U.S. ex rel. Purcell v. Mwi Corp.

Decision Date06 November 2007
Docket NumberCivil Action No. 98-2088(RMU).
Citation520 F.Supp.2d 158
PartiesUNITED STATES of America ex rel. Robert R. PURCELL, Plaintiff, v. MWI CORPORATION and J. David Eller, Defendants.
CourtU.S. District Court — District of Columbia

Joseph J. Monica, Duane Morris, David B. Wiseman, Michael D. Granston, U.S. Department of Justice, Roscoe Howard, Jr., Troutman Sanders LLP, Keith V. Morgan, U.S. Attorney's Office, Washington, DC, for Plaintiff.

Michael J. Madigan, Evangeline C. Paschal, Akin, Gump, Strauss, Hauer & Feld, LLP, Washington, DC, James F. Carroll, Conrad & Scherer, LLP, Ft. Lauderdale, FL, for Defendants.

MEMORANDUM OPINION

GRANTING DEFENDANT ELLER'S MOTION FOR SUMMARY JUDGMENT; DENYING DEFENDANTS' JOINT MOTION FOR SUMMARY JUDGMENT; GRANTING IN PART THE PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT; GRANTING THE PLAINTIFF'S MOTION TO FILE A SUR-REPLY

RICARDO M. URBINA, District Judge.

I. INTRODUCTION

Cross motions for summary judgment present the court with this qui tam1 action involving pump equipment sales to Nigeria. Robert Purcell (the "relator") brought suit pursuant to the False Claims Act ("FCA") against his former employer, Moving Water Industries, Inc. ("MWI"), a manufacturer of industrial pumps. The government subsequently intervened, bringing suit on its own accord against MWI and its former president and majority shareholder, J. David Eller (collectively, the "defendants"). At its core, the complaint alleges that the defendants failed to disclose irregular commissions paid to their Nigerian sales agent Alhaji Mohammed Indimi from 1992-1994, in contravention of certifications signed by the defendants to the United States Export-Import Bank ("Ex-Im"), which helped finance the pump sales.

Agreeing with Eller that the FCA claims against him are time barred and that the common law claims fail to show that the government conferred a benefit on him, the court grants his motion for summary judgment and denies the government's motion for partial summary judgment as against him. Agreeing with the government that the omission of the Indimi commissions constituted a violation of the terms of the supplier's certificates, the court grants the government's motion for partial summary judgment as against MWI and, accordingly, denies the defendants' joint motion for summary judgment.

II. BACKGROUND
A. Factual History

The following is undisputed. In the early 1990s MWI, a Florida corporation, arranged to sell irrigation pumps and other equipment to seven Nigerian states. Gov't's Compl. ¶¶ 8, 11. To finance the pump sales, Ex-Im made eight loans totaling $74.3 million to Nigeria in 1992. Id. ¶¶ 12-13. MWI received regular payments through a London bank which was then reimbursed by Ex-Im. Id. ¶ 14.

Before Ex-Im would approve the bank reimbursements, however, it required MWI to submit a "supplier's certificate" certifying that it had not paid any irregular commissions or other payments in connection with the pump sales. Id. ¶¶ 15-16. In turn, before the bank would release each payment to MWI, the company had to submit an additional supplier's certificate again certifying that it had not paid commissions or other payments in connection with the pump sales. Id. ¶ 17. Accordingly, MWI submitted supplier's certificates to obtain Ex-Im approval of the bank reimbursements, and submitted 48 additional supplier's certificates for each of its payments from the bank. Id. ¶¶ 16, 18. On the supplier's certificates, 43 of which were signed by Eller, MWI certified that it had not paid any irregular commissions or made other payments in connection with the pump sales. Id. ¶¶ 19, 21.

The government alleges that these certifications were false. Id. ¶¶ 35. Specifically, the government claims that the defendants failed to disclose on the supplier's certificates that they had paid $28 million in "excessive, highly irregular" commissions to their Nigerian sales representative, Indimi, to obtain the pump sales. Id. ¶¶ 22-27. The government contends these commissions represented 34% of the sales price of the pumps. Gov't's Mot. for Partial Summ. J. at 1. MWI contends that Indimi's compensation totaled no more than $26.2 million, reflecting aggregate commissions of 31.75%. Defs.' Mot. for Summ. J. at 3. At the time of this project, MWI's policy was to pay its other sales agents a commission of 10% of the standard discounted sale price plus half of any amount received over that price. Gov't's Mot. for Partial Summ. J. at 7, Ex. 10 ("Roegiers Dep.") at 11-12. With the exception of Indimi's commission, MWI's commission payments between January 1, 1990 and December 31, 1994 — a period encompassing the Nigerian sales and 70 other MWI transactions — averaged $13,956 or 9%. Gov't's Mot. for Partial Summ. J. at 8.

B. Procedural History

The FCA imposes liability for civil penalties and treble damages on any person who submits or causes false claims to be submitted to the federal government. 31 U.S.C. § 3729. Under § 3730 of the FCA, a private person — known as the "relator" — may bring an FCA action in the name of the government. Id. § 3730(h). The relator must file the complaint in camera and under seal, and may not serve it upon the defendant until the court so orders. Id. The relator must serve a copy of the complaint on the government, however, which then has 60 days (subject to court-approved extensions of time) to elect to intervene in the case. Id. If the government elects to intervene, it has primary responsibility for prosecuting the action and is not bound by the actions of the relator, who may continue as a party to the action. Id. § 3730(c). If the government chooses not to intervene, the relator has the right to conduct the action. Id.

Section 3731(b) of the FCA establishes a two-pronged statute of limitations for FCA actions. 31 U.S.C. § 3731. First, § 3731(h)(1) limits FCA actions to those brought within six years of the date of the FCA violation. Id. § 3731(b)(1). Alternatively, § 3731(b)(2) limits FCA actions to those brought within three years of the date "when facts material to the right of action are known or reasonably should have been known by the official of the United States charged with responsibility to act[.]" Id. § 3731(b)(2).

For the purposes of Eller's motion for summary judgment, the content and filing date of the two complaints are particularly significant, and therefore merit comparison. On August 27, 1998, nearly four years after the defendants submitted their last supplier's certificate, the relator, a former management-level employee of MWI, filed his complaint and transmitted to the Attorney General a statement of material evidence comprising inter alia: the relator's complaint describing Eller as the "current President and Chief Executive Officer" of MWI as well as its owner, through the J. David Eller & Children Trust, of 100% of MWI's stock, Relator's Compl. ¶ 19; an allegedly false supplier's certificate executed by Eller, Def. Eller's Statement of Undisputed Mat. Facts ("Eller's Statement") ¶ 8; and a commission agreement signed by Eller providing that Indimi would receive a commission of 30%, Eller's Mot. for Summ. J. at 10. In his complaint, the relator names MWI as the sole defendant based on one count that describes several FCA violations. Id. ¶¶ 4, 11-17. Specifically, the relator's complaint describes MWI's pump sales to the seven Nigerian states, the $74 million in Ex-Im loan guarantees, the allegedly fraudulent supplier's certificates and the allegedly undisclosed commissions to MWI's sales representative that found their way to various Nigerian officials. E.g., id. ¶¶ 11-13, 15-16. The complaint also discusses MWI's increased use of Ex-Im financing for its Nigerian sales, alleges that MWI attempted to promote sales in Nigeria by creating an artificial need for its equipment, and claims that MWI developed deceptive equipment descriptions to avoid price comparisons with similar goods. Id. ¶¶ 23-31, 47-49. The relator's complaint contains one count under FCA charging MWI with knowingly causing the submission of false or fraudulent claims for payment or approval, knowingly making false records or statements to obtain government payment of false or fraudulent claims and conspiring to defraud the government. Id. ¶¶ 50-55. The relator seeks treble damages and civil penalties under the FCA. Id. ¶¶ 24-25.

The government filed its complaint on April 4, 2002, nearly eight years after the defendants submitted their last certificate. Gov't's Compl. ¶¶ 11-45. In contrast to the relator, the government names both MWI and Eller as defendants. Id. ¶¶ 6-7, 52-56. It also contains not one but four counts relating to the defendants' alleged actions. Id. ¶¶ 46-56. Of the four counts, the first two allege the same FCA violations as the relator's complaint: (1) knowingly causing the presentation of false or fraudulent claims for payment or approval and (2) knowingly making false records and statements to obtain government payment of false or fraudulent claims. Id. ¶¶ 46-51. The third and fourth counts ("the common law claims") allege, respectively, that the defendants were unjustly enriched by the United States, which mistakenly made payments to them. Id. ¶¶ 52-56. The government seeks treble damages and civil penalties under the FCA and common law equitable principles. Id. ¶¶ 1, 57.

Eller moved to dismiss the government's FCA allegations against him on the grounds that they were time barred. Id. ¶ 21. On March 25, 2003, the court denied the motion, finding that, in the current pre-discovery posture of the case, it lacked the factual "detail necessary to determine when the official of the United States charged with responsibility to act in the circumstances knew or should have known of the facts material to the right of actions." Mem. Op. (Mar. 25, 2003) at 14 (internal quotations omitted). Discovery closed on ...

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