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Western District of Texas Court Summaries
FEDERAL COURT UPDATE
By Soledad Valenciano, Melanie Fry, and Jeffrie Lewis
If you are aware of a Western District of Texas order that you believe would be of interest to the local bar and should be summarized in this column, please contact Soledad Valenciano (svalenciano@svtxlaw.com, 210–787–4654) or Melanie Fry (mfry@dykema.com, 210–554–5500) with the style and cause number of the case, and the entry date and docket number of the order.
Rule 41(b) Motion to Dismiss; False Claims Act; Anti-Kickback Statute; Statute of Limitations
United States ex rel. Hueseman v. Prof. Compounding Ctrs. of Am., Inc., SA-14-CV00212-XR (Rodriguez, X., May 3, 2024)
One of twelve named defendants, Professional Compounding Centers of America (PCCA), filed a Rule 41(b) motion to dismiss for want of prosecution against the United States government, which intervened in this lawsuit in 2021. The suit was originally filed in 2014 by the plaintiff, Relator Peter Hueseman, a licensed pharmacist formerly employed by one of the defendants. The plaintiff brought this qui tam complaint under seal, alleging “a nationwide fraud scheme against several federal healthcare programs in violation of the False Claims Act (“FCA”) . . . and the Anti-Kickback Statute (“AKS”) . . . .” Under the AKS, once a potential violation is identified, the government is afforded a 60-day timeframe, during which the complaint remains sealed, to “diligently [] investigate” so as to determine whether or not to intervene in the lawsuit. The statute also allows the government “to move the court for extensions of time during which the complaint remains under seal” on a showing of “good cause.”
Due to the passage of time, granting PCCA’s motion would result in a dismissal with prejudice. In such cases, dismissal requires: (1) “a clear record of delay or contumacious conduct by the plaintiff and (2) [that] the court determine[] that lesser sanctions would not prompt diligent prosecution . . . .” A clear record of delay involves “significant periods of total inactivity[,]” and contumacious conduct is defined as “stubborn resistance to authority.” Furthermore, in most cases in which dismissal would bar refiling, one of three aggravating factors is also required: (1) the plaintiff personally caused the delay; (2) prejudice to the defendant; or (3) intentional conduct caused the delay. Therefore, to prevail on its motion to dismiss, the defendant must show a record of the government’s delay or contumacious conduct plus one aggravating factor, and the court must determine that no lesser sanctions would prompt diligent prosecution.
The government first requested an extension of its statutory 60-day timeframe in 2014, warning that “[a]n extensive investigation will likely be necessary to determine whether to intervene.” The court granted this extension, as well as fourteen additional extensions, before the government filed its notice of partial intervention in 2021. The defendant’s 41(b) motion to dismiss arose out of these fifteen extensions, specifically. The court analyzed the government’s activities during the timeframe in question and found neither delay nor contumacious conduct. On the contrary, it found that in more than one instance, the defendant caused delays in the investigation. It also highlighted that, over this time, the defendant gradually produced almost 400,000 documents responsive to the government’s requests, the contents of which prompted interviews of the defendant’s employees— current and former. While reviewing its production and conducting the interviews, the government repeatedly presented its findings to PCCA. As a result, the parties discussed an ability-to-pay settlement over the course of several years. In 2019, the government and several defendants entered into a settlement agreement. Ultimately, PCCA did not submit the requested financial information. Nonetheless, the parties continued settlement discussions into 2021. By summer 2021, the government determined settlement was not a viable option and intervened in the lawsuit.
In support of its motion to dismiss, PCCA relied on a 2023 Fifth Circuit opinion in which the court criticized the government’s eighteen extensions of the sealing period granted by the district court. See United States ex. rel. Aldridge v. Corp. Mgmt., Inc., 78 F.4th 727 (5th Cir. 2023). However, in Aldridge, the Fifth Circuit declined to find that the district court should have granted a 41(b) motion to dismiss with prejudice, based in large part on a lack of precedent. PCCA tried to distinguish the Hueseman case from Aldridge by alleging that the government received a draft of the complaint before it was filed, as well as a report referring PCCA for investigation—a fact that PCCA characterized as “the most critical,” not only because the report outlined the claims that would be asserted by the government “eight years later[,]” but also because the report contained “mere allegations—not evidence—that [PCCA] violated the FCA.” The court clarified that “the FCA does not permit the Government to intervene on the basis of well pled allegations; it must investigate and must find that the FCA has been violated before filing a complaint.” The court found that neither the draft complaint nor the referral report relieved the government “of its statutory obligation to investigate the allegations[,]” and rationalized the court’s granting of the fifteen extensions, since “[t]he realities of managing such an [extensive] investigation continued to color the good-cause analysis in later extensions.” The court concluded that “[the defendant] has failed to pinpoint when the [c]ourt’s ‘cumulative indulgence of the Government’s snail’s pace rose to an abuse of discretion.’” The court further explained that had it denied an earlier extension, the government would have been forced to decide, then, to intervene, to dismiss the case, or not to intervene, allowing the relator to pursue the action; in any case, an earlier extension denial “would not have resulted in the termination of the action—as PCCA now seeks.”
Liability; Summary Judgment; Circumstantial Evidence; Spoliation
Kinney v. Dolgencorp of Tex., Inc., SA-22CV-00575-JKP (Pulliam, J., May 28, 2024)
In this trip and fall suit, the court granted the defendant’s motion for summary judgment with prejudice because the plaintiff could not establish that the defendant had knowledge of the condition alleged to have caused the fall. The plaintiff claimed to have tripped on a loose thread from a frayed door mat as she entered a store, and that the store had constructive knowledge of the damaged door mat. Put differently, “[the plaintiff] allege[d] the hazardous condition ‘existed long enough for [the defendant] to have discovered it upon reasonable inspection.’” What constitutes “long enough” or “a reasonable time for a premises owner to discover a dangerous condition[,]” the court noted, depends on the facts of the case. Nonetheless, in any case, the plaintiff must be able to prove the hazardous condition existed for the case-specific length of time required to establish premises liability. The policy underpinning this standard is the prevention of imposing “strict liability for any dangerous condition” on an owner’s premises—and the plaintiff was unable to meet this standard. In response to the defendant’s motion for summary judgment on these grounds, the plaintiff offered deposition testimony and affidavits regarding the general condition of the store and the door mat. For example, the store manager admitted that the rugs get worn out over time, and the plaintiff testified that she noticed mud caked on the mat she tripped on. However, because the plaintiff mentioned nothing in the way of the exposed threading alleged to have caused her fall, the court found that she was unable to establish that the store had constructive knowledge of the hazardous condition because she could not show that the rug had been frayed long enough to give the store a reasonable opportunity to discover it. Finally, the plaintiff argued that the defendant should not be rewarded for failing to preserve evidence by not saving the video evidencing the fall. The court declined to address this argument, pointing to the fact that the plaintiff had filed no spoliation claim or other related motion.
Rule 30 Deposition; Managing Agent; Fair Credit Reporting Act
Allen v. Experian Info. Sols. Inc., SA-24-CV00157-XR (Chestney, E., June 13, 2024)
The plaintiff sought to compel Rule 30(b) (1) depositions of two non-US-based dispute associates who conducted Experian’s statutorily required investigation of her credit dis-
pute. Rule 30(b)(1) allows a party to compel the deposition of a specific officer, director, or managing agent of a corporate party. Here, the defendant refused to produce the individuals on several grounds, including that they did not work for the defendant and that the plaintiff failed to comply with foreign law and international treaties. The court denied the plaintiff’s motion to compel, holding that the plaintiff failed to meet the “modest” burden to show that the individuals were “managing agents” of the defendant. The court relied on caselaw explaining that the standard for what a managing agent is “remains a functional one to be determined largely on a case-by-case basis” and one that should not be “read too restrictively to be limited to persons in the upper management of the corporation.” The person, however, should have “significant independence and/or supervisory responsibility with respect to the aspect of the corporation’s activities that are at issue in the case.” Here, the undisputed evidence, a declaration from the defendant, stated the individuals sought to be deposed held entry- or low-level positions with no managerial or supervisory powers over the defendant or its foreign entities. The court also refused to “comb through [p]laintiff’s exhibits on its own in an attempt to piece together [p]laintiff’s arguments.”
Carmack Amendment; Offers of Judgment; Costs of Court; Local Rule CV-54
Arnold v. Allied Van Lines, Inc., SA-21-CV00438-XR (Rodriguez, X., June 14, 2024)
The plaintiffs sued the defendant under the Carmack Amendment, a federal statute governing the liability of those who provide transportation services in interstate commerce within the jurisdiction of the Surface Trans-
portation Board. After the plaintiffs rejected the defendant’s offer of judgment of $32,500 for damages to the plaintiffs’ household goods, a jury awarded the plaintiffs $31,909 in damages. The plaintiffs were not eligible for attorney’s fees under the Carmack Amendment because the interstate move was not a C.O.D. (collect on delivery) transaction. Although the bill of lading signed by both parties identified the transaction as C.O.D., the plaintiffs paid for the delivery of their household goods before delivery. The court declined to tax costs in favor of the plaintiffs because they failed to file a bill of costs as required by Local Rule CV-54. The court concluded that the defendant was entitled to costs under Rule 68(a) because the defendant timely served an offer of judgment on the plaintiffs, and the plaintiffs’ judgment was “not more favorable” than the unaccepted offer. The court awarded the defendant the costs allowed by 28 U.S.C. § 1920, including deposition transcripts and exhibits “necessarily obtained for the use in the case” but denied costs for video depositions and trial exhibit notebooks. Expert witness fees, which are also governed by Rule 54(d)(1) and 28 U.S.C. § 1821, are limited to the expert’s appearance at court or at a deposition, travel, and a subsistence allowance when an overnight stay is warranted, with such subsistence allowance equal to the per diem rate for official travel in the area of attendance (here, $64 for a full day and $48 for the first and last day of travel). Although the defendant also did not file a bill of costs, Rule 68’s award of costs is mandatory.
