United States of America v. Fiat S.p.A., et al

Filing 27

Memorandum and Order Granting Defendant's 22 Motion to Dismiss and Dismissing Case. Signed by District Judge Avern Cohn. (SCha)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

ELIAS AWAD,
Plaintiff,
v.

Case No. 11-14082

CHRYSLER GROUP LLC,

HON. AVERN COHN

Defendant.
_______________________________________/

MEMORANDUM AND ORDER GRANTING DEFENDANT’S
MOTION TO DISMISS (Doc. 22) AND DISMISSING CASE1
I. INTRODUCTION
This is a case under the False Claims Act, 21 U.S.C. § 3729, et seq. (FCA). Plaintiff
Elias Awad (Awad) contends that Defendant Chrysler Group, LLC (Chrysler) retaliated
against him for uncovering, attempting to report, and refusing to engage in fraudulent
activity against the United States government as directed by his superiors.
The case was originally filed by Awad as a qui tam action against Chrysler, Fiat
S.p.A., Fiat North America, LLC (Fiat), and Chrysler executives Michael Manley, Sergio
Marchionne, Barbara Pilarski, and Richard Roth. (Doc. 1). The complaint was filed in
camera and under seal and alleged a scheme to defraud the United States relating to Fiat
acquiring ownership of Chrysler. The complaint was in four counts:
Count I
Count II
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False Record; Fraudulent Concealment
Conspiracy to Defraud the United States U.S. Government

Upon review of the papers, the Court deems this matter appropriate for decision
without oral argument. See Fed. R. Civ. P. 78(b); E.D. Mich. LR 7.1(f)(2).

Count III

Retaliation of 31 U.S.C. § 3729(h)

Count IV

State Claim; Retaliatory Discharge in Violation of Public Policy

The government has filed a Notice of Election to Decline Intervention under 31
U.S.C. § 3730(b)(4)(B). See (Doc. 18). Awad is continuing the action as relator in the
name of the United States.
After the United States declined to intervene, Awad filed an amended complaint and
discontinued the fraud and conspiracy claims under the FCA. (Doc. 19). Awad also
dropped all the defendants except Chrysler. The amended complaint is in two counts:
Count I

Retaliation Under 31 U.S.C. § 3730(h)

Count II

State Claim; Retaliatory Discharge in Violation of Public Policy

The United States consented to Awad’s filing of the amended complaint
discontinuing the fraud and conspiracy claims under the FCA. (Doc. 20). Now before the
Court is Chrysler’s motion to dismiss Awad’s first amended complaint under Fed. R. Civ.
P. 12(b)(6) on the grounds that Awad has already sued Chrysler in state court for wrongful
termination and entered into a settlement agreement. (Doc. 22). Therefore, Chrysler
argues that Awad’s first amended complaint should be dismissed on res judicata grounds
and principles of accord and satisfaction. Alternatively, Chrysler argues that Awad fails to
state a claim upon which relief can be granted.
Awad disagrees and argues that he could not have brought the current claims
against Chrysler in the state court proceeding because he is pursuing this case as relator
for the United States. As such, Awad contends that this action is not barred by res judicata
or the accord and satisfaction doctrine. In addition, Awad says that he has stated claims
upon which relief can be granted.
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For the reasons that follow, Chrysler’s motion is GRANTED.
II. BACKGROUND
The scenario that follows is taken from the allegations in the first amended complaint
which are accepted as true for purposes of Chrysler’s motion to dismiss under Fed. R. Civ.
P. 12(b)(6). See Barney v. PNC Bank, Nat. Ass’n, 714 F.3d 920, 923 (6th Cir. 2013) (citing
Handy–Clay v. City of Memphis, Tenn., 695 F.3d 531, 535 (6th Cir. 2012) (“Because we
are reviewing the district court’s order of dismissal under Fed. R. Civ. P. 12(b)(6), we must
accept as true the facts set out in the complaint.”)).
Chrysler was formed on April 28, 2009 with the use of federal funds as a limited
liability company. Through a Master Transaction Agreement, Chrysler agreed to purchase
the assets of an entity named Old Carco. To facilitate the transaction, and in exchange for
capital contributions, Chrysler issued membership interests to UAW, Fiat, the United States
Department of the Treasury (United States), and Canada CH Investment Corporation
(Canada).
Relevant to this action, Chrysler’s operating agreement with the United States
required it to keep complete and accurate books and records, including detailed financial
records that accurately and fairly reflected all financial transactions and dispositions of
assets of the company among other things.
Awad has been employed with Chrysler and its predecessors since 1998. From
2007 to 2010, Awad was regional controller for Latin America. From 2010 until his
termination in 2011, Awad was Financial Director – Chief Financial Officer of the Chrysler
de Venezuela subsidiary.

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In January of 2010, Awad was assigned as the lead financial analyst on the sale of
a subsidiary of Chrysler in Columbia (Chrysler Columbia).

In this capacity, Awad

conducted an initial analysis of Chrysler Columbia and determined that it had a fair market
value of approximately $100,000,000. However, Chrysler’s upper management instructed
Awad to manipulate the books to reflect that Chrysler Columbia had a fair market value of
only $1,500,000, a fraction of its true value, so as not to record its true value.
Awad objected to manipulating the books. He voiced his objections and concern to
upper management and Chrysler’s in-house counsel. Awad was subsequently removed
from the project involving the Chrysler Columbia account and reassigned to work in
Venezuela on August 5, 2010. Awad received a performance appraisal that was less
favorable than in prior years. He was later demoted and eventually terminated from his
employment with Chrysler.
On September 7, 2011, Awad filed an action in Wayne County Circuit Court, later
transferred to Oakland County Circuit Court, against Chrysler and certain Chrysler
executives claiming that he was wrongfully terminated from his employment with Chrysler.
This action was filed thirteen days later on September 20, 2011.
In the state court action, Awad claimed that he was entitled to receive a relocation
allowance for being relocated to Venezuela, as well as a monthly housing allowance and
a quality of life allowance. He claimed that he did not receive these payments. In addition,
Awad claimed that, while he was in Venezuela, he was falsely accused by Chrysler of
violating its vehicle purchase policy in 2009. Awad alleged that Chrysler terminated him
on June 23, 2011 claiming that he violated the vehicle purchase policy. Awad claimed:
Count I

Breach of Contract
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Count II

Wrongful Discharge

Count III

Defamation

Count IV

Violation of the Bullard-Plawecki Employee Right-To-Know Act

Count V

Reverse Discrimination and Violation of the Michigan Elliot-Larsen
Civil Rights Act

The action was sent to Case Evaluation pursuant to MCR 2.403. Each side
accepted the Case Evaluation award and the case was dismissed with prejudice on
November 2, 2012.
III. STANDARD OF REVIEW
A motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) tests the sufficiency of a
complaint. In a light most favorable to the plaintiff, the court must assume that the plaintiff’s
factual allegations are true and determine whether the complaint states a valid claim for
relief. See Albright v. Oliver, 510 U.S. 266 (1994); Bower v. Fed. Express Corp., 96 F.3d
200, 203 (6th Cir. 1996). To survive a Rule 12(b)(6) motion to dismiss, the complaint’s
“factual allegations must be enough to raise a right to relief above the speculative level on
the assumption that all of the allegations in the complaint are true.” Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 555 (2007) (internal citations and emphasis omitted). See also
Ass’n of Cleveland Fire Fighters v. City of Cleveland, Ohio, 502 F.3d 545, 548 (6th Cir.
2007). “[T]hat a court must accept as true all of the allegations contained in a complaint
is inapplicable to legal conclusions. Threadbare recitals of all the elements of a cause of
action, supported by mere conclusory statements do not suffice.” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009). The court is “not bound to accept as true a legal conclusion couched
as a factual allegation.”

Id. at 679 (internal quotation marks and citation omitted).

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Moreover, “[o]nly a complaint that states a plausible claim for relief survives a motion to
dismiss.” Id. “Determining whether a complaint states a plausible claim for relief will . . .
be a context-specific task that requires the reviewing court to draw on its judicial experience
and common sense. But 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 shown
– that the pleader is entitled to relief.” Id. (internal quotation marks and citation omitted).
In sum, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to state a claim for relief that is plausible on its face.” Id. at 678 (internal
quotation marks and citation omitted).
IV. DISCUSSION
Chrysler asserts that Awad’s claims in this action are barred by the doctrine of res
judicata. Chrysler’s position is well-taken.
A. Res Judicata – The Law
Under the full faith and credit statute, 28 U.S.C. § 1738, a federal court must give
preclusive effect to prior state court actions according to preclusion law of the state. San
Remo Hotel, L.P. v. City and Cnty. Of San Fran., Cal., 545 U.S. 323, 336 (2005) (“This
statute has long been understood to encompass the doctrines of res judicata, or “claim
preclusion,” and collateral estoppel, or “issue preclusion.”); DLX, Inc. v. Kentucky, 381 F.3d
511, 520 (6th Cir. 2004) (“[P]reclusive effect must be given to . . . prior state-court action[s]
under 28 U.S.C. [§] 1738 according to res judicata law of the state.”).
The Michigan Supreme Court has recognized that “[t]he doctrine of res judicata bars
a subsequent action when ‘(1) the first action was decided on the merits, (2) the matter
contested in the second action was or could have been resolved in the first, and (3) both
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actions involve the same parties or their privies.” Estes v. Titus, 481 Mich. 573, 585 (2008);
Adair v. State, 470 Mich. 105, 121 (2004). The essence of the doctrine is that it “bars all
matters that with due diligence should have been raised in the earlier action.” Estes, 481
Mich. at 585. The Michigan Supreme Court “has taken a broad approach to the doctrine
of res judicata, holding that it bars not only claims already litigated, but also every claim
arising from the same transaction that the parties, exercising reasonable diligence, could
have raised but did not.” Adair, 470 Mich. at 121.
B. Analysis
After applying res judicata principles, the Court comes to the conclusion that the
claims in Awad’s first amended complaint must be dismissed.
1. The state-court dismissal constitutes a “prior state-court adjudication”
First, there is no question that there is a prior state-court action that was decided on
the merits. Awad filed an action in state court against Chrysler and its executives. The
action was sent to Case Evaluation and, after the parties agreed on a Case Evaluation
amount, the state court judge issued an order of dismissal with prejudice. A dismissal with
prejudice serves as a final adjudication for res judicata purposes. Wilson v. Kinght-Ridder
Newspapers, Inc., 190 Mich. App. 277, 278 (1991).
Awad argues that the prior state court action does not amount to a “decision on the
merits” for res judicata purposes because it addressed different claims than the claims
raised here. Awad’s argument is misplaced. Awad’s attack goes to the second res judicata
factor–whether his claims in the federal court action were or could have been brought in
the state court action. This does not change the fact that the state-court dismissal was a
final adjudication.
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2. Awad’s claims in the federal action could have been resolved in the statecourt action
The second factor the Court considers is whether Awad’s claims in this action could
have been brought in the state-court action. Awad’s state-court action challenged, among
other things, his wrongful termination from Chrysler. Therefore, he could have brought his
current claims in the state-court action.
Awad first contends that he could not have brought his claims in state court because
the qui tam action would have been subject to dismissal. Awad relies on the Sixth Circuit’s
decisions in Summers v. LHC Grp., 623 F.3d 287 (6th Cir. 2010) and Poteet v. Medtronic,
Inc., 552 F.3d 503 (6th Cir. 2009) for the proposition that public disclosure of the facts and
circumstances giving rise to the qui tam action would have rendered the subsequent qui
tam action subject to dismissal. His reliance on these cases is not helpful to his position.
The False Claims Act (FCA) contains a public disclosure provision that limits
jurisdiction of federal courts over qui tam actions that are “based upon previously disclosed
information.” Poteet, 552 F.3d at 511 (citing 31 U.S.C. § 7370(e)4)(A); Walburn v.
Lockheed Martin Corp., 431 F.3d 966, 973 (6th Cir. 2005); Rockwell Int’l Corp. v. United
States, 549 U.S. 457 (2007). The public disclosure provision states,
No court shall have jurisdiction over an action under this section based upon the
public disclosure of allegations or transactions in a criminal, civil, or administrative
hearing, in a congressional, administrative, or Government Accounting Office report,
hearing, audit, or investigation, or from the news media, unless the action is brought
by the Attorney General or the person bringing the action is an original source of the
information.
31 U.S.C. § 3730(e)(4)(A). An original source is defined as “an individual who has direct
and independent knowledge of the information on which the allegations are based and has

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voluntarily provided the information to the Government before filing an action under this
section which is based on the information.” 31 U.S.C. § 3730(e)(4)(B).
The Sixth Circuit has explained the process in determining whether the FCA’s public
disclosure jurisdictional bar applies:
To determine whether § 3730(e)(4)(A)’s jurisdictional bar applies, a court must
consider “first whether there has been any public disclosure of fraud, and second
whether the allegations in the instant case are ‘based upon’ the previously disclosed
fraud.” “If the answer is ‘no’ to [either] of these questions, the inquiry ends, and the
qui tam action may proceed; however, if the answer to each of the above questions
is ‘yes,’ then we must determine whether the relator nonetheless qualifies as an
‘original source’ under § 3730(e)(4)(B), in which case the suit may proceed.”
Poteet, 552 F.3d at 511 (internal citations omitted).
Here, had Awad brought the current claims in the state-court action, there is no
question that the filing of the complaint in state court would constitute a public disclosure
of fraud and would have been “previously disclosed.” Id. at 513 (reasoning that the filing
of a state court complaint is “clearly” a public disclosure) (citations omitted).
However, Awad is the “original source,” and, therefore, his argument that he could
not have brought the current claims in state court because this Court would not have had
jurisdiction over the subsequent qui tam action is without merit. An “original source” is “‘an
individual: (1) with direct and independent knowledge of the information on which the
allegations are based; and (2) who has voluntarily provided the information to the
government before filing an action under the FCA which is based upon the information.’”
Id. at 515 (citation omitted). As the Sixth Circuit stated, “[w]ith respect to this second
element, we have clarified that ‘[i]n addition to the requirement that a relator must have
provided information to the government prior to filing her FCA suit, . . . a relator must also

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provide the government with the information upon which the allegations are based prior to
any public disclosure.’” Id. (citations omitted).
Awad has direct knowledge of the information on which the allegations are based.
Indeed, the allegations involve actions directed at him for allegedly failing to alter Chrysler’s
books. In addition, Awad communicated to the government the information upon which the
allegations are based. Awad alleged in the original complaint:
As required by the False Claims Act, 31 U.S.C. § 3730(b)(2), the Relator has
provided to the Attorney General of the United States and to the United States
Attorney for the Eastern District of Michigan a statement of all material evidence and
information related to the Complaint. The disclosure statement is supported by
material evidence known to Relator at his filing establishing the existence of
Defendants’ false claims and active concealment.
(Doc. 1 at 1). Having satisfied the requirements to constitute an “original source,” Awad’s
argument that he could not have brought his current claims in the state-court action is
without merit.
Next, Awad argues that the federal courts have exclusive jurisdiction in FCA cases
and, therefore, he could not have raised the current claims in the state-court action. He is
wrong. Another court in this district has considered this issue and rejected Awad’s position.
See Ernsting v. Ave Maria Coll., No. 06-10636, 2006 WL 1284626 (E.D. Mich. May 10,
2006) (Cleland, J.).
Under the FCA, “[a]n action . . . may be brought in the appropriate district court of
the United States for the relief provided in this subsection.” 31 U.S.C. § 3730(h). The court
in Ernsting explained that this language does not alter the concurrent state-court jurisdiction
to hear FCA actions. First, the court explained that the use of the word “may,” a permissive
form, “cuts exactly against an argument that a presumption of concurrent jurisdiction should

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be overcome.” Id. at *3. Second, the court reasoned that the legislative history does not
support the position that federal courts have exclusive jurisdiction over FCA actions. Id.
Finally, the court determined that there was no “clear incompatibility” between state-court
jurisdiction and federal interests. Id. at 4 (citation omitted). As such, the court determined
that the “Plaintiff has not shown how the word ‘may’ is properly to be interpreted only as
‘must’ such that the Act instructs ‘[a]n employee must bring an action in the appropriate
district court of the United States. . . .’” Id. (citation omitted).
The Court agrees with the Ernsting court that state-court jurisdiction is concurrent
with federal jurisdiction in FCA actions. Therefore, Awad could have brought the current
claims in the state-court action.
Finally, Awad argues that he could not have brought the current claims in the statecourt action because the claims here involve a different subject matter, transaction, and
occurrence. He argues that the state-court action involved his employment with Chrysler
in Venezuela. Awad contends that this action is different because it only involves his
employment with Chrysler in the Columbia subsidiary. The Court is not persuaded by
Awad’s argument.
Both actions involve the underlying issue of Awad’s allegedly unlawful termination
from Chrysler. One theory involves facts relevant to his employment in Venezuela. The
second theory involves facts relevant to his employment in the Columbia subsidiary. In
essence, Awad has two different theories of why he was ultimately retaliated against and
terminated from his employment with Chrysler. The claims should have been brought
together.

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Awad’s argument that different evidence would be required for the current claims
does not change the result. The Michigan Supreme Court has rejected the “same
evidence” test which bars a second suit “if the evidence needed to sustain the second suit
would have sustained the first, or if the same facts were essential to maintain both actions.”
Adair, 470 Mich. at 124 (citation and internal quotation marks omitted). Instead, the
Michigan Supreme Court has adopted the broader “same transaction” test which “provides
that ‘the assertion of different kinds of theories of relief still constitutes a single cause of
action if a single group of operative facts give rise to the assertion of relief.’” Id. (citation
omitted). “‘Whether a factual grouping constitutes a transaction for purposes of res judicata
is to be determined pragmatically, by considering whether the facts are related in time,
space, origin or motivation, [and] whether they form a convenient trial unit . . . .” Id. at 125
(citing 46 Am. Jur. 2d, Judgments 533, p. 801) (emphasis in original).
Here, as Chrysler points out, Awad “should have and could have brought his federal
claims in the state court action because they arose from the same transactional set of facts
– his alleged discharge from Chrysler.” (Doc. 22 at 16, Def’s. Mot. to Dismiss). Awad’s
contention that the claims involve different facts–his employment with the Columbia
subsidiary versus his employment with Chrysler in Venezuela–overlooks his main
complaint–that he was retaliated against and eventually discharged by Chrysler. His
alternative theories should have been presented in one case regardless of the different
evidence which would have been required to prove the alternative theories.
3. The state-court action involved the same parties
The final factor for res judicata to apply is that the prior state-court action involved
the same parties or privies. Defendant argues that the prior state-court action involved
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different parties because, in addition to Chrysler, it involved named executives that are not
defendants in this action. The Court disagrees. “The parties to the second action need be
only substantially identical to the parties in the first action.” Peterson Novelties, Inc. v. City
of Berkley, 259 Mich. App. 1, 13 (2003) (citation omitted). There can be no question that
Chrysler was a defendant in both actions. That Chrysler is the only defendant in the
subsequent federal court action does not alter the analysis. Ray v. Citibank, N.A., No.
256322, 2005 WL 3179677, at *2 (Mich. Ct. App. Nov. 29, 2005) (“It is also undisputed that
plaintiff and defendant were opposing parties in the federal action. Under federal law, it is
immaterial for res judicata purposes that the prior action included additional parties.”), citing
Nolan v. Owensboro, 75 F.2d 375, 376–77 (6th Cir. 1935).
V. CONCLUSION
For the reasons stated above, Chrysler’s motion to dismiss has been granted. This
action is barred by the doctrine of res judicata and is, therefore, DISMISSED.
SO ORDERED.

S/Avern Cohn
AVERN COHN
UNITED STATES DISTRICT JUDGE

Dated: October 29, 2013

I hereby certify that a copy of the foregoing document was mailed to the attorneys of record
on this date, October 29, 2013, by electronic and/or ordinary mail.

S/Sakne Chami
Case Manager, [phone]

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