Opinion
No. C 98-02068 MHP.
September 22, 2000
MEMORANDUM AND ORDER
Ashok Bhatnagar instituted this qui tam action against Kiewit Pacific Company and the State of California, Department of Transportation ("Caltrans"), alleging violations of the False Claims Act, 31 U.S.C. § 3729 et seq. ("FCA"). Having considered the parties' arguments and for the reasons set forth below, the court enters the following memorandum and order.
BACKGROUND
Bhatnagar is a Senior Transportation Engineer with Caltrans. In the course of his employment with Caltrans, Bhatnagar served as a site inspector on a Kiewit Pacific Company ("Kiewit") construction project involving roadway construction and modifications to Bay Area Rapid Transit ("BART") tracks located on Highway 238 in San Leandro, California. The contract required Kiewit inter alia to institute a Storm Water Pollution Prevention Plan ("SWPPP") to control the entry of storm water run-off from the construction site into adjacent waterways. Bhatnagar's duties included inspection and observation of the contractors' field operations and review of extra work bills submitted by contractors.
Special Provision 10-1.02 of the contract between the parties requires the contractor to devise and implement a plan "to prevent, to the extent feasible, any net increase in pollution of storm water runoff from entering waterways." Villa Dec., Exh. A-1 at 33.
On August 10, 1994, the California Regional Water Quality Board ("the Regional Board") issued Cleanup and Abatement Order No. 94-092 to BART as overseer of the BART rail line extension. Wood Dec., Exh. D. The Order prohibited the "discharge, or creation of potential for discharge, of any soil materials including fresh concrete, cement, silt, clay, sand and other organic materials" to storm drains, creeks and tributaries. Id. at 2. The Cleanup and Abatement Order further required submission of an SWPPP by August 15, 1994. Id.
Kiewit submitted an SWPPP to Caltrans on August 16, 1994. The SWPPP called for implementing storm water control measures within the limits of the construction site. Wood Dec., Exh. B. According to Lloyd Wood, the Resident Engineer of the project, the boundaries of the site were identified as approximately 150 feet on either side of Highway 238. Wood Dec. ¶ 4. Wood avers that he learned of Cleanup and Abatement Order No. 94-092 "some nine months" into the project. Wood Dec. ¶ 5. Wood declares that the August 16, 1994, SWPPP complied with then existing National Pollutant Discharge Elimination System ("NPDES") General Permit No. CAS000002 regulating storm water discharges associated with Caltrans construction activities. Id.
The NPDES General Permit requires all owners of land where construction activity occurs to (1) eliminate or reduce all non-storm water discharges to storm sewer systems and other waters, (2) develop and implement an SWPPP and (3) inspect storm water pollution protection measures. Wood Dec., Ex. A at 1. It also prohibits dischargers from "caus[ing] or threaten[ing] to cause pollution, contamination, or nuisance." Id. at 6.
On August 17, 1994, the Regional Board issued a new NPDES permit, Permit No. CAS029998, prohibiting discharged storm waters from altering the temperature, turbidity or apparent color beyond present natural background levels of receiving waters. Wood Dec., Exh. E at 4.
Wood met with the Regional Board's staff and toured the construction site in the summer of 1995 to discuss the Cleanup and Abatement Order and the new NPDES permit. According to Wood, the Regional Board's staff informed him at that meeting that the project's boundary extended approximately 2000 feet north of Highway 238 and "well beyond" the 150 foot limit to the south. Wood Dec. ¶ 6.
After his meeting with the Regional Board's staff, Wood directed his staff to prepare a new SWPPP for the project. Wood Dec. ¶ 7. The revised SWPPP is entitled Amendment No. 1 and is dated September 15, 1995. Wood Dec., Exh. F. The amended SWPPP declares its purposes as (1) identifying pollutant sources, (2) identifying, constructing and implementing storm water pollution prevention measures and (3) conforming to the requirements set forth in NPDES Permit Number CAS029998. Id. Wood approved an addendum to the amended SWPPP on September 28, 1995. Wood Dec. ¶ 7. The addendum identifies particular sources of pollution and additional measures of prevention. Wood Dec., Exh. G. Kiewit submitted, and Wood approved, additional invoices for work related to the amended SWPPP. See Villa Dec. ¶ 9. Wood billed the charges "by force account under Contract Change Order [Number] One." Wood Dec. ¶ 10.
The parties executed Contract Change Order Number One in December 1993 to provide additional funds to pay for traffic control measures. See Bhatnagar Dec., Exh. E.
In February 1996, Bhatnagar complained to Wood about extra work bills submitted by Kiewit for SWPPP-related work. According to Bhatnagar, Wood stated in response that failure to process the extra work bills would jeopardize Bhatnagar's opportunities for advancement. Bhatnagar Dec. ¶ 19. Bhatnagar then wrote a letter to Ramsey Hissen, Caltrans Branch Chief, on April 30, 1996, complaining about perceived irregularities on the project and allegedly illegal payments made to Kiewit for SWPPP work. Bhatnagar Dec. ¶ 20; id., Exh. F.
On November 18, 1997, Jeffery A. Lindley, Division Administrator for the Federal Highway Administration, sent a letter to Caltrans Director James van Loben Sels regarding allegations of improper use of federal funds on the project. Bhatnagar Dec., Exh. G. Lindley advised Caltrans that the Division office conducted a preliminary investigation and concluded that storm water prevention items should not have been included in payment for Contract Change Order Number One. Id. Lindley asked Caltrans to audit the extra work summaries to determine the total dollar amount that was eligible as traffic control costs. Id.
Caltrans responded to Lindley by letter dated December 22, 1997. Deputy Director Diane Eidam stated that of the $128,427 reviewed under Contract Change Order Number One, costs for storm water prevention work totaling $24,764 and other work totaling $16,547, were not eligible for federal reimbursement. See Bhatnagar Dec., Exh. H.
On May 21, 1998, Bhatnagar filed this action under seal alleging violations of the federal False Claims Act, 31 U.S.C. § 3729 et seq., against Kiewit and Caltrans. Bhatnagar alleges that Kiewit and Caltrans knowingly and intentionally submitted false claims for payment for storm water pollution protection measures and other improper claims. Complaint ¶ 7-9. Bhatnagar also alleges that Caltrans retaliated against him by reassigning him to the graveyard shift, refusing to transfer him into a different position "in a timely fashion," engaging in "arbitrary and capricious disciplinary action" against him, denying his vacation requests and confiscating his private papers and diaries from his workplace. Complaint ¶¶ 14-15.
On March 31, 1999, the United States Department of Justice elected to decline intervention in the matter. On April 5, 1999, the court ordered the complaint unsealed and required service within 60 days. Now before the court are Caltrans' motion to dismiss the action and Kiewit's motion for summary judgment.
LEGAL STANDARD
1. Rule 12(b)(6)
In considering the sufficiency of a complaint under Rule 12(b)(6), the court will not grant a motion to dismiss "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of [her] claims which would entitle [her] to relief."Conley v. Gibson, 355 U.S. 41, 45-46 (1957). The Federal Rules do not require her to plead in detail the facts upon which she bases her claim; she must merely set forth a "short and plain statement of the claim" that gives the defendant fair notice of its nature and grounds. See id. at 47 (citing Fed.R.Civ.P. 8(a)(2)). Rejecting the notion that "pleading is a game of skill in which one misstep by counsel may be decisive to the outcome," the Federal Rules instead embody the principle that pleading should make possible a just decision on the merits. Id. at 48. Nevertheless, courts in the Ninth Circuit have often stated that unwarranted inferences and conclusory allegations of law, even when pled as facts, are insufficient to defeat a motion to dismiss. See Halkin v. Verifone, Inc. (In re Verifone Securities Litig.), 11 F.3d 865, 868 (9th Cir. 1993).
2. Rule 56(c)
Summary judgment shall be granted when there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. See Fed.R.Civ. 56(c). The moving party bears the initial burden of identifying those portions of the record that demonstrate the absence of a genuine issue of material fact. The burden then shifts to the nonmoving party to "go beyond the pleadings, and by her own affidavits, or by the 'depositions, answers to interrogatories, and admissions on file,' designate 'specific facts showing that there is a genuine issue for trial.'" Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986) (citations omitted). A dispute about a material fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The moving party discharges its burden by showing that the nonmoving party has not disclosed the existence of any "significant probative evidence tending to support the complaint." First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 290 (1968). The court does not make credibility determinations in considering a motion for summary judgment.See Anderson, 477 U.S. at 249. Rather, it views the inferences drawn from the facts in the light most favorable to the party opposing the motion. See T.W. Elec. Serv., Inc. v. Pacific Elec. Contractor's Ass'n, 809 F.2d 626, 631 (9th Cir. 1987).
DISCUSSION
1. Bhatnagar's Claim Against Caltrans
Caltrans cannot be subjected to qui tam liability in light of the United States Supreme Court's recent decision in Vermont Agency of Natural Resources v. United States ex re. Stevens, 529 U.S. ___, 120 S.Ct. 1858 (2000). In Stevens, a private individual brought a qui tam action against Vermont Agency of Natural Resources alleging that it had submitted false claims to the Environmental Protection Agency in connection with various federal grant programs. 120 S.Ct. 1861. Vermont Agency moved to dismiss the action, arguing that a state agency is not a "person" subject to liability under the FCA and that the Eleventh Amendment bars a qui tam action against a State. Id. The district court denied the order and the Second Circuit affirmed.
The Supreme Court determined that the statutory question whether the States can be sued under the FCA was "'logically antecedent to the existence of' the Eleventh Amendment question."Id. at 1866 (citing Amchem Products Inc. v. Windsor, 521 U.S. 591, 612 (1997)). The court reviewed the language of the FCA, which it found to lack the "requisite affirmative indications" that the term "person" included States. Id. at 1870. In addition, the Court noted the rule of construction that Congress must make unmistakably clear any intention to alter the usual constitutional balance between the States and the Federal Government. Id. The Court also considered the doctrine that statutes should be construed so as to avoid difficult constitutional questions. Id. The court concluded that the FCA does not subject States or state agencies to liability in FCA actions by private individuals. 120 S.Ct. at 1871. The Court "express[ed] no view on the question whether an action in federal court by a qui tam relator against a State would run afoul of the Eleventh Amendment, but noted "serious doubt on that score."Id. at 1870 (internal citation omitted). Following Stevens, Bhatnagar's qui tam claim against Caltrans must be dismissed because the state agency is not subject to qui tam liability.
Bhatnagar attempts to distinguish Stevens by noting that the instant case presents allegations of retaliation that were not at issue in Stevens. Bhatnagar alleges that Caltrans retaliated against him on the basis of his complaints about improper payments to Kiewit. See Complaint ¶ 16; see also id. at ¶ 24. Bhatnagar seeks relief under 31 U.S.C. § 3730 (h), which provides in relevant part:
It appears to the court that Bhatnagar's retaliation claim is likely time barred. The Ninth Circuit has held that retaliation claims under the FCA are subject to a one-year statute of limitations. See United States ex rel. Lujan v. Hughes Aircraft Co., 162 F.3d 1027 (9th Cir. 1998) (applying to FCA retaliation claims California's one-year statute of limitations applicable to wrongful termination in violation of public policy as the most closely analogous statute of limitations under state law). Bhatnagar complained to Wood about alleged improper claims in February or March 1996. Complaint ¶ 8. He complained in writing to Caltrans in April 1996. Complaint ¶ 11. Bhatnagar does not identify dates of particular acts of retaliation in his complaint. In his supplemental memorandum in opposition to the motion to dismiss, he states that he was relieved of his office and reassigned to graveyard shift field work on April 19, 1996. Supp. Mem. at 3. Bhatnagar filed his complaint on May 21, 1998. Any retaliatory acts occurring before May 22, 1997 are time-barred. A review of Bhatnagar's papers suggests that all of the alleged retaliatory conduct occurred before May 22, 1997.
Any employee who is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment by his or her employer because of lawful acts done by the employee on behalf of the employee or others in furtherance of an action under this section . . . shall be entitled to all relief necessary to make the employee whole. Such relief shall include reinstatement with the same seniority status such employee would have had but for the discrimination, 2 times the amount of back pay, interest on the back pay and compensation for any special damages sustained as a result of the discrimination including litigation and reasonable attorneys' fees.31 U.S.C. § 3730(h).
Bhatnagar cannot maintain an FCA-based retaliation claim against Caltrans after Stevens. Nothing in the text of section 3730(h) purports to subject States to liability for retaliation; the statute only prohibits an "employer" from retaliating against an employee who has pursued an FCA claim. Moreover, the retaliation provision is one subsection in the statutory framework of FCA. The court is persuaded that the retaliation provision of the FCA falls within the Supreme Court's broad conclusion in Stevens that the FCA does not subject States to liability. See Stevens, 120 S.Ct. at 1871 (holding "that a private individual has standing to bring suit in federal court on behalf of the United States under the False Claims Act, 31 U.S.C. § 3729-3733, but that the False Claims Act does not subject a State (or state agency) to liability in such actions").
This is consistent with other recent Supreme Court holdings emphasizing the limits of Congressional power to abrogate the sovereign immunity of the States. See, e.g., Kimel v. Florida Board of Regents, ___ U.S. ___, 120 S.Ct. 631, 640-644 (2000) (discussing Seminole Tribe of Fla. v. Florida, 517 U.S. 44 (1996) and its progeny). In these cases the Supreme Court repeatedly has cautioned that the Eleventh Amendment limits Congress' power to authorize suits by private parties against the States. Only where it is clear from the face of the statute that it is Congress intention to permit such suits may the statute be read to constitute an abrogation. The Eleventh Amendment does not allow for abrogation by implication. Thus, statutes that explicitly provide for private party suits against a state may be a valid abrogation.
For example, Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e (a) as amended in 1972, specifically includes in its definition of "person" "governments, governmental agencies, [and] political subdivisions", thereby bringing state entities within the meaning of "employer". The Supreme Court found this express provision the necessary Congressional authorization for suits against the States. Fitzpatrick v. Bitzer, 427 U.S. 445, 452 (1976) (permission "to sue the States as employer is clearly present" distinguishing other cases where the statutes were silent). The Court then went on to find that this amendment is a valid exercise of Congress' power under section 5 of the Fourteenth Amendment, So too, the Seventh Circuit has recently found, upon remand after Kimel, that the Equal Pay Act, 29 U.S.C. § 206(d), which explicitly applies to the states, clearly demonstrates Congress' intent to authorize private party suits against the States and meets the test for a valid exercise of Congress' power under section 5 of the Amendment. Varner v. Illinois State University, ___ F.3d ___, 2000 WL 1257266, at *4 (7th Cir. Sept. 6, 2000)
Subdivision (b) of section 2000e provides:
"The term "employer" means a person engaged in an industry affecting commerce who has fifteen or more employees. . . ."
29 U.S.C. § 203, the definitional section applying to the Equal Pay Act defines "employer" at subparagraph (d) to include public agencies and then goes on in subparagraph (e)(2)(c) to include among public agencies "a State, political subdivision of a State. . . ."
Even where a statute explicitly provides for private party suits against the States the Supreme Court has looked to whether the authorization was a valid exercise of Congressional power. Thus, in Kimel, although the Age Discrimination in Employment Act of 1967 ("ADEA"), 29 U.S.C. § 621 et seq., was specifically amended to define among employers who could be sued "a State or political subdivision of a State and any agency or instrumentality of a State or a political subdivision of a State . . .", 29 U.S.C. § 630(b), the Court found this was not a valid exercise of Congress' power under section 5 of the Fourteenth Amendment and dismissed the private party suits brought against the State of Florida under the ADEA.
The statute at issue here, the FCA, is a far cry from Title VII, the Equal Pay Act and the ADEA. It makes absolutely no mention of suits against the States and does not define "employer", "employee" or "person" in any way that implicates the States. For the foregoing reasons, Bhatnagar's FCA claims against Caltrans must be dismissed.
2. Kiewit's Motion for Summary Judgment
Kiewit moves for summary judgment on Bhatnagar's FCA claim. The FCA prohibits any person from knowingly presenting a false or fraudulent claim for payment or approval by the federal government. 31 U.S.C. § 3729(a)(1); United States ex rel. Oliver v. The Parsons Company et al., 195 F.3d 457, 461 (9th Cir. 1999), cert. denied, 120 S. CT. 2657 (2000).
Bhatnagar contends that Kiewit violated the FCA by submitting claims for work related to storm water pollution prevention measures despite a provision in the contract that the cost of SWPPP items was included in the contract and no additional compensation would be provided for such costs. Complaint ¶ 7. Bhatnagar refers to the last paragraph of Special Provision 10-1.02 which provides, "Full compensation for conforming to the requirements in Section 7-1.01G, 'Water Pollution,' of the Standard Specifications and these special provisions shall be considered as included in the contract prices paid for the various items of work and no additional compensation will be made therefor." Id. at 34 (endnote supplied). Similarly, Standard Specification Section 7-1.01G concludes by stating that full compensation for conforming to the requirements of Standard Specification 7-1.01G "shall be considered as included in the prices paid for the various items or work and no additional compensation will be allowed" for such costs. Id. at 7-14.
Section 7-1.01G of the Standard Specifications provides in relevant part:
7-1.01G Water Pollution. — The Contractor shall exercise every reasonable precaution to protect streams, lakes reservoirs, bays and costal waters from pollution with fuels, oils, bitumens, calcium chloride and other harmful materials and shall conduct and schedule his operations so as to avoid or minimize muddying and silting of said streams, lakes, reservoirs, bays and coastal waters. . . . Villa Dec., Exh. A-2 at 7-11.
Kiewit maintains that the extra work billings related to storm water pollution prevention work were proper because the work expanded as a result of the amendment to the SWPPP. Wood states that the amended SWPPP required storm water pollution prevention measures "in an area far beyond that which was contemplated at the time that this contract was awarded, and also required [Kiewit] to perform additional work." Wood Dec. ¶ 9. Wood declares that he determined the additional storm water pollution protection measures were instituted "for the purpose of public safety and necessary to ensure that the roads were cleared." Wood Dec. ¶ 10. On the basis of this conclusion, Wood believed that "no specific [contract] change order was necessary" and that the work "appropriately could be billed by force account under [contract] Change Order [Number] One." Id. Wood asked Kiewit to submit extra work billings under Change Order Number One and Change Order Number Twenty Three. Wood Dec. ¶ 11. Finally, Wood states that he reviewed each of the extra work billings to ensure that the work described was actually performed. Wood Dec. ¶ 14. He declares that he only authorized payment to Kiewit on the basis of work actually performed. Wood Dec. ¶ 15.
Wood offers the following examples of work required by the amended SWPPP beyond what was required in the original SWPPP: (1) Kiewit installed aggregate pads six inches deep over fabric for a minimum of thirty feet at all points of ingress and egress at the site; (2) Kiewit continually swept sediment from all roads in the new expanded area; (3) Kiewit installed gravel bags at all drain inlets to facilitate desilting of all water run-off; and (4) Kiewit repaired damages to drain inlets caused by vehicular traffic. Wood Dec. ¶ 8; see also Villa Dec. ¶ 10 (describing extra work performed by Kiewit).
The record demonstrates that the contract between Caltrans and Kiewit allows for adjustments to the scope and cost of the project. Pursuant to Section 4-1.03 of the Standard Specifications, Caltrans reserves the right to make such "alterations, deviations, additions to or deletions from the plans and specifications," including the right to increase or decrease any portion of the work, "as may be deemed by the Engineer to be required for the proper completion or construction of the whole work contemplated." Villa Dec., Exh. A-2 at 4-1. The Engineer retains power to direct the contractor to revise his operations and his water pollution control program if the contractor's water pollution prevention measures are inadequate.See Villa Dec., Exh. A-2 at 7-12 (Standard Specification 7.10G). The Special Provisions state that any changes to the contract will be set forth in a contract change order and direct the contractor to submit "adequate detailed cost data" to support an adjustment in compensation for an item of work. See Villa Dec., Exh. A-1 at 4-2 (Section 4-1.03).
At the heart of Bhatnagar's FCA claim against Kiewit are allegations regarding various irregularities in the management of the project. For example, Kiewit did not submit an SWPPP until August 16, 1994, despite its obligation to submit the plan prior to the start of work in 1993. Standard Specification 7-1.01G requires the contractor to submit " before starting any work on the project," a program to control water pollution effectively during construction of the project. Villa Dec., Exh. A-2 at 7-12 (emphasis supplied). In addition, the parties did not execute a contract change order for the expanded storm water pollution prevention measures. Wood declares that he believed "no specific change order was necessary" because the additional storm water pollution protection work was "for the purpose of public safety and necessary to ensure that the roads were cleared." Wood Dec. ¶ 10. However, Standard Specification 4-1.03 requires the execution of a contract change order prior to an adjustment to any portion of the work. If the amended SWPPP required such a substantial expansion of pollution prevention measures as to warrant additional compensation, it certainly warranted adjustment to the contract. Finally, the extra work billings related to the pollution prevention measures were submitted with Contract Change Order Number One. Even the Division Office for the Federal Highway Administration concluded that storm water prevention items "were not allowable cost items and should not have been included in the payment for [Contract Change Order Number One]." Bhatnagar Dec., Exh. G (Letter from FHA Division Administrator Jeffery A. Lindley to Caltrans).
These financial irregularities, however, are insufficient to state an FCA claim against Kiewit. A qui tam relator's allegation that a contractor failed to comply with contractual requirements is a contract dispute and not a proper basis for an FCA claim.See United States ex rel. Butler v. Hughes Helicopters, Inc., 71 F.3d 321, 326 (9th Cir. 1995). "What constitutes the FCA offense is the knowing presentation of a claim that is either fraudulent or simply false." United States ex rel. Hopper v. Anton, 91 F.3d 1261, 1266 (9th Cir. 1996). There is no triable issue of fact with regard to Kiewit's completion of the work for which it sought additional billing. Lloyd declares that he reviewed each extra work billing submitted by Kiewit and "compared the work set forth in the [extra work billings] with the assistant resident engineers' daily job diaries to ensure the work described on the [extra work billings] was actually performed." Lloyd Dec. ¶ 14; see also id. ¶ 15 ("I only authorized payment to [Kiewit] on the basis of work actually performed."). Kiewit employee Chris Villa states that all of the work for which Kiewit sought additional compensation "was in fact done. All of the [extra work billings] described the work, which was done, who did it, where the work was done and when that work was done." Villa Dec. ¶ 15. Kiewit is entitled to summary judgment on Bhatnagar's FCA claim.
Bhatnagar challenges Kiewit's assertion that Kiewit performed the work described in the extra work billings. Bhatnagar points to Wood's statement in his declaration that he asked Kiewit "and others to perform other work which [Wood] believed was beyond the scope of the original contract." Bhatnagar's Opp. to Mot. for Summ. J. at 10-11 (citing Wood Dec. ¶ 11). In his complaint, Bhatnagar alleges that Kiewit submitted "improper claims through other contract change orders which were not properly documented or otherwise improper." Complaint ¶ 10. The nature of these other "improper claims" involving work other than the storm water pollution prevention measures is unclear.
CONCLUSION
For the reasons stated above, the court GRANTS Caltrans' motion to dismiss and GRANTS Kiewit's motion for summary judgment.
JUDGMENT (Fed.R.Civ.P. 58)
This action having come before this court, the Honorable Marilyn Hall Patel, United States District Judge presiding, and the issues having been duly presented and an order having been duly filed granting dismissal and/or summary judgment in favor of defendants.IT IS ORDERED AND ADJUDGED that defendant STATE OF CALIFORNIA, DEPARTMENT OF TRANSPORTATION's motion to dismiss is GRANTED and defendant KIEWIT PACIFIC CO.'s motion for summary judgment is GRANTED and the action is DISMISSED in its entirety.