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United States ex rel Kirk v. Schindler Elevator Corp.

March 30, 2009

UNITED STATES OF AMERICA EX REL. DANIEL KIRK, PLAINTIFF,
v.
SCHINDLER ELEVATOR CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Sidney H. Stein, U.S. District Judge.

OPINION AND ORDER

Daniel Kirk ("Kirk" or "relator") brings this action on behalf of the United States under the qui tam provisions of the False Claims Act (the "FCA"), 31 U.S.C. §§ 3729-33, against defendant Schindler Elevator Corporation. Schindler is a party to numerous contracts with the federal government for the manufacture, installation, and maintenance of elevators and escalators in government buildings. As a government contractor, Schindler is subject to the Vietnam Era Veterans Readjustment Assistance Act ("VEVRAA"), 38 U.S.C. § 4212. VEVRAA and its implementing regulations require government contractors such as Schindler to establish affirmative action programs for covered veterans, invite their employees to identify themselves as covered veterans, and file annual reports-known as "VETS-100" reports-with the United States Department of Labor detailing the number of covered veterans they employ. 38 U.S.C. § 4212; 41 C.F.R. § 61-250.10; 48 C.F.R. §§ 52.222-35 to -38. According to Kirk, Schindler has failed to comply with these requirements for a number of years.

Kirk alleges that, despite its noncompliance with VEVRAA, Schindler nevertheless submitted to agencies of the United States hundreds of requests for payment under its government contracts, each of which was a "false or fraudulent claim" rendering Schindler liable to the United States for a civil penalty of $5,500 to $11,000 as well as three times any damages sustained by the government. 31 U.S.C. § 3729(a)(1)-(2); 28 C.F.R. § 85.3(a)(9).*fn1 Kirk seeks to share in the government's recovery pursuant to 31 U.S.C. § 3730(d)(2), which provides that a qui tam relator who brings a successful suit without government intervention is entitled to a "reasonable" portion of not less than twenty-five and not greater than thirty percent of the government's proceeds.

Schindler now moves to dismiss the complaint, contending, first, that most of Kirk's allegations fail to state a claim under the FCA, and second, that this Court lacks subject-matter jurisdiction over the remaining allegations. In particular, Schindler argues that because relator's properly stated FCA claims stem from information obtained through responses to a series of Freedom of Information Act ("FOIA") requests submitted by him*fn2 to the U.S. Department of Labor ("DOL"), the action is "barred" by 31 U.S.C. § 3730(e)(4)(A), which strips federal courts of jurisdiction over qui tam actions "based upon the public disclosure of allegations and transactions in a[n]... administrative... report, hearing, audit, or investigation unless the... person bringing the action is an original source of the information." 31 U.S.C. § 3730(e)(4)(A).*fn3

Kirk contends that all of his allegations state FCA claims and that the jurisdictional bar does not apply to any of them for at least four reasons. Kirk claims, first, that the FOIA requests did not "publicly disclose" the information; second, that the DOL's responses to those requests were not "administrative reports" or "investigations" within the meaning of the statute; third, that the FOIA responses did not reveal the fraudulent "allegations or transactions" underlying his claims; and finally, that his action is not "based upon" the information obtained through his FOIA requests since Kirk, as a former Schindler employee, had independent knowledge of the alleged false claims.

The Court finds, first, that most of Kirk's allegations fail to state a claim upon which relief can be granted pursuant to the FCA, and second, that those of Kirk's allegations that do properly state FCA claims are barred by section 3730(e)(4)(A) as "publicly disclosed." Accordingly, defendant's motion to dismiss the amended complaint is granted.

I. BACKGROUND

Unless otherwise noted, the following facts are taken from the amended complaint and are presumed to be true:

A. The Parties

Schindler Elevator Corporation manufactures, installs, and services elevators and escalators and has offices throughout the United States. (Am. Compl. ¶¶ 2, 12-13.) In 1989, Schindler acquired Millar Elevator Industries, Inc., and the two companies merged in 2002. (Id. ¶ 12.)

Relator Daniel Kirk, a veteran of the United States Army who served on active duty during the Vietnam War, has worked in the elevator industry since 1968. (Id. ¶¶ 19, 25.) From 1978 until 2003, Kirk was employed by Millar and Schindler (collectively, "Schindler") in various supervisory, managerial, and executive capacities. (Id. ¶¶ 11, 19-21, 28.) In August 2003, Kirk resigned from Schindler as a result of what he characterizes as Schindler's attempts to "force[] [him] out of the company." (Id. ¶ 24.) Since then, Kirk has been an active litigant against his former employer, commencing four separate legal or administrative proceedings against Schindler, all alleging claims stemming from his employment with and separation from the company. (Aff. of Daniel E. Kirk, Jr. dated Sept. 27, 2007 ("Kirk Aff.") ¶¶ 12-24); (Def. Mem. of Law in Supp. of Summ. J. at 3-4.)

B. VEVRAA and Schindler's Alleged Noncompliance

All federal procurement contracts for non-personal services including construction that meet or exceed certain monetary thresholds are subject to VEVRAA. 38 U.S.C. § 4212(a)(1). That Act and its various implementing regulations set forth a series of requirements for all contracts subject to its provisions, three of which are relevant to this litigation: First, each contract subject to VEVRAA must "contain a provision requiring that the [contractor] take affirmative action to employ and advance in employment [certain covered] veterans." 38 U.S.C. § 4212(a)(1). Second, every such contract must include language requiring the contractor to "invite all... eligible veterans who wish to benefit under the affirmative action program... to identify themselves to the [c]ontractor." 48 C.F.R. §§ 22.1310(b), 52.222-37(e). Third, to satisfy VEVRAA's requirement that all covered contractors "report, at least annually, to the Secretary of Labor" on such issues as "the number of such employees, by job category and hiring location, who are qualified covered veterans," 38 U.S.C. § 4212(d), VEVRAA-covered contracts must contain a clause providing that the "[c]ontractor shall submit VETS-100 Report[s]... no later than September 30 of each year." 48 C.F.R. §§ 22.1310(b), 52.222-37(c).

With regard to the third requirement, Congress passed the Veterans Employment Opportunities Act in 1998, which supplemented VEVRAA by providing that "no agency may obligate or expend funds... to enter into a contract [covered by VEVRAA] with a contractor from which a [VETS-100] report was required... with respect to the previous fiscal year if such contractor did not submit such report." 31 U.S.C. § 1354(a). To facilitate compliance, an implementing rule provides that "by submission of its offer, the offeror represents that, if it is subject to the reporting requirements [of VEVRAA]... it has submitted the most recent VETS-100 Report required of that [act]." 48 C.F.R. § 52.222-38.

During the period covered by the complaint, Schindler entered into hundreds of contracts with agencies of the federal government that were subject to VEVRAA and its various requirements. (Am. Compl. ¶¶ 3, 13, 20, 44(a), 56, 81-87.) While Kirk does not have access to any of the actual contracts or to a comprehensive list of all of Schindler's government contracts (id. ¶ 81), he submits, based on the requirements imposed by VEVRAA, that each contract must have contained provisions requiring Schindler to develop affirmative actions for veterans, to allow veterans to self-identify, and to submit annual VETS-100 Reports. (Id. ¶¶ 81-87.)

Kirk proceeds to allege that Schindler failed to comply with all three requirements. First, Kirk alleges generally that Schindler has no affirmative action program for veterans. (Id. ¶ 29.) In support of the claim, Kirk asserts that while he was employed by Schindler as a supervisor and manager with responsibility for employment decisions within his department, he was never informed that Schindler had any policy to take affirmative action with respect to veteran employees. (Id. ¶¶ 28, 57.) Further, Kirk claims that Schindler's employee manual makes no mention of any affirmative action program for veterans. (Id. ¶ 28.)

Second, Kirk alleges generally that Schindler failed to invite any of its employees to self-identify as veterans (id. ¶¶ 27, 58-59) and asserts in support of the claim that during his tenure as a Schindler employee he was never asked to self-identify as a veteran. (Id. ¶ 26.)

Third, Kirk alleges that during several years covered by the complaint Schindler failed to comply with VEVRAA's reporting requirements, by either not filing the required VETS-100 reports with the DOL or by filing reports containing false or partial information. (Id. ¶¶ 4, 60.)

In support of that third claim, Kirk relies on the DOL's responses to a series of FOIA requests submitted by his wife, Linda Kirk, seeking past VETS-100s filed by defendant with the DOL. Relator's FOIA requests, and the DOL's responses, were as follows:

First FOIA Request:On November 4, 2004, Mrs. Kirk wrote to the DOL seeking VETS-100 reports filed by defendant in the years 2002, 2003, and 2004. (Letter from Linda Kirk to Robert Wilson dated Nov. 5, 2004, Ex. G to Kirk Aff.)*fn4 On February 11, 2005, Robert Wilson, the Chief of the Investigation and Compliance Division for DOL's Office of Veteran's Employment and Training responded, providing the report for 2004 and indicating that "no records... for the years 2002 and 2003 were found." (Letter from Wilson to Kirk dated Feb. 11, 2005, Ex. G to Kirk Aff.)

Second FOIA Request: On January 17, 2005, Mrs. Kirk wrote to the DOL seeking VETS-100 reports filed by defendant for the years 1998, 1999, 2000, and 2001. (Letter from Kirk to Wilson dated Jan. 17, 2005, Ex. H to Kirk Aff.) In response, the DOL provided Schindler's 2001 report, and indicated that "no records... for the years 1998, 1999 and 2000" were found. (Letter from Wilson to Kirk dated Sept. 29, 2005, Ex. H to Kirk Aff.) The 2001 report, which covered the twelve-month period ending September 30, 2002, is referred to by Kirk as Schindler's "2002 Report."

Third FOIA Request: On April 10, 2007, Mrs. Kirk submitted a FOIA request for defendant's VETS-100 reports for the years 2005 and 2006. (Facsimile from Kirk to Wilson dated Apr. 4, 2007, Ex. I to Kirk Aff.) In response, the DOL provided each of the requested reports. (E-mail from Eric Rudert, Ass't Dir., Office of Agency Mgmt. and Budget, U.S. Dep't of Labor, to Kirk dated May 14, 2007, Ex. I to Kirk Aff.)

In light of this correspondence and the reports produced to relator as a result, Kirk alleges the following: first, that defendant never submitted VETS-100 reports for the years 1998 to 2001, and 2003 (Am. Compl. ¶ 60); second, that defendant initially failed to submit a report for 2002, but, upon learning of Kirk's complaint to the DOL regarding this matter in 2004, belatedly submitted a 2002 Report (id. at ¶ 5); third, that the reports defendant did submit for the years 2002, 2004, 2005, and 2006, and that the DOL produced in response to the Kirks' FOIA requests, were incomplete, inaccurate, and improperly prepared. (See e.g. Id. ¶¶ 63, 68, 71-72.) Accordingly, Kirk concludes that during the entire period covered by the complaint, Schindler was not in compliance with VEVRAA's reporting requirements and therefore was "not eligible" for any of the contracts it received. (Id. ¶ 8.)

C. Schindler's Submission of Allegedly False or Fraudulent Claims for Payment to the United States

The complaint alleges that "[s]ince at least March 1999, Schindler has submitted hundreds of claims to agencies of the United States government seeking payment for construction services" and that "those claims were false" (Am. Compl. ¶ 2) because "at all times... Schindler was in violation of VEVRAA and was not eligible for payment." (Id. ¶ 8.) While Kirk "cannot... identify all of the false claims for payment that were caused by Schindler's conduct," (id. ¶ 95) he does advance at least three ways by which Schindler's course of conduct resulted in false claims. First, pursuant to 48 C.F.R. § 52.222-38, defendant "expressly certified to the United States that it was in compliance" with the VETS-100 reporting requirement each time it submitted a bid for a VEVRAA-covered contract. (Id. ¶¶ 75, 92.) Those certifications were "false statements [made] to induce the government to enter into contracts for which Schindler was ineligible because it had not, in fact, complied with VEVRAA." (Id. ¶ 79.) Accordingly, Kirk argues that not only each bid, but also any claim for payment on a contract obtained as a result of those bids, constituted a false claim.

Second, because Schindler allegedly filed VETS-100 reports for several of the years covered by the complaint that were inaccurate, incomplete, or otherwise not in conformity with VEVRAA's requirements, it "knowingly made, used, or caused to be made or used false or fraudulent records and statements, and omitted material facts to induce the Government to approve and pay such false or fraudulent claims." (Id. ¶ 91.) Accordingly, Kirk contends that "each claim... seeking payment on a contract subject to VEVRAA for a fiscal year when [Schindler] had not filed an accurate VETS-100 represents a false or fraudulent claim for payment." (Id. ¶ 93.)

Finally, Kirk implies that because Schindler did not have an affirmative action program for veterans or allow veterans to self-identify, each claim submitted was a false claim because "Schindler was in violation of ...


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