Reply in Further Support of the United States' Motion for Entry of Judgment — Docklight Brands (Document 23)

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Reply in Further Support of the United States' Motion for Entry of Judgment, filed March 8, 2024 as Document 23 in United States of America ex rel. SideSolve LLC v. Docklight Brands, Inc., Case No. 22-cv-1371-JNW, in the U.S. District Court for the Western District of Washington at Seattle. The United States states that Docklight acknowledges the United States is entitled to payment and does not dispute a valid False Claims Act settlement agreement. It argues that Burford abstention does not apply, that the Court should exercise its jurisdiction and enter judgment in the amount of $989,438.00, and that the request to stay should be denied. It points to Docklight's waiver of the 30-day execution of judgment provision in the agreement. It is signed s/ Matt Waldrop and certifies 2,238 words.

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“Reply in Further Support of the United States' Motion for Entry of Judgment — Docklight Brands (Document 23).” Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/court-filing-w-d-wash-no-2-22-cv-01371-dkt-23-w-d-wash-4ea3eb228e/, SHA-256 3914e1164a94dcc132afb4d7da53ec8815556bcc9ae0db6349687165ef904cc1.

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Case 2:22-cv-01371-JNW Document 23 Filed 03/08/24 Page 1 of 9

1 The Honorable Jamal N. Whitehead

6 UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF WASHINGTON
7 AT SEATTLE

9
UNITED STATES OF AMERICA, ex rel. Case No. 22-cv-1371-JNW
10 SIDESOLVE LLC,
Noted for Consideration on:
11 Plaintiff,
March 8, 2024
v.
12

13 DOCKLIGHT BRANDS, INC.,

14 Defendant.

15
REPLY IN FURTHER SUPPORT OF
16 THE UNITED STATES’ MOTION FOR ENTRY OF JUDGMENT

17 Docklight acknowledges that the United States is entitled to payment and does not dispute that

18 the parties have negotiated a valid False Claims Act (FCA) settlement agreement that resolves the

19 federal claims pending before this Court. Dkt. 22 at 1, 3. In opposing entry of a judgment consistent

20 with that agreement, Docklight instead requests that the Court dismiss or stay this civil action based

21 on Burford 1 abstention and principles of comity. Id.

23 1
Burford v. Sun Oil Co., 319 U.S. 315 (1943).

REPLY IN FURTHER SUPPORT OF UNITED STATES ATTORNEY
700 STEWART STREET, SUITE 5220
MOTION FOR ENTRY OF JUDGMENT - 1
SEATTLE, WASHINGTON 98101
CASE NO. 22-cv-1371-JNW (206) 553-7970
Case 2:22-cv-01371-JNW Document 23 Filed 03/08/24 Page 2 of 9

1 Granting Docklight’s request forces the United States out of the judicial forum the parties

2 agreed to and requires the United States to seek payment as a creditor in a recently filed Washington

3 State Superior Court receivership proceeding.

4 As will be shown below, the Court should reject this request, exercise its jurisdiction, and enter

5 judgment for the United States in the amount of $989,438.00 because Burford abstention does not

6 apply in this case.

7 I. ARGUMENT

8 A. The Court has authority and should enter judgment in favor of the United
States.
9
As explained in the United States’ Motion, “it is . . . well settled in the usual litigation context
10
that courts have inherent power summarily to enforce a settlement agreement with respect to an action
11
pending before it[.]” Dacanay v. Mendoza, 573 F.2d 1075, 1078 (9th Cir. 1978); Gonzalez v. Compass
12
Vision, Inc., No. 07cv1951 AJB (WMC), 2013 WL 6158987, at *1 (S.D. Cal. Nov. 25, 2013). “The
13
authority of a trial court to enter a judgment enforcing a settlement agreement has as its foundation
14
the policy favoring the amicable adjustment of disputes and the concomitant avoidance of costly and
15
time consuming litigation.” Dacanay, 573 F.2d at 1078. Enforcement requires a complete settlement
16
agreement agreed to by both parties. Compass Vision, Inc., 2013 WL 6158987, at *1 (citing Maynard
17
v. City of San Jose, 37 F.3d 1396, 1401 (9th Cir. 1994)).
18
Docklight does not dispute that the Court has authority to enter judgment in favor of the United
19
States based on the terms of the parties’ FCA settlement agreement. Under that agreement, Docklight
20
consented to the United States District Court for the Western District of Washington as the exclusive
21
venue for any dispute over the agreement. See Dkt. 20-2 at ¶ 21.
22
Accordingly, the Court should enter judgment in favor of the United States.
23

REPLY IN FURTHER SUPPORT OF UNITED STATES ATTORNEY
700 STEWART STREET, SUITE 5220
MOTION FOR ENTRY OF JUDGMENT - 2
SEATTLE, WASHINGTON 98101
CASE NO. 22-cv-1371-JNW (206) 553-7970
Case 2:22-cv-01371-JNW Document 23 Filed 03/08/24 Page 3 of 9

1 B. Burford abstention does not apply.

2 To get around its agreed-upon commitment to pay the United States, and its consent to this

3 federal forum, Docklight asks the Court to exercise its discretion and dismiss or stay this civil action

4 under the Burford abstention doctrine because of its recently-filed state court receivership proceeding.

5 Dkt. 22 at 2-3.

6 The Court should reject this invitation as “[a]bstention from the exercise of federal jurisdiction

7 ‘is the exception, not the rule[.]’” Knudsen Corp. v. Nevada State Dairy Com’n, 676 F.2d 374, 376

8 (9th Cir. 1982) (quoting Colorado River Conservation Dist. v. United States, 424 U.S. 800, 813

9 (1976)). “[O]rdinarily a federal court must decide cases properly before it[.]” Colorado River, 424

10 U.S. at 813. “Burford abstention is designed ‘to protect[] complex state administrative processes from

11 undue federal influence.’” Blumenkron v. Multnomah Cnty., 91 F.4th 1303, 1312 (9th Cir. 2024)

12 (quoting Poulos v. Caesar’s World, Inc., 379 F.3d 654, 671 (9th Cir. 2004)).

13 Application of Burford 2 abstention in the Ninth Circuit requires Docklight to establish each of

14 the following:

15 (1) that the state has chosen to concentrate suits challenging the actions of the agency
involved in a particular court;
16
(2) that federal issues could not be separated easily from complicated state law issues with
17 respect to which the state courts might have special competence; and

18 (3) that federal review might disrupt state efforts to establish a coherent policy.

19
Id. (internal quotation marks and citation omitted).
20

21 2
The posture of this case as compared to Burford also shows why abstention is not appropriate. This case involves the
United States, as a party, exercising its police powers through enforcement of a federal statutory scheme combatting fraud.
22 Burford involved litigation between private parties, with jurisdiction based solely on diversity. See 319 U.S. at 316
(summarizing the litigation as a private party, through diversity jurisdiction, challenging a complex state regulatory scheme
enforced by the Texas Railroad Commission).
23

REPLY IN FURTHER SUPPORT OF UNITED STATES ATTORNEY
700 STEWART STREET, SUITE 5220
MOTION FOR ENTRY OF JUDGMENT - 3
SEATTLE, WASHINGTON 98101
CASE NO. 22-cv-1371-JNW (206) 553-7970
Case 2:22-cv-01371-JNW Document 23 Filed 03/08/24 Page 4 of 9

1 As will be shown below, Docklight has not shown why Burford abstention applies to this

2 federal False Claims Act litigation. Accordingly, the Motion should be granted, and judgment

3 entered in favor of the United States.

4 1. Washington has not created a complex regulatory scheme for
receiverships.
5
The Court should decline to abstain because there is no indication that Washington has chosen
6
to concentrate general receivership suits in a particular court or created a complex regulatory scheme
7
to address general receivership actions. Compare Stirling Hort, LLC v. Industrial Ventilation, Inc.,
8
No. C22-1155-JCC, 2023 WL 3866702, at *2 (W.D. Wash. June 7, 2023) (finding Burford abstention
9
appropriate because Washington has “enacted a comprehensive regulatory scheme to manage” state
10
cannabis sales) with United States v. Bayley, No. 3:20-cv-05867-DGE, 2022 WL 770292, at *4-*5
11
(W.D. Wash. Jan. 10, 2022) (declining to abstain under Burford because Clean Water Act enforcement
12
actions “are not concentrated in a particular state court,” and are “routinely brought and adjudicated
13
in U.S. district courts”).
14
The district court’s approach in Tis v. Waucpaca Elevator Company, Incorporated, is
15
instructive on how the Court should proceed in this instance. In Tis, a defendant moved to stay/dismiss
16
the federal court action on Burfurd abstention grounds because it had subsequently entered state court
17
receivership proceedings voluntarily. No. 7:21-cv-200-BO, 2022 WL 3590318, at *1-*2 (E.D.N.C.
18
Aug. 22, 2022). The district court denied the motion, finding that Burford abstention was not
19
appropriate because the state court receivership order was not binding on the federal court, the federal
20
court case preceded the state receivership action, and there was no evidence the issues before the
21
district court were “intertwined or entangled” with the receivership action. Id.
22

REPLY IN FURTHER SUPPORT OF UNITED STATES ATTORNEY
700 STEWART STREET, SUITE 5220
MOTION FOR ENTRY OF JUDGMENT - 4
SEATTLE, WASHINGTON 98101
CASE NO. 22-cv-1371-JNW (206) 553-7970
Case 2:22-cv-01371-JNW Document 23 Filed 03/08/24 Page 5 of 9

1 Here, Docklight has not explained how Washington’s general receivership process works, or

2 why it is the kind of “complex state administrative process” that would require application of “an

3 extraordinary and narrow exception to the general rule that a federal court should adjudicate cases

4 otherwise properly before it.” Blumenkron, 91 F.4th at 1311-12. Instead, like the district court in Tis,

5 this Court can—and should—continue to exercise its jurisdiction over this first-filed federal FCA

6 civil action and enter a judgment consistent with the parties’ settlement agreement, especially when,

7 like the defendant in Tis, Docklight voluntarily entered into this state receivership proceeding. Tis,

8 2022 WL 3590318, at *2.

9 Accordingly, the Court should grant the Motion and enter judgment in favor of the United

10 States.

11 2. The federal issue is easily separable.

12 Burford abstention is also inappropriate because this Court can easily decide this dispute

13 without impacting Docklight’s state receivership proceeding. “Burford abstention is designed to limit

14 federal interference with the development of state policy. It is justified where the issues sought to be

15 adjudicated in federal court are primarily questions regarding that state's laws.” Tucker v. First

16 Maryland Sav. & Loan, Inc., 942 F.2d 1401, 1407 (9th Cir. 1991).

17 Here, the settlement agreement between the parties is governed by “the laws of the United

18 States,” involves the United States directly, and provides that this Court retains “exclusive

19 jurisdiction” and be the exclusive “venue for any dispute relating to” the agreement. Dkt. 20-2 at ¶ 21.

20 The Court is simply being asked to enter a judgment consistent with the agreement reached by the

21 parties.

22 This task is easily separated from Washington’s general receivership process, especially when

23 Docklight has consented to this Court’s jurisdiction. See Southern California Edison Co. v. Lynch, 307

REPLY IN FURTHER SUPPORT OF UNITED STATES ATTORNEY
700 STEWART STREET, SUITE 5220
MOTION FOR ENTRY OF JUDGMENT - 5
SEATTLE, WASHINGTON 98101
CASE NO. 22-cv-1371-JNW (206) 553-7970
Case 2:22-cv-01371-JNW Document 23 Filed 03/08/24 Page 6 of 9

1 F.3d 794, 806 (9th Cir. 2002) (declining to apply Burford abstention because the plaintiff had

2 “expressly waived any abstention defense . . . and consented to the Stipulated Judgment” keeping the

3 matter in federal court).

4 Again, Docklight cannot point to any decision that holds Burford abstention is appropriate

5 simply because there is a pending state court receivership proceeding. Instead, Docklight relies on

6 inapposite cases that present unique factual situations to support its improper request that the Court

7 abstain in this matter. The critical distinguishing factor in all of these cases is that they involve an

8 insolvent insurance company in state receivership proceedings. See Riley v. Simmons, 45 F.3d 764,

9 771 (3d Cir. 1995) (“Burford abstention has particular relevance to claims arising in the course of state

10 regulation of insolvent insurance companies.”).

11 First, Docklight incorrectly relies on AMS Mktg. v. Fidelity Sec. Life Ins. Co., 830 F. Supp.

12 1284 (D. Ariz. 1993), which involved Arizona’s statutory scheme for the regulation of insurance

13 companies, a regulatory power that is expressly given to the states under the federal McCarran-

14 Ferguson Act. Id. at 1287 (“The handling of the affairs of insolvent insurance companies is generally

15 the responsibilities of the states and federal courts have been reluctant to interfere in state receivership

16 proceedings.”). Additionally, AMS did not involve any issues of federal law. Id.

17 This same unique fact pattern is also present in Navajo Life Insurance Company by Gallagher

18 v. Fidelity and Deposit Company of Maryland. In Navajo Life, the district court found Burford

19 abstention appropriate because “Arizona has enacted a detailed regulatory scheme for the regulation

20 of the insurance industry.” 807 F. Supp. 1485, 1489 (D. Ariz. 1992). Arizona law gave its state courts

21 “original jurisdiction over insurance liquidation proceedings,” which made abstention appropriate in

22 that unique instance. Id.

REPLY IN FURTHER SUPPORT OF UNITED STATES ATTORNEY
700 STEWART STREET, SUITE 5220
MOTION FOR ENTRY OF JUDGMENT - 6
SEATTLE, WASHINGTON 98101
CASE NO. 22-cv-1371-JNW (206) 553-7970
Case 2:22-cv-01371-JNW Document 23 Filed 03/08/24 Page 7 of 9

1 Finally, Docklight relies on Idaho, ex rel. Soward v. United States, but that case also involved

2 the state’s exclusive regulation of insurance companies. 858 F.2d 445, 446-47 (9th Cir. 1988).

3 Washington has a similar regulatory scheme for insolvent insurance companies. 3 This scheme does

4 not exist for general receivership actions, which are governed by a different RCW title.

5 None of these cases relied on by Docklight are applicable to the issue before the Court, which

6 is simply whether the United States, as a party exercising its police powers to combat fraud on the

7 government, is entitled to entry of a judgment under the terms of the parties’ FCA settlement

8 agreement.

9 Accordingly, the Court should grant the Motion and enter judgment in favor of the United

10 States.

11 3. Entry of a judgment will not disrupt Washington’s efforts to establish a
coherent receivership policy.
12
Entry of a judgment in favor of the United States would also not disrupt Washington’s coherent
13
policy around receiverships. Docklight’s conclusory statement that entry of a judgment will “flip the
14
orderly liquidation of Docklight on its head and potentially abrogate the state law receivership
15
process,” dkt. 22 at 3, is insufficient to explain why Burford abstention is appropriate here. See
16
Corvallis Hospitality, LLC v. Wilmington Trust, No. 6:22-cv-00024-MC, 2022 WL 1969498, at *2 (D.
17
Or. June 6, 2022) (rejecting request to apply Burford abstention because plaintiff “has not shown any
18
state efforts to implement a coherent state-wide policy”).
19

21 3
See https://www.insurance.wa.gov/companies-receivership
22

REPLY IN FURTHER SUPPORT OF UNITED STATES ATTORNEY
700 STEWART STREET, SUITE 5220
MOTION FOR ENTRY OF JUDGMENT - 7
SEATTLE, WASHINGTON 98101
CASE NO. 22-cv-1371-JNW (206) 553-7970
Case 2:22-cv-01371-JNW Document 23 Filed 03/08/24 Page 8 of 9

1 Here, entry of a judgment by the Court will not interfere with Docklight’s state receivership

2 action because the United States must seek further action to enforce payment of the judgment.

3 Docklight cannot provide the Court with any concrete example why entry of a judgment in this case

4 will impact Washington’s policy on receiverships.

5 Accordingly, the Court should grant the Motion and enter judgment in favor of the United

6 States.

7 C. The Court should deny Docklight’s request to stay these proceedings.

8 The Court should also reject Docklight’s last-ditch attempt stay the United States’ ability to

9 collect on a judgment until the state receivership proceeding is concluded. Dkt. 22 at 3. Docklight

10 offers Tucker v. First Maryland Savings & Loan, Inc. for the proposition that a stay is appropriate. Id.

11 (citing 942 F.2d 1401, 1405 (9th Cir. 1991)). However, that court noted in passing that the district

12 court likely erred by staying the case, because, if Burford abstention applies, then dismissal is the

13 appropriate remedy. Id. at 1405 n.1. Tucker does not stand for the proposition that Burford abstention

14 requires this Court to stay proceedings.

15 Docklight offers no other justification or case law supporting its conclusory request to stay

16 these proceedings if judgment is entered in favor of the United States. Docklight states that

17 Washington’s receivership statute provides for a general stay but concedes that the stay provision does

18 not apply here because it expressly exempts the government’s exercise of police powers, like the

19 United States’ actions under the FCA in this case. Dkt. 22 at 2; see also In re Universal Life Church,

20 Inc., 128 F.3d 1294, 1298 (9th Cir. 1997) (noting that “a civil suit brought pursuant to the Federal

21 False Claims Act is sufficient to satisfy” the fraud exception to the Bankruptcy Act’s automatic stay

22 provisions).

REPLY IN FURTHER SUPPORT OF UNITED STATES ATTORNEY
700 STEWART STREET, SUITE 5220
MOTION FOR ENTRY OF JUDGMENT - 8
SEATTLE, WASHINGTON 98101
CASE NO. 22-cv-1371-JNW (206) 553-7970
Case 2:22-cv-01371-JNW Document 23 Filed 03/08/24 Page 9 of 9

1 Here again, reference to the parties’ agreement is instructive as to why a stay is not appropriate

2 in this case. Docklight explicitly waived the 30-day execution of judgment provision and the 30-day

3 demand for payment requirement. Dkt. 20-2 at ¶ 18. Docklight agreed that the United States “may

4 immediately enforce payment of the full amount due under the Agreement . . . via writ of garnishment

5 or any other legal process.” Id. Based on Docklight’s previous commitments to resolve this matter

6 through settlement, its request to stay proceedings should be rejected by the Court.

7 Accordingly, the Court should grant the Motion and enter judgment in favor of the United

8 States.

9 II. CONCLUSION

10 Under the terms of the Settlement Agreement, the United States requests that the Court enter

11 judgment in favor of the United States in the amount of $989,438.00.

12 Dated this 8th day of March, 2024.

13
TESSA M. GORMAN
14 United States Attorney

15 s/ Matt Waldrop_____________
MATT WALDROP, GA#349571
16 Assistant United States Attorney
United States Attorney’s Office
17 700 Stewart Street, Suite 5220
Seattle, Washington 98101-1271
18 Phone: 206-553-7970
Fax: 206-553-4067
19
Attorneys for the United States of America
20
I certify that this memorandum contains 2,238 words, in
21 compliance with the Local Civil Rules.

REPLY IN FURTHER SUPPORT OF UNITED STATES ATTORNEY
700 STEWART STREET, SUITE 5220
MOTION FOR ENTRY OF JUDGMENT - 9
SEATTLE, WASHINGTON 98101
CASE NO. 22-cv-1371-JNW (206) 553-7970

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