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1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

UNITED STATES OF AMERICA and No. 2:04-cv-1955-MCE-PAN (JFM)

the STATE OF CALIFORNIA 

ex rel. MIKE STIERLI,

Relator Plaintiff,

v. ORDER

SHASTA SERVICES INC. dba

TIMBERWORKS; and DOES 1 

through 50, inclusive,

Qui Tam Defendants.

----oo0oo----

By Order filed July 11, 2006, this Court granted Motions to

Dismiss brought by both the United States of America (“United

States) and the State of California (“State”) with respect to the

viability of this qui tam action. The qui tam Plaintiff, Mike

Stierli, had sought to invoke false claims provisions contained

within both federal and state law. 

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Case 2:04-cv-01955-MCE -PAN Document 93 Filed 09/08/06 Page 1 of 6
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2

In bringing the present motion, Defendant Shasta Services Inc.

dba Timberworks (“Timberworks”) seeks to recover attorneys’ fees

expended in defending this matter in the amount of $130,946.11. 

That motion is denied. 

Both the Federal False Claims Act, 31 U.S.C. § 3729, et seq.

(“FCA”) and its state law counterpart, California Government Code

§ 12650, et seq. (“CFCA”) provide that a prevailing defendant in

a qui tam action can recover its attorney fees if the underlying

claim was clearly frivolous, vexatious, or brought for purposes

of harassment. Section 3730(d)(4) of the FCA provides in

pertinent part as follows:

“If the Government does not proceed with the action and the

person bringing the action conducts the action, the Court

may award to the defendant its reasonable attorneys’ fees

and expenses if the defendant prevails in the action and the

Court finds that the claim of the person bringing the action

was clearly frivolous, clearly vexatious, or brought

primarily for purposes of harassment.”

The CFCA contains the same stringent standard in requiring

that an action must be frivolous, vexatious or harassing before

any award of attorneys’ fees to a prevailing defendant is

justified:

“If the state, a political subdivision, or the qui tam

plaintiff proceeds with the action, the Court may award to

the defendant its reasonable attorney’s fees and expenses

against the party that proceeded with the action if the

defendant prevails in the action and the Court finds that

the claim was clearly frivolous, clearly vexatious, or

brought solely for purposes of harassment.

Cal. Gov’t. Code § 12652(g)(9).

As a preliminary matter, under either federal or state law a

defendant seeking attorneys’ fees in a false claims action, like

Timberworks herein, must establish that it was a prevailing

party. 

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3

The motions to dismiss which ultimately terminated the case,

however, were brought by the United States and the State of

California. Those motions were ultimately granted by the Court

on grounds that no actionable false claims violation had occurred

since the State awarded the construction contract in question to

Timberworks, and paid Timberworks’ invoices, with full knowledge

of Timberworks’ alleged noncompliance with disadvantaged business

entity (“DBE”) requirements attached to the project. Because the

State’s actions were taken in the face of complete disclosure as

to Timberworks’ purported failure to incorporate a last-minute

DBE bid within its work proposal, the Court found that the State

could not have been defrauded. Am. Contract Servs. v. Allied

Mold & Die, Inc., 94 Cal. App. 4th 856, 862 (Cal. App. 2001);

U.S. ex rel. Durcholz v. FKW, Inc., 189 F.3d 542, 544-45 (7th

Cir. 1999). 

It was primarily the State’s knowledge of Timberworks’

behavior that precluded any potential false claims violation in

this case. Secondarily, the Court also noted that to the extent

that Stierli’s complaint took issue with the State’s own policies

and procedures in awarding governmental contracts, the complaint

was defective on that ground as well, since the False Claims Act

“is not an appropriate vehicle for policing technical compliance

with administrative regulations.” Allied Mold, 94 Cal. App. 4th

at 865-66, citing Durcholz, 189 F.2d at 545, n.2. Both bases for

the Court’s ruling, however, focused on the State’s role in this

litigation, whether through its knowledge of Timberworks behavior

or the impropriety of a false claims action challenging the

State’s own contract award practices. 

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 The mere fact that Timberworks joined in the State’s 1

Motion to Dismiss (as set forth in its April 12, 2006 Statement

of Non-Opposition to said Motion) does not make Timberworks a

prevailing party.

4

Neither rationale for dismissing Stierli’s qui tam action on

behalf of the government focused on Timberworks’ own conduct;

indeed, the Court expressly declined to rule on Timberworks’ own

concurrently pending motion for summary judgment on the merits

after it granted the governmental entities’ dismissal requests. 

Because there was no decision in favor of Timberworks in that

regard, and since the motions that terminated the case were not

brought by Timberworks, it is difficult to fathom how Timberworks

can be considered a prevailing party in this lawsuit, as both the

FCA and CFCA fee statutes require.1

Although Timberworks’ inability to qualify as a prevailing

party would appear in and of itself to mandate denial of its

request for attorneys’ fees, Timberworks’ fee motion fares no

better if we proceed to the second part of the analysis and

consider whether Stierli’s actions were “clearly frivolous”,

“clearly vexatious”, or brought either “primarily” or “solely”

for “purposes of harassment”. Timberworks did not in fact

disclose that a DBE bid had been tendered, and the United States

Department of Transportation (“USDOT”) did issue a report

concluding that Timberworks’ efforts to meet DBE requirements

were only pro forma “because it never intended to use any DBEs”

and did not take all “necessary and reasonable steps” that one

would expect from a bidder “actively and aggressively trying to

obtain DBE participation”. USDOT Report of Investigation, Ex. 1

to Pl.’s Opp., p. 41. 

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The USDOT concluded that this failure to secure adequate DBE

compliance was egregious enough to warrant withdrawal of federal

funding for the project. Id. at 42. While the Court ultimately

determined that the timing of the State’s knowledge militated

against any false claim for payment that would support a viable

FCA or CFCA claim, that does not mean that there was no basis

whatsoever for Stierli’s claims against Timberworks. Stierli’s

claim that Timberworks’s claim was invalid was, at least on its

face, supported by the findings of the USDOT as the federal

funding agency. The timing issues ultimately determined by the

Court to be crucial in ruling out a false claim for payment were

not fully elucidated prior to the pendency of this litigation. 

Moreover, while Timberworks argues that the Allied Mold decision

was necessarily fatal to Stierli’s claim, Stierli had at least a

viable argument for distinguishing that case on its facts. The

Court simply cannot conclude under these circumstances that

Stierli’s action was clearly frivolous, clearly vexatious, or

brought primarily for purposes of harassment as it must to

justify an award of attorneys’ fees under either 31 U.S.C. §

3730(d)(4) or Cal. Gov’t. Code § 12652(g)(9). This

extraordinarily high standard can be met only if an action is

wholly lacking in both legal merit and evidentiary support. U.S.

ex rel. Mikes v. Straus, 98 F. Supp. 2d 517, 526 (S.D.N.Y. 2000). 

///

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Timberworks urges the Court to conclude, even apart from 2

the merits of Stierli’s FCA and CFCA claims, that his RICO cause

of action was patently untenable and therefore frivolous and

harassing. Plaintiff apparently believed his RICO theory was

tenable given an assertion that Timberworks engaged in mail fraud

by, for example, submitting fraudulent payment requests to the

State for payment. (See Pl.’s Compl., ¶¶ 48-51). This theory is

obviously related to Stierli’s claims under the FCA and CFCA. 

Merely pleading an alternative means of recovery does not itself

constitute frivolous, vexatious and/or harassing behavior.

Because oral argument would not be of material assistance, 3

this matter was deemed suitable for decision without oral

argument. E.D. Local Rule 78-230(h).

6

The simple fact that the Qui Tam Plaintiff did not ultimately

prevail does not mean that his action was per se unreasonable or

without foundation. Christiansburg Garment v. EEOC, 434 U.S.

412, 421-22.2

Based on the foregoing, Timberworks’ Motion for Attorney’s

Fees is DENIED.3

IT IS SO ORDERED.

DATED: September 8, 2006

_____________________________

MORRISON C. ENGLAND, JR

UNITED STATES DISTRICT JUDGE

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