United States District Court, M.D. Georgia, Albany Division
UNITED STATES OF AMERICA, ex rel. JAMES E. REEVES,
MERCER TRANSPORTATION COMPANY, INC., Defendant.
J. ABRAMS, UNITED STATES DISTRICT COURT JUDGE
the Court is Defendant's Motion to Dismiss for Failure to
State a Claim (Doc. 32). For the reasons that follow,
Defendant's Motion to Dismiss (Doc. 32) is GRANTED in
part and DENIED in part. The Government's claims for
unjust enrichment and payment by mistake are dismissed. All
other claims remain.
James E. Reeves initiated this action on June 27, 2013. (Doc.
1). The United States of America elected to intervene in this
matter on July 25, 2016 (Doc. 21), and filed its Complaint on
October 31, 2016 (Doc. 24). Therein, the United States
alleges that Defendant Mercer Transportation Company, Inc.
committed violations of the False Claims Act
(“FCA”), 31 U.S.C. § 3729, as well as
inducement of breach of fiduciary duty, fraud, unjust
enrichment, and payment by mistake in violation of Georgia
state law. Id. at ¶¶ 128-153.
Military Freight Transportation
Mercer Transportation Company, Inc. (“Mercer”) is
a trucking company that provides transportation services to
both commercial and government customers, including the
Marine Corps Logistics Base (“MCLB”) in Albany,
Georgia. Id. at ¶ 2. MCLB's principal
mission is to rebuild and repair ground combat and
combat-support equipment and to support military
installations throughout the United States. Id. at
¶ 26. The Defense Logistics Agency (the
“Agency”) manages the re-utilization of military
equipment as well as supply distribution, and coordinates the
transportation of these items to and from military bases
around the world. Id. at ¶ 27. The Agency
maintains a presence on MCLB. Id. at ¶ 28. The
Agency Traffic Office at MCLB planned, arranged, and
coordinated the shipment of all sensitive freight material
that required transportation protective services, including
arms, ammunition, explosives, and classified and controlled
cryptographic items. Id. at ¶ 29. Mercer
drivers David Nelson, J.M., and M.H. were authorized by the
Department of Defense (“DOD”) to transport
sensitive freight. Id.
Service Providers (“Service Providers”), such as
Mercer, enter into contracts with DOD to transport shipments
via the Global Freight Management System
(“GFMS”). Id. at ¶ 32. Service
Providers submit standing offers, known as tenders, to the
GFMS for specific categories of shipments they are capable of
carrying. Id. When MCLB has a load ready for
shipment, an Agency employee is supposed to enter the
required shipment details into the GFMS, and the GFMS
dispenses a list of Service Providers that have submitted
tenders matching the specific parameters required for that
shipment. Id. at ¶ 34. The list of Service
Providers is arranged according to price, and using the
“best value” approach required by DOD, the Agency
official is expected to move down the list from least to most
expensive and select the first available Service Provider.
Id. at ¶¶ 33-34.
Service Provider is selected, a Government Bill of Lading is
generated based on the Service Provider's tender.
Id. at ¶ 35. When the driver arrives at his
destination site, the goods are inspected by a government
employee; and the driver confirms delivery with the Service
Provider. Id. at ¶ 37. The Service Provider
then confirms delivery in the Third Party Payor System, and
the third party payor with which the United States has
contracted to administer payments pays the Service Provider
the amount listed in the bill of lading on behalf of the
United States. Id. The United States' money is
transmitted to the Service Provider through the Third Party
Payor System. Id.
The Bribery Scheme
of the bribery scheme, Mercer agents and employees Ivan
Brannan, David Nelson, J.M., and M.H. bribed DOD employees
Mitchell Potts and Jeffrey Philpot to award sensitive freight
shipments to Mercer. Id. at ¶¶ 3, 4, 11,
12, 15. According to Potts and Philpot, Mercer would not have
otherwise received the contracts for those shipments.
Id. at ¶ 4. Also under the scheme, the parties
conspired to inflate the shipping costs. Id.
was an agent of Mercer with the authority to bid on and
accept sensitive freight shipments out of MCLB. Id.
at ¶ 12, 36. Mercer had actual knowledge of and accepted
all awards of sensitive freight shipments out of MCLB.
Id. at ¶ 39. Mitchell Potts and Jeffrey Philpot
were members of the Agency Traffic Office and had the
responsibility for awarding sensitive freight shipments to
Service Providers. Id. at ¶ 30.
shipment for non-sensitive freight was awarded to Mercer,
Brannan entered the shipment documentation directly into
Mercer's computer system. Id. at ¶ 44. When
a sensitive freight shipment was awarded to Mercer, the
shipment information was placed in a separate queue
accessible only by a special committee of Mercer's
managers, the Truck Operations Managers (“TOM”).
Id. at ¶¶ 44-45. This committee, which
included Jack Lubay, handled specific transportation related
issued in close coordination with John Fallot. Id.
at ¶¶ 44-45. After the information was placed in
the special queue, the TOM would assign sensitive freight
shipments to particular drivers who met the security
requirements applicable to that shipment. Id. at
¶ 48. Fallot serves as Mercer's General Manager of
Branch Offices and Business Development and is one of five
general managers at Mercer with significant authority and
responsibility over the day-to-day management of the company.
Id. at ¶ 47. Lubay is Mercer's Manager of
Government Operations, and reports directly to Fallot.
Id. at ¶ 46.
Philpot, Brannan, and Nelson have all pled guilty to their
role in the bribery scheme. Id. at ¶¶
9-16. As part of the factual basis for his guilty plea,
Brannan admitted to mailing cash gifts, providing cruise
tickets, planning a hunting trip, and regularly purchasing
meals for Potts in exchange for Potts continuing to award
sensitive freight shipments out of MCLB to Mercer.
Id. at ¶¶ 55-57, 61, 94. Philpot received
cash payments for his role in the scheme. Id. at
¶ 58-59, 90. Brannan admitted to directing Nelson to
make cash payments to Potts and Philpot when Nelson picked up
loads awarded to Mercer from MCLB. Id. at ¶
58-59. As a part of the factual basis for his guilty plea,
Nelson admitted that he paid Potts between $500 and $1, 500
per shipment awarded to Mercer. Id. at ¶ 60. In
at least one instance, the vacation expenses for Potts were
listed on Mercer's Expense Report as “Entertainment
Expenses” for “Mitchell Potts-MCLB.”
Id. at ¶ 62.
also admitted that Mercer would not have been awarded the
subject contracts without the bribes. Id. at ¶
56. Potts and Philpot admitted that they awarded the
shipments to Mercer because of the bribes. Id. at
¶ 80. In the factual basis for his guilty plea, Potts
admitted that he accepted bribes from Nelson, J.M., M.H., and
Brannan in exchange for awarding shipments leaving from MCLB.
Id. at ¶¶ 86-87. After Potts was promoted,
Philpot admitted that he began accepting bribes in exchange
for awarding shipments to Mercer. Id. at ¶ 90.
in 2007, several Mercer drivers complained about the
favorable treatment received by Nelson, J.M., and M.H.
Id. at ¶ 64. In response to these complaints,
Mercer established a Dedicated Driver Program. Id.
at ¶ 66. Under this program, all sensitive freight loads
were to be assigned by the TOM to one of the drivers in the
program before any others were considered. Id. at
¶ 69-70. The drivers in the program included Nelson,
J.M., and M.H. Id. at ¶ 66. The creation of the
program allowed Mercer to continue bribing Potts and Philpot
with less suspicion. Id. at ¶ 69-70. Despite
continued complaints to Mercer of suspicions of bribery and
favorable treatment, Mercer continued the Dedicated Driver
Program without investigation. Id. at ¶ 74-76.
October 2006, to April 2012, a total of 1, 333 Government
Bills of Lading were awarded to Mercer as a result of the
bribery scheme. Id. at ¶ 100. During this time,
Mercer drivers Nelson, J.M., and M.H hauled numerous
sensitive freight loads from MCLB in which multiple bills of
lading were used to contract for the transportation of goods
on one truck by one driver, instead of using one bill of
lading with multiple stop-offs. Id. at ¶¶
63, 100. The use of multiple bills of lading rather than a
single bill of lading with multiple stop-offs resulted in
higher costs for the government. Id. at ¶ 63.
Nelson stipulated in the factual basis for his guilty plea
that the loads resulting from the bribes involved multiple
bills of lading shipped on a single truck and that the
planning of shipments in this manner led to substantial
profits for Mercer, Brannan, and Nelson. Id. at
¶ 98. For example, on October 7, 2011, Nelson arrived at
MCLB with one trailer, which he proceeded to load with
deliveries under four separate bills of lading. Id.
at ¶ 102. Three of the delivery locations were in
California, and the fourth was in Nevada. Id. By
using four bills of lading instead of one bill of lading with
stop-off charges, Mercer received payment for mileage for
four cross-country shipments, instead of mileage for one
cross-country trip, plus the mileage for the additional
stops. Id. at ¶¶ 103-104. As a result,
Mercer was paid $26, 562.88 instead of $7, 084.23.
Id. at ¶105.
Government alleges that: Nelson transported the loads
contained in 333 bills of lading in this manner, J.M
transported the loads contained in 439 bills of lading in
this manner, and M.H. transported the loads contained in 361
bills of lading in this manner. Id. at ¶¶
101-127. The Government also attached to the complaint a list
of all affected bills of lading transported by each driver
that includes the Government Bill of Lading number, the
pickup date, the drop-off date, the Third Party Payor System
transaction identification number, and the billed total.
(Docs. 24-1; 24-2; 24-3).
2006, before the bribery scheme was fully implemented, Mercer
was paid approximately $278, 652 for shipments arising out of
MCLB. (Doc. 24, ¶ 81). In 2007, however, the total
payments jumped to $6, 500, 000. Id. Between 2007
and 2012, Mercer was paid approximately $23, 000, 000 from
shipments arising from MCLB. In 2013, after Potts and Philpot
were terminated, the total payments drastically decreased to
$218, 000. Id.
Rule of Civil Procedure 12(b)(6) allows a party to assert the
defense of failure to state a claim upon which relief can be
granted. Fed.R.Civ.P. 12(b)(6). To survive a motion to
dismiss under Rule 12(b)(6), the complaint must plead enough
facts to state a claim for relief that is plausible-not just
conceivable-on its face. Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007). Restated, “the factual
allegations in the complaint must possess enough heft to set
forth a plausible entitlement to relief.” Edwards
v. Prime, Inc., 602 F.3d 1276, 1291 (11th Cir. 2010)
(internal citation and punctuation marks omitted).
motion to dismiss, the Court “construes the complaint
in the light most favorable to the plaintiff and accepts all
well-pled facts alleged  in the complaint as true.”
Sinaltrainal v.Coca-Cola Co., 578 F.3d 1252, 1260
(11th Cir. 2009), abrogated on other grounds by Mohamad
v. Palestinian Auth., 132 S.Ct. 1702 (2012). The
“tenet that a court must accept as true all of the
allegations contained in a complaint is inapplicable to legal
conclusions. Threadbare recitals of the elements of a cause
of action, supported by mere conclusory statements, do not
suffice.”Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009). While notice pleading is a liberal standard,
“it does not unlock the doors of discovery for a
plaintiff armed with nothing more than conclusions.”
Id. at 678-79. A “plaintiff's obligations
to provide the grounds of his entitlement to relief requires
more than labels and conclusions, and a formulaic recitation
of the elements of a cause of action will not do.”
Twombly, 550 U.S. at 555 (internal citations
omitted). Moreover, when evaluating the sufficiency of a
complaint, the Court must “make reasonable inferences
in plaintiff's ...