United States v. Bollinger Shipyards, Inc.

UNITED STATES OF AMERICA

v.BOLLINGER SHIPYARDS, INC., ET AL.

CIVIL ACTION NO: 12-920

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA SECTION: R(5)

Dated: January 30, 2013

ORDER AND REASONS

Before the Court is defendants'¹ motion to dismiss plaintiff United States' False Claims Act (FCA), common law fraud, negligent misrepresentation, and unjust enrichment claims.² For the following reasons, defendants' motion is GRANTED, and plaintiff is granted leave to amend.

I. Background

The United States brings claims against Bollinger in connection with its work on the United States Coast Guard's Deepwater program, which involved the replacement of the Coast Guard's fleet of water vessels, aircraft, and electronic systems. The Government's claims are based on the following allegations.

In Phase 1 of the Deepwater program, the Coast Guard considered proposals from three prospective lead contractors. The Coast Guard selected Integrated Coast Guard Systems (ICGS) to proceed as the lead systems integrator under Phase 2 of the project. Part of the Deepwater program involved converting existing 110-foot patrol boats into 123-foot patrol boats. Bollinger, which had built the 110-foot fleet, was ultimately selected as the subcontractor to design and construct the new 123-foot patrol boats.

The government alleges that in September 2000, during Phase 1 of the project, the Coast Guard notified ICGS and Bollinger that it was concerned about the structural integrity of the hulls of the vessels to be modified, since the vessels were to be extended by thirteen feet.³ It said that no analysis had been performed to determine if the increased stress on the hull would produce unacceptable bending of the hull girder.⁴ On October 3, 2000, Bollinger submitted to the Coast Guard a calculation of midship section modulus, which measures the hull's resistance to bending and is one measure of a boat's longitudinal strength.⁵ Bollinger told the Coast Guard that it calculated the section modulus to be 7,152 cubic inches, which compared favorably to thestandard of 3,113 cubic inches contained in the American Bureau of Shipping (ABS) Guide for Building and Classing High Speed Craft.⁶ The government alleges that Bollinger's section modulus calculation overstated the longitudinal strength of the proposed 123-foot patrol boat design by using thicker hull plating in its calculation than existed in the vessels.⁷ The complaint alleges that this initial representation was "unreasonable."⁸ The government alleges that it relied on Bollinger's representation of sufficient hull strength in accepting Bollinger's design and awarding the Phase 2 contract to ICGS on June 25, 2002, about two years after it received Bollinger's section modulus calculation.

The contract between the Coast Guard and ICGS contained a Contract Data Requirements List (CDRL), which identified the information that ICGS and Bollinger were required to provide the Coast Guard concerning the contract deliverables.⁹ The United States alleges that one of the requirements was that Bollinger provide the Coast Guard with a Hull Load and Strength Analysis (HLSA) in order to verify that the modified vessels met the program and contract requirements.¹⁰ The Government neverspecifically alleges what the program and contract requirements were for the converted vessels. In August 2002, the Coast Guard issued the first of four Delivery Task Orders (DTOs) to ICGS for Bollinger to commence the 110-foot patrol boat conversion project on a firm fixed-price basis.¹¹ In May and August 2003, the Coast Guard issued three additional DTOs for converted patrol boats.¹²

The United States alleges that during Phase 1, Bollinger was notified by a NGSS predecessor that the ICGS contract required the contractor to use ABS to certify compliance with ABS standards.¹³ The government does not allege that ABS certification was in fact a written contract requirement or that the CDRL included ABS certification as a requirement for delivery. The United States alleges that on August 26, 2002, Bollinger's chief executive officer, Boysie Bollinger, advised Bollinger personnel that an ABS executive who was a former Coast Guard Commandant had offered to review the hull design of the modified patrol boats confidentially.¹⁴ CEO Bollinger asked for the views of his staff as to whether or not to accept the offer.¹⁵ The United States alleges that Bollinger vice presidentT.R. Hamblin responded by recommending that Bollinger decline ABS' offer to conduct a review. Then on August 27, 2002, CEO Bollinger allegedly replied to Hamblin:

I'm concerned that [Kramek] sells CG on the fact that they need this review. . . . [ABS] would love the additional responsibility from the CG and as we both know, adverse results could cause the entire 123 to be an un-economical solution if we had to totally rebuild the hull. . . . MY CONCERN - we don't do anything - ABS gets CG to require it without our input, and the result is we BLOW the program.¹⁶

The United States alleges that on or about the same day an unidentified Bollinger employee or employees performed a series of calculations of the 123-foot patrol boat section modulus.¹⁷ They allegedly ran the Midship Section Calculator (MSC) program at least three times, changing input data, and obtaining results of 2,836, 3,037, and 5,232 cubic inches.¹⁸ The United States alleges that Bollinger obtained the result of 5,232 cubic inches by changing the physical properties of the shape files included in the MSC model and by entering "data into the MSC program that did not reflect the actual structural characteristics of the converted vessels."¹⁹

On August 28, 2002, NGSS authorized Bollinger to proceed with the work "in anticipation of definitizing a Firm Fixed Price - type contract by 30 September 2002."²⁰ The complaint does not allege when the contract was actually "definitized."²¹ On September 4, 2002, Bollinger submitted to the Coast Guard an initial CDRL S012-11 report stating that the midship section modulus was 5,232 cubic inches.²² This calculation was significantly lower than the 7,152 cubic inches calculation that Bollinger submitted during Phase 1, but still above the minimum section modulus of 3,113 cubic inches contained in the ABS Guide.²³ The complaint also alleges that Bollinger created an internal draft CDRL S012-11 report that showed a 3,037 cubic inches section modulus, but it did not submit this to the Coast Guard.

The United States alleges that on October 9, 2002, Bollinger held a Preliminary Design Review meeting at which Bollinger told the Coast Guard that ABS would review the midship section modulus calculation and longitudinal strength.²⁴ The complaint alleges that on December 18, 2002, Bollinger informed the Coast Guard ata Critical Design Review Meeting that ABS had been engaged to review compliance with "ABS rules."²⁵ The United States further alleges that ABS did not certify or review Bollinger's section modulus calculations.²⁶ On December 16, 2002, Bollinger submitted a final CDRL S012-11 report with the same section modulus of 5,232 cubic inches as the September report.²⁷ In March 2004, Bollinger delivered to the Coast Guard the first converted patrol boat, the Matagorda, which the Coast Guard paid for.²⁸

The United States alleges that on August 20, 2004, after the delivery of the Matagorda, a Bollinger Vice President signed CDRL S016 certifying compliance with applicable contract requirements.²⁹ On September 10, 2004, the Matagorda suffered a structural casualty.³⁰ The United States alleges that the subsequent Coast Guard investigation found that Bollinger's reported measurements "overstated the actual section modulus depicting the longitudinal strength of the hull."³¹ Bollingerretested the hull strengths of the boats and reported an actual section modulus of 2,615 cubic inches.³² The United States also alleges that on October 13, 2004, after the failure of the Matagorda, Bollinger vice president Hamblin emailed CEO Bollinger and others that, "we did lead the CG into a false sense of security by telling them early on that the Section Modulus for a 123 would be 5230 inches cubed as opposed to the real number, just above 2600."³³ The complaint alleges that between November 22, 2002, and December 26, 2006, the Coast Guard paid approximately $78 million in response to 65 requests for payment from ICGS for work performed by Bollinger.³⁴ The United States alleges that all of the vessels supplied by Bollinger turned out to be unseaworthy.³⁵ The parties executed a statute of limitations tolling agreement on December 5, 2008.³⁶

On July 29, 2011, the United States filed this action against Bollinger based on allegations that "Bollinger knowingly misled the Coast Guard to enter into a contract for the lengthening of the Coast Guard cutters by falsifying data relating to the structural strength of the converted vessels."³⁷ The United States alleges five causes of action: that Bollinger (1) knowingly presented false or fraudulent claims for payment or approval to the United States in violation of the False Claims Act, 31 U.S.C.A. § 3729(a)(1)(A); (2) knowingly made false records or statements material to false or fraudulent claims for payment by the United States in violation of the False Claims Act, § 3729(a)(1)(B); (3) committed common law fraud by making misrepresentations of material fact; (4) made negligent misrepresentations; and (5) was unjustly enriched. Bollinger has filed a motion to dismiss for failure to state a claim, and for failure to plead fraud with particularity as required by Federal Rule of Civil Procedure 9(b). Bollinger also argues that the statute of limitations bars the United States' False Claims Act and negligent misrepresentation claims.

II. Legal Standard

To survive a Rule 12(b)(6) motion to dismiss, the plaintiff must plead enough facts "to state a claim to relief that isplausible on its face." Ashcroft v. Iqbal, 129 S.Ct. 1937,...