United States of America v. Bollinger Shipyards, Inc., et al

Filing 131

ORDER AND REASONS denying 73 Motion for Reconsideration of this Court's order of January 30, 2013. Signed by Chief Judge Sarah S. Vance on 8/1/13. (jjs, )

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA

UNITED STATES OF AMERICA

CIVIL ACTION

VERSUS

NO: 12-920

BOLLINGER SHIPYARDS, INC., ET AL.

SECTION: R(5)

ORDER AND REASONS
Before the Court is the government's motion for
reconsideration of this Court's order of January 30, 2013.1 For
the following reasons, the Court DENIES the United States'
motion.

I. Background
A. Procedural History
The United States brought claims against Bollinger in
connection with its work on the United States Coast Guard’s
Deepwater program, which involved the replacement of the Coast
Guard’s fleet of water vessels, aircraft, and electronic systems.
On July 29, 2011, the United States filed its original complaint
against Bollinger based on allegations that “Bollinger knowingly
misled the Coast Guard to enter into a contract for the
lengthening of the Coast Guard cutters by falsifying data

1

R. Doc. 73.
1

relating to the structural strength of the converted vessels.”2
The complaint alleged five causes of action: that Bollinger (1)
knowingly presented false or fraudulent claims for payment or
approval to the United States in violation of the False Claims
Act, 31 U.S.C.A. § 3729(a)(1)(A); (2) knowingly made false
records or statements material to false or fraudulent claims for
payment by the United States in violation of the False Claims
Act, § 3729(a)(1)(B); (3) committed common law fraud by making
misrepresentations of material fact; (4) made negligent
misrepresentations; and (5) was unjustly enriched. Bollinger
filed a motion to dismiss, which the Court granted.3 The Court
dismissed all of the claims but granted the United States leave
to amend its False Claims Act and fraud claims.4
The United States then filed its First Amended Complaint and
a motion for reconsideration of certain rulings in the Court's
order dismissing the original complaint.5 Specifically, the
United States seeks reconsideration of the Court's dismissal of
the unjust enrichment claim and the Court's ruling that to the
extent the United States could successfully re-plead causes of
action under the False Claims Act, any damages would be limited

2

Id. at 1.

3

R. Doc. 71.

4

Id. at 40.

5

R. Docs. 74, 73.
2

to the period of time before the Coast Guard had knowledge of the
problems with the converted patrol boats.

B. Factual Allegations in the Original Complaint
The complaint alleged that the Coast Guard selected
Integrated Coast Guard Systems (ICGS) to proceed as the lead
contractor, with Bollinger, which had built the 110-foot fleet,
selected as the subcontractor to design and construct the new
123-foot patrol boats.6 The government alleged that in September
2000, during Phase 1 of the project, the Coast Guard notified
ICGS and Bollinger that it was concerned about the structural
integrity of the hulls of the vessels to be modified, since the
vessels were to be extended by thirteen feet.7 It said that no
analysis had been performed to determine if the increased stress
on the hull would produce unacceptable bending of the hull
girder.8 On October 3, 2000, Bollinger submitted to the Coast
Guard a calculation of midship section modulus, which measures
the hull’s resistance to bending and is one measure of a boat’s
longitudinal strength.9 Bollinger told the Coast Guard that it
calculated the section modulus to be 7,152 cubic inches, which

6

R. Doc. 1 at 4.

7

R. Doc. 1 at 4-5.

8

Id.

9

Id. at 5.
3

compared favorably to the standard of 3,113 cubic inches
contained in the American Bureau of Shipping (ABS) Guide for
Building and Classing High Speed Craft.10 The complaint alleged
that Bollinger’s section modulus calculation overstated the
longitudinal strength of the proposed 123-foot patrol boat design
by using thicker hull plating in its calculation than existed in
the vessels.11 The complaint alleged that this initial
representation was “unreasonable.”12 The government alleged that
it relied on Bollinger’s representation of sufficient hull
strength in accepting Bollinger’s design and awarding the Phase 2
contract to ICGS on June 25, 2002, about two years after it
received Bollinger’s section modulus calculation.
The contract between the Coast Guard and ICGS contained a
Contract Data Requirements List (CDRL), which identified the
information that ICGS and Bollinger were required to provide the
Coast Guard concerning the contract deliverables.13 In the
original complaint, the United States alleged that one of the
requirements was that Bollinger provide the Coast Guard with a
Hull Load and Strength Analysis (HLSA) in order to verify that

10

Id.

11

Id. at 5-6.

12

Id.

13

Id. at 6-7.
4

the modified vessels met the program and contract requirements.14
The Government never specifically alleged what the program and
contract requirements were for the converted vessels. In August
2002, the Coast Guard issued the first of four Delivery Task
Orders (DTOs) to ICGS for Bollinger to commence the 110-foot
patrol boat conversion project on a firm fixed-price basis.15 In
May and August 2003, the Coast Guard issued three additional DTOs
for converted patrol boats.16
The United States alleged that during Phase 1, Bollinger was
notified by a NGSS predecessor that the ICGS contract required
the contractor to use ABS to certify compliance with ABS
standards.17 The complaint did not allege that ABS certification
was in fact a written contract requirement or that the CDRL
included ABS certification as a requirement for delivery. The
United States alleged that on August 26, 2002, Bollinger's chief
executive officer, Boysie Bollinger, advised Bollinger personnel
that an ABS executive who was a former Coast Guard Commandant had
offered to review the hull design of the modified patrol boats
confidentially.18 CEO Bollinger asked for the views of his staff

14

Id.

15

Id. at 7.

16

Id.

17

Id. at 6.

18

Id.
5

as to whether or not to accept the offer.19

The complaint

alleged that Bollinger vice president T.R. Hamblin responded by
recommending that Bollinger decline ABS’ offer to conduct a
review. Then on August 27, 2002, CEO Bollinger allegedly replied
to Hamblin:
I'm concerned that [Kramek] sells CG on the fact that
they need this review. . . . [ABS] would love the
additional responsibility from the CG and as we both
know, adverse results could cause the entire 123 to be
an un-economical solution if we had to totally rebuild
the hull. . . . MY CONCERN - we don't do anything - ABS
gets CG to require it without our input, and the result
is we BLOW the program.20
The United States alleged that on or about the same day an
unidentified Bollinger employee or employees performed a series
of calculations of the 123-foot patrol boat section modulus.21
They allegedly ran the Midship Section Calculator (MSC) program
at least three times, changing input data, and obtaining results
of 2,836, 3,037, and 5,232 cubic inches.22 The United States
alleged that Bollinger obtained the result of 5,232 cubic inches
by changing the physical properties of the shape files included
in the MSC model and by entering “data into the MSC program that

19

Id.

20

Id. at 7-8 (as quoted in the complaint)

21

Id. at 8.

22

Id.
6

did not reflect the actual structural characteristics of the
converted vessels.”23
On August 28, 2002, NGSS authorized Bollinger to proceed
with the work “in anticipation of definitizing a Firm Fixed Price
- type contract by 30 September 2002.”24 The original complaint
did not allege when the contract was actually “definitized.”25
On September 4, 2002, Bollinger submitted to the Coast Guard an
initial CDRL S012-11 report stating that the midship section
modulus was 5,232 cubic inches.26 This calculation was
significantly lower than the 7,152 cubic inches calculation that
Bollinger submitted during Phase 1, but still above the minimum
section modulus of 3,113 cubic inches contained in the ABS
Guide.27 The complaint also alleged that Bollinger created an
internal draft CDRL S012-11 report that showed a 3,037 cubic
inches section modulus, but it did not submit this to the Coast
Guard.
The United States alleged that on October 9, 2002, Bollinger
held a Preliminary Design Review meeting at which Bollinger told
the Coast Guard that ABS would review the midship section modulus

23

Id. at 8-9.

24

Id. at 8.

25

Id.

26

Id.

27

Id. at 5-6.
7

calculation and longitudinal strength.28 The complaint alleged
that on December 18, 2002, Bollinger informed the Coast Guard at
a Critical Design Review Meeting that ABS had been engaged to
review compliance with “ABS rules.”29 The United States further
alleged that ABS did not certify or review Bollinger’s section
modulus calculations.30 On December 16, 2002, Bollinger submitted
a final CDRL S012-11 report with the same section modulus of
5,232 cubic inches as the September report.31 In March 2004,
Bollinger delivered to the Coast Guard the first converted patrol
boat, the Matagorda, which the Coast Guard paid for.32
The United States alleged that on August 20, 2004, after the
delivery of the Matagorda, a Bollinger Vice President signed CDRL
S016 certifying compliance with applicable contract
requirements.33 On September 10, 2004, the Matagorda suffered a
structural casualty.34 The complaint alleged that the subsequent
Coast Guard investigation found that Bollinger’s reported
measurements “overstated the actual section modulus depicting the

28

Id. at 9

29

Id.

30

Id.

31

Id.

32

Id.

33

Id. at 10.

34

Id.
8

longitudinal strength of the hull.”35 Bollinger retested the hull
strengths of the boats and reported an actual section modulus of
2,615 cubic inches.36 The United States also alleged in its
complaint that on October 13, 2004, after the failure of the
Matagorda, Bollinger vice president Hamblin emailed CEO Bollinger
and others that, “we did lead the CG into a false sense of
security by telling them early on that the Section Modulus for a
123 would be 5230 inches cubed as opposed to the real number,
just above 2600.”37 The complaint alleged that between November
22, 2002, and December 26, 2006, the Coast Guard paid
approximately $78 million in response to 65 requests for payment
from ICGS for work performed by Bollinger.38 The United States
alleged that all of the vessels supplied by Bollinger turned out
to be unseaworthy.39 The parties executed a statute of
limitations tolling agreement on December 5, 2008.40

35

Id.

36

Id.

37

Id.

38

Id.

39

Id. at 10-11.

40

Id. at 11. Before the government filed its complaint, it
had access to substantial information from its investigation into
the conduct of ICGS, Lockheed, NGSS, and Bollinger arising from
the WPB conversion project. R. Doc. 51 at 3, n. 3. Bollinger
asserts that it made eleven document productions, totaling more
than 40,000 documents, made eight of its employees available for
interviews, and agreed to toll the statute of limitations for
9

II. Legal Standard
Federal Rule of Civil Procedure 54(b) provides that an order
that adjudicates fewer than all the claims among all the parties
“may be revised at any time” before the entry of a final
judgment. Fed.R.Civ.P. 54(b). As Rule 54 recognizes, a district
court “possesses the inherent procedural power to reconsider,
rescind, or modify an interlocutory order for cause seen by it to
be sufficient.” Melancon v. Texaco, Inc., 659 F.2d 551, 553 (5th
Cir. Unit A Oct. 1981). Although the district court's discretion
in this regard is broad, see Calpetco 1981 v. Marshall
Exploration, Inc., 989 F.2d 1408, 1414–15 (5th Cir.1993);
Lavespere v. Niagara Mach. & Tool Works, Inc., 910 F.2d 167, 185
(5th Cir.1990), abrogated on other grounds by Little v. Liquid
Air Corp., 37 F.3d 1069 (5th Cir.1994) (en banc), it is exercised
sparingly in order to forestall the perpetual reexamination of
orders and the resulting burdens and delays. See generally 18b
Charles A. Wright et al., Federal Practice & Procedure:
Jurisdiction § 4478.1 (2d ed.2002).
This Court generally evaluates motions to reconsider
interlocutory orders under the same standards that govern Rule
59(e) motions to alter or amend a final judgment.41 Although

potential legal claims to give the Department of Justice more
time to complete its investigation. Id.
41

See, e.g., Rosemond v. AIG Ins., No. 08–1145, 2009 WL
1211020, at *2 (E.D.La. May 4, 2009) (Barbier, J.); In re Katrina
10

there may be circumstances in which a different standard would be
appropriate, the present motion does not present such
circumstances. See, e.g., American Canoe Ass'n v. Murphy Farms,
Inc., 326 F.3d 505, 514–16 (4th Cir.2003) ("true declaratory
judgments ... trigger heightened standards for reconsideration").
The proper inquiry is therefore whether the moving party has
“clearly establish[ed] either a manifest error of law or fact or
... present[ed] newly discovered evidence.” Ross v. Marshall, 426
F.3d 745, 763 (5th Cir.2005) (quoting Simon v. United States, 891
F.2d 1154, 1159 (5th Cir.1990)). A motion to reconsider is “not
the proper vehicle for rehashing evidence, legal theories, or
arguments that could have been offered or raised before the entry
of [the order].” Templet v. HydroChem Inc., 367 F.3d 473, 478–79
(5th Cir.2004).

III. Discussion
In its motion for reconsideration, the United States argues
that the Court erred in dismissing with prejudice its unjust
enrichment claims and barring the United States from asserting

Canal Breaches Consol. Litigation, No. 05–4182, 2009 WL 1046016,
at *1 (E.D.La. Apr.16, 2009) (Duval, J.); Total Sleep
Diagnostics, Inc. v. United Healthcare Ins. Co., No. 06–4153,
2009 WL 928646, at *2 (E.D.La. Mar.31, 2009) (Fallon, J.); Town
of Gramercy v. Blue Water Shipping Services, No. 07–2655, 2009 WL
580445, at *1 (E.D.La. Mar.4, 2009) (Engelhardt, J.); Letap
Hospitality, L.L.C. v. Days Inn Worldwide, Inc., No. 08–1355,
2008 WL 2959649, at *2 (E.D.La. July 30, 2008) (Berrigan, J.).
11

liability under the FCA and common law fraud for claims for
payment made after October 2004 when the Coast Guard gained
knowledge of the actual section modulus of the converted boats.

A. Unjust Enrichment
The United States alleged that Bollinger was unjustly
enriched at the expense of the United States and, in the absence
of another remedy, Bollinger should be required to pay
restitution. The Court held that the existence of a contract
foreclosed the quasi-contractual remedy of unjust enrichment. The
United States argues that this conclusion was factually erroneous
because although the United States pleaded an express contract
between the Coast Guard and ICGS, it never pleaded an express
contract between the Coast Guard and Bollinger.44 However, the
Court's ruling was not dependant on an express contract between
the Coast Guard and Bollinger. Instead, the Court dismissed the
United States' unjust enrichment claim because the availability
of any contractual remedy forecloses an unjust enrichment claim
and the Coast Guard had a contractual remedy against ICGS. See
Bamburg Steel Buildings, Inc. v. Lawrence General Corp., 817
So.2d 427, 438 (La. Ct. App. 2002) (explaining that the existence
of a contract makes an unjust enrichment claim unavailable); See,
e.g., United States v. United Techs. Corp., 51 F.Supp.2d 167, 200

44

R. Doc. 73-1 at 3.
12

(D.Conn. 1999) (because claim of unjust enrichment is
quasi-contractual, it is unavailable when there is an express
contract). This is true even when the contractual remedy is
against a third party. See Conerly Corp. v. Regions Bank, Civ. A.
No. 08-813, 2008 WL 4975080, at *9 (E.D.La. November 20, 2008)
(dismissing unjust enrichment claim because plaintiff had
contractual remedy against a third party); Otis Elevator Co. v.
Hunt Const. Grp., Inc., No. 03-CV-71478, 2005 WL 1348742, at *7
(E.D. Mich. June 3, 2005)(dismissing unjust enrichment because
"the work in question was covered by [plaintiff's] contract with
[a third-party]."); see also Kane Enters. v. MacGregor, Inc., 322
F.3d 371, 376 (5th Cir. 2003) (affirming dismissal of quantum
meruit suit where plaintiff had contract with third party).
Here, the Court properly dismissed the United States' unjust
enrichment claim because a contractual remedy was available.
Although the Coast Guard did not contract directly

with

Bollinger, it did enter a contract with ICGS for the conversion
of 110-foot patrol boats. Accordingly, the Coast Guard had a
contractual remedy available against a third party, ICGS, for the
conversion of the patrol boats.
The United States' First Amended Complaint further
highlights the impropriety of an unjust enrichment claim by

13

detailing the contractual relationships between the parties.45
The First Amended Complaint alleges that the Coast Guard had an
express contract with ICGS, which subcontracted to NGSS, which in
turn subcontracted to Bollinger.46 The United States alleges that
the contract between Bollinger and NGSS incorporated by reference
requirements from ICGS' contract with the Coast Guard.47 It
alleges that Bollinger's "false data submission violated a flowdown requirement in Bollinger's subcontract" with NGSS.48 The
arrangement as alleged makes clear that contractual relationships
governed the contractors' work on the patrol boat conversion
project. Given that contractual provisions cover the scope of the
United States' action against Bollinger, the alternative remedy
of unjust enrichment is unavailable. The Court therefore denies
the motion for reconsideration of the dismissal of plaintiff's
unjust enrichment claim.

B. Government Knowledge Defense
The United States also argues that the Court erred in ruling
that the government knowledge defense bars the United States from
asserting FCA and fraud claims with respect to claims for payment

45

R. Doc. 81 at 5.

46

R. Doc. 74 at 7-8.

47

Id.

48

Id. at 11.
14

submitted after the Matagorda failed and the United States
learned the true section modulus of the converted vessels.49 The
United States argues that it was legal error to apply the
government knowledge defense on a motion to dismiss. The
government's argument fails to justify reconsideration.
First, the Court's discussion of the government knowledge
defense was in the alternative to the Court's ruling that the FCA
and fraud claims must be dismissed because the complaint failed
to “state with particularity the circumstances constituting
fraud” as required by Federal Rule of Civil Procedure 9(b). The
Court noted that the government's knowledge undermined the
plausibility of its claim that the misrepresentations were
material to its payment of claims after October 2004.
Second, the government's motion for reconsideration has
failed to clearly establish a manifest error of law or fact or
presented newly discovered evidence. Ross, 426 F.3d at 764.
Instead, the United States simply advances an "argument[] that
could have been offered or raised" in its briefing on Bollinger's
motion to dismiss the first complaint. Templet v. HydroChem Inc.,
367 F.3d 473, 478–79 (5th Cir.2004). In its opposition to the
first motion to dismiss, the United States did not deny that it
knew about the erroneous section modulus calculations in August
2004 as a result of the Coast Guard's investigation and yet

49

R. Doc. 73-1 at 3-10.
15

continued to pay claims for work done by Bollinger. Rather, it
argued that FCA liability continued after the Coast Guard learned
of the true section modulus because sunk costs required the Coast
Guard to continue accepting the flawed vessels in the hope of
repairing them.50 Now that the Court has rejected its "sunk
costs" theory, the United States attempts to avoid dismissal by
arguing that the government knowledge defense cannot be applied
at the motion to dismiss stage. It has cited no controlling law
to this effect. Rather, the cases it cited are out of circuit and
context specific. For example, in Hagood v. Sonoma Country Water
Agency, 929 F.2d 1416 (9th Cir. 1991), the court refused to apply
the government knowledge theory on a motion to dismiss when the
specific facts alleged in the complaint were insufficient to
establish the defense. Indeed, if a defense appears on the face
of the complaint, a motion to dismiss is proper. Wright and
Miller, 5 Fed. Prac. & Proc. Civ. § 1277 (3d ed.). The United
States cites no authority for the proposition that the government
knowledge defense is not applicable when the government pleads
that the contracting agency conducted an investigation into
product failure and discovered the misrepresented specification
that caused the failure, and then nevertheless continued to
accept and pay for products from the contractor. Finally, the
Court fully considered and applied Fifth Circuit law on this

50

R. Doc. 49 at 14 n.9.
16

issue. Because the United States does not point to any new facts
or controlling law which dictate a different ruling, its motion
for reconsideration is unavailing.

III. Conclusion
For the foregoing reasons, the United States' motion for
reconsideration is DENIED.

New Orleans, Louisiana, this

1st

day of August, 2013.

SARAH S. VANCE
UNITED STATES DISTRICT JUDGE

17