The United States of America ex rel. Kevin Grupp and Robert Moll v. DHL Express (USA), Inc. et al
Filing
65
-CLERK TO FOLLOW UP--Decision and Order granting Defendant's 50 Motion to Dismiss. The complaint is dismissed with prejudice. The Clerk is directed to enter judgment accordingly. Signed by Hon. John T. Curtin on 9/10/2014. (JEC)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
THE UNITED STATES OF AMERICA ex rel.
KEVIN GRUPP and ROBERT MOLL,
Plaintiffs,
-vs-
08-CV-301C
DHL EXPRESS (USA), INC.,
DHL WORLDWIDE EXPRESS, INC., and
DPWN HOLDINGS (USA), INC. (f/k/a
DHL HOLDINGS (USA), INC.)
Defendants.
APPEARANCES:
HODGSON RUSS LLP (DANIEL C. OLIVERIO,
ESQ., JOHN L. SINATRA, ESQ., and REETUPARNA
DUTTA, ESQ., OF COUNSEL), Buffalo, New York,
Attorneys for Plaintiffs.
CONNORS & VILARDO, LLP (TERRENCE M.
CONNORS, ESQ., LAWRENCE J. VILARDO, ESQ.,
and PAUL A. WOODARD, ESQ., OF COUNSEL),
Buffalo, New York, Attorneys for Defendants.
BACKGROUND
This is a qui tam action brought by the relators on behalf of the United States for
alleged violations of the False Claims Act (“FCA”), 31 U.S.C. § 3729, et seq. Relators
assert that the defendants have violated the FCA by improperly billing the United States
for jet fuel surcharges on deliveries that traveled solely by ground transportation.
Specifically, relators allege that the defendants “falsely and fraudulently misrepresented
that certain Next Day and 2nd Day shipments were delivered by air such that jet fuel
surcharges were necessary, when, in fact, they were delivered solely by ground
transportation . . . .” (Item 25, ¶ 2). Additionally, relators allege the defendants imposed
diesel fuel surcharges on ground delivery shipments when “only a small portion of those
surcharge amounts was passed along to DHL’s independent contractor network of
trucking companies who bought the relevant fuel.” Id., ¶ 3.
The case was originally assigned to Chief United States District Judge
William M. Skretny. In a Notice of Election filed March 24, 2011, the Government
declined to intervene in the action (Item 21). On July 15, 2011, the relators filed a
notice of their intention to proceed with the action in light of the Government’s election
not to intervene (Item 24) and additionally filed an amended complaint (Item 25). On
November 8, 2011, the defendants filed a motion to dismiss (Item 36), raising several
grounds for dismissal. Thereafter, on March 16, 2012, the case was transferred to the
docket of the undersigned (Item 47).
In a Decision and Order filed September 14, 2012, this court granted the
defendants’ motion and dismissed the complaint (Item 50). That decision was based
solely on defendants’ argument that the relators had failed to satisfy the statutory notice
requirement imposed by 49 U.S.C. § 13710(a)(3)(B). That statute requires a shipper, in
a proceeding before the Surface Transportation Board, to contest a bill within 180 days
of its receipt, as a precondition to suit. Upon appeal to the Second Circuit, that court
agreed with the relators that the 180-day rule did not apply in a qui tam action under the
FCA. The Court of Appeals vacated the judgement for defendants and remanded the
matter to this court (Item 56).
As neither this court nor the Second Circuit addressed the defendants’ remaining
grounds for dismissal, this court issued an order directing the filing of additional
submissions in support of and opposition to the motion to dismiss (Items 60, 62-64).
The court has determined that oral argument is unnecessary. For the reasons that
follow, the defendants’ motion to dismiss is granted.
FACTS
According to the amended complaint (Item 25, ¶ 20), defendants, collectively
referred to as “DHL,” are a shipping company that transports packages for a fee.1 DHL
provided delivery services to the United States government, through the General
Services Administration (“GSA”), the Department of Homeland Security, and the
Department of Defense. Id., ¶ 25. At all times relevant to the complaint, relators were
the owners and operators of MVP Delivery and Logistics, Inc., (“MVP”), a trucking
company located in Depew, New York, and an independent contractor to DHL. Id., ¶ 9.
Relators allege that, beginning in or about 2003 or 2004, DHL began to assess a jet
fuel surcharge on its “Next Day” and “2nd Day” delivery service, regardless of whether
the package traveled by air or ground. Id., ¶ 29. Relators further allege that a
“substantial percentage of DHL Next Day and 2d Day shipments paid for by the United
States government did not travel by air at all, even though they included a jet fuel
surcharge.” Id., ¶ 32. Additionally, beginning in 2003 or 2004, DHL began charging a
diesel fuel surcharge notwithstanding the fact that it contracted out 65% to 70% of its
ground delivery service. Id., ¶ 40. Relators allege that DHL “shared only a small
portion of fuel surcharges with its independent contractors.” Id., ¶ 42. At all times
1
Defendant DHL Worldwide Express, Inc. no longer exists. For purposes of the motion, all
defendants are referred to collectively herein as “DHL.”
3
relevant to the complaint, the jet fuel surcharge has been substantially higher than the
ground fuel surcharge. Id., ¶ 38.
Relators offered three specific examples of the alleged improper jet fuel
surcharges. Waybill #61662929845 represents a March 2008 Next Day shipment from
Washington, D.C. to Lorton, Virginia which traveled solely by ground transportation
through DHL’s truck hub in Allentown, Pennsylvania. Waybill #75371715440
represents a March 2008 Next Day shipment from Buffalo, New York to Cleveland,
Ohio which traveled by ground transportation through DHL’s truck hub in Erie,
Pennsylvania. Waybill #65415662141 represents a February 2008 Next Day shipment
from Alameda, California to Walnut Creek, California which traveled solely by ground
transportation through DHL’s truck hub in Fresno, California. Relators allege that in
each of these instances, the government was improperly assessed a jet fuel surcharge
(Item 25, ¶ 36).
In support of their motion to dismiss, defendants submitted DHL’s 2008
“Standard Rate Guide” (Item 36, Exh. B), a copy of DHL’s Ground Delivery Service
Waybill (Item 36, Exh. C), DHL’s 2008 Fuel Surcharge Tables (Item 36, Exh. D), and a
copy of DHL’s Next Day and 2nd Day Delivery Waybill (Item 36, Exh. E).
DHL’s 2008 Rate Guide provides information regarding DHL’s various shipping
services (Item 36, Exh. B). On Page 2 of the Rate Guide, “U.S. Domestic Shipping”
services are noted to include DHL Same Day, DHL Next Day: 10:30, 12:00 PM and
3:00 PM, DHL 2nd Day, DHL Ground, DHL Shipready, and DHL Smartmail. Each of the
“Domestic Services” are further described on Page 4 of the Rate Guide. For example,
“DHL Next Day 10:30 AM” is described as providing “[g]uaranteed delivery by 10:30
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a.m. the next business day.” “DHL Ground” provides “[d]oor-to-door delivery throughout
the U.S. . . . in 1-6 business days.” This method of shipment is said to offer “increased
savings without decreased service features. We guarantee your packages receive the
same attention and careful handling that you value with our Air Express services,
including tracking and delivery details.”
The Rate Table for DHL Ground delivery service on page 14 of the Rate Guide
contains a description of DHL Ground service and a guarantee “that your packages
receive the same attention and careful handling that you value with our express
services, including tracking and delivery details.” On Page 35 of the Rate Guide,
entitled “FEES,” DHL advises its customers that “Air Express shipments are assessed a
fuel surcharge which is indexed to the USGC kerosene-type jet fuel index. Ground
shipments are assessed a fuel surcharge which is indexed to the U.S. Dept. Of
Energy’s on-highway diesel fuel index.” Customers are directed to DHL’s “Fuel
Surcharge Table” for further details.
On Page 37 of the Rate Guide, DHL domestic shipping services are categorized
as either “Same Day,” “Time Definite,” or “Day Definite.” “DHL Ground,” a “Day
Definite” delivery service, is described as a way to “[s]ave money on your routine
shipments with guaranteed door-to-door delivery in 1 to 6 business days, depending on
the origin and destination of your shipment.”
DHL’s fuel surcharge terms are described in a document entitled “DHL Express
Fuel Surcharge Information” (Item 36, Exh. D). According to this document, “DHL
utilizes an indexed fuel surcharge based upon the fuel prices published monthly by the
U.S. Department of Energy.” Id. The “Air Express and International indexed surcharge
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calculation is linked to the monthly rounded average of the U.S. Gulf Coast (USGC)
price” for kerosene-type jet fuel, while the “Ground Delivery Service indexed surcharge
calculation is linked to the monthly rounded average” of the national price for diesel
fuel. Id. There are two fuel surcharge tables, one for “DHL Air Express Services” and
the other for “DHL Ground Delivery Service.”
DHL used distinct waybills for “Ground Delivery Service” and for “Next Day” and
“2nd Day” shipments. Both waybills provided that DHL reserved the right to transport
packages by any means including air, road, or any other carrier (Item 36, Exhs. C, E).
DISCUSSION
At the outset, the relators argue that in vacating the judgment and remanding the
case to this court, the Second Circuit impliedly rejected the defendants’ alternative
arguments in support of their motion to dismiss. On the contrary, the Second Circuit
explicitly stated that the judgment in favor of DHL was vacated “on the ground that the
180-day rule cannot apply to a qui tam action under the FCA.” United States ex rel.
Grupp v. DHL Express (USA), Inc., 742 F.3d 51, 53 (2d Cir. 2014). Accordingly, this
court will address the defendants’ remaining arguments: (1) that relators have failed to
state a plausible claim for relief under the FCA, and (2) that the claims are partially
time-barred.
1. Motion to Dismiss for Failure to State a Plausible Claim for Relief
When considering a motion to dismiss under Rule 12(b)(6) of the Federal Rules
of Civil Procedure, a court should “draw all reasonable inferences in Plaintiff['s] favor,
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assume all well-pleaded factual allegations to be true, and determine whether they
plausibly give rise to an entitlement to relief.” Faber v. Metro. Life Ins. Co., 648 F.3d 98,
104 (2d Cir. 2011) (internal quotation marks omitted). To state a claim for relief, “a
plaintiff must provide the grounds upon which his claim rests through factual allegations
sufficient ‘to raise a right to relief above the speculative level.’ ” ATSI Commc'ns, Inc. v.
Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007) (quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 555 (2007)). Plaintiff must allege “ ‘enough facts to state a claim to relief
that is plausible on its face.’ ” Starr v. Sony BMG Music Entm't, 592 F.3d 314, 321 (2d
Cir. 2010) (quoting Twombly, 550 U.S. at 570). “A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009).
When a plaintiff alleges fraud, the factual allegations must meet the higher
pleading standard set forth in Rule 9(b) of the Federal Rules of Civil Procedure. See
U.S. ex rel. Moore v. GlaxoSmithKline, LLC, 2013 WL 6085125, *3 (E.D.N.Y. Oct. 18,
2013) (“The Second Circuit has held that the FCA is an ‘anti-fraud statute,’ and
therefore claims brought under the FCA ‘fall within the express scope of Rule 9(b)’ of
the Federal Rules of Civil Procedure.”) Under Rule 9(b), “[i]n alleging fraud or mistake,
a party must state with particularity the circumstances constituting fraud or mistake.
Malice, intent, knowledge, and other conditions of a person's mind may be alleged
generally.” Fed.R.Civ.P. 9(b). To be fraudulent, a false statement must have been
made with the requisite scienter, and thus the complaint must “plead the factual basis
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which gives rise to a strong inference of fraudulent intent.” Shields v. Citytrust Bancorp,
Inc., 25 F.3d 1124, 1128 (2d Cir. 1994) (quoting O'Brien v. Nat'l Prop. Analysts
Partners, 936 F.2d 674, 676 (2d Cir. 1991)). “In sum, to state a fraud claim, the plaintiff
must make particular factual allegations supporting a reasonable inference that the
defendants are liable for fraud, and allegations that strongly support an inference that
the defendants acted with intent to defraud.” Williams v. GMAC Mortg., Inc., 2014 WL
2560605, *3 (S.D.N.Y. June 6, 2014). A court is not, however, bound to accept
“conclusory allegations or legal conclusions masquerading as factual conclusions.”
Rolon v. Henneman, 517 F.3d 140, 149 (2d Cir. 2008); see also Harris v. Mills, 572
F.3d 66, 72 (2d Cir. 2009) (“[A]lthough a court must accept as true all of the allegations
contained in a complaint, that tenet is inapplicable to legal conclusions, and threadbare
recitals of the elements of a cause of action, supported by mere conclusory statements,
do not suffice.” (internal quotation marks omitted) (quoting Iqbal, 556 U.S. at 678)).
Additionally, In considering a motion to dismiss for failure to state a claim
pursuant to Rule 12(b)(6), a district court may consider the facts alleged in the
complaint, documents attached to the complaint as exhibits, and documents
incorporated by reference in the complaint.” DiFolco v. MSNBC Cable LLC, 622 F.3d
104, 111 (2d Cir. 2010). “Even where a document is not incorporated by reference, the
court may nevertheless consider it where the complaint ‘relies heavily upon its terms
and effect,’ which renders the document ‘integral’ to the complaint.” Chambers v. Time
Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002) (quoting Int'l Audiotext Network, Inc. v.
Am. Tel. & Tel. Co., 62 F.3d 69, 72 (2d Cir. 1995) (per curiam)).
8
The FCA imposes civil liability on any person who “knowingly presents, or
causes to be presented, to [the United States government] a false or fraudulent claim
for payment or approval” or “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.” 31 U.S.C. § 3729(a). To plead a violation of the FCA, the plaintiff “must
show that defendants (1) made a claim, (2) to the United States government, (3) that is
false or fraudulent, (4) knowing of its falsity, and (5) seeking payment from the federal
treasury.” Mikes v. Straus, 274 F.3d 687, 695 (2d Cir. 2001). “Knowing” and
“knowingly” are defined as meaning that the person (1) has actual knowledge of the
information; (2) acts in deliberate ignorance of the truth or falsity of the information; or
(3) acts in reckless disregard of the truth or falsity of the information. 31 U.S.C.
§3729(b). Here, the relators allege that DHL knowingly and falsely represented that
Next Day and 2nd Day shipments were transported by air; that jet fuel surcharges were
properly imposed on Next Day and 2nd Day shipments; and that diesel fuel surcharges
were necessary to compensate DHL for ground shipments. Item 25, ¶ 48.
Defendants did not falsely represent that all Next Day and 2nd Day shipments
were transported by air. The relevant waybills expressly advise DHL customers that
DHL reserved the right to transport Next Day and 2nd Day packages by any means of
transportation, not specifically by air. Additionally, nowhere in the contract documents
does DHL represent that diesel fuel surcharge amounts were necessary to compensate
DHL and would be passed along to its independent contractor network of trucking
companies. The only possible misrepresentation relators have plausibly alleged is their
claim that DHL fraudulently imposed jet fuel surcharges on Next Day and 2nd Day
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shipments that did not travel by air.
Defendants argue that the contract documents clearly permit the imposition of jet
fuel surcharges on the Next Day and 2nd Day shipments at issue, and thus relators have
failed to allege a false claim. The Rate Guide states that a jet fuel surcharge is
imposed on all “Air Express” shipments. Although “Air Express” is not explicitly defined,
defendants argue that it refers to a category of service, not a mode of transportation,
and thus impliedly includes Next Day and 2nd Day packages.2 Defendants argue that
their computation of the fuel surcharges, as contemplated by the contract documents, is
the only plausible interpretation in the business context in which customers want their
packages delivered in a timely manner at a specific price, regardless of the method of
transportation. They contend that DHL must establish the cost of a shipment prior to its
delivery and explicitly reserves the right to ship Next day and 2nd Day packages by any
mode of transportation it deems appropriate.
Relators argue that, as the term “Air Express” is not explicitly defined in the Rate
Guide, it refers to a mode of transportation, rather than a category of service.3
Consequently, they contend that jet fuel surcharges were only authorized on shipments
transported by airplane. Defendants counter that this reading of the contract
2
The Second Circuit appears to have accepted as true the defendants’ assertion that, although it
is not explicitly set out in the Rate Guide, DHL Same Day, Next Day, and 2nd Day services are “Air
Express” services, as distinguished from “DHL Ground” service. See United States ex rel. Grupp v. DHL
Express (USA), Inc., 742 F.3d 51, 52 (2d Cir. 2014); Rate Guide, at p. 4.
3
Relators argue that the Second Circuit has already determined, in REA Express, Inc. v. C.A.B.,
507 F.2d 42 (2d Cir. 1974), that “Air Express” refers to a mode of transportation, not a category of service.
REA involved a decision by the Civil Aeronautics Board not to review a complaint of unfair competition
regarding the name “Air Express.” The court affirmed the Board’s determination that REA had failed to
establish the reasonable likelihood that the unfair use of the term “Air Express” in that case caused
specific and substantial public injury. REA is neither relevant to nor determinative in the present case.
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documents, which would require the computation of an appropriate fuel surcharge
following the delivery of a package based on the mode of transportation, would create
confusion and uncertainty and is simply impractical given the realties of the shipping
industry.
In an unrelated case based on the same contract documents, this court
determined that the term “Air Express” “can either denote a mode of transportation . . .
or is used as a term of art to denote a category of services . . ..” Jim Ball PontiacBuick-GMC, Inc. v. DHL Exp. (USA), Inc., 2010 WL 1840316, *4 (W.D.N.Y. May 7,
2010). As the contract ambiguity was not resolved through extrinsic evidence in the Jim
Ball case, this court denied cross motions for partial summary judgment on liability. Id.
Similarly, the court here is presented with a contract ambiguity and two competing
interpretations of the provisions at issue. The court must determine whether the
allegation of a contract ambiguity, without more, is sufficient to allege a false claim
under the FCA.
When alleging fraud, a plaintiff must “specifically plead those events which give
rise to a strong inference that the defendant had an intent to defraud, knowledge of the
falsity, or a reckless disregard for the truth.” Beth Israel Med. Ctr. v. Verizon Bus.
Network Servs., 2013 WL 1385210, at *4 (S.D.N.Y. Mar. 18, 2013) (quoting
Connecticut Nat'l Bank v. Fluor Corp., 808 F.2d 957, 962 (2d Cir. 1987)). Here, relators
have alleged, in a conclusory fashion, that the imposition of jet fuel surcharges on Next
Day and 2d Day shipments that were transported solely by ground transportation was
fraudulent (Item 25, ¶48). However, defendant’s method of rate computation is both
11
consistent with the contract documents and reasonable in the business context. The
relators’ conclusory allegation of fraud, based solely on a disputed interpretation of the
contract documents, is insufficient to “strongly support an inference that the defendants
acted with intent to defraud.” Williams v. GMAC Mortg., Inc., 2014 WL 2560605, at *3;
see also Dash v. Seagate Technology (U.S.) Holdings, Inc., 2014 WL 2922658, *4
(E.D.N.Y. June 30, 2014) (conclusory statement as to defendant’s fraudulent intent not
sufficient to survive motion to dismiss); Scheiner v. Wallace, 832 F. Supp. 687, 702
(S.D.N.Y. 1993) (“Facts that are merely as consistent with fraudulent intent as they are
with its absence are insufficient. Plaintiffs must allege facts that unambiguously give
rise to a strong inference of fraudulent intent.”). Moreover, a conclusory allegation of
conduct that is merely “ ‘consistent with’ liability, fail[s] to satisfy both Rule 9(b) and
Twombly’s instruction that a plausible complaint ‘nudge [ ] [plaintiff’s] claims across the
line from conceivable to plausible . . ..’ ” United States ex rel Corporate Compliance
Assocs. v. New York Soc. for the Relief of the Ruptured and Crippled, 2014 WL
3905742, *17 (S.D.N.Y. Aug. 7, 2014) (citing Twombly, 550 U.S. at 570).
Many courts have determined, in the summary judgment context, that “[w]ithout
more than a relator's subjective interpretation of an imprecise contractual provision, a
defendant's reasonable interpretation of its legal obligation precludes a finding that the
defendant had knowledge of its falsity.” U.S. ex rel. Thomas v. Siemens AG, 991 F.
Supp. 2d 540, 568 (E.D. Pa. 2014); see also U.S. Dep’t of Transp. ex rel. Arnold v.
CMC Engineering, 2014 WL 2442945, *3 (3rd Cir. June 2, 2014) (as a result of contract
ambiguity, court found no evidence from which a reasonable jury could find that
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defendant “knowingly” made a factually false claim or false certification as defined
under the FCA); cf. U.S. ex rel. K & R Ltd. P'ship v. Mass. Hous. Fin. Agency, 530 F.3d
980, 984 (D.C.Cir. 2008) (holding that, where relator and defendant “simply disagree
about how to interpret ambiguous contract language” and relator could not point to
anything that might have dissuaded defendant from its interpretation, “there is no
genuine issue as to whether [the defendant] knowingly presented false claims”); United
States v. Basin Elec. Power Coop., 248 F.3d 781, 805 (8th Cir. 2001) (holding relator
had failed to state a claim under the FCA where the defendant's “interpretation and
performance under the contract was reasonable” and the relator thus “did not prove that
[the defendant] acted with the requisite knowledge”); United States ex rel. Lamers v.
City of Green Bay, 168 F.3d 1013, 1018 (7th Cir. 1999) (“[I]mprecise statements or
differences in interpretation growing out of a disputed legal question are similarly not
false under the FCA.”); Hagood v. Sonoma County Water Agency, 81 F.3d 1465, 1477
(9th Cir. 1996). Similarly, upon a motion to amend the complaint to add a claim under
the FCA, the Fourth Circuit found proposed FCA claims involving general and vague
contract provisions did not constitute false statements under the FCA.
While the phrase “false or fraudulent claim” in the False Claims Act should
be construed broadly, it just as surely cannot be construed to include a
run-of-the-mill breach of contract action that is devoid of any objective
falsehood. An FCA relator cannot base a fraud claim on nothing more
than his own interpretation of an imprecise contractual provision. To hold
otherwise would render meaningless the fundamental distinction between
actions for fraud and breach of contract.
U.S. ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370, 378 (4th Cir. 2008)
(internal citations and quotes omitted). Here, a commonsense reading of the pertinent
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documents - the Rate Guide, waybills, and Fuel Surcharge Tables - would apprise DHL
customers that jet fuel surcharges would be imposed on “Air Express” shipments, which
include Next Day and 2nd Day shipments. Relators’ alternate interpretation of the
documents falls far short of the FCA’s requirement that the relator allege the “factual
basis which gives rise to a strong inference of fraudulent intent.” Shields v. Citytrust
Bancorp, Inc., 25 F.3d 1124, 1128 (2d Cir. 1994); see also U.S. ex rel. K & R Ltd.
P’ship, 530 F.3d at 984 (parties’ disagreement “about how to interpret ambiguous
contract language” does not give rise to factual issue that defendant knowingly
presented false claims). This disagreement regarding the proper imposition of jet fuel
surcharges raises, at best, a possible claim of breach of contract which only the
government could, and has chosen not to, assert.
Although “[c]omplaints dismissed under Rule 9(b) are ‘almost always' dismissed
with leave to amend …,” Luce v. Edelstein, 802 F.2d 49, 56 (2d Cir. 1986) (quoting 2A
J. Moore & J. Lucas, Moore's Federal Practice, ¶ 9.03 at 9–34 (2d ed. 1986)), the
decision to allow an amendment rests in the discretion of the court. Relators have
already amended the complaint once to add specific examples of the alleged false
claims. On this motion, the court has determined that the complaint is deficient, not for
a lack of specificity but because the alleged fraudulent scheme does not state a claim
under the FCA. Thus, the court fails to see how an amendment would address the
shortcomings of the FCA cause of action. The specifics of the alleged fraudulent
scheme are fully included in the complaint and all pertinent contract documents have
been incorporated by reference and considered by the court. No additional detail will
transform this contract ambiguity into a fraud claim. Accordingly, the motion to dismiss
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is granted and the complaint is dismissed with prejudice.
2. Statute of Limitations
In the interest of thoroughness, the court will address defendants’ alternative
argument that relators’ claims that predate September 9, 2005 must be dismissed as
time-barred. The FCA applies a six-year statute of limitations precluding relator claims
filed “more than 6 years after the date on which the violation of [the FCA] is committed.”
United States v. Baylor Univ. Med. Ctr., 469 F.3d 263, 267 (2d Cir. 2006) (quoting 31
U.S.C. § 3731(b)(1)). The FCA's six-year statute of limitations begins to run “ ‘on the
date the claim is made, or, if the claim is paid, on the date of payment.’ ” U.S. ex rel.
Kreindler & Kreindler v. United Techs. Corp., 985 F.2d 1148, 1157 (2d Cir. 1993)
(quoting Blusal Meats, Inc. v. United States, 638 F. Supp. 824, 829 (S.D.N.Y. 1986),
aff'd, 817 F.2d 1007 (2d Cir. 1987)).
This action was commenced on April 18, 2008, with the filing of the complaint
under seal (Item 1). After the government declined to intervene, the relators served an
amended complaint on September 9, 2011 (Item 25). Citing Baylor, supra, defendants
argue that the amended complaint does not relate back to the date of the filing of the
original complaint and that any claims prior to September 9, 2005, six years prior to the
date of the filing of the amended complaint, must be dismissed.
In Baylor, the court determined that the Government’s complaint-in-intervention
did not relate back to the original qui tam complaint filed under seal. Section 3731(c) of
the FCA was then amended to provide that any pleading by the Government, whether
an amendment or a complaint-in-intervention, relates back to the original qui tam
15
complaint, to the extent that it arises out of the same conduct, transactions, or
occurrences set forth in the original complaint. 31 U.S.C. § 3731(c). Neither Baylor nor
section 3731(c) applies to the original qui tam complaint in this case.
Here, the case was commenced with the filing of the original complaint in a
timely fashion, the Government chose not to intervene, and the original sealed
complaint tolled the applicable statute of limitations. See Hayes v. Dep’t of Educ. of
City of New York, 2014 WL 2048196, *5 (S.D.N.Y. May 16, 2014). The amended
complaint is substantially the same as the original complaint, with some added factual
details. Thus, the allegations of the amended complaint are timely, as “no claim actually
pleaded in the Amended Complaint would be time-barred, if timely when the original
sealed complaint was filed.” Hayes, 2014 WL 2048196, at *6. Accordingly, if the court
had not dismissed the complaint for failure to plead a plausible claim for relief under the
FCA, this aspect of the defendant’s motion would be denied.
CONCLUSION
The defendants’ motion to dismiss (Item 36) is granted, and the complaint is
dismissed with prejudice. The Clerk is directed to enter judgment accordingly.
So ordered.
_______\s\ John T. Curtin____
JOHN T. CURTIN
United States District Judge
Dated: September 10, 2014
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