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Chotas v. Area Storage and Transfer Inc.

United States District Court, M.D. Pennsylvania

June 12, 2014



SYLVIA H. RAMBO, District Judge.

In this civil action, Plaintiff sued her former employer pursuant to Section 3730 of the False Claims Act, 31 U.S.C. §§ 3729-3733, for unlawful termination in retaliation to her complaints about and efforts to stop her employer's allegedly fraudulent conduct. Presently before the court is Defendant Area's motion to dismiss (Doc. 11), which challenges whether Plaintiff sufficiently pleaded that she engaged in conduct protected by the FCA. For the following reasons, the court concludes that Plaintiff sufficiently pleaded her cause of action and will deny Defendant Area's motion to dismiss.

I. Background

As is required when deciding a motion to dismiss, the court will accept the well-pleaded factual averments set forth in the complaint (Doc. 1) as true and view them in the light most favorable to Plaintiff as the nonmoving party.

A. Facts

Defendant Area Storage and Transfer Inc. ("Defendant Area") is a Pennsylvania Corporation with its principle place of business located within the Middle District of Pennsylvania and an employer of approximately 400 employees. ( Id. at ¶ 2.) David F. Demchak II ("Mr. Demchak") and Lori Demchak ("Mrs. Demchak") are husband and wife and are Defendant Area's President and Vice President, respectively. ( Id. at ¶ 3.) The United States Postal Service ("USPS") contracts with private companies to provide various services, including those for transportation and delivery. ( Id. at ¶ 13.) Defendant Area was retained by USPS to supply transportation services, which involved the physical transportation of mail from one location to another via long-haul tractor trailers. ( Id. ) Defendant Area has operated Highway Contract Routes ("HCRs") for USPS since 1989. ( Id. at ¶ 2.) In order to receive and maintain an HCR, Defendant Area was required to submit various forms and certifications, which assist USPS in its evaluation of prospective suppliers based on supplier eligibility, financial capability, past performance, and supplier capability. ( Id. at ¶¶ 14-15.) For purposes of determining financial capability, USPS requires the supplier submit detailed financial information, copies of the last three months' bank statements, a letter from the supplier's bank stating that the contractor has an available credit line of at least ten-percent of the estimated contract amount, and credit reports from the three major credit bureaus. ( Id. at ¶ 15.) For purposes of determining supplier capability, USPS assesses the supplier's equipment capacity, which incorporates, inter alia, a review of the supplier's fleet. ( Id. at ¶ 16.)

Plaintiff, Jennifer Chotas, began her employment as Defendant Area's Accounting and Analysis Manager on July 11, 2011. ( Id. at ¶ 1.) As part of Plaintiff's job duties, she was responsible for preparing and reviewing Defendant Area's financial records, including accounting and ledger sheets, balance sheets, equipment inventory records, profit and loss statements, financial statements, and banking records, and was responsible for payroll auditing, human resources planning and management, accounting controls maintenance, and other duties as assigned by Mr. and Mrs. Demchak. ( Id. at ¶¶ 11, 20.) In late February 2012, Mrs. Demchak informed Plaintiff that certain documents were soon due for purposes of renewal of Defendant Area's contracts with USPS. ( Id. at ¶ 21.) Soon thereafter, Plaintiff took three days of personal leave ( Id. ) and, upon her return on March 5, 2012, Mrs. Demchak told Plaintiff that her assistance with the USPS documents was not needed ( Id. at ¶ 22).

On March 6, 2012, while reconciling Defendant Area's February 2012 PNC bank account statement, Plaintiff discovered a $725, 000.00 adjustment to the contract revenue account which replaced a January 5, 2011 $225, 000.00 cash deposit from Kemner Delivery Service. ( Id. at ¶ 23.) This adjustment effectively increased Defendant Area's revenue by $500, 000.00. ( Id. ) Plaintiff also noticed that a $500, 000.00 payment journal entry had been posted to the company's computerized account ledger in QuickBooks, which recorded the purchase of $500, 000.00 worth of trucks to correspond to a $500, 000.00 decrease in cash, which was not reflected in the bank statements. ( See id. at ¶ 24.) Plaintiff also discovered a second payment journal entry for $500, 000.00, which overrode the first entry by making the financial accounts reflect the $500, 000.00 disbursement for trucks effective December 31, 2011. ( Id. ) All three of these transactions occurred within an eleven minute period on March 1, 2012. ( See id. at ¶¶ 23, 24.)

On March 7, 2012, Plaintiff printed the journal entries that overstated revenue by $500, 000.00 and questioned Mrs. Demchak about the changes. ( Id. at ¶ 25.) Mrs. Demchak acknowledged that she made the changes, explaining that she "was just trying something for up and coming [USPS] contracts." ( See id. ) In response to Plaintiff's characterizing Mrs. Demchak actions as fraudulent, Mrs. Demchak disposed of the printout. ( Id. )

On March 8, 2012, Plaintiff audited other QuickBooks accounts and found entries affecting Fuel line items for 2009, 2010, and 2011. ( Id. at ¶ 26.) The following day, Plaintiff brought the results of her investigation to the attention of Mrs. Demchak, who again indicated that she was "just trying something" for the USPS contracts. ( Id. at ¶ 27.) Plaintiff again told Mrs. Demchak that these alterations should not have been made. ( Id. ) Plaintiff corrected each of the entries. ( Id. at ¶ 28.) Soon thereafter, Plaintiff began to be minimized and marginalized in her job duties and responsibilities by Mrs. Demchak. ( See id. at ¶¶ 34-41.)

On August 16, 2012, Plaintiff discovered a directory in Defendant Area's shared computer hard drive labeled "Area_Postal, " in which she found various files related to Defendant Area's USPS business, including one called "Area_Financials." ( Id. at ¶ 29.) In that file, Plaintiff found the financial documents submitted to USPS, which were dated March 2, 2012, and initialed by Mr. Demchak, and a letter dated March 2, 2012, that forwarded Defendant Area's financial statements for 2009, 2010, and 2011, and certifying that the documents reflected an accurate overview of the company's financial strength. ( Id. ) Upon examination, Plaintiff realized that the submissions contained the false information she previously brought to Mrs. Demchak's attention, inasmuch as Defendant Area's 2011 net income was falsely overstated by $500, 000.00. ( Id. at ¶ 31.)

On August 21, 2012, Plaintiff reported her discovery to Al Gremmel, Defendant Area's Operations Manager, and informed him that there were "fraudulent entries" on the financial submissions to USPS. ( Id. at ¶ 33.) Plaintiff also told Mr. Gremmel that she believed the documents and entries she had discovered had been illegally used to obtain USPS contract renewals. ( Id. ) Mr. Gremmel brought Plaintiff's accusations to the attention of the Demchaks, and discovered that Mr. Demchak was aware of the fraudulent activities. ( Id. at ¶¶ 43-45.)

On August 23, 2012, Plaintiff left work early with the approval of Mr. Gremmel. ( Id. at ¶ 46.) The following day, Plaintiff met with Mrs. Demchak and Mr. Gremmel, during which time she was informed that her employment was terminated. ( Id. at ¶ 48.) Mr. Gremmel confirmed that Plaintiff's reports of fraudulent activities contributed to Mrs. Demchak's decision to ...

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