United States ex rel. Lambert v. Elliott Contracting, Inc.

Decision Date11 March 2015
Docket NumberCIVIL ACTION NO. 1:13-1106
CourtU.S. District Court — Southern District of West Virginia
PartiesUNITED STATES ex rel. OREN LAMBERT, et al., Plaintiffs, v. ELLIOTT CONTRACTING, INC., et al., Defendants.

This matter is before the court on defendants' motions to dismiss relators' amended complaint pursuant to Federal Rule of Civil Procedure 9(b). (Doc. Nos. 38, 42). For the reasons that follow, the court GRANTS in part and DENIES in part defendants' motions to dismiss.

I. Background1

The instant dispute centers on the construction of a federal prison in McDowell County, West Virginia. Defendant Clark Construction Group, LLC (hereinafter "Clark") acted as the general contractor for the construction of Federal Corrections Institute McDowell ("FCI McDowell"). (Doc. No. 34 at ¶ 13).Defendant Elliott Contracting, Inc. (hereinafter "Elliott") acted as a subcontractor for Clark, handling plumbing and HVAC installation services during the prison's construction. (Doc. No. 34 at ¶ 14). Relators Oren Lambert, James Day, Jonathan Miller, Michael Spencer, and Lance Lambert all worked for defendant Elliott in various capacities.

A. The Contract

On May 26, 2006, the Federal Bureau of Prisons ("BOP") awarded the FCI McDowell construction contract to Clark, Contract No. DJB-X00-039 (hereinafter "the contract"). (Doc. No. 34 at ¶ 13). The contract provided for over $232 million in payments to Clark during construction of the facility. Id. Like many other federal construction contracts, the contract required Clark and all subcontractors to comply with the Buy American Act and the Federal Trade Agreements Act. (Doc. No. 34 at ¶ 18). Pursuant to these federal laws, all materials used in the construction of FCI McDowell had to originate in the United States or one of a number of Designated Countries.2 Notably, the Designated Countries list does not include the People's Republic of China or Vietnam and, as a result, materials from either country may not be used in the construction of a federal building or public work.

Further, the contract mandated that Clark and all subcontractors comply with the Davis-Bacon Act. (Doc. No. 34 at ¶ 21). This required both Clark and all subcontractors to pay their workers the prevailing wage for his or her craft--a wage rate determined by the Department of Labor. Id. For the construction of FCI McDowell, the contract specified a prevailing wage of $27.34 per hour for a general laborer and $40.64 for a plumber (a base pay rate of $27.51 per hour plus $13.13 in fringe benefits). (Doc. No. 34 at ¶¶ 33-4). The contract further required each subcontractor to submit weekly payroll reports to Clark at the end of each work week, with Clark then to submit the subcontractors' reports to the Government along with their own weekly payroll reports. (Doc. No. 34 at ¶ 25). These reports also included a certification that all workers received their full wages, without any deductions or rebates. (Doc. No. 34 at ¶ 26).

B. Relators' Claims
1. Use of Plumbing Parts from Non-Designated Countries

Relators' first claim alleges violations of the Buy American Act and Trade Agreements Act. Defendant Elliott hired Relator Michael Spencer in September 2007 as an Operating Engineer IV on the project. (Doc. No. 34 at ¶ 37). Soon thereafter, Elliott Project Manager Eddie McCoy gave Spenceranother job: to obscure the origin of plumbing parts from non-Designated Countries. (Doc. No. 34 at ¶ 38). McCoy directed Spencer to remove country of origin markings from plumbing parts that Elliott employees later installed in the prison. (Doc. No. 34 at ¶¶ 38, 41). McCoy told Spencer that this was part of Spencer's job and that Spencer would lose his position unless he obeyed. (Doc. No. 34 at ¶ 38).

Spencer complied with McCoy's direction and used a grinding machine to remove country of origin stamps from plumbing parts, usually "Made in China" or "Made in Vietnam" stamps. Id. Once he removed the markings, Spencer then painted over the plumbing parts to obscure further their origin. (Doc. No. 34 at ¶ 40). Spencer estimates that he did this for "dozens of pallets, with each pallet holding numerous boxes, and each box dozens of parts." (Doc. No. 34 at ¶ 38).

Further, Spencer alleges that Elliott took considerable steps to conceal his work. When federal officials inspected the construction site, McCoy or another Elliott employee locked Spencer in a storage unit to hide the grinding operation. (Doc. No. 34 at ¶ 39). When he wanted to be let out, Spencer had to bang on the walls of the storage unit. Id.

When Clark employees inspected Elliott's work, they discovered Elliott's use of plumbing parts originating from non-Designated Countries. (Doc. No. 34 at ¶ 43). After thediscovery, Clark inspectors directed Elliott to remove those non-compliant plumbing parts that Elliott had already installed. Id. But after this initial inspection, Clark did not check Elliott's work again to determine whether Elliott followed through with this directive or discontinued its use of plumbing parts from China and Vietnam. Id.

2. Misclassification of Relators' Work and Unpaid Overtime

Relators' second claim alleges violations of the Davis-Bacon Act. Relators Oren Lambert, Jonathan Miller, Lance Lambert, and James Day contend that they worked as plumbers on the FCI McDowell project. (Doc. No. 34 at ¶¶ 55-68). While they acknowledge that they each performed some work on the project that was unrelated to plumbing, they all contend that this non-plumbing work was de minimis. Id. However, Elliott paid each relator at an hourly rate (absent overtime or holiday pay) of $27.34, the rate for a general laborer, rather than the $40.64 hourly rate set for plumbers. Id. Each relator contends that he did not receive any fringe benefits along with his hourly wage. Id.

Further, relators allege geographic discrimination by Elliott. Employees who hailed from Kentucky worked as general laborers, but received plumbers' wages, while those workers, relators included, who were from West Virginia received onlygeneral laborers' wages despite working as plumbers. (Doc. No. 34 at ¶ 73). Again, relators implicate Elliott Project Manager Eddie McCoy and contend that he as well as Elliott's managing executives knew of the labor misclassification, but did nothing to correct it. (Doc. No. 34 at ¶ 74).

According to relators, Clark knew of the misclassification, as well. (Doc. No. 34 at ¶ 75). In or around October 2007, Clark employees acknowledged that relators and others were doing plumbing work, but receiving only general laborers' wages. Id. Clark employees Kenny Keefer and Jack Donithan told Clark Project Manager Dave Young about the misclassification, but Young told the two to drop the issue and not raise it again. Id.

Relators also allege unpaid overtime in connection with their responsibilities at FCI McDowell. (Doc. No. 34 at ¶ 81). Elliott required each project worker, including relators, to work sixteen hours on several weekends. Id. During this time, relators and other Elliott employees worked on the construction of the residence of Claude Sullivan, an Elliott Supervisor. Id. Elliott did not pay relators for their work; instead, Elliott supervisors considered the work to be a condition of employment on the FCI McDowell project. Id.

3. Employment of Illegal Aliens

Finally, relators contend that Elliott hired undocumented workers from Mexico and countries in Central America to work as project workers on the FCI McDowell project. (Doc. No. 34 at ¶ 45). According to relators, an Elliott foreman, Juan Perez, recruited these undocumented workers, two of whom went by the names "Ricardo" and "Maynor." (Doc. No. 34 at ¶ 45-6). In return for getting the job, Perez demanded a $100 up-front payment from each undocumented worker. (Doc. No. 34 at ¶ 47). Perez kept some of the money for himself; the rest went to his supervisors at Elliott, who were aware of the kickback scheme. (Doc. No. 34 at ¶ 48).

At the end of each week, Elliott required all undocumented workers to hand over their paychecks to be cashed. (Doc. No. 34 at ¶ 50). An Elliott employee then took the paychecks, usually 25 to 30 checks, to a local grocery store for cashing. Id. The Elliott employee reserved $100 from each paycheck, $150 if the worker received overtime pay, and then distributed the remainder of the paycheck to the worker. Id.

Relators implicate Clark in the kickback scheme, as well. According to relators, Clark purported to perform a background check for every individual who worked on the FCI McDowell project. (Doc. No. 34 at ¶ 53). However, Clark did not perform background checks on these undocumented workers. Id.

II. Procedural History

On January 22, 2013, relators filed a qui tam complaint under seal against defendants Clark and Elliott. (Doc. No. 1). The United States declined to intervene and the case was unsealed on November 26, 2013. (Doc. Nos. 10, 11). On May 2, 2014, Clark filed a motion to dismiss relators' complaint. (Doc. No. 27). On May 16, 2014, Elliott also filed a motion to dismiss. (Doc. No. 31).

On May 23, 2014, relators filed an amended complaint. (Doc. No. 34). In the amended complaint, relators allege a single count related to violations of the False Claims Act ("FCA"). In this count, relators allege that defendants violated the FCA in a number of ways: (1) illegally employing illegal aliens in violation of 8 U.S.C. § 1324(a)(3)(a) and Executive Order 12989; (2) violating the Buy American and Trade Agreements Acts and thereby knowingly certifying false claims for payment to the Government; (3) violating the Davis-Bacon Act by failing to pay workers the prevailing wage and thereby knowingly presenting and certifying false claims; (4) violating the Copeland and Davis-Bacon Acts by extorting kickbacks from undocumented workers and thereby knowingly presenting and certifying false claims for payment; and (5) conspiring to violate the FCA.

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