United States District Court, E.D. Pennsylvania
UNITED STATES, ex rel. DONALD PALMER, Plaintiff,
C & D TECHNOLOGIES, INC., Defendant.
GENE E.K. PRATTER, District Judge.
Relator Donald Palmer filed this qui tam action alleging that his former employer C&D Technologies defrauded the Government when it changed its manufacturing procedures for manufacturing back-up batteries for missiles without informing or seeking approval from the Government. Both parties have filed motions for summary judgment. Both parties have also moved to exclude at least one of the opposing party's experts. Because genuine issues of material fact exist, the Court will deny both motions for summary judgment, and while the Court cautions both parties to keep their experts from straying into the province of the jury and from opining on issues not encompassed by their reports, the Court will similarly deny the Daubert motions for the reasons that follow.
FACTUAL AND PROCEDURAL BACKGROUND
C&D manufactures two types of custom ICBM batteries for the United States, the RN-145 and the RN-148. C&D began making these batteries in the 1970s and is the United States' sole supplier. The batteries consist of a large blue steel cabinet (called a tray) that contains eight plastic rectangular jars which house battery plates and acid (called battery cells). The jars are capped with a hard rubber cover or lid. In the manufacture of the batteries, both the battery jars and lids are sandblasted to roughen the surface of the lids and jars. The lid is then attached to the jar with epoxy, and the assembly is coated with polyurethane. There is a dispute of fact as to whether this sandblasting process is done to improve the polyurethane coating's ability to bond to the jar and cover or to improve the epoxy's ability to adhere the cover to the jar, and a dispute as to whether the epoxy seal is to seal the battery to keep electrolytes in the battery or to create a dam to keep polyurethane out. In any case, these steps in the manufacturing process are reflected in C&D's procedure specifications M-551 (for the RN-145 batteries) and M-556 (for the RN-148 batteries).
Until 2006, the sandblasting of both the jars and the covers was performed with #4 grit flint at 120 to 140 psi, and that is reflected in C&D's procedures. When C&D's subcontractor died in 2006, C&D began sandblasting the covers in-house at its Attica, Indiana facility using aluminum oxide instead of flint. The jars were still sandblasted with flint by subcontractors until 2013, at which time the subcontractors informed C&D that they were having trouble obtaining flint. At that time, C&D instructed them to use #24 grit aluminum oxide instead.
1. The Contracts
In August 2005, C&D submitted a bid to the United States in response to a solicitation for RN-145 and RN-148 batteries. The Government accepted C&D's offer and issued a requirements contract that would run for one year, with the option to renew the contract for four additional one year periods. The batteries were identified in the contract by national stock number, part number, and cage code. The batteries were also designated as "Critical Application Items." The contract provided that:
This award consummates the contract which consists of the following documents: (a) the Government's solicitation and your offer, and (b) this award/contract. No further contractual document is necessary.
2006 Contract, Ex. 2 to Relator's Mot. Summ. J., at 1, Block 18. The contract also specified that, "All requests for waivers or deviations classified as critical, major, and minor must be forwarded to the DSC [Defense Supply Center] Contracting Officer for review and approval." Id. at 3, 6. Under the contract, the Government could reject an entire order or shipment if a single defect was found, either upon pre-shipment inspection or after shipment. The contract also stated that, "DSCR does not currently have an approved technical data package available for this NSN. Please do not submit request to DSCR-VABA, " and the box for "Descriptions/Specs/Work Statement" is not checked. Id. at 1, Block 16.C; 3. In the 2005 Solicitation Offer, the boxes for "technical data agreement" and "technical data" are not checked as included as exhibits to the Solicitation Offer. 2005 Solicitation and Offer, Ex. E to Relator's Mot. Summ. J., at 22.
When the contract expired in 2011, the United States continued to order batteries from C&D through a series of follow-on solicitations, contracts, and purchase orders, each of which contained the same language regarding requests for waivers and rejection of entire shipments based on a single defect found during an inspection.
2. The Specifications
Over the course of the relationship between C&D and the Government, C&D has provided copies of its internal manufacturing specifications and has often informed the Government of changes to the specifications. C&D also has sought Government approval for deviations from its specifications. C&D also provided technical drawings of the batteries to the Government at some point in time, and those drawings refer to the specifications for the RN-145 and RN-148 batteries as "Government Document M-551" and "Gov't Document M-556." According to a C&D employee and to an email from a Government employee, the reference to the specifications as "Government" documents was erroneous.
In 2012, C&D provided updated M-551 and M-556 specifications to the Government. The M-551 procedures included a revision that referred to the use of aluminum oxide as a blast media, but did not delete the reference to flint. The M-556 procedures, perhaps inadvertently, did not include a mention of aluminum oxide. After a paragraph-by-paragraph review, the Government did not take issue with the addition of aluminum oxide to the M-551 procedures, but the aluminum oxide addition also was not mentioned in the "Revision Record" which highlighted the changes to the specifications.
C&D employees have testified at depositions that the M-551 and M-556 specifications were internal specifications only, while a Government inspector, Mr. Robinson, testified that he believed there was a technical data package, including the M-551 and M-556 specifications, associated with the batteries and that C&D was obligated to provide a product complying with those specifications. Mr. Robinson also testified that the Government established a set list of areas/processes that it sent inspectors to examine when deciding whether to accept the batteries, and that list did not include inspection of the sandblasting process.
3. Battery Defects
In 2010, the Government sent some batteries back to C&D because they failed voltage leak tests. C&D performed a root cause analysis, through which it detected a jar-to-cover leak in one cell of the first battery it tested. The final investigation report discussed an adhesive failure as the likely culprit, and, among other methods of fixing the problem, C&D stated that it would work with the jar vendor to "improve uniformity of jar (and cover) sandblasting, since the mechanical bond is very sensitive to material surface variability." September 10, 2010 Report to Defense Supply Center re: Returned Leaking RN-148 Batteries, Ex. 33 to Relator's Mot. Summ. J., at 2. C&D told the Government, and still maintains now, that the voltage leaks would not affect battery performance. The analysis of the leaks did not mention the blast media used to sandblast the jars or covers.
C&D has suggested a change in procedure to adhere the lid to the jar using a chemical bonding process to completely seal the jars, but the Government has rejected this offer to change the sealing process.
4. The Relator and his Lawsuit
Donald Palmer was a product engineer at C&D's headquarters in Blue Bell, Pennsylvania. In July 2008, he traveled to C&D's Attica, Indiana facility, and while there, he learned that C&D had substituted aluminum oxide for flint as its sandblasting media for the RN-145 and 148 batteries. He reported the matter to C&D management, warning that, "If it is a contract requirement to use the Flint process, then that is what must be used, unless a written waiver from the government has been obtained prior to starting the contract." See Ex. 63 to Relator's Mot. Summ. J.
Mr. Palmer's employment was terminated in 2011. In 2012, Mr. Palmer filed this qui tam suit, alleging violations of the False Claims Act ("FCA"), 31 U.S.C. § 3729(a)(1)(A) and (B). After this suit was filed, the Government investigated the claims made in Mr. Palmer's suit. After completing the investigation, the Government declined to intervene. Since the time of the investigation, the Government has ordered more batteries per year from C&D than it has in the past and has waived on-site inspection from time to time.
After the Government declined to intervene and the case was unsealed, Mr. Palmer amended his Complaint to add a retaliation claim, which he later withdrew after C&D filed a counterclaim for breach of contract, alleging that the retaliation claim violated portions of Mr. Palmer's Separation Agreement. He more recently amended his Complaint to expand his claims to include all batteries delivered subsequent to the original Complaint through the present as violative of the FCA.
Both parties have filed motions for summary judgment. Both parties have also moved to exclude at least one of the opposing party's experts. Each ...