FCA Alert : Lawyers & Attorneys for Whistleblower, False Claims Act & Qui Tam Defense : Kelley Drye & Warren LLP

In United States ex rel. Baklid-Kunz v. Halifax Hospital Medical Center, et al., No. 6:09-cv-1002-Orl-31DAB (M.D. Fla. June 6, 2011), the Middle District Court of Florida denied a defendant’s motion to dismiss False Claims Act (FCA) and other federal statutory claims on grounds of Eleventh Amendment immunity.  The defendant, Halifax, is a public hospital district established by the Florida legislature to provide hospital and healthcare services to state residents irrespective of ability to pay.  The relator was the director of physician services at Halifax.  The United States did not intervene in this case.

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On June 9, 2011, the District Court of Massachusetts in United States ex rel. Saltzman v. Textron Systems Corp., et al., Civil Action No. 09-cv-11985-RGS (D. Mass. June 9, 2011), dismissed a federal False Claims Act lawsuit alleging that Textron Systems, a defense contractor, submitted false claims for reimbursement for workers’ compensation insurance premiums.  The court held that even if the insurance costs were not in fact reimbursable, the defendant “is not culpable, as the FCA is not a strict liability statute.” The lawsuit was brought by a former employee of the defendant.  The United States declined to intervene.

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Former senior engineer at Lockheed Martin Corp., Darrol Olsen, filed a False Claims Act lawsuit against Lockheed, alleging that Lockheed used inferior and defective coatings on F22 aircraft.  The coatings are allegedly critical for the F22s stealth capability. The U.S. Air Force purchased 648 of these F-22s from Lockheed at a cost of about $87 billion. The Government did not intervene in the lawsuit, and the district court dismissed the complaint because Olsen failed to plead the claims with the particularity required by Rule 9(b) of the Federal Rules of Civil Procedure. The 11th Circuit affirmed the district court’s opinion. See United States ex rel. a.k.a. SEAL 1 v. Lockheed Martin Corp., Case No. 10-14763, 2011 WL 2150052 (11^th Cir. June 1, 2011).

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In United States ex rel. King v. DSE, Inc., et al., No. 8:08-cv-02416-SDM-EAJ (M.D. Fla. May 17, 2011), the Middle District Court of Florida denied various defense contractors’ motions to dismiss for failure to plead fraud with particularity.  The defendant contractors are weapons manufacturers retained by the government for the supply of grenades.  The relator, a former quality control manager for one of the defendants, alleged that defendants failed to follow proper quality control procedures and shipped defective grenades that failed to meet contract specifications.  Defendants contended that the relator failed to allege the dates and amounts of the false billing or payments, and that relator’s claims were spurious because he worked for only one of the defendants and for only several months at most. 

Nevertheless, the court found that allegations of improper quality control procedures against the contractors were sufficient in this case to satisfy FCA’s heightened pleading requirements.  In so holding, the court distinguished the case from the healthcare fraud context where an FCA plaintiff must allege with particularity a claim or bill for payment submitted to the government.  As the court stated, “in the medical context the harm to the government arises from the act of billing” whereas improper quality control procedures and defective military equipment “distinctly harm the government entirely distinct from any financial impact.”

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In United States ex rel. Minge v. TECT Aerospace, Inc. et al., Case No. 07-1212-MLB, Relators filed a False Claims Act lawsuit on behalf of the United States against defense contractors, alleging that the defendants manufactured aircraft parts with a “defective process” and were liable under the FCA for violations of express and implied certifications. Relators withheld certain documents during discovery claiming that the documents were protected from disclosure under the work product protection of Fed.R.Civ.P. 26(b)(3) and the “common interest doctrine.” Defendant Hawker Beechcraft Corporation moved to compel and the court found that the work product and common interest doctrines were not as far-reaching as Relators claimed, holding that certain communications from Relators to Government agents and attorneys were not protected work product and that Relators had no standing to object to the disclosure of the Government’s work product. 

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