Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_13-cv-02599/USCOURTS-casd-3_13-cv-02599-1/pdf.json

Nature of Suit Code: 375
Nature of Suit: False Claims Act
Cause of Action: 31:3729 False Claims Act - Liability

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

U.S. ex rel. JOSEPH EARL PERRY,

Plaintiff,

CASE NO. 13cv2599-LAB (JMA)

ORDER GRANTING IN PART AND

DENYING IN PART PERRY'S MOTION

FOR LEAVE TO FILE AN AMENDED

COMPLAINT

vs.

PACIFIC MARITIME INDUSTRIES

CORP., HARCON PRECISION METALS,

INC., and JOHN ATKINSON,

Defendants.

Joseph Earl Perry brought this qui tam action under the False Claims Act, 31 U.S.C.

§ 3729 et seq., alleging violations by two government contractors—Pacific Maritime

Industries Corporation and Harcon Precision Metals, Inc.—and their president, John

Atkinson. Defendants filed a motion to dismiss, and the Court granted it in part and denied

it in part. (Docket no. 16.) Former Counts I (NASSCO contract), IV (Coast Guard metal

joiner door contract), V (Austal locker contract), and VII (chair contract) were dismissed with

leave to amend. (Id.) Perry has since moved for leave to file an amended complaint. 

(Docket no. 17.) There, Perry voluntarily dismisses former Count IV and adds to his previous

complaint with respect to former Counts I, V, and VII (now Counts I, IV, and VI). (Id.) 

Defendants oppose Perry's motion to file an amended complaint. (Docket no. 19.)

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NASSCO Contracts

Perry's initial complaint alleged that the NASSCO contracts required Defendants to

supply doors that meet specific testing criteria and that are fabricated using specific

adhesive. The Court dismissed it, explaining:

C Perry's reliance on Drawing No. 804-4623540 is misplaced because it applies

to metal joiner bulkheads, and not to doors, and is therefore inapplicable to

Perry's allegations;

C Perry didn't explain the testing requirement, so his "testing allegation boils

down to a citation to a drawing number and an unexplained claim that

Defendants didn't follow the drawing"; 

C He alleged the misrepresentations were made in a certificate of conformance,

but "nowhere does Perry indicate when the certificate of conformance was

delivered or what it said Defendants had done to meet the contractual

requirements. Nor does Perry allege the identity of the individuals engaged

with falsifying the certificate"; and

C "[L]ike his testing allegation, Perry's adhesive allegation is nothing more than

a citation to a drawing number and an unexplained claim that Defendants didn't

follow the drawing."

(Docket no. 16 at 6-9.)

Perry's amended complaint expands on his initial allegations. It adds that Defendants'

contracts were for both doors and bulkhead panels. (Docket no. 17-1 at ¶¶ 16-19.) It

specifies the alleged testing requirement: "Tests must be performed with passing results on

at least one door and panel, and if all other doors and panels are fabricated using the same

fabrication process it is deemed that all doors and panels have met the testing requirements." 

(Id. at ¶ 18.) It explains that Perry learned from several named people involved with the

process that "Defendants did not perform the testing requirements as called for by the

contracts and failed to include use of the approved adhesive required by the contracts." (Id.) 

While the amended complaint is light on details regarding the content of the alleged

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certificates of conformance, it alleges "reliable indicia that lead to a strong inference that

claims were actually submitted." U.S. ex rel. Brown v. Celgene Corp., 2014 WL 3605896,

at *9 (C.D. Cal. July 10, 2014). And, as a whole, the amended complaint is "specific enough

to give defendants notice of the particular misconduct which is alleged to constitute the fraud

charged so that they can defend against the charge and not just deny that they have done

anything wrong." Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir. 2001). Thus, Count

I of the amended complaint meets Rule 9(b)'s mandate.

Austal Locker Contract

Perry's initial complaint alleged that Defendants submitted falsified documents

indicating its Austal lockers met testing requirements when, in fact, the tested locker had

failed. He alleged that: Defendants entered into the contract with Austal in August 2012; the

contract required some unspecified testing; testing was performed on a locker, and it failed;

Defendants' engineering manager and Atkinson instructed Perry to prepare falsified test

documentation; Defendants obtained approval of the nonconforming lockers; and Defendants

were paid for them. The Court dismissed this claim, explaining:

C "While [Perry] implies that certain contract drawings required some type of

testing, and that one of the lockers failed a test, he doesn't explain what testing

was required"; and

C Perry failed to allege "when the alleged fraudulent misrepresentation was

made, who made the misrepresentation, how approval was secured, or even

the content of the alleged misrepresentation."

(Docket no. 16 at 11-12.)

Perry's amended complaint adds that the previously unspecified shock test is the one

specified in MIL-S-901D and that "based on [Perry's] experience while employed by

Defendants Austal would not have permitted the lockers and cabinets to be installed aboard

United States Navy ships without documentation evidencing that the lockers had passed the 

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required shock testing." (Docket no. 17-1 at ¶¶ 35, 42.) As with the amended NASSCO

allegations, Count IV of the amended complaint provides minimally sufficient facts to satisfy

Rule 9(b). 

Arguing that, due to a typo, Perry's amended complaint references the wrong

document number, Defendants urge the Court to take judicial notice of a drawing that isn't

referenced in Perry's complaint. While Defendants' document indicates that MIL-S-901D isn't

applicable to the Austal contract, because Defendants' drawing isn't referenced in the

amended complaint, the Court sees no basis for accepting it as true at this stage.

Chair Contract

Perry contends Defendants were required to supply the Navy with chairs

manufactured in the United States, but it supplied chairs manufactured in China. Perry

alleges Defendants entered into the contract in April 2012 and that he learned of the

requirement through Edward Pannek, an employee with the Defendants. (Docket no. 17-1

at ¶¶ 48, 49.) After that, the amended complaint descends into speculation. Perry alleges,

on information and belief, that Defendants purchased chairs from China—but doesn't allege

facts explaining why he thinks this. (Id. at ¶ 50.) Then he alleges, on information and belief,

that only Atkinson could have approved the decision to misrepresent the chairs' country of

origin—but he doesn't name even one person that was involved with the choice to purchase

chairs from China. (Id.) And he provides absolutely no details about the allegedly falsified

documents that he alleged Defendants supplied to the government. (Id. at ¶ 51.) 

It's tough to square Perry's allegations of serious wrongdoing with his utter inability

to provide facts about the alleged wrongdoing. Perry appears to have anticipated the Courts'

concern, explaining that he hasn't been employed by Defendants for almost three years and

he didn't take any documents upon his departure. (Docket no. 17 at 3.) He assures the

Court that he's "confident that, through the discovery process, a number of those documents

from Defendants' records, or their absence where such records are required to be retained,

will assist him in establishing the truth of allegations of facts set forth in his pleadings." (Id.)

His confidence notwithstanding, without factual allegations identifying "the who, what, when,

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where, and how of the misconduct charged, as well as what is false or misleading about the

purportedly fraudulent statement, and why it is false," Count VI of Perry's complaint fails to

state a claim. Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055

(9th Cir. 2011) (internal brackets and quotation marks omitted). 

Dismissal of John Atkinson

Defendants seek dismissal of Atkinson, contending he's not named in Perry's causes

of action. But, Perry's factual allegations feature Atkinson prominently. (Docket no. 17-1 at

¶¶ 22, 27, 29, 37, 38, 39,40, 47, 50.) Atkinson isn't dismissed.

Conclusion

Counts I (NASSCO Contracts) and IV (Austal Contract) in the proposed amended

complaint sufficiently state a claim, but Count VI (Chair Contract) doesn't. Perry may file his

amended complaint, excluding the allegations related to Count VI, no later than August 24,

2015.

IT IS SO ORDERED.

DATED: August 17, 2015

HONORABLE LARRY ALAN BURNS

United States District Judge

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