Dowell v. Penn et al

Filing 54

ORDER and REASONS - Presently before the Court is "Defendant Penn's Motion to Dismiss Plaintiff/Relator's Amended Qui Tam Complaint" (Rec. Doc. 45). IT IS ORDERED that the motion is DENIED IN PART AND GRANTED IN PART. To clarify certain factual matters, IT IS FURTHER ORDERED that Relator, Tharius Dowell, shall file an amending and superseding complaint no later than twenty (20) days from the entry of this Order and Reasons, as stated within document. Signed by Judge Kurt D. Engelhardt on 9/23/2014. (cbs)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
UNITED STATES, ex rel.
THARIUS DOWELL

CIVIL ACTION

VERSUS

NO. 08-4740

ANTHONY PENN, METRO DISPOSAL, INC.
AND KENNETH JOHNSON

SECTION "N" (2)

ORDER AND REASONS
Presently before the Court is "Defendant Penn's Motion to Dismiss Plaintiff/Relator’s
Amended Qui Tam Complaint” (Rec. Doc. 45). As stated herein, IT IS ORDERED that the motion
is DENIED IN PART AND GRANTED IN PART. To clarify certain factual matters, IT IS
FURTHER ORDERED that Relator, Tharius Dowell, shall file an amending and superseding
complaint no later than twenty (20) days from the entry of this Order and Reasons.
BACKGROUND
With his motion, Defendant Penn seeks dismissal of the claims asserted against him
pursuant to the False Claims Act ("FCA"), 31 U.S.C. §3729(a), et seq. In short, Relator contends
that Defendants Penn and Johnson conspired to fraudulently procure a subcontract between
Defendant Metro Disposal, Inc. ("Metro"), for whom Penn worked, and KCJ Enterprises, which was

owned and operated by Johnson, for storm debris removal.1 According to Relator, Metro hired KCJ
upon Penn's recommendation; he further alleges that Penn "directed" Johnson, his brother-in-law,
to submit the required paperwork, on behalf of KCJ, to obtain a sub-tier contract with Metro.2 As
required by the United States Army Corps of Engineers' solicitation and prime contract, certain text
of Federal Acquisition Regulation (F.A.R.) 52.203-7, Anti-Kickback Procedures (July 1995), was
included in the subcontract entered into by Metro and KCJ.3 As alleged by Relator,4 and admitted
by Penn as part of a related guilty plea,5 however, KCJ (at Johnson's direction) thereafter made
kickback payments to Penn from the monies that KCJ received from its contract with Metro.
In this suit, Relator goes one step beyond the parameters of Penn's criminal
proceeding by alleging that, as of the time KCJ entered into the subcontract with Metro, Penn and
Johnson (on behalf KCJ) had no intention of complying with requirements of Federal Acquisition
Regulation (F.A.R) 52.203-7. Based on this allegation, Relator contends that Penn should bear FCA
liability for fraudulent inducement. Penn's motion seeks dismissal of these claims under Rules (9)(b)
and 12(b)(6) of the Federal Rules of Civil Procedure.

1

The subcontract in question is for removal of storm debris in the New Orleans area
caused by Hurricane Katrina. The United States Army Corps of Engineers awarded the prime
contract to Phillips and Jordan, Inc., which entered into a number of subcontracts, including one with
Metro.
2

See Amended Complaint (Rec. Doc. 37), at ¶11.

3

Id. at ¶¶ 7-8.

4

Id. at ¶ 13.

5

See United States of America v. Anthony Penn, Criminal Action No. 13-15, Sect. "K",
Eastern District of Louisiana, Rec. Doc. 33.
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LAW AND ANALYSIS
I. Legal Principles
Claims brought under the FCA must satisfy the pleading requirements of Rules 8(a)
and 9(b) of the Federal Rules of Civil Procedure. See, e.g., United States ex rel. Thompson v.
Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir. 1998). Rule 8 requires that
complaints provide a “short and plain statement of the claim showing that the pleader is entitled to
relief.” Fed. R. Civ. Proc. 8(a)(2). Although a complaint does not need “detailed factual allegations,
. . . more than labels and conclusions are necessary, and a formulaic recitation of the elements of a
cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations
and quotations omitted); Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (“Threadbare recitals of the
elements of a cause of action, supported by mere conclusory statements, do not suffice.”). Similarly,
in evaluating motions to dismiss, courts “are not bound to accept as true a legal conclusion couched
as a factual allegation.” Papasan v. Allain, 478 U.S. 265, 286 (1986); see also Iqbal, 556 U.S. at
678 (“tenet that a court must accept as true all of the allegations contained in a complaint is
inapplicable to legal conclusions.”). “Nor does a complaint suffice if it tenders ‘naked assertion[s]’
devoid of ‘further factual enhancement.’” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at
557); see also Christopher v. Harbury, 536 U.S. 403, 416 (2002) (elements of a plaintiff's claim(s)
“must be addressed by allegations in the complaint sufficient to give fair notice to a defendant”).
Further, to survive a motion to dismiss, a complaint must contain sufficient factual
matter, accepted as true, to “state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at
678 (quoting Twombly, 550 U.S. at 570). Facial plausibility exists “when the plaintiff pleads factual
content that allows the court to draw the reasonable inference that the defendant is liable for the

3

misconduct alleged.” Id. “The plausibility standard is not akin to a ‘probability requirement,’ but
it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. Factual
allegations that are “merely consistent with a defendant's liability, stop short of the line between
possibility and plausibility of entitlement to relief,” and thus are inadequate. Id. (internal quotations
omitted). Rather, a complaint’s allegations "must make relief plausible, not merely conceivable,
when taken as true." United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 186 (5th Cir. 2009).
“Determining whether a complaint states a plausible claim for relief” is “a
context-specific task that requires the reviewing court to draw on its judicial experience and
common sense.” Id. at 679 (internal citations omitted). See also Robbins v. Oklahoma, 519 F.3d
1242, 1248 (10th Cir. 2008) (degree of required specificity depends on context, i.e., the type of
claim at issue). And, in evaluating motions to dismiss filed under Federal Rule of Civil Procedure
12(b)(6), the Court "must accept all well-pleaded facts as true, and . . . view them in the light most
favorable to the plaintiff." Campbell v. Wells Fargo Bank, N.A., 781 F.2d 440, 442 (5th Cir.), cert.
denied, 476 U.S. 1159 (1986). Further, "[a]ll questions of fact and any ambiguities in the controlling
substantive law must be resolved in the plaintiff's favor." Lewis v. Fresne, 252 F.3d 352, 357 (5th
Cir. 2001). Nevertheless, “where the well-pleaded facts do not permit the court to infer more than
the mere possibility of misconduct, the complaint has alleged – but it has not ‘show[n]’ – “that the
pleader is entitled to relief.’” Iqbal, 556 U.S. at 678 (quoting Fed. Rule Civ. Proc. 8(a)(2)).
In addition to Rule 8(a)(2)’s pleading demands, Rule 9(b) supplements Rule 8(a), if
fraud is alleged, by requiring circumstances allegedly constituting fraud be stated with particularity.

4

See Fed. R. Civ. Proc. 9(b); Grubbs, 565 F.3d at 185.6 Thus, Rule 9(b) generally requires the
plaintiff to set forth the “who, what, when, where, and how” of the alleged fraud.” See, e.g., United
States ex rel. Steury v. Cardinal Health, Inc., 625 F.3d 262, 266 (5th Cir. 2010); see also Sullivan
v. Leor Energy, LLC, 600 F.3d 542, 550-51 (2010) (claimant must "specify the statements contended
to be fraudulent, identify the speaker, state when and where the statements were made, and explain
why the statements were fraudulent").
Significantly, however, courts must realistically observe that “there is no single
construction of Rule 9(b) that applies in all contexts.” Grubbs, 565 F.3d at 188. Indeed, the Fifth
Circuit has explained that the “‘time, place, contents, and identity’ standard is not a straitjacket for
Rule 9(b).” Id. at 190. “Rather, the rule is context specific and flexible and must remain so to
achieve the remedial purpose of the False Claim Act.” Id. Thus, for instance, with a FCA
“presentment claim,” brought pursuant to 31 U.S.C. §3729(a)(1)(A), a relator's complaint may
survive, even absent allegations of the details of an actually submitted false claim, e.g., billing
numbers, dates, and amounts, “by alleging particular details of a scheme to submit false claims
paired with reliable indicia that lead to a strong inference that claims were actually submitted.” Id.
On the other hand, a relator cannot bypass Rule 9(b)’s pleading requirements simply
by premising its allegations “on information and belief.” Thompson, 125 F.3d at 903. To the
contrary, though fraud may be alleged on information and belief if the “facts relating to the fraud
are peculiarly within the perpetrator’s knowledge,” the complaint nevertheless “must set forth a
factual basis for such belief.” Id.

6

"Malice, intent, knowledge, and other conditions of a person's mind", however, "may
be alleged generally." See Fed. R. Civ. Proc. 9(b).
5

II. Application of Legal Principles
Having carefully reviewed the parties’ submissions and applicable law, the Court,
on the showing made, finds Relator’s allegations satisfy the requirements of Rules 8(a), 9(b) and
12(b)(6) for pleading a fraudulent inducement claim under the FCA7 – specifically, 31 U.S.C.
§3729(a)(1)(B)(2009) and 31 U.S.C. §3729(a)(3)(2008).8 In reaching this conclusion,
7

FCA fraudulent inducement liability exists “when the contract under which payment
is made was procured by fraud.” United States ex rel. Longhi v. United States, 575 F.3d 458, 467-68
(5th Cir. 2009)(quoting United States ex rel. Willard v. Humana Health Plan of Texas, Inc., 336 F.3d
375, 384 (5th Cir. 2003) (citing Harrison v. Westinghouse Savannah River Company, 176 F.3d 776,
787 (4th Cir. 1999)). "Under a fraudulent inducement theory, although . . . 'subsequent claims for
payment made under the contract were not literally false, [because] they derived from the original
fraudulent misrepresentation, they, too, became actionable false claims.'" Longhi, 575 F.3d at 468
(quoting United States ex rel. Laird v. Lockheed Martin Eng'g & Science Servs. Co., 491 F.3d 254,
259 (5th Cir. 2007) (citing United States ex rel. Marcus v. Hess, 317 U.S. 537, 543-44 (1943)).
8

Relator's complaint purports to assert substantive and conspiracy claims under 31
U.S.C. §3729(a) of False Claims Act. The statute, which was amended in 2009, presently provides
in pertinent part:
31 U.S.C. §3729 (a) Liability for certain acts.
(1) In general. Subject to paragraph (2), any person who-(A) knowingly presents, or causes to be presented, a false or
fraudulent claim for payment or approval;
(B) knowingly makes, uses, or causes to be made or used, a false
record or statement material to a false or fraudulent claim;
(C) conspires to commit a violation of subparagraph (A), (B), (D),
(E), (F), or (G);
***
is liable to the United States Government for a civil penalty of not
less than $5,000 and not more than $10,000, as adjusted by the
Federal Civil Penalties Inflation Adjustment Act of 1990 (28 U.S.C.
2461 note; Public Law 104-410), plus 3 times the amount of damages
which the Government sustains because of the act of that person.
See 31 U.S.C. §3729(a).
Prior to the 2009 amendment, the statute provided, in pertinent part:
6

31 U.S.C. §3729 (a) Liability for certain acts.
Any person who-(1) knowingly presents, or causes to be presented, to an officer or
employee of the United States Government or a member of the
Armed Forces of the United States a false or fraudulent claim for
payment or approval;
(2) knowingly makes, uses, or causes to be made or used, a false
record or statement to get a false or fraudulent claim paid or approved
by the Government;
(3) conspires to defraud the Government by getting a false or
fraudulent claim allowed or paid;
***
“is liable to the United States Government for a civil penalty of not
less than $5,000 and not more than $10,000, plus 3 times the amount
of damages which the Government sustains because of the act of that
person, except that if the court finds that[.]
Regarding the application of the 2009 amendment, the enacting legislation provides:
“The amendments made by this section [amending this section and 31
U.S.C.A. §§ 3730 to 3733] shall take effect on the date of enactment
of this Act [May 20, 2009] and shall apply to conduct on or after the
date of enactment [May 20, 2009], except that –
“(1) subparagraph (B) of section 3729(a)(1) of title 31, United States
Code, as added by subsection (a)(1) [amending subsec. (a) of this
section], shall take effect as if enacted on June 7, 2008, and apply to
all claims under the False Claims Act (31 U.S.C. 3729 et seq.) . . .
that are pending on or after that date[.]
See Fraud Enforcement and Recovery Act of 2009, Pub. L. 111-21, § 4(f), May 20, 2009, 123 Stat.
1617, 1625 (2009); see also United States ex rel. Steury v. Cardinal Health, Inc., 625 F.3d 262, 267
n. 1 (5th Cir. 2010) (§ 3729(a)(1)(B) applies retroactively to all claims pending on or after June 7,
2008, i.e., just before the Supreme Court's decision in Allison Engine Company. v. United States ex
rel. Sanders, 553 U.S. 662, 665 (2008)); see also S. Rep. No. 111–10, at 10 (2009), reprinted in
2009 U.S.C.C.A.N. 430, 437-38, 2009 WL 787872, *10-12 (expressing legislative intent to overrule
Allison Engine).
In Steury, the Fifth Circuit, addressing the retroactivity of 31 U.S.C. §3729(a)(1)(B)(2009),
construed the word "claims" in the amending legislation to mean judicial "complaints." See Steury,
625 F.3d 267 n. 1; see also United States ex rel. Spicer v. Westbrook, 751 F.3d 354, 360 n. 6 (5th
Cir. 2014). Here, Relator's original complaint was filed on October 26, 2008, but the relevant
7

the Court emphasizes that, in this instance, the key disputed issues concern matters of knowledge
and intent, which are not required to be plead with particularity, and that the undisputed facts do not
necessarily preclude the existence of a kickback agreement between Penn and Johnson (on behalf
of KCJ) as of the time that Metro and KCJ contracted. Furthermore, this determination is being
made at the pleading stage and, as such, is without prejudice to Defendant Penn's ability to obtain
judgment in his favor by motion for summary judgment, by another properly filed and supported
motion, or by prevailing at trial.
Despite denying Penn's motion, in part, the Court finds certain factual matters set
forth in Relator's amended complaint nevertheless warrant clarification. Specifically, the total
amount alleged to have been paid as kickbacks to Penn, and whether this sum is alleged to have been
taken from KCJ's or Metro's profit, require clarification.9 Additionally, certain paragraphs of the
amended complaint appear to reference the relevant year(s) incorrectly.10 Accordingly, no later than

conduct occurred prior to May 20, 2009. Thus, the Court finds the 2009 amendment applicable to
Relator's assertions regarding any liability to be imposed under §3729(a)(1)(B)(2009); otherwise,
Relator's FCA claims are governed by the 2008 version of the statute. Given the narrow
interpretation of then §3729(a)(1) and (a)(2) in Allison Engine Company and United States of
America, ex rel. Totten, and that KCJ neither directly contracted with, nor was paid directly by, the
Army Corps of Engineers, it is not apparent to the Court that Relator would be eligible for relief
under §3729(a)(1). See Allison Engine Company, 553 U.S. at 670-72 and n.1; United States of
America, ex rel. Totten v. Bombardier, 380 F.3d 488, 492-93 (D.C. Cir. 2004). Accordingly, to the
extent that Relator seeks relief under 31 U.S.C. §3729(a)(1), Penn's motion is granted relative to that
aspect of Relator's claim(s).
9

The amended complaint appears to allege that KCJ paid $255,059.03 from the monies
it received from Metro, whereas Defendant Penn's reply references an "overpayment" by Penn, on
behalf of Metro, to KCJ in the amount of $222,260.00. See, e.g., Amended Complaint (Rec. Doc.
37) at ¶¶ 13 and 15; Reply Memorandum (Rec. Doc. 50), pp. 2.
10

See, e.g, Amended Complaint (Rec. Doc. 37) at ¶ 12 ("KCJ's work on the load and
haul sub-tier contract [for Hurricane Katrina debris] began in approximately early April 2005.");
¶13 ("On or about July 12, 2005, after KCJ's start up costs during the first few weeks under the
[2006] sub-tier contract had leveled off. . . . .").
8

twenty (20) days from the entry of this Order and Reasons, Relator must file a second amended and
superseding complaint that includes all of the allegations from Relator's original and first amended
complaints on which Relator continues to rely, as well as the ordered clarifications and/or
corrections, such that the case can proceed on the basis of the second amended and superseding
complaint without requiring further reference to the original or first amended complaint.
CONCLUSION
As stated herein, IT IS ORDERED that the motion to dismiss presently before the
Court is denied in part and granted in part. Additionally, the amendments ordered by the Court are
to be made, in accordance with the Court’s instructions stated above, no later than twenty (20) days
following entry of this Order and Reasons.
New Orleans, Louisiana, this 23rd day of September 2014.

_________________________________
KURT D. ENGELHARDT
United States District Judge

9