U.S. v. Pemco Aeroplex, 97-6910

CourtUnited States Courts of Appeals. United States Court of Appeals (11th Circuit)
Writing for the CourtBefore ANDERSON; BARKETT, HULL, MARCUS and WILSON; HULL
Citation195 F.3d 1234
Parties(11th Cir. 1999) UNITED STATES OF AMERICA, Plaintiff-Appellant, v. PEMCO AEROPLEX, INC., a subsidiary of Precision Standard Company, a corporation, Defendant-Appellee
Docket NumberNo. 97-6910,97-6910
Decision Date15 November 1999

Page 1234

195 F.3d 1234 (11th Cir. 1999)
UNITED STATES OF AMERICA, Plaintiff-Appellant,
v.
PEMCO AEROPLEX, INC., a subsidiary of Precision Standard
Company, a corporation, Defendant-Appellee.
No. 97-6910
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
Nov. 15, 1999

Appeal from the United States District Court for the Northern District of Alabama D. C. Docket No. 97-P-1300-S

Before ANDERSON, Chief Judge, TJOFLAT, EDMONDSON, COX, BIRCH, DUBINA, BLACK, CARNES,

BARKETT, HULL, MARCUS and WILSON, Circuit Judges.

Page 1235

HULL, Circuit Judge:

The United States ("government") appeals the district court's dismissal of its False Claims Act and state common law claims against appellee Pemco Aeroplex, Inc. ("Pemco"). The specific issue we decide is whether the district court erred in dismissing for failure to state a claim under Fed. R. Civ. P. 12(b)(6) the government's "reverse false claim" under the False Claims Act, 31 U.S.C. 3729(a)(7). We conclude that the government has stated a claim under 3729(a)(7) and thus reverse the dismissal of its complaint.

I. BACKGROUND

The complaint alleges that Pemco performed high-level maintenance of C-130 aircraft as a contractor for the United States Air Force ("Air Force"), and as a result of its contracts with the Air Force, Pemco had on its premises both older model and newer model C-130 wings belonging to the government. As asserted in the complaint, Pemco possessed five wings (three right-side wings and two left-side wings) belonging to the government that "were not needed by PEMCO for performance of its contracts with the United States." Consequently, Pemco initiated a procedure known as "Plant Clearance" in order to have the government instruct Pemco regarding the return of the wings to the Air Force or other disposal.1 The complaint states that "[u]nder the Plant Clearance procedure, the contractor (in this case PEMCO) advises the government that the contractor is holding certain property belonging to the United States in excess to the needs of its [g]overnment contract." The complaint also explains that the contractor may offer to purchase the property from the government, and the government can elect to sell the property to the contractor rather than having the contractor return the property or providing alternative disposition instructions to the contractor.

As asserted in the complaint, "PEMCO submitted to the United States a document entitled `Inventory Schedule B' which was part of the `Plant Clearance' procedure mentioned above." The complaint continues that, on this Inventory Schedule B, Pemco listed the five wings and described those wings using one national stock number for the right-side wings and another for the left-side wings. The government uses national stock numbers for correct and precise identification of items within its inventory system. However, according to the complaint, the national stock numbers Pemco used in its Inventory Schedule B incorrectly referenced older, obsolete model wings that the government routinely disposed of as scrap.

The complaint asserts that in its Inventory Schedule B, Pemco offered to purchase the five wings for a total price of $1,875, the scrap value corresponding to the national stock numbers for older, obsolete model wings. The complaint alleges that Pemco knew that the national stock numbers it used in its Inventory Schedule B were incorrect and that the five newer model wings actually in its possession were worth substantially more than $1,875. According to the complaint, as a result of Pemco's use of the incorrect national stock numbers, the government agreed to sell the five wings to Pemco for $1,875. The complaint asserts that Pemco, shortly after purchasing these five wings from the government

Page 1236

for $1,875, sold just two of the five wings for approximately $1,500,000. The complaint also estimates the total market value of the five newer model wings actually in Pemco's possession to be at least $2,071,526.

The government sued Pemco in the United States District Court for the Northern District of Alabama, alleging that Pemco had violated the False Claims Act, 31 U.S.C. 3729-3733, and also alleging state common law counts of mistake of fact and unjust enrichment. With regard to the False Claims Act count, the complaint specifically contended that Pemco "knowingly made, used, or caused to be made or used, false statements or actions for the purpose of obtaining property from the United States," "knowingly presented, or caused to be presented, to an officer or employee of the United States Government a false or fraudulent claim for approval," and "knowingly made, used, or caused to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the government." The district court granted Pemco's motion to dismiss the False Claims Act count for failure to state a claim under Rule 12(b)(6). The court also dismissed the government's state law counts but did not specify the grounds for dismissal.

A panel of this Court affirmed the district court's dismissal. United States v. Pemco Aeroplex, Inc., 166 F.3d 1311 (11th Cir. 1999). However, we vacated the panel opinion in order to hear the case en banc. United States v. Pemco Aeroplex, Inc., 179 F.3d 1327 (11th Cir. 1999).

II. STANDARD OF REVIEW

We review de novo a dismissal...

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