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

Filing 369

ORDER AND REASONS dismissing as moot 306 Motion to Dismiss for Failure to State a Claim; denying 309 Motion to Dismiss for Failure to State a Claim; denying 315 Motion to Strike; denying 317 Motion to Strike ; granting in part and denying in part 335 Motion for Summary Judgment; dismissing as moot 337 Motion to Amend/Correct; granting in part and denying in part 351 Motion for Summary Judgment; dismissing as moot 359 Motion to Strike. Relators shall file a second amended complaint within 30 days as set forth in document. Failure to comply with this order will result in involuntary dismissal of counts 1, 2 and 4. Signed by Judge Helen G. Berrigan on 11/13/2014. (kac)

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

CIVIL ACTION

v.

NO. 06-11229

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

SECTION C

ORDER AND REASONS
This matter comes to the Court on the defendants’, Fluor Enterprises, Inc. (“Fluor”) and
CH2M Hill Constructors, Inc. (“CH2M”), motions to dismiss Counts 1, 2, 7, and 8, of relators’,
Terry D. McLain and J. Len Hodges (collectively, “relators”), first amended complaint. Rec.
Docs. 306 & 309. Relators have both opposed and moved to strike these motions to dismiss. Rec.
Docs. 315, 317, 321, & 322. They have also filed a conditional motion to amend their complaint.
Rec. Doc. 337. Defendants oppose both the motion to strike and the motion for leave to amend.
Rec. Docs. 345, 346, 348, & 349. Finally, defendants Fluor and Shaw Environmental, Inc.
(“Shaw”) have also moved for summary judgment, which plaintiffs oppose. Rec. Docs. 335 &
352.
Having considered the record, the memoranda of counsel, and the law, the Court hereby,
and for the reasons that follow:
1. DENIES relators’ Motions to Strike,
2. DISMISSES Fluor’s Motion to Dismiss as MOOT,

3. DENIES CH2M’s Motion to DISMISS,
4. GRANTS IN PART and DENIES IN PART Fluor’s Motion for Summary Judgment,
5. GRANTS IN PART and DENIES IN PART Shaw’s Motion for Summary Judgment,
6. DISMISSES Shaw’s Motion to Strike Relators’ Exhibits Filed With Relators’
Opposition to Motion for Summary Judgment as MOOT, and
7. DISMISSES relators’ Motion to File a Second Amended Complaint as MOOT.
I. BACKGROUND
This case concerns the defendants’ alleged failure to comply with Louisiana state
liquefied petroleum (LP) safety statutes during the installation of temporary housing units
(THUs) or travel trailers from September 2005 to January 2006 in the aftermath of Hurricanes
Katrina and Rita. Rec. Doc. 53. Plaintiffs allege that FEMA “adopted and incorporated state
licensing, permitting, and other safety-related standards governing the installation of travel
trailers in Louisiana, as explicit requirements for entering and operating trailer installation
contracts between FEMA and the Defendants.” Id. ¶ 29. Defendants allegedly knew about these
requirements but did not comply, repeatedly submitting invoices for payment and certifying that
they were in compliance with the terms of the contract. Id. ¶¶ 49-64, 82-97.
Counts 1, 4, and 7 charge defendants with presenting false claims for payment in
violation of 31 U.S.C. § 3729(a)(1) (False Claims Act, hereinafter “FCA” or “the Act”).1 Id. ¶¶
99-103, 129-33. Counts 2 and 8 of the complaint charge Fluor and CH2M with making false

1

Now codified as 31 U.S.C. § 3279(a)(1)(A).

certifications in order “to get false claims paid” in violation of 31 U.S.C. § 3729(a)(2).2 Id. ¶¶
104-08, 134-38. Relators claim that defendants’ claims for payment were false both because they
were not entitled to payment under the express terms of their FEMA contracts – a breach of
contract theory - and because their failure to comply with LP gas regulations that existed for
public safety rendered their installation contracts a nullity under Louisiana law – a lack of
capacity to claim theory. Id. ¶¶ 24-25, 29.
A. Fluor and CH2M’s Motions to Dismiss
In their motions to dismiss, Fluor and CH2M argue that Counts 1 and 7 should be
dismissed because a simple breach of contract is not equivalent to a “false claim” and thus not a
violation of the Act. Rec. Doc. 306-1 at 9-16; Rec. Doc. 309-1 at 9. They argue that Counts 2 and
8 should be dismissed because plaintiffs have failed to allege, as required by Fifth Circuit
precedent, that certification of compliance was a pre-requisite to receiving payment from FEMA.
Rec. Doc. 306-1 at 6-9; Rec. Doc. 309-1 at 3-8. For support, the defendants rely heavily on this
Court’s decision to dismiss a related action brought by a separate group of plaintiffs, “the
Warders.” Rec. Doc. 255. The Court found that the plaintiffs were required, and failed to, plead
that certification of compliance was a pre-requisite to payment. Id. at 8. The Court thus dismissed
all claims against Fluor and CH2M “based on false certification of compliance with Louisiana or
local statutes or regulations governing liquefied petroleum handling or installation . . . .” Id. at
11. Finally, in its motion to dismiss, CH2M brings the Court’s attention to a recent Fifth Circuit
2

Now codified as 31 U.S.C. § 3729(a)(1)(B). Claim 5, which pleaded a violation of 31 U.S.C. § 3729(a)(2) against
Shaw, was voluntarily dismissed without prejudice.

opinion, U.S. ex rel. Spicer v. Westbrook, 751 F.3d 354 (5th Cir. 2014), which it argues requires dismissal of all
claims against it.

Plaintiffs have responded that the defendants’ non-compliance was not a mere breach of
contract but a violation of a requirement affecting their entitlement to be paid. Rec. Doc. 321 at
3-6. With respect to Counts 2 and 8, they contend that even though such certifications were not
expressly required, the defendants’ compliance (if not the certification of that fact) was a prerequisite to payment and thus the certifications to that effect were material to FEMA’s decision
to pay the defendants. Rec. Doc. 321 at 13. In direct response to CH2M, relators urge that Spicer
is factually inapposite and should therefore be disregarded by this Court in deciding whether to
grant the motions to dismiss. Rec. Doc. 322 at 15.
B. Relators’ Motions to Strike and to Amend their Complaint
Relators have moved to amend their complaint should the Court find their pleading of
false certification in the First Amended Complaint legally deficient. Rec. Doc. 337. Defendants
oppose this motion on the grounds that the amended complaint does not remedy the deficiency.
Rec. Doc. 345.
Relators have further moved to strike both motions to dismiss as repetitive of previous
unsuccessful motions to dismiss. Rec. Doc. 315 &317. Defendants oppose this motion, arguing
both that the plaintiffs have not met the high standard for a motion to strike and that this Court
possesses broad discretion to reconsider its prior orders. Rec. Doc. 346.
C. Fluor and Shaw’s Motions for Summary Judgment

Fluor has moved for summary judgment, adopting the argument, first raised by CH2M,
that the Fifth Circuit’s opinion in Spicer forecloses the merit of relators’ complaint. Rec. Doc.
335-2 at 5-9. Fluor also argues that it was entitled to compensation for non-conforming services
under its FEMA contract, thereby precluding any possible FCA liability for providing nonconforming services. Id. at 9-13. Fluor argues, in the alternative, that it came into compliance
with relevant LP regulations within the period of performance such that its services did conform
to the contract. Id. at 13-18. Fluor argues, further in the alternative, that whether or not its
services conformed was irrelevant to its entitlement to bill for costs in particular. Id. at 19.
Finally, Fluor argues that Louisiana law has no bearing on its entitlement to payment under the
FEMA contract, which is governed by federal common law. Id. at 19-24. Shaw has filed its own
motion for summary judgment that raises this final argument. Rec. Doc. 351.
In opposition, relators maintain that Spicer is, for various reasons, inapposite. Rec. Doc.
355-1 at 1-5. They further argue that Fluor was not entitled to payments for non-conforming
services in light of the absence of express language providing for such entitlement. Id. at 7-9.
Finally, they argue in various ways that the LP regulations that Fluor allegedly violated were so
central to the requirements for performance that there is no way they could not have affected
Fluor’s entitlement to either fixed fees or cost-reimbursement. Id. at 9-24. Relators have not
responded to either Shaw or Fluor’s choice of law argument.
II. STANDARD OF REVIEW
A. Rule 12(b)(6) Dismissal

When considering a Rule 12(b)(6) motion to dismiss, the court must take the wellpleaded factual allegations of the complaint as true, viewing them in the light most favorable to
the plaintiff. In re Katrina Canal Breaches Litigation, 495 F.3d 191, 205 (5th Cir. 2007)
(citations and quotation marksomitted). Plaintiff’s pleading must provide “enough facts to state a
claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570
(2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the
court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). On the other
hand, a “pleading that offers ‘labels and conclusions’ or a ‘formulaic recitation of the elements of
a cause of action will not do.’” Id.. Courts “are not bound to accept as true a legal conclusion
couched as a factual allegation.” Id. (internal quotation marks omitted). “In considering a motion
to dismiss for failure to state a claim, a district court must limit itself to the content of the
pleadings, including attachments thereto.” Collins v. Morgan Stanley Dean Witter, 224 F.3d 496,
498 (5th Cir. 2000).
B. Rule 56 Summary Judgment
Summary judgment is appropriate where “the pleadings, deposition, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is entitled to judgment as a matter
of law.” Fed. R. Civ. P. 56(c). Regardless of whether it bears the burden of proof at trial, the
party seeking summary judgment “bears the initial responsibility of informing the district court of

the basis for its motion, and identifying those portions of ‘[discovery], together with the
affidavits, if any,’ which it believes demonstrate the absence of a genuine issue of material fact.”
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the initial burden is satisfied, the
nonmoving party must “designate specific facts showing there is a genuine issue for trial” using
evidence cognizable under Rule 56. Id. at 324. Material facts are those which “might affect the
outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248 (1986).
When considering whether any genuine issues of material fact exists, courts view the
evidence and inferences drawn from that evidence in the light most favorable to the non-moving
party. Daniels v. City of Arlington, Texas, 246 F.3d 500, 502 (5th Cir. 2001). Summary judgment
does not allow a court to resolve credibility issues or weigh evidence. Int’l Shortstop, Inc. v.
Rally’s, Inc., 939 F.2d 1257, 1263 (5th Cir. 1991). Rather, “so long as the evidence in the record
is such that a reasonable jury drawing all inferences in favor of the nonmoving party could arrive
at a verdict in that party’s favor, the court must deny the motion.” Id.
III. LAW AND ANALYSIS
A. Relators’ Motions to Strike
As an initial matter, relators argue that since this Court denied the defendants’ motion to dismiss once
already (Rec. Doc. 189), defendants’ motion to dismiss is more properly characterized as a motion for
reconsideration under Rule 54(b). See, e.g., Rec. Doc. 315-1 at 2. The Court agrees.
“The

general practice of courts in this district has been to evaluate Rule 54(b) motions to

reconsider interlocutory orders under the same standards that govern Rule 59(e) motions to alter

or amend a final judgment.” Lightfoot v. Hartford Fire Ins. Co., No. 07–4833, 2012 WL 711842 at *2 (E.D.
La. Mar. 5, 2012) (citation omitted). Reconsideration may be granted if “the

motion is necessary to correct a

manifest error of law or fact upon which the judgment is based.” Id. (citation omitted).
Relators argue that defendants’ motions to dismiss should be stricken because they have failed to satisfy this
or any of the other Rule 59(e) standards. Rec. Doc. 315-1 at 2-7. However, the Court is not limited to the Rule 59(e)
grounds in determining whether to entertain or grant a Rule 54(b) motion. “Under Rule 54(b), the district court
‘possesses the inherent procedural power to reconsider, rescind, or modify an interlocutory order for cause seen by it
to be sufficient.’” Id. at *2 (quoting Melancon v. Texaco, Inc., 659 F.2d 551, 553 (5th Cir. 1981)).
Reconsideration is appropriate in this case because, after denying the motions to dismiss relators’ false
certification claims, the Court granted motions to dismiss on identical claims against the same defendants in a related
case. Rec. Doc. 255. Moreover, as the next section explains, in the time since this Court denied motions to dismiss
these claims, the case law of the Fifth Circuit has become more apparently hostile to the theory of FCA liability that
relators are attempting to pursue in this lawsuit. In light of the foregoing, relators’ motions to strike will be DENIED.

B. FCA Liability for Gratuitous Certifications of Contractual Compliance
Insofar as Counts 1, 2, 7 and 8 rely on a breach of contract theory, both Fluor and CH2M
argue that these counts should be dismissed because a simple breach of contract is not equivalent
to a “false claim” and thus not a violation of the Act. Rec. Doc. 306-1 at 9-16; Rec. Doc. 309-1 at
9. They argue that dismissal is required because relators have failed to allege, as required by Fifth
Circuit precedent, that any certification of compliance was a pre-requisite to receiving payment
from FEMA under their contract. Rec. Doc. 306-1 at 6-9; Rec. Doc. 309-1 at 3-8. They point to a
recent Order in a consolidated case that ordered dismissal of all claims “based on false

certification of compliance with Louisiana or local statutes or regulations governing liquefied
petroleum handling or installation . . . .” Rec. Doc. 255 at 11. Finally, they bring the Court’s
attention to a recent Fifth Circuit opinion, U.S. ex rel. Spicer v. Westbrook, 751 F.3d 354 (5th Cir. 2014).
Rec. Doc. 309 at 9; Rec. Doc. 335 at 5-9. In opposition, relators argue that defendants have misinterpreted Spicer,
this Court’s previous order, and their complaint. Rec.

Doc. 322 at 15. They argue that compliance with LP gas

statutes and regulations was too important to the lawfulness of the contract for failure to comply to be deemed a
simple breach. Rec. Doc. 321 at 13.

The question that determines the viability of this entire FCA-based complaint is whether
relators can plausibly allege and ultimately establish that defendants’ claims for payment under
their FEMA contract were false or fraudulent within the meaning of the FCA. Even if relators
can point to certifications that were actually false, such certifications are not actionable unless
they were material to a claim for payment that was itself false or fraudulent. See United States v.
Southland Management Corp., 326 F.3d 669, 675 (5th Cir. 2003) (“There is no liability under
[the FCA] for a false statement unless it is used to get [a] false claim paid.”).
In its previous Order and Reasons, this Court found that plaintiffs had sufficiently alleged
a theory of why each defendant’s invoices had been “false,” in light of each defendant’s knowing
failure to comply with LP gas regulations. Rec. Doc. 189 at 11-13. Before determining whether
current Fifth Circuit case law compels a different conclusion, it will be helpful to review how
precedent has evolved from the time that the defendants first moved for dismissal.
In their first motions to dismiss, defendants relied heavily on United States v. Southland
Management Corp.. In that case, the Fifth Circuit sitting en banc affirmed summary judgment on

a false certification claim against property owners under a housing assistance payment (HAP)
contract. The contract required the owners to maintain the property in decent, safe, and sanitary
condition as a condition of obtaining payments, but provided for a “corrective action period”
before the government could “abate payment” during which the owner would still be entitled to
payment. 326 F.3d at 675-76.
Defendants also cited United States ex rel. Thompson v. Columbia/HCA HealthCare
Corp., 125 F.3d 899 (5th Cir. 1997). That case involved Medicare reimbursement claims by FCA
defendants who allegedly falsely certified compliance with anti-kickback statutes. Id. at 900-01.
The district court found that allegations that defendants had submitted Medicare claims for
services rendered in violation of the statutes, and falsely certified that the services were rendered
in compliance, were insufficient to state a claim under the FCA.. Id. The Fifth Circuit reversed
and remanded for further consideration and factual development, noting that while “claims for
services rendered in violation of a statute do not necessarily constitute false or fraudulent claims
under the FCA, . . . where the government has conditioned payment of a claim upon a claimant’s
certification of compliance with, for example, a statute or regulation, a claimant submits a false
or fraudulent claim when he or she falsely certifies compliance with that statute or regulation.”
Id. at 902-03 (emphasis added).
Although the Thompson court framed the certification prerequisite as a sufficient, rather
than necessary, condition to establishing FCA liability for a breach of a Government contract, the
Fifth Circuit would later treat it as a necessary condition in United States ex rel. Marcy v. Rowan

Companies, Inc., 520 F.3d 384 (5th Cir. 2008), which defendants did not cite, and United States
ex rel. Steury v. Cardinal Health, Inc. (Steury I), 625 F.3d 262 (2010), which they did. Steury I
dealt with a claim that the defendant sold defective medical equipment to the Department of
Veterans Affairs in violation of the warranty of merchantability. 625 F.3d at 267-68. Ms. Steury
alleged that the defendant made implied certifications of compliance with the warranty by
requesting payment for the defective equipment. Id. at 268. The Fifth Circuit affirmed dismissal
of the complaint under Rules 12(b)(6) and 9(b), noting that “[n]ot every breach of a federal
contract is an FCA problem.” Id. at 265, 268. The Steury I court thus adopted and applied a
“prerequisite requirement,” whereby a “contractor’s mere request for payment does not fairly
imply [a certification of compliance with a statute, regulation, or contract provision],” “unless the
Government conditions payment on a certification of compliance.” Id. at 268.
Examining the Federal Acquisition Regulations (FAR), the Steury I court found “no
indication that the Government conditioned payment for the [goods] on a certification that the
[goods] complied with the warranty of merchantability.” Id. at 269. It noted that “the
Government’s ability to seek a range of remedies in the event of noncompliance” tends to
undermine any inference that certification is required. Id. at 270. Thus, it held that dismissal of
Steury’s complaint was appropriate. Id.
Citing Steury I, Southland Management, and Thompson, the defendants argued in their
original motions that relators’ complaint should be dismissed because relators failed to plead that
the government conditioned payment on the claimant’s certification of compliance and because

48 C.F.R. § 52.246-5(d) – part of the FAR – gave the Government the ability to compel
corrective action or reduce payment for uncorrectable work performed under the contract. Rec.
Doc. 89-1 at 16-17; Rec. Doc. 99-1 at 16; Rec. Doc. 87-1 at 14-15. However, this argument
failed to acknowledge important caveats to the holdings of Southland Management and Steury I,
in particular. As the Court explained in its original Order and Reasons denying the motions to
dismiss, the Southland court had the benefit of a fully developed summary judgment record in
determining that the HAP contract’s payment abatement procedures foreclosed any possible FCA
liability. Rec. Doc. 189 at 13. In this case, although the FAR prescribed a similar corrective
process in 48 C.F.R. 52.246-5(d), the details of the process, and its ramifications for entitlement
to particular payments claimed, were murkier. The Court was not inclined to read it as a
categorical bar to FCA liability without the benefit of a better-developed factual record, such as
that which the Southland Management court had at its disposal. Steury I, if anything, validates
this more conservative approach. If “the Government's ability to seek a range of remedies in the
event of noncompliance” under the FAR automatically negated any possible FCA liability, it
stands to reason that the Fifth Circuit would have come to that conclusion in Steury I, rather than
stating that such an ability merely “suggests that payment is not conditioned on a certification of
compliance.” Steury I, 625 F.3d at 270.
Moreover, in Steury I, even as the Fifth Circuit embraced the prerequisite requirement, it
acknowledged certain plausible alternate theories of FCA liability in cases involving the delivery
of nonconforming goods and services under a Government contract. It acknowledged a

“worthless goods” theory that other courts had applied. Id. Significantly, for purposes of this
case, the court held open the possibility that “a knowing attempt to deceive the Government
about the nature of commercial items may violate the FCA,” while noting that Ms. Steury had not
attempted to plead such a claim. Id. (citing United States v. Aerodex, Inc., 469 F.2d 1003, 1008
(5th Cir. 1972)). Ultimately, although the Steury I court affirmed dismissal, it remanded the case
to the district court with instructions to consider proposed remedial amendments to Ms. Steury’s
complaint. Id. at 270-71.
Because relators, unlike Ms. Steury, were attempting to plead a knowing deception
regarding the nature of their commercial services using express certifications, the Court did not
consider Steury I to be persuasive or controlling authority requiring dismissal with prejudice. Cf.
Rec. Doc. 189 at 16 (“Unlike Steury, the plaintiffs’ amended complaint makes clear that Fluor
and CH2M’s numerous certifications of compliance were not made independent of claims for
payment, but rather as part of claims for payment themselves.”). Therefore, considering
Thompson, Southland Management Corp., and Steury I, the Court determined that relators had
successfully alleged that defendants’ invoices were false or fraudulent.
Shortly after this Court’s decision to allow the relators’ complaint to move forward, the
Fifth Circuit released a second opinion in Steury. On remand, Ms. Steury had sought to amend
her complaint to allege that the defendant Cardinal had expressly warranted that its goods were
merchantable; that Cardinal’s contract required implicit certification; and that merchantability
was a material condition of the contract. United States ex rel. Steury v. Cardinal Health, Inc.

(Steury II), 735 F.3d 202, 206 (5th Cir. 2013) (per curiam). The Steury II court found that these
allegations were too conclusory to be regarded as well pleaded and taken as true. Id. at 206-07.
Further, the court found the vagueness of the complaint inexcusable given the posture of the
litigation. Id. at 207. The court concluded by reaffirming its embrace of the prerequisite
requirement and rejecting Ms. Steury’s attempt to leverage the aforementioned worthless goods
theory as insufficiently well-pleaded. Id.
Judge Higginson, concurring, urged caution in adopting the prerequisite requirement
wholesale as it lacked any foundation in the text of the FCA, and threatened to obscure the
traditional statutory distinction between false and fraudulent claims and eliminate liability
altogether for the latter category. Id. at 208-11. Fraud, he explained, encompasses a “broader
range of deceptive conduct” than the factually false statements contemplated in the false claims
portion of the statute. Id. at 209. “[T]o avoid foreclos[ing] FCA liability in situations that
Congress intended to fall within the Act’s scope,” rather than adopt the a-textual prerequisite
requirement, Judge Higginson proposed a return to the distinction between false and fraudulent
conduct, using strict enforcement of the Act’s materiality and scienter requirements. Id. at 211.
Finally, only months ago, the Fifth Circuit published the opinion in United States ex rel.
Spicer v. Westbrook. Spicer dealt with the delivery of Mine Resistant Ambush Protected vehicles
("MRAPs") under a defense contract that required the contractor to apply Chemical Agent
Resistant Coating (“CARC”) and further, pursuant to FAR clause 52.246-2, to inspect the
MRAPs prior to delivery for compliance with contract specifications, and to keep records of the

inspection. 751 F.3d at 359. Mr. Spicer argued that delivery of these MRAPs without CARC
constituted a false certification of compliance with the MRAP contract. Id. at 365. The Fifth
Circuit did not agree.
In the first test of its prerequisite requirement since Steury II, rather than heed Judge Higginson’s words of
caution or make allowances for possible alternate theories of FCA liability as it had done in Steury I, the Fifth Circuit
doubled down: “The linchpin of an FCA claim resting on the violation of a statute or regulation . . . is the
requirement of a certification of compliance.” Id. Using this statement as its only guiding principle, the Fifth Circuit
disposed of Spicer’s complaint. Like Ms. Steury, Mr. Spicer had failed to allege that certification of compliance with
FAR 52.246-2 was a prerequisite to payment. Id. at 366. As in Steury I, the Government’s ability to seek alternative
remedies under the FAR, which it had actually exercised against the Spicer defendants, belied any notion that
certification of compliance was a prerequisite. Id. It is this precedent that the Court must consider in evaluating
whether to dismiss or grant summary judgment on relators’ claims.
Nowhere in their First Amended Complaint do relators allege that certification of compliance was a
prerequisite to obtaining payment. See generally Rec. Doc. 53. In response to Fluor’s motion for summary judgment,
they have come forward with no evidence tending to support the inference that such certifications were required to
obtain payment under defendants’ FEMA contracts. Rec. Doc. 355. They readily concede

that the opposite

was true. Rec. Doc. 321 at 7 (“The Relators/Plaintiffs here do not allege in their [complaint] that
FEMA required Fluor (or any other Defendant here) to make any particular express certification .
. . on Fluor’s invoices to FEMA.”). After Spicer, this would seem fatal to the complaint.
Relators resist this conclusion in two different ways. First, they argue that Spicer is
inapposite. They contend that it does not apply to their direct false claims causes of action
because Spicer only appealed his two false certification causes of action that the district court

dismissed. Rec. Doc. 355-1 at 2-3. They also argue that it should not govern their false
certification causes of action because, like its predecessors in Steury and Marcy, Spicer only
addressed implied certifications of compliance, as opposed to the express certification at issue
here. Id. at 2-4. Neither of these arguments can be squared with the opinions themselves.
Although the Spicer court first analyzed the two claims of false certification in violation of § 3729(a)(1)(B)
that Spicer had directly appealed, its analysis reached other parts of the FCA. In a footnote, the Spicer court noted
that its analysis would be the same for Spicer’s direct false claims cause of action under former § 3729(a)(1) and
conspiracy cause of action under former § 3729(a)(3) and current § 3729(a)(1)(C). 751 F.3d at 367 n.16. Moreover,
the court concluded that the district court had not erred in denying Mr. Spicer leave to amend his complaint, which
“purport[ed] to assert claims against Navistar Defense under the false claim provision, false statement provision, and
the conspiracy provision,” because he still failed to allege that certification of compliance was a prerequisite to
payment. Id. at 364, 367-68. Thus, one fair reading of Spicer is that, generally speaking, a simple breach of contract
combined with a false certification of compliance with that contract cannot create any species of FCA liability unless
some certification of compliance was a prerequisite to payment, especially where, as here, the FAR’s corrective
action/payment reduction process is involved.

Next, while Steury, Marcy, and Spicer deal with alleged implied certifications, the Fifth
Circuit has been unequivocal about the fact that the prerequisite requirement applies to both
express and implied certifications of compliance:
As already discussed, when payment is not conditioned on a certification of
compliance, it is not fair to infer such certification from a mere request for
payment. Similarly, even if a contractor falsely certifies compliance (implicitly or
explicitly) with some statute, regulation, or contract provision, the underlying
claim for payment is not “false” within the meaning of the FCA if the contractor
is not required to certify compliance in order to receive payment.

Steury I, 625 F.3d at 269 (emphasis added). Thus, relators’ proposed distinction between express
and implied certification cases lacks any foundation in the case law.
In the end, relators’ main opposition to dismissal and summary judgment is a
recapitulation of Judge Higginson’s Steury II concurrence: the sweeping version of the
prerequisite requirement that the defendants are advocating, and that the Fifth Circuit seemed to
apply in Spicer, lacks foundation in the text of the FCA and threatens to eliminate FCA liability
for conduct that the Act was meant to cover. Rather than embracing this non-textual prerequisite
requirement, relators argue that the court should focus on the express certifications identified and
their materiality, i.e., natural tendency to influence the payment decision. Rec. Doc. 321 at 7, 10.
They present the declarations of FEMA officials that show that the defendants’ alleged false
certifications of contractual compliance had this tendency. Rec. Doc. 355-4.
Defendants might respond that this argument misses the point of Southland, Steury I and
II, and Spicer. Those cases recognize that whether a certification is false and whether a claim is
false are two separate issues. Cf. Southland Management Corp., 326 F.3d at 675.
Notwithstanding whether false certification is express or material, it will not render a claim false
unless some certification was a prerequisite to payment of the claim. See Spicer, 751 F.3d at 36566 (“Although we have previously indicated that the prerequisite requirement derives from the ‘materiality’ element
of an FCA claim . . . we have also reasoned, with greater precision, that the term ‘material’ . . . does not fully
encompass the requirement . . . .”) (citing Steury

be unfair to contractors. Id.

I, 625 F.3d at 269). Any other rule, it is argued, would

Relators might reply that, regardless of whether a false certification is gratuitous or
required, it can and should render a claim for payment fraudulent, when (a) the defendant is not
entitled to payment for the goods or services for which payment is claimed, (b) the certification
knowingly and materially misrepresents the nature of those goods or services, and (c) payment is
made in reliance on that certification. This was effectively the holding in Aerodex, which found
that FCA liability could be imposed for mislabeling non-conforming ball bearings delivered
pursuant to a Government contract. 469 F.2d at 1008. Aerodex has not been expressly overruled
in the Fifth Circuit, and was cited to as good law as recently as Steury I, 625 F.3d at 270.
It may ultimately fall to a different court to reconcile Spicer and Aerodex. However, until
Aerodex is expressly overruled or abrogated, this Court will continue to apply it as good law.
Regardless of whether an express statement of compliance is required, FCA liability can lie for
“a knowing attempt to deceive the Government about the nature of commercial [services]”
provided pursuant to a Government contract. Steury I, 625 F.3d at 270 (citing Aerodex, 469 F.2d
at 1008). However, under this theory, a relator must successfully plead and ultimately prove that
the defendant responsible for the false certification had a specific intent to defraud the federal
government. See Steury II, 735 F.3d at 209 (discussing fraud’s intent requirement); Aerodex, 469
F.2d at 1007 (“The law is settled in this Circuit that to show a violation of the False Claims Act
the evidence must demonstrate ‘guilty knowledge of a purpose on the part of [the defendant] to
cheat the Government’”). The qui tam relator must also show that the federal government was
injured-in-fact as a result of a defendant’s fraud. See, e.g., United States ex rel. Kelly v. Boeing

Co., 9 F.3d 743, 748 (9th Cir. 1993) (finding that injury-in-fact to the Government is required for
standing in qui tam cases); cf. United States ex rel. Riley v. St. Luke's Episcopal Hosp., 355 F.3d
370, 380 (5th Cir 2004) (finding injury was adequately pled when plaintiff alleged that the
Government paid the full amounts of the claims, unaware of their falsity). With this
understanding, the Court will analyze the sufficiency of the allegations against CH2M and the
evidence and allegations against Fluor to resolve their respective motions.
1. Fluor
Relators allege that Fluor became aware of the requirement that it and its subcontractors
obtain permits with the state LP gas commission before installing LP gas-equipped trailers as
early as January 2006. Rec. Doc. 53, ¶ 51. It is alleged that despite this knowledge, and the
knowledge that it and its subcontractors lacked such permits, Fluor continued to invoice FEMA
for millions of dollars in costs for non-permit trailer installations until December 2006, even after
receiving an email from FEMA regarding the permits in February 2006 and pleading “nocontest” to a criminal charge of violating Louisiana’s gas permit statute in May 2006. Id. ¶ 52-65.
Fluor is alleged to have misled FEMA by submitting invoices and expressly certifying on each
invoice that each was “in accordance with the terms of the contract,” which required compliance
with Louisiana law. Id. ¶ 56, 64.
In the context of Fluor’s actual agreement with FEMA, these factual allegations do not
allow for a fair inference that Fluor defrauded the Government of funds. Under Fluor’s contract
with FEMA, it was entitled to prompt payments for costs invoiced in amounts approved by the

FEMA’s Contracting Officer. Rec. Doc 355-5 at 15, 50. However, it does not follow that these
invoices were relied upon in a vacuum. The trailer installations were performed pursuant to a
task order – Task Order 20 – with a “Period of Performance” that lasted until October 31, 2006,
during and perhaps even after which time, FEMA was entitled to question the way the work was
being performed and compel corrective action or reduce payment. Rec. Doc. 335-6 at 160. It was
further contemplated that Fluor would bill as the work was completed. Rec. Doc. 335-6 at 83;
Rec. Doc. 335-5 at 30. Even assuming that Fluor was never, in any sense, “entitled” to bill for
unlawful installations, it is clear that the Government had contractual recourse for wrongful
billing.
Under the circumstances, something more than a boilerplate certification of compliance
on an initial invoice is required to plead actual fraud; relators must plead that Fluor successfully
misrepresented the nature of its services throughout the corrective action/payment reduction
process. Otherwise, it would be too likely that the Federal Government availed itself of free
corrective action before deciding to pay Fluor the entirety of amounts billed to allow the
complaint to move forward. The allegations of the complaint are thus deficient as against Fluor.
Moreover, even assuming relators could properly allege fraud, Fluor has demonstrated
that there is no genuine issue of material fact regarding whether Fluor actually misled FEMA to
the Government’s financial detriment. Relators admit that Fluor obtained the permits required to
perform state-mandated LP gas tank inspection and testing on April 27, 2006. Rec. Doc. 53 ¶ 59.
After Fluor pleaded “no contest” to violating the State’s LP gas laws in May 2006, it entered into

a settlement with the LPGC whereby it agreed to leak and pressure test LP gas tanks in trailers
that it and its subcontractors were installing pursuant to Task Order 20. Fluor did not actually
certify to FEMA that all of the work required by Task Order 20 was complete until November 1,
2006, one day after the period of performance ended and after it had complied with the terms of
the settlement. This certification included a line item for “LP gas inspections.” The technical
representative for FEMA’s contracting officer confirmed receipt and acceptance of Fluor’s
services.
Relators argue that this settlement agreement, and FEMA’s subsequent acceptance of the
services rendered, are irrelevant to determining liability because Fluor had a non-negotiable
contractual duty to follow the letter of the law. Rec. Doc. 355-1 at 15. This argument in part
implicates their contractual nullity theory, addressed below. However for the purposes of this
breach of contract theory, there can be no liability for false certification of a fraudulent claim as
long as the United States was made aware of the terms of the settlement.
To show false certification liability relators would need to come forward with evidence
from which a reasonable trier of fact could infer that Fluor misled FEMA regarding the nature of
its services in their November 1, 2006 close-out letter. They point to no such evidence in their
opposition to summary judgment. Nor do they argue that additional discovery will lead to such
evidence. For these reasons, summary judgment will enter against relators as to the breach of
contract theories pleaded in Counts 1 and 2 of the First Amended Complaint.
2. CH2M

The allegations against CH2M are similar to those against Fluor. Relators allege that
CH2M became aware of statutory requirements for LP gas tank installation in February 2006 but
continued to install and bill FEMA for non-conforming installations until November 2007,
despite their knowing failure to comply. Rec. Doc. 53, ¶¶ 86-98. They allege that CH2M falsely
certified on the invoices for these installations that “amounts requested are only for performance
in accordance with the specifications, terms, and conditions of the contract.” Id. ¶ 93. Were these
the only allegations presented, the Court would grant CH2M’s motion to dismiss, as relators’
right to recover could not be deemed more than speculative. However, relators also allege that on
or about April 10, 2006, CH2M executive David Knowles represented to FEMA’s Stephen
Reams that “all of our subcontractors who deal with propane have met Louisiana Stat
requirements” and further that CH2M used this statement to fraudulently avoid re-payments that
FEMA might have otherwise claimed. Id. ¶ 94. This is a serious allegation and, even in light of
the FAR’s standard corrective action/reduction procedures, would tend to support a cause of
action for false certification. CH2M’s motion to dismiss will therefore be DENIED.
C. Contractual Nullity/Eligibility to Collect
Fluor and Shaw argue that summary judgment should enter against relators on Counts 1,
2, and 4 because Louisiana State law could not have possibly rendered its contract with FEMA
absolutely null. Rec. Doc. 335-2 at 20; Rec. Doc. 351. Although defendants have styled their
motions as motions for summary judgment, they have not cited any affidavits or discovery to
demonstrate the absence of a genuine issue of fact on this issue. Their argument is entirely legal,

assuming as true those facts that have been pleaded in the petition. See, e.g., Rec. Doc. 351-1 at 7
n.17. Accordingly, the Court considers this argument under the standard of review applicable to
motions to dismiss for failure to state a claim.
In addition to claiming FCA liability based on breach of contract, relators’ complaint
alleges that the LP gas statutes and regulations were “laws enacted for the protection of the
public interest” (La. Civ. Code Ann. art. 7); Rec. Doc. 53 ¶ 24. As such, they claim that
defendants’ failure to comply with these laws rendered the contract a nullity, i.e. defendants were
not entitled to any payment under Louisiana law. Id. ¶ 25. The gist of relators’ argument is that
defendants’ claims for payment were de jure false because the voidness of their FEMA contracts
negated any possible entitlement to claim payment ab initio. Rec. Doc. 355-1 at 13.1 They argue
that, because the LP gas statutes and regulations exist for the public’s safety, a violation cannot
be considered an ordinary breach of contract. Id. Rather, it implicates their eligibility to claim
payments under the contract in the first place. Id.
1. Louisiana Law and Preemption
In their motions, Fluor and Shaw argue that “Louisiana law does not govern the
interpretation, application, termination and declaration of the nullity of a federal contract.” Id.
The Court agrees. Certain areas of law involving “‘uniquely federal interests’ . . . are so

1

As stated above, this is a theory of FCA liability independent from relators’ fraudulent breach
of contract theory, not merely a mechanism for calculating damages. To establish fraudulent
breach, relators need not establish that any of the defendants’ agreements with FEMA or its
subcontractors were void, null, or unenforceable. Insofar as there was fraud, damages would be
equal to the amount “wrongfully paid to satisfy the claim.” Aerodex, 469 F.2d at 1011.

committed by the Constitution and laws of the United States to federal control that state law is
pre-empted and replaced . . . by federal law of a content prescribed (absent explicit statutory
directive) by the courts—so-called ‘federal common law.’” Boyle. v. United Technologies
Corporation, 487 U.S. 500, 504 (1988) (citations omitted). Hence, “obligations to and rights of
the United States under its contracts are governed exclusively by federal law.” Id. (citations
omitted).
Relators’ argument that state law renders defendants’ federal contracts with FEMA a
“nullity” therefore has no merit. Relators cite a number of cases in which federal courts refused
to enforce contracts requiring payments to “unlicensed service providers” on public policy
grounds; however, none of the cases involves a federal contract. See, e.g., U.S. Nursing Corp. v.
St. Joseph Medical Center, 39 F.3d 790, 792-95 (7th Cir. 1994); Paul Arpin Van Lines Inc. v.
Universal Transportation Services, 988 F.2d 288, 289-91 (1st Cir. 1993). Moreover the bar for
absolute nullity is higher than the bar for unenforceability. See United States v. Jamieson Science
and Engineering, Inc., 214 F.3d 1372, 1377-78 (D.C. Cir. 2000) (declining to find false a claim
made in violation of federal restrictions on contracting amid conflicts of interest). This claim has
no merit.
2. False Eligibility for Payment
Citing United States ex rel. Riley v. St. Luke’s Hospital, relators argue that claims for
federal payments made based on services by a provider who does not have a state-required
license are inherently false. However, Riley and the other cases cited by relators all address FCA

liability for unlawful Medicare billing by unqualified providers. See Riley, 355 F.3d at 378;
United States v. Mackby, 339 F.3d 1013 (9th Cir. 2003); U.S. ex rel. Putnam v. Eastern Idaho
Reg. Med. Center, 696 F.Supp.2d 1190 (D. Idaho 2010); U.S. ex rel. Gonzalez v. Fresnius
Medical Care, 571 F.Supp.2d 758 (W.D. Tex. 2008); United States v. Sazama, 88 F.Supp.2d
1270 (D. Utah 2000); U.S. ex rel. Sanders v. East Alabama Healthcare Authority, 953 F. Supp.
1404 (M.D. Ala. 1996). Relators’ proposed analogy to the role of state licensing in Medicare
billing is strained at best.
In the Medicare context, state licensing requirements are incorporated directly into the
statutes that govern eligibility to bill as a provider. 42 U.S.C. §1395y(e). By contrast, legal
eligibility to participate in the FEMA contract did not depend on having a particular permit,
license or certification, per se. As Shaw notes in its motion, eligibility depended on an
“affirmative determination of responsibility” by a duly empowered contracting officer. 48 C.F.R.
§ 9.103; see 41 U.S.C. § 3101 (adopting General Services contracting regulations for executive
agency contracting). A determination of responsibility must be made by reference to eight
general criteria in addition to any appropriate special criteria set forth in the solicitation. 48
C.F.R. §§ 9.104-1, 9.104-2. It seems plausible that state licensing was relevant to the applicable
criteria in this case. Cf. id. § 9.104-1(g) (listing qualification and eligibility “to receive an award
under applicable laws and regulations” as a general criteria). Nevertheless, because the
contracting officer has “wide discretion” in making responsibility determinations, Bender
Shipbuilding & Repair Co. v. United States, 297 F.3d 1358, 1362 (Fed. Cir. 2002), a mere

showing that the defendants lacked installation permits would not necessarily indicate lack of
eligibility or entitlement to payment. Relators would have to show that the defendants
misrepresented their qualifications in this regard to the contracting officer, leading him to
determine that they were eligible. Relators have not alleged that the defendants misled the
FEMA contracting officer regarding their desire, ability, or willingness to obtain the relevant
licensing. Accordingly, relators fail to support a claim for false eligibility for payment based on
actual ineligibility for payment.
3. Absolute Nullity of Subcontracts
Finally, relators argue that the absolute nullity of the defendants’ agreements with their
subcontractors under state law rendered their claims for cost reimbursement legally false under
their federal contract within the meaning of the FCA. Rec. Doc. 356-1 at 2. Although relators
have not properly pleaded this theory, it has plausible merit based on the well-pleaded allegations
of the complaint.
Article 2030 of the Louisiana Civil Code provides that “[a] contract is absolutely null
when it violates a rule of public order, as when the object of a contract is illicit or immoral.” A
null contract may not be confirmed or invoked by any person. La. Civ. Code art. 2030.
“Generally, where the law contains a penalty for a failure to obtain a license it implies a
prohibition to collect on the contract entered into or work done.” United Stage Equipment v.
Charles Carer & Co., 342 So. 2d 1153, 1155 (La. App. 1 Cir. 1977); see also La. Civ. Code art.
7 (“Persons may not by their juridical acts derogate from laws enacted for the protection of the

public interest. Any act in derogation of such laws is an absolute nullity.”). Thus, “Louisiana
courts have long recognized that statutory licensing requirements ‘were enacted to protect an
interest vital to the public order,’ and have relied on these Civil Code articles to invalidate
contracting agreements entered into with unlicensed contractors.” Tradewinds Environmental
Restoration, Inc. v. St. Tammany Park, LLC, 578 F.3d 255, 259 (5th Cir. 2009) (citing Hagberg
v. John Bailey Contractor, 435 So. 2d 580, 584-85 (La. App. 3 Cir. 1983).
The Court does not agree with Fluor that the rule of absolute nullity only applies to state
contractors’ licenses, and not permits, of which a single contracting job may require many. See
Rec. Doc. 335-2 at 22-23. The case law does not distinguish between contractors’ licenses and
individual permits for purposes of public safety nullification. In Sunbelt Security Services, Inc. v.
Delahoussaye, the Fourth Circuit did not find that failure to obtain permits cannot result in
contractual nullity; that court simply concluded that the permit requirements at issue were not
sufficiently tied to public order to result in nullity. 572 So.2d 598, 603-04 (La. App. 4 Cir. 1990)
(The fact “[t]hat lessees did not have the required permit and were disallowed their 1987
occupational license pending acquisition of that permit does not render the contract violative of
public order and absolutely null.”). By contrast, in Davis v. Town of St. Gabriel, the First Circuit
found that an agreement in derogation of state building permit requirements was an absolute
nullity. 809 So.2d 537, 547 (La. App. 1 Cir. 2002).
Nevertheless, relators must do more than show that defendants entered into contracts with
their subcontractors when those subcontractors lacked the required permits. In East Tangipahoa

Dev. Co., LLC v. Bedico Junction, LLC, 5 So. 3d 238 (La. App. 1 Cir. 2008) and River Cities
Construction Co. v. Barnard & Burk, Inc., 444 So. 2d 1260 (La. App. 1 Cir. 1984), in which
(sub)contractors faced contractual obligations to obtain necessary permits before undertaking to
perform the contract, the First Circuit treated the (sub)contractors’ failure to obtain permits as an
ordinary breach of contract. See East Tangipahoa Dev., 5 So. 3d at 248; River Cities, 444 So. 2d
at 1265-66. This is significant because a court can and should take notice of contractual nullity
on its own motion. La. Civ. Code art. 2030. The implication of these opinions is that it does not
violate public policy to enter into a contract with a pre-permit contractor, as long as the contract
requires the contractor to obtain the necessary permits before the work begins.
To state a meritorious FCA claim based on the nullity of these subcontracts, relators must
plead sufficient facts to allow for a plausible inference that defendants failed in their subcontracts
to require their subcontractors to obtain the required permits. It is not sufficient that they simply
failed to enforce the contractual provisions calling for adherence to state law. The current
complaint does not contain the necessary allegation or sufficient facts to support it. Rec. Doc. 53,
¶ 24-25. The Court will grant relators 30 days leave in which to accomplish this amendment. In
doing so, the Court notes that insofar as defendants would argue that their subcontractors were
entitled to bill for costs and labor even if their contract was void, see Tradewinds, 578 F.3d at
260, defendants might still be liable for any invoices that exceeded that amount.
The Court has not considered relators’ summary judgment affidavits in reaching this
conclusion. Therefore, Shaw’s Motion to Strike relator’s summary judgment affidavit will be

DISMISSED AS MOOT. Rec. Doc. Similarly, in light of the foregoing, relator’s Conditional
Motion to Amend the Complaint will be DISMISSED AS MOOT. Rec. Doc. 337.
IT IS ORDERED that:
1. Relators’ Motions to Strike is hereby DENIED. Rec. Doc. 315 & 317.
2. Defendant Fluor’s Motion to Dismiss Counts 1 and 2 of the First Amended Complaint
is DISMISSED AS MOOT. Rec. Doc. 306.
3. Defendant CH2M’s Motion to Dismiss Counts 7 and 8 of the First Amended
Complaint is DENIED. Rec. Doc. 309.
4. Defendant Fluor’s Motion for Summary Judgment is GRANTED IN PART and
DENIED IN PART as set forth above. Rec. Doc. 335. Relators’ allegations of fraudulent breach
are DISMISSED. Relators shall file a second amended complaint within thirty (30) days of this
order, setting forth specific facts showing that Fluor failed to obligate its subcontractors to
comply with state LP gas statutes and regulations. Failure to comply with this order will result in
involuntary dismissal of Counts 1 and 2.
5. Plaintiffs’ motion to file a Second Amended Complaint is DISMISSED AS MOOT.
Rec. Doc. 337.
6. Shaw’s Motion for Summary Judgment is GRANTED IN PART and DENIED IN
PART. Rec. Doc. 351. Relators shall file a second amended complaint within thirty (30) days of
this order, setting forth specific facts showing that Shaw failed to obligate its subcontractors to
comply with state LP gas statutes and regulations. Failure to comply with this order shall result in

involuntary dismissal of Count 4.
7. Shaw’s Motion to Strike Relators’ Exhibits Filed With Relators’ Opposition to Motion
for Summary Judgment is DISMISSED AS MOOT. Rec. Doc. 359.

New Orleans, Louisiana this 13th day of November, 2014.

_________________________________
HELEN G. BERRIGAN
UNITED STATES DISTRICT JUDGE