Court Opinion

ID: 2755031
Source: CourtListenerOpinion
Date Created: 2014-11-25 18:00:29.553267+00
Date Added: 2024-06-11T10:26:50.128800
License: Public Domain

NOT PRECEDENTIAL
                                 UNITED STATES COURT OF APPEALS
                                      FOR THE THIRD CIRCUIT
                                           _____________

                                                     No. 14-1358
                                                    _____________

                UNITED STATES OF AMERICA ex rel. WILLIAM A. THOMAS,
                                                  Appellant

                                                             v.

                      SIEMENS AG, SIEMENS MEDICAL SOLUTIONS, INC.,
                                 SIEMENS CORPORATION

                                                  _______________

                              On Appeal from the United States District Court
                                  for the Eastern District of Pennsylvania
                                          (D.C. No. 2-09-cv-04414)
                               District Judge: Honorable Timothy J. Savage
                                             _______________

                                 Submitted Under Third Circuit LAR 34.1(a)
                                            November 18, 2014

                     Before: RENDELL, JORDAN, NYGAARD, Circuit Judges.

                                            (Filed: November 25, 2014)
                                                 _______________

                                                     OPINION*
                                                  _______________

*
    This disposition is not an opinion of the full court and, pursuant to I.O.P 5.7, does not constitute binding precedent.
JORDAN, Circuit Judge.

      In this qui tam action, the relator, William A. Thomas, appeals the grant of

summary judgment by the United States District Court for the Eastern District of

Pennsylvania in favor of his former employer Siemens Medical Solutions USA, Inc.

(“SMS”), a subsidiary of Siemens AG, for claims under the False Claims Act, 31 U.S.C.

§ 3729 et seq. (“FCA”). He also appeals the District Court’s denial of his fourth motion

to amend the complaint.1 For the reasons that follow, we will affirm.

I.    Background

      Thomas worked for SMS, a manufacturer and seller of capital medical

equipment,2 and before that for Acuson Corporation, a manufacturer and seller of one

kind of such equipment, ultrasound systems. Siemens AG acquired Acuson in 2000 and

merged it into SMS in 2002. Thomas worked in sales and marketing and as an account

manager. Though his employers had business with the federal government, he never had

any involvement with those contracts.

      1
         In his notice of appeal, Thomas further states that he is appealing “the order
entered April 26, 2010 (doc. 69) granting defendant Siemens AG’s motion to dismiss the
Second Amended Complaint.” (Doc. No. 1.) He has not, however, provided any
argument on that point and his appeal of it is therefore abandoned. Nagle v. Alspach, 8
F.3d 141, 143 (3d Cir. 1993) (“When an issue is either not set forth in the statement of
issues presented or not pursued in the argument section of the brief, the appellant has
abandoned and waived that issue on appeal.”).
      2
       Capital medical equipment includes ultrasound systems, computed-tomography
(CT) scanners, magnetic resonance imaging (MRI) scanners, and nuclear medical
equipment.

                                            2
      At issue here are three contracts between Acuson/SMS and the Department of

Veterans Affairs (the “VA”): (1) a 2001 contract for ultrasound equipment; (2) a 2002

contract for CT/MRI equipment; and (3) a 2002 contract for nuclear medicine equipment.

United States ex rel. Thomas v. Siemens AG, 991 F. Supp. 2d 540, 546-48 (E.D. Pa.

2014). Two of the contracts – the ultrasound contract and the CT/MRI contract – were

fully audited by the VA Inspector General pursuant to a policy of conducting pre–award

audits for any contract proposal with an expected value exceeding $9 million. Id.

      A.     The Ultrasound Contract

      The ultrasound contract was the result of extensive negotiations.             Acuson

responded to a VA solicitation for ultrasound equipment in 2000 with a bid that included,

inter alia, a form setting forth required “Discount and Pricing Information.”3 Acuson

offered the VA a 43% discount and disclosed that other entities were given discounts

greater than those extended to the government – as high as 48%. The pre-award audit

also confirmed that the discounts offered to commercial customers exceeded those

offered to the government – specifically that Acuson had provided discounts of 59% and

      3
         The Discount and Pricing Information form is used as part of the award process
to evaluate the vendors’ pricing. The form asks vendors to specify the basis of the list
pricing the vendor is offering the VA and the discount percentage offered for the capital
medical equipment. The form also requests information on discounts given to other
customers. It contains neither completion instructions, nor definitions of terms. For
example, the form does not specify whether to disclose contract-level or transaction-level
discounts. The undisputed evidence establishes that the VA accepted such forms
completed in materially different ways, namely forms containing either transaction-level
or contract-level discounts, and forms containing either comparable or noncomparable
discounts. (App. at 1698) (former chief operating officer of the VA stated that the VA
understood the “significant ambiguities, limitations, and differing interpretations of the
[Discount and Pricing Information] form.”).

                                            3
56% on ultrasound products. Based on the audit, the VA asked Acuson to increase its

discounts to 48% and 50% respectively for two different products.          Acuson then

resubmitted its Discount and Pricing Information to the VA and increased its discount

offer to 48% with additional multiple-system discounts.         The VA accepted the

resubmitted information and awarded Acuson the contract.

         B.      The CT/MRI Contract

         The VA solicited bids for CT/MRI equipment and SMS submitted a response in

April 2002. SMS submitted separate Discount and Pricing Information forms for the CT

and MRI equipment in which it – unlike Acuson – identified the discounts offered only to

customers with contracts comparable to the VA contract. SMS thus disclosed maximum

discounts of 32% for CT equipment and 35% for MRI equipment, stating that it offered

further discounts if certain minimum orders were satisfied. SMS then went on to offer

those same discounts to the VA.        Before SMS submitted the Discount and Pricing

Information forms, the VA notified it that SMS would be subject to an Inspector General

audit.       The audit revealed that SMS was offering larger discounts to commercial

customers than it had offered to the VA.4 Based on that information, the VA negotiated

further upgrades to the equipment, but ultimately accepted the discounts of 32% and 35%

respectively, even though it knew that SMS offered greater discounts to other customers.

         4
         The District Court concluded that the pricing offered to commercial customers
was distinguishable from that offered to the VA because those contracts were part of a
group purchase and were structured differently than the government contracts or referred
to items which were not offered as part of the CME needed by the VA. Siemens AG, 991
F. Supp. 2d at 585-88.

                                            4
       C.     The Nuclear Medicine Contract

       In October 2002, SMS submitted a response to the VA’s solicitation for nuclear

medicine equipment.      In the Discount and Pricing Information submitted with its

response, SMS offered the VA a discount of 60% off of its list pricing and disclosed that

it had multiple-quantity unit pricing plans that “result[ed] in lower net prices than those

offered the [g]overnment in this offer.” (App. at 2518.) SMS stated that it offered regular

discounts of 52% to 56% and quantity discounts of 54% to 58%.             The undisputed

evidence establishes that the 60% discount SMS offered to the government was the

highest discount it offered at that time, with one exception that the parties agree is not

pertinent.5 After several months of negotiation, the VA awarded the nuclear medicine

contract to SMS.

       D.     Procedural History6

       Relying on Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure, SMS

moved to dismiss Thomas’s claims. While that motion was pending, Thomas moved to

       5
         As the District Court noted, Thomas, during his deposition, conceded that those
exceptional discounts given to one company are distinguishable from the contracts at
issue here. Id. at 586; (App. at 1521-23, 1191-92; Supp. App. at 79).
       6
         Thomas filed this action in the District Court for the Virgin Islands in September
2004 – within a few months of beginning work at SMS. The initial complaint made no
reference to the Discount and Pricing Information forms because, at the time, Thomas
erroneously believed the VA was obligated to receive SMS’s best price on all capital
medical equipment. In 2006, Thomas amended his complaint to remove the state law
claims he had asserted. In 2008, the government formally declined to intervene and the
District Court ordered the case unsealed. Thomas then amended the complaint a second
time before eventually serving it in January 2009. The case was thereafter transferred to
the United States District Court for the Eastern District of Pennsylvania.

                                            5
amend his complaint, which he had already amended twice before. The District Court

denied the motion to amend and granted in part the motion to dismiss. The Court left

intact Thomas’s claims regarding the three contracts described above.

       Thomas chose not to take any discovery of the VA or Inspector General or to

pursue any third-party evidence or expert testimony regarding relevant practices of the

VA or Inspector General. Siemens AG, 991 F. Supp. 2d at 575, 595. Thomas also

declined to depose the SMS employees who had negotiated and signed the contracts at

issue. At the close of expert and fact discovery, SMS moved for summary judgment.

The government then submitted a statement of interest, in which it said that it had the

complete contractually required information to make a price reasonableness

determination and to negotiate a fair and reasonable price for the ultrasound and CT/MRI

contracts.   (App. at 391-92.)    The government included a sworn declaration from

Maureen Regan, Counselor to the Inspector General for the VA, in which she affirmed

that the VA understood that both companies offered commercial customers discounts

greater than those offered to the VA. (App. at 397-98.)

       While dispositive motions were pending, Thomas again moved to amend his

complaint – his fourth such motion.       He sought to add claims related to contracts

involved in earlier claims that the District Court had already dismissed from the case. He

also sought to assert a new theory of liability as to the three contracts at issue. (App. at

765-80.)

                                             6
       The District Court granted summary judgment in favor of SMS on all of Thomas’s

claims and denied Thomas’s motion to amend his complaint. Thomas now appeals only

those two orders.

II.    Discussion7

       Thomas argues that the District Court erred in concluding that he failed to produce

evidence sufficient for a jury to find that SMS and Acuson fraudulently induced the VA

to enter into the contracts at issue. He also argues that the District Court abused its

discretion in refusing to grant his fourth motion to amend his complaint. Neither position

is persuasive.

       A.        Summary Judgment on Fraudulent Inducement Claims

       The False Claims Act makes it unlawful for any person to “knowingly present[],

or cause[] to be presented, ... a false or fraudulent claim for payment or approval” to the

government or “knowingly make[], use[], or cause[] to be made or used, a false record or

statement to get a false or fraudulent claim paid or approved by the [g]overnment.” 31

U.S.C. § 3729(a)(1)-(2) (1986). The primary purpose of the False Claims Act “is to

       7
        The District Court had subject matter jurisdiction under 28 U.S.C. § 1331 and 31
U.S.C. § 3732(a). We have jurisdiction pursuant to 28 U.S.C. § 1291. We review the
grant of summary judgment de novo, applying the same standard as the district court.
Lichtenstein v. Univ. of Pittsburgh Med. Ctr., 691 F.3d 294, 300 (3d Cir. 2012).
“Summary judgment should only be granted if ‘there is no genuine dispute as to any
material fact.’” Id. (quoting Fed. R. Civ. P. 56(a)). “In considering the record, we must
draw all reasonable inferences in favor of the non-moving party … .” Id. We review the
denial of a motion to amend a pleading for an abuse of discretion. United States ex rel.
Wilkins v. United Health Grp., Inc., 659 F.3d 295, 302 (3d Cir. 2011).

                                            7
indemnify the government – through its restitutionary penalty provisions – against losses

caused by a defendant’s fraud.” United States ex rel. Wilkins v. United Health Grp., Inc.,

659 F.3d 295, 304-05 (3d Cir. 2011) (citations omitted). A private individual, otherwise

known as a relator, may bring a civil action in the name of the United States to enforce

this provision of the False Claims Act and may share a percentage of any recovery

resulting from the suit. 31 U.S.C. § 3730(b) & (d).

       Although the focus of the False Claims Act is on false “claims,” courts have

employed a fraudulent inducement theory to establish liability under the Act for each

claim submitted to the government under a contract which was procured by fraud, even in

the absence of evidence that the claims were fraudulent in themselves. See generally

United States ex rel. Marcus v. Hess, 317 U.S. 537, 542-44 (1943) (superseded by

statute) (recognizing fraudulent inducement theory); United States v. Veneziale, 268 F.2d
504, 505 (3d Cir. 1959) (“[I]t has long since been settled that a fraudulently induced

contract may create liability under the False Claims Act when that contract later results in

payment thereunder by the government... .”).

       To prevail on a fraudulent inducement claim under the False Claims Act, a

plaintiff must show that (1) there was a knowingly false or fraudulent statement; (2) that

the statement was material; and (3) that it caused the government to pay out money or to

forfeit moneys due (i.e., a “claim”). United States ex rel. Schmidt v. Zimmer, Inc., 386
F.3d 235, 242 (3d Cir. 2004); Hutchins v. Wilentz, Goldman & Spitzer, 253 F.3d 176, 182

(3d Cir. 2001); Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 785 (4th

Cir. 1999). Here, the District Court correctly concluded that Thomas could show none of
                                             8
the required elements. It suffices for us to note that Thomas produced no evidence that

false statements were knowingly made.

      The False Claims Act says statements are made “knowingly” when they are made

with “actual knowledge,” “deliberate ignorance,” or “reckless disregard of the truth or

falsity of the information.” 31 U.S.C. § 3729(b)(1)(A). A statement is “false” when it is

objectively untrue. Cf. United States ex rel. K & R Ltd. P’ship v. Mass. Hous. Fin.

Agency, 530 F.3d 980, 984 (D.C. Cir. 2008) (noting that where relator and defendant

simply disagree about how to interpret ambiguous contract language there is no genuine

issue as to whether the defendant knowingly presented false claims). The unrebutted

evidence in this case demonstrates that the VA forms were ambiguous and that the VA

itself accepted different interpretations of how they should be completed, including what

kinds of discounts needed to be disclosed.       See supra, note 3.     Acuson disclosed

comparable transaction discounts while SMS disclosed comparable contract discounts for

the CT/MRI contract and all contract discounts for the nuclear medicine contract.

Because Thomas chose not to take any discovery of the government or to depose SMS

witnesses, the only evidence in the record establishes that the form was ambiguous, that it

was not uncommon for it to be completed incorrectly, that the VA accepted the forms,

and that, despite the manner in which the forms were completed, the VA was fully aware

before it entered into the contracts at issue that SMS and Acuson offered commercial

customers higher discounts than were offered the VA. Based on the record before us, no

reasonable juror could conclude that SMS or Acuson made knowingly false statements to

the VA.
                                            9
       B.     Thomas’s Fourth Motion to Amend the Complaint

       A motion to amend a complaint is committed to the sound discretion of the district

court. Cureton v. Nat’l Collegiate Athletic Ass’n, 252 F.3d 267, 272 (3d Cir. 2001).

Among the grounds that could justify a denial of leave to amend are “undue delay, bad

faith, dilatory motive, prejudice, and futility.” In re Burlington Coat Factory Sec. Litig.,

114 F.3d 1410, 1434 (3d Cir. 1997) (citing Foman v. Davis, 371 U.S. 178, 182 (1962)).

Here, Thomas’s argument that the District Court should have granted his motion to

amend the complaint is without merit.

       The proposed amendment sought to revive claims relating to other contracts that

previously had been dismissed under Rule 9(b). Further, the amendment was predicated

on a legal theory – that other SMS and Acuson contracts were “merged” with the

contracts at issue – which the District Court had rejected in its ruling on summary

judgment. Accordingly, granting leave to amend would have been pointless. In any

event, even if the proposed amendment were not both futile and improper, it would still

have been highly prejudicial to the Appellees to allow new theories of liability four

months after summary judgment motions were filed and well after the close of discovery.

Given that the proposed amendment was untimely, futile, and unduly prejudicial, the

District Court did not abuse its discretion in refusing to allow it.

III.   Conclusion

        For the forgoing reasons, we will affirm the District Court’s grant of summary

judgment and its denial of Thomas’s fourth motion to amend his complaint.

                                              10