SIM LAKE, District Judge.
Plaintiff, the United States of America, brings this action against defendants, BNP Paribas SA, BNP Paribas North America, BNP Paribas Houston Agency (collectively "BNPP defendants"), and Jovenal Miranda Cruz, under the False Claims Act ("FCA"), 31 U.S.C. § 3729, et seq., and for unjust enrichment and payment by mistake. Pending before the court are the Motion to Dismiss the Complaint by Defendants BNP Paribas, BNP Paribas North America, Inc., and BNP Paribas Houston Agency (Docket Entry No. 22), and Defendant Jovenal Miranda Cruz's Motion to Adopt in Part Motion to Dismiss Complaint by BNPP (Docket Entry No. 25). For the reasons set forth below, the motion to dismiss filed by defendant Cruz will be denied, and the motion to dismiss filed by the BNPP defendants will be granted in part and denied in part, and the United States will be ordered to file an amended complaint within thirty (30) days.
From 1998 through 2005, a number of individuals and companies schemed and conspired to exploit the Supplier Credit Guarantee Program ("SCGP") pursuant to which the Commodity Credit Corporation ("CCC"), a federally chartered corporation within the United States Department of Agriculture ("USDA"), issues guarantees to United States commodity exporters. The SCGP allows United States commodity exporters to access financing before payments are due from foreign importers. Under this program exporters assign to a financial institution both the importer's promissory note and the exporter's right to payment, and the CCC guarantees payment to a financial institution. Eligibility requirements barred exporters from participating in the SCGP if they were directly or indirectly owned or controlled by the foreign importer, or by a person or entity that owned or controlled the importer.
The scheme at issue involved exporters and importers that were owned and/or controlled by Fernando Pablo Villarreal Cantu (Villarreal), a citizen of Mexico. Villarreal's ownership and/or control of both the exporters and the importers meant that the exporters were not eligible to receive SCGP guarantees from the CCC. As part of the scheme, the criminal co-conspirators bribed defendant Jovenal Miranda Cruz (Cruz) who at the relevant time served as a Vice-President and Manager of Trade Finance for BNPP in Houston. Largely through Cruz, BNPP entered into a series of Master Purchase and Sale Agreements ("MPSAs") with several United States Exporters ("Exporters") pursuant to which BNPP agreed to provide financing to the Exporters in exchange for receipt of payment obligations from a series of corresponding Mexican Importers ("Importers") and SCGP guarantees for those payment obligations. The MPSAs detailed the income BNPP would earn for each transaction. Using false documents the Exporters, acting with the assistance and knowledge of Villarreal, the Importers, and Cruz, applied for and received SCGP guarantees. Upon receipt of a CCC guarantee, the Exporters assigned the guarantee and the Importers' payment obligation to BNPP. In exchange, BNPP provided the Exporters a line of credit up to the amount of the guarantee minus the amount BNPP charged for the service.
Beginning in April of 2005 the Mexican Importers failed to make over $78 million in payments due to BNPP. BNPP promptly filed claims on the CCC guarantees to recover its losses. BNPP filed its last claim on September 15, 2005. The CCC and the USDA referred the defaults to the United States Attorney's Office in Houston ("USAO"). A subsequent investigation resulted in the indictment of several individuals, including Cruz. The indictments charged Cruz and his co-conspirators with various acts, including "knowingly mak[ing] a false statement for the purpose of influencing the action of BNP Paribas... in connection with advance or draw requests for funds on lines of credit."
On October 18, 2011, the United States filed this action against BNPP based on allegations that BNPP and Cruz knew the Exporters were not eligible for the SCGP guarantees, yet concealed that information from the CCC and the USDA. The United States also alleges that Cruz acted within
Defendants move the court to dismiss the plaintiff's claims pursuant to Federal Rules of Civil Procedure 12(b)(6) for failure to state a claim for which relief may be granted and 9(b) for failure to plead fraud with particularity. "A dismissal for failure to plead fraud with particularity under Rule 9(b) is treated as a dismissal for failure to state a claim under Rule 12(b)(6)." United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 901 (5th Cir.1997).
A motion to dismiss pursuant to Rule 12(b)(6) for failure to state a claim for which relief may be granted tests the formal sufficiency of the pleadings and is "appropriate when a defendant attacks the complaint because it fails to state a legally cognizable claim." Ramming v. United States, 281 F.3d 158, 161 (5th Cir.2001), cert, denied sub nom. Cloud v. United States, 536 U.S. 960, 122 S.Ct. 2665, 153 L.Ed.2d 839 (2002). The court must accept the factual allegations of the complaint as true, view them in a light most favorable to the plaintiff, and draw all reasonable inferences in the plaintiff's favor. Id.
Swierkiewicz v. Sorema N.A., 534 U.S. 506, 122 S.Ct. 992, 997, 152 L.Ed.2d 1 (2002). To avoid dismissal a plaintiff must allege "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007). Plausibility requires "more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id. The plausibility standard is not akin to a "probability requirement," but asks for more than a sheer possibility a defendant acted unlawfully. Id. "Dismissal is proper if the complaint lacks an allegation regarding a required element necessary to obtain relief." Torch Liquidating Trust ex rel. Bridge Associates L.L.C. v. Stockstill, 561 F.3d 377, 384 (5th Cir.2009). When considering a motion to dismiss courts generally are limited to the complaint and its proper attachments. Dorsey v. Portfolio Equities, Inc., 540 F.3d 333, 338 (5th Cir. 2008). However, courts may rely upon "documents incorporated into the complaint by reference, and matters of which a court may take judicial notice." Id.
Rule 9(b) provides that "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.P. 9(b). "[A] complaint filed under the False Claims Act must meet the heightened pleading standard of Rule 9(b)." United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 185 (5th Cir.2009). Pleading fraud with particularity in this circuit requires "[a]t a minimum ... the particulars of time, place, and contents of the false
Grubbs, 565 F.3d at 185-86 (citing Twombly, 127 S.Ct. at 1955). "Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Fed.R.Civ.P. 9(b).
The United States asserts both statutory claims for violation of the FCA, 31 U.S.C. § 3729, et seq., and common law claims for unjust enrichment and payment by mistake against each of the four defendants. These claims are all based on allegations that "from 1998 through 2006 (the `Relevant Time Period'), BNP and its former Vice President, Jerry M. Cruz, engaged in a scheme to defraud the United States in connection with commodity payment guarantees provided by the U.S. Department of Agriculture (`USDA') under its Supplier Credit Guarantee Program (`SCGP')."
Asserting that
the BNPP defendants argue that "[a]fter repeatedly and deliberately taking the position that BNPP is the victim of the fraud, the government should be judicially estopped from now asserting the opposite — that BNPP is liable as the perpetrator."
The United States argues that its FCA and common law claims are not judicially estopped because
The United States explains that
"[J]udicial estoppel prevents a party from asserting a claim in a legal proceeding that is inconsistent with a claim taken by that party in a previous proceeding." Reed v. City of Arlington, 650 F.3d 571, 573-74 (5th Cir.2011). Judicial estoppel "is `an equitable doctrine invoked by the court at its discretion' to 'protect the integrity of the judicial process,'" id. at 574, by preventing parties from "playing fast and loose with (the courts) to suit the exigencies of self interest." Brandon v. Interfirst Corp., 858 F.2d 266, 268 (5th Cir.1988). The Fifth Circuit has recognized that the doctrine of judicial estoppel does not apply unless (1) the position of the party to be estopped is plainly inconsistent with its previous position, (2) the court accepted the previous position, and (3) the party did not act inadvertently. Reed, 650 F.3d at 574.
The BNPP defendants have not attempted to show that the United States' position in this case is clearly inconsistent with a position taken by the United States in a related criminal proceeding, or that the court in a related criminal proceeding accepted the United States' clearly inconsistent position. Instead, citing the criminal prosecutions of Cruz and his co-conspirators, the BNPP defendants argue that "the government has repeatedly explained to the district court that BNPP was a victim of Cruz and his co-conspirators' scheme."
Defendants argue that the United States' Complaint should be dismissed because the United States' FCA claims and common law claims are all time-barred. "[A] complaint may be subject to dismissal if its allegations affirmatively demonstrate that the plaintiff's claims are barred by the statute of limitations and fail to raise some basis for tolling." Frame v. City of Arlington, 657 F.3d 215, 240 (5th Cir.2011), cert, denied, ___ U.S. ___, 132 S.Ct. 1561, 182 L.Ed.2d 168 (2012) (citing Jones v. Bock, 549 U.S. 199, 127 S.Ct. 910, 166 L.Ed.2d 798 (2007)). See also Jones v. Alcoa, Inc., 339 F.3d 359, 366 (5th Cir. 2003) ("A statute of limitations may support dismissal under Rule 12(b)(6) where it is evident from the plaintiff's pleadings that the action is barred and the pleadings fail to raise some basis for tolling ...").
The following language from the FCA provides a six-year statute of limitations and a three-year tolling period, and bars the United States from filing FCA claims over ten years old:
31 U.S.C. § 3731(b).
Defendants argue that the United States' FCA claims are time barred because
Although the court concludes that the United States' FCA claims do not fall squarely within the FCA's six-year limitation period, the court also concludes that these claims are not subject to dismissal because whether they are subject to the FCA's three-year tolling provision is a question of fact that cannot be resolved on the pleadings alone, and because the WSLA acts to suspend the FCA's statute of limitations.
Asserting that "[f]alse claims paid after October 18, 2005 fall within the FCA's six-year statute of limitations,"
Asserting that "[t]he FCA's six-year limitation period may be tolled for three years from the date when `facts material to the right [of] action are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances,'"
In support of their argument that the United States is not able to rely on the FCA's three-year tolling provision, defendants cite a number of cases in which courts have denied plaintiffs the benefit of tolling, e.g., United States v. Incorporated Village of Island Park, 791 F.Supp. 354, 364 (E.D.N.Y.1992) (concluding that DOJ should have known of alleged fraud when government released cabinet-level audit report alleging wrongdoing because "it cannot be but that the Department of Justice `should have ... known' through the exercise of `due diligence' about these matters at the time that they were well known throughout the rest of the United States government"); United States, ex rel. Kreindler & Kreindler v. United Techs. Corp., 777 F.Supp. 195, 205 (N.D.N.Y.1991) (dismissing FCA claims where "facts material to relator's cause of action were known... by the senior officials in charge of the... project"); United States ex rel. Purcell v. MWI Corp., 520 F.Supp.2d 158, 170 (D.D.C.2007) ("courts apply a `discovery-due diligence' standard" that "begins to run when the government official charged with bringing the civil action `discovers, or by reasonable diligence could have discovered, the basis of the lawsuit'"); United States ex rel. Miller v. Bill Harbert International Construction, 505 F.Supp.2d 1, 14 (D.D.C.2007) (concluding that Civil Division attorneys did not exercise due diligence in pursuing FCA claims where they "made no attempts to investigate the bid-rigging
The allegations contained in the United States' Complaint make clear that the question of whether this action was filed "more than 3 years after the date when facts material to the right of action are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances," 31 U.S.C. § 3731(b)(2), is a question of fact that cannot be answered based solely on the pleadings before discovery has begun. The Complaint alleges that the
This excerpt from the Complaint alleges that as of October 19, 2005, the United States official charged with responsibility to act neither knew nor should have known of the material facts. Accordingly, the court concludes that the United States' Complaint is not subject to dismissal under Rule 12(b)(6) because the Complaint's allegations do not affirmatively demonstrate that the plaintiff's claims are barred by the statute of limitations and do raise some basis for tolling. See Frame, 657 F.3d at 240.
The United States argues that the FCA claims were timely filed because the WSLA, as amended by the Wartime Enforcement of Fraud Act of 2008 ("WEFA"), 18 U.S.C. § 3287, suspends the FCA's statute of limitations for the United States' FCA claims. Defendants argue that the WSLA does not apply to the United States' FCA claims.
Congress initially enacted the WSLA for World War I, 42 Stat. 220, and repealed it in 1927. In 1942 Congress re-enacted the WSLA temporarily for World War II to extend the time prosecutors had to bring charges relating to criminal fraud offenses against the United States, 56 Stat. 747. "Both statutes were similar and extended the statute of limitations as to any `offenses involving the defrauding or attempts to defraud the United States ... and now indictable under any existing statutes.'" Dugan & McNamara, Inc. v. United States. 127 F.Supp. 801, 802 (Ct.Cl. 1955). In 1944 the WSLA was amended to reach violations of the Contract Settlement Act of 1944. "In so doing the phrase `now indictable under existing statutes' was deleted." Id. (citing 58 Stat. 649, 667, 41
In 2005 when the claims at issue in this action were submitted for payment, WSLA provided, in relevant part,
18 U.S.C. § 3287. The Fifth Circuit has explained that
United States v. Pfluger, 685 F.3d 481, 483 (5th Cir.2012). In United States v. Smith, 342 U.S. 225, 72 S.Ct. 260, 261, 96 L.Ed. 252 (1952), the Supreme Court held that the WSLA applied only to offenses committed after the triggering of the suspension of limitations but before the termination of hostilities. The Supreme Court explained that "under our construction the... period prescribed by the [WSLA] starts to run at the date of termination of hostilities ... No reasons of policy are suggested for straining the language of the Act to suspend the running of the statute beyond the emergency which made the suspension seem advisable." Id. at 262, 72 S.Ct. 260.
Effective October 14, 2008, Congress amended the WSLA through the WEFA, Pub.L. No. 110-417 § 855, to expand its operation to times "[w]hen the United States is at war or Congress has enacted a specific authorization for the use of the Armed Forces, as described in section 5(b) of the War Powers Resolution (50 U.S.C. 1544(b))." 18 U.S.C. § 3287 (2011) (change in italics). The amendment also extended the suspension period until "5 years after the termination of hostilities as proclaimed by the Presidential proclamation, with notice to Congress, or by a concurrent resolution of Congress." Id.
The United States contends that the amended WSLA applies to BNPP's conduct.
Defendants argue that the WSLA does not save the United States' FCA claims because "the WSLA does not apply in civil FCA cases"
Defendants argue that the WSLA does not apply to civil FCA cases because the FCA's six-year statute of limitations and attendant three-year tolling period provide the exclusive limitations period applicable to FCA claims.
The FCA was first enacted in 1863, 12 Stat. 696. The FCA made certain acts to defraud the government punishable by fine and imprisonment, and provided that any person who committed any of the prohibited acts should forfeit and pay to the United states the sum of $2,000 for each act and, in addition, double the amount of the damages. The prohibited acts included the making of a claim against the United States knowing such claim to be false, fictitious, or fraudulent. The different portions of the FCA have since been distributed throughout the United States Code. The portion imposing criminal penalties is now 18 U.S.C. §§ 287 and 1001, and the portion imposing civil penalties is now 31 U.S.C. § 3729, which provides "for a civil penalty of not less than $5,000 and not more than $10,000, as adjusted by the Federal Civil Penalties Inflation Adjustment Act of 1990 (28 U.S.C. 2461 note; Public Law 104-410), plus 3 times the amount of damages which the Government sustains because of the act of that person." 31 U.S.C. § 3729(a)(1).
In United States v. Grainger, 346 U.S. 235, 73 S.Ct. 1069, 1071, 97 L.Ed. 1575 (1953), the Supreme Court held that the WSLA applied to the statute of limitations relating to proceedings under that portion of the FCA that imposed criminal penalties. Since the criminal portion of the FCA and the civil portion involved here both prohibit knowingly making a false, fictitious, or fraudulent claim against the United States and since the Supreme Court has held that such an act constitutes an "offense" within the scope of the WSLA when the United States proceeds against the wrongdoer by criminal prosecution, making such a claim would also appear to fall within the scope of the WSLA when the United States avails itself of the civil remedies afforded to it under 31 U.S.C. § 3729. Nevertheless, defendants argue that the WSLA applies only to criminal charges and not to civil claims.
Defendants argue that
In support of this argument defendants cite United States ex rel. Erskine v. Baker, No. 99-50034, 2000 WL 554644 (5th Cir. April 13, 2000) (per curiam), and United States v. Borin, 209 F.2d 145 (5th Cir.), cert. denied, 348 U.S. 821, 75 S.Ct. 33, 99 L.Ed. 647 (1954). In Erskine, 2000 WL 554644, at *1-*2, the Fifth Circuit rejected the plaintiffs' argument that relators could take advantage of the equitable tolling provision in 31 U.S.C. § 3731(b)(2). Reasoning that the language and the legislative history of § 3731(b)(2) made clear that relators cannot benefit from equitable tolling unless they are "in direct identity with the United States," the Fifth Circuit concluded that the relators could not benefit from "a tolling provision passed exclusively for the government's benefit." Id. at *1. In reaching this conclusion, the Fifth Circuit cited Borin, 209 F.2d at 148-49, for its "finding that a much earlier version of the statute of limitations, which stated only that "[e]very [Fair Claims Act] suit shall be commenced within six years from the commission of the act, and not afterward," did not allow for equitable tolling." Id. *2. Defendants' reliance on Erskine and Borin is misplaced because, as the United States argues, those cases involved the judicially created doctrine of equitable tolling; they did not involve a tolling statute like the WSLA. Because the WSLA expressly applies to "any statute of limitations applicable to any offense," 18 U.S.C. § 3287 (emphasis added), the court concludes that the WSLA applies to the FCA's statute of limitations.
Alternatively, the defendants argue that the WSLA suspends the FCA's statute of limitations in criminal cases and has no application in civil cases. In support of this argument defendants assert that the "WSLA, by its own terms, only tolls the period applicable to an `offense' involving fraud,"
As additional support for this argument defendants cite United States v. Weaver, 107 F.Supp. 963, 966 (N.D.Ala.1952), rev'd on other grounds, 207 F.2d 796 (5th Cir. 1953), for its statement that "the history of
With the exception of Weaver, 107 F.Supp. at 963, all other courts to have faced the issue of whether the WSLA applies to civil actions have concluded the WSLA applies to such actions. Moreover, all of these courts have reached this conclusion either by analyzing WSLA's legislative history, analyzing the meaning of the word "offense," and/or by citing opinions that have analyzed WSLA's legislative history and/or the meaning of "offense." See, e.g., Dugan & McNamara, 127 F.Supp. at 803-04 (analyzing both the meaning of "offense" and WSLA's legislative history before concluding that amendments to WSLA enacted in 1944 made WSLA applicable to civil FCA actions); United States v. Kolsky, 137 F.Supp. 359, 362 (E.D.Pa. 1955) (same). In Dugan & McNamara, 127 F.Supp. at 804, the court concluded that the term "offense" as used in the 1942 version of the WSLA referred only to criminal offenses, but that the 1944 amendments deleting the words "now indictable" made the WSLA applicable to all actions involving fraud against the United States regardless of whether the government sought criminal or civil penalties. In reaching this conclusion the court reasoned that
Id. In Kolsky, 137 F.Supp. at 361, the court similarly concluded that the WSLA applied to civil claims as well as to criminal charges. The court explained:
Id.
Although defendants correctly argue that some courts have reached their conclusions that the WSLA applies to civil claims without analyzing the meaning of "offense," all the cases that the defendants cite in support of this argument relied on Dugan & McNamara, 127 F.Supp. at 801, and/or Kolsky, 137 F.Supp. at 359, in support of their conclusions. See, e.g., United States v. Temple, 147 F.Supp. 118, 120-21 (N.D.Ill.1956) (citing Dugan & McNamara, 127 F.Supp. at 801, in support of conclusion that 1944 version of WSLA applied to civil FCA claims); United States ex rel. McCans v. Armour & Co., 146 F.Supp. 546, 551 (D.D.C.1956) (citing both Dugan & McNamara, 127 F.Supp. at 801, and Kolsky, 137 F.Supp. at 359, in support of its conclusion that the WSLA as amended in 1944 applied "to civil actions in addition to criminal proceedings"); United States v. Salvatore, 140 F.Supp. 470, 473 (E.D.Pa.1956) (citing Kolsky, 137 F.Supp. at 359, in support of its conclusion that the 1944 version of WSLA applied to civil FCA claims). Defendants' attempt to counter the United States' position by citing directly to the WSLA's legislative history is not persuasive because the legislative history on which defendants rely pertains to the 1942 and earlier versions of the WSLA, i.e., versions of the WSLA that all agree applied only to criminal actions.
Because defendants have failed to cite any persuasive authority in support of their contention that the WSLA applies only to criminal and not to civil actions, and because the court finds persuasive the analysis of the WSLA's legislative history, the analysis of the meaning of the word "offense," and the conclusion that the amendments to the WSLA made in 1944 extended the WSLA's application to civil actions made in Dugan & McNamara, 127 F.Supp. at 801, and in Kolsky, 137 F.Supp. at 359, the court concludes that defendants have failed to carry their burden of showing that the FCA claims asserted in this action should be dismissed as time barred because the WSLA applies only to criminal charges and does not apply to civil claims.
Defendants argue that
Defendants' contention that "[a]ll of the courts that recently have analyzed the WSLA in criminal cases have either concluded that the U.S. was never `at war' in Iraq and Afghanistan or that those conflicts had ended by 2003" is not accurate. For the reasons explained below, the court concludes that the United States was "at war" in 2005 when the acts underlying the claims asserted in this action occurred.
Citing Shelton, 816 F.Supp. at 1135, and two unpublished district court cases from other jurisdictions, United States v. Western Titanium, Inc., No. 08-cr-4229-JLS, 2010 WL 2650224 (S.D.Cal. July 1, 2010), and Anghaie, 2011 WL 720044, defendants argue that the "WSLA has no application to [the conflicts in Iraq and Afghanistan] because the term `at war' in the WSLA `requires a finding that it encompasses only those wars that have been formally declared by Congress.'"
The courts in Shelton, 816 F.Supp. at 1132, and Prosperi, 573 F.Supp.2d at 436, addressed the question of what constitutes "at war" for purposes of the WSLA before the 2008 amendments and reached opposite conclusions. In Shelton, 816 F.Supp. at 1135, the court held that the United States was not "at war" during the 1991 conflict in Iraq because WSLA requires a formal declaration of war that was never issued for that conflict. In Prosperi the court held that the Authorization for Use of Military Force ("AUMF") issued by Congress on September 18, 2001, granting the President the power to use all "necessary and appropriate force" against "those
Defendants' contention that the wars initiated by the AUMF and the AUMFAI ended before 2005 when the claims at issue in this action were submitted for payment fails in light of the Fifth Circuit's recent decision to the contrary in United States v. Pfluger, 685 F.3d 481 (5th Cir.2012). Because the defendant in Pfluger did not dispute that either the AUMF or the AUMFAI was sufficient to place the United States "at war," the court in that case was required to determine only "(1) what conditions serve to mark the termination of hostilities and (2) whether such conditions were in place prior to May 2004, when the last of [the defendant's] criminal conduct occurred." Id. at 484. The Fifth Circuit rejected the conclusion reached in Prosperi, 573 F.Supp.2d at 454-55, that the war in Afghanistan ended on December 22, 2001, with the formal recognition of Hamid Karzai's government, and that the war in Iraq ended on May 1, 2003, when President George W. Bush proclaimed that major combat operations in Iraq had ended, concluding, instead, that "neither Congress nor the president met the formal requirements for terminating the WSLA's suspension of limitations as of May 2004 (nor yet to this date)." Id. at 485 (citing Hamdi v. Rumsfeld, 542 U.S. 507, 124 S.Ct. 2633, 2642, 159 L.Ed.2d 578 (2004), for its statement that "[a]ctive combat operations against Taliban fighters apparently are ongoing in Afghanistan"). Based on the Fifth Circuit's finding in Pfluger that the wars initiated by the AUMF and the AUMFAI have not yet ended, the court concludes that the United States was "at war" for purposes of the WSLA in 2005 when the acts alleged in this action occurred.
Alternatively, the court concludes that the 2008 amendments to the WSLA, which recognized specific authorization for the use of Armed Force as described in § 5(b) of the War Powers Resolution, 50
Citing the statute of limitations for common law claims, 28 U.S.C. § 2415, defendants argue that the United States' claims for unjust enrichment and payment by mistake are time barred regardless of whether they are subject to the six-year period for claims "founded upon any contract" referenced in § 2415(a), or the three-year limitations period for claims "founded upon a tort" referenced in § 2415(b).
Section 2416 provides in relevant part:
28 U.S.C. § 2416(c). The United States' Complaint alleges that the
The facts alleged in this excerpt from the United States' Complaint do not affirmatively establish that by October 19, 2005, facts material to the right of action were known or reasonably could have been known by a United States official responsible to act in the circumstances. Instead, the United States affirmatively alleges that the official charged with responsibility to act in the circumstances neither knew nor should have known facts material to the right of action as of October 19, 2005, six years before the date on which the United States filed this action. Accordingly, the court concludes that the question of when facts material to the right of action were known or reasonably could have been known is a question of fact, and that the United States' Complaint is not subject to dismissal because the complaint's "allegations affirmatively demonstrate that the plaintiff's claims are barred by the statute of limitations and fail to raise some basis for tolling." Frame, 657 F.3d at 240.
The BNPP defendants argue that the United States' Complaint should be dismissed because the FCA and common law claims asserted therein are legally flawed.
The United States' Complaint asserts three FCA claims against all the defendants: (1) Count One alleges that "Defendants BNP and Cruz violated the False Claims Act, 31 U.S.C. § 3729(a)(1), by knowingly presenting or causing to be presented to the United States Government, false or fraudulent claims for payment on the CCC commodity payment guarantees assigned to BNP by any of the U.S. Exporters";
The FCA prohibits three distinct, but overlapping practices, all of which are alleged in the United States' Complaint: (1) the knowing presentment of a false claim to the Government,
31 U.S.C. § 3729(b) (2003).
The statute's definition of "knowingly" excludes liability for innocent mistakes or negligence. Id. at 681.
The BNPP defendants argue that the FCA claims "fail because BNPP's claims were not false."
The BNPP defendants' argument fails because in United States ex rel. Longhi v. Lithium Power Technologies, Inc., 575 F.3d 458 (5th Cir.2009), cert. denied, ___ U.S. ___, 130 S.Ct. 2092, 176 L.Ed.2d 722 (2010), the Fifth Circuit reaffirmed that long-standing principle that, "[i]n certain cases, FCA liability may be imposed `when the contract under which payment is made was procured by fraud.'" Id. at 467-68 (quoting United States ex rel. Willard v. Humana Health Plan of Texas, Inc., 336 F.3d 375, 384 (5th Cir.2003)). The Fifth Circuit explained that "[t]his type of FCA claim is characterized as fraudulent inducement. Under a fraudulent inducement theory, although the Defendants' `subsequent claims for payment made under the contract were not literally false, [because] they derived from the original fraudulent misrepresentation, they, too, became actionable false claims.'" Id. at 468 (quoting United States ex rel. Laird v. Lockheed Martin Engineering & Science Services Co., 491 F.3d 254, 259 (5th Cir.), cert. denied, 552 U.S. 1023, 128 S.Ct. 629, 169 L.Ed.2d 395 (2007)). The United States' Complaint alleges that BNPP and its co-conspirators engaged in a course of false or fraudulent conduct by making false statements to obtain guarantees from the United States for transactions that they knew they were not eligible for guarantees. The United States alleges that when these transactions created losses, BNPP made claims under the guarantees that BNPP knew were false or fraudulent and thereby caused the USDA to pay BNPP money that BNPP knew it was not
The BNPP defendants argue that the FCA claims fail because the United States "does not allege that any of BNPP's purportedly false statements were made `knowingly.'"
Citing United States v. Ridglea State Bank, 357 F.2d 495, 500 (5th Cir.1966), the BNPP defendants argue that "[t]he Fifth Circuit has prohibited vicarious liability in circumstances materially identical to those here."
In Ridglea a bank officer perpetrated a fraudulent scheme that involved approval of applications for loans insured by the Federal Housing Authority ("FHA") while employed at two different banks. The officer knew that material representations in the borrowers' applications were false, and he personally received some of the proceeds of the loans as kickbacks from the borrowers. When the borrowers defaulted the banks sought to recover from the FHA, which paid some of the claims. The bank officer was indicted and pleaded guilty of making fraudulent loans. The United States subsequently sought to hold the two banks liable for the officer's fraudulent acts under the FCA. Ridglea, 357 F.2d at 496-97. The facts developed at trial established that "none of the employees in either bank except [the officer who had approved the loans] had actual knowledge of the falsity of the documents which accompanied the claims." Id. at 498. "The Government's case rest[ed] on imputing to the banks [the officer's] knowledge of the falsity of the documents, on the theory that he was acting as the agent of the banks at the time he approved the loans." Id. "The district court, sitting without a jury ... gave judgment for both defendant banks on all of the counts which went to trial, primarily on the grounds that [the bank officer's] fraud could not properly be imputed to the banks." Id. at 497. The Fifth Circuit affirmed the district court's judgment, explaining that the bank officer's
Id. at 498.
The BNPP defendants argue that like the bank officer in Ridglea, Cruz must have known that approval for disbursement of funds under guarantees that he knew had been obtained by the Exporters through false statements would jeopardized BNPP's reputation and financial integrity, and endanger BNPP's ability to continue to handle the SCGP and/or other USDA-related business. Moreover, the BNPP defendants argue that far from benefitting BNPP, Cruz's actions led to a substantial loss, a lengthy criminal investigation, and the institution of this civil action seeking $237 million ($79 million trebled). The BNPP defendants argue that "[i]n such circumstances," Cruz's knowledge cannot be imputed to BNPP as a matter of law.
The BNPP defendants' reliance on Ridglea is misplaced for at least two reasons. First, Ridglea is distinguishable from this case because the facts on which both the district and circuit courts based their conclusions that the bank officer had not acted within the scope of his employment for the benefit of his employers were established during a trial and not, as here, merely alleged in a complaint challenged by a motion to dismiss prior to discovery. Second, the United States has alleged that unlike the bank officer in Ridglea, Cruz was acting within the scope of his employment and for the benefit of BNPP when he committed the acts at issue. The United States' Complaint alleges that
If true, these facts alleged in the United States' Complaint are capable of proving that when Cruz committed the acts underlying the United States' FCA claims he was acting within the scope of his employment and for the benefit of BNPP. These facts are thus capable of establishing that the BNPP defendants, through Cruz, knowingly violated the FCA. See Ridglea, 357 F.2d at 498-500 (acknowledging that guilty intent of an agent acting for the benefit of his employer will be imputed to the employer when the latter is sought to be held liable under a statute requiring knowledge or guilty intent).
The BNPP defendants argue that the United States' Complaint fails to plead
In response to the BNPP defendants' assertion that the Complaint does not attempt to distinguish between the alleged conduct of the three BNPP defendants, the United States argues that it has alleged that
The United States has not cited the paragraphs of the Complaint in which these allegations are made, and the court has not found them. The United States' Complaint contains a Table that lists the date each of the guarantees was approved by the CCC, the date the CCC received BNP's claims on each guarantee, the date the CCC paid BNP on each guarantee, and the amount paid on each guarantee; but the Table does not identify which of the BNPP defendants accepted the assignment of each guarantee, submitted the claim on each guarantee, and/or received payment on each guarantee. Accordingly, the court is not persuaded that the Complaint adequately distinguishes between the allegedly fraudulent conduct of the three BNPP defendants. See United States ex rel. Russell v. Epic Healthcare Management Group, 193 F.3d 304, 308 (5th Cir.1999) ("The conduct to which liability attaches in a False Claims Act suit consists in part of false statements or claims for payment presented to the government... Because such statements or claims are among the circumstances constituting fraud in a False Claims Act suit, these must be pled with particularity under Rule 9(b)."), abrogated on other grounds by United States ex rel. Eisenstein v. City of New York, New York, 556 U.S. 928, 129 S.Ct. 2230, 2233 n. 1, 173 L.Ed.2d 1255 (2009). See also United States ex rel. Hebert v. Dizney, 295 Fed. Appx. 717, 722 (5th Cir.2008) (recognizing the need for plaintiffs in FCA cases with multiple corporate defendants to plead with particularity the identity of corporate actors making the misrepresentations).
In response to the BNPP defendants' assertion that the United States alleges that Cruz was an employee of BNP Houston (Compl. ¶ 15), but fails to provide any
In response to the BNPP defendants' assertion that the United States has failed to identify with particularity who it believes made false statements to the government, what these statements were, or when, where, and to whom they were made, the United States cites the Complaint at ¶ 34 as evidence of allegations that "identif[y] precisely who was responsible for the false statements of eligibility being submitted to the USDA,"
In response to the BNPP defendants' assertion that the United States fails to provide details related to the nature of the agreements the defendants allegedly made, when these agreements were made, or which parties made them, the United States acknowledges that the Complaint does not recite all of the terms and conditions of the relevant agreements at issue in this case, but asserts that "each of the agreements is identified: the MPSAs between BNPP and the Exporters (Compl. ¶¶ 27-34); the guarantees between BNPP and the USDA and the claims made thereon (Compl. ¶ 48). Surely, the BNPP defendants are on notice of the facts alleged against them."
The BNPP defendants argue that the United States' common law claims for unjust enrichment and payment by mistake
Alternatively, the BNPP defendants argue that the United States' common law claims "fail as a matter of law because equity dictates that Plaintiff must bear the loss of alleged fraudulent scheme because BNPP is an innocent third party."
These arguments fail because the United States has a longstanding power, independent of any statute, to recover monies its agents have wrongfully, erroneously, or illegally paid out pursuant to the federal common law doctrines of unjust enrichment and/or payment by mistake. See United States v. Wurts, 303 U.S. 414, 58 S.Ct. 637, 638, 82 L.Ed. 932 (1938); LTV Education Systems, Inc. v. Bell, 862 F.2d 1168, 1175 (5th Cir.1989). Moreover, since parties may plead alternative and inconsistent theories of recovery, a motion to dismiss is not the appropriate vehicle for determining whether the guarantees preclude claims for unjust enrichment and/or payment by mistake. In United States v. Applied Pharmacy Consultants, Inc., 182 F.3d 603 (8th Cir.1999), the Eighth Circuit affirmed a judgment for the United States on unjust enrichment claims despite the presence of a claimed contract. The court explained that
Id. at 608. Alternatively, the defendants' arguments fail because the United States has pleaded facts capable of establishing that the payment guarantee contracts, which the BNPP defendants argue foreclose the United States' common law claims, are void because they were tainted by fraud, bribes, and/or kickbacks. See
For the reasons explained above, the Motion to Dismiss the Complaint by Defendants BNP Paribas, BNP Paribas North America, Inc., and BNP Paribas Houston Agency (Docket Entry No. 22) is
As the length of this Memorandum Opinion and Order indicates, the court has expended considerable time reading these papers and performing a significant amount of independent research to be as fully informed as possible when addressing the parties' arguments. When appropriate the court will consider motions for summary judgment, but additional motions to dismiss pursuant to Rule 12(b)(6) will not be considered.
