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United States v. United Airlines Inc.

United States Court of Appeals, Fourth Circuit

December 26, 2018

UNITED STATES EX REL. DAVID GRANT, Plaintiff - Appellant,
v.
UNITED AIRLINES INC., Defendant-Appellee.

          Argued: September 27, 2018

          Appeal from the United States District Court for the District of South Carolina, at Charleston. David C. Norton, District Judge. (2:15-cv-00794-DCN)

         ARGUED:

          William Stephen Norton, MOTLEY RICE, LLC, Mt. Pleasant, South Carolina, for Appellant.

          Keith J. Harrison, CROWELL & MORING LLP, Washington, D.C., for Appellee.

         ON BRIEF:

          Louis M. Bograd, Washington, D.C., William P. Tinkler, MOTLEY RICE, LLC, Mt. Pleasant, South Carolina, for Appellant.

          Michael T. Cole, Erika Karnaszewski Fedelini, NELSON MULLINS RILEY & SCARBOROUGH, LLP, Charleston, South Carolina; Jason M. Crawford, Charles D. Austin, CROWELL & MORING LLP, Washington, D.C., for Appellee.

          Before WILKINSON, DUNCAN, and KEENAN, Circuit Judges.

          DUNCAN, CIRCUIT JUDGE

         Relator David Grant brought this qui tam action against his former employer, United Airlines, Inc. ("United"), under the False Claims Act (the "FCA"), 31 U.S.C. §§ 3729, et seq. The district court dismissed Grant's second amended complaint (the "SAC") for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). For the reasons that follow, we affirm in part, reverse in part, and remand to the district court for proceedings consistent with this opinion.

         I.

         Grant was a Lead Aviation Maintenance Technician for United. From 2008 to 2014, he worked at Charleston Air Force Base ("CAFB"), where United provided engine maintenance services for the U.S. Air Force's fleet of Boeing C-17 Globemaster III military transport airplanes ("C-17s"). United performed this work pursuant to a series of subcontracts. The Air Force contracted with Boeing to manufacture and repair C-17s. Boeing, in turn, subcontracted with Pratt & Whitney ("P&W") to build and maintain F117 engines ("F117 engines") for the C-17s. Finally, P&W subcontracted with United to maintain and repair those F117 engines.

         Specifically, the SAC alleges that pursuant to its subcontract with P&W, United was responsible for, inter alia, repairing, overhauling, and inspecting the F117 engines and accompanying parts. According to the SAC, United is the only company in the world that performs these services for F117 engines. The subcontract requires that repairs be conducted in accordance with numerous regulations for maintaining and inspecting airplanes, including federal aviation regulations ("FAR"), P&W build standards, and Air Force Technical Orders ("Air Force T.O.") (collectively "the regulations"). The regulations required, for example, that United use specific tools that were calibrated to specified levels when conducting certain procedures and investigations. Grant alleges that because United's work was required to comply with the regulations, United violated the FCA by certifying repairs that did not meet those requirements as complete and serviceable and returning them to the Air Force for payment.

         In his SAC, Grant alleges that from 2008 to 2014, he observed three specific practices that purportedly violated the FCA. First, Grant alleges several instances when United "pencil whipped" repairs, meaning it certified that work had been completed even when it had not. For example, an inspector employed by United reported being "[coerced] into not making write ups" regarding problematic engines and was instead asked to "make it disappear or shop for another investigator to sign the item off." J.A. 118-19. Second, Grant alleges several instances when United certified repairs that had been performed by uncalibrated and uncertified tools, in violation of the subcontract's requirements. For example, the SAC alleges that United was required under the regulations to conduct fluorescent penetrant inspections ("FPIs") for cracks in engine parts using a calibrated radiometer. However, between 2008 and 2014, United repeatedly certified that such inspections had been completed even when they were performed using an uncalibrated radiometer or without a radiometer at all; in fact, between December 2013 and March 2014, there was no radiometer at CAFB. Finally, the SAC alleges that United allowed inspectors to continue certifying repairs even after their training and eye exams had expired.

         The SAC further alleges that beginning in early 2014, Grant alerted United to numerous aircraft maintenance violations and was ultimately terminated a few months later. For instance, on February 19, 2014, Grant expressed his concerns that CAFB had no radiometer on the premises to United's Provisioning Coordinator, and later to one of United's F117 engine engineers who in response asked him, "[d]on't you have anything better to do than f[***] things up here?" J.A. 134-35. On March 5 and 13, 2014, he attended investigatory meetings where he discussed United's pencil whipping, failure to use a radiometer, and use of uncalibrated tools with several United managers. That same month, Grant was observed taking pictures of CAFB's FPI radiometer after it had been absent from the premises for five months. He was immediately escorted out of the building. On March 18, 2014, Grant alerted United's Managing Director of Maintenance about the use of "unserviceable" tools and management's knowledge of such use. Two days later, he wrote to the same managing director about these failures, observing that they could "result in catastrophic failure to an engine." J.A. 144. The next day, on March 21, 2014, Grant was informed that his employment would be terminated. A subsequent investigation into Grant's allegations in April 2014 "did not identify any areas of deficiency in the equipment or the training of personnel." Id. Ultimately, Grant was terminated on May 6, 2014.

         II.

         On February 24, 2015, Grant filed a qui tam action against United alleging that United violated three provisions of the FCA. Specifically, Grant alleged that United "knowingly present[ed], or caus[ed] to be presented, a false or fraudulent claim for payment or approval," 31 U.S.C. § 3729(a)(1)(A); "knowingly ma[de], us[ed], or caus[ed] to be made or used, a false record or statement material to a false or fraudulent claim," id. at § 3729(a)(1)(B); and unlawfully terminated Grant for "lawful acts done . . . in furtherance of an [FCA] action . . . or other efforts to stop 1 or more violations of [the FCA]," id. at § 3730(h)(1).

         The district court dismissed Grant's SAC for failure to state a claim under Rule 12(b)(6). See Fed. R. Civ. P. 12(b)(6). It dismissed the first two claims under the FCA because the SAC failed to sufficiently allege that United ever presented, or caused another contractor to present, a false claim for payment to the government, as required by §§ 3729(a)(1)(A) and (B). The district court also dismissed the retaliation claim, reasoning that the SAC did not allege that Grant engaged in the type of activity that is protected by the FCA. This appeal followed.

         III.

         First, we address Grant's claims under §§ 3729(a)(1)(A) and (B). We review de novo the district court's dismissal of a complaint for failure to state a claim under Rule 12(b)(6). Garnett v. Remedi Seniorcare, LLC, 892 F.3d 140, 142 (4th Cir. 2018). In our analysis, we consider only the allegations contained in the SAC. See E.I. du Pont de Nemours & Co. v. Kolon Indus. Inc., 637 F.3d 435, 449 (4th Cir. 2011) ("[M]atters beyond the pleadings . . . cannot be considered on a Rule 12(b)(6) motion.").

         A.

         Generally, a complaint will survive a Rule 12(b)(6) motion to dismiss if it "state[s] a claim to relief that is plausible on its face," meaning that it pleads sufficient facts to support a "reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted). However, fraud-based claims must satisfy Rule 9(b)'s heightened pleading standard. United States ex rel. Nathan v. Takeda Pharm. N. Am., Inc., 707 F.3d 451, 455-56 (4th Cir. 2013). Rule 9(b) requires that "a party must state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.P. 9(b).

         Claims arising under §§ 3729(a)(1)(A) and (B) of the FCA are fraud-based claims that must satisfy Rule 9(b)'s pleading standard. Nathan, 707 F.3d at 455-56. The FCA protects the government against false claims that are presented to it in federal contracts. All FCA claims require, among other elements, that the false statement or conduct "caused the government to pay out money or to forfeit money due." United States ex rel. Harrison v. Westinghouse Savannah River Co., 352 F.3d 908, 913 (4th Cir. 2003) (Harrison II). Section 3729(a)(1)(A) of the FCA prohibits any person from "knowingly present[ing], or caus[ing] to be presented, a false or fraudulent claim for payment or approval." 31 U.S.C. § 3729(a)(1)(A). Section 3729(a)(1)(B) of the FCA prohibits any person from "knowingly mak[ing], us[ing], or caus[ing] to be made or used, a false record or statement material to a false or fraudulent claim." 31 U.S.C. § 3729(a)(1)(B).

         In order for a false statement to be actionable under either subsection of the FCA, it must be made as part of a false or fraudulent claim. Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 786 (4th Cir. 1999) ("The statute attaches liability not to the underlying fraudulent activity or to the government's wrongful payment, but to the 'claim for payment.'") (alterations omitted). A "claim" is "any request or demand, whether under a contract or otherwise, for money or property that . . . is presented to an officer, employee, or agent of the United States." 31 U.S.C. ยง 3729(b)(2)(A) & (A)(i). Therefore, a central question in all FCA cases is whether the ...


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