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holding that if a defendant in a qui tam action under the FCA supports its motion to dismiss with affidavits, testimony or other evidentiary materials, the attack becomes factual and the plaintiff is then required to prove subject matter jurisdiction by a preponderance of the evidence
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Civil Action No. 3:98-CV-2143-D
August 1, 2002
MEMORANDUM OPINION AND ORDER
Defendant Northrop Grumman Corporation ("Northrop") moves to dismiss plaintiff Stephen G. Coppock's ("Coppock's") first amended complaint ("amended complaint") under Fed.R.Civ.P. 12(b)(1), 9(b), and 12(b)(6). It contends the court lacks subject matter jurisdiction, Coppock has failed to plead a qui tam cause of action under § 3729(a) of the False Claims Act ("FCA"), 31 U.S.C. § 3729-32, with the particularity required by Rule 9(b), and he has failed to state an FCA claim on which relief can be granted. Northrop also maintains that Coppock's state-law claims for common law fraud and breach of contract fail to satisfy the requirements of Rule 9(b) and to state a claim on which relief can be granted. The court grants the motion in part and denies it in part and directs Coppock to replead.
After briefing concluded on this motion on June 17, 2002, Northrop filed on July 23, 2002 a motion for leave to file supplemental brief. The court declines to consider additional briefing and therefore denies the motion.
Northrop also flIed on July 23, 2002 a motion to stay discovery pending the ruling on its motion to dismiss. The court denies the motion. First, the court is today deciding the motion to dismiss. Second, although the court concludes in part that it lacks subject matter jurisdiction over Coppock's ECA claim and in part that he has failed to state such a claim, he also brings state-law claims for fraud and breach of contract that the court is not dismissing. It appears that these causes of action can be prosecuted past the pleading stage because, even without federal question jurisdiction, the court would have diversity jurisdiction. See Compl. ¶¶ 11-12 (reflecting diverse citizenship). (If Coppock were to rely on diversity, he would be required to replead to assert his citizenship rather than his residence, as he now does in ¶ 11.)
I
For purposes of deciding Northrop's Rule 12(b)(1) and 12(b)(6) motions, the court accepts as true the well-pleaded factual allegations of Coppock's amended complaint and views them in the light most favorable to him. See Capital Parks, Inc. v. Southeastern Adver. Sales Sys., Inc., 30 F.3d 627, 629 (5th Cir. 1994); Royal Bank of Can. v. FDIC, 733 F. Supp. 1091, 1094 (N.D. Tex. 1990) (Fitzwater, J.). The court therefore recounts the background facts of this case based on the well-pleaded factual allegations of Coppock's amended complaint.A
The court first sets out the factual allegations on which Coppock relies to support his cause of action under the ECA. Coppock worked for Northrop for several years as an engineer at its Naval Weapons Industrial Reserve Plant ("NWIRP"), a multi-acre industrial production and waste treatment complex located in Dallas, Texas that was built for production of military aircraft. Since approximately September 1988, Northrop has directly or indirectly leased the NWIRP facility from its owner, the United States Department of the Navy ("Navy"), using the complex principally for production of military aircraft for the United States Department of Defense ("DOD"). Northrop was also contractually authorized to operate the facility to fulfill commercial aircraft contracts, provided such use did not exceed 25% without approval and did not interfere with DOD production contracts. NWIRP is located adjacent to the Naval Air Station Dallas and fronts the shoreline of Mountain Creek Lake.
Coppock maintains there are three pertinent leases: one in 1987, a second in 1993, and a third in 1998. See Compl. ¶ 26. In its motion to dismiss, Northrop argues that there is only one lease and two use agreements. See D. Br. at 8 n. 3. The court accepts Coppock's allegation as true for purposes of deciding Northrop's Rule 12(b)(1) and (6) motions. See supra note 2.
Northrop uses toxic and hazardous chemicals and heavy metals in its manufacturing operations, and the manufacturing process generates waste products, including industrial waste concentrate ("IWC") and industrial waste general ("IWG"). The facility includes an industrial waste treatment facility ("IWT Plant"). Northrop's use of the facility for commercial aircraft contracts exceeded NWIRP's designed capacity and resulted in significantly greater quantities of industrial waste than could be safely treated. Since September 1988 the IWT Plant has operated continuously, generating an average of approximately 110,000 gallons of IWC per day through a facility designed to handle 4,000 to 5,000 gallons daily. This flow rate has resulted in IWC treatment that is insufficient to convert hexavalent chromium ("HC") — a highly toxic substance and known carcinogen that is associated with various health hazards — to trivalent chromium — a safer form of chromium — and to remove other toxins. Improperly treated waste was routinely discharged into the Trinity River, at levels far above effluent limits, thereby putting at risk persons who utilize the Trinity River water system.
The Trinity River Authority ("TRA"), a state political body, provides the Dallas community with water treatment and recycling services, including drinking water derived from recycled effluent from Northrop's NWIRP operations. Because TRA's facilities are incapable of safely recycling certain waste chemicals, including HC, TRA severely restricts the discharge of effluents that contain such chemicals. Discharge of these chemicals in unauthorized quantities causes toxins to enter the Dallas drinking water supply and results in diseases and health risks to Dallas residents.
Instead of scaling back it operations, Northrop knowingly mishandled the waste, occasionally permitting it to enter the environment essentially untreated. Northrop thus polluted public drinking water by routinely discharging improperly treated waste, including IWC, into the system, exceeding the acceptable limits for HC and other toxic chemicals. Additionally, by failing to maintain the facility, Northrop polluted the NWIRP and surrounding environs with these chemicals. To avoid halting production, it allowed ongoing leaks to continue for years, constantly discharging toxic materials into the Navy's property and surrounding environs, occasionally resulting in catastrophic spills. This conduct has caused millions of dollars in damages to the Navy's property and nearby lands and jeopardized the health of persons who rely on the Dallas public water system. Northrop covered up the breaches of its lease with the Navy by falsifying government records and falsely certifying that it was complying with its lease obligations.
Northrop's obligations under the pertinent leases are governed by the terms of the leases and by incorporated federal and agency regulations and federal and state law. Northrop knowingly violated the leases and falsely certified to the government that it was complying with the terms of the agreements.
The leases obligated Northrop to perform normal maintenance and adhere to a normal maintenance program; made Northrop financially liable for, and imposed on it a duty to disclose, loss, destruction, or damage to government property; required Northrop to protect the facility from further injury due to any such occurrence; forbad Northrop from making structural alterations without government approval; required Northrop to comply with applicable environmental laws, including the Clean Water Act ("CWA"), and to use its best efforts to adhere to all clean water standards, including those set by the TRA; dictated that Northrop maintain and adhere to a system for inspecting its own compliance with the lease terms; obligated Northrop to indemnify and hold the government harmless for liability for injuries to persons and property arising from its use of the NWIRP, including fines and liability for environmental contamination of neighboring properties and the discharge of hazardous wastes into the Dallas public drinking water supply and to report the occurrence of indemnifiable events; and required Northrop to calculate and pay rent in accordance with the lease terms, which allowed it to take credits for work performed on DOD contracts but precluded such credits if it made unauthorized use of the facility. The government, as lessor, is liable under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") for pollution emanating from the NWIRP.
Coppock maintains that each periodic rent payment that Northrop made to the government constituted a false implied certification that it was complying with its duties under the leases, because it knew it was violating numerous contractual requirements. In fact, Northrop had breached commercial use restrictions, maintenance obligations, duties to notify the government of damage to its property and to repair the property, duties to notify the government of damage to third parties and to indemnify the government for damage, alteration restrictions, environmental restrictions, environmental notification requirements, and best effort requirements. These violations included the following: environmental contamination in the form of a leak in the flash mix basin that caused waste and treated chemicals to seep into the bottom of the basin and into surrounding soil at the NWIRP; a leak in the No. 4 IWC holding tank that caused highly toxic and untreated IWC to be released into the ground at the NWIRP and into the floor drains leading to the Trinity River, and that caused a catastrophic tank failure on July 1, 1997, in which at least 30,000 gallons of untreated IWC spilled into the ground at the IWT plant and into the floor drains; a July 31, 1997 spill in which 200,000 to 300,000 gallons of waste, including hexavalent chromium foam and other toxic wastes overflowed the solid contact basin, settled into the ground surrounding the basin, and later drained or was washed into a storm pipe into a lagoon that feeds into Mountain Creek Lake; a discharge into the Trinity River IWC that far exceeded applicable effluent limits because they were treated for significantly less time than was needed to convert hexavalent chromium to trivalent chromium and to remove other toxins from the mix; cutting back on the use of waste treatment chemicals that would reduce the hazardous content of effluent; taking out of service the air flotation clarifier portion of the IWT treatment system, thereby reducing the facility's efficiency for treating IWC and causing increased hazardous materials content in the effluent; allowing improperly installed piping in the 327 Building, thereby permitting IWC runoff from the production floor to drain directly into the IWG line to the flash mix without receiving sulfur dioxide treatment in the IWC holding tanks; allowing effluent from the 327 Building to exceed limits on the discharge of hexavalent chromium; removing or disabling fixtures (flood gates, testing and alarm system, and pumps) that were essential to a system that was designed to prevent toxic waste water (rain and flood surface water) runoff from discharging into the lagoon and Mountain Creek Lake without first being processed through the IWT and that, had they not been removed, could have prevented the July 1997 spill and other chemical-laden rainwater runoff from reaching Mountain Creek Lake; paying reduced rent under the 1987 and 1993 leases based on DOD work credits to which it was not entitled because it had made unauthorized use of the facilities (use beyond designed capacity that overwhelmed the waste handling capacity and use for excessive amounts of commercial production work); improperly piping the 327 Building so that floor drains in the production area ran to the IWG line rather than to the IWC line; and improperly requesting funds for capital repairs or improvements (e.g., pneumatic reciprocating processors and a drop hammer compressor), which Northrop falsely represented had failed due to their age, but that would not have been needed had Northrop not been conducting excessive and unauthorized amounts of commercial work and had it been complying with its maintenance duties under the 1993 lease.
Coppock also avers that Northrop made reverse false claims in the form of rent payments that knowingly miscalculated the amount owed the government, because the company took credits that were not allowable due to its unauthorized overuse of the facility, and that falsely assumed that Northrop had performed its maintenance obligations. Northrop also made reverse false claims in the form of falsified required records by failing to disclose reportable matters, particularly failing to log a July 31, 1997 catastrophic spill in its environmental records and to record other specific instances of spills that it was contractually obligated to disclose.
Coppock contends that Northrop submitted capital maintenance and improvement requests under its 1993 lease that included requests for funding to replace or repair equipment and fixtures that Northrop had damaged and for which it was liable to pay. Northrop also made a reverse false claim by including requests for approval to perform in-kind capital repairs under its 1998 lease even though it caused the damage and was responsible for this expense. It also made several false claims via requests or recommendations that the government fund or allow allocation of in-kind rent for capital improvements to the NWIRP under the 1998 lease that were not needed to perform production properly under DOD contracts but were required only due to Northrop's use of the facility for commercial production. Northrop constructed a new production facility on the NWIRP, known as the 327 Building, for use in producing aircraft, and the periodic and final payments that it received for this construction are false claims.
B
Coppock's state-law claims against Northrop arise from the events surrounding the July 31, 1997 spill at the solid contact basin. He contends that Northrop managers, including its IWT Plant Manager, Bruce Kaylor ("Kaylor"), and Environmental Liaison, Pat Wilson ("Wilson"), ordered him and other personnel to wash hexavalent chromium foam off the ground using water hoses. When Coppock expressed concern regarding the environmental consequences of doing so, Wilson knowingly and falsely represented that he had checked the discharge in the area of the lagoon and there was none. Coppock was thus induced to wash hexavalent chromium foam into the lagoon and Mountain Creek Lake, in violation of applicable laws.
Coppock also avers that, after Wilson prevented him from logging the spill, as required, and after he discovered that hexavalent chromium foam had washed into the lagoon and Mountain Creek Lake, he made a call to a Northrop hotline based on the representation that this communication would be kept in strict confidence. He spoke to a Northrop attorney, Susie Kent, Esquire ("Kent"), requesting anonymity. During the call, Coppock recounted the events of July 31, 1997 and indicated he intended to blow the whistle to the EPA. At Kent's request, he attended a meeting, finding upon his arrival that two other attorneys were present, including Francis Phillips, Esquire ("Phillips"), outside counsel. Based on promises of strict confidentiality and the representation that the meeting was being conducted as part of Northrop's internal investigation, he related to the attorneys the events of July 31. The attorneys' purpose, however, in conducting the meeting was to undermine his account and assist Northrop in covering up the true scope of the event. Shortly thereafter, the lawyers revealed Coppock's identity to union representatives and others. A few days later, during a meeting with Kent and Phillips, Phillips attempted to persuade him to change his story and state that the water spilling into Mountain Creek Lake on July 31 contained no contaminants. Coppock refused, and he recounted his story to the EPA.
Based on the foregoing allegations, Coppock contends that Northrop committed two counts of common law fraud — inducing him to wash hazardous materials into Mountain Creek Lake and inducing him to confide in Northrop — and one count of breach of contract— breaching its promise of confidentiality and anonymity in exchange for his report of the July 31, 1997 incident.
II
Northrop moves to dismiss Coppock's FCA claim under Rule 12(b)(1) for lack of subject matter jurisdiction. It contends that Coppock has failed to plead facts that establish the court's subject matter jurisdiction, because he has not pleaded whether Northrop publicly disclosed the information that is the basis of his FCA cause of action, and Northrop in fact disclosed on numerous different occasions all the information on which his claim is based. It also posits that Coppock has failed to allege whether he was the original source of any information on which he relies in his amended complaint. Northrop asserts that Coppock was not an original source of most of the claims he has made in the amended complaint, and it sets out the public disclosures that it maintains show that Coppock was not an original source.
Throughout this memorandum opinion, the court refers to Coppock's FCA claim in the singular — despite the fact that he relies on three separate types of claims (§ 3729(a)(1), (a)(2), and (a)(7)) and on several factual predicates to establish these claims — because he asserts the claim as a single count in his amended complaint, see Compl. ¶¶ 113-117.
Northrop moves to dismiss the action with prejudice. It is well settled, however, that a dismissal for lack of subject matter jurisdiction is without prejudice. See, e.g., Hitt v. City of Pasadena, 561 F.2d 606, 608 (5th Cir. 1977) (per curiam); Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001) (per curiam) ("When a Rule 12(b)(1) motion is filed in conjunction with other Rule 12 motions, the court should consider the Rule 12(b)(1) jurisdictional attack before addressing any attack on the merits. This requirement prevents a court without jurisdiction from prematurely dismissing a case with prejudice. The court's dismissal of a plaintiff's case because the plaintiff lacks subject matter jurisdiction is not a determination of the merits and does not prevent the plaintiff from pursuing a claim in a court that does have proper jurisdiction." (citations omitted)).
A
The court must decide as a threshold matter whether Northrop is advancing a "facial" or a "factual" attack on jurisdiction under Rule 12(b)(1). As do other circuits, the Fifth Circuit distinguishes between these two types of challenges. See Paterson v. Weinberger, 644 F.2d 521, 523 (5th Cir. May 1981). Northrop implies in its opening brief that its attack takes both forms. See D. Br. at 4-5. In its reply brief, it clearly maintains that it is challenging subject matter jurisdiction facially and factually. See D. Rep. Br. at 2 ("[Northrop] has made both a `facial attack' and a "factual attack' in its Motion to Dismiss."). The court holds that Northrop's challenge is facial only.
Northrop's reply brief does not comply with N.D. Tex. Civ. R. 7.2(d) because it exceeds ten pages but does not contain a table of contents with page references and an alphabetically arranged table of cases, statutes, and other authorities cited, with page references to the location of all citations. Although the court, by June 4, 2002 agreed order, permitted Northrop to file a reply brief that exceeded ten pages, it did not excuse Northrop from the requirements of Rule 7.2(d). Because this defect has not interfered with the decisional process of the court, the court has disregarded it.
An attack under Rule 12(b)(1) is initially presumed to be facial, but evidence such as affidavits or testimony may be presented to create a factual attack. Daniels v. Church of the Living Word #4, 2001 WL 1445407, at * I (ND. Tex. Nov. 14, 2001) (Fitzwater, J. adopting opinion by Stickney, J.) (citing Paterson, 644 F.2d at 523). Northrop apparently assumes that the challenges it makes in its motion and brief to the factual accuracy of Coppock's allegations are sufficient to present a factual attack. This court has held that if "the defendant supports [its] motion with affidavits, testimony or other evidentiary materials, then the attack is `factual' and the burden shifts to the plaintiff to prove subject matter jurisdiction by a preponderance of the evidence." id (citing Paterson, 644 F.2d at 523). Because Northrop has presented no evidence to support its assertions concerning the subject matter allegations of Coppock's complaint, the court holds that Northrop has presented only a facial challenge under Rule 12(b)(1).
B
Subject matter jurisdiction in this case is governed by 31 U.S.C. § 3730(e)(4). In relevant part, § 3730(e)(4) provides that a court only has jurisdiction over a cause of action under the FCA if the incidents alleged in the complaint have not been publicly disclosed or, if they have, the plaintiff must be an "original source" of the information on which the FCA claim is being made. Section 3730(e)(4)(B) defines original source as "an individual who has direct and independent knowledge of the information on which the allegations are based and has voluntarily provided the information to the Government before filing an action under this section which is based on the information." Accordingly, to qualify as an original source, Coppock must (1) have direct and independent knowledge of the information on which the allegations are based and (2) have voluntarily provided the information to the government before the filing of the lawsuit based on the information.
Section 3730(e)(4):
Certain actions barred. —
* * *
(4)(A) No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or [General] Accounting Office report, hearing, audit, or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information. (B) For purposes of this paragraph, "original source" means an individual who has direct and independent knowledge of the information on which the allegations are based and has voluntarily provided the information to the Government before filing an action under this section which is based on the information.
C
A facial attack to subject matter jurisdiction will succeed only if the plaintiff has failed to allege the facts necessary for jurisdiction. "If the defense merely files a Rule l2(b)(1) motion, the trial court is required merely to look to the sufficiency of the allegations in the complaint because they are presumed to be true. If those jurisdictional allegations are sufficient the complaint stands." Paterson, 644 F.2d at 523.
Coppock's amended complaint includes several related, but distinct, grounds that form the basis of his FCA cause of action. In ¶ 11 he avers that he has "direct and independent knowledge of the violations alleged herein." This allegation clearly satisfies the first requirement for qualifying as an "original source." Coppock does not, however, satisfy the second requirement as to all components of his FCA cause of action. Coppock only alleges facts that support the premise that he voluntarily provided the government (the EPA) information on the July31, 1997 spill before the filing of the lawsuit based on the information. See Compl. ¶ 112. Consequently, under § 3730(e)(4)(B), Coppock has only adequately alleged that he is an original source of information for this single ground of his FCA claim.
If Coppock is unable to allege that he is an original source, then in order for the other grounds of his FCA claim to survive a facial attack, he must assert that the information has not been publicly disclosed. See § 3730(e)(4); United States ex rel. Precision Co. v. Koch Indus., Inc., 971 F.2d 548, 551 (10th Cir. 1992) (holding in qui tam case that plaintiff must inter alia allege the facts essential to show jurisdiction) (citing McNutt v. Gen. Motors Acceptance Corp. of md., 298 U.S. 178, 189 (1936) (a plaintiff "must allege in his pleading the facts essential to show jurisdiction")). Northrop maintains that Coppock has failed to allege that the incidents upon which his FCA claim is based were not publicly disclosed. Coppock argues in response that "[n]othing on the face of the First Amended Complaint suggests that there has been a public disclosure of any matter upon which the allegations are based of which Mr. Coppock is not the source." P. Br. at 34-35.
Of course, if Coppock is able to allege that he is an original source, the issue of absence of public disclosure is immaterial.
Coppock fails, however, to address the controlling issue. To establish subject matter jurisdiction where he was not an original source, Coppock must plead that the incidents upon which his amended complaint is based were not publicly disclosed. The mere absence of an allegation indicating that they were disclosed is insufficient to meet the requirement that he "allege in his pleading the facts essential to show jurisdiction." McNutt, 298 U.S. at 189; see also Precision, 971 F.2d at 551. Similarly, Coppock's assertion that "[t]he only arguably disclosed matter, are the allegations regarding t[h]e July 1997 spill event," P. Br. at 35, does not satisfy his obligation to plead the necessary facts to establish the court's jurisdiction concerning the other components of his ECA claim.
Accordingly, the court holds that Coppock has failed to plead subject matter jurisdiction under the FCA except to the extent that he predicates this cause of action on the July 31, 1997 spill alleged in ¶¶ 42-43 and 62-71 of his amended complaint.
III
Northrop argues that Coppock has not complied with Rule 9(b) in several respects. Because the court concludes that Coppock's FCA claim invokes this court's subject jurisdiction only with respect to the July 31, 1997 spill, it will limit its decision to the question whether this component of the claim satisfies Rule 9(b).
A
Rule 9(b) provides, in relevant part, that "in all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." The Rule has been characterized as having four purposes: "to ensure that the defendant has sufficient information to formulate a defense by having notice of the conduct complained of, to protect defendants against frivolous suits; to eliminate fraud actions in which all the facts are learned after discovery; and to protect defendants from undeserved harm to their goodwill and reputation." United States ex rel Wilkins v. N. Am. Constr. Corp., 173 F. Supp.2d 601, 614 (S.D. Tex. 2001) (Rosenthal, J.) (FCA case) (citing Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 783 (4th Cir. 1999)). "Rule 9(b) must be interpreted and applied in light of these purposes." id.
"To plead fraud with particularity a plaintiff must include the `time, place and contents of the false representations, as well as the identity of the person making the misrepresentation and what [that person] obtained thereby."' United States ex rel. Russell v. Epic Healthcare Mgmt. Group., 193 F.3d 304, 308 (5th Cir. 1999) (FCA case) (quoting Williams v. WMX Techs., Inc., 112 F.3d 175, 177 (5th Cir. 1997)). In other words, "[a]lthough the particularity demanded by Rule 9(b) differs with the facts of each case, a plaintiff pleading fraud must set forth the who, what, when, and where . . . before access to the discovery process is granted. Anything less fails to provide defendants with adequate notice of the nature and grounds of the claim." Wilkins, 173 F. Supp.2d at 613 (internal quotation marks omitted) (quoting Hart v. Bayer Corp., 199 F.3d 239, 248 n. 6 (5th Cir. 2000)). "The complaint in a False Claims Act suit must fulfill the requirements of Rule 9(b)." Russell, 193 F.3d at 308 (citation omitted).
B
In ¶¶ 42-43 and 62-71 of his amended complaint, Coppock sets out the factual details of his FCA claim that is based on the July 31, 1997 spill. In ¶ 71 he alleges that Northrop falsely certified with its periodic rent payments that it was in compliance with the terms of the leases when it was in fact breaching them in a manner that precipitated the spill; that Northrop falsified required records regarding the spill to avoid or reduce liability for it; and that Northrop falsely reported the nature of the spill and the scope of the required remediation to avoid or reduce its liability to the government. Compl. ¶ 71. Although Coppock's amended complaint can be read to assert an FCA claim under § 3729(a)(1), (a)(2), and (a)(7), see Compl. ¶¶ 114-1 16, it is doubtful that he intends to rely on the spill to state a claim under § 3729(a)(1), which applies to "actual demands for money or property," see United States ex rel. Totten v. Bombardier Corp., 286 F.3d 542, 551 (D.C. Cir. 2002), in this case in which Northrop owed obligations to the government and allegedly falsified records and made false statements.
Section 3729(a)(1) provides, in relevant part:
Any person who mdash; (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 . . . is liable to the United States Government[.]
Section 3729(a)(1) provides, in relevant part:
Any person who — (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[.]
Section 3729(a)(1) provides, in relevant part:
Any person who — knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government. is liable to the United States Government[.]
Coppock's amended complaint contains a typographical error in ¶ 116, in which he cites § 3729(a)(2), rather than § 3729(a)(7), as the legal basis for his reverse false claim cause of action. The court has construed ¶ 116 in accordance with its apparent intent. Cf Compl. ¶ 115 (asserting § 3729(a)(2) claim).
Northrop challenges the sufficiency of the amended complaint, contending that although Coppock "makes fairly specific allegations concerning the `spill,' . . . he then makes only broad allegations concerning how the `overflow' is a claim under the FCA." D. Br. at 11. Northrop also complains that Coppock does not state what records were falsified, what false information was alleged, when the records were falsified, whether the records were required to be maintained pursuant to the leases or environmental regulations, what provisions, if any, contained such requirements, or whether the records were corrected, and that Coppock' s amended complaint fails to specify what information was inaccurately disclosed to the government, when it was disclosed, or who disclosed it.
Northrop also challenges the adequacy under Rule 9(b) of other components of Coppock's FCA claim — elements that the court need not consider because Coppock has not adequately pleaded jurisdiction — and also advances a more general attack based on the premise that Coppock has not "explain[ed] how the fraud worked." See D. Br. at 7. Northrop appears to derive this requirement from Wilkins, which does make the statement that "the plaintiff must explain how the fraud worked," Wilkins, 173 F. Supp.2d at 616, but Northrop reads the conclusion more broadly than the Wilkins court intended. Wilkins held:
Like the majority of courts of appeals, the Fifth Circuit has consistently applied the Rule 9(b) standard to require a fifth element. "[W]hat [that person] obtained thereby," "why the statement or omission complained of was false or misleading," and the "how required by Rule 9(b)," are all variants of the same rule: in cases in which the mechanism or basis of the fraud is not otherwise apparent from the face of the complaint, the plaintiff must explain how the fraud worked.
Id (citations omitted). In other words, before a plaintiff must explain how the fraud worked, the case must be one in which the mechanism or basis of the fraud is not otherwise apparent from the face of the complaint. Moreover, explaining "how the fraud worked" can be accomplished by pleading what the person obtained by the fraud, or why the statement or omission complained of was false or misleading, or the "how required by Rule 9(b)." Coppock has met at least one of these requirements by asserting that Northrop acted for the purpose of getting false claims paid and to conceal, avoid, or decrease obligations it would owe to the government. See Compl. ¶¶ 115, 116. His amended complaint does not founder on this basis.
Coppock responds that the allegations of his amended complaint are sufficient. He contends the assertions concerning periodic rent payments are adequate because he has pleaded that the spill contaminated the Navy's property and that Northrop violated express contractual terms that obligated it to prudently manage and maintain the property, take steps to mitigate further injury when it knew damage was occurring, report damage to the contracting officer and, in the case of environmental damage, to federal authorities, and pay to remediate the damage it caused, but that it continued to submit quarterly rent payments and accompanying statements while in violation of these materials terms. Coppock posits that Northrop falsified required records regarding the spill by preventing him from attempting to record the event, as required under the CWA, in the plant environmental logs. He asserts that Northrop falsely reported to the EPA the nature of the spill and the scope of the contamination so as to avoid its full remediation liability.
Coppock actually sets out these arguments earlier in his brief, see P. Br. at 19-20, but he also applies them by incorporation to the spill incident, see id at 26.
C
Coppock has adequately pleaded how the overflow serves as the foundation for a false claim under the FCA. Although Northrop focuses in this respect on ¶¶ 62-68 of the amended complaint, Coppock's pleading must be assessed more comprehensively. He asserts that, to conceal its obligations to the government, Northrop knowingly failed to log the spill. Coppock also avers that the leases required Northrop to use prudent management and best efforts to prevent the spill, Compl. ¶ 69, and that Northrop falsely certified with its periodic rental payments that it was in compliance with the terms of the leases when it in fact was breaching the requirements in a manner that precipitated the spill, id. at ¶ 71. If properly pleaded, these allegations concerning the overflow can serve as the basis for an FCA claim under § 3729(a)(2) and/or (a)(7).
It is clear from the amended complaint that Coppock does not allege that the overflow is itself a claim.
In its reply brief, Northrop asserts that Coppock has failed to specify what payments constitute false statements. D. Rep. Br. at 8. In its opening brief, Northrop did not make this precise argument with sufficient clarity to shift to Coppock the obligation to respond to it. See D. Br. at 11. Because Coppock did not have a fair opportunity to address the contention, the court will not consider it. The court notes, however, that the amended complaint contains the allegation that Northrop was required under the 1987 and 1993 leases to make quarterly rent payments and submit quarterly statements. See Compl. at ¶ 37(A). It also alleges that each periodic payment from September 1998 to the present contains false implied certifications, id. at ¶ 39, and reverse false claims, id. at 41.
Concerning his contention that Northrop falsified required records regarding the spill to avoid or reduce its liability to the government, Coppock has met in part and failed to meet in part Rule 9(b)'s requirements insofar as this claim is based on the plant environmental logs. And he has not met any of his Rule 9(b) obligation to the extent this claim is based on any other "required records."
Regarding plant environmental logs, Coppock has sufficiently pleaded what records were falsified, what false information was alleged, whether the records were required to be maintained pursuant to the leases or environmental regulations, whether the records were corrected, what information was inaccurately disclosed to the government, and who disclosed it. According to the amended complaint, Coppock attempted to record the spill in the plant's environmental logs but Wilson precluded him from doing so. Id at ¶ 67. Northrop was required under the leases to comply with the CWA, which included reporting spills associated with the processing of industrial waste at the complex. Id at ¶ 33. Northrop failed to timely apprise authorities, including the contracting officer, of the spill. Id at ¶ 67. It did not disclose the incident until after Coppock blew the whistle to the EPA, and then it made an incomplete disclosure in which it falsely denied that the spill went into the lagoon or Mountain Creek Lake and otherwise mischaracterized the nature of the spill and the remediation required. Id at ¶ 68.
In this case, the more precise question is who prevented Coppock from disclosing the spill. According to the amended complaint, Wilson did so.
Northrop also contends in its reply brief that Coppock has failed to specify what statements in the log or what part of the disclosure was fraudulent. D. Rep. Br. at 8. Northrop appears to assume that Coppock relies in this respect on fraud by commission rather than by omission. Coppock alleges that the environmental logs were false because they did not disclose the spill. He cannot specify what statements were false because he contends the logs did not contain required information. Nor can he specify what part of a nonexistent disclosure was affirmatively fraudulent.
Coppock has not adequately pleaded when Northrop falsified the records. Coppock argues that Northrop falsified records regarding the spill by preventing him from recording the event in the plant environmental logs. He must specify when this occurred.
Coppock does not argue that the "when" requirement pertains to the making of a rent payment. Even if he did, the court would not be inclined to adopt such a rule. The point in the claim process at which the Rule 9(b) test is applied is important in fulfilling the purpose and role of Rule 9(b). In a case such as this one that involves payments to the government and alleged falsification of records and false reports, if compliance with Rule 9(b) were assessed only in relation to the payments themselves, it is possible that, in many instances, little useful information would be disclosed to the defendant. Concerning the "when" component in particular, the complaint could simply plead the date the defendant made a payment, leaving it to the defendant to discern at what point during its lengthy relationship with the government it is supposed to have violated the statute or regulation in question, falsified a record, or made a false report. Such a pleading would not accomplish Rule 9(b)'s function of "alerting defendants to the precise misconduct with which they are charged and protecting defendants against spurious charges of immoral and fraudulent behavior." See United States ex rel. Clausen v. Laboratory Corp., 290 F.3d 1301, 1310 (11th Cir. 2002) (qui tam case) (quoting Ziemba v. Cascade Int'l, Inc., 256 F.3d 1194, 1202 (11th Cir. 2001)).
Northrop has not shown that Coppock is required to specify the provisions of the leases that contained the requirements on which he relies. The only cases Northrop appears to cite for this proposition, see D. Rep. Br. at 10, do not require such pleading detail in a suit like the instant one. Williams involved a securities fraud claim in which the plaintiff alleged that a prospectus contained fraudulent statements. See Williams, 112 F.3d at 179. It was necessary in that context for the plaintiffs to specify the portion of the prospectus that was false. This is not a case in which Coppock contends the lease provisions are fraudulent. He relies on them to establish that Northrop's conduct in response to the spill made false the rent payments it later made to the government, or concealed conduct that, if known, would have given rise to obligations to the government. Cf, e.g., Shaw v. AAA Eng'g Drafting, Inc., 213 F.3d 519, 531 (10th Cir. 2000) (addressing contractor's invoices for photography services that were false claims because they falsely, impliedly certified that contractor had complied with silver recovery terms of contract). In the other case on which Northrop relies, Pickens v. Kanawha River Towing, 916 F. Supp. 702 (S.D. Ohio 1996), the court cited the fact that the plaintiff had alleged "the provision of the contract that pertains to the misconduct alleged," as well as other details, to support its holding that the complaint gave the defendant adequate notice under Rule 9(b) of the alleged fraud. See id. at 706. The court did not hold that such detail is invariably necessary. Accordingly, although specifying the particulars of a lease or contract may be necessary in other cases to comport with the intent of Rule 9(b). the court holds that Northrop has failed to establish that they are required here.
Regarding Coppock's allegation that Northrop falsely reported the nature of the spill and the scope of the required remediation, he does not identify the document or oral disclosure that was falsified, when the false disclosure occurred, or who made the false representation. This is required by the classic formulation of the Rule 9(b) test, which mandates inter alia that the plaintiff plead the identity of the person making the misrepresentation and the time it was made. See Russell, 193 F.3d at 308. He does specify the false information that Northrop provided the government, see Compl. at ¶ 68, allege that a truthful disclosure was required under the leases, id at ¶ 33, and inferentially assert that these false disclosures were never corrected, see id. at ¶ 68. As the court has explained above, he is not required to plead the lease provisions that contained the requirements in question.
It does not appear that Northrop is contending that Coppock must specifically identify who at Northrop presented rent payments to the government. The court would not impose such a requirement in any event. The specificity that Rule 9(b) requires varies according to the context of the fraud claimed. See Williams, 112 F.3d at 178 (noting that "courts have emphasized that Rule 9(b)'s ultimate meaning is context-specific."). Given the nature of Coppock's claim, Northrop would benefit little from being told who at the company made the quarterly rent payments.
To the extent Coppock relies on information-and-belief pleading to meet the Rule 9(b) pleading standards, see id. and P. Br. at 17, 27, the court holds that he has failed to plead the factual basis for his belief. A plaintiff may rely upon information and belief to plead fraud in compliance with Rule 9(b) when "the facts relating to the alleged fraud are peculiarly within the perpetrator's knowledge." United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir. 1997). "[Elven where allegations are based on information and belief, the complaint must set forth a factual basis for such belief." Id (citing Kowal v. MCI Communications Corp., 16 F.3d 1271, 1279 n. 3 (D.C. Cir. 1994); Neubronner v. Milken, 6 F.3d 666, 672 (9th Cir. 1993)). Therefore, this component of his FCA claim in part satisfies Rule 9(b) and in part does not.
The court assumes for purposes of this decision that Coppock can rely on information-and-belief pleading, although this premise is not free from doubt where, as here, Coppock was employed by Northrop as an engineer at its NWIRP works for over 15 years. See Compl. ¶ 11; cf United States ex rel Lee v. SmithKline Beecham, Inc., 245 F.3d 1048, 1052 (9th Cir. 2001) ("However, given that Lee worked as a supervisor at NETC for over twenty years, was knowledgeable about the tests allegedly falsified, and was employed by SmithKline when he filed this action, he cannot fairly allege that SmithKline has sole possession of the facts evidencing an FCA violation. In light of these circumstances, Lee has no legitimate excuse for filing a vague complaint that does not assert particular details to support its allegations of fraud.").
In view of the foregoing conclusions, the court directs Coppock to replead in order to comply with Rule 9(b) with respect to the spill component of his ECA claim. See Wilkins, 173 F. Supp.2d at 614 (holding that although district court may dismiss claim for failure to plead fraud with particularity, it should not do so without granting leave to amend, unless defect is simply incurable or plaintiff has failed to plead with particularity after being afforded repeated opportunities to do so).
IV
Northrop next moves under Rule 12(b)(6) to dismiss Coppock's FCA claim for failure to state a claim on which relief can be granted. As with its Rule 9(b) analysis, the court addresses only the components of Coppock's FCA claim that are based on the July 31, 1997 spill.
Northrop contends that Coppock has failed to allege that the pump failure was attributed to acts of Northrop or to assert all the elements of an FCA claim pertaining to the 327 Building. See D. Br. at 21-22. The court need not decide these grounds of Northrop's motion.
A
"[T]he motion to dismiss for failure to state a claim is viewed with disfavor and is rarely granted." Kaiser Aluminum Chem. Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir. 1982) (quoting Charles A. Wright Arthur R. Miller, Federal Practice and Procedure § 1357, at 598 (1969)). "[D]ismissal of a claim on the basis of barebones pleadings is a `precarious [disposition] with a high mortality rate."' Id (quoting Barber v. Motor Vessel "Blue Cat," 372 F.2d 626, 627 (5th Cir. 1967)). "The court may dismiss a claim when it is clear that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief." Jones v. Greninger, 188 F.3d 322, 324 (5th Cir. 1999) (per curiam) (citing Fee v. Herndon, 900 F.2d 804, 807 (5th Cir. 1990)). "In analyzing the complaint, [the court] will accept all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff." Id (citing Doe v. Hillsboro Indep. Sch. Dist., 81 F.3d 1395, 1401 (5th Cir. 1996)). "The issue is not whether the plaintiff will ultimately prevail, but whether he is entitled to offer evidence to support his claim." Id. (citing Doe, 81 F.3d at 1401). "Thus, the court should not dismiss the claim unless the plaintiff would not be entitled to relief under any set of facts or any possible theory that he could prove consistent with the allegations in the complaint." Id (citing VanderZee v. Reno, 73 F.3d 1365, 1368 (5th Cir. 1996)).B
Northrop contends that Coppock has not alleged all the elements necessary to establish a proper certification or false implied certification claim. It maintains that courts are reluctant to endorse an implied certification theory and that Coppock has failed to plead that certification was a prerequisite to, or even related to, the government's decision to pay or forfeit sums to Northrop. Northrop also posits that the prerequisite standard is essentially a heightened materiality requirement and that the government must have conditioned payment of the claim on certification of compliance with the provision of the statute, regulation, or contract at issue. Northrop asserts that, to state an FCA claim based on an allegedly false certification, Coppock must allege that certification was a prerequisite to the government's decision to pay or forfeit monies due.
Northrop first argues that several of Coppock's FCA claims are time-barred. "[W]hen a successful affirmative defense appears on the face of the pleadings, dismissal under Rule 12(b)(6) may be appropriate." Simon v. Telsco Indus. Emp. Benefit Plan, 2002 WL 628656, at *1 (N.D. Tex. April 17, 2002) (Fitzwater, J.) (citing Kansa Reinsurance Co. v. Congressional Mtg. Corp. of Tex., 20 F.3d 1362, 1366 (5th Cir. 1994)). "In the usual case, this court is unable to grant dismissal under Rule 12(b)(6) based on an affirmative defense because it rarely appears on the face of the complaint." Id The present case is the usual one that the court cannot dismiss as time-barred on the basis of the amended complaint. The court therefore denies relief based on this affirmative defense in the context of a Rule 12(b)(6) motion.
Coppock attempts to distinguish the authorities on which Northrop relies, contending that they are "program fraud"-type cases. He argues that the requirements pertinent to such cases do not apply when the government enters into an express contract in which it seeks a specific set of performances from a contractor. Coppock cites other decisions that he contends recognize implied certification as grounds for an FCA claim.
The court assumes that Coppock intends to advance this argument in response to this ground for Northrop's motion. His brief is structured such that his arguments do not always align perfectly with Northrop's arguments. For example, the assertion that Northrop is relying on distinguishable "program fraud" cases is proffered in the part of his brief that addresses the flash mix basin and holding tank allegations. See P. Br. at 21-23.
The court holds that Northrop's characterization of the law in the Fifth Circuit is correct and that Coppock's reliance on a "program fraud" distinction and other authorities is misplaced. InMikes v. Straus, 274 F.3d 687 (2d Cir. 2001), the Second Circuit "join[ed] the Fourth, Fifth. Ninth, and District of Columbia Circuits in ruling that a claim under the Act is legally false only where a party certifies compliance with a statute or regulation as a condition to governmental payment." Id at 697 (collecting cases). The Fifth Circuit had earlier held in Thompson that "where the government has conditioned payment of a claim upon claimant's certification of compliance with, for example, a statute or regulation, a claimant submits a false or fraudulent claim when he or she falsely certifies compliance with the statute or regulation." Thompson, 125 F.3d at 902. The Fourth Circuit in Harrison characterized Thompson as "emphasiz[ing] that liability for a false certification will lie only if compliance with the statutes or regulations was a prerequisite to gaining a benefit, and the defendant affirmatively certified such compliance[.]" Harrison, 176 F.3d at 787 (emphasis in original). The D.C. Circuit has applied this rule to implied certifications. See United States ex rel. Siewick v. Jamieson Sci. and Eng'g, Inc., 214 F.3d 1372, 1376 (D.C. Cir. 2000) ("Courts have been ready to infer certification from silence, but only where certification was a prerequisite to the government action sought." (collecting cases)). This court concludes that the Fifth Circuit would do so as well.
Coppock attempts to distinguish the present case from those involving "program fraud" by arguing that the concern that animates the rule in that context — that thousands of laws and regulations may govern participation in a government program without being material to the issue whether payment is due — is inapposite where the government expressly seeks a set of contractual performances from a contractor. of course, if, as part of the set of contractual performances, the government has expressly conditioned payment (or forbearance of a right) on such performance, an FCA claim can be established. But requiring that payment or forbearance be conditioned on certification has no less force outside the confines of a "program fraud" suit. Were this principle not followed, payments to the government could constitute false claims simply because the contractor at some point in time did not comply with a statute or regulation, even if the fact of the violation would have had no conceivable bearing on the government's decision to accept the payment in the amount tendered or decided not to hold the contractor liable for the violation.
Accordingly, the court holds that, to state a proper certification or false implied certification claim, Coppock is required to plead that the government in some manner (e.g., contractually or statutorily) conditioned acceptance of a rent payment, or conditioned its decision not to seek to hold Northrop liable for violations of the lease or of statutory or regulatory obligations made applicable through the lease, based on Northrop's certification of compliance with a specific statute, regulation. or contractual provision. Because Coppock does not contend that he has complied with this requirement — arguing instead that such allegations are unnecessary — the court holds that he has failed to state a proper certification or false implied certification claim on which relief can be granted concerning the July 31, 1997 spill.
C
In a related, but distinct, argument, Northrop contends that Coppock has failed to state a cause of action because he has not alleged how Northrop's claims or conduct is materially false. Coppock concedes that "the law in the Fifth Circuit recognizes a requirement that the false statement or omission be material." P. Br. at 7. He argues that recording the July 31, 1997 spill was required under the CWA and that CWA compliance was a material term of Northrop's contracts.
See Mikes, 274 F.3d at 697 (referring to materiality as related, but distinct, concept to FCA requirement of legal falsity).
Northrop also advances the factual assertion that the government was aware of the alleged incidents and that the information did not influence its decision to accept rent payments. It asserts that it was not required to maintain or disclose an environmental log and that doing so was entirely voluntary. See D. Br. at 20. Northrop also posits that the materiality standard compares the actions of a reasonable agency confronted with true statements with the actions if presented false statements and determines if there is a difference. Id. at 21. It maintains that because it voluntarily maintained the log and the information was irrelevant to the government's decision, the log's content would have no effect on the government's decision whether to accept Northrop's payments in the amounts tendered. Therefore, Coppock has failed to state a claim under the FCA to the extent he alleges that Northrop falsified an internal environmental log that it was under no duty to maintain or disclose Id These factual assertions, and the argument that relies on a factual assertion, exceed the scope of Coppock's amended complaint and rely on facts that Northrop asserts to be true. Because they do, the court cannot entertain them in the context of a Rule 12(b)(6) motion, and they present no basis for relief.
Although Coppock cites ¶ 33 of his amended complaint to support his contention that compliance with the CWX was a material element of Northrop's lease with the government, see P. Br. at 26, this paragraph does not mention the materiality of the CWA to a lease in question. It merely indicates that Northrop was obligated under each lease to abide by the CWA and other clean water standards. This type of allegation is no different from one that asserts an obligation to comply generally with all statutes and regulations that are incorporated into a government contract.
Coppock has failed adequately to plead materiality concerning Northrop's conduct or claims related to the July 31, 1997 spill. Therefore, he has failed to state a claim upon which relief can be granted under the FCA.
D
To summarize, the court holds concerning Coppock's spill-based FCA claim that he has adequately pleaded that the spill serves as a foundation for a false claim because Northrop knowingly failed to log the spill and falsely certified with its rent payments that it was in compliance with the leases. Coppock has not satisfied Rule 9(b) to the extent he relies on the falsification of unspecified "required records." Concerning falsification of plant environmental logs, he has in part met Rule 9(b)'s requirements and in part failed to do so. As to falsely reporting the nature of the spill, Coppock has also complied in part and failed to comply in part with Rule 9(b). To the extent he relies on a proper certification or false implied certification claim, Coppock has not stated a claim on which relief can be granted. And insofar as he relies on a statement or omission to state an ECA claim, he has not pleaded that Northrop's claims or conduct is materially false.
The court now applies these rulings to Coppock's amended complaint to determine whether an FCA claim remains. The court holds that none does. As noted supra at § 111(B), it is doubtful that Coppock intends to rely on the spill to state a claim under § 3729(a)(1). Coppock's § 3729(a)(2) claim appears to be found in ¶¶ 42-43 and 62-71 of his amended complaint. He avers that Northrop falsified required records and falsely reported the nature of the spill. This claim fails in part to satisfy Rule 9(b)'s requirements, and Coppock has not adequately pleaded materiality. Coppock's § 3729(a)(7) claim appears to be found in ¶ 71, in which he alleges a reverse false claim on the ground that Northrop certified with its periodic rent payments that it was in compliance with the terms of the leases when it was in fact breaching them. Coppock has failed to state a claim because he has not pleaded that payment of forbearance was conditioned on such a certification and has not adequately pleaded materiality.
"The [FCA] recognizes that a party may be liable for a reverse false claim if he `knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government."' Hutchins v. Wilentz, Goldman Spilzer, 253 F.3d 176, 185 (3d Cir. 2001) (quoting 31 U.S.C. § 3729(a)(7)), cert. denied, ___ U.S. ___ 122 S.Ct. 2360 (2002).
V
Northrop moves to dismiss Coppock's state-law claims for common law fraud and breach of contract under Rules 9(b) and 12(b)(6). It posits that Coppock has not pleaded fraud with requisite particularity and that he has failed to identify the contract upon which he bases his breach of contract claim. Northrop maintains that Coppock has failed to allege certain specific facts concerning effluent discharges into Mountain Creek Lake, that his reliance on information-and-belief pleading to allege that Northrop did not intend to keep his identity confidential is insufficient to meet Rule 9(b), and that he has not pleaded all the elements of common law fraud. It contends that he has failed to allege what contract existed, how it was breached, or what damages resulted.
A
The court has set out supra at § III(A) the standards that Rule 9(b) exacts upon a plaintiff pleading a fraud claim. Coppock bases his first claim of fraud on the actions of Wilson mdash; orthrop's Environmental Liaison — and Kaylor — its IWT Plant Manager — in response to the July 31, 1997 spill. As the court has recounted above, see supra § 1(B), Coppock has specifically alleged that the statements of Wilson and Kaylor following the spill were fraudulent because they were intended to and succeeded in causing Coppock to violate the law. These allegations clearly address the questions of who, what, when, where, and why concerning the fraud, and they provide Northrop adequate notice of the precise actions of its agents that are alleged to be fraudulent.
He has also pleaded the elements of common law fraud, which are: (1) the defendant made a material representation. (2) it was false when made, (3) the speaker knew the representation was false, or made it recklessly without knowledge of its truth and as a positive assertion, (4) the defendant made the representation with the intent that the plaintiff should act upon it, and (5) the plaintiff acted in reliance upon it and suffered injury as a result. Beijing Metals Minerals Imp./EXP. Corp. v. Am. Bus. Ctr. Inc., 993 F.2d 1178, 1185 (5th Cir. 1993) (Texas law). Although Coppock does not allege in ¶ 119 of his amended complaint that the representations that Wilson and Kaylor made were material, he incorporates in this fraud claim all preceding paragraphs of his amended complaint. See id. ¶ 118. In ¶¶ 105-107 he alleges that, when he expressed concern regarding the environmental consequences of washing hexavalent chromium foam off the ground using water hoses, Wilson represented that he had checked the discharge in the area of the lagoon and there was none. Coppock avers that he was thus induced to wash hexavalent chromium foam into the lagoon and Mountain Creek Lake, in violation of applicable laws. A misrepresentation is material if it "`relat[es] to [a] matter which is so substantial and important as to influence [the] party to whom [it was] made."' Godchaux v. Conveying Techniques, Inc., 846 F.2d 306, 316 (5th Cir. 1988) (quoting BLACK'S LAW DICTIONARY at 880 (5th ed. 1979)). Coppock has adequately pleaded the materiality element of this fraud claim.
B
As set out above, see supra § 1(B), Coppock's second fraud cause of action alleges that Northrop's attorneys made false representations of confidentiality to induce him to tell his story about the July 31, 1997 spill, that they had no intention of maintaining his confidentiality, and that they revealed his identity to union representatives and others. Coppock has identified the statements, the speakers, when and where the statements were made, and explained why the statements were fraudulent. See Compl. ¶ 122. Northrop argues that Coppock's amended complaint fails to satisfy Rule 9(b) because he relies on information and belief to assert that Northrop did not intend to keep his identity confidential and does not reveal the source of any such information or the reason for that belief.
Two essential elements of a fraud claim are that a representation was false when made and that the person making the misrepresentation knew the representation was false, or made it recklessly without knowledge of its truth and as a positive assertion. To rely upon information and belief to plead fraud in compliance with Rule 9(b), Coppock's amended complaint must set forth a factual basis for his belief. Thompson, 125 F.3d at 903.
Coppock asserts on information and belief in ¶ 111 of his amended complaint that Northrop's attorneys' actual purpose in conducting the meeting with him was to undermine his account and assist the company in covering up the true scope of the July 31, 1997 spill, and that they had no intention of honoring their promise to preserve his confidentiality. He does not set out, however, the factual basis for this belief to any greater extent than to assert that they made promises that they did not keep. If this were sufficient, the mere making of a representation, coupled with the failure to perform it, would be sufficient to satisfy the factual predicate for an information and belief allegation.
Accordingly, the court holds that Coppock has not adequately pleaded his second common law fraud claim under Rule 9(b).
C
Coppock also asserts a claim for breach of contract, contending that Northrop breached its contract with him when he called Northrop's hotline and offered his report of the July 31, 1997 spill in exchange for Northrop's promise of confidentiality. Under Texas law, the essential elements of a breach of contract action are (1) the existence of a valid contract; (2) performance or tendered performance by the plaintiff, (3) breach of the contract by the defendant; and (4) damages sustained by the plaintiff as a result of the breach. See Vakro Mktg. Supply Co. v. Kalama Int'l, 51 S.W.3d 345, 351 (Tex.App. 2001, no pet.).
Coppock alleges that Northrop contracted with him to maintain his confidentiality and anonymity in exchange for his report of the July 31, 1997 incident, that he disclosed the information, that Northrop breached the agreement by revealing his identity, and that he has been damaged by the breach. See Compl. ¶ 125. Under the highly deferential standard of Conley v. Gibson, 355 U.S. 41, 45-46 (1957), and viewing the allegations of Coppock's amended complaint in the light most favorable to him for purposes of deciding the motion to dismiss, see, e.g., Royal Bank of Can., 733 F. Supp. at 1094, the court is unable to say that he can prove no set of facts, consistent with the allegations, that would entitle him to relief for breach of contract. The court therefore denies Northrop's motion to dismiss in this respect.
The court suggests no view regarding whether this claim can survive a motion for summary judgment.
* * *
The court grants in part and denies in part Northrop's motion to dismiss. Coppock shall have 30 days from the date this memorandum opinion and order is filed to file an amended complaint that cures the deficiencies identified. After he amends, Northrop may move anew to dismiss if it has grounds to do so.
Northrop argues that the court should not permit Coppock to replead. In view of the consequences of dismissal on the pleadings and the pull to decide cases on the merits rather than on the sufficiency of pleadings, this and other courts typically give a plaintiff at least one opportunity to cure pleading defects that the court has identified before dismissing the case, unless it is clear that the defect is incurable or the plaintiff advises the court that he is unwilling or unable to amend in a manner that will avoid dismissal. Moreover, although the court has held Coppock's FCA claim to be defective, he has asserted fraud and contract claims that survive Northrop's motion. Where the court, in ruling on a motion under Rules 9(b) and 12(b)(6), has not dismissed a suit in its entirety, it discerns no reason to deny plaintiff leave to amend.
SO ORDERED.