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U.S. EX REL. BETTIS v. ODEBRECHT CONTRACTORS OF CALIFORNIA

January 28, 2004.

UNITED STATES OF AMERICA ex rel. ALVA BETTIS, Plaintiff,
v.
ODEBRECHT CONTRACTORS OF CALIFORNIA, INC. et al., Defendants



The opinion of the court was delivered by: ELLEN S. HUVELLE, District Judge

MEMORANDUM OPINION

Before the Court are cross motions for summary judgment regarding plaintiff/relator Alva Bettis' ("Relator") Fourth Amended Complaint, a qui tam action seeking damages and civil penalties under the False Claims Act, 31 U.S.C. § 3729 ("FCA").*fn1 Defendant Odebrecht Contractors of California, Inc. ("OCC") moves for summary judgment as to all counts, while relator seeks summary judgment as to the first count only.

BACKGROUND

 I. Procedural History

  Relator's allegations stem from a government contract involving a multi-million dollar construction project that spanned a six-year period. The Army Corp of Engineers ("COE") issued invitations for bid on March 1, 1993, for the construction of the Seven Oaks Dam and Page 2 Appurtenance in San Bernadino County, California. Defendant CBPO of America ("CBPO"), a construction company, was ultimately awarded the Seven Oaks contract. CBPO also committed the resources of its affiliates, Odebrecht S.A. of Brazil and Odebrecht Contractors of California ("OCC") to this project. (Fourth Am. Compl. ["Compl."] ¶ 20.)*fn2

  COE also contracted with Black and Veatch Consultants ("B & V") to monitor the dam's progress. Beginning in April 1995 relator was employed by CCL Construction Consultants, Inc. as a project scheduler to assist B & V in fulfilling a contract with COE for the Seven Oaks Dam project. (Def.'s Statement of Material Facts on Which There is No Dispute ["Def.'s Stmt."] ¶ 10.) Mr. Bettis was terminated from the project in 1998 by B & V. (Def.'s S.J. Mot. Tab 9 [King Decl.] ¶ 11.)

  In 1999 relator commenced this suit under seal, claiming that defendants had violated the FCA. After the government declined to intervene on October 30, 2000,*fn3 this Court ordered, on November 1, 2000, that the complaint be unsealed and served on defendants. Relator filed a Third Amended Complaint in June 2002. In this complaint relator claimed that defendants violated the FCA by submitting an intentionally low bid, intending to seek modifications at a later date (Count I); submitting false claims for payment in months when they had received failing grades on required monthly schedules (Count II); engaging in a pattern of submitting requests for payments based on intentionally wrong measurements (Count III); seeking Page 3 modifications based on false statements concerning the nature and extent of the conditions in the field and the need for the work (Count IV); submitting false statements while performing several construction projects (Count V); improperly charging the government for the cost of delays that defendants had caused (Count VI); and retaliating against relator by influencing his employer's decision to discharge him in violation of 31 U.S.C. § 3730(h) (Count VII).

  In response, defendant moved to dismiss, and on October 24, 2002, this Court issued a Memorandum Opinion and Order dismissing Counts II and VII of the Third Amended Complaint with prejudice and Counts I and V without prejudice, but denying defendant's motion as to Counts III, IV and VI. (See Memorandum Opinion ["Mem. Op."], Civ. Action No. 99-2879 (D.D.C. Oct. 24, 2002).) Thereafter, on January 23, 2003, relator filed a Fourth Amended Complaint in which he re-alleged Counts III, IV, and VI and amended Counts I and V. The Complaint now alleges that defendant violated the FCA by intentionally submitting a low bid, intending to seek false modifications in the future, and then submitting false modifications (Count I); intentionally submitting false survey data in support of progress payments (Count III); making false claims in connection with its excavation of the right abutment of the dam (Counts IV and VI); and making false claims in connection with its construction of the Intake Structure Access Road (Count V).

  Upon completion of discovery, the parties moved for summary judgment. Plaintiff seeks judgment as to liability only under Count I. Defendant has moved for summary judgment as to all counts arguing that the evidence is insufficient as a matter of law to justify a finding of liability under the FCA, because plaintiff has failed to adduce any evidence that: (1) OCC fraudulently induced COE to enter into the contract or that OCC thereafter sought to increase the Page 4 contract price through false modifications or adjustments (Count I);*fn4 (2) OCC's monthly progress payment applications constituted false claims based on inaccurate survey data regarding the height of the face of the dam (Count III); or (3) the claims submitted for work relating to the right abutment or the Intake Structure Access Road were false (Counts IV, V and VI). In his opposition, plaintiff addresses defendant's arguments as to Counts I and III only. With respect to Count I, plaintiff concedes that certain contract modifications and concomitant increases in the contract price were due to design changes or COE's requests for additional work; he nonetheless argues that OCC knew from the outset that it could not perform the contract at its bid price; that it made knowing misrepresentations to COE to induce it to award the contract to OCC; that it fraudulently planned to seek monies from the government above and beyond the bid price; and that defendant received additional monies based on false claims for adjustments. (Pl.'s Opp. to Def.'s S.J. Mot. at 2-3 & n.1.) With respect to Count III, plaintiff contends that defendant knowingly presented non-survey numbers to support pay estimates that were submitted to COE and thereby "knowingly presented figures to COE that were dishonestly inflated or which manifest a reckless disregard for the truth." (Id. at 30.)

  Before addressing these arguments in detail, it is, however, necessary to begin by giving an overview of the facts that underlie this lawsuit, as well as the applicable law. Thereafter, the Court will turn to the cross motions as to Count I and then to defendant's motion as to Count III,*fn5 Page 5

 II. Factual Background

  On March 1, 1993, COE solicited bid invitations for the construction of the Seven Oaks Dam project. This project included construction of an embankment dam that was to be 550 feet high; a cofferdam that was to be fifty feet high; excavation of a spillway approximately 550 feet wide and 1,400 feet long; completion of the outlet works and intake tower; installation of gates in the outlet tunnel; construction of approximately three miles of permanent access roads and two access bridges; and revegetation and hydroseeding of the work areas. (Compl. ¶ 13.) Contractors were invited to submit bids for a fixed-price contract, with the price determined on a per-unit basis. In preparing the solicitation, COE divided the construction of the dam into 150 separate tasks, referred to as bid items. COE estimated the types and quantities of materials and labor needed to complete each bid item. (Def's Stmt. ¶ 1.) Each bidder was required to calculate a unit cost for each bid item, which was to include all direct and indirect costs and any profit. (Id.) The final price of each bid was calculated by multiplying the bidder's unit price by the quantity for each bid item. (Id. ¶ 2.) By submitting a bid, each bidder became legally obligated to complete the work, based on the project's specifications, for the unit prices set forth in its bid. (Id. ¶ 1.) The final bid price was, however, an estimate, which would vary depending on the actual quantities of material and labor required by the conditions in the field, since the actual cost of construction is calculated using actual quantities, not COE estimates. Thus, the ultimate cost of the project would differ from the bid price if COE's quantity estimates did not Page 6 prove to be accurate, but a bidder was bound by its unit prices and assumed the risk if these prices turned out to be too low. (Id. ¶¶ 1-2.)

  After conducting pre-bid analyses, OCC submitted a $167,777,000 bid. (Id. ¶ 4.) The sealed bids were opened on July 7, 1993, and OCC's bid was the lowest, coming in almost $30 million below the second-lowest bid, which had been submitted by a joint venture involving Tutor-Saliba Corp., Perini Corp., and others ("Tutor-Saliba"), and more than $35 million below COE's cost estimate of $203,771,540. (Id. ¶ 5.)

  Immediately thereafter Tutor-Saliba commenced a series of bid protests seeking to prevent OCC from being awarded the contract on the grounds that defendant's bid was unreasonably low. (Id. ¶ 7.)*fn6 Following the resolution of Tutor-Saliba's bid protest, COE awarded the contract to OCC on March 29, 1994. (Id. ¶ 8.) On April 20, 1994, COE issued to OCC a notice to proceed ("NTP") with construction. OCC began construction on the dam shortly thereafter.*fn7 (Def.'s Opp. Tab 4 [Price Decl.] ¶ 3.)

  Construction of the dam consisted primarily of excavating materials from specified borrow areas via mechanical means or, when necessary, blasting; transporting the excavated materials to the dam site; processing materials to the required size and consistency if necessary; and placing materials in the appropriate zones of the dam.*fn8 The contract provided for monthly Page 7 progress payments, which were to be based on estimates of satisfactory work accomplished. (Def.'s S.J. Mot. Tab 17.) Because much of the work involved placing fill material into the dam's embankment, progress was estimated in part by using regular surveys of the height of the dam. (Def.'s S.J. Mot. Tab 18 [Long Decl.] ¶¶ 7-10.)

  During the course of construction, defendant requested and received numerous equitable adjustments to the contract price. As plaintiff concedes, COE requested that OCC perform additional work that was not included in the original contract specifications amounting to at least $38,796,466.59. (Pl.'s Opp. to Def.'s S.J. Mot. at 2 n.1.) In addition to COE design changes, as well as changes in the scope of work that were requested by COE, there were other equitable adjustments that were granted by COE over the life of the project. By the time that all outstanding disputes between OCC and COE were resolved, the government had paid $267,801,501 to OCC as of August 31, 2003, and although OCC had received $100,024,501 over its bid price, it nonetheless sustained a loss in excess of $30 million on the project. (Def.'s S.J. Mot. Tab 55 [Christiani Decl.] ¶ 2.)

  LEGAL ANALYSIS

 I. Standard of Review

  Under Fed.R.Civ.P. 56, a motion for summary judgment shall be granted if the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits show that there is no genuine issue of material fact, and that the moving party is entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). A dispute about a material fact is genuine, and should preclude summary judgment, if a reasonable jury could return a verdict in favor of the non-moving party. Id. at 248. Page 8

  In considering a motion for summary judgment, the "evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Id. at 255; see also Washington Post Co. v. United States Dep't of Health and Human Servs., 865 F.2d 320, 325 (D.C. Cir. 1989). However, the non-moving party's opposition must consist of more than mere unsupported allegations or denials and must be supported by affidavits or other competent evidence setting forth specific facts showing that there is a genuine issue for trial. Fed.R.Civ.P. 56(e); Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). The non-moving party must provide evidence that would permit a reasonable jury to find in the non-moving party's favor. Laningham v. United States Navy, 813 F.2d 1236, 1241 (D.C. Cir. 1987). The Court "must assume the truth of all statements proffered by the party opposing summary judgment," except for wholly conclusory statements unsupported by any competent evidence. Green v. Dalton, 164 F.3d 671, 674-75 (D.C. Cir. 1999); Dickerson v. SecTek, Inc., 238 F. Supp.2d 66, 73 (D.D.C. 2002).

 II. False Claims Act

  The False Claims Act protects government funds and property from false or fraudulent claims. Rainwater v. United States, 356 U.S. 590, 592 (1958). It provides liability for any person who

 
(1) knowingly presents, or causes to be presented, to an officer or employee of the United States Government . . . a false or fraudulent claim for payment or approval; [or] (2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government.
31 U.S.C. § 3729 (a). Page 9

  The Act's mens rea element does not require proof of a specific intent to defraud or deceive. § 3729(b); see also United States v. TDC Mgmt. Corp., Inc., 24 F.3d 292, 298 (D.C. Cir. 1994). Instead, a person acts knowingly when he or she: "(1) has actual knowledge of the information; (2) acts in deliberate ignorance of the truth or falsity of the information; or (3) acts in reckless disregard of the truth or falsity of the information." § 3729(b) (emphasis added). In other words, the requisite intent is the "knowing presentation of what is known to be false." United States ex rel. Hagood v. Sonoma County Water Agency, 929 F.2d 1416, 1421 (9th Cir. 1991). "While a faulty estimate or opinion can qualify as a false statement where the speaker knows facts which would preclude such an opinion, the `facts' . . . are those that the speaking party could reasonably classify as true or false." United States ex rel. Siewick v. Jamieson Science and Eng'g, Inc., 214 F.3d 1372, 1378 (D.C. Cir. 2000) (internal quotation marks and citation omitted.) However, innocent mistakes, negligence, and the common failings of scientists or engineers are insufficient. Hindo v. Univ. of Health Sciences/The Chicago Med. Sch., 65 F.3d 608, 613-14 (7th Cir. 1995); Wang v. FMC Corp., 975 F.2d 1412, 1420-21 (9th Cir. 1992). "In short, the claim must be a lie" (Hindo, 65 F.3d at 613), and for a qui tam FCA action to survive summary judgment, the relator must provide "sufficient evidence to support an inference of knowing fraud." United States ex rel. Anderson v. N. Telecom, Inc., 52 F.3d 810, 815 (9th Cir. 1995).

  Nonetheless, not all false statements are actionable. Rather, there must be a claim "for payment or approval," and

  [a]s a result, only (i) actions which have the purpose and effect of causing the government to pay out money where it is not due, or (ii) actions which intentionally deprive the government of money it is lawfully owed, are considered claims within the meaning of the FCA. Page 10

 United States ex rel. Windsor v. DynCorp, Inc., 895 F. Supp. 844, 850 (E.D. Va. 1995) (internal quotation marks and citations omitted). A "claim" is "any request or demand, whether under a contract or otherwise, for money or property which is made to a contractor, grantee, or other recipient." § 3729(c). But given the remedial nature of the statute, a submission need not be an actual invoice to be a "claim" or a "statement," for the statute reaches all fraudulent attempts to cause the government to pay out sums of money. United States ex rel. Schwedt v. Planning Research Corp., 59 F.3d 196, 199 (D.C. Cir. 1995) (citing United States v. Neifert-White Co., 390 U.S. 228, 233(1968)).

  Once a false claim or statement in support of a false claim has been established, the Act provides for two types of liability.*fn9 First, statutory penalties may lie simply for submitting a false or fraudulent claim to the government, even if the government has suffered no loss as a result of the claim. Schwedt, 59 F.3d at 199; accord Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 785 n.7 (4th Cir. 1999) ("Harrison I") ("there is no requirement that the government have suffered damages as a result of the fraud"); United States v. Rivera, 55 F.3d 703, 709 (1st Cir. 1995) ("[i]ndeed, a contractor who submits a false claim for payment may still be liable under the FCA for statutory penalties, even if it did not actually induce the government to pay out funds or to suffer any loss"). Second, the FCA provides for the recovery of damages if the government suffers a loss that was caused by the fraudulent claim or statement. ...


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