U.S.A Ex Rel. Snapp Inc v. Ford Motor Co.

Decision Date01 September 2010
Docket NumberNo. 09-1654.,09-1654.
Citation618 F.3d 505
PartiesUNITED STATES of America ex rel. SNAPP, INC., Plaintiff-Appellant,v.FORD MOTOR COMPANY, Defendant-Appellee.
CourtU.S. Court of Appeals — Sixth Circuit

ARGUED: David H. Fink, The Miller Law Firm, P.C., Rochester, Michigan, for Appellant. Francis R. Ortiz, Dickinson Wright PLLC, Detroit, Michigan, for Appellee. ON BRIEF: David H. Fink, E. Powell Miller, The Miller Law Firm, P.C., Rochester, Michigan, for Appellant. Francis R. Ortiz, Kenneth J. McIntyre, Jodi Munn Schebel, Dickinson Wright PLLC, Detroit, Michigan, for Appellee.

Before: BOGGS and CLAY, Circuit Judges; and WISEMAN, District Judge.*

OPINION

BOGGS, Circuit Judge.

SNAPP, Inc. (“SNAPP” or “Relator”) appeals from an order of the district court denying its motion to alter or amend a final judgment so as to permit it to file an amended complaint in litigation brought pursuant to the False Claims Act (“FCA”), 31 U.S.C. § 3729 et seq. SNAPP argues that the district court erred in concluding that the proposed amended complaint, which included a list of contracts that the Government allegedly entered into as a result of fraudulent representations on the part of Ford, did not allege with sufficient particularity the existence of a “claim” as defined by the FCA.

I

This case is before us for the second time. See United States ex rel. SNAPP, Inc. v. Ford Motor Co., 532 F.3d 496 (6th Cir.2008) (“ SNAPP I ”). In SNAPP I, we set forth the relevant factual and procedural history, as it existed to that point, as follows:

According to Relator, Ford is a “prime contractor” to the United States, and is accordingly required to comply with certain federal laws governing the use of small and minority-owned businesses as subcontractors. Among these requirements, a prime contractor may not contract with the federal government unless they establish a plan to “provide[ ] the maximum practicable opportunity” for small businesses and minority-owned businesses to subcontract with the prime contractor. Failure to develop such a plan can render a prime contractor ineligible to receive federal contracts.
Relator alleges that, from 1991 until 1999, Ford fraudulently exaggerated the extent of its dealings with small and minority-owned businesses, and that these exaggerations induced the federal government to contract with Ford, even though Ford never implemented a plan to “provide[ ] the maximum practicable opportunity” to such businesses. According to Relator, during this eight-year period Relator was controlled entirely by Ford. Ford nominated the majority of Relator's board members, its organization charts included Relator and its employees, and Ford had full control over its dealings with Relator. Though Relator was nominally owned and managed by a person of color, Relator maintains that this nominal control was a sham, and that Relator actually operated as a subdivision of the Ford Motor Company. Moreover, Relator claims, even if it did qualify as a minority-owned business during its dealings with Ford, from 1995 until 1999, Relator had too many employees to qualify as a small business.
Despite Relator's claims that it functioned entirely as a subdivision of Ford, Ford filed official reports with the government stating that, between 1991 and 1998, Ford made significant improvements in the amount of business it subcontracted to small and minority-owned businesses. As a prime government contractor, Ford was required to file yearly reports documenting what percentage of the subcontracts related to its government contracts were made with small or minority-owned businesses....
The crux of Relator's complaint is that, despite Ford's reports claiming that it had enacted and was successfully implementing a plan to “provide[ ] the maximum practicable opportunity” to small and minority-owned businesses, Ford had inflated the extent of its dealings with such businesses by fraudulently declaring money paid to Relator as a subcontract with a small and minority-owned business.... Ford, Relator claims, would subcontract with a large, majority-owned business; Ford would then launder its payments to that large, majority-owned business through Relator. Under this scheme, Relator would receive those payments only for the purpose of passing them through to the large, majority-owned subcontractor, but Ford would still report these transactions to the government as a subcontract with a small, minority-owned business.
....
In light of these alleged sham payments, Relator claims that had the federal government been aware that Ford was exaggerating its dealings with small and minority-owned businesses, it would not have permitted Ford to act as a prime contractor. Accordingly, Relator argues, none of the federal government contracts Ford received during the period that it was allegedly inflating its dealings with small and minority-owned businesses would have been awarded to Ford. Because these contracts were allegedly awarded to Ford as a direct result of Ford's fraudulent statements, Relator further claims that none of the payments made to Ford under these contracts would have been made had Ford not deceived the government.
....
On April 30, 2003, Relator filed its original complaint, under seal, in the Southern District of Ohio. That complaint was unsealed on July 19, 2004, when the United States declined to intervene.... On April 14, 2006, the parties ... stipulated to a transfer of this case to the Eastern District of Michigan.
On September 7, 2006, the district court issued an order dismissing a portion of Relator's claim and ordering Relator to file an amended complaint.... Additionally, the district court held that Relator's original complaint did not comply with the particularity requirements of Fed.R.Civ.P. 9(b), finding that this complaint “contains no allegations as to which claims submitted by Ford would not have been paid” but for Ford's alleged fraudulent statements. Accordingly, the court ordered Relator to amend its complaint in order to bring it into compliance with Rule 9(b).
Relator filed its First Amended Complaint on October 4, 2006, and shortly thereafter, it filed copies of the annual reports Ford had submitted to the government in order to retain its eligibility as a prime contractor. In a February 1, 2007 order, the district court dismissed this amended complaint, holding that it still had not “identified any contract that Ford was allegedly wrongfully awarded as a result of being a Prime Contractor.” On February 9, 2007, Relator filed a motion, which the district court construed as a motion to vacate its dismissal of this case under Rule 59(e) and to permit Relator to subsequently file a Second Amended Complaint. Accompanying this motion were additional copies of Ford's 1991-99 reports to the federal government. Although Relator argued that these reports constituted new evidence justifying the reconsideration of its case, the district court concluded that it had already considered these reports in the context of its decision dismissing the First Amended Complaint, and denied Relator's motion.

Id. at 499-502 (citations and footnotes omitted). Following the district court's dismissal of SNAPP's First Amended Complaint and its denial of SNAPP's motion to file a Second Amended Complaint, SNAPP filed its appeal in SNAPP I.

On appeal, we affirmed the dismissal of SNAPP's First Amended Complaint on Rule 9(b) grounds, finding that the complaint's allegation that [f]rom 1991 through at least 2001, Ford was awarded contracts on an annual basis by the General Services Administration,” coupled with an estimate of the approximate value of those contracts, failed to comply with the Rule 9(b) requirement that a relator “state with particularity the circumstances constituting fraud or mistake.” SNAPP I, 532 F.3d at 504-06.

Specifically, we observed that the portion of the FCA under which SNAPP now alleges a cause of action 1 “imposes liability on a person who ‘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.’ 2 SNAPP I, 532 F.3d at 504 (quoting 31 U.S.C. § 3729(a)(2)). We then noted that a cause of action under that portion of the FCA contained several elements, including: (1) that the defendant make a false statement or create a false record with actual knowledge, deliberate ignorance, or reckless disregard of the truth or falsity of the information; (2) that the defendant have submitted a claim for payment to the federal government; (3) that the defendant's false statement have been made with the purpose of getting a false or fraudulent claim paid or approved by the Government; and (4) that the false statement or record have been material to the Government's decision to make the payment sought in the defendant's claim. Id. at 504-05. We found that SNAPP had adequately pleaded the existence of a false statement or record, and that Rule 9(b) did not require SNAPP to plead the elements dealing with Ford's state of mind with particularity.

However, we further observed that, given that SNAPP had alleged a “complex and far-reaching fraudulent scheme,” it was subject to a rule of law recently established in United States ex rel. Bledsoe v. Community Health Systems, Inc., 501 F.3d 493 (6th Cir.2007) (“ Bledsoe II ”). Under the rule of Bledsoe II, a relator who alleges such a complex and far-reaching fraudulent scheme need not state with particularityall of the false claims made over the course of the scheme, but must nevertheless “include specific examples of the defendant's claims for payment” that are “characteristic example[s] ... illustrative of [the] class of all claims covered by the fraudulent scheme.” SNAPP I, 532 F.3d at 506 (quoting Bledsoe II, 501 F.3d at 510-11) (internal quotation marks omitted). With that in mind, we held in SNAPP I that:

Despite the requirement that Relator must provide specific examples
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