United States ex rel. Budike v. Peco Energy, Civil Action No. 07–4147.

• Decision Date: 14 September 2012
• Docket Number: Civil Action No. 07–4147.
• Citation: 897 F.Supp.2d 300
• Parties: UNITED STATES of America ex rel. Lothar E.S. BUDIKE, Sr. v. PECO ENERGY, et al.
• Court: U.S. District Court — Eastern District of Pennsylvania

897 F.Supp.2d 300

UNITED STATES of America ex rel. Lothar E.S. BUDIKE, Sr.

v.PECO ENERGY, et al.

Civil Action No. 07–4147.

United States District Court, E.D. Pennsylvania.

Sept. 14, 2012.

Margaret L. Hutchinson, U.S. Attorney's Office, Paul W. Kaufman, U.S. Department of Justice, Philadelphia, PA, Shelley C. Dugan, Media, PA, for United States of America ex rel. Lothar E.S. Budike, Sr.

Michael A. Schwartz, Peter M. Smith, Pepper & Hamilton, LLP, Michael P. Meehan, Eckert, Seamans, Cherin & Mellott, Daniel Segal, Hangley Aronchick Segal & Pudlin, Philadelphia, PA, Jeffrey W. Larroca, Nicholas T. Moraites, Eckert Seamans Cherin & Mellott LLC, Washington, DC, for PECO Energy, et al.

MEMORANDUM

SURRICK, District Judge.

Presently before the Court are Defendants PECO Energy Company, Philadelphia Regional Port Authority and General Dynamics American Overseas Marine's Motions To Dismiss the Amended Complaint. (ECF Nos. 43–45.) For the following reasons, the Motions will be granted in part and denied in part.

I. JURISDICTION

We have subject matter jurisdiction over the alleged violations of the False Claims Act (“FCA,” or the “Act”) in the instant action pursuant to 31 U.S.C. § 3732(a) and 28 U.S.C. § 1331.¹ We also have supplemental jurisdiction over the state law claim pursuant to 28 U.S.C. § 1367. United States ex rel. Wilkins v. United Health Grp., 659 F.3d 295, 302 (3d Cir.2011).

II. BACKGROUNDA. Background Facts²

1. PRPA Provides Electric Power To LMSR Naval Vessels

On January 29, 2003, the Philadelphia Regional Port Authority (“PRPA”) and the United States entered into a contract, No. “N00033–03–C–5310.” (Am. Compl. ¶ 14, ECF No. 18.) ³ Pursuant to this contract, PRPA agreed to provide electric power to two Large, Medium–Speed, Roll–On/Roll–Off (“LMSR”) Naval Vessels (“Vessels”) at the Tioga Marine Terminal (“Terminal”), located in Philadelphia, Pennsylvania. (Am. Compl. ¶¶ 14–15.) The United States agreed to procure electric power from PRPA, which agreed to subcontract electric services “at the most competitive rates obtainable.” ( Id. at ¶ 18.) The competitive rates were to be supported by documentation. ( Id. at ¶ 20.) The electric power consumed on the Vesselswas to be measured on the local utility's meter. ( Id. at ¶ 16.)

On April 25, 2003, PRPA began ordering electric power from PECO Energy Company (“PECO”). ( Id. at ¶¶ 16–17, 21.) ⁴ On October 17, 2003, the Vessels arrived at the Terminal. Shortly after their arrival, PECO began generating and submitting monthly bills to PRPA. (Am. Compl. ¶ 22.) These bills reflected the demand for, and consumption of, electric power supplied to the Vessels. ( Id.)

2. AVE's Comprehensive Energy Audit on Behalf of PRPA

Relator Lothar E.S. Budike, Sr. is a federally licensed United States Marine Chief Engineer, and President of A–Valey Engineers, Inc. (“AVE”), a multi-disciplinary engineering and consulting firm. ( Id. at ¶ 8.) AVE has over fifty years of experience in working with naval vessels. ( Id. at ¶ 54.)

In 2005, PRPA hired AVE to provide on-call engineering services at its facilities. ( Id. at ¶ 26.) AVE conducted a preliminary investigation. At the conclusion of this investigation, AVE recommended a comprehensive energy audit for PRPA. ( Id.) After reviewing this recommendation, James T. McDermott Jr., Executive Director of PRPA, and Charles J. Lawrence, Director of Engineering for PRPA, expressed concern that PECO was submitting inflated bills for the electric power that was being supplied to the Vessels. ( Id. at ¶ 29.) As a result, PRPA hired AVE to conduct the recommended comprehensive energy audit. ( Id.) After the initial stages of the comprehensive audit, AVE confirmed to PRPA that its billing concerns were valid. ( Id. at ¶ 30.)

On June 22, 2006, PRPA notified PECO that it had retained AVE to investigate the electric power charges and authorized PECO to release to AVE all documentation and information related to the investigation. ( Id.) On August 7, 2006, AVE requested from PECO copies of certain documents, including contracts and monthly bills to PRPA from January 2003 to July 2006. ( Id. at ¶ 31.) On August 21, 2006, PECO responded that all of the documents that AVE requested were not available since PECO had moved its office location and, over the course of the move, some documents had been discarded. ( Id. at ¶ 32.) On September 18, 2006, AVE again requested the information it deemed necessary to complete its audit. ( Id. at ¶ 35.) AVE also requested that PECO respond in writing to its request for documents. ( Id.) On October 3, 2006, PECO stated that it did not possess any signed agreement between PECO and PRPA with respect to the Vessels. ( Id. at ¶ 33.) PECO stated that the first bill that it submitted to PRPA, which had been paid, set forth the terms of agreement. ( Id. at ¶ 34.) In addition, PECO provided AVE with “an informal, unexplained, customer totalized report for PECO meter (918MQEC45482K) installed at the PRPA's LMSR Naval Vessel(s) location,” as well as “non-specific blank forms and reference documents associated with the typical process required to energize a commercial customer's facility.” ( Id. at ¶ 36.) AVE concluded that it was not going to be provided with all of the documents requested from PECO. AVE continued to conduct the audit using information and documents obtained from PRPA's record retention system. ( Id. at ¶ 37.) This included copies of PECO's monthly bills from September 4, 2003 to April 20, 2007. ( Id.)

As part of its investigation, AVE installed its own meter and monitoring equipment throughout the Vessels. ( Id. at ¶¶ 38–39.) This enabled AVE to monitor continuously and capture the Vessels' energy consumption from September 29, 2006 to April 30, 2007. ( Id. at ¶ 40.)

3. Allegations of PECO's Overcharges and Attempts To Conceal These Overcharges

Relator alleges that “Defendants engaged in a pattern of deception, and fraudulently account[ed] for electric power supply purportedly used in the performance of a government program and contract that was billed to and paid by the United States” and that they

fraudulently manipulated and grossly inflated the cost of the monthly utility bills submitted to the United States, by directly inflating the units of kilowatts consumed, installing expensive and unnecessary capacitor bank equipment, charging the United States and Commonwealth of Pennsylvania for unnecessary costs and misrepresenting the level of services provided to the United States.

( Id. at ¶ 4.) Specifically, Relator alleges that PECO's monthly energy bills from September 4, 2003 to April 20, 2007 were “grossly inflated and unrealistic.” ( Id. at ¶ 44.)

a) Allegations of False Actual Load Usage Data

In September 2006, shortly after AVE commenced capturing the Vessels' energy consumption, PECO's electric supply meter shut down and ceased to capture electric load usage data. ( Id. at ¶ 41.) During this shut-down period, PECO submitted estimated load usage and meter data to PRPA for payment. ⁵ On March 20, 2007, PECO removed its meter entirely. (Am. Compl. ¶ 42.) From March 20, 2007 to April 9, 2007, PECO submitted to PRPA bills stating actual load usage data. The data amounted to 793,715 kWh total. ( Id. at ¶ 43.) ⁶

b) Allegations of PECO's Overcharges

Relator's allegations of PECO's overcharges are as follows:

• On April 25, 2003, six months before the Vessels arrived at the Terminal, PECO prepared a contract for supplying electric power to the Vessels. Relator asserts that PECO “knowingly and intentionally” prepared this “illusory” document, in which figures were “grossly inflated and unrealistic.” (Am. Compl. ¶ 45.) PECO agreed to reassess this contract once the Vessels arrived at the Terminal and began consuming electric power. ( Id.) In accordance with this agreement, PECO prepared another electric-power-supply contract once the Vessels arrived at the Terminal. ( Id. at ¶ 46.) Relator alleges that while PECO lowered its electric demand requirements, they were still “grossly inflated, unrealistic and a detriment to the United States.” ( Id.) Relator asserts that PECO “knowingly and intentionally continued to grossly overcharge the PRPA, who in-turn continued to grossly overcharge[] the United States” and attempted to conceal their “overbilling practices.” ( Id.)

• During the periods in which only one Vessel was in port, PRPA submitted to the United States expenditure reports that reflected a dollar amount per kilowatt (“kw”) that was lower than what PECO was charging PRPA per kw. ( Id. at ¶ 47.) Specifically, PRPA subtracted kw usage from the bills submitted by PECO to PRPA. ( Id. at ¶ 23.) Relator alleges that these reports were “false” and “knowingly and intentionally” submitted and reflects attempts by PECO and PRPA to conceal PECO's overbilling practices. ( Id. at ¶ 47.) Relator alleges that this is evidenced by the fact that the electric power consumption rates on the expenditure reports that PRPA submitted to the United States did not match the corresponding data on the bills that PECO sent to PRPA. ( Id. at ¶ 48.) PECO charged PRPA over ten cents per kw, whereas the reports that PRPA submitted to the United States reflected a four-cents-per-kw charge. ( Id.) The United States, relying on the reports submitted to it by PRPA, paid the electric power bills for the Vessels in full. ( Id. at ¶ 24.) Relator asserts that from September 29, 2006 to April 30, 2007, the United States was overbilled “in excess of $1.4 million dollars.” ( Id. at ¶ 25.)

• PECO “knowingly and intentionally overcharged the Commonwealth of Pennsylvania during the period when there were no LMSR Naval Vessel(s) in port.” ( Id. at ¶ 49.) To maintain a “threshold payment of $25,000 [ ] per month,” PECO charged the Commonwealth “as much as $1.40 per kw.” ( Id.) ⁷ The average retail price of electric power for commercial customers between the years 2003 to 2007 was between 8.03 and 9.65 cents per kw. (Am. Compl. ¶ 49.) AVE and...