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United States ex rel McCurdy v. General Dynamics National Steel and Shipbuilding

August 31, 2010

UNITED STATES OF AMERICA, EX REL. SEAN MCCURDY, PLAINTIFF,
v.
GENERAL DYNAMICS NATIONAL STEEL AND SHIPBUILDING (NASSCO), A NEVADA CORPORATION, ET AL., DEFENDANT.



The opinion of the court was delivered by: Honorable Barry Ted Moskowitz United States District Judge

ORDER DENYING MOTION TO DISMISS

Defendant has moved to dismiss the complaint for failure to state a claim and for lack of subject-matter jurisdiction [Doc. 41]. For the following reasons, the Court DENIES the motion.

I. BACKGROUND

This is a qui tam False Claims Act ("FCA") action alleging fraud in Defendant's ship building and repair work for the United States Navy. Through the course of its work, Defendant's employees allegedly collected and sold scrap metal owned by the Navy. The scrap metal should have been reported for the Navy so that the Navy could receive credit for the value of the scrap metal Defendant sold and collected. But according to Relator Sean McCurdy, Defendant under-reported the proceeds from the sale of this scrap metal in its disclosure statements and invoices to the government because certain employees were stealing the scrap metal and selling it. The government allegedly did not receive credit for all the value of the scrap metal, resulting in overpayments to Defendant.

Defendant argues that the Court lacks subject-matter jurisdiction to hear this case because the facts underlying Relator's allegations have already been publicly disclosed. Defendant also argues that Relator has failed to state a claim because Defendant should not be held responsible for the alleged actions of rogue employees, and that Relator has failed to allege it actually submitted any false statements to the Navy. The Court resolves these issues below, starting with the question of subject-matter jurisdiction.

II. LEGAL STANDARD

1. Subject-Matter Jurisdiction

A party may move for dismissal of a suit under Federal Rule of Civil Procedure 12(b)(1) for lack of subject-matter jurisdiction. In a factual attack on jurisdiction, a court "may review evidence beyond the complaint without converting the motion to dismiss into a motion for summary judgment." Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). The Court is not bound to accept the plaintiff's jurisdictional allegations as true, and once the moving party has produced evidence negating jurisdiction, the opposing party must produce its own evidence in order to satisfy its burden of establishing subject-matter jurisdiction. Id.

2. Failure to State a Claim

Under Federal Rule of Civil Procedure 8(a)(2), the plaintiff is required only to set forth a "short and plain statement of the claim showing that the pleader is entitled to relief," and "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). When reviewing a motion to dismiss, the allegations of material fact in plaintiff's complaint are taken as true and construed in the light most favorable to the plaintiff. See Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). But a court must only accept as true factual allegations-not legal conclusions. Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. Although detailed factual allegations are not required, the factual allegations "must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. Furthermore, "only a complaint that states a plausible claim for relief survives a motion to dismiss." Iqbal, 129 S.Ct. at 1949.

III. DISCUSSION

1. The Court Has Subject-Matter Jurisdiction

Defendant argues that the Court lacks subject-matter jurisdiction because the details underlying Relator's suit have been publicly disclosed. Under the FCA, courts lack jurisdiction to hear claims that have already been publicly disclosed, unless the person bringing suit was the original source of the information:

The court shall dismiss an action or claim under this section, unless opposed by the Government, if substantially the same allegations or transactions as alleged in the ...


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