U.S. ex rel. Roby v. Boeing Co.

• Decision Date: 24 March 2000
• Docket Number: No. C-1-95-375.,C-1-95-375.
• Parties: UNITED STATES of America ex rel. Brett ROBY, Plaintiff, v. The BOEING COMPANY, Defendant.
• Court: U.S. District Court — Southern District of Ohio

100 F.Supp.2d 619

UNITED STATES of America ex rel. Brett ROBY, Plaintiff, v. The BOEING COMPANY, Defendant.

No. C-1-95-375.

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

March 24, 2000.

James Burdette Helmer, Jr., Helmer Martins & Morgan—2, Fourth & Walnut Centre, Cincinnati, OH, David Phillip Wilson, Michael A Havard, Provost & Umphrey, Beaumont, TX, Charles V Firth, Reuben A Guttman, Daniel J Guttman, Provost & Umphrey, Washington, DC, James Edward Wimberley, McPherson Monk Hughes Bradley & Wimberley, Nederland, TX, for Brett Roby.

Michael S Child, U.S. Department Of Justice, Washington, DC, for U.S.

Jerome Charles Randolph, Keating Muething & Klekamp—1, Cincinnati, OH, Curtrice M White, Todd W Rosencrans, Steve Y Koh, Steven S Bell, Mark H Lough, Gary DiBiance, Perkins Coie, Seattle, WA, Mitchell S Ettinger, Bonnie J Austin, Martin T Moe, Edward J Meehan, Raina E Burbaker, Jennifer L Spaziano, Gary DiBianco, Skadden Arps Slate Meagher & Flom, Caprice L Roberts, Skadden Arps Slate Meagher & Flom LLP, Washington, DC, for Boeing Company.

Jerome Charles Randolph, Keating Muething & Klekamp-1, Cincinnati, OH, for Speco Corporation.

ORDER

SPIEGEL, Senior District Judge.

This matter is before the Court on Defendant's Motion for Summary Judgment (doc. 456); the Government's and Relator's Response (doc. 484); Defendant's Reply (doc. 491); the Government's and Relator's Motion for Partial Summary Judgment in Regards to the Liability of Helicopters Sold with Defective Gears (doc. 457); Defendant's Response (doc. 481); the Government's and Relator's Reply (doc. 495); the Government's and Relator's Motion for Partial Summary Judgment as to Defendant's Third Affirmative Defense in Regards to the High-Value Items Clause and Insurance Coverage (doc. 458); Defendant's Response (doc. 482); the Government's and Relator's Reply (doc. 493); the Government's and Relator's Motion for Partial Summary Judgment in Regards to Defendant's Fourth, Eighth, and Twelfth Affirmative Defenses (doc. 459); Defendant's Response (doc. 483); and the Government's and Relator's Reply (doc. 492).

In addition, the Parties have also filed the following supplements or amendments to their original motions for summary judgment: (1) the Government's and Relator's Brief of Supplemental Authority in Regards to its Motion for Summary Judgment (doc. 514); (2) the Government's and Relator's Addenda/Amended Exhibits/Indexes/Amendments to their Joint Motions for Partial Summary Judgment (docs. 462, 476, 498, 513 & 514); and (3) Defendant's Motion to file a sur-reply to the Government's and Relator's Reply Brief (doc. 509).

Furthermore, this Court held a hearing in this matter on August 12, 1999 (doc. 521).

BACKGROUND

On May 22, 1995, qui tam relator,¹ Brett Roby (hereinafter, "Relator"), filed this action under seal pursuant to Title 31 U.S.C. § 3730(b) on behalf of himself and the United States Government (hereinafter, "the Government" or "the United States") in the United States District Court for the Southern District of Ohio (doc. 2). Relator alleges that The Boeing Company (hereinafter, "Boeing" or "Defendant") and its supplier, The Speco Corporation (hereinafter, "Speco"),² violated the False Claims Act, Title 31 U.S.C. § 3729, et seq., by manufacturing and selling defective transmission gears to the United States via Boeing's CH-47(D) Chinook Army helicopters³ (hereinafter, "CH-47(D) helicopters") (Id.). Speco manufactured the allegedly defective gears at its Springfield, Ohio facility before the gears were then installed by Boeing into the CH-47(D) helicopters. Those helicopters were then provided to the Government by Boeing (Id.).

On April 30, 1997, the Government intervened and filed an Amended Complaint against Boeing (doc. 34). The Amended Complaint was unsealed on May 1, 1997. In the Amended Complaint, the Government alleges that Speco manufactured defective, transmission gears at its Springfield, Ohio facility before Boeing installed the gears into the CH-47(D) helicopters, and, thereafter, supplied the defective gears and helicopters to the United States Army (Id.).

According to the allegations contained in the Amended Complaint, in 1985, Defendant contracted with the Government to "re-manufacture" or "re-convert" its medium-lift helicopter fleet, consisting of appropriately 400 helicopters, into what is now known as the CH-47(D) helicopter (doc. 34). Over a period of time, Defendant entered into two multi-year contracts for the modification or conversion of the Army's Chinook helicopter fleet, at a total project cost of approximately $2 billion dollars (Id.). Among the modifications made during the re-manufacturing of the helicopters were the use of Defendant's proprietary steel alloy, BMS 7-223, known as "Vasco," which was to be used as the engine and combining transmission gears for the modified helicopters (Id.).

The Government and Relator allege in Count I of the Amended Complaint that Defendant submitted false claims in violation of the False Claims Amendments Act as prescribed under Title 31 U.S.C. §§ 3729-3133, as amended by Pub.L. 99-562, 100 Stat. 3153 (1986) (doc. 34). Specifically, the Government contends that in 1991, one of the Speco-made gears failed in flight, while in service in Saudi Arabia, leading to the total loss of a CH-47(D) helicopter and all of its contents at an estimated loss of approximately $10 Million (Id.).⁴ In addition, the Government alleges that in 1993, another Speco-made gear failed in another helicopter incident resulting in a hard landing near Ft. Meade, Maryland,⁵ causing approximately $1 million in damage to that helicopter (Id.).⁶

Relator alleges that at a total cost to the United States of about two billion dollars ($2,100,000,000), Boeing re-manufactured the Army's fleet of Chinook CH-47 A/B/C model helicopters into Chinook CH-47(D) and MH47D/E helicopters, and the contracted work to those helicopters was performed in an "incompetent and dangerous manner" by Defendant (see docs. 34 & 367). Moreover, Relator asserts that each of these "unsuitably, re-manufactured helicopters" were delivered by Boeing to the Government by operation of a claim for payment in the form of a "Standard Form DD250" that falsely represented that the contracted helicopters conformed to all of the specified contract requirements (Id.). Relator avers that it has evidence that Defendant acted in a reckless manner by installing the defective gears without adequate inspection (Id.). For example, Relator alleges that, Boeing for at least ten years prior to the Saudi crash had prior knowledge that the transmission helicopter gears were prone to certain grinding cracks and breakage (Id.). Relator further alleges that the material from which the gears were made are especially susceptible to exactly the kind and type of burning and cracking that resulted in the crash of Aircraft 89-0165 (Id.).

Moreover, the Government and Relator aver in the Amended Complaint that, "[b]y virtue of the acts described above, Boeing, by and through its officers, agents, and employees, knowingly submitted, and caused to be submitted, false or fraudulent claims for payment or approval to [its] officers, employees, or agents of the United States Government" (doc. 34). The Government concludes Count I with the contention that "[b]y reason of these payments made upon these false claims, the United States Government has been damaged as a result of Defendant's violations of the False Claims Act (hereinafter, the "FCA" or the "Act"), arising under 31 U.S.C. §§ 3729(a)(1), (2), (3) & (7), for damages to be determined at trial" (Id.).

The Amended Complaint further asserts claims against Defendant for: (1) payment by mistake; (2) unjust enrichment; (3) breach of contract; and (4) common law fraud (Id.). The Government seeks to recover treble damages based on the value of the first CH-47(D) helicopter and its contents, for the cost of repairing the second aircraft, and to treble those damages under the False Claims Act of 1986 (Id.).⁷ In addition, the Government asserts that it is entitled to treble damages for the delivery of other U.S. Army Chinook helicopters with allegedly non-conforming engine transmission gears that were manufactured by Speco from 1987 to 1995,⁸ and statutory penalties of $5,0000 to $10,000 for the submission of each purportedly false claim for the helicopters in question (Id.).

In its Answer, Defendant submits a general denial of the Government's allegations of false claims, violations of the False Claims Act, and the resulting compensatory and statutory damages (doc. 161). Specifically, Defendant counters the allegations contained in the Amended Complaint by asserting a total of twelve (12) affirmative defenses that would individually or collectively relieve Defendant of all liability from the Government's claims (Id.).⁹ For example, Defendant's Third Affirmative Defense originally stated that, the "damages sought by the [G]overnment are barred by its inclusion of the High Value Items Clause in the prime contract with Boeing" (Id.).¹⁰ Furthermore, Defendant's Fifth Affirmative Defense originally stated that, the "United States cannot recover damages under the False Claims Act for the two helicopters, or their contents, which the [G]overnment alleges were lost or damaged as a consequence of defective parts...." due to the fact that consequential damages are not recoverable under the FCA (doc. 340). Defendant asserts that, the False Claims Act precludes recovery for product defects, consequential damages¹¹, or any other recovery not found in the statute itself (Id.).¹²

The Court will now address the Parties' cross-motions for summary judgment in the order of their filing (see docs. 456, 457, 458 & 459) and we will make our determination as to the appropriateness of each motion in Sections I-IV of the Discussion.

STANDARD OF REVIEW

The narrow question that we must decide on a motion for summary judgment is...