Thursday, January 31, 2013

Judge Sinks $78M FCA Suit Over Faulty Coast Guard Boats

Judge Sinks $78M FCA Suit Over Faulty Coast Guard Boats
By David McAfee
Law360, Los Angeles (January 30, 2013, 6:23 PM ET) -- A Louisiana federal judge on Wednesday threw out the federal government's False Claims Act suit over the alleged failure of eight U.S. Coast Guard vessels' hulls that Bollinger Shipyards Inc. modified at a cost of roughly of $78 million, saying the government has yet to specify where fraud had occurred.
U.S. District Judge Sarah S. Vance’s order dismissed the U.S.’ FCA, common law fraud, negligent misrepresentation and unjust enrichment claims against Bollinger in a suit brought in 2011 over eight of the Coast Guard’s boats that were rendered unseaworthy because Bollinger miscalculated the hulls’ resistance to bending.
Judge Vance sided with Bollinger, saying the federal government failed to meet the pleading standards required for FCA suits.
“The complaint does not allege facts indicating that Bollinger’s initial representation of the hull strength was knowingly false or made in deliberate ignorance or disregard for the truth,” Judge Vance wrote in the order. “Thus, the complaint does not even allege that Bollinger made an intentionally false or recklessly untrue statement, or acted with deliberate indifference.”
The judge gave the U.S. leave to amend the FCA claims within 20 days of the order, saying it has yet to specify with particularity what was fraud actually was.
“The United States may well have False Claims Act or fraud claims to plead against Bollinger,” Judge Vance wrote in the order. “But given the federal pleading standards, the government’s factual allegations in the context of the history of the parties’ dealings and the technical nature of the government contract, do not add up to a plausible theory of fraud.”
According to the government's July 2011 complaint, Bollinger said the 13-foot hull extensions would not compromise the integrity of the vessels. But eight of the boats, known as patrol cutters, were eventually rendered unseaworthy because of the modifications that took place between 2000 and 2006.
Bollinger faced charges that it violated the FCA by knowingly using false records in connection with government payments and by submitting false claims, as well as allegations of fraud, unjust enrichment and negligent misrepresentation.
In its motion to dismiss the claims, Bollinger said the federal government had resurrected the flawed calculations from 2000 and 2002 and distorted them into a false claims case.
“This is a contract matter, not a fraud case,” Bollinger wrote in the April filing. “It centers ona flawed engineering calculation that Bollinger acknowledged was mistaken and which it 1/30/13 Judge Sinks $78M FCA Suit Over Faulty Coast Guard Boats - Law360 2/2
addressed during performance through contract modifications with the Coast Guard.”
Representatives for the parties didn’t immediately respond to requests for comment Wednesday.
Defendants are represented by Mark B. Sweet, Roderick L. Thomas, Scott M. McCaleb, Kara M. Sacilotto and Erin K. Nord of Wiley Rein LLP; C. Berwick Duval II and Stanwood Duval of Duval Funderburk Sundbery Lovell & Watkins; and Marcus B. Slater Jr. and Jennifer J. Zeien of Slater & Zeien LLP.
The case is U.S. v. Bollinger Shipyards Inc. et al., case number 2:12-cv-00920, in the U.S. District Court for the Eastern District of Louisiana.
--Editing by Lindsay Naylor.
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