City of N.Y. v. Siemens Elec., LLC.

2020 NY Slip Op 31136(U)

CITY OF NEW YORK, STATE OF NEW YORK,CITY OF NEW YORK EX REL. CLIFFORD WEINER, Plaintiffs, v. SIEMENS ELECTRICAL, LLC. F/K/A SCHELESINGER-SIEMENS ELECTRICAL, LLC,SIEMENS INDUSTRY, INC. F/K/A SIEMENS ENERGY & AUTOMATION, INC.,SCHLESINGER ELECTRICAL CONTRACTORS, INC. Defendants.

INDEX NO. 104330/2012

SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY PART IAS MOTION 33EFM

RECEIVED: May 4, 2020

April 2, 2020

NYSCEF DOC. NO. 346

PRESENT: HON. MARGARET A. CHAN Justice

MOTION DATE __________

MOTION SEQ. NO. 007

DECISION + ORDER ON MOTION

The following e-filed documents, listed by NYSCEF document number (Motion 007) 270, 271, 272, 273, 274, 275, 276, 277, 278, 279, 280, 281, 282, 283, 284, 285, 286, 287, 288, 289, 290, 291, 292, 293, 294, 295, 296, 297, 298, 299, 300, 301, 302, 303, 304, 305, 306, 307, 308, 309, 310, 311, 312, 313, 314, 315, 316, 317, 318, 319, 320, 321, 322, 323, 324, 325, 326, 327, 328, 329, 330, 331, 332, 333, 334, 335, 336, 337, 338, 339, 340, 341, 342 were read on this motion to/for Amount of Award.

In this civil enforcement action, Clifford Weiner, the relator in this matter, moves pursuant to New York State Finance Law § 190(6)(a) and New York City Admin Code § 7-804(i)(1) for an order awarding him a twenty-five percent share of: 1) the proceeds recovered by the City of New York in the settlement of the New York State and New York City False Claims Act claims against Siemens Electrical, LLC; 2) the payment by Siemens Electrical, LLC to the State of New York under the Deferred Prosecution Agreement; 3) the off-set from Siemens Electrical's contractual claims against the City; and (4) the future interest in the proceeds of a 2018 lawsuit by Siemens Electrical against the City. The City partially opposes the relator's motion.

FACTS

The factual background of this action was addressed in a previous decision by this court.¹ Accordingly, this Decision and Order solely discusses the facts underlying the relator's instant motion.

In February 2012, the relator filed the instant action alleging that defendants, Siemens Electrical, LLC (Siemens Electrical) f/k/a Schlesinger-Siemens Electrical, LLC; Siemens Industry, Inc., f/k/a Siemens Energy & Automation, Inc., and Schlesinger Electrical Contractors, Inc., violated the New York State False Claims Act (NYSFCA) and New York City False Claims Act (NYCFCA).² The relator alleged, first, that Siemens Electrical falsely represented itself as a business with a licensed Master Electrician who had a responsibility for supervising employees that did electrical work on the Department of Environmental Protection (DEP) projects, in violation of the New York City Electrical Code (Electrical Code) (Admin Code § 27-3017[a][1]). And second, the relator alleged that Siemens Electrical falsely submitted reports overstating the participation of Minority Business Enterprises (MBE). The City of New York investigated the relator's allegations and intervened in the relator's qui tam action. In November 2015, the City filed the Superseding Complaint (NYSCEF # 305, Superseding Complaint).

In the interim, Siemens Electrical commenced three actions against the DEP for damages related to the contracts between the parties: (i) contract 26W-12E;³ (ii) contract PO-87B-E;⁴ and (iii) contract WI-79E.⁵ The three contracts serving as the basis for Siemens Electrical's contract claims were also grounds for the FCA claims (id. at ¶ 21).

In July 2018, the City and Siemens Electrical entered into the Commercial Settlement Agreement, wherein the parties agreed to settle Siemens Electrical's claims against the City. The parties agreed that the value of Siemens Electrical's three contract claims, for the purpose of settlement, was $6.15 million (NYSCEF # 291, Commercial Settlement Agreement at 2). The parties further agreed that Siemens Electrical would discontinue its contract claims against the City in exchange for the payment of $4.65 million (id. at ¶¶ 2, 7).

Around the same time, the parties also entered into the Stipulation, Settlement Agreement, and Release settling the City's False Claims Act claims against Siemens Electrical (FCA Settlement Agreement). Pursuant to the FCA Settlement Agreement, the City released its False Claims Act claims against defendants in exchange for the payment of $1.5 million, which was to be set-off against the payment due by the City in the Commercial Settlement Agreement (NYFCSF # 292, FCA Settlement Agreement at ¶¶ 2, 7).

In November 2018, Siemens Electrical filed another action against the City for breach of contract, project delays, and disruptions related to the Croton Water Filtration Plant at Moshulu Golf Course. The contract serving as the basis for Siemens Electrical's claims, entitled CRO-312-E1, was also a contract that served as a basis for the FCA claims (NYSCEF # 305 at ¶ 23). The City's answer to Siemens Electrical's novel contract claim contains affirmative defenses alleging that Siemens Electrical failed to employ a Master Electrician and that it did not have employees of its own, in violation of the terms to of the contract and Admin Code § 27-2013 (NYSCEF # 293, City's Verified Answer and Counterclaim).

Subsequent to the relator's filing his qui tam action, the New York County District Attorney's Office (DANY) pursued criminal charges against Siemens Electrical related to the MBE and Electrical License fraud. In January 2013, Siemens Electrical and DANY entered into the Deferred Prosecution Agreement (DPA). Under the DPA, Siemens Electrical admitted that it knowingly violated the Electrical Code and that it misrepresented its compliance with the MBE requirements in the contracts it had with the DEP. Pursuant to the DPA, Siemens Electrical was required to pay the DANY $10 million for the resolution of the DANY's criminal and forfeiture claims (NYSCEF # 278, DPA at 4).

DISCUSSION

The parties agree that the relator is entitled to a share of the proceeds the City received pursuant to the FCA Settlement Agreement; their disagreement is on the amount of the share and whether the relator is entitled to recovery beyond the FCA Settlement Agreement. Thus, it must be first determined whether the relator may receive a share of the recovery pursuant to the DPA, and whether the relator is entitled to a share of the savings, if any, to the City as a result of the settlement of Siemens Electrical's contract claims. Based on the ensuing analysis, the court finds that the relator is entitled to only a share of the FCA Settlement Agreement.

Whether the Relator is Entitled to a Share of the DPA

The relator contends that he is entitled to a portion of the $ 10 million forfeiture paid by Siemens Electrical under the DPA. The relator argues that the DANY relied on information provided by the relator to enter into the DPA. In opposition, the City argues that the relator is not entitled to a share of the DPA proceeds because the City did not pursue a criminal action as an alternative to pursuing the FCA claims. The City contends that the relator is entitled to only the amount of proceeds recovered in the settlement of the FCA action.

The NYSFCA provides that a qui tam relator may recover a percentage of the recovery in a qui tam suit (State Finance Law § 190[6]). The NYSFCA also provides that the government may elect to pursue "any remedy available" to pursue falseclaims (id. at § 190[5][c]). Where the government pursues such alternative remedy in another proceeding, "the person initiating the action shall have the same rights in such proceeding as such person would have had if the action had continued under this section" (id.; see 31 USC 3730[5]). The NYCFCA also contains a provision permitting a relator to a share of the City's proceeds where the City pursues an "alternate action" (Admin Code § 7-804[f][2]). New York State courts have yet to address whether another proceeding constitutes an "alternate civil remedy."

The federal False Claims Act (FCA) has a nearly identical provision - where the government seeks an "alternate remedy in another proceeding, the person initiating the action shall have the same rights in such proceeding as such person would have had if the action had continued under this section" (31 USC 3730[c][5]). And the federal courts have spoken on this very issue. Hence, it is instructive to review federal jurisprudence in interpreting the NYSFCA (State ex rel. Seiden v Utica First Ins. Co., 96 AD3d 67, 71 [1st Dept 2012]).

Federal courts have found that an "alternate remedy" may not exist where the government elected to intervene in a the relator's qui tam action (see United States ex rel. Bledsoe v Community Health Systems, Inc., 342 F3d 634, 647 [6th Cir 2003] ["We hold that 'alternate remedy' refers to the government's pursuit of any alternative to intervening in a the relator's qui tam action"]; United States ex rel. Barajas v United States, 258 F3d 1004, 1010 [9th Cir 2001] ["An alternate remedy under § 3730(c)(5) is a remedy achieved through the government's pursuit of a claim after it has chosen not to intervene in a qui tam the relator's FCA action"]; United States ex rel. LaCorte v Wagner, 185 F3d 188, 191 [4th Cir 1999] ["Section 3730(c)(5) simply preserves the rights of the original qui tam plaintiffs when the government resorts to an alternate remedy in place of the original action"). Indeed, the plain language of State Finance Law § 190(5)(c) states that a relator shall have the same rights as in an "alternative remedy" if the action would have proceeded under the NYSCFA, suggesting that that an "alternative remedy" is unavailable where government proceeds in the qui tam action (id. at § 190[5][c]; see 31 USC § 3730[5]).

Here, the DPA is not considered an "alternate remedy" as to the relator. Instead, the City elected to pursue its claims by intervening in the relator's qui tam action and subsequently litigating and settling the action. That the criminal prosecution came before the City's intervention is...