United States Ex Rel. John Owens v. First Kuwaiti Gen. Trading & Contracting Co.

• Decision Date: 16 July 2010
• Docket Number: No. 09-1899.,09-1899.
• Citation: 612 F.3d 724
• Parties: UNITED STATES ex rel. John OWENS, Plaintiff-Appellant,v.FIRST KUWAITI GENERAL TRADING & CONTRACTING COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

612 F.3d 724

UNITED STATES ex rel. John OWENS, Plaintiff-Appellant,v.FIRST KUWAITI GENERAL TRADING & CONTRACTING COMPANY, Defendant-Appellee.

No. 09-1899.

United States Court of Appeals, Fourth Circuit.

Argued: May 13, 2010.

Decided: July 16, 2010.

COPYRIGHT MATERIAL OMITTED

ARGUED: Victor Aronoff Kubli, Kubli & Associates, PC, Vienna, Virginia, for Appellant. Andy Liu, Crowell & Moring, LLP, Washington, D.C., for Appellee. ON BRIEF: Christian L. Simpson, Kubli & Associates, PC, Vienna, Virginia, for Appellant. Richard L. Beizer, David W. O'Brien, Crowell & Moring, LLP, Washington, D.C., for Appellee.

Before TRAXLER, Chief Judge, WILKINSON, Circuit Judge, and SAMUEL G. WILSON, United States District Judge for the Western District of Virginia, sitting by designation.

Affirmed by published opinion. Judge WILKINSON wrote the opinion, in which Chief Judge TRAXLER and Judge WILSON joined.

OPINION

WILKINSON, Circuit Judge:

Relator John Owens brought this qui tam suit under the False Claims Act (“FCA”), 31 U.S.C. § 3729 et seq., against First Kuwaiti construction firm, his former employer. He alleged that the firm billed falsely for deficient work in connection with construction of the U.S. embassy in Baghdad and that it retaliated against him for actions taken in furtherance of his FCA contentions. The district court granted summary judgment to defendant.

The essence of Relator's claim is that defendant failed to live up to its contractual obligations. He produced no evidence either of knowing misrepresentations on defendant's part or of having been mistreated for any actions taken on behalf of his FCA claims. We therefore affirm the district court's judgment. Congress crafted the FCA to deal with fraud, not ordinary contractual disputes. The FCA plays an important role in safeguarding the integrity of federal contracting, administering strong medicine in situations where strong remedies are needed. Allowing it to be used in run-of-the-mill contract disagreements and employee grievances would burden, not help, the contracting process, thereby driving up costs for the government and, by extension, the American public.

I.

In 2005, the State Department selected defendant, First Kuwaiti General Trading & Contracting Company, to undertake construction of a new U.S. Embassy on a sixty-five acre site in Baghdad. The contracts awarded First Kuwaiti called for the construction of more than twenty buildings, as well as major components of the infrastructure at the embassy compound. The parties represent the construction project to be the largest the State Department had ever undertaken, and the Department's Bureau of Overseas Building Operations (“OBO”) had more than one hundred of its own personnel on site, including engineers, supervisors, project managers, and construction workers. Altogether, the contracts totaled close to $600 million. First Kuwaiti billed the State Department in progress payment invoices, as contemplated by the contracts, beginning in late 2005 and ending in September 2008.

First Kuwaiti hired John Owens as a general construction foreman in November 2005, shortly after work had begun. Owens's primary responsibility, however, was to supervise the construction of an office building that did not get underway until some time the following March. In the interim, he was given a variety of assignments to perform at different parts of the embassy site. Almost immediately, Owens says, he was treated rudely by various people he encountered and “got disrespected a lot.” By June 2006, Owens had evidently grown dissatisfied with the job and sent an email resigning his position. He says he did so because of the lack of respect shown toward him and because of his objection to the way the company treated its third country national workers. At the time, he was considering filing a mechanic's lien, believing that First Kuwaiti owed him “Salary and Iraq Pay.”

In December 2006, Owens filed an FCA qui tam suit against First Kuwaiti, alleging that the company had defrauded the government by billing for defective work and that it retaliated against him for investigating possible FCA wrongdoing. He claimed that he had witnessed a number of “construction mistakes” at the embassy site, which he had brought to the attention of First Kuwaiti employees. He also included a breach of contract claim in which he alleged that First Kuwaiti had wrongfully withheld pay from him.

Owens's fraud allegations triggered the U.S. government's obligation to investigate his claims and to determine whether to intervene in the case. See 31 U.S.C. § 3730(a). The government commissioned an independent expert to look into the matter, resulting in a document known as the Collins Report. See Report of Johns & Bhatia Engineering Consultants, Ltd. (Dec. 12, 2007) (“Collins Report”). Completed in December 2007, the Collins Report concluded that “the quality of workmanship at the NEC Baghdad site is comparable to that found in the United States for a similar size and type of project. Defects found in the structure were minor and not unexpected for a project of this size and they have been repaired.” Id. at 10. First Kuwaiti, which had requested a final inspection of its work in October 2007, was granted certificates of final acceptance from OBO in April 2008. Shortly afterwards, the government formally elected not to intervene in Owens's suit.

In November 2008, Owens's breach of contract claim was dismissed with prejudice because of a forum selection clause. His FCA false claims and false statements allegations were dismissed without prejudice for failure to plead fraud with particularity as required by Fed.R.Civ.P. 9(b). He filed an amended complaint several weeks later. His amended complaint leveled eight different allegations of fraud at First Kuwaiti and contended that, as a result, the invoices and accompanying documentation First Kuwaiti submitted to the government constituted false claims or statements under the FCA. He also repeated his earlier retaliation allegations. Following extensive discovery, First Kuwaiti moved for summary judgment. In responding to First Kuwaiti's motion, Owens abandoned four of his original allegations of fraud but added several new ones on the basis of materials received in discovery. After a hearing, the district court granted First Kuwaiti's motion for summary judgment in its entirety. This appeal followed.

II.

We review the grant of summary judgment de novo. Nader v. Blair, 549 F.3d 953, 958 (4th Cir.2008). Summary judgment is appropriate if “there is no genuine issue as to any material fact” and First Kuwaiti “is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). In making this determination, we must view all facts and reasonable inferences in the light most favorable to Owens, the non-moving party. Battle v. Seibels Bruce Ins. Co., 288 F.3d 596, 603 (4th Cir.2002).

The FCA provides that suit may be brought against anyone who “knowingly presents” to the government “a false or fraudulent claim for payment or approval.” 31 U.S.C. § 3729(a)(1). It similarly allows suit against anyone who “knowingly makes ... a false record or statement material to a false or fraudulent claim.” Id. at § 3729(a)(1)(B).^* In adopting the FCA, “the objective of Congress was broadly to protect the funds and property of the government.” Rainwater v. United States, 356 U.S. 590, 592, 78 S.Ct. 946, 2 L.Ed.2d 996 (1958).

The FCA's scienter requirement does not demand “specific intent to defraud” and can be satisfied by proving only “reckless disregard of the truth or falsity of the information.” Id. § 3729(b). Congress, however, has made plain “ ‘its intention that the act not punish honest mistakes or incorrect claims submitted through mere negligence.’ ” United States ex rel. Hochman v. Nackman, 145 F.3d 1069, 1073 (9th Cir.1998) (quoting S.Rep. No. 99-345, at 7 (1986), U.S.Code Cong. & Admin.News 1986, pp. 5266, 5272). This is because “[t]he FCA is a fraud prevention statute.” United States ex rel. Lamers v. City of Green Bay, 168 F.3d 1013, 1019 (7th Cir.1999); see also Allison Engine Co. v. United States ex rel. Sanders, 553 U.S. 662, 128 S.Ct. 2123, 2130, 170 L.Ed.2d 1030 (2008). It does not allow a qui tam relator to “shoehorn what is, in essence, a breach of contract action into a claim that is cognizable under the False Claims Act.” United States ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370, 373 (4th Cir.2008).

To avoid summary judgment on his false claims and false statements allegations Owens must create a genuine issue of fact showing: (1) that First Kuwaiti made a false statement or engaged in a fraudulent course of conduct; (2) that such statement or conduct was made or carried out with the requisite scienter; (3) that the statement or conduct was material; and (4) that the statement or conduct caused the government to pay out money or to forfeit money due. See United States ex rel. Harrison v. Westinghouse Savannah River Co., 352 F.3d 908, 913 (4th Cir.2003) ( Harrison II ). We discuss the application of this standard to Owens's various allegations seriatim, beginning with those related primarily to construction defects raised in his amended complaint.

A.

1. Use of Concrete

Owens alleges that First Kuwaiti violated the FCA by billing for substandard concrete work. Owens points to the fact that some of First Kuwaiti's concrete work subsequently needed to be repaired and to statements from First Kuwaiti's quality control personnel who expressed concern that concrete was occasionally arriving at job sites too far in advance of when it was to be poured, which could negatively affect its quality.

But such occurrences do not, at least in the context of the record of this case, establish a false claim, much less a knowingly false one. As the Collins Report concluded, work on the Baghdad site “was comparable to work performed in the United States for typical similar type concrete structures” and any problems...