GERRY DALE; and PATRICIA DALE in the name of the UNITED STATES GOVERNMENT pursuant to the False Claims Act, 31 U.S.C. § 3729 et seq; the STATE OF DELAWARE; the DISTRICT OF COLUMBIA; the STATE OF FLORIDA; the STATE OF ILLINOIS; the STATE OF INDIANA; the STATE OF LOUISIANA; the STATE OF NEW YORK; the STATE OF TENNESSEE; and the STATE OF VIRGINIA, Plaintiffs
ALAN ABESHAUS; ERIC ABESHAUS; MITCHELL KURLANDER; and DAVID DRILL, Defendants
ROSS BEGELMAN, ESQUIRE MARC MICHAEL ORLOW, ESQUIRE REGINA D. POSERINA, ESQUIRE On behalf of Plaintiffs.
RUDOLPH GARCIA, ESQUIRE JOSEPH R. LOVERDI, ESQUIRE  On behalf of Defendants Alan Abeshaus, Eric Abeshaus, and Mitchell Kurlander
ROBERT S. MORAFF, ESQUIRE WILLIAM R. HINCHMAN, ESQUIRE  On behalf of Defendant David Drill
JAMES KNOLL GARDNER, United States District Judge.
This matter is before the court on The Abeshaus Parties’ Motion to Dismiss the Fourth Amended and Restated Qui Tam Complaint, which motion was filed on September 19, 2012. On September 19, 2012 Defendant David Drill’s Joinder of the Abeshaus Parties’ Motion to Dismiss the Fourth Amended and Restated Qui Tam Complaint was filed.
SUMMARY OF DECISION
For the following reasons I grant in part and deny in part defendants’ motion to dismiss.
Specifically, I grant defendants’ motion to dismiss to the extent it seeks dismissal of Count II because plaintiffs have not alleged that the Attorney General for the State of Delaware issued a written determination that plaintiffs’ claim under the Delaware False Claims and Reporting Act was supported by substantial evidence. Accordingly, Count II of plaintiffs’ Fourth Amended Complaint is dismissed with prejudice.
However, defendants’ motion to dismiss is denied in all other respects. I conclude that plaintiffs have asserted a viable claim under the federal False Claims Act in Count I and have asserted viable claims under various state-law false claims acts in Counts III though IX.
Specifically, I conclude that plaintiffs have alleged with sufficient particularity that defendants knowingly submitted false claims to the federal government and various state governments. Moreover, I conclude that plaintiffs’ federal claim and state-law claims are not barred by the statute of limitations. Finally, I conclude that former defendants the Schutt Corporate Entities are not necessary parties under Rule 19 of the Federal Rules of Civil Procedure.
Jurisdiction in this case is based upon federal question jurisdiction pursuant to 28 U.S.C. § 1331. This court has supplemental jurisdiction over plaintiff’s pendent state-law claims. See 28 U.S.C. § 1367.
Venue is proper pursuant to 28 U.S.C. § 1391(b) because a substantial part of the events giving rise to plaintiffs’ claims occurred within this judicial district.
This case was initiated on October 20, 2006 as a qui tam action under the federal False Claims Act (“FCA”), 31 U.S.C. § 3730.
Pursuant to the FCA, such actions must not be served and must remain under seal for 60 days, during which time the United States has the opportunity to intervene, or seek an extension of time for which the complaint must remain under seal. See 31 U.S.C. § 3730(b).
This case was placed in civil suspense by the Clerk of Court and remained under seal until 2009. During this time, plaintiffs apparently filed a second amended complaint. On September 3, 2009 the United States’ Notice of Election to Decline Intervention was filed. By Order dated September 10, 2009 and filed September 15, 2009, I ordered that the case remain sealed for 60 days in order to provide the state parties with the opportunity to intervene. On September 22, 2009 plaintiffs filed their third amended complaint under seal.
None of the state parties moved to intervene. Accordingly, by Order dated December 23, 2009 and filed December 29, 2009 I removed this case from civil suspense and ordered that the United States’ notice declining intervention, my September 10, 2009 Order, and plaintiffs’ third amended complaint, as well as all subsequent pleadings, be unsealed.
On January 12, 2010 plaintiffs’ moved to file their third amended complaint nunc pro tunc. By Order dated May 11, 2010 and filed May 12, 2010 I granted plaintiffs’ motion and on May 20, 2010 plaintiffs’ filed their third amended complaint.
Plaintiffs’ fourteen-count third amended complaint asserted causes of action against the above-captioned defendants as well as former defendants Schutt Holdings, Inc.; Schutt Sports, Inc.; and Circle Systems Group, Inc. (collectively “the Schutt Corporate Entities”).
On July 1, 2010 the Schutt Corporate Entities filed a motion to dismiss the third amended complaint. Also on July 1, 2010 the defendants Alan Abeshaus, Eric Abeshaus and Mitchell Kurlander (collectively “the Abeshaus Defendants”) filed a motion to dismiss. On July 12, 2010 defendant David Drill filed a motion to dismiss.
On September 9, 2010, while the motions to dismiss were pending, Circle Systems Group, Inc. and Schutt Sports, Inc. filed a suggestion of bankruptcy under Chapter 11. On September 17, 2010 Schutt Holdings, Inc. also filed a suggestion of bankruptcy. Accordingly, by Order dated February 14, 2011 and filed February 15, 2011, this case was again placed in civil suspense.
Although the Schutt Corporate Entities bankruptcy proceedings remained pending, on June 13, 2011, I held oral argument on the Abeshaus’ Defendants motion to dismiss and defendant Drill’s motion to dismiss. At oral argument, as well as in their responses in opposition to defendants’ motions to dismiss, plaintiffs requested leave to file a fourth amended complaint.
These motions to dismiss remained pending while the Schutt Corporate Entities proceeded in bankruptcy. However after the bankruptcy proceedings persisted for an excess of a year, by Order dated July 31, 2012 and filed August 1, 2012, I granted plaintiffs’ request to file a fourth amended complaint and dismissed defendants’ motions to dismiss plaintiffs’ third amended complaint as moot.
On August 15, 2012 plaintiffs filed their Fourth Amended Complaint, which alleges claims against defendants Alan Abeshaus, Eric Abeshaus, Mitchell Kurlander and David Drill. In their Fourth Amended Complaint, plaintiffs do not assert claims against the Schutt Corporate Entities.
Count I of plaintiffs’ Fourth Amended Complaint asserts a claim under the federal False Claims Act, 31 U.S.C. § 3729 (a). Within Count I plaintiff alleges four parts: (1) a violation of § 3729(a)(1) for presenting a false claim for payment or approval; (2) a violation of § 3729(a)(2) for making or using a record or statement to get a false claim paid; (3) a violation of § 3729(a)(3) for conspiring to defraud the Government by getting a false claim paid; and (4) a violation of § 3729(a)(7) which imposes liability on any person who “knowingly makes, uses, or causes to be made or used a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government.”
Counts II through IX assert state-law claims for violations of the false claims acts of various states. Specifically, plaintiffs allege a claim under the Delaware False Claims and Reporting Act, 6 Del.C. §§ 1201 to 1211 (Count II), a claim under the District of Columbia False Claims Act, D.C.Code. §§ 2-308.13 to 2-308.21 (Count III), a claim under the Florida False Claims Act, Fla.Stat. §§ 68.081 to 68.1051 (Count IV), a claim under the Illinois Whistle Blower Reward and Protection Act, 740 Ill.C.S. 175/1 to 175/8 (Count V), a claim under the Indiana False Claims and Whistle Blower Protection Act, Ind. Code §§ 5-11-5.5-1 to 5-11-5.5-18 (Count VI), a claim under the Tennessee False Claims Act, Tenn.C.A. §§ 71-5-181 to 71-5-199 (Count VII), a claim under Virginia’s Fraud Against Taxpayer’s Act, Va.Code.Ann. §§ 8.01-216.1 to 8.01-216.19 (Count VIII), and a claim under the New York False Claims Act, N.Y.State.Fin. §§ 187 to 194(Count IX).
On September 10, 2012 the Abeshaus Defendants filed the within motion to dismiss. On September 19, 2012 defendant David Drill filed his motion to dismiss, which joined the Abeshaus Defendants’ motion to dismiss. Defendants seek dismissal for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, and in the alternative, for failure to join a necessary party pursuant to Rule 12(b)(7).
STANDARD OF REVIEW 12(b)(6) Failure to State a Claim
A claim may be dismissed under Federal Rule of Civil Procedure 12(b)(6) for “failure to state a claim upon which relief can be granted.” A Rule 12(b)(6) motion requires the court to examine the sufficiency of the complaint. Conley v. Gibson, 355 U.S. 41, 45, 78 S.Ct. 99, 102, 2 L.Ed.2d 80, 84 (1957) (abrogated in other respects by Bell Atlantic Corporation v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Generally, in ruling on a motion to dismiss, the court relies on the complaint, attached exhibits, and matters of public record, including other judicial proceedings. Sands v. McCormick, 502 F.3d 263, 268 (3d Cir. 2008).
Except as provided in Federal Rule of Civil Procedure 9, a complaint is sufficient if it complies with Rule 8(a)(2), which requires “a short and plain statement of the claim showing that the pleader is entitled to relief”. Rule 8(a)(2) does not require heightened fact pleading of specifics, but only enough facts to state a claim to relief that is plausible on its face. Twombly, 550 U.S. at 570, 127 S.Ct. at 1974, 167 L.Ed.2d at 949.
In determining whether a complaint is sufficient, the court must accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading, the plaintiff may be entitled to relief. Fowler, 578 F.3d at 210 citing Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008).
Although “conclusory” or “bare-bones allegations” will not survive a motion to dismiss, Fowler, 578 F.3d at 210, a complaint may not be dismissed merely because it appears unlikely that the plaintiff can prove those facts or will ultimately prevail on the merits. Phillips, 515 F.3d at 231. Nonetheless, to survive a Rule 12(b)(6) motion, the complaint must provide “enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary element.” Id. at 234 quoting Twombly, 550 U.S. at 556, 127 S.Ct. at 1965, 167 L.Ed.2d at 940 (internal quotations omitted).
The court is required to conduct a two-part analysis when considering a Rule 12(b)(6) motion. First, the factual matters averred in the complaint, and any attached exhibits, should be separated from legal conclusions asserted. Fowler, 578 F.3d at 210. Any facts pled must be taken as true, and any legal conclusions asserted may be disregarded. Id. at 210-211.
Second, the court must determine whether those factual matters averred are sufficient to show that the plaintiff has a “plausible claim for relief.” Id. at 211 quoting Iqbal, 556 U.S. at 679, 129 S.Ct. at 1950, 178 L.Ed.2d at 884.
Ultimately, this two-part analysis is “context-specific” and requires the court to draw on “its judicial experience and common sense” to determine if the facts pled in the complaint have “nudged [plaintiff’s] claims” over the line from “[merely] conceivable [or possible] to plausible.” Iqbal, 556 U.S. at 679-680, 129 S.Ct. at 1949-1951, 178 L.Ed.2d at 884-885.
A well-pled complaint may not be dismissed simply because “it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely.” Twombly, 550 U.S. at 556, 127 S.Ct. at 1965, 167 L.Ed.2d at 940-941 (internal quotations omitted).
12(b)(7) Failure to Join a Necessary Party
Federal Rule of Civil Procedure 12(b)(7), together with Federal Rule of Civil Procedure 19, allow for dismissal for failure to join a party “in whose absence the court cannot accord complete relief, or whose interest in the dispute is of such a nature that to proceed without their presence could prejudice that party or others.” Cummings v. Allstate Insurance, Co., 2012 U.S.Dist. LEXIS 84673, *8 (E.D.Pa. June 19, 2012) (Kelly, S.J.).
As with a 12(b)(6) motion, “[i]n reviewing a Rule 12(b)(7) motion to dismiss, the court must accept all factual allegations in the complaint as true and draw all reasonable inferences therefrom in favor of the non-moving party.” Pittsburgh Logistics Systems, Inc. v. C.R. England, Inc., 669 F.Supp.2d 613, 618 (W.D.Pa. 2009) citing Jurimex Kommerz Transit G.M.B.H. v. Case Corp., 65 Fed.Appx. 803, 805 (3d Cir. 2003).
Additionally, the court may consider “relevant, extra-pleading evidence” in deciding a 12(b)(7) motion. Cummings, 2012 U.S.Dist. LEXIS 84673 at *8-9. The moving party can provide, and the court can consider, “affidavits of persons having knowledge of these interests as well as other relevant extra-pleading evidence.” See Collier, 17 F.3d at 1293 quoting 5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure 1359, at 426-27 & n.12.
Ultimately, the moving party bears the burden of showing that the absent party should be joined under Rule 19. See Disabled in Action v. Southeastern Pennsylvania Transportation Authority, 635 F.3d 87, 97 (3d Cir. 2011).
Based upon the well-pled averments in plaintiff’s Fourth Amended Complaint, which I must accept as true under the above standards of review, the pertinent facts are as follows.
Beginning on November 19, 1993 plaintiff Gerry Dalewas employed as a sports production manager by former defendant Circle Systems Group, Inc.
Circle Systems Group, which was in the business of reconditioning athletic equipment, was owned by former defendant Schutt Holdings, Inc., which also owned the outstanding shares of stock of former defendant Schutt Sports, Inc.
Defendant Alan Abeshaus is the former executive chairman of the board of directors for Circle Systems Group and was its “de facto” Chief Executive Officer. Defendant Eric Abeshaus, son of Mr. Alan Abeshaus, is the former vice president of manufacturing of Circle Systems Group, Inc. Defendant David Drill is the former president of Circle Systems, Inc.Defendant Mitchell Kurlander, son-in-law of Alan Abeshaus and brother-in-law of Eric Abeshaus, is the former vice president and Chief Financial Officer of Circle Systems Group.
All defendants had unrestricted access to the details and facts underlying Circle Systems Group’s daily operations and financial position.
During his employment at Circle Systems Group, Mr. Dale was affiliated with the reconditioning of all athletic equipment.
The reconditioning of athletic equipment is influenced by the National Operating Committee on Standards for Athletic Equipment (“NOCSAE”). NOCSAE is a nonprofit corporation formed in 1969 in response to a ...