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United States ex rel. Bailey v. Gatan, Inc.

United States District Court, E.D. California

March 20, 2015

UNITED STATES OF AMERICA, and STATE OF CALIFORNIA, ex rel. BRENT BAILEY and EMILY WADE, Relators,
v.
GATAN, INC., ROPER INDUSTRIES, INC. and DOES 1 through 100, Inclusive, Defendants.

MEMORANDUM AND ORDER

MORRISON C. ENGLAND, Jr., Chief District Judge.

Through the present action, Relators Brent Bailey ("Bailey") and Emily Wade ("Wade") (collectively "Relators")[1] sue Gatan, Inc. ("Gatan") and its parent corporation Roper Industries ("Roper") (collectively "Defendants") under the False Claims Act, 31 U.S.C. § 3729, et seq. ("FCA") and its California counterpart, Government Code § 3729, et seq. ("CFCA"). This lawsuit was originally filed under seal on January 13, 2012, pursuant to the qui tam provisions of the FCA. The United States of America ("United States") and the State of California ("California") declined to intervene in the action, and therefore this Court unsealed the complaint. ECF No. 11, 12.

Relators allege seven claims against Defendants under both the FCA and CFCA. Compl., ECF No. 1, at ¶¶ 71-91. The claims can be summarized as follows: (1) that Gatan knowingly presented, or caused to be presented, a false or fraudulent claim (first and fourth claims); (2) that Gatan knowingly made, used, or caused to be made or used, a false record or statement material to a false or fraudulent claim (second and fifth claims); (3) that Gatan conspired to defraud the United States and the State of California by getting a false or fraudulent claim allowed or paid (third and sixth claims); and (4) that Gatan failed to disclose false claim within reasonable time (seventh claim). Id.

Presently before the Court is Defendants' Motion for Judgment on the Pleadings pursuant to Federal Rule of Civil Procedure 12(c), which alternatively seeks to strike certain allegations. ECF No. 56. Relators filed a timely opposition to both requests contained in Defendants' motion.[2] ECF No. 61. For the reasons stated below, Defendants' motion is DENIED in part and GRANTED in part.[3]

BACKGROUND

Relators are former employees of Gatan, which is a wholly-owned subsidiary of Roper. Compl. at ¶¶ 8-9, 11. Gatan is a leading manufacturer of instrumentation and software that enhance the performance of electron microscopes. Id. at ¶ 20. Relators allege that Defendants made false or fraudulent claims in the sale of equipment and accessories that cause potentially unsafe and hazardous X-ray radiation leaks. Id. at ¶ 1. Specifically, Relators claim that Gatan fails to advise its customers that the allegedly defective products put them at risk of being exposed to radiation in excess of the limits proscribed by the Nuclear Regulatory Commission ("NRC") and the Federal Drug Administration ("FDA"). Id. at ¶ 3-4. Relators also allege that Gatan falsely claims to all its employees and customers that its products are exempt from compliance with FDA regulations. Id. at ¶ 3. Additionally, Relators aver that, as a result of Gatan's concealment and misrepresentations, its customers fail to classify their employees as radiation workers despite the radiation risks associated with the equipment. Id. at ¶ 5. Finally, Relators allege that Gatan regularly failed to test the radiation emissions of their products before shipping to its customers. Id. at ¶ 45. Relators contend that the adversely-affected customers include the United States, California, and entities that receive funding from the United States and California. Id. at ¶ 50. Consequently, Relators argue that these allegations show that Defendants knowingly made false and misleading claims to its customers, in violation of the FCA and CFCA.

Relators brought this action on January 13, 2012, alleging seven claims under both the FCA and CFCA. Compl. at ¶¶ 71-91. Relators further claim that Roper is liable for Gatan's conduct because "[i]n California, a parent corporation is fully liable for the acts of its wholly owned subsidiary." ECF No. at ¶ 12. Defendants bring the instant motion seeking judgment on the pleadings. As indicated above, Defendants alternatively move to strike several allegations in Relators' Complaint. ECF No. 56.[4]

STANDARD

Under Federal Rule of Civil Procedure 12(c), [5] "a party may move for judgment on the pleadings" after the pleadings are closed "but early enough not to delay trial." A motion for judgment on the pleadings pursuant to Rule 12(c) challenges the legal sufficiency of the opposing party's pleadings. See, e.g., Westlands Water Dist. v. Bureau of Reclamation, 805 F.Supp. 1503, 1506 (E.D.Cal. 1992). Any party may move for judgment on the pleadings under Rule 12(c) after the pleadings are closed but within such time as to not delay trial.

The standard for evaluating a motion for judgment on the pleadings is essentially the same as the standard applied to a Rule 12(b)(6) motion. Dworkin v. Hustler Magazine, Inc., 867 F.2d 1188, 1192 (9th Cir. 1989). A motion for judgment on the pleadings should only be granted if "the moving party clearly establishes on the face of the pleadings that no material issue of fact remains to be resolved and that it is entitled to judgment as a matter of law." Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1550 (9th Cir. 1989) (internal citation omitted). Judgment on the pleadings is also proper when there is either a "lack of cognizable legal theory" or the "absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1988). In reviewing a Rule 12(c) motion, "all factual allegations in the complaint [must be accepted] as true and construe[d]... in the light most favorable to the non-moving party." Fleming v. Pickard, 581 F.3d 922, 925 (9th Cir. 2009). Judgment on the pleadings under Rule 12(c) is warranted "only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Deveraturda v. Globe Aviation Sec. Servs., 454 F.3d 1043, 1046 (9th Cir. 2006) (internal citations and quotation marks omitted).

Courts have discretion to grant leave to amend in conjunction with motions made pursuant to Rule 12(c). Lonberg v. City of Riverside, 300 F.Supp.2d 942, 945 (C.D. Cal. 2004) (citation omitted). Generally, leave to amend a complaint is denied only if it is clear that the deficiencies of the complaint cannot be cured by amendment. DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992).

ANALYSIS

Defendants claim that Relators have failed to allege FCA liability with particularity, failed to allege a false claim under an "implied false certification" theory, and failed to describe any false record or statement. ECF No. 57 at 6-15. Also, Defendants contend that Relators have not established a basis for holding Roper liable for its parent company Gatan's alleged ...


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