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UNITED STATES EX REL. DECARLO v. KIEWIT/AFC ENTERP

August 22, 1996

UNITED STATES ex rel. and PHILIP DECARLO, Plaintiffs, against KIEWIT/AFC ENTERPRISES, INC., a Joint Venture, KIEWIT EASTERN CO. and AFC ENTERPRISES, INC., Defendants.


The opinion of the court was delivered by: KRAM

 SHIRLEY WOHL KRAM, U.S.D.J.

 In this qui tam action alleging various violations of the False Claims Act, 31 U.S.C. § 3729, et seq. (the "False Claims Act" or the "Act"), defendants Kiewit/AFC Enterprises, Inc., Kiewit Eastern Co. and AFC Enterprises, Inc. (collectively, "Kiewit"), move, pursuant to Federal Rules of Civil Procedure 9(b), 12(b)(1), 12(b)(6) and 56(b), *fn1" to dismiss the complaint (1) on the ground that Philip DeCarlo ("DeCarlo") released Kiewit in settlement of a related civil matter; (2) for lack of subject matter jurisdiction; and (3) for failure to plead fraud or false claims with particularity. For the reasons set forth below, Kiewit's motion is granted in part and denied in part, and the complaint is dismissed without prejudice.

 BACKGROUND

 On July 15, 1991, DeCarlo commenced employment as Massachusetts Electric Construction Co., Inc.'s ("Mass Electric") manager for the Hutchinson River Parkway Bridge Rehabilitation Project (the "Project"), *fn2" and was stationed on the project site between July 1991 and August 1992. On or about August 11, 1992, Mass Electric terminated DeCarlo's employment, and on April 23, 1993, DeCarlo commenced a civil suit in this Court for wrongful termination against Mass Electric, Kiewit and Harry Shaver, a Kiewit employee. See DeCarlo v. Massachusetts Electric Constr. Co., 1996 U.S. Dist. LEXIS 3578, 93 Civ. 2690 (SWK) (the "Mass Electric " action). During the pendency of this litigation, DeCarlo wrote letters to various New York state and federal officials regarding conditions on the Project site. One such letter to the United States Department of Transportation, dated November 27, 1993, stated, in part:

 
I have brought legal action against both Kiewit and Mass [Electric] as per the enclosed Summons and Complaint, and as a result of my document inspection which began on November 4, 1993 it has become clear that many other violations of various laws have occurred, with the obvious knowledge of the on site D.O.T. personnel, as well as the Construction Manager . . . . These include widespread violations of the prevailing wage/Davis Bacon Law, jurisdictional irregularities, inferior and unsafe work, overpayments, continued hazardous working conditions involving asbestos and lead paint abatement, and a lack of Hazard Communications to my fellow workers.

 Letter to U.S. Dep't of Trans., dated Nov. 27, 1993, annexed to the Affidavit of Terrence Dwyer, sworn to on Sept. 11, 1995 (the "Dwyer Aff."), as Exh. "H."

 On May 19, 1994, DeCarlo executed a stipulation of settlement with Kiewit in the Mass Electric action, and on June 1, 1994, DeCarlo executed a general release, releasing Kiewit

 
from all actions, causes of action, suits, . . . controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, claims, and demands whatsoever, in law, admiralty or equity, which against the RELEASEE, the RELEASOR . . . ever had, now have or hereafter can, shall or may, have for, upon, or by reason of any matter, cause or thing whatsoever from the beginning of the world to the day of the date of this RELEASE.
 
This Release embraces any and all matters which were or could have been asserted in the matter presently pending in the United States District Court, Southern District of New York, "entitled Philip DeCarlo, plaintiff v. Mass Electric Construction Co., Kiewit AFC/Enterprises, Inc., Kiewit Eastern Company and Harry L. Shaver, Defendants", bearing Case No. 93 CIV 2690 (SWK).

 Release, dated June 1, 1994, annexed to the Dwyer Aff. as Exh. "C" (emphasis in original).

 Shortly thereafter, on July 28, 1994, DeCarlo filed the present complaint against Kiewit under the qui tam provisions of the False Claims Act. *fn3" The complaint seeks damages and civil penalties arising from alleged false claims for payments submitted by Kiewit to the New York State Department of Transportation, the Federal Highway Administration, the United States Department of Labor, the United States Department of Transportation and other federal and state agencies. Following the filing of this action under seal, the United States conducted an investigation into the allegations in the complaint in accordance with the requirements of the False Claims Act, see 31 U.S.C. § 3730(b), but ultimately declined to intervene in the suit.

 Kiewit now moves to dismiss the complaint (1) on the ground that DeCarlo released Kiewit in settlement of the Mass Electric action; (2) for lack of subject matter jurisdiction under the False Claims Act; and (3) for failure to plead fraud or false claims with particularity.

 DISCUSSION

 I. Standard of Law

 Pursuant to Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is appropriate where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). The moving party must initially satisfy a burden of demonstrating the absence of a genuine issue of material fact, which can be done merely by pointing out that there is an absence of evidence in support of the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 323-25, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). The nonmoving party then must meet a burden of coming forward with "specific facts showing that there is a genuine issue for trial," Fed. R. Civ. P. 56(e), by "a showing sufficient to establish the existence of [every] element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. at 322.

 The court "must resolve all ambiguities and draw all reasonable inferences in favor of the party defending against the motion." Eastway Constr. Corp. v. New York, 762 F.2d 243, 249 (2d Cir. 1985); see also Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59, 90 S. Ct. 1598, 26 L. Ed. 2d 142 (1970); Knight v. United States Fire Ins. Co., 804 F.2d 9, 11 (2d Cir. 1986), cert. denied, 480 U.S. 932, 94 L. Ed. 2d 762, 107 S. Ct. 1570 (1987). But the court is to inquire whether "there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for the party," Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986), and to grant summary judgment where the nonmovant's evidence is merely colorable, conclusory, speculative or not significantly probative. Id. at 249-50; Knight v. United States Fire Ins. Co., 804 F.2d at 12, 15; Argus Inc. v. Eastman Kodak Co., 801 F.2d 38, 45 (2d Cir. 1986), cert. denied, 479 U.S. 1088, 94 L. Ed. 2d 151, 107 S. Ct. 1295 (1987). To determine whether the nonmoving party has met his or her burden, the court must focus on both the materiality and the genuineness of the factual issues raised by the nonmovant. As to materiality, "it is the substantive law's identification of which facts are critical and which facts are irrelevant that governs." Anderson v. Liberty Lobby, Inc., 477 U.S. at 248. A dispute over irrelevant or unnecessary facts will not preclude summary judgment, id., but the presence of unresolved factual issues that are material to the outcome of the litigation mandates a denial of the summary judgment motion. See, e.g., Knight v. United States Fire Ins. Co., 804 F.2d at 11-12.

 Once the nonmoving party has successfully met the burden of establishing the existence of a genuine dispute as to an issue of material fact, summary judgment must be denied unless the moving party comes forward with additional evidence sufficient to satisfy his or her ultimate burden under Rule 56. See Celotex Corp. v. Catrett, 477 U.S. at 330 n.2 (Brennan, J., dissenting). In sum, if the court determines that "the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no 'genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986) (quoting First Nat'l Bank of Arizona v. Cities Serv. Co., 391 U.S. 253, 289, 20 L. Ed. 2d 569, 88 S. Ct. 1575 (1969)).

 Kiewit first moves dismiss the complaint on the ground that DeCarlo released Kiewit from all liability pursuant to the stipulation of settlement and the release in the Mass Electric action. Kiewit reasons, and DeCarlo does not contest, that the present qui tam action falls within the scope of the release, as DeCarlo discharged all claims which were or could have been brought in the Mass Electric case. DeCarlo has reasserted in this action many of the same underlying allegations presented in the earlier case, and the Court finds the release sufficiently broad to encompass the present claims.

 In response, however, DeCarlo urges the Court to adopt a rule rendering the prefiling release of a qui tam claim void as a matter of public policy where the agreement was entered into without the assent of the United States. In the alternative to finding that such a public policy exception does not exist, Kiewit asks that, in cases where a valid release is given by a relator, the Court establish a "middle ground" by ...


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