United States of America et al v. Acacia Mental Health Clinic LLC et al
ORDER signed by Judge J.P. Stadtmueller on 3/2/2017: GRANTING 61 Relator Rose Presser's Motion for Voluntary Dismissal; DENYING as moot 70 United States' Motion for Leave to File a Statement of Interest; and DISMISSING action without prejudice. (cc: all counsel) (jm)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
UNITED STATES OF AMERICA and the
STATE OF WISCONSIN, ex rel. ROSE
Case No. 13-CV-71-JPS
ACACIA MENTAL HEALTH CLINIC,
LLC and ABE FREUND,
Relator Rose Presser (“Presser”) initiated this qui tam action against
Defendants on January 18, 2013, alleging violations of the federal False
Claims Act (“FCA”), 31 U.S.C. § 3730, and its Wisconsin counterpart. (Docket
#1). After an appeal to the Seventh Circuit, on remand she sought and was
granted leave to file a second amended complaint. (Docket #58). She filed her
second amended complaint on December 14, 2016, which Defendants
answered on December 28, 2016. (Docket #59 and #60).
Also on December 28, 2016, the government filed its own civil action
under the FCA, raising largely the same claims as Presser asserts here.
(Docket #61 at 2). Because the government did not identify this action as
related, the government’s suit was assigned to District Judge Lynn Adelman
and is pending in Case No. 16-CV-1718. Currently before the Court is
Presser’s motion for voluntary dismissal without prejudice, which she filed
on February 3, 2017. Id. She seeks dismissal on the ground that the
government’s FCA action prevents her from maintaining this one. See id. at
3. Additionally, she notes that under the FCA she has the same rights to a
share in the government’s recovery in its case as she does here. Id.; see 31
U.S.C. § 3730(c)(5). Defendants oppose the motion, arguing that while they
agree the case should be dismissed, any dismissal should be with prejudice.
(Docket #65). Presser filed a reply in support of her motion on February 27,
2017. (Docket #69). The motion is fully briefed and, for the reasons stated
below, it will be granted.1
Federal Rule of Civil Procedure 41 governs Presser’s motion for
voluntary dismissal. Because Defendants have answered the second amended
complaint, and because Defendants would not consent to the dismissal, Rule
41 provides that Presser can only obtain voluntary dismissal by court order
and “on terms that the court considers proper.” Fed. R. Civ. P. 41(a)(2). In
considering whether to grant a motion under Rule 41(a)(2), a court must
examine whether the defendant will suffer unfair prejudice from the
dismissal. Marlow v. Winston & Strawn, 19 F.3d 300, 304 (7th Cir. 1994).
Several factors guide this analysis, including “‘the defendant’s effort and
expense of preparation for trial, excessive delay and lack of diligence on the
part of the plaintiff in prosecuting the action, insufficient explanation for the
need to take a dismissal, and the fact that a motion for summary judgment
has been filed by the defendant.’” Kunz v. DeFelice, 538 F.3d 667, 677 (7th Cir.
2008) (quoting Pace v. S. Express Co., 409 F.2d 331, 334 (7th Cir. 1969)).
Under Rule 41(a)(2), a court can, in its discretion, impose conditions
on dismissal that are necessary to offset possible prejudice to the defendant.
On February 28, 2017, the day after Presser’s motion fully ripened, the
government filed a motion for leave to submit its own brief in support of dismissal
without prejudice. (Docket #70). The Court need not consider this eleventh-hour
submission in order to reach the government’s desired conclusion, so the Court
will deny the government’s motion as moot.
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Marlow, 19 F.3d at 303; McCall–Bey v. Franzen, 777 F.2d 1178, 1184 (7th Cir.
1985). One common condition is requiring the plaintiff to pay the defendant’s
reasonable attorney’s fees and costs. Marlow, 19 F.3d at 305. Another
permissible condition is dismissing the matter with prejudice, although
dismissals under Rule 41(a)(2) are normally made without prejudice. See Fed.
R. Civ. P. 41(a)(2); Marlow, 19 F.3d at 305. The Seventh Circuit has instructed
that the plaintiff must be given a reasonable opportunity to withdraw the
motion for voluntary dismissal if the court indicates that it will grant the
requested dismissal but only with conditions the plaintiff has not previously
agreed to. Marlow, 19 F.3d at 305.
Defendants raise several concerns about Presser’s proposed dismissal.
At the outset, however, it should be noted that the Defendants seem more
focused on obtaining dismissal of the government’s related case. Defendants
apparently believe that if they can achieve a dismissal of Presser’s case with
prejudice, they can take that dismissal to Judge Adelman and obtain
dismissal of the government’s action on res judicata grounds. Viewed from
that perspective, it is easier to understand the parties’ positions.
Defendants open with a description of what they view as a history of
delay and obfuscation by Presser and the government. Defendants suggest
that the government has waived its ability to bring its own FCA suit by
choosing not to intervene in this case during its four-year life span. (Docket
#65 at 1). In Defendants’ view, the government’s newly filed case comes as
Presser finally realizes that she will have to litigate this case in a meaningful
way. Id. at 1–2. Defendants state that Presser has not provided dates for her
own deposition and has not responded to Defendants’ discovery requests,
which were served on December 28, 2016. Id. at 2. Nor has she propounded
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her own discovery requests although the case is fully entered into the
discovery phase. See id. at 3. Indeed, according to Defendants, even the
government is dragging its feet. The United States filed its separate action on
December 28, 2016 and only obtained a waiver of service from Defendants’
counsel in early February 2017. Id. at 2.
Defendants tie this theory of dilatoriness into the Pace factors and ask
for dismissal with prejudice.2 First, they claim that they have expended
significant amounts of time and money litigating two motions to dismiss, an
appeal, and other trial preparation in this case, including serving their recent
discovery requests. Id. at 2–3. Second, Defendants contend that Presser has
not been diligent in her prosecution of this case, since she failed to plead
actionable claims twice and is now refusing to participate in discovery. Id. at
Third, and most critical to Defendants, they believe that Presser’s
explanation of her need for dismissal falls short. Id. According to Defendants,
Presser does not adequately explain how the government can now bring its
own FCA suit despite failing to intervene in this action. Id. at 4. Defendants
say that this is not permitted, arguing that the government must intervene in
a relator’s FCA suit or be bound to the result reached in its absence. Id. (citing
U.S. ex rel. Lusby v. Rolls-Royce Corp., 570 F.3d 849, 853 (7th Cir. 2009)). It
cannot simply file its own duplicative lawsuit. Id.
By contrast, Presser believes that the FCA permits just what occurred
here. She points to language in the statute which allows the government to
Defendants request only dismissal with prejudice and do not seek their
fees or costs as a condition for dismissal. Consequently, the Court does not decide
whether an award of fees or costs would be appropriate as a condition.
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pursue “any alternate remedy” instead of intervening in Presser’s lawsuit, id.
§ 3730(c)(5), which has been interpreted as allowing the government to bring
its own FCA action. (Docket #61 at 2) (citing U.S. ex rel. Bledsoe v. Cmty.
Health Sys., 342 F.3d 634, 647 (6th Cir. 2003)); (Docket #69 at 4). Additionally,
Presser contends that because there has been no determination on the merits
in this action, Defendants’ reliance on principles of claim preclusion is
misplaced. (Docket #69 at 7).
Defendants disagree. They argue that since the government needs to
show “good cause” to intervene late in private citizen’s FCA action, 31 U.S.C.
§ 3730(b)(3), it cannot be that instead of showing good cause the government
can decide to file its own case. (Docket #65 at 5). This would, in Defendants’
view, render the requirement “toothless.” Id. Defendants emphasize that
allowing the government to bypass the “good cause” requirement for
intervening in Presser’s suit after four years of silence would work substantial
prejudice against them. Id. at 5–6.
In reply, Presser seeks to justify the government’s failure to intervene
in her case, claiming that the government initially failed to intervene after the
Court did not give it enough extensions of time to complete its investigation.
(Docket #69 at 2). After the government completed its investigation, it
decided to pursue its own FCA action. Id. Presser argues that this is not an
end-run around the “good cause” standard, but instead represents the
government’s strategic choice among the options available to it under the
She also challenges the notion that the government has not
participated in this case. Id. She states that when the Seventh Circuit referred
the case to mediation, the government “took the lead, seeking a global
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settlement of all potential claims involving defendants’ conduct offending the
False Claims Act.” Id. Presser further contends that Defendants have always
known that the government has been “aggressively pursuing its own
investigation of them,” including acquiring documents from Defendants and
conducting witness interviews, suggesting that the government’s new case
comes as no surprise to them. Id. at 3.
Presser next defends her own litigation conduct. She states that
because the government has filed an FCA action based on similar facts, she
is not permitted to pursue her claims independently. Id. at 3–4 (citing U.S. ex
rel. LaCorte v. Wagner, 185 F.3d 188, 191 (4th Cir. 1999)). Thus, when
Defendants served discovery requests on her the same day as the government
filed its own case, she was powerless to respond. Id. at 3–6.
Finally, Presser opposes Defendants’ claim that they have expended
significant time and effort in defending this case thus far. She points out that
discovery began recently and that trial is not scheduled until September 2017.
Id. at 4. Thus, Defendants cannot have spent much on trial preparation at this
time. Id. Moreover, she contends that because Defendants twice sought and
ultimately failed to obtain dismissal of this case, they cannot now claim
prejudice from the time spent litigating their motions to dismiss and the
appeal. Id. at 5. Further, because Presser cannot pursue this case any longer
in light of the government’s related case, Defendants’ contention that they are
actively preparing for trial in this case “ignores reality.” Id.
The Court, weighing the Pace factors, concludes that dismissal without
prejudice is appropriate. First, despite Defendants’ complaint about their
effort in litigating this case for four years, that delay was caused as much by
them as by Presser, for it was they who moved to dismiss Presser’s first two
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complaints. The operative inquiry here is whether Defendants will suffer
unfair prejudice from the dismissal. See Tyco Labs., Inc. v. Koppers Co., 627 F.2d
54, 56 (7th Cir. 1980) (noting that dismissal with conditions is only required
where the defendant will suffer “plain legal prejudice” in the absence of such
conditions). Delay occasioned by one’s own actions cannot be considered
Additionally, while this case is picking up speed as it heads toward
trial in September 2017, that date is a long way off. Serving discovery
requests and asking for deposition dates are not the sort of substantial trial
preparation efforts that warrant a prejudicial dismissal. Notably, the final
Pace factor concerns whether a summary judgment motion has been filed by
the defendant. Pace, 409 F.2d at 334. This suggests that the Seventh Circuit
was contemplating cases in the late stages of preparation when it spoke of
the need for conditioned dismissals. See id. (noting that dismissal with
prejudice was appropriate since “considerable discovery had been
undertaken at substantial cost to the defendant,” and the defendant’s
summary judgment motion had been fully briefed). Of course, Defendants
have not filed such a motion, and discovery in this case is just beginning.
Thus, these considerations militate against Defendants’ request for dismissal
Second, contrary to Defendants’ claims, it does not appear that Presser
has been dilatory in her approach to this litigation. Rather, she has spent most
of the case defending her complaints from dismissal and, by virtue of the
government’s newly filed related action, she cannot participate in discovery
or other trial preparation in this case. Defendants do not contest this latter
assertion, and the Court assumes for present purposes that it is true that
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Presser cannot continue to prosecute the instant case. See LaCorte, 185 F.3d at
188 (noting that operation of Section 3730(c)(5) “assumes that the original qui
tam action [does] not continue”); U.S. ex rel. Babalola v. Sharma, 746 F.3d 157,
161 (5th Cir. 2014).
Third, the Court is satisfied that Presser’s explanation of the need for
dismissal is, at worst, a neutral factor. It is enough to say that Defendants’
cited cases do not compel the conclusion that the government’s related case
is impermissible. For instance, Lusby concerned whether the disposition of an
employment discrimination case bars the institution of a later qui tam action
with that employee as the relator. Lusby, 570 F.3d at 851. That is not the
situation here. Likewise, Lusby holds that if the relator “had litigated a qui
tam action to the gills and lost, neither another relator nor the United States
could start afresh.” Id. at 853; see also U.S. ex rel. Eisenstein v. City of New York,
556 U.S. 928, 936 (2009). Again, that is not this case, as there has been no
merits determination here. Finally, the Court notes that Defendants do not
distinguish Bledsoe, which, although not controlling, holds that under Section
3730(c)(5), one of the “alternate remed[ies]” the government may pursue in
the face of a relator’s FCA suit is to institute its own. Bledsoe, 342 F.3d at
647–48; see also Stinson, Lyons & Bustamante, P.A. v. United States, 79 F.3d 136,
138 (Fed. Cir. 1996) (noting that the government “may at its option intervene
in [a relator’s] suit and conduct it,” “pursue an independent action,” or “take
no action”). Without definitively resolving the question, the Court finds that
Presser is not so plainly without cause to seek dismissal that her action
should be dismissed with prejudice, particularly since each of the other Pace
factors support dismissal without prejudice. Tyco Labs., 627 F.2d at 56 (“The
enumeration of the factors to be considered in Pace is not equivalent to a
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mandate that each and every factor be resolved in favor of the moving party
before dismissal is appropriate. It is rather simply a guide for the trial judge,
in whom the discretion ultimately rests.”). Therefore, after considering the
Pace factors and the entire record in this case, the Court concludes that this
action should be dismissed without conditions placed on the dismissal.
IT IS ORDERED that Relator Rose Presser’s motion for voluntary
dismissal (Docket #61) be and the same is hereby GRANTED;
IT IS FURTHER ORDERED that the government’s motion for leave
to file a statement of interest (Docket #70) be and the same is hereby
DENIED as moot; and
IT IS FURTHER ORDERED that this action be and the same is hereby
DISMISSED without prejudice.
The Clerk of the Court is directed to enter judgment accordingly.
Dated at Milwaukee, Wisconsin, this 2nd day of March, 2017.
BY THE COURT:
U.S. District Judge
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