation in violation of the FCA.
Id. ¶¶ 3, 9-12, 14; see also id. ¶¶ 4-6 (providing additional
summary information on the allegations against the defendants
under the FCA). 2

Once the court ruled on the motions to dismiss,

the case was stayed for two years while the state defendants
unsuccessfully sought the protection of qualified immunity in an
interlocutory appeal.
As relevant here, under Count VII of the amended
complaint, Citynet alleged that Frontier billed Facility Build
Out (“FBO”) invoice processing costs of $465,000 to the grant
despite a lack of documentation to support the costs and with
knowledge that the costs were impermissible and unreflective of
costs actually incurred.

See id. ¶ 176; see also Citynet Mem.

Supp. Mot. Summ. J., ECF No. 383 at 27-29.

The parties filed

cross-motions for summary judgment on Count VII, with Frontier’s

2

Citynet also filed suit against West Virginia state employee
Kelly Goes. Citynet, with the United States’ consent,
voluntarily dismissed Goes from this action without prejudice.
ECF Nos. 92, 93.
3

motion limited to the element of scienter. 3

Frontier Mot. Summ.

J., ECF No. 380; Citynet Mot. Summ. J., ECF No. 382.
On September 8, 2022, the court entered a memorandum
opinion and order on the parties’ cross-motions for summary
judgment.

Ord. Summ. J., ECF No. 465.

In that order, the court

provided an extensive recitation of the facts of this case, and,
as relevant here, granted summary judgment for Citynet with
regard to liability, but not damages, as to its Count VII claim
against Frontier under 31 U.S.C. § 3729(a)(1)(B) that the
Frontier defendants made or used a false record or statement
material to a false claim regarding FBO invoice processing costs
charged by Frontier and presented to the WVEO for payment with
grant funds.

Id. at 51-67.

The parties appeared on December 5, 2022, the eve of
the scheduled trial date, for a final settlement conference
before the court.

The court directed the parties to appear for

a continuation of that conference the following afternoon, at
which point the parties informed the court that they had reached

3

Frontier’s motion for summary judgment was joined by defendants
Arndt, McKenzie, and Waldo. Because they do not join Frontier
in seeking vacatur of the court’s order on that motion, the
court refers herein to that motion only as regards defendant
Frontier West Virginia, Inc. unless otherwise indicated.
4

a settlement, pending approval by the United States as required
under the False Claims Act.

See ECF No. 576.

The court’s summary judgment memorandum opinion and
order doubtless played a pivotal role in inducing the blanket
settlement reached by the parties in this action.

By virtue of

the settlement, Frontier achieved a broad compromise with
Citynet, an effect of which was the sacrifice by Frontier of the
opportunity to appeal the court’s finding of Frontier’s Count
VII liability that dealt with a relatively minor issue in
relation to the whole case.
On January 19, 2023, Frontier filed the unopposed
motion for partial vacatur of the court’s summary judgment
order, under Fed. R. Civ. P. 60(b)(6), which is presently before
the court.

Frontier Mot. Vacatur, ECF No. 578.

II. Legal Standard

“On motion and just terms, the court may relieve a
party or its legal representative from a final judgment, order,
or proceeding[.]”

Fed. R. Civ. P. 60(b).

“Under Rule 60(b)(1),

a party may seek relief based on ‘mistake, inadvertence,
surprise, or excusable neglect,’” while subsections (b)(2)
through (b)(5) supply other grounds, and “Rule 60(b)(6) provides
5

a catchall for ‘any other reason that justifies relief.’”

Kemp

v. United States, 142 S. Ct. 1856, 1861 (2022) (quoting Fed. R.
Civ. P. 60(b)).

“This last option is available only when Rules

60(b)(1) through (b)(5) are inapplicable.”

Id. (citing

Liljeberg v. Health Servs. Acquisition Corp., 486 U.S. 847, 863
n.11 (1988)); see also United States v. Williams, 56 F.4th 366,
373 (4th Cir. 2023) (“the grounds for Rule 60(b)(6) are mutually
exclusive from the grounds of other Rule 60(b) motions”).
Where Rule 60(b)(6) applies, relief should be granted
only in “extraordinary circumstances.”

Id.; McMellon v. United

States, 528 F. Supp. 2d 611, 613 (S.D. W. Va. 2007) (citing Reid
v. Angelone, 369 F.3d 363, 370 (4th Cir. 2004); Valero
Terrestrial Corp. v. Paige, 211 F.3d 112, 118 n.2 (4th Cir.
2000)).

Ultimately, a grant of vacatur under Rule 60(b)(6) is

discretionary.

Id.; Plaut v. Spendthrift Farm, Inc., 514 U.S.

211, 233í34 (1995).

III. Discussion

With this motion for vacatur, Frontier urges the
court to vacate in part its memorandum opinion and order on the
parties’ cross motions for summary judgment (ECF No. 465),
entered September 8, 2022.

In support of the motion, Frontier

advances several arguments that can be summarized as stating two
6

grounds for its requested relief: (1) the court’s scienter
finding on Count VII at summary judgment was legally erroneous, 4
and (2) equitable considerations weigh in favor of vacatur.

The

court will address each in turn.
As to the first ground, Frontier substantively
restates its prior arguments in summary judgment briefing in the
course of questioning the propriety of the court’s determination
that Citynet established the element of scienter on Count VII so
as to avoid a jury question.

See Frontier Mot. at 4–5.

The

court therefore considers whether an error in the court’s
reasoning, were the court to find one existed, would constitute
extraordinary circumstances meriting vacatur.
Relief under Rule 60(b)(6) “is available only when
Rules 60(b)(1) through (b)(5) are inapplicable.”
States, 142 S. Ct. 1856, 1861 (2022).

Kemp v. United

“Mistake” within the

meaning of Rule 60(b)(1) “covers all mistakes of law made by a
judge.”

Id. at 1862-63.

Where a litigant’s Rule 60(b) motion

“boils down to an argument that the court made a mistake[] or .
. . . inadvertently over-looked [an] argument[,]” it should . .

4

Such contentions are ostensibly raised as part of Frontier’s
analysis in its motion for vacatur of the purported fact-bound
nature of the court’s ruling on Count VII, though it is apparent
from the discussion that Frontier takes issue with the merits of
the court’s decision on Count VII. See Frontier Mot. at 4-5.
7

. invoke[] Rule 60(b)(1), not (b)(6).”

Blitch v. United States,

39 F.4th 827, 834 (7th Cir. 2022) (applying Kemp).

Insofar as

Frontier brings this motion for an alleged mistake of law under
Rule 60(b)(6), when 60(b)(1) would be the correct avenue of
relief, the court could not grant the relief sought on this
basis, even were it persuaded, although it is not, that
Frontier’s memorandum articulates an error of law warranting the
extraordinary relief of vacatur.

Therefore, the court does not

consider Frontier’s substantive arguments that the court erred
by finding scienter as to the FBO invoice processing costs under
Count VII entitling it to summary judgment.
Frontier’s equitable arguments that extraordinary
circumstances meriting relief exist can be summarized as: (1)
the adverse judgment imposes significant undue prejudice on
Frontier and (2) the court’s summary judgment order holds
minimal precedential value.

Frontier Mot. at 3.

Frontier contends that it would be prejudiced by “the
weight of an unappealable summary judgment finding as to
liability” in the event that it might possibly undertake at some
unspecified future time to “enter the government contracts and
public funding arenas.”

Frontier Mot. at 6.

Frontier

acknowledges, correctly, that appeal would be precluded on
account of the doctrine of mootness.
8

See id. at 2.

In general, “[m]ootness by reason of settlement does
not justify vacatur[.]”

U.S. Bancorp Mortg. Co. v. Bonner Mall

P’ship, 513 U.S. 18, 29 (1994); see also Valero Terrestrial
Corp. v. Paige, 211 F.3d 112, 121 (4th Cir. 2000) (Bonner Mall
considerations are “relevant to, and likewise largely
determinative of, district court decisions on vacatur under Rule
60(b)(6)).

However, vacatur is an equitable remedy such that

“exceptional circumstances may conceivably counsel in favor of
such a course.”

Bonner Mall, 513 U.S. at 29.

The “voluntary,

deliberate, free, and untrammeled choice not to appeal the
decision of [a] district court granting . . . summary judgment”
cannot alone justify relief under Rule 60(b)(6).

Dowell v.

State Farm Fire and Cas. Auto. Ins. Co., 993 F.2d 46, 48 (4th
Cir. 1993) (citing Ackermann v. United States, 340 U.S. 193, 200
(1950)) (internal marks omitted).
As a defendant in this case, Frontier made a series of
voluntary, deliberate, free, and untrammeled choices of trial
strategy that rendered the summary judgment ruling on Count VII
unappealable.

After proceeding with this case to summary

judgment, Frontier obtained judgment in its favor on Counts I-VI
and IX, while Citynet obtained summary judgment against Frontier
on liability as to Count VII, and the court allowed Count VIII
and damages on Count VII to proceed to trial.

9

See Ord. Summ. J.

at 71.

Thereafter, the summary judgment order was tested by two

parties to the litigation, McKenzie and Citynet, through motions
for reconsideration. 5

See ECF Nos. 481, 499.

Perhaps as a

matter of strategy, Frontier chose not to seek reconsideration
of the summary judgment order on Count VII before this court,
although it did assiduously preserve its right to appeal the
ruling in five separate pre-trial filings with the court and
during the first day of the Final Settlement Conference on
December 5, 2022.

See ECF No. 471-1 at 3; ECF No. 520 at 17

n.6; ECF No. 530 at 2; ECF No. 530-1 at 2, 3; ECF No. 535 at 2;
ECF No. 571.

The availability of appeal was also directly

contemplated by Frontier during settlement negotiations.

See

Fenwick Email, Sept. 14, 2022, ECF No. 581-3 at 2; Garcia Decl.,
ECF No. 583-1 at ¶ 8.
Until the time the parties informed the court of their
settlement of this matter on December 6, 2022, the ability of

5

The court granted McKenzie’s motion and revised its adverse
liability finding as to him on Count VII. ECF No. 563 at 24.
At the time the parties notified the court of their settlement
of this matter on December 6, 2022, Citynet’s motion for
reconsideration remained pending decision.
Frontier incorrectly states that the court set aside the
summary judgment order as to defendant Arndt. See Frontier Mot.
at 3. As the record correctly reflects, the court’s erroneous
clerical amendment of the summary judgment order with respect to
Arndt, ECF No. 467, was vacated, set aside, and held for naught
by subsequent order. ECF No. 489. Accordingly, the court’s
summary judgment order stands unaltered as to Arndt.
10

Frontier to appeal the adverse summary judgment ruling on Count
VII was preserved, seemingly well-understood, and a strategic
matter for Frontier’s contemplation when it arrived at a
settlement with Citynet on the eve of trial.

Any foreclosure of

appeal was of Frontier’s own making by its consent to settle and
therefore does not, without more, justify the vacatur that
Frontier seeks by its motion.
Frontier asserts that the court’s summary judgment
order with respect to Count VII holds minimal precedential value
because it is fact-specific, not dispositive in future
litigation, and turns on a scienter standard that Frontier
believed to be in flux due to the Supreme Court’s grant of
certiorari to address the issue.

In light of the Supreme

Court’s decision in that case, United States ex rel. Schutte v.
SuperValu Inc., 598 U.S. 739 (2023), this last argument is
unpersuasive.

In Schutte, the Supreme Court held that the FCA

scienter standard depends on the knowledge and subjective belief
of a defendant, rather than what an objectively reasonable
person may have known or believed.
752.

598 U.S. at 743, 748–49,

This articulation of the FCA scienter standard accords

with that applied by this court on Count VII at summary
judgment, a decision that is amply supported by the evidence
presented.

See Ord. Summ. J. at 60-65.

11

In any event, “[a]s always when federal courts
contemplate equitable relief,” they must “take account of the
public interest.”

Bonner Mall, 513 U.S. at 26.

“Judicial

precedents are presumptively correct and valuable to the legal
community as a whole . . . and should stand unless a court
concludes that the public interest would be served by a
vacatur.”

Id. (quoting Izumi Seimitsu Kogyo Kabushiki Kaisha v.

U.S. Philips Corp., 510 U.S. 27, 40 (1993) (Stevens, J.,
dissenting)); see also Valero, 211 F.3d at 121.
The court’s summary judgment order was the culmination
of years of investigation and discovery, vigorous advocacy, and
thousands of pages of exhibits and briefing submitted on
Frontier and Citynet’s cross-motions for summary judgment alone.
This immense effort allowed for a thorough airing of the issues
and an extensive, reasoned analysis of the parties’ contentions.
Under the reasoning of Bonner Mall and Valero, this judicial
work product is presumptively valuable, and Frontier has failed
to rebut that presumption.
Nevertheless, in addressing a motion under Rule
60(b)(6), a district court may grant vacatur in “‘exceptional
circumstances,’ even where the considerations of relative fault
and the public interest would otherwise counsel against

12

vacatur.”

Valero, 211 F.3d at 121 (quoting Bonner Mall, 513

U.S. at 29).
As the court’s foregoing discussion reflects, the
condition of fault counsels against vacatur.

Notwithstanding

that, Frontier makes two points that merit the court’s
consideration of whether “exceptional circumstances” warranting
vacatur exist.

First, Frontier points out the comparatively

minor value of the fraudulent invoice processing costs for which
the court found it liable, noting they total “approximately
$465,000, or roughly one percent of the BTOP grant funds paid to
Frontier and roughly one-third of one percent of the total grant
funds.” 6

Frontier Mot. at 4.

Second, Frontier points out the

severe consequences of that adverse fraud ruling for the company
and its affiliates.

Namely, Frontier avers that “[i]n the event

Frontier (or any affiliate) undertakes to procure a government
contract or other public finding [sic, funding], the company
would be saddled with an adverse ruling finding a violation of
the False Claims Act.”

Id. at 6.

In a subsequent filing on

September 29, 2023 (ECF No. 594), Frontier supports this concern
by reference to the federal regulation at 2 C.F.R. Part 180

6

The court also notes that the entirety of the invoice
processing costs of $465,000, had it been fully recovered as
damages, would have equaled one-thirtieth of the settlement.
13

entitled “OBM Guidelines to Agencies on Governmentwide Debarment
and Suspension (Nonprocurement).”
The court, like Frontier, finds troubling the immense
incongruency in this case between the limited scale of the
liability and the steep, wide-ranging consequences to Frontier
and its affiliated concerns.

In particular, the court observes

that Frontier stands to suffer the material reputational
consequences of False Claims Act liability upon a tiny fraction
of the case to the same degree as if it had been liable for the
case in its entirety.

These consequences are serious because

they are enduring, reputational, material, and affect related
entities beyond just the defendant in this case.

While Frontier

must answer for the conduct and practices raised in the course
of this litigation, the consequences here stretch far past the
point of proportionate accountability, to the end that relative
fault and the equitable considerations outlined above yield a
public interest that is in equipoise.
In view of this gross asymmetry between the scale of
liability and the weight of consequences, the court finds that,
on the facts of this case, the exceedingly rare circumstances
warranting vacatur are present.

Accordingly, the court will

grant Frontier’s requested relief.

14

IV. Conclusion

For the reasons set forth herein, it is ORDERED that
Frontier’s motion for partial vacatur (ECF No. 578) of the
court’s grant of summary judgment for Citynet on Count VII
against Frontier as to liability be, and hereby is, granted.

It

is further ORDERED that the court’s summary judgment order (ECF
No. 465) as to Count VII in favor of Citynet against Frontier as
to liability be, and hereby is, VACATED.
The Clerk is requested to transmit copies of this
memorandum opinion and order to all counsel of record and any
unrepresented parties.
ENTER: November 7, 2023

15