U.S. ex rel. Kreindler & Kreindler v. United Technologies Corp.

• Decision Date: 22 January 1993
• Docket Number: 1756,D,Nos. 1363,s. 1363
• Citation: 985 F.2d 1148
• Court: U.S. Court of Appeals — Second Circuit
• Parties: , 10 IER Cases 1603, 38 Cont.Cas.Fed. (CCH) P 76,474 UNITED STATES of America, ex rel. KREINDLER & KREINDLER, Plaintiff-Appellant, Cross-Appellee, v. UNITED TECHNOLOGIES CORPORATION, Defendant-Appellee, Cross-Appellant. ockets 91-9288, 91-9380.

Page 1148

985 F.2d 1148

61 USLW 2464, 10 IER Cases 1603,

38 Cont.Cas.Fed. (CCH) P 76,474

UNITED STATES of America, ex rel. KREINDLER & KREINDLER Plaintiff-Appellant, Cross-Appellee, v. UNITED TECHNOLOGIES CORPORATION, Defendant-Appellee, Cross-Appellant.

Nos. 1363, 1756, Dockets 91-9288, 91-9380.

United States Court of Appeals Second Circuit.

Argued May 13, 1992.

Decided Jan. 22, 1993.

Steven R. Pounian, New York City (Milton G. Sincoff, Blanca I. Rodriguez, David L. Fiol, Kreindler & Kreindler, of counsel), for plaintiff-appellant, cross-appellee.

Patrick W. Lee, Washington, DC (Jonathan H. Pittman, Crowell & Moring, Washington DC, Christopher Massaroni, DeGraff, Foy, Holt-Harris & Mealey, Albany, NY, of counsel), for defendant-appellee, cross-appellant.

Stuart M. Gerson, Asst. Atty. Gen. of the U.S., Washington, DC, Frederick J. Scullin, Jr., U.S. Atty., N.D.N.Y., Syracuse, NY, Douglas N. Letter, Matthew M. Collette, Attys., Appellate Staff Civ. Div., Dept. of Justice, Washington, DC, for amicus curiae, U.S.

Michael Davidson, Senate Legal Counsel, Ken U. Benjamin, Jr., Deputy Senate Legal Counsel, Morgan J. Frankel, Claire M. Sylvia, Asst. Senate Legal Counsel, Washington, DC, for amicus curiae, U.S. Senate.

John R. Phillips, Hall & Phillips, Evan Caminker, U.C.L.A. School of Law, Los Angeles, CA, for amicus curiae, Taxpayers Against Fraud.

Clarence T. Kipps, Jr., Emmett B. Lewis, Mary Lou Soller, James R. Lovelace, Miller & Chevalier, Daniel J. Popeo, John C. Scully, Washington Legal Foundation, Washington, DC, for amicus curiae, Washington Legal Foundation.

Before CARDAMONE, PIERCE, and MAHONEY, Circuit Judges.

MAHONEY, Circuit Judge:

Plaintiff-appellant, cross-appellee Kreindler & Kreindler ("Kreindler"), the relator in this qui tam action filed on behalf of the United States under the False Claims Act, 31 U.S.C. § 3729 (1988) et seq. (the "FCA"), appeals from a summary judgment of the United States District Court for the Northern District of New York, Neil P. McCurn, Chief Judge, entered November 14, 1991 that dismissed Kreindler's complaint for failure to comply with the applicable statute of limitations. The underlying memorandum-decision and order is reported as United States ex rel. Kreindler & Kreindler v. United Technologies Corp., 777 F.Supp. 195 (N.D.N.Y.1991).

Defendant-appellee, cross-appellant United Technologies Corp. ("UTC") cross-appeals from the district court's determination that Kreindler had standing to bring this action. UTC also contends on cross-appeal that the district court lacked subject matter jurisdiction over this suit, a contention raised below but not addressed by the district court.

We affirm on the basis of an absence of subject matter jurisdiction, viewing the suit as "based upon the public disclosure of allegations or transactions in a ... civil ... hearing" within the meaning of 31 U.S.C. § 3730(e)(4)(A) (1988), and concluding that Kreindler is not an "original source of the information" underlying this action within the meaning of § 3730(e)(4)(A) and (B).

Background

Kreindler previously represented Audrey L. Bryant, widow of United States Army warrant officer Charles Bryant, in a wrongful death action, Bryant v. UTC, 83 Civ. 992 (N.D.N.Y.), brought against UTC as a result of Charles Bryant's death in the 1982 crash of a UH-60A ("Black Hawk") helicopter manufactured by UTC. In connection with the discovery in that case, Kreindler entered into a stipulation and protective order (the "Stipulation") which stated that all UTC documents provided in discovery were "confidential and proprietary information which shall be used by plaintiff solely for the purposes of [the Bryant ] action," and were to be immediately returned to UTC or destroyed upon the final termination of that action. The Bryant action was settled in 1987 prior to trial. In the settlement agreement, Kreindler agreed to return all discovery documents and to honor the terms of the Stipulation. The agreement stated further that it was "binding upon Mrs. Bryant and [UTC] and their respective ... attorneys." The agreement was signed by Mrs. Bryant, an attorney for UTC, and an attorney from Kreindler.

Army design specifications for the Black Hawk required that the helicopter be capable of being transported aboard military cargo aircraft. To accomplish this, the main rotor blades had to be folded, and the blade folding and unfolding had to be done rapidly and without maintenance technicians. Because folding the blades without disconnecting the control rods attached to them would transmit unacceptable pressure to the control assembly of the helicopter, UTC incorporated blade fold pins into its prototype helicopter design. The pins were inserted into holes in the helicopter's internal control mechanisms during blade folding. The function of these pins was to withstand and sustain the physical loads generated by folding the main rotor blades for transportation without disconnecting the attached control rods, preventing these physical loads from damaging sensitive flight control system components. The applicable contract did not specifically require blade fold pins, but did require blade folding capability.

Under Department of Defense regulation DOD-STD-480A (Apr. 12, 1978), UTC was required to seek approval from the assigned Army contracting officer for changes and waivers impacting upon safety and performance. Engineering changes to the Black Hawk design were classified as either Class I, those affecting "contractually specified form, fit or function," or Class II, minor changes not having such an effect, such as alterations in documentation or hardware. UTC was contractually required to submit Class I change requests to the contracting officer at the Army Aviation Systems Command ("AVSCOM") in St. Louis, Missouri.

In late 1977 or early 1978, UTC discovered that certain engineering changes prevented the use of blade fold pins because the prefabricated holes into which the pins were to be inserted did not line up properly. According to Kreindler, UTC unilaterally and secretly revised its design to eliminate the pins rather than refabricate the components or submit design changes to the government for approval. In addition, UTC allegedly did not propose any substitute design for protecting the flight control system from pressure generated by folding the rotor blades. UTC contends that it abandoned the blade fold pin concept not only because of the alignment problems, but also because the final design of the helicopter made it too tall to fit into several cargo transport aircraft without disconnecting the pitch control rods connecting the blades to the control mechanisms. UTC claims that the disconnection alleviated the blade fold loads and made the blade fold pins unnecessary. UTC also maintains that the change was made with the full knowledge of the responsible Army officials.

The first Black Hawk helicopters were delivered to the Army in the summer of 1979. According to UTC, during training exercises in November 1979, UTC and the Army discovered that folding the rotor blades without disconnecting the pitch control rods exerted excess pressure that could crack ball bearings manufactured by the Fafnir Corporation ("Fafnir bearings") that were utilized in the flight control system. ¹ In November 1979, UTC changed the procedure by which rotor blades could be folded, requiring the pitch control rods to be disconnected before folding "to prevent loading the control system." In December 1979, the Commander of AVSCOM circulated a memorandum to all Army field units using the Black Hawk which advised that folding the rotor blades without disconnecting the pitch control rods could damage the Fafnir bearings, and ordered the Army units to inspect all affected Black Hawks and replace any damaged bearings.

On November 6, 1979, UTC submitted an engineering change notice that called for the replacement of the Fafnir bearings in all newly produced Black Hawks with solid rollers that could withstand greater pressure. Kreindler claims that when UTC switched to solid rollers, it concealed the fact that the change was necessitated because the blade fold loads resulting from the lack of blade fold pins tended to crack the Fafnir bearings. According to Kreindler, UTC falsely categorized the change notice as a Class II change rather than a Class I change in order to avoid retrofitting existing helicopters. UTC contends that the change notice was prompted by the warnings put out by Fafnir in its 1979 catalogue. See supra note 1. According to UTC, it did not become aware of the relationship between failure to disconnect the pitch control rods and the cracked bearings until November 15, 1979, after it had submitted the change notice.

The first 115 Black Hawks delivered to the Army, for which payment was made in March 1981, contained the Fafnir bearings which could not withstand blade folding pressures without disconnection of the pitch control rods. These helicopters were eventually retrofitted with solid metal rollers in 1983, after the fatal accident that led to the Bryant litigation. Although the related change notice specified that safety and standards were affected, UTC classified it as a Class II change.

Kreindler filed this action on December 30, 1987, contending that UTC knowingly violated its government contract and presented false or fraudulent claims for payment of over 700 Black Hawk helicopters delivered to the United States Army without blade fold pins, a contractually required and critical safety and performance feature. Kreindler asserted that this constituted a fraud on the government under the FCA, which imposes liability upon any person who

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.

31 U.S.C. § 3729(a)(1) (1988). "Knowingly" is...