United States ex rel. Graves v. Internet Corp. for Assigned Names & Nos., Inc.

398 F.Supp.3d 1307

UNITED STATES of America EX REL. Marks. GRAVES, Plaintiff/Relator,

v.INTERNET CORPORATION FOR ASSIGNED NAMES AND NUMBERS, INC., et al., Defendants.

CIVIL ACTION NO. 1:18-CV-05482-LMM

United States District Court, N.D. Georgia, Atlanta Division.

Filed August 16, 2019

Mark Stephens Graves, Atlanta, GA, pro se.

Anthony Christopher DeCinque, Office of the United States Attorney-ATL600 Northern District of Georgia, Atlanta, GA, for Plaintiff.

ORDER

Leigh Martin May United States District Judge This case comes before the Court on the Government's Motion to Dismiss, Dkt. No. [14], which Relator opposes. After due consideration, the Court enters the following Order.

I. BACKGROUND¹

Relator brings this case on behalf of the United States alleging violations of the False Claims Act ("FCA"), 31 U.S.C. §§ 3729 et seq. Relator alleges that Defendant Internet Corporation for Assigned Names and Numbers, Inc. ("ICANN") conspired with Defendant Verisign, Inc. ("Verisign") to collect more than $590 million in fees in connection with the new generic top level domain ("new-gTLD") project, purportedly in violation of a contract between ICANN and the Government.

Although the Internet was originally a project of the Department of Defense, the Government has transferred control over many Internet functions to private third parties such as ICANN through contract. The contract at issue here is the IANA Functions Contract between ICANN and the Government, specifically the fourth iteration of that contract signed in 2006. "IANA" stands for "Internet Assigned Numbers Authority." The IANA functions are the administrative responsibilities involved in managing the Domain Name System ("DNS") of the Internet. One of the IANA functions is controlling the top-level domains of the DNS, or "TLDs," i.e., .com, .org, .gov, etc. ICANN has controlled the registry and registrar services for the DNS since 1998. Pursuant to that authority, in 2000 ICANN made a call for new gTLD proposals and accepted 47 applications from potential gTLD registry operators to instantiate and operate nearly 200 new gTLDs. Applicants had to pay $50,000 application fees to ICANN as part of this process.

Then, in 2006, the Government and ICANN entered into the underlying IANA Functions Contract at issue in this litigation. Central to the complaint here, before ICANN could collect fees from any third parties "for the functions performed under this contract," ICANN was required to "notify the Contracting Officer in writing at least sixty days prior to the fee being applied .... The Contracting Officer shall approve any fee in writing prior to the Contractor [ICANN] imposing the fee." Dkt. No. [14-2] at 4, § B.1(d). In 2012, ICANN again opened up an application submission period for a new gTLD application process called the new-gTLD project. ICANN collected more than $357 million in application fees in connection with the new-gTLD project. Additionally, ICANN. auctioned off gTLDs to the highest bidder if more than one applicant applied for the same gTLD. Net auction proceeds exceeded $233 million.

As a result of the new-gTLD program, Verisign added approximately 1,230 gTLDs to the DNS root zone, which Verisign manages under a cooperative agreement with the United States Department of Commerce's National Telecommunications and Information Administration ("NTIA"). Pursuant to that agreement, Verisign was solely responsible for adding gTLDs to the authoritative DNS root zone until 2016, when the agreement was amended to collaboratively include ICANN in the management of changes to the root zone.

Relator's claims are based on ICANN's failure to obtain a Contracting Officer's approval of the application fees or auction process, in violation of both the 2006 contract. Additionally, Relator asserts that ICANN and Verisign violated the 2006 contract and the Verisign/NTIA cooperative agreement by failing to receive the approval or delegation of NTIA, the root zone administrator, before adding the 1,230 new gTLDs to the DNS root zone. Relator further contends the 2006 IANA Functions Contract required both the fee proceeds and auction net proceeds to be transferred to the Government, although Relator does not explain which provision requires such transfer.

Finally, Relator also seeks injunctive relieve preventing the termination of the IANA Functions Contract and the Verisign cooperative agreement, because the termination of both contracts will result in the transition of key DNS managerial functions to ICANN–i.e, the permanent privatization of the IANA Functions.

The Government moved to dismiss this action pursuant to 31 U.S.C. § 373o(c)(2)(A) of the FCA. Dkt. No. [14]. If the Court grants the motion to dismiss, the Government also asks that the seal be lifted with respect to all docket entries except its investigation summary. Dkt. No. [12]. Relator opposes the motion to dismiss as well as the motion to unseal.

II. DISCUSSION

A. Motion to Dismiss

The FCA provides: "The Government may dismiss the action notwithstanding the objections of the person initiating the action if the person has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion." 31 U.S.C. § 3730(c)(2)(A). As the Government explains in its Motion, federal courts are split on the question of whether, pursuant to this provision, the Government has absolute discretion to dismiss qui tam claims or whether the Government must show that there is a "valid" and "rational" basis for the dismissal. See Dkt. No. [14-1] at 11 (citing Swift v. United States, 318 F.3d 250, 252-53 (D.C. Cir. 2003) (Government has an unfettered right to dismiss); United States ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., 151 F.3d 1139, 1145 (9th Cir. 1998) (applying rational basis review) ; Ridenour v. Kaiser-Hill Co., 397 F.3d 925, 935 (10th Cir. 2005) (following Sequoia )).

While the Eleventh Circuit has not directly decided that question, it has explained in dicta that, in contrast to seeking a settlement under the FCA, "[w]hen the government seeks to dismiss the FCA action, the statute does not prescribe a judicial determination of reasonableness[.]" United States v. Everglades Coll., Inc., 855 F.3d 1279, 1288 (11th Cir. 2017) (citing 31 U.S.C. § 3730(c)(2)(A) ). The court went on to describe the Government's "decision to dismiss the case" in a qui tam action as "a choice committed to the discretion of the Executive Branch[.]" Id.

Therefore, it is clear that the Court must at the very least give substantial deference to the Government's decision to dismiss this action. Nonetheless, the statute's requirement that the Court provide Relator "with an opportunity for a hearing on the motion" would serve no purpose if he were not, in fact, meaningfully heard. That provision thus indicates that the Government's discretion to dismiss a case is not entirely "unfettered," as the Swift court decided.² In any event, the Court need not decide which standard to apply because the Government's Motion meets the less deferential rational basis review standard applied in Sequoia.

Under the rational basis review standard, the Court must engage in a two-step analysis: "(1) identification of a valid government purpose; and (2) a rational relation between dismissal and accomplishment of the purpose. If the government satisfies the two-step test, the burden switches to the relator to demonstrate that dismissal is fraudulent, arbitrary and capricious, or illegal." Sequoia, 151 F.3d at 1145 (adopting the district court's test articulated below) (quotations and citations omitted). "The standard of review is deferential to preserve the traditional authority of the executive branch to make policy choices about the litigation it pursues." United States ex rel. Sequoia Orange Co. v. Sunland Packing House Co., 912 F. Supp. 1325, 1340 (E.D. Cal. 1995). Thus, to avoid infringing on prosecutorial discretion, the Court's "limited review" of an FCA dismissal motion restricts the Court to determining whether the Government is "enforc[ing] the FCA in accordance with the intent of Congress ... that FCA claims be dismissed for legitimate government purposes, and not as a result of fraud, illegality, or lack of political will." Id.

To meet this test, the Government argues (1) the allegations in the Complaint fail to state a valid claim under the FCA; and (2) permitting this case to move forward may interfere with the Government's "long-held goal of transferring the IANA Functions to private control." Dkt. No. [14-1] at 12.

First, the Government contends the Complaint fails to state a claim because Relator's claims are based on the provision of the IANA Functions Contract barring ICANN from charging fees to third parties without written approval from the relevant government contracting officer. Dkt. No. [1-1] ¶ 32. Relator claims ICANN violated this provision by collecting more than $590 million in revenue in connection with the new-gTLD program. However, the Government avers that ICANN's development of the new-gTLD program was not one of the IANA Functions and is thus not subject to the provisions of the IANA Functions Contract. Therefore, the Government believes it would be a waste of its resources to pursue this case given the "vanishingly small" likelihood of recovering damages under Relator's claims. Dkt. No. [14-1] at 14.

Second, the Government explains it "has been working for more than twenty years to transfer control of the Internet to private hands" and that any attempt "to block or unwind that transition" by requiring ICANN to transfer its revenue from the new-gTLD project to the Government would conflict with this "long-held bipartisan policy goal." Id. at 15.

Either of the Government's proffered reasons for dismissal, standing alone, overcomes rational basis review. First, the Government has established that there is a "rational relationship" between its decision to...