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Anderson v. McTish

July 13, 2006


The opinion of the court was delivered by: Malcolm Muir U.S. District Judge

Complaint Filed 04/07/2004



On April 7, 2004, Plaintiff, David A. Anderson, commenced this action under seal pursuant to the False Claims Act, 31 U.S.C. § 3729 et seq. The Defendants named in the complaint were New Enterprise Stone & Lime Co., Inc. ("New Enterprise"), and McTish, Kunkle & Associates ("McTish"). Anderson in the complaint alleged that New Enterprise and McTish violated section 3729(a)(1), (2) and (3) of the False Claims Act. (Count 1) Anderson also contended that McTish violated section 3730(h) of the False Claims Act which prohibits retaliation by an employer against an employee for investigating or reporting fraudulent activity (Count 2).

Service of the complaint was delayed for an extended time to give the United States an opportunity to decide whether or not it should intervene in the action. On November 30, 2005, the United States filed a notice of election to decline intervention.*fn1

On December 12, 2005, we issued an order unsealing the complaint and authorizing Anderson to serve the Defendants with it. The complaint was served on McTish on April 4, 2006, but the docket does not indicate that it was served on New Enterprise. On May 2, 2006, Anderson filed an amended complaint consisting of one count and setting forth a claim of retaliation under section 3730(h) of the False Claims Act. The amended complaint only named McTish as a Defendant. However, the factual allegations relating to the alleged fraudulent activity set forth in the complaint and amended complaint are practically identical (see the original complaint paragraphs 18 through 37 and the amended complaint paragraphs 14 through 33).

On June 2, 2006, McTish filed a motion pursuant to rule 12(b)(6) of the Federal Rules of Civil Procedure to dismiss the amended complaint for failure to state a claim upon which relief can be granted. A brief in support of that motion was filed on June 8, 2006. On June 21, 2006, Anderson filed a brief in opposition. The motion became ripe for disposition on July 6, 2006, with the filing of McTish's reply brief.

Motions to dismiss pursuant to Rule 12(b)(6) for failure to state a claim are not favored and are to be granted sparingly. Dann v. Studebaker-Packard Corporation, 288 F.2d 201, 215 (6th Cir. 1961). When evaluating a motion to dismiss, the court must accept all material allegations of the complaint as true and construe all inferences in the light most favorable to the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974); Colburn v. Upper Darby Township, 835 F.2d 663, 665-66 (3d Cir. 1988). A complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of the plaintiff's claim which would entitle the plaintiff to relief. See Conley v. Gibson, 355 U.S. 41, 44-46 (1957). A complaint is sufficient if it contains only a short and plain statement of the plaintiff's claim showing that the plaintiff is entitled to relief. Rule 8(a), Fed. R. Civ. P. A plaintiff need only aver generalized facts and not evidentiary facts. American Technical Machinery Corp. v. Masterpiece Enterprises, Inc., 235 F. Supp. 917 (M.D. Pa. 1964). However, the court is "not required to accept legal conclusions either alleged or inferred from the pleaded facts". Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993) (quoting Mescall v. Burrus, 603 F.2d 1266, 1269 (7th Cir. 1979)). Likewise, the court need not "conjure up unpled allegations or contrive elaborately arcane scripts" in order to breathe life into an otherwise defective complaint. Gooley v. Mobil Oil Corp., 851 F.2d 513, 514 (1st Cir. 1988). All reasonable factual inferences are drawn to aid the pleader. So long as a complaint contains facts upon which relief can be granted on any legally sustainable basis and a defendant is on notice as to the nature of the claims, a claim is sufficient.*fn2

To state a claim under section 3730(h), the "whistleblower" section of the the False Claims Act, a plaintiff need not actually file a False Claim Act suit. Hutchins v. Wilentz, Goldman & Spitzer, 253 F.3d 176, 188 (3d Cir. 2001)("The False Claims Act was enacted to encourage parties to report fraudulent activity and was intended to 'protect employees while they are collecting information about a possible fraud, before they have put all the pieces of the puzzle together.'")(citation omitted). To state a claim under section 3730(h) a plaintiff must allege facts indicating the following:

(1) the plaintiff engaged in "protected conduct," i.e., acts done in further of an action under section 3730;

(2) the employer was on notice of the distinct possibility of False Claim Act litigation; and

(3) the employer's retaliation was motivated, at least in part, by the plaintiff's engaging in protected conduct.

Id. at 189 n.9. As for the first element, internal reporting and investigation can be considered protected activity. Id. at 187 One Court has noted that "[i]t would [not] . . . be in the interest of law-abiding employers for the [False Claims Act] to force employees to report their concerns outside the corporation in order to gain whistleblower protection. Such a requirement would bypass internal controls and hotlines, damage corporate efforts at self-policing, and make it difficult for corporations and boards of directors to discover and correct on ...

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