U.S. ex rel. Atkinson v. Pennsylvania Shipbuilding, No. CIV.A.94-7316.

CourtUnited States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
Writing for the CourtYohn
PartiesUNITED STATES of America <I>ex rel.,</I> Paul E. ATKINSON, Plaintiff, v. PENNSYLVANIA SHIPBUILDING CO. and First Fidelity Bank, N.A., Defendants.
Docket NumberNo. CIV.A.94-7316.
Decision Date30 August 2002
255 F.Supp.2d 351
UNITED STATES of America ex rel., Paul E. ATKINSON, Plaintiff,
v.
PENNSYLVANIA SHIPBUILDING CO. and First Fidelity Bank, N.A., Defendants.
No. CIV.A.94-7316.
United States District Court, E.D. Pennsylvania.
August 30, 2002.

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United States of America, ex rel, Paul E. Atkinson, Philadelphia, PA, Pro se.

Bijan Amini, Storch, George W. Croner, Janis Ettinger, Norman Trabulus, Steven G. Storch, Amini & Munves, PC, New York City, for Plaintiff.

David W. Engstrom, Harkins Cunninham Philadelphia, PA, John T. Boese, Fried Frank Harris, et al, Joseph 0. Click, Dyer, Margaret A. Dillenburg, Ellis & Joseph, Washington, DC, Matthew Miner, Dechert Price & Rhoads, Philadelphia, PA, Melissa E. Lamb, Fried Frank Harris, et al., Michael Joseph, Patrick 0. Cavanaugh, Richard A. Kirby, Dyer, Ellis & Joseph, Washington, DC, Thomas H. Lee, Dechert Price Rhoads, Gregory H. Mathews, Joseph G. Derespino, Derespino & Dougher PC, Philadelphia, PA, for Defendants.

Memorandum and Order

YOHN, District Judge.


I. Factual Background and Procedural History

This is a qui tam action brought by Paul E. Atkinson ("Atkinson," "plaintiff or "relator") pursuant to the False Claims Act ("FCA"), 31 U.S.C. § 3729. The case, originally filed on December 5, 1994,1 requires the court to engage in a lengthy, complicated legal analysis of various issues related to the interpretation of the FCA, federal pleading and jurisdictional standards, and the occasionally uneasy interaction among them. Moreover, it features an extensive factual background and procedural history, both of which are delineated at length in the court's Aug. 24, 2000 memorandum in this matter. See Atkinson v. Pennsylvania Shipbuilding Co., 2000 WL 1207162, at *l-6 (E.D.Pa. Aug.24, 2000). Accordingly, I will not reiterate that discussion here. Before addressing the motions presently at bar, however, I will briefly summarize the basis for the present dispute, the import of the August, 2000 Atkinson holding, and the developments in the case since the issuance of that opinion.

A. Factual Background

This lawsuit stems from a pattern of fraud allegedly perpetrated by defendants Pennsylvania Shipbuilding Co. ("Penn Ship") and First Fidelity Bank, N.A. ("Fidelity") on the United States Navy ("Navy") in connection with the construction of several Henry J. Kaiser class fleet Oiler ships ("Oilers"). Third Amended Complaint ("Complaint") 1113. As occurs in the context of most government contracts, bids were solicited by the Navy for the construction of the Oilers.2 Id. 138. Although Penn Ship desired the Oiler contract, Atkinson asserts, it was financially weak, a condition that was exacerbated by the use of a significant portion of its assets to "prop up" Levingston Shipbuilding Company ("Levingston"), a company that, like Penn Ship, was under the control of Edward E. Paden.3 Id. H39. This weakness,

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if revealed, would have prevented Penn Ship from obtaining the contract, as it bore directly on the ability of the Paden companies generally, and Penn Ship specifically, to perform the Oiler contract, and thus on the likelihood of a default. Id. 1148. Accordingly, plaintiff continues, Penn Ship undertook a ten year, multifaceted pattern of fraudulent misrepresentations and asset transfers, the purpose of which was to "deceivef ] the Navy into concluding that Penn Ship's financial condition was better than it in fact was, and, in particular, [to] conceal[] from the Navy the extent of Levingston's financial weakness and the consequences of that weakness to Penn Ship." Id. 1139.

Atkinson avers that this pattern of deception commenced prior to Penn Ship's submission of its Oiler contract bid. Id. 1142. Specifically, he contends that Penn Ship's financial statement for fiscal 1984, dated September 30, 1984, omitted the required loss contingency relating to the impairment of its Levingston receivable. Id. UH43-4A. He asserts that Penn Ship's December 31, 1984 interim financial statement similarly lacked such a loss contingency, and that this statement also failed to disclose Penn Ship's guaranties of Levingston's worker's compensation insurance obligations. Id. ¶ 49.

After the close of the bidding period, it was revealed that Penn Ship had submitted the lowest bid, a result that Atkinson alleges was made possible by Penn Ship's knowing, fraudulent disregard of the cost of architectural drawings and the attendant delay that the creation of these schematics would impose before construction of the ships could begin. Id. 1157. Before the Oiler contract was awarded to Penn Ship, however, the Navy requested that Penn Ship secure it against the reprocurement costs it would incur in the event of a Penn Ship default. Id. 1161. Penn Ship provided the desired security interest to the Navy in the form of a Trust Indenture, with Fidelity serving as the trustee, and the trust res including security agreements and mortgages4 on all but seven acres of the Chester ship yard ("Chester yard")-in which Penn Ship's ship building operations were centered — and in some of the equipment used by Penn Ship.5 Id. UK 62-65. Atkinson avers that on March 15, 1985, as a means of inducing the Navy to accept the Trust Indenture-without which the Oiler contract would not have been awarded to Penn Ship-Thomas Weller, the chairman of Penn Ship, sent a letter ("the Weller letter") to Christopher Pigott, a financial analyst of Naval Sea Systems Command and a member of the team responsible for the financial analysis of Penn Ship's proposal. Id. ¶ 64. In this letter, plaintiff asserts, Weller intentionally made several false representations to the Navy regarding the degree of security afforded the Navy by the Trust Indenture.

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Id. HI 67-69. On March 26, 1985, the Navy assented to the terms of the Trust Indenture, and on May 6, 1985, it awarded the Oiler contract to Penn Ship, thereby rendering the Indenture immediately effective.

Relator contends, however, that Fidelity and Penn Ship conspired to defeat the Trust Indenture. This allegedly transpired, in Penn Ship's case, by intentionally failing to record-and thus perfect-the security instruments specified in the Indenture. Fidelity's asserted role in the conspiracy consisted of 1) convincing the Navy not to mandate the inclusion of a provision within the Indenture that would have required the delivery by Fidelity of "copies of all recording documents to the Navy"6; 2) failing to insist that the security interests be perfected; 3) not perfecting those interests itself; and 4) failing to inform the Navy that they had not been perfected. Id. UK 70-70K. As a result of these fraudulent actions, Atkinson alleges, the Navy was unaware that it was not secured against potential reprocurement costs.7 Plaintiff contends that based on this misunderstanding and its false impression of Penn Ship's financial well being, both of which were fraudulently induced, the Navy exercised during February, 1986 its option to order a third, and then, during February, 1987, a fourth Oiler from Penn Ship. Id. UK 76-77.

During late 1987, with the first Oiler being due for delivery in March, 1989, Penn Ship informed the United States that it was experiencing financial difficulty, a direct consequence, relator asserts, of the matters misrepresented by Penn Ship to the Navy prior to the award of the Oiler contract. Id. ¶ 78. It consequently requested permission to transfer the two option Oilers to another ship builder. Id. H 79. On June 5, 1988, the Navy agreed, and signed Modification 5 ("Mod.5") to the contract. Id. 1180. Besides eliminating the two option Oilers from the contract, Mod. 5 restructured Penn Ship's compensation arrangement, changing it from a cost reimbursement incentive price contract for $222,476,849 for the original two Oilers to a fixed price contract for $331,400,000 for the same two ships. Id. H 81. Atkinson asserts that Mod. 5, and the resultant increase in the Navy's overall costs, were a direct consequence of Penn Ship's misrepresentations regarding its financial condition and the degree of security provided by the Trust Indenture. Id. H82.

Also allegedly caused by these false representations was Modification 11 ("Mod.ll") to the Oiler contract, which was executed on January 26, 1989, and which similarly was asserted by Penn Ship to have been necessitated by its worsening financial status. Id. 1183. Pursuant to the terms of Mod. 11, a $10 million payment was advanced by the Navy to Penn Ship. As a means of securing this advance payment, Penn Ship granted the Navy a $17 million secured interest in a large floating drydock located at the Chester yard. Id. UH 83, 86.

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On August 24, 1989, the United States and Penn Ship agreed to again modify the Oiler contract, and they signed Modification 17 ("Mod. 17" or the "default Mod."). Id. K 85. The default Mod. terminated the Trust Indenture and transferred the two original Oilers to another shipyard. Id. Although Atkinson avers that the default Mod. "substantially released Penn Ship from liability under the contract," Penn Ship remained obligated to compensate the Navy for the reprocurement costs and other expenses occasioned by its default. Id. II86. As a means of securing this remaining obligation, Penn Ship agreed to an increase of $2 million in the Navy's security interest in the floating drydock. Id. It also agreed to exert a good faith effort to sell within the ensuing thirteen months some of the land and buildings that comprised the Chester yard and the Sun 800, a massive floating derrick owned by Penn Ship, and to apply a portion of the proceeds of such a sale toward the Navy's reprocurement costs. Id. 1188. To secure its new obligation to attempt to liquidate these assets, Penn Ship conveyed to the...

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28 practice notes
  • U.S. ex rel. Taylor v. Gabelli, No. 03 Civ.8762(SAS).
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • July 29, 2004
    ...S.Ct. 379, 87 L.Ed. 443 (1943)). 102. Mikes, 84 F.Supp.2d at 432. 103. United States ex rel. Atkinson v. Pennsylvania Shipbuilding Co., 255 F.Supp.2d 351, 371-72 (E.D.Pa.2002) (quotation marks and citation 104. Mikes, 84 F.Supp.2d at 432 (citing Blusal Meats, Inc. v. United States, 638 F.Su......
  • United States v. CVS Caremark Corp., CIVIL ACTION NO. 09-4672
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    • United States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
    • December 20, 2012
    ...which ultimately lead to a request or demand for money or property." United States ex rel. Atkinson v. Pa. Shipbuilding Co., 255 F. Supp. 2d 351, 365 (E.D. Pa. 2002). Defendants now allege that, although the PDE data supplied information to CMS, it did not request or demand payment and, thu......
  • United States ex rel. Spay v. CVS Caremark Corp., Civil Action No. 09–4672.
    • United States
    • United States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
    • December 20, 2012
    ...which ultimately lead to a request or demand for money or property.” United States ex rel. Atkinson v. Pa. Shipbuilding Co., 255 F.Supp.2d 351, 365 (E.D.Pa.2002). Defendants now allege that, although the PDE data supplied information to CMS, it did not request or demand payment and, thus, i......
  • Miller v. Holzmann, Civil Action No. 95-1231 (RCL).
    • United States
    • United States District Courts. United States District Court (Columbia)
    • June 23, 2008
    ...Healthcare Corp., 251 F.Supp.2d 114, 120 (D.D.C.2003) (Lamberth, J.); United States ex rel. Atkinson v. Penn. Shipbuilding Co., 255 F.Supp.2d 351, 405 (E.D.Pa.2002). If the defendant satisfies the FCA's knowledge standard, ordinary causation principles apply— his conduct must be at least a ......
  • Request a trial to view additional results
28 cases
  • U.S. ex rel. Taylor v. Gabelli, No. 03 Civ.8762(SAS).
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • July 29, 2004
    ...S.Ct. 379, 87 L.Ed. 443 (1943)). 102. Mikes, 84 F.Supp.2d at 432. 103. United States ex rel. Atkinson v. Pennsylvania Shipbuilding Co., 255 F.Supp.2d 351, 371-72 (E.D.Pa.2002) (quotation marks and citation 104. Mikes, 84 F.Supp.2d at 432 (citing Blusal Meats, Inc. v. United States, 638 F.Su......
  • United States v. CVS Caremark Corp., CIVIL ACTION NO. 09-4672
    • United States
    • United States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
    • December 20, 2012
    ...which ultimately lead to a request or demand for money or property." United States ex rel. Atkinson v. Pa. Shipbuilding Co., 255 F. Supp. 2d 351, 365 (E.D. Pa. 2002). Defendants now allege that, although the PDE data supplied information to CMS, it did not request or demand payment and, thu......
  • United States ex rel. Spay v. CVS Caremark Corp., Civil Action No. 09–4672.
    • United States
    • United States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
    • December 20, 2012
    ...which ultimately lead to a request or demand for money or property.” United States ex rel. Atkinson v. Pa. Shipbuilding Co., 255 F.Supp.2d 351, 365 (E.D.Pa.2002). Defendants now allege that, although the PDE data supplied information to CMS, it did not request or demand payment and, thus, i......
  • Miller v. Holzmann, Civil Action No. 95-1231 (RCL).
    • United States
    • United States District Courts. United States District Court (Columbia)
    • June 23, 2008
    ...Healthcare Corp., 251 F.Supp.2d 114, 120 (D.D.C.2003) (Lamberth, J.); United States ex rel. Atkinson v. Penn. Shipbuilding Co., 255 F.Supp.2d 351, 405 (E.D.Pa.2002). If the defendant satisfies the FCA's knowledge standard, ordinary causation principles apply— his conduct must be at least a ......
  • Request a trial to view additional results

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