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Miller v. Holzmann

March 7, 2007

RICHARD F. MILLER, PLAINTIFF,
v.
PHILIPP HOLZMANN, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Royce C. Lamberth, United States District Judge,

ORDER

This matter is before the Court upon consideration of the March 9, 2006, Report and Recommendation [231] issued by Magistrate Judge Facciola. In his Report and Recommendation, Magistrate Judge Facciola addressed eight issues: (1) the application of the statute of limitations under the False Claims Act ("FCA") as it pertains to relation back of the government's claims to the date the relator's original complaint was filed, as allowed under Rule 15(c) of the Federal Rules of Civil Procedure; (2) whether the plaintiffs failed to plead fraud with particularity pursuant to Rule 9(b) of the Federal Rules of Civil Procedure; (3) the preclusive effect of the issues found at the criminal prosecution of certain defendants in the civil case; (4) whether the Foreign Assistance Act ("FAA") preempts the FCA; (5) whether this Court lacked personal jurisdiction over foreign defendants in this case; (6) whether the lack of formal service of the complaints on certain defendants warranted a dismissal of those defendants from this case; (7) whether a party improperly named by the plaintiffs should be dismissed; and (8) the effect of the bankruptcy of defendant J.A. Jones Construction Company on the litigation. With respect to the first issue, the magistrate judge found that relation back under Rule 15(c) was permissible as to claims brought by the government on contract 20A. The magistrate judge found that relation back was not available to the government on claims based on contracts 07 and 29. The magistrate judge therefore recommended that the government submit a memorandum at the close of discovery detailing whether it could take advantage of the alternate three-year limitations period available under 31 U.S.C. § 3731(b)(2) of the FCA.

With respect to the issue of whether plaintiffs pleaded fraud with sufficient particularity, the magistrate judge found that the plaintiffs failed to sufficiently plead fraud relating to defendants Harbert UK, BHIC, J.A. Jones Construction Co., and Bill Harbert. Therefore, the magistrate judge recommended dismissal of the complaints against these defendants without prejudice to refiling amended complaints to cure the fraud particularity deficiency. Dealing with the same issue, the magistrate judge found that plaintiffs had sufficiently pleaded fraud against defendant Roy Anderson, and therefore recommended that his motion to dismiss be denied.

The magistrate judge next recommended that defendant Roy Anderson was precluded from relitigating the issue of whether payments sought pursuant to the three contracts at issue in this case were false claims, and that the government was entitled to summary judgment to that effect. He also found that the guilty plea entered into by defendant Holzmann had a preclusive effect on relitigating what Holzmann admitted to upon its guilty plea.

Next, the magistrate judge found that the FAA did not preempt the FCA.

With respect to the issue of personal jurisdiction over Harbert UK and Holzmann, the magistrate judge found that the Court could properly exercise specific personal jurisdiction over defendant Holzmann. He found, however, that the plaintiffs complaints as pleaded with insufficient particularity as to fraud made it unable for him to determine whether the Court could exercise personal jurisdiction over defendant Harbert UK. Accordingly, the magistrate judge permitted additional jurisdictional discovery so that he would be better able to determine the issue.

With respect to the final three issues, the magistrate judge found as follows. First, as to the issue of invalid summons, the magistrate judge found that, the requirements of Rule 4 of the Federal Rules of Civil Procedure were met notwithstanding the lack of formal service of summons upon the defendants, and therefore recommended that the motions to dismiss on the basis of invalid summons should be denied. Second, the magistrate judge recommended that the improperly named defendant--Harbert International Establishment, Inc.--should be dismissed, but granted the plaintiffs leave to file an amendment that included claims against the allegedly intended defendant: Bilhar. Third, the magistrate judge recommended that the Court should not stay the proceedings of this case pending the outcome of defendant J.A. Jones' reorganization in the bankruptcy court, and that the defendant's Suggestion of Stay should be denied.

Pursuant to Local Rule 72.3(b), the parties properly filed timely objections to the Report and Recommendation. Objections were raised by the defendants on the following grounds: (1) that the magistrate judge was incorrect in finding that the statute of limitations for False Claims Act ("FCA") conspiracy claims begins to run anew upon the submission of each allegedly fraudulent or false claim to the government; (2) that the defendants were on notice of the government's complaints in March 2001 instead of February 2001; (3) that the government's common law claims for unjust enrichment were untimely; (4) that the unjust enrichment claims were insufficiently pleaded; (5) that the invalid summons of the plaintiffs complaints warranted a dismissal of the defendants; (6) and that the FAA preempted the FCA.*fn1 The relator objected to the magistrate judge's finding that the government could not relate back claims on contracts 07 and 29 to the date the relator's original complaint was filed.

For the forgoing reasons, the Court finds that defendant HII's objection to the magistrate judge's recommendation that the relator's complaint was timely-filed is OVERRULED; defendants' objection as to the date defendants were on notice as to the government's claims shall be DISMISSED AS MOOT; the relator's objection to the magistrate judge's recommendation that only the claims as to contract 20A may relate back is SUSTAINED; defendants' objection as to the applicable period of limitations for the government's common law claims is OVERRULED; defendant HII's objection on the grounds of insufficient pleading of the claim of unjust enrichment as to contract 29 against HII is OVERRULED AS MOOT by virtue of the Second Amended Complaint in Intervention, which sufficiently alleges HII's role in the conspiracy to bid-rig contract 29; the defendants' objection as to improper service of process of the Second Amended Complaint is OVERRULED; and that the defendants' objection that the FAA preempts the FCA is OVERRULED.

A. Timeliness of the Conspiracy Claims

1. Timeliness of Relator's Complaint

Defendant HII first objects to the magistrate judge's conclusion that the statute of limitations for False Claims Act ("FCA") conspiracy claims begins to run anew upon the submission of each allegedly fraudulent or false claim to the government. Defendant contends that the six-year statute of limitations under 31 U.S.C. § 3731(b)(1) for FCA conspiracy claims begins to run upon the formation of the conspiracy. According to the relator and government's respective complaints, the latest that the alleged conspiracy could have been formed is April 16, 1989, when the letter of intent to award contract 20A was issued to Joint Venture, the company who allegedly submitted the low bid on contract 20A as part of the conspiracy. (See Relator's 2d Am. Compl., ¶ 25; Gov.'s Compl. in Intervention, ¶ 27.) The relator filed its original complaint on June 30, 1995, which occurred beyond the six-year period in which the relator had to file its complaint against the defendants. Therefore, HII asserts that the relator's conspiracy claims are untimely. Consequently, HII argues that the government's Complaint in Intervention--even if it were able to relate back under Rule 15(c) of the Federal Rules of Civil Procedure--would nonetheless be untimely because of the alleged untimeliness of the relator's initial complaint.

In order to determine when the statute of limitations begins to run for a conspiracy claim under the FCA, the Court must first look to what constitutes the necessary elements of a conspiracy claim under the FCA. As this Court has previously held, the plaintiff must prove three elements in order to assert a valid conspiracy claim under the FCA; those elements are: "(1) that defendant conspired with one or more persons to have a fraudulent claim paid by the United States, (2) that one or more of the conspirators performed any act to have such a claim paid by the United States, and (3) that the United States suffered damages as a result of the claim." United States v. Bouchey, 860 F. Supp. 890, 893 (D.D.C. 1994). In light of the fact that proof of an overt act in furtherance of the conspiracy is required, the six-year statute of limitations under 31 U.S.C. § 3731(b)(1) begins on the date six years prior to the date the complaint was filed, and ends at the filing of the relator's complaint. See Fisher, 180 F. Supp. at 195.*fn2 Accordingly, the relator may use any overt acts that occur within that time frame to prove the underlying conspiratorial agreement, but may not use overt acts occurring prior to the date the statute of limitations began to run. Id. If the relator is successful in proving the existence of the conspiracy by the use of overt acts from within the designated period, "he may recover damages for all violations committed as a part of the conspiracy from that date forward." Id.

Applying the six-year period of limitations to the date the original complaint was filed, the relator may use any overt acts that occurred on or after June 30, 1989. The relator's claims on contract 20A run from October 3, 1989 through June 20, 1993. Accordingly, under this analysis, the relator will be able to capture all claims on contract 20A, and use those overt acts at trial to prove the existence of the conspiracy to bid-rig AID contracts, including contract 20A.*fn3

Therefore, the relator's conspiracy claims against the defendants were not untimely under the six-year period of limitations under ยง 3731(b)(1) of the FCA. In light of this fact, this Court finds that defendant HII's objection to the magistrate judge's ...


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