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Judge Jones concurs in Part IIA but dissents in Part IIB of the opinion.

United States Court of Appeals

Fifth Circuit

FILED

July 13, 2005

Charles R. Fulbruge III

Clerk

UNITED STATES COURT OF APPEALS

FIFTH CIRCUIT

____________

No. 04-10468

____________

United States of America, ex rel, DOUGLAS W. WILLIAMS,

Plaintiff-Appellant,

UNITED STATES OF AMERICA,

Appellant,

versus

BELL HELICOPTER TEXTRON INC., 

Defendant-Appellee.

Appeal from the United States District Court

for the Northern District of Texas

Before REAVLEY, JONES,1 and GARZA, Circuit Judges.

EMILIO M. GARZA, Circuit Judge:

Douglas W. Williams (“Williams”) appeals the district court’s order dismissing his qui tam

action under the False Claims Act (“FCA”) against BellHelicopter Textron, Inc. (“Bell Helicopter”).

Williams argues the district court erred by failing to accept as true the facts set out in the complaint.

The United States of America, which declined to intervene in the case below, also appealsthe district

court’s decision to dismiss all potential claims by the government with prejudice. 
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I

Bell Helicopter is a government contractor that supplies goods and services for the

development of military aircraft. The company employed Williams as an engineer for over five years

before terminating him. Five months after his termination, Williams filed suit on behalf of the United

States alleging that his former employer had made false claims against the government in violation

of the FCA. 31 U.S.C. § 3729-33. After investigating the claims in the complaint, the government

declined to intervene. Bell Helicopter filed a motion to dismiss, arguing that Williams had failed to

comply with the requirements of Rule 9 of the Federal Rules of Civil Procedure, which requires a

party to plead “the circumstances constituting fraud . . . with particularity.” FED.R.CIV.P. 9(b). The

district court agreed, but allowed Williams to amend his complaint in order to give him an

opportunity to “be very specific in his ‘who, what, when, where, and how’ allegations related to his

asserted false claim cause of action.” As a result, Williams filed an amended complaint alleging that

BellHelicopter had violated the FCAby: 1) charging the government for time and expenses on behalf

of non-American customers; 2) making false records and claims that were approved by the

government; 3) conspiring to charge the government for work or expenses that were never

performed; 4) exercising possession, custody or control over property or money used by the

government; and 5) making false statements or records i n order to conceal, avoid, or decrease its

obligation to pay or transmit money to the government. Bell Helicopter moved to dismiss under Rule

12(b)(6) for failure to state a claim because the complaint did not comply with the requirements of

Rule 9(b). The district court agreed that the amended complaint still did not comply with the

heightened pleading standard and dismissed the case. The co urt also dismissed all claims by the
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government with prejudice because “the United States has had ample opportunity to participate in

the prosecution of those claims if she had any notion that any of them has the slightest merit.”

II

A

Williams argues the district court erred by failing to accept as true the facts set out in the

complaint. He asserts that these facts are sufficient to meet the heightened pleading standard set out

in Rule 9(b).

We review the district court’s dismissal of a civil complaint de novo, “accepting the facts

alleged in the plaintiffs’ complaint as true and construing their allegations in the light most favorable

to them.” Goldstein v. MCI WorldCom, 340 F.3d 238, 244 (5th Cir. 2003). Under the FCA, a

private partymay sue on behalf ofthe government “to recoverfor false claimsmade bythe defendants

to secure payment by the [g]overnment.” United States, ex rel. Doe v. Dow Chem. Co., 343 F.3d

325, 329 (5thCir. 2003). However, “[c]laims brought under the FCA must comply with Federal Rule

ofCivil Procedure 9(b), which requires pleading with particularityin cases alleging fraud.” Id. at 328.

“At a minimum, [this] requiresthat a plaintiffset forth the ‘who, what, when, where, and how’ of the

alleged fraud.” United States, ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899,

903 (5th Cir. 1997). 

Williams’ amended complaint is based on three incidents he claims prove the defendant

violated the FCA. First , he alleges that, over a period of time in 1998, three Bell Helicopter

employees “conspired to falsifyand knowinglyand intentionallyfalsified labor charges of over $3,000

each on the United States Marine Corps UH-1 program.” He asserts that Bell Helicopter discovered

these false charges and failed to report them to the government. The complaint further states
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that“[t]he knowledge of which Bell Helicopter agent or employee failed to reimburse the U.S. for its

payment to Bell Helicopter, as well as the date Bell Helicopter knew of its false claim and failed to

notify the U.S. and failed to reimburse the U.S. for its payment it was not obligated to make is

peculiarly within the knowledge of Bell.”

These allegations fail to meet the particularity requirements of Rule 9(b). Significantly,

Williams’ complaint is directed at the company, not the three named employees that allegedly filed

false reports. Beyond its conclusory assertions, Williams’ complaint fails to plead any particular facts

showing that Bell Helicopter was aware of the actions of its employees, that it had intentionally filed

these false claims with the government, that it had purposefully withheld information about these

charges, or that it intentionally failed to repay the government for the overcharges.

Similarly, Williams allegesthat two employees chargedBellHelicopter “for work on the V-22

[program] while sitting in the hospital with a dying co-worker . . . for a period spanning four to six

weeks.” In support, Williams attached to the complaint a copy of the false charges made by the

employees. The complaint, however, is devoid of any facts indicating that these allegedly false

charges were ever filed with the government or that Bell Helicopter was aware that these charges

were fabricated. Indeed, the complaint only states that “[o]n information and belief, these [claims]

were delivered to, certified to, and invoiced to the U.S. . . . by Bell Helicopter.” While fraud may be

pled on information and belief when the facts relating to the alleged fraud are peculiarly within the

perpetrator’s knowledge, the plaintiffmuststillset forth the factual basisfor his belief. United States,

ex rel. Russell v. Epic Healthcare Mgmt. Group, 193 F.3d 304, 308 (5th Cir. 1999). Williams has

failed to plead the basisfor his beliefthat BellHelicopter filed these claims knowing it was defrauding

the government.
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Finally, Williams alleges that emails showing Bell Helicopter was “conspiring to conceal” its

obligation to repay the government for software and wiring upgrades is evidence of the defendant’s

fraudulent actions. Under § 3729 of the FCA, a party can only be held liable if it “knowingly makes,

uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an

obligation to pay or transmit money or property to the Government.” 31 U.S.C. § 3729(a)(7). The

complaint and emails do not indicate that Bell Helicopter ever made a false statement or record to

conceal its obligation to pay the government. Rather, it only alleges that the company intended to

avoid repayment. Without any affirmative action by the company to allegedly defraud the

government, a plain reading of the statute indicates that Williams cannot rely on these emails to

establish a FCA violation. 

In reviewing the complaint as a whole, we find that the district court did not fail to accept the

pleaded facts as true. Rather, it correctly concluded that the complaint, reviewed in the light most

favorable to the plaintiff, was too general and conclusory to satisfy the particularity requirementsset

forth in Rule 9(b).

B

The government assertsthe district court erred in dismissing the complaint against the United

States with prejudice. Specifically, the government argues its statutory rights should not be

foreclosed when a qui tam action is dismissed, not on the merits, but because of a deficient complaint.

We review for abuse of discretion the district court’s decision to dismiss with prejudice for failure

to comply with Rule 9(b). United States ex rel. Bledsoe v. Cmty. Health Sys., Inc., 342 F.3d 634,

644 (6th Cir. 2003).

The district court stated it was dismissing the claims against the government with prejudice
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because it believed “the United States has had ample opportunity to participate in the prosecution of

those claims if she had any notion that any of them has the slightest merit.” We find the district

court’s speculation as to the motives of the government’s actions is unreasonable, especially given

the fact that the complaint was dismissed under Rule 12(b)(6) due to lack of specificity. Under §

3730 of the FCA, the Attorney General is required to make a diligent investigation based on the

allegationsin the complaint and any additional material evidence in order to determine whether it will

proceed or decline to take over the action. 31 U.S.C. § 3730. “If the Government proceeds with

the action, it shall have the primary responsibility for prosecuting the action . . . .” 28 U.S.C. §

3730(c). The statute, however, does not require the government to proceed if its investigation yields

a meritorious claim. Indeed, absent any obligation to the contrary, it may opt out for any number of

reasons. For example, a decision not to intervene may “ not [necessarily be] an admission by the

United States that it has suffered no injury in fact, but rather [the result of] a cost-benefit analysis.”

United States ex rel. Berge v. Bd. of Trs. of the Univ. of Ala., 104 F.3d 1453, 1458 (4th Cir. 1997).

Here, given the Rule 9(b) deficiencies, the government may have determined that the costs associated

with proceeding based on a poorly drafted complaint outweighed any anticipated benefits. The

record is simply void on thisissue. While the government could have opted to intervene and amend,

it is not the court’s duty to speculate as to the costs and benefits associated with such a strategy.

Moreover, dismissing the claims with prejudice circumvents a purpose of Rule 9(b)))to

“guard[] against the institution of a fraud-based action in order to discover whether unknownwrongs

actually have occurred.” WRIGHT & MILLER, FEDERAL PRACTICE AND PROCEDURE § 1296. By

essentiallyrequiring the government to intervene in order to avoid forfeiting anyfuture claims against

the defendant, private parties would have the added incentive to file FCA suitslacking in the required
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particularity, knowing full well that the government would be obligated to intervene and ultimately

“fillin the blanks” ofthe deficient complaint. Accordingly, in order to avoid such perverse incentives,

we find that the district court abused its discretion in dismissing the claims as to the United States

with prejudice after holding that the qui tam complaint failed to meet the heightened pleading

standard of Rule 9(b). Such a holding guards against concerns previously raised by this court that

the FCA allows a relator, in the most egregious of circumstances, “to make sweeping allegationsthat,

while true, he is unable to effectively litigate, but which nonetheless bind the government, via res

judicata, and prevent it from suing over those concerns at a later date when more information is

available.” Riley v. St. Luke’s Episcopal Hosp., 252 F.3d 749, 757-58 (5th Cir. 2001) (en banc)

(Smith, J dissenting). 

In this regard, our decision is distinguishable from the one articulated by the Ninth Circuit in

In re Schimmels, 127 F.3d 875 (9th Cir. 1997). In Schimmels, the court of appeals held that a

summary judgment order against a relator in a qui tam action precluded the government from

bringing its own FCA case against the defendants. The court noted that the government had “tacitly

participated in the adjudication ofthe relators’ adversary proceeding” by holding “its own adversarial

proceeding in abeyance for over a year, presumably awaiting the outcome of the relator’s actions.”

Id. at 882, n.15. Here, not only was there no such tacit participation, but the complaint itself was so

deficient that the court never reached the merits of the claim. Furthermore, our approach is

consistent with our previous assertion that a dismissal against one relator may not necessarily

preclude another relator from bringing the same suit on behalf of the government. See United States

ex rel., Laird v. Lockheed Martin Eng’g, 336 F.3d 346, 358 (5th Cir. 2003).

Finally, while we acknowledge that our ruling would in fact give the government further
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opportunity to look into the allegations of the relator, that opportunity is constrained by the statute

of limitation provisions of the FCA. See 31 U.S.C. § 3731(b) (“A civil action. . .may not be

brought. . .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 in the United States charged with responsibility

to act in the circumstances. . . .”). Accordingly, we find that the dismissal with prejudice as to the

United States was unwarranted where, as here, the relator’s claims were dismissed on aRule 12(b)(6)

motion based on a lack of specificity in the complaint as required by Rule 9(b).

III

For the above stated reasons, we AFFIRM the district court’s order dismissing the plaintiff’s

qui tam action but MODIFY the judgment to be without prejudice to the United States of America.

AFFIRMED AS MODIFIED.