U.S. ex rel. Doe v. Dow Chemical Co., No. 02-30790.

• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)
• Writing for the Court: Edith Brown Clement
• Citation: 343 F.3d 325
• Parties: UNITED STATES of America, ex rel. John DOE, Plaintiff-Appellant, v. DOW CHEMICAL COMPANY, Defendant-Appellee.
• Docket Number: No. 02-30790.
• Decision Date: 13 August 2003

343 F.3d 325 UNITED STATES of America, ex rel. John DOE, Plaintiff-Appellant,
v.
DOW CHEMICAL COMPANY, Defendant-Appellee. No. 02-30790. United States Court of Appeals, Fifth Circuit. August 13, 2003. Revised August 29, 2003.

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COPYRIGHT MATERIAL OMITTED

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Stephen Todd Hoover, Hoover Law Firm, Baton Rouge, LA, for Plaintiff-Appellant.

Richard Ben Foster, Kent B. Ryan, Lemle & Kelleher, New Orleans, LA, John A. Gray, The Dow Chemical Co., Plaquemine, LA, for Defendant-Appellee.

Edward Himmelfarb, Douglas N. Letter, U.S. Dept. of Justice, Civ. Div.-App. Staff, Washington, DC, for U.S., Amicus Curiae.

David Lawrence Bateman, Law Office of David L. Bateman, Baton Rouge, LA, for Bain, Amicus Curiae.

Luis A. Leitzelar, Murphy J. Foster, III, Cade Aaron Evans, Breazeale, Sachse & Wilson, Baton Rouge, LA, for Georgia Gulf Corp., Amicus Curiae.

Appeal from the United States District Court for the Middle District of Louisiana.

Before WIENER, CLEMENT, and PRADO, Circuit Judges.

EDITH BROWN CLEMENT, Circuit Judge:

In this case, appellant contends that he stated a valid reverse false claim under the False Claims Act, 31 U.S.C. § 3729(a)(7). The district court dismissed appellant's claim for failure to plead with particularity under Federal Rule of Civil Procedure 9(b) and failure to state a claim on which relief can be granted under Federal Rule of Civil Procedure 12(b)(6), and denied his motion

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to dismiss without prejudice and his motion to amend. We affirm.

I. FACTS AND PROCEEDINGS

Appellant John Doe ("Doe"), later revealed to be Russell Thomas, was an employee of appellee Dow Chemical Company ("Dow Chemical") in its Plaquemine, Louisiana facility. At that site, Dow Chemical operates an incinerator for hazardous wastes. While employed by Dow Chemical, during a period of time described in the complaint only as "several months in late 1998 to early 1999," Doe allegedly became aware of discharges from the Plaquemine facility in excess of the amount of total suspended solids allowable by permit.

On August 30, 2001, Doe filed suit in the United States District Court for the Middle District of Louisiana on behalf of the United States against Dow Chemical, alleging violations of the False Claims Act ("FCA"), 31 U.S.C. § 3729 (2000). The complaint alleged "illegal" discharges by Dow Chemical from the Plaquemine facility. Citing no statutory authority, Doe merely stated that "[p]ursuant to the laws of the United States of America and the State of Louisiana, including the rules and regulations of and the permits issued by the Louisiana Department of Environmental Quality and the Environmental Protection Agency, Dow is required to monitor and report emissions above those allowed by law." Only in his appeal to this Court did Doe manage to allege specific environmental statutory violations.

Doe's complaint was sealed, pursuant to court order, until the United States determined whether it desired to intervene. The Government declined to do so on December 18, 2001. At that point, the district court unsealed the complaint and ordered it served on Dow Chemical. After a flurry of discovery disputes, stays, and motions for sanctions, Doe filed a motion to dismiss without prejudice under Federal Rule of Civil Procedure 41(a)(2) on May 23, 2002. Dow Chemical filed its own motion to dismiss with prejudice under Federal Rules of Civil Procedure 9(b) and 12(b)(6) on June 12, 2002. Only on June 20, 2002 did Doe make a passing reference to a desire to amend his complaint if it were not dismissed without prejudice. The district court denied Doe's motions and granted Dow Chemical's motion to dismiss all of Doe's claims with prejudice. Doe timely filed notice of appeal.

II. STANDARD OF REVIEW

Claims brought under the FCA must comply with Federal Rule of Civil Procedure 9(b), which requires pleading with particularity in cases alleging fraud. United States, ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir.1997). "At a minimum, Rule 9(b) requires that a plaintiff set forth the `who, what, when, where, and how' of the alleged fraud." Id. (citations omitted). As such, a dismissal for failure to meet the requirements of Rule 9(b) is a dismissal for failure to state a claim, and therefore is subject to de novo review. United States, ex rel. Russell v. Epic Healthcare Mgmt. Group, 193 F.3d 304, 308 (5th Cir.1999).

Dismissals for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), as noted above, are reviewed de novo. Cousin v. Small, 325 F.3d 627, 631 (5th Cir.2003). "A district court may not dismiss a complaint for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts that would entitle him to relief." Thompson, 125 F.3d at 901.

Federal Rule of Civil Procedure 41(a)(2) permits dismissal of a complaint without prejudice "upon order of the court

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and upon such terms and conditions as the court deems proper."FED.R.CIV.P. 41(a)(2). The denial of a motion for voluntary dismissal under this rule is reviewed only for abuse of discretion. Davis v. Huskipower Outdoor Equip. Corp., 936 F.2d 193, 199 (5th Cir.1991).

Leave to amend under Federal Rule of Civil Procedure 15(a) "shall be freely given when justice so requires." FED.R.CIV.P. 15(a). Although liberally allowed, such leave to amend is not automatic, but rather "is within the sound discretion of the district court." Bloom v. Bexar County, Tex., 130 F.3d 722, 727 (5th Cir. 1997) (citations omitted). This Court reviews denials of leave to amend under an abuse of discretion standard. Id.

III. DISCUSSION

A. Failure to Plead Fraud with Particularity under Federal Rule of Civil Procedure 9(b).

The FCA generally permits the Government or a party suing on the Government's behalf to recover for false claims made by the defendants to secure payment by the Government. Under the subsection at issue here, often called the "reverse" FCA, a plaintiff may recover against "any person who ... knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an...