Opinion
Case No. 1-:95-CV-970.
March 11, 2005
The Defendants made several motions for judgment as a matter of law after the Relators rested their case. These motions were made pursuant to Rule 50(a) of the Federal Rules of Civil Procedure.
The Defendants moved for judgment as a matter of law on all false claims counts, on Relators damage allegations, on Roger Sanders' retaliation allegations and on certain paragraphs in Relators' Second Amended Complaint. The motion on "all false claims counts" is in regard to a requirement that a false claim be submitted to the government and is in regard to the materiality of the claims presented by the Relators.
The Motions were initially made and briefed by all Parties on the record on March 4, 2005. Subsequently, the Defendants filed written briefs on the false claims counts (Doc. #669) and damages (Doc. #670) motions. The Relators responded in writing to the false claims motion. (Doc. #673) and the Defendants replied (Doc. #674). Following further oral briefing on the record on March 7, 2005, the Defendants filed a supplemental reply. (Doc. #675.)
The Motions were fully briefed and the Court entered its opinion in summary fashion on the record on March 7, 2005, so that the Trial could proceed. This Entry more fully sets forth the Court's opinion.
The branch of the Motion on the false claims act counts that challenges whether evidence was presented that a false claim was submitted to the Government is dispositive of a significant portion of the Relators' Second Amended Complaint. Therefore, it will be addressed first herein.
THE PRESENTATION OF A FALSE CLAIM TO THE GOVERNMENT
The Defendants argue that the Relators are required by the False Claims Act (the "FCA") to show that a false or fraudulent claim was submitted by Bath or Ingalls to the Government and that the Relators have not presented evidence of such. Bath and Ingalls were the prime contractors in this case who had contracts directly with the government. The Defendants in this case were subcontractors to Bath and Ingalls.
Relators first argued that they need not present invoices from Bath to the Government because the invoices are "totally irrelevant." They are irrelevant, according to the Relators, because the Court should focus, not upon the claim being presented to the United States, but upon the claims being made under the contracts involving the subcontractors who are the Defendants in this case. In other words, the Relators first argued that they do not have to show that there was a false claim submitted to the Government. They only have to show that Government money was eventually used to pay the subcontractors who submitted allegedly false claims.
Relators later argued that there was evidence presented to the jury that a false or fraudulent claim had been submitted to the Government by Bath. This argument was based upon an "implied certification" theory of liability.
Defendants' Rule 50(a) Motion regarding the presentation of a false claim to the Government centers upon certain sections and subsections of the FCA. Those relevant sections and subsections will first be set forth followed by an analysis of Defendants' Motion.
RELEVANT SECTIONS OF THE FCA
Section 3729(a) of the FCA provides that,
Any person who —
(1) knowingly presents, or causes to be presented, to an officer or employee of the United States Government or a member of the Armed Forces of the United States a false or fraudulent claim for payment or approval;
(2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government;
(3) conspires to defraud the Government by getting a false or fraudulent claim allowed or paid;
. . .
is liable to the United States Government for a civil penalty . . .
Section 3729(c) of the FCA provides that,
For purposes of this section, "claim" includes any request or demand, whether under a contract or otherwise, for money or property which is made to a contractor, grantee, or other recipient if the United States Government provides any portion of the money or property which is requested or demanded, or if the Government will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded.
Having set forth the relevant sections and subsections of the FCA, the analysis turns to the Defendants' Rule 50(a) Motion regarding the presentation of a false claim to the Government.
ANALYSIS OF THE MOTION REGARDING THE PRESENTATION OF A FALSE CLAIM
The Defendants argue and the Relators agree that liability under Section 3729(a)(1) ("subsection (a)(1)") requires proof that a false or fraudulent claim has been submitted "to an officer or employee of the United States Government or a member of the Armed Forces of the United States." However, the Parties disagree with regard to whether Section 3729(a)(2) ("subsection (a)(2)") requires proof that a false or fraudulent claim has been submitted to the Government. The Defendants argue that liability under subsection (a)(2) requires proof that a false or fraudulent claim has been submitted to the Government and the Relators argue that it does not.
Current Caselaw
At least nine Federal Circuit Courts have determined that a defendant must, in claims based upon subsections (a)(1) and (a)(2) of the FCA, show that a false or fraudulent claim was submitted to the Government. In addition, no caselaw has been identified nor has any been found that would support the proposition that a violation of subsection (a)(2) of the FCA does not require evidence of the submission of a false or fraudulent claim to the Government. A brief summary of the most recent, relevant Order of each of the nine Federal Circuit Courts follows.
The First Circuit has held that "the statute attaches liability not to the underlying fraudulent activity or to the government's wrongful payment, but to the `claim for payment.'" United States v. Rivera, 55 F.3d 703, 709 (1st Cir. 1995). In Rivera, the First Circuit was reviewing the appeal of a motion for summary judgment in a case brought pursuant to 31 U.S.C. §§ 3729- 3733 wherein the Government had asserted that the defendants caused a bank to submit an inflated claim for payment to the Government. Id. at 706. The First Circuit found that the violation of the FCA by the defendants was committed when the bank presented its claim to the Government. Id. at 707.
The Third Circuit has held that, "In order to prove a claim under § 3729(a)(2), a plaintiff must also show that the defendant made or used (or caused someone else to make or use) a false record in order to cause the false claim to be actually paid or approved." United States v. Schmidt, 386 F.3d 235, 243 (3rd Cir. 2004) (emphasis added). In Schmidt, the Third Circuit was reviewing an appeal of the dismissal of an FCA claim brought pursuant to subsections (a)(1) and (a)(2). Id. at 237. The FCA action was brought against a manufacturer of orthopedic implants who allegedly caused a hospital to submit a false or fraudulent claim to the government for Medicare reimbursement. Id. at 237. The Third Circuit, in a later case, again confirmed that, for liability to attach under subsection (a)(2), a false or fraudulent claim for payment must be submitted to the Government. United States ex rel. Quinn v. Omnicare, 382 F.3d 432, 438 (3rd Cir. 2004).
The Fourth Circuit has found that the FCA "at least requires the presence of a claim — call upon the government fisc — for liability to attach." Harrison v. Westinghouse Savannah River Company 176 F.3d 776, 785 (4th Cir. 1999). Said another way, the FCA attaches liability not to the underlying fraudulent activity or to the government's payment, but to the `claim for payment.' Id. at 785. In Harrison, the Fourth Circuit was reviewing an appeal of the dismissal of a charge, among others, that a false statement by a subcontractor resulted in a false claim to the government by a prime contractor. Id. at 793.
The Fifth Circuit has held that, "Although § 3729(a)(2) prohibits the submission of a false record or statement, it does so only when the submission of the record or statement was done in an attempt to get a false claim paid. There is no liability under this Act for a false statement unless it is used to get [a] false claim paid." United States v. Southland Management Corp., 326 F.3d 669, 675 (5th Cir. 2003). In Southland, the Fifth Circuit was reviewing the appeal of a summary judgment. Id. at 669.
The Sixth Circuit, in affirming the dismissal of a relator's FCA claim, indicated as a basis for dismissal that "he is unable to identify a specific claim submitted directly to the United States by a prime contractor . . ." who incorporated the subcontractor's work into the finished product that was then sold to the government. Yuhasz v. Brush Wellman, 341 F.3d 559, 564-65 (6th Cir. 2003). While the underlying claim was brought pursuant to subsection (a)(1), the Court referred to both Sections 3729(a)(1) and (a)(2) of the FCA when rendering its opinion and the Sixth Circuit was addressing a claim against a subcontractor.
In a very recent opinion, the Sixth Circuit has said that liability for an allegation brought pursuant to subsection (a)(2) "attaches only where the claim itself is false or fraudulent and the false record or statement is being used "to get" that false claim paid. Put another way, a false statement or record within a true claim is not actionable under the FCA." "Thus, liability does not arise merely because a false statement is included within a claim, but rather the claim itself must be false or fraudulent." United States of America ex rel. A+ Homecare, Inc. v. Medshares Management Group, Inc., No. 02-6545, slip op. at 13 (6th Cir. Mar. 10, 2005).
The Eighth Circuit has found that only those actions by a claimant which have the effect of causing the United States to pay out money it is not obligated to pay are actionable. Costner v. URS Consultants, Inc., 153 F.3d 667, 677 (8th Cir. 1998). In Costner, the Eighth Circuit was reviewing the appeal of a motion to dismiss a case where a subcontractor allegedly received money from a private trust fund and no federal funds were ever intermingled with that fund. Id. In addition, no money disbursed from the private trust fund was ever reimbursed by the Government. Id. The subcontractor was dismissed by the Eighth Circuit. Id.
The Ninth Circuit began an opinion rendered in 2002 with the statement that, "It seems to be a fairly obvious notion that a False Claims Act suit ought to require a false claim." United States v. Kitsap Physicians Service, 314 F.3d 995, 996 (9th Cir. 2002). In Kitsap, the Ninth Circuit was reviewing a dismissal on summary judgment of an allegation, brought pursuant to 31 U.S.C. § 3729- 3733, that false bills had been submitted to Medicare. Id. at 998. The Court found that the allegation of a private false scheme is not enough without showing an actual false claim for payment to the Government. Id. at 1002.
The Eleventh Circuit, when considering claims brought pursuant to Sections 3729(a)(1), (a)(2) and (a)(3) of the FCA, determined that the FCA does not create liability for a health care provider's disregard of Government regulations or improper internal policies unless there is a presentment of a claim to the Government. United States ex rel. Clausen v. Laboratory Corporation of America, Inc., 290 F.3d 1301, 1311 (11th Cir. 2002). In Clausen, the Eleventh Circuit was addressing the appeal of a motion to dismiss a claim alleging that a corporation submitted false claims for payment to medical programs of the United States. Id. at 1301.
More recently, the District of Columbia Circuit performed a detailed analysis of the FCA and concluded that, to be actionable under either subsection (a)(1) or (a)(2), a false or fraudulent claim must be presented to an officer or employee of the United States Government. United States ex rel. Totten v. Bombardier Corp., 380 F.3d 488, 492-93. (D.C. Cir. 2004), reh'g en banc denied (Dec. 8, 2004). The Totten Court concluded that a false claim that is not presented to an officer or employee of the United States Government is not actionable simply because payment will come out of funds received from the federal government. Id. Since the Totten holding was argued by the Parties in this case with regard to whether a false or fraudulent claim must be submitted by the Government, this opinion will be reviewed in some detail.
Analysis of Totten
The Totten decision was rendered by two of a three judge, en banc, panel of the District of Columbia Circuit. The Court analyzed the requirements of both subsections (a)(1) and (a)(2) in detail. All three judges agreed regarding subsection (a)(1) and one judge dissented with regard to the decision on subsection (a)(2).
Subsection (a)(1)
The Totten Court based its decision regarding subsection (a)(1) on a plain reading of the "clear and unambiguous" language. Id. at 492. Further, the Totten Court "squared" the presentation requirement in subsection (a)(1) with the definition of a "claim" found in Section 3729(c) ("subsection (c)") by finding that nothing in the language of subsection (c) requires ignoring the language of subsection (a)(1). Id. at 493. In other words, subsections (a)(1), (a)(2) and (c) should be read and applied together.
To confirm its conclusion that the language in subsection (c) can be read without ignoring the language in subsection (a)(1), the Totten Court applied the two "if" clauses in the definition of claim in subsection (c) to the language in subsection (a)(1). The Court found that FCA liability attaches when the Government provides the funds to the grantee upon presentment of a claim to the Government or if, after the grantee presents the claim, the Government provides the funds directly to the claimant. Id. Liability also attaches if the government, upon presentment of the claim, reimburses the grantee for funds that the grantee has already disbursed to the claimant. Id.
Subsection (a)(2)
The Totten majority also found that subsection (a)(2) did not provide for liability unless a false or fraudulent claim is presented to an officer or employee of the United States Government. Although subsection (a)(2) does not contain specific language requiring that a false or fraudulent claim be "presented to an officer or employee of the United States," according to the Totten Court, this section does require that a false or fraudulent claim be paid or approved "by the Government." Id. at 498.One of the three judges in Totten dissented on the issue of whether subsection 3729(a)(2) requires proof that a false or fraudulent claim be submitted to the Government. The arguments presented by Relators' Counsel in this case are the same as some of the arguments presented by the dissent in Totten. Therefore, examining the dissent's arguments in Totten will serve to also examine some of the Relators' arguments regarding subsection (a)(2) in this case.
The Totten dissent argues that the majority's interpretation of subsection (a)(2) as requiring presentment is inconsistent with its plain text and is inconsistent with the statutory definition of "claim" contained in Section 3729(c). Id. at 503. The dissent also argues that the Court's interpretation is inconsistent and irreconcilable with the legislative history of the 1986 Amendments to the FCA. Id. Finally, the dissent argues that the policies upon which the majority relies are faulty. The textual argument will first be examined followed by the legislative history and the policy arguments.
Textual Argument on Subsection (a)(2)
The dissent argues that, while subsection (a)(1) contains presentment language, subsection (a)(2) contains no express requirement of presentment to an officer or employee of the United States Government. Id. at 506. From this, the dissent concludes that, since the language in the subsections is different, Congress must have intended the meanings to be different and payment by an entity that has received government funds is the same as payment "by the Government". Id.
However, the majority concludes that payment by an entity that has received Government funds, a grantee in the Totten case, is not the same as payment "by the Government." Id. at 499. The majority bases this conclusion upon textual interpretation and legislative history. Id. at 498-99.
First, the majority reasoned that if Congress had intended to predicate liability under subsection (a)(2) on payment or approval either by the Government or by an entity that had received Government funds, then a reference to false records or statements made "to get a false or fraudulent claim paid or approved" would have been enough without the requirement that the claim be paid or approved "by the government." Id. Yet, the "by the government" language was added in 1986 at the same time that the definition of claim was added in subsection (c). Id. at 499. The majority concluded that by adding the "by the government" language, Congress was referring back to the presentment requirement of subsection (a)(1). Id.
The dissent's response is that, if Congress meant the same thing it would have said the same thing. Id. at 505. The majority then argues that the payment to the defendants in Totten was not a payment "by the government" and was a payment by an entity that had received government funds. Id.
The dissent's next response is that the fact that expenses are paid by an entity does not mean that the entity paid them directly. Id. at 506. In support of this argument, the dissent cites the definition of claim in subsection (c) wherein a request for money is a claim if the United States Government provides any portion of the money. Id. However, the majority has reasoned, as stated above, that subsection (c) can and is to be read in conjunction with subsections (a)(1) and (a)(2) and not as a separate requirement or as providing a definition of "by the government." The majority also responds that the dissent has to alter the words to make a plain language argument by asserting that "paid by the Government" means "paid with government money."
The dissent next argues that, if subsection (a)(2) is read to require that a claim be presented to the Government, it is then "swallowed" by subsection (a)(1). Yet, the majority points out that subsections (a)(1) and (a)(2) were once in one "unwieldy" sentence and that this sentence was dividend into the numbered subsections of Section 3729(a) in 1982 with the stated purpose of making no substantive changes to the law. Id. at 500. Therefore, subsection (a)(2) is the "direct descendant of a clause that could only be read in conjunction with what is now Section 3729(a)(1) . . ." Id.
The majority also argues that subsections (a)(1) and (a)(2) have different meanings and applications. Subsection (a)(1) refers to presenting claims to the Government for "payment or approval" while subsection (a)(2) refers to making false statements that result in false or fraudulent claims being paid. Id. at 499-500. Subsection (a)(2) could only, therefore, be read in conjunction with subsection (a)(1). Id. at 500.
The dissent responds that, in his view, the second clause of the pre-1982 FCA did not contain a presentment requirement. Id. at 508. However, the only law cited in support of this belief is the Supreme Court's statement that the act was intended to reach all types of fraud that might result in financial loss to the government. Id at 509. No caselaw directly on point is cited.
The dissent next criticizes the majority's interpretation of the legislative history surrounding subsections (a)(1) and (a)(2). The majority refers to the legislative history for an explanation of why subsections (a)(1) and (a)(2) should be read in conjunction with subsection (c).
The phrase "by the Government" was added in 1986 at the same time as the definition of "claim" was added at subsection (c). On this both the majority and the dissent agree.
The dissent goes on, however, to argue that, rather than adding something new to the FCA, the words "were intended to clarify what the Supreme Court has long held: that the FCA reaches only those false claims that ultimately result in losses to the United States." Id. at 508. The basis for this argument is that the overall stated purpose of the 1986 Amendments was to "clarify" the FCA. Id. at 508.
Yet, the majority argues that something new was, in fact, added in 1986, the "by the government" language. Id. at 499. And the "by the government" language was added at the same time that the definition of claim was added in subsection (c). Id. The majority concluded that, by adding the "by the government" language, Congress was referring back to the presentment requirement of subsection (a)(1). Id.
The dissent then makes one last attempt to argue that the definition of a "claim" in subsection (c), when examined together with subsections (a)(1) and (a)(2), leads to the conclusion that subsection (a)(2) does not require the presentation of a claim to the Government. Id. at 510-11. Here again, contrary to its argument that the relevant subsections should be read together, the dissent is reading subsection 3729(c) alone without adding all of the requirements of subsections (a)(1) and (a)(2).
Both the majority and the dissent refer to scholarly comments on subsections (a)(1) and (a)(2). However, neither are substantive nor are they persuasive.
Legislative History Argument on Subsection (a)(2)
The dissent next turns to the legislative history of the 1986 Amendments to the FCA. Id. at 511. The dissent argues that the purpose of the 1986 Amendments was to "clarify" the FCA and the definition of claim was added to permit the Government to sue for frauds perpetrated on federal grantees. Id. at 512. In support, the dissent cites a Senate Judiciary Committee statement that a false claim is actionable although the false claim was made to a party other than the government and the House Judiciary Committee agreed. Id. The Senate Judiciary Committee added that the new definition of claim was added in response to earlier court holdings that a fraud against the grantee does not include a fraud against the government. Id.
The majority does not rely upon these statements because they were based upon a version of the bill that did not yet include the addition of the words "by the Government" to subsection (a)(2). Id. Further, the legislative history is silent on why the words "by the Government" were added. Id.
The Policy Arguments on Subsection (a)(2)
The final area of which the dissent is critical is policy considerations. Id. at 514. The majority sets forth three policy arguments. First, extending false claims act liability could result in quadruple liability for false claimants in that a grantee could bring suit and obtain a recovery for itself in addition to the treble damages available to the relator and the Government. Id. at 496. The dissent responds that other FCA requirements would prevent this because recovery is permitted only on behalf of the government and only for damages sustained by the Government. Yet, the FCA provides for forfeitures in addition to the damages sustained by the Government and the dissent overlooks the possibility of a state-law breach-of-contract suit by the grantee.The second policy argument set forth by the majority is that authorizing suit on behalf of an entity to which a claim was not presented raises complicated questions in applying the FCA's scienter requirement. Id. at 496. It is unclear to the majority as to how to apply the "knowingly" requirement when the Government itself or a relator brings suit for claims made to a grantee if there is no longer any requirement of presentment to the Government. Id. The dissent does not respond to this argument in that the dissent believes that this argument has no relevance to subsection (a)(2) because the "knowingly presents" language does not apply to subsection (a)(2). Id. at 514, n. 18.
The third policy argument set forth by the majority is that a reading of the act as the dissent wishes would make the potential reach of the Act almost boundless. Id. at 496. For example, liability could attach for any false claim made to any college or university, so long as the institution has received some federal grants as most do. Id.
The dissent's response to this policy argument is that the FCA limits damages to those that the government sustains and, although determining whether the government has been damaged by fraud may be difficult in some cases, in others it will not. Id. at 514. However, the dissent does not address the forfeiture penalty that applies whether or not the government can prove actual damages. Also, ironically, the dissent argues that, "if traceability is a problem, it is a problem borne by the plaintiff who must prove that the claim was " paid . . . by the Government" in order to establish liability under § 3729(a)(2). Id.
Relators' Additional Arguments Regarding the Presentation of a False Claim
The Relators' argument regarding the presentation of a false claim began with an analysis of the language of the FCA which is addressed by the preceding analysis of the Totten case. Relators next cite United States ex rel. Marcus v. Hess for support. 317 U.S. 537 (1943). Yet Marcus does not support the Relators' argument because the defendants in Marcus caused the government to pay claims of the local sponsors in order that they might in turn pay the defendants under contracts executed as the result of fraudulent bidding. Id. at 543. Thus, in Marcus, the subcontractors made false statements but there was evidence of false claims made directly to and paid directly by the government to local sponsors as a result of those false statements.The Relators next cite United States v. Bornstein for support. 423 U.S. 303 (1976). Yet, Bornstein does not support the Relators' argument because, in Bornstein, a subcontractor made three shipments of falsely branded electron tubes to a prime contractor which caused the prime contractor to submit false claims to the Government for radio kits. Id. at 307.
The Relators next argue that the Fifth Circuit has issued another opinion after Clausen where they backed away from their Clausen holding. However, Clausen is an Eleventh Circuit case and the only FCA opinion issued since Clausen by the Eleventh Circuit that cites Clausen is Hill v. Morehouse Medical Associates, Inc., 2003 WL 22019936 (11th Cir. 2003). And, Hill merely restates the holding from Clausen that "without the presentment of a false or fraudulent claim . . . there is simply no actionable damage to the public fisc as required under the FCA." Id. at *2. Further, there is no indication that the Fifth Circuit has cited Clausen in any subsequent opinion.
Next, the Relators attempt to distinguish Totten on the basis that Totten applies to a situation where "money doesn't flow." In Totten, the Government gives a block grant to a grantee and, while the grantee is regularly paying "subcontractors," there are no requests regularly going from the grantee to the Government. The Totten Court agreed that the grantee was not the Government or an arm of the Government.
However, the same reasoning used by the majority in Totten would apply to a prime contractor as well as it does to a grantee who is not the Government or an arm of the Government. In many respects, the reasoning in Totten need not be extended as far to reach a prime contractor as to reach a grantee. Finally, the Totten court did not indicate that its holding does not apply to situations where a grantee was replaced by a prime contractor.
The Relators also argue that the Totten case will be taken to the Supreme Court. The record indicates that Totten was issued on August 27, 2004 and rehearing en banc was denied on December 8, 2004. However, there is no record that Totten has, thus far, been appealed nor do Relators indicate that it has been appealed, only that it "will be."
Finally, the Relators have, themselves argued in this case that liability for a false statement requires that a false or fraudulent claim be submitted to the Government. In their Consolidated Memorandum In Opposition To Defendants' Motions To Dismiss the Amended Complaint filed on July 30, 1999, the Relators state that, "In fact, the law is settled that a subcontractor can violate the False Claims Act when its conduct causes a prime contractor (either knowingly or not) to submit to the Government a claim of its own that is in fact false." (Doc. #44, p. 19 (emphasis added) citing United States v. Bornstein.)
Conclusion
Nine Circuit courts have found that a violation of subsection (a)(2) of the FCA requires a showing that a false or fraudulent claim has been presented to an officer or employee of the Government. In addition, the detailed opinion of the Totten majority on this matter is persuasive. The only contrary finding is by a single judge, the dissent in Totten. Finally, the Relators have previously agreed with this requirement. Therefore, a violation of subsection (a)(2) of the FCA requires a showing that a false or fraudulent claim has been submitted to an officer or employee of the United States Government.
THE PRESENTMENT OF A FALSE CLAIM
After arguing that a false claim need not be presented for liability pursuant to subsection (a)(2) to attach, the Relators then argue that evidence of a false claim has been presented in this case. Relators base this argument on the theory of "implied certification" espoused by the Sixth Circuit in United States ex rel. Augustine v. Century Health Services Inc., 289 F.3d 409 (6th Cir. 2002).
The "implied certification" theory holds that "a false implied certification may constitute a false or fraudulent claim even if the claim was not expressly false when it was filed. Instead, liability can attach if the claimant violates its continuing duty to comply with the regulations on which payment is conditioned." 289 F.3d at 415. The theory of "implied certification" is applied where the underlying statute or regulation expressly states that payment is conditioned upon compliance with the underlying statute or regulation. Id. at 414 (citing Mikes v. Straus, 274 F.3d 687, 700 (2nd Cir. 2001)).
The Relators argued that Bath submitted a false "implied certification" to the Government. When asked, the Relators identified the Solicitation Offer and Award issued by the Department of the Navy to Bath Iron Works on April 2, 1985, as the underlying "regulation" with which Bath was required to comply. (PX 128.) This Solicitation Offer and Award (the "DDG-51 Award") is in the amount of $321,964, 557 and appears to be for the design and construction of one ship, DDG-51. (Id.) Relators also indicated that the specific certification requirement is found on pages 73 and 74 of the DDG-51 Award.
Page 73 of the DDG-51 Award contains several paragraphs regarding the computation of payments under the Award. Specifically, the DDG-51 Award requires that, "the Government, upon submission by the Contractor of invoices certified by the Contractor as hereinafter provided, will make payments, on account of the total contract price . . ." (PX 128, p. 73.) Page 76 of the DDG-51 Award then indicates that:
The Contractor shall certify on each Invoice:
(1) the percentage of physical progress in the performance of work on the vessel as a decimal carried to four places; and
(2) the allowable costs incurred in the performance of the work on the vessel as of the date the invoice is submitted. Such certification shall provide for cost category reporting in accordance with the Contractor's normal accounting system and shall be broken down into direct material, direct labor and indirect costs.
No further certification requirements are to be found in the DDG-51 Award that was admitted into evidence.
Having set forth what they believed to be the underlying "regulation on which payment is conditioned," the Relators then argued that the Jury could infer that Bath submitted invoices to the Government because the ships were continuing to be built. And, since the Jury could infer that Bath submitted invoices, the Jury could find that Bath had submitted false invoices pursuant to the "implied certification" theory. This, of course, is in light of Relators' initial argument that they were not required to submit Bath invoices to the Jury.
Even if the Jury could infer that Bath submitted invoices to the Government, there is no evidence that Bath had a continuing duty to comply with any "regulations" let alone certify its compliance with any "regulations." Even if the Court could infer that the DDG-51 Award was a "regulation," the only evidence of a required "continuing certification" with this contract is with regard to the percent of physical completion and the allowable costs incurred that must be certified on each invoice. There is no evidence of a required continuing certification with regard to quality which is the issue being tried in this case.
Therefore, since there are no "regulations" with which Bath was required to comply, the "implied certification" theory is not well founded. Even if the DDG-51 Award could be construed to be a regulation, which it cannot, the DDG-51 Award in evidence does not provide for a continuing certification with regard to quality on each invoice.
SUMMARY AND CONCLUSIONS
To sustain a claim pursuant to subsections (a)(1) and (a)(2) of the FCA, the Relators are required to show that a false or fraudulent claim was submitted to the Government. Further, inferred invoices submitted by Bath to the Government pursuant to the DDG-51 Award are not false invoices pursuant to the "implied certification" theory.
In this case, the only entities that could have submitted actionable claims to the Navy were the prime contractors, Bath Iron Works and Ingalls. During their case in chief, the Relators presented no evidence that either Bath Iron Works or Ingalls submitted false or fraudulent claims to the Government or evidence from which the Jury could infer that either Bath Iron Works or Ingalls submitted false or fraudulent claims to the Government.
In addition, violation of Section 3729(a)(3) ("subsection (a)(3)") requires a false or fraudulent claim. United States v. Murphy, 937 F.2d 1032, 1038-39 (6th Cir. 1991). Since Relators have not shown that there has been a false or fraudulent claim in this case, Relators' claim with regard to Section 3729(a)(3) must fail.
Pursuant to Fed.R.Civ.P. 50(a)(1), the Relators have been fully heard on their complaints and there is no legally sufficient basis for a reasonable jury to find under the controlling law that any of the Defendants violated 31 U.S.C. § 3729(a)(1), (a)(2) and (a)(3). Therefore, the Defendants' Motion for Judgment As a Matter Of Law as to Relators' claims brought pursuant to 31 U.S.C. § 3729(a)(1), (a)(2) and (a)(3) is GRANTED.
The Defendants' Rule 50(a) Motion regarding all false claims counts also argues that, assuming Relators had produced evidence of false or fraudulent claims, they have not satisfied the materiality element of their claims. Although, based upon the A+ Homecare opinion just issued by the Sixth Circuit, materiality is relevant in this case. However, since the Court does not have a false or fraudulent claim to consider, the Court cannot address the materiality argument now. It is MOOT.
In addition, the Rule 50(a) Motion regarding Damages (Doc. #670) is now MOOT. Also, the pending oral Rule 50(a) motion with regard to paragraphs 159 through 161 of Relators' Second Amended Complaint is MOOT.
The Relators have presented facts upon which a reasonable juror could find that Defendant General Tool retaliated against Roger Sanders in violation of 31 U.S.C. § 3730(h) and in violation of Ohio Public Policy. Therefore General Tool Company's oral Rule 50(a) Motion is not well-founded and is OVERRULED.
Following the issuance of the Court's summary opinion regarding the above matters on the record on March 7, 2005, the Relators dismissed their Retaliation claims without prejudice. These claims were dismissed without prejudice under certain conditions that were agreed to by General Tool Company.
The dismissal of the only remaining claims renders Relators' pending Motion for Rule 54(b) Certification (Doc. #472) MOOT. The captioned cause is hereby ordered terminated upon the docket records of the United States District Court for the Southern District of Ohio, Western Division, at Dayton.
DONE and ORDERED.