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United States ex rel. Marshall v. Woodward, Inc.

United States Court of Appeals, Seventh Circuit

December 11, 2015

UNITED STATES ex rel. DEBRA MARSHALL, et al., Plaintiffs-Appellants,
WOODWARD, INC., Defendant-Appellee

Argued October 29, 2015

Petition for certiorari filed at, 03/07/2016

Page 557

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 1:06-CV-01746 -- Gary S. Feinerman, Judge.

For DEBRA MARSHALL, United States of America, ex. rel. and individually, PEGGY THURMAN, United States of America, ex. rel. and individually, Plaintiffs-Appellants: Steven P. Schneck, Attorney, Allison & Schneck, LLC, Chicago, IL.

For Woodward, Incorporated, Defendant - Appellee: Lawrence C. DiNardo, Attorney, Tina M. Tabacchi, Attorney, Jones Day, Chicago, IL; Hashim M. Mooppan, Esq., Attorney, Jones Day, Washington, DC.

Before FLAUM, MANION, and ROVNER, Circuit Judges.


Page 558

Flaum, Circuit Judge.

Plaintiffs Debra Marshall and Peggy Thurman bring this qui tam action against Woodward, Inc. under the False Claims Act (" FCA" ). Plaintiffs allege tat Woodward falsely certified helicopter engine parts that it sold to the government. They also claim that Woodward violated the FCA and Illinois state law by terminating their employment. In the district court, Woodward moved for summary judgment. The court granted the motion, holding that even if Woodward made false statements to the government, no reasonable jury could find that Woodward did so knowingly and that the statements were material. The district court also rejected plaintiffs' retaliation claims. Marshall and Thurman appeal and for the reasons that follow, we affirm.

I. Background

Woodward is a government contractor that manufactures parts used in military aircrafts. One of these parts, the " T700 HMU," regulates fuel flow for engines in Blackhawk and Apache helicopters. Woodward sells the T700 HMU to General Electric (" GE" ) for incorporation into helicopter engines. It also sells the part directly to the U.S. Department of Defense (" DOD" ) for spare and replacement parts.

One of the components of the T700 HMU is the " T2 sensor," which helps regulate fuel flow by measuring changes in air temperature. A picture of the T2 sensor is included below:

The sensor has a coil end and a bellows end connected by a capillary tube. The coil end measures changes in air temperature. Any change in temperature causes alcohol contained in the capillary tube to expand or contract, which in turn triggers movement in the bellows end and controls fuel flow to the engine. Crucially, the functionality of the sensor depends on the amount of alcohol in the capillary tube; if any alcohol leaks, the sensor will add more fuel than it should. A defective sensor can cause the engine to smoke, decrease thrust, lose horsepower, or burn up.

The T2 sensor has a total of eight " sealing joints" that connect the various parts of the component and contain the alcohol. Joints are sealed by " brazing," a process that joins two metal surfaces by melting a filler metal. Woodward classifies its joints by category, such as Grade A, Grade B, and so forth. These classifications help determine what procedures are used to braze the joint and how the joint is inspected for imperfections. One of the T2 sensor's sealing joints, the joint that connects the capillary tube to the sensor head at the bellows end, is designated as a Grade A joint (hereinafter " the Grade A joint" ). Plaintiffs allege that Woodward failed to properly braze and inspect the Grade A joint.

Woodward, like every military supplier, must follow a set of comprehensive quality

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requirements. Woodward develops these requirements and certifies compliance with them when delivering parts and requesting payments. The procedure for brazing and inspecting joints is generally governed by Woodward's Shop Procedure 865 (" SP865" ). Woodward can revise provisions of SP865 without notifying or obtaining consent from GE or the DOD. Further requirements for the Grade A joint are set forth in engineering drawings and process drawings. The parties disagree about the specific requirements for the Grade A joint, including: (1) the appropriate diametrical clearance (i.e., the distance between the capillary tube and the sensor head); (2) how " stop off" and " flux" (materials used during the brazing process) are removed and detected; and (3) whether the joint's non visible edge must be inspected by an alternative to visual examination, such as by Xray.

Whenever Woodward ships parts to GE or the DOD, it must include a " Certificate of Conformance," in which it confirms that all shipments are " in the Quantities and Quality called for, and were in all respects in accord with the applicable specifications." The district court assumed, and the parties do not dispute on appeal, that Woodward certifies that it has followed its quality requirements in manufacturing each part by including these certificates. Neither GE nor the DOD accepts shipments without a certificate.

Prior to their termination in 2005, plaintiffs Marshall and Thurman were longtime employees of Woodward. They received all of their training at Woodward. Neither has a college or technical degree. Both Marshall and Thurman worked on the T2 sensor at Woodward. They were tasked with brazing various joints on the sensor, but not the Grade A joint.

On April 6, 2005, Marshall attended a meeting with T700 engineer Heather Diedrich, senior Xray technician Mark Frutig, and two other engineers. Diedrich noted an increased incidence of leakage in the T2 sensor. Marshall volunteered to investigate the problem and asked Frutig to Xray the Grade A joint. Based on Frutig's findings and her own inspection, Marshall determined that the diametrical clearance of the joint was too small, that stopoff and flux were not removed, that there was insufficient braze in the joint, and that braze from another joint was " masking" the problems with the Grade A joint. Marshall also learned from Frutig that ...

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