Intracorporate Conspiracy Doctrine Does Not Protect Georgia Company Alleged to Defraud Government

James Michael Harris sued Lockheed Martin on behalf of the United States,
alleging that the Marietta, Georgia company had defrauded the Government.
Mr. Harris filed a
Georgia False Claims Act case. Lockheed Martin makes aircraft, and it has numerous contracts with the
United States Government. Mr. Harris’ complaint alleged that Lockheed
had been overbilling, billing work that had been done on one contract
to another contract because it would allow Lockheed to recover more money.

Mr. Harris had worked in Lockheed’s trim department for 27 ½
years, and based his allegations on what he had personally observed and
witnessed during that time period. He sued as a whistleblower knowing
about fraud against the Government, which was costing the Government substantial
sums of money.

Lockheed asked the Court to dismiss the claims against it. In an order
dated 3/9/2012, Judge Nina Totenberg of the United States District Court
for the Northern District of Georgia, refused to dismiss the claims. Judge
Totenberg wrote a very comprehensive order, and my previous entries have
talked about the first-to-file rule, the public disclosure bar, and pleading
fraud with particularity under Rule 9(b). Today I want to discuss a third
issue that Judge Totenberg covered in her opinion, the intracorporate
conspiracy doctrine.

Lockheed cited to another case that had involved itself,
McAndrew v. Lockheed Martin Corp., 206 F.3d 1031, 1036 (11th Cir. 2000). In that case, the Eleventh Circuit
had ruled that, since a corporation is composed of its agents, it “cannot
conspire with its agents and they cannot conspire amongst themselves as
long as they are acting within the scope of their employment.”

Lockheed argued that it could not conspire with itself to defraud the Government
under the False Claims Act. Since the people who allegedly had arranged
the fraud were all employees of Lockheed, Lockheed argued that they could
not conspire together to violate the False Claims Act by making fraudulent
charges to the Government.

The Georgia district court dismissed this argument, however, again citing
to the McAndrew case, 206 F.3d at 1036 (11th Cir. 2000). In that case,
the Eleventh Circuit had acknowledged that a corporation could not conspire
with itself, but had also discussed an important exception to the general
rule “for intracorporate criminal conspiracies under 18 U.S.C. §
371.” That provision prohibits people from conspiring to defraud
the United States. Since the allegations were that Lockheed Martin had
engaged in conduct to defraud the United States Government, Judge Totenberg
found that the exception clearly applied.

She explained that Mr. Harris had alleged actions that “would be
violative of both the civil liability provisions of 31 U.S.C. § 3729(a)6
and the criminal fraud conspiracy provisions of 18 U.S.C. § 371.”
Thus, the exception that the Eleventh Circuit had laid out applied: the
intracorporate doctrine “cannot shield the same conspiracy, alleging
the same criminal wrongdoing, from civil liability.” McAndrew, 206
F.3d at 1034.

Judge Totenberg concluded that Mr. Harris’ claims were not barred
by the intracorporate conspiracy doctrine, and therefore she refused to
dismiss Mr. Harris’ suit against Lockheed Martin. She allowed the
False Claims Act lawsuit to proceed toward trial.

I am a whistleblower lawyer handling FCA cases around the country, but
since I live in Georgia, I found this opinion of especial interest.