District Court for the Eastern District of Louisiana Dismisses United States Government's Action against Bollinger Shipyards

In an Order issued on October 21, 2013, Judge Sarah Vance of the District Court for the Eastern District of Louisiana dismissed the United States government's action against Bollinger Shipyards, Inc.'s ("Bollinger"). This action was commenced over two (2) years ago, by the filing of the United States' initial Complaint, wherein the government asserted the following five (5) causes of action against Bollinger: (i) knowingly presenting false or fraudulent claims for payment or approval to the United States in violation of the False Claims Act ("FCA"), 31 USCA Ā§3729(a)(1)(A); (ii) knowingly making false records or statement material to false or fraudulent claims for payment by the United States in violation of the FCA, 3729(a)(1)(B); (iii) common law fraud; (iv) negligent misrepresentation; and (v) unjust enrichment. Following a motion to dismiss the initial Complaint by Bollinger, the Court dismissed the unjust enrichment and negligent misrepresentation claims with prejudice, but allowed the United States leave to amend its FCA and common law fraud claims. Thereafter, the United States filed a First Amended Complaint. Bollinger sought to dismiss the First Amended Complaint, which was granted by the Court.

The government's claims in Bollinger arose from a contract for the replacement of the government's fleet of water vessels, aircraft and electronics systems (known as the Deepwater program). Specifically, the U.S. entered into a contract in June 2002 with lead contractor, Integrated Coast Guard Systems ("ICGS"), who sub-contracted a portion of the work to Northrup Gruman Ship Systems ("NGSS"), who in turn sub-contracted a portion of the work to Bollinger. The parties' contract required ICGS and its subcontractors to, inter alia, provide a Hull Load and Strength Analysis ("HLSA") to the Coast Guard, which would ensure that ICGS's proposal to modify existing 110- foot Coast Guard patrol boats (known as cutters) into 123-foot cutters met program and contract requirements.

The Court explained that, for the government to proceed with its FCA claims, it is necessary that the person who alleged committed the violation "has actual knowledge of the information, acts in deliberate ignorance of the truth or falsity of the information or act in reckless disregard of the truth or falsity of the information." The United States alleged that Bollinger made false statements regarding the design of the cutter which induced the Coast Guard to accept delivery of and to pay for the cutters. In particular, the United States argued that the section modulus figure (a measure of longitudinal strength) for the design of the cutters, reported in the HLSA was inaccurate, which according to the government, constituted a material false statement, made knowingly, which caused the government to pay money.

The Court ultimately determined that the United States' allegations, when taken as true, "fail to make plausible that Bollinger submitted the HLSA with actual knowledge of the inaccuracy of the section modulus calculation, or in reckless disregard or deliberate ignorance of its accuracy." Also relevant to the Judge's decision was the fact that the Coast Guard took delivery of the cutters and continued to make payments for Bollinger's work, even after the structural failure in one (1) of the cutters.

The Court similarly dismissed the common law fraud claims on the basis that the United States failed to establish that Bollinger knowingly submitted false material information to the Coast Guard.

While the United States sought a third bite at the apple, by requesting permission to further amend its allegations, the Court denied this request. In reaching this decision, the Court considered that, in light of the advance stage of discovery and the government's inability to plead fraud in its Amended Complaint, any further amendment would be futile.

To read a copy of the Eastern District of Louisiana Court's Order and Reasons in United States v. Bollinger Shipyards, Inc. et. al., case number 2:12-cv-00920, click here.

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