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United States v. Bollinger Shipyards, Inc.

United States Court of Appeals, Fifth Circuit

December 23, 2014

UNITED STATES OF AMERICA, Plaintiff-Appellant,

Appeal from the United States District Court for the Eastern District of Louisiana.

For UNITED STATES OF AMERICA, Plaintiff - Appellant: Abby Christine Wright, U.S. Department of Justice, Civil Division, Appellate Staff, Washington, DC; Arnold M. Auerhan, U.S. Department of Justice, Washington, DC; Sharon Denise Smith, Esq., Assistant U.S. Attorney, U.S. Attorney's Office, Eastern District of Louisiana, New Orleans, LA.

For BOLLINGER SHIPYARDS, INCORPORATED, BOLLINGER SHIPYARDS LOCKPORT, L.L.C., HALTER BOLLINGER JOINT VENTURE, L.L.C., Defendants - Appellees: Scott Michael McCaleb, Andrew Gerald McBride, Esq., Senior Litigation Attorney, Mark Bradley Sweet, Roderick L. Thomas, Wiley Rein, L.L.P., Washington, DC; C. Berwick Duval, II, Stanwood Robert Duval, Duval, Funderburk, Sundbery, Lovell & Watkins, Houma, LA; Marcus Bedford Slater, Jr., Jennifer Jean Zeien, Slater & Zeien, L.L.P., Washington, DC.

Before DAVIS, DeMOSS, and ELROD, Circuit Judges.


Page 256

W. EUGENE DAVIS, Circuit Judge.

The United States of America appeals from the district court's final judgment in which the court granted the defendants-appellees' motion to dismiss its False Claims Act case under Fed.R.Civ.P. 12(b)(6) . We conclude that the United States alleged sufficient facts in its complaint to allow a factfinder to infer that the defendants-appellees either knew that their statements were false or had a reckless disregard of their truth or falsity. We therefore REVERSE and REMAND for further proceedings consistent with this opinion.[1]


The United States filed this action under the False Claims Act (" FCA" ), 31 U.S.C. § § 3729 et seq., alleging that Bollinger Shipyards, Inc., Bollinger Shipyards Lockport,

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L.L.C., and Halter Bollinger Joint Venture, L.L.C. (collectively, " Bollinger" ) knowingly submitted false statements and false claims for payment to the government in relation to a government contract under which Bollinger was to modify eight vessels owned by the United States Coast Guard (" Coast Guard" ). After allowing the United States to replead once, the district court granted Bollinger's second Rule 12(b)(6) motion to dismiss, holding that the United States failed to satisfy the plausibility and particularity requirements of the Federal Rules of Civil Procedure concerning Bollinger's knowledge under the FCA. The United States appeals this dismissal.

Because this case comes up on the grant of a motion to dismiss under Rule 12(b)(6), we review the district court's ruling de novo.[2] Generally, we " must assess whether the complaint contains sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face under Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), and Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)." [3]

The facts as stated in the United States' First Amended Complaint are as follows: In 1999, the Coast Guard began a program called Deepwater to upgrade or replace its aging fleet of vessels, aircraft, and electronics systems. One of the contractors competing for the project was Integrated Coast Guard Ship Systems (" ICGS" ). ICGS's proposal included converting existing 110-foot Coast Guard patrol boats into 123-foot patrol boats to extend the service life of the boats by adding a 13-foot extension to the hulls, among other changes. Under this proposal, the conversion of the 110-foot boats would be subcontracted to Bollinger, which had originally built the boats.

In September 2000, the Coast Guard expressed concerns to Bollinger about the feasibility of converting the vessels and questioned whether the hulls of the converted vessels would have adequate structural integrity. In response, Bollinger prepared a longitudinal strength analysis describing the modified boats' projected " section modulus," a measure of longitudinal strength. Bollinger performed its calculation of the section modulus using the Midship Section Calculator (" MSC" ) program, which uses as inputs a number of components, including the structural geometry of the ship's hull, the physical and engineering properties of the hull, and shell plate material and thickness. Bollinger advised the Coast Guard that the minimum section modulus required by the American Bureau of Shipping (" ABS" ), an independent organization that develops standards for shipbuilding, was 3,113 cubic inches, and the calculated section modulus for the proposed modified boats would be 7,152. As was later discovered, Bollinger reached this calculated section modulus by inputting a thicker hull plating than existed in the 110-foot boats. Bollinger did not advise the Coast Guard that it used a thicker hull plating in its calculations, and its proposal did not include a provision for replacing or thickening the hull in the boats. In August of 2001, Bollinger was notified that the Coast Guard would require Bollinger to certify compliance with ABS structural standards.

In June 2002, the Coast Guard then selected ICGS as the contractor for the Deepwater program and entered into a

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contract with ICGS. The contract required ICGS and its subcontractors, including Bollinger, to provide the Coast Guard with a " CDRL S012-11," a Hull and Load Strength Analysis, to verify that the 123-foot boat design met the program and contract requirements. The contract also required Bollinger to obtain ABS certification of compliance with ABS structural standards.

In August 2002, the Coast Guard issued the first of four delivery task orders under the contract for the design and modification of the 123-foot patrol boats. On August 26, 2002, Bollinger's chief executive officer, Boysie Bollinger, sent an email to other Bollinger officials stating that an ABS official had offered to provide a confidential assessment of the structural analysis of the converted vessels. Boysie Bollinger sought advice on whether to accept the offer. T.R. Hamblin, Bollinger's vice president, recommended declining the offer, reflecting concern that the review would find that the design required additional structural support. Boysie Bollinger replied:

I'm concerned that [ABS] sells CG on the fact that they need this review. . . . [ABS] would love the additional responsibility from the CG and as we both know, adverse results could cause the entire 123 to be an un-economical solution if we had to totally rebuild the hull. . . . MY CONCERN--we don't do anything--ABS ...

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