Northrop Escapes FCA Suit Over Botched $874M USPS Order

northrop_postalLaw360, New York (September 10, 2014) — A Virginia federal judge has agreed to dismiss a False Claims Act suit accusing Northrop Grumman Systems Corp. of misleading the U.S. Postal Service and failing to meet benchmarks in delivering worth $874 million.

U.S. Judge T. S. Ellis III agreed with Northrop’s memorandum that no evidence exists that the company made false statements or omitted material facts, had any intention to mislead the federal government or caused the USPS to pay improper or false invoices.

The brief decision, made Friday and entered by the clerk Wednesday, also struck relator Beau Michaud’s corrected outline of disputed material facts, finding that Michaud, a former Northrop employee, didn’t file it in a timely fashion.

“Because plaintiff’s corrected outline of disputed material facts simply repeats verbatim the facts listed in its earlier submission, plaintiff’s corrected outline … does not alter the result reached here,” Judge Ellis wrote.

Counsel for Michaud declined to comment on Wednesday. The whistleblower made his last motion in the case on Aug. 25.

Michaud, who worked for Northrop Grumman on the project as a subcontractor and then as an employee from January 2007 through February 2011, claimed in an amended version of his qui tam suit that Northrop intentionally misled the USPS over the “slow, unreliable, inaccurate and inefficient” Flats Sequencing System machines that it delivered.
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But while the USPS eventually refused to pay Northrop Grumman for items in the contract and tried to recover claims totaling $400 million, the defendant argued that the federal government hasn’t alleged fraud, as Michaud does.

The Flats Sequencing System was part of the USPS’s five-year transformation plan, which included the system prototype and preproduction contracts as well as the system production contract, all of which were awarded to Northrop Grumman, according to court papers.

Northrop Grumman was contracted to install 100 of the units at 32 sites around the country, and an additional two units at the USPS’s training facility in Norman, Oklahoma. The contract also required the company to deliver spares, training, maintenance and certain system maintenance handbooks.

Michaud’s qui tam suit claimed Northrop Grumman’s repeated assurances to the USPS that it would meet requirements specified in the production contract caused the USPS to make milestone payments for machines that could never meet those requirements — in addition to paying for fixes to the products and manual work that should have been done by the machines.

Northrop Grumman’s August memorandum noted that the Virginia federal court rejected the first amended complaint for failure to plea alleged fraud with required particularity and that the present iteration of the whistleblower suit asserts a new theory of recovery in the form of fraud.

Northrop Grumman also filed a second memorandum in August supporting its motion to exclude three expert witnesses. It said their reports and proffered testimony was inadmissible because they lacked sufficient qualifications, based their assessments on flawed or incorrect assumptions, or didn’t use reliable methods or principles in reaching their conclusions. Because the case was dismissed, this motion was mooted.

Michaud is represented by David L. Scher and R. Scott Oswald of the Employment Law Group PC.

Northrop Grumman is represented by John W. Chierichella, Anne B. Perry, David S. Gallacher, Christopher M. Loveland and Townsend L. Bourne of Sheppard Mullin Richter & Hampton LLP and by Susan R. Podolsky of the Law Office of Susan R. Podolsky.

The case is U.S. ex rel. Beau Michaud v. Northrop Grumman Systems Corp., case number 1:11-cv-00606, in the U.S. District Court for the Eastern District of Virginia, Alexandria Division.

via Northrop Escapes FCA Suit Over Botched $874M USPS Order – Law360.

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