United States of America et al v. Brickman Group Ltd., LLC
Filing
29
ORDER denying 26 Motion for Certificate of Appealability. Signed by Judge Michael R. Barrett on 1/12/12. (ba1)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
United States of America ex rel.
Mark Elliott,
Case No.: 1:10-cv-392
Plaintiff,
v.
Judge Michael R. Barrett
Brickman Group Ltd., LLC,
Defendant.
OPINION & ORDER
This matter is before the Court on Defendant Brickman Group Ltd., LLC’s
(“Brickman”) Motion to Certify Interlocutory Appeal and Stay Proceedings (Doc. 26). 1
This motion requests an order permitting an immediate appeal of this Court’s November
21, 2011, Order (Doc. 25) denying Brickman’s Motion for Reconsideration, and the
Court’s August 25, 2011, Order (Doc. 20) denying Brickman’s Motion to Dismiss.
Brickman also moves for a stay of proceedings pending the outcome of any
interlocutory appeal. Plaintiff Mark Elliott 2 filed a response in opposition (Doc. 27), and
Defendant has filed a reply in support (Doc. 28).
This case is a civil action brought under the False Claims Act, 31 U.S.C. § 3729
et seq. The False Claims Act imposes liability on any person who presents a false or
fraudulent claim for payment to the government. 31 U.S.C. § 3729(a)(1). It authorizes
private individuals to bring civil actions in the government’s name, referred to as qui tam
1
All Court document citations are to Docket Entry numbers.
2
The Court refers to Mr. Elliott as “Plaintiff” instead of “Relator” because the government has declined to
intervene in this action.
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actions, and for individuals to collect a portion of any amount recovered. 31 U.S.C. §
3730(b)(1); see also U.S. ex rel. Summers v. LHC Group, Inc., 623 F.3d 287, 291 (6th
Cir. 2010). Here, Plaintiff brings two counts against Defendant. Count one alleges
violations of the False Claims Act, and count two alleges False Claims Act retaliation.
(Doc. 13 ¶¶ 49–60.) Both counts survived Defendant’s previously filed motion to
dismiss (Doc. 20, 21, 30) and Defendant’s more recently filed motion to reconsider
(Doc. 25, 20, 21). This matter is ripe for review.
I.
Background
The following facts are repeated verbatim from the Court’s Order denying
Defendant’s motion to dismiss. (Doc. 20, 2–6.) They are included here solely for
convenience sake.
The following facts come from Plaintiff’s Amended
Complaint. Defendant disputes these facts, but as it
concedes (Doc. 15, 2), the Court must accept them as true
on this motion to dismiss, see Bassett v. NCAA, 528 F.3d
426, 430 (6th Cir. 2008). Plaintiff Mark Elliott was an
employee of Brickman from November 2004 until January
2010. (Doc. ¶ 10.) Brickman is a national commerciallandscaping firm that performs multimillion-dollar
landscaping contracts with large real-estate firms, one of
which is Duke Realty. Duke Realty, in turn, has a
multimillion-dollar, real-estate building contract with the
federal government. (Doc. 13 ¶ 11.)
Mr. Elliott worked for Brickman as a branch manager and
as a regional sales manager/business development
associate. (Doc. 13 ¶ 14.) During the first two-and-a-half
years Mr. Elliott worked for Brickman, he served directly
under regional manager Mark Davis. At that time, Mr. Elliott
was the branch manager of Brickman’s Great Lakes Region.
(Doc. 13 ¶ 15.) In that position, Mr. Elliott oversaw the
operational, financial, and administrative activities of
Brickman’s landscape-maintenance branch. Brickman’s
largest client within Mr. Elliott’s branch was Duke Realty.
(Doc. 13 ¶ 17.)
2
Duke Realty is a publicly traded, commercial-real-estate
firm. It leases office, industrial, and retail properties to a
wide array of private and governmental entities. (Doc. 13 ¶
18.) Brickman handled all of Duke Realty’s landscaping
business in the Cincinnati, Ohio, area from 2001 onward.
(Doc. 13 ¶¶ 19, 20.)
During the two-and-a-half years Mr. Elliott worked under
Mark Davis, from November 2004 to the spring of 2007, Mr.
Davis ordered Brickman employees not to perform or to
perform at a reduced rate specific landscaping work it was
contractually obligated to perform for Duke Realty. This
resulted in significant financial gains for Brickman. This
underperformed work included applying fertilizer and mulch,
pruning, flower installations, and various other tasks typically
associated with the landscaping business. (Doc. 13 ¶ 21.)
Mr. Davis, as regional manager, also directed Brickman
managers to delete specific line items within the estimates it
had contractually agreed to perform for Duke Realty without
Duke Realty’s knowledge or authorization. (Doc. 13, ¶ 22.)
During one incident, Mr. Davis directed Mr. Elliott and others
to remove over 4,000 hours of contractually obligated
services from the Duke Realty estimates to meet certain
profit margins, known as “budget directives,” that Brickman’s
lead management set. Plaintiff alleges that these budget
directives were ordered by Jeff Herold, Brickman’s chief
operating officer. (Doc. 13 ¶ 25.) Despite these changes,
which led to services either not being performed or being
performed at reduced levels, the amount of services billed to
Duke Realty was never changed. (Doc. 13 ¶ 27.) As the
Amended Complaint states, “Duke Realty was never made
aware of the deletion and reductions in services and,
therefore, paid for services which were either not fulfilled or
not completely fulfilled.” (Doc. 13 ¶ 28.) Plaintiff further
alleges that Brickman never displayed any intention of
informing Duke Realty of these changes. (Doc. 13 ¶ 28.)
Plaintiff states that this deletion or reduction in services was
repeated for each of the years Mr. Elliott worked under Mr.
Davis. (Doc. 13 ¶ 29.)
Plaintiff also claims that Mr. Davis manipulated “work
orders,” which were for work performed by Brickman in
addition to the original contractual obligations it owed to its
clients. These work orders were allegedly manipulated to
meet bottom-line profit margins. (Doc. 13 ¶ 31.) As a result,
substantial amounts of landscaping materials were
purchased for work to be done on Duke Realty properties,
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but without Duke Realty’s knowledge, unused materials were
resold, resulting in large profits for Brickman. (Doc. 13 ¶ 32.)
Plaintiff also alleges that Brickman marked up bills for
snow removal services and billed for unused snow removal
materials. (Doc. 13 ¶ 33.) Mr. Elliott and other Brickman
managers were repeatedly told that their bonuses relied on
how much profit they could squeeze from clients’ snow
removal bills. As the Amended Complaint alleges, “they
were instructed to ‘use their thumbs’ when billing for snow
removal services.” (Doc. 13 ¶ 34.) Plaintiff alleges that
every year he worked under Mr. Davis, large quantities of
salt were improperly added to Duke Realty’s snow removal
bills. Duke Realty would occasionally complain about these
bills, and Defendant would accept reduced payments on
these occasions, but Brickman’s profit margin was still well
above what would have otherwise resulted without the
overbilling. (Doc. 13 ¶ 35.)
Duke Realty’s largest tenant within the Cincinnati area
was the General Services Administration (“GSA”), a federal
agency that acts as the landlord for the federal government.
(Doc. 13 ¶ 37.) When private companies, such as Duke
Realty, lease property to the U.S. government, the actual
lessee is the GSA. (Doc. 13 ¶ 38.) Plaintiff alleges that
Brickman’s inflated billing estimates were incorporated into
bids Duke Realty made to the GSA and which the GSA
ultimately accepted. As a result, Plaintiff alleges that
because of its inflated estimates, Brickman has repeatedly
defrauded the federal government. (Doc. 13 ¶ 42.) The
federal properties in question include the Fort Campbell
Military Base in Kentucky; the Bureau of Worker’s
Compensation at Governor’s Hill in Mason, Ohio; the Fort
Drum Army Base in New York; and several industrial sites
leased by the Internal Revenue Service and co-run by
Prologis and Brickman. Plaintiff’s Amended Complaint also
refers to a criminal investigation of this matter that has been
referred to the Cincinnati Division of the Federal Bureau of
Investigation. (Doc. 13 ¶ 43.)
In the spring of 2007, Brickman moved Mr. Elliott to a
newly created job under the title of “Business Development
Associate.” Shortly thereafter, Mr. Elliott informed two
Brickman divisional managers, Chris Hayes and Gary
Kuykendall, of Brickman’s allegedly fraudulent billing
practices. (Doc. 13 ¶ 44.) These disclosures apparently
prompted an investigation, but Mr. Elliott claims that no one
at Brickman ever informed him of the progress of this
4
investigation or consulted him for additional information.
(Doc. 13 ¶ 45.)
In the summer of 2009, Mr. Elliott was reassigned to
again work under Mark Davis. In this new position, Mr.
Elliott and Mr. Davis had numerous verbal arguments, which
resulted in Mr. Davis stating that he knew of Mr. Elliott’s
reports to Mr. Hayes and Mr. Kuykendall. Mr. Davis
allegedly threatened Plaintiff by telling him that he “would
‘pay for that oversight’ and that Plaintiff’s ‘days were
counted.’” (Doc. 13 ¶ 46.)
In December 2009, Mr. Elliott approached Mr. Hayes and
requested reassignment to a position away from Mr. Davis.
Mr. Hayes allegedly told him that he would contact Plaintiff
once he determined where he could be reassigned.
However, Mr. Hayes never contacted Mr. Elliott again
regarding his requested reassignment. (Doc. 13 ¶ 47.)
Mr. Elliott resigned “under duress” on January 21, 2010.
(Doc. 13 ¶ 48.) He alleges that the duress came from Mr.
Davis’ verbal threats and a written reprimand issued by Mr.
Davis on January 20, 2010. Plaintiff brought this suit against
Brickman approximately six months later, on June 16, 2010.
(Doc. 1.) The government was given the opportunity to
intervene in this action, but it declined to do so. (Doc. 9.)
Count one of Plaintiff’s Amended Complaint alleges
violations of the False Claims Act, and count two alleges
False Claims Act retaliation. (Doc. 13 ¶¶ 49–60.) More
specifically, Plaintiff alleges that Brickman knowingly
presented false or fraudulent claims for payment to the
government and knowingly made false records relating to
those claims. (Doc. 13 ¶ 51.) He further alleges that he
resigned under duress after Brickman retaliated against him
based on its belief that he would bring a qui tam action
against Brickman. (Doc. 13 ¶ 57.) In other words,
“Brickman forced Plaintiff’s resignation in an effort to
threaten, harass, and discriminate against him, in violation of
31 U.S.C. § 3730(h).” (Doc. 13 ¶ 58.)
(Doc. 20, 2–6) (footnotes omitted).
At a case-management conference held after the denial of Defendant’s motion to
reconsider, Defendant requested that the Court make its recent orders final and
appealable. Based on this request, the Court set a briefing schedule for Defendant’s
5
motion to certify appeal. (Docket Entry of 11/22/2011.) The issues raised therein are
now before this Court.
II.
Legal Analysis
Defendant’s motion to certify appeal asks this Court to certify its prior Orders for
an immediate appeal under 28 U.S.C. § 1292(b). Defendant maintains that because §
1292(b)’s requirements have been satisfied, and because compelling equitable
considerations exist, this Court should stay further proceedings in this action and permit
Defendant to immediately appeal to the Sixth Circuit Court of Appeals. (Doc. 26, 5.)
A.
Legal Standards
Title 28 U.S.C. § 1292(b) “‘confer[s] on district courts first line discretion to allow
interlocutory appeals.’” Turi v. Main St. Adoption Servs., LLP, 633 F.3d 496, 504 (6th
Cir. 2011) (quoting Swint v. Chambers Cnty. Comm’n, 514 U.S. 35, 47 (1995)). “As a
threshold matter, interlocutory appeals in the federal system are generally disfavored.”
Alexander v. Provident Life & Accident Ins. Co., 663 F. Supp. 2d 627, 639 (E.D. Tenn.
2009) (citing Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368 (1981). “‘Attractive
as it may be to refer difficult matters to a higher court for advance decision, such a
course of action is contrary to our system of jurisprudence.’” Id. (quoting Trollinger v.
Tyson Foods, Inc., No. 4:02–CV–23, 2006 WL 2868980, at *3 (E.D. Tenn. Sept. 29,
2006)). “Review under § 1292(b) is granted sparingly and only in exceptional cases.”
W. Tenn. Chapter of Assoc. Builders & Contractors, Inc. v. City of Memphis (In re City of
Memphis), 293 F.3d 345, 350 (6th Cir. 2002). As the Sixth Circuit explained, “‘Congress
intended that section 1292(b) should be sparingly applied. It is to be used only in
exceptional cases where an intermediate appeal may avoid protracted and expensive
6
litigation and is not intended to open the floodgates to a vast number of appeals from
interlocutory orders in ordinary litigation.’” Kraus v. Bd. of Cnty. Road Comm’rs of the
Cnty. of Kent, 364 F.2d 919, 922 (6th Cir. 1966) (quoting Milbert v. Bison Labs., Inc.,
260 F.2d 431, 433 (3d Cir. 1958)). Perhaps most significantly for this case, Ҥ 1292(b)
is not appropriate for securing early resolution of disputes concerning whether the trial
court properly applied the law to the facts.” Howe v. City of Akron, 789 F. Supp. 2d 786,
810 (N.D. Ohio 2010) (citing Link v. Mercedes-Benz of N. Am., Inc., 550 F.2d 860, 863
(3d Cir. 1977)); see also In re Gray, 447 B.R. 524, 534 (E.D. Mich. 2011) (refusing to
grant § 1292(b) appeal because questions posed required factual determinations);
Gieringer v. Cincinnati Ins. Cos., No. 3:08-cv-267, 2010 WL 2572054, at *3 (E.D. Tenn.
June 18, 2010) (refusing to apply § 1292(b) where “Defendant is challenging this
Court’s application of law to the facts because of its own disagreement with the
outcome, rather than presenting a situation where there are substantial disputes as to
the applicable law”); In re ASC Inc., 386 B.R. 187, 196 (E.D. Mich. 2008) (“factual
determinations are not appropriate for interlocutory review,” and, “[i]nterlocutory appeals
are intended for situations in which the court of appeals can rule on a pure, controlling
question of law without having to delve beyond the surface of the record in order to
determine the facts”); In re Pilch, No. 1:07-CV-306, 2007 WL 1686308, at *4 (W.D.
Mich. June 8, 2007) (refusing to apply § 1292(b) where an appeal “presents a mixed
question of law and fact”); Sanderson Farms, Inc. v. Gasbarro, No. 2:07-CV-00857,
2007 WL 3402539, at *3 (S.D. Ohio Nov. 13, 2007) (refusing to apply § 1292(b) where
the court was required to apply the law to the facts).
Title 28 U.S.C. § 1292 states as follows:
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When a district judge, in making in a civil action an order not
otherwise appealable under this section, shall be of the
opinion that such order involves a controlling question of law
as to which there is substantial ground for difference of
opinion and that an immediate appeal from the order may
materially advance the ultimate termination of the litigation,
he shall so state in writing in such order. The Court of
Appeals which would have jurisdiction of an appeal of such
action may thereupon, in its discretion, permit an appeal to
be taken from such order, if application is made to it within
ten days after the entry of the order: Provided, however,
That application for an appeal hereunder shall not stay
proceedings in the district court unless the district judge or
the Court of Appeals or a judge thereof shall so order.
28 U.S.C. § 1292(b). To establish that relief should be granted under § 1292(b), a
district court must consider whether: “(1) the order involves a controlling question of law,
(2) a substantial ground for difference of opinion exists regarding the correctness of the
decision, and (3) an appeal may materially advance the ultimate termination of the
litigation.” In re City of Memphis, 293 F.3d at 350.
Defendant makes two overall arguments here: (1) § 1292(b)’s requirements have
been satisfied, and (2) there is an equitable concern that favors certification of an
appeal. (Doc. 26, 5, 12.) Defendant further argues that if the Court certifies an appeal,
it should stay this action. (Doc. 26, 14.) The Court addresses each of these issues
seriatim.
B.
Certification of an Appeal under § 1292(b)
Defendant first argues that all of the elements required to grant relief under §
1292(b) are present here. (Doc. 26, 5.) Each element is addressed below.
1.
§ 1292(b)’s First Element—A Controlling Question of Law
The first element a Court must consider in deciding whether to grant relief under
8
§ 1292(b) is whether the order involves a controlling question of law. 28 U.S.C. §
1292(b); In re City of Memphis, 293 F.3d at 350. “A question of law is controlling if
reversal of the district court’s order would terminate the action.” Howe, 789 F. Supp. 2d
at 810 (internal quotations omitted) (quoting Genentech, Inc. v. Novo Nordisk A/S, 907
F. Sup. 97, 99 (S.D.N.Y. 1995)). In other words, “[a] legal issue is controlling if it could
materially affect the outcome of the case.” In re City of Memphis, 293 F.3d at 351.
As many cases recognize, there are actually two requirements within what this
Court (and most others) has labeled as § 1292(b)’s first element: “(1) The question
involved must be one of law; [and] (2) It must be controlling.” Mason v. Massie, 335
B.R. 362, 369 (N.D. Ohio 2005); see also Dungan v. Chase Home Fin., LLC, No. 1014549, 2011 WL 4737581, at *2 (E.D. Mich. Oct. 7, 2011); In re A.P. Liquidating Co.,
350 B.R. 752, 755 (E.D. Mich. 2006); Cronovich v. Dunn, 573 F. Supp. 1340, 1342
(D.C. Mich. 1983). As § 1292 states, an order must present a “question of law” that is
“controlling.” 28 U.S.C. § 1292(b).
Although Defendant’s motion is not entirely clear on this point, (see Doc. 26, 7–8)
Defendant’s reply in support presents three controlling questions of law: “(1) whether
plaintiff’s failure to allege with particularity the presentment of a single false claim to the
government requires dismissal of his complaint under applicable Sixth Circuit
precedent, (2) whether the “strong inference” exception mentioned, but not applied, by
the Sixth Circuit in Chesbrough v. VPA, P.C., 655 F.3d 461 (6th Cir. 2011), retains any
vitality in the qui tam context, and (3) if so, whether Elliott’s allegations bring his
complaint within that exception,” (Doc. 28, 2). Because the question of dismissal of a
complaint pursuant to Rule 12(b)(6) is a question of law, Ass’n of Cleveland Fire
9
Fighters v. City of Cleveland, 502 F.3d 545, 548 (6th Cir. 2007); see also Ybarra v. K &
S Flooring Servs., LLC, No. 1:07-CV-1249, 2008 WL 607267, at *1 (W.D. Mich. Feb. 29,
2008) (“Whether dismissal is proper pursuant to Federal Rule of Civil Procedure
12(b)(6) is a question of law.”), the Court accepts without discussion Defendant’s
assertion that each of these three questions are questions of law.
The second requirement of § 1292(b)’s first element asks whether there is a
“controlling” question of law. Mason v. Massie, 335 B.R. 362, 369 (N.D. Ohio 2005); 28
U.S.C. § 1292(b). Here, Defendant argues that the questions presented in this case are
controlling because “a legal ruling would be substantively dispositive of [Plaintiff’s]
theories of liability.” (Doc. 26, 7.) Because Defendant’s three questions are of primary
importance in this matter, the Court again accepts without discussion Defendant’s
assertion that each of its three questions are “controlling” questions of law.
2.
§ 1292(b)’s Second Element—A Substantial Ground for Difference of
Opinion
The second element a Court must consider when deciding whether to allow an
interlocutory appeal under § 1292(b) is whether a substantial ground for difference of
opinion exists regarding the correctness of the decision. 28 U.S.C. § 1292(b); In re City
of Memphis, 293 F.3d at 350. In other words, an appeal is warranted when there is a
substantial difference of opinion regarding the questions of law identified in the first
element. See In re City of Memphis, 293 F.3d at 350. “A ‘difference of opinion’ is
established ‘when (1) the case is difficult and of first impression; (2) a difference of
opinion exists within the controlling circuit; or (3) the circuits are split on the issue.’” In
re Regions Morgan Keegan ERISA Litig., 741 F. Supp. 2d 844, 849 (W.D. Tenn. 2010)
10
(quoting Gaylord Entm’t Co. v. Gilmore Entm’t Group, 187 F. Supp. 2d 926, 956 (M.D.
Tenn. 2002)). Defendant argues that such a difference of opinion exists here because
“the Sixth Circuit itself would disagree with the Court’s reading of Chesbrough and its
application of the ‘strong inference’ exception.” (Doc. 26, 8.)
In its motion to reconsider and memorandum in support (Docs. 22 & 22-1)
Defendant argued that this Court’s Order denying its motion to dismiss failed to consider
a recently issued, dispositive Sixth Circuit opinion—Chesbrough v. VPA, P.C., 655 F.3d
461 (6th Cir. 2011). (Doc. 22, 1.) More specifically, Defendant argued that under
Chesbrough’s interpretation of Rule 9(b), which requires False Claims Act violations to
be alleged with particularity, U.S. ex rel. Marlar v. BWXT Y-12, L.L.C., 525 F.3d 439,
445 (6th Cir. 2008); Fed. R. Civ. P. 9(b), Plaintiff’s Amended Complaint failed to state a
claim because Plaintiff did not specifically identify any individual false claim that was
presented to the federal government (Doc. 22-1, 2). However, this Court applied an
exception to the normal rule that a plaintiff must particularly plead that a fraudulent claim
for payment has been submitted to the government. (Doc. 25, 17); Chesbrough, 655
F.3d at 470 (citing U.S. ex rel. Bledsoe v. Cmty. Health Sys., Inc. (Bledsoe II), 501 F.3d
493, 510 (6th Cir. 2007)). As this Court recognized in its Order on Defendant’s motion
to reconsider (Doc. 25, 17), Chesbrough stated as follows:
Bledsoe [II] left open the possibility that a court may “relax”
the requirements of Rule 9(b) “in circumstances where a
relator demonstrates that he cannot allege the specifics of
actual false claims that in all likelihood exist, and the reason
that the relator cannot produce such allegations is not
attributable to the conduct of the relator.”
655 F.3d at 470 (quoting Bledsoe II, 501 F.3d at 504 n.12). This is the “strong
inference” exception. (Doc. 25, 17.) As Chesbrough further explained, “case law . . .
11
suggests that the requirement that a relator identify an actual false claim may be
relaxed when, even though the relator is unable to produce an actual billing or invoice,
he or she has pled facts which support a strong inference that a claim was submitted.”
655 F.3d at 471 (emphasis added). This Court disagreed with Defendant’s reading of
Chesbrough and held as follows:
Chesbrough did not overturn or even modify earlier Sixth
Circuit holdings that this Court relied on its prior Order [on
Defendant’s motion to dismiss]. Rather, Chesbrough relied
on and cited many of the same cases and rules as this Court
did. Compare Doc. 20, with Chesbrough, 655 F.3d 461.
Instead of overturning prior precedent, Chesbrough
reaffirmed that precedent—the same precedent this Court
relied on in its prior Order, in particular, the Sixth Circuit case
of Bledsoe II. See 655 F.3d at 470–71. Moreover, the
arguments Defendant presents in its motion to reconsider
are nothing more than a restatement of arguments this Court
has already considered and rejected. Defendant’s
arguments have not changed, and Chesbrough did not
change the required analysis applicable to those arguments.
(Doc. 25, 17–18.) Upon an examination of the underlying facts, (Doc. 25, 18–19) this
Court held that “Plaintiff’s Amended Complaint creates a ‘strong inference’ that a false
claim was submitted to the government,” (Doc. 25, 18). Overall, this Court held that
Chesbrough “provides no reasons justifying relief from this Court’s Order denying
Defendant’s motion to dismiss” (Doc. 25, 20–21).
With that as background, the Court now considers whether there is a substantial
difference of opinion regarding the three questions of law Defendant identified above.
See In re City of Memphis, 293 F.3d at 350. The three questions Defendant raised are,
“(1) whether plaintiff’s failure to allege with particularity the presentment of a single false
claim to the government requires dismissal of his complaint under applicable Sixth
Circuit precedent, (2) whether the “strong inference” exception mentioned, but not
12
applied, by the Sixth Circuit in Chesbrough v. VPA, P.C., 655 F.3d 461 (6th Cir. 2011),
retains any vitality in the qui tam context, and (3) if so, whether Elliott’s allegations bring
his complaint within that exception,” (Doc. 28, 2). The Court considers each of these
questions in detail.
a.
No Substantial Difference of Opinion Regarding Defendant’s First
and Third Questions of Law
Defendant’s first and third questions can be disposed of quickly because they are
not the pure questions of law that § 1292(b) demands. See Howe, 789 F. Supp. 2d at
810 (Ҥ 1292(b) is not appropriate for securing early resolution of disputes concerning
whether the trial court properly applied the law to the facts.”); In re ASC Inc., 386 B.R. at
196 (“Interlocutory appeals are intended for situations in which the court of appeals can
rule on a pure, controlling question of law without having to delve beyond the surface of
the record in order to determine the facts.”); In re Pilch, 2007 WL 1686308, at *4
(refusing to apply § 1292(b) where an appeal “presents a mixed question of law and
fact”). Instead, Defendant’s first and third questions call for an application of law to the
facts, something that is “not appropriate” under § 1292(b). Howe, 789 F. Supp. 2d at
810
Defendant’s first question asks whether plaintiff’s failure to particularly allege the
presentment of false claim for payment to the government requires dismissal. (Doc. 28,
2). Recall that Defendant must show a “difference of opinion” regarding its questions of
law, In re City of Memphis, 293 F.3d at 350, and a “difference of opinion” is, “when (1)
the case is difficult and of first impression; (2) a difference of opinion exists within the
controlling circuit; or (3) the circuits are split on the issue,” In re Regions Morgan, 741 F.
13
Supp. 2d at 849 (internal quotations omitted). But there is no difference of opinion
regarding whether a False Claims Act plaintiff must particularly allege the presentment
of a false claim for payment. See Chesbrough, 655 F.3d at 470; Bledsoe II, 501 F.3d at
510. That rule is solidly and uncontroversially established. See id. Defendant is merely
arguing with this Court’s application of that law to the facts in this particular case, and
that is not an appropriate use of § 1292(b). See Howe, 789 F. Supp. 2d at 810.
Similarly, Defendant’s third question asks whether Plaintiff’s allegations fall within
Chesbrough’s strong-inference exception. (Doc. 28, 2). Once again, there is no dispute
over a question of law here. Rather, Defendant is faulting this Court’s application of the
law to the facts. And Ҥ 1292(b) is not appropriate for securing early resolution of
disputes concerning whether the trial court properly applied the law to the facts.” Howe,
789 F. Supp. 2d at 810.
Defendant’s own statements highlight the correctness of this holding. For
example, where Defendant argues that “Chesbrough is directly on point, and the Sixth
Circuit might well disagree with its application in the subject Orders,” (Doc. 26, 10)
Defendant is rearguing this Court’s application of the law to the facts. Similarly,
Defendant states that “the issues of law are unique in this case, particularly the
application of the ‘strong inference’ exception as mentioned in the Court’s most recent
order.” (Doc. 26, 16). Once again, certifying an appeal under § 1292(b) for a dispute
over the application of the law to the facts is improper. Howe, 789 F. Supp. 2d at 810.
Before continuing, the Court pauses to note that several of Defendant’s
arguments here repeat ones that the Court has already addressed its prior Order. (See
Doc. 26, 10; Doc. 28, 3–4.) This also is an improper use of § 1292(b). See Alexander
14
v. Provident Life & Accident Ins. Co., 663 F. Supp. 2d 627, 639 (E.D. Tenn. 2009).
Given that this Court has already considered, and rejected, Defendant’s arguments
regarding whether Plaintiff’s Amended Complaint is particularly pled (Doc. 25, 16–19,
20) and whether Chesbrough is directly on point, (Doc. 25, 18–20) Defendant’s motion
under § 1292(b) is not an opportunity to relitigate these issues. As occurred in
Alexander v. Provident Life and Accident Insurance Co., 663 F. Supp. 2d 627, 639 (E.D.
Tenn. 2009), Defendant does not point to controlling authority raising a difference of
opinion regarding the two above-discussed controlling questions of law (see Docs. 26 &
28). Instead, Defendant merely repeats arguments addressed in the Court’s decision
on its motion to reconsider. See id.; (see also Doc. Doc. 26, 10; Doc. 28, 3–4). This
Court previously distinguished Chesbrough based on the facts (Doc. 25, 18–20) (“based
on all the facts plead, Plaintiff’s Amended Complaint creates a ‘strong inference’ that a
false claim was submitted to the government”), and this Court previously found that
“Plaintiff meets the particularly requirements of Rule 9(b) by providing sufficient detail
regarding the time, place, and content of Brickman’s alleged fraud,” (Doc. 25, 20) (citing
Doc. 20, 21). This is not an occasion to reargue those decisions.
b.
No Substantial Difference of Opinion Regarding Defendant’s
Second Question of Law
Defendant’s second question of law asks “whether the ‘strong inference’
exception mentioned, but not applied, by the Sixth Circuit in Chesbrough v. VPA, P.C.,
655 F.3d 461 (6th Cir. 2011), retains any vitality in the qui tam context.” (Doc. 28, 2.)
More specifically, Defendant argues that Bledsoe II did not expressly establish the
“existence of any such exception to the general rule that an allegation of an actual false
15
claim is a necessary element of [a False Claims Act] violation.” (Doc. 26, 9.) Rather,
Defendant argues that “Bledsoe [II] merely mentioned the possibility that some sort of
exception could conceivably be formulated; at the same time, the court expressly
declined to speculate as to whether such an exception in fact existed.” (Doc. 26, 9)
(citing Bledsoe II, 501 F.3d at 504 n.12). Furthermore, Defendant argues that while
Chesbrough did not foreclose the existence of the strong-inference exception derived
from Bledsoe II, neither did it endorse or apply such an exception. (Doc. 26, 9.)
Defendant states, “The Chesbrough court said only that the ‘strong inference’ that a
claim was submitted ‘may arise when the relator has “personal knowledge that the
claims were submitted by Defendants . . . for payment.”’” (Doc. 26, 9) (quoting
Chesbrough, 655 F.3d at 471) (emphasis added). In sum, Defendant maintains that the
question of law over which there is a difference of opinion here is whether the stronginference exception exists. (Doc. 26, 9.) In other words, the legal issue is the existence
of the strong-inference exception, which Bledsoe and Chesbrough only implied might
exist in uncertain circumstances. (See Doc. 26, 9.)
Defendant is incorrect where it states that no Sixth circuit case has applied the
strong-inference exception. (Doc. 26, 9.) In fact, Chesbrough itself applied the stronginference exception. 3 In considering whether the plaintiffs in that case sufficiently
alleged that fraudulent claims were submitted to the government, Chesbrough
discussed Bledsoe II in detail. 655 F.3d at 470. After holding that the plaintiffs in that
case could not identify any actual claims submitted to the government, Chesbrough
went only to discuss the strong-inference exception introduced in Bledsoe II. Id.
Chesbrough analyzed this exception in significant detail and discussed the cases that
3
It appears to the Court that Defendant has willfully chosen to ignore this obvious fact.
16
Bledsoe II relied on to create that exception. Id. at 470–71. Chesbrough then
considered the plaintiff’s argument that this relaxed standard should apply in that case.
Id. at 471. At that point, the Sixth Circuit could have specifically foreclosed the
existence of such a strong-inference exception. The Court did not. Id. Rather, it
refused to do so. Having the opportunity to definitively do away with the stronginference exception, and passing on that opportunity, lends credence to the theory that
such an exception actually exists. In other words, because the Sixth Circuit refused to
“kill” the exception created in Bledsoe II, the exception necessarily remains “alive.” As
the Sixth Circuit stated, “we do not foreclose the possibility that this court may apply a
‘relaxed’ version of Rule 9(b) in certain situations, we do not find it appropriate to do so
here.” Id.
This leads to a second point. Not only does this quote affirm the existence of the
strong-inference exception, as just discussed, but Chesbrough specifically applied that
exception to its facts. See id. Reaffirming the rule’s existence, Chesbrough states,
“The case law just discussed suggests that the requirement that a relator identify an
actual false claim may be relaxed when, even though the relator is unable to produce an
actual billing or invoice, he or she has pled facts which support a strong inference that a
claim was submitted.” Id. Applying this strong-inference exception that it had just
identified and defined, Chesbrough states, “[h]ere, the Chesbroughs lack the personal
knowledge of billing practices or contracts with the government that the relators had in
cases like Lane [v. Murfreesboro Dermatology Clinic, PLC, No. 4:07-cv-4, 2010 WL
1926131 (E.D. Tenn. May 12, 2010)].” Id. at 471–72. The Court went on to apply the
strong-inference exception to the facts in greater depth, and it identified “a series of
17
assumptions” that would have had to be true for the exception to apply. Id. at 472.
After specifically applying the exception, the Court concluded, “this is not a situation in
which the alleged facts support a strong inference . . . that a false claim was presented
to the government.” Id. The Sixth Circuit would not apply an exception that does not
exist, as Defendant contends. Rather, it applied the exception exactly because it does
exist and because ignoring it would have been ignoring binding precedent. Any other
reading of Chesbrough ignores the obvious.
Furthermore, recognizing that Chesbrough provided an example of how the
strong-inference exception should be applied, this Court specifically used it as a model
to apply that exception in its prior Order on Defendant’s motion for reconsideration.
(Doc. 25 18–19.) In holding that Plaintiff’s Amended Complaint did indeed “create a
strong inference that false claims were submitted to the government,” this Court
specifically compared the facts applied to the exception in Chesbrough to the facts of
the present case. (Doc. 25, 18–29); Chesbrough, 655 F.3d at 472. Not only does the
strong-inference exception exist, but in light of Chesbrough it undisputedly retains its
vitality, and Chesbrough provides the perfect model showing how it should be applied.
See Chesbrough, 655 F.3d at 471–72.
Plaintiff fails to address these issues, (see Doc. 27), but Defendant’s own
statements illustrate why it fails to demonstrate a substantial ground for difference of
opinion here. Defendant states that “[t]he Chesbrough court found no such exception
because the relators lacked ‘the personal knowledge of billing practices or contracts
with the government’ that might support such an inference as their personal knowledge
was ‘limited to the allegedly fraudulent scheme.’” (Doc. 26, 9–10) (quoting Chesbrough
18
. . .). But this is misleading. Rather, as has just been explained, Chesbrough found that
the strong-inference exception did not apply based on the particular facts in that case.
Chesbrough, 655 F.3d at 472.
Going directly to Defendant’s argument that the legal issue here is the existence
of the strong-inference exception, (Doc. 26, 9) recall that Defendant’s burden is to show
that “(1) the case is difficult and of first impression; (2) a difference of opinion exists
within the controlling circuit; or (3) the circuits are split on the issue.” In re Regions
Morgan, 741 F. Supp. 2d at 849. Defendant has not argued the first or third points
here—that the existence of the strong-inference exception is a difficult issue and one of
first impression or that the circuits are split on this issue. (See Docs. 26 & 28.)
Defendant instead maintains that in relation to the strong-inference exception,
“Brickman is not aware of any case in which the Sixth Circuit has found such an
exception to definitively exist, much less apply.” (Doc. 26, 9.) This Court definitively
disagrees with this statement, because, as has been shown, Chesbrough itself found
the exception to exist, and Chesbrough itself applied the exception. Further analysis on
this point is unnecessary.
Defendant has failed to establish the second required element of § 1292(b).
There are no substantial grounds for difference of opinion regarding the correctness of
the decision in relation to Defendant’s questions of law. See 28 U.S.C. § 1292(b); In re
City of Memphis, 293 F.3d at 350. There are no substantial differences of opinion
regarding any of the three questions of law presented by Defendant.
c.
“The Level of Uncertainty”
Defendant additionally argues that “‘[t]he level of uncertainty required to find a
19
substantial ground for difference of opinion should be adjusted to meet the importance
of the question in the context of the specific case.’” (Doc. 26, 10) (quoting 16 Charles
Alan Wright, Arthur R. Miller, & Edward H. Cooper, Federal Practice and Procedure, §
3930 (2d ed. West 2008). In other words, Defendant maintains that because the
viability of Plaintiff’s primary claim and the future course of these proceedings hinge on
the determination of the issues presented here, this Court should apply a lower standing
in determining whether a substantial ground for difference of opinion exists. (See Doc.
26, 10; Doc. 28, 5.) First, as discussed above, no differences of opinion exist on
Defendant’s questions of law. Second, Defendant’s argument here ignores the fact that
an interlocutory appeal in Defendant’s favor would only dispose of one of Plaintiff’s
claims. As this Court noted in its prior Order, “Defendant’s motion to reconsider does
not directly challenge Plaintiff’s second count, which alleges [False Claims Act]
retaliation,” and, “Rule 9(b)’s particularity requirement was not at issue in relation to
Plaintiff’s second count . . . because as Defendant acknowledges, such claims are
subject to Rule 8’s relaxed notice-pleading standard.” (Doc. 25, 21, 6 n.3.) Thus, even
if Defendant were successful on appeal, Plaintiff’s second count would remain to be
litigated by this Court. This point naturally flows into § 1292(b)’s next element.
3.
§ 1292(b)’s Third Element—Appeal May Materially Advance the
Termination of the Litigation
The third element a Court must consider when deciding whether to grant relief
under § 1292(b) is whether an immediate appeal may materially advance the ultimate
termination of the litigation. 28 U.S.C. § 1292(b); In re City of Memphis, 293 F.3d at
350. “An interlocutory appeal will materially advance the litigation if it will ‘save
20
substantial judicial resources and litigant expense.’” In re Regions, 741 F. Supp. 2d at
849 (quoting W. Tenn. Chapter of Assoc. Builders & Contractors, Inc v. City of
Memphis, 138 F. Supp. 2d 1015, 1026 (W.D. Tenn. 2000)). “Under this standard, ‘an
interlocutory appeal is more appropriate early in the proceedings, particularly in
protracted and expensive cases, where failure to resolve a question of law early in the
case could lead to the placement of an enormous burden on the parties.’” Id. (quoting
Black & Decker, Inc. v. Smith, No. 07–1201, 2008 WL 3850825, at *10 (W.D. Tenn.
Aug. 13, 2008). This analysis appears to overlap with the first element’s determination
of whether the question of law presented is “controlling.” If a question of law is
“controlling,” and if an appeal definitively determines that question, then such an appeal
will almost certainly “materially advance the ultimate termination of the litigation,” and,
“save substantial judicial resources and litigant expense.” 28 U.S.C. § 1292(b); In re
Regions Morgan, 741 F. Supp. 2d at 849.
But as previously mentioned, regardless of the result of an interlocutory appeal,
Plaintiff’s second count would remain to be litigated in this Court. As a result, an
immediate appeal would not materially advance the ultimate termination of the litigation.
Recognizing this, Defendant argues that “advancing the ultimate termination of the
litigation does not necessarily mean dismissal of all claims in the event the Court of
Appeals reverses the District Court.” (Doc. 26, 11.) Defendant maintains that even if
Plaintiff’s retaliation claim were to survive, at least the course of discovery would
change dramatically. (Doc. 26, 12 n.7.) Furthermore, even if the Sixth Circuit were to
accept an interlocutory appeal and affirm this Court’s decisions, several of its legal
defenses would be “effectively foreclosed,” and the litigation would necessarily be
21
simplified. (Doc. 26, 12.)
Defendant additionally argues that the intent behind § 1292(b)—to avoid
protracted and expensive litigation—“meshes perfectly with the heightened pleading
standard applicable to FCA claims”—the prevention of fishing expeditions, to protect
defendants’ reputations from allegations of fraud, and to narrow potentially wide ranging
discovery to relevant matters. (Doc. 26, 11) (citing Abrams v. United Steel Workers of
Am., AFL-CIO-CLC, No. 1:07-CV-181, 2009 WL 700699, at *2 (S.D. Ohio, Mar. 13,
2009) and Chesbrough, 655 F.3d at 466). Defendant contends that “[b]oth of these
goals would be advanced by allowing an immediate appeal of the Court’s Orders.”
(Doc. 26, 11.)
This Court generally agrees with each of Defendant’s points here. Regardless of
the outcome, an interlocutory appeal would, at least to a limited extent, materially
advance the ultimate termination of this litigation. However, given that “[r]eview under §
1292(b) is granted sparingly and only in exceptional cases,” In re City of Memphis, 293
F.3d at 350, and more importantly, given that there is no substantial ground for
difference of opinion regarding the questions of law underlying this Court’s prior
decisions, granting leave to file an interlocutory appeal would be inappropriate here.
4.
§ 1292(b) Conclusion
In enacting § 1292(b), “‘Congress . . . chose to confer on district courts first line
discretion to allow interlocutory appeals.’” Turi, 633 F.3d at 504 (quoting Swint, 514
U.S. at 47). Because this is not an exceptional case presenting a question of law as to
which there is substantial ground for difference of opinion, this Court holds that an
immediate appeal here would not materially advance the ultimate termination of this
22
litigation. See 28 U.S.C. § 1292(b); In re City of Memphis, 293 F.3d at 350. Although
there are controlling questions of law presented here, and although appellate review of
those questions would advance the termination of this litigation to a limited extent, there
are not a substantial grounds for difference of opinion on any of those questions. For
each of the reasons stated above, Defendant’s request for an order permitting an
immediate appeal of this Court’s prior Orders is DENIED.
C.
Defendant’s Equitable Concerns
Defendant’s presentation of what it labels “powerful equitable concerns” does not
alter this Court’s decision to deny Defendant’s requested relief. Defendant maintains
that it has information that Plaintiff Mark Elliott and another former employee of
Defendant are “planning to go into business and go after Brickman customers as soon
as their respective non-compete agreements expire[ ] in early 2012.” (Doc. 26, 13; Doc.
26-1, 1–2.)
In support of this allegation, Defendant presents the Declaration of Thomas A.
Brown, a Brickman employee. Mr. Brown specifically alleges, among other things, that
Plaintiff has started a landscaping and snow removal business to compete with
Defendant and he has already presented proposals to prospective clients. (Doc. 26-2,
1–2.) Defendant maintains that because Plaintiff seeks “highly confidential and
proprietary information regarding Brickman’s billing practices and other business
strategies. . . . there can be little doubt that this information would be put to improper
competitive use.” (Doc. 26, 13.)
But in point of fact, there a great deal of doubt here, and the Court cannot
determine the truth because Plaintiff Mark Elliott has filed a Declaration of his own (Doc.
23
27-2). Implicitly denying Defendant’s allegations, Plaintiff’s Declaration (Doc. 27-2)
states, “I have no intention of EVER working in the green industry in this market or any
other market in the United States.” (Doc. 27-2, 2.) It would be impossible for Plaintiff to
compete with Defendant, as Defendant alleges Plaintiff intends, if Plaintiff never again
works in Defendant’s industry. Thus, Defendant appears to be incorrect where it states
that “the Brown Declaration stands unrebutted.” (Doc. 28, 2.) While Plaintiff does not
deny each of Defendant’s specific allegations, (compare Doc. 26-1, with Doc. 27-2) his
Declaration does not appear to be a pure pregnant denial given that he denies being
“involved in any manner or way . . . with any organization associated with the green
industry,” and, that he has “no intention of EVER working in the green industry in this
market or any other market in the United States.” (Doc. 27-2, 2.) As Defendant implies,
(Doc. 28, 2) Plaintiff may be deceptively defining the term “green industry” in a nonstandard way, but upon a plain-meaning reading, Plaintiff’s Declaration denies of the
main thrust of Defendant’s allegations. Because a plain reading of both Declarations
shows that both of them cannot be simultaneously true, the Court cannot consider
Defendant’s equitable concern here by picking and choosing whose declaration to
believe. Simply put, the facts here are unclear.
Given Defendant’s fears of unfair competition based on Plaintiff’s access to
confidential documents, a protective order would seem to be the natural solution. But
Defendant maintains that “a protective order would be worthless” given Plaintiff’s desire
to gain access to Defendant’s “[c]lient lists, bidding information, [and] internal pricing
schemes.” (Doc. 26, 13.) Defendant contends that this equitable consideration
“mandate[s] that any lingering questions be resolved in favor of certification.” (Doc. 26,
24
14.) The Court disagrees, in part, because it does not have any lingering questions
about certification. As addressed above, the result here is certain because Defendant
has presented no disputed questions of law. Additionally, a doubt about the
effectiveness of a protective order is not a factor going to the application of § 1292(b).
The cases Defendant cites do not support its argument. (See Doc. 26) (citing Iowa Beef
Processors Inc. v. Bagley, 601 F.2d 949, 953–54 (8th Cir. 1979) and United States v.
U.S. Dist. Ct. for E. Dist. of Mich., 444 F.2d 651, 655–56 (6th Cir. 1971)). Both of
Defendant’s cases specifically state that § 1292 is not at issue, and thus, they are
distinguishable on that basis alone. See Iowa Beef Processors, 601 F.2d at 953; U.S.
Dist. Ct. for E. Dist. of Mich., 444 F.2d at 655.
Defendant’s equitable considerations do not change this Court’s decision to deny
its request for an order permitting an immediate appeal. To this extent, Defendant’s
motion to certify appeal is DENIED.
D.
Stay
Defendant’s final request is for a stay of this action pending the outcome of an
interlocutory appeal. Given the Court’s denial of the remainder of Defendant’s motion,
the question of a stay is moot. Because § 1292(b) provides that a request for an
interlocutory appeal “shall not stay proceedings in the district court unless the district
judge or the Court of Appeals or a judge thereof shall so order,” a stay is not proper at
this time. See 28 U.S.C. § 1292(b). Defendant’s motion to certify appeal is DENIED to
this extent.
III.
Conclusion
Based on the foregoing, Defendant Brickman’s Motion to Certify Interlocutory
25
Appeal and Stay Proceedings (Doc. 26) is DENIED in its entirety. Defendant has failed
to show that this is an exceptional case warranting the grant of permission to file an
interlocutory appeal under 28 U.S.C. § 1292. This case shall proceed as previously
ordered.
IT IS SO ORDERED.
s/Michael R. Barrett
United States District Judge
26
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