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Perry v. Pacific Maritime Industries Corp.

United States District Court, S.D. California

May 30, 2017



          HONORABLE LARRY ALAN BURNS United States District Judge

         When evaluating a False Claims Act case, courts must “ensure that government contractors will not face onerous and unforeseen FCA liability as the result of noncompliance with any of potentially hundreds of legal requirements established by contract. Payment requests by a contractor who has violated minor contractual provisions that are merely ancillary to the parties' bargain are neither false nor fraudulent.” United States ex rel. Kelly v. Serco, Inc., 846 F.3d 325, 333 (9th Cir. 2017) (quotations and citation omitted). That's the case here.

         Joseph Perry filed a qui tam action on behalf of the United States against his former employer-Pacific Maritime Industries, Harcon Precision Metals, and owner John Atkinson (“Pacific”)-for knowingly submitting false claims for payment to the United States in violation of the False Claims Act. 31 U.S.C. § 3729. Perry says Pacific tried to cheat the Navy on three contracts by supplying (1) overweight doors, (2) cheap locks, and (3) defective lockers. The Court disagrees. Pacific's motion for summary judgment is granted.

         Legal Standard

         Summary judgment is appropriate when there's no genuine issue as to any material fact. Fed.R.Civ.P. 56(c). “To survive summary judgment, the relator must establish evidence on which a reasonable jury could find for the plaintiff.” Serco, Inc., 846 F.3d at 330 (9th Cir. 2017) (affirming summary judgment for defense contractor accused of submitting fraudulent claims to Navy) (quotations and emphasis omitted).


         Under the False Claims Act, Perry must prove that Pacific knowingly presented a false claim for payment or approval. 31 U.S.C. § 3729 (a)(1)(A).[1] “A misrepresentation about compliance with a . . . contractual requirement must be material to the Government's payment decision in order to be actionable under the False Claims Act.” Universal Health Servs., Inc. v. United States, 136 S.Ct. 1989, 1996 (2016). Perry hasn't offered material evidence that Pacific was trying to cheat the government. In fact, Perry didn't mention a single case or offer any argument on how the specific aspects of the law apply to his claims.

         I. Doors

         A. Background

         Pacific agreed to build 50 doors for Defense Logistics Agency for use on Navy ships. The contract specified payment of some $86, 000-roughly $82, 500 for the doors and $3, 500 for a First Article Test. The Test required Pacific to inspect one of the doors to ensure the door complied with the contract specifications. The contract also required Defense Contract Management Agency to approve the Test.[2]

         Perry says the Test had two parts. Juvenal Torres performed the first part; Perry performed the second part. The doors complied with all of the contract specifications, except, on Perry's reading of the relevant military provision, the doors were too heavy. Perry told CEO John Atkinson and Engineering Manager Phu Vu. They disagreed. Atkinson said there was no weight requirement for the doors. Perry alleges Atkinson instructed him to write down “that all items tested” “were in conformance with the requirements.” Perry prepared the Test, but refused to sign it. Instead, Juvenal Torres, Phu Vu, and Roger Kemp (Quality Department) signed the Test.[3]

         Pacific shipped the doors to Defense Logistics before Defense Contract Management Agency approved the Test as the contract required. As a result, Defense Logistics paid Pacific for the doors, but it never paid for the Test. About nine months after Pacific shipped the doors, Defense Logistics modified the contract and deleted the provision requiring the Test. Atkinson says the problem was that Pacific hadn't performed a First Article Test in a while, there was some confusion over what needed to be done, and ultimately, Pacific performed a standard inspection of the 50 doors instead of a true First Article Test.[4]

         B. Analysis

         Perry alleges two false statements: (1) Perry's statements on the First Article Test that the doors conformed with weight requirements even though they didn't; and (2) Torres, Vu, and Kemp's signatures approving the portion of the Test that Perry performed.

         1. Weight

         “Knowing submission of claims that, as here, are not false or fraudulent, obviously does not give rise to liability.” U.S. ex rel. Lindenthal v. Gen. Dynamics Corp., 61 F.3d 1402, 1412 (9th Cir. 1995). Perry says that he falsified the First Article Test on Atkinson's orders by writing down that the doors “were in conformance with the requirements.” But that's not what the Test says. Item 78, “Weight of Furnishing, ” states that “the weight of the furnishing shall not be greater than 105 percent of the weight ...

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