United States ex rel. Weiner v. Siemens AG

87 F.4th 157

UNITED STATES of America EX REL. Clifford WEINER,State of New York ex rel. Clifford Weiner, Plaintiffs-Appellants, v. SIEMENS AG, Siemens Industry,Siemens Schlesinger Electric, LLC, Defendants-Appellees.^*

Docket No. 22-2656

August Term, 2022

United States Court of Appeals, Second Circuit

Argued: June 7, 2023

Decided: November 28, 2023

Appeal from the United States District Court for the Southern District of New York (Carter, J.) Max Rodriguez (Adam Pollock, Agatha M. Cole, on the brief), Pollock Cohen LLP, New York, N.Y., for Relator

Wendy H. Schwartz (Travis A. Gonyou, on the brief), Binder & Schwartz LLP, New York, N.Y., for Defendants-Appellees^‡

Before: CARNEY and ROBINSON, Circuit Judges.^†

Per curiam:

The False Claims Act ("FCA"), 31 U.S.C. §§ 3729-32, creates civil liability for those who knowingly submit "a false or fraudulent claim for payment or approval" to the federal government. 31 U.S.C. § 3729(a)(1)(A). The FCA contains a qui tam provision, allowing private persons (known as relators) to file complaints on the government's behalf. Id. § 3730(b)(1); see generally State Farm Fire & Cas. Co. v. United States ex rel. Rigsby, 580 U.S. 26, 29, 137 S.Ct. 436, 196 L.Ed.2d 340 (2016). Section 3730 of the FCA instructs that such a complaint "shall be filed in camera, shall remain under seal for at least 60 days, and shall not be served on the defendant until the court so orders." 31 U.S.C. § 3730(b)(2). It also provides that a defendant is not "required to respond" to a qui tam complaint "until 20 days after the complaint is unsealed and served upon the defendant pursuant to Rule 4 of the Federal Rules of Civil Procedure." Id. § 3730(b)(3).

This appeal presents a narrow question: Under Section 3730, when does the service-of-process clock begin to tick? Relator Clifford Weiner argues that the service-of-process period does not begin until the district court explicitly orders service. Defendants-Appellees Siemens Industry, Inc., and Siemens Electrical, LLC (collectively, "Defendants") contend that the service period begins automatically when the district court unseals a complaint.

The answer is clear. Because the statute prohibits a relator from serving a qui tam complaint "until the court so orders," the service-of-process clock does not begin until a district court expressly authorizes service. Id. § 3730(b)(2). Here, having never issued such an order, the district court (Carter, J.) exceeded the permissible bounds of its discretion by dismissing the case for insufficient service of process. We thus VACATE the district court's judgment and REMAND the case for further proceedings consistent with this opinion.

BACKGROUND

I. Procedural History

Relator instituted this action on behalf of the United States and the State of New York on February 23, 2012. He complained that Defendants made misrepresentations to the New York City Department of Environmental Protection with the intention of having their claims "paid or approved" by the United States in violation of the FCA and New York's False Claims Act. In accordance with the FCA, the complaint was filed in camera and placed under seal for a preliminary period of sixty days. See id.

Initially, this litigation proceeded in the normal course. The United States and the State of New York obtained several extensions of the sealing period to determine whether either would take the lead role in the case by intervening. Approximately nine months after the complaint was filed, the United States declined to intervene. New York continued to request extensions for almost two years, but the case did not stagnate during this time. For example, while the action was sealed, the district court authorized limited disclosures to the New York City Law Department, the Corporation Counsel of the City of New York, Defendants, and an attorney named Peter H. Woodin, whom the City of New York and Defendants had selected as a mediator in hopes of reaching a settlement.

On December 11, 2015, after considering a letter motion from the City of New York, the district court declined to exercise supplemental jurisdiction over the state law claims.¹ In its order dismissing the state law claims, the district court instructed that "[t]he seal shall remain in place pending a status conference, to be requested by Relator, regarding Relator's intent to continue to pursue the United States' claims against Defendants." Relator responded to the district court's instruction with silence.

The case then languished. After almost three years of inaction, the United States wrote to the district court on June 22, 2018, requesting that the suit be unsealed. Four days later, the district court signed an order unsealing Relator's complaint, the court's orders, and the United States' letter in which it declined to intervene. Over a year passed, however, before the district court docketed the unsealing order in August 2019. In September 2020, after another year slipped by without any action, the district court directed the parties to file a status report. Later that same month, Relator advised the court in writing that he was ready to effectuate service "immediately after such an order" by the district court. App'x at 82-83.

II. Decision Below

Defendants then moved to dismiss Relator's complaint for insufficient service of process and failure to prosecute, citing the age of the proceedings. United States ex rel. Weiner v. Siemens AG, No. 12-cv-1466, 2021 WL 3544718, at *1 (S.D.N.Y. Aug. 10, 2021), reconsideration denied, 2022 WL 4467051 (S.D.N.Y. Sept. 26, 2022). On August 10, 2021, the district court granted in part and denied in part Defendants' motion. The district court rejected Defendants' contention that it is "well-settled that the service period begins immediately at the unsealing of the complaint," id. at *3, explaining its view that "it is not clear from existing law and court practice whether an express order to serve defendants is required for the service period to begin," id. at *5. Nevertheless, it held, because Relator had not served Defendants in the preceding nine years, there was "no way for this Court to determine that service was not untimely." Id. The district court then declined Relator's request for either an extension for "good cause" shown under Rule 4(m) or a discretionary extension of the service period, and dismissed the action for insufficient service of process.

Defendants' motion to dismiss under Rule 41 for failure to prosecute proved a different story. The district court reasoned that Relator did not have sufficient notice that the case might be subject to dismissal on this ground, suggesting that Relator may not have "intentionally or willfully failed to pursue this case." Id. at *7. And although the case had been pending for years, the district court found that the action had not wasted judicial resources because the court had "only reviewed a handful of submissions and held a telephone conference." Id. On balance, the district court determined, dismissal with prejudice for failure to prosecute under Rule 41 was "too extreme." Id.

After his request for reconsideration of that order was denied, Relator timely appealed.

DISCUSSION

We review a district court's dismissal for insufficient service of process and failure to prosecute for an abuse of discretion. See Gerena v. Korb, 617 F.3d 197, 201 (2d Cir. 2010); United States ex rel. Drake v. Norden Sys., Inc., 375 F.3d 248, 254 (2d Cir. 2004). "A district court has abused its discretion if it has (1) based its ruling on an erroneous view of the law, (2) made a clearly erroneous assessment of the evidence, or (3) rendered a decision that cannot be located within the range of permissible decisions." Lynch v. City of New York, 589 F.3d 94, 99 (2d Cir. 2009) (internal quotation marks omitted). A question of statutory interpretation is a legal question that we review de novo. See In re: Vitamin C Antitrust Litig., 8 F.4th 136, 142 (2d Cir. 2021).

I. Service of Process

The parties' debate centers on whether the Rule 4(m) service of process clock begins to run when the district court unseals a qui tam action under the FCA even if the district court does not issue an order authorizing service. Relator argues that under Section 3730, he was not permitted to serve Defendants in the absence of a court order. Because the district court never issued such an order, Relator reasons, the service clock has not yet started. Defendants, meanwhile, read Section 3730 to suggest that the service period commences automatically whenever a complaint is unsealed. Because the complaint was unsealed in 2019, they maintain, the service period has long since lapsed.

Our analysis starts with the text of Section 3730. As noted above, that section provides that a qui tam complaint alleging violations of the FCA "shall be filed in camera, shall remain under seal for at least 60 days, and shall not be served on the defendant until the court so orders." 31 U.S.C. § 3730(b)(2). The FCA further provides that the defendant is not required to "respond to any complaint filed under this section until 20 days after the complaint is unsealed and served upon the defendant pursuant to Rule 4 of the Federal Rules of Civil Procedure." Id. § 3730(b)(3). Rule 4, in turn, instructs that the court must dismiss an action or order that service be made within a specified time when a plaintiff has not served a defendant "within 90 days after the complaint is filed," unless the plaintiff shows "good cause" for the failure. Fed. R. Civ. P. 4(m).

Where statutory text is "unambiguous, our inquiry begins with the statutory text, and ends there as well." Nat. Ass'n of Mfrs. v. Dep't of Defense, 583 U.S. 109, 127, 138 S.Ct. 617, 199 L.Ed.2d 501 (2018) (internal quotation marks omitted). Section 3730(b)(2) forbids a relator from serving a qui tam complaint on the defendant "until the court so orders." 31 U.S.C. § 3730(b)(2). With this language, Congress provided unambiguously that a...