United States ex rel. Sheet Metal Workers Int'l Ass'n v. Horning Invs., LLC, 15-1004

Citation828 F.3d 587
Decision Date07 July 2016
Docket NumberNo. 15-1004,15-1004
PartiesUnited States of America ex rel. Sheet Metal Workers International Association, Local Union 20, Plaintiff–Appellant, v. Horning Investments, LLC, Defendant–Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)

Jill Z. Julian, Attorney, Office of the United States Attorney, Indianapolis, IN, for Plaintiff.

Kera L. Paoff, Attorney, Wildman & Franklin, LLC, Toledo, OH, for Appellant.

A. Jack Finklea, Attorney, Scopelitis, Garvin, Light, Hanson & Feary, P.C., Indianapolis, IN, for DefendantAppellee.

Before Wood, Chief Judge, and Posne r and Easterbroo k, Circuit Judges.


, Chief Judge.

Horning Investments, LLC, is a roofing company, but this case is about a floor—in particular, the lower limit on wages and benefits imposed by the federal Davis-Bacon Act. The dispute concerns a construction project for the U.S. Department of Veterans Affairs. Horning was a subcontractor for the project; its workers are represented by Local 20 of the Sheet Metal Workers International Association (the Union). Believing that Horning had paid its workers less than the Davis-Bacon Act requires, the Union sued. Interestingly, however, it did not pursue relief directly under Davis-Bacon; instead, it filed a qui tam action under the False Claims Act, 31 U.S.C. §§ 3729

–3733 —the statute at issue in the Supreme Court's recent decision in Universal Health Servs., Inc. v. United States ex rel. Escobar , ––– U.S. ––––, 136 S.Ct. 1989, 195 L.Ed.2d 348 (2016).

By choosing the False Claims route, the Union undertook to show that Horning knowingly made false statements (or misleading omissions of the type described in Universal Health Services

) that were material to the government's payment decision. We conclude that the Union did not proffer enough evidence to permit a reasonable jury to conclude that Horning acted with the requisite knowledge. We thus affirm the judgment of the district court in Horning's favor.


Horning Investments does business as Horning Roofing & Sheet Metal, LLC; we refer to both entities as Horning. In May 2011, a company called Construct Solutions won the contract to perform work at the Veterans Affairs Medical Center in Dayton, Ohio. Construct Solutions awarded Horning the subcontract to provide roofing for the Medical Center. As all concede, the Davis-Bacon Act, 40 U.S.C. §§ 3141

–43, applied to this project.

That Act requires contractors who perform construction projects for the federal government to pay their workers the “prevailing wage.” Id. § 3142(a). Regulations issued by the Department of Labor define that term by region; the definition outlines base wage rates and fringe benefits for each type of worker. Id. § 3142(b). The parties have stipulated that in Dayton, Ohio, at the time the Medical Center was being built, the base rate for a worker classified as a Sheet Metal Worker was $26.41 per hour, and the additional fringe benefit rate was another $16.82 an hour. The parties also agree that the workers were classified in the proper category and that they were paid the appropriate base rate. This case is about their fringe benefits.

Horning provides certain fringe benefits to all of its employees, both those who work on projects covered by Davis-Bacon and those who work on other projects. For example, employees who have worked at Horning for more than 90 days are eligible for life, dental, vision, and health insurance; some also receive vacation days. After a year, they become eligible for matching contributions to a 401(k) account. In October 2010, Horning created a Trust for its employee insurance benefits. (It already had a separate fund for the 401(k) accounts.) Robin Moore, who handled Horning's human resources portfolio, testified that she relied on advice from Horning's accountants to determine how much to deduct from paychecks and how to allocate those funds between the 401(k) account and the new Trust. The accountants advised Horning about how much it needed to deposit into the Trust in order to comply with applicable law, including both the Employment Retirement Income Security Act of 1974 (which is not at issue here) and the Davis-Bacon Act.

Horning ran into trouble when it decided to deduct a flat hourly fee, to be paid into the Trust, from the paycheck of each employee working on the Medical Center project. Moore testified that, based on a “rounded figure” she received from the accountants, she deducted $5.00 per hour from those paychecks and deposited those funds into the Trust. That amount was deducted regardless of whether the employee was eligible for any benefits at all (for instance, without differentiating between those employed for more than 90 days and new hires). Furthermore, the $5.00 did not correspond to the actual monetary value of the benefits each individual employee received. It is this arrangement, according to the Union, that violates Davis-Bacon.1

In order fully to understand the Union's theory, we must delve into the details of Horning's system for paying benefits. First, Moore calculated the paycheck deduction for each employee. Then Leanne Torres, the person directly responsible for payroll, passed along information about each employee's paycheck, including total amount, deductions, and contributions to the Trust and the 401(k) account, to Horning's external payroll processor, Paychex.

Paychex deposited money into the appropriate accounts and generated a form, known as the Certified Payroll Report (or Register), memorializing the payments. Torres reviewed the Certified Payroll Report and submitted it to Construct Solutions, which in turn submitted the Report to the government for payment.

Initially, the Certified Payroll Report listed the higher, total amount, before deductions for payments to the Trust and the 401(k) account were made, as the “wage” paid to each employee. It incorrectly indicated that amounts paid into the Trust and the 401(k) accounts were in addition to the listed number rather than included within it. Torres eventually corrected the Certified Payroll Reports. The Union contends, however, that this was not enough, because its employees were still not receiving the proper Davis-Bacon pay rates. Each Certified Payroll Report included a statement attesting that it was accurate, that no further deductions were taken, and that fringe benefits were properly paid.

In addition to the Certified Payroll Reports that it submitted to the government, Horning also prepared eight specific applications for payment and sent them to Construct Solutions. Construct Solutions later forwarded these to the government. Like the Certified Payroll Reports, the applications included a statement attesting that Horning was paying Davis-Bacon rates to its employees.

The Union brought this action, in which it alleges that Horning's Certified Payroll Reports and the eight applications for payment (along with the certifications of Davis-Bacon compliance appearing in both types of documents), violated the False Claims Act. That Act provides a damages remedy against any person who “knowingly presents, or causes to be presented, a false or fraudulent claim for payment.” 31 U.S.C. § 3729(a)(1)(A)

. It permits a private party, known as a relator, to sue on behalf of the United States in specified circumstances. Id. § 3730(b). The Union is seeking to take advantage of that provision. It argues that Horning, through the actions of Moore and Torres, “knowingly ... cause[d] to be presented [ ] a false or fraudulent claim for payment.” Id. § 3729(a)(1)(A). After discovery, the parties filed cross-motions for summary judgment. Finding that Horning had relied on the advice of its accountants and thus did not have the requisite knowledge that its statements were false, the district court granted Horning's motion. The Union appeals.


Before we may turn to the merits of this appeal, we must assure ourselves that the district court's jurisdiction was secure. On the surface, this seems clear: the Union's claims rest on the False Claims Act, which indicates that federal-question jurisdiction exists under 28 U.S.C. § 1331

. Horning resists this simple conclusion, however, for two reasons: first, it contends that the Union is not the original source of the information on which the suit is based and thus is not entitled to act as a relator (i.e. as the one asserting the interests of the United States in not paying false claims); second, it argues that the Department of Labor has “primary jurisdiction” here, and that its authority ousts the district court's power to adjudicate the case. We find no merit in either of these contentions.

It is true that claims that previously have been disclosed may be brought only in limited circumstances, see 31 U.S.C. § 3730(e)(4)

, and that this rule is jurisdictional, see Rockwell Int'l Corp. v. United States , 549 U.S. 457, 467, 127 S.Ct. 1397, 167 L.Ed.2d 190 (2007). But both sides acknowledge that the Union's allegations had not been “publicly disclosed” before this suit was filed. Section 3730(e)(4)

thus does not apply, and it makes no difference whether the Union was an original source. See Glaser v. Wound Care Consultants, Inc. , 570 F.3d 907, 913 (7th Cir. 2009) (recognizing that section 3730(e)(4) applies only to “publicly disclosed” allegations). That disposes of Horning's first objection.

Its second one is equally unavailing. Despite the label, the doctrine of “primary jurisdiction” is not jurisdictional in the sense that matters here. Illinois Bell Tel. Co. v. Global NAPs Illinois, Inc. , 551 F.3d 587, 595 (7th Cir. 2008)

; cf.

Lexmark Int'l, Inc. v. Static Control Components, Inc. , ––– U.S. ––––, 134 S.Ct. 1377, 1387–88 & n. 4, 188 L.Ed.2d 392 (2014) (emphasizing that few doctrines are truly “jurisdictional”). “Primary jurisdiction” is a permissive doctrine that applies when resolving a claim “requires the resolution of issues which, under a...

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