966 F. Supp. 2d 282
S.D.N.Y.2013Background
- Relator Ping Chen, a long‑time asbestos lab analyst and former EMSL supervisor, sued EMSL and 14 air‑monitoring firms under the federal False Claims Act (FCA) and New York/NYC analogues alleging widespread submission of “fake” (blank or improperly taken) air samples and false test reports to obtain government payments.
- Plaintiff’s theory: air monitoring firms submitted fake post‑abatement samples to testing labs (primarily EMSL), labs returned clean reports, and defendants billed government agencies or contractors for those services.
- Two high‑profile public prosecutions and media reports (the CES indictment and the Todaro information/plea and press coverage) disclosed similar asbestos‑testing frauds in the relevant region shortly before Chen filed suit. The government declined to intervene in Chen’s qui tam action.
- Defendants moved to dismiss based on (1) the FCA public‑disclosure bar, (2) failure to plead fraud with particularity under Rule 9(b), and (3) improper service on EMSL; some defendants also sought fees.
- The district court dismissed the federal, New York, and NYC FCA claims in full (also dismissing claims against EMSL for untimely service) and denied fee requests.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Applicability of FCA public‑disclosure bar | Chen alleged independent, direct knowledge from EMSL work that materially adds to public disclosures | Public disclosures (CES/Todaro prosecutions and press) already revealed the same fraud; dismissal required unless Chen is an original source | Dismissed: public disclosures were "substantially the same" and Chen is not an original source because his additional allegations do not materially add to disclosures |
| Original‑source exception | Chen contends he had independent knowledge from employment and gave information to government | Defendants say Chen did not disclose to government pre‑disclosure and his allegations add nothing material | Held against Chen: he had independent knowledge but did not materially add to public disclosures and did not show prior voluntary disclosure |
| Rule 9(b) particularity for FCA fraud allegations | Chen argued many specific incidents and produced sample reports and a declaration (in opposition) | Defendants argued complaint lacks who/what/when/where/how and fails to identify any specific false claims submitted for payment | Dismissed for failure to plead particularity: complaint lacks specific false claims, dates, billing details, and coherent fraudulent scheme allegations |
| Service on EMSL and attendant dismissal | Chen admitted late service and asserted process‑server difficulties | EMSL argued 4(m) period not met; no good cause shown | Dismissed as to EMSL for failure to serve within Rule 4(m); court refused discretionary extension |
Key Cases Cited
- Rockwell International Corp. v. United States, 549 U.S. 457 (U.S. 2007) (discusses jurisdictional treatment of the public‑disclosure bar)
- Sebelius v. Auburn Regional Medical Center, 133 S. Ct. 817 (U.S. 2013) (statutory limits are jurisdictional only if Congress clearly says so)
- LaFaro v. New York Cardiothoracic Group, PLLC, 570 F.3d 471 (2d Cir. 2009) (Rule 12(b)(6) pleading standard summary)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (plausibility standard for federal pleading)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (pleading must be plausible, not conclusory)
- Doe v. John Doe Corporation, 960 F.2d 318 (2d Cir. 1992) (history and purpose of public‑disclosure bar in FCA context)
- U.S. ex rel. Kreindler & Kreindler v. United Technologies Corp., 985 F.2d 1148 (2d Cir. 1993) (parasitic‑suit concern motivating public‑disclosure bar)
- United States ex rel. Clausen v. Laboratory Corporation of America, 290 F.3d 1301 (11th Cir. 2002) (relator must identify specific false claims to state FCA claim)