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United States v. Kaplan Early Learning Co.

United States District Court, W.D. New York

March 31, 2014

THE UNITED STATES OF AMERICA, ex rel. JOHN PANARELLO, Plaintiff,
v.
KAPLAN EARLY LEARNING COMPANY, Defendant.

DECISION AND ORDER

WILLIAM M. SKRETNY, Chief District Judge.

I. INTRODUCTION

Relator John Panarello commenced this qui tam action on behalf of the United States in April 2011, alleging violations of the False Claims Act ("FCA"), 31 U.S.C. § 3729, et seq . Relator alleges that Defendant Kaplan Early Learning Company submitted false claims for work performed by workers who were not paid the prevailing wage rate required by the Davis-Bacon Act. Defendant moves this Court to dismiss the Amended Complaint pursuant to sections 12(b)(5) and (6) of the Federal Rules of Civil Procedure. For the reasons that follow, Defendants' motion is granted to the extent it seeks dismissal of the Amended Complaint for failure to state a claim.

II. BACKGROUND

As alleged in the Amended Complaint, Defendant, a North Carolina corporation, submitted false claims:

in connection with playground construction contracts with the United States, including its agencies or departments and/or one or more federally-funded entities, where the playground construction work was performed by workers who were required to be paid prevailing wages pursuant to the Davis-Bacon Act, but where those workers were not paid the prevailing wages and/or [Defendant] otherwise violated the Davis-Bacon Act.

(Am. Compl. ¶¶ 10, 15, Docket No. 19); see 40 U.S.C. § 3141 et seq. The Davis-Bacon Act requires every construction contract with the United States to include a term providing that construction workers will be paid the prevailing wage, and requiring that the contractor certify its requirements with the Act. (Am. Compl. ¶ 17); see 40 U.S.C. § 3142(c).

Since 2004, Defendant has been awarded playground construction contracts by "U.S. Government purchasers which are financed with federal funds, " including federally-funded Head Start Programs, hospitals, elementary and secondary schools, and/or public colleges. (Am. Compl. ¶¶ 22, 26.) Defendant would only comply with Davis-Bacon Act when expressly required to do so by a "minority" of these purchasers. (Am. Compl. ¶¶ 53, 56, 59-61.) In such cases, Defendant would insert "a cursory reference to the payment of prevailing wages in its contract documents with the purchaser, " but would not advise the subcontractor of such terms, direct that workers be paid the applicable prevailing wage rates, or prepare and submit certified payroll records. (Am. Compl. ¶ 61-63.) Where the purchaser did not affirmatively require compliance, Defendant would include "a putative prevailing wage disclaimer in the contract documents it drafted." (Am. Compl. ¶ 67.) Relator alleges that this failure to abide by the Davis-Bacon Act's requirements gave Defendant "a competitive advantage as against any competitor whose labor costs were higher because of that competitor's compliance with the prevailing wage requirements of the Davis-Bacon Act." (Am. Compl. ¶ 65.)

Relator's company, Celtic Builders, Inc., was one of Defendant's subcontractors from 2004 to 2010. (Am. Compl. ¶¶ 33-35.) During that time, Defendant "submitted claims to the U.S. Government or to other U.S. Government funded purchasers, for payments under Playground Construction Contracts with Celtic as the subcontractor in a total amount of not less than Six Million Dollars." (Am. Compl. ¶ 38.)

III. DISCUSSION

Defendant moves to dismiss the Amended Complaint pursuant to Rule 12(b)(5) and (6) of the Federal Rules of Civil Procedure. (Docket No. 30.) Defendant argues that there was insufficient service of process, and that in any event, the Amended Complaint fails to state a viable FCA cause of action. Defendant further argues that any claim that accrued prior to April 22, 2005 is barred by the applicable six-year statute of limitations.

A. Sufficiency of Process

"Before a federal court may exercise personal jurisdiction over a defendant, the procedural requirement of service of summons must be satisfied." Omni Capital Int'l, Ltd. v. Rudolf Wolff & Co., Ltd., 484 U.S. 97, 104, 108 S.Ct. 404, 98 L.Ed.2d 415 (1987). In the face of a Rule 12(b)(5) challenge, the plaintiff bears the burden of proving the adequacy of service of process. Mende v. Milestone Technology, Inc., 269 F.Supp.2d 246, 251 (S.D.N.Y. 2003).

Absent a waiver by the defendant, a domestic or foreign corporation must be served in a manner that complies with "state law for serving a summons in an action brought in courts of general jurisdiction in the state where the district court is located or where service is made." Fed.R.Civ.P. 4(e)(1), (h)(1)(A). A company or corporation may also be served "by delivering a copy of the summons and of the complaint to an officer, a managing or general agent, or any other agent authorized by appointment or by law to receive service of process and - if ...


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