1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 UNITED STATES OF AMERICA, ex No. 2:19-cv-01057-JAM-AC rel. DONALD CLOYCE WAGDA, 12 Plaintiffs, 13 ORDER GRANTING DEFENDANTS’ v. MOTION TO DISMISS 14 AT&T CORP., a corporation, et 15 al. 16 Defendants. 17 18 I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND 19 Donald Wagda (“Relator”) brought this action on behalf of 20 the United States against AT&T Inc. and its subsidiaries 21 (“Defendants”), after review of California’s Unclaimed Property 22 Database indicated Defendants escheated federal property to the 23 State under California’s Unclaimed Property Law (“UPL”). Compl. 24 ¶¶ 11, 25-28, ECF No. 1. Relator alleges Defendants held 182 25 items of federal property with a total value of over 26 $133,429.00, which they then escheated to the State. Id. ¶¶ 26, 27 27. Relator contends this was improper, and that rather than 28 escheating the property to the State, Defendants should have 1 returned the property to the United States. Id. ¶ 26. 2 Relator brings two claims under the False Claims Act 3 (“FCA”): (1) failure to return federal property in violation of 4 31 U.S.C. § 3729(a)(1)(D) and (2) conspiracy to violate the act 5 in violation of 31 U.S.C. § 3729(a)(1)(C). See generally id. 6 Accordingly, Relator filed this action on behalf of the United 7 States as “[t]he FCA allows private individuals, referred to as 8 ‘relators,’ to bring suit on the Government’s behalf against 9 entities that have violated the Act’s prohibitions.” U.S. ex 10 rel. Mateski v. Raytheon Co., 816 F.3d 565, 569 (9th Cir. 2016) 11 (citing 31 U.S.C. § 3730(b)(1)). “Such suits are commonly 12 called qui tam suits.” Id. In a qui tam suit, the relator 13 asserts the FCA claim “on behalf of the government, which may 14 choose to intervene in the action” and “[i]f the relator is 15 successful, [they are] entitled to a share of the recovery, 16 whether or not the government intervenes.” Seal 1 v. Seal A, 17 255 F.3d 1154, 1158 (9th Cir. 2001) (citing 31 U.S.C. 18 §§ 3730(d)(1),(2)). 19 The United States declined to intervene. United States’ 20 Notice of Election to Decline Intervention, ECF No. 19. Shortly 21 thereafter, the complaint was unsealed and served on Defendants. 22 Order, ECF No. 20. Defendants then filed this motion to dismiss 23 under 12(b)(6) and 12(b)(7). Mot. to Dismiss (“Mot.”), ECF No. 24 36. 1 Relator opposed the motion. Opp’n, ECF No. 45. Defendants 25 replied. Reply, ECF No. 51. Additionally, the United States 26
27 1 This motion was determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). The hearing was scheduled 28 for May 3, 2022. 1 filed a statement of interest. United States’ Statement of 2 Interest, ECF No. 41. For the reasons set forth below, the Court 3 grants Defendants’ 12(b)(7) motion to dismiss. 4 5 II. OPINION 6 A party may move under Federal Rule of Civil Procedure 7 12(b)(7) to dismiss a claim for “failure to join a party under 8 Rule 19.” Rule 19(a) provides that:
9 A person who is subject to service of process and whose joinder will not deprive the court of 10 jurisdiction over the subject matter of the action must be joined as a party if (A) in that person’s 11 absence, the court cannot accord complete relief among existing parties; or (B) that person claims an 12 interest relating to the subject of the action and is so situated that the disposition of the action in the 13 person’s absence may: (i) as a practical matter impair or impede the person’s ability to protect that 14 interest; or (ii) leave an existing party subject to a substantial risk of incurring double, multiple, or 15 otherwise inconsistent obligations because of the interest. 16 17 If it is not feasible for the court to join a person 18 meeting the requirements of Rule 19(a), then under 19(b) the 19 court “shall determine whether in equity and good conscience the 20 action should proceed among the parties before it, or should be 21 dismissed.” Fed. R. Civ. P. 19(b). The factors to be 22 considered by the court in determining whether a party is 23 indispensable include: (1) “to what extent a judgment rendered 24 in the person’s absence might be prejudicial to the person or 25 those already parties”; (2) “the extent to which any prejudice 26 could be lessened or avoided”; (3) “whether a judgment rendered 27 in the person’s absence would be adequate”; and (4) “whether the 28 plaintiff would have an adequate remedy if the action were 1 dismissed for nonjoinder.” Id. Rule 19 thus “provides a three- 2 step process for determining whether the court should dismiss an 3 action for failure to join a purportedly indispensable party.” 4 United States v. Bowen, 172 F.3d 682, 688 (9th Cir. 1999). 5 The Court first “determine[s] whether a nonparty should be 6 joined under Rule 19(a).” E.E.O.C. v. Peabody W. Coal Co., 400 7 F.3d 774, 779 (9th Cir. 2005). Defendants contend that 8 California “is a necessary party by virtue of the fact that it 9 is holding the federal assets in question for the benefit of the 10 federal government and as such is effectively the trustee over 11 the 182 assets enumerated in Exhibit A.” Mot. at 20. Relator 12 disputes that California has an interest in the property arguing 13 it “is not a lawful trustee with respect to the federal property 14 at issue (due to intergovernmental immunity and the UPL being 15 pre-empted [by] the FCA).” Opp’n at 14. But the Ninth Circuit 16 has rejected such circular arguments in determining whether a 17 party is necessary. Am. Greyhound Racing, Inc. v. Hull, 305 18 F.3d 1015, 1024 (9th Cir. 2002). “It is the party’s claim of 19 protectible interest that makes its presence necessary.” Id. 20 As the transferee of the assets at issue, California has an 21 interest in this case. See Nastro v. D’Onofrio, 263 F.Supp.2d 22 446, 450 (D. Conn. 2003). Relator in this action, asks the 23 Court to find it was improper for Defendants to escheat this 24 property to the State under the UPL rather than return it to the 25 federal government, Compl. ¶ 26, which would necessarily impact 26 the State’s interest in the property. See Nastro, 263 F.Supp.2d 27 at 450. Accordingly, the Court finds the State of California is 28 a necessary party under Rule 19(a). Id. 1 “If an absentee is a necessary party under Rule 19(a), the 2 second stage is for the court to determine whether it is 3 feasible to order that the absentee be joined.” Peabody W. Coal 4 Co., 400 F.3d at 779. Relator concedes it is not feasible to 5 join the State because of sovereign immunity. See Opp’n at 14- 6 15; see also Dawavendewa v. Salt River Project Agric. 7 Improvement and Power Dist., 276 F.3d 1150, 1159 (9th Cir. 2002) 8 (not feasible to join party entitled sovereign immunity); Bly- 9 Magee v. California, 236 F.3d 1014
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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 UNITED STATES OF AMERICA, ex No. 2:19-cv-01057-JAM-AC rel. DONALD CLOYCE WAGDA, 12 Plaintiffs, 13 ORDER GRANTING DEFENDANTS’ v. MOTION TO DISMISS 14 AT&T CORP., a corporation, et 15 al. 16 Defendants. 17 18 I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND 19 Donald Wagda (“Relator”) brought this action on behalf of 20 the United States against AT&T Inc. and its subsidiaries 21 (“Defendants”), after review of California’s Unclaimed Property 22 Database indicated Defendants escheated federal property to the 23 State under California’s Unclaimed Property Law (“UPL”). Compl. 24 ¶¶ 11, 25-28, ECF No. 1. Relator alleges Defendants held 182 25 items of federal property with a total value of over 26 $133,429.00, which they then escheated to the State. Id. ¶¶ 26, 27 27. Relator contends this was improper, and that rather than 28 escheating the property to the State, Defendants should have 1 returned the property to the United States. Id. ¶ 26. 2 Relator brings two claims under the False Claims Act 3 (“FCA”): (1) failure to return federal property in violation of 4 31 U.S.C. § 3729(a)(1)(D) and (2) conspiracy to violate the act 5 in violation of 31 U.S.C. § 3729(a)(1)(C). See generally id. 6 Accordingly, Relator filed this action on behalf of the United 7 States as “[t]he FCA allows private individuals, referred to as 8 ‘relators,’ to bring suit on the Government’s behalf against 9 entities that have violated the Act’s prohibitions.” U.S. ex 10 rel. Mateski v. Raytheon Co., 816 F.3d 565, 569 (9th Cir. 2016) 11 (citing 31 U.S.C. § 3730(b)(1)). “Such suits are commonly 12 called qui tam suits.” Id. In a qui tam suit, the relator 13 asserts the FCA claim “on behalf of the government, which may 14 choose to intervene in the action” and “[i]f the relator is 15 successful, [they are] entitled to a share of the recovery, 16 whether or not the government intervenes.” Seal 1 v. Seal A, 17 255 F.3d 1154, 1158 (9th Cir. 2001) (citing 31 U.S.C. 18 §§ 3730(d)(1),(2)). 19 The United States declined to intervene. United States’ 20 Notice of Election to Decline Intervention, ECF No. 19. Shortly 21 thereafter, the complaint was unsealed and served on Defendants. 22 Order, ECF No. 20. Defendants then filed this motion to dismiss 23 under 12(b)(6) and 12(b)(7). Mot. to Dismiss (“Mot.”), ECF No. 24 36. 1 Relator opposed the motion. Opp’n, ECF No. 45. Defendants 25 replied. Reply, ECF No. 51. Additionally, the United States 26
27 1 This motion was determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). The hearing was scheduled 28 for May 3, 2022. 1 filed a statement of interest. United States’ Statement of 2 Interest, ECF No. 41. For the reasons set forth below, the Court 3 grants Defendants’ 12(b)(7) motion to dismiss. 4 5 II. OPINION 6 A party may move under Federal Rule of Civil Procedure 7 12(b)(7) to dismiss a claim for “failure to join a party under 8 Rule 19.” Rule 19(a) provides that:
9 A person who is subject to service of process and whose joinder will not deprive the court of 10 jurisdiction over the subject matter of the action must be joined as a party if (A) in that person’s 11 absence, the court cannot accord complete relief among existing parties; or (B) that person claims an 12 interest relating to the subject of the action and is so situated that the disposition of the action in the 13 person’s absence may: (i) as a practical matter impair or impede the person’s ability to protect that 14 interest; or (ii) leave an existing party subject to a substantial risk of incurring double, multiple, or 15 otherwise inconsistent obligations because of the interest. 16 17 If it is not feasible for the court to join a person 18 meeting the requirements of Rule 19(a), then under 19(b) the 19 court “shall determine whether in equity and good conscience the 20 action should proceed among the parties before it, or should be 21 dismissed.” Fed. R. Civ. P. 19(b). The factors to be 22 considered by the court in determining whether a party is 23 indispensable include: (1) “to what extent a judgment rendered 24 in the person’s absence might be prejudicial to the person or 25 those already parties”; (2) “the extent to which any prejudice 26 could be lessened or avoided”; (3) “whether a judgment rendered 27 in the person’s absence would be adequate”; and (4) “whether the 28 plaintiff would have an adequate remedy if the action were 1 dismissed for nonjoinder.” Id. Rule 19 thus “provides a three- 2 step process for determining whether the court should dismiss an 3 action for failure to join a purportedly indispensable party.” 4 United States v. Bowen, 172 F.3d 682, 688 (9th Cir. 1999). 5 The Court first “determine[s] whether a nonparty should be 6 joined under Rule 19(a).” E.E.O.C. v. Peabody W. Coal Co., 400 7 F.3d 774, 779 (9th Cir. 2005). Defendants contend that 8 California “is a necessary party by virtue of the fact that it 9 is holding the federal assets in question for the benefit of the 10 federal government and as such is effectively the trustee over 11 the 182 assets enumerated in Exhibit A.” Mot. at 20. Relator 12 disputes that California has an interest in the property arguing 13 it “is not a lawful trustee with respect to the federal property 14 at issue (due to intergovernmental immunity and the UPL being 15 pre-empted [by] the FCA).” Opp’n at 14. But the Ninth Circuit 16 has rejected such circular arguments in determining whether a 17 party is necessary. Am. Greyhound Racing, Inc. v. Hull, 305 18 F.3d 1015, 1024 (9th Cir. 2002). “It is the party’s claim of 19 protectible interest that makes its presence necessary.” Id. 20 As the transferee of the assets at issue, California has an 21 interest in this case. See Nastro v. D’Onofrio, 263 F.Supp.2d 22 446, 450 (D. Conn. 2003). Relator in this action, asks the 23 Court to find it was improper for Defendants to escheat this 24 property to the State under the UPL rather than return it to the 25 federal government, Compl. ¶ 26, which would necessarily impact 26 the State’s interest in the property. See Nastro, 263 F.Supp.2d 27 at 450. Accordingly, the Court finds the State of California is 28 a necessary party under Rule 19(a). Id. 1 “If an absentee is a necessary party under Rule 19(a), the 2 second stage is for the court to determine whether it is 3 feasible to order that the absentee be joined.” Peabody W. Coal 4 Co., 400 F.3d at 779. Relator concedes it is not feasible to 5 join the State because of sovereign immunity. See Opp’n at 14- 6 15; see also Dawavendewa v. Salt River Project Agric. 7 Improvement and Power Dist., 276 F.3d 1150, 1159 (9th Cir. 2002) 8 (not feasible to join party entitled sovereign immunity); Bly- 9 Magee v. California, 236 F.3d 1014, 1017 (9th Cir. 2001) (states 10 and state agencies enjoy sovereign immunity from liability under 11 the FCA). 12 Thus, the Court must decide whether in “equity and good 13 conscience” the action can continue without the State. Fed. R. 14 Civ. P. 19(b). It finds it cannot. The analysis generally 15 requires consideration of four factors: (1) prejudice to the 16 absent or existing parties; (2) possibility to lessen or avoid 17 said prejudice; (3) adequacy of the remedy in the party’s 18 absence; and (4) the existence of an adequate remedy in the 19 event of a dismissal. Id. “However, where the absent party 20 cannot be joined in light of sovereign immunity, there may be 21 very little need for balancing because immunity itself may be 22 viewed as the compelling factor.” Delano Farms Co. v. Cal. 23 Table Grape Comm’n, 623 F.Supp.2d 1144, 1168 (E.D. Cal. 2009), 24 aff’d, 655 F.3d 1337 (Fed. Cir. 2011) (quoting Kescoli v. 25 Babbit, 101 F.3d 1304, 1311 (9th Cir. 1996)). 26 Here, since California is a necessary party with an 27 interest in the land, it would be prejudiced by a judgment 28 rendered in its absence. See Williams v. Arizona, No. CV-17- eee REE ROS EOE OI OO EEE
1 03390-PHX-DJH, 2018 WL 6605845, at *5 (D. Ariz. Dec. 17, 2018), 2) aff'd, No. 19-15330, 2019 WL 8064707 (9th Cir. Oct. 21, 2019). 3 | And while Relator does not request specific relief against the 4 State, a finding in his favor would require a determination that 5 escheating certain property under California’s UPL statute 6 | violates the FCA. See Opp’n at 3-8. Thus, there is no way to 7 avoid prejudice to the State. Finally, while Relator may not 8 have an alternative remedy, the United States, the real party in 9 interest, does, as it may request any of its property under the 10 UPL. See Harris v. Westly, 116 Cal.App.4th 214, 346 (2004) 11 (“The UPL is not a permanent or ‘true’ escheat statute. 12 Instead, it gives the state custody and use of unclaimed 13 | property until such time as the owner claims it.”) Accordingly, 14 the Court finds the case cannot proceed without the State and 15 therefore GRANTS Defendants’ 12(b)(7) motion to dismiss for 16 failure to join an indispensable party, with prejudice. Because 17 the Court finds dismissal is warranted under 12(b) (7) it need 18 not reach the parties’ additional 12(b) (6) arguments. 19 20 Til. ORDER 21 For the reasons set forth above, the Court GRANTS 22 Defendants’ motion to dismiss with prejudice. 23 IT IS SO ORDERED. 24 Dated: June 30, 2022 25 Me 26 HN A. MENDEZ, a UNITED STATES DISTRICT 27 28