CityNet, LLC v. Frontier W.Va.

1

CITYNET, LLC, on behalf of the United States of America, Plaintiff/Relator, v. 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.

Civil Action No. 2:14-cv-15947

United States District Court, S.D. West Virginia, Charleston

November 7, 2023

MEMORANDUM OPINION AND ORDER

John T. Copenhaver, Jr. Senior United States District Judge

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 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 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 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 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, 233-34 (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 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.” Kemp v. United States, 142 S.Ct. 1856, 1861 (2022). “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 . . 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. 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...