Third party defendant’s motion to dismiss for lack of subject matter jurisdiction is denied. The plaintiff sued the government in the COFC for copyright infringement. The plaintiff also sued a contractor that had given the government the copyrighted information in a state court action. The contractor was joined as a third party defendant in the COFC action. The contractor moved to dismiss the COFC suit, contending that it was barred by 28 U.S.C. 1500, which precludes dual litigation against the government and its proxies in multiple jurisdictions. The contractor claimed that, as a contractor, it acted as a proxy for the government. Because the plaintiff had sued the government’s proxy in state court, the COFC action was precluded by § 1500. The court rejected the contractor’s argument, reasoning that a government contractor merely provides goods and services to the government; it does not act under the authority of or as a proxy for the government. Thus, a suit against a contractor does not trigger § 1500.
ASM Research had a contract with the Army to provide a platform for electronic veterinary records. ASM subcontracted with HEALTHeSTATE, LLC (HeS) to provide software services. As part of that subcontract, HeS developed a software product called Remote Online Veterinary Records (ROVR). The subcontract provided that ROVR was HeS’s proprietary program and that ASM did not have a license to use the program.
HeS’s subcontract with ASM expired in 2014. Shortly thereafter, ASM transferred the ROVR source code to the Defense Health Agency (DHA). At the same time, DHA awarded ASM a sole-source contract for continued maintenance and technical support for ROVR. HeS contacted DHA to inform the agency of the company’s proprietary rights in the ROVR software. DHA admitted to uncertainty concerning ownership, but it continued to use the software.
HeS sued ASM in Virginia state court, asserting, among other causes of action, violation of the Virginia Trade Secrets Act, conversion, fraud, unjust enrichment, and tortious interference. Over a year later, HeS sued the United States in the Court of Federal Claims, alleging that the government infringed on its copyright in the ROVR software.
ASM joined the COFC action as a third party defendant and moved to dismiss the COFC action for lack of subject matter jurisdiction. ASM claimed that HeS’s suit was barred by 28 U.S.C. § 1500, which precludes the court from hearing a suit against the government if the plaintiff has already filed suit in another jurisdiction against a person acting for or under the authority of the government. ASM claimed that as a contractor for the government, it acted under the authority of the United States. Because HeS had already sued ASM in Virginia state court, it could not sue the government in the COFC.
The court noted that dismissal under 28 U.S. § 1500 is compulsory when: (1) the defendant in two lawsuit is either the United States or a party acting under the authority of the United States, and (2) the claim pending before the COFC shares the same operative facts as the claim against the government proxy elsewhere.
The court examined whether ASM was acting under the authority of the government. The court reviewed the few cases that had considered the issue and found that an entity acts under the authority of the government if they are a government agency, a government-chartered corporation, or a government official acting within their official or individual capacity. In all of these instances the party’s role as a proxy for the government had been incidental to a formal grant of power from the government that authorized them to wield government authority.
ASM did not fall into this category. ASM was simply a private corporation that provided a good or service to the government. ASM had an agreement with the government that may have conferred liability on the government, but it did not permit ASM to exercise the authority of the United States. The contract did not give ASM the ability to wield authority vested in the government and was not itself a source of federal authority.
ASM contended that in its COFC complaint, HeS had alleged the government and those acting with its authorization and consent had infringed on the ROVR copyright. ASM argued that in alleging this, HeS had conceded that ASM was acting under the authority of the United States.
The court was persuaded reasoning that preclusion under 28 U.S.C. § 1500 requires that the government be subject to suit in multiple fora for a based on the same wrong. Here, the suit against ASM in state court did not allege copyright infringement. Indeed, the court examined all the state court causes of action—e.g., violation of Trade Secrets Act, conversion, fraud, tortious interference—and found that none of those claims were alleged to be against the United States or one its proxies. In fact, for each claim, HeS alleged that ASM had engaged in malfeasance in its corporate capacity, not under the authority of the government.
The court concluded by noting that Congress had enacted 28 U.S.C. § 1500 to effectively apply the principles of res judicata to dual cases against the United States. The court reasoned that denying ASM’s motion to dismiss was consistent with the doctrine of res judicata. Res judicata precludes repetitive suits involving the same cause of action between the same parties. The doctrine does not apply when the parties are distinct or the suit seeks recovery for difference causes of action. Here, a judgement against ASM in Virginia would be different than judgment against the government in the copyright infringement suit. The government was not in danger of double liability, and the parties were distinct entities that had acted independently.
HeS is represented by Bryan Steven Banes of Neel, Hooper, & Banes, PC. Third party defendant ASM is represented by Ranganath Sudarshan of Covington & Burling LLP. The government is represented by Alex Hanna, Scott Bolden, Joseph Hunt, and Gary Hausken of the Department of Justice.
