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United States ex rel. Voris v. Genphar Inc.

United States District Court, D. South Carolina, Charleston Division

March 5, 2018

United States of America, ex rel., Elaine Van Voris, Peter Van Voris, and John Johnston, Plaintiffs/Relators,
v.
GenPhar, Inc.; Jian-yun Dong a/k/a John Dong; Danher Wang; and Vaxima, Inc.; Defendants.

          ORDER REPORT AND RECOMMENDATION (AS TO PLAINTIFFS' RULE 41(A)(2) MOTION)

          Kaymani D. West, United States Magistrate Judge.

         This matter is before the court on the motion of Plaintiffs/Relators Elaine Van Voris, Peter Van Voris, and John Johnston (collectively, “Relators” or “Plaintiffs”) for an order voluntarily dismissing all substantive claims of this qui tam case filed under the False Claims Act, 31 U.S.C. §§ 3729 et seq. (“FCA”).[1] Pl. Rule 41(a)(2) Conditional Request or Motion for Court Order of Dismissal of Claims (“Motion for Voluntary Dismissal”), ECF No. 187. Also pending is pro se Defendant Jian-yun Dong (“Dong”)'s Motion for Recovery of Legal Fees. ECF No. 194.[2]

         I. Relevant background

         Briefly stated, Relators bring claims pursuant to the FCA alleging fraudulent activity relating to the procurement of and use of grant funds from the Army, Navy, and the National Institutes of Health (“NIH”). See generally Compl., ECF No. 1. Although filed on January 2, 2009, the Complaint was not served at that time and remained sealed until April 1, 2016. The case was stayed during much of this time.

         During the time this qui tam case was sealed and stayed, the Government pursued a related criminal case against Defendants GenPhar, Inc. (“GenPhar”); Vaxima, Inc. (“Vaxima”); and Dong. The indictments on which GenPhar, Vaxima, and Dong were prosecuted included many of the same allegations found in the First Amended Complaint. See, e.g., ECF No. 29 (Government's motion seeking a stay explaining similarities between pending criminal indictments and qui tam matter); ECF No. 30 (Order previously staying this civil qui tam matter while the criminal matters were pending, noting the “Government's criminal case could make moot many issues in the civil case[.]”).

         The prosecutions resulted in criminal convictions of GenPhar, Vaxima and Dong. See U.S. v. John Dong, et al. Criminal No. 2:11-cr-00511-DCN, ECF Nos. 556, 557 and 558 (verdicts); 556-1, 557-1, 558-1 (orders in support of verdicts). Appeals of these verdicts are pending in the Fourth Circuit. E.g., U.S. v. Vaxima, No. 17-4277 (4th Cir.); U.S. v. GenPhar, No. 17-4278 (4th Cir.); U.S. v. Dong, No. 17-4268 (4th Cir.). As of the writing of this Report, the Fourth Circuit had administratively stayed the briefing scheduling pending its ruling on a motion.

         On March 30, 2016, the date on which the court's stay ended, the Government provided notice pursuant to 31 U.S.C. § 3730(b)(4)(B) that it would not intervene. ECF No. 69. In an Order dated April 1, 2016, United States District Judge Richard M. Gergel lifted the seal as to the Complaint and “all other papers filed in this action” and ordered that the Relators serve the Complaint upon Defendants within 60 days of the Order. ECF No. 70. The Relators served the Complaint on Defendants GenPhar, Dong, Vaxima, and Robert Tex S. Small, Jr. (“Small”). The Relators obtained a waiver of service from Defendant William T. Ratliff, Jr. (“Ratliff”), who is now deceased, and Ratliff's Estate is now a party Defendant. It does not appear that Defendants Danher Wang or Heung Yueng Yeung were served.

         Defendants Dong, Small, Ratliff each filed motions to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, which were granted in an Order issued by United States District Judge Bruce Howe Hendricks on May 31, 2017. ECF No. 168; see also Report and Recommendations, ECF Nos. 136, 144. As recommended in those reports, the court's order granted the motions to dismiss of Defendants Dong, Small, and Ratliff, but held the dismissals “in abeyance for a period of 14 days during which the Relators may file an amended complaint addressing the issues outlined in the Magistrate Judge's Reports.” ECF No. 168 at 4.

         Relators filed a First Amended Complaint on June 5, 2017, including GenPhar, Dong, Wang, and Vaxima as Defendants. ECF No. 173. GenPhar filed an answer to the Amended Complaint. ECF No. 174. As discussed within, Dong has not filed an answer to the Amended Complaint but has continued to be in communication with the court regarding this matter. Vaxima has never appeared in this matter, and a Clerk's Entry of Default has been entered against it. ECF No. 128. Wang appears never to have been served.

         II. Status of pro se Defendant Dong

         Dong never filed a responsive pleading to the Amended Complaint. Based on Relators' request and their counsel's affidavit, ECF No. 177, the Clerk entered default as to Dong on September 20, 2017. ECF No. 197. The Clerk of Court has no discretion but to enter default as to a party that has “failed to plead or otherwise defend” upon affidavit of the party seeking affirmative relief. Fed.R.Civ.P. 55(a) (providing the clerk “must enter the party's default.”). That stated, the undersigned notes Dong's repeated representations that he sought extensions of time to respond from Relators' counsel, but was told that counsel “cannot respond to an extension for you personally.” See ECF No. 177-1 at 4. Further, it appears that, upon being advised by Relators of their agreement with the Government to dismiss the complaint with prejudice, pro se Defendant Dong did not believe he was required to file a response to the Amended Complaint. See Dong's Status Report and Objections to Plaintiffs' Request for Entering Default, ECF No. 185.

         Given these facts, the undersigned finds it appropriate to consider Defendant Dong's additional filings despite his technically being in default.

         Should the United States District Judge find it appropriate, she may wish to relieve Dong from the entry of default for good cause shown and grant him leave to file a responsive pleading at this time. See Fed. R. Civ. P. 55(c). In any event, this issue may be no more than academic should the District Judge adopt the following Report and Recommendation. No default judgment has been entered against Dong (or against Vaxima), [3] and the dismissal Relators seek will be with prejudice.

         II. Analysis

         A. Settlement Agreement between Relators and the Government

         Based on their agreed-to settlement with the Government, Relators now seek voluntary dismissal of their substantive claims. Relators have reached a settlement agreement with the Government in which Relators will be awarded 27% of any proceeds obtained from Defendants as a result of their criminal convictions and any related property forfeitures. A copy of the agreement between Relators and the Government is attached as an exhibit to Relators' Motion. See Settlement Agreement (the “Agreement”), ECF No. 187-1. Notably, the Agreement required that Relators move for dismissal of the Complaint in this matter with prejudice as to Relators and without prejudice as to the Government. Agreement 3. The Agreement noted that the Motion could be conditioned upon the court's “not awarding to any defendant any attorney's fees or court costs to be paid by the Relators.” Id. at 4. The Agreement is binding only if the Complaint is dismissed pursuant to Relators' Motion to Dismiss. Id. The Agreement further contemplates that the dismissal to ...


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