997 F.Supp. 1159 (S.D.Ind. 1998), EV 95-121, United States ex rel. Durcholz v. FKW Inc.

Docket Nº:EV 95-121 C B/H.
Citation:997 F.Supp. 1159
Party Name:UNITED STATES of America, ex rel. Robert A. DURCHOLZ, and Durcholz Excavating and Construction, Inc., Plaintiffs, v. FKW INCORPORATED and Jeffrey J. Strange, Defendants.
Case Date:April 27, 1998
Court:United States District Courts, 7th Circuit, Southern District of Indiana

Page 1159

997 F.Supp. 1159 (S.D.Ind. 1998)

UNITED STATES of America, ex rel. Robert A. DURCHOLZ, and Durcholz Excavating and Construction, Inc., Plaintiffs,

v.

FKW INCORPORATED and Jeffrey J. Strange, Defendants.

No. EV 95-121 C B/H.

United States District Court, S.D. Indiana, Evansville Division.

April 27, 1998

Page 1160

[Copyrighted Material Omitted]

Page 1161

Daniel M. Anderson, Schottenstein Zox & Dunn, Columbus, OH, Charles C. Griffith, Johnson Carroll & Griffith, Evansville, IN, John C. McDonald, Schottenstein Zox & Dunn, Columbus, OH, Michael D. Tarullo, Schottenstein Zox & Dunn, Columbus, OH, for Plaintiffs.

Maurice A. Byrne, Jr., Jeffersonville, IN, Jeffrey B. Kolb, Emison Doolittle Kolb & Roellgen, Vincennes, IN, Marsha C. Massey, Assistant U.S. Attorney, Office of the United States Attorney, Indianapolis, IN, R. Joseph Sher, Torts Branch, Civil Division, U.S. Department of Justice, Washington, DC, Robert F. Stayman, Ziemer Stayman Weitzel & Shoulders, Evansville, IN, Ponce D. Tidwell, Jr., Ice Miller Donadio & Ryan, Indianapolis,

Page 1162

IN, Bradley L. Williams, Ice Miller Donadio & Ryan, Indianapolis, IN, for Defendants.

ENTRY GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENT

BARKER, Chief Judge.

This motion comes before the Court on Defendants' Motion for Summary Judgment on Plaintiffs' False Claim Act ("FCA") claims, alleging that (1) Plaintiffs' claims are jurisdictionally barred, and (2) even if jurisdiction exists, neither Defendant violated the FCA. 1 For the following reasons, Defendants' Motion for Partial Summary Judgment is GRANTED IN PART AND DENTED IN PART.

I. PROCEDURAL HISTORY

Plaintiff's complaint sets forth claims against Defendants Jeffrey J. Strange ("Strange") and FKW Incorporated ("FKW") for violating the FCA and tortiously interfering with Plaintiff's business relationship with the United States Government. In a February 25, 1998 Entry, this Court denied Plaintiff's Motion for Summary Judgment on the FCA claims and dismissed Plaintiff's tortious interference claim against Strange. See United States ex rel. Durcholz v. FKW Incorporated, 1998 WL 89659, No. 95-121-C-B/S (Feb. 25, 1998 S.D.Ind.). That Entry outlined the facts of this action in considerable detail. Therefore, we now discuss only those facts which are relevant to the instant motion.

II. BACKGROUND

This case arises out of a government contract awarded to FKW to clear two sedimentation ponds at the Crane Navel Surface Warfare Center ("Crane") in Crane, Indiana. As an employee of the Navy's office of the Officer in Charge of Construction ("OICC"), Strange was assigned to serve as the government's contracting officer on the ponds project. Strange Depo., vol. 1, at 77. Strange's immediate supervisors were Lieutenant DeWayne Roby ("Roby") and Commander Larry Laws ("Laws"). Id., vol. 2, at 170. Gerald Hill ("Hill"), the Deputy Director of the Public Works Directorate, and David Smith ("Smith"), Support Division Director for the Engineering Field Activity (supervisor of the OICC), also were Strange's superiors with important roles in the project. Hill Aff. ¶ 1; Smith Aff. pp 3-4.

Recognizing the need for an expedited effort to clear the ponds, a consensus developed among Crane officials that dredging should be used to complete the project because it was quicker than conventional excavation, which was the traditional alternative. Laws Aff. ¶ 4; Hill Aff. pp 5-7. Although dredging was the method that the government preferred, using non-prepriced items to support the delivery order would invariably slow the process. 2 Laws Aff. ¶ 21. Therefore, Strange requested and received authorization from Smith to use conventional excavation ("conventional") line items listed in the UPB to price the project so long as the delivery order was issued as a "performance specification." 3 D.Smith Aff. ¶ 8, 11. Indeed, if the delivery order was issued as a performance specification, Smith instructed Strange that he could use line items from the UPB which support any method of completing the project. Id. pp 8, 11.

In November 1994, Strange informally requested FKW to submit a proposal on the

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project. Strange Depo. at 134; Frederick Depo. at 27; Plaintiff's Exhibit. FKW determined that it would use a subcontractor to perform the project and therefore began soliciting bids from various government-approved subcontractors. Plaintiff's Exhibit 3; Frederick Depo. at 39. Knowing that the government wanted the project performed by dredging, FKW indicated to potential subcontractors that it preferred dredging bids. Frederick Depo. at 40; Bex Depo. at 115. Pursuant to FKW's request for bids, Durcholz Excavating and Construction submitted the lowest dredging bid ($271,700) and Midwest Dredging and Excavation ("Midwest") submitted the second-lowest dredging bid ($369,800). 4 Frederick Depo. at 59-61.

Brian K. Frederick ("Frederick"), FKW's supervisor of operations at Crane in 1994 and 1995, knew that Durcholz submitted the lowest dredging bid. 5 Frederick Depo. at 190-91. Strange's superiors knew the prices of the various subcontractor bids, but believed that Durcholz's bid was only for conventional excavating and not dredging. Roby Depo. at 83. 6 Strange and Dale Bex ("Bex") 7 told FKW that it preferred Midwest and, consistent with that preference, FKW selected Midwest and not Durcholz. 8 Frederick Depo. at 61. It is undisputed that FKW was not required to select the lowest dredging bid. D.Smith Depo. at 77.

FKW submitted its formal written proposal for the project in the amount of $457,810 on December 22, 1994. Strange's Exhibit 8. FKW priced its proposal by reference to attached conventional line items, but the figure was really based primarily upon Midwest's bid. Frederick Depo. at 69; Strange Depo., vol. 2, at 208. Roby, Strange, and Bex knew and approved of FKW's use of conventional line items, knowing that the proposed price was actually based on Midwest's bid. Roby Depo. at 99, 112. FKW's proposed price was higher than both the government's and FKW's original estimates. Frederick Depo. at 64; Strange Depo. at 182-83. Following Strange and Bex's direction, FKW supported the increase in price by adding a conventional line item for gravel for a road from the ponds up to the containment site. Frederick Depo. at 64. However, since Midwest planned to use dredging, neither the road construction nor the other conventional line items would actually be performed. Id. at 64.

Thereafter, Bex concluded that FKW's proposal was reasonable. Bex Depo. at 65. Strange and Bex then held a negotiation session with FKW, at which they accepted FKW's proposed price without modification. 9 Strange's Exhibit 9; Bex Depo. at 67; Frederick Depo. at 81. Following the session, Strange wrote a post-negotiation memorandum which stated that non-prepriced items for the project amounted to $2,817. Strange's Exhibit 7; Strange Depo. at 186.

On December 27, 1994, Strange completed the delivery order for the project in the

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amount of $457,810. 10 Hill Aff. ¶ 10. Acting on behalf of Laws, Hill instructed Strange not to issue the order until Stan Armstrong ("Armstrong"), a representative from the Crane Army Ammunition Activity ("CAAA"), approved the price. 11 Id. After Hill advised Armstrong that the relevant government officials on the project recommended approval of the delivery order's price, Armstrong gave his approval and the order was issued. Id. at ¶ 10.

Midwest proceeded to perform the project by dredging. The government, however, rejected FKW's first submitted invoice because it was supported with attached conventional line items which for obvious reasons had not been performed. Frederick Depo. at 121. Roby, Jim Riggins (a supervisory civil engineer for Crane), and Strange all directed FKW to submit future invoices with the percentage of work completed and the amount due, without attached line items. Strange Depo. at 199-200; Frederick at 121. FKW re-submitted its first invoice, consistent with the Navy's instructions, and it was paid. Frederick Depo. at 123. The remaining five FKW invoices were submitted and paid in similar fashion. Id. at 123-24; Plaintiff's Exhibits 11, 13.

Believing that its bid had been improperly rejected, Durcholz began investigating the contracting process and allegedly verified his suspicions through, among other things, private conversations with Frederick, FKW's supervisor of operations of Crane. Durcholz Depo. at 97, 99-100, 103-104. Durcholz informed Laws of the possibility of a civil suit and sent Laws a letter dated January 30, 1995, alleging that FKW had been forced to use Midwest even though Durcholz's bid was substantially lower. Frederick Depo. at 95-96; Plaintiff's Exhibit A. Approximately one week later, on February 5, 1995, Laws held a meeting with various government officials and with Frederick in an effort to investigate the possibility of fraud. Frederick Depo. at 95-96. This litigation ensued.

III. SUMMARY JUDGMENT STANDARDS

Summary judgment is appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.Pro. 56(c). A genuine issue of material fact exists if there is sufficient evidence for a jury to return a verdict in favor of the non-moving party on the particular issue. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); Methodist Med. Ctr. v. American Med. Sec., Inc., 38 F.3d 316, 319 (7th Cir.1994).

In resolving a motion for summary judgment, a court must draw all reasonable inferences in the light most favorable to the non-movants. Patel v. Allstate Ins. Co., 105 F.3d 365, 366 (7th,Cir.1997); Spraying Sys. Co. v. Delavan, Inc., 975 F.2d 387, 392...

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