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United States ex rel. Budike v. Peco Energy

United States District Court, Third Circuit

November 4, 2013



R. BARCLAY SURRICK, District Judge.

Presently before the Court is Defendant General Dynamics American Overseas Marine's Motion to Dismiss the Second Amended Complaint (ECF No. 65) and Plaintiff's Motion for Leave to Amend the Second Amended Complaint (ECF No. 66). For the following reasons, Plaintiff's Motion will be granted and Defendant's Motion will be dismissed without prejudice.


Relator, Lothar E.S. Budike, Sr. submitted a complaint to the Attorney General of the United States and the United States Attorney's Office for the Eastern District of Pennsylvania. (Am. Compl. ¶ 75, ECF No. 18.) In the Amended Complaint, Relator alleged systemic and widespread "improper billing practices by PECO Energy Company ("PECO"), the Philadelphia Regional Port Authority ("PRPA"), and General Dynamics American Overseas Marine ("AMSEA") with regard to providing electricity to certain United States naval vessels. ( Id. )

On October 3, 2007, Relator filed a qui tam complaint, pursuant to the Federal Claims Act ("FCA") 31 U.S.C. §§ 3729 et seq., . (Compl., ECF No. 1.) Relator alleged that the named Defendant in the action, PECO, submitted false and fraudulent claims and cost reports to the United States Navy to obtain "hundreds of thousands of dollars in overpayment for electricity and related services." ( Id. at ¶ 2.) On April 8, 2011, Relator filed an Amended Complaint. (Am. Compl.) The Amended Complaint named as additional Defendants PRPA and AMSEA and contained additional factual allegations. ( Id. ) The Amended Complaint alleges three Counts: (i) violation of the FCA (Count I); (ii) retaliation and discrimination under the FCA (Count II); and (iii) retaliatory discharge of Relator (Count III). ( Id. at ¶¶ 77-86.) Relator requested relief in the form of civil damages, treble damages, and attorneys' fees and costs. ( Id. at ¶¶ 1, 81, 83, 86.)

In October 2011, PECO, PRPA, and AMSEA each filed a motion to dismiss. (ECF Nos. 43, 44, 45.) On September 13, 2012, Defendants' motions were granted in part and denied in part. (Sept. 2012 Mem. Op., ECF No. 56.) Counts II and III were dismissed in their entirety, with prejudice. (Sept. 2012 Order, ECF No. 57.) Count I, as it related to PRPA, was also dismissed with prejudice. ( Id. ) Count I against AMSEA, however, was dismissed without prejudice, and the Court gave Relator the "opportunity to cure the deficiencies... with respect to Count I." (Sept. 2012 Mem. Op. ¶ 51.) On November 20, 2012, Relator filed its Second Amended Complaint. (SAC, ECF No. 60.) On December 18, 2012, AMSEA filed its Motion to Dismiss Relator's Second Amended Complaint, claiming that Relator has failed to state a claim under the FCA against AMSEA. (AMSEA's Mot., ECF No. 65.) In response, on January 7, 2013, Relator filed his Motion for Leave to Amend the Second Amended Complaint, (Relator's Motion, ECF No. 65) as well as a response in opposition to AMSEA's Motion (ECF No. 67). Relator attached a copy of its proposed Third Amended Complaint (TAC) to his Motion. (Relator's Mot. Ex. B.) On January 15, 2013, AMSEA filed an opposition to Relator's Motion (AMSEA's Opp'n, ECF No. 69), and on January 22, 2013, PECO joined AMSEA's Opposition (ECF No. 70).


The factual background surrounding this case is fully set forth in our September 2012 Memorandum Opinion. Our discussion here will be limited to those facts that are relevant to the Motions currently before us. ( See Sept. 2012 Mem. Op. 2-9.)

A. PRPA Provides Electric Power to LMSR Naval Vessels

On January 29, 2003, PRPA and the United States entered into a contract, No. "N00033-03-C-5310." (SAC ¶ 13; TAC ¶ 14.) Pursuant to this contract, PRPA agreed to provide auxiliary support services, including electrical power, to two Large, Medium-Speed, Roll-On/Roll-Off ("LMSR") Naval Vessels ("Vessels") at the Tioga Marine Terminal ("Terminal"), located in Philadelphia, Pennsylvania. (SAC ¶¶ 13-14; TAC ¶¶ 14-15.) The United States agreed to procure electric power from PRPA, which agreed to subcontract electric services "at the most competitive rates obtainable." (SAC ¶ 15; TAC ¶ 16.) AMSEA, a ship operating segment of General Dynamics Marine Systems, operates and manages seven LMSR Vessels for the United States. (SAC ¶ 11; TAC ¶ 11.)

On April 25, 2003, PRPA entered into a contract with PECO to provide electric power to the LMSR Vessels. (SAC ¶ 20; TAC ¶ 20.) Shortly after October 17, PECO began generating and submitting monthly bills to PRPA that reflected the demand for, and consumption of, electric power supplied to the Vessels. (SAC ¶ 21; TAC ¶ 21.)

B. AVE's Comprehensive Energy Audit on Behalf of PRPA

Relator is a federally licensed United States Marine Chief Engineer, and President of A-Valey Engineers, Inc. ("AVE"), a multi-disciplinary engineering and consulting firm. (SAC ¶ 8; TAC ¶ 8.) In 2005, PRPA hired AVE to provide on-call engineering services at its facilities. (SAC ¶ 24; TAC ¶ 24.) AVE conducted a preliminary investigation. At the conclusion of this investigation, PRPA hired AVE to conduct a comprehensive energy audit because there were concerns that PECO was submitting inflated bills for electric power being supplied to the LMSR Vessels. (SAC ¶ 27; TAC ¶ 27.)

On June 22, 2006, PRPA notified PECO that it had retained AVE to investigate the electric power charges and authorized PECO to release to AVE all documentation and information related to the investigation. (SAC ¶ 28; TAC ¶ 20.) In August and September 2006, AVE requested from PECO copies of certain documents, including contracts and monthly bills to PRPA from January 2003 to July 2006. (SAC ¶ 29; TAC ¶ 29.) When PECO failed to provide AVE with the information that it requested, AVE continued ...

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