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Chen v. EMSL Analytical, Inc.

United States District Court, S.D. New York

August 16, 2013

PING CHEN, on behalf of the United States of America, the State of New York, and the City of New York, Plaintiff-Relator,
v.
EMSL ANALYTICAL, INC., et al., Defendants

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For Ping Chen, on behalf of the United States of America, Ping Chen, on behalf of the City of New York, Plaintiffs: Heng Wang, Wong, Wong & Associates, P.C., New York, NY.

For Ping Chen, on behalf of the United States of America, Plaintiff: Heng Wang, Wong, Wong & Associates, P.C., New York, NY; Kenneth Hayes, Hardin, Kundla, McKeon, Poletto & Polifroni, P.A. (NJ), Springfield, NJ.

For EMSL Analytical, Inc., Defendant: Claude M Millman, LEAD ATTORNEY, Proskauer Rose LLP (NY), New York, NY.

For The Louis Berger Group, Inc., The Louis Berger Group (Domestic), Defendants: Kathleen Barnett Einhorn, Rajiv Dilip Parikh, LEAD ATTORNEYS, Genova, Burns & Giantomasi & Webster, Newark, NJ.

For Taylor Environmental Group, Inc., Defendant: Ronald Eric Steinvurzel, Steinvurzel Law Group P.C., White Plains, NY.

For J.C. Broderick & Associates Inc., Defendant: Marc Alan Pergament, Weinberg, Kaley, Gross & Pergament, LLP, Garden City, NY.

For Hillman Environmental Co., Inc., Hillman Environmental Group, L.L.C., Defendants: Michael B. Titowsky, LEAD ATTORNEY, Morris, Duffy, Alonso & Faley, LLP, New York, NY.

For Airtek Environmental Corp., Defendant: John Balestriere, LEAD ATTORNEY, Ballestriere, P.L.L.C., New York, NY; Jillian Lee McNeil, Balestriere Fariello, New York, NY.

For Liro Engineers, Inc., Defendant: Dianna L. Daghir McCarthy, LEAD ATTORNEY, Winget, Spadafora & Schwartzberg, LLP, New York, NY.

For McCabe Environmental Services, L.L.C., Defendant: William F. Costello, LEAD ATTORNEY, Curan, Ahlers, Fiden & Norris L.L.P. (Mamaroneck Ave), White Plains, NY.

For ATC Associates, Inc., Warren & Panzer, Engineers, P.C., Defendants: Daniel Hamilton Crow, John E. Osborn P.C., New York, NY.

For JLC Environmental Consultants, Inc., Defendant: Arturo Martin Boutin, Joseph S. Kavesh, Robert D. Lang, D'Amato & Lynch, New York, NY.

For Ambient Group, Inc., Defendant: Eugene T. Boule, Wilson Elser Moskowitz Edelman & Dicker LLP(Albany NY), Albany, NY.

OPINION

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OPINION AND ORDER

Ronnie Abrams, United States District Judge.

Plaintiff-Relator Ping Chen brings this action against Defendants EMSL Analytical, Inc. (" EMSL" ), The Louis Berger Group, Inc. (" Louis Berger" ), Taylor Environmental Group, Inc. (" Taylor" ), J.C. Broderick & Associates Inc. (" J.C. Broderick" ), Hillman Environmental Co, Inc. and Hillman Environmental Group, L.L.C. (together, " Hillman" ), Airtek Environmental Corp. (" Airtek" ), Liro Engineers, Inc. (" Liro" ), McCabe Environmental Services, L.L.C. (" McCabe" ), ATC Associates, Inc. (" ATC" ), JLC Environmental Consultants, Inc. (" JLC" ), Detail Associates (" Detail" ), Ambient Group, Inc. (" Ambient" ), Warren & Panzer, Engineers, P.C. (" Warren & Panzer" ) and Consulting & Testing Services, Inc. (" Consulting & Testing" ). Plaintiff alleges that Defendants, all of which operate in the asbestos air testing industry, violated the federal False Claims Act (" FCA" ), 31 U.S.C. § 3729 et seq., and its state and local counterparts, N.Y.S. Fin. L. § 188 et seq., and N.Y.C. Admin. Code § 7-801 et seq . (" New York FCA" and " New York City FCA," respectively).

Defendants have moved to dismiss on the grounds that: (i) Plaintiff's claims are barred by the FCA's public disclosure provision and (ii) Plaintiff has failed to plead his claims with particularity. EMSL seeks dismissal on the additional basis that it was not properly served. Warren & Panzer and ATC also seek attorneys' fees.

The Court agrees as to each asserted basis for dismissal. Accordingly, this action is dismissed in its entirety. The motions for attorneys' fees are denied.

BACKGROUND[1]

Plaintiff Ping Chen

Plaintiff holds " a degree equivalent to a Doctor of Public Health" from Shanghai Medical University and a masters degree in Environmental Health Science from The City University of New York. (Relator's Third Amended Complaint (" Complaint" ) ¶ 36.) He is also an accredited " Laboratory Director." (Id. ¶ ¶ 37-38.)

Prior to coming to the United States, Plaintiff was an Assistant Professor at Shanghai Medical University. (Id. ¶ 36.) He has worked in the U.S. air monitoring industry for twenty-four years and has " accumulated rich asbestos testing experience." (Id. ¶ 39.) Following the September 11 attacks, Plaintiff was a member of the emergency response team that performed air quality analysis at the World Trade Center. (Id. ¶ 40.)

Plaintiff worked for Detail as a lab director for nearly eighteen years, and also worked as a part-time analyst for Airtek from 1989 to 2007. (Id. ¶ ¶ 71, 96.) From October 2006 to February 2010, Plaintiff worked as a " weekend/night shift supervisor" at EMSL where his job duties included

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" testing and analyzing asbestos air samples." (Id. ¶ 41.)

The Asbestos Testing Process

When government buildings containing asbestos are demolished or renovated, asbestos fibers can become airborne, posing a significant health hazard. (Id. ¶ ¶ 27-28.) Before such projects commence, asbestos abatement companies are retained to remove materials that contain asbestos. (Id. ¶ 29.)

To ensure that asbestos abatement processes are effective, air monitoring companies are also retained to collect air samples at abatement sites. (Id. ¶ ¶ 28-29.) According to the Complaint, all Defendants, except for EMSL, are air monitoring companies (" Air Monitoring Defendants" ). (Id. p. 2.) Air monitoring companies collect air samples before, during and after abatement work is performed. (Id. ¶ 52.) They then submit the samples to an environmental testing company like EMSL to analyze the samples and report as to the presence or absence of asbestos fibers contained therein. (Id. ¶ 29.) If the tested samples do not meet federal and state regulations, further abatement work must be performed. (Id. ¶ 53.)

The Complaint's Allegations Against the Air Monitoring Defendants

Plaintiff alleges that " [i]n order to obtain favorable testing reports," the Air Monitoring Defendants " for many years . . . fraudulently provided countless fake air samples, namely, blank cassettes, to environmental testing service companies, such as EMSL, for testing." (Id. ¶ 54.) These " fake" samples " would definitely pass the tests because there was nothing in them." (Id. ¶ 55.) Plaintiff alleges to have " learned about the fake samples" submitted by the Air Monitoring Defendants while at EMSL by " personally coming across the[m] . . . and discussing [them] with EMSL's employees who have personal knowledge about the fake samples." (Id. ¶ 43.) As a supervisor, Plaintiff " had access to EMSL's air sample analysis records showing that countless air samples provided by [the Air Monitoring Defendants] were fake." (Id. ¶ 55.) Plaintiff attaches copies of such records to the Complaint. (Id. Ex. 1.)

The Complaint asserts the following allegations (or substantially similar allegations) as to most or all of the Air Monitoring Defendants:

o Each of the Air Monitoring Defendants provides services to government agencies in connection with government projects. As to each Air Monitoring Defendant, the Complaint lists at least one government agency or one government project for which that Defendant has provided services. For instance, as to McCabe, the Complaint alleges: " McCabe Environmental is an air monitoring firm which provides its services for federal, state, and local government projects and government agencies such as the SCA; New York City MTA; New York City Department of Transportation; Port Authority of New York and New Jersey; and the New Jersey Transit Authority." (Id. ¶ 102.)[2]
o " Most post-abatement air samples" provided to EMSL by the Air Monitoring Defendants were " fake." (Id. ¶ 64.) Plaintiff " personally" or " regularly" reviewed a " substantial

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amount" or " large volume" of " fake samples" submitted by a number of Air Monitoring Defendants.[3]
o The Air Monitoring Defendants " had knowledge that the samples collected and provided to EMSL were either improperly taken, fake, and/or blank." (Id. ¶ 102.)[4]
o The Air Monitoring Defendants billed the government, directly or indirectly, for the samples they collected and were compensated for doing so. For instance, as to McCabe, the Complaint alleges: " [B]ased on the samples collected and provided to EMSL for analysis, McCabe Environmental would either invoice the government agencies directly for the service performed or invoice the general contractors who would then bill the government. Thus whether McCabe Environmental invoiced the government or the general contractor, they received compensation for their services provided from the government." (Id. ¶ 102.)[5]
o The Air Monitoring Defendants did " not have an in-house lab" and sent their air samples " to EMSL for analysis." [6]

The Complaint also contains the following additional allegations specific to particular Air Monitoring Defendants:

o Louis Berger and J.C. Broderick: Louis Berger and J.C. Broderick " sent about 50 to 300, sometimes even 500, air samples to EMSL every[]day." (Id. ¶ 63.)
o Taylor, Hillman and Consulting & Testing: " About 50% to 80% of the post-abatement samples provided by Hillman, Taylor Environment Group [sic], and CTSI [Consulting & Testing] were fake." (Id. ¶ 64.)
o Airtek: " Based on [Plaintiff's] personal knowledge gained from employment with Airtek," " Airtek's most samples [sic] were fake" and that " [d]uring his employment at Airtek, [he] personally came across Airtek's fake air samples and reviewed documents showing fake samples from Airtek's various federal, state, and NYC projects." (Id. ¶ 72.)
o Ambient: Plaintiff " personally knows two analysts working for Ambient Group, Inc. who were [his] former colleagues . . . at EMSL." (Id. ¶ 76.) " From 2006 to 2009, these two analysts told [Plaintiff] multiples times that numerous air samples analyzed by . . . Ambient Group, Inc. . . . were fake." (Id. ¶ 77.)

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" These two analysts . . . have a lab in the basement of their house in East Brunswick, NJ, called Asbestos Analytical Lab" which is " not accredited." (Id. ¶ 78.) Plaintiff alleges that " Ambient would send its air samples to these two analysts to be analyzed in their basement. However, the reports would be issued under Ambient's name so that it would look like that they [sic] were analyzed by Ambient." Ambient would then " submit[] these false reports and invoices to the government and/or general contractors for payments." (Id. ¶ ¶ 79, 82.)
Plaintiff separately alleges that he " heard from Ronald McDonald, the owner of A.Mac, which is also a contractor known to Mr. Chen, about the fraudulent practice at Ambient." (Id. ¶ 80.) " From 2007 to 2010, Mr. McDonald told [Relator] that a supervisor that he hired dropped off TEM samples multiple times at Asbestos Analytical Lab." (Id. ¶ 81.) Although Asbestos Analytical Lab " was not accredited by ELAP to perform TEM analysis," " numerous samples were delivered and analyzed by Asbestos Analytical Lab for TEM analysis and were invoiced under the name of Ambient." (Id. ¶ 82.)
A certain " Roman Peysakhova analyzed samples in his basement, where he had set up an unauthorized lab and issued reports as though they were completed in Ambient's lab." (Id. ¶ 88.)
o ATC: From 2006 to 2009, two Ambient analysts Plaintiff knows " told [him] multiples times that numerous air samples analyzed by ATC . . . were fake" and that " [a] great many of these samples were taken by ATC . . . themselves." (Id. ¶ 77.) Separately, " [i]n approximately 2010, [Plaintiff] also personally learned from a sampling technician of ATC that the vast majority of the air samples were fake." (Id. ¶ 86.)
" In 2010 or 2011, ATC bid $1 to $2 per sample for PCM analysis for several government projects and earned contract work including the Brooklyn Navy Yard project. The cost for PCM analysis is at least several dollars per sample. There is only one way for ATC to possibly make money on the project: fake samples and/or fake analysis." (Id. ¶ 85.)
o Warren & Panzer: Plaintiff alleges that a " former colleague of [his] at EMSL" who " [c]urrently works for Warren & Panzer" told Plaintiff on September 9, 2011 that " all Warren & Panzer, Engineers, P.C.'s air samples had been fake," and that " Warren & Panzer's own technicians took these air samples themselves," a " majority" of which were from " SCA jobs." (Id. ¶ ¶ 90-92.)

The Complaint's Allegations Against EMSL

EMSL is the largest environmental testing service company in the world. (Id. ¶ 46.) Approximately 50% of EMSL's revenue derives from asbestos testing and related services. (Id. ¶ 47.) To receive compensation for those services, EMSL invoices the federal, state and local government directly, or charges general contractors, which in turn seek government reimbursement. (Id. ¶ 51.) EMSL was aware that the Air Monitoring Defendants submitted to it " false and useless" air samples, and it " conspired" with them by generating inaccurate " data and testing reports" that were then used to " obtain funds from the federal, state, and local government." (Id. ¶ ¶ 57-58.) EMSL has submitted " countless false and useless asbestos testing reports" in connection with " numerous

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federal, state, and city construction projects." (Id. ¶ 119.)

When working at EMSL, Plaintiff alleges to have " voiced his concern about the falsified data and fake samples multiple times" to his lab manager, Jim Hall. (Id. ¶ 122.) Mr. Hall allegedly told Plaintiff that " he knew the samples provided by some clients were fake" and that he knew " these clients never took real samples for rush analysis because they could not afford failed results as they would cause delay to the construction projects." (Id. ¶ 125.) He further explained that " a lot of clients never collected real air samples but submitted blank cassettes instead." (Id. ¶ 126.) " These blank cassettes had nothing on it [sic] and thus the analysis would definitely return good results." (Id. ¶ 126.) Mr. Hall also " admitted EMSL's illegal practice but indicated that he did not care," explaining that " that's how [EMSL] make[s] money." (Id. ¶ 123.)

Plaintiff also alleges that EMSL " recklessly disregarded various regulations and intentionally engaged in other illegal and fraudulent practices." (Id. ¶ 104.) For instance, " EMSL willfully disregarded the applicable regulations and required its analysts to work at a speed not permitted" by the governing regulations. (Id. ¶ ¶ 105-109.) Plaintiff further alleges that, at EMSL, " the same analyst who analyzed the air samples would fabricate the quality control data," and " [i]n order to cover it up . . . a different analyst would be asked to sign off on data so that it would appear that independent quality control had been performed." (Id. ¶ 117.) As a result of these violations " all the data generated by such improper procedures are fraudulent and false," and the " testing reports based on these data virtually have no practical value." (Id. ¶ 118.)

As a result of the Air Monitoring Defendants' and EMSL's alleged frauds, the Complaint alleges that:

a huge amount of government funds have been wasted by EMSL and its co-defendants, who are government contractors. For instance, upon information and belief, SCA spent more than one billion dollars each year on asbestos testing, removal and monitoring for thousands of schools in New York City. However, the ...

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