Appeal of the dismissal of a qui tam case is denied, where the relator failed to show his employer had fraudulently entered into contracts with the government or submitted fraudulent invoices for payment. The court found the transportation contractor was not required to describe nonresponsive services in its proposal, and therefore it had not fraudulently induced the government to enter into the contract. The court also found the contract gave the vendor the discretion to choose ground or air transportation, regardless of the service selected by the customer, but to bill the government according to the service selected, and therefore it had not submitted false claims for payment. The court also held the relator failed to support his allegations with a sample of fraudulent invoices or the details of the alleged scheme, other than general statements.
Mark DeFatta appealed the dismissal of his qui tam action alleging his employer United Parcel Service Inc. fraudulently entered into shipping contracts with the government and submitted false claims for payment.
DeFatta brought a qui tam action against UPS alleging the firm made false representations in its responses to government’s request for proposals, submitted facially false invoices for air shipments that were shipped using only ground transportation methods, and submitted claims which falsely implied certification with rules that required the carrier to bill at rates applicable to actual service performed. The Court of Appeals held that DeFatta failed to state his claims.
Specifically, DeFatta alleged that UPS used surface ground transportation to ship packages for the government, even though it had proposed using air transportation methods. DeFatta alleged UPS overcharged the government for air shipments that actually traveled by ground and had violated the Air Mobility Command Freight Traffic Rules Publication No. 5.
The district court granted the defendant’s motion to dismiss and the appeals court affirmed. In its decision, the district court disagreed that UPS had misled the government into entering into the contract. The relator argued that UPS was required to disclose its ground service in its response to the RFP, but the district court found the RFP sought domestic express delivery services for same day, one-day, two-day, and three-day delivery. While UPS Ground shipments may arrive within one to three days, UPS does not guarantee this level of service for ground transportation shipments. Because UPS could not make this guarantee, its ground transportation services were not responsive to the RFP and therefore UPS was not required to disclose or propose these services in its response. Accordingly, the district court held – and the appeals court affirmed – that UPS had not made false statements in its proposal. a
The district court also rejected DeFatta’s claim that UPS submitted false invoices for shipments transported by air that were actually sent over ground. The court found the contract allowed UPS the discretion to choose the transportation method regardless of the service selected and tied the type of fuel surcharge to the service selected, not to the actual method used for transportation. Thus, the court held that UPS’ use of surface transportation for some air shipments, and the subsequent invoicing, were consistent with the contracts and were not false. The appeals court affirmed.
The district court also held that DeFatta had not identified representative examples of the false claims for payment nor alleged with particularity the details of the alleged scheme and a reliable inference that false claims were submitted.
The appeals court also affirmed the district court’s finding that DeFatta had not shown UPS falsely implied certification with Air Mobility Command Freight Traffic Rules Publication No. 5, which establishes rules governing freight services for the Department of Defense and requires shippers to bill the government at the rate applicable to the services rendered. While DeFatta argued UPS billed air rates for shipments purportedly transported over ground, the district court again found the relator had not pled his case with sufficient detail to support a reasonable inference that UPS had engaged in this practice. Instead, DeFatta relied on conclusory generalizations about the practice, which both courts deemed insufficient to survive the motion to dismiss.
Mark DeFatta is represented by Kathleen H. Goodhart, Jeffrey M. Gutkin, Bethany Christa Lobo, Kelsey Rose Spector, and Stephen C. Neal of Cooley LLP; Peter J. McNulty of the McNulty Law Firm; and Kirk D. Tresemer of Tresemer Law. The defendants are represented by Caitlin Sinclaire Blythe, Ruth N. Borenstein, Paul Terry Friedman, Stacey M. Sprenkel, Gregory Bryant Koltun, and Deanne Maynard of Morrison & Foerster LLP.
