United States District Court, D. Kansas
THE UNITED STATES OF AMERICA ex rel. MICHELE COFFMAN, Plaintiff-Relator,
v.
THE CITY OF LEAVENWORTH, KANSAS, Defendant.
MEMORANDUM AND ORDER
JULIE
A. ROBINSON CHIEF UNITED STATES DISTRICT JUDGE.
Plaintiff-Relator
Michele Coffman filed this qui tam action against Defendant
the City of Leavenworth, Kansas (“the City”),
alleging that it committed fraud on the federal government by
making a false claim for reimbursement to the Federal
Emergency Management Agency (“FEMA”) and
fraudulently billing federal agencies for sewage service.
This matter is before the Court on the parties' cross
motions for summary judgment (Docs. 92 and 94). The motions
are fully briefed and the Court is prepared to rule. For the
reasons stated below, the Court denies Plaintiff's motion
for partial summary judgment and grants in part the
City's motion for summary judgment.
I.
SUMMARY JUDGMENT STANDARDS
Summary
judgment is appropriate if the moving party demonstrates
“that there is no genuine dispute as to any material
fact” and that it is “entitled to judgment as a
matter of law.”[1]In applying this standard, the Court views
the evidence and all reasonable inferences therefrom in the
light most favorable to the nonmoving party.[2] “There is
no genuine [dispute] of material fact unless the evidence,
construed in the light most favorable to the non-moving
party, is such that a reasonable jury could return a verdict
for the non-moving party.”[3] A fact is
“material” if, under the applicable substantive
law, it is “essential to the proper disposition of the
claim.”[4] A dispute of fact is “genuine”
if “there is sufficient evidence on each side so that a
rational trier of fact could resolve the issue either
way.”[5]
The
moving party initially must show the absence of a genuine
dispute of material fact and entitlement to judgment as a
matter of law.[6] In attempting to meet this standard, a
movant who does not bear the ultimate burden of persuasion at
trial need not negate the nonmovant's claim; rather, the
movant need simply point out to the court a lack of evidence
for the nonmovant on an essential element of the
nonmovant's claim.[7]
Once
the movant has met the initial burden of showing the absence
of a genuine dispute of material fact, the burden shifts to
the nonmoving party to “set forth specific facts
showing that there is a genuine issue for
trial.”[8] The nonmoving party may not simply rest
upon its pleadings to satisfy its burden.[9] Rather, the
nonmoving party must “set forth specific facts that
would be admissible in evidence in the event of trial from
which a rational trier of fact could find for the
nonmovant.”[10] In setting forward these specific facts,
the nonmovant must identify the facts “by reference to
affidavits, deposition transcripts, or specific exhibits
incorporated therein.”[11] To successfully oppose summary
judgment, the nonmovant must bring forward more than a mere
scintilla of evidence in support of his
position.[12] A nonmovant may not create a genuine
issue of material fact with unsupported, conclusory
allegations.”[13]
Finally,
summary judgment is not a “disfavored procedural
shortcut”; on the contrary, it is an important
procedure “designed to secure the just, speedy, and
inexpensive determination of every
action.”[14] “Where, as here, the parties file
cross-motions for summary judgment, [the Court is] entitled
to assume that no evidence needs to be considered other than
that filed by the parties, but summary judgment is
nevertheless inappropriate if disputes remain as to material
facts.”[15] The Court considers cross-motions
separately: the denial of one does not require the grant of
the other.[16] “To the extent the cross-motions
overlap, however, the Court may address the legal arguments
together.”[17] The material facts are undisputed in
this case, and the legal issues asserted in both motions
overlap. The Court will therefore address those issues
together.
II.
UNCONTROVERTED FACTS
The
following material facts are either uncontroverted or, if
controverted, are construed in the light most favorable to
the nonmovant.
A.
The Parties and Relevant Entities
The
City is a municipal government in the State of Kansas. It
operates a wastewater treatment plant (the “WTP”)
that provides sewage and wastewater treatment services for
its residents. It also provides wastewater treatment services
to the Veterans Administration (“VA”), the United
States Army (“Army”), and the United States
Department of Justice Bureau of Prisons (“BOP”)
pursuant to contracts it has with these federal agencies. The
City entered into contracts with the Army and the BOP for
sewage service in 1974, and with the VA in 1978.
At all
times relevant to this litigation, Charles Klingler was the
WTP's Superintendent, Michael McDonald was the City
Engineer and Director of Public Works (“Public Works
Director”), and Scott Miller was the City Manager. Chad
Lough was the WTP's Assistant Superintendent from July
22, 2010 until June 20, 2012.
Plaintiff
worked at the WTP from 2010 to 2013. She began as a Class I
Operator, rose to the rank of Assistant Superintendent, and
resigned after being demoted to a Class II Operator. She
filed this qui tam action, alleging, inter alia, she
was constructively discharged after she began asking
questions about billing irregularities.
B.
Regulatory Overview
The
Clean Water Act prohibits “the discharge of any
pollutant by any person” into waters of the United
States, except in accordance with certain provisions of the
Act.[18] To comply with the Act, pollutant
dischargers can obtain a permit through the National
Pollutant Discharge Elimination System (“NPDES”)
permit program, administered by the Environmental Protection
Agency (“EPA”) and authorized
states.[19] “NPDES permits impose limitations
on the discharge of pollutants, and establish related
monitoring and reporting requirements, in order to improve
the cleanliness and safety of the Nation's
waters.”[20] “Noncompliance with a permit
constitutes a violation of the Act.”[21]
The EPA
delegated to the Kansas Department of Health and Environment
(“KDHE”) the authority to regulate wastewater
discharge in the state of Kansas.[22] The KDHE issues the NPDES
permits in Kansas and monitors compliance with the permits.
During
the relevant period, the City held two NPDES permits, one
effective from 2008 through 2012, and the other effective
from January 2013 through 2017. These permits allowed the
City to discharge treated effluent from its wastewater
treatment plant into the Missouri River. Under both NPDES
permits, the City was required to report all bypasses to
KDHE. A “bypass” is an intentional or
unintentional diversion of a waste stream from any portion of
a treatment facility.
Standard
Condition 8 of the City's 2008 NPDES permit required the
City to “at all times maintain in good working order
and efficiently and effectively operate all treatment,
collection, control systems or facilities to achieve
compliance with the terms of this permit . . .
.”[23] Standard Condition 6 of the 2013 permit
required the City to “at all times properly operate and
maintain all facilities and systems of treatment and control
(and related appurtenances) which are installed or used by
the permittee to achieve compliance with the requirements of
this permit and Kansas and Federal Law.”[24]
C.
The Broken Sewer Line
On or
around August 25, 2010, WTP operators discovered a break in a
sewer line that crosses Five-Mile Creek in front of the WTP,
between manholes AAB and ABA (also referred to as manholes
4284 and 4268). Then Assistant Superintendent Chad Lough
reported the break to KDHE on August 25, 2010. His report
stated: “Erosion caused large sections of concrete to
slide down the hill and damage [the] pipe crossing the
creek.”[25] Under “Date Bypass Ended, ”
Lough marked “N/A.”[26]
In
response to the break, Superintendent Klingler directed
operators to place an inflatable plug into the pipe inlet at
Manhole AAB to stop backflow from the manhole from entering
the line and escaping into the creek. The inflatable plug
ruptured at some point and was replaced by sandbags.
On
August 27, 2010, EPA representative Mike Boeglin called
Public Works Director McDonald to discuss a citizen complaint
about the broken line. McDonald told him the City was aware
of the break, had reported it to KDHE, and had already
undertaken efforts to plug the line.
On
August 28, 2010, KDHE environmental scientist Vic Montgomery
met with Superintendent Klingler at the WTP to inspect the
broken pipe. Montgomery directed Klingler to discharge
treated effluent from the final clarifiers into the creek to
improve the smell and color of the creek. Montgomery
considered the effluent discharge not a violation of the
City's NPDES permit.
On or
about October 8, 2010, KDHE district engineer Helen Holm
inspected the WTP for compliance with the City's NPDES
permit.[27] In her inspection report, she indicated,
in pertinent part, that: 1) the laboratory data indicated
compliance with permit effluent limitations since the last
inspection, and 2) the City had reported all bypasses
properly.[28]
On
November 17, 2010, KDHE representative Chris Seeds sent
Assistant Superintendent Lough an e-mail asking about the
status of the broken line. Lough responded:
The bypass report dated . . . 8/25/10 was for the creek
crossing located at the east side of our facility. This
bypass was not a planned bypass. The pipe that crosses the
creek is damaged. Flow from that line upstream is minimal
(only one business on that service and it's an asphalt
production plant). On our side of the creek[, ] there are
35-50 sand bags in place in front of the line minimizing flow
back towards the creek. This project is currently under
review for repair and or replacement of the pipe that crosses
the creek.[29]
WTP
operators were unable to successfully “camera”
the broken line to determine the exact location of the break
until January 25, 2011. In February 2011, the City contracted
with Water Resource Solutions to prepare a design study for
use in the project to repair the broken line and re-stabilize
the creek bank.
In
April 2011, the City received notice from the Army Corps of
Engineers that it would experience flooding. The City
undertook certain mitigation measures in anticipation of the
flood to prevent damage to the WTP.
On June
7, 2011, Seeds asked Lough if the broken line had been
repaired. Lough responded on June 13, “This repair has
not been completed. I do believe that there are some
proposals/plans available from the Engineering Dept. or
Charles Klingler . . . .”[30]
On
November 17, 2011, Linaweaver Construction capped the broken
line by filling it with concrete. The work to cap the pipe
took “a day or two.”[31] Following this repair,
the sewer line no longer leaked. The City notified KDHE the
same day that the bypass had ended. The City paid $7, 021.00
for the repair.
D.
Submissions to FEMA
From
May 19, 2011 to June 14, 2011, the Missouri River flooded due
to record snow and rainfall.[32] On September 23, 2011, FEMA
declared the 2011 Missouri River flood to be a “Major
Disaster, ” and designated the incident as
“Kansas Flooding (DR-4035).”[33] Following a
natural disaster, FEMA representatives work with cities to
prepare a standardized “Project Worksheet”
(“PW”) document that FEMA prepares as part of a
formal request for reimbursements.[34]
Kansas
Department of Emergency Management (“KDEM”)
project specialist Les Money acted as the liaison between the
City and FEMA, and was responsible for gathering the
information compiled by FEMA for the PW. On December 11,
2011, FEMA representative Thomas Montgomery sent Les Money an
email advising of his decision to include the broken sewer
line in the PW and asked for: 1) a description of work
completed; 2) copies of invoices for work completed; 3)
manhole numbers at each end of the break; 4) size of the
damaged pipe; 5) length of pipe to replace; 6) brief
description of repair/replacement process; and 7) estimated
cost of repair/replacement.[35] Montgomery's request was
forwarded to Superintendent McDonald, who responded via email
on December 12, 2011.
City
Finance Director Dan Williamson decided not to submit a claim
for repairs to the broken sewer pipe because that project had
been on the City's improvement list prior to the flood.
Ultimately, on December 13, 2011, the City submitted a claim
to FEMA requesting $22, 966.73, which was the cost of: 1)
removing debris in the bar screen building; 2) removing
excessive grit in the clarification chamber building; and 3)
unclogging sewer lines in approximately 20
locations.[36]
E.
Plant Maintenance
The WTP
consists of primary clarifiers, trickling filters, final
clarifiers, holding tanks for sludge, a belt press to dewater
sludge, and a UV treatment building. The WTP utilizes three
large vertical towers called “trickling filters,
” which contain microorganisms utilized in the
wastewater treatment process. At some point in 2012,
operators discovered that the bearings in Trickling Filters
#1 and #2 were deteriorating, which periodically caused the
distributor arms to stop turning. This, in turn, periodically
caused water from inside the filters to escape through the
bottom air vent, which was a bypass event.
Trickling
Filter #1 was eventually taken out of service because parts
necessary to repair it were unavailable. The WTP placed
Trickling Filter #2 on an aggressive maintenance schedule.
Following implementation of the maintenance schedule in July
2013, there were no further bypasses. KDHE district engineer
Helen Holm made specific note of the issues with Trickling
Filters #1 and #2 in her December 2014 inspection report, and
determined that because the City had properly notified KDHE
of the issues and was attempting to remedy them, the City was
not in violation of Standard Condition 6 of its NPDES permit.
Plaintiff's expert disagrees with Holm; he believes the
City violated its 2008 permit any time a piece of equipment
used in the treatment process malfunctioned and was unable to
be fixed within a matter of a few days.[37]
The
WTP's holding tank mixers also experienced mechanical
issues. Without operational mixers, the heaviest parts of the
sludge sat at the bottom of the holding tank, while the
lighter parts remained at the top. Consequently, sludge being
processed by the belt press was inconsistent. After October
2013, the City replaced the mechanical mixers with an air
bubbling system. The broken mixers had no effect on the
City's compliance with its NPDES permit. Plaintiff's
expert opines that the City's failure to promptly repair
or replace the mixers constituted a violation of the 2008 and
2013 permits.
F.
The Vactor Truck and Improper Dumping
The
City owns a large industrial truck equipped with a
high-pressure water jet cleaning system, as well as a vacuum
system for clearing out objects (the “Vactor
Truck”). When the vacuum component was used, operators
drained some, but not all, of the truck's liquid contents
into a manhole inside the plant for processing. From
approximately 2007 to some point in 2012, operators deposited
the solids and whatever liquid remained in the truck on the
ground in one of two areas behind the gates of the WTP.
Solids from the truck typically consisted of items such as
personal hygiene products, plastic razors, gravel, rocks, and
raw septage.
The
area where solids were dumped was not enclosed, was not a
lined pit, and contained no warning signs. The City never
performed any laboratory analysis on the dumped material. The
City did not inform the Army, the VA, or the BOP of its
practice of dumping materials from the Vactor truck.
At some
point, WTP operator Kris Bennetts called KDHE with concerns
about the above procedure. According to Bennetts, KDHE's
response was that the procedure he described was “no
big deal” and was “an affirmation of this is not
as big as what I'm thinking it is.”[38]
KDHE
inspector Vic Montgomery performed a plant inspection on
April 4, 2012. He observed operators dump the contents of the
Vactor truck on the ground, before being removed. In his
inspection report, Montgomery noted: “Vac trucks are
dewater[ed] then the septage is dumped on the ground to be
processed, please make sure to check that water does not
migrate from the area.”[39] In a letter accompanying the
report, Montgomery clarified, “Solids [from the Vactor
truck] are being collected and handled properly but please
make sure any excess water does not migrate from the
site.”[40]
Public
Works Director McDonald first learned about the
operators' practice of depositing the solids from the
Vactor truck on the ground around the time he reviewed
KDHE's 2012 inspection report. During the preliminary
treatment process, wastewater passes through a large grate,
referred to as a bar screen, which is designed to catch large
items such as plastics or rags. These items, referred to as
“screenings, ” are then typically placed into a
bin to dry, before being sent to a landfill. Scott Huismann,
Plaintiff's expert, has expressed the opinion that the
contents of the Vactor truck were “sewage sludge,
” which, under 40 C.F.R. Part 503, was allowed to be
dumped on the ground for up to two years without restriction
or control. Although Huismann did not visit the site where
the Vactor truck solids were allegedly dumped, he believes
some of the material deposited on the ground may still remain
there, in violation of 40 C.F.R. Part 503. Huismann admitted
the distinction between preliminary treatment and removal of
the Vactor truck solids was confusing and unclear, and could
lead an operator to mistakenly equating the two.
G.
Plaintiff's Employment
Plaintiff
began working at the WTP on April 29, 2010, as a Wastewater
Treatment Class I Operator. Superintendent Klingler exempted
Plaintiff from carrying an “on call” pager and
sent her to training. She became a Level II Operator on June
23, 2011. In January 2012, she was appointed to be the
project representative for the construction of the UV
Building. In 2012, the City selected her as the
“Employee of the Second Quarter.” In December
2012, she received the City's award for “Employee
of the Year.” On August 16, 2012, Plaintiff was
promoted to Assistant Superintendent. Upon her promotion,
Klingler became her direct supervisor. She was also informed
that she was required to pass the KDHE Class IV certification
exam within twelve months, and that her failure to do so
would result in demotion or termination. KDHE's Class IV
certification exam had a pass rate of approximately 33
percent at that time.
On
March 26, 2013, City Manager Miller met with Plaintiff to
discuss concerns raised by James Bennetts, a WTP operator,
who had just resigned and raised concerns about operations at
the WTP and unfair treatment by Klingler. The parties
disagree about what was discussed at this meeting. Plaintiff
says she told Miller that she believed the City had submitted
a fraudulent claim to FEMA regarding the broken Pipe. Miller
says she did not talk to him about a fraudulent claim to
FEMA. He says their discussion was about Klingler's
management style and operation issues at the plant.
On
April 1 and 2, 2013, Miller visited the plant, talked to
Klingler, and interviewed several other employees. On April
3, 2013, Klingler told Plaintiff that he would be busy with
other things and she should contact him about plant-related
matters by email.
On
April 16, 2013, Klingler wrote a memo to Plaintiff about four
issues: 1) the failure to follow bypass guidelines on April
1, 2013; 2) a request for a timeline regarding a complaint
call; 3) new trickling filter procedures; and 4) a request
for documentation for sick leave taken on March 18 through
March 20, 2013 (the “Memo”).[41] Plaintiff
responded to the memorandum by email on April 18, 2013. She
addressed each issue and concluded with the following
sentence, “I feel the Memo you gave me on 4/16/2013 is
not justified and I will be contacting your Supervisor, Mr.
Bob Patzwald, to discuss this issue with
him.”[42]
On
April 18, 2013, Public Works Director McDonald met with
Klingler to address concerns about his management style.
McDonald directed Klingler to focus on listening to staff,
communicating his expectations clearly, and allowing staff to
do their jobs.
On
April 19, 2013, Plaintiff met with Klingler and McDonald to
discuss her response. McDonald told Coffman he had assisted
Klingler in drafting the memo, and reiterated it had been
sent for training. Plaintiff responded that she felt the memo
had been sent as retaliation for meeting with Miller, which
McDonald denied. The parties dispute what was said at the
meeting. The meeting ended with Plaintiff asking to speak
with City Manager Miller.
After
this meeting, Plaintiff began receiving weekly “To
Do” lists from Klingler, which contained tasks to be
completed in addition to everyday operations. The items on
the “To Do” lists fell within the scope of
Plaintiff's job duties, but Plaintiff believes the lists
included unnecessary work because Klingler never followed up
on them. She also believes this was a scheme to cause her to
work long hours to prevent her from studying and passing the
Class IV exam.
On June
12, 2013, Plaintiff met with Klingler and Lona Lanter, the
Director of Human Resources (“HR Director”),
regarding what would happen if she failed to pass the Class
IV exam. Plaintiff had taken the Class IV exam in December
2012 and on May 9, 2013, failing both times. Lanter suggested
Plaintiff take the Class III test as a “fall
back.” Plaintiff rebuffed the idea. She complained of
retaliation and explained that her increased workload, which
was filled with meaningless tasks, made it impossible for her
to study for either tests. The City agreed to extend the
deadline from August 16, 2013 to August 29, 2013, which would
allow her to take the test scheduled on the 29th
if necessary.
On
August 2, 2013, Plaintiff took the Class IV exam again and
failed. On August 8, she asked Klingler to extend the Class
IV certification deadline from 12 months to 18
months.[43] On August 16, Klingler denied the
request, stating the City had already agreed to extend the
deadline to the end of August 2013.[44]
On
August 16, 2013, Klingler also presented Plaintiff with her
first performance evaluation as assistant superintendent. On
a scale from 0 (lowest) to 2 (highest), Klingler rated
Plaintiff's performance as a “1, ” defined to
mean “[a] totally competent employee, ”
“[a] good steady contributor, ” and “[a]n
employee that completes all stated job requirements in a
timely and efficient manner” on each of the ten
categories of review.[45] Based on her evaluation, Coffman
received a two percent raise, the highest performance-based
raise during her tenure with the City.
Plaintiff
appealed Klingler's denial of her requested extension and
her evaluation scores to Public Works Director McDonald and
HR Director Lanter. Both McDonald and Lanter affirmed
Klingler's decisions. McDonald explained that it was the
City's policy not to extend certification deadlines other
than for a few days to meet a testing schedule, which was
exactly what the City did when it extended her deadline from
August 16 to August 29.[46] As for her evaluation scores,
McDonald concluded that he had no reason to change them
because: 1) a rating of 2 required additional documentation,
and 2) expectations for a management position are different
than for a regular worker.[47] Lanter stated that
Klingler's denial of her extension was “a
consistent application of the related criteria used for all
employees within [the plant], ” and that performance
evaluations were not grievable.[48]
On
September 3, 2013, KDHE notified the City and Plaintiff that
she had failed the August 29th Class IV exam. On September
12, 2013, the City notified Plaintiff she had been demoted to
Operator II for failing to pass her KDHE Class IV
certification exam within 12 months of her promotion.
Plaintiff submitted her letter of resignation on October 4,
2013.
H.
Billing to Federal Agencies
Ruby
Maline is the City's Finance Director. Effective July 1,
1995, the City renewed its 1974 contract with the Army for
the provision of sewage service, which is still in effect.
The “Sewage Service Specifications” section of
the contract states:
SERVICE TO BE RENDERED. The [City] shall furnish a sanitary
sewer connection and sanitary sewage service as required by
the Government and shall receive, carry, treat, and dispose
of all sanitary sewage originating at the project in such
amounts as the Government desires to release into
Contractor's sewer system and in a manner and by such
means as will constitute no hazard to the public health. The
[City] shall operate [its] sewage disposal and treatment
facilities in conformity with applicable laws, rules, and
regulations promulgated by Federal, state and local
authorities.[49]
Each
month from at least 2008 to present, the City has sent the
Army an invoice for sewage service. The amount billed is
based on three components: (a) annual operating and
maintenance expenses; (b) overhead; and (c) reserves for
repair and replacement.
The
“annual operating and maintenance expenses”
component has three sub-parts: (1) the total budget for
operating the treatment plant for the current year,
multiplied by the Army's percentage of plant flow; (2)
the total budget for operating the collection system for the
current year, multiplied by a percentage specified by the
contract; and (3) adjustments to account for the difference
between the Army's share of the prior year's budget
and the actual amount spent during the prior year to operate
the treatment plant and collection system, which is then
prorated over 12 months. Because the Army receives a credit
for any amount budgeted but not spent, the City does not
retain money from the Army that is budgeted for the operation
of the treatment plant or collection system, but not spent.
The “overhead” component of the bill is
calculated, pursuant to the contract, at 13 percent of the
Army's annual charge for budgeted treatment plant and
collection system expenses, subject to the same adjustment to
account for the difference between budgeted and actual costs
for the prior year, and then prorated over 12 months. The
“reserves for repair and replacement” component
is calculated at 21 percent of the replacement value of the
treatment plant, divided by a projected useful life of 25
years and then prorated over 12 months.
On
August 1, 1978, the City entered into a contract with the VA
to provide it sewage services, which is still in effect
today. An addendum to the VA contract states that the City
agrees to comply with Section 308 of the Federal Water
Pollution Control Act (33 U.S.C. 1251 et seq.)
“relating to inspection, monitoring, entry, reports,
and information, as well as other requirements specified in .
. . section 308 of . . . the Water Act . . . and all
regulations and guidelines issued thereunder before the award
of this contract.” However, the section is preceded by
the following language:
(Applicable only if the contract exceeds $100, 000 or the
contracting officer has determined that orders under an
indefinite quantity contract in any one year will exceed
$100, 000, or a facility to be used has been subject of a
conviction under the Clean Air Act (42 U.S. 1857c-8(c) (1) or
the Federal Water Pollution Control Act (33 U.S.C. 1319(c))
and is listed by the EPA, or the contract is not otherwise
exempt.)[50]
On
November 15, 1974, the City entered into a contract with the
BOP to provide it sewage services, which is still in effect
today. The VA and BOP's monthly bills are calculated as a
percentage of the total actual operating expenses, derived
from each entity's flow readings.
Each
month from 2008 to present, the Army, VA, and BOP have paid
their monthly sewage bills in full. At no time from 2008 to
present have any of these federal agencies declined to pay
the full amount billed. At no point from 2010 to 2014 has the
Army, VA, or BOP ever requested or performed an audit of the
WTP to ensure the City was operating in conformity with its
NPDES permit.
III.
DISCUSSION
The
City seeks summary judgment on all five counts: Count I,
violations of the Federal False Claims Act
(“FCA”); Count II, violations of the
anti-retaliation provision of the FCA; Count III,
Whistleblower Retaliation under Kansas common law; Count IV,
Common Law Retaliatory Discharge; and Count V, Negligent
Infliction of Emotional Distress.[51] Plaintiff seeks summary
judgment as to Count I only. The Court discusses each count
separately.
A.
Count I - False Claims to Government Agencies
The FCA
“covers all fraudulent attempts to cause the government
to pay out sums of money.”[52] The FCA's qui tam
provisions permit a private plaintiff to bring civil actions
on behalf of the government.[53] And while the government
“may intervene and take over a private plaintiff's
case, it often declines to do so.”[54] If the
government declines to intervene, a private plaintiff may
proceed as a relator on behalf of the
government.[55] A relator is entitled to a portion of
any civil penalty and damages awarded.[56]
The
FCA, in pertinent part, makes any person liable who
“knowingly presents, or causes to be presented, a false
or fraudulent claim for approval, ”[57] or who
“knowingly makes, uses, or causes to be made or used, a
false record or statement material to a false or fraudulent
claim.”[58] Knowledge or scienter is an essential
element for all FCA violations. The FCA defines
“knowing” and “knowingly” to mean
“that a person, with respect to information-(i) has
actual knowledge of the information; (ii) acts in deliberate
ignorance of the truth or falsity of the information; or
(iii) acts in reckless disregard of the truth or falsity of
the information, and no proof of specific intent to defraud
is required.”[59] “For a statement to be knowingly
false, it must be more than merely an innocent mistake or
misinterpretation of a regulatory
requirement.”[60]
The FCA recognizes two types of actionable claims-factually
false claims and legally false claims. In a run-of-the-mill
“factually false” case, proving falsehood is
relatively straightforward: A relator must generally show
that the government payee has submitted “an incorrect
description of goods or services provided or a request for
reimbursement for goods or services never provided.”
[Mikes v. Straus, 274 F.3d 687, 97 (2nd Cir. 2001)].
By contrast, in a claim based on an alleged legal falsehood,
the relator must demonstrate that the defendant has
“certifie[d] compliance with a statute or regulation as
a condition to government payment, ” yet knowingly
failed to comply with such statute or regulation.
Id.[61]
Materiality
is a requisite element for factually false claims under 31
U.S.C. § 3729(a)(1)(B) and false certification
claims.[62] The FCA defines materiality to include
facts that have “a natural tendency to influence, or be
capable of influencing, the payment or receipt of money or
property.”[63] “The materiality standard is
demanding.”[64]
Count I
alleges the City submitted false claims for two types of
payment: 1) a claim for flood damages to FEMA, and 2) monthly
bills for wastewater services to the VA, Army, and BOP. The
FEMA-claim falls under the factually false theory, while the
monthly wastewater bills present a legal
falsity.[65]
1.
False Claim to FEMA
Plaintiff
asserts the City submitted two documents to FEMA that
contained false statements: 1) an email dated December 12,
2011 (the “Email”), and 2) the Project Worksheet.
a)
The Email
Plaintiff
claims the Email violated 31 U.S.C. § 3729(a)(1)(B)
because it contains a false explanation regarding the source
of the damage to the Pipe.[66] She argues that by providing
the costs to repair the Pipe and stabilize the river bank,
the Email supported the false statement that the Flood broke
the Pipe. The Court disagrees.
The
Email, in pertinent part, states:
The 10” sewerline between Manholes 4284 and 4268
crossed Five Mile Creek in a concrete encased structure. The
creek had eroded sufficiently that the structure had become a
“waterfall[.]” City staff had explored a variety
of repair strategies that would have been programmed into a
future CIP [capital improvements project] program.
The 2011 Flood submerged this structure and subjected it to
unusual forces. The structure became unstable and essentially
“broke” at the outside of MH 4268. This allowed
substantial inflow to enter the plant, and created other
operational difficulties. Efforts to stop[] the flow from
inside MH 4268 proved only marginally effective. Once the
water receded[, ] a contract was issued to Linaweaver
Construction to remove the broken sewer crossing and seal the
two manholes. This work cost $7021 on PO 4478.
This solves the immediate concerns over inflow. There are a
very small number of users upstream of MH 4284, and the City
will use the vacuum truck periodically to remove any sewage
generated until this is repaired.
Staff has had plans prepared for a replacement of the sewer
and mitigation of the conditions that created the failure.
The estimated cost for replacement of the sewer only is $358,
000. There is an additional cost of $121, 000 related to bank
stabilization up and downstream of the crossing that prevents
the severe erosion that has occurred.
A spreadsheet with the estimates is attached. The estimates
are based on a concept developed in early 2011 as part of the
CIP planning.[67]
Plaintiff's
construction of the Email is untenable because she ignores
the first paragraph and construes the second paragraph in a
vacuum. The first paragraph explained that erosion caused the
Pipe to become a waterfall; in other words, erosion had
damaged the Pipe. The second paragraph explained the effects
of the Flood to the already damaged Pipe-it broke at the
outside of MH 4268, which allowed substantial water to enter
the plant. These paragraphs thus reported two sources of
damage to the Pipe, creek erosion and the Flood.
Although
the Email did not expressly state the Pipe was damaged prior
to the Flood, the fifth paragraph explained that the
estimates to repair the erosion damage were obtained in early
2011, many months before the Flood triggered FEMA funding.
This explanation, combined with the first two paragraphs,
show a lack of intent to hide the fact that the Pipe had
pre-Flood damage.
Plaintiff
points to McDonald's testimony that he could not recall
when or who from the City had informed FEMA about pre-Flood
damage to the Pipe to suggest a genuine issue of fact exists
regarding whether the City had informed FEMA of the
pre-existing damage to the Pipe. The Email, however,
establishes that the City informed FEMA of the erosion damage
prior to submitting its claim.
The
Court rejects Plaintiff's argument that providing
estimates to repair the Pipe and stabilize the river bank was
effectively engaging in a false communication to influence
FEMA's decision to pay. Plaintiff conveniently ignores
that the City did not submit a claim for these repairs.
Additionally, Plaintiff offers no evidence that the Pipe
repair estimates contained any false information. Nor does
she provide evidence suggesting that the Pipe repair
estimates were material to payment for damages from
floodwater inflow.[68] The Court fails to see how the Pipe
repair estimates would influence FEMA's decision to
reimburse the City for the costs of removing debris in the
bar screen building, removing excessive grit in the
clarification chamber building, and unclogging approximately
20 sewer lines.[69] These facts make this argument a non
sequitur. The Court concludes no reasonable jury could find
falsity, materiality, or the requisite scienter with respect
to the Email and its attachment.
b)
The Project Worksheet
On
December 13, 2011, the City submitted a claim to FEMA in
Project Worksheet #90 (“PW90”), requesting $22,
966.73 for damages due to flood water entering the
WTP.[70] Plaintiff claims PW90 constitutes a
false claim in two ways: 1) it sought reimbursement for
damages caused, at least in part, by a known pre-existing
condition; and 2) it concealed the failure to undertake
proper mitigation measures in anticipation of the
Flood.[71] The Court finds these arguments
unpersuasive.
First,
Plaintiff offers no evidence to suggest that FEMA requires
the Flood be the sole cause for the damage. As discussed
above, the Email establishes that the City informed FEMA of
the pre-Flood damage to the Pipe. FEMA representative Tom
Montgomery even suggested that the broken sewer line near the
treatment be included in the PW.[72] The uncontroverted
evidence is that floodwater entered the WTP from numerous
sources, not just the broken Pipe. Plaintiff adduces no
evidence that FEMA was unaware of this fact. Nor is there
evidence that FEMA required the City to analyze and determine
the sources of water that damaged the Plant. These facts
suggest that FEMA did not consider it material that
floodwaters had entered the Plant from a pipe that had
pre-Flood damage.
Second,
the Court fails to see how PW90 concealed the City's
failure to undertake proper mitigation measures in
anticipation of the Flood. The worksheet does not ask for
information regarding mitigation efforts. There is also no
evidence that FEMA requested this information from the City.
These facts suggest that FEMA did not consider it material
that floodwaters had entered the Plant from a pipe that had
pre-Flood damage.
Third,
it is undisputed that the broken Pipe caused no damage to the
Bar Screen Building, the Clarification Building, and the
sewer lines that required unclogging before the Flood. This
fact suggests that the temporary measure of sandbags had done
its job until it had to face the Flood's overwhelming
force. Additionally, there is no evidence that FEMA asked the
City to analyze the extent of damage to the WTP had the Pipe
been capped with concrete prior to the Flood. These facts
suggest that FEMA did not consider the efforts to repair the
broken Pipe prior to the Flood material to its decision to
pay PW90.
Fourth,
Plaintiff cites 44 C.F.R. § 206.48 for the proposition
that FEMA considers the City's mitigation measures
material in deciding whether to approve payment of PW90. But
that regulation sets forth the factors to consider when
evaluating a Governor's request for a major disaster
declaration. It does not set out FEMA's standards for
approving claims for disaster relief. Plaintiffs reliance
upon this regulation is thus misplaced.
In sum,
the summary judgment evidence, even when viewed in the light
most favorable to Plaintiff, fails to demonstrate that the
City submitted a false claim to FEMA. Accordingly, the Court
grants summary judgment to the City on the false-FEMA claim.
2.
Implied False Certifications in Sewage Bills to the Army, the
VA, and the BOP
In
Universal Health Services, Inc. v. United States ex rel.
Escobar,[73] the Supreme Court held that
“[w]hen . . . a defendant makes representations in
submitting a claim but omits its violations of statutory,
regulatory, or contractual requirements, those omissions can
be a basis for liability if they render the defendant's
representations misleading with respect to the goods or
services provided.”[74] The Supreme Court made clear
that courts should continue to police expansive implied
certification theories “through strict enforcement of
the Act's materiality and scienter
requirements.”[75] In particular, “a
misrepresentation about ...