Ill. Conclusion

In sum, while defendants’ objections to being haled into court almost a decade after the
filing of the complaint do not fall upon deaf ears, Sarmont’s right to have his suit heard on the
merits cannot be foreclosed by the government’s facially legitimate, albcit glacial, investigative

process, Accordingly, defendants’ motions for summary judgment [106], [112] are denied

ENTER:

Blanche M. Manning
United States District Court Judge

pate: 2°77 6


As of February 1998, the DCIS was strongly recommending that criminal charges be
filed against Target and its officers. On February 27, 1998, the government requested a partial
lifting of the seal to allow it to confer with Target counsel regarding a possible settlement of the
civil and criminal action against Target and its officers. The California court granted the request
and partially lifted the seal for this limited purpose. No settlement ensued, and the seal remained
in place.

In fate summer 1998, Sarmont requested a status conference so “the government [could]
more fully articulate a reasonable basis for seeking yet another extension.” On September 2,
1998, the California court ordered a meeting and the submission of a joint status report by
September 16. During a conference call with the government’s attorneys, Sarmont learned that
the government had decided not to pursue criminal charges, but needed more time to consider
whether to intervene in his gui tam suit. Indeed, on August 28, 1998, Target had received an
official declination letter from the DOJ declining all criminal prosecution. Based on the
government’s assurance that it would act with all deliberate speed in clecting whether to
intervene in the civil matter, Sarmont agreed to withdraw his opposition to further enlargement
of the seal period.

In late 1998, Target received a letter from a DOJ Civil Division lawyer in Washington,
D.C. indicating that the DOJ was reviewing the file for possible civil prosecution. This review
spanned another 2% years. On August 1, 2001, the DOJ’s Civil Division attorneys filed with the
California court its notice of election to not intervene. Accordingly, on August 17, 2001, the
California court ordered that “the complaint be unsealed and served upon the defendant[s} by the

relator.”



extension of the seal deadline. The Court does not glean from this a bad-faith “failure to
prosecute” by Sarmont. Rather, Sarmont’s lengthy cooperation merely reflects his all-too-
rational desire to have the government on board in prosecuting his claim. In fact, the evidence
shows that in the later stages of the investigation, Sarmont prodded the government to complete
their investigation and only reluctantly, on the government’s assurances of due diligence, joined
in the final motions to extend the scal period,

Likewise, although Sarmont’s prosecution of his claim since August 1, 2001 has not been a
model of expediency, the Court is not persuaded that Sarmont ignored any court orders or that his
lumbering was borne out of “willfulness, bad faith or fault.” /d. Accordingly, defendants’ Rule
41 argument must fail

B. The FCA’s Seal Provision

Defendants argue that Sarmont and the government did not make a good cause showing
under section 3730(b)(3) for extending the seal period. While the Court understands that it is
commonplace to defer a civil investigation and the intervention decision pending completion of a
U.S. Attorney’s criminal investigation, the passing of almost a decade between the filing and
service of the complaint, facilitated largely by extensions of the seal period, docs give the Court
pause. Length of the investigation alone, however, does not raise a specter of bad faith with
respect to the government’s conduct. See, ¢.g., United States v. Davis, 231 F.Supp.2d 701, 708
(S.D. Ohio 2002). And defendants proffer nothing more than its opaque “look how Jong this
took” arguments, which do not suggest the absence of good cause, let alone overcome the
presumption of validity accorded to the California court’s rulings. See White v. Godinez, 301

F.3d 796, 803 (7th Cir. 2002) (“[U]nder the law of the case doctrine, we do not reopen issues


March 27, 2002, at which time this Court entered an order lifting the seal nunc pro tunc March
12, 2002. Sarmont served the complaint upon Motorola on April 29, 2002, and upon Target on
April 30, 2002.
Il. Discussion

On this record, defendants proffer three arguments — first, that Sarmont (along
with the government) violated Fed. R. Civ. P. 41(b)’s requirement that a plaintiff prosecute his
case with reasonable diligence; second, that Sarmont (along with the government) violated the
FCA’s seal provisions; and finally, that Sarmont’s (and the government’s) delay in prosecuting
this case have violated defendants’ duc process rights. Each of these arguments, though framed
under a distinct legal theory, emanates from the same premise. Namely, the 94 year delay
between Sarmont’s filing of his complaint and defendants’ reccipt of service constitutes
unreasonable foot-dragging that has prejudiced defendants.

A. Rule 41(b)

Defendants argue that the government and Sarmont failed to prosecute
their case as required under Fed.R.Civ.P. 41(b). Before evaluating the particulars of defendants’
argument, the Court must address a prefatory matter which frames our analysis of each of
defendant’s arguments. Simply, while defendants lump the government and Sarmont together in
its allegations of unreasonable delay, a brief recap of both the FCA’s statutory framework and the
procedural timeline in this case demonstrate that the Court must evaluate Sarmont’s role in
isolation from that of the government. The qui tam provisions of the FCA contemplate the
following scenario: a relator files a complaint under seal and serves that complaint and a

disclosure statement on the DOJ. The relator is then obligated to remain idle pending resolution


Sometime during Summer 2001, Sarmont’s California counsel informed Sarmont that he
did not intend to pursue the case if the government did not intervene. Sarmont then contacted a
Chicago lawyer on the advice of a neighbor and told the lawyer that he was a qui tam relator ina
case pending in California, and further, that he was interested in transferring the case to Illinois.
The Chicago lawyer told Sarmont that he had no experience in qui tam matters, but that he
would help Sarmont find appropriate counsel in Chicago.

On September 30, 2001, California counsel notified Sarmont that he was withdrawing
from the case. In a minute order dated November 27, 2001, the California court ordered that the
complaint be served by December 27, 2001. Inexplicably, the November 27 order ~ the docket
entry immediately following the August 17 order — was issued under seal. Sarmont’s Chicago
lawyer, on December 13, 2001, filed a motion in the California court to transfer the case to the
Northern District of Illinois, and requested an extension of time to serve defendants while
Sarmont found suitable Chicago counsel. On January 8, 2002, the California court granted both
the transfer request and an extension until January 31, 2002 to serve defendants. The case was
transferred, under seal, to the Northern District of Illinois.

In carly January 2002, Sarmont retained his present Chicago counsel. Sarmont’s new
attorneys promptly prepared and attempted to file their appearances, but were notified by the
Northern District’s clerk’s office that it would not accept any pleadings until the file arrived and
the case had been assigned to a judge. Counsel was advised to call the clerk’s office to monitor
the file’s arrival. The file arrived in the Northern District on February 1, 2002, and in late
February, counsel were informed that the case had been assigned to this Court. On February 28,
2002, counsel filed their appearances and a motion to lift the seal to be presented on March 12,
2002. Miscommunication in the clerk’s office resulted in the motion not being presented unul

5


Mindful of the FCA’s statutory design, the Court does not, as defendants suggest, merely
lump together the conduct of the government and Sarmont. ‘This timeline yields that Sarmont did
not become master of his complaint until August 1, 2001. Prior to August 1, the government was
conducting its criminal investigation and deciding whether to intervene in the civil action.
Sarmont was not entitled to go it alone in the meantime — indeed, doing so is grounds for
dismissal. See Khan, 2002 WL 849801, at *2. Thus, the Court rejects defendants’ tacit
argument that the pre-August 1, 2001 conduct of the government is attributable to Sarmont. This
is not to say that Sarmont cannot be held to account for his conduct prior to August 1, only that
the length of the government’s investigation does not fall on his shoulders. With these principles
in mind, the Court’s analysis is brief.

Rule 41(b) provides that a lawsuit can be involuntarily dismissed “{fJor failure of
the plaintiff to prosecute or to comply with these rules or any order of court...” Fed.R.Civ.P.
41(b). The Seventh Circuit has cautioned that “[{i]n the normal course of events, justice is
dispensed by the hearing of cases on their merits; only when the interests of justice are best
served by dismissal can this harsh sanction be consonant with the role of the courts.” Schilling v.
Walworth County Park and Planning Conun'n, 805 ¥.2d 272, 275 (7th Cir. 1986) (citation
omitted). Thus, a sanction of dismissal usually is appropriate only in “extreme situations” in
which plaintiff has exhibited “a clear record of delay or contumacious conduct, or when other
less drastic sanctions have proven unavailing.” Jd. A dismissal is the “ultimate sanction” and is
“reserved for cases in which the offending party has demonstrated willfulness, bad faith, or
fault.” Long y. Steepro, 213 F.3d 983, 986 (7th Cir. 2000) (citation omitted).

Defendants make much of the fact that Sarmont joined in multiple requests for


Mine Order Ko.n (06/97)

United States District Court, Northern District of Hlinois

Name of Assigned Judge
or Magistrate Judge

Blanche M. Manning

CASE NUMBER 02 C 0815 DATE October 17, 2003
CASE Sarmont v. Target Corporation
TITLE

of the motion being presented.

[In the following bex (a) indicate the party filing the motion, c.g., plaintilf, defenciant, 3rd party plaintifl, and (b} state briefly the nature

Defendants’ Motions for Summary Judgment

DOCKET ENTRY:

(11) © [For further detail see order on the reverse side of the original minute order.}

d) Oo Filed motion of [ use listing in “Motion” box above.}

(2) ia) Brief in support of motion duc _

(3) a Answer brief to motion due Reply to answer bric€due

(4) a Ruling/Hearingon set for at

(5) Oo Status hearing[held/continued to] [set for/re-set for]on set for att

6 a Pretrial conference[held/continued to] [set for/re-set for] on. set for at

aM oa Trial[set for/re-set for}on. at

~@) [Bench/Jury trial] (Hearing) held/continued to at

0 oO This case is dismissed [with/without] prejudice and without costs|by/agrecment/pursuant to]
COFRCP4(m) O General Rule 21 COFRCP4I(a)(1) CO FRCP 1(a)(2).

(a0) of [Other docket entry] Defendants’ motions for summary judgment [106], [112] are denied

No notices required, advised in open court

No notices required, umber wt aaties

Document
Number

ant act 20 Oss

Y | Notices mailed by judge’s s

Notified counsel by telephone. hale Gackotect

Docketing to mail notices. |
Mail AO 450 form. aan yf doc gingzlent ods
gyngd | re

Copy to judge/magistrate judge.

eae ed doe date mie noice
courtroom ak yok

RTS deputy's
initials

~ Dateftime received in
central Clerk's Office ailing depty tials

[2



Cc. Due Process

Finally, Motorola argues that this case’s delay has infringed on its due process rights
secured by the Fifth Amendment. Jlowever, our finding that Sarmont’s complaint is now
properly before this Court, £e., it would survive a statute of limitations challenge, gives
Motorola a slender reed upon which to rest a due process argument premised on delay. “[1]f
courts could conclude that a mere temporal delay were enough to give rise to a deprivation of
due process even where the statutory period of limitations had not run, it would be tantamount to
a judicial override of legislative prerogative.” Davis, 231 F.Supp.2d at 707; see also United
States v. Lovasco, 431 U.S. 783, 789 (1977) (“[T]he Due Process Clause has a limited role to
play in protecting against oppressive delay.”)

To show a due process violation when an action was timely filed, a defendant must
demonstrate that the government intentionally delayed to gain a tactical advantage and that
actual prejudice resulted. United States v. Marion, 404 U.S. 307, 324 (1971). As to the first
prong, although the Court has little trouble finding measurable delay, the Court finds no
evidence that such delay was deliberately undertaken to acquire a tactical advantage. The
Supreme Court’s treatment in Lovasco is on point:

[T]he Due Process Clause does not permit courts to abort
criminal prosecutions simply because they disagree with a
prosecutor’s judgment as to when to seek an indictment.
Judges are not free, in defining “due process,” to impose on
law enforcement officials our “personal and private notions”

of fairness and to “disregard the limits that bind judges in
their judicial function.

Group, 171 F.Supp.2d 1323, 1325 (M.D. Fla. 2001) (seal in place for six years), United States ex
rel. Franklin vy. Parke-Davis, \47 F.Supp.2d 39, 43 (D. Mass. 2001) (seal in place for almost
four years).

11


decided in earlier stages of the same litigation unless we have strong conviction that the earlier
ruling was wrong and the party that benefitted from the earlier ruling would not be unduly
harmed.”) (citation omitted).

The Court’s own review of the record reveals several factors which appear to
have contributed to the prolonged investigation. First, in late 1993, the Assistant U.S. Attorney
assigned to the prosecution of the case left the government, and a new prosecutor was assigned,
Second, Target’s counsel was heavily engaged in discussions with the U.S. Attorney’s Office.
The parties’ characterization of these efforts differ markedly. DCIS reports suggest that Target's
vigorous lobbying efforts “stymied prosecution efforts.” For instance, during the government's
presentation to the grand jury, proccedings were interrupted, on Target’s request, to allow
discussions on the issue of criminal liability. During these discussions, Target counsel urged an
agreement to toll the criminal statute of limitations, According to DCIS, Target’s counsel
requested, and received, a tolling of the criminal statute of limitations on thirteen separate
occasions to allow counsel to continue to meet with the U.S. Attorney’s office to “discuss
potential resolution of the case” or to review government reports. Against this summary, Target
credibly submits that its interaction with the U.S. Attorney’s Office was nothing more than the
typical negotiating (ultimately successful) for a declination of prosecution. In any event, the
parties have presented nothing which suggests that the investigative delay in this case, while
undeniably significant, was duc to the bad faith of any party.

Absent any showing that the government did not, in fact, have good cause to seck

an extension of the seal period, the Court declines to revisit the California cours rulings.”

*To put the California court's rulings in context, substantial extensions of the seal period
are not uncommon in qui fam cases. See, e.g., United States ex rel. Alderson v. Quorum Health

10


of the government’s investigation and decision whether to intervene. See Khan v Chicago
Housing Authority, 2002 WL 849801, at *2 (N.D. Ill. 2002). The relator takes over only upon
the government’s decision not to intervene and the court’s lifting of the seal. See id. Initially,
the government is allowed sixty days to consider whether to intervene in the case. See 31 U.S.C
§ 3730(b)(2). Unreasonable delay by the government in evaluating a gui dam action, and in
secking a corresponding extension of the seal period, is held in check by the FCA’s requirement
that a court grant a request for extension only upon a showing of good cause. Id. § 3730(b)(3).
On October 21, 1991, Sarmont, in compliance with the FCA, filed a complaint under seal,
and served both the complaint and a disclosure statement on the DOJ, shortly thereafter, the
United States Attorney’s Office, aided by DCIS and NIS, commenced a criminal investigation,
which included interviewing employees of both Motorola and Target; from the inception of its
criminal investigation until its formal closing on August 28, 1998 — an investigation spanning
almost seven years ~ the DOJ requested and received fifteen separate extensions of the seal upon
its good cause showing that it needed more time to complete its criminal investigation; Sarmont
fully cooperated with, and in some cases joined in, the government’s extension requests;
following the U.S. Attorney’s decision to forego criminal prosecution, the DOJ’s Civil Division
in Washington D.C. deliberated, for close to three years, on whether to intervene in Sarmont’s
civil action; two more extensions later, the DOJ declined to intervene on August 1, 2001;
Sarmont, then the only plaintiff, moved for a transfer to this District and for an extension of ume
to serve the complaint; after those motions were granted, the case arrived in this Court in
February 2002, and on March 12, 2002, Sarmont moved to lift the seal; both defendants were

served by April 30, 2002.



Sarmont filed the complaint under seal, and served a copy of the complaint and a disclosure
statement on the United States Department of Justice (“DOJ”). See 31 U.S.C. $ 3730(b)(2).
Under the FCA, the government had sixty days to consider whether to intervene in the case. /d.
However, the FCA allows the government to petition the court for an extension of the deadline
upon a showing of good cause. /d. § 3730(b)(3). The case will proceed under seal until the
government decides whether to intervene, at which point the complaint may be served upon the
defendants. /d. § 3730(b)(2) & (3).

Shortly after Sarmont’s complaint was filed, the United States Attorney for the
Northern District of Illinois commenced a criminal investigation. This criminal investigation
would last approximately seven years. The investigation included a grand-jury investigation
during the intervening years 1994 and 1995, Throughout the seven-year period, the government
sought, and the California court granted, fifteen separate extensions of the seal period. The nub
of these requests was that the government needed more time to complete its criminal
investigation before electing whether to intervene in the civil action.

During that time, both Target and Motorola, though not served with the complaint, were
aware of the nature of the investigation. In November 1990, DCIS and NIS agents executed a
search warrant at Target’s premises and interviewed a number of Target employees including its
president. In October 1990, DCIS agents interviewed Motorola’s program manager of discrete
military marketing, and on July 22, 1996, another Motorola employee was interviewed. Defense
counsel were present at the interviews of Target and Motorola cmployees. Moreover, Target’s
counsel engaged in extensive negotiations with the U.S. Attorney’s Office throughout the

pendency of the criminal investigation.


Nonetheless, a brief recital of the underlying facts is instructive.' Target is a small
illinois company which produced electronic components used by the United States military to
emit “friend or foe” identification signals. In 1990, Sarmont, a Target employee, allegedly
discovered that Target had substituted commercial parts for higher-quality military-grade parts,
falsely certified that the parts met military specifications, and misrepresented to the government
the costs of producing the components. Sarmont also learned that Motorola, a Target
subcontractor, was not properly testing the components, and was also falsely certifying that
commercial parts met military specifications.

Sarmont allegedly shared his findings with his superiors and was told that the
irregularities he had discovered were under investigation, and further, that he should continue to
ship the noncompliant products or risk losing his job. On October 4, 1990, Sarmont reported his
alleged findings to the Naval Investigative Service (“NIS”) and the Defense Criminal
Investigative Service (“DCIS”). At the government’s request, Sarmont began to cooperate with
the investigation and even wore a “wire.” Target terminated Sarmont on October 19, 1990.7

The Court now turns to the procedural history. On October 21, 1991, Sarmont
filed this suit in the Central District of California. His complaint, brought pursuant to the FCA,
enumerates the alleged false claims made by Target and Motorola, and also alleges that his

termination was in retaliation for his “whistle-blowing.” Pursuant to the FCA’s requirements,

‘Because the merits of Sarmont’s complaint do not bear on the Court’s resolution of
defendants’ motions, these facts are presented only by way of background and are not to be
construed as containing findings of fact, or any comment, express of implied, on the complaint’s
merits.

*Not surprisingly, the parties differ on the reasons for Sarmont’s termination (Target avers
theft, while Sarmont alleges retaliation for whistle-blowing activities); again, it is of no moment
to our analysis.


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

UNITED STATES, ex rel. LELAND
SARMONT, LELAND SARMONT,
individually,

Plaintiffs,
Case No. 02 C 0815
v.
Judge Blanche M. Manning
TARGET CORPORATION, et al.,

eevrvvevevevervrvev

Defendants.

MEMORANDUM AND ORDER

Plaintiff Leland Sarmont brought this action under the False Claims Act, 31 U.S.C. §§
3729-3733 (the “FCA”), both in bis individual capacity and as a qui tam relator on behalf of the
United States, against defendants Target Corp., Motorola, Inc., and Target employees Tom
Oxley, Carol Oxley, Ray Nofster, and Barbara Kipnis (collectively, “defendants”). Presently
before the Court are defendants’ two motions for summary judgment pursuant to Fed. R. Civ. P.
56(c) filed by Target and its employees and Motorola, respectively. For the reasons set forth
below, both motions are denied. .

lL Background

Defendants’ motions, styled as summary judgment pleadings, are something of a
misnomer in that the merits of Sarmont’s claims are irrelevant to the motions. Plainly,
defendants contend that Sarmont’s complaint must be dismissed, not because it presents no
triable issue, but because of Sarmont’s alleged delay in pursuing it. Indeed, defendants’ motions

only implicate this case’s procedural history.



431 US. at 790 (citing Rochin y. California, 342 U.S. 165, 170 (1952))

On the prejudice showing, a claim of prejudice must be “specific, concrete and supported
by evidence.” United States v. Sowa, 34 ¥.3d 447, 450 (7th Cir. 1994). Tere, Motorola submits
that its record destruction policy likely led to the destruction of exculpatory evidence during the
course of the criminal investigation, that witnesses no longer employed by Motorola may not be
available to testify, and that it was not given adequate notice of the suit in order to prepare a
defense. First, Motorola’s arguments regarding document retention and witness availability are,
at this time, entirely speculative. See Lovasco, 431 U.S. at 790. Second, Motorola cannot now
be heard to complain that it had no notice of the pendency of a criminal investigation. It has had
notice from its inception through interviews conducted in both 1990 and 1996 in the presence of
Motorola counsel. Motorola’s argument that, despite its knowledge of a criminal investigation
into circumstances surrounding military contracts for which it was directly or indirectly
involved, it did not know that i/ could face liability is specious.

This leaves us with Motorola’s argument that is has been prejudiced by the mere
passage of time. However, just as lengthy pre-indictment delays do not bar criminal prosecution
(see Aleman vy. Judges of Cook County, 138 F.3d 302, 309 (7th Cir. 1998) (twenty year delay);
United States y. Miahat, 106 F.3d 89, 93 (Sth Cir. 1997) (nine year delay); United States vy.
Edwards, 159 F.3d 1117, 1128 (8th Cir, 1998) (same); United States v. MeMutuary, 217 F.3d
477, 482 (7th Cir. 2000) (five year delay)), here too, the government’s delay does not foreclose
Sarmont’s civil suit. Indeed, although 9 4 years will take its toll on the freshness of any party’s
evidentiary arsenal, such is expressly contemplated by the FCA which itself contains a ten year
statute of limitations. See 31 U.S.C. § 3731. Defendants have not made the requisite showing to

support a due process violation.

12