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United States ex rel Zeller v. Cleveland Construction

March 22, 2007

UNITED STATES EX REL., JOHN ZELLER, PLAINTIFF,
v.
CLEVELAND CONSTRUCTION, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: District Judge Susan J. Dlott

ORDER GRANTING MOTION TO DISMISS

This matter comes before the Court on Defendant Centex Construction's Motion to Dismiss Plaintiff's Third Amended Complaint (doc. 43). Relator John Zeller alleges that Defendant Centex Construction ("Centex"), aided by its subcontractors, submitted a fraudulent Omnibus Claim to the United States. Centex seeks dismissal of this qui tam action in part for failure to satisfy the particularity requirements of Rule 9(b) of the Federal Rules of Civil Procedure. For the reasons that follow, the Court GRANTS Centex's motion.

I. PROCEDURAL BACKGROUND

Zeller brings this qui tam action against Defendants Cleveland Construction, Inc. ("CCI") and Centex -- and in the name of the United States Government -- pursuant to 31 U.S.C. § 3730(b). On February 15, 2006, after reviewing the Plaintiff's [First] Amended Complaint (doc. 11) and noting a lack of particularity necessary to satisfy the requirements of Rule 9(b), this Court issued an Order Granting in Part Defendant's Motion to Dismiss and Ordering Plaintiff to Submit a More Definite Statement of His Complaint (doc. 24). The Court noted certain specific failures in Zeller's Amended Complaint that are relevant to the current motion:

Zeller has specifically identified only one portion of the fraudulent act he alleges -- Centex's submission of a claim to the Navy based on Cleveland's falsely inflated subcontracting costs -- but Zeller alleges that other subparts of Centex's claim . . . were also fraudulent. Zeller has failed to identify any of the other "previously warring subcontractors" whose subparts of Centex's claim were false, the nature of those alleged falsities, or who at Centex knew of the falsities. . . . [B]ecause Zeller appears to be alleging that other subparts of Centex's claim were fraudulent, he must provide such information to put Centex on fair notice of the claims against it. Zeller has not done so, and thus has failed to sufficiently identify the content of the allegedly fraudulent claim.

(Doc. 24 at 7.)

On March 8, 2006, Zeller filed his Second Amended Qui Tam Complaint (doc. 25) in which he restated the allegations against Centex made in the First Amended Complaint and added a list of the subcontractors allegedly participating in the fraud. On April 22, 2006, Centex moved to dismiss the Second Amended Complaint asserting that Zeller's list of subcontracts was grossly inaccurate and that he again failed to state the fraud claims with particularity. (Doc. 27.) The Court allowed Zeller a third and final opportunity to amend his Complaint in light of the extraordinary circumstances that had hindered Zeller's communications with his former counsel and the fact that he had obtained new counsel. (Doc. 40.)

On October 26, 2006, Zeller filed Relator's Third Amended Complaint (doc. 41.) Centex now has moved to dismiss Relator's Third Amended Complaint in part.*fn1 Briefing is complete and the motion is ripe.

II. JURISDICTION AND LEGAL STANDARDS

Zeller alleges that Defendants submitted fraudulent claims to the United States Government in violation of the False Claims Act ("FCA"), 31 U.S.C. § 3729(a).*fn2 This Court has original jurisdiction over this case under 31 U.S.C. § 3730. Centex moves to dismiss under Federal Rules of Civil Procedure 12(b)(6) and 9(b). Rule 12(b)(6) authorizes dismissal of a complaint for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). Rule 9(b) provides: "In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally." Fed. R. Civ. P. 9(b). "[L]ack of compliance with Rule 9(b)'s pleading requirements is treated as a failure to state a claim under Rule 12(b)(6)." Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 783 (4th Cir. 1999); see also State of Mich. ex rel. Kelley v. McDonald Dairy Co., 905 F.Supp. 447, 450 (W.D. Mich. 1995). When acting upon a motion to dismiss filed under Rule 9(b), "a district court must accept as true the plaintiff's well-pleaded facts and draw all inferences in favor of the complaint." Sanderson v. HCA-The Healthcare Co., 447 F.3d 873, 876 (6th Cir. 2006). Thus, in order to survive Centex's motion to dismiss, Zeller's allegations of fraud must satisfy the requirements of Rule 9(b).

III. ANALYSIS

The FCA provides in part that any person who:

(1) knowingly presents, or causes to be presented, to an officer or employee of the United States Government or a member of the Armed Forces of the United States a false or fraudulent claim for payment or approval;

(2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim ...


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