United States of America v. Hooker Creek Asphalt and Paving, LLC et al

Filing 141

ORDER: Granting 124 Motion to Dismiss for Failure to State a Claim; Granting 128 Motion to Dismiss for Failure to State a Claim; Granting 130 Motion to Dismiss for Failure to State a Claim; and Defendant Knife River Corp.'s Motion to Dismiss Case for Lack of Jurisdiction 132 is granted to the extent it has not been withdrawn. This action is dismissed. Signed on 3/16/12 by U.S. District Judge Michael R. Hogan. (sln)

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF OREGON

UNITED STATES OF AMERICA EX REL.
MICHAEL RAY PERRY,

No. 6:08-cv-6307-HO
Pl

ntiff,
ORDER

vs.
HOOKER CREEK ASPHALT & PAVING, LLC,
OREGON MAINLINE PAVING, LLC, WILDISH
STANDARD PAVING CO.; HAMILTON
CONSTRUCTION CO., J.C. COMPTON
CONTRACTOR, INC., HAP TAYLOR & SONS,
INC., KNIFE RIVER CORP.,
CENTRAL
OREGON REDI-MIX, LLC.,
Defendants.
In this qui tam act
fendants'
Act

(FCA),

alleged
Perry

of the United States
al

systematically falsified

ORDER - page 1

brought by relator Michael Perry for

that

defendants

se Claims

consistently

character and quality

and

materials

used

construction of federally-funded highways.
Re

led his initial complaint under seal on October 3,

2008.

nt remained under seal while the

ted States

the allegations in the complaint to

st
it would

ervene.

ne whether

After the United States decl

ervene,

to

the court ordered the complaint unsealed on January 21, 2010, and
requi

relator to serve defendants.

After seve

extensions of

time to accomplish service, relator served defendants in December
of 2010.
On

March

4,

2011,

defendants

moved

to

responded by seeking leave to amend the comp

Relator

ss.
nt

the court

rst round of motions to dismiss on April 27,
i

led an amended complaint on April 30, 2011.

On June 13, 2011, defendants again moved to di
several ext ens

ss.

to brief the motions, the court

on November 15, 2011.

The court granted the mot

After

argument
to

December 13, 2011, but allowed relator 30 days to
compla

2011.

smiss on

Ie an amended

curing noted deficiencies.

Relator filed a second amended complaint on January 17, 2012,
and a

corrected second amended complaint

on

February 3,

2012.

Defendants again move to dismiss. l

court incorporates its previous legal f
s and the
background information in its order dated December 13, 2012,
(#122)
ing
last round of motions to dismiss wi
respect
to the current motions to dismiss.

ORDER - page 2

In granting the

ous motion to di

ss, the court noted

the applicable provisions of the FCA require either a lack of
public

disclosure

or

relator have

rect

and

independent

knowledge of the information on which the allegations are based
he voluntarily provided to the Government before filing,
order for the court to have jurisdiction.
2012 (#122) at p. 11;

31 U.S.C.

Relator previously al
r detail as to
amended complaint,

§

Order dated December 13,

3730(e) (4) (A) and (B)

(2006).

a public disclosure by him, requiring
original source allegations. In the second
ator again alleges "no public disclosure,"

but again also alleges that he is an ori
Amended Complaint (#126) at

~~

5-6.

1 source.

The court

Second

cally noted,

the complaint is defi ent with regard to
legations of
subject matter jurisdiction because
must include
additional
deta
regarding
the
source
assertion.
The issue needs to be pleaded because if
there has been a public disclosure, timing and the
content of the al
disclosure by relator will be
significant. [footnote omitted] The motion to dismiss is
granted, without
judice to amend, on this basis.
Order (#122) at p. 11 12.

Relator now alleges that

Relator
had direct
and
independent
knowledge
of
information important to disclosure of seve
instances
of fraudulent conduct and false statements
connection
with defendants' contract compliance. Prior to the
initiation of
s qui tam action in October 2008,
relator voluntarily disclosed his information to state
and federal offic Is, including superiors at Oregon
Department of Transportation
(ODOT)
throughout his
employment; (now
sed) state legislator Ben Westlund
beginning in December 2005; the Fraud
sion of the
Oregon Secretary of State beginning in January 2006; the
Federal Bureau of Investigation beginning in March of

ORDER - page 3

2007; and the Department of Justice in February of 2005
and on dates subsequent to January, 2008.
Second Amended
sufficient
complaint

for

Complaint

(#126)

jurisdictional

contradicts

the

crr6.

at

While

this

the

second

amended

that

relator

further

purposes,

allegation

in

might

be

alleges that he
... does not have access to the information, records
and practices underlying defendants' bills for work
performed and materials provided relating to road
construction and maintenance contracts at issue in this
lawsuit. Such information is in the exclusive possession
or control of defendants and/or the United States.
Each allegation herein is made upon information and
belief and identifies a fact regarding which Relator has,
based upon his personal knowledge and experience working
for ODOT for 25 years, a reasoned basis to allege, but
lacks complete detail.
Second Amended Complaint (#126) at crrcrr 49-50.
In a nutshell,

these allegations demonstrate that plaintiff

cannot plead the fraud allegations with particularity and that any
further leave to amend would be futile.
the

allegations

regarding

the

2

As previously noted,

fraudulent

conduct

is

2Relator confirms an inability to conform to Fed. R. Civ. P.
9 and that this case is merely a fishing expedition in his
response to the motions to dismiss wherein he states: "While
Relator has a good faith basis to allege systemic wrongdoing by
defendants in violation of the Act, he need not personally know
all the evidence supporting the claim before discovery. And,
indeed, in the event that discovery shows that some contract work
was not subject to systemic false claims, realtor may amend the
complaint ....
So long as Relator satisfies pleading requirements
[pJroof as to the breadth of defendants' scheme-whether it
impacted some or all of its work on FAHP contracts-should await
discovery." Response (#134) at p. 5, n. 2.

ORDER - page 4

woe
ly lacking in detail.
Relator generally all
s
that defendants submitted bills for highway construction
work and materials in violation of specifications
quality assurance. However, relator fails to all
who
the alleged misconduct
(other then
commi
defendant companies generally), what invoices conta
se statements or even the specific false statements
themselves.
There are no allegations of when the
allegedly deficient work was done (or not done), or when
se records or statements were made.
Other
a
ils
1 location for the contract itself, relator
to allege where the specific defective construction took
ce.
Indeed,
relator alleges that he does not
access to records underlying defendants billings
work
rformed.
Lack of knowledge of the billings is not grounds
relieving
relator
from
Rule
9's
part
ty
requirement. See Ebeid ex reI United States, 616 F.3d at
999 (it is not appropriate to jettison the part
ty
requirement simply because it would facilitate a
aim by
an outsider especially because the False Claims Act is
geared primarily to encourage insiders to di
information
necessary
to
prevent
fraud
on
government) .
In addition, even under circumstances
cookie cutter fraud [when] a relator may be able to avoid
pleading all facts supporting each and every
tance of
fraudulent billing, Rule 9 still requires a re
to
the fraud with some level of specifi
y.
In
s case, the allegations go beyond coo
cutter fraud that merely asserts repeated substant lly
s
fraudulent billing practices.
amended
compla
suggests a wide variety of misrepresentations
and fraudulent conduct regarding quality control and to
simply allege vague "examples" is insufficient to apprise
s of the particular conduct constituting fraud
a defense.
The motion to dismiss is granted
the complaint utterly fails to state with
the
circumstances constituting fraud
including the who, what, when, where, and how of the
misconduct.
See Id. at 998.
Defendants are not only
in the dark regarding what specific conduct
allegedly constitutes fraud, but also cannot determine if
ific tests, etc., that may have been non-conforming
wi
various quality control standards were nonetheless
non-fraudulent because of, for instance, a change order
or reduced payments. This is precisely why the federal
es require particularity.

ORDER - page 5

Order (#122) at pp. 13 14.
In re

e to the order,

relator adds few specifics to

"examples," and now challenges virtually every claim/bill/

s

st

for payment by defendants for every project over a ten
period.

Second Amended Complaint at

2000, on a re
certi

ons and

and mate

~~

51-55 (Since at

basis, defendants made claims, representat
s regarding the quality of work

s provided and submitted bills containing

fraudulent

in order to obtain funds).

lse and

Specifically re

alleges
On
projects, at each location and throughout
the
riod on which defendants have claimed to work
on
projects,
defendants
knowingly,
consistently and systematically billed for work
materials
did not meet standards and specifications,
and knowingly received payment in violation of laws
regulat
required as
a
condition of payment.
De
s, and each of them, knowingly, consistently
systemat
lly
made
false
implied
and
certifications as to the character and quality
materials provided on their proj ects, and they
knowingly made
lse records or otherwise engaged
fraudulent conduct to cause FHWA to pay false claims to
ODOT on its contacts.
Second Amended Complaint at
The court

~

53.

ly directed relator to include in

second

amended compl
the "who, what, when, where, and how" to support
of
alleged False Claims Act violations
regard to
false claim supposedly made by
de
as well as the conduct alleged to
fraudulent.
In addition, the amended complaint should
inc
i
c facts regarding the intention of

ORDER - page 6

defendants
making alleged false statements as well as
the mater Ii ty of the false statements or conduct.
Finally,
amended complaint should
ude
ific
facts
the request for payment and to whom such
requests were made.
Order

(#122)

general

at pp.

all

19-20.

s

complaint has

of

or

breadth of defendants' scheme-whether
of

s

work

on

FAHP

The

1

indictment

of

a

impacted

contracts-

Relator's allegations are still woe

g

(a

aim.

See Response (#134) at p. 5, n. 2.

See Ebeid ex reI. U.S. v. Lungwitz,
2010)

FCA

to equate

just lacking in detail to alleging

rently show.

all

discovery. ").

es

defendants have ever done is fraudulent, or so

discovery will
("Proof as to

relator still t

substandard work to an

from not

virtually everyth

some

But

d

awa

ly inadequate.

616 F.3d 993, 1000 (9th
defendant's

bus

ss

is

r.
not

enough) .
Moreover, even though the court determined that
this

case

pleading,

were

not

re

amenable

to

representat

claims in
example

type

again to rely on such form of pleading.

However, even the examples provided lack the necessary detail to
allege

the

Complaint at

FCA cIa
~~

57-83.

with particularity.

See

Second Amended

Of course, given realtor's concession that

he does not have access to the information the billing, records and
practices underlying defendant's billing for work performed
materials provided
comes as no surprise.

ORDER - page 7

ating to the road construction at issue, this
Second Amended Complaint at

~

49.

The representative examples merely provide

I time frames

of the contracts themselves, the general work to
billing occurred in violation of generalized
location

within

occasionally
manager,

the

names

a

contractor

areas

technicians,

Transportation inspector.

cif

referenced

superintendent
or

rformed, that

in

ions at some

the

contract

for

ect,

an

Oregon

proj ect

rtment

The second amended comp

and

of

still does

not connect any person to the alleged fraudulent conduct, or state
when and where the conduct occurred (other the general area
contract

and

the

contract

time

frame).

There

are

of the

no

s

concerning the alleged false vouchers and cost schedules caus

to

be presented to the federal government or when and by whom they
were submitted.

It is simply not plausible that all de

s

submitted falsified billings for all projects for
Oregon Department of Transportation over a ten year per
Furthermore, because there are insufficient
billings

themselves,

requisite

the

complaint

specificity defendants'

government,
government

what

information

was

fails

intent

to

of
al

vis-a-vis

presented

to

1

(or even the Oregon Department of Tran

that matter), or what role the information provided in
government's

decision

government paid).

to

pay

(or

even

what

if

anything

the

There are no allegations of facts about what was

contained in the claims for payment, whether the c

ORDER - page 8

1

were

wi th or without adj ustment,
viewed

payment

as

and whether the

contingent

deficient testing or materials.

on

the

1 government

absence

of

alleged

Mere conclusory al

the elements of the statutes in question are met are
meet the
compla

requirements in this case.

te to

Accordingly,

the

ssed.

is

The court has provided clear direction as to what should be
included

second amended complaint.

event the court

Relator asks

the second amended complaint to be lacking,

the court should consider granting leave to amend.
noted

in the

above,

to

concessions

amend

would

be

futile

However,

given

re

's

lacks the information necessary to plead

claims with parti

arity.

as

s

In addition, relator has now had

attempts at amending the complaint with the benefit of two
rounds of mot

s

s to dismiss to highlight the deficiencies in

complaint.
Leave to

should be freely given when justice

Fed. R. Civ. P. 15(a} (2).
are repeated

res.

Leave to amend may be denied where

ures to cure deficiencies by amendments

allowed, undue

re
ously

udice to defendants, and futility.

Inc. v. BMG Music Publ'g, 512 F.3d 522, 532 (9th Cir. 2008).
the clear direction and ample notice as to the defici
pleading
de

FCA

ims

in

this

case,

the

persistence

s, and the futility of further amendment g

ORDER - page 9

s

re

of
's

professed

lack

of

knowledge

of

the

specifics

fraudulent billi

in this case, it is c

plead

facts

a

set

Accordingly, t

compla

sufficient

of

alleged

plaintiff cannot

r

to

is dismissed with

the

an

FCA

claim.

judice.

CONCLUSION
For the reasons stated above,
(#s

124,

128,

130)

Corp. 's motion to

smiss

not been withdrawn.
DATED

ORDER - page 10

are

defendants' motions to dismiss

granted and

(#132)

/~ '1'"

River

is granted to the extent it has

This action is dismis
s

Knife

day of March, 2012.