Opinion
Case No. 2:99-CV-00040 PGC
December 23, 2003
ORDER GRANTING MOTION TO DISMISS UNDER RULE 9(B) AND GRANTING LEAVE TO FILE A FOURTH AMENDED COMPLAINT
This matter is before the court on the motion of defendants Wasatch Constructors, Granite Construction Company, Washington Construction Co., Washington Group International, Inc., Morrison-Knudsen Corporation, Kiewit Construction Company, and Gilbert Western Corporation, ("Wasatch") to dismiss the claims against them under Rules 12(b)(6) and 9(b) of the Federal Rules of Civil Procedure. Defendant Staker Paving also filed a motion for summary judgment, and joined in Wasatch's motion to dismiss. After argument, the court requested a copy of a monthly "certification" provided to UDOT during the course of completion of the I-15 reconstruction project. Based on the following, the court GRANTS the motion to dismiss under Rule 9(b) and allows the Maxfield one final opportunity to amend the complaint. In light of this action, the court also DENIES the motion for summary judgment as premature.
I. BACKGROUND
This action involves allegations of problems in the reconstruction of Interstate 15 ("I-15") in Utah. The I-15 reconstruction project was massive, involving extensive construction work throughout the entire Salt Lake City area for several years, In April 1997, the Utah Department of Transportation ("UDOT") awarded the contract for the project. The I-15 Corridor Reconstruction Project request for Proposal Project No. *SP-15-7(135)296 ("UDOT Contract") was then the largest highway construction contract in the United States. Under the contract Wasatch was to design, construct, and monitor the quality control of 17 miles of new highway for a lump sum price. The Federal Highway Administration ("FHA") identified the work as a "Special Experimental Project" ("Project") due to the fact that its completion required Wasatch to assume the risk for the design, quality control and the actual construction of the highway. The UDOT Contract provided substantial incentives for early completion. And, in fact, Wasatch received $40 million for its early completion. The design/build/quality control nature of the Project shifted a large part of the control of the project from UDOT to Wasatch.
Under the UDOT Contract, Wasatch received monthly payments based on the percentage of the Project completed. To obtain these payments, Wasatch filed a lengthy monthly report indicating what portion of the Project was done, areas of compliance with the UDOT Contract, and what problems had occurred. Wasatch had the overall responsibility for Quality Control and Quality Assurance on the Project (QC/QA). However, throughout the project, UDOT and the FHA, conducted independent verification sampling and testing, independent assurance sampling and testing, and review and oversight of the Project. UDOT had the final say on whether or not the completed Project was "accepted."
Plaintiff Steven K. Maxfield is the Chief Executive Officer of Mighty Max Truck Parts, Inc., a Utah trucking company. Mighty Max worked as a sub-contractor for defendant, Ralph Smith, Co. transporting dirt and other fill materials to and from the I-15 reconstruction site. Plaintiff, John Peterson, owns and operates a truck and trailer. As an independent contractor Peterson was engaged by Mighty Max to assist in hauling dirt and other fill materials to and from the I-15 reconstruction project. Maxfield and Peterson (hereinafter "Maxfield" or "relators") brought this qui tam action jointly on behalf of the United States of America.
Maxfield filed the initial complaint under the False Claims Act ("FCA") in January 1999. The matter was kept under seal for over three years to allow the government an opportunity to review the case and determine whether to join the suit. In late 2002, the government decided not to join suit. Maxfield then amended his complaint. Shortly thereafter, in February 2003, Maxfield filed his third amended complaint.
II. THE FALSE CLAIMS ACT
Congress originally enacted the Civil False Claims Act in response to allegations of fraud, defective weapons, and illegal price-gouging of the Union Army during the Civil War. Despite this history, the Act did not gain acceptance as a fraud-fighting tool until the 1986 Amendments to the Act. Under the Act, individuals — in this case Maxfield and Peterson — can bring suits on behalf of the government when they become aware of a scheme to defraud the United States. The Act provides an award of treble damages to the government and penalties of up to $10,000 per claim. The qui tam action is unique in that it allows for individuals who do not have traditional standing to bring suit on behalf of the United States. Since the 1986 amendments, the qui tam plaintiff (also named a"relator") can recover "at least 15 percent but not more than 25 percent of the proceeds of the action or settlement of the claim.III. DISCUSSION
A. Factual Bases for Maxfield's Claims.Maxfield raises twelve different factual bases for violations of the False Claims Act during the 1-15 Project. First, Maxfield alleges that the trucks hauling fill from the gravel pits to the various I-15 construction sites throughout the Salt Lake Valley were improperly weighed, if at all. He also alleges that the scales used to weigh the trucks did not conform to the UDOT Contract specifications. Max field also contends that Ralph Smith and the other grave pit owners created false inflated invoices that they then submitted to Wasatch ("truck weight" violations),
Maxfield next charges that Wasatch's monthly certifications to UDOT assuring compliance with the contract were false in several areas, specifically: 1) Wasatch did not provide proper office facilities ("facilities"violations); 2) Wasatch did not properly manage traffic flow during the Project ("traffic" violations); and 3) Wasatch did not comply with the contract in five areas of workmanship and quality control ("workmanship" violations).
The five areas where Maxfield alleges substandard workmanship and quality control issues are a) the girders provided throughout the Project were substandard ("girder" problems); b) the concrete used throughout the project was substandard, including the testing of the concrete throughout the life of the Project ("concrete" problems); c) the 142 bridges used throughout the project were made of precast deck panels and geofoam and this was not consistent with the design envisioned by the UDOT contract ("bridge" problems); d) the compaction of fill for ramps, and the decision to use wire mesh, and ungalvanized steel wire that was not teflon-coated failed to meet the requirements of the contract ("compaction" problems); and e) the quality control staff hired by Wasatch did not have the qualifications mandated by the contract, and that Wasatch falsely certified the quality of workmanship and materials ("quality control" or "QC" problems). In general, Maxfield alleges Wasatch had incentive to cut corners to receive a $40 million bonus for early completion of the I-15 Project.
Maxfield also alleges that Wasatch violated environmental laws during the Project. First he alleges that Wasatch did not comply with Clean Air Standards, as was required by the UDOT Contract ("Clean Air" violations). He also contends that Wasatch did not comply with the state permits that had been issued for wetland and stream alteration activities, specifically with regard to where the 201 Freeway crossed the Jordan River ("Water Quality" violations).
Maxfield alleges two final violations of federal statute during the Project. First, that the truck drivers involved, including Maxfield employees and Peterson, were not paid minimum wage for the time they spent hauling fill ("wage violations"). Second, that a dispatcher for Ralph Smith required drivers to pay a "fee" for access to the I-15 construction sites and this violated anti-kickback provisions under federal law ("anti-kickback" violations).
The court will review each of these violations in turn under the relevant provisions of the False Claims Act
B. Wasatch's Motion to Dismiss
Wasatch has filed a motion to dismiss under both Rule 12(b)(6) and Rule 9(b). Because the basis for the cause of action is fraud, the complaint must comply with the mandates of Rule 9(b) requiring the complaint to be plead "with particularity." As a preliminary matter, Wasatch refers to several provisions of the UDOT contract, specifically RFP sections 1, 2, 4 and Appendices B, D. E 5, 8.2 and 13. The UDOT contract is also repeatedly referenced and quoted in the complaint. Wasatch also refers to the "Stream Channel Alteration Permit No. 97-57-18SA" in their pleadings. All of these materials are matters of public record and appropriate for this court to review.
Fed.R.Civ.Pro. 12(b)(6); am/Fed.R.Civ.Pro. 9(b).
See Boisjoly v. Morton Thiokol, Inc., 706 F. Supp. 795, 808 (D. Utah 1988); and C. WRIGHT A. MILLER, FEDERAL PRACTICE AND PROCEDURE, § 1357.
The requirement that qui tam cases comply with the Rule 9(b) heightened pleading requirements has five primary purposes:
(1) to provide the defendant with enough notice to allow for the development of a defense against the charges (including the filing of dispositive motions);
(2) to eliminate fraud actions in which all of the facts are learned after discovery;
(3) to safeguard potential defendants from frivolous accusations of moral turpitude;
(4) to protect defendants from harm to their good will and reputation; and
(5) to prohibit plaintiff's from unilaterally imposing upon the court, the parties and society enormous societal and economic costs absent some factual basis.
BOESE, CIVIL FALSE CLAIMS AND QUIT TAM ACTIONS, § 5.04 at 5-48 (2003-1 Supp.).
BOESE, CIVIL FALSE CLAIMS AND QUIT TAM ACTIONS, § 5.04 at 5-48 (2003-1 Supp.).
To plead with particularity under Rule 9(b), a plaintiff typically must allege the "time, place, and contents of the false representations, as well as the identity of the person making the misrepresentations and what he obtained thereby." Wasatch urges this court to dismiss all of Maxfield's claims under Rule 9(b) due to a failure to plead with particularity. Wasatch further urges that the dismissal should be with prejudice because Maxfield has had previous opportunities to amend his complaint. Maxfield responds that the 9(b) standards should be relaxed because Wasatch controlled access to the facts necessary to demonstrate the fraud. If there is any dismissal, Maxfield argues it should be without prejudice so that he can remedy any defects.
CHARLES ALAN WRIGHT AND ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE: CIVIL, § 1297 at 590 (2d ed. 1990).
See United States ex rel Schwartz v. Coastal Healthcare Group, Inc., No. 99-3105 (CA-10/DKS, October 26, 2000), 2000 WL 1595976, at *4, 232 F.3d 902 (10th Cir. 2000).
What Wasatch certified either expressly or impliedly to UDOT each month is a critical element of the fraud alleged by Maxfield. In his initial response to the motion to dismiss, Maxfield sought discovery from Wasatch arguing that Wasatch controlled the facts necessary for Maxfield to better flesh out the complaint. However, after oral argument, it became apparent that the bulk of the information necessary for Maxfield to properly plead their complaint was — and is — available through the Utah Government Records Access and Management Act ("GRAMA"). What is now clear is that the certifications are available presently, and Maxfield can now access them. Therefore, no reason exists for lowering the particularity requirement for pleading a fraud claim.
Utah Code Ann. § 63-2-101-909 (1997, Supp. 2003).
The court concludes that Maxfield has failed to plead the alleged fraud with particularity. Accordingly, the court grants Wasatch's motion to dismiss under Rule 9(b). Maxfiek's third amended complaint does little more than provide a laundry-list of provisions of the RFP and the UDOT Contract that were allegedly violated. The alleged contractual and statutory violations are made with scant references to specific individuals, locations, or even general time frames involved.
C. Analysis of Particular Violations
1. Truck Weight Violations
The facts surrounding the truck weight violations are supported by the affidavit of John Peterson filed in connection with the relators' response to the motions to dismiss. Wasatch contracted with the Ralph Smith Company to provide fill materials and the transportation of these materials for the 1-15 Project. Under the Smith Contract, each truckload of fill material needed to be weighed, and Wasatch paid Smith for the actual fill material provided on a per ton basis. Smith, in turn, paid the owners of the gravel pits for the dirt and fill taken from the gravel pits, on a per ton delivered basis. In his affidavit Peterson alleges that the pit owners improperly billed Smith, who then improperly billed Wasatch for more fill than was actually received at the various I-15 job sites. Peterson also claims that trucks with fill were "rarely" weighed. Instead, the driver of the truck would inform the gravel pit manager of the weight of his load without actually weighing the load. This amount was recorded in the form of an invoice to Smith, which Smith then submitted to Wasatch for payment. Peterson contends that the load weights were routine exaggerated by as much as six tons, and often exceeded the trucks actual physical capacity. Furthermore, the reported loads exceeded the legal load limits for the truck and trailers in use on the project.
In support of these allegations, Maxfield has submitted a single invoice allegedly demonstrating the over-billing of truck loads. The complaint then extrapolates from this single invoice to the 320,000 loads of fill used on the I-15 Project to conclude there are over $4 million in damages in this case.
Another truck weight claim states that the scales that the trucks drove across were not within the tolerances required by the UDOT Contract.
The complaint further claims that dirt/fill materials were purposefully directed to wrong areas of the I-15 project by Smith, to allow for increased hourly billing. Peterson states that trucks were summoned when they were not needed to increase Smith's billing to Wasatch. Additionally, Peterson contends that the drivers of these unused trucks were not compensated by Smith for their time, though Smith billed Wasatch for their time, The complaint provides no time frames or even locations for these incidents.
The complaint alleges that Smith, and the other gravel pit operators required many truck drivers to work nine hour shifts without breaks or lunch, yet were paid for only eight hours of work. Smith, however, billed Wasatch for nine hours of work from the drivers and kept the payment for the extra hour. Again, no time frames or locations for these incidents are specified.
Lastly, Peterson alleges that Smith dispatchers only dispatched trucks when the drivers were willing to pay a three to five dollar "fee" for access to the job site. The complaint is devoid of any individual names, locations, or time frames regarding these allegations.
The complaint also states that "relators are further aware of other potential false claims involving charges paid to Smith for each truck summoned or dispatched to pick up and haul a load of dirt and other fill material" without any additional explanations.
a. Section (a)(1) Claims — False Claim
Under section (a)(1) of the FC A, a relator must allege a knowing presentation of a false claim "for payment or approval to the United States." As the complaint currently stands, Maxfield alleges a scheme by Smith of improperly weighing trucks and subsequently presenting for payment false invoices to Wasatch. In this case the relators allege the false "claim" is various false invoices to Wasatch, Wasatch provided extensive monthly certifications of its progress to UDOT in order to receive its monthly payments. Maxfield has not demonstrated that Wasatch's monthly certifications falsely invoiced UDOT for materials, based on the false Smith invoices. At best, what has been alleged is that Smith bilked Wasatch. Maxfield must connect the alleged improper truck weight allegations to either a specific invoice presented to the United States, or a specific false certification made by Wasatch that it was in conformity with the UDOT Contract when it was not.
See 31 U.S.C § 3729(a)(1); and Shaw v. AAA Engineering Drafting, Inc., 213 F.3d 519, 529 (10th Cir. 2000).
Maxfield also alleges that the scales used did not conform to the requirements of the RFP constitutes a violation of the UDOT Contract. Nowhere in the complaint does this alleged violation tie into a monthly certification by Wasatch that indicated that the scales met the RFP standard or that the truck weights were in compliance with RFP standards. At this point the complaint does not state a false representation to the government by Wasatch to obtain payment.
Similarly problematic are the claims that Smith and other pit operators failed to pay the drivers appropriately. First, nothing has been specifically alleged tying Wasatch as opposed to Smith or other pit operators to these claims. Nor has Maxfield tied his allegations into false claims against the United States. Without that connection, these claims cannot stand.
In conclusion, Maxfield's Section (a)(1) claims, related to the truck weight allegations, have no references to time frames, or even to which of the many I-15 job sites or gravel pits were involved. Because of this missing information, this court is left with little alternative other than to dismiss under Rule 9(b).
b. Section (a)(2) Claims — False Record
Section (a)(2) of the FCA requires making or using a false record to cause a false claim to be paid or approved. The same three elements discussed above are required but include the creation of a false record when submitted a claim to the United States.
See United States ex rel Aakhus v. DynCorp, Inc., 136 F.3d 676, 682 (10th Cir. 1998).
As to the truck weight claims, Maxfield alleges that the falsified invoices submitted by Smith to Wasatch were then, in turn, used by Wasatch to have a false claim paid by the United States. As stated above, somewhere the relators must connect this scheme regarding the false weights to a specific certification made by Wasatch to UDOT for payment. Though a single invoice has been submitted, no details on locations, time frames, or a connection to United States' funds has been established. Without these specifics the court must grant the motion to dismiss.
c. Section (a)(3) Claims — Conspiracy
To prove a violation of 31 U.S.C. § 3729 (a)(3), the relators must establish six elements:
1) A claim to the United States;
2) which is false or fraudulent;
3) payment or approval by the government;
4) an agreement to submit that false claim;
5) an act in furtherance of the object of the agreement; and
BOESE, CIVIL FALSE CLAIMS AND QUIT TAM ACTIONS, § 2.01 [C], 2-24.
The courts reviewing this statute have interpreted it to require a specific intent to defraud.
See Boisjoly. 706 F. Supp. at 802-803; United States ex rel Durchoz v. FKW Inc., 189 F.3d 542, 545 n. 3 (7th Cir. 1999); United States ex rel. Johnson v. Shell Oil Co., 183 F.R.D. 204, 208 (E.D. Tex. 1998); see also BOESE, Id. at § 2.01[C][2], 2-26, 2003-1 Supp.
In addition to lack of a connection to a payment by the United States noted above, the conspiracy claim suffers other serious problems. First, it is unclear who conspired with whom. At this time, all that is alleged is that Smith conspired with itself to defraud Wasatch. Maxfield must plead with more detail an agreement between different defendants to defraud the United States. Also missing is any allegation of an "overt act" committed by Wasatch. Maxfield has only alleged that Wasatch placed employees in the pits. How these employees specifically furthered the conspiracy has not been explained. Maxfield must make clear what Wasatch did in the pits. Finally, merely alleging a pattern of negligent billing of truck weights will not meet the requirements of the conspiracy statute. Maxfield must allege specific acts on the part of Wasatch demonstrating they "knowingly" made false certifications about the scales or the truck weights.
See Boisjoly, 706 F. Supp. at 802-803.
See e.g., id. and United States v. Murphy, 937 F.2d 1032, 1039 (6th Cir. 1991).
d. Section (a)(4) — Delivery of Less Property
This cause of action requires proof of:
1) possession, custody or control of the property or money used, or to be used by the government,
2) delivery of less property that the amount for which the person receives a certificate or receipt,
3) with intent to defraud or willfully to conceal the property.
See United States ex rel. Aakhus, 136 F.3d at 681 (citing United States ex rel Stinson, Lyons, Gerlin Bustamante, PA. v. Provident Life Accident Ins. Co. 721 F. Supp. 1247, 1259 (S.D.Fla. 1989).
See United States ex rel. Aakhus, 136 F.3d at 681 (citing United States ex rel Stinson, Lyons, Gerlin Bustamante, PA. v. Provident Life Accident Ins. Co. 721 F. Supp. 1247, 1259 (S.D.Fla. 1989).
Typically, this section of the FC A applies when a defendant has received a certificate or receipt from the government that has some relationship to the defendants' return of property, Stretching the current pleadings, Maxfield claims that the monthly payments by UDOT were the use of government "money." Because Wasatch was allegedly providing false certifications as to the progress on the I-15 project, and the government paid based on these certifications, Wasatch "delivered" less property in violation of the statute. Maxfield provides no law in support of this somewhat circular — and novel — use of this section of the FCA. Again missing are the details: What certifications were false? What payments by the government were in fact for "less property received?" What demonstrates that Wasatch had control of the property in question? Without these specifics in the complaint, Maxfield cannot proceed on this cause of action.
See Aakhus, 136 F.3d at 681.
31 § U.S.C. § 3729(a)(4).
e. Section (a)(5) — False Receipt
Section (a)(5) of the FCA provides liability under the FCA for any person who:
authorized to make or deliver a document certifying receipt of property used, or to be used, by the Government and, intending to defraud the Government, makes or delivers the receipt without completely knowing that the information on the receipt is true;
This little-used section of the False Claims Act has been interpreted as addressing "the problem of a receipt being issued for less than what the government actually receives. It is directed primarily against government officials or contractors acting on behalf of the government." The complaint merely parrots the statute, and does not indicate any specific government employee was a "bad actor" in the transaction. Using the same novel interpretation as raised with regard to section (a)(4), Max field argues that the payments by UDOT were certifications of receipt of property by the government and that the payments were for less property than was actually received. Again, the "who, what, where, when and how" of the alleged fraud is missing. The circumstances required to be plead with particularity are the "time, place, and contents of the false representations as well as the identity of the person making the misrepresentations and what he obtained thereby." All of these are lacking in this claim.
See Boese, § 2.01 [E] at 2-35 (emphasis added).
Id.
See United States ex rel. Schwartz, No. 99-3105 (CA-10/DKS, Oct. 26, 2000), 2000 WL 1595976 at * 3(unpublished) (quoting United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir. 1997) (internal citations omitted).
Id. (quoting 5 CHARLES ALAN WRIGHT ARTHUR MILLER, FEDERAL PRACTICE AND PROCEDURE: CIVIL § 1297 at 590 (2d ed. 1990)).
2. False Certifications of Contractual Compliance
Maxfield alleges that Wasatch, when providing its monthly certifications to UDOT, provided false information that it was in compliance with the UDOT Contract. The UDOT Contract involved hundreds of documents, including a document entitled Contract Provisions (Evidencing a Design/Build/Maintain Contract for Reconstruction of I-15) by and between the State of Utah, by and through the Department of Transportation and Wasatch Constructors, a Joint Venture ("Contract Provisions"). The UDOT Contract also incorporated portions of the UDOT I-15 Corridor Reconstruction Project Request for Proposals Project No. *SP-15-7(135)296, ("RFP"). In his complaint, Maxfield simply lists Section 4 of the RFP and the relevant Contract Provisions. Maxfield generally alleges that "Wasatch Constructors, in many and varied ways, knowingly and intentionally provided substandard workmanship and materials which did not confirm to the requirements of the UDOT Contract." Maxfield raises three general areas where he contends that Wasatch's monthly certifications to UDOT were false: 1) facilities usage; 2) traffic flow management; and 3) workmanship and quality control representations.
Third Amended Complaint for Damages and Other Relief Under the False Claims Act, No. 59, p. 15.
Maxfield's complaint sometimes points to sections of the RFP or the UDOT contract that Wasatch alleged violated. What is missing in every claim, however, is some link to the monthly certification. Maxfield provides no specific allegation that Wasatch falsely certified it was in compliance with the contract. Without this information, this court has no choice but to dismiss the claim under Rule 9(b).
a. Facilities
Maxfield alleges that Wasatch's decision to co-locate its offices with UDOT and to leave parking surfaces unpaved violated sections of the RFP. Wasatch responds that UDOT had granted Wasatch a "change order" allowing for this change. The court has concerns about these less-than-compelling claims on their face. It appears that there was no "false certification" by Wasatch; but rather, they told UDOT about the changes, and UDOT agreed to them. This presents a serious hurdle for Maxfield's section (a)(1) and (2) claims.
RFP Sections 2.2.11, and 2.2.11.2.2, and 2.2.11.2.3.
See generally, Boese, § 2.03A.
The court also questions whether office location and parking lot surfaces are properly the subject of a qui tam fraud action. Maxfield fails to establish how compliance with these particular terms of the contract were material to the government's decision to pay Wasatch. Without such allegations, these claims may become "grist for the summary judgment mill." In addition, UDOT's extensive involvement in the project is apparent by the issued change order and presents concerns for future claims, In any event, at this juncture the court will simply dismiss the claims as insufficiently particular.
See BOESE, § 2.03A, and United States ex rel. Wilkins v. North American Const. Corp., 173 F. Supp.2d 601 (S.D.Tex. 2001).
See Shaw, 213 F.3d at 534 (citing United States ex rel Butler v. Hughes Helicopters, Inc., 71 F.3d 321, 327 (9th Cir. 1995); Wang v. FMC Corp., 975 F.2d 1412, 1421 (9th Cir. 1992).
b. Traffic
Maxfield alleges that under the RFP Wasatch had an obligation to maximize the safe movement of people, goods and services while minimizing negative impacts to residents, commuters and businesses. The UDOT contract required the design and implementation of maintenance of traffic plans. Several sections of the RFP dictated the requirements for traffic control during the Project. Maxfield generally alleges that Wasatch violated these sections of the RFP by failing to set up signs and warnings; to maintain access to railroads, residences, and other businesses; and to provide appropriate motorist guidance as to detour routes. Maxfield alleges no specific locations for these violations.
RFP section 5.1.1
RFP section 5.1 and:
a. UDOT Standard Traffic control Plans (RFP Section 7.4);
b. Part VI, Standards and Guides for Traffic Controls for Street and Highway Construction, Maintenance, Utility and Incident Management Operations, Part VI of the Manual of Uniform Traffic Control Devices, 1988 Edition, Revision 3, September 3, 1993. (RFP Section 5.1.2.1).
c. Manual on Uniform Traffic Control Devices (MUTED)
RFP Sections 5.1.3, 5.1.3.2, 5.1.3.4, 5.1.5.LI., 5.1.5.1.2, 5.1.5.1.4
The massive M5 Project no doubt impeded traffic. But Maxfield's complaint lacks any precision and is insufficient to sustain a cause of action for fraud against Wasatch. Only at oral argument did Maxfield come forward with any specific intersection or portion of the I-15 project that did not comply with the traffic control requirements of the Project. Details on which intersections violated which portions of the traffic management plans must be found in the complaint or no cause of action is proper. The complaint must also explain whether Wasatch made specific false certifications of compliance either impliedly or expressly, with the UDOT Contract.
b. Workmanship and Quality Control
Maxfield raises several issues of substandard workmanship and materials. Though each claim arises from a different series of facts, the application of sections (a)(1) and (a)(2) to these allegations is the same.
i. Prefabricated Concrete Girders
According to the complaint, many of the girders on the 1-15 project were provided by Basic Precast Company, Cindy Davis was a quality assurance inspector for Wasatch Constructors and apparently rejected many of Basic Precast girders. At some point in time, Ms. Davis left Wasatch to work for Basic Precast. Maxfield alleges that "many of the precast girders she had rejected because they did not meet the quality standards imposed by the Contract were used on the project." The complaint does not point to specific girders or even a generalized time frame when these alleged problems occurred. Without these specifics, the cause of action must be dismissed.
Third Amended Complaint for Damages and Other Relief Under the False Claims Act, p. 21, No. 88.
ii. Compromised Concrete
Maxfield alleges that the concrete used in the Project did not conform to site specifications; improperly mixed different grades of concrete; was not poured at the appropriate temperatures; and was not appropriately cured. He further alleges that because the testing laboratories were owned and controlled by Wasatch, all concrete supplied to the Project is "suspect." Finally, he contends that the concrete tests themselves were defective because Wasatch failed to keep the concrete test cylinders in a temperature, and humidity-controlled environment and the concrete test cylinders were rarely submitted to the testing labs within the required time. Again, the complaint does not provide any specificity as to where this concrete might has been used, who supplied the concrete, or a general time frame when these problems occurred. This cause of action is therefore dismissed.
iii. Bridge Defects
Maxfield alleges that Wasatch's use of precast deck panels and geofoam was inconsistent with the design envisioned by UDOT and it compromised the quality and longevity of the 142 bridges constructed during the Project. The complaint does not specify if these panels were used on all of the bridges or certain parts of the bridges. It also fails to specify how this was a violation of the UDOT Contract. This cause of action too is defective.
iv. Compaction
Maxfield alleges that the fill incorporated into the embankments and other portions of the project did meet the standards of the UDOT project. Maxfield alleges that Wasatch ignored its own engineers' recommendations regarding compaction. He further alleges that Wasatch's decision to use wire mesh and ungalvanized steel wire, rather than Teflon coated material, failed to meet the material requirements of the UDOT Contract. Finally, he alleges that Wasatch did not re-vegetate areas of the Project as required by the UDOT Contract. No specificity is provided as to which embankments or ramps were involved with these problems. This claim is dismissed.
v. Quality Assurance/Quality Control
Maxfield argues that Wasatch hired inexperienced control managers and transferred quality control inspectors that "produced reports that would cause undesirable delays and expenses" He also alleges that Wasatch falsely certified the quality of workmanship and materials to ensure the early completion bonus of $40 million,
These causes of action, under sections (a)(1) and (a)(2), based on the girders, concrete, bridge defects, compaction problems and management of the QC/QA process, almost pass muster under 9(b). Maxfield however must detail the specific sections of the RFP or UDOT Contract that were violated and the specific certifications provided by Wasatch to the government indicating that each of these areas was in compliance with the contract. Also, the complaint does not specify which girders, concrete batches, bridges, embankments, or QC/QA employees or testing did not meet the standards of the UDOT Contract. Even the serious allegations about Ms. Davis shifting employment from Wasatch to Basic Precast does not specifically allege that the girders subsequently provided were in violation of the contract. Without these details, the court will not proceed on this cause of action,
3. Environmental Certifications
Maxfield alleges that Wasatch committed violations of sections (a)(1) and (a)(2) by falsely certifying it was in compliance with the relevant environmental air and clean water statutes. These claims are also deficient.
a. Clean Air Standards
The RPP required Wasatch to comply with certain Clean Air Standards by controlling "opacity" and "fugitive dust sources" at all times. Maxfield alleges "upon information and belief that Wasatch did not comply with this term of the contract.
RFP Sections 13.1.6, 13.1.6.2.4, 13.1.6.3.4
Maxfield's complaint indicates which sections of the RFP required compliance with the Clean Air Standards. The complaint, however, does not indicate where and when the alleged opacity violations occurred. Maxfield has not alleged any "false or fraudulent" claims paid based on compliance with the Act, Also, it is unclear, at best, whether a violation of the air quality standards was a violation of a term of the UDOT Contract. At this point, it appears that the Utah Division of Air Quality was, by express terms of the contract, allowed to proceed against Wasatch for any violations of the state's standards. Whether UDOT was allowed a "double enforcement" of this provision has not been alleged. Eventually, Maxfield will also have to face the issues discussed above regarding materiality and intent that arise under this cause of action. But for now it is enough to dismiss these claims as insufficiently particular.
See BOESE, § 2.03A, and see United States ex rel. Wilkins, 173 F. Supp.2d 601.
See Shaw, 213 F.3d at 534 (citing United States ex rel Butler, 71 F.3d at 327; Wang, 975 F.2d at 1421.
b. Clean Water Standards
The RFP required Wasatch comply with all the requirements of the Utah Pollution Discharge Elimination System General Storm Water Discharge Permit ("General Permit). Wasatch also had to comply with the 404 Permits, which cover water quality for wetlands and stream altering activities. 404 Permits are required for projects that impact wetlands. The I-15 Project required two separate 404 Permits. One permit from the Corps of Engineers covered wetlands under its jurisdiction. The second permit, from the State of Utah Division of Water Rights covered stream crossing and new outfalls that were constructed as a part of the project. Maxfield alleges that Wasatch either (a) did have the proper permits and did not comply with them or (b) did not have the proper permits. Based on the supplemental materials filed by Wasatch, it appears this issue of permits can be resolved by looking into information available through a GRAMA request. Maxfield further alleges Wasatch dumped fill into the Jordan River at the 201 crossing in violation of the UDOT Contract, Wasatch responds with a certification from the Department of Water Quality (DWQ), indicating that the Jordan River dumping and subsequent clean up was approved by the DWQ. Again, Maxfield does not allege how Wasatch's compliance with DWQ regulations and permits is a violation of the UDOT contract.
See RFP section 6, 4. L
RFP Sections 6.4. land 13, 2.
RFP Section 13 at 13.2.
The Clean Water Act claims suffer similar defects. The terms of the contract indicate that the Army Corps of Engineers and UDOT bore the burden of dealing with the 404 Permit for wetland mitigation, not Wasatch. Also, Wasatch did obtain a Stream Channel Alteration Permit from the Utah Division of Water Rights. Maxfield has not demonstrated that violation of this permit was a violation of the UDOT Contract. At first blush, it appears that enforcement of this permit remained the jurisdiction of the DWQ, and the Corps of Engineers. Again, with all of the environmental claims, Maxfield fails to point to any evidence that Wasatch either falsely certified or created false records it was in compliance with the relevant statutes. In fact, Wasatch has provided letters from the DWQ that indicates Wasatch was fully cooperating with them to ensure compliance with the UDOT Contract,
4. Other Statutory Claims — Davis-Bacon, Copeland Act
Maxfield has alleged to final violations of statutes during the 1-15 Project, both related to the original truck weight claims. a. Davis-Bacon Act (Minimum Wage)
The UDOT contract required Wasatch to comply with the Davis-Bacon Act, which ensured that all workers on the I-15 project were paid minimum wage. The complaint raises two bases for violations of the Davis-Bacon Act: first, that Wasatch did not properly account for when workers were on-site or off-site, resulting in underpayment of workers on the Project; and, second, that workers were called to the site and, after waiting several hours, were sent away unpaid.
Wasatch agrees it was obligated to comply with Davis-Bacon, but argues that the classification of workers as on-site or off-site, and the related determination of what proportion of work is on-site or off-site, is a complex issue best handled by the Department of Labor, However, the issue of whether or not the hours logged were true or false could be viewed as a question of fact best resolved by this court as finder-of-fact. In any event, at this time, the complaint lacks necessary detail about which drivers and which job-sites were involved and will therefore be dismissed on that basis.
See United States ex rel Windsor, 895 F. Supp. 844.
b. Copeland Act (Anti-Kickback)
The UDOT Contract required compliance with the Copeland Act. Maxfield alleges that Wasatch and Smith solicited kickbacks from the truck drivers employed by them to haul dirt and fill to and from the work site. He alleges that the Smith dispatcher required payments to allow a driver access to the job site. He further contends that Wasatch "knew or should have known" of these violations.
Third Amended Complaint for Damages and Other Relief Under the False Claims Act, p. 31, No. 143.
Again, Wasatch does not dispute that it was expected that it would comply with the requirements of the Copeland Act in the work on the I-15 project. Wasatch instead argues that the alleged bad actor was a single Ralph Smith dispatcher, and that it had no control over the alleged kickback scheme involved. Though the pleadings as they stand are sparse, lacking detail regarding the dispatcher in question, the dates and times of the alleged kickbacks, and the extent of Wasatch's complicity in the scheme. This claim is therefore dismissed.
With respect to whether the dismissal should be with prejudice, the court concludes Maxfield should be given one last chance to amend the complaint. The court appreciates the fact that Maxfield waited a long time while the government determined whether to pursue this case, with the facts surrounding the Project potentially changing over time. Since the government's decision, Maxfield has only filed one amended complaint. In light of this history, allowing a fourth — and final — amendment is appropriate.
See United States ex rel Wilkins, 173 F. Supp.2d 601, citing Hart v. Bayer Corp., 199 F.3d 239, 248 n. 6 (5th Cir. 2000).
Because Maxfield perceived he could not access GRAMA records; this motion to amend is only the second amendment since the government chose not to proceed; and this will be an extremely complicated suit should Maxfield proceed; dismissal without prejudice is appropriate and leave to file a fourth amended complaint will be granted.
D. Staker Motion for Summary Judgment
Staker Parson ("Staker") filed a motion for summary judgment in this matter independent of the motions to dismiss. The well-known summary judgment standard requires granting of summary judgment when there are "no genuine issues" as to any material fact and the moving party is entitled to judgment as a matter of law. All facts must be viewed in the light most favorable to the non moving party. In light of the court's decision to dismiss the complaint this motion is denied as premature. Staker may re-raise these issues should a new complaint survive a subsequent motion to dismiss,
Steele v. Thiokol Corp., 241 F.3d 1248, 1252 (10th Cir. 2001).
Carl v. City of Overland Park, Kan., 65 F.3d 866, 868 (10th Cir. 1995).
V. REMAINING ISSUES
Maxfield has filed a motion for leave to file affidavits under seal because the information in the affidavits might cause individuals not to cooperate with the "investigation of this case." The court denies this motion. The United States is not a party to this suit, and this court has no information that a criminal investigation is ongoing. Second, in light of the court's ruling that much of the missing information in the current pleadings is available through public records, it makes little sense to file any information under seal at this point in time. The relators have not demonstrated the necessary "good cause" to justify withholding this information from the public.
DUCivR 5-2.
The defendants need not produce any additional discovery while this next round of briefing occurs. Maxfield may be able to fill in some of the gaps in his complaint with his own information, or information available to the public, but that matter can be decided down the road. Maxfield should promptly obtain through GRAMA information he feels is necessary. The court directs the defendants to raise all of the relevant issues, objections, or defects to any amended complaint in one single, consolidated pleading. This pleading shall address all concerns that can be raised at that time, including the issues of materiality, engineering judgment, government involvement in the Project, and this court's jurisdiction. The court will allow the parties to exceed the page limitations up to 75 pages. The briefing schedule is as follows.
See generally BOESE, § 2.03A, et seq,; and U.S. ex rel Wilkins, 173 F. Supp.2d 601.
See generally Boisjoly, 706 F. Supp. 795.
See generally Shaw, 213 F.3d 519.
See 31 U.S.C. § 3730(e)(4); see, e.g., United States ex rel. Holmes v. Consumer Ins. Group, 318 F.3d 1199 (10th Cir. 2003); United States ex rel Stone v. Rockwell Intern. Corp., 282 F.3d 787 (10th Cir. 2002); see generally, BOESE, § 4.02, et seq.
Fourth Amended Complaint February 27, 2004 Answer or Motions to Dismiss April 20, 2004 Reply May 20, 2004 Sur-reply June 1, 2004 Oral Argument on Pending Motions June 3, 2004 at 2:30 pm.
VI. Conclusion
The court GRANTS the motion to dismiss under Rule 9(b), without prejudice, and with leave to amend the complaint (#83-1). The court DENIES the motion for Summary Judgment filed by Staker Paving as premature (#90-1). The court DENIES the motion to file affidavits of Steven K. Maxfield and John Peterson under seal (#117-1).