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U.S. v. TECH REFRIGERATION
United States District Court, Northern District of Illinois, Eastern Division
June 5, 2001
UNITED STATES OF AMERICA, PLAINTIFF, VS. TECH REFRIGERATION, DIANE KULASKI, AND THOMAS KULASKI, DEFENDANTS.
The opinion of the court was delivered by: Matthew F. Kennelly, United States District Judge.
The United States government sued Tech Refrigeration, its president
Diane Kulaski, and its general manager Thomas Kulaski, for defrauding
Amtrak. The government alleges that the defendants, along with Raymond
Corcoran, a former Amtrak employee who headed Amtrak's project to
redevelop Chicago's Union Station, bilked Amtrak out of tens of thousands
of dollars through an over-billing and kickback scheme. It claims that
Tech submitted fraudulent claims totaling $87,800 and kicked back just
over $52,000 to Corcoran. In October 1999, Corcoran pled guilty to mail
fraud. The government filed this suit, along with several others against
other contractors who allegedly engaged in similar schemes with
Corcoran, in June 2000. The complaint alleges violations of the False
Claims Act, 31 U.S.C. § 3729(a)(1), (2) and (3), as well as common
law claims of payment by mistake and unjust enrichment. The defendants
have moved to dismiss under Rule 12(b)(6), arguing that the claims are
barred by the statute of limitations.
The parties have discussed only the False Claims Act claim, so we will
focus our analysis there as well. We begin with the language of the
False Claims Act. The statute provides that a civil action under §
3730 may not be brought —
(1) more than 6 years after the date on which the
violation of section 3729 is committed, or
(2) more than 3 years after the date when facts
material to the right of action are known or
reasonably should have been known by the official of
the United States charged with responsibility to act
in the circumstances, but in no event more than 10
years after the date on which the violation is
committed, whichever occurs last.
31 U.S.C. § 3731(b). "The six-year limitations period begins to run
`on the date the claim is made, or if the claim is paid, on the date of
the payment.'" United States ex rel. Kreindler & Kreindler v. United
Technologies, Corp., 777 F. Supp. 195, 200 (N.D.N.Y. 1991) (quoting
Blusal Meats, Inc. v. United States, 638 F. Supp. 824, 829 (S.D.N.Y.
1986), aff'd, 817 F.2d 1007 (2d Cir. 1987)). See also Jana, Inc. v.
United States, 41 Fed. Cl. 735, 743 (Ct.Cl. 1998) (when the government
pays a false claim, the FCA statute of limitations begins to run on the
date of final payment).
The complaint, however, does not identify the dates of Amtrak's
payments; it says only that the scheme spanned from 1990 through 1995.
These allegations do not permit dismissal of the complaint under Rule
12(b)(6). A contention that the statute of limitations bars an action is
an affirmative defense, meaning that the plaintiff is not required to
negate it in its complaint. Gomez v. Toledo, 446 U.S. 635, 630 (1980).
If the complaint alleged facts demonstrating that the tolling provision
does not apply, the government would have pleaded itself out of court,
requiring dismissal of the complaint. See Tregenza v. Great American
Communications Co., 12 F.3d 717, 718 (1993). The government's complaint
has no such allegations, and it is not required to have any: as the
Seventh Circuit said in Tregenza, "it does not follow from the fact that
a plaintiff can get into trouble by pleading more than he is required to
plead that he is required to plead that more." Id. Under the
circumstances, we are unable to say based on the complaint's allegations
that the government will be unable to establish that its claim is
timely. Hishon v. King & Spaulding, 467 U.S. 69, 73 (1984); Conley v.
Gibson, 355 U.S. 41, 45-46 (1957).
Defendants attached to their motion two items that supply more detail
regarding the timing of the allegedly false claims and the date when
Amtrak may have obtained evidence of their existence. The first item is a
listing of the dates of the alleged kickback checks; the second is a copy
of an administrative subpoena served on Tech in late March 1996 by
Amtrak's Office of Inspector General, seeking among other things
documents concerning defendants' dealings with Corcoran. These
documents, which are not part of the government's complaint, cannot serve
as a basis for dismissal under Rule 12(b)(6). It is true, as Tregenza
indicates, that when a defendant attaches evidence to a motion to
dismiss, the Court has the option of converting defendant's motion to a
motion for summary judgment. Tregenza, 12 F.3d at 719. The Court
declines to take that step, however, for defendants' evidence, even if
undisputed, would be insufficient to entitle defendants to summary
judgment. We will discuss why this is so, in order to guide the parties
should defendants seek summary judgment at a later time.
Defendants have supplied the dates on which Tech is claimed to have
issued the kickback checks to Macor, Corcoran's company, which according
to the allegations in the complaint would have occurred after Amtrak paid
the inflated bills. The alleged kickback checks were written on January
18, 1990; sometime around April 30, 1991; April 12, 1993; February 17,
1994; March 21, 1994; May 18, 1994; June 9, 1994; and September 8, 1994.
The Department of Justice filed suit on June 9, 2000. Thus, under the
best case scenario for the government (assuming Tech wrote its kickback
check the same day Amtrak paid the claim), all but the last two claims
appear to have been made more than six years before suit was filed.
If the statute of limitations under § 3731(b) were six years,
period, that would be the end of the story with regard to most of the
government's claim. But the statute contains a tolling provision; under
§ 3731(b)(2), the government gets three years from the date "when
facts material to the right of action are known or reasonably should have
been known by the official of the United States charged with
responsibility to act in the circumstances." This brings us to the
second item attached to defendants' motion: a copy of an administrative
subpoena served by Amtrak's OIG in late March 1996, requesting records
concerning dealings between Tech and Corcoran or Macor, and a certificate
of compliance indicating that Tech produced the responsive records to the
OIG on May 1, 1996. Defendants argue that § 3731(b)(2)'s three year
clock should be deemed to have started on that date. The government
argues that the clock did not start to run until June 10, 1997, when
Amtrak officials supposedly first told the United States Attorney's
Office of their suspicions that defendants had violated the FCA.
Determination of who is right turns, in part, on how the Court construes
the phrase "official of the United States charged with responsibility to
act in the circumstances." If it means Amtrak, as defendants argue, the
clock would have started running before June 10, 1997, and the claims
would be barred under § 3731(b)(2); if it means the Department of
Justice, as the government argues, the claims may be timely.*fn1
Section 3731 does not contain a definition of the term "official of the
United States charged with responsibility." The only part of the
legislative history of § 3731(b)(2) that is published — the
Senate Report on its version of the legislation that ultimately was
enacted — says that the statute "include[s] an explicit tolling
provision on the statute of limitations under the False Claims Act. The
statute of limitations does not begin to run until the material facts are
known by an official within the Department of Justice with the authority
to act in the circumstances." S. Rep. No. 345, 99th Cong., 2d Sess. 30
(1986), reprinted in U.S. Code Cong. & Admin. News 5266, 6295. This
suggests that the government's construction is the right one. However,
as one district court has suggested, the Senate Report may have concerned
an earlier version of the proposed legislation that included different
wording. See United States ex rel. Condie v. Board of Regents of the
University of California, No. C89-3550, 1993 WL 740195, at *1 (N.D.Cal.
Sept. 7, 1993). In view of this ambiguity, the legislative history is an
uncertain guide to the meaning of "official of the United States."
In fact we need not look to the legislative history to determine the
meaning of the term. The provision of the FCA that immediately precedes
§ 3731 makes it the duty of the Attorney General to diligently
investigate violations of the statute and identifies only private
relators and the Attorney General — not other government agencies
— as parties who may sue under the statute. 31 U.S.C. § 3730(a)
& (b)(1). For this reason, we agree with those courts that have
concluded that the term "official of the United States charged with
responsibility to act," as used in § 3731(b)(2), means pertinent
Department of Justice officials. Accord, United States v. Incorporated
Village of Island Park, 791 F. Supp. 354, 363 (E.D.N.Y. 1992) (holding
that the official charged with responsibility to act must be an official
within the DOJ with the authority to act in the circumstances); United
States v. Macomb Contracting Corp., 763 F. Supp. 272, 274 (M.D.Tenn.
1990) (holding without discussion that "[t]he `official of the United
States charged with responsibility' could only have been the appropriate
official of the Civil Division of the Department of Justice, which alone
has the authority to initiate litigation under the Act."). But see United
States v. Kensington Hospital, No. 90-5430, 1993 WL 21446, at *12
(E.D.Pa. Jan. 14, 1993) (indicating that knowledge by IRS and FBI agents
could trigger the limitations period).*fn2
That does not mean that the statute of limitations begins to run only
when a responsible Department of Justice official actually knows the
material facts: the statute says the clock starts running when the
material facts "are known or reasonably should have been known" to the
DOJ. It is possible to conceive of circumstances in which the statute
might begin to run before the DOJ is actually advised of the pertinent
facts. In Island Park, the government sued a village and several of its
officials alleging, among other things, violations of the FCA; it claimed
that the defendants misused Housing and Urban Development funds in
connection with a HUD-sponsored block grant program.
HUD began receiving
complaints about the village's administration of the program in 1981; it
conducted an extensive internal investigation into the allegations of
misconduct, and in 1984 it issued an audit report, which was widely
disseminated throughout HUD. The government filed suit under the FCA in
1990, and the defendants moved for summary judgment on statute of
limitations grounds. The government argued that the suit was timely
because it had been filed less than a year after the DOJ had first
learned of the fraud through press reports published in June 1989. The
district court held that for purposes of § 3731(b)(2), the relevant
question was when the DOJ knew or reasonably should have known about the
fraud, not when HUD knew about it. Island Park, 791 F. Supp. at 361-63.
But it went on to say that tolling of the statute of limitations "assumes
due diligence on the part of the party charged with the responsibility of
uncovering the fraud." Id. at 363 (quoting United States v. Uzell,
648 F. Supp. 1362, 1367 (D.D.C. 1986)). In the final analysis, the court
concluded that "the common knowledge of the Island Park affair at all
levels of the federal government" — specifically, at HUD and its
Office of Inspector General — reasonably could be attributed to the
Department of Justice. Island Park, 791 F. Supp. at 363-64. Based on
this conclusion, the court held that the government's FCA claim was
time-barred. Id. at 364.
This Court agrees with Island Park's conclusion that there may be
circumstances in which the knowledge of government agencies other than
the Department of Justice might trigger the running of the FCA statute of
limitations. See also United States v. Kass, 740 F.2d 1493, 1498 (11th
Cir. 1984) (holding that "the government through its agent Blue Shield
had the facts making up the `very essence of the right of action,'"
thereby triggering the limitations period in §§ 2415 & 2416(c), which
are virtually identical to § 3731(b)); United States v. Kensington
Hospital, No. 90-5430, 1993 WL 21446, at *12 (E.D.Pa. Jan. 14, 1993)
(suggesting that knowledge by IRS and FBI agents could trigger the
limitations period); Kreindler & Kreindler, 777 F. Supp. at 204
(suggesting that knowledge by senior Department of Defense officials
could trigger the limitations period).*fn3 Such a finding should be
reserved for unusual situations; as the court in Condie noted, the scant
legislative history that exists under § 3731(b) suggests that the
"should have known" provision should be applied sparingly, and defendants
are protected against inordinate delay by the ten-year outside limit
contained in the statute. See Condie, 1993 WL 740195, at *2.
The record in this case is nowhere near as clear cut as it was in
Island Park. We know only that Amtrak's OIG obtained Tech's records on
May 1, 1996; we have no idea what those records indicated, what else the
OIG did to investigate the matter and what it learned, whether knowledge
of the investigation was widely known inside or outside of Amtrak,
whether OIG had any communications with Department of Justice personnel,
whether it reached any conclusions or issued a report, or indeed any
details at all about the investigation. In short, on the current record
the Court cannot say that DOJ knew or should have known of the material
facts before June 10, 1997. Thus even if we had converted defendants'
motion to a summary judgment motion, their evidence would be insufficient
to entitle them to summary judgment on the FCA claim.
As noted earlier, the parties did not discuss the common law claims in
their memoranda. Those claims, like the FCA claim, are governed by a
six-year statute of limitations. See 28 U.S.C. § 2415(a); United
States v. First National Bank of Cicero, 957 F.2d 1362, 1371 (7th Cir.
1992). That statute is subject to a tolling provision that is worded in
a way virtually identical to § 3731(b)(2). See 28 U.S.C. § 2416(c).
It is unclear, however, whether our analysis of the term "responsible
official of the United States" applies equally to § 2416(c); in
contrast to the False Claims Act, there is no provision in or
associated with § 2416 that limits authority to bring suit to the
Attorney General. And there is some authority indicating that
officials at the contracting agency may be "responsible officials"
for purposes of § 2416(c). See United States v. Boeing,
845 F.2d 476, 481-82 (4th Cir. 1988), rev'd on other grounds,
494 U.S. 152 (1990). But for present purposes, summary judgment
would be inappropriate on the common law claims for the same reasons
noted in the preceding paragraph with regard to the FCA claim.
For the reasons explained above, the Court denies defendants' motion to
dismiss [Item 8-1].
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