United States of America and State of New York v. Carranza

Background

Patrick Donohue brought this qui tam action under the False Claims Act and related state false-claims laws. A qui tam action allows a private person, called a relator, to pursue claims on behalf of the government. Donohue alleged that, after pandemic-related school-building closures, defendants provided remote services to students with disabilities in ways that did not comply with Medicaid and Individuals with Disabilities Education Act requirements, then submitted false claims for reimbursement.

The operative Second Amended Complaint named defendants including New York City education officials and the New York City Department of Education, as well as school districts and superintendents in several states. The pending motion was filed by Loudoun County Public School District and Scott A. Ziegler, referred to as the Loudoun Defendants. They sought dismissal under Federal Rules of Civil Procedure 12(b)(2), 12(b)(3), and 12(b)(6), asserting lack of personal jurisdiction, improper venue, and failure to state a claim.

Venue and Joinder

The court addressed venue before personal jurisdiction and failure to state a claim. It explained that the False Claims Act has a specific venue provision allowing an action to be brought where a defendant can be found, resides, transacts business, or where a prohibited act occurred. The court held, however, that this provision did not allow Donohue to rely on the presence of the New York defendants because the Loudoun Defendants were not properly joined with them under Rule 20.

Rule 20 permits multiple defendants to be joined when the claims arise from the same transaction or series of transactions and involve a common question of law or fact. The court found that Donohue had not alleged that the Loudoun Defendants could be held jointly or separately liable for false claims allegedly made by the New York defendants. The court therefore concluded that the Loudoun Defendants had been improperly joined and that their claims should be separated under Rule 21.

After separation, the court applied the general federal venue statute. It found that the Loudoun Defendants were located in the Eastern District of Virginia and that the events giving rise to the claims against them occurred there, not in the Southern District of New York. Donohue’s assertion that the Loudoun Defendants had significant contacts with New York did not establish that a substantial part of the relevant events occurred in New York.

Disposition

Because venue was improper, the court exercised its authority under 28 U.S.C. § 1406(a) to transfer the claims rather than dismiss them. It found that transfer was in the interest of justice and that the Eastern District of Virginia had personal jurisdiction over the Loudoun Defendants and was the appropriate court to address the merits, including the Virginia-law claims.

The court expressly declined to decide the Loudoun Defendants’ arguments about the merits of Donohue’s claims. Its order denied the Loudoun Defendants’ motion to dismiss, severed the claims against Loudoun County Public School District and Scott A. Ziegler, and directed the Clerk to transfer those claims to the U.S. District Court for the Eastern District of Virginia.