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United States ex rel. Tracy v. Emigration Improvement District

United States District Court, D. Utah

June 15, 2018

UNITED STATES OF AMERICA ex rel. MARK CHRISTOPHER TRACY, Plaintiff,
v.
EMIGRATION IMPROVEMENT DISTRICT, et al., Defendants.

          MEMORANDUM DECISION AND ORDER GRANTING MOTIONS TO DISMISS

          Jill N. Parrish, United States District Court Judge

         I. INTRODUCTION

         In the words of Relator Mark Christopher Tracy, “This lawsuit is simple.” He asserts two causes of action. Both arise under the False Claims Act. The first is barred by the applicable statute of limitations because the alleged violations occurred over ten years before Mr. Tracy filed suit. The second fails because it is based on conclusory allegations that are contradicted by a document that Mr. Tracy incorporated by reference into his complaint. Mr. Tracy has amended his complaint three times, and letting him do so a fourth time would prove futile. Accordingly, Mr. Tracy's third amended complaint is dismissed with prejudice as to the defendants that have moved to dismiss.

         II. STATEMENT OF FACTS

         Mr. Tracy's third amended complaint spans 93 pages. There are twenty-two named defendants[1] and 145 unnamed “Doe” defendants. For the sake of brevity, the court highlights the most salient points, of which there are few:

         Defendant Emigration Improvement District, which the court will refer to as the District, is a special service district organized under the laws of the State of Utah. The District was created to provide water and sewer services to the residents of Emigration Canyon, a township in Salt Lake County, Utah. The District has the power to issue bonds, charge fees and assessments, and levy taxes on the residents of Emigration Canyon.

         On or about September 29, 2004, the District received the final disbursement of a $1.846 million loan. The loan came from Utah's Drinking Water State Revolving Fund, which uses federal funds to finance the construction of water systems for drinking or culinary water.

         Mr. Tracy filed his initial complaint on September 26, 2014. His current complaint, the third amended complaint, alleges two causes of action under the False Claims Act. First, he alleges that the District and its co-conspirators made false statements that induced the Government to disburse the proceeds of the $1.846 million loan. Second, he alleges that the District, after the loan proceeds were disbursed, failed to comply with conditions of the loan and failed to report this noncompliance to the Government.

         III. DISCUSSION

         A number of the defendants move to dismiss Mr. Tracy's third amended complaint with prejudice.[2] First, these defendants argue that the first cause of action is barred by the six-year statute of limitations found at 31 U.S.C. § 3731(b)(1). Second, these defendants argue that the second cause of action fails to state a claim because Mr. Tracy has not alleged that the defendants were obligated to pay or transmit money or property to the Government, a requirement of the provision upon which Mr. Tracy bases the second cause of action. The court agrees with both arguments and concludes that it would be futile to let Mr. Tracy amend his complaint for a fourth time. Accordingly, Mr. Tracy's third amended complaint is dismissed with prejudice as to the defendants that have moved to dismiss.

         A. Motion Standard: Rule 12(b)(6)

         Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss a claim upon which relief cannot be granted. The court's function on a Rule 12(b)(6) motion is not to weigh potential evidence that the parties may present at trial but to assess whether a party's allegations are legally sufficient to state a claim upon which relief can be granted. Dubbs v. Head Start, Inc., 336 F.3d 1194, 1201 (10th Cir. 2003).

         A complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a). This standard “does not require ‘detailed factual allegations, ' but it demands more than an unadorned, the defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Where the allegations are merely “label and conclusions” or a “formulaic recitation of the elements of a cause of action, ” the plaintiff's claim will not survive a motion to dismiss. Twombly, 550 U.S. at 555.

         Moreover, “[a] complaint is subject to dismissal for failure to state a claim if the allegations, taken as true, show the plaintiff is not entitled to relief.” Jones v. Bock, 549 U.S. 199, 215 (2007). “If the allegations, for example, show that relief is barred by the statute of limitations, the complaint is subject to dismissal for failure to state a claim . . . .” Id.; see also Aldrich v. McCulloch Props., Inc., 627 F.2d 1036, 1041 n.4 (10th Cir. 1980) (“While the statute of limitations is an affirmative defense, when the dates given in the complaint make clear that the right sued upon has been extinguished, the plaintiff has the burden of establishing a factual basis for tolling the statute.”).

         B. The First Cause of Action: Direct False Claims Under 31 U.S.C. § 3729

         Mr. Tracy alleges that “Defendants knowingly presented or caused to be presented a false or fraudulent claim to an officer or employee of the United States Government-or to a contractor, grantee, or other recipient-in order to induce disbursement of $1.846 million in federal funds, ” Third Am. Compl. ¶ 502, and that “Defendants knowingly made, used, or caused to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the United States Government-or by a contractor, grantee, or other recipient-in order to induce disbursement of $1.846 million in federal funds, ” Third Am. Compl. ¶ 507. Specifically, the District and its co-conspirators “made misrepresentations to the federal government or its agents that induced the federal government or its agents to disburse the $1.846 million loan.” Third Am. Compl. at 8. “On or about September 29, 2004, [the District] received the final disbursement of [the] . . . $1.846 million loan . . . .” Third Am. Compl. ¶ 40.

         The first cause of action is based on § 3729(a)(1)(A) and § 3729(a)(1)(B), which impose liability on any person who (A) “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval” or (B) “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.” § 3729(a)(1)(A), (B). Section 3730(b)(1) provides that “[a] person may bring a civil action for ...


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