The U.S. v. the Boeing Co.

• Decision Date: 11 March 2011
• Docket Number: Case No. 03–CV–810–GKF–PJC.
• Citation: 778 F.Supp.2d 1231
• Parties: The UNITED STATES of America, ex rel. Dwayne LANCASTER, personal representative of the Estate of Teresa Lancaster, Deceased, Plaintiffs,v.The BOEING COMPANY, Defendant.
• Court: U.S. District Court — Northern District of Oklahoma

778 F.Supp.2d 1231

The UNITED STATES of America, ex rel. Dwayne LANCASTER, personal representative of the Estate of Teresa Lancaster, Deceased, Plaintiffs,

v.The BOEING COMPANY, Defendant.

Case No. 03–CV–810–GKF–PJC.

United States District Court, N.D. Oklahoma.

March 11, 2011.

Michael Lee Carr, Philard Leaon Rounds, Jr., Steven Ernest Holden, Holden & Carr, Tulsa, OK, for Plaintiffs.

Amelia Ann Fogleman, Dennis Clarke Cameron, Oliver Sterling Howard, Tyson Dean Schwerdtfeger, Gable & Gotwals, Kimberly Lambert Love, Mary Lynn Lohrke, Robyn Marie Funk, Titus Hillis Reynolds Love Dickman & McCalmon, Tulsa, OK, for Defendant.

OPINION AND ORDER

GREGORY K. FRIZZELL, District Judge.

This action was brought pursuant to the False Claims Act (“FCA”), 31 U.S.C. § 3729 et seq., by Dwayne Lancaster, the personal representative of the estate of his deceased wife, Teresa Lancaster, on behalf of the United States and against her former employer, The Boeing Company (“Boeing”). Before the Court is Boeing's Motion for Summary Judgment for Lack of Jurisdiction [# 138].

Boeing is the world's largest manufacturer of commercial jets, and provides support for many of the aircraft it manufactures, including four Boeing–747–200B aircraft that have been modified for military application and use by the United States Air Force in its “E–4 Advanced Airborne Command.” Boeing provides “Contractor Logistics Support” (“CLS”) to the Air Force for the aircraft in the E–4 Program, acting essentially as the purchasing agent for the Air Force in obtaining repair and replacement parts for the aircraft.

Teresa Lancaster was an employee at Boeing's facility in Oklahoma City from February 1996 to September 12, 2002. In her job, she had oversight duties over certain military programs at the facility, including the E–4 Program. After resigning from Boeing, she brought this action under the FCA, alleging that Boeing had submitted false claims to the Air Force in connection with the E–4 Program. Specifically, she alleged that the CLS contract generally requires Boeing to use only FAA-certified parts in modifying and maintaining aircraft in the E–4 Program. She asserted Boeing breached this requirement and falsely represented to the government that the parts Boeing provided were in full compliance with the contract. Following her death in 2004, her husband was appointed as the personal representative of her estate and substituted as the Relator in this action.

In its motion for summary judgment, Boeing asserts the court lacks subject matter jurisdiction over the Relator's claims because the Relator cannot establish Teresa Lancaster was the “original source of the information” regarding alleged fraud, as required by 31 U.S.C. § 3730(e)(4)(A). The Relator contends § 3730(e)(4)(A) does not bar him from proceeding because there had been no “public disclosure” of information at the time the action was filed, his claim was not based upon allegations made in an earlier investigation, and Teresa Lancaster qualified as an “original source” of the information upon which the complaint was based.

I. Material Facts

1. In the 1970s, the Air Force purchased four commercial Boeing–747–200B aircraft that were modified for military application and use by the Air Force in its “E–4 Advanced Airborne Command.” [# 138, Defendant's Statement of Undisputed Material Facts, ¶ 1; # 160, Plaintiff's Response to Defendant's Statement of Undisputed Material Facts, ¶ 1]. The Air Force contracted with Boeing to provide “Contractor Logistics Support” (“CLS”) for the E–4 Program. Under the CLS contract, Boeing essentially acts as a purchasing agent for the Air Force in obtaining repair and replacement parts for the aircraft in that program. [ Id.]. Additionally, Boeing is to insure that repair/replacement parts met contract specifications, including FAA certification.

[# 160,

Plaintiff's Response, ¶ 1 and Exs. 3 and 3A].

2. Teresa Lancaster was an employee at Boeing's facility in Oklahoma City from February 1996 to September 2002. Beginning in or around December 1999, she worked in Boeing's Procurement Quality Assurance (“PQA”) Department with responsibilities including the E–4 Program. [# 138, Defendant's Statement of Facts; # 160, Plaintiff's Response].

3. After resigning from Boeing in September 2002, Ms. Lancaster filed this action on November 26, 2003 [# 1, Complaint].¹ Pursuant to the FCA, the matter was sealed while the United States made a determination whether to intervene in the action. [# 9]. On April 21, 2004, Ms. Lancaster died and her husband subsequently was appointed as the personal representative of her estate. [# 81, 2nd Amended Complaint, ¶ 7]. On September 1, 2006, Relator filed an Amended Complaint. [# 29]. On March 14, 2007, the United States declined intervention. [# 45]. The court ordered the case unsealed on April 25, 2007. [# 48].

4. On February 14, 2008, the court granted Boeing's Motion to Dismiss Count One of the Amended Complaint for Failure to Plead Fraud with Particularity. [# 78]. The court granted plaintiff's Motion to Amend [# 79], and on July 31, 2008, plaintiff filed his Second Amended Complaint (the “Complaint”). [# 81].

Allegations of the Complaint

5. In the Complaint, Relator alleges that the CLS contract between Boeing and the Air Force relating to the E–4 Program “requires that, with very few exceptions, modifications and maintenance ... be performed using FAA certified parts.” [ Id., ¶ 22]. Relator asserts that under the contract, all parts, repairs and overhauls of the E–4 aircraft were required to meet FAA requirements, parts were to be replaced with qualitatively equivalent parts, maintenance records were required to be documented using certain specified forms and certain safety and quality assurance standards were required to be met by Boeing. [ Id., ¶ 25.] Relator contends:

26. Boeing has continually breached these provisions of the Contract while continually representing to the Air Force that the parts Boeing has submitted have met these requirements. Boeing has used non-FAA compliant parts in tens of thousands of repairs, has used inferior and dangerous parts for repair of the E–4 Aircraft, has failed to keep proper maintenance records, and has created an alleged system of safety and quality assurance standards which, in reality, allows Boeing to circumvent any true standard of safety.

27. Boeing has continually and falsely represented to the federal government with the submission of these parts, that the parts have met the appropriate standards of law, safety and the Contract. Boeing has intentionally and willfully concealed the truth from the Air Force.

[ Id., ¶¶ 26–27]. In Paragraphs 29–48 of the Complaint, the Relator describes the system by which Boeing allegedly carried out its purported plan to substitute “inferior and less expensive parts” for the FAA approved parts that Relator contends are required under the contract. The Complaint asserts that “[t]hese parts are then passed on to the Air Force as if they were fully compliant, FAA certified parts.” [ Id., ¶ 47]. Relator contends that “[f]or at least the past ten years, Boeing has engaged in a pattern and practice of fraudulently submitting claims to the Air Force which represent that repairs and replacement of parts on the E–4 Aircraft have been compliant with the Contract and with FAA certifications.” [ Id., ¶ 48].

CLS Contract

6. In October 1986, the Air Force awarded Boeing a $20 million per year contract to perform depot maintenance and spares support on the four E–4 aircraft. [# 138, Defendant's Statement of Facts, ¶ 9 and Ex. 3, Draft Report at AFOSI 000355; # 160, Plaintiff's Response, ¶ 9 and Exs. 3 and 3A]. The contract number was F34601–86–0953. [# 138, Ex. 3 at AFOSI 000355]. (The contract is also referred to as the “CLS contract,” the “base contract” and the “E–4 Program Contract.”)

Repair of Fire Damaged Aircraft

7. On December 30, 1991, a ground fire caused $2.2 million in damages to one of the aircraft in the E–4 Program. Boeing began the repairs on the fire-damaged aircraft in early 1992 at Offutt Air Force Base (“Offutt”) in Nebraska. [# 138, Defendant's Statement of Facts, ¶ 10 and Ex. 3, Draft Report at AFOSI 000355; # 160, Plaintiff's Response, ¶ 10]. At the conclusion of the repair project, Boeing submitted a Certificate of Completion in which it stated that “all effort associated with Invoice 92AE069, dated 12/21/92 accomplished under CLIN ²4010, Contract F34601–86–C–0953, Option 4” had been completed in accordance with the Statement of Work and certified that “the supplies or services are of the quality specified and conform in all respect with the contract requirements.” [# 168, Defendant's Supplement to Reply Brief, Ex. 2].

Investigation Into Repairs of Fire–Damaged Aircraft

8. In September 1992, the Air Force Office of Special Investigations (“OSI”) initiated an investigation into Boeing's repairs of the fire-damaged E–4 aircraft. [# 138, Defendant's Statement of Facts, ¶ 11 and Ex. 4, Report of Investigation dated March 4, 1994 (“Report”) at AFOSI 000003–6]; # 160, Plaintiff's Response, ¶ 11]. The Department of Defense Inspector General's (“IG”) office later joined the investigation. [# 138, Defendant's Statement of Facts, ¶ 11 and Ex. 5, Significant Incident Report, April 10, 1994, at AFOSI 000617–18]; # 160, Plaintiff's Response, ¶ 11]. The investigation was based on information received from an unnamed Boeing employee who told the Air Force that Boeing had installed parts on the aircraft without complying with the quality assurance (“QA”) process. [# 138, Defendant's Statement of Facts, ¶ 11 and Ex. 4, Report at 1; # 160, Plaintiff's Response, ¶ 11].

9. According to the Report, the informant told the Air Force that Boeing had failed to conduct QA inspections of replacement parts placed on the aircraft by Boeing and that many of those parts did not have authentic Certificates of Compliance (COCs). [ Id. at AFOSI 000003]. Darlene...