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Schweizer v. Canon Inc.

United States District Court, S.D. Texas, Houston Division

October 9, 2019

STEPHANIE SCHWEIZER, et al, Plaintiffs,
v.
CANON INC., et al, Defendants.

          ORDER

          ANDREW S. HANEN UNITED STATES DISTRICT JUDGE.

         The Court has before it the Magistrate Judge's Memorandum and Recommendation (Doc. No. 73) that the Court grant the Motion for Summary Judgment filed by Defendant Canon USA, Inc. (hereinafter "Canon"). (Doc. No. 59). The Plaintiff, Stephanie Schweizer, filed objections to the Memorandum and Recommendation, (Doc. No. 75), as did the Government, acting as an interested party. (Doc. No. 74). Defendant responded to these objections. (Doc. Nos. 77 & 78). Plaintiff filed a Reply. (Doc. No. 82).

         I. Standard of Review

         Objections timely filed within fourteen days of entry of the United States Magistrate Judge's memorandum and recommendation must specifically identify the findings and recommendations for which the party seeks reconsideration. 28 U.S.C. § 636(b)(1)(C); Fed.R.Civ.P. 72(b). Findings by the Magistrate Judge to which a party specifically objects must be reviewed de novo under 28 U.S.C. § 636(b)(1)(C). Consequently, the Court considers these matters de novo. The district court "may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C. § 636(b)(1)(C).

         Whether the public disclosure bar precludes a relator from bringing a qui tarn action is determined in the summary judgment context. See U.S. ex rel. Colquitt v. Abbott Labs., 858 F.3d 365, 373 (5th Cir. 2017). Summary judgment is warranted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). "The movant bears the burden of identifying those portions of the record it believes demonstrate the absence of a genuine issue of material fact." Triple Tee Golf, Inc. v. Nike, Inc., 485 F.3d 253, 261 (5th Cir. 2007) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-25 (1986)). Once a movant submits a properly supported motion, the burden shifts to the non-movant to show that the Court should not grant the motion. Celotex, 477 U.S. at 321-25. The non-movant then must provide specific facts showing that there is a genuine dispute. Id. at 324; Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). A party opposing a properly supported motion for summary judgment may not rest on mere allegations or denials in a pleading, and unsubstantiated assertions that a fact issue exists will not suffice. Celotex, 411 U.S. at 324.

         II. Statement of Facts

         The Magistrate Judge's Memorandum and Recommendation sets out a detailed factual history. (Doc. No. 73 at 7-10). The Court includes here only a brief restatement of the pertinent facts. Plaintiff is a relator bringing this qui tarn action against Defendant Canon alleging Defendant overcharged the Government for copiers and services and provided copiers that were manufactured in non-designated countries. Previously, in 2006, Plaintiff brought a qui tarn suit alleging similar conduct by Oce North America, Inc. (hereinafter "Oce"). That suit (hereinafter referred to as the "Oce Action") settled in 2012. In that same year, Defendant Canon acquired Oce. Four years later, Plaintiff brought this suit, alleging that Defendant Canon "adopt[ed] and expand[ed] ... the fraudulent scheme originally launched by Oce." (Doc. No. 75 at 13). Defendant moved for summary judgment arguing, inter alia, that Plaintiff could not clear the False Claims Act's public disclosure bar and/or the government action bar.

         The Magistrate Judge's Recommendation agrees with Defendant. In its discussion of the public disclosure bar, the Recommendation found first that "the allegations of fraud related to the Government's purchase of copiers and services were publicly disclosed in the Oce action and the media reports associated therewith." (Doc. No. 73 at 14). Second, the Magistrate Judge found that "summary judgment evidence show[ed] that [Plaintiffs current] qui tarn action is 'based upon' allegations and transactions disclosed in the Oce action." Id. at 15. Third, the Magistrate Judge found that "the summary judgment evidence does not show, or even raise a genuine issue of material fact on whether, Schweizer was/is an original source of the information upon which the allegations in this case are based." Id. at 18. As the action was based upon allegations and transactions which were publicly disclosed, and Plaintiff could not show she was an original source, the Magistrate Judge recommended that summary judgment be granted in favor of the Defendant.

         III. Public Disclosure Bar

         After a de novo review of the record, the Court agrees with the Magistrate Judge's conclusion that Plaintiff has not brought forward evidence raising a genuine dispute exists over any material facts. Under 31 U.S.C. § 3730(e)(4)(A), a "court shall dismiss an action or claim under [the False Claims Act], unless opposed by the government, [1] if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed .. . unless .. . the person bringing the action is an original source of the information." The Fifth Circuit has distilled this language governing the public disclosure bar into a three-step inquiry asking "1) whether there has been a 'public disclosure' of allegations or transactions, 2) whether the qui tarn action is 'based upon' such publicly disclosed allegations, and 3) if so, whether the relator is the 'original source' of the information." Abbott Labs., 858 F.3d at 373. On the first two steps of the test, defendant bears the initial burden to "point to documents plausibly containing allegations or transactions on which [the relator's] complaint is based." U.S. ex rel. Jamison v. McKesson Corp., 649 F.3d 322, 327 (5th Cir. 2011). The burden then shifts to the relator to "produce evidence sufficient to show that there is a genuine issue of material fact as to whether [her] action was based on those public disclosures." Id. The Court discusses the three Abbott Labs requirements below.

         A. Was There a Public Disclosure of the Alleged Fraud?

         The Magistrate Judge concluded that "summary judgment evidence shows that the allegations related to the Government's purchase of copiers and services were publicly disclosed in the Oce Action and media reports associated therewith." (Doc. No. 73 at 14). Plaintiff objects to this characterization of her lawsuit, arguing that the "facts underlying Canon's fraud are so separate from the Oce case, that the public disclosure bar is not triggered in the first instance." (Doc. No. 75 at 19). To this end, Plaintiff argues that this suit "involves Canon's adoption and expansion of the fraudulent scheme originally launched by Oce." Id. at 16. Separate from the alleged factual distinction, Plaintiff argues that the Oce Action did not publicly disclose the fraud because (1) the suit is brought against a different company (Canon) and (2) the intervening settlement agreement "weigh[s] against applying the public disclosure bar." (Doc. No. 75 at 13).

         Whatever truth there may be to the notion that Canon adopted and expanded Oce's fraudulent scheme, Plaintiff has brought forward no admissible evidence to contest Defendant's motion and consequently does not create a genuine issue of fact. Here, Defendant raised the public disclosure bar, put forward evidence of both public filings and news media documenting the Oce Action, and properly demonstrated the similarities between the two actions. (Doc. Nos. 60-2, -3, -4 & -5). The burden then shifted to Plaintiff to show that the allegations were not disclosed by the Oce Action. Plaintiff has failed to do so. The evidence attached to Plaintiffs Response to Defendant's Motion for Summary Judgment is comprised of: a copy of the Oce settlement agreement, records showing the Texas franchise tax status of Canon USA, Oce Imagistics, and Oce North America, and a somewhat paltry affidavit containing no more than a few statements that provide evidence that may imply Plaintiff was the relator and source in the Oce action.[2] (Doc. Nos. 61-2, -3, -4, -5, & -6). None of these exhibits present facts detailing Canon's alleged fraudulent scheme or the distinctions between said scheme and the scheme at issue in the Oce Action, and thus, these exhibits cannot create a fact issue as to whether there has been a public disclosure of the fraud at issue here.

         Plaintiffs argument that this suit is against an entirely different Defendant is equally unavailing. A defendant undergoing a mere change in corporate ownership does not provide a license for a qui tarn Plaintiff to renew allegations against that defendant based upon prior public disclosures. While Defendant's allegation that "Canon adopt[ed] and expand[ed]... the fraudulent scheme originally launched by Oce" may avoid the public disclosure ...


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