United States District Court, N.D. West Virginia
MEMORANDUM OPINION AND ORDER DENYING MOTION TO
DISMISS OR, IN THE ALTERNATIVE, MOTION TO TRANSFER [DKT. NO.
M. KEELEY, UNITED STATES DISTRICT JUDGE
case involves an alleged kickback scheme in violation of the
Anti-Kickback Act, 41 U.S.C. §§ 8701, et
seq., as well as the defendants' alleged submission
of false or fraudulent claims in violation of the False
Claims Act, 31 U.S.C. §§ 3729-3733.
before the Court is defendant Donald Karner's motion to
dismiss for improper venue, lack of personal jurisdiction,
and failure to state a claim or, in the alternative, motion
to transfer venue (Dkt. No. 101). Defendants Brian Waibel,
Joy Waibel, and Raymond Hobbs have joined Karner's motion
(Dkt. Nos. 103, 104, and 105). For the reasons that follow,
the Court DENIES the motion (Dkt. No. 101).
Raymond Hobbs (“Hobbs”) was an employee of
Arizona Public Service Company
(“APS”), which generated, transmitted, and
distributed electricity to eleven Arizona counties. Its
operations included limited exploration and implementation of
renewable and sustainable energy alternatives. Hobbs was the
principal investigator for two projects awarded to APS by the
National Energy Technology Laboratory (“NETL”).
NETL is part of the Department of Energy (“DOE”)
national laboratory system, and is owned, operated, and
funded by the DOE. The first project with which Hobbs was
involved, NETL Award No. DE-FC26-06NT42759, involved the
development of a hydro-gasification process for the
co-production of substitute natural gas (the “CSNG
Project”). The government's share of the CSNG
Project was $15, 000, 000. The second project, NETL Award No.
DE-FE0001099, involved developing an integrated energy system
with beneficial carbon dioxide use (the “IES
Project”). The government's share of the IES
Project was $70, 000, 000. The NETL administered the Projects
from its Morgantown, West Virginia, offices
amended complaint, the government alleges that defendants
Algem, LLC, Dynasep, LLC, Electric Transportation Engineering
Corporation, Element Cleantech, Inc., Greenfuel Technologies
Corporation, and Omni Engineering, PLLC (collectively the
“Entity Defendants”) were prime contractors or
subcontractors on the Projects. It further alleges that
defendants Isaac Berzin, Alana McCamman, Scott McCamman,
Raymond Hobbs, Donald Karner, Brian Waibel, and Joy Waibel
(collectively the “Individual Defendants”) were
subcontractors or vendors on the Projects, or were employees
of, or otherwise affiliated with, the Entity Defendants.
position as principal investigator for APS, Hobbs was
primarily, if not exclusively, responsible for issuing
purchase orders, entering into subcontracts, and authorizing
payment of invoices generated by vendors and subcontractors.
Around March of 2010, APS discovered
“improprieties” related to the Projects,
including insufficient supporting documentation and
undisclosed conflicts of interest related to the
administration of the Projects. APS determined that Hobbs was
responsible for the improprieties, and it terminated his
employment in March of 2010.
also ordered an external audit and inquiry, following which
it prepared a report and forwarded it to the DOE.
government alleges that Hobbs received kickbacks from the
Entity Defendants in return for issuing them subcontracts or
purchase orders for the Projects, and that he approved
invoices from the Entity Defendants based upon the kickbacks
he received. The alleged kickbacks included cash payments, as
well as employment for Hobbs' immediate family members or
family members of his associates. According to the amended
complaint, some or all of the payments made to the Entity
Defendants could not be substantiated or verified as
legitimate, and some claims for services contained within the
invoices lacked supporting detail.
the government alleges that the defendants concealed the
kickbacks through various means, including:
(a) making payments to Hobbs in cash;
(b) providing payments to Hobbs through subsidiary or
unrelated entities that did not have direct contractual ties
to APS or NETL;
(c) using corporate entities to hide the fact that
subcontractors were employing and paying members of the Hobbs
(d) submitting invoices for lodging in the Landmark Towers
condominium units, which were owned by Hobbs' son, to
shroud the fact that the payments would benefit the Hobbs
(e) directing invoices to Hobbs, so that APS representatives
could not question unsupported and unsubstantiated services
or the existence of conflicts of interest.
government asserts that the kickback scheme violated the
Anti-Kickback Act (“AKA”), 41 U.S.C. §§
8701, et seq., and caused the knowing submission of
false or fraudulent claims to NETL in violation of the False
Claims Act (“FCA”), 31 U.S.C. §§
3729-3733. The Court has subject matter jurisdiction under 28
U.S.C. § 1345, which provides that “the district
courts shall have original jurisdiction of all civil actions,
suits or proceedings commenced by the United States . . .
.” During a scheduling conference in the case on May
22, 2017, the Court addressed with the parties the issues of
personal jurisdiction and venue. During the conference, the
government indicated that it intended to amend its complaint
to more adequately plead the basis for jurisdiction and
venue. After the government filed its amended complaint (Dkt.
No. 97), defendant Donald Karner (“Karner”) filed
a combined motion and memorandum to dismiss for improper
venue, lack of personal jurisdiction, and failure to state a
claim, or to transfer venue (Dkt. No. 101). Individual
defendants Brian Waibel, Joy Waibel, and Raymond Hobbs have
filed notices of joinder in Karner's motion (Dkt. Nos.
103, 104, and 105).
Motion to Dismiss
has moved to dismiss the amended complaint, arguing (1) that
venue is improper, (2) that the Court does not have personal
jurisdiction over him, and (3) that the government has failed
to state a claim against him (Dkt. No. 101).
to Fed.R.Civ.P. 12(b)(3) and 28 U.S.C. § 1406, Karner
argues that venue in this district is improper, as the events
giving rise to this action occurred almost exclusively in
Arizona. Once a defendant objects to venue, the plaintiff
bears the burden of establishing that venue is proper.
See Alvarez v. Babik, 2014 WL 1123383, at *2
(N.D.W.Va. 2014) (Bailey, J.) (citing Plant Genetic Sys.,
N.V. v. Ciba Seeds, Mycogen Plant Sci., Inc., 933
F.Supp. 519, 526 (M.D. N.C. 1996) (citing in turn
Bartholomew v. Va. Chiropractors Ass'n, Inc.,
612 F.2d 812, 816 (4th Cir.1979))).
in the absence of an evidentiary hearing, a plaintiff need
only present a prima facie showing of proper venue to survive
a 12(b)(3) motion to dismiss. See Mitrano v. Hawes,
377 F.3d 402, 405 (4th Cir. 2004).
case, the government asserts claims for violations of the
FCA, which contains its own venue statute:
Any action under section 3730 may be brought in any judicial
district in which the defendant or, in the case of multiple
defendants, any one defendant can be found, resides,
transacts business, or in which any act proscribed by section
3729 occurred. . . .
31 U.S.C. § 3732(a). The government does not allege that
any defendant resides in West Virginia. The question
presented therefore is whether any defendant transacts
business in this district, or whether any of the acts
proscribed by § 3729 occurred here.
provides that “[a]ny action under section 3730 may be
brought in any judicial district in which . . . any one
defendant . . . transacts business.” 31 U.S.C. §
3732(a). A plaintiff satisfies the FCA's venue provision
if it is alleged that a defendant entered into business
agreements in the district or visited the district to work on
business projects. See, e.g., Pickens v. Kanawha
River Towing, F.Supp. 702, 709 (S.D. Ohio 1996). Here,
at least one defendant transacted business in the Northern
District of West Virginia within the meaning of 31 U.S.C.
government alleges that, as part of the alleged kickback
scheme, Hobbs awarded subcontracts to defendant Electrical
Transportation Engineering Company (“ETEC”), a
company controlled by Karner. According to the amended
complaint, Karner was the President and CEO of ETEC, and was
directly and extensively involved in the management and
operation of the NETL Projects.
government further alleges that defendant ETEC was the
primary engineering firm for the CSNG Project and, therefore,
frequently transacted business in the Northern District in
connection with the Project. The government specifically
alleges that ETEC management and personnel, including Karner
in his role as Project Manager, routinely communicated with
NETL personnel in Morgantown, West Virginia, regarding the
CSNG Project, and also submitted invoices and claims for
reimbursement directly to NETL in Morgantown. ...