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United States ex rel. Kustom Products, Inc. v. Hupp & Associates, Inc.

United States District Court, S.D. Ohio, Eastern Division

May 12, 2017


          Deavers Magistrate Judge.

          OPINION & ORDER


         This matter is before the Court on Defendant Hupp & Associates, Inc.'s (“Hupp”) Motion to Dismiss for failure to state a claim upon which relief can be granted and failure to plead fraud with particularity pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b). For the reasons set forth below, Hupp's Motion is GRANTED.

         I. BACKGROUND

         This is a qui tam lawsuit brought under the False Claims Act (the “FCA”). 31 U.S.C. §§ 3729-33. Plaintiff/Relator Kustom Products, Inc.'s (“KPI”) FCA claims arise out of Hupp's alleged purchase of unauthorized parts in connection with six contracts for maintenance kits awarded to Hupp by the Department of Defense's contracting arm, the Defense Logistics Agency (“DLA”). Hupp is a leading provider of such kits to the Department of Defense. (See Compl., Doc. 1, ¶ 3.14.) The DLA uses National Stock Numbers (“NSNs”) to identify each unique part used by the government in these kits. (See Id. ¶ 3.17.) Each kit has its own NSN, as do the individual component parts within each kit. (Id. ¶ 3.20.)

         More specifically, the six contracts referenced in KPI's Complaint are for annual maintenance kits for the U.S. Military's Family of Medium Tactical Vehicles (“FMTV”). (Id. ¶ 3.24.) Each kit contains a variety of FMTV parts, such as “fluid filters, O-ring washers, seals, and nuts.” (Id. ¶ 3.28.) Each contract is for a slightly different variation of the FMTV kits. (See id.) The kits are specified by a technical data package with a drawing (drawing number 57K4845) that identifies the quantity and approved sources of supply for each part. (See Id. ¶ 3.26.) Unless the contract states otherwise, the supplier must provide the exact parts from the specified manufacturer to fulfill its contractual obligations to the DLA. (Id. ¶ 3.22.) At issue here are five variations of the FMTV kit in drawing number 57K4845 with different NSNs. (Id. ¶ 3.27.) Each contract required Hupp to include two different types of seals (each type with its own NSN) in each kit. (See Def.'s Mot. to Dismiss, Doc. 24, at 3.)

         According to the Complaint, pursuant to drawing number 57K4845, “the only approved sources of supply” for the seals in the FMTV kits are AxleTech, International, Inc. and Meritor Heavy Vehicle Systems, LLC. (See Compl. ¶¶ 3.32, 3.33.) Meritor manufactures the seals, and AxleTech distributes seals that it obtains from Meritor. (Id. ¶ 3.34.) With regard to each of the six contracts identified in the Complaint, KPI alleges that, “in the course of business, ” it learned “from AxelTech [sic] and Meritor that at or around the time [the contract] was awarded to Hupp, Hupp did not purchase these seals from AxelTech or Meritor.” (Id. ¶¶ 3.49, 3.64, 3.78, 3.92, 3.106, 3.121.) KPI also claims “upon information and belief” that, for each contract: (1) Hupp was able to provide the DLA with the maintenance kits at a lower cost by supplying seals that were not manufactured by AxleTech or Meritor; (2) Hupp certified under the contract that it provided the proper seals in each kit; and (3) Hupp submitted an invoice to the government for the seals and has been paid for those seals. (See Id. ¶¶ 3.50, 3.53, 3.54, 3.56, 3.65, 3.69, 3.71, 3.79, 3.82, 3.83, 3.85, 3.93, 3.96, 3.97, 3.99, 3.107, 3.110, 3.111, 3.113, 3.122, 3.125, 3.126, 3.128.)

         KPI filed its Complaint against Hupp in December 2015. (Doc. 1.) The United States declined to intervene in the lawsuit in July 2016. (See Doc. 8.) Hupp now moves to dismiss KPI's Complaint in its entirety.[1] Hupp's motion is fully briefed and ripe for adjudication.


         KPI's Complaint should be dismissed under Federal Rule of Civil Procedure 12(b)(6) if it “fail[s] to state a claim upon which relief can be granted.” Generally, a complaint must merely contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). The district court, in turn, “must treat as true all of the well-pleaded allegations of the complaint.” Bower v. Fed. Express, 96 F.3d 200, 203 (6th Cir. 1996). This “tenet is inapplicable to legal conclusions, or legal conclusions couched as factual allegations.” McCormick v. Miami Univ., No. 1:10-cv-345, 2011 WL 1740018, at *4 (S.D. Ohio May 5, 2011) (citing Ashcroft v. Iqbal, 556 U.S. 662 (2009)). KPI's ground for relief must entail more than “a formulaic recitation of the elements” of a cause of action. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).

         A well-pleaded complaint must “give the defendant fair notice of what the claim is, and the grounds upon which it rests.” Nader v. Blackwell, 545 F.3d 459, 470 (6th Cir. 2008). The plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570. To “survive a motion to dismiss under Fed.R.Civ.P. 12(b)(6), the ‘complaint must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory.'” Noble v. Genco I, Inc., No. 2:10-cv-648, 2010 WL 5541046, at *2 (S.D. Ohio Dec. 30, 2010) (quoting Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir. 1988)). Finally, the complaint must be construed in a light most favorable to the party opposing the motion to dismiss. See Watson Carpet & Floor Covering, Inc. v. Mohawk Indus., Inc., 648 F.3d 452, 456 (6th Cir. 2011).

         In addition, Federal Rule of Civil Procedure 9(b) requires that “in any complaint averring fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.” Yuhasz v. Brush Wellman, Inc., 341 F.3d 559, 563 (6th Cir. 2003). The heightened pleading standard set forth in Rule 9(b) applies to complaints alleging violations of the FCA. Id. A complaint's failure to comply with Rule 9(b)'s pleading requirements is treated as a failure to state a claim under Rule 12(b)(6). United States ex rel. Howard v. Lockheed Martin Corp., 499 F.Supp.2d 972, 976-77 (S.D. Ohio 2007).


         A. KPI's FCA Claims Are Not ...

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