McLain et al v. Fluor Enterprises, Inc. et al

Filing 256

ORDER AND REASONS denying 217 MOTION to Dismiss for Failure to State a Claim; denying 220 MOTION to Dismiss for Failure to State a Claim as to Count 2 of the Warder Relators' Fourth Amended Complaint. Signed by Judge Helen G. Berrigan on 11/12/2013.(Reference: 09-4191)(kac, )

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
U.S. ex rel. TERRY D. MCLAIN and J.
LEN HODGES

Civil Action No. 06-11229 c/w 09-4191
Pertains to 09-4191

v.
FLUOR ENTERPRISES, INC., SHAW
ENVIRONMENTAL, INC., and CH2M
HILL CONSTRUCTORS, INC.

SECTION “C” (3)

ORDER AND REASONS
Before the Court are motions to dismiss by defendants Shaw Environmental, Inc. (“Shaw
”) and CH2M Hill Constructors, Inc. (“CH2M”) against relators Thomas Warder, Gary Keyser,
and Elizabeth Reeves (collectively, “the Warder relators” or “the Warders”) for failure to state a
claim upon which relief can be granted. Rec. Docs. 217 & 220. The motions argue that Count II
of the Fourth Amended Complaint should be dismissed because no “falsity” cognizable under
the False Claims Act (“FCA”), 31 U.S.C. §§ 3729, has been properly alleged. The Warder
relators oppose. Rec. Doc. 237. For the reasons that follow, the motions will be DENIED.
I. Background
The Court hereby adopts the facts, procedural history, and standard of review set forth in
its November 12, 2013 Order and Reasons granting in part and denying in part Fluor Enterprises,
Inc. and CH2M’s motions to dismiss. Rec. Doc. 255. The Court notes, by way of addendum, that
its November 12 Order and Reasons dismissed all of Count II of the Warder relators’ Fourth
Amended Complaint against all defendants, except for the allegation that all defendants had
billed FEMA for trailer installations that were not performed according to liquified petroleum
(LP) statutes and regulations. Id. The Court found this claim actionable under § 3729(a)(1) of the
FCA as it existed at the time of the misconduct alleged. Id.

III. Analysis
Before the enactment of 2009 amendments, 31 U.S.C. § 3729(a)(1) established liability
for any person who “knowingly presents or cause to be presented, to an officer or employee of
the United States Government or a member of the Armed Forces of the United States[,] a false or
fraudulent claim for payment or approval.” In United States v. Southland Management
Corporation, the Fifth Circuit, sitting en banc, explained the meaning of “false claim” under the
Act:
The statute defines a “claim” as “any request or demand, whether under a contract
or otherwise, for money or property” which is made to someone—including the
government itself—who will at least in part use government money or property to
pay it. Stated differently, it is a “request or demand” made in connection with a
“contract or otherwise,” the “contract or otherwise” allegedly warranting the
making of the claim. Thus, whether a claim is valid depends on the contract,
regulation, or statute that supposedly warrants it. It is only those claims for
money or property to which a defendant is not entitled that are “false” for
purposes of the False Claims Act. See Costner v. URS Consultants, Inc., 153 F.3d
667, 677 (8th Cir. 1998) (“[O]nly those actions by the claimant ... [calculated to]
caus[e] the United States to pay out money it is not obligated to pay ... are
properly considered ‘claims’ within the meaning of the FCA.”); United States ex
rel. Wilkins v. N. Am. Constr. Corp., 173 F. Supp. 2d 601, 626 (S.D. Tex. 2001)
(collecting authorities for the proposition that a “false claim” is a claim for more
than one is due).
326 F.3d 669, 674-75 (5th Cir. 2003) (en banc) (footnote omitted). Throughout its opinion, the
Southland Court emphasized that the focal point of liability under the FCA is entitlement to the
payment claimed according to the contract, regulation, statute under which payment was
claimed. See, e.g., id. at 677 (“We hold that under the HAP Contract and on this record the
Owners were entitled to receive the housing assistance payments that they sought during the
corrective action period at issue. Their claims therefore cannot be false under the False Claims
Act as a matter of law.”).

Shaw and CH2M argue that the remainder of Count II should be dismissed against them
because, taking relators’ allegations as true, they have submitted no factually false claim to the
government for payment. The crux of this argument is that, although the complaint alleges
failure to comply with LP gas inspection and testing laws, and submission of invoices for trailer
installations, it fails to allege that defendants actually submitted invoices for compliance-related
fees or expenditures. See Rec. Doc. 217-1 at 7 (“Simply put, none of these allegations assert that
Shaw billed the government for LP gas inspection and testing work that Shaw allegedly did not
perform.”). In other words, according to defendants, the failure of the complaint to allege that
defendants billed the government for the inspection and testing as separate line items is fatal to
any FCA claim based on their failure to perform inspection and testing in accordance with the
statutes and regulations.
This argument misunderstands definition of “false claim” under the FCA. As the
Southland opinion makes unequivocally clear, whether a claim for payment is “false” or not
“depends on the contract . . . that supposedly warrant[ed] it.” Southland Mgmt Corp., 326 F.3d
at 674. Relators need not allege that defendants billed the government directly and expressly for
inspection and testing that complied with LP statutes and regulations, as long as such inspection
and testing was expected to accompany the installations for which defendants did bill and,
further, was material to the amount of compensation owed under the contract. It is well
established that billing for goods and services under a contract that do not conform to contractual
specifications can be actionable under the FCA. See, e.g., United States v. Aerodex, 469 F.2d
1003, 1008 (5th Cir. 1972) (“We think that deliberate mislabeling in the case at bar, coupled
with the fact that the parts delivered did not actually meet the specifications of the contract,
compels a finding of liability under the Act.”).

Relators have adequately pleaded: (1) that government awarded defendants contracts to
haul and/or install trailers in the aftermath of Hurricanes Katrina and Rita; Rec. Doc. 211 ¶¶ 1220; (2) that compliance with state and local statutes and regulations was a condition of
performance under the contract; id.¶ 45; and that defendants invoiced the government for trailer
installations that were not performed in accordance with state and local statutes and regulations;
id.¶ 45. They have also adequately pleaded that nonconformity with the terms of the contract in
this respect would have reduced the defendants entitlement to compensation. Although the
complaint does not state this expressly, this inference is warranted based on the allegation
repeated throughout the complaint that the government would not have fully compensated, id. ¶¶
55, 63, and that the contract incorporated a provision that allows the government to reduce
compensation for nonconforming work. See Second Amended Complaint, No. 09-4191, Rec.
Doc. 34-2 at10 (incorporating FAR 48 C.F.R. §§ 52.246-4(e), 52.246-5(d)). These allegations
and inferences are sufficient to sustain relators’ burden at the pleading stage.

Accordingly,
IT IS ORDERED that the Shaw and CH2M’s Motions to Dismiss Count 2 of the
Warder’s Fourth Amended Complaint are hereby DENIED. Rec. Docs. 217 & 220.
New Orleans, Louisiana, this 12th day of November, 2013

HELEN G. BERRIGAN
UNITED STATES DISTRICT JUDGE