Opinion
Civil Action No. H-96-3626
March 29, 2002
ORDER GRANTING DEFENDANT'S MOTION FOR JUDGMENT AS A MATTER OF LAW
I. Background and Procedural History
This lawsuit was brought against Boeing North American Space Operations Company, f/k/a Rockwell Space Operations Company ("RSOC"), by Relator, William E. Whipple, under the qui tam provisions of the False Claims Act, which allow private citizens to bring claims against government contractors on behalf of the United States government. RSOC provided engineering, ground support and other services to NASA for the Space Shuffle program pursuant to a government contract. RSOC subcontracted a portion of this work to Omniplan, which provided drafting and document support services. Relator is a former Omniplan employee who alleges that Omniplan and successor subcontractors engaged in fraudulent and wastefull practices that were designed to artificially inflate labor and other charges to NASA. Relator alleges that he informed RSOC of these fraudulent practices, but that RSOC ignored his complaints and knowingly presented the false and inflated Omniplan charges to the government for reimbursement.
Relator filed this qui tam lawsuit in October 1996, but the government declined to intervene. From November 1999 through June 2001, Relator's case was abated while the Fifth Circuit considered the constitutionality of qui tam actions when the government does not intervene. After Relator's case was reinstated, this Court held a three-day bench trial. At the end of Relator's case, this Court granted the Defendant's Motion for Judgment as a Matter of Law for the reasons stated below.
II. Findings of Fact
A. Relator's Allegations
Relator alleges that employees at Omniplan and successor subcontractors, on the instruction of their supervisors, (1) charged excessive idle time as direct labor spent working on the government contract; (2) failed to fill out "correction timecards" to correct projections of time to be worked on Fridays; (3) charged direct labor hours for time spent in meetings not devoted to the objectives of the government contract; (4) failed to use a program known as "Autolsp" to automate format changes to certain drawings; (5) charged time for format changes completed automatically using the Autolsp program as though the changes were completed manually; (6) unnecessarily inflated direct labor charges by failing to use a revision matrix" on all multisheet drawings; and (7) completed revisions and submitted them for review in a piecemeal fashion (also called "churning").
Relator contends that these practices originated at Omniplan and continued to the present day. Relator also alleges that RSOC had knowledge of these practices and knowingly presented false claims for reimbursement in its own invoices to the government in violation of the False Claims Act.
B. The STSOC Contract and the Omniplan Subcontract
In 1986, RSOC entered into the Space Transportation System Operations Contract with NASA (the "Contract"). RSOC subcontracted the design drafting and other document support services (such as technical writing, word processing, graphics, technical library services, and illustrations) to Omniplan, which qualified as a small, disadvantaged business. Omniplan employed Relator as a night shift draftsman from July 1990 through April 1992.
On April 30, 1993, RSOC terminated its subcontract with Omniplan. For a six month period following this termination, RSOC temporarily hired the majority of the former Omniplan employees to perform the work previously done by Omniplan. In October 1993, RSOC awarded Hernandez Engineering ("Hernandez") a new subcontract for much of the work previously done by Omniplan, including design drafting.
In October 1996, the STSOC Contract was terminated. A new contract, covering the work previously done by RSOC, was awarded to United Space Alliance, L.L.C., a joint venture in which RSOC was a member.
Prior to trial, Relator dismissed all claims against Bendix Field Operations Company ("Bendix"), which provided engineering services for the STSOC Contract. During trial, Relator dismissed all claims arising after October 1996, when United Space Alliance, L.L.C., instead of RSOC, was the prime contractor under a new prime contract with NASA.
C. Excessive Idle Time
At trial, Relator estimated that 10% of the time charged to the Contract by Omniplan, RSOC, and Hernandez employees was improperly charged because these employees were not working on the Contract. In support of this allegation, Relator testified that the draftsmen did not have enough work to keep them busy. Relator also offered his own weekly reports to his supervisor in which Relator requested more work for the night shift, preferably new drawings or revisions to existing drawings, which were known as Engineering Design Change Orders ("EDCOs"). This Court finds that Relator's evidence is not credible for a number of reasons.
First, Relator's testimony is contradicted by the testimony of the two former Omniplan draftsmen Relator called as witnesses at trial. These witnesses testified that the draftsmen were always busy and never ran out of work, whether at Omniplan, RSOC, or Hernandez. Moreover, one of the draftsmen, Mr. Bazan, testified that the night shift wanted more new drawings so that they could justify overtime. Mr. Bazan further testified that Relator admitted to him that Relator's weekly reports requested more work to justify overtime. Thus, Relator's weekly reports do not reflect a lack of work, and Relator's testimony is not corroborated by any witness.
Second, the documentary evidence at trial demonstrated that there was abundant drafting work to be done at Omniplan. For example, Omniplan's internal performance reports reflect that there was a backlog of hundreds and sometimes thousands of revisions requiring incorporation by Omniplan's draftsmen, and that this backlog was never eliminated. See Def. Exs. 187-189; see also Def. Exs. 134-137 141. Likewise, Omniplan's Quarterly Program Reviews demonstrated that in May 1990 (around the time Relator was hired), there was an eleven-month backlog of drawing revisions that needed to be incorporated. See Def. Ex. 133, at 4-8. Omniplan's then Vice President Tom Williams testified that this backlog meant that even if the engineers never issued another new drawing request or EDCO, it would take Omniplan's draftsmen eleven months to eliminate the backlog. Similarly, the Quarterly Program Review for April 1992 (the month in which Omniplan terminated Relator's employment) notes that the "Design Drafting Unit workload escalated and is projected to be extremely heavy through September," and that the "[h]eavy workload [is] being managed with addition of temporary drafters, personnel from other units, and overtime as required to meet critical due dates." See Def. Ex. 142, at 1-7. Mr. Williams testified that the backlog was never eliminated at Omniplan, RSOC, or Hernandez, and that it still exists today. Finally, although draftsmen liked new work better than backlog work, this was because such work could be used to justify overtime.
In contrast to specific evidence establishing that there was always work for the draftsmen, neither Relator nor his expert offered any statistical or other analysis of time cards, workload data, accounting records, or other objective data to substantiate Relator's estimate that 10% of all time charged by certain Contract employees constituted idle or nonproductive hours.
Faced with evidence that a backlog of drafting work always existed, Relator testified that only engineers could release backlog drawings from the library and that the engineers would not release the work. No witness corroborated Relator's claim. Furthermore, Relator's testimony is contradicted by Mr. Williams' testimony that Omniplan could pull backlog work from the technical library, which Omniplan operated. A printout from Omniplan's work control system likewise confirmed that an Omniplan draftsman had originated work pulled from the library. See Pl. Ex. 12. Finally, government audit reports contradict Relator's testimony that the draftsmen did not have enough work. For instance, a government audit report from November 7, 1991 states that Omniplan employees were performing Contract work and that the work was verifiable to the charge numbers posted on the employees' timecards. See Pl. Exs. 37-38.
In sum, Relator's claim that 10% of the labor time charged by Omniplan, RSOC, and Hernandez employees was really idle time is neither credible nor supported by the weight of the evidence and other witnesses at trial.
D. Failing to Complete Correction Timecards
At trial, Relator testified that Omniplan, RSOC, and Hernandez employees projected the hours that they would work on Fridays and then failed to submit correction timecards to eliminate charges for time that they did not actually work. Relator estimated that 5% of the time on Fridays that needed correction was not corrected. In support of this allegation, Relator testified that Omniplan management instructed employees not to submit correction timecards. This Court finds Relator's testimony unbelievable for several reasons.
First, Omniplan's written policies required that employees turn in correction timecards on Mondays. See Pl. Ex. 5. Second, the other draftsmen called by Relator as witnesses testified that they were never instructed not to complete correction timecards. One of the other draftsmen, Mr. Barry, specifically recalled completing correction timecards at Omniplan, RSOC, and Hernandez when necessary.
Third, Relator's own weekly reports establish that Relator himself told his supervisor that he would complete correction timecards if necessary. In one of his reports, for example, Relator states that he, along with several other draftsmen, would complete correction timecards if they played in a softball game. See Pl. Ex. 166. Another of Relator's reports states that draftsmen would complete correction timecards for a power outage that had occurred. See Pl. Ex. 168.
Relator offered no evidence, either through documents or through the testimony of other witnesses, that employees at Omniplan, RSOC or Hernandez failed to correct 5% of their time on Fridays. In fact, Relator failed to offer any specific instance of any employee who failed to correct his or her time, let alone how much time needed correction. There is simply no evidence, other than Relator's uncorroborated testimony, that employees failed to correct their time.
E. Improperly Billing Meeting Time
Relator testified that employees working on the Contract improperly charged the time that they spent in Team Excellence and All-Hands meetings. According to Relator, a portion of the time spent in each of these types of meetings included discussions that were not related to the Contract; therefore, time spent in these meetings was improperly charged to the Contract. Without objective data, statistical analysis or sampling, Relator estimated that 1.5% of the time billed to the Contract constituted improperly-charged meeting time. Relator's testimony is not credible. First it is undisputed that Team Excellence was a program required by the subcontract:
The derivation of this 1.5% is based on disallowing all time spent in Team Excellence and All-Hands meetings.
Seller [Omniplan] shall implement and maintain a STSOC Team Excellence Program (STEP) for their firm which will reward and motivate the achievements of identified goals and encourage productivity and cost improvement in the performance of orders issued under the Space Transportation Systems Operations Prime Contract (NAS9-18000).See Pl. Ex. 112, Attachment 3, § 6 (emphasis added). Other witnesses at trial testified that Team Excellence meetings were necessary and helped improve Omniplan's quality and productivity under the STSOC Contract. Thus, the Court finds that Team Excellence meetings were related to the Contract.
Relator also sought damages for the time that employees spent in All-Hands meetings. By definition, a meeting of all hands working on the STSOC Contract would be related to that Contract.
With respect to Relator's claim that 1.5% of the time spent in these meetings was not properly charged, the record contains no corroborating evidence that employees spent a material amount of time in either All-Hands or Team Excellence meetings discussing non-contract items. indeed, Relator offered no evidence of any specific meeting during which employees discussed topics that were unrelated to the Contract for a material amount of time. Relator himself admitted there was no evidence, data or calculations he could use to substantiate his estimate.
In sum, Relator's testimony was completely uncorroborated and falls far short of establishing that a material amount of all time at Team Excellence and All-Hands meetings was spent on matters unrelated to the objectives of the Contract.
F. Improperly Billing for Using Autolsp
At trial, Relator claimed that another draftsman developed a software program called "Autolsp" that automated the process of updating the format of certain drawings. According to Relator, this program not only worked, but also saved substantial time. Relator testified, however, that Omniplan management told the draftsmen not to use the program, and/or that draftsmen used the program, but were instructed to bill as if they had not used it.
Both of Relator's theories depend on Relator's assertion that the Autolsp program worked. No other witness at trial substantiated Relator's assertion, and the record contains no credible evidence that the Autolsp program actually worked. Relator did not offer the program into evidence or demonstrate to the Court that it worked. Relator is not an expert on computer programs, and Relator offered no expert testimony to establish that the program would have saved time if it had been used. Indeed, contrary to Relator's assertion that the program worked, Mr. Bazan testified that Relator told him that the program was demonstrated for the drafting supervisor and that the demonstration failed.
In addition, Relator produced no documentary evidence to support his claim that Omniplan management instructed the draftsmen to bill as if they did not use the program. No other witness corroborated Relator's claim that draftsmen used Autolsp but billed as if they did the work manually. This Court finds Relator's uncorroborated testimony that the draftsmen used the program for fifteen to thirty minutes but billed as if the project had taken several hours to be without credence.
G. Failing to Use a Revision Matrix on All Multisheet Drawings
The revision status of each sheet of a drawing is usually reflected by a letter code (version A, B, C, etc.) in the revision status block located on the lower right corner of each sheet of a drawing. This allows the user to confirm that he or she has the correct and latest version of a drawing. A revision matrix is a chart located on the first sheet of a drawing that reflects the current revision status of all sheets of a multisheet drawing, each sheet of which may have a different revision level.
Without a revision matrix, a draftsman updates the revision level on each sheet to reflect the same and latest revision level as all other sheets so that the user can verify that all pages are current. With a revision matrix, the draftsman updates the revision level block only on the revised sheets and then updates the revision matrix on page one to reflect the corresponding revision level for each sheet.
At trial, it was undisputed that Omniplan's policy required the use of a revision matrix only on multisheet drawings with ten or more sheets. For drawings with nine or less sheets, no revision matrix was required. Relator alleges that a revision matrix should have been required on all multisheet drawings to avoid printing or replotting the sheets in a multisheet drawing that were not otherwise revised. With a revision matrix, a draftsman could revise and print only those pages with revisions, update the revision matrix, and then collate the unrevised sheets with the revised sheets to create a new original version of the drawing.
Relator is not an expert in design drafting, engineering control systems, or configuration management, and his opinion was not substantiated by credible testimony or other evidence. To the contrary, Rockwell's expert (called adversely by Relator) testified that while there are pluses and minuses to using a revision matrix on a drawing, it is easier for a user (typically an engineer) to use a drawing without a revision matrix because it is easier to verify that all sheets of a drawing are current. Likewise, by reprinting or replotting all sheets of a drawing, a draftsman avoids errors associated with printing the wrong pages or miscollating sheets.
Although Relator speculated that the use of a revision matrix on all multisheet drawings could save time, this was never established at trial. In addition, although NASA was the ultimate customer for drawings drafted by Omniplan, no witness from NASA was called to testify that revision matrices should have been used on all multisheet drawings. Finally, Relator could point to no government or industry standard requiring the use of a revision matrix on all multisheet drawings. It was undisputed that there was no such requirement by NASA in the STSOC Contract with RSOC. Relator's claim amounted to his preference for revision matrices and his personal opinion that such matrices should be used on all drawings — an opinion that ignores the downsides of his preferred practice to the end user, the engineer.
H. Unnecessary Churning of Drawings
Relator alleged at trial that Omniplan fraudulently "churned" drawings by having two draftsmen work on the same drawing at the same time. In addition, Relator complained that engineers at RSOC and Bendix would issue EDCOs for the same drawing shortly after a new drawing or a previous EDCO had been issued. Relator complained that this latter practice sometimes necessitated sending the same drawing through the revision process (including internal checking and engineering review) twice when a second trip through the revision process would be unnecessary if the EDCO had been combined with the earlier new drawing or EDCO and revised at the same time.
At trial, other testimony established that two draftsmen working on the same drawing at the same time was, in most instances, a rare mistake, and that these mistakes were caught and corrected each time. In any event, there was no credible evidence that this situation was the result of a deliberate or systematic attempt to artificially inflate the draftsmen's workload, which is what Relator would have the Court believe.
Relator's testimony that a drawing was fraudulently churned if an EDCO was issued by an engineer shortly after a new drawing or earlier EDCO had been issued is simply not credible. To maintain control of the drawing process, an engineer cannot revise a drawing without issuing an EDCO, and the fact that a drawing may need to be revised shortly after it was created or previously revised is not surprising. Although Relator opined that Omniplan or the engineers should try to combine EDCOs so that they could be incorporated by the draftsman at the same time, the failure to do so is not fraudulent. For example, the Court finds persuasive testimony that engineering priorities sometimes required that the earlier EDCO be incorporated immediately instead of waiting for a subsequent EDCO. Likewise, RSOC's expert testified that processing each EDCO separately through the design cycle is preferable in terms of engineering control and configuration management. In sum, Relator's testimony that there was deliberate churning of drawings is neither credible nor supported by the other evidence at trial.
I. RSOC's Alleged Knowledge of Relator's Claims
Relator testified that he telephoned the Rockwell Ombudsman's office in July and August 1991 and orally advised Rockwell of all the allegedly fraudulent Omniplan practices identified in this lawsuit. Relator claims that Rockwell ignored his complaints and knowingly presented false charges for reimbursement to the government. Again, Realtor's testimony is not credible.
First, Relator claimed that at least one of his four phone conversations with the Rockwell Ombudsman was witnessed by Mr. Bazan, but Mr. Bazan testified he recalled no such phone call and that he would have remembered such a call had it occurred. The only other witness to Relator's alleged conversation is dead. Second, Relator's testimony is not consistent with other evidence presented at trial. For example, while Relator frequently wrote long and exhaustive letters recounting the substance of various meetings or phone conversations months after they occurred, Relator presented no evidence of a contemporaneous letter or other document demonstrating that phone conversations with Rockwell in July or August 1991 ever took place. The evidence at trial established that Relator did not document his claimed contact with RSOC until he realized he would be terminated, and even then his letters did not include the detailed allegations he purportedly itemized to RSOC in his oral conversations.
To the contrary, Relator's complaints in 1991 to RSOC were in writing and were limited to employment-related issues such as Relator's repeated complaints about his supervisor's "false" and bad evaluations of him; his supervisor treating him unfairly and prohibiting him from taking a one-hour lunch break when the rest of the night shift had voted for a 30-minute lunch break; and Omniplan's failure to pay Relator for up to 500 hours of compensatory time Relator claimed he worked but never recorded on his time card. Relator's employment-related complaints are in writing, expressed repeatedly, but there are no contemporaneous references to any alleged fraud at Omniplan. Thus, Relator's claim that he orally notified RSOC that certain Omniplan practices were fraudulent is neither corroborated nor credible.
The Court notes that Relator's claim that he worked extensive amounts of overtime is inconsistent with his claim that there was insufficient drafting work at Omniplan.
Similarly, Relator's claim that he told Sherrie Kyle, an RSOC clerk, about alleged fraud is not credible.
Finally, at trial, Relator never pointed to any invoice or series of invoices which RSOC knew contained false or fraudulent charges and which RSOC knowingly presented to the government for payment. Not only does the Court reject Relator's testimony that he orally put RSOC on notice of potential fraudulent activity at Omniplan in 1991, but the Court finds that Relator failed to establish that any person at RSOC actually knew or recklessly disregarded the truth or falsity of any invoice submitted to the government.
J. Relator's Testimony is Not Credible
After hearing three days of testimony and reviewing the documentary evidence, this Court finds that Relator is not a credible witness for a number of reasons. First, Relator's inconsistent statements regarding his termination from Omniplan demonstrate Relator's lack of credibility. At trial, Relator claimed that Omniplan's management gave him a bad evaluation and eventually terminated him because Omniplan learned that Relator orally reported fraud to RSOC. Omniplan's Vice President Tom Williams established that this contention was not true, and no contemporaneous document or other evidence supports Relator's claim. To the contrary, in a sworn statement to the EEOC, Relator claimed that his problems at Omniplan began in March 1991 (long before he allegedly called RSOC), and that he was discriminated against and eventually terminated because he was a male who had filed a sexual discrimination claim, not because he was a whistleblower. At other times, Relator complained to NASA that he never had a difference of opinion with Omniplan until he allegedly refused to perform a false evaluation of a coworker. See Pl. Ex. 135.
There was ample evidence presented at trial that Relator's bad evaluation was warranted because of insubordinate and personal attacks on his female supervisor's fairness and truthfulness. See Def. Exs. 18, 19, 48. Relator copied his coworkers on letters setting forth these attacks, which resulted in Relator receiving poor marks for arousing antagonism with coworkers and management. See Pl. Ex. 43; Def. Exs. 126 127.
Relator's stories not only continually changed with respect to his termination, but also with respect to the claims that Relator brought in this lawsuit. For example, Relator initially complained to NASA that Omniplan's practice of not using a revision matrix on all multisheet drawings was fraudulent because it raised the SEGUs count on drafting jobs. See Def. Ex. 54. Relator told NASA that the revision matrix policy was implemented so that Omniplan could receive payment from the government for SEGU points even when a draftsman performed minimal work on a drawing. See id; see also Relator's Disclosure Statement, dated October 22, 1996 ("With no revision matrix, Omniplan inflated both SEGU points and time charges by billing the United States as though every sheet of a multisheet drawing had been revised, sometimes repeatedly."). The undisputed evidence at trial was that SEGU points were only an Omniplan internal measure of productivity used to compare the page output of different Omniplan workgroups; SEGU points were never used to bill RSOC or the government.
Relator later alleged that failing to use a revision matrix was fraudulent because the government required the use of such matrices. See Second Amended Complaint. The evidence at trial, however, established that no government guideline, law, or regulation required a revision matrix. Finally, Relator was left only with the theory that failing to use a revision matrix was fraudulent because the lack of a revision matrix required the draftsmen to spend unnecessary time plotting drawings. Relator's changing theories of liability undermine the credibility of his claims.
Relator's failure to provide specific instances of improperly billed time in support of his global estimates also undermines his credibility. At trial, Relator testified that he "conservatively" estimated that each of the allegedly fraudulent practices resulted in overcharges to the government, ranging from 1.5% to 10% for each practice. Relator testified that employees spent at least 50% of their time on an average day doing nothing. On its face, this Court finds Relator's assertion unbelievable.
Despite the inordinate amount of time that employees allegedly spent doing nothing, Relator failed to present any specific evidence of improperly-charged time or corroborating testimony from other witnesses. Instead, the evidence and testimony at trial established that the Omniplan draftsmen were always busy, and that even Relator was working extensive amounts of overtime.
Relator's voluminous letters to various government agencies also bring Relator's credibility into question. Relator sent letters on multiple occasions to several government agencies and representatives, including NASA's Office of Inspector General, the Department of Labor, the EEOC, the Internal Revenue Service, the Securities and Exchange Commission, NASA's legal services department, the United States Attorney General, Senator Phil Gramm, Congressman Tom Delay, the Department of Defense, the Defense Logistics Agency, the Merit Systems Protection Board, the U.S. Office of Special Counsel, and the Defense Contract Audit Agency. Indeed, Relator testified that he sent over 700 pages of letters and documents to NASA. Relator's letters complain about his alleged mistreatment by a "clique" of female employees at Omniplan, and include spurious and personal allegations about his coworkers. For example, Relator complained to NASA, in writing, about the financial status of female Omniplan employees whom Relator characterized as belonging to a "clique group (Mutual Admiration Social Society)." See Pl. Ex. 191. Relator urged NASA to investigate the comfortable lifestyle of omniplan employees, who "live[d] in homes and operate[d] new automobiles and [had] a voluminous wardrobe." Id. Relator reported that one of these employees, who had a home, a new truck, "substantial orthodontic and dental work," books and tuition, a computer, and various vacations, had a "live in," and then speculated that this employee was either "receiving God's blessings or reaping benefits in some other manner." Id.
In another letter that Relator shred with his coworkers, Relator wrote derogatory statements about his supervisor, accusing her of "misrepresent[ing] the truth and misappropriat[ing] the authority she has been entrusted." See Def. Ex. 18. Despite the contents of this letter, Relator complained that he was being unfairly criticized for "arous[ing] antagonism with co-workers and management." Id. In yet another letter to NASA, Relator speculated that one of his coworker's "antics" appeared to be drug influenced and that Mr. Williams was involved in drug activity. See Pl. Ex. 187 199.
Although this Court does not attach legal significance to the fact that the government did not intervene in this case, this Court notes that Relator actually reported all of the alleged fraud at Omniplan (and more) to the NASA Office of Inspector General. Relator also met repeatedly with NASA investigators and detailed his allegations in writing to NASA, who was the ultimate customer on the Contract. Despite the fact that Relator called attention to himself and to his claims numerous times, no witness from NASA testified at trial to substantiate any of Relator's claims.
K. Damages
Relator estimated that each of the allegedly fraudulent practices resulted in overcharges to the government, ranging in amount from 1.5% to 10% of the billings submitted by Omniplan, RSOC, and Hernandez. For each of his claims, however, Relator offered no verifiable evidence, objective data, or statistical sampling to support his estimates. It is undisputed that Relator is not an expert and is not qualified to conduct statistical sampling or to offer a scientific basis for his estimates. Relator admitted at trial that there was no data or other evidence about which defense counsel could cross-examine Relator or use to test Relator's estimates. Relator proposed that the Court simply accept his estimates because Relator personally observed allegedly fraudulent practices. Not only is this a factually insufficient basis to substantiate the types of estimates Relator makes, but the Court also finds that Relator's alleged observations are highly questionable.
Relator's damages expert, Darrell Oyer, is a certified public accountant with experience in auditing government contractors and would be well qualified to conduct an audit or an investigation of many of Relator's allegations. He did not do so. Mr. Oyer testified that his role as an expert was limited to accepting Relator's estimates as true, ignoring all evidence to the contrary, tweaking the numbers to account for allowable costs and other issues, and multiplying Relator's estimates by the value of the Omniplan subcontract as though it continued uninterrupted until 1996. As a consequence, the accuracy of Mr. Oyer's damage assessment is entirely dependent upon the accuracy and the credibility of Relator's nonexpert and unreliable estimates. Mr. Oyer's opinion is not reliable because it was built upon a faulty foundation: the uncorroborated and unreliable estimates of Relator.
Any item identified as a finding of fact that is more appropriately considered a conclusion of law shall be deemed as such.
III. Conclusions of Law
In a bench trial, if "a party has been fully heard on an issue and the court finds against the party on that issue, the court may enter judgment as a matter of law against that party with respect to a claim or defense that cannot under the controlling law be maintained or defeated without a favorable finding on that issue." FED. R. CIV. P. 52(c). "Judgment entered under Rule 52(c) is made after the district court has heard all of the evidence bearing on crucial issues of fact." Samson v. Apollo Res., Inc., 242 F.3d 629, 632 (5th Cir.), cert. denied, 122 S.Ct. 63 (2001) (citation omitted). The Fifth Circuit, interpreting former Rule 41 (b), has stated that dismissal of the plaintiff's case is warranted "when the district court, even before hearing the defendant's evidence, determines that the plaintiff has failed to offer persuasive evidence regarding the necessary elements of his case." DuPont v. Southern Nat'l Bank, 771 F.2d 874, 879 (5th Cir. 1985). In reaching this determination, the Court is "entitled to weigh evidence, make credibility judgments, and draw inferences unfavorable to the plaintiffs." North Mississippi Communications, Inc. v. Jones, 792 F.2d 1330, 1333 (5th Cir. 1986). The Court has heard all of the evidence presented by Relator and concludes that judgment should be entered under Rule 52(c) on all of Relator's claims against RSOC.
Rule 52(c) "replaces part of Rule 41(b), which formerly authorized a dismissal at the close of the plaintiffs case [in a bench trial] if the plaintiff had failed to carry an essential burden of proof." FED. R. Civ. P. 52, Advisory Committee Note. Case law construing the former Rule 41(b) is equally applicable to Rule 52(c). See 9A CHARLES ALAN WRIGHT ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 2573.1 at 494 (2d ed. 1995); see also Somat Corp. v. Somat Corp., NO. 90 C 4943, 1992 WL 315198, at *2 (N.D. Ill. Oct. 26, 1992) ("In analyzing a Motion under Rule 52(c), we will apply the standard previously articulated for dismissal under Rule 41(b).")
The False Claims Act requires proof of the following elements: (1) that the defendant knowingly presented or caused to be presented, to an officer or employee of the government, a false or fraudulent claim for payment or approval; (2) that the claim was false or fraudulent; (3) that the defendant knew the claim was false or fraudulent; and (4) the United States suffered damages as a result of the false or fraudulent claim. See 31 U.S.C. § 3729 (a) (1994); United States v. Tran, 11 F. Supp.2d 938, 941 (S.D. Tex 1998).
Under the FCA, a person acts "knowingly" if that person: (1) has actual knowledge of the information; (2) acts in deliberate ignorance of the truth or falsity of the information; or (3) acts in reckless disregard of the truth or falsity of the information. 31 U.S.C. § 3729 (b). Negligence does not meet the statutory standard of knowing conduct. United States ex rel. Durcholz v. FKW Inc., 189 F.3d 542, 544 (7th Cir. 1999).
This Court determines that Relator has presented insufficient evidence to support a finding in Relator's favor on any of his claims that employees at Omniplan, RSOC, and Hernandez, (1) charged excessive idle time as direct labor on the Contract; (2) failed to fill out correction timecards to correct projections of time that were not worked; (3) charged direct labor hours to the Contract for time spent in meetings not devoted to the objectives of the Contract; (4) failed to use a program known as "Autolsp" to automate format changes to certain drawings; (5) charged lime for format changes completed automatically using the Autolsp program as though the changes were completed manually; (6) unnecessarily inflated direct labor charges by failing to use a "revision matrix" on all multisheet drawings; or (7) completed revisions and submitted them for review in a piecemeal fashion (also called "churning").
With respect to Relator's idle time claim, this Court finds that applicable government guidance allows for a range of idle or unproductive time (such as breaks, restroom time, work flow stoppages, etc.) of 5% to 13% of an employee's idle time to be properly billed to a government contract. See Defense Contract Audit Agency Audit Manual, Appendix 1-204.2, 1-204.3, 1-204.4; see also Stanwick Corp., ASBCA No. 18,083, 76-2 B.C.A. (CCH) § 12,114, 1976 WL 2087 (A.S.B.C.A.) at *8 (idle time exceeding 5% of total wages held allowable in GA under cost reimbursement contracts). Regardless of the amount of idle time that could be properly billed under applicable government guidance, this Court finds that Relator presented no reliable evidence that any employees improperly billed any material amount of idle time to the Contract.
The Court notes that even Relator's expert Darryl Oyer testified that up to 5% of idle time could be properly billed to the Contract.
With respect to Relator's allegation that the time spent in meetings was improperly billed, this Court finds that the costs of attending meetings are "allowable costs" under the Federal Acquisition Regulations if the purpose of the meeting "is the dissemination of trade, business, technical or professional information or the stimulation of production or improved productivity." 48 C.F.R. § 31.205-43 (c) (2001). As previously noted, there is insufficient evidence to support a finding that any Omniplan, RSOC, or Hernandez employees spent a material amount of time in Team Excellence or All-Hands meetings that fell outside of this classification. See Wickham Contracting Co. v. Fischer, 12 F.3d 1574, 1581 (Fed. Cir. 1994) (holding that meeting costs are properly charged as direct costs rather than as overhead). As such, this Court finds that the time spent in Team Excellence and All-Hands meetings was properly charged to the Contract.
Regarding Relator's allegations that Omniplan, RSOC and Hernandez: (1) failed to use Autolsp, (2) failed to use revision matrices, and (3) "churned" drawings, this Court determines that Relator's allegations amount to no more than a claim that these drafting procedures were inefficient or could have been improved. An allegation of inefficiency does not state a claim under the FCA. See Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 789 (4th Cir. 1999) ("The allegations of breaches of contractual and fiduciary duty amount to no more than allegations of poor and inefficient management of contractual duties. The district court was correct in holding that poor, or to use Harrison's term, `non-cost effective' management is not actionable under the False Claims Act.") (citation omitted); see also Luckey v. Baster Healthcare Corp., 183 F.3d 730, 733 (7th Cir. 1999) ("All this record reveals is a dispute about whether Baxter's testing protocols could be improved. An affirmative answer to that question would not suggest that Baxter's representations to the United States in years past were false or fraudulent."). This Court concludes that Relator's Autolsp, revision matrix, and churning claims, and the evidence offered to support them, do not amount to fraud or false claims. Regardless of whether Relator's claims are characterized as allegations about efficiency, this Court concludes that Relator has failed to present credible evidence that would support a finding in his favor on the Autolsp, revision matrix, and churning claims. There is insufficient evidence to support a finding that RSOC knowingly presented any claims for payment to the government that were false or that it knowingly presented any invoices containing false claims. Relator has presented insufficient evidence to show that RSOC acted in deliberate ignorance or reckless disregard of the truth or falsity of invoices that allegedly contained false claims. Further, there is insufficient evidence to support a finding that the United States suffered damages as a result of any of the alleged practices enumerated above.
Relator's estimates of the amount of time that was improperly billed as a result of the allegedly fraudulent practices exceed the scope of permissible lay testimony. "[A] person may testify as a lay witness only if his opinions or inferences do not require any specialized knowledge and could be reached by any ordinary person." Doddy v. Oxy USA, Inc., 101 F.3d 448, 460 (5th Cir. 1996). Relator was never offered as an expert, and this Court finds that Relator is not qualified as an expert under Federal Rule of Evidence 702, which provides that only witnesses qualified as experts by knowledge, skill, experience, training, or education can offer expert opinions. Moreover, Relator's estimates are not supported by any objective data, studies, or reliable sampling techniques. As such, Relator's estimates are not competent evidence on which to base a damage award.
Relator's damage estimates are also unsupported by any reliable expert testimony. The failure of Relator's damages expert, Darrell Oyer, to conduct an investigation or to analyze objective data places his methodology at odds with the procedures established by comparable experts in the accounting field. Consequently, and given the limitations on the scope of his work, Mr. Oyer's testimony does not meet the reliability standards imposed by federal law. See, e.g., Kumho Tire Co. v. Carmichael, 526 U.S. 137, 152 (1999) (stating that the expert should employ "in the courtroom the same level of intellectual rigor that characterizes the practice of an expert in the relevant field"); Seatrax, Inc. v. Sonbeck Int'l, Inc. 200 F.3d 358, 372 (5th Cir. 2000) (describing a damages expert's failure to independently analyze the numbers underlying his proposed testimony as an "insurmountable" obstacle.).
Furthermore, as previously stated, Mr. Oyer merely relied on Relator's estimates in order to calculate damages. Relator's estimates are not supported by any objective data, studies, or sampling techniques. As such, this Court finds that Relator's estimates are not a sufficiently reliable basis for Mr. Oyer's damage calculations. See FED. R. EVID. 702 (1) (stating that expert testimony must be "based upon sufficient facts or data"); see also Viterbo v. Dow Chem. Co., 826 F.2d 420, 422 (5th Cir. 1987). Finally, Relator's extrapolation of damages from the night shift draftsmen to other work groups and companies that he did not observe amounts to impermissible speculation. See United States v. Collyer Insulated Wire Co., 94 F. Supp. 493, 498-99 (D.R.I. 1950) (finding that the government's attempt to extrapolate damages by projecting the percentage of faulty wire found in a sample that it had tested to all of its contracts with the defendant to be impermissible "speculation and guesswork.").
Any item identified as a conclusion of law that is more appropriately considered a finding of fact shall be deemed as such.
IV. Conclusion
For the reasons stated above, this Court finds that Relator's evidence is both legally and factually insufficient and cannot support a judgment in his favor. Accordingly, Defendant's Motion for Judgment as a Matter of Law is GRANTED and Relator's claims are DISMISSED.
FINAL JUDGMENT
As the Court has granted Defendant's Motion for Judgment as a Matter of Law, the Court hereby ORDERS that final judgment be entered in favor of Defendant. Relator shall take nothing from Defendant.