United States Court of Appeals, District of Columbia Circuit
United States of America, ex rel. Kasowitz Benson Torres LLP,
BASF Corporation, et al., Appellees and Kasowitz Benson Torres LLP, Appellant
May 13, 2019
from the United States District Court for the District of
Columbia (No. 1:16-cv-02269)
A. Davenport argued the cause for appellant. With him on the
briefs was Daniel Benson.
Gregory G. Garre argued the cause for appellees. On the brief
were Christopher Landau, Alice S. Fisher, Anne W. Robinson,
Alex Loomis, William F. Goodman III, Raymond Cardozo, Brian
A. Sutherland, Steven M. Bauer, Fred M. Haston III, Lawrence
S. Sher, and Seth A. Rosenthal. Ryan Baasch entered an
Before: Henderson, Srinivasan and Pillard, Circuit Judges.
LeCraft Henderson, Circuit Judge.
non satiat avaritiam, sed inritat" translates from Latin
to English as "money doesn't satisfy greed; it
stimulates it." This case teaches that money also
stimulates legal artifice. For over one hundred and fifty
years, the False Claims Act (FCA) has imposed civil liability
on anyone who defrauds the federal government of money or
property. See generally Act of March 2, 1863, ch.
67, 12 Stat. 696 (1863) (codified as amended at 31 U.S.C.
§§ 3729 et seq.). A third party-a
relator-may bring an FCA lawsuit on behalf of the government
and collect a substantial bounty if he prevails. See
31 U.S.C. § 3730(b), (d). Today we review a
relator's novel theory of FCA liability.
firm Kasowitz Benson Torres LLP (Kasowitz) alleges that a
handful of large chemical manufacturers violated the Toxic
Substances Control Act, Pub. L. No. 94-469, 90 Stat. 2003
(1976) (codified as amended at 15 U.S.C. §§ 2601
et seq.) (TSCA), by repeatedly failing to inform the
United States Environmental Protection Agency (EPA) of
information regarding the dangers of isocyanate chemicals.
Kasowitz claims the defendant-chemical manufacturers'
failure to disclose and subsequent actions deprived the
government of property (substantial risk information) and
money (TSCA civil penalties and contract damages). Kasowitz
demands billions of dollars in damages, even though the
government openly supports the defendants. The district court
dismissed its lawsuit. Kasowitz now appeals, asking us to
become the first court to recognize FCA liability based on
the defendants' failure to meet a TSCA reporting
requirement and on their failure to pay an unassessed TSCA
penalty. We decline the invitation and affirm the dismissal.
requires a chemical manufacturer, inter alia, to
inform the EPA of substantial risk information-that is,
"information which reasonably supports the conclusion
that [a] substance or mixture presents a substantial risk of
injury to health or the environment." 15 U.S.C. §
2607(e). TSCA authorizes the EPA to take administrative
action against any individual or entity that violates the
duty to disclose and to impose a civil penalty on a violator.
Id. § 2615(a)(2)(A)-(C). As part of its role in
implementing TSCA, the EPA established the Compliance Audit
Program, a "one-time voluntary compliance program
designed to strongly encourage companies to voluntarily audit
their files" and disclose substantial risk information.
Registration and Agreement for TSCA Section 8(e) Compliance
Audit Program, 56 Fed. Reg. 4128, 4129 (Feb. 1, 1991). The
EPA offered a reduced civil penalty for any tardy disclosure
made under the Program and reserved the right to "take
appropriate enforcement action" against a violator.
Id. The Compliance Audit Program was in effect from
1991 to 1996. See TSCA Section 8(e); Notification of
Substantial Risk; Policy Clarification and Reporting
Guidance, 68 Fed. Reg. 33, 129, 33, 131 (June 3, 2003) (The
"EPA reached final settlements with CAP participants,
announced those settlements on October 15, 1996, and
collected payment for stipulated penalties.").
alleges that the defendants-BASF Corporation, Covestro LLC,
Dow Chemical Company and Huntsman International
LLC-"manufacture isocyanate chemicals, which are used to
produce various polyurethane-based materials such as paint,
adhesives, rigid foam for insulation, flexible foam for
mattresses and cushions, and parts for automotive
interiors." United States ex rel. Kasowitz Benson
Torres LLP v. BASF Corp., 285 F.Supp.3d 44, 47 (D.D.C.
2017). Isocyanate chemicals can, under some circumstances,
pose a health hazard if inhaled or exposed to skin. Beginning
in the late 1970s and continuing through the early 2000s, the
defendants acquired information about the adverse health
effects of isocyanate chemicals. They did not disclose this
information to the EPA, however, not even while participating
in the Compliance Audit Program.
sued the defendants under the FCA, alleging that their TSCA
violations-and evasion of responsibility for those
violations-deprived the government of its money and property.
The defendants allegedly deprived the government of money by
failing to pay TSCA and Compliance Audit Program civil
penalties and by concealing their liability from the EPA. And
the defendants allegedly deprived the government of property
in the form of undisclosed substantial risk information
regarding isocyanate chemicals. The complaint's first
four counts allege violations of the FCA's reverse false
claim provision (Counts One, Two and Four) and conversion
provision (Count Three). Count Five alleges that the defendants
engaged in a conspiracy to violate the FCA. The defendants
moved to dismiss the case for failure to state a claim upon
which relief can be granted. BASF Corp., 285
F.Supp.3d at 46-47, 49. The district court rejected
Kasowitz's legal theories and accordingly granted the
motion. Id. at 50- 56. Kasowitz timely appealed.
survive dismissal under Federal Rule of Civil Procedure
12(b)(6), a complaint must include factual allegations that
establish a plausible claim to relief. Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007) (plaintiff must plead
"enough facts to state a claim to relief that is
plausible on its face"). We consider seriatim
and review de novo the five counts of Kasowitz's
complaint. See Elec. Privacy Info. Ctr. v. IRS, ...