897 F. Supp. 2d 300
E.D. Pa.
2012
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Background

  • Relator sues PECO Energy, PRPA, and AMSEA under the False Claims Act (FCA) for alleged inflated electric bills to the U.S. Navy via PRPA’s LMSR vessel contract.
  • PRPA contracted to provide shore power to LMSR vessels; PECO billed PRPA under a subcontracting arrangement; U.S. Navy would reimburse PRPA for energy supplied.
  • AVE conducted a comprehensive energy audit for PRPA after PRPA suspected overbilling; AVE installed meters to capture vessel energy use and identified discrepancies.
  • PECO allegedly downplayed or concealed documents, provided nonresponsive or incomplete data, and charged for unnecessary equipment (e.g., capacitor banks) and inflated kilowatt usage.
  • AVE’s findings suggested substantial overcharges; AMSEA participated in the investigation but later dropped independent data corroboration; PRPA’s stop-work order terminated AVE’s audit.
  • Amended Complaint added PRPA and AMSEA as defendants; U.S. declined to intervene; Relator asserts three FCA counts plus retaliation/disciplinary claims.

Issues

Issue Plaintiff's Argument Defendant's Argument Held
Whether service of the Amended Complaint was proper under Rule 4(m). Relator served within 120 days of unsealing. Service was untimely. Relator timely served; Rule 4(m) satisfied.
Whether the FCA claim under Section 3729(a)(1) is adequately pled with Rule 9(b) specificity. Plaintiff identified the scheme and control over information; Rule 9(b) flexible in complex fraud. Plaintiff failed to identify a specific false claim and lacks particularity. Counts under §3729(a)(1) adequately pled with particularity; sufficient to withstand dismissal.
Whether §3729(a)(2) (false records to obtain payment) is adequately pled against PECO. PECO knew bills would be paid by the Government through PRPA; false records implicated. Lacks explicit knowledge that payments would be Government-funded. Adequately pled against PECO; §3729(a)(2) survives for PECO.
Whether AMSEA can be liable under §3729(a)(1) and (a)(2) given its role. AVE informed AMSEA; AMSEA participated in investigation and acknowledged discrepancies. No independent data or knowledge showing AMSEA knowingly submitted false claims. AMSEA §3729(a)(1)/(a)(2) claims dismissed for lack of evidence of knowing false claims.
Whether Count II retaliation claim has standing under §3730(h) post-2009 amendment. Amendment extends to contractors; supports standing. Amendment applies retroactively only; Relator was an independent contractor, so no standing. Count II dismissed for lack of standing.

Key Cases Cited

  • Schmidt v. Zimmer, Inc., 386 F.3d 235 (3d Cir.2004) (FCA pleading standards; Rule 9(b) applicability)
  • Quinn v. Omnicare, Inc., 382 F.3d 432 (3d Cir.2004) (identification of at least one specific claim implicated FCA pleading)
  • Clausen v. Lab. Corp. of Am., Inc., 290 F.3d 1301 (11th Cir.2002) (Rule 9(b) specificity requirement for FCA claims)
  • In re Rockefeller Ctr. Props., Inc. Secs. Litig., 311 F.3d 198 (3d Cir.2002) (fraud allegations require factual background sufficient for notice)
  • Allison Engine Co. v. United States ex rel. Sanders, 553 U.S. 662 (2008) (necessity to show intent to obtain payment; 3729(a)(2) standard)
  • United States ex rel. Drescher v. Highmark, Inc., 305 F. Supp. 2d 451 (E.D. Pa.2004) (Rule 9(b) pleading and FCA claims context)
  • United States ex rel. Schmidt v. Zimmer, Inc., 386 F.3d 235 (3d Cir.2004) (FCA claims under 3729(a)(1) and (a)(2) pleading)
  • Cooper v. Southeastern Pa. Transp. Auth., 548 F.3d 296 (3d Cir.2008) (Fitchik factors for Eleventh Amendment immunity; state funding debate)
  • Bolden v. Southeastern Pa. Transp. Auth., 953 F.2d 807 (3d Cir.1991) (funding as factor in sovereign immunity analysis)
  • Holt Cargo Sys., Inc. v. Del. River Port Auth., 20 F. Supp. 2d 803 (E.D. Pa.1998) (sovereign immunity analysis under Fitchik factors)
  • Stevens v. United States, 529 U.S. 765 (1999) (capability of states to be immune under certain statutes; FCA context)
  • Gibbons v. Kvaerner Philadelphia Shipyard, Inc., 2006 WL 328362 (E.D. Pa.2006) (Rule 9(b) particularity sufficiency in FCA cases)
  • McCauley v. Univ. of the Virgin Islands, 618 F.3d 232 (3d Cir.2010) (arm-of-state analysis context)
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