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UNITED STATES EX REL. MCCANS v. ARMOUR & CO.

November 27, 1956

UNITED STATES of America, on relation of Mildred B. McCANS, and Mildred B. McCans on her own behalf, Plaintiff,
v.
ARMOUR & COMPANY, a corporation, Defendant



The opinion of the court was delivered by: PINE

This is a qui tam action under 31 U.S.C.A. § 231-233 and 235, sometimes referred to as the False Claims Act. It is brought in the name of the United States by relator Mildred B. McCans. It alleges the commission by defendant of certain wrongful acts hereinafter set forth, and seeks to recover damages and forfeitures. The statute permits the United States to intervene, {F. Supp. 547but} this it has declined to do, by formal notice. The case now comes before me on motions for summary judgment, filed by relator and defendant.

The wrongful acts are of a pecuniary nature and are alleged to have been committed between July 1, 1942, and February 15, 1943. During this period the Emergency Price Control Act of 1942, 50 U.S.C.A.Appendix, § 901 et seq., and certain maximum price regulations and orders issued pursuant thereto were in effect. Among them was a price regulation establishing the maximum ceiling price which packers and processors might lawfully charge for sales of dressed hog carcasses and wholesale pork cuts. There were also in effect supplementary order No. 9 *fn1" and procedural regulation No. 6, *fn2" the former providing in brief that any person who had entered into or proposed to enter into a government contract, and who believed that an established maximum price impeded the production of a commodity which was essential to the prosecution of the war, might apply to the Office of Price Administration for adjustment of the maximum price of that commodity in accordance with the procedures provided in procedural regulation No. 6. Pending the issuance of an order granting or denying such an application, the seller could make deliveries to government war procurement agencies at prices requested therein, and in the event of denial of the application in whole or in part, the price would be revised downward and the applicant required to refund the excess.

 Relator alleges that defendant sold and delivered to government war procurement agencies between the dates above set forth dressed hog carcasses, fresh and cured fabricated pork cuts, and canned pork products at prices in excess of the maximum ceiling prices, that it failed to apply to the Office of Price Administration for such increases, and that its acts were a wilful evasion of the maximum price regulations and price adjustment regulations and in violation of the Emergency Price Control Act. Following this, she alleges that defendant presented to officers of the United States for payment and allowance, invoices for dressed hog carcasses, fabricated pork cuts, and canned pork products at prices in excess of the maximum ceiling prices, and in this connection, presented claims to such officers, known by defendant to be false and fraudulent, and received payment therefor of various sums of money to which it was not entitled, thereby becoming liable to the United States under the False Claims Act. In consequence, she charged that the United States made overpayments in the sum of approximately $ 4,000,000, and claims damages and forfeitures under the Act of approximately $ 8,000,000, of which she would be entitled to receive personally not in excess of one-quarter, together with reasonable expenses and costs.

 Defendant has answered, denying these charges and setting forth numerous affirmative defenses. An extensive deposition of relator has been taken, and numerous exhibits connected therewith have been filed, along with affidavits. As above stated, both the relator and defendant have filed motions for summary judgment. Examination of her deposition herein reveals the following facts and conclusions reached by her, viz.:

 Relator commenced working for the United States in 1940, and was employed in the Quartermaster Corps of the Army from that time until her services were terminated on November 5, 1951. From 1944 until the termination of her employment, she was a claims examiner in the office of the Quartermaster General. In that capacity her duties consisted of auditing claims evidenced by contracts, invoices, etc., made by meat packers against the United States for meat and other articles sold to the Quartermaster Corps of the Army, auditing procurement records, and verifying that the prices charged were in accord with contract provisions and ceilings established by the Office of Price Administration.

 In 1947 and 1948 she was assigned to work in connection with a suit brought by defendant, known as the Beef Refund Suit ( Armour & Co. v. Bowles, Em.App., 148 F.2d 546), and in 1949 and 1950 she was assigned to work on a suit known as the Icing Charges Case ( Armour and Co. v. United States, 102 F.Supp. 987), 121 Ct.Cl. 716, both of which related to sales by defendant to the United States under the OPA Regulations and resulted in recovery by defendant. Her duties included research to ascertain what defenses or counterclaims were available to the United States. She also examined during her employment the Quartermaster file containing abstracts of bids and other documents relating to defendant's port contracts, and concluded from her examination of this file that defendant had charged over-ceiling prices on pork products sold to the government during the period involved in this suit. Also during this period of employment she examined OPA records at the National Archives office to ascertain whether defendant had filed Procedural 6 applications as well as price regulations in the RFC warehouse, where OPA records in Washinton were filed, and the Quartermaster procurement records in an Alexandria warehouse. On the basis of this examination, she concluded that no procedural 6 applications had been filed by defendant, covering the sales of pork to the Federal government prior to April 1943, and as early as 1949 concluded that defendant had made over-ceiling sales of pork products to the Quartermaster Corps in the period from July 1942 to January 1943.

 In January 1951, at her request, she was transferred to the office of the Quartermaster General in Chicago, Illinois, so that she could work on meat packer and OPA cases, and while in Chicago, between February 15, 1951, and November 5, 1951, had access to and examined defendant's invoices and payment vouchers which were stored in the Quartermaster Building in Chicago. These documents reflected the prices paid to defendant for pork sold to the Government for the fiscal year 1943. During the same period she cross-checked records of the Cudahy Packing Co. with defendant's vouchers, to verify ceiling prices. By examining these vouchers, she claims she verified that the over-ceiling prices defendant had allegedly charged had been paid. Her purpose in examining defendant's vouchers was to ascertain whether the alleged unlawful prices listed in the contracts later examined in Washington had in fact been paid. Before termination of her employment, she had examined every payment voucher of defendant in the files, and had checked the payment vouchers relatable to the contracts listed in the amended complaint.

 Her services were terminated on November 5, 1951, and on August 27, 1954, she instituted the present action. After filing suit, she called at the Department of Justice where approximately 33 of defendant's pork contracts executed during the period involved in this suit were made available to her. The contracts on which she bases her suit were obtained from the Department of Justice after her complaint was filed, and the computations of the alleged overcharges were made after the filing of her original complaint but prior to filing the amended complaint pursuant to order of this court to identify and list separately each transaction involved. She previously had examined abstracts of bids and reports of awards of these contracts made available to her while a government employee, and had seen copies of the contracts attached to payment vouchers in Chicago, where she examined them in detail. On several occasions before the termination of her employment, she brought to the attention of her superiors and other government officials the alleged over-ceiling prices charged by defendant.

 The specific section under which relator brings this action is 31 U.S.C.A. § 232. In subparagraph (C) thereof it is provided that

 'the court shall have no jurisdiction to proceed with any such suit * * * whenever it shall be made to appear that such suit was based upon evidence or information in the possession of the United States, or any agency, officer or employee thereof, at the time such suit was brought.' (Italics supplied).

 The first point raised by defendant in its motion is a challenge to the court's jurisdiction under this provision. It asserts that all the evidence or information on which this suit is based was in the possession of the United States at the time the suit was brought, and still is in its possession, and therefore the court has no jurisdiction to proceed. Its position is that the contracts of purchase and sale, invoices, vouchers, OPA regulations, files, etc., are the basis, and only basis, for the suit, and relator's deposition makes it undeniable that they were in the possession of the United States. Relator makes no argument to the contrary, except her claim in her Memorandum of Points and Authorities that the 'thrust' of her case is the failure of defendant to file procedural 6 applications, above referred to, for approval. Of course the negative fact that defendant did not file such applications was as much in the possession of the United States before she informed them as it was afterward, and I am unable to follow her argument that the notification of failure to file such applications can be the basis for supplying information of the existence of OPA violations and subsequent false claims. The contracts, invoices, vouchers, etc., would disclose on their face whether over-ceiling charges had been made and false claims submitted, when compared with the applicable maximum price regulations, and the United States would have been in position to proceed against defendant, without more, subject to the defense of procedural 6 applications. If filed, these would have absolved defendant from the wrongdoing charged, and if not filed, would have left defendant without this defense. It is therefore apparent that the 'evidence or information' on which her suit is based was in the possession of the United States, if the language of the statute be literally read.

 However, if the language be not literally read and be construed to exclude instances where, although the evidence or information was latently in the possession of the United States, it had to be pointed out or analyzed to make it of value to the United States, as contended by relator, this court would still have no jurisdiction because relator did on occasions during her employment by the United States bring her claim of over-ceiling prices charged against defendant to the attention of her superiors. This was sufficient to point out the wrongdoing and make the evidence or information already in its possession of value to the United States, and was sufficient, if true, to justify legal proceedings by the United States, prior to which it presumably would make certain that no procedural 6 applications were available in defense. Consequently the evidence or information was no longer latent, by reason of relator's own acts prior to termination of her employment.

 I am therefore of the opinion that this court is without 'jurisdiction to proceed' because it has been made to appear that this suit was based upon 'evidence or information in the possession of the United States' at the time the suit was brought.

 In addition, the statute on which relator relies for authority to bring her action has for its purpose, among others, the exclusion from its coverage of this type of claim, sometimes described as parasitical. This is demonstrated by its legislative history, as follows: In United States ex rel. Marcus v. Hess, 317 U.S. 537, 63 S. Ct. 379, 392, 87 L. Ed. 443, decided January 18, 1943, the court held that under the statute, as it then existed, a person who allegedly contributed nothing to the discovery of the fraud, could nevertheless bring an ...


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