Opinion
Case No. C-1-95-1016.
November 17, 1998
MEMORANDUM and ORDER
On July 21, 1998, the United States of America filed its complaint in this action. The United States asserted ten claims against Dynamics Corporation of America, Ellis Watts Company, and CTS Corporation (collectively, "Ellis Watts"). Four of those claims, Counts I through IV, arise under the False Claims Act, 31 U.S.C. §§ 3729 to 3733. The United States asserts the remaining six claims under common law. Specifically, pursuant to Counts V and VI, the United States asserts claims for payment by mistake. Pursuant to Counts VII and VIII, the government asserts claims for unjust enrichment, and, pursuant to Counts IX and X, it asserts breach of contract claims. This matter is now before the Court upon Ellis Watts' motion to dismiss Counts III through X, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.
1. Background
Relator Michael J. Klump initiated this action pursuant to 31 U.S.C. § 3730(b)(1), which permits a private person to assert claims under the False Claims Act on behalf of the United States. In this case, the United States elected to intervene pursuant to 31 U.S.C. § 3730(b)(2) and (4) and filed its complaint on July 21, 1998.
This action arises from two separate contracts: (1) a contract between Lockheed Martin Astronautics ("Lockheed") and the United States Air Force, F42600-89-6-1193, for the construction of 36 payload transporter trailers and (2) a contract between Eastern Computers, Inc. ("Eastern") and the United States Navy, N60921-94-C-A321, for the manufacture of a trailer to be used by the Naval Surface Warfare Center to house electronic equipment. Both Lockheed and Eastern entered into subcontracts with Ellis Watts, and the United States alleges that Ellis Watts failed to construct and manufacture the trailers in accordance with the specifications set forth in the contracts between Lockheed and Eastern, on the one hand, and the United States, on the other.
Pursuant to Counts III and IV of its complaint, the government asserts that Ellis Watts violated 31 U.S.C. § 3729(a)(2) by making false certifications to the United States concerning its compliance with the contracts' specifications in order to obtain payment. Pursuant to Counts V and VI, the United States asserts that it paid Ellis Watts by mistake and that Ellis Watts is liable to return the payment it received under its subcontracts with Lockheed and Eastern to the United States. Pursuant to Counts VII and VIII, the United States alleges that Ellis Watts was unjustly enriched by virtue of the payments it received for performing work under its subcontracts with Lockheed and Eastern. Pursuant to Counts IX and X, the government asserts that Ellis Watts breached contracts with the United States.
Ellis Watts moves for the dismissal of each of Counts III through X. Ellis Watts argues, specifically, that it made no certifications to the United States in order to obtain payment and that, accordingly, the United States has failed to state a claim against Ellis Watts under 31 U.S.C. § 3729(a)(2). Regarding Counts V through VIII, Ellis Watts notes that the United States made no direct payments to Ellis Watts and argues that, absent any such direct payments, the United States may not assert claims of payment by mistake or unjust enrichment against Ellis Watts. Finally, Ellis Watts contends that the United States' breach of contract claims, Counts IX and X, fail in light of the absence of a contract or privity of contract between the government and Ellis Watts. The United States concedes that it may not maintain breach of contract claims against Ellis Watts and accedes to the dismissal of Counts IX and X. The United States opposes Ellis Watts' motion to the extent that it addresses the claims set forth in Counts III through VIII of the government's complaint.
2. The Rule 12(b)(6) Standard
The purpose of Rule 12(b)(6) is to allow a defendant to test whether, as a matter of law, the plaintiff is entitled to legal relief if all the facts and allegations in the complaint are taken as true. See Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993) (citing Nishiyama v. Dickson County, 814 F.2d 277, 279 (6th Cir. 1987)). To that end, for purposes of a motion to dismiss under the Rule, the complaint must be construed in the light most favorable to the nonmoving party and its allegations taken as true. See Scheuer v. Rhodes, 416 U.S. 232 (1974);Miller v. Currie, 50 F.3d 373, 377 (6th Cir. 1995). To survive a motion to dismiss under Rule 12(b)(6), "a . . . complaint must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory." Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir. 1988) (citations and internal quotation marks omitted). The test for dismissal under Rule 12(b)(6), however, is a stringent one. "[A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Hartford Fire Insurance Co. v. California, 509 U.S. 764, 811 (1993) (quotingConley v. Gibson, 355 U.S. 41, 45-46 (1957)). See also Monette v. Electronic Data Systems Corp., 90 F.3d 1173, 1189 (6th Cir. 1996). Consequently, a complaint will not be dismissed pursuant to Rule 12(b)(6) unless no law supports the claim made, the facts alleged are insufficient to state a claim, or an insurmountable bar appears on the face of the complaint.
3. Analysis
A. Counts III and IV
In support of its claims under 31 U.S.C. § 3729(a)(2), Counts III and IV herein, the United States alleges that Ellis Watts made false certifications in order to obtain payment from the government. In opposition to Ellis Watts' motion, the United States concedes that Ellis Watts made no such certifications. Indeed, the parties agree that Ellis Watts made no certifications or statements of any kind to the government. The government contends, nevertheless, that Counts III and IV are not subject to dismissal, inasmuch as the government may be able to demonstrate that Ellis Watts caused others, presumably Lockheed and Eastern, to make false certifications to the United States.
The Court need not consider, at this time, whether the United States can state a claim against Ellis Watts under § 3729(a)(2) based upon certifications made to the United States by others. As Ellis Watts notes, the government has not asserted such a claim in its complaint in this matter. While the complaint may be amended, under appropriate circumstances, the Court must consider the claims actually asserted in ruling upon Ellis Watts' motion under Rule 12(b)(6). Because the United States has conceded that it cannot prove that Ellis Watts made certifications to the government, as it alleges in its complaint, the Court concludes that the United States can prove no set of facts that would entitle it to relief with regard to the claims set forth in Counts III and IV. Those claims are, therefore, DISMISSED, subject to a motion to amend the complaint to allege violations of 31 U.S.C. § 3729(a)(2) by virtue of Ellis Watts' actions vis-a-vis any certifications made to the United States by Lockheed, Eastern, or any other party.
B. Counts V and VI
In support of its motion to dismiss Counts V and VI, Ellis Watts argues that the common law does not recognize a claim for payment by mistake when the plaintiff has made no direct payment to the defendant. The parties agree that the United States has not made direct payment to Ellis Watts. The government contends, nevertheless, that it may maintain claims for payment by mistake in light of payments made to Ellis Watts by others, who were paid by the United States.
Another district court, when faced with a similar claim, responded as follows:
Generally, the mistake of payment theory is used to recover money from the payee, not from a third party to the payment. Therefore, . . . the government must present a theory that would allow this court to extend mistake of payment theory to cover third parties to the payment. Very few cases discuss this issue and none found allow this court to extend the theory of mistaken payment to the case at bar.United States v. Vector Corp., No. C 93-48, 1994 U.S. Dist. LEXIS 21330, *14 (N.D. Iowa April 14, 1994) (citing United States v. Systron-Donner Corp., 486 F.2d 249 (9th Cir. 1973);A.C. Davenport Son Co. v. United States, 538 F. Supp. 730 (N.D. Ill. 1982)). Ellis Watts relies upon the decision of theVector Corp. court in arguing for the dismissal of the United States' payment by mistake claims in this action.
In opposition to Ellis Watts' motion to dismiss the payment by mistake claims, the United States cites only the decision of the Ninth Circuit Court of Appeals in United States v. Mead, 426 F.2d 118 (9th Cir. 1970). The Vector Corp. court explicitly rejected that decision as a basis for recovery by the United States in a context similar to that underlying the unjust enrichment claims in this action. See Vector Corp., supra.
This Court has identified other support for the claims the United States asserts in Counts V and VI of its complaint, however. In LTV Education Systems, Inc. v. T.H. Bell, 862 F.2d 1168, 1175 (5th Cir. 1989), the Court of Appeals stated that
it is well established that the government, without the aid of a statute, may recover money it mistakenly, erroneously, or illegally paid from a party that received the funds without right. Moreover, the government is entitled to obtain repayment from a third party into whose hands the mistaken payments flowed where that party participated in and benefitted from the tainted transaction.Id. (citing United States v. Wurts, 303 U.S. 414 (1938);Mead, supra). The LTV Education Systems did not consider the idiosyncracies of the Mead case dispositive of its applicability outside its own context. Rather, the court concluded that the Mead decision stood for the general proposition that the United States may recover payments made by mistake from the hands of third parties into which they have flowed. The LTV Education Systems court articulated a requirement that the third party have participated in and benefitted from the tainted transaction.
In this case, the United States' allegations in support of Counts V and VI of its complaint satisfy the elements of the payment by mistake cause of action as it is clarified in LTV Education Systems. The Court finds no basis in the case law for a departure from the LTV Education Systems court's decision with regard to the breadth of the payment by mistake cause of action. Accordingly, the Court concludes that the United States has stated payment by mistake claims upon which relief may be granted. Ellis Watts' motion to dismiss those claims is DENIED.
C. Counts VII and VIII
Ellis Watts contends that the United States may not maintain unjust enrichment claims against it, inasmuch as the government did not make direct payments to Ellis Watts. The Court finds no such requirement in the case law concerning claims of unjust enrichment under Ohio law, which the parties apparently agree applies to the United States unjust enrichment claims in this action.
Ellis Watts relies upon General Acquisition, Inc. v. Gencorp Inc., 766 F. Supp. 1460, 1484 (S.D. Ohio 1990), in which Judge Kinneary of this Court set forth the elements of an unjust enrichment claim under Ohio law. Ellis Watts notes that the elements as set forth there include a requirement that the plaintiff have conferred a benefit upon the defendant. See id. Ellis Watts infers from that statement of the element that the plaintiff must demonstrate that it has conferred a benefit directly upon the defendant. Inasmuch as the United States did not make payment directly to Ellis Watts, Ellis Watts contends that the United States may not maintain an unjust enrichment claim against it.
Ellis Watts accords too much weight to the absence of a qualifier in the General Acquisition decision, and the decisions of the Ohio courts upon which it is based, that indicates that the benefit may be directly or indirectly conferred. In essence, Ellis Watts would have the Court add a requirement that the benefit have been directly conferred by the plaintiff upon the defendant. The Court declines to do so in light of the absence of authority for the proposition that the requirement is so limited under Ohio law and in light of an alternative statement of the elements of the unjust enrichment claim that is not subject to the interpretation urged by Ellis Watts.
The Court finds no requirement in Ohio law that the benefit underlying an unjust enrichment claim have been directly conferred by the plaintiff upon the defendant. In Liberty Mutual Insurance Co. v. Industrial Commission of Ohio, 40 Ohio St.3d 109, 111 (1988), the Ohio Supreme Court stated that the cause of action lies whenever a party retains money that, in justice and equity, belongs to another. That statement of the law leaves no room for the additional requirement Ellis Watts would have the Court impose upon the United States in this action. The government has alleged that Ellis Watts has retained money that, in justice and equity, belongs to the United States. It has, accordingly, stated claims of unjust enrichment under Ohio law. Ellis Watts' motion to dismiss those claims is DENIED.
4. Conclusion
For the foregoing reasons, Ellis Watts' motion to dismiss (Doc. 24) is hereby GRANTED, in part, and DENIED, in part. Counts III, IV, IX, and X of the United States' complaint (Doc. 10) are hereby DISMISSED. IT IS SO ORDERED.