United States ex rel. Freedom Unlimited, Inc. v. City of Pittsburgh, 2:12cv1600

• Decision Date: 31 March 2016
• Docket Number: 2:12cv1600
• Parties: THE UNITED STATES ex rel. FREEDOM UNLIMITED, INC., NORTHSIDE COALITION FOR FAIR HOUSING, INC., THE HILL DISTRICT CONSENSUS GROUP, INC. and the FAIR HOUSING PARTNERSHIP OF GREATER PITTSBURGH, Plaintiffs, v. THE CITY OF PITTSBURGH, PENNSYLVANIA and LUKE RAVENSTAHL, its Chief Executive Officer, Defendants.
• Court: U.S. District Court — Western District of Pennsylvania

THE UNITED STATES ex rel. FREEDOM UNLIMITED, INC.,NORTHSIDE COALITION FOR FAIR HOUSING, INC.,THE HILL DISTRICT CONSENSUS GROUP, INC.and the FAIR HOUSING PARTNERSHIP OF GREATER PITTSBURGH, Plaintiffs, v. THE CITY OF PITTSBURGH, PENNSYLVANIA and LUKE RAVENSTAHL,its Chief Executive Officer, Defendants.

2:12cv1600

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA

March 31, 2016

Electronic Filing

OPINION

Plaintiffs Freedom Unlimited, Inc. ("FUI"), Northside Coalition for Fair Housing, Inc. ("NCFH"), The Hill District Consensus Group, Inc. ("HDCG") and the Fair Housing Partnership of Greater Pittsburgh ("FHP") (collectively "plaintiffs"), brought this qui tam action on behalf of the United States of America against the City of Pittsburgh, Pennsylvania ("the City" or "defendant"), and its former mayor, Luke Ravenstahl ("Ravenstahl") (collectively "defendants"), pursuant to the False Claims Act ("FCA"), 31 U.S.C. §§ 3729-3733. Plaintiffs allege that defendants submitted express and implied false certifications of compliance in order to receive federal funding under programs administered by the United States Department of Housing and Urban Development ("HUD"). The United States declined to intervene. Presently before the court is defendants' motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction, 12(b)(6) and 8(a)(2) for failure to state a claim upon which relief can be granted, and 9(b) for failure to plead fraud with particularity. For the reasons set forth below, defendants' motion will be granted.

I. STANDARD OF REVIEW

Under a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction, the plaintiff bears the burden of persuasion in establishing subject matter jurisdiction. Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1409 (3d Cir. 1991). There are two categories of Rule 12(b)(1) motions: a facial attack on the complaint and a factual attack that challenges the plaintiff's facts. Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977). In reviewing a facial attack, "the court must only consider the allegations of the complaint and documents referenced therein and attached thereto, in the light most favorable to the plaintiff." Gould Elecs., Inc. v. United States, 220 F.3d 169, 176 (3d Cir. 2000).

If the attack is factual, however, the court is not confined to the allegations in the complaint and "can look beyond the pleadings to decide factual matters relating to jurisdiction." Cestonaro v. United States, 211 F.3d 749, 752 (3d Cir. 2000) (citation omitted). The court, therefore, must weigh the evidence relating to jurisdiction, "with discretion to allow affidavits, documents, and even limited evidentiary hearings," and "accord[] plaintiff's allegations no presumption of truth." Turicentro, S.A. v. Am. Airlines, Inc., 303 F.3d 293, 300 n.4 (3d Cir. 2002). Further, in a factual challenge the plaintiff bears the burden of proving that jurisdiction does, in fact, exist. Carpet Group Int'l v. Oriental Rug Imps. Ass'n, 227 F.3d 62, 69 (3d Cir. 2000).

It is well-settled that in reviewing a motion to dismiss under 12(b)(6) "[t]he applicable standard of review requires the court to accept as true all allegations in the complaint and allreasonable inferences that can be drawn therefrom, and view them in the light most favorable to the non-moving party." Rocks v. City of Philadelphia, 868 F.2d 644, 645 (3d Cir. 1989). Under the Supreme Court's decision in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 561 (2007), dismissal of a complaint pursuant to Rule 12(b)(6) is proper only where the averments of the complaint plausibly fail to raise directly or inferentially the material elements necessary to obtain relief under a viable legal theory of recovery. Id. at 544. In other words, the allegations of the complaint must be grounded in enough of a factual basis to move the claim from the realm of mere possibility to one that shows entitlement by presenting "a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009) (quoting Twombly, 550 U.S. at 570).

"A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. In contrast, pleading facts that only offer "'labels or conclusions' or 'a formulaic recitation of the elements of a cause of action will not do,'" nor will advancing only factual allegations that are "'merely consistent with' a defendant's liability." Id. Similarly, tendering only "naked assertions" that are devoid of "further factual enhancement" falls short of presenting sufficient factual content to permit an inference that what has been presented is more than a mere possibility of misconduct. Id. at 1949-50; see also Twombly, 550 U.S. at 563 n. 8 (A complaint states a claim where its factual averments sufficiently raise a "'reasonably founded hope that the [discovery] process will reveal relevant evidence' to support the claim.") (quoting Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336, 347 (2005) & Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 741 (1975)); accord Morse v. Lower Merion School Dist., 132 F.3d 902, 906 (3d Cir. 1997) (a court need not credit "bald assertions" or "legal conclusions" in assessing a motion to dismiss) (citing with approval Charles Alan Wright & Arthur R. Miller, FEDERALPRACTICE AND PROCEDURE § 1357 (2d ed. 1997) ("courts, when examining 12(b)(6) motions, have rejected 'legal conclusions,' 'unsupported conclusions,' 'unwarranted inferences,' 'unwarranted deductions,' 'footless conclusions of law,' or 'sweeping legal conclusions cast in the form of factual allegations.'").

This is not to be understood as imposing a probability standard at the pleading stage. Iqbal, 556 U.S. at 678 ("'The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully.'"); Phillips v. County of Allegheny, 515 F.3d 224, 235 (3d Cir. 2008) (same). Instead, "[t]he Supreme Court's Twombly formulation of the pleading standard can be summed up thus: 'stating ... a claim requires a complaint with enough factual matter (taken as true) to suggest the required element ... [and provides] enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary element.'" Phillips, 515 F.3d at 235; see also Wilkerson v. New Media Technology Charter School Inc., 522 F.3d 315, 321 (3d Cir. 2008) ("'The complaint must state 'enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary element.'") (quoting Phillips, 515 F.3d at 235) (citations omitted). "Once a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint." Twombly, 550 U.S. at 563.

A plaintiff alleging violations of the False Claims Act also must meet the pleading standard for fraud under Fed. R. Civ. P. 9(b). The United States Court of Appeals for the Third Circuit ("Third Circuit") has held "that plaintiffs must plead FCA claims with particularity in accordance with Rule 9(b)." U.S. ex rel. Wilkins v. United Health Grp., Inc., 659 F.3d 295, 301, n. 9 (3d Cir. 2011) ("Wilkins") (citing U.S. ex rel. LaCorte v. Smith-Kline Beecham Clinical Labs., 149 F.3d 227, 234 (3d Cir. 1998)). Rule 9(b) requires a party "alleging fraud...[to] statewith particularity the circumstances constituting fraud," but "[m]alice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Fed. R. Civ. P. 9(b). "Rule 9(b) exists to insure adequate notice so that defendants can intelligently respond." U.S. ex rel. Richards v. R & T Investments LLC, 29 F. Supp.3d 553, 560 (W.D. Pa. July 3, 2014) (Hornak, J.) ("Richards") (citing Illinois Nat. Ins. Co. v. Wyndham Worldwide Operations, Inc., 653 F.3d 225, 233 (3d Cir. 2011) (citing Morganroth & Morganroth v. Norris, McLaughlin & Marcus, P.C., 331 F.3d 406, 414 n. 2 (3d Cir. 2003) ("The purpose of Rule 9(b) is to provide notice, not to test the factual allegations of the claim.")).

A plaintiff asserting false claims satisfies the standard imposed by Rule 9(b) by alleging "particular details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims were actually submitted." Foglia v. Renal Ventures Management, LLC, 754 F.3d 153, 157-58 (3d Cir. 2014) (quoting United States ex. rel. Grubbs v. Kanneganti, 565 F.3d 180, 190 (5th Cir. 2009)). "Describing a mere opportunity for fraud will not suffice. Sufficient facts to establish 'a plausible ground for relief must be alleged." Id. (quoting Fowler, 578 F. 3d at 211.)

II. FACTUAL BACKGROUND

The record as read in the light most favorable to plaintiffs establishes the background set forth below. Plaintiffs are community-based organizations that advocate for equal a) housing opportunities, b) community development, and c) revitalization in the city of Pittsburgh. HUD is the federal entity responsible for administering programs related to housing and urban development. In accord with the Fair Housing Act ("FHA"), 42 U.S.C. § 3601 et seq, HUD must administer those programs in a manner that affirmatively will further fair housing. 42 U.S.C. § 3608(e)(5).

HUD offers federally funded grants to support housing and community development in Pittsburgh and other communities. These grants include the Community Development Block Grant ("CDGB") funding¹ and the HOME Investment Partnerships ("HOME") program,² both of which endeavor to provide fair housing opportunities for all Americans, particularly "members of disadvantaged minorities." 42 U.S.C. § 12702 and 24 C.F.R. § 91.1. Any grantee for these funds must certify that it will comply with all applicable statutes and regulations in its application for a HUD grant.³

Applicants...