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United States ex rel. Wall v. Circle C Construction, LLC

United States District Court, M.D. Tennessee, Nashville Division

August 22, 2014

UNITED STATES OF AMERICA ex rel. BRIAN WALL, Plaintiffs,
v.
CIRCLE C CONSTRUCTION, LLC, Defendant

Page 854

For Brian Wall, Plaintiff: James S. Higgins, Jonathan A. Street, LEAD ATTORNEYS, The Higgins Firm, PLLC, Nashville, TN; Matthew E. Wright, LEAD ATTORNEY, Hardee, Martin & Donohoe, P.A., Jackson, TN; Perry Allan Craft, LEAD ATTORNEY, Law Office of Perry A. Craft, PLLC, Nashville, TN.

For United States of America, Plaintiff: Ellen Bowden McIntyre, LEAD ATTORNEY, Lisa S. Rivera, Office of the United States Attorney (MDTN), Nashville, TN.

For Circle C Construction, LLC, Defendant: Timothy W. Burrow, Burrow & Cravens, P.C., Nashville, TN.

For Phase Tech, LLC, Defendant: Daniel Mark Nolan, Jennifer A. Deen, LEAD ATTORNEYS, Kathryn W. Olita, Batson Nolan PLC, Clarksville, TN.

Page 855

MEMORANDUM

KEVIN H. SHARP, UNITED STATES DISTRICT JUDGE.

Relator Brian Wall brought this action in January 2007 alleging that Circle C Construction, LLC violated the federal False Claims Act (FCA), 31 U.S.C. § 3729(a)(2). (Docket No. 1). Wall claimed that Circle C knowingly submitted payroll certifications to the Department of the Army that falsely stated that the company met the requirements of the Davis-Bacon Act when it constructed buildings at the Fort Campbell military facility. The United States intervened in the action in October of that year. (Docket No. 9). On March 15, 2010, Judge Haynes granted summary judgment in favor of Wall and the United States, and awarded damages against Circle C in the amount of $553,807.71, trebled according to the FCA's requirements to $1,661,423.13. See generally United States ex rel. Wall v. Circle [C] Constr., LLC, 700 F.Supp.2d 926pede (M.D. Tenn. 2010) ( Wall I ).

Circle C appealed the liability and damages determinations. (Docket No. 121). The government and Wall cross-appealed a single issue related to Judge Haynes's refusal to award civil penalties, (Docket No. 125), but voluntarily dismissed that cross-appeal days later, (Docket No. 129). In October 2012, the Sixth Circuit affirmed the grant of summary judgment in favor of Plaintiffs, but reversed the damages award and remanded the case for the district court to recalculate damages. See generally United States ex rel. Wall v. Circle C Constr., L.L.C., 697 F.3d 345 (6th Cir. 2012) ( Wall II ).

The matter came before this Court after Judge Haynes declared a mistrial and recused himself following an unfinished three-day damages trial. (Docket No. 233). This Court held a subsequent bench trial on damages on March 18-21, 2014. After trial, the parties filed proposed findings of fact and conclusions of law.

Having reviewed those filings, the parties' arguments, the record, and the exhibits received in evidence, and after considering the testimony of the witnesses, their interests, and their demeanor, the Court enters the following findings of fact and conclusions of law in accordance with Rule 52(a) of the Federal Rules of Civil Procedure. Except where the Court discusses different testimony on a specific issue, contrary testimony on a specific matter has been rejected in favor of the specific fact found. Further, the Court omits from its recitation facts immaterial to the issues presented. Finally, to the extent a finding of fact constitutes a conclusion of law, the Court so concludes; to the extent that a conclusion of law constitutes a finding of fact, the Court so finds. For the reasons that follow, the Court will award Plaintiffs $762,894.54 in damages.

BACKGROUND

Before reaching the core matter of Plaintiffs' damages, the Court will review the relevant background of the case as it has unfolded over the past seven years. Wall II quoted at length the facts set forth in Wall I :

Circle C signed an agreement with the Army to construct buildings at the Fort Campbell military base. Circle C's

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agreement included determinations of hourly wages for electrical workers with a base hourly rate of $19.19, plus fringe benefits of $3.94 an hour. Prior to this contract, Circle C has had government contracts for almost twenty (20) years. Frances Cates, a Circle C co-owner, and Dorothy Tyndall, Circle C's bookkeeper, attended a training session at Fort Campbell on the prevailing wage requirement for federal government contracts. In this Fort Campbell contract, Circle C acknowledged its " familiarity with" the prevailing wage requirements in all of its contracts. John W. Cates, Circle C's corporate representative, conceded Circle C's knowledge of various Davis-Bacon Act requirements.
Among Circle C's contractual obligations on the Fort Campbell project were Circle C's obligations to pay electricians according to the wage determinations in the contract[; ] to ensure that persons doing electrical work were paid as electricians; to submit payroll certifications to Fort Campbell as a condition of payment; and to ensure that its subcontractors complied with the Davis-Bacon Act and that the payroll certification submitted to Fort Campbell were complete and accurate, including information on Circle C's subcontractors. Circle C conceded that it " should submit payroll certifications for all employees on the Fort Campbell project." Circle C submitted its payroll certifications for the original certifications, but did not list Phase Tech's employees. Circle C asserts that it never promoted itself as the prime contractor on this project. Yet, during this same period, Circle C submitted separate certified payrolls for its other subcontractors. Phase Tech did not submit any payroll certification for 2004 and 2005.
Phase Tech was Circle C's subcontractor on at least 98 percent of the electrical work on the Fort Campbell project, but did not sign a written contract with Circle C. Circle C provided Phase Tech with the wage determination excerpts from its contract, but did not discuss the Davis-Bacon Act requirements with Phase Tech nor verify whether Phase Tech submitted its own payroll certifications to Fort Campbell. Circle C did not provide a blank payroll certification form to Phase Tech. Circle C lacked a protocol or procedure to monitor Phase Tech's employees' work on the Fort Campbell project and did not take measures to ensure payment of proper wages under the Davis-Bacon Act to Phase Tech's employees. According to Charles Cooper, Phase Tech co-owner and [a] certified electrician, Circle C did not inform Phase Tech of the need to submit certified payrolls for the Fort Campbell project until approximately 2006, two years after the project commenced.
Phase Tech had eight employees, including Relator Wall, who worked on the Fort Campbell contract, performed electrical and conduit work as electricians. Wall, the relator, and Ryan McPherson were Phase Tech employees on a construction project for which Circle C was the prime contractor and Phase Tech was a subcontractor. Wall also performed preparatory and finishing work for the electrical wiring on the Fort Campbell project. According to John W. Cates, Circle C's corporate representative for this project, Circle C neither supervised, directed nor paid for Wall's or McPherson's work on Fort Campbell's contract. Circle C notes that it was neither asked or requested to pay or supervise the payment of Wall or McPherson.
After this action was filed, Circle C asked Phase Tech to provide new payroll

Page 857

certifications for the years when Phase Tech's employees were not included on any certified payrolls. Phase Tech provided this information to Circle C in December 2008. Phase Tech's contemporaneous records include daily calendars with the names of Phase Tech employees and their assigned job sites as well as dates and times of their work. Phase Tech also has pay stubs, but not for Phase Tech employees on the Fort Campbell project. According to Cooper, Phase Tech's owner at the time that these certifications were completed, " I'm sure I told John W. Cates they weren't--they weren't complete." Circle C never verified these 2008 certifications for completeness and accuracy, but submitted them to Fort Campbell officials.
Edison Gunter, Special Agent with the United States Department of Labor (" DOL" ) reviewed Circle C's and Phase Tech's certifications for the Fort Campbell contract as well as Phase Tech's daily calendars and pay stubs. Gunter found 62 inaccurate or false payroll certifications of which 53 were Circle C's original payroll certifications from 2004 and 2005. Despite contemporaneous records of Phase Tech employees on the project, Circle C did not list Phase Tech's employees. Of the payroll certifications Phase Tech signed and Circle C submitted in December 2008, nine (9) certifications were inaccurate because certification for Phase Tech workers did not match Phase Tech's contemporaneous documents for workers on the project.
In the December 2008 payroll certifications, Circle C listed one certified electrician for this project who was paid at the hourly wage of $12 to $16 an hour. The wages on these certifications are below the rates on the Circle C's contract for its subcontractors' electrical workers that required a wage of $19.19 per hour, plus fringe benefits of $3.94 an hour for work in Kentucky. The pay stubs of the original 2004 and 2005 Circle C payroll certifications also reflect the workers' pay between $12 and $16 an hour. Thus, 62 payroll certifications contained non-complying hourly wages for laborers as well as an electrical worker on the payroll, with the exception of one worker who was paid about $17 an hour.
Karen Garnett, assistant district director in the DOL's Louisville Office found Circle C's original payroll certifications to be false, because Circle C knew its subcontractor Phase Tech had employees working on the contract, but failed to list those employees on its certified payrolls. According to Garnett, Circle C is also responsible for the false December 2008 certifications because Circle C was responsible for the inaccurate submissions of its subcontractor. For all certifications, Phase Tech's employees should have been categorized and paid as electricians because they performed electrical work. Garnett considered listing only one electrician with all other employees as laborers to be a red flag.
Cates and Cooper[,] who were shown comparisons of Circle C's payroll certifications and Phase Tech's contemporaneous documents, admitted that the certifications and records were inaccurate. Cates acknowledged that the wages listed for Phase Tech employees in the certification were less tha[n] the Davis-Bacon Act requirement for electrical workers. Circle C's and Phase Tech's December 2008 certifications include the provision that [the] certifying representative states that " I pay or supervise the payment of the persons employed by Circle C or Phase Tech and that during the payroll period . . . all persons employed

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on said project have been paid the full weekly--the full weekly wages earned . . . and that any payrolls . . . are correct and complete." The certifying agents also know that false statements in these certifications could subject the contractor or subcontractor to civil prosecution.
For this Fort Campbell project, the United States paid Circle C a total five hundred sixty-five thousand, one hundred nine dollars ninety one cents ($565,109.91) for the electrical portion of this project based upon specific delivery work orders for electrical work . . . . Phase Tech performed 98% of this project's electrical work that represents a total payment of five hundred fifty-three thousand eight hundred seven dollars seventy-one cents ($553,807.71), that was given to Circle C and is the actual amount that should have been paid to Phase Tech's electrical and other workers.

Wall II, 697 F.3d at 346-49 (quoting Wall I, 700 F.Supp.2d at 930-32) (brackets and record citations omitted; final ellipsis added).

Judge Haynes held that Circle C's payroll certifications ran afoul of the FCA in two ways:

(1) Circle C violated the FCA by submitting false payroll certifications to the government regarding wages for Phase Tech employees, contrary to its agreement to abide by Davis-Bacon requirements; and, (2) because Circle C did not have a written subcontract with Phase Tech and did not ensure that Phase Tech complied with the Davis-Bacon Act, its wage certifications wrongly certified that prevailing wages were paid to Phase Tech electricians working on the Fort Campbell project, in violation of the FCA.

Id. at 350 (citing Wall I, 700 F.Supp.2d at 939). The Sixth Circuit affirmed these holdings, concluding that

the district court did not err in finding that Circle C's original and 2008 payroll certifications at issue were expressly false because (1) they stated that they were complete, when in fact no Phase Tech employees who worked on the project were listed, and (2) the certifications wrongly represented that the prevailing wages were paid to its subcontracted employees.
. . .
[T]he totality of the circumstances show that Circle C, an experienced contractor, made false statements, acted in reckless disregard of the truth or falsity of the information, and that the false statements were " material" to the government's decision to make the payment sought in Circle C's claim. Thus, we affirm the district court's grant of summary judgment in favor of plaintiffs on their FCA claim.

Id. at 357 (citing Wall I, 700 F.Supp.2d at 939).

Although Judge Haynes's liability analysis was correct, Wall II disagreed with his damages determination. Specifically, Judge Haynes said it was an " undisputed fact" that the Army paid $553,807.71 " that would not have not paid if the United States had known about Circle C's false certifications." Wall I, 700 F.Supp.2d at 940. Judge Haynes concluded this after finding that the United States paid Circle C $565,109.91 for electrical work on the delivery orders at issue and that Phase Tech did 98% of the electrical work on the buildings Circle C constructed (which works out to $553,807.71). The opinion, however, did not sufficiently detail the evidence on which these findings rested. Id. at 932.

Page 859

The Sixth Circuit reviewed the record and determined that the $553,807.71 figure was based on the Declaration of Jeanne Shykes, a Supervisory Contract Specialist at the Directorate of Contracting at Fort Campbell who administered the construction and service contracts her office awarded. Wall II first quoted and then described the relevance of Shykes's Declaration:

I was requested to provide information relevant to United States ex rel. Brian Wall v. Circle C Construction, LLC. Fort Campbell has paid Circle C a total of $22,466,493.24 under contract DABK09-03-D-0003. This amount was for all of the delivery orders on this contract construction of Pre-Engineered Steel Building.
For the specific delivery orders 6 through 12, and 14 and 15 on this contract--which I understand are the delivery orders at issue in this case--Fort Campbell paid Circle C a total of $3,767,399.41. Of this total award amount, approximately 15%--or $565,109.91--was for electrical work. Assuming that the electrical subcontractor at issue in this case did 98% of the electrical work on the contract, that would amount to a total of $553,807.71 in Fort Campbell funds that were affected. For these same delivery orders, seven of the nine delivery orders were performed in Kentucky. The two other delivery orders were performed in Tennessee.
Shykes further explained in her Declaration that the Contracting Office did not suspect that inaccurate or false payrolls had been submitted at the time of performance, and if it had known at the time that Circle C was not properly reporting its payrolls, it would not have paid Circle C for the electrical portion of the work on the relevant delivery orders until the issue was resolved, i.e., it would not have paid $553,807.71 to Circle C. Based on her Declaration, the district court held that " the undisputed fact is that the Army paid $553,807.71 that would not have been paid if the United States had known about Circle C's false certifications." Wall [I], 700 F.Supp.2d at 940.

Wall II, 697 F.3d at 358-59 (brackets omitted). The $553,807.71 figure, however, was not " undisputed." As the Sixth Circuit explained:

[I]n its response to interrogatories, Circle C stated that it paid Phase Tech the following amounts on the delivery orders relevant to this case:
$13,000 on delivery order number 6
$12,200 on delivery order number 7
$8,800 on delivery order number 8
$13,898.77 on delivery order number 9
$13,900 on delivery order number 10
$1,672 on delivery order number 11
$15,842.08 on delivery order number 12
$15,625.89 on delivery order number 14
$16,635.07 on delivery order ...

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