United States ex rel. Kiro v. Jiaherb, Inc., CV 14-2484-RSWL-PLAx

UNITED STATES OF AMERICA, ex rel. TRAVIS KIRO Plaintiff, v. JIAHERB, INC., Defendant.

CV 14-2484-RSWL-PLAx

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

July 3, 2019

ORDER re: Relator's Motion in Limine 1-7 [95]; Defendant's Motion in Limine 1-9 [98]

Currently before the Court is Relator Travis Kiro's ("Relator") Motion in Limine ("MIL") 1-7 [95]; and Defendant Jiaherb, Inc.'s ("Defendant") MIL 1-9 [98]. Having reviewed all papers submitted pertaining to the Motions, the Court NOW FINDS AND RULES AS FOLLOWS: the Court GRANTS Relator's MIL #1; GRANTS Relator's MIL #2; DENIES Relator's MIL #3; GRANTS Relator's MIL #4; DENIES Relator's MIL #5; DENIES Relator's MIL #6; GRANTS Relator's MIL #7; GRANTS Defendant's MIL #1; GRANTS Defendant's MIL #2; GRANTS Defendant's MIL #3; DENIES Defendant's MIL #4; GRANTS Defendant's MIL #5; GRANTS Defendant's MIL #6; GRANTS Defendant's MIL #7; DENIES Defendant's MIL #8; and GRANTS Defendant's MIL #9.

I. BACKGROUND

This case arises out of a qui tam action brought by Relator on behalf of himself in the name of the United States Government ("the Government") for violations of the False Claims Act, 31 U.S.C. § 3729 et seq. ("FCA"). Compl., ECF No. 1. The Government declined to intervene [22]. Currently before the Court are Relator's and Defendant's MIL for the forthcoming trial currently set for July 9, 2019. Relator filed seven MIL seeking the Court to:

MIL #1) Preclude Defendant from referring to or advising the jury about penalties under the FCA

MIL #2) Exclude all reference to the recovery of attorneys' fees and expenses under the FCA

MIL #3) Exclude evidence regarding any purported "Government knowledge" defense

MIL #4) Not permit Defendant to argue or introduce evidence that the Government has not intervened

MIL #5) Preclude Defendant from asserting equitable affirmative defenses

MIL #6) Preclude Defendant from introducing prejudicial and irrelevant evidence about RelatorMIL #7) Preclude Defendant from introducing self-serving evidence about its or its employees' charitable activities

Defendant filed nine MIL seeking the Court to:

MIL #1) Not qualify Relator Travis Kiro as an expert witness

MIL #2) Exclude proposed expert testimony from Relator Travis Kiro regarding the price of imports, the processes and composition of imports, proper duties owed, and customs procedures

MIL #3) Exclude Relator Travis Kiro's proposed expert testimony

MIL #4) Exclude character evidence or testimony regarding alleged prior acts unrelated to the payment of customs duties

MIL #5) Limit evidence and testimony to exclude any continued, unnecessary, harmful interference with Defendant's business relationships

MIL #6) Exclude any evidence or testimony implying an alleged scheme was more likely because Defendant's parent company is located in China

MIL #7) Limit evidence and testimony to the issues raised by the Complaint

MIL #8) Require properly identified trial exhibits and exclude Relator's proposed exhibits to the extent they contain irrelevant, immaterial and inadmissible evidence

MIL #9) Exclude evidence concerning Defendant's finances

///

///

///

///

///

II. DISCUSSION

A. Relator's MIL

1. Relator's MIL #1 is GRANTED

In Relator's MIL #1, Relator requests that the Court preclude the introduction of any evidence or argument to the jury regarding the FCA's mandatory civil penalties. The FCA provides that any person who violates the Act "is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000 . . . plus 3 times the amount of damages which the Government sustains because of the act of that person." 31 U.S.C. § 3729(a)(1). Relator is correct that the role of the jury in this case is to determine whether Defendant violated the FCA, and if so, the number of violations. The imposition of penalties are reserved to the Court as a matter of law. See, e.g., Cook County, Ill. v. United States ex rel. Chandler, 123 S. Ct. 1239, 1247 (2003) (citing 31 U.S.C. § 3729(a)) ("But under the FCA, . . . if [the jury] finds liability, its instruction is to return a verdict for actual damages, for which the court alone then determines any multiplier, just as the court alone sets any separate penalty."); Brooks v. Cook, 938 F.2d 1048, 1052 (9th Cir. 1991) ("The majority rule is that it is error for a court to instruct a jury that it will subsequently treble any damages the jury awards."). Moreover, permitting the jury to hear evidence regarding statutory treble damages and civil penaltiesis prejudicial to Defendant and would risk the jury imposing monetary relief beyond actual damages, or on the other hand, lowering actual damages in light of the possibility of added penalties. As such, the Court GRANTS Relator's MIL #1.

2. Relator's MIL #2 is GRANTED

Relator's MIL #2 similarly seeks to exclude all reference to the recovery of attorneys' fees and expenses under the FCA. The award of attorneys' fees is a matter of law for the Court, and not the jury to decide. See Brooks, 938 F.2d at 1051 ("The jury's role is to determine liability and the amount of damages. These determinations are distinct from the awarding of fees."); see also Redwood Christian Schools v. Cnty. of Alameda, No. C-01-4282 SC, 2007 WL 214317, at *2 (N.D. Cal. Jan. 26, 2007) (granting motion in limine to exclude evidence of availability of attorneys fees, stating "[such] evidence is irrelevant and . . . unfairly prejudicial"). Defendant does not oppose this Motion, and for the same reasons discussed as to Relator's MIL #1, the Court GRANTS Relator's MIL #2.

3. Relator's MIL #3 is DENIED

Relator's MIL #3 requests that the Court exclude evidence regarding any purported "government knowledge" defense at trial because it fails as a matter of law and fact. Defendant opposes this Motion to the extent that such evidence relates to the question of scienter. One of the elements required to prove a violation ofthe FCA requires that the defendant "knowingly" submitted a "false or fraudulent" claim. 31 U.S.C. § 3729. The FCA defines "knowingly" to mean that a "defendant knew a claim for payment was false, or that it acted with reckless disregard or deliberate indifference as to the truth or falsity of the claim." United States ex rel. Anita Silingo v. WellPoint, Inc., 904 F.3d 667, 680 (9th Cir. 2018).

"The requisite intent is the knowing presentation of what is known to be false. That the relevant government officials know of the falsity is not in itself a defense." United States ex rel. Hagood v. Sonoma Cnty. Water Agency, 929 F.2d 1416, 1421 (9th Cir. 1991). That said, "the government's knowledge of the facts underlying an allegedly false record or statement can negate the scienter required for an FCA violation." United States ex rel. Becker v. Westinghouse Savannah River Co., 305 F.3d 284, 289 (4th Cir. 2002); accord United States ex rel. Burlbaw v. Orenduff, 548 F.3d 931, 951 (10th Cir. 2008) ("The 'government knowledge inference' helps distinguish, in FCA cases, between the submission of a false claim and the knowing submission of a false claim—that is, between the presence and absence of scienter."); Hagood, 929 F.2d at 1421 ("[T]he knowledge possessed by officials of the United States may . . . show that the defendant did not submit its claim in deliberate ignorance or reckless disregard of the truth."). Thus,while government knowledge is not in itself a defense, evidence of any government knowledge is relevant to the issue of whether Defendant acted with reckless disregard or deliberate indifference to the truth or falsity of its submissions to CBP. See United States ex. rel. UBI v. IIF Data Solutions, 650 F.3d 445, 452 (4th Cir. 2011) (finding evidence of government knowledge "relevant to the issue of [defendant's] intent" in an FCA action). As such, the Court DENIES Relator's MIL #3.¹

4. Relator's MIL #4 is GRANTED

Relator's MIL #4 seeks that the Court preclude any argument or evidence that the Government has not intervened in this Action. Indeed, such evidence is irrelevant and would be highly prejudicial in that it could allow the jury to draw the inference that Relator's claim is substantively weak. See, e.g., United States ex rel. Ubl v. IIF Data Sols., 650 F.3d 445, 457 (4th Cir. 2011) ("The government's decision not to intervene in an FCA action does not mean that the government believes the claims are without merit . . . and the government's decision not to intervene therefore is not relevant in an FCA action brought by aprivate party."); United States ex rel. Feldman v. van Gorp, No. 03 Civ. 8135 (WHP), 2010 WL 2911606, at *2-3 (S.D.N.Y. July 8, 2010) (granting motion in limine to exclude evidence of government's decision not to intervene as irrelevant). Defendant does not oppose this Motion, and in light of the above, the Court GRANTS Relator's MIL #4.

5. Relator's MIL #5 is DENIED

Relator's MIL #5 requests that Defendant be precluded from asserting equitable affirmative defenses because as a matter of law, these defenses are unavailable in FCA cases where a relator is seeking to recover on behalf of the United States, rather than himself. Defendant argues that Relator does not specify any such affirmative defense, and only cites one non-FCA case,² to argue generally that Defendant should be stripped of any and all equitable affirmative defenses.

Indeed, Relator did not initially specify any such affirmative defense. According to the FPTC Order, which controls, Defendant plans to pursue two affirmative defenses. See FPTC Order at 4. In hisReply, Relator only took issue with the first affirmative defense, stated as follows:

(a) Relator's claims are barred in whole or in part, because acts or omission of other persons or entities, over whom Defendant Jiaherb had no supervision or control and for whose actions and omissions Defendant Jiaherb has no legal responsibility, caused and/or contributed to the alleged claim.

Id.

Relator argues that this position is legally flawed because Defendant cannot blame...