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Zelenka v. NFI Industries Inc.

July 6, 2006


The opinion of the court was delivered by: Honorable Joseph E. Irenas


IRENAS, Senior District Judge

Plaintiff-Relator Deanna Zelenka ("Zelenka") filed the instant qui tam action against Defendants NFI Industries, Inc. ("NFI Industries"), and Honeywell International, Inc. ("Honeywell"), alleging that they violated the False Claims Act, 31 U.S.C. §§ 3729-33, in submitting various certifications and other documents connected to their participation in the Customs and Trade Protection Against Terrorism ("C-TPAT") program of the United States Custom and Border Protection Agency within the Department of Homeland Security ("CBP"). Presently before the Court are the Motions to Dismiss of NFI Industries and Honeywell.


Zelenka was hired by NFI Contract Manufacturing, LLC, doing business as NFI Hazmat, LLC ("NFICM"), in or about November, 2002, to run the operations of NFICM's manufacturing and warehousing business. Zelenka contends that NFICM is one of the "five core companies" comprising Defendant NFI Industries, which "hold themselves out to be a 'family of companies'" and maintain an office in Cherry Hill, New Jersey. (Compl. at ¶ 2) She contends that this family includes: (1) NFI Contract Manufacturing; (2) National Distribution Centers, L.P.; (3) NFI Interactive; (4) NFI Trucking; and (5) NFI Real Estate (collectively the "NFI Companies").*fn1

At some point in or about 2002, NFI entered into an agreement with Honeywell to consolidate Honeywell's warehousing of certain chemical products and hazardous materials in the northeast United States to one facility in Pennsauken, New Jersey, owned or leased by one or more of the NFI Companies ("Pennsauken Facility"). Zelenka contends that when she started working for NFICM, "[s]ubstantial work was necessary in order to make the Pennsauken Facility compliant with all applicable local building and construction codes." (Compl. at ¶ 7) She further alleges that the Pennsauken Facility was "not ready" to store the chemical products and hazardous materials being transferred by Honeywell to the facility. (Compl. at ¶ 8) Zelenka maintains that she informed NFI executives that the Pennsauken Facility was understaffed, not in compliance with the applicable codes and standards, and was being used to store corrosive, toxic, flammable and combustible materials, some of which could be used to make chemical weapons. She contends that NFI safety chief Paul Abrams, NFI head of security Willard Graham, and NFI vice president of risk management Craig Bollinger "acknowledged to Zelenka the misrepresentations that NFI was engaging in." (Compl. at ¶ 11) Honeywell applied for and was approved for participation in the C-TPAT program for its Pennsauken Facility operations. The CTPAT program is a "voluntary government-business initiative to build cooperative relationships that strengthen and improve overall international supply chain and U.S. border security." Customs-Trade Partnership Against Terrorism (C-TPAT): Partnership to Secure the Supply Chain, commercial_enforcement/ctpat/ (last visited June 27, 2006). Companies that engage in the importation, transportation and coordination of commercial import cargo into the United States are eligible for the program. In conjunction with an application to participate in C-TPAT, a company must conduct a comprehensive self-assessment of its security procedures using guidelines developed by the CBP and the trade community. Companies that participate in C-TPAT receive certain benefits for complying with the C-TPAT guidelines, including fewer inspections by CBP and reduced border wait times, and reduced selection rates for Compliance Measurement Examinations.

Zelenka contends that Honeywell and NFI Industries knowingly and falsely certified that the Pennsauken Facility met the C-TPAT requirements for procedural, physical and personnel security, education and training, access controls, manifest procedures and conveyance security. She alleges that one of the buildings at the Pennsauken facility had local building approval only for the storage of corrosive and toxic materials, but not for the flammable and combustible materials that were also stored there. Zelenka further maintains that NFI did not file a required Spill Containment Countermeasures Plan with the Environmental Protection Agency. As a result of these misrepresentations and failures, Zelenka contends that Honeywell and NFI Industries have received certain benefits from the C-TPAT program and avoided the payment of fines, fees and other costs to the government.

Zelenka filed the instant Complaint on January 28, 2005, pursuant to 31 U.S.C. § 3730(b)(1), which permits a private person to bring a civil action in the name of the United States Government for violation of the False Claims Act. On December 7, 2005, the United States filed a Notice of Election to Decline Intervention pursuant to § 3730(b)(4).


Rule 12(b)(6) provides that a court may dismiss a complaint "for failure to state a claim upon which relief can be granted." In considering a Rule 12(b)(6) motion, the court will accept the allegations of the complaint as true. See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). Dismissal of claims under Rule 12(b)(6) should be granted only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957). Although the court must assume as true all facts alleged, "[i]t is not . . . proper to assume that the [plaintiff] can prove any facts it has not alleged." Associated Gen. Contractors of Cal., Inc., v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983). Finally, when "[c]onfronted with [a 12(b)(6)] motion, the court must review the allegations of fact contained in the complaint; for this purpose the court does not consider conclusory recitations of law." Pennsylvania v. Pepsico, Inc., 836 F.2d 173, 179 (3d Cir. 1988).


Zelenka contends that the submission of various certifications to CBP by Honeywell and NFI Industries that the Pennsauken Facility met the C-TPAT guidelines constitutes a "reverse false claim" in violation of 31 U.S.C. § 3729(a)(7), because Honeywell's participation in the C-TPAT program entitled it to certain benefits, including fewer inspections and thus, fewer inspections fees. The False Claims Act provides that a party may be liable for making a "reverse false claim" if he or she "knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government. . . ."*fn2 § 3729(a)(7); see also Hutchins v. Wilentz, Goldman & Spitzer, 253 F.3d 176, 185 (3d Cir. 2001). The statute does not define the term "obligation."

Honeywell and NFI Industries argue that Zelenka has not alleged that there is any legal obligation to pay or transmit money that Honeywell could have avoided, concealed or decreased through its statements made in conjunction with the C-TPAT program.*fn3 See U.S. ex rel. Quinn v. Omnicare, Inc., 382 F.3d 432, 444 (3d Cir. 2004)(holding that a "prerequisite for liability under [the reverse false claim] theory is a legal obligation" to "pay . . . to the government money or property").

Zelenka alleges that Honeywell avoided obligations to pay the Government through several benefits provided to participating CTPAT companies, including: "(i) reduced number of inspections and inspection fees[;] (ii) reduced selection rates for compliance measurement exams[;] and (iii) receipt of targeting benefits by receiving a 'credit' through the CBP Targeting system." (Compl. at ΒΆ 26) The Court interprets this allegation to state that Honeywell used false statements to secure its participation in CTPAT. As a result of its participation in C-TPAT, fewer of Honeywell's shipments into the United States were ...

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