Clinton v. Steel Warehouse Co LLC

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF INDIANA

SOUTH BEND DIVISION

KEVIN CLINTON,

Plaintiff,

v. CAUSE NO. 3:22-CV-223 DRL-MGG

STEEL WAREHOUSE CO., LLC et al.,

Defendants.

OPINION AND ORDER

Kevin Clinton, a prisoner without a lawyer, is serving a 71-month sentence for

embezzling more than $2,000,000 from his employer, Steel Warehouse, Inc. United States

v. Clinton, No. 3:18-cr-136-RLM (N.D. Ind. sentenced Oct. 24, 2019). Now, he has filed a

civil complaint against the company, its owners, and several employees, alleging they

defrauded the government by fraudulently applying for and receiving funding through

the federal New Market Tax Credit program. ECF 1. This case cannot proceed because

Mr. Clinton cannot bring a qui tam suit on behalf of the government without a lawyer,

and he does not have standing to sue for this alleged injury.

“A document filed pro se is to be liberally construed, and a pro se complaint,

however inartfully pleaded, must be held to less stringent standards than formal

pleadings drafted by lawyers.” Erickson v. Pardus, 551 U.S. 89, 94 (2007) (quotation marks

and citations omitted). Under 28 U.S.C. § 1915A, the court still must review the merits of

a prisoner complaint and dismiss it if the action is frivolous or malicious, fails to state a

claim upon which relief may be granted, or seeks monetary relief against a defendant

who is immune from such relief.

Mr. Clinton’s complaint lays out the details of the alleged fraudulent scheme, but

it is unnecessary to repeat them here. It appears he is attempting to bring a qui tam action,

in which a private party asserts a claim alleging the defendant committed fraud on the

government:

A qui tam action is brought by a private party, called the “relator,” on behalf

of the government. If a qui tam suit under the False Claims Act succeeds,

the relator obtains a reward of 25 to 30 percent of the judgment or

settlement. 31 U.S.C. § 3730(d)(2). The government gets the rest. Because

the government thus has the primary stake in the suit, it is empowered to

take it over and prosecute it itself. The complaint is initially filed under seal

and served only on the government, which then has 60 days in which to

inform the district court that it plans to take over the prosecution of the

suit. § 3730(b)(4).

U.S. ex rel. Lu v. Ou, 368 F.3d 773, 774 (7th Cir. 2004), abrogated on other grounds by U.S. ex

rel. Eisenstein v. City of New York, 556 U.S. 928 (2009). Only an attorney may file a qui tam

lawsuit. “[A] pro se relator cannot prosecute a qui tam action, because he is acting as an

attorney for the government.” Id. at 775; see also Georgakis v. Illinois State Univ., 722 F.3d

1075, 1077 (7th Cir. 2013) (“[T]o maintain a suit on behalf of the government, the relator

(as the qui tam plaintiff is termed) has to be either licensed as a lawyer or represented by

a lawyer . . .. A nonlawyer can’t handle a case on behalf of anyone except himself.”).

Mr. Clinton may not bring this lawsuit about alleged fraud against the government as a

qui tam suit under the False Claims Act.

Without the possibility of a federal claim under the False Claims Act, there is no

basis for federal jurisdiction over this case. Federal courts are courts of limited

jurisdiction, which means that there are specific requirements that must exist before a

federal court may hear a case. Hart v. FedEx Ground Package Sys. Inc., 457 F.3d 675, 679

(7th Cir. 2006). Without a federal question to base jurisdiction on, see 28 U.S.C. § 1331,

Mr. Clinton must allege diversity jurisdiction, see 28 U.S.C. § 1332. Diversity jurisdiction

requires the plaintiff to be a citizen of a different state than the defendants and the amount

in controversy to exceed $75,000. Id. Here, Mr. Clinton makes no allegations concerning

his or the defendants’ citizenship.

It would be nonetheless futile to allow Mr. Clinton to amend his complaint to

allege diversity jurisdiction because he has no standing to bring this claim:

Our cases have established that the “irreducible constitutional minimum”

of standing consists of three elements. The plaintiff must have (1) suffered

an injury in fact, (2) that is fairly traceable to the challenged conduct of the

defendant, and (3) that is likely to be redressed by a favorable judicial

decision. The plaintiff, as the party invoking federal jurisdiction, bears the

burden of establishing these elements. Where, as here, a case is at the

pleading stage, the plaintiff must clearly allege facts demonstrating each

element.

Spokeo, Inc. v. Robins, 578 U.S. 330, 338 (2016) (quotation marks, citations and ellipsis

omitted). Here, Mr. Clinton has not suffered an injury in fact. He alleges he has been

injured because the defendants’ alleged $2 million fraud cancels out the more than $2

million he has paid in federal taxes. But being a taxpayer does not allow Mr. Clinton to

claim an injury from the misuse of government funds. “[T]axpayers have no direct,

personal interest in the money in the Treasury simply by virtue of having paid taxes[.]”

Laskowski v. Spellings, 546 F.3d 822, 825 (7th Cir. 2008); cf. Hein v. Freedom From Religion

Found., Inc., 551 U.S. 587, 593 (2007) (“It has long been established, however, that the

payment of taxes is generally not enough to establish standing to challenge an action

taken by the Federal Government. In light of the size of the federal budget, it is a complete

fiction to argue that an unconstitutional federal expenditure causes an individual federal

taxpayer any measurable economic harm.”). Therefore, even if diversity jurisdiction

exists, Mr. Clinton has not suffered a cognizable injury and cannot maintain this suit on

his own behalf.

“The usual standard in civil cases is to allow defective pleadings to be corrected,

especially in early stages, at least where amendment would not be futile.” Abu-Shawish v.

United States, 898 F.3d 726, 738 (7th Cir. 2018). However, “courts have broad discretion to

deny leave to amend where . . . the amendment would be futile.” Hukic v. Aurora Loan

Servs., 588 F.3d 420, 432 (7th Cir. 2009). Such is the case here.

For these reasons, this case is DISMISSED under 28 U.S.C. § 1915A.

SO ORDERED.

March 24, 2022 s/ Damon R. Leichty

Judge, United States District Court