Territory of Guam Ex Rel John Ryan v. Titan Imports

Opinion

2 2024 JUL -8 PM I: 39 CLERK OF COURT 3

4 BY=·--~~-- 5 IN THE SUPERIOR COURT OF GUAM

6 TERRITORY OF GUAM EX REL Civil Case No. CV1278-19 7 JOHN RYAN, 8 Plaintiff-Relator, DECISION AND ORDER 9 (Amended Motion for Award) vs. 10 TIT AN IMPORTS, INC.; JOHN DOES 11 1-4, 12 Defendants. 13

14 This qui tam 1 action came before the Honorable Alberto E. Tolentino on December 7, 2023,

15 upon Plaintiff-Relator2 John Ryan's ("Ryan") Amended Motion for Award (Nov. 9, 2023). At the 16 hearing, Attorney Braddock J. Huesman appeared on behalf of Ryan; Attorney Jehan 'Ad G. Martinez 17 appeared on behalf of Defendant Titan Imports, Inc. ("Titan Imports"), and Attorney Sandra E.C. 18 Miller appeared on behalf of nonparty Guam Department of Revenue and Taxation ("DRT"). Having 19

20 duly considered the arguments and applicable law, the Court GRANTS Ryan's Motion.

21 BACKGROUND

22 Ryan brought this case under Guam's False Claims and Whistleblower Act, 5 GCA ch. 37 23 ("False Claims Act"). The False Claims Act allows private individuals to prosecute civil actions in 24

25 1 "The term 'qui tam' comes from the Latin expression 'qui tam pro domino rege quam prose ipso in hac parte

26 sequitur,' which means, 'who pursues this action on our Lord the King's behalf as well as his own.'" People ex rel. Allstate Ins. Co. v. Weitzman, 132 Cal. Rptr. 2d 165, 167 (Ct. App. 2003). 27 2 In a qui tam action, a relator is "essentially a self-appointed private attorney general." People ex rel. Strathmann v. Acacia Research Corp., 148 Cal. Rptr. 3d 361,370 (Ct. App. 2012). 28 Page 1 of9 1 the name of the Government of Guam. 5 GCA § 37202(a). The Government of Guam has the right

2 to intervene in False Claims Act cases, but it declined to do so in this case. See 5 GCA § 3 7202(b)(2);

3 Notification of Declination to Intervene (Jan. 6, 2020). 4 Titan Imports is a Guam corporation whose business includes the importation and wholesale 5 of alcoholic beverages. Alcoholic beverages sold in Guam are subject to an excise tax. 11 GCA § 6 26302. Ryan has alleged that Titan Imports knowingly failed to comply with its tax obligations, 7

8 violating several provisions of the False Claims Act in the process. See generally V. Compl. (Nov.

9 5, 2019). Ryan seeks to recover these unpaid taxes on behalf of Guam, and collect a portion of the

10 recovery for himself. 11 In 2022, before trial in this case had begun, Titan Imports entered Chapter 11 bankruptcy 12 proceedings in the District Court of Guam ("Bankruptcy Case"). 3 On March 31, 2022, Titan Imports 13 filed a Notice of Automatic Stay, asserting that 11 U.S.C. § 362 required this case to be stayed until 14 the Bankruptcy Case was resolved. The Court agreed, and the case was stayed indefinitely thereafter. 15

16 See Min. Entry (July l, 2022).

17 On August 2, 2023, Ryan filed a Motion for Award, accompanied by a Declaration of

18 Braddock J. Huesman. These filings informed the Court that the automatic stay in the bankruptcy 19 case no longer precludes this Court from proceeding. The judge in the bankruptcy case issued a 20 Confirmation Order,4 which provides, in relevant part: 21 The automatic stay, to the extent still applicable to the Debtor's Bankruptcy Case, 22 pursuant to 362(a) of the Bankruptcy Code shall be, and is hereby, modified 23 pursuant to Section 362(d) of the Bankruptcy Code solely to permit John Ryan, Ex Rel the Territory of Guam ("Mr. Ryan") to petition the Superior Court of Guam for 24 an order and judgment in the Qui Tam Action (Civ. Case No. CV1278-19) granting 25 him a "Whistleblower Award" from the Debtor's distributions under the Plan on

26 3 In re Titan Imports, Inc., Case No. 22-0007 (Bankr. D. Guam), before the Honorable Daniel P. Collins. 27 4 The full title is "Order Confirming Small Business Debtor's First Amended Plan of Reorganization: Exhibits 1-5." See Am. Deel. Braddock J. Huesman, Ex. 3 (Nov. 9, 2023). 28 Page 2 of9 1 account of the ABC Taxes, under Guam's False Claims Act. 5 GCA § 37101 et seq.

3 Am. Deel. Braddock J. Huesman, Ex. 3 at 3 (Nov. 9, 2023) (Confirmation Order). The Confirmation

4 Order states that Titan Imports owes a tax liability to Guam in the amount of $1,463,987.09

5 (hereafter, "Total Tax Amount"), although the amount still due is lessened by "the $600,000 paid by 6 the Debtor directly to DRT in March of 2022." Id. 7 1 Ryan's Motion for Award asks the Court to enter judgment in this case for the Total Tax 8 Amount, and to award Ryan 30% of this amount ($439,192.12) under 5 GCA § 37103(b)(7). Mot. 9 10 Award at 4. It also asks the Court to award Ryan 30% of the annual interest accruing from Titan

11 Imports' payments into escrow. Id. at 3, 4. The Motion for Award also highlights Titan Imports'

12 previous payment of $600,000.00 to DRT. Ryan asserts that he is entitled to 30% of this money

13 ($180,000.00), but that DRT has so far made "no provision" ofit to Ryan. Id. at 3. The Motion for 14 Award asks the Court to order that Ryan be allowed to claim a disproportionately large (i.e., more 15 than 30%) share of Titan Imports' future escrow payments until he is made whole on the $180,000.00 16 he is already owed, and thereafter resume a 30%-70% split of future payments. Neither Titan nor 17

18 the Government of Guam5 filed a response to the Motion.

19 On November~' 2023, Ryan filed an Amended Motion for Award, accompanied by an

20 Amended Declaration of Braddock J. Huesman. The Amended Motion "seeks substantially similar 21 relief to the Original Motion with exception of timing of the Award payment." Am. Mot. Award at 22 2 (Nov. 9, 2023). While the initial Motion sought for Ryan to temporarily receive a 23 disproportionately large share of future payments to recoup the $180,000.00 he is owed, the 24 ' Amended Motion asks the Court to order DRT to pay him $180,000.00 immediately. Id. at 4. Ryan 25

26 5 At the hearing on December 7, 2023, ORT explained that it had not filed anything because the Government of 27 Guam had previously declined to intervene, which means it is not a party to this matter and therefore was prohibited to file. Tr. at 17-18 (Mot. Hr'g, Dec. 7, 2023). 28 Page 3 of9 1 grounds his new request in the text of the statute, as well as the legal positions DRT has taken in

2 another case before the District Court of Guam. Again, no responses were filed.

3 The Court heard the Amended Motion on December 7, 2023. At the hearing, Titan Imports 4 took no position on the Amended Motion, explaining that the payment issue is solely between Ryan 5 and DRT. See Transcript ("Tr.") at 6 (Mot. Hr'g, Dec. 7, 2023). DRT argued that under the False 6 Claims Act, the Government of Guam is the "correct payor" of Ryan's award, so he should seek 7

8 payment from the Government of Guam, not from DRT. Id. at 12. Ryan objected that DRT's

9 arguments were not submitted in writing before the hearing and that neither DRT nor the Government

10 of Guam are parties to this action. Id. at 14. Ryan also argued that DRT's position about the "correct 11 payor" is contrary to the plain language of 5 GCA § 37103(b)(7). Id. at 15-16. At the conclusion of 12 the hearing, the Court took the matter under advisement. 13 DISCUSSION 14 Ryan is entitled to a share of the Total Tax Amount recovery from Titan Imports. The 15

16 remaining questions are how much he should recover and from whom. With respect to "how much,"

17 Ryan argues he is statutorily entitled to an award of 30%, while DRT asks the Court to award a lesser

18 amount. With respect to "from whom," it appears undisputed that uponfuture payments into escrow 19 by Titan Imports, Ryan's award should draw from those funds. The dispute today is over who should 20 pay Ryan's share of the $600,000.00 already collected by DRT. Ryan argues that since DRT 21 collected the $600,000.00, it should also be the entity to pay him his share of that money. DRT 22 argues that the False Claims Act does not authorize it to make payments directly; DRT instead asserts 23

24 Ryan must collect his share of the money from the Government of Guam, through the Department

25 of Administration. 26 The parties ground their arguments about pay or power in two different provisions of the False 27 ·claims Act. Ryan relies on 5 GCA § 37103 ("Whistleblower Awards to Individuals Who Report 28 Page 4 of9 1 Underpayment of Taxes Levied Under the Laws of Guam"), while DRT relies on 5 GCA § 3 7204

2 ("Award to Qui Tam Plaintiff;). The Court must therefore examine both statutes to determine which

3 one controls here. 4 1. The Two Statutes 5 The statutes differ in two important ways. First, 5 GCA § 37103, Ryan's preferred statute, 6 provides that when the Government of Guam does not intervene in an action under that statute, "the 7

8 Tax Enforcement Division shall award not less than thirty percent (30%) of the·collected proceeds

9 (including penalties, interest, additions to tax, and additional amounts) resulting from the action

10 (including any related actions) or from any settlement in response to such action." 5 GCA § 11 37103(b)(7) (emphasis added). Title 5 GCA § 37204, DRT's preferred statute, provides that when 12 the Government of Guam does not intervene in a qui tam action, a successful relator is entitled to "an 13 amount which the court decides is reasonable for collecting the civil penalty and damages," which 14 "shall be not less than twenty-five percent (25%) and not more than thirty percent (30%) of the 15

16 proceeds .... " 5 GCA § 37204(b)(l) (emphasis added). In short, Ryan's preferred statute provides

17 for an award to a successful relator of at least 30% of the recovery, while DRT's preferred statute

18 provides for an award of at most 30%. 19 Second, 5 GCA § 37103 suggests that such awards can be paid directly by DRT, while 5 20 GCA § 37204 is silent on the matter. Title 5 GCA § 37103(a)(2) provides that the Director of DRT 21 "is authorized to pay ... such sums as he deems necessary for ... detecting and bringing to trial and 22 punishment persons guilty of violating the tax laws enacted in Guam or conniving at the same." In 23

24 other words, this statute appears to authorize DRT itself to make award payments. Title 5 GCA §

25 37204, by contrast, provides that in a qui tam action, "the person bringing the action or settling the

26 claim shall receive an amount which the court decides is reasonable for collecting the civil penalty 27 and damages, and that this amount "shall be paid out of such proceeds" of the action. 5 GCA § 28 Page 5 of9 1 37204(b)(l). While this statute clearly contemplates payments to successful relaters, it does not

2 specffy who makes this payment. DRT argues that this silence compels a finding that the payor must

3 11 be tli~ Government of Guam. 4 2. Title S GCA § 37103 Controls This Action 5 To determine which statute applies here, the Court applies traditional canons of statutory 6 construction. "It is a cardinal rule of statutory construction that courts must look first to the language 7

8 of the statute itself. Absent clear legislative intent to the contrary, the plain meaning prevails."

9 Sumitomo Constr., Co. v. Gov 't ofGuam, 2001 Guam 23 ,r 17. Additionally, "[a]cts in pari materia,

10 or which deal with the same subject matter, are to be construed together." Aguon v. Gutierrez, 2002 11 Guam 14 ,r 13; see also Dir. ofDep 't of Pub. Health and Soc. Servs. v. Cruz, 1987 WL 109396 * 1- 12 2 (D. Guam App. Div. 1987 (explaining in pari materia rule). And "when two in pari materia 13 provisions conflict with each other, the more specific provision trumps the general." Topasna v. 14 Gov 't of Guam, 2021 Guam 23 ,r 17. Both statutes here are components of the same overarching 15

16 legislative enactment, the False Claims Act, so they must be read in pari materia.

17 Title 5 GCA § 37204, DRT's preferred statute, applies by its plain terms to all "action[s]

18 brought by a person under [5 GCA] § 37202." Title 5 GCA § 37202 in turn provides that individuals, 19 acting as relators, can bring "civil action[s] for a violation of§§ 37102 and 37103[.]" These latter ~o two statutory provisions are the only components of Chapter 37, Article 1 ("False Claims and 21 Whistle blowing") that create qui tam causes of action. 6 Therefore, all qui tam actions brought under 22 the False Claims Act fall within the scope of 5 GCA § 37204. Because the statute applies to all such 23

24 actions, it is a general statute for purposes of the False Claims Act.

26 6 27 The remaining provisions of Chapter 37, Article 1 provide definitions (5 GCA § 37101), exemptions from disclosure (5 GCA § 37104), and a general severability clause (5 GCA § 37105). 28 Page 6 of9 1 5 GCA § 37103, by contrast, applies to two particular actions: "detecting underpayments of

2 tax levied under the laws enacted in Guam," or "detecting and bringing to trial and punishment

3 persons guilty of violating the tax laws enacted in Guam or conniving at the same, in cases where 4 such expenses are not otherwise provided for by law." 5 GCA § 37103(a)(1)(2). In such actions, 5 5 GCA § 37103 provides unique procedures, including the higher minimum award (at least 30%) 6 under 5 GCA § 37103(b)(7). Because these unique procedures apply only to specific tax actions 7

8 under 5 GCA § 37103, this is a specific statute for purposes of the False Claims Act.

9 In this circumstance, 5 GCA § 37103 controls this action, by application of the "general-

10 specific" canon of construction: 11 It is an old and familiar rule that, where there is, in the same statute, a particular 12 enactment, and also a general one, which, in its most comprehensive sense, would include what is embraced in the former, the particular enactment must be operative, 13 and the general enactment must be taken to affect only such cases within its general 14 language as are not within the provisions of the particular enactment.

15 Topasna v. Gov't of Guam, 2021 Guam 23 ,I 17 (quoting RadLAX Gateway Hotel, LLC v. 16 Amalgamated Bank, 566 U.S. 639, 646 (2012)). In short, when an act contains two provisions that 17 are both applicable-one of which applies generally, and the other of which applies specifically- 18 the specific statute controls. 19

20 Here, both 5 GCA § 37204 and 5 GCA § 37103 apply. The former applies because, as

21 explained above, all actions under 5 GCA § 37103 fall within the ambit of 5 GCA § 37204. The

22 latter applies because this is an action where Ryan has "detect[ed] underpayments of taxes levied 23 under the laws enacted in Guam" and "br[ought] to trial and punishment persons guilty of violating 24 the tax laws." 5 GCA § 37103(a)(2). Ryan has detected Titan Imports' underpayment of taxes, and 25 although Ryan has not brought Titan Imports to trial in this case, his actions have clearly brought 26 Titan Imports to punishment. As the Judge in the Bankruptcy Case noted, "Ryan conducted 27

28 Page 7 of9 1 exhaustive (and presumably expensive) discovery against [Titan Imports]. Ryan's dogged pursuit

2 of the ABC Taxes eventually drove [Titan Imports] to file its [bankruptcy petition] on March 25,

3 2022." Deel. Braddock J. Huesman, Ex. 1 at 3 (Bankruptcy Court Order, Aug. 23, 2022). Ryan's 4 pursuit of this case directly led to the Bankruptcy Court's finding that Titan Imports owes the 5 Government of Guam over $1.4 million dollars in unpaid taxes. The Court therefore finds that 6 Ryan's action is within 5 GCA § 37103, which means it is also within 5 GCA § 37204. 7

8 Because both 5 GCA § 3 7204 and 5 GCA § 3 7103 apply, "the particular enactment must be

9 operative, and the general enactment must be taken to affect only such cases within its general

10 language as are not within the provisions of the particular enactment." Topasna, 2021 Guam 23 ,r 11 17. Title 5 GCA § 37103 is the "particular enactment" here, so it is the operative statute. Any 12 ~onflict between 5 GCA § 37103 and 5 GCA § 37204 must be resolved in favor of the former. 13 3. Application of 5 GCA § 37103 14 Because·5 GCA § 37103 governs this case, the Court holds that Ryan is entitled to receive an 15

16 award commensurate with that statute: "not less than thirty percent (30%) of the collected proceeds

17 (including penalties, interest, additions to tax, and additional amounts) resulting from the action

18 (including any related actions) or from any settlement in response to such action." 5 GCA § 19 37103(b)(7). The Court denies DRT's request to award a lower amount; the plain language of the 20 statute requires an award of "not less than thirty percent," so that it what the Court shall order. The 21 Judgment in this case shall therefore award Ryan 30% of the Total Tax Amount, as well as 30% of 22 the annual interest accruing based on Titan Imports' escrow payments. 23

24 Furthermore, because 5 GCA § 3 7103 governs this case, the special procedures of that statute

25 take precedence over any conflicting provisions of 5 GCA § 37204. Title 5 GCA § 37103 provides

26 that Director of DRT is "authorized to pay" awards to "from the proceeds of amounts collected," and 27 that "any amount so collected shall be available for such payments." 5 GCA § 37103(b )(7). Here, it 28 Page 8 of9 1 is undisputed that DRT collected $600,000.00 from Titan Imports in 2022. DRT is statutorily

2 "authorized to pay" an award from that amount, and the amount itself is "available for such payment."

3 The Court will therefore order DRT to pay 30% of this amount, or $180,000.00, to Ryan within 30 4 days of the entry of judgment. Thereafter, Ryan and DRT shall be entitled to 30% and 70%, 5 respectively, of Titan Imports' future payments into escrow and the interest accruing thereon. 6 CONCLUSION 7

8 Based on the above analysis, the Court GRANTS Ryan's Amended Motion for Award in

9 entirety. Ryan shall submit to the Court a proposed Judgment which reflects the rulings herein, as

10 well as any other requests made in the Amended Motion but not addressed in this Decision and Order. 11 SO ORDERED this -JUL 8 2024 ------- o 12

14 C HONOR..AB:t;E-ALBERTO .. ,_;,...-:-- -... /1 ·~ E. TOLENTINO 15 Judge, Supeijod:oiµf of Guam ~ ' ✓ "~ •

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