Smith et al v. Boeing Company
Filing
756
MEMORANDUM AND ORDER granting 644 Motion for Summary Judgment; finding as moot 646 Motion for Partial Summary Judgment; granting 648 Motion for Summary Judgment; denying 650 Motion for Partial Summary Judgment; granting 657 Motion for Summary Judgment; finding as moot 659 Motion for Partial Summary Judgment; granting 682 Motion to Strike ; denying 687 Motion to Strike. Signed by District Judge Monti L. Belot on 10/8/2014. (smg)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
UNITED STATES OF AMERICA ex rel.
TAYLOR SMITH, JEANNINE PREWITT,
and JAMES AILES,
Plaintiffs-Relators,
v.
THE BOEING COMPANY and
DUCOMMUN, INC.,
f/k/a AHF-Ducommun,
Defendants.
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CIVIL ACTION
No.
05-1073-MLB
MEMORANDUM AND ORDER
Before the court are the following:
1. Boeing’s Motion for Summary Judgment on Liability
(Docs. 644, 645); Relators’ Response (Doc. 703); Boeing’s
Reply (Doc. 733).
2. Boeing’s Motion for Partial Summary Judgment on
Damages (Docs. 646, 647); Ducommun’s Joinder in the
Motion (Doc. 659); Relators’ Response (Doc. 702);
Boeing’s Reply (Docs. 731, 735).
3. Boeing’s Motion for Summary Judgment on Retaliation
Claim (Docs. 648, 649); Prewitt’s Response (Doc. 701);
Boeing’s Reply (Doc. 732).
4. Relators’ Motion for Partial Summary Judgment on
Liability (Doc. 650); Boeing’s Response (Doc. 691);
Relators’ Reply (Doc. 728).
5. Ducommun’s Motion for Summary Judgment (Docs. 657,
658); Relators’ Response (Doc. 704); Ducommun’s Reply
(Doc. 734).
6. Relators’ Motion to Strike Eastin Testimony and
Declaration (Doc. 682, 683); Defendants’ Response (Docs.
711, 713); Relators’ Reply (Doc. 715).
7. Relators’ Motion to Strike 2004 and 2005 SUP Reports
(Doc. 687, 700); Defendants’ Response (Docs. 712, 714);
Relators’ Reply (Doc. 716, 720).
8. Relators’ Notice of Supplemental Authority and
Supplemental Expert Report (Doc. 737); Defendants’
Response (Docs. 745, 747); Relators’ Reply (Doc. 749).
Table of Contents
1. Boeing’s Motion for Summary Judgment on Liability (Doc. 644).
. . . . . . . . . . . . . . . . . . . . . . . . . . . . -3A. Uncontroverted facts
. . . . . . . . . . . . . . . . -4FAA Regulatory Overview. . . . . . . . . . . . . . . -5The Purchase Contracts . . . . . . . . . . . . . . . -8Development of 737 Next Generation . . . . . . . .
-10ATA . . . . . . . . . . . . . . . . . . . . .
-11HVC . . . . . . . . . . . . . . . . . . . . .
-14Quality Assurance; SPC . . . . . . . . . . . .
-15Flag note S3. . . . . . . . . . . . . . . . .
-17Ducommun production . . . . . . . . . . . . . . . .
-21Ducommun tooling audit . . . . . . . . . . . . . .
-23FAA Review of Relators’ Allegations . . . . . . . .
-28Air Force and Navy Purchasers . . . . . . . . . . .
-31747 and 757 Aircraft . . . . . . . . . . . . . . .
-32B. Relators’ Motions to Strike the FAA SUP Reports and Eastin
Testimony (Docs. 682, 687) . . . . . . . . . . . .
-32SUP Reports . . . . . . . . . . . . . . . . . . . .
-33Eastin declaration and testimony . . . . . . . . .
-34C. Summary Judgment Standards
. . . . . . . . . . . .
-40D. Elements of an FCA Claim
. . . . . . . . . . . . .
-41E. Discussion
. . . . . . . . . . . . . . . . . . . .
-421. False or fraudulent claims; scienter . . . . . .
-422. Materiality . . . . . . . . . . . . . . . . . .
-542. Ducommun’s Motion for Summary Judgment on Liability (Doc. 657).
. . . . . . . . . . . . . . . . . . . . . . . . . . .
-613. Boeing’s Motion for Summary Judgment on
648) . . . . . . . . . . . . . . . .
A. Uncontroverted Facts
. . . . . .
Prewitt’s medical leave . . . . .
Prewitt’s return from leave . . .
Prewitt’s layoff . . . . . . . .
B. FCA retaliation . . . . . . . . .
C. State wrongful discharge claim
.
Retaliation
. . . . . .
. . . . . .
. . . . . .
. . . . . .
. . . . . .
. . . . . .
. . . . . .
Claim (Doc.
. . .
-61. . .
-61. . .
-63. . .
-64. . .
-68. . .
-69. . .
-75-
4. Conclusion . . . . . . . . . . . . . . . . . . . . . . . .
-2-
-77-
1. Boeing’s Motion for Summary Judgment on Liability (Doc. 644).
Relators filed this action under the qui tam provisions of the
False Claims Act (“FCA”), 31 U.S.C. § 3729, et seq.1 They claim that
Boeing
and
one
of
its
suppliers,
Ducommun,
manufactured
and
incorporated a number of nonconforming parts into aircraft sold to the
U.S. Government. The complaint alleges that defendants knowingly and
falsely certified to the Government, in connection with claims for
payment, that the parts conformed to contract specifications and to
applicable Federal Aviation Administration (FAA) regulations. In large
part Relators claim the parts were nonconforming because they were
produced with manually controlled machine tools rather than with
computerized machine tools that used statistical control methods.
Based on a total purchase price of over $1.6 billion for twenty-four
specified aircraft, relators seek treble damages under the FCA of more
than
$4.8
billion.
In
addition,
relator
Prewitt
claims
Boeing
unlawfully retaliated against her because she pursued an FCA claim.
Defendants deny the allegations and contend that relators’ claims fail
as a matter of law.
Boeing’s motion for summary judgment on FCA liability asserts
three main points. First, it argues that Boeing met its contract
requirements by delivering aircraft that were certified as airworthy
by
the
FAA.
Boeing
denies
that
1
the
contracts
required
it
to
A private person may bring a civil action for a violation of
the FCA for themselves and for the United States Government. If the
person prevails, they may be entitled to a percentage of the proceeds
recovered. 31 U.S.C. § 3730(b). The Government may intervene in such
an action if it wishes; it has declined to do so here. When the
Government elects not to intervene, the person who initiated the
action shall have the right to conduct it. § 3730(b)(4)(B).
-3-
additionally certify compliance with all FAA regulations. Although it
denies that any violations occurred, it says if any did occur they
should be addressed by the FAA through its regulatory enforcement
powers. According to Boeing, “[m]ere regulatory violations do not give
rise to a viable FCA action.” (citing United States ex rel. Conner v.
Salina Reg’l. Health Ctr., Inc., 543 F.3d 1211 (10th Cir. 2008)).
Second, Boeing argues Relators have no evidence that any of the
claimed regulatory violations were material to the government’s
payment of claims. Boeing says this point is emphasized by the
government’s eventual rejection of Relator’s allegations and its
decision to continue certifying and purchasing Boeing aircraft despite
knowledge of relators’ allegations. Third, Boeing contends relators
have at most shown a genuine dispute about how certain engineering
drawings should be interpreted, but they have failed to show that
Boeing acted with the scienter required for an FCA claim.
A. Uncontroverted facts.
This qui tam action was brought by Jeannine Prewitt, Taylor
Smith and James Ailes, three former employees of Boeing in Wichita.
It relates to fuselage parts produced by Ducommun, a Boeing supplier
in California.
Ducommun supplied parts mainly for Boeing’s 737 Next Generation
(or New Generation) aircraft (“737NG”). Ducommun delivered the parts
to Wichita, where Boeing workers assembled them with other parts to
form aircraft fuselages. The fuselages were shipped to Boeing’s
facility in Renton, Washington, where complete 737s were assembled.
The completed 737 aircraft at issue were sold by the Boeing Commercial
Airplanes business (BCA) to the Boeing Defense and Space Systems
-4-
company (BDS). BDS then modified the aircraft for use by the U.S. Air
Force and U.S. Navy. Finally, BDS personnel submitted claims for
payment to the Air Force and Navy for the aircraft.
FAA Regulatory Overview. An overview of the FAA’s regulatory
scheme is necessary for an understanding of the claims. The following
summary is taken largely from United States v. S.A. Empresa de Viacao
Aerea Rio Grandense (Varig Airlines), 467 U.S. 797 804-06 (1984).
In the Federal Aviation Act of 1958, Congress directed the
Secretary of Transportation to promote flight safety by establishing
minimum
standards
for
aircraft
design,
materials,
workmanship,
construction, and performance. Congress established a multi-step
certification process to monitor the aviation industry’s compliance
with these requirements. Authority over the process rests with the
FAA.
The FAA has promulgated comprehensive regulations setting out
the minimum safety standards that aircraft designers and manufacturers
must meet before marketing their aircraft. At each step of the
certification
representative
process,
evaluates
an
FAA
employee
materials
or
submitted
an
by
FAA-designated
the
aircraft
manufacturer to determine whether it has satisfied these regulatory
requirements. Upon a showing that the requirements have been met, the
FAA issues an appropriate certificate permitting the manufacturer to
continue with production and marketing.
Varig Airlines, 467 U.S. at
804-06. There are three main steps in the certification process: a
type certificate, a production certificate, and an airworthiness
certificate. 49 U.S.C. § 44704.
Type certificate. A manufacturer
wishing to introduce a new type of aircraft must first obtain FAA
-5-
approval
of
the
plane’s
basic
design
in
the
form
of
a
type
certificate. After receiving an application for a type certificate,
the FAA typically requires the applicant to make such tests as the FAA
deems necessary in the interests of safety. By regulation the FAA
makes the applicant itself responsible for conducting all inspections
and tests necessary to determine that the aircraft comports with FAA
airworthiness requirements. The applicant must submit to the FAA the
designs, drawings, test reports, and computations necessary to show
that the aircraft satisfies FAA regulations. It must certify that it
has complied with the applicable requirements. 14 CFR § 21.20. The
“type design” that must be submitted includes the drawings and
specifications necessary to define the configuration and design
features of the product, as well as information on the materials and
processes necessary to define the structural strength of the product.
14 CFR § 21.31.
The manufacturer must produce a prototype of the aircraft and
conduct ground tests and flight tests on it. FAA employees or their
representatives review the resulting data and make such inspections
or tests as they deem necessary to ascertain compliance with the
regulations.2 If the FAA finds that the proposed aircraft design meets
the minimum safety standards, it signifies its approval by issuing a
2
In order to obtain a type certificate, Boeing completes an
extensive compliance checklist to demonstrate that the airplane
complies with the requisite regulations for a type certificate. It
lists all of the regulations complied with, the means of compliance,
and the underlying documents demonstrating compliance. The checklist
itself may be hundreds of pages long and may reference hundreds of
underlying documents, some of which consist of hundreds or thousands
of pages. Similarly comprehensive information is required to obtain
production and airworthiness certificates.
-6-
type certificate.
Production
Varig Airlines, 467 U.S. at 805-06.
certificate.
Production
may
not
begin
until
a
manufacturer obtains a production certificate from the FAA authorizing
the manufacture of duplicates of the prototype. To obtain a production
certificate, the manufacturer must prove to the FAA that it has
established and can maintain a quality control system to assure that
each aircraft (including parts purchased from suppliers) will meet the
design provisions of the type certificate. When it is satisfied that
duplicate aircraft will conform to the approved type design, the FAA
issues a production certificate, and the manufacturer may begin mass
production of the approved aircraft. Regulations require a production
certificate holder to notify the FAA of any changes in its quality
control
system
that
may
affect
the
inspection,
conformity,
or
airworthiness of its product.
Airworthiness certificate. Finally, before any aircraft may be
placed
into
service,
its
owner
must
obtain
an
airworthiness
certificate (or its military equivalent, a “conformity certificate”)
from the FAA. Such a certificate signifies that the particular
aircraft in question conforms to the type certificate and is in
condition for safe operation. It is unlawful for any person to operate
an
aircraft
in
air
commerce
without
a
valid
airworthiness
(or
conformity) certificate.
Because the FAA does not have near the number of engineers
needed to complete this elaborate compliance review on its own, the
law allows the FAA to delegate certain inspection and certification
responsibilities
“designated
to
properly
engineering
qualified
private
representatives”
-7-
persons.
(DERs)
and
These
other
representatives3 assist in the FAA certification process. They are
typically employees of the aircraft manufacturers themselves who
possess detailed knowledge of an aircraft’s design based on their dayto-day involvement in its development.
The FAA may reexamine a certificate at any time and may modify,
suspend or revoke it. See 49 U.S.C. § 44709. The FAA may investigate
a suspected violation of safety regulations and may issue an order to
compel compliance if it finds a violation. It also has the power to
impose fines and can bring a civil or criminal action against persons
who violate the regulations.
The Purchase Contracts
When the Air Force and Navy contracted with Boeing for the
planes at issue, it had the option of using military procurement
procedures. It opted instead to buy commercial airplanes and to modify
them.
Each of the contracts at issue contained the following language
or something similar to it requiring Boeing to obtain the appropriate
FAA certificates:
1. FAA Certificates
a. Boeing will obtain from the Federal
Aviation Administration (FAA):
(a) a Type Certificate ... issued
pursuant to Part 21 of the
Federal Aviation Regulations for
the type of aircraft covered by
this Agreement, and
(b)
a
Standard
Airworthiness
Certificate for each Basic Aircraft
3
The regulations also authorize designated manufacturing
inspection representatives (DMIRs) and designated airworthiness
representatives (DARs) to act as surrogates for the FAA. See 14 CFR
Part 183.
-8-
issued pursuant to part 25 of the
Federal Aviation Regulations or in
the
alternative
a
Conformity
Certificate - Military Aircraft,
FAA Form 8130-2, which will be
provided to Buyer with delivery of
the Aircraft.
b. Boeing will not be obligated to obtain
any other certificates or approvals for the
Basic Aircraft. * * *
The contracts required that Boeing provide the Government an FAA
Standard
Airworthiness
Certificate
Form
8100-2
or
a
Conformity
Certificate Form 8130-2. Both of these forms included a certification
that the aircraft was manufactured in conformity with data forming the
basis
for
the
type
certificate
and
required
disclosure
of
any
deviations from the type certificate.
Each of the contracts also contained language similar to that
set forth below pertaining to quality control and FAA oversight:
The production facilities of the aircraft
Contractor ... shall be FAA approved and in
compliance with 14 CFR 21 (FAR Part 21). Quality
Assurance requirements shall be in accordance
with FAA Advisory Circular 00-41B, “Quality
Control System Certification Program”, FAA STD
13[D], “Quality Control Program Requirements”,
and FAA STD 16[A], “Quality Control System
Requirements”. Compliance is evidenced by the
Production Certificate.
See Doc. 643, Exh. F-1.4
4
Some
of
the
contracts
added
the
following
paragraph:“Contractor’s manufacturing and quality systems are under
the cognizance of the Federal Aviation Agency and are monitored as
necessary to meet FAA requirements for commercial aircraft production.
These designees include Designated Engineering Representatives (DERs)
listed in Advisory Circular (AC) 183.29-1Z, Designated Airworthiness
Representatives (DARs) listed in AC 183.35B, and Designated
Manufacturing Inspection Representatives (DMIRs). These designees and
assigned FAA officials perform necessary inspections, verifications,
and evaluations to ascertain conformance to certification requirements
and the adequacy of the implementing procedures and records.” See
-9-
Boeing also warranted that each airplane would be free not only
from defects in material and workmanship, but also “free from defects
in ... process of manufacture” and “free from defects in design,
including selection of ... process of manufacture, in view of the
state of the art at the time of design.”
Boeing did, in fact, hold a type certificate and production
certificate with respect to each model at issue, and it obtained from
the FAA airworthiness or conformity certificates for each aircraft.
Each certificate is signed by a Boeing employee who was an authorized
FAA designee.
The contracts also incorporated Federal Acquisition Regulation
(FAR) 52.212-4 (48 CFR). Among other things, this regulation allows
the Government to terminate a contract for cause in the event of a
default by the contractor or if the contractor fails to comply with
any terms and conditions of the contract. Upon such a cancellation,
the Government shall not be liable for any amount for supplies or
services not accepted.5
Development of 737 Next Generation
Boeing first obtained a type certificate for the 737 in 1967.
In subsequent years, it obtained type certificate approval for several
737 derivatives. Boeing refers to these later derivatives, including
the 737-600, 700, 800 and 900 series, as the Next Generation, or
e.g., Doc. 643, Exh. F-1, p. TBC 080439.
5
§ 52-212-4(a) also allows the Government to require repair or
replacement of nonconforming supplies at no increase in contract
price. If repair or replacement is not possible, the Government may
seek an equitable reduction in price. The Government must exercise its
post-acceptance rights within a reasonable time after the defect was
discovered.
-10-
737NG, as opposed to the original 737 Classic. All of the 737
derivatives are listed under a single FAA type certificate number.
The 737 Classic was manufactured using traditional design and
manufacturing methods, including two-dimensional drawings, laborintensive hand-directed machine tools, and manual measurement and
inspection of tools and parts to ensure quality control. Assembly of
parts into the fuselage required the use of massive, complicated and
expensive assembly equipment.
Design,
development
and
manufacture
of
the
737NG
models
incorporated newer technologies, including Computer Aided ThreeDimensional
Interactive
Application
(CATIA)
design
software
and
Computer Aided Design (CAD) drawings to define detail parts and
assemblies. The CATIA-created designs use solid modeling, a threedimensional computer process that allows for interface of parts and
computer-based structural analysis. Solid modeling requires that
suppliers like Ducommun have the technical capability to work with and
implement
the
new
electronic
designs.
The
relevant
engineering
drawings in this case were delivered to Ducommun in CATIA format,
although
they
could
also
be
printed
out
as
conventional
two-
dimensional drawings.
ATA. One of the manufacturing processes used by Boeing in making
its newer planes, including the 737NG, was “Advanced Technology
Assembly” (ATA). ATA requires the drilling of precision-located and
coordinated fastener holes in detail parts. The holes are placed and
“toleranced” from other part features such as surfaces, edges and
other holes. The accurate placement of these ATA holes establishes the
location and orientation of a part relative to its “mate-with” part.
-11-
This allows for a simplified assembly process that does not require
large and expensive assembly equipment and may reduce the need for
frequent measurement and inspection. It also reduces the need for
shims and potentially damaging force (i.e. “make it fit”) in the
assembly process.
Machine tools were traditionally hand-directed and controlled.
The use of automated numerically-controlled (“NC”) machines has now
become widespread, with many NC machines controlled by computer
(“CNC”). Due to the close tolerances required for ATA parts and the
ability of CNC machines to perform precision drilling, ATA holes are
typically drilled on CNC machines. These machines automatically
collect statistical data during the manufacturing process. The data
can be used in applying “statistical process controls” (SPC), a
quality control tool that employs statistics to track, predict and
minimize variations in the manufacturing process.
Boeing’s guide for assessment of its suppliers’ ATA capability
(Doc. 669-13) provides in part:
In order for ATA to be successfully implemented,
several tools and processes are required. Among
the most critical are a digitally engineered
model as the controlling “drawing” used in
conjunction with CNC machine tools. This marriage
allows us to ensure accurate, first generation
engineering
to
drive
reliable,
accurate
production methods. The final element is the
acceptance of the product and the assurance of
product integrity. While not required for ATA
production, coordinate measuring machines (CMMs)
have proven to be invaluable in performing highly
accurate, complex, repeatable verification of
engineering requirements.
The ultimate goal of this program is to obtain a
position whereby precise, consistent products are
obtained at reasonable cost with a minimum of
actual piece part inspection. No part or product
-12-
has ever been improved by the inspection process.
As such, it is our desire to move reliable
processes to the mode of process acceptance and
sampling. In order to obtain this goal it is
necessary that each process be characterized as
to
capability
and
repeatability.
Once
established, and improved as necessary to meet
product requirements, the process must be
stabilized to the point of “reliable”, and then
a method to periodically validate continued
reliability must be must be implemented. Through
this,
the
process
can
be
proven
to
be
statistically stable and the products, by
inference, acceptable. This process acceptance
can then be done without using 100% inspection.
The same guide also states, however, that a supplier has
alternatives for establishing an ATA process:
Certainly the preferred process would be one in
which the supplier uses CATIA for their CAD
system, a CNC mill for establishing part geometry
and hole placement, and a programmable CMM for
verification of engineering requirements, prior
to obtaining a sampling approval plan. None of
these is a requirement, however. In place of
CATIA, Boeing supports nearly all CAD systems via
IGES. Precision drill jigs may, and in some
instances should, replace the CNC mill. Many
parts can be validated very effectively using
digital height gages, digital calipers, etc.,
with proper certification. This means you are not
required to have a CMM.
* * *
Precision drill jigs may be used for the ATA
program to install and inspect the ATA holes.
These drill jigs must meet the requirements of
[certain specified standards6]. This is not the
Boeing preferred method due to the potential for
higher non-recurring cost associated with part
configuration changes. It is however a viable
alternative and in some instances provides the
best value approach. Use of drill jigs requires
the production of five parts, which must be
validated
independently
by
a
secondary
measurement, and a periodic maintenance plan to
insure continued compliance to the engineering
requirements.
6
Identified as D33200-1, D31013-1, and D800-10438-1.
-13-
The guide provides that a supplier must demonstrate its ATA production
capability. As indicated above, if it elects to use drill jigs for the
ATA program, it must produce five parts with the drill jig and have
them independently verified on a certified CMM prior to Boeing
acceptance.
If it elects to use CNC machine tools, it must drill a
prescribed test plate. The supplier’s production plan must identify
the method by which it will install ATA holes, and it must supply
either measurement results from the CNC test plate or from the five
items produced with a drill jig.
HVC. Boeing also implemented a quality control process called
HVC (Hardware Variability Control). Although “no single definition of
HVC exists,” (Doc. 669-11 at p.3), the concept focuses on defect
prevention rather than defect detection. It involves several steps:
product definition and analysis; development and documentation of “Key
Characteristics”7 on engineering drawings; development, documentation
and implementation of a supporting manufacturing plan and a tool
indexing plan; and use of SPC methods to measure performance and
process capability, as well as an effective method of improving
processes based on findings. Defendants point to Boeing documents
citing the importance of HVC – including one describing it as “the
foundation to ATA” – and argue that ATA necessarily required the use
7
“A feature whose variation has the greatest impact on the fit,
performance, or service life of the finished product from the
perspective of the customer. Key characteristics are a tool to help
decide where to focus limited resources. They are intended to be used
for process improvement purposes. Key characteristics should not be
confused with flight safety or design features that are sometimes
called critical characteristics in the aircraft industry. Key
characteristics may or may not also be categorized as critical
characteristics.” (Doc. 668-4 at 46).
-14-
of HVC methods including collection and use of SPC data.
Quality Assurance; SPC. The quality control procedures adopted
by Boeing pursuant to FAA standards are in Boeing’s Advanced Quality
System (AQS) D1-9000 Revision A, dated 1996, and the Boeing Quality
Assurance Detailed Instruction Manual (Quality Manual) containing
revisions beginning in 1997. Boeing’s D1-9000 AQS system is divided
into two sections: the basic quality system and the advanced quality
system. Section 1 describes the basic quality system that must be in
place to be a Boeing supplier. It does not necessarily require HVC or
SPC. Among other things, it provides that the supplier “shall perform
100% inspection, acceptance sampling[,] or statistical process control
for in-process inspection or final inspection for each characteristic
of a product.” Section 2, the advanced quality system, “describes a
process for improving quality by systematically reducing the variation
of key characteristics.” (Doc. 668-4). For a supplier to obtain Boeing
approval under Section 2, it must have the ability to determine and
measure the variation of key characteristics and show statistical
control and capability8 of
the
key
characteristics.
When
a
key
characteristic is not in control and/or not capable, corrective action
must be taken by the supplier to identify and establish control of key
8
Process capability is a statistically derived number indicating
the spread of a process, customarily plus or minus three standard
deviations (99.73%), into which measured items (i.e. parts) fall. It
is also referred to as the “natural spread” or common cause
variability in process output. (Doc. 669-5 at 5). Statistical control
occurs when results fall within these statistical limits. Results
falling outside of these limits indicate some special cause
variability that must be identified and removed from the process.
Cpk is the process capability index, which measures the ability
of the process to produce output within the engineering specification
limits for the part.
-15-
sources of variation, and 100% inspection may be required until the
characteristic is back in control and the process is capable. Under
either section, the supplier is required to take corrective action
when noncompliances are identified by a Boeing audit.
According to Boeing’s ATA design guide (Doc. 669-5), use of
reliable processes for ATA key features is critical to the success of
ATA
assemblies,
because
tolerances
for
ATA
key
features
are
significantly smaller than for traditional designs. Using force to
make ATA parts fit can damage or deform the assembly, so accuracy of
the detail parts and adherence to specified tolerances is essential.
The ATA design guide (Doc. 669-5) also states that successful
implementation
of
ATA
requires
control
of
random
variations
in
manufacturing processes. Manufacturers often use tolerance analysis
to establish and verify such control. If an assembly consists of
numerous manufactured parts, the acceptable variation or “tolerance
level” for each part must be considered in determining whether the
overall assembly will be acceptable. Variations in individual parts
can accumulate or “stack up” and cause critical features of the final
assembled product to be unacceptable.
Two common methods of tolerance analysis are arithmetic (or
“worst
case”)
and
statistical
(or
“RSS”9)
analysis.
Arithmetic
analysis adds up the maximum possible variation for each part to show
the
“worst
case”
scenario
for
an
entire
assembly.
Because
it
anticipates the worst possible outcome, a design using arithmetic
9
RSS or “root-sum-squared.” Boeing may actually use more complex
statistical methods, but for purposes of this motion the foregoing
description is sufficient.
-16-
analysis requires the smallest or “tightest” manufacturing tolerance
for individual parts to ensure that the total assembly does not exceed
acceptable limits. Statistical tolerance, by contrast, relies on the
concept of a normal distribution or bell curve to predict that random
variations will usually fall toward the middle of a range rather than
at the extremes. Using statistical tolerance, a manufacturer can
prescribe
“looser”
individual
part
tolerances
and
still
have
confidence that the final assembly will be within acceptable limits.10
To use this method, the manufacturer must monitor the process to
identify the normal range of variation and must ensure that the
process stays within that range.
Flag note S3.
Boeing’s ATA Design Guide provided that ATA key
feature tolerances “are determined by a statistical tolerance ... or
a worst case analysis of the assembly. This document [the Design
Guide] contains a brief discussion of statistical analysis.” An
ensuing section on statistical tolerancing states:
When statistical tolerancing is used on an
engineering drawing, the corresponding arithmetic
tolerances may also be shown. The statistical
tolerances will be identified with an “S” series
Flag Note. If Manufacturing elects to build to
statistical tolerances rather than arithmetic
tolerances, the part features must be fabricated
using statistical process controls; and Quality
Assurance shall accept/reject parts based on
statistical acceptance methods. Part acceptance
requirements for statistically toleranced parts
is based on evaluation of process data or lot
10
According to Boeing’s ATA design guide, statistical
tolerancing also “takes advantage of the high probability that the
features in a tolerance path on any given assembly will deviate from
nominal in both directions such that the deviations negate each other
and are not all additive.” This results in “a larger tolerance band”
for individual details. This method accepts a small probability
(typically .27%) that the final assembly will be non-conforming.
-17-
measurement data. Each coordinate axis is
analyzed independently .... If the results of the
analysis require statistical tolerancing to
predict good assemblies/installations, the
following notes shall be used on the drawings
that specify these tolerances:
FLS2
FEATURES IDENTIFIED AS STATISTICALLY TOLERANCED SHALL
BE PRODUCED WITH STATISTICAL PROCESS CONTROLS, OR THE
MORE RESTRICTIVE ARITHMETIC TOLERANCES ON THE DRAWING.
THE STATISTICAL TOLERANCE APPLIES ONLY WHEN PROCESS
MEASUREMENTS MEET THE FOLLOWING REQUIREMENTS: 1) THE
PROCESS CONTROL CHARTS SHOW THAT THE ASSOCIATED
MANUFACTURING PROCESS IS IN CONTROL. 2) THE MEAN
DEVIATES FROM NOMINAL NO MORE THAN 10 PERCENT OF THE
SPECIFIED TOLERANCE. 3) THE MINIMUM Cpk IS 1.0, WITH 90
PERCENT CONFIDENCE. * * *
FLS3
FEATURES IDENTIFIED AS STATISTICALLY TOLERANCED SHALL
BE PRODUCED WITH STATISTICAL PROCESS CONTROLS. THE
DRAWING
TOLERANCE
APPLIES
ONLY
WHEN
PROCESS
MEASUREMENTS MEET THE FOLLOWING REQUIREMENTS: 1) THE
PROCESS CONTROL CHARTS SHOW THAT THE ASSOCIATED
MANUFACTURING PROCESS IS IN CONTROL. 2) THE MEAN
DEVIATES FROM NOMINAL NO MORE THAN 10 PERCENT OF THE
SPECIFIED TOLERANCE. 3) THE MINIMUM Cpk IS 1.0, WITH 90
PERCENT CONFIDENCE. WHEN THESE REQUIREMENTS ARE NOT
SATISFIED, INDIVIDUAL PRODUCT MEASUREMENT MUST FALL
WITHIN +/- THIRTY PERCENT OF THE SPECIFIED TOLERANCE,
CENTERED ON NOMINAL. * * *
FLS4
FEATURES IDENTIFIED AS STATISTICALLY TOLERANCED SHALL
BE PRODUCED WITH STATISTICAL PROCESS CONTROLS. PROCESS
MEASUREMENTS MUST MEET THE FOLLOWING REQUIREMENTS: 1)
THE PROCESS CONTROL CHARTS SHOW THAT THE ASSOCIATED
MANUFACTURING PROCESS IS IN CONTROL. 2) THE MINIMUM Cpk
IS 1.0, WITH 90 PERCENT CONFIDENCE. * * *
Application notes in the guide indicate the usage of Flag S2 is for
“any ATA drawing with both arithmetic (worst case) and statistical
tolerances for a feature.” Flag S3 is for “any ATA drawing with only
statistical tolerances for a feature.”
Boeing’s engineering drawings or data sets for many of the 737NG
ATA parts manufactured by Ducommun included flag note S3. Relators and
their experts contend flag note S3 mandated the use of NC machines and
the collection of statistical process control data in making these ATA
-18-
parts.11
Boeing cites the testimony of the two authors of the Design
Guide’s discussion of Flag Note S3. Michael Kuss states that he and
colleague Bob Atkinson wrote these provisions recognizing that Boeing
does not dictate particular methods of drilling ATA holes and that
suppliers might use NC machines or they might use drill jigs. If a
supplier used NC machines and collected enough SPC data to show that
the process was in control, a wider tolerance for ATA holes was
allowed because it could be determined statistically that the holes
would rarely mismatch.
If the supplier used drill jigs, however, the
process “was not conducive to data collection for SPC purposes data”
and so “we provided a tighter tolerance – forty percent tighter, to
be exact, if SPC data were not used for product acceptance.” Kuss said
the line next to Flag S3 [i.e., .0300 x .60 = .0180] means that the
hole center must fall within a circle with a .03” diameter centered
on the nominal location, but if the supplier does not have sufficient
SPC data, then the tolerance is only 60% of that, or .018. Kuss states
that Flag Note S3 “was not meant to require SPC in every instance” and
that they inserted the phrase “when these requirements are not met”
to explain that different methods of manufacture would result in
different
tolerances
depending
on
whether
or
not
SPC
data
was
generated. According to Kuss, “the use of drill jigs by Ducommun, or
any other supplier, was acceptable, so long as the hole location
11
Relators’ brief asserts that Flag Note S3 “was only the tip of
the ice berg,” arguing that Boeing was also responsible for Ducommun’s
failure to collect and use SPC data to measure key characteristics,
for its poor tooling made from the wrong materials, for its use of
ball peen steel hammers on ATA parts, and for failing to require
proper first article inspections and reports.
-19-
tolerances stated in the drawings were satisfied.” (Doc. 645-11). Coauthor Atkinson similarly states that they knew “suppliers would have
options for the method of drilling” and that they provided different
tolerances depending on whether the supplier conducted a statistical
analysis. If SPC data was collected, a 40% wider tolerance was
permitted, but “when holes were drilled using other methods, such as
drill jigs, that did not lend themselves to collection of statistical
data,” a tighter tolerance was required to ensure that holes would
line up properly. (Doc. 645-12). Boeing cites further evidence in
support of the same conclusion, including expert testimony from former
Boeing design engineer Theodore Gladhill, who says he interprets Flag
Note S3 in the manner described above and that he is “aware of no
engineer at Boeing who interpreted flag note S3 differently.” (Doc.
645-10). He adds that after Ducommun stopped supplying these parts for
Boeing, the new supplier used some of the same drill jigs to fabricate
737NG ATA parts for Boeing.
Relators’ experts, meanwhile, opine that Flag Note S3 required
the use of NC machines and SPC data, emphasizing the note’s first
sentence
providing
that
“FEATURES
IDENTIFIED
AS
STATISTICALLY
TOLERANCED SHALL BE PRODUCED WITH STATISTICAL PROCESS CONTROLS.”
Relators contend this made application of SPC (and therefore use of
NC machines) mandatory. (Doc. 702-4 at 712). Relators concede that the
12
Dreikorn states: “This engineering and type design requirement
did not give Ducommun a choice of using computers or not using
computers to fabricate the part. Ducommun did not have an option to
choose between using computerized machinery and using hand forming
manufacturing processes that were not capable of satisfying
‘statistical process control’ requirements. It is understood within
the aviation industry that the use of ‘shall’ in engineering drawings
is mandatory and requires strict conformity. Boeing/Ducommun was
-20-
flag note sometimes allows acceptance of parts where statistical
control has been lost, but argue the parts must still be produced
using SPC and, in any event, they say the circumstances allowing drill
jigs to be used for acceptance were not satisfied, a point they say
is shown by the tooling audit report. Relators’ expert Dr. Dreikorn
argues that the language of the design drawings speaks for itself and
cannot be “reinterpreted” retroactively by Boeing’s witnesses. He
further
opines
that
the
failure
to
use
SPC
to
control
key
characteristics other than ATA holes was also a violation of Boeing’s
production certificate.13
Ducommun production
Ducommun supplied Boeing with over 200 different types of parts
for the 737NG aircraft, including chords, fail-safe chords, and
frames. All but 16 formed at least part of principal structural
elements. Ducommun was the single source supplier (i.e., the only
manufacturer)
for
nearly
all
the
structural
fuselage
parts
it
contracted to produce for Boeing between 1996 and 2004. It was a
primary source manufacturer of bear straps, which reinforce the skin
and frame around door openings. Boeing incorporated the component
required to use computerized machinery to produce these parts.” (Doc.
702-4 at 7).
13
See Doc. 702-4 at 17, asserting that the FLKEY flag note in
drawings “relates to Key Characteristics identified in the engineering
drawings that are integral to Hardware Variability Control (HVC). []
HVC cannot be controlled without SPC data. The utilization of
electronic datasets and computer controlled equipment for production
and inspection purposes are derived from the overall requirements of
ATA and Hardware Variability Control (HVC), as provided for in
relevant design, production, inspection and purchasing documents (as
defined by both relevant type design and production certificate
requirements), as well as, geometric datum being represented in space
through electronic datasets.”
-21-
parts it received from Ducommun into the fuselage structures of the
737NG aircraft at issue that it sold to the government.
The contracts between Boeing and Ducommun required Ducommun to
implement and maintain a quality system that met or exceeded the
requirements of Boeing’s AQS D1-9000. The latter system required
suppliers to establish procedures to ensure that non-conforming
products were not used or installed and to notify Boeing of such nonconformities. It required the supplier to provide a detailed “first
article inspection” (FAI) on a new part that was representative of a
first production run to verify that the prescribed production methods
produced
an
acceptable
specifications.
provided
that
dispositioned
Boeing’s
item
Quality
non-conforming
by
a
in
Material
accordance
Assurance
material
Review
was
Board
with
Manual
to
(MRB)
engineering
(Doc.
be
652-6)
marked
and
consisting
of
representatives of quality assurance and engineering departments. By
regulation, the MRB had the responsibility of determining whether
parts withheld as non-conforming were in fact serviceable, needed to
be reworked, or should be rejected.
Ducommun was also required under its contracts with Boeing to
obtain and maintain ATA qualification. Ducommun was supposed to
measure all Key Characteristics and validate that they met engineering
tolerances. Boeing’s contracts with Ducommun provided that Ducommun
“may utilize SPC control charts ... in an effort to provide process
improvements.” Ducommun was required to submit a sampling plan (i.e.,
less than 100% inspection) for ATA parts.
Ducommun
obtained
ATA
qualification
from
Boeing
after
demonstrating that it had NC machine and CMM capability to manufacture
-22-
and measure ATA parts. On May 10, 1995, Boeing delegated to Ducommun
authority to perform quality assurance inspections of Ducommun’s work
product on Boeing’s behalf. This authority did not extend to ATA parts
until a first article inspection was completed by Boeing. In May of
1996, Boeing extended Ducommun’s delegated authority to include
inspection of ATA parts. This delegation saved Boeing the cost of
inspecting Ducommun parts.
Ducommun initially produced the contracted-for ATA parts on NC
machines. First article inspection was performed on the initial NC
machined items. Apparently because it could not keep up with demand
using only NC machines, however, and because it was a cheaper
alternative, Ducommun began sometime in 1996 to use what are referred
to here as hand-directed “wagon wheel tools”14 to produce ATA parts.
(Relators dispute whether these tools qualified as “drill jigs” but
they cite no evidence that Boeing did not consider them as such.)
Ducommun opened a “Boeing cell” in its manufacturing facility where
it hand-drilled and ground ATA parts on wagon wheel tools. There were
no NC machines in the Boeing cell. Ducommun did not collect or keep
SPC data on key characteristics of the ATA parts – the hand-directed
tools being used did not collect such data – although its contracts
with Boeing required it to do so. Boeing managers knew that Ducommun
was not using computerized machines to fabricate ATA parts.
Ducommun tooling audit.
In 1999, Boeing detected non-conformities in parts known as
“bear straps.” Ducommun was one of the suppliers of these parts.
14
The tools were given this name by Ducommun employees because
they resembled half of a wagon wheel.
-23-
Boeing wrote up an NCR (non-conforming part report) and Boeing’s MRB
determined that a shipment of 24 of these parts should be scrapped.
The parts had unacceptable “shy” edge margins. Boeing suspended
Ducommun’s work on the parts and its delegation of source authority
for the parts. Relators Prewitt and Ailes were members of a Boeing
“bear strap team” that investigated the problem.
In 1999, Boeing appointed a “tooling audit team” to audit
numerous tools at Ducommun that were being charged to and paid for by
Boeing. Relators were members of the team. The scope of the audit
included inventory accountability, evaluation of tool usage, storage
and quality, manufacturing planning and processes, and tooling costs.
The resulting August 24, 2000 audit report contained the following
executive summary:
The
severity
of
anomalies discovered at
AHF-Ducommun is such that [Boeing] is pursuing
restitution far
a potential amount
of
$5.3
million. Although disputed
by AHF-Ducommun
management, evidence of mischaracterization of
AHF-Ducommun's current manufacturing process was
discovered. Tools contractually represented to
be
required
for
a numerical control
(NC)
machine
process were
found
being
used as
router
fixtures. Planning documents that were
provided to the audit team indicated NC machine
processing, NC machine- type
tools, and NC
programming tapes. However, planning documents
on the shop floor at AHF-Ducommun indicated
otherwise. Observations
at
AHF-Ducommun
revealed a labor- intensive hand-route[/]form
process where machining-tools are used as
shop-aids and contour templates. Misrepresented
processes, along with
inadequate inspections
were found to exist at AHF-Ducommun.
The body of the report included the following finding, among others:
Two sets of planning documents were found to
exist.
Planning provided to BCA-WD indicated
numerical control (NC) manufacturing process.
Planning used
by
AHF-Ducommun
production
-24-
personnel
indicated
a
hand-route/form
manufacturing process. Observations, interviews,
and process evaluation revealed a manufacturing
process
that includes hand-route, hand-form
using ball-peen steel hammers, scribing of the
profile, and hand-sanding with a belt sander.
ATA
holes are
hand-drilled on a router
fixture identified and sold to BCA-WD as a mill
fixture.
This
manufacturing
process
was
substantiated
by
AHF-Ducommun
production
personnel as being the "standard practice" for
production of BCA-WD
parts.
AHF-Ducommun
management contends that Boeing parts are NC
machined. Contractual and financial agreements
are based on NC machined production, in full,
and
not on
manufacturing
techniques
AHF-Ducommun
currently deploys in subsequent
production.
The report proposed the following management actions by Boeing in
response to these conditions: "Correct the manufacturing planning
documentation to reflect the current and actual manufacturing process"
and "Ensure that hand-form operations are performed in accordance with
BAC 5300 and all other applicable specifications."
The audit report further found:
In 1996, AHF-Ducommun was given full delegation
of product acceptance. First Article Inspection
was performed on initial production, which used
the NC process.
Once the First Article
Inspection was obtained,
it is believed
AHF-Ducommun
reverted
to
the
current
manufacturing process stated above. The current
manufacturing process has not been validated with
First Article Inspection, as required by Dl-9000,
Section 1.10.
Currently,
AHF-Ducommun uses tools for the
acceptance of parts.
These tools were found to
be out of calibration
and
inadequate
to
assure
dimensional
accuracy
of production
parts. ATA holes are checked back to production
tooling, which is not in compliance
with
800-10438, "Requirements For Product Acceptance
To Statistical Tolerance,” a supplement that
provides interpretation of statistical tolerances
per RDS-1065 and defines the approved methods for
-25-
determining if product
drawing requirements.
The
management
action
proposed
meets
by
the
Boeing
statistical
in
response
was
to
“[i]mplement additional controls to ensure there is adequate supplier
oversight.
Direct the supplier to conduct
Inspection
to
validate
Management
Action
the
current
00-8-039-07).
a
First
Article
manufacturing process (see
Instruct
AHF-Ducommun
to
cease
acceptance of parts using tools.” Other management actions listed in
the report included suspension of all new business with Ducommun and
“consider disengagement.” All Boeing divisions were to be notified of
the report to assess total impact to Boeing.
Boeing managers were aware during this time frame that some
suppliers were not collecting SPC data on 737NG detail parts. These
suppliers felt the data was not helpful for making better parts. They
were not using the data so they stopped collecting it. Boeing’s
Quality Assurance initially viewed NC machine processes as essential
for ATA production, but they eventually “backed off” and did not
require proof that NC processes were used if the parts otherwise met
engineering requirements.
Boeing entered into a confidential “Settlement and Release
Agreement” with Ducommun on January 31, 2001. Under the agreement
Ducommun admitted no wrongdoing, but it reduced the prices it charged
Boeing for 737NG parts by three percent. Among the terms of the
agreement were that Ducommun agreed to provide tool designs for
certain identified tools; it was to submit and adhere to a Boeing
approved periodic tooling calibration plan in accordance with D1-9000;
and it was to submit valid first article inspection reports for the
-26-
current method of manufacture for any parts as to which the parties
agreed that the original method of manufacture had changed. Boeing
agreed, among other things, to waive tool design requirements for
tools not used for final acceptance; to not require any revisions to
listed tools; and to not require Ducommun to create missing NC tapes.
Boeing thereby essentially approved Ducommun’s current tooling and
method of manufacture. Ducommun continued to use the wagon wheel tools
to make ATA parts without NC machines or SPC data collection.
Ducommun performed physical inspections on 100% of the parts it
made for Boeing. When it found parts that did not conform to the
drawings and engineering requirements, it would either scrap the
parts, rework them within engineering specifications, or issue a
Nonconformance Report (NCR). Boeing’s Material Review Board (MRB)
would then review the NCR and determine disposition of the part. The
MRB would determine whether the part should be scrapped, reworked, or
used “as is.”
At the time the 737NG aircraft at issue were delivered to the
government, Boeing was aware of Ducommun’s method of manufacture and
quality control system relating to 737NG parts. The government paid
Boeing a total of approximately $984,843,057 for such aircraft. At no
time did Boeing disclose Ducommun’s methods to the government or
obtain a waiver for any nonconforming parts. (Boeing maintains that
the parts were conforming and required no special disclosure).
For nine of the 737NG aircraft, Boeing obtained and submitted
a Conformity Certificate for military aircraft signed by both a Boeing
representative
and
a
Boeing-employed
FAA
designee.
In
the
certificates, Boeing expressly certified that each aircraft had been
-27-
manufactured in conformity with data forming the basis for type
certificate approval of 737NG aircraft. The remaining 737NG aircraft
carried FAA airworthiness certificates.
FAA Review of Relators’ Allegations
In 2002, as a result of the allegations in relators’ initial
lawsuit, the FAA opened a Suspect Unapproved Parts [SUP] investigation
in accordance with its regulations. The FAA’s Transport Airplane
Directorate led the investigation. It coordinated with the Defense
Criminal Investigative Service (DCIS) and the FAA’s Manufacturing
Inspection District Office (MIDO) in Wichita. Among other things, the
investigators reviewed relators’ complaint, met with the relators,
made an unannounced visit to Ducommun where investigators sampled and
inspected parts and evaluated the manufacturing process, and reviewed
records. The FAA concluded that the “current manufacturing process
appeared to have necessary controls in place that would result in a
product conforming to type design.” The report stated that “no
nonconforming parts were found during the investigation at Ducommun,”
that “all deviations to type design were recorded and approved through
MRB [Material Review Board] and records were complete.” It said a
review of databases showed no corrective actions or deficiency reports
on the parts initially singled out by relators (bear straps and failsafe chords). The FAA closed the investigation in 2004, stating it was
“unable to discover any evidence to support the allegations and no
criminal, civil, or administrative action is anticipated.” (Docs. 7123).
In 2005, relators submitted a second SUP report to the FAA after
retaining engineering experts. The FAA met with relators’ counsel and
-28-
with at least one of relators’ experts. Relators gave the FAA a list
of 737NG part numbers supplied by Ducommun and several Boeing SERs
citing deficiencies in Ducommun’s manufacturing processes. Following
an investigation, the FAA issued another report. It noted that the
Wichita MIDO office had witnessed the installation of the major
section fuselage joins (including skins, doubles, bear straps, shear
ties, frames, stringers and fail-safe chords) and found no evidence
of nonconforming ATA holes. The installation was witnessed “without
any signs of contour mismatch, binding and/or galling or enlargement
of ATA holes. The ATA holes were used to locate and install the
assemblies during the major join operation.” It said that following
its investigation and findings relating to SPC processes in 2002 and
2003, “Boeing provided this office with acceptable corrective action
regarding their SPC process,” and that the current manufacturing
process had the necessary controls in place. As for the Boeing SERs,
the FAA report noted that Boeing had requested corrective actions from
Ducommun, that Boeing had not delegated MRB authority to Ducommun, and
that nonconformance reports (NCRs) were generated by Boeing on some
of the Ducommun supplied parts.
FAA investigators specifically considered relators’ contention
concerning flag note S3. The FAA interpreted the language requiring
a tighter tolerance “when these [SPC] requirements are not met” as
allowing a deviation from the SPC requirements and allowing for
acceptance of ATA parts if they met the tighter tolerances on the
drawing. The FAA said the investigation “determined that the parts
were manufactured and approved in accordance with the approved data,
processes, and procedures as set forth by Boeing” and that “the parts
-29-
are considered approved.” (Doc. 645-3).
In
addition,
at
the
request
of
the
Defense
Criminal
Investigative Service (DCIS), the FAA’s Chief Scientific and Technical
Advisor for Fatigue and Damage Tolerance, Robert Eastin, reviewed
relators’ interpretation of Boeing’s drawings. He made a report to
DCIS setting forth his findings. Eastin subsequently submitted a
declaration in this matter and was deposed. Eastin’s declaration
states that Ducommun’s use of drill jigs was conforming:
It appears that [Boeing] designers had envisioned
that the locating holes would primarily be
created using an automated process and control of
automated processes typically requires the
collection and analysis of statistical process
control (“SPC”) data. The designers, however,
also permitted an alternative process of creating
the holes using drill fixtures and hand drilling
and, in practice, it was found to be a more cost
effective part fabrication process. Although the
engineering drawings identify the locator hole
dimensional requirements, they do not dictate the
method of creation. Even if the engineering
drawings required an automated process for hole
creation, the use[] of hand drilling using drill
fixtures would not, in itself, be a safety
concern and could easily have been dispositioned
by a Material Review Board (“MRB”).
(Doc. 647-9 at 4). The declaration states that Eastin looked for
documented discrepancies with parts that were either improperly
dispositioned by Boeing’s MRB or not dispositioned at all and still
assembled into airplanes, but he found no such evidence. He said none
of the quality system issues pointed to by relators constituted part
discrepancies requiring MRB action. He states that he also looked for
evidence of in-service problems, such as reports of cracked, failed
or distressed parts, but saw none.
Eastin’s declaration says there is an absence of evidence to
-30-
support relators’ allegation that the airplanes in question are not
safe and should be grounded. “On the contrary, evidence indicates that
the form, fit and function of the subject parts are as required due
to conformance with the engineering drawings or as determined by MRB
action for documented nonconformities. I see no need for the FAA to
take any actions related to the safety of the affected airplanes,
including issuance of any Airworthiness Directives.”
In response to an inquiry from the media network Al Jazeera, an
FAA representative stated that the FAA “found the parts were produced
in accordance with type design.” Additionally, a DOJ representative
told Al Jazeera the government had “thoroughly investigated” relators’
allegations,
including
the
claim
that
the
Ducommun
parts
were
nonconforming because they were not manufactured using a computerized
method.” Doc. 645.
The FAA continued to certify 737NG aircraft with Ducommun parts
after becoming aware of relators’ allegations. The agency took no
action to revoke any certificates or to require remedial action in
light of the allegations.
Air Force and Navy Purchasers
Benjamin Butler, the Air Force program manager responsible for
approximately twelve of the aircraft at issue, indicated that he
relies on and trusts the FAA certification of the aircraft. Ronald
Tucker, the Navy program manager responsible for four of the aircraft,
testified that airworthy means to him that the FAA has approved it,
and “as far as this program [is] concerned, the FAA is my engineering
department. They signed off on it, it is done.... You know, the FAA
has certified the aircraft and these modifications ... I don’t rely
-31-
on Boeing for anything.”
These witnesses testified that the aircraft
have met or exceeded contractual performance expectations.
The Air Force initially leased several of the aircraft at issue
rather than purchasing them outright. The Air Force had the right to
cancel the leases at the beginning of each year and the option to
purchase the aircraft when the leases ended. Between 2008 and 2010,
the Air Force opted to purchase the leased aircraft despite being
fully aware of relators’ claims.
747 and 757 Aircraft.
Aside from a speculative assumption by one or more of relators’
experts, relators cite no evidence of any nonconformities in Ducommun
parts installed on 747 or 757 aircraft.15
Twenty-five of the relevant invoices for 747 and 757 aircraft
were issued six or more years before March 11, 2005.
B. Relators’ Motions to Strike the FAA SUP Reports and Eastin
Testimony (Docs. 682, 687)
Relators move to strike the foregoing 2004 and 2005 SUP reports
and the declaration and deposition testimony of Robert Eastin.
Relators contend the FAA SUP reports do not qualify for the
public records hearsay exception in Federal Rule of Evidence 803(8)
because they are untrustworthy. They say the reports are untrustworthy
because: they were untimely; the FAA investigators lacked skill and
experience; the investigation was conducted without a hearing; the
reports were prepared for litigation; the reports contain redactions
and multiple hearsay; and no basis is set forth for the reports’
15
See Hammerquist Depo., Doc. 702-22 at 127-29.
-32-
conclusions. Relators argue the reports are not even relevant “because
they do not help the finder of fact determine the truth as to the
existence or absence of non-conforming parts installed on Boeing
aircraft.” Relators also complain the reports are prejudicial and
unfair “in light of the influence Boeing not only has with the FAA but
has actually exercised in this case, as when Boeing’s counsel drafted
declarations for an FAA representative.” This is a reference to the
Eastin declaration, which relators contend was “effectively created
by Boeing for the purpose of litigation.” Relators further argue
Eastin’s testimony should be excluded as an improper and unsupported
expert opinion.
SUP Reports. The court concludes that the SUP reports fall under
the public records exception of Rule 803(8)(A)(iii). They contain the
FAA’s findings from a legally authorized investigation and relators
have not shown that the reports should be excluded as untrustworthy.
See Perrin v. Anderson, 784 F.2d 1040, 1047 (10th Cir. 1986) (listing
factors to be considered). The reports were not untimely considering
the scope, extent and timing of relators’ FCA allegations; relators
make no showing that the FAA investigators lacked the requisite
qualifications (relators apparently did not attempt to depose the
investigators or otherwise discover their qualifications); the claims
and statements of relators and their experts were considered by the
FAA in its investigation; and the reports were not prepared for
purposes of litigation but resulted from the FAA’s legal obligation
to investigate upon receiving notice of suspected unapproved parts.
The FAA’s investigation included both physical inspection and document
review at Ducommun and at Boeing. The SUP reports cite a factual and
-33-
regulatory basis for the conclusions stated therein. And as defendants
point out, in reviewing this matter the FAA had a strong incentive to
identify
and
remedy
any
verifiable
safety
problems.
Relators’
disagreement with the findings in the SUP reports and their experts’
wide-ranging criticisms of the FAA’s motives and competence are not
enough to warrant exclusion of the FAA’s technical assessment of
relators’ allegations. Cf. U.S. ex rel. Milan v. Regents of Univ. of
Cal., 912 F.Supp. 868, 880 (D. Md. 1995) (investigative report of
oversight agency was admissible); Beech Aircraft Corp. v. Rainey, 488
U.S. 153, 170 (1988) (“As long as the conclusion is based on a factual
investigation and satisfies the Rule’s trustworthiness requirement,
it should be admissible along with other portions of the report.”).
Relators have shown no unfair prejudice or other grounds for excluding
these reports.
Eastin declaration and testimony. Relators also move to strike
the declaration and deposition testimony of Robert Eastin.
an employee of the FAA.
Eastin is
His title is Chief Scientific and Technical
Advisor for Fatigue and Damage Tolerance.
When relators made their
initial claim, the Defense Criminal Investigative Service (DCIS) and
the FAA asked Eastin to evaluate
relators' claims –- specifically,
whether the 737 aircraft were unsafe and should be grounded.
Eastin
did so and prepared a report. The report itself has never been
disclosed
by
the
government,
which
claims
it
is
privileged.
Nevertheless, the government made Boeing aware of Eastin and agreed
that Eastin (with Boeing's assistance) could prepare a declaration,
which was disclosed to relators (Docs. 683-8). Thereafter, Eastin was
-34-
deposed at length by relators' counsel (Docs. 686; 711-1).16
Eastin's
declaration and testimony are distinctly unfavorable to relators.
Relators' initial objection is that Boeing did not timely
identify Eastin as an expert witness.
but specious.
The claim is factually correct
Boeing identified Eastin as a person having knowledge
of facts, which clearly he does (Doc. 683-2). Boeing did not identify
Eastin as an expert because he is prohibited by regulation from giving
expert opinion or testimony.17 (Relators' counsel are presumed to have
been aware of the regulation when they prepared their clients' motion
to
strike).
Therefore,
relators'
objection
on
this
ground
is
overruled.
Relators' next objection is that Eastin's declaration and
testimony
cannot
be
admitted
under
Fed.
R.
Evid.
701
or
702.
Notwithstanding the fact that Boeing has not offered Eastin as an
16
The procedures for obtaining testimony of an employee of the
Department of Transportation in litigation between private parties are
set forth in 49 C.F.R. Part 9. A request for such testimony must
include a certification that the party will not seek expert or opinion
testimony from the witness and will not seek the testimony of the
witness at a hearing or trial. 49 C.F.R. §9.15. No employee may
provide testimony or disclose information acquired in the performance
of their official duties except as authorized by the regulations or
other law. §9.5. If authorized to testify, the employee may testify
only as to facts within his personal knowledge and arising out of his
official duties. The employee is not to testify as to facts contained
in a report without permission from agency counsel to disclose the
information, and shall not testify as to facts when agency counsel
determines the testimony would not be in the best interests of the
United States if disclosed. An employee shall not testify as an expert
with regard to any matter arising out of his official duties. §9.9.
17
See 49 C.F.R. §9.9.
-35-
expert witness (and no Daubert hearing has been held18), relators mount
a
full
Daubert-style
attack
on
Eastin's
supposed
lack
of
qualifications, bias (based on Boeing's involvement in the preparation
of his declaration), his "incomplete" knowledge of the facts and lack
of "independent testing," (whatever that is supposed to mean in the
context of this case).
Boeing, as expected, disputes each of relators' objections.
Boeing points out, correctly, that it didn't ask Eastin to review
relators' claims; the government made the request.
The materials
which Eastin reviewed came, in whole or in part, from relators'
counsel and expert witnesses.
Eastin counseled with other FAA
employees and then issued a report.
Boeing was not involved in any
of this, which relators do not dispute but rather have chosen to
pretend did not happen.
Boeing claims that Eastin's declaration and his deposition
testimony are admissible as statements by a party opponent, i.e., by
the government.
Fed. R. Evid. 801(d)(2).
Boeing argues that the
government is a real party in interest because it stands to recover
a
great
deal
of
money
should
relators
prevail.
From
a
legal
standpoint, the government has an interest in the case, at least in
the abstract.
But from a practical, case-specific standpoint, the
government's position and Boeing's are non-adverse and aligned. Why
else would Boeing want to use Eastin's declaration and testimony? Why
else would relators so strongly object to their use?
18
In a footnote of their reply brief (Doc. 715 at 5), relators
now say that “[i]f this Court is inclined to consider the opinions
contained in Eastin’s declaration and deposition testimony ...
Plaintiffs respectfully request a Daubert hearing.”
-36-
Fed. R. Evid. 801(d)(2) provides:
An Opposing Party's Statement. The statement is offered against
an opposing party and:
(A) was made by the party in an individual or
representative capacity;
B)is one the party manifested that it adopted or
believed to be true;
(C) was made by a person whom the party
authorized to make a statement on the subject;
(D) was made by the party's agent or employee on
a matter within the scope of that relationship
and while it existed; or
(E) was made by the party's coconspirator during
and in furtherance of the conspiracy.
The statement must be considered but does not by itself
establish the declarant's authority under (C); the
existence or scope of the relationship under (D); or the
existence of the conspiracy or participation in it under
(E).
Whether the Eastin materials qualify as statements of a party
opponent under Rule 801(d)(2) is problematic. The United States
clearly has some interest here, although it is not a party to the
action. U.S. ex rel. Mergent Svcs. v. Flaherty, 540 F.3d 89, 93 (2nd
Cir. 2008) (while relators have a stake in the outcome, the government
remains the real party in interest in an FCA qui tam case). Boeing
cites two cases in support of its Rule 801(d) argument: U.S. ex rel.
Milam v. Regents of Univ. of Cal., 912 F.Supp. 868, 880 (D. Md. 1995)
and United States ex rel. Hill v. Univ. of Medicine, 2010 WL 4116966
(D. N.J., Oct. 18, 2010), aff’d, 448 Fed.Appx. 314, 2011 WL 5008427
(3rd Cir. 2011). But neither of these cases bears much similarity to
this case. In Milam, for example, no claim of privilege was made with
respect to the underlying government report. The Milam court was
-37-
persuaded in part by the fact that the report was “relevant and highly
probative in that it is a detailed report, written by a scientific
oversight
agency,
on
the
precise
issue
before
this
Court.”
By
contrast, the contents of the FAA report have been shielded from
disclosure by the United States’ claim of privilege. As for Hill,
which relied on Milam, neither the district nor the appellate opinion
even mentions Rule 801. Hill’s relevance is tenuous, at best.
The issue which most concerns this court, however, is Boeing's
position that Eastin can state his "conclusions . . . regardless of
the accuracy of his conclusions."
(Doc. 711 at 22).
Eastin's
bottom-line "conclusions," as described by Boeing are: "He is part of
the factual story at the FAA.
Relators' complaints were received and
processed; no action was taken because the FAA concluded the aircraft
were safe.
Those facts speak directly to falsity, materially, and
scienter. Mr. Eastin can testify to those facts based on his personal
knowledge and participation." (id. at 3). Boeing also says Easton is
a fact witness because "[h]e has personal knowledge of the FAA process
for reviewing relators' contentions to determine whether they warrant
FAA action, including issuance of an Airworthiness Directive, and
rejecting those contentions."
(Doc. 711 at 17).
Does it make sense to allow Eastin to testify about these things
"regardless of their accuracy"?
Not to this court.
Moreover,
Eastin's testimony that the FAA (in reality, Eastin) concluded that
the 737 aircraft were "safe" is far more than just a fact; it is the
FAA's conclusion based upon Eastin's (and other FAA employees')
opinions.
Since Eastin can't be a Rule 702 expert because of the
regulation, the only other way he can give opinion testimony is by
-38-
qualifying under Rule 701.
But Rule 701(c) precludes lay opinion
testimony if it is ". . . based on scientific, technical or otherwise
specialized knowledge within the
scope of Rule 702."
How can
Eastin's testimony be anything else?
Even though Boeing is correct that Rule 801(d)(2) does not
require a showing of trustworthiness19, the court concludes that
Eastin’s declaration and deposition testimony should be excluded under
Rule 403. The simple fact is that the contents of Eastin’s report to
the FAA are unknown. The government has shielded the report through
an assertion of privilege -- though the court has no idea why -- and
Boeing
has
not
challenged
that
assertion.
Instead,
Boeing
has
attempted to recreate the contents of the report through other means.
But the means of doing so -- a restricted declaration, a deposition
hampered by claims of privilege, a limited opportunity to discern the
contents of the underlying report, and a legal restriction on the
witness’s testimony at trial -- presents an unacceptable substitute.
It unduly restricts what should be a free and open inquiry into
Eastin’s report to the FAA, which is the whole point of his testimony.
On the other hand, the probative value of Eastin’s declaration and
deposition testimony appear to be limited because they more or less
19
In Grace United Methodist Church v. City of Cheyenne, 451 F.3d
643, 667 (10th Cir. 2006), the court noted statements of a party
opponent require no showing of trustworthiness and may be introduced
even though the declarant lacks personal knowledge of the matter
asserted. But Grace itself made clear that the rule does not
obliterate all limitations on admission of such statements. Grace
found that the opposing party could use a bishop’s letter against his
church insofar as it contained admissions about a church matter, but
not insofar as it contained the bishop’s legal opinions. This was so
because he was “entirely unqualified to pontificate on legal
questions” and his statements therefore amounted to “irrelevant
hearsay.” Grace, 451 F.3d at 669.
-39-
duplicate other evidence in the record. The FAA’s actions with respect
to these aircraft and with respect to relators’ allegations are
essentially set forth in the SUP reports and elsewhere.
Rule 403 provides that the court may exclude relevant evidence
if its probative value is outweighed by a danger of unfair prejudice.
Absent an adequate showing that Eastin’s conclusions are trustworthy,
the court concludes it would be inappropriate to admit his scientific
opinions into evidence. See Aliotta v. Nat’l. R.R. Passenger Corp.,
315 F.3d 756, 763 (7th Cir. 2003) (“we see no good reason why
unqualified and unreliable scientific knowledge should be exempted
from the expert evidence rules simply because the speaker is an
employee of a party-opponent.”); Wright & Miller, 30B Fed. Prac. &
Proc. Evid. § 7015 (2014 ed.) (arguing Aliotta should have resorted
to Rule 403 and excluded any evidence whose probative value was
substantially outweighed by the danger of unfair prejudice).
Because
the
probative
value
of
Eastin’s
evidence
is
substantially outweighed by the danger of unfair prejudice, relators’
motion to strike Eastin’s declaration and deposition testimony is
granted. These materials will not be considered on summary judgment.
C. Summary Judgment Standards.
The rules pertaining to summary judgment are well-established.
Federal Rule of Civil Procedure 56(c) directs the entry of summary
judgment in favor of a party who “show[s] that there is no genuine
issue as to any material fact and that the moving party is entitled
to a judgment as a matter of law.” Fed.R.Civ.P. 56(c). An issue is
“genuine” if sufficient evidence exists so that a rational trier of
fact could resolve the issue either way, and an issue is “material”
-40-
if under the substantive law it is essential to the proper disposition
of the claim. Adamson v. Multi Community Diversified Svcs., Inc., 514
F.3d 1136, 1145 (10th Cir. 2008). When confronted with a fully briefed
motion for summary judgment, the court must ultimately determine
“whether there is the need for a trial – whether, in other words,
there are any genuine factual issues that properly can be resolved
only by a finder of fact because they may reasonably be resolved in
favor of either party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). If so, the court cannot
grant summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317,
322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
D. Elements of an FCA Claim.
Section 3729(a) of Title 31 prohibits making false or fraudulent
claims for payment to the United States. It makes any person liable
who “knowingly presents, or causes to be presented, a false or
fraudulent claim for approval,” §3729(a)(1)(A), or who “knowingly
makes, uses, or causes to be made or used, a false record or statement
material to a false or fraudulent claim,” §3729(a)(1)(B). Such acts
make the person liable to the U.S. Government for a civil penalty of
$5,000 to $10,000 “plus 3 times the amount of damages which the
Government sustains because of the act of that person.”20
The acts must have been knowingly done, but this standard does
20
The FCA was amended on May 20, 2009. The court will refer to
the amended version of the statute. Congress specifically provided
that two amendments – including the addition of §3729(a)(1)(B) – would
take effect as if enacted on June 7, 2008, and would apply to all FCA
cases pending on that date.
-41-
not require proof of a specific intent to defraud. §3729(b)(1). It is
satisfied if the person had actual knowledge of the falsity of the
information or acted in deliberate ignorance or reckless disregard of
the truth or falsity of it.
Relators and Boeing more or less agree on the essential elements
of relators’ claims. See Doc. 642 at 38-39. Relators can prevail under
§3729(a)(1)(A) by showing: (1) Boeing presented a claim for payment
or
approval
to
the
United
States;
(2)
the
claim
was
false
or
fraudulent; (3) the falsity was material to the government’s decision
to pay; and (4) Boeing acted with knowledge that the claim was false.
Relators can prevail under §3729(a)(1)(B) by showing: (1) Boeing
presented a claim for payment or approval to the United States; (2)
the claim was false or fraudulent; (3) Boeing made or used, or caused
someone else to make or use, a false record or statement to get a
claim paid or approved; (4) Boeing did so knowingly; and (5) the
falsity of the record or statement was material to the government’s
payment decision. These elements, which are tailored to the specific
allegations of this case, are consistent with case law construing the
statute. See e.g.,U.S. ex rel. Spicer v. Westbrook, ___ F.3d ___, 2014
WL 1778030 (5th Cir., May 5, 2014).
E. Discussion.
1. False or fraudulent claims; scienter. The FCA “covers all
fraudulent attempts to cause the government to pay out sums of money.”
U.S. ex rel. Conner v. Salina Reg. Health Center, Inc., 543 F.3d 1211,
1217 (10th Cir. 2008). It covers factually false claims, such as an
incorrect description of goods provided, and legally false claims,
such as falsely certifying compliance with a regulation as a condition
-42-
of payment. Conner, 543 F.3d at 1217.
A legally false certification can be either express or implied.
U.S. ex rel. Lemmon v. Envirocare of Utah, Inc., 614 F.3d 1163, 1168
(10th Cir. 2010).
certifies
An express claim arises when a payee “falsely
compliance
with
a
particular
statute,
regulation
or
contractual term, where compliance is a prerequisite to payment.” Ex
rel. Lemmon, 614 F.3d at 1168. The “certification” need not be a
literal certification, but can be “any false statement that relates
to a claim.” For an implied-certification claim, “the analysis focuses
on the underlying contracts, statutes, or regulations themselves to
ascertain
whether
they
make
compliance
a
prerequisite
to
the
government’s payment.” “If a contractor knowingly violates such a
condition
while
attempting
to
collect
remuneration
from
the
government, he may have submitted an impliedly false claim.” ex rel.
Lemmon, 614 F.3d at 1168-69.
The purchase contracts here required Boeing to obtain type
certificates,
production
certificates,
and
airworthiness
(or
conformity) certificates, and relators argue that each of these
certificates in turn required Boeing to follow the underlying FAA
regulations on aircraft manufacture. Relators contend Boeing thus
certified
its
compliance
with
the
regulations
by
obtaining
the
certificates, and that “in the process of procuring the[se] pieces of
paper, Boeing materially and expressly misrepresented compliance with
its substantive contract obligations.” Doc. 703 at 18. Relators argue
that obtaining the certificates amounted to an incorrect description
of the goods, as well as express and implied false representations of
compliance within the meaning of the FCA. Doc. 667 at 37-38.
-43-
There is no question that FAA certification of the airplanes was
a critical feature of the purchase contracts. It was an express
requirement of the contracts that Boeing obtain the certificates. The
Air Force and Navy contracted with Boeing to purchase “off the shelf”
commercial aircraft. The contracts and the uncontroverted facts show
that the FAA’s assessment and certification was basically the material
fact insofar as the government’s purchase decision was concerned. The
FAA certificates signified that the FAA had approved of Boeing’s type
design and quality control and production processes, and that the FAA
considered these aircraft to be in accordance with type design and in
a condition for safe operation.21 The uncontroverted facts show that
the
Air
Force
and
Navy
deferred
to
and
relied
upon
the
FAA’s
assessment of these matters.
Relators’ claims combine elements of both express and implied
false certification theories. Boeing represented and certified to the
FAA that it complied with the FAA regulations governing aircraft
manufacture. With the FAA certificates that Boeing obtained as a
result
of
these
representations,
it
obtained
payment
under
its
contracts with the military. The latter contracts expressly required
Boeing
to
obtain
the
certificates
“issued
pursuant
to”
FAA
regulations. Regardless of which label is applied here (express or
implied certification), the FCA “covers all fraudulent attempts to
cause the government to pay out sums of money.” Ex rel. Lemmon, 614
21
Relators make much of the fact that a Boeing employee was the
FAA designee who executed the airworthiness certificates. That fact
is a product of the system designed by Congress. It does not undermine
the validity of the certificates or call them into question. The FAA
designee was acting on behalf of the FAA in executing the
certificates.
-44-
F.3d at 1167. By obtaining the FAA certificates Boeing effectively
represented to the Air Force and Navy that it had followed critical
FAA regulations and that the planes were airworthy as defined by FAA
regulations. Stated otherwise, if Boeing had somehow managed to
hoodwink the FAA into certifying aircraft that Boeing knew were not
airworthy, then presenting the FAA airworthiness certificates to the
military to obtain payment on the purchase contracts would amount to
a false certification or the use of a false record to obtain payment.22
Boeing may be correct that the FCA should not serve as a substitute
for regulatory compliance and that Boeing’s compliance with each and
every one of the thousands of FAA underlying regulations covering all
conceivable
aspects
of
manufacture
could
not
all
reasonably
considered as conditions of payment on these contracts.
be
But a
representation that the aircraft were airworthy – i.e., that they were
manufactured in accordance with type design and were in a condition
for safe operation – went to the heart of the purchase contracts. Cf.
ex rel. Conner, 543 F.3d at 1222 (“some regulations or statutes may
be so integral to the government’s payment decision as to make any
divide between conditions of participation [in a federal program] and
conditions of payment a ‘distinction without a difference.’” ). And
the court agrees with relators that Boeing expressly or impliedly
represented
in
connection
with
the
22
purchase
contracts
that
the
As Boeing notes, there are thousands of underlying regulatory
requirements relating to aircraft manufacture. The fact that only
material representations are actionable under the FCA would likely bar
claims based on alleged violation of regulations that would not affect
the safety or performance of the aircraft.
-45-
airplanes were airworthy.23
Even so, relators must cite evidence from which a reasonable
jury could conclude that Boeing knowingly and falsely certified its
compliance. In this context the falsity and scienter requirements of
the FCA are inseparable. See U.S. ex rel. Lamers v. City of Green Bay,
168 F.3d 1013, 1018 (6th Cir. 1999). And “[e]xpressions of opinion,
scientific judgments, or statements as to conclusions about which
reasonable minds may differ cannot be false.” See U.S. ex rel. Morton
v. A Plus Benefits, Inc., 139 Fed.Appx. 980, 982-83, 2005 WL 1672221,
3 (10th Cir. 2005) (citing U.S. ex rel. Roby v. The Boeing Co., 100
F.Supp.2d 619, 625 (S.D. Ohio 2000)). “Falsity under the FCA does not
mean scientifically untrue; it means a lie.”
At a minimum it
“requires proof of an objective falsehood.” Ex rel. Morton, 139
Fed.Appx. at 982-83 (citations and punctuation marks omitted); Wang
v. FMC Corp., 975 F.2d 1412, 1420-21 (9th Cir. 1992) (“Without more,
the common failings of engineers and other scientists are not culpable
under the Act.”).
As applied to the case at hand, this means relators must cite
evidence that Boeing’s certifications – which were based on Boeing’s
understanding of its 737NG engineering drawings, quality control
requirements, and the applicable FAA regulations – amounted to a
23
By contrast, the contractual provisions relating to Boeing’s
production facilities and quality control systems listed several FAA
regulatory requirements and then stated: “Compliance is evidenced by
the [FAA] Production Certificate.” The court agrees with Boeing that
this language specifically limited Boeing’s contractual obligation to
obtaining and maintaining an FAA Production Certificate, something
Boeing unquestionably did. Thus, no FCA claim lies for any alleged
violation by Boeing of the quality control regulatory provisions
listed in these portions of the purchase contracts.
-46-
reckless or knowing falsehood. Evidence of good-faith differences of
opinion
between
Boeing
and
relators’
experts
about
what
FAA
regulations require will not suffice. This is a significant hurdle
given that the FAA – the federal agency charged by Congress for
determining whether type design and other regulatory requirements are
met – specifically examined relators’ allegations and essentially
concluded that Boeing’s interpretation was correct.
Notwithstanding the FAA’s findings, relators believe Boeing
failed to conform to and comply with the requirements of the 737NG
type design and Boeing’s production certificate. Doc. 703 at 13.
Boeing’s false claims allegedly “consisted of, among others, its
abandonment, without contemporaneous disclosure to or consent by the
Government, of the advanced technology process requirements specified
for the design, fabrication, assembly and quality control of the
aircraft....”
Relators’
allegations
are
based
in
significant
part on
Ducommun’s use of hand-directed tools to fabricate ATA parts and the
fact that ATA holes were drilled without collection or use of SPC
data. Relators cite their experts’ view that these practices violated
the 737NG type design, Boeing’s quality control policies, and various
FAA regulations. Most prominently, they point to the provision in flag
note S3 stating that parts identified as statistically toleranced
“shall be produced with statistical process controls.” When this flag
note was used in engineering drawings, a statistical tolerance for
each ATA hole was provided in the drawing. According to the evidence,
the use of statistical tolerances and SPC necessarily mandated the use
of a CNC machine to capture SPC data.
-47-
Although the foregoing facts, standing alone, would indicate
that SPC was mandatory, the rest of flag note S3 makes it possible to
conclude otherwise. In each instance where the flag note appeared, a
narrower specified tolerance was listed along with the statistical
tolerance. The note explained that the statistical tolerance applies
only if certain conditions were met. “When these requirements are not
met,” the note provided, individual measurements had to fall within
plus or minus thirty percent of the statistical tolerance. The latter
provision
can
reasonably
be
construed
to
mean
that
statistical
tolerancing and SPC were not always required. And if SPC was not
required, drilling ATA holes with a non-CNC tool (such as a drill jig)
would not violate the requirements of flag note S3 so long as the
narrower tolerance was satisfied. This is certainly not the only
possible understanding of the flag note, and perhaps not even the best
one, but it is a plausible one.
Boeing’s ATA design guide, which was in effect at the relevant
time,
similarly
indicated
that
statistical
tolerancing
was
not
mandated. An introductory note on the use of flag notes stated in
part:
When statistical tolerancing is used on an
engineering drawing, the corresponding arithmetic
tolerances may also be shown. The statistical
tolerances will be identified with an “S” series
Flag Note. If Manufacturing elects to build to
statistical tolerances rather than arithmetic
tolerances, the part features must be fabricated
using statistical process controls;...
(Doc. 669-5 at 8-9) (emphasis added). This indicates it was up to
manufacturing to choose the method of production and that use of SPC
was not required if part features were fabricated to satisfy the
-48-
drawing’s narrower specified tolerances.
This optional aspect of SPC is consistent with the testimony of
the two authors of flag note S3, Kuss and Atkinson. Kuss testified
they included the phrase “when these requirements are not met” to
explain that “the different methods of manufacture, depending on
whether SPC data was generated, would result in different tolerances.
Flag note S3 was not meant to require SPC in every instance....” He
said use of drill jigs by Ducommun was acceptable so long as ATA hole
location tolerances stated in the engineering drawings were satisfied.
Atkinson echoed that view, saying they knew “part suppliers would have
options for the method of drilling,” so they provided for different
tolerances depending on whether the supplier conducted a statistical
analysis. This uncontradicted testimony is consistent with other
evidence indicating that engineering drawings ordinarily set the
physical parameters for parts but did not dictate a specific method
of manufacture. Additionally, Boeing cites the declaration of a former
Boeing lead engineer who says he interpreted the flag note in the same
manner as the authors did, and that he knows of no Boeing engineer who
interpreted it differently.
Other Boeing policy documents support the same view. Boeing
publication
“Requirements
for
Product
Acceptance
to
Statistical
Tolerance” provided interpretation of statistical tolerances and
defined
the
approved
methods
for
determining
if
a
product
met
statistical drawing requirements. (Doc. 669-8 at 7). It too indicated
that use of SPC and CNC machines for drilling ATA holes was not an
absolute requirement and that ATA parts produced without SPC were
acceptable as long as they met the required tolerance. A provision
-49-
entitled “Summary of Flag Note S3 Requirements for Product Acceptance”
lists four options for accepting statistically toleranced features.
The first two involve using SPC and 100% lot inspection. The third
states in part that “[w]hen ... statistical process controls are not
utilized in the manufacturing process, every S3 identified feature
must fall within [plus or minus] 30% (goal post tolerance) of the
specified engineering tolerances, centered on the target value of the
feature
as
verified
using
standard
inspection
and
measurement
techniques.” The fourth option, which was characterized as “not
preferred,” provides in part: “A drill jig or check fixture may be
used, although this method does not provide quantifiable variation
data. The tool can consume a maximum of 2/3 of the 60% goal post
tolerance (which translates to 40% of the specified statistical
tolerance)
for
the
feature.
Variation
data
collection
and
characterization is not required in this case.” These provisions taken
together
indicate
that
use
of
SPC
was
not
mandated
either
in
production or acceptance of ATA parts.
Yet another Boeing document in effect at the time, the Supplier
ATA
Capability
Assessment
(Doc.
669-13),
also
stated
that
CNC
machining of ATA parts was not required. Although use of CNC machines
was preferred, “[p]recision drill jigs may, and in some instances
should, replace the CNC mill.” The use of drill jigs to install and
inspect ATA holes was “a viable alternative and in some instances
provides the best value approach.”
The upshot of all this is that there were, at a minimum,
conflicting indications of whether use of CNC machines and SPC were
required for production of ATA parts. That fact alone undermines
-50-
relators’ claim that Boeing knowingly and falsely certified compliance
with FAA regulations in this regard. But above and beyond that,
relators’ allegations were specifically investigated, reviewed and
rejected by the FAA. The uncontroverted facts show the FAA concluded
the aircraft parts conformed to type design. It rejected relators’
allegations about CNC machines and the use of SPC.
Congress has given the FAA primary responsibility for regulating
aircraft manufacture as a means of furthering public safety. The FAA
has the far-reaching technical expertise needed to judge compliance
with its regulations and to assess the impact of manufacturing
practices on public safety. The FAA has promulgated extensive, wideranging, complex regulations, and it is responsible for construing and
applying them on an industry-wide basis. It has exceptionally broad
remedial powers to enforce the regulations if it believes a violation
has occurred. Its agents and officers are accountable for their
actions (as members of the Executive Branch) and the agency is subject
to oversight by Congress.
Federal judges and juries, by contrast, have no such expertise
or restraints, and allowing them to decide whether aircraft are
airworthy has the potential to derail the oversight system devised by
Congress and implemented by the President. Cf. ex rel. Conner, 543
F.3d
at
1221
certification
(allowing
“would
FCA
claim
undermine
the
based
on
hospital’s
government’s
own
Medicare
scheme
for
ensuring that hospitals remain in compliance and for bringing them
back into compliance when they fall short of what the Medicare
regulations and statutes require.”); U.S. ex rel. Rostholder v.
Omnicare, Inc.,
745 F.3d 694, 702 (4th Cir. 2014) (“When an agency
-51-
has broad powers to enforce its own regulations, as the FDA does in
this case, allowing FCA liability based on regulatory non-compliance
could ‘short-circuit the very remedial process the Government has
established to address non-compliance with those regulations.’”).
If relators’ claims of regulatory non-compliance had not been
already been reviewed by the FAA, the court would likely stay this
case and submit these issues to the agency under the doctrine of
primary jurisdiction. See e.g., U.S. ex rel. Wall v. Circle C Constr.,
L.L.C., 697 F.3d 345, 352 (6th Cir. 2012) (“The primary jurisdiction
doctrine is a rule of judicial construction which ‘allows courts to
refer a matter to the relevant agency whenever enforcement of the
claim requires the resolution of issues which, under a regulatory
scheme,
have
been
placed
within
the
special
competence
of
an
administrative body.’”); In re Universal Serv. Fund Tel. Billing
Practices Litigation, 300 F.Supp.2d 1107, 1152 (D. Kan. 2003) (“courts
should generally refer matters to administrative agencies where issues
of fact are not within the conventional experience of judges, require
the exercise of administrative discretion, or require uniformity and
consistency in regulating the business entrusted to a particular
agency.”). But doing so now would be redundant. The FAA has already
investigated, reviewed and rejected relators’ allegations. Relators
and their experts were given an opportunity to submit any evidence for
the agency’s consideration, including after the FAA rejected their
initial submissions as unsubstantiated. Relators have not shown that
the FAA failed to consider some critical matter or that the FAA
findings should be disregarded. In 2011, in response to a letter to
the FAA from relators’ counsel urging the FAA to take action against
-52-
Boeing, the acting chief counsel of the FAA stated:
Although you may disagree with the FAA’s
position, the agency has thoroughly reviewed the
evidence you have provided, either in writing or
in your discussions with FAA officials, arising
out of your qui tam litigation. Based on the
information you provided, the FAA determined
there were no critical safety issues regarding
the Boeing 737, and the agency has no reason to
reconsider that conclusion. In the absence of new
evidence regarding the 737, I believe our past
evaluations have been sufficient to confirm
adherence
to
FAA
requirements.
If
other
information becomes available, we will reassess
what FAA actions, if any, are necessary to assure
compliance with regulatory requirements.
Doc. 647, Ex. A-15.
Relators
clearly
disagree
with
the
FAA,
but
the
agency
considered their arguments and evidence and reached a conclusion with
a rational basis. Relators’ arguments that FAA investigators lacked
the proper expertise or that the investigation was otherwise flawed
provide no basis for this court to disregard the FAA’s considered
conclusion that the parts were acceptable. See Auer v. Robbins, 519
U.S. 452, 462 (1997) (“There is simply no reason to suspect that the
interpretation does not reflect the agency’s fair and considered
judgment on the matter in question.”); U.S. ex rel. Purcell v. MWI
Corp., 520 F.Supp.2d 158, 176 (D. D.C. 2007) (“Federal courts hesitate
to second-guess an agency's interpretation of its own regulation and
in fact will sustain it unless ‘plainly erroneous or inconsistent’
with the regulation.). An FCA action is not the appropriate vehicle
for challenging a federal agency’s construction and application of its
regulations.
Similarly unpersuasive is relators’ suggestion that the FAA did
not really reject their claims, which flies in the face of both common
-53-
sense and the FAA’s findings and course of conduct. FAA investigators
concluded that “the parts were manufactured and approved in accordance
with the approved data, processes, and procedures as set forth by
Boeing” and that “the parts are considered approved.”
As noted above
by the FAA’s acting counsel, the agency reviewed relators’ allegations
and concluded there were no flight safety critical issues concerning
the 737. Had the FAA found otherwise, it would have been obligated to
act. Considering all of the circumstances, including the fact that the
responsible
government
agency
believes
these
parts
conform
to
regulatory requirements, relators have failed to show a genuine issue
of material fact on their claim that Boeing knowingly and falsely
certified compliance with the FAA regulations.
In so finding, the court need not go so far as to hold that the
FAA’s findings necessarily preclude relators as a matter of law from
claiming
that
Boeing
violated
FAA
regulations.
Cf.
Restatement
(Second) of Judgments §83, comment b (“Decisional processes using
procedures whose formality approximates those of courts may properly
be accorded the conclusiveness that attaches to judicial judgments.”).
It is enough to say that relators have made no showing of a genuine
issue of material fact in light of the FAA’s findings and the other
uncontroverted facts. See U.S. ex rel. Williams v. Renal Care Group,
Inc., 696 F.3d 518, 531 (6th Cir. 2012) (“The False Claims Act is not
a
vehicle
to
police
technical
compliance
with
complex
federal
regulations.”).
2. Materiality. All of relators’ “false claim” allegations also
require a showing of materiality. In view of the above finding that
relators have failed to support the first element of their FCA claims,
-54-
questions about materiality are arguably moot. But because relators
have made a such multitude of allegations, some of which are difficult
to categorize or even comprehend, the court deems it advisable to
address materiality as well. For example, in addition to claims about
Boeing’s failure to use SPC, relators claim that Boeing made numerous
false
representations
to
the
government
including
that
its
manufacturing processes would be “state of the art” and the aircraft
would be “free from defects,” that it would incorporate ATA, HVC, SPC,
and the D1-9000 AQS quality system in manufacturing the 737NG, that
it performed appropriate first article inspections, and that “key
characteristics” would be measured to ensure that they met engineering
tolerances. Relators’ experts, in combined reports spanning hundreds
of pages, assert innumerable regulatory violations relating to these
and other matters. But even if relators could manage to show that
Boeing knowingly made false representations about these matters, the
uncontroverted facts fail to demonstrate a genuine issue of whether
they were material to the government’s payment decision.
A false or fraudulent statement is material for purposes of the
FCA if it has “a natural tendency to influence, or [is] capable of
influencing,
the
payment
or
receipt
of
money
or
property.”
§3729(b)(4). See also U.S. ex rel. Lemmon v. Envirocare of Utah, Inc.,
614 F.3d 1163, 1169 (10th Cir. 2010) (“a false certification ... is
actionable under the FCA only if it leads the government to make a
payment which, absent the falsity, it may not have made.”); U.S. ex
rel. Conner v. Salina Regional Health Center, Inc., 543 F.3d 1211
(10th Cir. 2008) (“the false statement must be material to the
government’s decision to pay out moneys to the claimant”). Cf. U.S.
-55-
ex rel. Bahrani v. ConAgra, Inc., 624 F.3d 1275, 1295 (10th Cir. 2010)
(“To date, we have never directly addressed whether civil claims under
the FCA incorporate a materiality element and, if so, what the proper
test is for materiality.”).24
Materiality is an objective rather than a subjective standard.
See U.S. ex rel. Feldman v. Van Gorp, 697 F.3d 78, 95 (2nd Cir. 2012).
It turns on whether a statement would have a natural tendency to
influence or is capable of influencing the agency’s payment decision.
It does not require a showing that the particular government employee
making the payment decision in fact considered the statement to be
important.
The evidence here cannot reasonably support a finding that
Boeing’s
allegedly
false
representations
about
its
regulatory
compliance or manufacturing processes were material. To begin with,
relators cite no evidence that any physically non-conforming parts
were installed on any aircraft delivered to the government. It might
be reasonable to infer that a false representation that an aircraft’s
parts conformed to engineering requirements could influence the
government’s decision. But relators cite no evidence of such nonconformance. Boeing has cited evidence to the contrary and the FAA has
determined that the challenged Ducommun parts in fact conformed to
type design. It is true that relators have cited evidence of some
24
As noted in Bahrani, courts adopted a materiality element on
FCA claims before the statute expressly required it. Most courts held
that materiality focused on whether the false statement was capable
of influencing the agency’s decision. Bahrani, 624 F.3d at 1295, n.9.
As a result of amendments to the FCA in 2010, that standard was
expressly adopted as part of §3729. Boeing concedes that the statutory
standard applies in the instant case.
-56-
deficient tools, processes and record-keeping at Ducommun, as well as
a failure by Ducommun to properly measure “key characteristics” as
required
by
its
contract
with
Boeing.
But
according
to
FAA
investigative records, Boeing instituted corrective actions and the
FAA was satisfied that the problems were sufficiently addressed. It
is not reasonable to infer that these production and record-keeping
failures
alone
could
have
influenced
the
government’s
purchase
decision when the uncontroverted evidence is that the parts conformed
to engineering specifications and were approved by the FAA. In arguing
that the deficient processes raise the specter that physically nonconforming parts were installed, relators discount or disregard
Ducommun’s
100%
fabrication
and
inspection
its
and
validation
measurement
that
the
of
parts
ATA
met
parts
after
engineering
tolerances. They also dismiss evidence that Boeing’s MRB properly
dispositioned identified non-conforming parts and that Boeing was able
to reject parts during assembly if ATA holes did not line up or parts
were otherwise non-conforming.25 Against this evidence that several
quality control checks were in place, relators offer only speculation
that
some
non-conforming
parts
might
have
slipped
through.
But
speculation fails to meet relators’ burden of showing a genuine issue
of fact.
In
response
to
relators’
allegations
25
and
input,
the
FAA
Relators cite an incident where out-of-contour Ducommun chords
were detected by Boeing at final assembly in Renton, Washington.
Relators do not dispute that Boeing’s MRB properly dispositioned these
non-conforming parts. Rather, they argue it is evidence that nonconforming parts could avoid detection at Ducommun and Wichita. (See
Doc. 702-15 at 10). That fact is not proof that there were nonconforming parts on the aircraft delivered to the government, however,
nor is it proof of a materially false representation by Boeing.
-57-
investigated and found no evidence of non-conforming parts. The FAA
also found no service difficulty reports (i.e., reported problems) on
the Ducommun parts. (Doc. 647-4 at p. 33). Relators cite no competent
evidence that any of the challenged parts have failed in service or
have otherwise caused problems.26 Relators’ experts hypothesize that
defects in the Ducommun parts are latent and may only become apparent
after years of accumulated fatigue damage cause the parts to fail.
Anything is possible, of course, but a possibility alone cannot
satisfy a preponderance of the evidence standard. Some of the aircraft
at issue in this case have been in service now for over 15 years. No
evidence is cited of any damage or cracks relating to non-conforming
Ducommun parts. Declarations and testimony from Navy and Air Force
officers state that the aircraft have met or exceeded expectations,
with no evidence of unexpected corrosion or damage.
All of these
facts tend to refute rather than support a claim of materiality.
In an attempt to overcome this lack of evidence, Relators point
to an Airworthiness Directive (AD 2013-19-23) issued by the FAA in
2013 which changes maintenance requirements for 737NG aircraft. (Doc.
737). In a supplemental expert report – submitted without leave of
court – relators’ experts assert that this AD “demonstrates the
fallacy of Boeing’s reliance on its fuselage fatigue test” and
“provides new evidence ... that Boeing falsely certified conformance”
of Ducommun parts to type design. They contend it “shows that issues
26
Relators’ expert reports mention several past 737NG accidents
where a crash or hard landing resulted in a catastrophic structural
failure. The reports contain some clearly speculative assertions that
the structural failures might have been related to non-conforming
Ducommun parts. See e.g., Docs. 702-20, 702-21.
-58-
with cracking exist in the areas of the fuselage where Ducommun PSE
[principal structural elements] parts are located.” On its face the
AD states that it was issued as a result of additional analysis of
fatigue cracking by Boeing, not because of detection of existing
problems on in-service planes. Moreover, relators fail to show the
relevance of the AD. They attempt to tie it to Ducommun parts by
saying it concerns PSEs where Ducommun parts are located. But as
Boeing points out, Ducommun parts are located throughout the fuselage,
so any maintenance directive concerning the fuselage would be “in an
area” where Ducommun parts are located. The fact that an AD was issued
calling for greater inspection of PSEs in the fuselage, without more,
says nothing about Ducommun parts, and even less does it show that
problems were created by allegedly nonconforming Ducommun parts.
The uncontroverted facts are that the government’s purchase
decision here was based primarily – if not entirely – on the FAA’s
certification of Boeing’s production process and its assessment of the
airworthiness
of
the
aircraft.
As
an
Air
Force
representative
testified, “the FAA is my engineering department.” Under the purchase
contracts the Navy and Air Force relied completely on the FAA’s
assessment. Any questions the Air Force or Navy might have had about
the propriety of Boeing’s manufacturing processes undoubtedly would
have been referred to the FAA. Cf. Kungys v. United States, 485 U. S.
759, 775 (1988) (plurality opinion) (materiality is determined by
asking
what
would
have
ensued
from
official
knowledge
of
the
misrepresented fact). Given that the FAA initially certified the
planes and has twice now rejected relators’ claims of safety problems
and regulatory non-compliance, the uncontroverted facts tend to show
-59-
only that Boeing’s representations or non-disclosures would not have
influenced, and therefore were not material to, the government’s
purchase decision. Any lingering doubt on that question is dispelled
by
the
actions
of
the
government
purchasers
after
learning
of
relators’ claims. A number of the aircraft at issue were delivered to
the military after relators filed their first FCA action in 2002.
(Their first action was voluntarily dismissed and then refiled in
2005). The government did not terminate the leases or contracts after
learning of relators’ allegations, nor did it seek any contractual
remedies. On the contrary, the Air Force decided to go ahead and
purchase the leased aircraft on which it had an option to buy. The
most recent such purchase occurred in 2010. See ex rel. Conner, 543
F.3d 1211, 1219-20 (“If the government would have paid the claims
despite knowing that the contractor has failed to comply with certain
regulations, then there is no false claim for purposes of the FCA.”);
U.S. ex rel. Yannacopoulos v. General Dynamics, 652 F.3d 818, 831 (7th
Cir. 2011) (“the agency failed to take action when it actually learned
of the supposed misrepresentation. In that case, speculative testimony
about how that party might have acted if it had discovered that
misrepresentation earlier cannot raise a genuine issue of fact as to
materiality.”); U.S. ex rel. Owens v. First Kuwaiti Gen. Trading &
Contracting Co., 612 F.3d 724, 729 (4th Cir. 2010) (evidence that
government officials were aware of any alleged defects and accepted
the work anyway “effectively negates the fraud or falsity required by
the FCA”). All of the actions of the FAA and the military purchasers
show that the purported false statements or failures to disclose by
Boeing would not have affected the government’s purchase decision.
-60-
Because
Boeing’s
asserted
failures
were
not
material
to
the
government’s purchase decision, Boeing is entitled to judgment as a
matter of law on relators’ FCA claims.
2. Ducommun’s Motion for Summary Judgment on Liability (Doc.
657).
Ducommun adopts Boeing’s arguments for summary judgment and makes a
number of additional arguments. The essential elements of relators’
claims against Ducommun, like the claims against Boeing, require
evidence that false or fraudulent claims were made and that the
falsity was material to the government’s payment decision. For the
reasons discussed above with respect to Boeing, evidence of these
essential elements is likewise lacking in the claims against Ducommun.
The court grants Ducommun’s motion for summary judgment for the same
reasons previously discussed.
3. Boeing’s Motion for Summary Judgment on Retaliation Claim (Doc.
648).
A. Uncontroverted Facts.
Jeannine “Gigi” Prewitt began employment with Boeing in 1996.
Between 1996 and 2000, she held the positions of Buyer Level I,
Material Planner Level 2, Materials Management Analyst Level 2, and
Materials Management Analyst Level 3.
From 1998 to 2000, Prewitt did support work for the manufacture
of body panels for the 757 aircraft program. She also purchased
metallic fuselage parts for all Boeing models, including 737NG, 747,
-61-
757, 767 and 777 aircraft.
In 2000, she and several others at Boeing were placed on a team
that audited tooling at Ducommun. The tooling audit team discovered
evidence that Ducommun “had misrepresented manufacturing processes and
had
falsified
quality
inspections,
and
that
Ducommun’s
conduct
violated the basis for Boeing’s delegation to Ducommun of quality
assurance inspection authority.” Prewitt received favorable reviews
for her job performance and received a commendation and award of stock
for her work on the Ducommun audit team.
The tooling audit team reported its findings to directors,
executive management, and managers at Boeing in 2000. Unsatisfied with
Boeing’s response, Prewitt continued to raise the audit’s findings
with others at Boeing. She claims she was “cautioned to drop any
further efforts to report violations found in Ducommun’s production
process.” In early 2001, Prewitt and Taylor Smith met with Boeing’s
Director of Security Investigations, Gary Shaw. They expressed concern
as to whether Boeing was disclosing the circumstances at Ducommun to
the FAA, indicating they thought Boeing had an obligation to do so.
Shaw allegedly told them that Boeing could sue them for telling the
FAA.
The audit team raised concerns about non-conforming Ducommun
parts. They did not specifically raise issues about airplanes being
sold to the U.S. Government. On February 13, 2001, Prewitt sent a twopage document to Carolyn Harms, a Boeing manager, summarizing the
team’s remaining concerns. The document listed 12 issues, including
tooling, manufacturing and quality standards. None of the issues dealt
specifically with aircraft being sold to the government or with fraud
-62-
on the government.
Prewitt wrote an email summarizing her retaliation claims in
November
2003.
It
contains
nothing
about
fraud
or
government
airplanes. At the time of this email, relators’ FCA complaint was
still under seal, meaning Prewitt was precluded from making any
allegation of FCA retaliation in the email.
Prewitt’s medical leave.
Prewitt went on long-term medical leave in March 2001. She
returned more than two years later, in April 2003.
While Prewitt was on leave, the aviation industry suffered a
significant downturn following the attacks of September 11, 2001.
Boeing
saw
a
marked
decrease
for
its
commercial
aircraft.
It
subsequently engaged in several rounds of layoffs of employees.
As of July 2001, there were 126 Materials Management Analysts
performing Prewitt’s type of work in Boeing’s Wichita commercial
division. By the time Prewitt returned from leave, there were only 100
– a drop of 21 percent. Structural Bond, the unit to which Prewitt was
assigned, was reduced even more. The group lost approximately 40
percent of its employees in the first 6 months following 9/11, and
nearly 50 percent within two years of 9/11. When Prewitt went on
leave, the group had 12 employees with Prewitt’s particular job
classification and skill background. By early 2003, that number had
dropped to 3.
The Material Management Analyst job title can involve different
job skills, including planning and procurement. In 2001, the total
number of procurement buyers laid off with Prewitt’s job title and
skill code was 9. In 2002 it was 3. In 2003, Prewitt was the only
-63-
person with that title and skill code to be laid off.
Because Prewitt was on long-term leave, she was not subject to
the layoffs of 2001 and 2002. But just prior to and during her leave,
all of the body work for the 757 program – including work Prewitt did
before the tooling audit – was transferred to an Italian supplier. As
such,
Prewitt’s
previous
job
was
no
longer
available
when
she
returned.
On March 8, 2002, while Prewitt was on leave, she and other
relators filed their lawsuit under seal. It was still under seal when
relators voluntarily dismissed that case in June 2003.
Relators filed the present lawsuit under seal on March 11, 2005.
After the government declined to intervene, the court ordered in
August 2005 that the complaint be unsealed and served on Boeing.
In June 2002, Boeing FAA representative Randy Milne was informed
that an FAA investigation of suspected unapproved parts (SUP) had been
initiated based on information from the DCIS. He was informed that the
investigation related to Ducommun and allegedly involved “bad parts”
and possibly “fraudulently represented” parts. In June 2002, an FAA
request for information regarding Ducommun was transmitted to Rusty
Ulmer, Boeing Wichita Procurement Quality Manager. Ulmer testified he
may have asked Boeing’s Internal Audit department if it was okay to
send the FAA a copy of the 2000 tooling audit report. He also said he
may have told Carolyn Harms of his contact with the FAA because she
was Director of Materiel at the time.
Prewitt’s return from leave.
In February 2003, Prewitt sent an email to Carolyn Harms telling
her that she planned to return in April and asking for suggestions as
-64-
to what positions might be available. The following handwritten notes
appear on a printed copy of the email from Boeing’s files:
- Has been gone for almost 2 years - since
4/5/01.
- Not on authorized leave now - medical condition
not validated. Aetna has cut off insurance. She
has filed a lawsuit.
- Her group is much smaller now - her former boss
has been reduced and is now an MMA
- Headcount in group is at target - they probably
will absorb her when she returns to work.
Harms testified she did not write these notes. There is no
evidence showing who wrote them. The “lawsuit” comment ostensibly
refers to Prewitt’s challenge to Aetna’s insurance determination,
although at the time of her return from leave Prewitt had not filed
any “lawsuit” other than the FCA claim.27
When Prewitt returned from leave in April 2003, there were only
3 others in Structural Bond with the same job classification and skill
background as her. Boeing contends the group was fully staffed based
on business requirements and did not need a fourth person.
Neither Boeing policy nor the SPEEA-WTPU collective bargaining
agreement required Boeing to create a position for an employee
returning from a leave of absence. Nevertheless, the Structural Bond
manager, Steve Sharp, created a temporary position for Prewitt within
his group, telling her that her chances of securing a more permanent
position at Boeing would improve if she were back at work and not on
leave. Prewitt contends that she sat at a desk with little work to do
27
Prewitt acknowledged in her deposition that she filed a
complaint with the Kansas Department of Insurance concerning Aetna’s
denial of disability coverage.
-65-
and was not given an opportunity to use her skills as a buyer.
Prewitt presents evidence that she applied for a number of
“buyer position” openings at Boeing in 2003 but was not interviewed
or hired for any of them. She cites no evidence, however, that these
jobs were in her job classification.
Prewitt requested a transfer to SM&P [Supplier Management and
Procurement], the procurement group with buyers of her skill code, but
her request was denied. No evidence is cited of the circumstances of
this denial. Sharp and another manager tried to convince Prewitt to
change her skill code to a manufacturing planner rather than a buyer.
Prewitt declined, noting that her background was in procurement.
Prewitt says she was told in May 2003 that she and another buyer in
Structural Bond would soon be transferred to SM&P but the transfer
never occurred.
Prewitt was represented by the SPEEA union at Boeing. SPEEA and
Boeing have collective bargaining agreements governing the terms of
employment for salaried employees like Prewitt. The agreement in
effect in 2003 set forth a standard retention process. The process was
designed to let employees know where they stood compared to their
peers with respect to the risk of being laid off. Employees with
similar skills were grouped together and assigned one of three
retention ratings: R1, R2, or R3. The highest retention rating (i.e.
lowest risk of layoff) was R1; the lowest retention rating was R3. The
ratings were assigned under a forced distribution system in which
approximately 40% of employees had to be rated R1, 40% rated R2, and
20% rated R3.
Given the number of layoffs between 2001 and 2003, nearly all
-66-
of those rated R3 when Prewitt went on leave were no longer employed
at Boeing when Prewitt returned. The layoffs included R2 employees and
some R1 employees. Because of the forced distribution system, some
employees who were rated R2 or R1 when Prewitt left were rated R3 when
she came back.
When Prewitt returned, she was rated against the three other
Materials Management Analysts in Structural Bond. Todd Herrington, the
manager who reviewed the group and assigned retention rankings, stated
that two of the four employees had over twenty years service in the
group and the third had over 7 years. Prewitt had only about five
years service plus two years on leave. Herrington testified that he
believed Prewitt’s skills were not as developed as the other three
employees and he therefore assigned her a retention rating of R3. Each
of the other three employees had been rated an R1 in the past; Prewitt
had never been rated R1. Two of the three others had been moved down
to an R2 rating under the forced distribution system.
Prewitt contends she should have been rated with the pool of
buyers
in
procurement
rather
than
with
the
other
employees
in
Structural Bond who were internal planners.
Under the collective bargaining agreement, Prewitt had the right
to appeal her retention rating before an independent panel. Prewitt
availed herself of that right. The panel reviewed her rating but
declined to modify it by a 2-1 vote.
Prewitt testified during her deposition that she believes
someone at Boeing knew about her then-sealed 2002 lawsuit. When asked
the basis for that belief, she declined to answer, citing attorneyclient privilege.
-67-
Prewitt’s layoff.
In the summer of 2003, Boeing implemented additional layoffs to
meet revised business plans. Steven Sharp, business manager for
Structural Bond, testified that his department had to reduce overall
employment by five to ten persons. According to Sharp, he instructed
each of his managers in Structural Bond to determine which positions
in their group could be eliminated. Sharp maintains that Prewitt was
designated for layoff because she was rated R3 and was working in an
ad hoc position.
Prewitt received a lay off notice in August 2003 with an
impending effective date in November 2003. On the same day Prewitt
received her layoff notification, 22 other salaried SPEEA employees
also received layoff notices. One of the other salaried employees in
Prewitt’s group was designated for layoff in late 2003.
Prewitt cites no competent evidence that Sharp or Herrington was
aware before her layoff that she had raised complaints about fraud
against the government or flight safety issues. Sharp stated in his
declaration that he was aware that Prewitt had raised complaints about
a Boeing supplier and was unhappy with how Boeing had handled the
situation. He said Prewitt never expressed any concerns to him about
airplane safety or fraud against the government. Sharp said he did not
learn about Prewitt’s FCA lawsuit until several years after Prewitt
left Boeing.
After Prewitt received her layoff notice, Sharp stopped by her
desk. According to Prewitt and another witness, Sharp reported that
Ron Brunton, Director of Quality, wanted Prewitt gone and had said
there “wasn’t a hole deep enough to hide her” at Boeing. Sharp asked
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what she had done to merit such a remark and whether she had an
attorney.
After Prewitt was laid off, she applied for other jobs at
Boeing. Prewitt believes the hiring managers for these positions knew
of her FCA claims and refused to hire her as a result.
Prewitt filed a separate lawsuit against Boeing in 2004 and
dismissed
it
in
2009.
That
suit
alleged
that
she
was
treated
differently and laid off due to her disability status and gender.
Prewitt claims she was retaliated against for her FCA activities
in the following ways: (1) she was given a new assignment upon
returning from leave; (2) she was given an R3 retention rating; (3)
she was laid off; and (4) she was not rehired after her layoff.
B. FCA retaliation.
The FCA provides in part that an employee shall be entitled to
relief if the employee was in any manner discriminated against in the
terms and conditions of employment because of lawful acts done by the
employee in furtherance of an FCA action or because of other efforts
to stop violations of the FCA. 31 U.S.C. § 3730(h)(1).
The FCA “whistle blower” provision:
provides relief only if the whistleblower can
show by a preponderance of the evidence that the
employer's retaliatory actions resulted “because”
of the whistleblower's participation in a
protected
activity.
Under
other
Federal
whistleblower statutes, the “because” standard
has developed into a two-pronged approach. One,
the whistleblower must show the employer had
knowledge the employee engaged in “protected
activity”
and,
two,
the
retaliation
was
motivated, at least in part, by the employee's
engaging in protected activity. Once these
elements have been satisfied, the burden of proof
shifts to the employer to prove affirmatively
that the same decision would have been made even
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if the employee had not engaged in protected
activity.
U.S. ex rel. Erickson v. Uintah Special Svcs. Dist., 268 Fed.Appx.
714, 716 (10th Cir. 2008) (quoting S.Rep. No. 345 at 35, 99th Cong.,
2d Sess. 35 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5300).
See also U.S. ex rel. Sikkenga v. Regence Blue Cross and Blue Shield
of Utah, 472 F.3d 702, 729 (10th Cir. 2006) (relief is available if
the employee can show that the employer had knowledge that the
employee was engaged in protected activity, and that the retaliation
was
motivated,
at
least
in
part,
by
the
employee’s
protected
activity).
Boeing claims it is entitled to summary judgment on this claim
for three reasons: (1) because Prewitt’s tooling audit activities were
not protected activity under the FCA; (2) there is no evidence that
Boeing knew of Prewitt’s FCA lawsuit; and (3) Prewitt cannot show that
Boeing retaliated against her because any adverse employment actions
were based on legitimate business decisions. (Doc. 649).
The court need not address Boeing’s first and second arguments,
because its third argument is dispositive. Even assuming some managers
within Boeing were aware that Prewitt had engaged in efforts to stop
what she believed were violations of the FCA, Prewitt has failed to
cite evidence showing a genuine issue of fact as to whether Boeing
retaliated against her because of her efforts. Specifically, she fails
to cite evidence that any of the decision makers on the employment
actions affecting her were aware of her FCA activity or that they took
adverse action against her because of it. Moreover, she fails to cite
evidence
that
Boeing’s
proffered
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reasons
for
these
employment
decisions are a pretext for retaliation.28
Prewitt’s first complaint is that she was not given her former
position when she returned from leave. Boeing argues that the position
no longer existed in April of 2003. It cites evidence that work
Prewitt formerly did
relating to the 757 was transferred to a
contractor in Italy. In response, Prewitt calls this an “excuse”
because “in truth 757 work was already winding down in late 1999/early
2000 when Prewitt was purchasing parts for other model aircraft.” But
the fact the position existed in 2000 when 757 work was “winding down”
says nothing about whether it still existed two years later when
Prewitt returned. Without more, the prior availability of the position
and the fact that some portion of the prior work involved other
aircraft does not show a genuine issue for trial. Prewitt cites no
evidence from which a jury could reasonably conclude that her former
position was still available when she returned to work in 2003.
As for Boeing’s failure to assign Prewitt to another procurement
position
upon
transferred
procurement
to
her
return,
another
positions.
Prewitt
department
Sharp
claims
(SM&P)
instead
28
she
where
assigned
should
have
been
there
were
open
Prewitt
to
an
The First Circuit and other courts have applied the McDonnell
Douglas burden-shifting framework to FCA retaliation claims that are
based on circumstantial evidence. See Harrington v. Aggregate Indus.
Northeast Region, Inc., 668 F.3d 25, 31 (1st Cir. 2012). See also
McCollum v. Jacobs Engineering Group, Inc., ___F.Supp.2d ___, 2014 WL
218441 (S.D. Miss. 2014). Under that framework, an employee seeking
to avoid summary judgment must first cite evidence of a prima facie
case. That burden is not great; it merely requires the employee to
establish facts adequate to permit an inference of retaliatory motive.
The burden then shifts to the employer to articulate a legitimate nonretaliatory reason for the adverse employment action. If the employer
does so, the employee has the burden of showing a genuine issue as to
whether the employer’s proffered reason for the act is pretextual.
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essentially non-procurement job within Structural Bond, the department
where she had been employed when she went on leave. Even assuming a
jury could reasonably find that a transfer to SM&P would have been
objectively more desirable than the assignment to Structural Bond, the
evidence is lacking that Sharp (or anyone else) made this assignment
with knowledge of and as a result of Prewitt’s FCA activities.
Similarly, Prewitt contends she was “kept out of procurement” because
she applied for but was not hired for other procurement positions. But
the evidence shows nothing beyond the fact that Prewitt applied for
and was not hired for these jobs. It does not show what positions with
her
particular
job
code
were
available.
It
does
not
show
the
qualifications or selection criterion for these positions. It does not
show the relative qualifications of the candidates or of the persons
selected. Nor does it show anything about who made the decisions
affecting Prewitt or the reasons for those decisions. Such facts
cannot reasonably support a finding of retaliation.
Prewitt’s second allegation concerns her reduction from an R2
retention rating to an R3. On this point Prewitt cites nothing to
undermine Boeing’s asserted explanation that the reduction resulted
from a combination of the effect of layoffs, the forced distribution
of the retention rating system, and Herrington’s conclusion that
Prewitt’s service and skills were slightly less extensive than the
other three members of her group. Prewitt does not specifically
challenge her ranking within the Structural Bond group, but argues she
should have been rated against other buyers in SM&P rather than
against the group where she worked. But the evidence cited cannot
reasonably support a finding that Prewitt’s assignment or the fact
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that she was rated against the group where she actually worked was a
product of unlawful retaliation. Prewitt was in an area with other
employees who shared her same job title. Even if that assignment was
less than ideal in light of Prewitt’s experience as a buyer, the mere
fact of the assignment hardly supports a finding of retaliation. The
evidence before the court shows that the assignment was made by Sharp,
and
Prewitt
cites
nothing
retaliation.
Aside
from
the
to
suggest
opinions
that
of
it
Prewitt
resulted
and
a
from
union
representative that she should have been rated against other buyers,
Prewitt cites nothing to show that rating her within her assigned work
group
somehow
suggests
a
pretext
for
retaliation.
Nor
are
any
circumstances cited to suggest that Herrington’s determination was not
a genuine assessment of the relative qualifications of the group by
that group’s manager. Prewitt’s R3 rating itself was upheld upon
review by a panel and the circumstances surrounding the reduction,
including the significant number of contemporaneous lay offs, do not
suggest a retaliatory motive. Prewitt claims Herrington “was a ‘cat’s
paw’ decision maker, and was effectively used as a tool,” but no
evidence whatsoever is cited to support that claim. Any argument that
the retention rating was a product of FCA retaliation by Boeing is
based solely on speculation and not on evidence.
Prewitt next argues that her lay off constituted retaliation for
FCA activity. But given her retention rating of R3 and the undisputed
fact that large numbers of Boeing employees were laid off in the same
time frame – including another member of Prewitt’s four-person group
– the evidence does not support an inference that she was singled out
for adverse treatment. In addition, nothing is cited to show that
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Sharp or Herrington or any other decision maker involved in the lay
off
determination
was
aware
of
or
was
influenced
by
Prewitt’s
protected FCA activity.
Prewitt argues there is “substantial evidence that officials who
knew about the False Claims Act lawsuit, including Carolyn Harms,
Director of SM&P, created circumstances leading to Prewitt’s drop in
retention rating and her resulting layoff.” (Doc. 701 at 17). The
inference that Harms knew about the FCA lawsuit is apparently based
on the hand-written comment, previously referred to, that appeared on
a printed email from Prewitt to Harms. That inference is dubious at
best. (See footnote 28, supra). But even if Harms’ knowledge of the
FCA suit is presumed, Prewitt fails to articulate or show how Harms
“created circumstances” that led to Prewitt being laid off. The
evidence shows no involvement by Harms in any employment decisions
affecting Prewitt. Similarly unavailing is the evidence pertaining to
Brunton’s alleged comment that he wanted Prewitt “gone” and that there
“wasn’t a hole deep enough to hide” her at Boeing. These comments
clearly evidence some animus against Prewitt stemming from her efforts
to correct problems at Ducommun. But aside from pure speculation,
there is nothing to suggest that Brunton played any role or had any
influence on any adverse employment decision affecting Prewitt. His
negative comments were apparently made after she had already received
a layoff notice and evidently came as a surprise to Sharp, who asked
Prewitt what she had done to merit such a comment. Standing alone the
comments fail to show that Brunton played any role or had any
influence on the decision to lay off Prewitt.
Finally, Prewitt contends she was retaliated against because she
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was not interviewed or hired for positions after being laid off.
Again,
the
record
is
entirely
lacking
as
to
the
circumstances
surrounding these employment decisions. Prewitt claims that Boeing
learned by June of 2002 of her FCA suit, meaning these adverse
employment decisions occurred more than a year later. That time frame
alone does not suggest improper motive. While it is not beyond the
realm of possibility that retaliation played a role in Prewitt not
being hired, a mere possibility is not enough to withstand a properly
supported summary judgment motion. Prewitt offers no evidentiary basis
upon
which
a
jury
could
rationally
infer
retaliation.
Prewitt
undoubtedly believes that she was qualified for these positions – and
she may have been. She had a good employment record at Boeing. But
there may have been other applicants who were even better qualified
or who possessed skills that Prewitt did not possess. The positions
may have called for emphasis in areas where Prewitt’s skills were
lacking. The record is entirely silent on these points. A jury
evaluating this record could have no basis other than speculation for
concluding that retaliation for Prewitt’s FCA activity played a role
in these employment decisions. See Davis v. Unified School Dist. 500,
750 F.3d 1168, 1172 (10th Cir. 2014) (“The sheer number of failed
attempts might be significant in a different context or if more
completely developed, but in this case it is little more than rank
speculation.”).
Boeing’s
motion
for
summary
judgment
on
the
retaliation claim must be granted.
C. State wrongful discharge claim.
Prewitt also claims that Boeing unlawfully retaliated against
her for whistle blowing in violation of the public policy of Kansas.
-75-
Boeing argues that any such claim is precluded.
Kansas may allow a common law claim for unlawful discharge or
demotion
where
an
employer
retaliates
against
an
employee
for
reporting the employer’s violation of health, safety regulations or
general welfare regulations. See Goodman v. Wesley Med. Center,
L.L.C., 276 Kan. 586, 78 P.3d 817 (2003). But this “whistle-blower’s
exception” to the general rule of at-will employment is itself subject
to an exception. Under the “alternative remedies doctrine,” a federal
(or state) statute authorizing a remedy for retaliation will be
substituted for a state retaliation claim if the statute provides an
adequate alternative remedy. Flenker v. Willamette Indus., Inc., 266
Kan. 198, 967 P.2d 295 (1998). In other words, if a statutory remedy
is adequate, the common law remedy is precluded.
Prewitt contends the FCA retaliation provision is inadequate
because it does not allow for punitive damages. Doc. 701 at 18. As
Boeing points out, the Tenth Circuit previously found that the absence
of
punitive
inadequate.
damages
alone
did
not
render
a
statutory
remedy
See Masters v. Daniel Intern. Corp., 917 F.2d 455, 457
(10th Cir. 1990) (“We find that the remedies provided by the Act are
sufficient to have satisfied Masters' claim despite the fact that
exemplary damages would not have been recoverable.”). More recently,
the Kansas Supreme Court indicated that a lack of punitive or other
damages is “not trivial” and is a factor to consider. Hysten v.
Burlington N. Santa Fe Ry. Co., 277 Kan. 551, 108 P.3d 437, 445
(2004). But as Judge Robinson noted in Conus v. Watson’s of Kansas
City, Inc., 2011 WL 4348315 (D. Kan., Sept. 16, 2011), Hysten found
that a statutory remedy requiring arbitration was inadequate because
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of a number of differences with the common law remedy, including
“differences
in
process,
differences
in
claimant
control,
and
differences in the damages available.” Hysten, 277 Kan. at 445. Among
other things, the statutory remedy in Hysten did not allow recovery
of compensatory damages for pain and suffering or of punitive damages,
and the arbitrator’s initial ruling was subject to court review only
under an extremely narrow standard of review.
By contrast, the FCA retaliation provision (31 U.S.C. § 3730(h))
allows an employee to bring an action in federal district court and
to obtain all relief necessary to make the employee whole, including
reinstatement, double back pay, interest, and compensation for special
damages including litigation costs and attorney’s fees. For the
reasons articulated by Judge Lungstrum in Lipka v. Advantage Health
Group, Inc., 2013 WL 5304013 (D. Kan., Sept. 20, 2013), the court
believes the Kansas Supreme Court would find the FCA remedy to be
adequate and would conclude that it precludes a separate common law
retaliation claim under Kansas law. Lipka, 2013 WL 5304013, *8 (“the
anti-retaliation provision of the FCA adequately protects the state's
public policy and provides plaintiff with a sufficient remedy for the
allegedly
retaliatory
discharge.”).
Boeing’s
motion
for
summary
judgment is accordingly granted as to Prewitt’s state law retaliation
claim.
4. Conclusion.
Relators’ motion to strike Eastin’s declaration and testimony
(Doc. 682) is granted;
Relators’ motion to strike the 2004 and 2005 SUP reports (Docs.
-77-
687) is denied;
Boeing’s motion for summary judgment on liability (Doc. 644) and
Ducommun’s
motion
for
summary
judgment
(Doc.
657)
are
granted;
Relators’ motion for partial summary judgment on liability (Doc. 650)
is denied;
Boeing’s motion for partial summary judgment on damages (Doc.
646) and Ducommun’s joinder in the motion (Doc. 659) are denied as
moot; and
Boeing’s motion for summary judgment on retaliation claim (Doc.
648) is granted.
Judgment will be entered accordingly and the action will be
dismissed on the merits.
A motion for reconsideration of this order is not encouraged.
The standards governing motions to reconsider are well established.
A motion to reconsider is appropriate where the court has obviously
misapprehended a party's position or the facts or applicable law, or
where the party produces new evidence that could not have been
obtained through the exercise of reasonable diligence. Revisiting the
issues already addressed is not the purpose of a motion to reconsider
and advancing new arguments or supporting facts which were otherwise
available for presentation when the original motion was briefed or
argued is inappropriate. Comeau v. Rupp, 810 F.Supp. 1172 (D.Kan.
1992). Any such motion shall not exceed five pages and shall strictly
comply with the standards enunciated by this court in Comeau v. Rupp.
The response to any motion for reconsideration shall not exceed five
pages. These page limits will not be extended for any reason,
including by agreement of counsel. No reply shall be filed.
-78-
IT IS SO ORDERED.
Dated this 8th
day of October 2014, at Wichita, Kansas.
s/Monti Belot
Monti L. Belot
UNITED STATES DISTRICT JUDGE
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