U.S. ex rel. Sanders v. Allison Engine Co., Inc.

• Decision Date: 27 October 2009
• Docket Number: Case No. 1:99-cv-923.,Case No. 1:95-cv-970.
• Citation: 667 F.Supp.2d 747
• Parties: UNITED STATES of America ex rel. Roger L. SANDERS, et al., Relators, v. ALLISON ENGINE COMPANY, INC., et al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

667 F.Supp.2d 747

UNITED STATES of America ex rel. Roger L. SANDERS, et al., Relators, v. ALLISON ENGINE COMPANY, INC., et al., Defendants.

Case No. 1:95-cv-970.

Case No. 1:99-cv-923.

United States District Court, S.D. Ohio, Western Division, at Dayton.

October 27, 2009.

COPYRIGHT MATERIAL OMITTED

James Burdette Helmer, Jr., Paul B. Martins, Robert M. Rice, Helmer Martins, Rice & Popham Co., L.P.A., Gerald F. Kaminiski, Ass't U.S. Attorney, Cincinnati, OH, Donald Patrick McKenna, Jr., Scott A. Powell, Hare, Wynn, Newell & Newton LLP, Birmingham, AL, Joyce R. Branda, Michael F. Hertz, Paul J. Wogaman, U.S. Department of Justice, Civil Divison, Washington, DC, for Relators.

Glenn Virgil Whitaker, Victor A. Walton, Jr. Vorys Sater Seymour & Pease, Lawrence Robert Elleman, Thomas Jason Murphy, Dinsmore & Shohl, Cincinnati, OH, James A. Bensfield, Kara N. Schmidt, Peter B. Hutt, III, Miller & Chevalier, Chartered, Washington, DC, for Defendants.

ENTRY AND ORDER GRANTING DEFENDANTS' MOTION TO PRECLUDE RETROACTIVE APPLICATION OF 31 U.S.C. § 3729(a)(1)(B) OR TO DECLARE UNCONSTITUTIONAL FRAUD ENFORCEMENT AND RECOVERY ACT OF 2009, PUB. L. NO. 111-21, § 4(f) (Doc. # 716) AND LIFTING THE STAY OF BRIEFING ON THE ISSUE OF WHETHER THE RECORD ON THE QUALITY CASE SHOULD BE REOPENED AND WHAT SHOULD BE DONE IF THE RECORD IS NOT REOPENED

THOMAS M. ROSE, District Judge.

This is a qui tam action brought pursuant to the False Claims Act ("FCA") by Relators Roger L. Sanders and Roger L. Thacker against Defendants General Motors Corp. ("GM"), Allison Engine Co., Inc., Southern Ohio Fabricators and General Tool Co. The case against GM has been stayed due to GM's bankruptcy.

This case is the consolidation of two FCA suits alleging fraud in the negotiation and execution of subcontracts relating to the construction of United States Navy Arleigh Burke-class Guided Missile Destroyers. The first action, referred to by the parties as the "Quality Case," alleges that the Defendants submitted claims for payment despite knowing that the Generator Sets that they made for the Destroyers did not conform to contract specifications or Navy regulations. The second action, referred to by the parties as the "Pricing Case," alleges that the subcontractors withheld cost or pricing data during negotiations with the government's agent in violation of the Truth In Negotiations Act ("TINA") and the FCA.

This Court granted summary judgment to the Defendants on the Pricing Case. The Relators presented their Quality Case to a jury in January, February and March of 2005. At the close of Relator's case, this Court granted Defendants' Motion for Judgment As a Matter of Law on the grounds that the lack of evidence of any false claim presented to the government meant that no reasonable jury could find a violation of the FCA.

The Relators then appealed to the Sixth Circuit Court of Appeals. The Sixth Circuit affirmed this Court's grant of summary judgment on the Pricing Claim and reversed this Court's decision on the Quality Claim. United States ex rel. Sanders v. Allison Engine Co., Inc., 471 F.3d 610 (6th Cir.2006).

The Defendants then appealed the Sixth Circuit's decision on the Quality Case to the United States Supreme Court. The grant of summary judgment on the Pricing Case has not been appealed.

The Supreme Court vacated the Sixth Circuit's decision and remanded the case "for further proceedings consistent with this opinion." Allison Engine Co., Inc. v. U.S. ex rel. Sanders, ___ U.S. ___, 128 S.Ct. 2123, 2131, 170 L.Ed.2d 1030 (2008). In doing so, the Supreme Court held:

Contrary to the decision of the Court of Appeals below, we hold that it is insufficient for a plaintiff asserting a [31 U.S.C] § 3729(a)(2) claim to show merely that "[t]he false statement's use ... result[ed] in obtaining or getting payment or approval of the claim," or that "government money was used to pay the false or fraudulent claim." Instead, a plaintiff asserting a § 3729(a)(2) claim must prove that the defendant intended that the false record or statement be material to the Government's decision to pay or approve the false claim. Similarly, a plaintiff asserting a claim under § 3729(a)(3) must show that the conspirators agreed to make use of the false record or statement to achieve this end.

Id. at 2126(quoting United States ex rel. Sanders, 471 F.3d at 621).

The Supreme Court opinion was issued on June 9, 2008. On March 9, 2009, the Sixth Circuit remanded the case to this Court. (Doc. #709.) On April 24, 2009, this Court conducted a status conference. As a result of the status conference, a trial date of May 3, 2010, was set and a briefing scheduled on whether the record on the Quality Case should be reopened and what should be done if the record is not reopened. The Defendants filed their Memorandum on May 26, 2009. (Doc. # 710.) Further briefing on the issue was then stayed (doc. # 713) due to the passage and signing into law of the Fraud Enforcement and Recovery Act of 2009 ("FERA").

FERA was signed into law on May 20, 2009. Among other things, FERA includes amendments to the FCA. Prior to these amendments, any person was liable under 31 U.S.C. § 3729(a)(2) 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." This subsection of the FCA was amended by the FERA to provide that any person who "knowingly makes, uses or causes to be made or used, a false record or statement material to a false or fraudulent claim" is liable. 31 U.S.C. § 3729(a)(1)(B). Thus, the FERA amendments to the FCA eliminate the "to get" language and eliminate the words "paid or approved by the Government."

Although enacted on May 20, 2009, the FERA includes a retroactivity clause which provides that the amendments to the FCA identified above "shall take effect on the date of enactment and shall apply to conduct on or after the date of enactment, except that" the amendments identified above "shall take effect as if enacted on June 7, 2008, and apply to all claims under the False Claims Act (31 U.S.C. § 3729 et seq.) that are pending on or after that date" (the "retroactivity clause").

On July 21, 2009, the Defendants, sans GM, filed their Motion To Preclude Retroactive Application of 31 U.S.C. § 3729(a)(1)(B) or Alternatively To Declare FERA Unconstitutional. (Doc. # 716.) The Government has filed a Statement of Interest (doc. # 718) and the Relators have responded in opposition (doc. # 719). The Defendants have Replied. (Doc. # 726.) Thus, the Defendants' Motion To Preclude Retroactive Application of 31 U.S.C. § 3729(a)(1)(B) or, Alternatively To Declare FERA Unconstitutional is fully briefed and ripe for decision.

The Defendants now argue that a reading of the plain language indicates that the amendments identified above do not apply to this case and that application of the retroactivity clause to them would violate the Ex Post Facto Clause and the Due Process Clause of the U.S. Constitution. Both the Government and the Relators argue otherwise.

Defendants' arguments regarding a reading of the plain language of the amendments and regarding violation of the Ex Post Facto Clause have merit and will be further addressed. Defendants' Due Process Clause argument need not be and is not addressed herein.

The Plain Language

The Defendants argue that the plain language of the retroactivity clause does not make the amendments to the FCA retroactive to their case. However, Congress may enact laws with retrospective effect so long as the laws are within constitutional limits. Immigration and Naturalization Service v. St. Cyr, 533 U.S. 289, 316, 121 S.Ct. 2271, 150 L.Ed.2d 347 (2001)(citing Bowen v. Georgetown University Hospital, 488 U.S. 204, 208, 109 S.Ct. 468, 102 L.Ed.2d 493 (1988)).

A statute may not be applied retroactively absent a clear indication from Congress that it intended such a result. Id. When reading the plain language, statutory definitions normally control the meaning of statutory words. Lawson v. Suwannee Fruit & S.S. Co., 336 U.S. 198, 201, 69 S.Ct. 503, 93 L.Ed. 611 (1949). Finally, statutory language has meaning only in context. Graham County Soil & Water Conservation District v. United States, 545 U.S. 409, 415, 125 S.Ct. 2444, 162 L.Ed.2d 390 (2005).

The standard for finding such a clear indication is a demanding one. Id. The retroactivity language must be so clear that it can sustain only one interpretation. Id.

The analysis turns then to the FCA retroactivity clause placed in FERA by Congress. The retroactivity language that is relevant here is found in section 4(f)(1) of FERA which provides that:

The Amendments made by this section shall take effect on the date of enactment of this Act and shall apply to conduct on or after the date of enactment, except that — (1) subparagraph (B) of section 3729(a)(1) of title 31, United States Code, as added by subsection (a)(1), shall take effect as if enacted on June 7, 2008, and apply to all claims under the False Claims Act (31 U.S.C. 3729 et seq.) that are pending on or after than date ...

Pub. L. No. 111-21, section 4(f).

Subparagraph (B) of section 3729(a)(1) of title 31 is one of the FCA provisions which was changed by FERA and now provides that any person who knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim is liable under the FCA. Thus, Subparagraph (B) of section 3729(a)(1) of title 31 purportedly takes effect on all FCA claims pending on or after June 7, 2008.

The Supreme Court issued its order in this case on June 9, 2008. Thus, this case was pending on June 7, 2008, the retroactivity date provided in FERA. However, the retroactivity date in FERA applies to "claims" pending on June 7, 2008. So the issue becomes whether Congress intended the retroactivity language to apply to "cases" pending on June 7, 2009, or to "claims" pending on June 7,...