United States v. Honeywell Int'l, Inc., Civil Action No. 08–961 (RWR).

841 F.Supp.2d 112

81 Fed.R.Serv.3d 1057

UNITED STATES of America, Plaintiff,

v.HONEYWELL INTERNATIONAL, INC., Defendant.

Civil Action No. 08–961 (RWR).

United States District Court, District of Columbia.

Jan. 25, 2012.

Albert Thomas Morris, Alicia J. Bentley, Callie R. Owen, Jennifer Lynn Chorpening, United States Department of Justice, Washington, DC, for Plaintiff.

Craig S. Primis, Eugene Frank Assaf, Jr., Washington, DC, Jennifer Walsh Cowen, Chicago, IL, Daniel A. Bress, Janakan L. Thiagarajah, Laura Marie Cullen, New York, NY, for Defendant.

MEMORANDUM ORDER

RICHARD W. ROBERTS, District Judge.

The government brings claims against defendant Honeywell International, Inc. (“Honeywell”) for alleged violations of the False Claims Act (“FCA”), 31 U.S.C. §§ 3729–33, as well as for common law unjust enrichment, in connection with the sale of Zylon body armor containing “Z Shield” ballistic material. Honeywell's motion to dismiss was denied and Honeywell filed an answer to the complaint, asserting various affirmative defenses. The government moves to strike the first affirmative defense of waiver and estoppel on the grounds that waiver and estoppel are legally invalid defenses where, as here, the action is by the United States government for recovery of money paid from the United States Treasury.

An insufficient defense may be stricken from a pleading under Federal Rule of Civil Procedure 12(f). Fed.R.Civ.P. 12(f). But “striking pleadings is generally disfavored as an extreme remedy.” Intex Recreation Corp. v. Team Worldwide Corp., 390 F.Supp.2d 21, 24 (D.D.C.2005). What constitutes an insufficient defense depends upon the nature of the claim and the defense in question. “[A] defense that might confuse the issues in the case and would not, under the facts alleged, constitute a valid defense to the action can and should be deleted.” 5C Charles Alan Wright, Arthur R. Miller, Mary Kay Kane & Richard L. Marcus, Federal Practice and Procedure § 1381 (3d ed. 2011).

The government relies principally on the Supreme Court's decision in Office of Personnel Mgmt. v. Richmond, 496 U.S. 414, 110 S.Ct. 2465, 110 L.Ed.2d 387 (1990), for the proposition that courts are prohibited from applying equitable doctrines such as waiver and estoppel to prevent the government from bringing claims to recover funds paid improperly from the Treasury. (Pl.'s Mem. of P. & A. in Support of Mot. to Strike Def.'s First Affirmative Defense (“Pl.'s Mem.”) at 3–6.) Richmond addressed an action by a benefits claimant who relied on erroneous advice from a government employee about eligibility limits that caused the claimant to exceed the limits and lose eligibility for certain federal disability payments. Because the Appropriations Clause provides that “[n]o money shall be drawn from the Treasury” except as a result of lawful Congressional appropriations, the Court held that payments from the federal treasury were limited to those authorized by statute and the governmentemployee's erroneous advice could not estop the government from denying benefits not otherwise permitted by law. Richmond, 496 U.S. at 424, 110 S.Ct. 2465. The government argues that the principles of Richmond bar application of the equitable defenses of both estoppel and waiver to an action by the government under the FCA. (Pl.'s Mem. at 6–8.) The Richmond Court, however, limited its decision to the facts before it, where a plaintiff sought to use estoppel offensively to claim payment from the government, and expressly “le[ft] for another day whether an estoppel claim could ever succeed against the Government[.]” Richmond, 496 U.S. at 423, 110 S.Ct. 2465.

The D.C. Circuit has held that “the fundamental principle of equitable estoppel applies to government agencies, as well as private parties.” ATC Petroleum, Inc. v. Sanders, 860 F.2d 1104, 1111 (D.C.Cir.1988) (internal quotations omitted). The Circuit continued to recognize that position in decisions post-dating Richmond, see Morris Commc'ns, Inc. v. FCC, 566 F.3d 184, 191 (D.C.Cir.2009); Graham v. SEC, 222 F.3d 994, 1007 (D.C.Cir.2000), including where the government brought an action to recover federal funds. See LaRouche v. FEC, 28 F.3d 137, 142 (D.C.Cir.1994). The standard, however, is an exacting one. See Int'l Union v. Clark, Civil Action No. 02–1484(GK), 2006 WL 2598046, at *12 (D.D.C. Sep. 11, 2006) (“There is a clear presumption in this Circuit against invoking the doctrine [of equitable estoppel] against government actors in any but the most extreme circumstances.”) The government “may not be estopped on the same terms as any other litigant [may be].” Heckler v. Cmty. Health Svces., Inc., 467 U.S. 51, 60, 104 S.Ct. 2218, 81 L.Ed.2d 42 (1984). The party asserting equitable estoppel “must show that (1) ‘there was a “definite” representation to the party claiming estoppel,’ (2) the party ‘relied on its adversary's conduct in such a manner as to change his position for the worse,’ (3) the party's ‘reliance was reasonable’ and (4) the government ‘engaged in affirmative misconduct.’ ” Morris, 566 F.3d at 191 (quoting Graham, 222 F.3d at 1007).¹

The government conduct giving rise to the defense of waiver must constitute an “intentional relinquishment or abandonment of a known right.” United States v. Weathers, 186 F.3d 948, 955 (D.C.Cir.1999) (quoting United States v. Olano, 507 U.S. 725, 733, 113 S.Ct. 1770, 123 L.Ed.2d 508 (1993)). The waiver must be made by one having the authority to do so. See Fed. Crop Ins. Corp. v. Merrill, 332 U.S. 380, 384, 68 S.Ct. 1, 92 L.Ed. 10 (1947) (“Whatever the form in which the Government functions, anyone entering into an arrangement with the Government takes the risk of having accurately ascertained that he who purports to act for the Government stays within the bounds of his authority.”) The authority to bring FCA cases is vested in the Attorney General. 31 U.S.C. § 3730(a).

Honeywell argues that, though it anticipates additional discovery, it has already compiled a record supporting the defenses of waiver and estoppel. Specifically, it alleges that the United States knew at an early stage that the Z Shield contained in Zylon vests could degrade in certain conditions, that the government initiated a testing program to confirm this, that Honeywell informed the government of its own testing on this issue and offered to share data, but that the government failed to respond to Honeywell's offers. (Def.'s Mem. of P. & A. in Support of Opp'n to Pl.'s Mot. to Strike (“Def.'s Opp'n”) at 11–14.) The government contests the veracity of these assertions and contends that even assuming equitable estoppel and waiver are legally available defenses, they should be stricken here because the factual allegations proffered by Honeywell do not meet the high standards for maintaining such defenses. (Pl.'s Reply in Support of Mot. to Strike at 5–10.)

The government's argument has merit. Even if Honeywell's factual assertions are accepted as true, and deemed incorporated into the answer, Honeywell has not set forth the elements of either estoppel or waiver that are necessary in order to maintain these defenses against the government. With respect to estoppel, Honeywell has not pointed to any definite representation by the government, only a failure of the government to accept Honeywell's offer of test results. See, e.g., Morris, 566 F.3d at 191–92 (holding that FCC's failure to respond to plaintiff's licensing waiver request for three years was not a “definite” representation of approval). Nor has Honeywell shown any reasonable reliance on government representations in such a manner as to change its position for the worse. Honeywell merely describes continuing a course of action—the sale of Z Shield—that it had embarked on earlier. Lastly, the government's alleged failure to accept Honeywell's offers of research assistance, even if that failure could be characterized as misconduct, is not of an affirmative nature sufficient to assert a defense of estoppel against the government. See id. at 192 (concluding that FCC's three-year silence in response to licensing waiver request, while “egregious,” does not amount to “affirmative misconduct”).

With regard to the defense of waiver, Honeywell fails to identify any clear and intentional relinquishment or abandonment by the Attorney General of the right to sue under the FCA. Nor has Honeywell presented any support for the proposition that Department of Justice employees acted with the Attorney General's authority to waive the right to bring an FCA case during those employees' interactions with Honeywell. In sum, the government's continued purchase of vests containing Z Shield, over a period during which Honeywell allegedly made repeated offers of research assistance and test data, does not warrant a finding that the government has waived or should be estopped from bringing this action.

To be sure, a motion to strike is not the appropriate place to resolve significant factual disputes between the parties. Accordingly, courts in this circuit typically have resolved the availability of equitable...