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Schweizer v. Canon Inc.

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

January 15, 2020

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



         Before the Court is Plaintiff-Relator Stephanie Schweizer's ("Plaintiff or "Schweizer") Motion to Reconsider (Doc. No. 85) the Court's Order Adopting in Part the Magistrate Judge's Memorandum and Recommendation (Doc. No. 84). The Defendant, Canon, Inc. ("Canon"), filed a response. (Doc. No. 86). Plaintiff filed a Reply. (Doc. No. 87).

         I. 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. 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 16) (Plaintiffs Objections to Magistrate Judge's Memorandum and Recommendations). Defendant moved for summary judgment arguing, inter alia, that Plaintiff could not clear the False Claims Act's public disclosure bar.

         The Magistrate Judge's Recommendation agreed 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 that 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.

         This Court agreed with the Magistrate Judge's conclusion and issued an order adopting the recommendation in part[1] and granting summary judgment. Guided by the procedural analysis laid out in the Fifth Circuit's decision in U.S. ex rel. Jamison v. McKesson Corp., 649 F.3d 322, 327 (5th Cir. 2011), the Court found that, after Canon presented sufficient evidence to meet its burden on summary judgment, Plaintiff failed to put forward sufficient factual evidence to create a genuine issue of material fact as to whether her action was foreclosed by the public disclosure bar. (Doc. No. 84). In reaching this conclusion, the Court also found that Plaintiff was not an "original source" as that term is defined in the False Claims Act for this law suit. As such, the Court dismissed Plaintiffs suit with prejudice.

         II. Discussion

         Plaintiff brings a motion asking the Court to reconsider its ruling. The motion argues the Court erred because: (1) summary judgment on the public disclosure bar looks only to the allegations in the complaint; (2) the Court applied the incorrect prong of the original source exception; and (3) the Court disposed of the case due to lack of evidence despite not permitting Plaintiff to conduct discovery. The Court will take each of these arguments in turn, but first, some legal background is necessary.

         Overall, Plaintiffs challenge is to whether the Court correctly applied the law relating to the public disclosure bar. 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, [2] 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." U.S. ex rel. Colquitt v. Abbott Labs., 858 F.3d 365, 373 (5th Cir. 2017). Whether the public disclosure bar precludes a relator from bringing a qui tarn action is determined in the summary judgment context. See id.

         Plaintiffs first contention is that the Court erred in applying the standard derived from the Fifth Circuit's decision in Jamison. In Jamison, the Fifth Circuit stated that, although typically a Plaintiff bears the burden of establishing jurisdiction, [3] it would be unfair to require a Plaintiff to prove the absence of publicly existing information. Jamison, 649 F.3d at 327. Therefore, on the first two steps of the Abbott Labs test, the defendant bears the initial burden to "point to documents plausibly containing allegations or transactions on which [the relator's] complaint is based." Id. Once the defendant has done so, the burden 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. (emphasis added). Plaintiff argues that the Court failed to undertake an analysis as to whether Defendants pointed to documents plausibly raising the issue of whether her allegations were based upon the prior disclosures in the Oce Action, "provid[ing] only a cursory statement that" Defendants had done so. (Doc. No. 85 at 10). Next, Plaintiff argues that even if the burden did shift, she created a fact issue by submitting an affidavit and the settlement agreement in the Oce Action.[4] Finally, Plaintiff argues that her Complaint creates a fact issue as to whether her allegations were based on the Oce Action.

         None of these alleged points of error are correct. As to the Court's "cursory" analysis, the Court notes that it did not write against a blank slate. In her Recommendation, the United States Magistrate Judge undertook an extensive analysis, considering the allegations in both the complaint and the prior Oce Action, and found that Plaintiffs claims were based on the Oce Action. See (Doc. No. 73 at 15-17); see also Id. at 12-13 (addressing similarities between the actions in the context of the government action bar). There was no need for this Court to repeat the extensive factual review in its order.

         Nevertheless, the Defendant provided public disclosures regarding the Oce Action, including public filings and news media documenting the Oce action. (Doc. Nos. 60-2, -3, -4 & -5). Plaintiffs Second Amended Complaint is replete with references that her claims originate with, or are based on, the Oce Action. Indeed, she discusses at length the Oce contracts that were assumed by Canon and the prior Oce lawsuit. The complaint details the Oce settlement and the Government's refusal to pursue Canon. It states at various places:

• Previously, Oce, now Canon, was routinely giving non-government customers substantially better prices for the same products and creating false documents in an attempt to hide this from a government audit in violation of the above contractual provisions. Canon has continued this behavior as non-government customers are receiving lower pricing for the same products that the U.S. Government is purchasing through the GSA contracts. (Doc. No. 19 at 10).
• When Canon purchased Oce, Oce had specifically represented to the Government that the products and components that it manufactured came from the Netherlands. With the GSA Contracts that were novated, Canon had to abide by the same rules and have its products manufactured in countries that are compliant with the federal trade law. But this did not occur. The products sold by Canon to the Government are either comprised completely of components made in non-designated countries and later assembled in a designated country or ...

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