Yuhasz v. Brush Wellman, Inc.

• Decision Date: 20 August 2003
• Docket Number: No. 02-3087.,02-3087.
• Citation: 341 F.3d 559
• Parties: Richard M. YUHASZ, Plaintiff-Appellant, v. BRUSH WELLMAN, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

341 F.3d 559

Richard M. YUHASZ, Plaintiff-Appellant, v. BRUSH WELLMAN, INC., Defendant-Appellee.

No. 02-3087.

United States Court of Appeals, Sixth Circuit.

Argued August 1, 2003.

Decided and Filed August 20, 2003. Pursuant to Sixth Circuit Rule 206

COPYRIGHT MATERIAL OMITTED

ARGUED: Dennis E. Murray, Jr., Murray & Murray, Sandusky, Ohio, for Appellant. Geoffrey J. Ritts, Jones Day, Cleveland, Ohio, for Appellee.

ON BRIEF: Dennis E. Murray, Jr., Charles M. Murray, Barbara Quinn Smith, MURRAY & MURRAY, Sandusky, Ohio, for Appellant.

Dennis M. Kelly, JONES DAY, Cleveland, Ohio, for Appellee.

Before KENNEDY, GILMAN and GIBBONS, Circuit Judges.

OPINION

JULIA SMITH GIBBONS, Circuit Judge.

Relator Richard M. Yuhasz brought a qui tam action against defendant-appellant Brush Wellman, Inc. (Brush), claiming that Brush violated the False Claims Act (FCA), 31 U.S.C. § 3729 et seq., and wrongfully terminated him in retaliation for his allegations of wrongdoing. After the United States declined to intervene, Brush moved to dismiss the case pursuant to Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure, and the district court granted the motion. For the reasons set forth below, we affirm the judgment of the district court.

I.

Relator Yuhasz was employed as a laboratory manager for Brush at Brush's bronze alloy manufacturing facility in Lorain, Ohio, between September 1996 and January 2000. At this facility, Brush produces "`super' alloys, spinodal alloys, and other specialty alloys" that are supplied to the United States both directly and through intermediaries, including distributors, for use in aerospace and military aviation. Some of the alloys, supplied under requirements of and pursuant to contracts with the United States, are subjected to further processing and manufacturing before being delivered to the United States.

Yuhasz was hired to design and establish, and then operate as manager, a testing laboratory for its Lorain facility. The laboratory was established to conduct chemical, mechanical, and physical testing of Brush's alloys. At the laboratory, Yuhasz established the specifications for the laboratory equipment and both conducted and supervised testing procedures.

In order to claim or receive payments under government contracts, Brush must submit "certifications of compliance with technical specifications stating, representing, and warranting that the alloys were in strict conformity with specifications and that [Brush] was, thereby, legally entitled to claim and receive payment." These certifications include certification pursuant to Aerospace Materials Specifications, certification as to compliance with "QQC" specifications (a government standard), and certification pursuant to the specifications of the American Society for Testing and Materials.

On April 14, 2000, Yuhasz filed this qui tam action, alleging that Brush violated the FCA by making false certifications by itself or through intermediaries and that Brush wrongfully terminated him in retaliation for his allegations of improper conduct. After investigating Yuhasz's allegations, the United States declined to intervene on July 11, 2001. On September 7, 2001, Brush moved to dismiss the case for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). The district court granted Brush's motion to dismiss on December 14, 2001. On January 8, 2002, Yuhasz filed his notice of appeal.

II.

A district court's grant of a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure is reviewed de novo. Goad v. Mitchell, 297 F.3d 497, 500 (6th Cir.2002). Pursuant to Rule 12(b)(6), an action may be dismissed if the complaint fails to state a claim upon which relief can be granted. When considering a motion to dismiss, all well-pleaded allegations in the complaint are treated as true, and the dismissal of the complaint is deemed proper "only `if it appears beyond doubt that the plaintiff can prove no set of facts in support of its claims that would entitle it to relief[.]'" Id. (citing Kostrzewa v. City of Troy, 247 F.3d 633, 638 (6th Cir.2001)); see also Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).

III.

According to the FCA:

Any person who (1) knowingly presents, or causes to be presented, to an officer or employee of the United States Government or a member of the Armed Forces of the United States a false or fraudulent claim for payment or approval; (2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government... is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, plus 3 times the amount of damages which the Government sustains because of the act of that person.

31 U.S.C. § 3729. The purpose of the FCA is "to encourage any individual knowing of Government fraud to bring that information forward." United States ex rel. McKenzie v. BellSouth Telecomm., Inc., 123 F.3d 935, 938 (6th Cir.1997) (McKenzie I) (quoting S.Rep. No. 99-345 (1986), reprinted in 1986 U.S.C.C.A.N. 5266); see also United States ex rel. Dick v. Long Island Lighting Co., 912 F.2d 13, 18 (2d Cir.1990) ("`[T]he purpose of the qui tam provisions of the False Claims Act is to encourage private individuals who are aware of fraud being perpetrated against the Government to bring such information forward.'") (quoting H.R.Rep. No. 99-660, at 22 (1986)). If, as in this case, the government does not assert its statutory right to take over the case, the relator can recover between twenty-five and thirty percent of any monies recovered from a settlement or judgment, in addition to reasonable expenses and attorneys' fees and costs. 31 U.S.C. § 3730(d)(2).

Yuhasz claims that Brush, by itself or through intermediaries, submitted fraudulent certifications and claims for payment to the United States and received payment from the United States for alloys not meeting government specifications, in violation of the FCA. Specifically, Yuhasz alleges that Brush

had actual knowledge and/or acted in deliberate disregard or ignorance of the truth or falsity of: (i) alloy product that was off-specification due to defects such as cracks; (ii) false and fraudulent certifications of compliance with technical specifications; (iii) improper traceability and identifiability controls with respect to lots of alloy bar stock; (iv) beryllium contamination in alloys, rendering such alloys off-specification; (v) [Brush's] failure to perform requisite tests on the alloys, such as the mercurious nitrate testing; and, (vi) the fact that requisite internal controls were not in place, rendering alloy products untraceable and unidentifiable.

The district court granted Brush's motion to dismiss, concluding that since the complaint "did not state a specific false claim submitted to the government," Yuhasz "did not allege a FCA claim with sufficient particularity as required under Rule 9(b)." Yuhasz v. Brush Wellman, Inc., 181 F.Supp.2d 785, 794 (N.D.Ohio 2001).

Pursuant to Federal Rule of Civil Procedure 9(b), in any complaint averring fraud or mistake, "the circumstances constituting fraud or mistake shall be stated with particularity." The heightened pleading standard set forth in Rule 9(b) applies to complaints brought under the FCA. "[C]omplaints brought under the FCA must fulfill the requirements of Rule 9(b) — defendants accused of defrauding the federal government have the same protections as defendants sued for fraud in other contexts." Bly-Magee v. California, 236 F.3d 1014, 1018 (9th Cir.2001); see also United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir.1997); Gold v. Morrison-Knudsen Co., 68 F.3d 1475, 1476 (2d Cir. 1995); Cooper United States ex rel. v. Blue Cross & Blue Shield of Florida, Inc., 19 F.3d 562, 568 (11th Cir.1994). The requirement that fraud be plead with particularity need not be relaxed in FCA cases in order to protect the public because the government's ability to intervene on the basis of information brought to its attention vindicates the public interest. The Sixth Circuit interprets Rule 9(b) as requiring plaintiffs to "allege the time, place, and content of the alleged misrepresentation on which he or she relied; the fraudulent scheme; the fraudulent intent of the defendants; and the injury resulting from the fraud." Coffey v. Foamex L.P., 2 F.3d 157, 161-162 (6th Cir.1993) (quotation omitted).

The district court correctly found that Yuhasz had failed to allege an FCA claim with sufficient particularity as required by Rule 9(b). Yuhasz's complaint is short on specifics. For example, the complaint notes only that "certain testing that was outsourced according to a particular EAB number did not match-up to any heat number for alloy bar stock" and that "certain alloys of [Brush] may have been mismarked." (emphasis added). However, the complaint contains no particularized allegations of wrongdoing. The failure to identify specific parties, contracts, or fraudulent acts requires dismissal. See United States ex rel. Clausen v. Lab. Corp. of Am., Inc., 290 F.3d 1301, 1312 (11th Cir.2002) ("failure to allege with any specificity if — or when — any actual improper claims were submitted to the Government is indeed fatal"); U.S. ex rel. Walsh v. Eastman Kodak Co., 98 F.Supp.2d 141, 147 (D.Mass.2000) ("Relator's First Amended Complaint, in essence, sets out a methodology by which the vendors might have produced false invoices, which in turn could have led to false claims. Without citing a single false claim arising from an allegedly false invoice, Relator has not met even a bare-bones Rule 9(b) test."); United States ex rel. Butler v. Magellan Health Serv., Inc., 101 F.Supp.2d 1365, 1369 (M.D.Fla.2000) ("Plaintiff does plead a fraudulent scheme of conduct which may well be prohibited by law. However, Plaintiff pleads no...