UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
June 14, 2007
UNITED STATES OF AMERICA, EX REL. RICHARD F. MILLER, PLAINTIFFS,
BILL HARBERT INTERNATIONAL CONSTRUCTION, INC., ET AL., DEFENDANTS.
The opinion of the court was delivered by: Royce C. Lamberth, United States District Judge
This Memorandum Opinion confirms and explains the Orders issued by this Court during the April 27, 2007, hearing concerning defendants Bill L. Harbert ("Harbert") and E. Roy Anderson's ("Anderson") motions for judgments as a matter of law on statute of limitations grounds, except as to one false claim against Anderson relating to contract 29.
Relator filed his original complaint under seal on June 30, 1995, alleging an overarching conspiracy to rig bids on USAID contracts for construction programs in Egypt in violation of the False Claims Act ("FCA"), 31 U.S.C. § 3729, et seq. (2007). The extent of this complaint was limited to claims on contract 20A. Neither defendant Harbert nor defendant Anderson was named in this iteration of the complaint. Over five years later, on December 28, 2000, the relator filed his Second Amended Complaint against the defendants, including for the first time, defendants Anderson and Harbert. As with the relator's first complaint, the relator's Second Amended Complaint only specified claims arising out of contract 20A. Shortly thereafter, on March 13, 2001, the government filed its Complaint in Intervention against all of the defendants listed in the relator's Second Amended Complaint, including Anderson, but not including defendant Harbert. Unlike the relator's Second Amended Complaint, the government's Complaint in Intervention included claims arising out of all three contracts at issue in this case: contracts 20A, 29, and 07. The relator did not include claims arising out of either contract 29 or 07 until March 9, 2006, when the relator filed his Third Amended Complaint.
Prior to the commencement of trial, defendants Harbert and Anderson moved to dismiss as time-barred plaintiffs' causes of action against them, pursuant to § 3731 of the FCA. Under this section:
[a] civil action under section 3730 may not be brought: (1) more than 6 years after the date on which the violation of section 3729 is committed, or (2) more than 3 years after the date when facts material to the right of action are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances, but in no event more than 10 years after the date on which the violation is committed, whichever occurs last.*fn1
In response to the defendants' motions, this Court issued a series of pretrial Opinions addressing the propriety of the claims against both defendants under each statute of limitations provision.
Specifically, this Court found that, if the six-year limitations period under the FCA were to apply, the relator's claims against defendants Anderson and Harbert as to all three contracts at issue would be barred completely due to the fact that the relator's claims against both Anderson and Harbert were brought more than six years after the FCA violations occurred on contract 20A.
For the same reason, all but one of the government's claims against defendant Anderson*fn2 would be time-barred under the six-year limitations period.*fn3
Relying on its decision in United States ex rel. Pogue v. Diabetes Treatment Centers of America, 474 F. Supp. 2d 75 (D.D.C. Feb. 7, 2007) (Lamberth, J.), however, this Court noted that the three-year alternate statute of limitations under § 3731(b)(2) applied to the government and relator alike. See id. at 89. Accordingly, the Court indicated that the relator and government's claims against Harbert and Anderson could be deemed timely if the evidence showed that the plaintiffs' respective claims were filed within three years of the point in time the government knew or should have known of facts material to the cause of action against Harbert and Anderson. If the evidence demonstrated that the government knew or reasonably should have known facts material to the right of action against Harbert and Anderson more than three years prior to December 28, 2000 when the relator's complaint was filed,*fn4 however, then the plaintiffs could not take advantage of the three-year provision under § 3731(b)(2), and their claims would be measured under the six-year provision under § 3731(b)(1).
On April 27, 2007, this Court conducted a hearing out of the presence of the jury to determine when, as a matter of law, the government knew or reasonably should have known facts material to the cause of action brought by plaintiffs.*fn5 At the hearing, this Court GRANTED defendants Harbert and Anderson's motions for judgment as a matter of law on statute of limitations grounds, and ORDERED that all claims against defendant Bill Harbert be DISMISSED, and that all claims except the final claim on contract 29 against Roy Anderson be DISMISSED on the grounds that the government reasonably should have known facts material to the cause of action prior to December 28, 1997, and that no rational jury could find otherwise. The Court's analysis in support of its decision follows.
A. STANDARD OF REVIEW
"If a party has been fully heard on an issue during a jury trial and the court finds that a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue, the court may . . . grant a motion for judgment as a matter of law against the party on that claim or defense . . . ." Fed. R. Civ. P. 50(a)(1)(B). A party is entitled to a judgment as a matter of law in its favor only if "no reasonable jury could reach a verdict" in the opposing party's favor. Holbrook v. Reno, 196 F.3d 255, 259 (D.C. Cir. 1999). In resolving a motion for a judgment as a matter of law, a court must "view the evidence in the light most favorable" to the non-moving party, and must "resolve all conflicts in [the non-moving party's] favor." Id. at 259-60. A court should not direct a judgment as a matter of law in favor of a party if reasonable minds might differ as to the import of the evidence presented before the court. Borgo v. Goldin, 204 F.3d 251, 254 (D.C. Cir. 2000) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986)).
1. Purpose and Rules of Interpretation of Statutes of Limitations
Throughout this Court's determination of whether the government should have known of facts material to the right of action, it is important to keep in mind both the purpose behind, and the methodology in interpreting, statutes of limitations. As the Supreme Court has held, statutes of limitations "represent a pervasive legislative judgment that it is unjust to fail to put the adversary on notice to defend within a specified period of time and that 'the right to be free of stale claims in time comes to prevail over the right to prosecute them.'" United States v. Kubrick, 444 U.S. 111, 117 (1979) (quoting R.R. Tels. v. Ry. Express Agency, 321 U.S. 342, 349 (1944)). Statutes of limitations are designed to "afford plaintiffs what the legislature deems a reasonable time to present their claims [while simultaneously] protecting defendants and the courts from having to deal with cases in which the search for truth may be seriously impaired by the loss of evidence, whether by death or disappearance of witnesses, fading memories, disappearance of documents, or otherwise." Kubrick, 444 U.S. at 117 (citing, inter alia, United States v. Marion, 404 U.S. 307, 322, n.14 (1971)). Accordingly, courts "are not free to construe [a statute of limitations] so as to defeat its obvious purpose, which is to encourage the prompt presentation of claims." Kubrick, 444 U.S. at 117 (emphasis added).
2. Section 3731(b)(2) Analysis
The relevant issue before this Court is whether, applying the three-year statute of limitations under § 3731(b)(2) of the FCA, the plaintiffs' claims against defendants Harbert and Anderson were timely. The timeliness of a plaintiff's complaint under § 3731(b)(2) of the FCA depends upon a determination of when the fraud at issue was known or reasonably should have been known. See United States v. Intrados/Intl. Mgmt. Group, 265 F. Supp. 2d 1, 12 (D.D.C. 2002) (Urbina, J.). Though this Court has previously found that a relator may take advantage of the three-year period under § 3731(b)(2), the statute of limitations under that section begins to run from the point in time the government knew or reasonably should have known of facts material to the right of action. Cf. Pogue, 474 F. Supp. 2d at 85 ("[31 U.S.C. § 3731](b)(2)'s three-year statute of limitations applies across the board, measured by the government's knowledge.") (emphasis added). Therefore, this Court must determine whether no reasonable jury could find that the government reasonably should not have known facts material to the right of action prior to December 28, 1997.*fn6
In making the determination of whether a plaintiff--in this case, the government--"should have known" facts material to the right of action based in fraud for purposes of measuring when a statute of limitations begins to run, courts have repeatedly applied a "discovery-due diligence" standard, which is rooted in principles of equitable tolling. See, e.g., Sprint Commc'ns. Co. v. Fed. Commc'ns. Comm'n, 76 F.3d 1221 (D.C. Cir. 1995); Riddell v. Riddell Washington Corp., 866 F.2d 1480 (D.C. Cir. 1989); Richards v. Mileski, 662 F.2d 65 (D.C. Cir. 1981); Fitzgerald v. Seamans, 553 F.2d 220 (D.C. Cir. 1977).*fn7 Under the "discovery-due diligence" standard, the running of the statute of limitations does not begin at the point the plaintiff has sufficient information to prevail at trial, or even when a plaintiff is aware that the conduct at issue is actionable under the law.*fn8 Rather, courts have consistently found that a limitations period begins to run under the "should have known" standard at the point in time that the government official charged with bringing the civil action "discovers, or by reasonable diligence could have discovered, the basis of the lawsuit." See, e.g., Sprint Commc'ns. Co. v. Fed. Commc'ns. Comm'n, 76 F.3d 1221 (D.C. Cir. 1995); Riddell v. Riddell Washington Corp., 866 F.2d 1480 (D.C. Cir. 1989); Richards v. Mileski, 662 F.2d 65 (D.C. Cir. 1981); Fitzgerald v. Seamans, 553 F.2d 220 (D.C. Cir. 1977). That is, the limitations period starts to run on "the first date that the injured party possesses sufficient critical facts to put him on notice that a wrong has been committed and that he need investigate to determine whether he is entitled to redress." Loughlin v. United States, 230 F. Supp. 2d 26, 40 (D.D.C. 2002) (quoting Zeleznik, 770 F.2d at 23 (3d Cir. 1985)).
In cases where defendants have not engaged in affirmative acts of fraudulent concealment, a plaintiff is deemed to have sufficient notice of critical facts to set the statute of limitations running if the plaintiff has inquiry notice of the injury and its cause. Cf. Kubrick, 444 U.S. at 120; Cf. Sprint, 76 F.3d at 1228 (citing Riddell, 866 F.2d at 1491). In such a case, a plaintiff "may not wait passively until evidence of actual injury surfaces." Loughlin, 230 F. Supp. 2d at 40. Rather, a plaintiff must, within the statutory period, "make a diligent inquiry into the facts and circumstances that would support that claim," so as to determine whether and whom to sue. Sprint, 76 F.3d at 38; cf. Kubrick, 444 U.S. at 122; Davis v. United States, 642 F.2d 328, 331 (9th Cir. 1981) (citing Kubrick, 444 U.S. 111 (1979)). Where no fraudulent concealment exists, a plaintiff's failure to exercise due diligence in discovering the material facts underlying the cause of action is fatal to those claims. See Baldwin County Welcome Center v. Brown, 466 U.S. 147, 151 (1984).
In cases where the defendant has engaged in fraudulent concealment, however, the defendant must prove that the plaintiff had a higher degree of knowledge than inquiry notice of the fraud in order to prevail on a statute of limitations defense. Riddell, 866 F.2d at 1491. The defendant has the burden of "coming forward with any facts showing that the plaintiff could have discovered their involvement or the cause of action had [the plaintiff] exercised due diligence." Richards v. Mileski, 662 F.2d 65, 71 (D.C. Cir. 1981).
Accordingly, this Court must make three determinations. First, the Court must determine whether the defendants engaged in any fraudulent concealment of the injury.*fn9 Second, the Court must determine at what point the government was on notice of the injury alleged in the complaint. Third, if the plaintiff is deemed to have been on notice, the Court must determine whether the plaintiff exercised due diligence in conducting an inquiry into determining whether a cause of action existed.
3. Fraudulent Concealment Analysis
Plaintiffs contend that Harbert and Anderson's activities in covering up their respective involvement in the alleged conspiracy constituted affirmative acts of fraudulent concealment. Accordingly, plaintiffs argue that, under principles of equitable tolling, the three-year statute of limitations should be tolled unless the defendants can establish that the government could have discovered the defendants' involvement by exercising due diligence. In plaintiffs' opinion, the fact that the criminal investigation undertaken by the Antitrust Division at the DOJ did not uncover direct evidence of the defendants' involvement in the conspiracy until 1999 is proof that the Civil Division would not have uncovered the fraud even if it had exercised due diligence. (See JML Hr'g Tr.166, Apr. 27, 2007.) Accordingly, plaintiffs argue that the statute of limitations should be tolled until 1999, when the government uncovered more direct evidence of the defendants' involvement in the conspiracy. There are a number of problems with this argument.
First, plaintiffs' argument incorrectly interprets the fraudulent concealment standard. Under the law of this Circuit, "the doctrine of fraudulent concealment does not come into play, whatever the lengths to which a defendant has gone to conceal the wrongs, if a plaintiff is on notice of a potential claim." Hobson v. Wilson, 737 F.2d 1, 35 (D.C. Cir. 1984). That is, the doctrine of fraudulent concealment will toll a statute of limitations only insofar as the injury to the plaintiff and its cause is concealed by the defendants. Once a plaintiff becomes aware of these two pieces of information, however, the clock begins to run for statute of limitations purposes. Neither a lack of knowledge of the specific pattern of fraudulent activity, or an inability to know the particular identities of some of the perpetrators of the fraud alters this result. Moreover, "[t]he fact that a reasonably diligent investigation would not have discovered the defendant's involvement is no longer relevant for the purposes of accrual of the statute of limitations."*fn10 Therefore, the limitations period will only be tolled if the defendants' acts in concealing the fraud prevented the government from discovering that it had been injured by the alleged conspiracy.*fn11
Here, any reasonable jury would have to find that the government was directly aware of myriad pieces of evidence pointing to a scheme to defraud the United States government involving the submission of bids on multiple contracts for construction jobs in Egypt. The relator's Disclosure Statement very clearly lays out that a conspiracy existed to rig bids on USAID contracts in Egypt, and detailed the manner in which the conspiracy was acted out by its participants. (JML Hr'g Tr.15-18.)*fn12 The allegations within the relator's complaint also detailed similar information about the injury to the government and its cause. Both the Disclosure Statement and the Complaint were provided to the government in 1995. Accordingly, no reasonable jury could find that the government did not have knowledge of the injury from which this cause of action stems. Therefore, the three-year statute of limitations cannot be tolled on grounds of fraudulent concealment because the government was aware of the injury at the time the relator's Complaint and Disclosure Statement were filed in 1995.
Second, even if limitations periods were able to be tolled due to concealment of an individual's particular involvement in a fraud, it is clear--and, consequently, no reasonable jury could find otherwise--that the government knew of defendants Harbert and Anderson's identities in association with the fraud in this case prior to December 28, 1997. In fact, at the time the relator filed his Disclosure Statement with the government in 1995, the government had in its possession--and had access to--information that pointed to defendants Anderson and Harbert as members of the conspiracy at issue. See infra Section II.B.4.a; see also supra note 11.
Accordingly, the Court finds that no reasonable jury could find that fraudulent concealment of the injury occurred. Therefore, the Court finds that the requisite level of knowledge of the injury that the defendants must prove the government had prior to December 28, 1997 is inquiry notice. That is, the defendants must prove the government had sufficient information that "would lead an ordinary prudent person to investigate the matter further." Black's Law Dictionary 1091 (8th ed. 2004).
4. Inquiry Notice Analysis
a. Government Had Inquiry Notice of Injury
Based upon the evidence presented at the hearing, it is clear that the government had inquiry notice of the injury and its cause. The relator's Complaint and Disclosure Statement filed with the government in June 1995 provided in detail the various pieces of evidence and allegations supporting a finding that the defendants engaged in a conspiracy to rig bids on USAID contracts in Egypt. In these documents, the relator named key participants, both individuals and corporate entities, who allegedly participated in the fraudulent scheme. The relator also provided factual support in the form of exhibits and attachments to the Disclosure Statement that corroborated his allegations of wrongdoing toward the government.
In addition, the relator provided the government with ample evidence to put the government on inquiry notice that defendants Anderson and Harbert were likely involved in causing the injury to the government. For example, with respect to Mr. Anderson, Mr. Bell*fn13 admitted during his testimony that the relator referred to Anderson approximately a dozen times throughout the Disclosure Statement itself. (JML Hr'g Tr. 64.) Additionally, Mr. Bell acknowledged that the relator indicated in his Disclosure Statement the various leading roles Mr. Anderson played in running the companies charged in the conspiracy, including the facts that Mr. Anderson was president of Harbert UK, and was Harbert International, Inc.'s sponsor representative to the Harbert-Jones joint venture. (JML Hr'g Tr. 65.) In these capacities, the Disclosure Statement stated that Anderson "played a leading role in the organization and activities of the 'Frankfurt Club' of U.S. contractors qualified to do business in Egypt for construction projects. (JML Hr'g Tr. 65.) Perhaps most importantly, Mr. Bell testified that the relator explicitly stated in his Disclosure Statement that he considered Anderson a "central participant in the conspiracy," at one point calling him a "ringleader" in the conspiracy at issue. (JML Hr'g Tr. 64, 65.)
With respect to Mr. Harbert, the disclosure statement also clearly detailed Mr. Harbert's ownership and high-level involvement in the various companies alleged to have participated in the fraud.*fn14 Mr. Harbert was also listed as a participant in the quarterly meeting in November 1990, at which questions were raised as to the propriety of pre-bid cost figures on contract 20A.*fn15 Additionally, the Disclosure Statement points out that Mr. Harbert had signed wire transfers of money to satisfy Holzmann invoices that "appeared to be false," and was responsible for approving and signing payments for "the most glaring example of a questionable transaction," namely the sale-leaseback transaction between the Joint Venture and Sabbia. (Id. at 20.) The Disclosure Statement also states that Bill Harbert signed an amendment to the Harbert-Jones Joint Venture agreement allowing each party to charge home office overhead to overseas projects; a process that "was not Jones Construction's general practice," and appeared to be "another means of reducing (by over $3 million) the profit margin on these contracts." (Id. at 22.) Even more, the relator provided to the government a copy of this agreement signed by Mr. Harbert, as an attachment to the Disclosure Statement. (Id. at 44.) Finally, the two most significant examples of Bill Harbert's involvement in the fraud that are detailed in the Disclosure Statement are: (1) Bill Harbert's efforts to conceal the conspiracy by ensuring the relator was not involved in future Joint Venture meetings after the relator had begun to question suspicious activities; and (2) rumors of Bill Harbert's promise to Alf Hill and Tommy Kitchens to make them millionaires for their participation in rigging contract 20A. (JML Hr'g Tr. 46-50.)
In total, the allegations presented to the government in June 1995 draw specific links between the defendants and the injurious conduct (the bid-rigging conspiracy). Therefore, it is clear that an ordinary prudent person presented with the information that the government had in its possession prior to December 28, 1997 regarding defendants Harbert and Anderson would have investigated the matter further to ascertain the level of their involvement in the bid-rigging conspiracy. An ordinary prudent person presented with this type of information would not have sat on their hands, as the government did in this case. Accordingly, the Court finds that no reasonable jury could find that the government did not have inquiry notice of both the injury caused by the alleged conspiracy, and the involvement in the fraud by defendants Harbert and Anderson.
b. Interaction Between Federal Rules of Civil Procedure and Limitations Period
Still, plaintiffs argue that these statements about defendants Harbert and Anderson are mere allegations that needed to be substantiated in order to justify filing a valid complaint under the Federal Rules of Civil Procedure. (JML Hr'g Tr. 80-81, 158-60.) They contend that there was no direct evidence of bid-rigging, and that some of the allegations within the Complaint and Disclosure Statement were based on rumor and multiple levels of hearsay. (Id.) This level of evidence, plaintiffs argue, was insufficient to warrant the government's intervention and the filing of a complaint against defendants Harbert and Anderson. (Id.) Accordingly, plaintiffs argue that the statute of limitations could not begin to run until more substantial direct evidence of the bid-rigging conspiracy was uncovered; in this case, plaintiffs allege this occurred in 1999. (Id.)
Though plaintiffs are certainly correct that the requirements of particularity, and information and belief do dictate the sufficiency of information and allegations needed in order to file a valid complaint with the Court,*fn16 these pleading requirements are wholly inapposite to a statute of limitations discussion. Statutes of limitations are not open-ended guarantees that an injured party has whatever time it needs to bring a proper claim. Rather, statutes of limitations represent a "Congressional determination of a reasonable amount of time for injured parties to discover and make claims." Zeleznik, 770 F.2d at 24 (citing Kubrick, 444 U.S. at 117).
Accordingly, an injured party's satisfaction of these pleading requirements is not a trigger for the running of a limitations period, but is rather a procedural endgame that the injured party must reach before the limitations period expires. In other words, once the injured party is on notice that it has a claim, the injured party has the amount of time under the statute of limitations to attempt to bring a claim that satisfies the pleading requirements set forth in the Federal Rules of Civil Procedure. Here, the fact that the government felt it needed additional time to investigate the allegations averred in the relator's Disclosure Statement and Complaint before being able to file a proper complaint does not alter the point in time the limitations period began to run for claims brought against defendants Anderson and Harbert. Accordingly, the Court finds that the government had inquiry notice of the injury, at the latest, on or about August 4, 1995.*fn17
5. Due Diligence Analysis
As Judge Green pointed out in Uzzell, "[t]he term 'discovered,' of course, assumes due diligence" on the part of the government official who is responsible for uncovering the material facts at issue. Uzzell, 648 F. Supp. at 1367. The exercise of due diligence by plaintiffs is necessary in order to prevent--and at the very least, to mitigate--the inequitable result of allowing the government "to bring an action whenever it had the inclination to discover the material facts." Id. (internal citations omitted). In fact, as the Supreme Court has noted, a party who fails to act diligently in uncovering material facts underlying the cause of action "cannot invoke equitable principles to excuse that lack of diligence." Baldwin County Welcome Center v. Brown, 466 U.S. 147, 151 (1984). Therefore, tolling the statute of limitations is proper "unless the facts show that the plaintiff failed to exercise due diligence in discovering the material facts underlying his cause of action." Richards v. Mileski, 662 F.2d 65, 70-71 (D.C. Cir. 1981).
To determine whether a plaintiff properly exercised due diligence in uncovering a cause of action, a court must make "a fact-specific judgment in each case as to what the court expects a reasonable plaintiff to do in uncovering the elements of his claim." Intrados, 265 F. Supp. 2d at 11 (citing Hohri v. United States, 782 F.2d 227, 246 (D.C. Cir. 1986), vacated and remanded on other grounds, 482 U.S. 64 (1987)). A court must measure "the plaintiff's efforts to uncover his cause of action against what a reasonable person would have done in his situation given the same information." Richards, 662 F.2d at 71.
In this case, it is clear that the government attorneys did not exercise due diligence in attempting to uncover the material facts of the causes of action at issue in this case, and that the government's failure to act was unreasonable under the circumstances. The relator filed his first complaint on June 30, 1995. Along with his first complaint, the relator submitted a Disclosure Statement, also filed on June 30, 1995. (JML Hr'g Tr. 9.) The Disclosure Statement was provided to attorneys at the U.S. Department of Justice's ("DOJ") Antitrust Division and Civil Division. (JML Hr'g Tr. 26.) Inside this Disclosure Statement, the relator included "all material evidence and information" in his possession relating to the alleged conspiracy at issue. (JML Hr'g Tr. 62-63.) The Disclosure Statement also included a series of documents corroborating the facts, suspicions, allegations and beliefs put forth by the relator therein. (JML Hr'g Tr. 19.) Later, on August 3, 1995, the relator submitted an additional set of documents to help corroborate the information and allegations within the Disclosure Statement. (Id.)*fn18 At the time the relator filed his Disclosure Statement, and Mr. Bell "thought we had a very good case to go forward, and [that] the Civil Division would be . . . ready to intervene." (JML Hr'g Tr. 71-72.)*fn19 Indeed, at the hearing, Ms. Mark confirmed Mr. Bell's position when she indicated that "presumably, upon the filing of the [relator's] complaint, the United States could have elected to intervene." (JML Hr'g Tr. 126.)
After the Disclosure Statement and both sets of documents were submitted, the relator met with government attorneys, including Ms. Mark from the Civil Division of the DOJ, Mr. Morgan from the U.S. Attorney's office (collectively the "Civil Attorneys"), and a number of attorneys from the Antitrust Division at the DOJ, including Bill Dillon (collectively the "Antitrust Attorneys"). (JML Hr'g Tr. 21.) In a "lengthy, all day meeting" that took place on approximately August 4, 1995, the relator and his counsel shared information with the government attorneys, both Criminal and Civil. (JML Hr'g Tr. 21-22, 67.)
And yet, over the course of the next four years after the meeting, the Civil Attorneys did virtually nothing to discover any material facts underlying the fraudulent conspiracy.*fn20 First, the Civil Attorneys did not make any attempts to obtain information from the ongoing criminal investigation into the matter conducted by the Antitrust Attorneys. For example, though OIG investigators used by the Civil Attorneys were conducting interviews and making inquiries into the case to assist the Antitrust Attorneys, the Civil Attorneys never saw or attempted to see the OIG investigation file at all. (JML Hr'g Tr. 95.) The Civil Attorneys also made no attempts whatsoever to review any of the OIG investigators' notes of the interviews. (JML Hr'g Tr. 93-94.) In fact, the Civil Attorneys never made any attempt to determine who, if anyone, was interviewed by the OIG investigators. (JML Hr'g Tr. 103.) Nor did the Civil Attorneys ask the OIG agents, as a part of their investigation, to issue subpoenas to the companies participating in the bid-rigging conspiracy. (JML Hr'g Tr. 148-49.) In addition, the Civil Attorneys never reviewed or requested to review the file from the FBI's investigation into this matter. (JML Hr'g Tr. 109.) As if this were not enough, the Civil Attorneys never requested from the relator--at the time, a potential co-plaintiff in the civil action--that he provide the Civil Attorneys a copy of all the information given by the relator to the Antitrust Attorneys to assist in the investigation. (JML Hr'g Tr. 113.)*fn21
Second, the Civil Attorneys made no attempts to investigate the bid-rigging allegations under their own efforts. The Civil Attorneys made no efforts to interview key individuals listed in the Complaint and Disclosure Statement to verify the allegations contained within those documents. For example, the Civil Attorneys never attempted to meet with either John Ollis, notwithstanding the fact that Mr. Ollis could have easily verified two of the most critical pieces of information tying Harbert and Anderson to the bid-rigging conspiracy, namely that: (1) Bill Harbert had requested that only he and Johnnie Jones attend the Joint Venture meetings after the relator had begun raising questions as to possible improprieties in the bid-rigging process; and (2) Roy Anderson admitted to Ollis that Philipp Holzmann, acting primarily through Peter Schmidt, had organized the "Frankfurt Club" of all the contractors to rig bids on USAID contracts in Egypt. (See JML Hr'g Tr. 48-49, 65-66.) Additionally, the Civil Attorneys never made attempts to follow up with either Alf Hill or Tommy Kitchens to verify the allegations that Bill Harbert promised to make Messrs. Hill and Kitchens millionaires for their roles in helping to rig the bid on contract 20A. (JML Hr'g Tr. 46-47.) Even if neither Mr. Hill or Mr. Kitchens were available, the government very easily could have obtained similar verification of this last allegation by discussing with the relator his involvement in a September 22, 1995 phone call with Mr. Kitchens, in which Mr. Kitchens informed the relator that Bill Harbert had not made good on the promise to make Kitchens and Hill millionaires, but was keeping both men "happy by keeping both . . . on the payroll." (JML Hr'g Tr. 31.)*fn22 Ironically, though the Civil Attorneys did nothing to verify these inculpatory allegations between June 1995 and December 1997, the plaintiffs point to these three pieces of information as being critical in their decisions to bring actions against defendants Anderson and Harbert. (JML Hr'g Tr. 50-56.)
As this evidence shows, from August 1995 until June 1999, the Civil Attorneys exercised no due diligence whatsoever. Put simply, the Civil Attorneys made a judgment call that the criminal investigation into the bid-rigging at issue was more important than the civil investigation. Having made this decision, they then proceeded to do nothing, except wait for the Antitrust Attorneys to be finished with their criminal investigation into the bid-rigging conspiracy. They made no attempts to build their case against the defendants either through cooperation with the parallel criminal investigation or through their own efforts. Instead, the Civil Attorneys made "an assumption" that everything obtained during the course of the criminal investigation--even by OIG investigators working on behalf of both the Civil and Antitrust Divisions--was as a result of a grand jury, and could therefore not be obtained in order to aid the civil investigation due to Rule 6(e) of the Federal Rules of Criminal Procedure.*fn23 (JML Hr'g Tr. 96-97.)
Still, plaintiffs offer two arguments in defense of their failure to exercise due diligence, and their argument that their actions were reasonable under the circumstances. First, plaintiffs argue that the due diligence requirement should effectively be read out of the "reasonably should have known" inquiry due to the co-existence of parallel investigations by the Criminal and Civil Divisions into defendants' activities. Therefore, plaintiffs assert that the only reasonable action for a government official in the Civil Division would be to "defer to the criminal investigation" in order to avoid "the risk of hurting a criminal investigation." (JML Hr'g Tr. 162.) Second, plaintiffs posit that much of what would have been sought was likely protected under Rule 6(e) of the Federal Rules of Criminal Procedure. (JML Hr'g Tr. 96-97.)
These arguments are flawed because they presume--incorrectly--that all information obtained in the criminal investigation was off limits to the civil investigation. As the Supreme Court's decision in Sells Engineering and its progeny*fn24 point out, however, there are procedural methods that DOJ attorneys in the Criminal and Civil Divisions can utilize in order to ensure cooperation between the two investigations.*fn25 As these cases point out, Civil Division attorneys can seek criminal grand jury information and evidence if they can establish before a judge that "the material they seek is needed to avoid a possible injustice in another judicial proceeding, that the need for disclosure is greater than the need for continued secrecy, and that their request is structured to cover only material so needed . . . ." John Doe, 481 U.S. at 112 n.8 (citing Douglas Oil Co. v. Northwest Petrol Stops Northwest, 441 U.S. 211, 222-223 (1979)). Though Sells Engineering stated that Civil Division attorneys could not have unfettered access to these grand jury materials, the Court in John Doe stated that the standard for relinquishing that information is a "highly flexible one, adaptable to different circumstances and sensitive to the fact that the requirements of secrecy are greater in some situations than in others." John Doe, 481 U.S. at 112.
Moreover, these arguments are based on the flawed premise that, under the FCA, when parallel civil and criminal investigations into the same conduct are underway, one investigation--invariably the civil investigation--must take a backseat to the other investigation. In the context of limitations periods, such an interpretation would create a situation where the existence of a criminal investigation could delay indefinitely the running of the civil limitation period under the FCA. Such a result would run counter to the very purpose of statutes of limitation, which calls for the "the prompt presentation of claims." Kubrick, 444 U.S. at 117 (emphasis added). Admittedly, some statutes, such as the Clayton Act, do specifically allow for an ongoing civil or criminal proceeding brought by the government to toll the statute of limitations in certain instances.*fn26 There is, however, no such express provision in the FCA that would allow the statute of limitations to be suspended in a civil case during the pendency of a criminal investigation into the fraudulent conduct. See 31 U.S.C. § 3731(b). The Court will not read such a dramatic provision into the FCA. As written, the statutes of limitation provisions under the FCA contemplate cooperation between attorneys conducting parallel criminal and civil investigations into like conduct so that each case--civil and criminal--can be brought against the defendants within the appropriate limitations period.
In sum, even if all of the information and testimony uncovered during the course of the criminal investigation was protected by Rule 6(e),*fn27 there exists a working procedure whereby attorneys in the Civil Division at DOJ can seek to obtain information from an ongoing parallel criminal investigation. Moreover, even if the strictures under Rule 6(e) appear to prevent the Civil Attorneys from obtaining the information from the attorneys conducting the criminal investigation, there is nothing in the rule that appears to prevent the Civil Attorneys from seeking out this information on their own from the same witnesses used in the criminal investigation.*fn28 Indeed, the FCA's own provisions demand that the Civil Attorneys make efforts in earnest to obtain the information so that the action may be filed within the limitations period, even in the face of an ongoing criminal investigation. See 31 U.S.C. § 3731(b).
Accordingly, this Court finds that a reasonable Civil Division attorney would have--and should have--sought information from the criminal investigation being conducted by the Antitrust Division. At the very least, the Civil Attorneys should have taken steps on their own to investigate the conduct at issue. The failure by the Civil Division attorneys in this case to take these steps, all the while blindly and incorrectly assuming that there would be no fruit to bear from these efforts, was unreasonable under the circumstances. Therefore, the Court finds that no reasonable jury could find that the government exercised proper due diligence under the circumstances of this case.
As the Supreme Court has stated, a party who fails to act diligently to preserve his or her claim within the applicable limitations period cannot later invoke equitable principles to toll the statutory period. Baldwin County Welcome Center v. Brown, 466 U.S. 147, 151 (1984). It stands to reason, then, that a party who fails to act diligently to preserve his or her claim cannot hope to toll the running of a limitations period that is rooted in the principles of equity, such as Section 3731(b)(2).
III. APPLICATION OF LEGAL STANDARD TO FACTS OF THE PRESENT CASE
A. Validity of Claims Under Three-Year Provision Under Section 3731(b)(2)
No evidence of fraudulent concealment of the injury having been shown by the plaintiffs, the three-year statute of limitations under § 3731(b)(2) began to run the moment the government was on inquiry notice of the conspiracy to violate the False Claims Act. Based upon the evidence proffered by defendants, no reasonable jury could dispute the fact that the government was on inquiry notice of the injury when it was in possession of the relator's Complaint and Disclosure Statement with both sets of attachments on August 4, 1995. Therefore, this Court finds that the three-year limitations period began to run from that date. Neither the government nor the relator filed their respective complaints against defendants Harbert and Anderson within three years of August 4, 1995.
Therefore, applying the three-year limitations period under § 3731(b)(2), the relator's initial complaint against defendants Anderson and Harbert are time-barred. The government's complaint against defendant Anderson*fn29 is similarly untimely under the three-year limitations period.
B. Validity of Claims Under Six-Year Provision Under Section 3731(b)(1)
This resolution does not, however, end the Court's inquiry. As § 3731(b) clearly states, plaintiffs receive the benefit of a statute of limitations beginning either: (1) six years from the date of the False Claims Act violation; or (2) three-years from the date the government knew or should have known of the False Claims Act violation, whichever period is longer. See 31 U.S.C. § 3731(b). Accordingly, this Court must determine whether a reasonable juror could conclude that any claims survive for either plaintiff against the defendants under the six-year limitations period. The six-year statute of limitations under § 3731(b)(1) begins on the date six years prior to the date the complaint was filed, and ends at the filing of the relator's complaint. See Fisher, 180 F. Supp. at 195.*fn30 Accordingly, the relator may use any overt acts that occur within that time frame to prove the underlying conspiratorial agreement, but may not use overt acts occurring prior to the date the statute of limitations began to run. See id.
Therefore, any claim brought by either plaintiff against the defendants that was submitted within six-years of the filing date of each plaintiff's complaint*fn31 will be deemed timely. The government's Complaint in Intervention was filed on March 13, 2001, and included claims on all three contracts at issue in this case: contracts 20A, 29, and 07. Therefore, the Court finds that any claim on any contract submitted on or after March 13, 1995 is timely under the six-year limitations period. The claims for contract 20A were submitted October 3, 1989 and June 20, 1993. The claims for contract 07 were submitted between September 5, 1991 and January 18, 1995. The claims for contract 29 were submitted between July 10, 1990 and September 19, 1996. Therefore, applying the six-year limitations period, the only claims brought by the government against defendant Anderson that are timely are those claims on contract 29 that were submitted on or after March 13, 1995.
By contrast, relator's Second Amended Complaint was filed on December 28, 2000, and included only claims on contract 20A. Applying the six-year limitations period under § 3731(b)(1) of the FCA to the December 28, 2000 filing date, the plaintiffs would be able to bring claims on contracts that occurred on or after December 28, 1994. The claims for contract 20A allegedly were submitted October 3, 1989 and June 20, 1993. The last claim for payment on contract 20A was allegedly submitted on June 20, 1993, more than a year and a half outside of the limitations period. Therefore, under the six-year limitations period, the claims against defendants Harbert and Anderson as to the remaining two contracts must also be dismissed because they were brought in the relator's third amended complaint, which was filed on March 9, 2006.*fn32
For the foregoing reasons, it is clear the government reasonably should have known "facts material to the right of action" as to defendants Harbert and Anderson prior to December 28, 1997, and that no reasonable jury could find otherwise. Accordingly, all of the relator's claims on all contracts against defendant Harbert are untimely under the limitations periods prescribed by the FCA were dismissed. Similarly, all of the relator's claims on all contracts against defendant Anderson, and all of the government's claims but one claim on contract 29 against defendant Anderson were dismissed as untimely under the FCA's statute of limitations.
In reaching this decision, the Court notes that it is a lamentable consequence that the relator's ability to take advantage of the three-year alternate limitations period under § 3731(b)(2) has been hamstrung in this case by the government's failure to exercise due diligence in investigating the civil claims against the defendants. The relator may think it inequitable to punish one party's ability to bring a claim based upon the actions--or, in this case, patent inaction--of another party. Such an argument, however, fails to recognize the obvious effect that the twelve year tenure of this case had on the presentation of the claims against the defendants. Indeed, the very things that statutes of limitations are designed to prevent--loss of evidence, fading memories, disappearance of documents--were undeniably present in this case. Allowing the relator in this case to bring claims outside of the limitations period notwithstanding the government's unreasonable inaction under the circumstances would fashion a remedy that would run counter to the very purpose of statutes of limitations in general.*fn33 The Court is not free to construe statutes of limitation in that manner. See Kubrick, 444 U.S. at 117.
Finally, as the Supreme Court has stated, "[i]n the long run, experience teaches that strict adherence to the procedural requirements specified by the legislature is the best guarantee of evenhanded administration of the law." Mohasco Corp. v. Silver, 447 U.S. 807, 826 (1980). Along these lines, the Court hopes that the relator's case will serve as an example that will encourage greater cooperation between attorneys conducting parallel criminal and civil investigations into similar fraudulent conduct, and will encourage relators to be more vigilant in their pursuit of qui tam claims under the FCA. More importantly, the Court hopes that this case will remind all parties of the importance of statutes of limitations, and the concrete consequences that come when parties fail to exercise diligence in heeding them.