United States ex rel. Winkler v. Bae Sys., Inc.

• Decision Date: 15 July 2013
• Docket Number: Case No. 10–cv–13558.
• Citation: 957 F.Supp.2d 856
• Parties: UNITED STATES of America ex rel. Michael WINKLER, Plaintiff, v. BAE SYSTEMS, INC., Defendant.
• Court: U.S. District Court — Eastern District of Michigan

957 F.Supp.2d 856

UNITED STATES of America ex rel. Michael WINKLER, Plaintiff,

v.BAE SYSTEMS, INC., Defendant.

Case No. 10–cv–13558.

United States District Court,

E.D. Michigan,

Southern Division.

July 15, 2013.

Christopher M. Kloth, Shannon D. McDonald, McDonald & Kloth, LLC, Milwaukee, WI, David M. Blanchard, Nacht, Roumel, Salvatore, Blanchard & Walker, P.C., Ann Arbor, MI, Carolyn Bell Harbin, U.S. Attorney's Office, Detroit, MI, for Plaintiff.

Irina Kashcheyeva, Scott T. Seabolt, Foley and Lardner, Detroit, MI, for Defendant.

OPINION AND ORDER GRANTING DEFENDANT'S MOTION TO DISMISS (ECF NO. 22)

PAUL D. BORMAN, District Judge.

Before the Court is Defendant BAE Systems, Inc. (“BAE”) Motion to Dismiss. (ECF No. 22.) Plaintiff filed a response (ECF No. 25) and BAE filed a reply (ECF No. 26). The Court held a hearing on March 27, 2013. For the reasons that follow, the Court GRANTS the motion to dismiss.

INTRODUCTION

This is a qui tam action brought by Plaintiff–Relator Michael Winkler (“Plaintiff,” “Relator,” or “Winkler”) pursuant to the Federal False Claims Act (“FCA”), 31 U.S.C. §§ 3729 et seq. against Defendant BAE Systems, Inc. (“BAE”), alleging that BAE submitted false claims for payment to the United States Army in connection with the sale to the Army of Family of Medium Tactical Vehicles (“FMTVs”). “The FCA is an anti-fraud statute that prohibits the knowing submission of false or fraudulent claims to the federal government.” United States ex rel. Bledsoe v. Community Health Systems, Inc., 342 F.3d 634, 645 (6th Cir.2003) (“Bledsoe I ”) (statutory citation omitted). The FCA, as part of its enforcement mechanism, permits a private party, known as a “relator,” to file suit alleging FCA violations on behalf of the government. Section 3730(b)(2). A qui tam complaint filed by a relator is filed and remains under seal for a period of sixty days, during which time the government may elect to intervene. Id. If the government elects not to intervene, as the Government has done in the instant case, the relator may proceed with the suit and, if successful in recovering funds, is entitled to 25–30% of the recovery. Section 3730(d)(2).

BAE denies having submitted any false claims to the United States Government in connection with FMTVs but addresses the sufficiency of the allegations of the Complaint and argues that Plaintiff has failed to state his FCA claims with the requisite particularity under Fed.R.Civ.P. 9(b) and additionally argues that Plaintiff fails to state a claim for relief under Fed.R.Civ.P. 12. For the reasons that follow, the Court GRANTS the Defendant's motion and DISMISSES the Complaint.¹

I. BACKGROUND

Relator filed his qui tam Complaint in this action under seal on September 7, 2010. (ECF No. 1, Sealed Complaint.) On February 7, 2012, the United States gave notice declining to intervene and proceed with this action and suggesting the unsealing of the Complaint. (ECF No. 10.) On February 8, 2012, this Court entered an Order unsealing the Complaint and further ordering that the Complaint be served upon the Defendant. (ECF No. 11.) Pursuant to the Court's February 8, 2012 Order, any other matters previously sealed by the Court remain under seal. ( Id.)

The qui tam Complaint alleges that Plaintiff, who joined BAE at its Sealy, Texas plant in 2008 as an Integrated Logistics Support (“ILS”) Manager, discovered that the braking system designed by BAE for its FMTVs contained a latent defect that could reduce the vehicle's braking power, cause the brakes to fail the minimum performance standards set forth in the contracts, and render the vehicles unsafe to operate. (Compl. ¶¶ 5, 8.) The Complaint alleges that in June, 2008, the United States Army Tank–Automotive and Armaments Command Life Cycle Management Command (“TACOM LCMC”), and its constituent TACOM Contracting Center, awarded BAE a contract to supply up to 10,000 FMTVs. (Compl. ¶ 18.) According to the Complaint, the June 2008 Contract incorporated a lengthy set of product specifications, the System Specification, Family of Medium Tactical Vehicles (“System Specifications”). (Compl. ¶ 19.) The System Specifications incorporated by reference the Federal Motor Vehicle Safety Standard (“FMVSS”). (Compl. ¶ 20.)

The FMVSS sets performance standards for air brake systems for trucks, buses and trailers and sets forth stopping distance and side swerve tolerances. (Compl. ¶¶ 21–22, quoting 49 C.F.R. §§ 571.121 S5.3, 5.3.1, 5.3.6.) Additionally, according to the allegations of the Complaint, the Government contracts with BAE contain detailed product specifications that set forth performance requirements for the FMTVs. (Compl. ¶ 23.) The System Specifications also direct that BAE is responsible for the correction of all defects on the FMTVs and define a “major defect” as “any defect that could affect safety, or that will likely result in decreased vehicle performance, mission failure, reduced operational capability, or result in a loss of function to any major component or subsystem (i.e. .... brakes ... etc.).” (Compl. ¶¶ 24, 25 (quoting System Specifications ¶ 4.4.2.2.1).)

The System Specifications also required that each FMTV model have a maintenance ratio no greater than between 5,000 to 12,000 mean miles between hardware failures and from 0.0012 to 0.0094 maintenance man-hours per operating mile. (Compl. ¶ 27 (quoting System Specifications, ¶ 3.2.4, Table 1).) Plaintiff also alleges, on information and belief, that pursuant to the Federal Acquisition Regulation (“FAR”) 32.908(c), that the June, 2008 Contract between BAE and the Army incorporated FAR 42.232–25 which stated that if a contractor becomes aware of an overpayment to it by the Government, it must notify the Contracting Officer immediately and make arrangements to address the overpayment. (Compl. ¶ 28.)

The BAE-built FMTVs use an “air over hydraulic brake system,” which BAE designed to accommodate FMTV design changes resulting in increased front axle loads. The Complaint describes the brake system of the FMTVs as follows:

The design uses two identical, but independent brake mechanisms—one for each front wheel. In each of the systems, the diaphragm is mounted between a fixed housing and a movable plate. As compressed air is released into the diaphragm, it inflates, moving the plate and forcing the piston into a chamber filled with hydraulic fluid. As the piston moves into the chamber, it drives the hydraulic fluid out of the chamber, through the brake line, and to the wheel ends, where it activates the brakes (by causing the brake shoe to engage with the brake drum). When the driver releases the air in the diaphragm, the diaphragm deflates. A spring in the hydraulic chamber forces the piston out of the chamber (which pushes the plate back against the deflating diaphragm), creating a vacuum that draws the hydraulic fluid back from the brake line into the hydraulic chamber, releasing the brakes.

(Compl. ¶ 31.)

The Relator alleges that on or before June 10, 2009, BAE discovered two serious problems with its FMTV brake systems. (Compl. ¶ 32.) The Complaint alleges that BAE disclosed to the Government that there was a “manufacturing process” issue but did not inform the Government of the specifics of the problem, or the consequences of the problem. The Complaint alleges that, as a result, there were two “significant dangerous problems that BAE discovered,” of which the Government was not made aware. (Compl. ¶ 32.) According to the Relator's Complaint, both problems first arise when the FMTVs undergo ordinary maintenance procedures.

First, when the hydraulic chamber in the air brake system is filled with hydraulic fluid in the course of ordinary maintenance, called “bleeding the brakes,” the system is designed such that air bubbles are introduced into the hydraulic chamber. Those air bubbles act like a cushion, preventing the complete transfer of pressure to the wheels of the FMTV. This results in decreased braking power and increased stopping distances. Additionally, this introduction of air bubbles into the hydraulic chamber is inconsistently distributed between the two independent hydraulic systems for each front wheel, resulting in uneven braking power and vehicle “swerving,” i.e. pulling to one side, during braking. (Compl. ¶¶ 33–34.)

Second, and related to the first problem described by the Relator, because the air in the hydraulic chamber results in reduced braking power, the driver of the vehicle is required to apply more pressure to the brakes, leading to “over-stroke,” or excessive extrusion of the piston into the hydraulic chamber. The Complaint alleges that in FMTVs manufactured prior to August 2009, this could result in the dislodging of the spring that causes the piston to return to its idle position (non-braking) position, or, if the pressure applied is great enough, the check valve could be compressed causing it to extrude into the hydraulic brake line, leading to complete blockage of one brake line. This would result in the complete loss of brake function in one wheel making steering difficult if not impossible. (Compl. ¶ 35.)

According to the Complaint, when BAE discovered these problems in or before June, 2009, it did not inform the Government but began working on maintenance and design solutions to the problem. Relator and another logistics engineer met with two BAE engineers who presented a power point presentation addressing the “Effects of Air Entrapment in A1P2 Hydraulic Brake Circuits.” (Compl. ¶¶ 36–37, Exhibit A, FMTV A1P2 Air Over Hydraulic Brake System Recommendations By H. Bartels, June 10, 2009.) The Power Point presentation described the effects of the air entrapment, which included increased stopping distances, varying steer input and “significant pull,” and damage to the hydraulic converter from over-stroking. (Compl. ¶ 38.) The presentation further stated that a driver with “foreknowledge,” i.e. who knew and expected an uneven loss of braking power, ...