Louisiana Shipbuilder Bollinger Cannot Defeat False Claims Act Suit At The Pleading Stage For Destroying Eight Coast Guard Patrol Boats

The Coast Guard entrusted eight of its aging 110 foot Island Class Patrol Boats to Bollinger Shipbuilding for modification to extend their service lives. While Bollinger’s modifications included adding 13 feet to the length of the boats, Bollinger made no to attempt to strengthen the boats to compensate for the additional weight and length. Bollinger erroneously believed no structural modifications were needed because of Bollinger’s own incorrect section modulus calculations. As a result, after the United States paid over $100 million dollars, the Coast Guard’s eight formerly usable boats buckled and were rendered unusable. The United States filed a False Claims Act lawsuit against Bollinger. United States v. Bollinger Shipyards, Inc., 775 F.3d 255, 256-59 (5th Cir. 2014).

The Louisiana District Court dismissed the United States’ case, holding that the United States failed to properly plead that Bollinger knew that the calculation that it reported to the Government was wrong.

On December 23, 2014, the Fifth Circuit reversed, holding that Federal Rule of Civil Procedure 9(b) does not require knowledge to be plead with specificity. The United States’ allegations that Bollinger knowingly inputted false data into its calculations satisfied “Rule 9(b)’s requirement that Bollinger’s intent and knowledge be pled only generally, as well as Rule 8’s requirement that the allegation be plausible.” Id. at 260–61.

The Fifth Circuit explained that the Bollinger is liable under the False Claims Act even if the United States does not show that Bollinger knew the correct calculation. This is because the Act’s knowledge requirement is satisfied so long as the “defendant either knew that the figure was false or acted with reckless disregard of its truth or falsity.” Id. at 261. The Fifth Circuit also found that the District Court improperly weighed the evidence and “drew inferences in favor of Bollinger,” which is impermissible at the pleading stage. Id. at 262–63. Finally, the Court explained that the inaptly named “Government knowledge defense” should not be applied at the pleading stage. While the Government’s knowledge of the fraud may be a factor in whether the United States can show that Bollinger knowingly submitted false claims, that analysis is more appropriately conducted at summary judgment or trial. Id. at 264.

Helmer, Martins, Rice, & Popham is not counsel to any parties to this case. However, this important decision prevents Bollinger from escaping liability for destroying eight Coast Guard patrol boats and reaffirms important principles regarding pleading. If you are aware of efforts to shortchange the Government, contact us to discuss your options.