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In re Civil Investigative Demand 15-439

United States District Court, W.D. Virginia, Harrisonburg Division

August 12, 2016

In re Civil Investigative Demand 15-439

          MEMORANDUM OPINION

          Michael F. Urbanski United States District Judge

         This case involves Civil Investigative Demand 15-439 (the "CID"), issued December 28, 2015 to Beam Brothers Trucking, Inc. ("Beam") pursuant to 31 U.S.C. §§ 3729-33. In issuing the CID, the United States seeks documents and interrogatory responses related to an ongoing civil investigation by the Department of Justice ("DOJ") into whether Beam submitted false claims to the United States Postal Service ("USPS") under contracts to transport mail.

         Before the court are Beam's petition to set aside the CID, ECF No. 3, and the United States' cross petition to enforce the CID, ECF No. 9.[1] Under 31 U.S.C. § 3733, a CID may be issued by the Attorney General, or a designee, "before commencing a civil proceeding under section 3730(a) or other false claims law, or making an election under section 3730(b)." The primary issues before the court are (1) whether the actions taken by the United States constitute either commencement of a civil proceeding or intervention in a qui tarn action, and (2) whether the CID is overly burdensome, given that it commands Beam to produce a large quantity of materials already in the possession of the United States. Because the court finds that the United States has not commenced a civil proceeding or made an election in regards to a qui tarn action, Beam's motion to set aside the CID, ECF No. 3, is DENIED.

         The court finds that DOJ-Civil has authority to issue the CID and that the information sought appears relevant to the investigation of Beam. At the same time, however, the government acknowledges that certain of the information requested in the CID is already in its possession by virtue of its six year investigation. Given dais lengthy government investigation, during which the government has obtained a large volume of Beam's data, the court is required to consider whether enforcement of the CID will be unduly burdensome in that it will require production of information already widiin the government's possession. United States v. Powell, 379 U.S. 48, 57-58 (1964). Beam argues that many of the documents requested duplicate those obtained by the government by means of a search warrant and Beam's voluntary production. The government disputes the amount of duplication wrought by the CID, and posits that certain other non-duplicative information is necessary. Unlike the parties, the court is in no position to assess the extent to which the CID would require duplicative production. As such, the court TAKES UNDER ADVISEMENT the government's motion to enforce the existing CID, ECF No. 9, and DIRECTS the parties to meet and confer as to the production of non-duplicative information relevant to the government's inquiries. Should the parties not be able to negotiate the production of relevant, non-duplicative information within sixty (60) days, the government may renew its motion or issue an Amended CID narrowly tailored to obtain relevant and non-duplicative information within ninety (90) days.

         I.

         Beam is a trucking company located in Mt. Crawford, Virginia, and its business consists primarily of shipping mail for the USPS. ECF No. 24, at 1. Beam contracts with the USPS to deliver mail on a number of Highway Contract Routes ("HCR"). Id. at 3.

         Since 2005, Beam participated in the USPS's HCR Fuel Management Program ("FMP"). Id. Beam indicates that prior to 2005, postal contractors like Beam incorporated fuel cost estimates into their contract bids, subject to an adjustment for fuel price fluctuations. Id. In the pre-2005 system, contractors were allowed to retain fuel money to the extent the estimate exceeded actual use. Id. Beam indicates that since 2005, USPS required postal contractors to participate in the FMP program. Id. Under the FMP, USPS provided contractors including Beam with Voyager fleet transaction cards, essentially credit cards, to purchase fuel for HCR routes. Id. Beam received a number of Voyager cards to use for authorized fuel purchases. Id. FMP clauses contained in the HCR contracts governed the appropriate use of the Voyager cards. Id. In 2014, USPS began phasing out use of the Voyager cards after determining that use of the cards was generally ineffective and that USPS itself could not comply with requirements of the Voyager program. Id. at 4. The government indicates that while many HCR contracts provide fuel reimbursement through use of the Voyager card, some contracts stipulate pre-payment of fuel expenses based on a monthly quota that fluctuates with regional fuel price changes. ECF No. 22, at 3.

         The government has been investigating whether that Beam may have misused the Voyager cards by using them for fuel on non-USPS routes, for farm equipment, for personal vehicles, and on HCR contracts where Beam had already been reimbursed through an alternative payment arrangement. Id. at 4. The government questions whether Beam has misused the Voyager cards, leading to Beam's receipt of fuel reimbursements far in excess of what was stipulated under contracts with the USPS. Id.

         On February 12, 2013, approximately thirty federal agents executed a search warrant on Beam's Mt. Crawford, Virginia office, seizing large quantities of corporate records. ECF No. 24, at 2.[2] In an affidavit in support of the application for the search warrant to be executed on Beam, a special agent with the United States Department of Transportation ("USDOT") Office of the Inspector General ("OIG") stated that "[s]ince June of 2010, USDOT-OIG and the Postal Service-OIG have been engaged in this investigation." Aff. of Joseph A. Harris. ECF No. 24-1. Ex. 3. ¶ 11.

         Following the raid, Beam engaged in dscussions with various government agencies regardng the investigation. ECF No. 24, at 2. On September 4, 2013, Beam personnel met with government officials representing DOJ-Civil, DOJ-Criminal, and the U.S. Attorney's office for the Western District of Virginia. Id. Greg Pearson, an attorney with DOJ-Civil and the named custodian of the CID, attended the September 4, 2013 meeting. Id. In addition to the parallel civil and criminal investigations, Beam believes that a qui tarn action has been filed against it in New Jersey. Id. at 4.

         Beam contends the government has decided to intervene in the qui tarn action, rendering service of the CID improper. The government has not confirmed the existence of the qui tarn action, nor has the government filed a suit under 31 U.S.C. § 3730(a). ECF No. 22, at 11. On July 29, 2015, Gregory Pearson, on behalf of DOJ-Civil, sent a letter to Beam outlining the government's "findings regarding potential False Claims Act.. .violations by Beam Bros. Trucking." July 29. 2015 Letter from Greg Pearson. ECF No. 24-1, Ex. 6. This letter relayed the United States' belief that Beam had improperly used Voyager cards and thereby obtained "money from the federal government to which it [was] not entided, and [did] so with actual knowledge or recklessly." Id.

         Negotiations, including a setdement proposal prepared by the government, failed to resolve the concerns raised in the July 29 letter, and DOJ-Civil served the CID on Beam on December 28, 2015. ECF No. 22, at 5. The CID seeks production of documents and answers to written interrogatories that relate to Beam's use of Voyager cards, government contracts, and fuel reimbursement.

         Beam asserts that in executing the February 12, 2013 search warrant, -the government seized Beam contracts, driver gas receipts, fifty-five boxes of fuel files, three boxes that included fuel files, and eight boxes of employee files. ECF No. 25, at 6. The government also imaged all of Beam's computers, which contained a number of documents pertaining to fuel. Id. Beam asserts that a number of other documents relating to fuel purchases have been voluntarily produced. IcL The government does not challenge that it possesses some documents responsive to the CID, but disputes the extent of the duplication requested. ECF No. 22, at 10. Even were it, to consider Beam's concerns as to duplication to be true, the government asserts "that over half the materials requested by the CID have yet to be provided and should be provided." Id

         II.

         The False Claims Act ("FCA"), 31 U.S.C. §3729-33, empowers the Attorney General, or her designee, to issue a CID requesting documents, responses to interrogatories, or deposition testimony. 31 U.S.C. § 3733(a)(1). The CID can only be issued "before commencing a civil proceeding under section 3730(a) or other false claims law, or making an election under section 3730(b)." 31 U.S.C. § 3733(a)(1); United States v. Kernan Hosp.. No. RDB-11-2961, 2012 WL 5879133, *3 (D. Md. Nov. 20, 2012). The CID allows the government "to assess quickly, and at the least cost to the taxpayers or to the party from whom information is requested, whether grounds exist for initiating a false claims suit." United States v. Markwood, 48 F.3d 969, 979 (6th Cir. 1995).

         A CID is an administrative subpoena. Markwood, 48 F.3d at 975-76. Courts must enforce an administrative subpoena where: (1) the issuing agency has authority to engage in the investigation; (2) the issuing agency has complied with the statutory requirements of due process; (3) the information sought is reasonably relevant to the investigation and (4) where the information sought is not unduly burdensome. E.E.O.C. v. Ranstad. 685 F.3d 433, 442 (4th Cir. 2012); EEOC v. Maryland Cup Corp.. 785 F.2d 471, 476 (4th Cir. 1986); see also United States v. Powell. 379 U.S.48, 57-58 (1964); EEOC v. Ocean City Police Dept. 787 F.2d 955, 957 ...


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