U.S. ex rel. Thacker v. Allison Engine Co., Inc.

Citation471 F.3d 610
Decision Date19 December 2006
Docket NumberNo. 05-3502.,05-3502.
PartiesUNITED STATES of America ex rel. Roger L. Sanders and Roger L. THACKER, Relators-Appellants, v. ALLISON ENGINE COMPANY, INC., General Motors Corporation, General Tool Company, and Southern Ohio Fabricators, Defendants-Appellees.
CourtU.S. Court of Appeals — Sixth Circuit

ARGUED: James B. Helmer, Jr., Helmer, Martins, Rice & Popham, Cincinnati, Ohio, for Appellants. Glenn V. Whitaker, Vorys, Sater, Seymour & Pease, Cincinnati, Ohio, for Appellees. Steve Frank, United States Department of Justice, Washington, D.C., for Amici Curiae. ON BRIEF: James B. Helmer, Jr., Paul B. Martins, Robert M. Rice, Helmer, Martins, Rice & Popham, Cincinnati, Ohio, Scott A. Powell, Don McKenna, Hare, Wynn, Newell & Newton, Birmingham, Alabama, for Appellants. Glenn V. Whitaker, Victor A. Walton, Jr., Vorys, Sater, Seymour & Pease, Cincinnati, Ohio, for Appellees. Steve Frank, United States Department of Justice, Washington, D.C., Joseph E.B. White, Taxpayers Against Fraud Education Fund, Washington, D.C., for Amici Curiae.

GIBBONS, J., delivered the opinion of the court, in which COOK, J., joined. BATCHELDER, J. (pp. 627-28), delivered a separate opinion concurring in part and dissenting in part.

GIBBONS, Circuit Judge.

This case is the consolidation of two False Claims Act suits alleging fraud in the negotiation and execution of subcontracts relating to the construction of United States Navy Arleigh Burke-class Guided Missile Destroyers. The destroyers are built primarily by two shipyards — Bath Iron Works ("Bath") and Ingalls Shipbuilding (collectively "the shipyards"). The construction involves hundreds of subcontracts for the components and parts that make up the ships, each of which costs approximately one billion dollars.

Each destroyer contains three generator sets ("Gen-Sets") that supply all of the electrical power for the ship. The shipyards contracted with defendant-appellee Allison Engine Company ("Allison"), which for a period of time relevant to this lawsuit was a division of defendant-appellee General Motors Corporation, to build approximately ninety Gen-Sets to be used in over fifty destroyers. Allison in turn subcontracted the assembly of each Gen-Set to defendant-appellee General Tool Company ("GTC"), which in turn subcontracted part of its work to defendant-appellee Southern Ohio Fabricators ("SOFCO"). Thus, the shipyards were the prime contractors (contracting directly with the Navy). Allison was a first-tier subcontractor. GTC was a second-tier subcontractor, and SOFCO was a third-tier subcontractor. Relators-appellants Roger L. Sanders and Roger L. Thacker ("relators") are former employees of GTC who worked on the Gen-Set assembly teams. Relators brought two separate qui tam actions under the False Claims Act ("FCA"), 31 U.S.C. § 3729, alleging fraud against Allison, General Motors, GTC and SOFCO (collectively "defendants") in connection with the construction of the Gen-Sets. See id. § 3730(b)(1). The United States declined to intervene in the cases.1

The first action (referred to by the parties as the "Quality Case") alleges that the defendants submitted claims for payment despite knowing that the Gen-Sets did not conform to contract specifications or Navy regulations, in violation of the False Claims Act, 31 U.S.C. § 3729(a)(1)-(3). The district court construed § 3729 to require a showing that a false claim had actually been presented to the United States government ("government") for liability to attach. Because relators made no such showing at trial, the court granted judgment as a matter of law to the defendants at the close of relators' case pursuant to Fed.R.Civ.P. 50(a). We can discern no presentment requirement in § 3729(a)(2) or (3), and reviewing de novo, see Gray v. Toshiba Am. Consumer Prods., 263 F.3d 595, 598 (6th Cir.2001), we find this ruling to be in error and reverse. The second action (referred to by the parties as the "Pricing Case") alleges that the subcontractors withheld cost or pricing data during negotiations with the government's agent in violation of the Truth in Negotiations Act ("TINA"), 10 U.S.C. § 2306a, and the FCA. The district court granted summary judgment to the defendants, finding that at the time of the negotiations, the defendants did not know for a fact that their costs would be reduced, and thus they had no obligation to disclose their mere hope or expectation that costs could be lowered. Again reviewing de novo, see Cline v. Catholic Diocese of Toledo, 206 F.3d 651, 657 (6th Cir.2000), we agree and affirm.

I.

In the Quality Case, relators allege that the defendants knew of a number of defects in the construction of the Gen-Sets and knew that the defects constituted a violation of their respective contracts but nevertheless submitted invoices for payment.2 As a result, these invoices constituted "false or fraudulent claims" that were paid with government funds in violation of the False Claims Act, 31 U.S.C. § 3729. See United States ex rel. Compton v. Midwest Specialties, Inc., 142 F.3d 296, 304 (6th Cir.1998). Specifically, relators brought claims under § 3729(a)(1), (2), and (3).

The case was tried before a jury, and relators spent five weeks presenting evidence of the various defects. Relators introduced evidence that all of the money used to pay the relevant prime contracts and subcontracts, including all the money paid to the defendants, came from the government. Relators also introduced into evidence hundreds of invoices remitted for payment by the subcontractors (i.e., Allison to the shipyards, GTC to Allison, and SOFCO to GTC). Relators did not, however, present any evidence that the subcontractors or the shipyards ever presented any false or fraudulent claim directly to the United States or the Navy for payment.3 At the close of relators' case, defendants moved for judgment as a matter of law on the grounds that the lack of evidence of any false claim presented to the government meant that no reasonable jury could find a violation under the FCA. The district court accepted this argument and granted the motion. Relying on United States ex rel. Totten v. Bombardier Corp., 380 F.3d 488 (D.C.Cir.2004), cert. denied 544 U.S. 1032, 125 S.Ct. 2257, 161 L.Ed.2d 1059 (2005), the court held that liability under the FCA required a showing that a false or fraudulent claim was presented to the government, either by the defendants or by the prime contractor.

A.

The plain language of § 3729, the legislative history accompanying the most recent change to the statute, and the policy rationales behind the False Claims Act do not support the district court's reading of the statute. The FCA states in relevant part:

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 paid or approved by the Government; [or]

(3) conspires to defraud the Government by getting a false or fraudulent claim allowed or paid[,]

. . .

. . . is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, plus 3 times the amount of damages which the Government sustains because of the act of that person . . . .

31 U.S.C. § 3729(a). Section (c) of the FCA sets forth the definition of a "claim":

For purposes of this section, "claim" includes any request or demand, whether under a contract or otherwise, for money or property which is made to a contractor, grantee, or other recipient if the United States Government provides any portion of the money or property which is requested or demanded, or if the Government will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded.

Id. § 3729(c). The FCA was passed in 1863 in response to fraud perpetuated by defense contractors during the Civil War. Originally, it contained both a criminal and a civil component; the criminal component has since been separated and codified in a different section of the United States Code. This case concerns only the civil portion of the FCA.

To determine the meaning of a statute, this court first looks to the language of the statute itself. Desert Palace, Inc. v. Costa, 539 U.S. 90, 98, 123 S.Ct. 2148, 156 L.Ed.2d 84 (2003) (citing Conn. Nat'l Bank v. Germain, 503 U.S. 249, 253-54, 112 S.Ct. 1146, 117 L.Ed.2d 391 (1992)); Cox v. Mayer, 332 F.3d 422, 424 (6th Cir. 2003). The plain language of the FCA states that actual presentment of a claim to the government is required under one, but not all, of the statute's sections. Only subsection (a)(1) of the statute makes any mention of presenting a claim to the government or Armed Forces. Subsections (a)(2) and (a)(3), which are separate bases for liability, contain no such presentment language. Subsection (a)(2) requires only that a defendant "make[ ]" or "use[ ]" a "false record or statement" in order to induce the government to pay or approve a claim. 31 U.S.C. § 3729(a)(2). Subsection (a)(3) requires a conspiracy to defraud the government to pay or allow a false claim. Id. § 3729(a)(3). The definition of "claim" in part (c) further supports the reading that presentment is not required under all sections of the statute. A claim is "any request or demand . . . for money or property which is made to a contractor . . . if the United States provides any portion of the money or property which is requested or demanded, or if the Government will reimburse such contractor . . . for any portion of the money or property which is requested or demanded." Id. § 3729(c) (emphasis added). The focus of this language is on the money paid out by the...

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