US ex rel. Robinson v. Northrop Corp., 89 C 6111.

• Citation: 824 F. Supp. 830
• Decision Date: 16 June 1993
• Docket Number: No. 89 C 6111.,89 C 6111.
• Parties: UNITED STATES of America, ex rel., Rex A. ROBINSON, James Fredericks, James H. Holzrichter, and Lynn T. Austrheim, Plaintiffs, v. NORTHROP CORPORATION, Defendant.
• Court: U.S. District Court — Northern District of Illinois

824 F. Supp. 830

UNITED STATES of America, ex rel., Rex A. ROBINSON, James Fredericks, James H. Holzrichter, and Lynn T. Austrheim, Plaintiffs, v. NORTHROP CORPORATION, Defendant.

No. 89 C 6111.

United States District Court, N.D. Illinois, E.D.

June 16, 1993.

J. Peter Dowd, Kalman D. Resnick, Dowd & Bloch, Robert D. Allison, Ronald L. Futterman, Aram A. Hartunian, Futterman & Howard, Chtd., Joshua Karsh, Law Offices of Robert D. Allison, Chicago, IL, for plaintiffs.

Michael R. Dockterman, Lisa S. Simmons, Timothy G. Nickels, Robin L. Wolkoff, Wildman, Harrold, Allen & Dixon, Chicago, IL, for defendant.

MEMORANDUM AND ORDER

MORAN, Chief Judge.

Plaintiffs Rex Robinson (Robinson), James Fredericks (Fredericks), James Holzrichter (Holzrichter), and Lynn Austrheim (Austrheim) worked for defendant Northrop Corporation (Northrop) at its Defense Systems Division in Rolling Meadows, Illinois. They allege that Northrop defrauded the United States government on several defense contracts. Claiming to have independent knowledge of the alleged fraud, they have sued Northrop pursuant to the qui tam provisions of the False Claims Act (FCA). 31 U.S.C. § 3730(b)(1). The suit is brought on behalf of both the government and the plaintiffs themselves. The government has declined to join the suit.

Before us now are defendant's motion for dismissal of plaintiffs' amended complaint pursuant to Fed.R.Civ.P. 12(b)(1), defendant's motion for dismissal of plaintiffs' complaint pursuant to Fed.R.Civ.P. 9(b) and 12(b)(6), and defendant's motion to compel production of a document that plaintiffs submitted to the government describing the alleged false claims.

BACKGROUND

Count I of plaintiffs' amended complaint describes several allegedly false claims submitted by Northrop to the government, most relating to Northrop's roles in the production of the B-1 Bomber and the F-15 Fighter. According to Holzrichter, Northrop charged the government for scrapping parts that were not scrapped, for excess inventory, for non-conforming materials, and for parts that were scrapped accidentally and had to be reordered. According to Robinson, Northrop charged the government for labor that was not performed and for obsolete testing equipment. Fredericks claims that Northrop charged the government for brand new testing equipment after scrapping perfectly good equipment that did not need to be replaced. He also claims that Northrop certified to the government that the designs for certain testing equipment were complete, when in fact they were not, thereby prompting the government to pay Northrop money to which it was not entitled. Like Robinson, Austrheim alleges that Northrop charged the government for labor that was not performed and, like Fredericks, he alleges that Northrop received payment to which it was not entitled after it falsely certified to the government that certain projects were complete.

In count II of the complaint, which concerns only state law claims, Robinson and Austrheim allege that Northrop officials harassed them and then discharged them in retaliation for their efforts to stop Northrop's fraudulent practices. Holzrichter and Fredericks also assert that they were harassed as a result of their criticisms of Northrop's practices, and Fredericks ultimately was discharged, but neither Holzrichter nor Fredericks brings a state law claim for retaliatory discharge.

DISCUSSION

Motion to Dismiss Pursuant to Fed. R.Civ.P. 9(b) and 12(b)(6)

On January 8, 1993, this court dismissed count I of plaintiffs' complaint without prejudice, holding that plaintiffs had not alleged fraud under the FCA with the specificity required by Fed.R.Civ.P. 9(b). United States ex rel. Robinson v. Northrop Corp., 149 F.R.D. 142 (N.D.Ill. 1/8/93). This court afforded plaintiffs the opportunity to amend their complaint, and they have. Defendant now moves to dismiss count I and/or to strike each paragraph of count I of plaintiffs' amended complaint pursuant to Rules 9(b) and 12(b)(6).

Plaintiffs are not required to plead a wealth of evidentiary material, but must describe the outline of the fraudulent scheme and facts identifying the who, what, when and where of the fraud. This court has examined the amended complaint and finds that plaintiffs have pled sufficient detail necessary to put defendant on notice of the alleged fraud and have met Rule 9(b)'s pleading requirements. Defendant points to numerous examples in the amended complaint that it considers to be lacking in specificity. We agree with defendant that certain areas of the amended complaint lack exact details and, at times, contain superfluous information. However, that alone does not overcome the fact that plaintiffs have pled fraud with particularity. It is not necessary for this court to go through the complaint, paragraph-by-paragraph, to determine what information is extraneous to plaintiffs' claim. As the litigation proceeds, those issues will be resolved. At this stage of the litigation it is enough that plaintiffs have satisfied Rule 9(b). Defendant's motion to dismiss pursuant to Fed.R.Civ.P. 9(b) and 12(b)(6) is therefore denied.

Motion to Dismiss Pursuant to Fed. R.Civ.P. 12(b)(1)

Defendant also moves to dismiss plaintiffs' complaint pursuant to Fed.R.Civ.P. 12(b)(1). It contends that qui tam plaintiffs lack standing to sue under Article III; that the congressional authorization of qui tam suits violates the Appointments Clause of Article II; that qui tam suits violate the principle of separation of powers; and that qui tam suits deprive defendants of due process. The court is not persuaded by defendant's constitutional arguments.

Qui Tam Provisions of the FCA

The FCA provides that any person who knowingly submits a fraudulent claim for payment to the United States government is liable to the government for a civil penalty plus three times the amount of damages that the government incurs. 31 U.S.C. § 3729. Under the FCA's qui tam provisions a private individual may bring a civil action for FCA violations on behalf of both the government and the individual. Section 3730(b)(1). The action is brought by a qui tam relator in the name of the government, and the government is then given the choice between assuming control of the case, § 3730(b)(2), or allowing the original plaintiff to proceed with the suit without government involvement under § 3730(b)(4)(B). The government chose the latter course in this case.

Whether the government takes over the suit or not, the relator is entitled to a portion of the proceeds if the action is successful. If the government intervenes, the relator receives between 15 and 25 per cent of the amount recovered. § 3730(d)(1). If the government does not intervene, the relator receives between 25 and 30 per cent of the amount recovered. § 3730(d)(2).

Whether Qui Tam Plaintiffs Have Standing Under Article III

Northrop contends that the FCA violates Article III of the Constitution by granting standing to private individuals to sue for fraud against the government when, according to Northrop, those individuals have not suffered any injury. Like every other court to consider the issue to date, this court rejects Northrop's Article III attack.

A plaintiff seeking standing to sue in federal court must pass both constitutional and prudential hurdles. The case-and-controversy requirement of Article III of the Constitution permits a federal court to hear a lawsuit only if the plaintiff bringing the suit alleges "a personal stake in the outcome of the controversy" sufficient to warrant the court's use of its remedial powers on the plaintiff's behalf. Baker v. Carr, 369 U.S. 186, 204, 82 S.Ct. 691, 703, 7 L.Ed.2d 663 (1962). The requirement limits federal court jurisdiction to disputes concerning "some threatened or actual injury" to the plaintiff stemming from some putatively illegal act by the defendant. Linda R.S. v. Richard D., 410 U.S. 614, 617, 93 S.Ct. 1146, 1148, 35 L.Ed.2d 536 (1973). See also Warth v. Seldin, 422 U.S. 490, 498-99, 95 S.Ct. 2197, 2204-05, 45 L.Ed.2d 343 (1975). Assuming a case has met the minimum standards imposed by Article III, it still may be kept out of federal court for prudential or policy reasons. For example, when the injury asserted by the plaintiff is a general harm affecting the citizenry as a whole, an individual plaintiff usually will not be able to go forward with his or her case because, as the Supreme Court has explained, such matters are generally best left to Congress. See e.g., Schlesinger v. Reservists Committee to Stop the War, 418 U.S. 208, 94 S.Ct. 2925, 41 L.Ed.2d 706 (1974). But cf., United States v. Students Challenging Regulatory Agency Procedures (SCRAP), 412 U.S. 669, 687-88, 93 S.Ct. 2405, 2415-16, 37 L.Ed.2d 254 (1973) (noting that a plaintiff who claims a direct injury will not be denied standing simply because the alleged injury stems from a government action that has widespread effect).

In this case Northrop alleges that plaintiffs have suffered only a generalized injury. If Northrop had committed a fraud against the government, says Northrop, then plaintiffs would have been harmed, but only to the small degree that every taxpaying citizen in the county would have been harmed. Taxpayers frequently have claimed injury by virtue of increased expenditures caused by some improper congressional enactment or another, but, ever since Frothingham v. Mellon, 262 U.S. 447, 43 S.Ct. 597, 67 L.Ed. 1078 (1923), federal courts have rejected such suits. Analogizing from the Frothingham line of cases, Northrop argues that the harm caused by a marginal increase in a taxpayer's tax bill can never support a suit in federal court. Here the defendant is a defense contractor, not the United States government, but, according to Northrop, if a few extra pennies on a tax bill is too paltry a sum to justify a suit against the government, then it is too paltry a sum to justify a lawsuit against anyone, including Northrop.

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