RONNIE ABRAMS, District Judge:
Plaintiff-Relator Ping Chen brings this action against Defendants EMSL Analytical, Inc. ("EMSL"), The Louis Berger Group, Inc. ("Louis Berger"), Taylor Environmental Group, Inc. ("Taylor"), J.C. Broderick & Associates Inc. ("J.C. Broderick"), Hillman Environmental Co., Inc. and Hillman Environmental Group, L.L.C. (together, "Hillman"), Airtek Environmental Corp. ("Airtek"), Liro Engineers, Inc. ("Liro"), McCabe Environmental Services, L.L.C. ("McCabe"), ATC Associates, Inc. ("ATC"), JLC Environmental Consultants, Inc. ("JLC"), Detail Associates ("Detail"), Ambient Group, Inc. ("Ambient"), Warren & Panzer, Engineers, P.C. ("Warren & Panzer") and Consulting & Testing Services, Inc. ("Consulting & Testing"). Plaintiff alleges that Defendants, all of which operate in the asbestos air testing industry, violated the federal False Claims Act ("FCA"), 31 U.S.C. § 3729 et seq., and its state and local counterparts, N.Y.S. Fin. L. § 188 et seq., and N.Y.C. Admin. Code § 7-801 et seq. ("New York FCA" and "New York City FCA," respectively).
Defendants have moved to dismiss on the grounds that: (i) Plaintiffs claims are barred by the FCA's public disclosure provision and (ii) Plaintiff has failed to plead his claims with particularity. EMSL seeks dismissal on the additional basis that it was not properly served. Warren & Panzer and ATC also seek attorneys' fees.
The Court agrees as to each asserted basis for dismissal. Accordingly, this action is dismissed in its entirety. The motions for attorneys' fees are denied.
Plaintiff holds "a degree equivalent to a Doctor of Public Health" from Shanghai Medical University and a masters degree in Environmental Health Science from The City University of New York. (Relator's Third Amended Complaint ("Complaint") ¶ 36.) He is also an accredited "Laboratory Director." (Id. ¶¶ 37-38.)
Prior to coming to the United States, Plaintiff was an Assistant Professor at Shanghai Medical University. (Id. ¶ 36.) He has worked in the U.S. air monitoring industry for twenty-four years and has "accumulated rich asbestos testing experience." (Id. ¶ 39.) Following the September 11 attacks, Plaintiff was a member of the emergency response team that performed air quality analysis at the World Trade Center. (Id. ¶ 40.)
Plaintiff worked for Detail as a lab director for nearly eighteen years, and also worked as a part-time analyst for Airtek from 1989 to 2007. (Id. ¶¶ 71, 96.) From October 2006 to February 2010, Plaintiff worked as a "weekend/night shift supervisor" at EMSL where his job duties included
When government buildings containing asbestos are demolished or renovated, asbestos fibers can become airborne, posing a significant health hazard. (Id. ¶¶ 27-28.) Before such projects commence, asbestos abatement companies are retained to remove materials that contain asbestos. (Id. ¶ 29.)
To ensure that asbestos abatement processes are effective, air monitoring companies are also retained to collect air samples at abatement sites. (Id. ¶¶ 28-29.) According to the Complaint, all Defendants, except for EMSL, are air monitoring companies ("Air Monitoring Defendants"). (Id. p. 2.) Air monitoring companies collect air samples before, during and after abatement work is performed. (Id. ¶ 52.) They then submit the samples to an environmental testing company like EMSL to analyze the samples and report as to the presence or absence of asbestos fibers contained therein. (Id. ¶ 29.) If the tested samples do not meet federal and state regulations, further abatement work must be performed. (Id. ¶ 53.)
Plaintiff alleges that "[i]n order to obtain favorable testing reports," the Air Monitoring Defendants "for many years ... fraudulently provided countless fake air samples, namely, blank cassettes, to environmental testing service companies, such as EMSL, for testing." (Id. ¶ 54.) These "fake" samples "would definitely pass the tests because there was nothing in them." (Id. ¶ 55.) Plaintiff alleges to have "learned about the fake samples" submitted by the Air Monitoring Defendants while at EMSL by "personally coming across the[m] ... and discussing [them] with EMSL's employees who have personal knowledge about the fake samples." (Id. ¶ 43.) As a supervisor, Plaintiff "had access to EMSL's air sample analysis records showing that countless air samples provided by [the Air Monitoring Defendants] were fake." (Id. ¶ 55.) Plaintiff attaches copies of such records to the Complaint. (Id. Ex. 1.)
The Complaint asserts the following allegations (or substantially similar allegations) as to most or all of the Air Monitoring Defendants:
The Complaint also contains the following additional allegations specific to particular Air Monitoring Defendants:
"In 2010 or 2011, ATC bid $1 to $2 per sample for PCM analysis for several government projects and earned contract work including the Brooklyn Navy Yard project. The cost for PCM analysis is at least several dollars per sample. There is only one way for ATC to possibly make money on the project: fake samples and/or fake analysis." (Id. ¶ 85.)
EMSL is the largest environmental testing service company in the world. (Id. ¶ 46.) Approximately 50% of EMSL's revenue derives from asbestos testing and related services. (Id. ¶ 47.) To receive compensation for those services, EMSL invoices the federal, state and local government directly, or charges general contractors, which in turn seek government reimbursement. (Id. ¶ 51.) EMSL was aware that the Air Monitoring Defendants submitted to it "false and useless" air samples, and it "conspired" with them by generating inaccurate "data and testing reports" that were then used to "obtain funds from the federal, state, and local government." (Id. ¶¶ 57-58.) EMSL has submitted "countless false and useless asbestos testing reports" in connection with "numerous
When working at EMSL, Plaintiff alleges to have "voiced his concern about the falsified data and fake samples multiple times" to his lab manager, Jim Hall. (Id. ¶ 122.) Mr. Hall allegedly told Plaintiff that "he knew the samples provided by some clients were fake" and that he knew "these clients never took real samples for rush analysis because they could not afford failed results as they would cause delay to the construction projects." (Id. ¶ 125.) He further explained that "a lot of clients never collected real air samples but submitted blank cassettes instead." (Id. ¶ 126.) "These blank cassettes had nothing on it [sic] and thus the analysis would definitely return good results." (Id. ¶ 126.) Mr. Hall also "admitted EMSL's illegal practice but indicated that he did not care," explaining that "that's how [EMSL] make[s] money." (Id. ¶ 123.)
Plaintiff also alleges that EMSL "recklessly disregarded various regulations and intentionally engaged in other illegal and fraudulent practices." (Id. ¶ 104.) For instance, "EMSL willfully disregarded the applicable regulations and required its analysts to work at a speed not permitted" by the governing regulations. (Id. ¶¶ 105-109.) Plaintiff further alleges that, at EMSL, "the same analyst who analyzed the air samples would fabricate the quality control data," and "[i]n order to cover it up... a different analyst would be asked to sign off on data so that it would appear that independent quality control had been performed." (Id. ¶ 117.) As a result of these violations "all the data generated by such improper procedures are fraudulent and false," and the "testing reports based on these data virtually have no practical value." (Id. ¶ 118.)
As a result of the Air Monitoring Defendants' and EMSL's alleged frauds, the Complaint alleges that:
(Id. ¶ 120.)
On May 28, 2009, a grand jury sitting in the Northern District of New York returned an indictment charging Certified Environmental Services, Inc. ("CES"), an asbestos air monitoring company and laboratory, and certain of its employees with, inter alia, conspiring to defraud the United States by "impeding and impairing the governmental functions of the U.S. Environmental Protection Agency and U.S. Department of Labor, [and] Occupational Safety and Health Administration ... for assuring that those performing asbestos abatement and sampling/analysis activities comply with environmental and worker-safety laws." See U.S. v. Certified Environmental Servs., Inc., 5:09-CR-319 (N.D.N.Y. May 28, 2009) (Dkt. 1, at ¶ 2) ("CES Indictment" or, generally, "CES Prosecution"). The CES Indictment described a fraudulent scheme whereby, inter alia, CES gave asbestos abatement contractors false and fraudulent air results which led building owners to believe that asbestos has been properly removed. (Id. ¶ 7.) It listed numerous removal sites in Syracuse and other upstate New York areas
The next day, several online media publications re-published information about the CES Prosecution:
(Declaration of Jillian L. McNeil in Support of Joint Motion to Dismiss Third Amended Complaint, Dkt. 64-2, at Exs. H-J.)
On March 26, 2010, the United States Attorney for the Southern District of New York publicly filed an information in a criminal prosecution against Saverio Todaro. See U.S. v. Todaro, 10 Cr. 268(KMW) (S.D.N.Y. March 26, 2010) (Dkt. 2) ("Todaro Information" or, generally, "Todaro Prosecution"). The Todaro Information asserted, inter alia, two counts of mail fraud in connection with "Asbestos Air Monitoring" against Todaro, described as "a New York State licensed asbestos air sampling technician" who "purported to conduct asbestos air monitoring through his company, SAF." (Id. ¶ 9(d).) The Todaro Information alleged that:
(Id. ¶¶ 11-12.)
The same day, March 26, 2010, Todaro pleaded guilty to the relevant counts, and his plea was announced in a press release stating that "TODARO pleaded guilty ... to falsifying hundreds of lead and asbestos inspection and testing reports for residences and other locations throughout the New York City area." (Declaration of Claude M. Millman ("Millman Decl."), Dkt. 98, at Ex. E.) The press release continued:
Id. The press release also repeated relevant portions of the Todaro Information.
On April 26, 2010, The New York Times published an article about the Todaro Prosecution entitled "Inspector Says He Faked Data in New York Building Tests." (Millman Decl. Ex. B.) The article states, in part:
Plaintiff commenced this action on October 1, 2010. (Dkt. 1.) Because he brought suit under the False Claims Act, his original complaint was placed under seal to afford government authorities time to consider whether to intervene. See 31 U.S.C. § 3730(b)(2). The government ultimately declined to intervene, and the original complaint was unsealed as of June 1, 2012. (Dkt. 16.) Also on June 1, 2012, and again on September 5, 2012, Plaintiff amended his complaint. (Dkts. 17, 21.) After Defendants advised Plaintiff of the bases for their contemplated dismissal motions, as required by the Court's Individual Rule & Practices, the Court granted Plaintiff leave to file the Complaint. (Dkt. 41.) He did so on October 12, 2012. (Dkt. 49.)
On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act ("PPACA"), provisions of which amended the FCA. As Plaintiff filed his original complaint on October 1, 2010, the FCA, as amended by the PPACA, applies to his claims. See, e.g., U.S. ex rel. Osheroff v. HealthSpring, Inc., 938 F.Supp.2d 724, 728-29, 731-33 (M.D.Tenn.2013) (applying FCA as modified by PPACA to complaint filed in October 2010); U.S. ex rel. Sanchez v. Abuabara, No. 10-61673-CIV, 2012 WL 1999527, at *2 n. 1 (S.D.Fla. June 4, 2012) ("Since the suit in this case was filed many months after the Act was signed into law, this Court will apply the amended language.").
The PPACA amended the FCA's public disclosure provision, codified at 31 U.S.C. § 3730(e)(4), in several key respects. See Pub.L. 111-148, § 10104(j)(2), 124 Stat. 119 (Mar. 23, 2010). The Court discusses the substance of the amended provision in detail below, but must note here one amendment that affects the standard of the Court's review. Prior to the PPACA's enactment, § 3730(e)(4) provided that "[n]o court [had] jurisdiction over an action" the allegations of which had been previously publicly disclosed. A defendant invoking the public disclosure bar therefore challenged a court's subject matter jurisdiction. See Rockwell Intern. Corp. v. U.S., 549 U.S. 457, 127 S.Ct. 1397, 167 L.Ed.2d 190 (2007). After the PPACA's enactment, § 3730(e)(4) provides that a "court shall dismiss an action or claim" when the provision applies. The few district courts to have addressed the issue are split as to whether the public disclosure provision remains jurisdictional in nature. Compare U.S. ex rel. Paulos v. Stryker Corp., No. 11-0041-CV-W-ODS, 2013 WL 2666346, at *3 (W.D.Mo. June 12, 2013) ("After the 2010 amendment, the bar does is [sic] not described as jurisdictional in nature."), U.S. ex rel. Fox Rx, Inc. v. Omnicare, Inc., No. 1:11-cv-962-WSD, 2013 WL 2303768, at *8 n. 15 (N.D.Ga. May 17, 2013) ("Effective March 23, 2010, the public disclosure bar was amended to narrow its applicability and to make it a basis for dismissal, not a jurisdictional threshold."), and U.S. v. Chattanooga-Hamilton Cnty. Hosp. Auth., 958 F.Supp.2d 846, 857 n. 6, 1:10-CV-322, 2013 WL 3912571, at *7 n. 6 (E.D.Tenn. July 29, 2013) ("[T]he pre-PPACA language made
To determine whether to classify a statutory limitation as jurisdictional, a court inquires into whether Congress has clearly stated that the rule is jurisdictional; absent such a clear statement, courts should treat the restriction as nonjurisdictional. See Sebelius v. Auburn Reg'l Med. Ctr., ___ U.S. ___, 133 S.Ct. 817, 824, 184 L.Ed.2d 627 (2013); see also City of N.Y. v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 127 (2d Cir.2011) (where federal statute did not "speak in jurisdictional terms or refer in any way to the jurisdiction of the district courts," it was not jurisdictional) (citation and internal punctuation omitted). Not only is there such no clear statement in the present incarnation of the public disclosure provision, but, as explained immediately above, Congress deliberately removed such clear language from the provision when it could have kept it in. The Court therefore holds that the public disclosure provision is no longer jurisdictional in nature, but rather provides a basis for dismissal.
In light of this ruling, contrary to Defendant's suggestion, the Court is not permitted, as it would be on a motion challenging its jurisdiction, to refer to evidence outside the pleadings, nor does the burden rest with Plaintiff. See Hamm v. United States, 483 F.3d 135, 137 (2d Cir. 2007) ("In resolving the question of jurisdiction, the district court can refer to evidence outside the pleadings and the plaintiff asserting subject matter jurisdiction has the burden of proving by a preponderance of the evidence that it exists.") (quoting Luckett v. Bure, 290 F.3d 493, 496-97 (2d Cir.2002)). Accordingly, the Court will not consider the various declarations submitted by the parties, except to the extent they have been provided to place before the Court documents that may be considered on a motion to dismiss, in this case, judicially-noticeable public disclosures. See Staehr v. Hartford Fin. Servs. Group, Inc., 547 F.3d 406, 425 (2d Cir.2008) (taking judicial notice of "the fact that press coverage, prior lawsuits, or regulatory filings contained certain information, without regard to the truth of their contents") (emphasis in original). As discussed below, dismissal is appropriate based on the Complaint's allegations and these disclosures without resort to the additional materials submitted in or through the parties' declarations.
When considering a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a court must "accept all allegations in the complaint as true and draw all inferences in the non-moving party's favor." LaFaro v. New York Cardiothoracic Grp., PLLC, 570 F.3d 471, 475 (2d Cir. 2009) (citation omitted). The complaint must "contain sufficient factual matter ... to `state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868
Moreover, as discussed in greater detail below, because FCA claims "fall within the express scope of Rule 9(b)," Gold v. Morrison-Knudsen Co., 68 F.3d 1475, 1476-77 (2d Cir.1995), relators must "state with particularity the circumstances constituting fraud." Fed.R.Civ.P. 9(b).
The Court holds that: (1) Plaintiff's FCA claims must be dismissed under the statute's public disclosure provision; (2) Plaintiffs FCA claims are deficient on the independent basis that they are not pleaded with particularity; (3) dismissal is also warranted against EMSL on the basis that it was not properly served; (4) Plaintiff's claims under the New York FCA and New York City FCA, which are substantially the same as Plaintiff's claims under the federal FCA, must also be dismissed; and (5) the motions for attorneys' fees are denied.
The FCA "is the United States Government's primary tool for redressing fraud against the Government." Claire M. Sylvia, The False Claims Act: Fraud Against the Government § 1:1. Not only does the FCA "provide[] the Government a powerful means of combating fraud through an action for multiple damages and penalties," it "supplements the Government's enforcement efforts by authorizing private citizens with information about fraud to initiate a civil action on the Government's behalf." Id. Such private, or qui tam, actions "seek[] to tap the self-interest of individuals with information about fraud against the Government," id., by "allowing qui tam relators to share in any recovery." U.S. ex rel. Doe v. John Doe Corp., 960 F.2d 318, 321 (2d Cir.1992). In the past, however
Id. (citing U.S. ex rel. Marcus v. Hess, 317 U.S. 537, 63 S.Ct. 379, 87 L.Ed. 443 (1943)). In Marcus, the relator's civil complaint was "substantially identical" to a previously-released criminal indictment, with some paragraphs of the complaint "being almost verbatim copies" of the indictment. 317 U.S. at 558, 63 S.Ct. 379 (Jackson, J., dissenting). A majority of the Court nonetheless found no language in the FCA that barred relator's action even where his knowledge of the fraud was solely the product of the government's investigation, not his own. Id. at 545, 63 S.Ct. 379. In response to Marcus, "Congress immediately amended the qui tam provisions of the FCA to bar all qui tam actions based on information that the government already possessed." Doe, 960 F.2d at 321.
Hence the FCA's public disclosure provision, the purpose of which is "to bar `parasitic lawsuits' based upon publicly-disclosed information in which would-be relators
Congress has since amended the FCA more than once to attempt to "strike a balance between encouraging private citizens to expose fraud and avoiding parasitic actions by opportunists who attempt to capitalize on public information without seriously contributing to the disclosure of the fraud." Doe, 960 F.2d at 321. In 1986, Congress "amended the False Claims Act, in part to correct restrictive court interpretations that tend[ed] to thwart the effectiveness of the statute" and to "encourage more private enforcement suits." U.S. v. Johnson Controls, Inc., 457 F.3d 1009, 1016, n. 5 (9th Cir. 2006) (citations and internal punctuation omitted).
More recently, as discussed above, Congress again amended the FCA's public disclosure provision, as part of the PPACA. In its present form, the public disclosure provision reads:
31 U.S.C. § 3730(e)(4)(A). The statute then defines who falls into the "original source" exception:
31 U.S.C. § 3730(e)(4)(B).
Section 3730(e)(4) thus establishes a two-part test for determining whether dismissal is required. A court must first determine whether "substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed" through one of the sources listed in the statute. If that is the case, a court must then consider whether the relator is an
As discussed below, the Court finds that (a) the fraud alleged in the Complaint was "publicly disclosed" and (b) that Plaintiff is not an "original source." His claims must therefore be dismissed.
Plaintiff does not dispute that the documents disclosed in connection with the CES and Todaro Prosecutions constitute public disclosures within the meaning of § 3730(e)(4)(A). The charging instruments in each prosecution, the CES Indictment and the Todaro Information, were publicly disclosed "in a Federal criminal... hearing in which the Government or its agent is a party." § 3730(e)(4)(A)(i); see United States v. Reagan, 242 F.3d 385 (9th Cir.2000) ("The indictment was a `public disclosure' and triggered the public disclosure bar of § 3730(e)(4)(A).").
The news articles, as well as the press releases, were disclosed "from the news media." § 3730(e)(4)(A)(iii); see Schindler Elevator Corp. v. United States ex rel. Kirk, ___ U.S. ___, 131 S.Ct. 1885, 1891, 179 L.Ed.2d 825 (2011) (The phrase "news media" and the other sources of public disclosure suggest "that the public disclosure bar provides a broad sweep.") (internal punctuation omitted); U.S. ex rel. Alcohol Found., Inc. v. Kalmanovitz Charitable Found., Inc., 186 F.Supp.2d 458, 463 (S.D.N.Y.2002) (rejecting a "cramped reading" of the term "news media" and finding it to apply not only to news articles, but also to disclosures directed to a "smaller" or "professionally specialized" reader bases).
The only remaining inquiry under § 3730(e)(4)(A) therefore is whether the CES/Todaro Disclosures contain "substantially the same allegations or transactions as alleged in the [instant] action."
In the year and a half prior to the filing of Plaintiffs original complaint in this action, the CES/Todaro Disclosures disclosed to the public that:
These public disclosures are no doubt "substantially the same" as the allegations in the Complaint, which assert that EMSL and the Air Monitoring Defendants, all of which operated in the asbestos testing industry, participated in a scheme to defraud the government by preparing and providing "fake" air samples or "false" asbestos testing reports in connection with government abatement projects and then seeking and obtaining compensation from the government. No material aspect of this alleged scheme falls outside the scope of the information revealed in the CES/Todaro Disclosures. Accordingly, the Court finds that the CES/Todaro Disclosures are substantially the same as the Complaint's allegations.
It clear to the Court that the CES/Todaro Disclosures were "sufficient to set the government squarely upon the trail of the alleged fraud," In re Natural Gas Royalties, 562 F.3d 1032, 1041 (10th Cir.2009), and it therefore rejects Plaintiffs contrary assertion that the CES/Todaro Disclosures were not "sufficient to lead the government to the Defendants in this action." (Opp'n 9.) As the Court in Springfield explained, application of the public disclosure bar is appropriate where
14 F.3d at 654 (quoting U.S. ex. rel. Joseph v. Cannon, 642 F.2d 1373, 1377 (D.C.Cir. 1981)) (brackets in original). Plaintiff has alleged that EMSL is the largest, and one of the leading, environmental testing firms in the world with facilities in New York. (Compl. ¶ 46.) He has also alleged that the Air Monitoring Defendants, in addition to being EMSL's clients, (id. ¶ 49), are collectively involved in scores of major government abatement projects in the New York area. (Id. ¶¶ 50, 59, 67, 70, 73, 84, 88-89, 94, 96.) It is simply not plausible that government officials conducting an investigation into the frauds carried out by CES and Todaro were not alerted by the
The public disclosure provision thus appropriately serves its purpose here. Plaintiff filed his original complaint in this action shortly after substantial information about the alleged fraud had become available to the public. The provision thus prevents Plaintiff from being able to "`seek remuneration although [he] contributed nothing to the exposure of the [alleged] fraud.'" Kreindler & Kreindler, 985 F.2d at 1157 (quoting Doe, 960 F.2d at 319).
Because the allegations contained in the fraud were publicly disclosed, Plaintiffs action must be dismissed unless Plaintiff is an original source. The Court concludes that he is not.
To reiterate, the current version of § 3730(e)(4)(B) provides two separate methods by which a relator may demonstrate he is an original source:
"original source" means an individual who either (i) prior to a public disclosure under subsection (e)(4)(a), has voluntarily disclosed to the Government the information on which allegations or transactions in a claim are based, or (2) who has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions, and who has voluntarily provided the information to the Government before filing an action under this section.
This definition "attempt[s] to strike a balance between those individuals who, with no details regarding its whereabouts, simply stumble upon a seemingly lucrative nugget and those actually involved in the process of unearthing important information about a false or fraudulent claim." Stennett v. Premier Rehab., LLC, 479 Fed. Appx. 631, 635 (5th Cir.2012) (internal quotations and citations omitted) (alteration added).
Under the first prong of § 3730(e)(4)(B), a relator may show he is an original source by demonstrating that: "prior to a public disclosure under subsection (e)(4)(a), [he] has voluntarily disclosed to the Government the information on which allegations
Under the second prong of § 3730(e)(4)(B), Plaintiff must have knowledge that is both (1) "independent of and (2) "materially adds to" the publicly-disclosed allegations or transactions. He must also demonstrate (3) that he "has voluntarily provided the information to the Government before filing an action under this section."
Construing the Complaint liberally, the first and third of these requirements are met. Although Plaintiff alleges to have worked for only three of the fifteen Defendants, he alleges that he was exposed to the alleged fraudulent activities of the other Defendants during his work at EMSL, of which all the Air Monitoring Defendants were clients. See U.S. v. Northrop Corp., 5 F.3d 407, 411 (9th Cir.1993) ("Barajas's knowledge of the testing and inspection fraud was direct and independent because he acquired it during the course of his employment at Northrop."); Stennett, 479 Fed.Appx. at 635 ("Direct knowledge contemplates knowledge obtained from actually viewing source documents, or first hand observation of the fraudulent activity that provides the grounds for the qui tam suit"). Accordingly, the Complaint alleges knowledge "independent of" the CES/Todaro Disclosures. As to the third requirement, Plaintiff alleges that he "has voluntarily provided such information to the Government before filing this action." (Compl. ¶ 7.)
Plaintiff, however, does not allege knowledge that "materially adds to" the information in the public disclosures. Primarily for the same reasons (discussed below) the Court finds the Complaint to be insufficiently pleaded, it finds that the Complaint's rather bare bones allegations add little, and certainly add nothing material, to the previously-disclosed allegations or transactions. Indeed, the Complaint contains very little factual content at all. As outlined above, for all its length, the Complaint primarily consists of repetitive allegations that are similar as to each of the Air Monitoring Defendants — i.e., that each worked on government projects, that each took air samples they knew were "fake," and that each nonetheless billed the government. That there is little substance to the Complaint comes as no surprise since Plaintiff had only indirect contact with a large majority of the Defendants.
To be sure, the Complaint contains scattered allegations that certain of Plaintiff's colleagues professed to him that they too were aware of, or complicit in, a fraud, see, e.g., Compl. ¶¶ 77, 90, as well as certain other Defendant-specific details, see id. ¶¶ 63-64; 85-86. But none of these allegations can be said to materially add to the already robust universe of publicly-available information regarding schemes by asbestos companies to defraud the government. On the whole, the Complaint's allegations are "not much different from the allegations or transactions of the public disclosures" and therefore cannot be said to materially add to the publicly-disclosed fraud. U.S. ex rel. Lockey v. City of Dallas, Civ. A. No. 3:11-cv-354-O, 2013 WL 268371, at *16 (N.D.Tex. Jan. 23, 2013) (considering whether "the investigation or experience of the relator either ... translate[d] into some additional compelling fact, or ... demonstrate[d] a new and undisclosed relationship between disclosed facts") (quoting U.S. ex rel. Reagan v. E. Texas Med. Ctr. Reg'l Healthcare Sys., 384 F.3d 168, 179 (5th Cir.2004)); U.S. ex rel.
Accordingly, the Court holds that the FCA's public disclosure provision requires dismissal.
The Court further agrees with Defendants that Plaintiff has failed to meet the heightened pleading standard required under Federal Rule of Civil Procedure 9(b), which requires that allegations of fraud be stated with particularity.
To satisfy this heightened pleading requirement, "a complaint must `(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent.'" Wood ex rel. U.S. v. Applied Research Assocs., Inc., 328 Fed.Appx. 744, 747 (2d Cir.2009) (quoting Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1128 (2d Cir. 1994)). "In other words, Rule 9(b) requires that a plaintiff set forth the who, what, when, where and how of the alleged fraud." U.S. ex rel. Polansky v. Pfizer, Inc., No. 04-cv-0704 (ERK), 2009 WL 1456582, at *4 (E.D.N.Y. May 22, 2009) (citation and internal quotation marks omitted). As the Second Circuit has explained, the purpose of this requirement is to "to provide a defendant with fair notice of a plaintiffs claim, to safeguard a defendant's reputation from improvident charges of wrongdoing, and to protect a defendant against the institution of a strike suit," as well as to "discourage the filing of complaints as a pretext for discovery of unknown wrongs." Wood, 328 Fed. Appx. at 747 (citations omitted).
The Complaint's allegations fall well short of the "ample factual basis [that] must be supplied to support the charges" in a FCA suit. Id.
Courts in the Second Circuit have held that "allegations of violations of federal regulations are insufficient to establish a claim under the FCA if plaintiff cannot identify, with any particularity, the actual false claims submitted by the defendant." Dialysis Clinic, Inc., 2011 WL 167246, at *10 (citing Johnson v. Univ. of Rochester Med. Ctr., 686 F.Supp.2d 259, 265 (W.D.N.Y.2010)); see also U.S. v. Empire Educ. Corp., 959 F.Supp.2d 248, 254, No. 11-cv-0035, 2013 WL 4068237, at *3 (N.D.N.Y. Aug. 13, 2013) ("[Plaintiff] must not only allege with particularity the `underlying schemes and other wrongful activities' but also the resulting `submission of fraudulent claims.'") (quoting U.S. ex rel. Mooney v. Americare, Inc., No. 06-cv-1806, 2013 WL 1346022, at *3 (E.D.N.Y. Apr. 3, 2013)). Specifically:
Polansky, 2009 WL 1456582, at *4 (quoting United States ex rel. Karvelas v. Melrose-Wakefield Hosp., 360 F.3d 220, 232-33 (1st Cir.2004)).
The Complaint contains general allegations that "[a]ll defendants have fraudulently obtained government funds in connection with the federal, state, and NYC air monitoring projects." Compl. ¶ 45; see also, id. ¶ 58 ("The defendants used these fraudulently generated reports to obtain funds from the federal, state, and local government."); id. ¶ 128 ("As a result of Defendants' illegal and fraudulent practices, the federal, state, and local government and the public have suffered serious damages."). It also asserts, in repetitive fashion, that each of the Air Monitoring Defendants billed the government, directly or indirectly, for the samples they collected, and were compensated for doing so. See Compl. ¶¶ 59, 61, 65, 67, 73, 83, 88, 94, 96, 98, 100. And it asserts similarly general allegations as to EMSL. See, e.g., Compl. ¶ 51 ("EMSL submits invoices to the federal, state, and local government, its co-defendants, or the general contractors based upon the air sampling work provided, and receive compensation based upon said work provided."); id. ¶ 57 ("EMSL conspired with its co-defendants and generated these data and testing reports for the purpose of defrauding the government for money.").
Nowhere in the Complaint, however, does Plaintiff identify a particular false claim that was submitted to the government for payment by any Defendant. Dismissal is appropriate on this basis. See Dialysis Clinic, Inc., 2011 WL 167246, at *11 (complaint dismissed where plaintiff "fail[ed] to identify even one, specific fraudulent claim"); U.S. ex rel. Clausen v. Lab. Corp. of Am., Inc., 290 F.3d 1301, 1312 (11th Cir.2002) (FCA claim dismissed because "[n]o amounts of charges were identified. No actual dates were alleged.... No copy of a single bill or payment was provided.").
Furthermore, despite having carefully reviewed the Complaint, the Court struggles to discern the precise nature of the alleged fraudulent scheme. The gist of the Complaint is that the Defendants "faked"
As an initial matter, alleging that an Air Monitoring Defendant submitted "blank" samples is not suggestive of fraud. To the contrary, the regulation governing "Detailed Procedures for Asbestos Sampling and Analysis — Non-Mandatory" advises that "[b]lank samples [be] used to determine if any contamination has occurred during sample handling." 29 C.F.R. § 1910.1001, App'x B § 5.2.9. The regulation further instructs air samplers as follows:
Id. Because this regulation provides for the submission of "blank" samples, alleging that submitted samples were "blank" does not allege fraudulent activity unless Plaintiff also alleges that the relevant samples were "blank" when they should have indicated the presence of airborne asbestos fibers. The Complaint contains no such allegation.
Construed liberally, the Complaint's allegations could suggest that the air samples provided by an Air Monitoring Defendant (and tested by EMSL) were either: (i) not conducted in compliance with the relevant standards for measuring the presence of airborne asbestos fibers at abatement sites, or (ii) not the product of any testing at all when they should have been. It is unclear to the Court, however, whether and when Plaintiff is alleging which theory as to any given Defendant, or if he is alleging both.
What is clear, rather, is that the one-page reports attached to the Complaint, purporting to "reflect[ ] tests performed [by EMSL] on fake samples submitted" by each Air Monitoring Defendant (Opp'n 17), do not on their face provide support for either theory. While certain of these reports, involving samples provided by JLC and Airtek, appear to reflect that no asbestos fibers were present in the samples, this fact no more compels an inference of fraudulent activity than it does an inference that no asbestos was present at the site (pre- or post-abatement) when the sample was taken or that the no air was passed through the samples on purpose in compliance with the above-quoted regulation. Other reports, involving samples provided by Liro, Hillman, Detail, Consulting & Testing and Louis Berger, actually do reflect the presence of asbestos fibers, which would appear to undercut Plaintiffs allegations that the samples were "fake" or "blank" and that EMSL did not properly
Moreover, given that, as discussed above, the Complaint does not provide any details as to the who, when or why of the false claims themselves, the precise manner in which Defendants'"fake" samples and "false" testing reports are linked to the "false reports and invoices" allegedly submitted to the government remains unclear (not to mention what false statements those reports and invoices actually contained).
As noted, see n. 13, supra, the Complaint also makes certain ancillary allegations directed to individual Defendants, specifically that: EMSL failed to comply with regulatory and quality control requirements, and Ambient conducted air quality analysis at unauthorized laboratories. Largely for the reasons expressed immediately above, these claims are also inadequately pleaded. First, it is not immediately clear how these allegations support a cognizable claim under the FCA — they seem to allege mere regulatory violations, not actionable fraud — and the Complaint, once again, does not explain further. Generously construed, however, these allegations could suggest that Defendants' performance of tests under circumstances they knew were not compliant with governing regulations somehow tainted the results, and that the claims submitted to the government in connection with these tests were therefore fraudulent.
Not only does this theory make little sense, these alleged fraudulent schemes are not supported by the particulars (including, for instance, which claims were submitted) that courts have found necessary to survive a motion to dismiss on Rule 9(b) grounds. See Dialysis Clinic, Inc., 2011 WL 167246, at *11 (complaint dismissed where plaintiff "vaguely allege[d] that from 2004 to present, defendant submitted fraudulent claims for payment based upon false certifications that defendant was in compliance with Medicare rules and regulations for quality of care").
Even assuming Plaintiffs claims were not also dismissed on the independent basis that the Complaint's allegations were publicly disclosed, leave to amend would be inappropriate. While leave to amend must be freely given "when justice so requires," Fed.R.Civ.P. 15(a)(2), a court may, in its discretion, decline to grant leave if it would prejudice the opposing party or where the proposed amendment would be futile. Merrill Lynch & Co., Inc. v. Allegheny Energy, Inc., 229 F.R.D. 441, 443 (S.D.N.Y.2004); La Russo v. St. George's Univ. Sch. of Med., 936 F.Supp.2d 288, 301 n. 8 (S.D.N.Y.2013) (Dismissal with prejudice is appropriate
The Court notes initially that the Complaint is Plaintiffs fourth pleading in nearly three years. Most recently, the Court granted Plaintiff leave to file the Complaint after Defendants apprised him, pursuant to the Court's rule, of the bases for their contemplated dismissal motions. See, e.g., Dkt. 62. The purpose of that rule is to avoid the precise scenario Plaintiff now proposes: that the parties and the Court, having spent substantial resources addressing Defendants' attacks on one complaint, spend additional resources addressing a similar attack on another. Requiring Defendants to move to dismiss what would be Plaintiffs fourth amended complaint when Plaintiff was on notice of the deficiencies in his operative complaint and could have included in it the allegations in his declaration would prejudice Defendants.
In any event, the Court has reviewed Plaintiffs declaration and finds that the proposed amendments would be futile. These proposed amendments do not materially improve on the Complaint's allegations. For instance, a fourth amended complaint incorporating these allegations still would not include facts identifying specific false claims. Amendment would therefore be inappropriate.
The New York FCA and New York City FCA closely track their federal counterpart. The Complaint pleads no additional facts that distinguish his state and local FCA claims from his federal claim. These claims therefore suffer from the same deficiencies as his federal claim. Accordingly, these claims are dismissed as well. See, e.g., Dialysis Clinic, Inc., 2011 WL 167246, at *21 ("The N.Y. False Claims Act is closely modeled on the federal FCA. Accordingly, plaintiff's claims under the state statute are subject to dismissal for the same reasons as plaintiffs federal FCA claims.") (internal punctuation omitted); U.S. ex rel. Perez v. Beth Israel Med. Ctr., 736 F.Supp.2d 804, 816 (S.D.N.Y.2010) (state FCA claim failed for same reason as federal FCA claim); Briefing Paper of the Governmental Affairs Division: Examining the Usage and Efficacy of New York City's False Claims Act, 20120229A NYCBAR 111 (January 20, 2012) ("Briefing Paper") ("The City FCA, like the federal FCA it was modeled after, is intended to protect and enhance the public coffers and save taxpayers money by uncovering fraud against the City and by rewarding whistleblowers who bring forth information about fraudulent claims.").
Moreover, Plaintiff does not allege that he is authorized to sue under the New York City FCA, which requires that claims may be brought only by Corporation Counsel or by a person authorized by Corporation Counsel to bring them. See N.Y.C. Admin. Code § 7-804(e); see also Briefing Paper ("Within 180 days of receipt of a proposed civil complaint, the Corporation Counsel must inform the person who submitted it that the City will either: (1) commence a civil enforcement proceeding based upon the complaint (in which case the Corporation Counsel is required to commence a proceeding within 90 days of such notice); (2) authorize the
EMSL has moved to dismiss on the additional basis that it was not properly served. Plaintiff does not dispute that he failed to serve EMSL within the 120-day period set forth in Federal Rule of Civil Procedure 4(m). He concedes in his opposition brief that "service upon EMSL" was "late." (Opp'n 28.) He instead argues that he has established good cause for late service.
While courts "must extend the time for service upon a showing of good cause for the delay ... [g]ood cause is generally found only in exceptional circumstances where the plaintiff's failure to serve process in a timely manner was the result of circumstances beyond its control." E. Refractories Co. v. Forty Eight Insulations, Inc., 187 F.R.D. 503, 505 (S.D.N.Y. 1999). "An attorney's inadvertence, neglect, mistake or misplaced reliance does not constitute good cause." Id.; see also Spinale v. U.S., No. 03 Civ. 1704(KMW)(JCF), 2005 WL 659150, *3 (S.D.N.Y. Mar. 16, 2005) ("In order to establish good cause for failure to effect service in a timely manner, a plaintiff must demonstrate that despite diligent attempts, service could not be made due to exceptional circumstances beyond his or her control."). "A party seeking a good cause extension bears a heavy burden of proof." Id.
In an affidavit submitted in connection with his opposition, Plaintiffs counsel avers that service as to EMSL was late because, while he "did timely make arrangement for the service of process," his "process server ... had unexpected difficulties" in serving EMSL and was only able to serve EMSL "[a]fter multiple attempts." (Declaration of Heng Wang, Esq. ¶ 4; see also Opp'n 28.) However, "[m]isplaced reliance on a process server does not suffice to establish good cause for a failure to effect service." Sadler v. 148 Acad. Realty, LLC, No. 08 Civ. 3338(KMK)(LMS), 2010 WL 3952862, at *1 (S.D.N.Y. Oct. 8, 2010). Further, Plaintiff makes no effort to explain what such "unexpected difficulties" were, why they were beyond his control or why it took him multiple attempts to serve a former employer whose publicly-registered statutory agent for service of process in New York is listed on the New York Department of State website.
Plaintiff has failed to meet his "heavy burden" of establishing good cause. Accordingly, the Court agrees that this is an additional basis on which Plaintiff's claims against EMSL must be dismissed.
Warren Panzer and ATC Group seek attorneys' fees. The FCA authorizes an award of attorney fees and expenses to a defendant "if the defendant prevails in the action and the court finds that the claim of the person bringing the action was clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment."
Warren & Panzer and ATC (who are represented by the same counsel) argue that Plaintiffs claims are "patently frivolous" because 1) Plaintiffs claims were publicly disclosed, 2) Plaintiff "failed to plead with particularity," 3) Plaintiff did not allege that they submitted a false claim to the government, and 4) none of Plaintiffs claims against them are based on his "own direct and independent knowledge." Defendant Warren & Panzer, Engineers, P.C.'s Memorandum of Law in Support of Its Motion to Dismiss the Third Amended Complaint at 12-15; Defendant ATC Group Services Inc.'s Memorandum of Law in Support of Its Motion to Dismiss the Third Amended Complaint at 8-9.
As a general matter, these are bases for dismissal, not for an award of fees. The Court has reviewed the declarations Warren & Panzer has submitted to support its application and finds nothing in them that convinces the Court that such an award is appropriate. In short, although the Court agrees that dismissal is appropriate, the bases therefor are not "so staggeringly obvious [as to] render[ ] [Plaintiffs] action objectively frivolous." U.S. ex rel. Rosner v. WB/Stellar IP Owner, L.L.C., 739 F.Supp.2d 396, 408 (S.D.N.Y.2010) (emphasis in original; internal quotation marks omitted).
For the reasons set forth above, the Complaint is dismissed in its entirety. The motions for attorneys' fees are denied. The Clerk of Court is directed to terminate item numbers 62, 67, 78, 82, 87, 92, 96, 107, 125 and 134 on the docket and to close this case.
SO ORDERED.
