U.S. v. A.D. Roe Co.

• Decision Date: 25 September 1998
• Docket Number: DEFENDANT-APPELLEE,PLAINTIFF-APPELLE,FRED,No. 97-6044,PLAINTIFF-APPELLANT,DEFENDANTS-APPELLEES,97-6044
• Citation: 186 F.3d 717
• Parties: (6th Cir. 1999) UNITED STATES OF AMERICA,M. BURNS, EX REL UNITED STATES OF AMERICA,, v. A.D. ROE COMPANY, INC.; JIM MCCUBBINS, III; NORMAN LEIGH; KERRY WELCHER; CARL GRAF; STEVEN R. STAMBAUGH; RODGER CALL; PLANO CONSTRUCTION COMPANY; SWIFT ROOFING OF ELIZABETHTOWN, INC.; KOCH CORPORATION; WALLENDER PAINTING,, A & A MECHANICAL, INC., DEFENDANT, ROMAC, INC., Argued:
• Court: U.S. Court of Appeals — Sixth Circuit

Page 717

186 F.3d 717 (6th Cir. 1999)

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE, FRED M. BURNS, EX REL UNITED STATES OF AMERICA, PLAINTIFF-APPELLANT, v. A.D. ROE COMPANY, INC.; JIM MCCUBBINS, III; NORMAN LEIGH; KERRY WELCHER; CARL GRAF; STEVEN R. STAMBAUGH; RODGER CALL; PLANO CONSTRUCTION COMPANY; SWIFT ROOFING OF ELIZABETHTOWN, INC.; KOCH CORPORATION; WALLENDER PAINTING, DEFENDANTS-APPELLEES, A & A MECHANICAL, INC., DEFENDANT, ROMAC, INC., DEFENDANT-APPELLEE.

No. 97-6044

U.S. Court of Appeals, Sixth Circuit

Argued: September 25, 1998

Decided: June 28, 1999

Appeal from the United States District Court for the Western District of Kentucky at Louisville. No. 94-00357-John G. Heyburn, II, District Judge.

Terry M. Cushing, William F. Campbell, Asst. U.S. Attorneys, Regina S. Edwards, Office of the U.S. Attorney, Louisville, KY, Michael F. Hertz, Jr. (argued and briefed), U.S. Department of Justice, Civil Division, Washington, DC, John C. Hoyle, Douglas N. Letter (briefed), Stephen J. Gripkey (briefed), U.S. Department of Justice, Civil Division, Appellate Staff, Washington, DC, for Plaintiff-Appellee.

Peter F. Burns (briefed), Gary W. Fillingim (argued and briefed), Burns, Cunningham & Mackey, Mobile, AL, Michael E. Cohen, Bardstown, NY, for Plaintiff-Appellant.

George P. Parker, Sr. (briefed), George Bruce Stigger (argued and briefed), Parker & O'Connell, Louisville, KY, Michael T. Connelly, Connelly, Kaercher & Stamper, Louisville, KY, Max Parker, Murray, KY, James U. Smith, III, Smith & Smith, Louisville, KY, Ivan J. Frockt, Frockt & Klingman, Louisville, KY, for Defendants-Appellees.

Before: Norris, Batchelder, and Bright,^* Circuit Judges.

OPINION

Alice M. Batchelder, Circuit Judge

Fred M. Burns appeals the district court's dismissal for lack of subject matter jurisdiction of his qui tam action brought against A.D. Roe Company and numerous other individuals and entities pursuant to the False Claims Act ("FCA"), 31 U.S.C. § 3730, alleging that the defendants had defrauded the United States Government by making false certifications on their work under federal contracts. The government has now supplemented the record with new information which bears directly on the question of subject matter jurisdiction; we therefore vacate the district court's order and remand this case for the district court to reconsider the issue in light of the new information and the analysis we set forth below.

I. PROCEDURAL HISTORY

On June 23, 1994, pursuant to the FCA, Burns filed a Complaint and Disclosure of Material Facts in camera and under seal in the United States District Court for the Western District of Kentucky. The Complaint alleged that Defendants¹ submitted false and/or fraudulent claims to the government in order to secure payment for unacceptable materials, workmanship, testing, and performance in connection with the Defendants' performance of construction work known as the Phalanx Facility Modernization Project. On December 1, 1994, Burns filed a motion for leave to file an Amended Complaint and Disclosure Statement under seal. The government elected to intervene in the action and the Amended Complaint and Disclosure Statement were unsealed and served on the defendants. Various defendants filed answers only; others, including A.D. Roe Company, (collectively, "A.D. Roe") filed an Answer and Counter-Claim and an Amended Counter-claim; Burns filed Answers to each counterclaim.

The Defendants filed a Motion to Dismiss and for Summary Judgment, arguing that Burns was not a proper relator and the court did not have jurisdiction over his claims. Burns and the United States each responded to the Defendants' Motion. The United States took no position on Burns' status as relator, arguing only that the government should be able to continue the action should Burns be dismissed.

The district court concluded that it lacked subject matter jurisdiction over Burns's claims and granted the Defendants' Motion to Dismiss and for Summary Judgment, dismissing Burns's claims with prejudice but permitting the United States to continue to maintain the action against the Defendants. Burns's motion to reconsider the dismissal of his claims was denied, as was his motion for a Rule 54(b) order, and the case continued with the United States as Plaintiff. Eventually, the United States and the Defendants, with the exception of A & A Mechanical, settled the action, and the district court severed the United States' action against A & A Mechanical, dismissed the action with prejudice as to all other parties, and entered a final and appealable order approving the settlement. Burns filed a timely appeal.

II. FACTS

In January 1992, the United States Department of the Navy contracted with A.D. Roe Company for A.D. Roe to serve as general contractor in connection with construction work on the Phalanx Facility Modernization Project (the "Project") at the Naval Ordnance Station, Louisville, Kentucky ("NOSL"). The other Defendants were all either officers and/or employees of A.D. Roe or subcontractors to A.D. Roe on the Project.

Burns was employed by the United States as the Construction Representative ("ConRep") in connection with the Project at NOSL at all relevant times except for a period between November 1993 and February 1994. During that time-frame, Burns was assigned to other work not connected with the Project. Burns, a civilian, has been trained at "a number of schools" concerning how to be a ConRep.

As ConRep, Burns was required to coordinate the activities of various contractors on the job. He was required to have extensive familiarity with the drawings and specifications for the job, including pricing, and the contractor quality control/contractor inspection ("CI") plan; he was responsible for making or arranging for inspections to be performed by the government; he made site checks for the purpose of performing spot checks to verify materials and equipment delivered to the site, and to review and evaluate, among other things, workmanship, testing procedures, submittal logs, and contractors' control systems; he prepared non-compliance notices where necessary; he was responsible for overseeing compliance with labor standards and safety provisions.

As the ConRep, Burns also had to coordinate with the Contractor's Construction Quality Control ("CQC") Representative. The CQC Representative was to make daily reports recording items such as, among other things, the number of persons working that particular day, the type of work, equipment on site, materials received, and contract deficiencies corrected. If the CQC Representative found deficiencies in the performance, he was required to issue "deficiency notices." Burns, as the Navy's ConRep, had the duty to review these reports and notices and to independently monitor the contractors' performances and issue contract non-compliance notices ("NCNs") for substandard performance. In his deposition, Burns admitted that it was his duty to report to his superiors "any violation or deviation or change to the requirements of the contract specifications." Burns' duties also included reviewing A.D. Roe's monthly requests for payment and recommending "whether or not the contractor's requests for payments [were] reasonable." Based on Burns' recommendations, the Navy could withhold payments from the contractors.

Burns's Amended Disclosure Statement states:

"Shortly after award of this contract, Burns observed that [the Defendants were] falsely certifying unacceptable materials, equipment, workmanship, inspection and testing on this project. He further learned that employees of the [Defendant subcontractors] were not being paid the prevailing wages specified and that various subcontractors were providing false Weekly Certified Payroll Reports."

After he notified the Naval Investigative Service ("NIS") of his observations, the NIS initiated a criminal investigation. According to Agent Timothy W. Reeves, who was in charge of this investigation, Burns began disclosing his observations to Reeves before November 15, 1993. Burns helped Reeves prepare a subpoena issued to A.D. Roe and knew that Reeves was investigating the matter. Reeves was the custodian of all documents produced by A.D. Roe pursuant to a subpoena from NIS. Reeves claims that he never showed any of these documents to Burns, but disclosed the titles of the documents to Burns to see if the NIS had received all of the relevant information. Finally, Reeves states that to the best of his knowledge, no administrative report or investigation had been publicly disclosed before Burns filed suit against A.D. Roe.

Burns admits that he was "acting as Navy Construction Representative on this job [when he] saw numerous instances of what [he] perceived to be fraudulent conduct on the part of A.D. Roe personnel." Burns also claims that prior to filing this action, he reported all instances of fraud alleged in the complaint to either the NIS, the contracting officer, the assistant officer in charge of construction, or a naval detective.

During the period from November 1993 to February 1994 when Burns was not assigned to the Project, he reviewed and gathered documents to support his observations. He claims that during that time, he reviewed documents available to him as the Navy ConRep. In his deposition, however, he said that he requested and received documents pursuant to an FOIA request during that period.

The government has supplemented the record in this case, supplying information that appears to establish that, although Burns made several FOIA requests before he filed this action, he did not receive any information pursuant to these requests until September 30, 1994, several months after he filed suit.² Although the documents he received pursuant to his FOIA request were primarily construction-related documents that Burns himself had generated and signed or that A.D. Roe or other sub-contractors had prepared, they also included...