United States of America v. Bollinger Shipyards, Inc., et al
ORDER AND REASONS granting 83 Motion to Dismiss. Signed by Chief Judge Sarah S. Vance on 10/21/13. (jjs, )
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
UNITED STATES OF AMERICA
BOLLINGER SHIPYARDS, INC., ET AL.
ORDER AND REASONS
Before the Court is defendant Bollinger's1 motion to dismiss
the United States' First Amended Complaint.2 For the following
reasons, the Court GRANTS Bollinger's motion to dismiss.
A. Procedural History
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 Coast Guard cutters by falsifying data relating to
the structural strength of the converted vessels."3 The complaint
alleged five causes of action: (1) knowingly presenting false or
fraudulent claims for payment or approval to the United States in
violation of the False Claims Act ("FCA"), 31 U.S.C.A. §
Defendants are Bollinger Shipyards, Inc., Bollinger
Shipyards Lockport, L.L.C. and Halter-Bollinger Joint Venture,
L.L.C. (collectively "Bollinger").
R. Doc. 83.
R. Doc. 1 at 1.
3729(a)(1)(A); (2) knowingly making false records or statements
material to false or fraudulent claims for payment by the United
States in violation of the FCA, § 3729(a)(1)(B); (3) common law
fraud; (4) negligent misrepresentation; and (5) unjust
enrichment.4 Bollinger filed a motion to dismiss, which the Court
granted.5 The Court dismissed all of the claims but granted the
United States leave to amend its FCA and common law fraud
The United States then filed its First Amended Complaint,
alleging FCA violations, common law fraud and unjust enrichment.7
As stated, however, in dismissing the original complaint the
Court granted the United States leave to amend only its FCA and
common law fraud claims.8 Accordingly, its unjust enrichment
claim does not persist. This order proceeds to discuss only the
United States' FCA and common law fraud claims.
Id. at 11-13.
R. Doc. 71.
Id. at 40.
R. Doc. 74 at 20-21. The United States also filed a motion
for reconsideration of certain rulings in the Court's order
dismissing the original complaint. R. Doc. 73. The Court denied
this motion. R. Doc. 131.
R. Doc. 71 at 40.
In the First Amended Complaint, the United States no longer
advances a theory of fraud in the inducement of the contract.
Rather, it now relies exclusively on a theory of fraud in the
inducement of acceptance of delivery and of payment.9 The factual
allegations in the First Amended Complaint are substantially
similar to those in the original complaint, although the amended
complaint includes some new allegations seeking to support the
claim that Bollinger knowingly generated and presented false
measurements to the Coast Guard. Bollinger moved to dismiss the
First Amended Complaint in its entirety for failure to state a
B. Factual Allegations
The United States' First Amended Complaint alleges the
following facts. In 1999, the Coast Guard inaugurated its
Deepwater program to replace its fleet of water vessels, aircraft
and electronics systems.11 Integrated Coast Guard Systems
("ICGS") competed to serve as lead contractor of the program.12
ICGS submitted a proposal that included modification of existing
110-foot cutters (patrol boats) into 123-foot cutters.13 The
R. Doc. 74 at 1-2; R. Doc. 89 at 13-14.
R. Doc. 83.
R. Doc. 74 at 4.
Id. at 5.
proposal provided that ICGS would subcontract a portion of the
conversion work to Northrup Gruman Ship Systems ("NGSS").14 NGSS
in turn would subcontract a substantial portion of the work to
Bollinger, which had built the original fleet of 110-foot
On September 27, 2000, the Coast Guard notified ICGS and
Bollinger "that lengthening the vessel will increase primary
stress in the hull girder, but that no analysis has been
performed to investigate if the increase in hull girder bending
moment will be acceptable."16 The Coast Guard informed ICGS and
Bollinger that the sources of its concern included the
"significant hull degradation" of the 110-foot cutters.17
In response to the Coast Guard's concerns, Bollinger
prepared a longitudinal strength analysis.18 Bollinger's chief
naval architect, Robert Riviere, stated internally that the 123foot design exceeded American Bureau of Shipping ("ABS")
standards by a factor greater than two.19 On October 3, 2000,
Bollinger submitted to the Coast Guard its analysis, indicating
Id. at 5-6.
Id. at 6.
that the design satisfied ABS standards.20 Specifically,
Bollinger stated that "the required section modulus [a measure of
longitudinal strength] is 3113 [cubic inches] and the actual
section modulus is 7152 [cubic inches]."21 Bollinger obtained the
figure of 7,152 cubic inches using thicker hull plating in its
calculation than actually existed in the 110-foot cutters.22
On August 7, 2001, NGSS notified Bollinger by email that
NGSS's contract with ICGS required that NGSS use ABS to certify
compliance with ABS standards.23
On June 25, 2002, the Coast Guard named ICGS the lead
contractor of the Deepwater program.24 The contract required ICGS
and its subcontractors to provide the Coast Guard with a Hull
Load and Strength Analysis ("HLSA") to verify that the 123-foot
cutter modification design met program and contract
requirements.25 The contract incorporated an attachment that
required ICGS to use ABS to certify compliance with ABS
standards.26 The United States points to no provision of the
Id. at 6-7.
Id. at 7.
Id. at 11-12.
contract specifying the content of this review or when it was
supposed to take place.
In August 2002, the Coast Guard issued the first of four
delivery task order under the ICGS contract for the design and
modification of eight 123-foot cutters.27
On August 26, 2002, Bollinger's chief executive officer,
Boysie Bollinger, sent an email to Bollinger vice president T.R.
Hamblin, as well as to other Bollinger officials.28 The email
stated that ABS's Robert Kramek had offered a structural analysis
of the 123-foot cutter design.29 The email stated that ABS would
provide a "confidential assessment."30 Boysie Bollinger requested
the views of Hamblin and the other email recipients as to whether
to accept Kramek's offer.31 Hamblin replied, recommending that
Bollinger decline the offer.32 Although the United States
characterizes Hamblin's reply as an indication of concern that
ABS review would reveal deficiencies in the 123-foot design,33 it
provides no specific language from the email and does not dispute
Id. at 8.
Id. at 8-9.
Id. at 9.
Bollinger's statement that Hamblin relayed "business reasons" for
declining the offer.34 Bollinger quotes the email as stating, "I
see absolutely NO benefit to doing this. It is not a requirement
for the contract and would only cost money and eat up engineering
time to assist with the review."35
On August 27, 2002, Boysie Bollinger replied to Hamblin's
email, stating, "I'm concerned that [Kramek] sells [the Coast
Guard] on the fact that they need this review. . . . [ABS] would
love the additional responsibility from the [Coast Guard] 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 - if we don't do anything - ABS gets [the Coast
Guard] to require it without our input, and the result is we BLOW
"On or about" the same day, Bollinger made three
calculations assessing the 123-foot cutter section modulus.37 For
each calculation, it input six values into a software program to
manually input the shape property of a structural support known
as a bulb-T.38 For the first calculation, Bollinger input three
R. Doc. 83-1 at 10 n. 9.
R. Doc. 74 at 9.
Id. at 10.
correct values and three incorrect values.39 The first
calculation resulted in a section modulus of 3,037 cubic
inches.40 For the second calculation, it input the same six input
values for the bulb-T shape property, but changed the material on
a structural shape known as the C-channel.41 The second
calculation resulted in a section modulus of 2,836 cubic
inches.42 For the third calculation, Bollinger retained the
change in material used in the second calculation, but altered
the input values for the bulb-T shape property.43 For this
calculation, it input two correct values and four incorrect
values.44 Of the four incorrect values, one was retained from the
earlier calculations and three were increased values.45 One of
the new inputs was over 16,000 times greater than the correct
input value.46 The third calculation resulted in a section
modulus of 5,232 cubic inches.47
The United States alleges that Bollinger has failed or
refused to identify the employee or employees who made these
calculations.48 The United States acknowledges, however, that the
HLSA later submitted by Bollinger, which relied on these
calculations, stated that Bollinger naval architect David Chatham
"performed" the calculations, Bollinger chief naval architect
Robert Riviere "checked" the calculations, and Bollinger vice
president Dennis Fanguy "reviewed [the HLSA] and approved its
release."49 Thus, by the United States' own admission, Bollinger
apparently has identified the employees responsible for the
On August 28, 2002, NGSS authorized Bollinger to proceed
with the conversion work.50 The authorization provided, "The
Subcontractor acknowledges that it is a subcontractor of [NGSS]
for work to be performed by NGSS under its subcontract with
[ICGS], the Prime Contractor. The Subcontractor agrees . . . that
it will perform its subcontract in a manner which is consistent
in every way with the requirements of the Prime Contract."51
"On or about" August 30, 2002, Bollinger prepared a draft
version of the HLSA identifying the section modulus as 3,037
Id. at 9, 13.
Id. at 12-13.
Id. at 11.
Id. at 11.
cubic inches.52 Bollinger circulated this draft internally but
did not share it with the Coast Guard.53
On September 4, 2002, Bollinger submitted to the Coast Guard
an initial HLSA, reporting a section modulus of 5,232 cubic
inches.54 Bollinger wrote that the analysis demonstrated that the
123-foot cutter's "final configuration meets ABS requirements"
and that "the 123 conversion has adequate section modulus to meet
ABS High Speed Rules after modification."55 Specifically,
Bollinger stated, "The required section modulus is 2714 [cubic
inches] and the actual section modulus of the 123 foot patrol
boat is 5232 [cubic inches]."56
On October 9, 2002, in a meeting with Bollinger, the Coast
Guard expressed concern over the validity of the 5,232 cubic
inches section modulus calculation, in light of Bollinger's prior
calculation of 7,152 cubic inches.57 An unnamed Bollinger
Id. at 12.
Id. at 13.
Id. As stated, on October 3, 2000, Bollinger submitted an
analysis indicating that the required section modulus under ABS
standards was 3,113 cubic inches. Id. at 6. The First Amended
Complaint does not address why, by September 4, 2002, Bollinger
identified the required section modulus under ABS standards as
2,714, rather than 3,113, cubic inches.
Id. at 14.
employee told the Coast Guard that ABS would review the midship
section modulus calculation and the vessel's longitudinal
strength.58 The United States alleges that Bollinger never
requested, and ABS never conducted, such review.59
On November 22, 2002, the Coast Guard began issuing payments
to ICGS on the delivery task order for the work performed by
On December 16, 2002, Bollinger submitted its final version
of the HLSA, reporting a section modulus of 5,232 cubic inches.61
On December 18, 2002, in a meeting with the Coast Guard, an
unnamed Bollinger employee represented that Bollinger had engaged
ABS to review compliance with ABS standards.62
In May and August of 2003, the Coast Guard issued three
additional delivery task orders under the ICGS contract for the
design and modification of 123-foot cutters.63
In March 2004, Bollinger delivered the first 123-foot
cutter, U.S. Coast Guard cutter Matagorda.64 The Coast Guard
Id. at 17.
Id. at 14.
Id. at 15.
Id. at 8.
Id. at 15.
accepted the cutter and made "additional payments."65 Between
March and September, 2004, the Coast Guard accepted delivery of
three additional 123-foot cutters.66
The United States alleges that on August 20, 2004, Bollinger
vice president Dennis Fanguy, on behalf of Bollinger, certified
compliance with applicable contract requirements, including a
requirement that the 123-foot cutters would be "reviewed for
unrestricted service."67 The United States does not allege that
this review would have included review of the section modulus or
hull design. It alleges that Fanguy incorrectly certified that
compliance with this requirement, and other requirements, had
been "verified by a representative of an independent agency."68
Id. at 16, 17.
Id. at 15.
Id. In its memorandum in support of its motion to
dismiss, Bollinger disputes the United States' characterization
of the certification signed by Fanguy. R. Doc. 83-1 at 16 n. 11.
Specifically, Bollinger states, and the United States does not
refute, that "the face of the certification explicitly states
that it certifies ABS review per the 'certification document
issued by ABS Letter Report . . . Number MC510848' – a letter
that is attached to the [certification] and enumerates exactly
what ABS reviewed. The certification is facially accurate.
Moreover, the certification is only made with regard to
Matagorda, not all eight converted [cutters]." Id. (emphases
On September 10, 2004, Coast Guard cutter Matagorda suffered
a structural casualty that included buckling of the hull.69 Later
investigation revealed that Bollinger's calculations overstated
the actual section modulus.70 Bollinger recalculated the "true
section modulus" at 2,615 cubic inches.71
On October 13, 2004, Hamblin stated in an email to Boysie
Bollinger and other Bollinger officials, "we did lead the [Coast
Guard] into a false sense of security by telling them early on
that the Section Modulus for 123 would be 5230 inches cubed as
opposed to the real number, just above 2600."72
On October 22, 2004, the Coast Guard notified ICGS that it
would not accept delivery of additional 123-foot cutters until a
structural fix had been implemented to correct the design
defect.73 ICGS made two structural modifications.74 In reliance on
the feasibility of the modifications, the Coast Guard accepted
delivery of four additional 123-foot cutters.75 Ultimately, the
R. Doc. 74 at 15.
Id. at 15-16.
Id. at 16.
Id. at 17.
structural modifications proved inadequate, and the Coast Guard
removed the 123-foot cutters from service.76
The Coast Guard continued issuing payments to ICGS for work
performed by Bollinger through December 26, 2006, "or soon
II. Legal Standard
To survive a Rule 12(b)(6) motion to dismiss, the plaintiff
must plead sufficient facts "to state a claim to relief that is
plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009)(quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570
(2007)). A claim is facially plausible when the plaintiff pleads
facts that allow the court to "draw the reasonable inference that
the defendant is liable for the misconduct alleged." Iqbal, 556
U.S. at 678. A court must accept all well-pleaded facts as true
and must draw all reasonable inferences in favor of the
plaintiff. Lormand v. US Unwired, Inc., 565 F.3d 228, 239, 244
(5th Cir. 2009). The Court is not bound to accept as true legal
Id. In the order dismissing the United States' original
complaint, the Court foreclosed liability "for all claims for
payment made after the government knew that the section modulus
was incorrect." R. Doc. 71 at 24. This is because, under the
"government knowledge defense," the FCA does not apply where "the
government knows and approves of the particulars of a claim for
payment before that claim is presented." United States v.
Southland Mgmt. Corp., 326 F.3d 669, 682 (5th Cir. 2003) (quoting
United States ex rel. Durcholz v. FKW, Inc., 189 F.3d 542, 545
(7th Cir. 1999)) (quotation marks removed).
conclusions couched as factual allegations. Iqbal, 556 U.S. at
A legally sufficient complaint must establish more than a
"sheer possibility" that the plaintiff's claim is true. Id. It
need not contain detailed factual allegations, but it must go
beyond labels, legal conclusions, or formulaic recitations of the
elements of a cause of action. Twombly, 550 U.S. at 555. In other
words, the face of the complaint must contain enough factual
matter to raise a reasonable expectation that discovery will
reveal evidence of each element of the plaintiff’s claim.
Lormand, 565 F.3d at 256. If there are insufficient factual
allegations to raise a right to relief above the speculative
level, Twombly, 550 U.S. at 555, or if it is apparent from the
face of the complaint that there is an insuperable bar to relief,
Jones v. Bock, 549 U.S. 199, 215 (2007); Carbe v. Lappin, 492
F.3d 325, 328 & n.9 (5th Cir. 2007), the claim must be dismissed.
The FCA and common law fraud claims that the Court permitted
the United States to amend must also meet the heightened pleading
standard of Federal Rule of Civil Procedure 9(b). See United
States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 185 (5th Cir.
2009). Rule 9(b) requires a party alleging fraud or mistake to
"state with particularity the circumstances constituting fraud or
mistake." Fed. R. Civ. P. 9(b). This standard supplements the
pleading requirements of Federal Rule of Civil Procedure 8(a),
and together the two rules necessitate that a plaintiff supply
"simple, concise, and direct" allegations of the circumstances
amounting to fraud. Grubbs, 565 F.3d at 186. These allegations
"must make relief plausible, not merely conceivable, when taken
as true." Id.; see also Iqbal, 556 U.S. at 678-79; Twombly, 550
U.S. at 570.
In order to plead fraud with particularity, "a plaintiff
must state the factual basis for the fraudulent claim with
particularity and cannot rely on speculation or conclusional
allegations." United States ex rel. Rafizadeh v. Continental
Common, Inc., 553 F.3d 869, 873 (5th Cir. 2008). In general, such
a statement should include the "time, place, and contents of the
false representation, as well as the identity of the person
making the misrepresentation and what that person obtained
thereby." Grubbs, 565 F.3d at 186 (quoting United States ex rel.
Russell v. Epic Healthcare Mgmt. Group., 193 F.3d 304, 308 (5th
Cir. 1999)); see also United States ex rel. Thompson v.
Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir. 1997).
In certain circumstances, the pleading requirements of Rule
9(b) may be slightly relaxed and the plaintiff may plead on
information and belief, in particular when facts about the fraud
are "peculiarly within the perpetrator's knowledge." United
States ex rel. Doe v. Dow Chem. Co., 343 F.3d 325, 330 (5th Cir.
2003) (quoting Russell, 193 F.3d at 308); see also United States
ex rel. Williams v. Bell Helicopter Textron, Inc., 417 F.3d 450,
454 (5th Cir. 2005). Such relaxation, however, "must not be
mistaken for license to base claims of fraud on speculation and
conclusory allegations." Thompson, 125 F.3d at 903 (quoting
Tuchman v. DSC Commc'ns Corp., 14 F.3d 1061, 1068 (5th Cir.
A. False Claims Act
In its First Amended Complaint, the United States alleges
violations of two different provisions of the FCA.78 The first
provision, 37 U.S.C. § 3729(a)(1)(A), imposes liability upon any
person who "knowingly presents, or causes to be presented, a
false or fraudulent claim for payment or approval" to the
government. The second provision, section 3729(a)(1)(B), imposes
liability upon any person who "knowingly makes, uses, or causes
to be made or used, a false record or statement material to a
false or fraudulent claim."
For the purposes of the statute, "knowing" and "knowingly"
mean that a person either "has actual knowledge of the
information," "acts in deliberate ignorance of the truth or
falsity of the information," or "acts in reckless disregard of
The subsections of § 3729 were reorganized by statute in
2009 as part of the Fraud Enforcement and Recovery Act of 2009.
See Pub.L. No. 111-21, 123 Stat. 1617, 1621-22 (2009). References
will be to the current version of the statute.
the truth or falsity of the information." 37 U.S.C. §
3729(b)(1)(A). The mental-state requirement of the FCA requires
nothing more. Id. § 3729(b)(1)(B).
Liability for a violation of sections 3729(a)(1)(A) and (B)
of the FCA rests on "(1) whether there was a false statement or
fraudulent course of conduct; (2) made or carried out with the
requisite scienter; (3) that was material; and (4) that caused
the government to pay out money or to forfeit moneys due (i.e.,
that involved a claim)." United States ex rel. Longhi v. Lithium
Power Techs., 575 F.3d 458, 467 (5th Cir. 2009)(quoting United
States ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d
370, 376 (4th Cir. 2008)) (quotation marks removed).
The United States alleges that Bollinger made false
statements that fraudulently induced the Coast Guard to accept
delivery of the 123-foot cutters and to pay for the cutters. It
identifies as material false statements only Bollinger's
September 4, 2002, initial HLSA and December 16, 2002, final
HLSA, both of which allegedly overstated the section modulus of
the 123-foot cutter design.79 Although the United States alleges
additional false statements made by Bollinger, including
Bollinger's oral assertions that ABS would review the 123-foot
design,80 it does not argue that these statements are material
R. Doc. 89 at 10.
R. Doc. 74 at 14, 15.
false statements triggering FCA liability,81 and the Court agrees
that they are not.82 Thus, the United States' theory relies on
the proposition that the inaccurate section modulus figure
reported in the HLSA was a material, false statement, made with
the requisite scienter, that caused the government to pay out
money. See Longhi, 575 F.3d at 467.
Taken as true, however, the United States' factual
allegations fail to make plausible that Bollinger submitted the
HLSA with actual knowledge of the inaccuracy of the section
modulus calculation, or in reckless disregard or deliberate
ignorance of its accuracy. Because the United States has not
alleged with particularity, pursuant to Rule 9(b), that Bollinger
made material false statements with the requisite scienter, its
R. Doc. 89 at 10.
The Court agrees that the oral statements regarding ABS
review are not material, because there is no indication that ABS
certification of the section modulus was a "prerequisite" for
payment under the Coast Guard's contract with ICGS. See United
States ex rel. Steury v. Cardinal Health, Inc., 625 F.3d 262, 268
(5th Cir. 2010). In fact, the Coast Guard accepted delivery of
the converted 123-foot cutters and issued payment for the cutters
without any such certification. Thus, Bollinger's representations
regarding ABS review do not appear to have had "the potential to
influence the government's decisions." Longhi, 575 F.3d at 470.
The United States offers Bollinger's oral statements regarding
ABS review only to show that Bollinger was deliberately ignorant
or reckless as to the accuracy of the reported section modulus,
and to show that Bollinger attempted to conceal the falsity of
the reported section modulus by avoiding ABS review. R. Doc. 74
at 1; R. Doc. 89 at 11, 13, 15-16.
theory of FCA liability cannot survive Bollinger's motion to
At the core of the United States' theory are its allegations
that Bollinger made three section modulus calculations in 2002
and submitted only the highest calculation to the Coast Guard.
The United States argues that Bollinger's multiple calculations
using incorrect inputs, together with Boysie Bollinger's
contemporaneous email expressing concern over possible ABS
review, lead to the inference that "Bollinger knowingly input
false data . . . to obtain a false section modulus result high
enough to avoid further Coast Guard scrutiny and ABS review of
the vessel's structural integrity."83
This inference is not reasonable. The First Amended
Complaint does not allege that Bollinger, when it made the three
incorrect calculations in 2002, knew that the actual section
modulus of the 123-foot cutter design was 2,615 cubic inches. Nor
does it allege that Bollinger had in its possession the complete
set of correct inputs necessary to calculate the section modulus.
The United States argues simply that three incorrect calculations
suggest an effort to fabricate. This is unpersuasive. All three
calculations included multiple incorrect inputs, suggesting that
Bollinger did not know the correct inputs, not that it knew the
correct inputs but reported a section modulus using incorrect
R. Doc. 74 at 11.
inputs. Further, the allegation that one of the incorrect values
in the reported calculation was 16,000 times greater than the
correct input is of little significance without knowing the
context and nature of these inputs.
Similarly, that Bollinger reported only the highest of the
three section modulus figures to the Coast Guard does not
indicate that it acted with the requisite scienter. The United
States does not allege that either of the two unreported figures
was correct or should have been reported. Rather, the First
Amended Complaint indicates that none of the three alleged
calculations of 3,037, 2,836 and 5,232 cubic inches matched the
"true section modulus" of 2,615 cubic inches.84 Thus, there is no
allegation that Bollinger knew the "true" section modulus and
concealed the correct calculation in its HLSA. Similarly, that
Bollinger circulated an internal draft HLSA with a section
modulus of 3,037 cubic inches before reporting to the Coast Guard
a section modulus of 5,232 cubic inches suggests that Bollinger
considered both figures and chose one incorrect figure over
another. There is no allegation that any relevant document – and
the United States has had access to hundreds of thousands in this
litigation85 – suggests any particular reason why Bollinger chose
Id. at 16.
R. Doc. 96 at 1. The United States' First Amended
Complaint follows a years-long Coast Guard investigation, a
Department of Justice investigation and substantial discovery in
one figure over another, much less that the reason was to choose
a false number that was higher than the minimum ABS requirement.
To bolster its claims of scienter, the United States points
to the 2002 email exchange between Boysie Bollinger and Hamblin,
which allegedly occurred contemporaneously with the three
incorrect calculations. The United States alleges that Boysie
Bollinger, in his August 27, 2002, email, implicitly indicated
that "Hamblin should take steps to avoid ABS review of the design
of the complete hull."86 For several reasons, the First Amended
Complaint offers inadequate factual predicate for this assertion.
First, on its face Boysie Bollinger's email says nothing
about taking steps to evade ABS review, much less falsifying
figures. The First Amended Complaint gives no explanation as to
why Hamblin or the other email recipients would believe that
falsifying section modulus calculations was the proper response
to Boysie Bollinger's concerns. Neither does it specify how the
alleged plan was developed or communicated to lower level
Second, there is no allegation that Boysie Bollinger knew in
2002 that the actual section modulus of the 123-foot design was
insufficient under ABS, or any other, standards. The First
this litigation, including production of hundreds of thousands of
relevant documents, interviews with eight Bollinger employees and
responses to written discovery requests. Id. at 1-2.
R. Doc. 74 at 9.
Amended Complaint alleges that in 2000 Bollinger's chief naval
architect, Robert Riviere, stated internally that the 123-foot
design exceeded ABS standards by a factor greater than two. The
United States does not allege that, at any point between
Riviere's internal statement in 2000 and Boysie Bollinger's
emails in 2002, Riviere or any other Bollinger employee stated
that the design did not exceed ABS standards. Thus, it is
reasonable to infer that at the time of his 2002 emails Boysie
Bollinger did not know that the section modulus was insufficient
under ABS standards.
Third, Boysie Bollinger's two emails actively entertain
ABS's offer of a confidential review and ultimately express
ambivalence as to whether Bollinger should engage ABS for a
confidential assessment of the 123-foot design. His first email
"request[s] the views of Hamblin and the other email recipients
as to whether to accept ABS' offer," while his second email
expresses concern over the possible consequences if Bollinger
were to decline the offer.87 If Boysie Bollinger knew that the
section modulus was insufficient, it is unlikely that he would
have entertained ABS's offer for an assessment.
Fourth, Boysie Bollinger's second email indicates that he
was primarily concerned with the possibility of ABS reviewing the
design without Bollinger's input. The email states, "MY CONCERN –
we don't do anything – ABS gets [the Coast Guard] to require it
without our input, and the result is we BLOW the program."88 If
Boysie Bollinger knew that the section modulus was insufficient,
presumably he would have been concerned about ABS review with or
without Bollinger's input. His email reads most naturally as
expressing a desire that Bollinger be involved in any ABS review,
to answer questions and provide information or insights that
could help ABS evaluate the design.
Fifth, the First Amended Complaint alleges that Bollinger
was contractually obligated to engage ABS to certify compliance
with ABS standards.89 The United States does not explain whether
or to what extent this required certification overlapped with the
review Kramek offered to conduct confidentially and Boysie
Bollinger allegedly sought to avoid. The United States' theory on
this point is obscure. Bollinger's email suggests his belief that
the proffered ABS review was not contractually required by the
Coast Guard, not a belief that he could somehow escape an
existing requirement by turning it down. Further, if Bollinger
expected a non-confidential ABS review per contract requirements,
it does not follow that it could escape this ABS review by
falsifying section modulus figures or avoiding a confidential
review by ABS.
Id. at 7, 11-12.
In sum, Boysie Bollinger's emails do not suggest an intent
either to avoid ABS review at all costs or to falsify section
modulus calculations. The inferential leap the United States
urges – that Boysie Bollinger implicitly instructed his
subordinates to take steps to avoid ABS review, and that they
responded by falsifying calculations – is simply not reasonable.
Neither do Bollinger's October 9 and December 18, 2002, oral
statements that ABS would review the 123-foot design suggest that
Bollinger acted with knowledge of the falsity of the reported
section modulus, or with reckless disregard or deliberate
ignorance of its accuracy. The statements do not evince
fraudulent intent simply by virtue of being incorrect. Further,
the United States does not specify who made these statements on
Bollinger's behalf, or allege that the speakers knew that the
statements were incorrect.
The United States concedes that Hamblin's 2004 email, which
states that "we did lead the [Coast Guard] into a false sense of
security," has no bearing on Bollinger's knowledge in 2002.90 The
United States offers Hamblin's 2004 email only to establish "the
materiality of the section modulus result."91
Similarly, the August 20, 2004, certification signed by
Bollinger vice president Dennis Fanguy has no bearing on
R. Doc. 89 at 15.
Bollinger's knowledge in 2002. It is unclear what significance
the United States ascribes to the certification. In its
opposition to Bollinger's motion to dismiss, it implies that the
certification itself, which states that an "independent agency"
reviewed the 123-foot vessel for "unrestricted service," might
qualify as a material false statement.92 But the certification
post-dates the Coast Guard's acceptance of the Matagorda by
several months, and appears as well to post-date the Coast
Guard's acceptance of one or more of the next three cutters.93
Thus, the certification could not have induced the Coast Guard to
accept delivery of the vessels. Moreover, the United States does
not allege that Fanguy knew that the certification was inaccurate
when he signed it or what the independent agency review was to
consist of that was not done.
Finally, the allegations in the First Amended Complaint lead
to the inference that the Coast Guard was aware of the
variability of the section modulus when it accepted delivery of
the cutters. Bollinger's 2002 section modulus calculations,
including the 5,232 cubic inches reported to the Coast Guard,
were all significantly lower than its prior calculation of 7,152
Id. at 16.
According to the First Amended Complaint, the Coast Guard
accepted the second, third and fourth cutters sometime between
March 2004, when Bollinger delivered the Matagorda, and September
2004, when the Coast Guard received notice "that Bollinger had
submitted a materially false section modulus." R. Doc. 74 at 16.
cubic inches. The only reason the United States offers as to why
the Coast Guard was willing to proceed with the program after a
drop of almost 2,000 cubic inches in the reported section modulus
is that Bollinger orally represented that ABS would review the
calculation. Yet the Coast Guard accepted delivery of the
Matagorda and the other 123-foot cutters without any confirmation
that such review had taken place. Moreover, the Coast Guard
continued issuing payments for Bollinger's work for more than two
years after the structural failure of the Matagorda. These
circumstances suggest that the government knew that the reported
section modulus might be incorrect and was willing to pay anyway.
There can be no FCA liability in such circumstances. See United
States v. Southland Mgmt. Corp., 326 F.3d 669, 682 (5th Cir.
2003) ("government knowledge defense").
The United States has failed to allege facts that allow the
inference that Bollinger acted knowingly or with reckless
disregard or deliberate ignorance of the truth. Because its First
Amended Complaint lacks a plausible theory of fraudulent
inducement of acceptance of delivery or of payment, the Court
must dismiss the United States' FCA claims.
B. Common Law Fraud
The United States also makes a claim that Bollinger's
actions constituted common law fraud. As with the FCA claims, a
common law fraud claim is subject to the heightened pleading
requirements of Rule 9(b).
In its opposition to Bollinger's motion to dismiss the
original complaint, the United States asserted that its common
law fraud claim is governed by federal, not state, law.94 As the
Court determined in its order dismissing the original complaint,
"the elements of fraud are essentially the same under both
federal and Louisiana law."95 To make out a claim for fraud under
either federal or Louisiana law, a plaintiff must show that the
defendant made a material false representation with the requisite
scienter and that the plaintiff relied on it. See Pence v. United
States, 316 U.S. 332, 338 (1942); United States v. Toyobo Co.
Ltd., 811 F. Supp. 2d 37, 52 (D.D.C. 2011); Wooley v. Lucksinger,
14 So. 3d 311, 378–79 (La. App. 1st Cir. 2008). The scienter
requirement for common law fraud, which calls for the plaintiff
to show that the defendant had the specific intent to deceive, is
stricter than the "knowing" element of FCA claims. See Schaumburg
v. State Farm Mut. Auto. Ins. Co., 421 F. App'x 434, 442 (5th
The United States bases its fraud claim on the same
allegations it relies on for its FCA claims.96
R. Doc. 49 at 18-19.
R. Doc. 71 at 25.
R. Doc. 74 at 20-21.
supra at § III(A), those allegations, taken as true, fail to
establish that Bollinger knowingly submitted false material
information to the Coast Guard. Thus, the United States'
allegations also fail to satisfy the higher standard of specific
intent, and its fraud claim must be dismissed.
C. Leave to Amend
The United States has failed to cure the deficiencies in its
complaint by amendment. Given the advanced stage of discovery and
the United States' failure to plead a plausible theory of fraud
in its First Amended Complaint, the Court concludes that further
amendment would be futile. Accordingly, the Court declines to
grant the United States leave to amend its FCA and common law
fraud claims. See Jamieson By and Through Jamieson v. Shaw, 772
F.2d 1205, 1208 (5th Cir. 1985).
For the foregoing reasons, Bollinger's motion to dismiss the
First Amended Complaint is GRANTED with prejudice.
New Orleans, Louisiana, this
day of October, 2013.
SARAH S. VANCE
UNITED STATES DISTRICT JUDGE
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