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U.S. v. COMPREHENSIVE COMMUNITY DEVELOPMENT CORPORATION

July 16, 2001

UNITED STATES OF AMERICA EX REL., CLAUDETTE PHIPPS, PLAINTIFF,
v.
COMPREHENSIVE COMMUNITY DEVELOPMENT CORPORATION, D/B/A SOUNDVIEW HEALTH CENTER, NONPROFIT COMMUNITY RESOURCES, INC., PEDRO ESPADA, SANDRA LOVE, KENNETH BRENNAN, ESTHER HILL, AND MARIA CRUZ, EACH IN THEIR OFFICIAL AND INDIVIDUAL CAPACITIES, DEFENDANTS.



The opinion of the court was delivered by: John G. Koeltl, District Judge:

      OPINION and ORDER

Plaintiff Claudette Phipps ("Phipps") brings this qui tam action on behalf of the United States against Comprehensive Community Development Corporation, d/b/a Soundview Health Center ("CCDC"), Nonprofit Community Resources, Inc. ("NCR"), Pedro Espada ("Espada"), Sandra Love ("Love"), Kenneth Brennan ("Brennan"), Esther Hill ("Hill"), and Maria Cruz ("Cruz"), each in their official and individual capacities pursuant to the False Claims Act, 21 U.S.C. § 3729 et seq. ("FCA"). Phipps has also brought common law claims for unjust enrichment, fraud, and mistake of fact. Phipps alleges that the defendants falsely represented that certain individuals were enrolled in CCDC's Women, Infants, and Children ("WIC") program and submitted false claims, statements, records, and information to the federal government ("Government") and to New York State to obtain funds from various federal and state programs. The defendants CCDC, Espada, Love, Brennan, Hill and Cruz (collectively the "Moving Defendants") now move pursuant to Fed. R. Civ. P. 12(c) for judgment on the pleadings, or in the alternative, for partial summary judgment. on the grounds, that this Court lacks subject matter jurisdiction over the plaintiff's qui tam action and that the plaintiff's complaint does Nat meet the requirements of Fed. R. Civ. P. 9(b).*fn1

I.

The same standards apply to a Rule 12(c) motion for judgment on the pleadings and to a Rule 12(b)(6) motion to dismiss for failure to state a claim. See Burnette v. Carothers, 192 F.3d 52, 56 (2d Cir. 1999); Narvarte v. Chase Manhattan Bank. N.A., 969 F. Supp. 10, 11 (S.D.N.Y. 1997). The Court "must view the pleadings in the light most favorable to, and draw all reasonable inferences in favor of, the non-moving party." Davidson v. Flynn, 32 F.3d 27, 29 (2d Cir. 1994); see also Madonna v. United States, 878 F.2d 62, 65 (2d Cir. 1989) National Ass'n of Pharmaceutical Mfrs., Inc. v. Ayerst Labs., 850 F.2d 904, 909 n.2 (2d Cir. 1988) (indicating that the Court treats a motion for judgment on the pleadings as if it were a motion to dismiss); Slavsky v. New York City Police Dep't, 967 F. Supp. 117, 118 (S.D.N.Y. 1997), aff'd, 159 F.3d 1348 (2d Cir. 1998). A court should not dismiss a complaint unless it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim that would entitle the plaintiff to relief. See Valmonte v. Bane, 18 F.3d 992, 998 (2d Cir. 1994) (citing Conley v. Gibson, 355 U.S. 41 (1957)). In deciding the motion, the Court can consider documents referenced in the complaint and documents that are in the plaintiff's possession or that the plaintiff knew of and relied on in bringing suit. See Brass v. American Film Technologies. Inc., 987 F.2d 142, 150 (2d Cir. 1993); Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 4748 (2d Cir. 1991); I. Meyer Pincus & Assoc., P.C. v. Oppenheimer & Co., Inc., 936 F.2d 759, 762 (2d Cir. 1991); Skeete v. IVF America, Inc., 972 F. Supp. 206, 208 (S.D.N.Y. 1997). The Court can also consider "matters of which judicial notice may be taken." See Leonard F. v. Israel Discount Bank of New York, 199 F.3d 99, 107 (2d Cir. 1999) (quotation omitted); see also Kramer v. Time Warner Inc., 937 F.2d 767, 773 (2d Cir. 1991).

Although subject matter jurisdiction is usually challenged by way of a Rule 12(b)(1) motion to dismiss, it may also be raised on a Rule 12(c) motion for judgment on the pleadings. See Ryan v. Volpone Stamp Co., Inc., 107 F. Supp.2d 369, 375 (S.D.N.Y. 2000); Brooks v. New York City Housing Authority, No. 98 Civ. 5016, 1999 WL 395387, at *2 (S.D.N.Y. Jun. 15 1999); Peters v. Timespan Comm., Inc., No. 97 Civ. 8750, 1999 WL 135231, at' *2 (S.D.N.Y. Mar. 12, 1999). "A Rule 12(c) motion for judgment on the pleadings based upon a lack of subject matter jurisdiction is treated as a Rule 12(b)(1) motion to dismiss the complaint. See Peters, 1999 WL 135231, at *2. A party invoking federal jurisdiction "must allege in [its] pleading the facts essential to show jurisdiction," and "must support [those facts] by competent proof." See McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 179 (1936); see also Board of Educ. of the Mount Sinai Union Free Sch. Dist. v. New York State Teachers Retirement Sys., 60 F.3d 106, 109 (2d Cir. 1995) (citation omitted); United States ex rel. Pentagen Tech. Int'l Ltd. v. CACI Int'l Inc., No. 96 Civ. 7827, 1997 WL 473549, at *6 (S.D.N Y Aug. 18, 1997), aff'd, 172 F.3d 39 (2d Cir. 1999). In considering a motion to dismiss for lack of subject matter jurisdiction, a court must accept as true all material factual allegations in the complaint and refrain from drawing inferences in favor of the party contesting jurisdiction. See Atlantic Mut. Ins. Co. v. Balfour MacLaine Intel Ltd., 968 F.2d 196, 198 (2d Cir. 1992). Where subject matter jurisdiction is challenged, however, a court may consider materials outside the pleadings, such as affidavits, documents and testimony. See Antares Aircraft v. Fed. Rep, of Nigeria, 948 F.2d 90, 96 (2d Cir. 1991); Kamen v. American Tel. & Tel. Co., 791 F.2d 1006, 1011 (2d Cir. 1986). Thus, the standard used to evaluate a Rule 12(b)(1) claim is similar to that for summary judgment under Fed. R. Civ. P. 56. See Kamen, 791 F.2d at 1011. The plaintiff has the ultimate burden of proving the Court's jurisdiction by a preponderance of the evidence. See Malik v. Meissner, 82 F.3d 560, 562 (2d Cir. 1996); see also Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1409 (3d Cir. 1991) (when subject matter jurisdiction is challenged under Rule 12, plaintiff must bear burden of persuasion); Martin v. Reno, No. 96 Civ. 7646, 1999 WL 527932 at *1 (S.D.N.Y. July 22, 1999).*fn2

II.

The following facts are undisputed for purposes of this motion except where specifically noted. Phipps was the Director of defendant CCDC's Women, Infants, and Children program ("WIC program") from on or about August 1990 until on or about May 6, 1999. (Compl. ¶¶ 4, 20; Declaration of Maria, Cruz dated January 25, 2001 ("Cruz Decl."), n.2; Pl.'s 56.1 Counter-St. ¶ 1.) CCDC is a New York Corporation incorporated on or about April 21, 1987, doing business as Soundview Health Center. (Compl. ¶ 5.) Defendant NCR is a New York Corporation incorporated on or about April 14, 1993. (Compl. ¶ 6.) Defendant Espada is the chairman and/or Director of CCDC. (Compl. ¶ 7.) Defendant Love is a Senior Vice-President for CCDC. (Compl. ¶ 8.) Defendant Brennan is the Chief Financial Officer for CCDC. (Compl. ¶ 9.) Defendant Cruz is the Executive Director of NCR. (Compl. ¶ 10.) Defendant Hill is a Coordinator of Human Resources for CCDC. (Compl. ¶ 11.)

The Child Nutrition Act, 42 U.S.C. § 1786 et. seq. ("CNA"), was enacted to provide supplemental foods and nutrition education to women, infants, and young children from families with inadequate income. See 42' U.S.C. §"1786(a). The CNA provides for grants to assist State agencies to provide, through local agencies, supplemental foods and nutrition education to eligible women and children. See 42 U.S.C. § 1786(c). The State agency receiving assistance must submit a plan of operation and administration to the Secretary of Agriculture containing various information designed to implement the purposes of the CNA. See 42 U.S.C. § 1786(f). CCDC runs a WIC program by authority and contract granted by New York State by authority granted to New York State through the CNA. (Compl. & 5.)

The Ryan White Comprehensive AIDS Resources Emergency Act of 1990, 42 U.S.C. § 300ff et seq. ("White Act"), was enacted "to provide emergency assistance to localities that are disproportionately affected by the Human Immunodeficiency Virus epidemic and to make financial assistance available to States and other public or private nonprofit entities to provide for the development, organization, coordination, and operation of more effective and cost efficient systems for delivery of essential services to individuals and families with HIV disease." 42 U.S.C. § 300ff. CCDC allegedly receives grants pursuant to the White Act and/or other federal programs which provide monies for AIDS research, treatment, and/or education. (Compl. ¶ 19.)

In or around 1998, the New York State Department of Health ("DOH") initiated an investigation into CCDC's WIC program based upon allegations made to the DOH by current and/or former employees of CCDC. (Compl. ¶ 23; Defs.' 56.1 St. ¶ 2.) The DOH investigation, which Phipps alleges is still ongoing, is headed by Fred Fogel, a Regional Chief Investigator with DON's Investigative Services Unit. (Compl. ¶ 24; Defs.' 56.1 St. ¶ 3.) Phipps alleges that according to Mr. Fogel, false information was provided as to certain women and/or children to the WIC program, so as to enroll these women and/or children into CCDC's WIC program when, in fact, these individuals were not eligible for the WIC program. (Compl. ¶ 25.) Phipps alleges, in particular, that certain relatives of defendants Espada and Love received benefits from the WIC program that they were not eligible to receive. (Compl. ¶¶ 26-28.) In or about December 1998, Mr. Fogel allegedly appeared at CCDC and requested certain files from Phipps. (Defs.' 56.1 St. ¶ 4; Pl.'s 56.1 Counter-St. ¶ 4.) Phipps informed some of the individual defendants about the visit and she was told to cooperate with the DOH. (Def.'s 56.1 St. ¶ 6; Pl.'s 56 Counter St. ¶ 6.)

Phipps also alleges that the defendants engaged in various fraudulent transactions by misappropriating funds granted to CCDC and/or NCR by the State or Federal Government pursuant to the CNA and White Act. Phipps contends that Love presented Phipps with two vouchers, one for $10,000.00 and one for $20,000.00, the first voucher for payment to a company run by Espada's son and the second voucher for payment to a company run by Espada. (Compl. ¶ 31.) Although Phipps asserts that she refused to process the vouchers, she alleges that the "vouchers were eventually processed by the defendants and that payment was made out of the WIC program on the vouchers, constituting false claims for services and/or goods. (Compl. ¶ 32.)

Phipps also alleges that in or around 1997, when Phipps would go on vacation and be absent, the WIC program would be charged a portion of Love's and/or Cruz's salary despite the fact that neither Love or Cruz performed any of Phipps's duties in or absence. (Compl. ¶ 33.) Phipps also asserts that Espada's spouse Carmine Rosado was employed by CCDC as Director of Marketing in 1997 and 1998 despite the fact that she did not perform any marketing services, but rather, babysat. (Compl. ¶ 35.) Phipps further alleges that the defendants submitted false information to the Government to receive monies pursuant to the White Act in the form of vouchers for services from doctors, namely Dr. Verdialis, that were not actually performed. (Compl. ¶¶ 36-43.)

On April 9, 1999, Phipps filed a charge of discrimination and harassment with the United States Equal Employment Opportunity Commission ("EEOC"). (Defs.' Ex. E.) Phipps filed the present action under seal on July 15, 1999. The Government notified the Court that it was declining, to intervene on September 12, 2000. See Govt.'s Notice of Election to Decline Intervention dated September 12, 2000. In her complaint, Phipps alleges numerous fraud claims against the defendants pursuant to the FCA, 31 U.S.C. ยง 3729 (a)(1), (a)(2), (a)(3) & (a)(7), with respect to funds obtained by CCDC from various federal and state programs under the CNA and the White Act. (Counts 1-8). Phipps also alleges numerous common law claims for unjust enrichment (Counts 9-13), fraud (Counts 14-18), and mistake of fact (Counts 19-23). In response to the present motion, the plaintiff withdrew ...


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