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United States, ex rel. Dahlstrom v. Sauk-Suiattle Indian Tribe of Washington

United States District Court, W.D. Washington, Seattle

November 15, 2019

UNITED STATES OF AMERICA, ex rel. RAJU A.T. DAHLSTROM, STATE OF WASHINGTON, ex rel. RAJU A.T. DAHLSTROM, Plaintiffs,
v.
SAUK-SUIATTLE INDIAN TRIBE OF WASHINGTON, et al., Defendants.

          ORDER REGARDING THE PLAINTIFF'S NOTICE OF BANKRUPTCY, THE PARTIES' RESPONSES TO THE COURT'S ORDER TO SHOW CAUSE, AND CERTAIN MOTIONS

          JAMES L. ROBART UNITED STATES DISTRICT JUDGE.

         I. INTRODUCTION

         Before the court are: (1) Plaintiff Raju A.T. Dahlstrom's notice of Chapter 13 bankruptcy (Bankr. Not. (Dkt. # 84)); (2) the parties' responses to the court's order to show cause why the court should not award a portion of Defendants' attorney's fees against Mr. Pope, personally, as a sanction pursuant to 28 U.S.C. § 1927, Federal Rule of Civil Procedure 11(b), or its inherent authority (Def. OSC Resp. (Dkt. # 89); Pope OSC Resp. (Dkt. # 101); see also SJ Order (Dkt. # 79) at 36-37 (detailing order to show cause)); (3) Mr. Dahlstrom's and his attorney Richard L. Pope's agreed motion for Mr. Pope to withdraw as Mr. Dahlstrom's counsel (MTW (Dkt. # 83)); and (4) Mr. Dahlstrom's motion for relief from the deadline to file a motion for reconsideration of the court's summary judgment order (MFR (Dkt. # 87); see also SJ Order). The court has reviewed the bankruptcy notice, the parties' responses to and other submissions regarding the court's order to show cause, Mr. Dahlstrom's motions, the parties' submissions filed in support of and opposition to the motions, the relevant portions of the record, and the applicable law. Being fully advised, the court (1) STAYS consideration of its imposition of attorney's fees and costs against Mr. Dahlstrom due to his bankruptcy notice; (2) AWARDS a portion of Defendants' attorney's fees against Mr. Pope personally as a sanction for bad faith conduct pursuant to 28 U.S.C. § 1927 and the court's inherent authority; (3) GRANTS Mr. Dahlstrom's and Mr. Pope's agreed motion for Mr. Pope to withdraw as Mr. Dahlstrom's counsel; and (4) GRANTS in part and DENIES in part Mr. Dahlstrom's motion for relief from the deadline to file a pro se motion for reconsideration as described below.

         II. BACKGROUND

         Defendant Sauk-Suiattle Indian Tribe of Washington's (“the Tribe”) initially hired Mr. Dahlstrom as a social worker for the Tribe's Indian Child Welfare Department in 2010. (6/6/19 Nedderman Decl. (Dkt. # 67) ¶ 2, Ex. 1.) Mr. Dahlstrom became the Director of the Department in 2011. (Id. ¶ 3, Ex. 2.) On April 30, 2015, the Tribe appointed Mr. Dahlstrom interim Health and Social Services (“HSS”) Director. (Id. ¶ 4, Ex. 3.) In July 2015, the Tribe appointed him HSS Director. (Id. ¶ 5, Ex. 4.) As an at-will employee, Mr. Dahlstrom acknowledged that the Tribe “may terminate [his] employment at any time, with or without cause.” (Id. ¶ 6, Ex. 5.) The Tribe placed Mr. Dahlstrom on administrative leave with pay in October 2015. (Id. ¶ 7, Ex. 6.) The Tribal Counsel terminated his employment without cause on December 4, 2015. (Id. ¶ 8, Ex. 7; see also Metcalf Decl. (Dkt. # 66) ¶ 2.) Mr. Dahlstrom received a letter confirming his termination on December 8, 2015. (6/6/19 Nedderman Decl. ¶ 9, Ex. 8.)

         On January 12, 2016, approximately one month after the Tribal Counsel terminated his employment, Mr. Dahlstrom filed this qui tam lawsuit as a pro se litigant. (Compl. (Dkt. # 1).) Mr. Dahlstrom asserted claims under the federal False Claims Act (“FCA”), 31 U.S.C. § 3729, et seq., and the Washington Medicaid Fraud False Claims Act (“the Washington Medicaid Fraud FCA”), RCW ch. 74.66. (See Compl. ¶¶ 71-82.) He also brought claims for FCA retaliation and Washington Medicaid Fraud FCA retaliation. (See id. ¶¶ 92-95.)

         Because a plaintiff may not prosecute a qui tam action pro se, see Stoner v. Santa Clara Cty. Office of Educ., 502 F.3d 1116, 1127 (9th Cir. 2007), on January 22, 2016, the court issued an order to show cause within 30 days why the matter should not be dismissed (see 1/22/16 OSC (Dkt. # 2) at 1-2). Alternatively, the court ordered Mr. Dahlstrom to retain counsel within the same timeframe. (Id. at 2.) On February 18, 2016, Mr. Pope appeared on Mr. Dahlstrom's behalf. (Not. of App. (Dkt. # 3).) Mr. Pope attests that he “believed Mr. Dahlstroms' claims . . . to be valid when [he] entered [his] [n]otice of [a]ppearance” (9/26/19 Pope Decl. ¶ 22), however, Mr. Pope does not describe what, if any, investigation he undertook prior to agreeing to represent Mr. Dahlstrom (see generally id.).

         On September 26, 2016, the United States of America and Washington State notified the court of their decision not to intervene in the action. (Notice (Dkt. # 8) at 2 (citing 31 U.S.C. § 3703(b)(4)(B) and RCW 74.66.050).) Accordingly, on September 28, 2016, the court unsealed the case and ordered Mr. Dahlstrom to serve Defendants with the complaint and related filings. (9/28/16 Order (Dkt. # 9) at 2.)

         On January 12, 2017, Defendants Sauk-Suiattle Indian Tribe of Washington (“the Sauk-Suiattle” or “the Tribe”), Community Natural Medicine, PLLC (“CNM”), Christine Morlock, Robert Morlock, and Ronda Metcalf's (collectively “Defendants”) filed a motion to dismiss arguing that they were immune from suit due to the Tribe's sovereign immunity and that this immunity extended to all Defendants. (MTD (Dkt. # 13).) Defendants did not challenge the merits of Mr. Dahlstrom's allegations in their motion. (See Id. at 4 (“Movant expresses no opinion upon the merits of Plaintiff Dahlstrom's allegations . . . .”).) On March 21, 2017, the court granted Defendants' motion to dismiss as to the Tribe but denied the motion as to all other Defendants. (3/21/17 Order (Dkt. # 39).) The court concluded that Defendants failed to establish that the other Defendants shared in the Tribe's sovereign immunity. (Id. at 7-9.)

         On June 6, 2019, the remaining Defendants filed a motion for summary judgment on all of Mr. Dahlstrom's alleged false claims. (MSJ (Dkt. # 64).) On July 8, 2019, Mr. Dahlstrom filed his response to Defendants' motion opposing each ground for summary judgment. (SJ Resp. (Dkt. # 72).) On August 29, 2019, the court granted Defendants' motion for summary judgment and dismissed Mr. Dahlstrom's action with prejudice. (SJ Order (Dkt. # 79) at 2, 37.)

         In his responsive memorandum to Defendants' motion for summary judgment, Mr. Dahlstrom described Dr. Morlock's medical practices as “dangerous, ” “worthless, ” “deleterious, ” “fraudulent, ” and “to the detriment of children, youth and their families, residing within and beyond the boundaries of the Sauk-Suiattle Indian Reservation.” (SJ Resp. at 4.) He further accused Dr. Morlock of “actively and serially injecting [the Tribe's] children, youth and families, ” and other patients, with “spoiled” and “expired” vaccines. (Id. at 3.) He asserted that the Tribe's children were at risk from Dr. Morlock's “barbaric reaches” and that she “dangerously and with reckless abandon violated” those children. (Id. at 5.) Yet, despite this litany of scurrilous and potentially professionally-damaging allegations, Mr. Dahlstrom was unable to sustain a single false claim related to Dr. Morlock and the tribal vaccines. (See SJ Order at 19-22.) Mr. Dahlstrom's counsel of record, Mr. Pope, signed the responsive memorandum containing the foregoing statements. (See SJ Resp. at 24.)

         Pursuant to 31 U.S.C. § 3730(d)(4) and RCW 74.66.070(d)(4), the court concluded in its summary judgment order that all of Mr. Dahlstrom's claims were “frivolous, ” “clearly vexatious, ” and “brought for the primary purpose of harassing and embarrassing . . . Defendants.” (SJ Order at 34-36.) Accordingly, the court granted Defendants' motion for an award of reasonable attorney's fees and expenses against Mr. Dahlstrom and ordered Defendants to file, within fourteen days, a motion setting forth the reasonable fees and expenses they incurred in bringing their motion for summary judgment and conducting any necessary preceding discovery. (Id. at 36.) The court also ordered Mr. Pope “to show cause why the court should not impose a portion of its attorney's fees award, if any, against him personally pursuant to 28 U.S.C. § 1927, [Federal] Rule [of Civil Procedure] 11(b), or its inherent authority.” (Id. at 36-37.) The court also permitted Defendants to respond to the court's order to show cause. (Id. at 37.)

         On September 12, 2019, Mr. Dahlstrom and Mr. Pope filed a joint motion seeking the court's permission for Mr. Pope to withdraw as Mr. Dahlstrom's attorney. (See MTW.) On the same day, Mr. Dahlstrom filed a notice of Chapter 13 bankruptcy. (See Bankr. Not.) In addition, Mr. Dahlstrom filed a motion seeking relief from the deadline to file a pro se motion for reconsideration of the court's summary judgment order. (See MFR.)

         On September 12, 2019, Defendants filed a response to the court's June 6, 2019, order to show cause. (Def. OSC Resp. (Dkt # 89); see also SJ Order at 36-37.) Defendants assert that the court has the authority to impose sanctions in the form of an award of fees against Mr. Pope personally for his conduct in this litigation, and they seek an award of $25, 000.00 against Mr. Pope personally. (See generally id.; see also 9/12/19 Nedderman Decl. (Dkt. # 90) ¶ 2, Ex. 1 (attaching a spreadsheet of Defendants' counsel's billing records related to this matter).)

         Mr. Pope filed his response to the court's order to show cause on September 26, 2019. (See Pope OSC Resp.) Mr. Pope opposes the entry of sanctions against him personally.[1] (See id.) In his defense, he argues that he “had nothing to do with the research, drafting or filing of Mr. Dahlstrom's pro se complaint.” (9/26/19 Pope Decl. (Dkt. # 100) ¶ 2.) He states that he “certainly believed Mr. Dahlstrom's claims . . . to be valid when [he] entered [his] [n]otice of [a]ppearance.” (Id. ¶ 22.) He also states that “Mr. Dahlstrom . . . agree[d] to assist with research, briefing and organization - which he disappointingly fell short on later in this litigation.” (Id.) Mr. Pope does not indicate that he conducted any independent investigation into Mr. Dahlstrom's claims prior to accepting the representation and entering his notice of appearance in this suit. (See generally id.)

         As a part of his response to the court's order to show cause, Mr. Pope attests that he had an agreement with Mr. Dahlstrom whereby Mr. Dahlstrom would provide Mr. Pope with a draft response to Defendants' motion for summary judgment seven days prior to the filing deadline. (Id. ¶ 25.) Mr. Pope then planned to “refine” Mr. Dahlstrom's draft with his “own corrections, additional research and input, by the response deadline.” (Id.) Mr. Pope blames Mr. Dahlstrom for “not timely doing his part of the work” and not providing Mr. Pope “with a draft response until 6:56 p.m. . . . just a few hours before the midnight filing deadline.” (Id. ¶ 26.) Mr. Pope admits that he signed and filed Mr. Dahlstrom's draft “with very few corrections, much less improvements.” (Id. ¶ 28.) He acknowledges that he only “lightly” edited and proofread Mr. Dahlstrom's draft. (Id. ¶ 29.) He again blames Mr. Dahlstrom by stating: “If I had gotten ANYTHING for a draft in advance, I would have been able to do something a lot more useful.” (Id.) He acknowledges being “very embarrassed, ” but states he “was in a situation where [he] basically had to file something.” (Id.)

         Mr. Pope also acknowledges the reasonableness of the court's and Defendants' concerns about the language he uses in the summary judgment response regarding Dr. Morlock. (See Id. ¶ 56 (“Both the court and . . . Defendants (especially [Dr.] Morlock herself) are understandably not pleased with the language used to describe her involvement in the . . . vaccine program.”).) Indeed, he attests that he “very much regret[s] the tone and wording that . . . [he] used in relation to Dr. Morlock.” (Id. ¶ 58.) He acknowledges that-had he not relied on Mr. Dahlstrom's draft and then failed to properly review the draft prior to filing-he would have used “quite substantially different wording.” (Id. ¶ 58.)

         The court now addresses Mr. Dahlstrom's bankruptcy notice, the court's order to show cause concerning Mr. Pope, and Mr. Dahlstrom's motions.

         III. ANALYSIS

         A. Mr. Dahlstrom's Notice of Chapter 13 Bankruptcy

         As noted above, Mr. Dahlstrom filed a notice of Chapter 13 bankruptcy on September 12, 2019. (See Bankr. Not.) Although the filing of a bankruptcy petition automatically stays an action or a proceeding “against the debtor that was or could have been commenced before the commencement of the [bankruptcy] case, ” 11 U.S.C. § 362(a)(1), the automatic stay does not apply to actions brought by the debtor, nor does it “prohibit a defendant in an action brought by a plaintiff/debtor from defending itself in that action, ” In re Way, 229 B.R. 11, 13 (B.A.P. 9th Cir. 1998); see also In re White, 186 B.R. 700, 704 (B.A.P. 9th Cir. 1995); In re Merrick, 175 B.R. 333, 336, 338 (9th Cir. BAP 1994). Thus, Mr. Dahlstrom's notice does not act as a stay on these proceedings generally.

         Nevertheless, pursuant to 31 U.S.C. § 3730(d)(4) and RCW 74.66.070(d)(4), the court previously ruled that Defendants are entitled to an award of their attorney's fees and expenses from Mr. Dahlstrom because his claims were frivolous, clearly vexatious, and brought for the primary purpose of harassing and embarrassing Defendants. (SJ Order at 34-36.) The court order ordered Defendants to file a motion detailing their reasonable fees and expenses no later than September 12, 2019. (8/30/19 Order (Dkt. # 82) at 2.) Following Mr. Dahlstrom's bankruptcy notice, Defendants were concerned that filing such a motion may be contrary to the automatic stay provided in 11 U.S.C. § 362. (Def. OSC Resp. at 2-3 & n.2.) Accordingly, Defendants did not file and note their motion on the court's docket but rather attached it as an exhibit to a declaration. (See id.; see also 9/12/19 Nedderman Decl. (Dkt. # 90) ¶ 12, Ex. 6 (attaching a copy of Defendants' fees motion).)

         The court agrees that, although the automatic bankruptcy stay does not apply to this action generally, it does apply to any motion for fees and expenses against Mr. Dahlstrom. See Morawski v. Lightstorm Entm't, Inc., No. CV 11-10294 MMM (JCGx), 2013 WL 12122290, at *2 (C.D. Cal. Aug. 7, 2013) (“[C]ourts frequently stay claims for costs against losing plaintiffs who subsequent seek protection in bankruptcy court.”) (citing Conley v. Pitney Bowes, Inc., 978 F.Supp. 892, 902 (E.D. Mo. 1997) (noting that “although [the prevailing defendant's claim for costs was] part of a proceeding initiated by plaintiff, ” the claim for costs could “be construed as a judicial proceeding against a debtor”)). Accordingly, the court stays its consideration of Defendants' motion until the bankruptcy stay is lifted. The court further ORDERS the parties to notify the court within seven (7) days of any change in the status of Mr. Dahlstrom's bankruptcy proceeding that would lift the automatic stay and permit the court to consider Defendants' motion for fees and expenses against Mr. Dahlstrom.

         B. The Court's Order to Show Cause Concerning Mr. Pope

         In response to the court's order to show cause, Defendants assert that the court has the authority to impose sanctions in the form of an award of fees against Mr. Dahlstrom's attorney, Mr. Pope, under (1) Federal Rule of Civil Procedure 11(b), (2) 28 U.S.C. § 1927, and (3) the court's inherent authority to levy sanctions. (Def. OSC Resp. at 3-5.) Mr. Pope opposes the imposition of any ...


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