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False Claims Act

Court Decision in Hodgson Russ Clients’ Favor Allows Suit Alleging Fraud by DHL to Continue

May 5, 2010

State False Claims Act Suit Alleges Carrier Routinely Overbilled Government

A decision by State Supreme Court Justice John M. Curran last week will allow a New York State False Claims Act lawsuit brought by Kevin Grupp and Robert Moll, the owners of MVP Delivery and Logistics, to proceed. MVP Delivery is an independent trucking company that was subcontracted by DHL.

New York State’s False Claims Act, like the Federal False Claims Act, allows plaintiffs to bring suit on behalf of the government against contractors and others accused of submitting a false or fraudulent claim for payment to the state. The successful plaintiff, or “whistleblower,” then shares in the government’s proceeds.

In this case, the plaintiffs allege that DHL submitted false claims under a state contract by charging improper fuel surcharges for package delivery. The alleged fraudulent claims were submitted to the NYS Department of Transportation, the Thruway Authority, and various universities, hospitals, and local governments for pick ups and deliveries in the Buffalo area. The plaintiffs assert that DHL misrepresented that its Next Day and Second Day packages would travel by air when they were actually delivered solely by ground transport; that DHL imposed jet fuel surcharges for these ground deliveries; and that DHL imposed diesel fuel surcharges to ground shipments but only passed along a small portion of these surcharges to the independent contractors who actually paid for the fuel.

DHL moved to dismiss the charges, with its primary argument being that the Airline Deregulation Act and the Federal Aviation Administration Authorization Act pre-empt this state suit. The court disagreed, finding that, “when a state or municipality acts as a participant in the market and does so in a narrow and focused manner consistent with the behavior of other market participants, such action does not constitute regulation subject to pre-emption.”

Daniel C. Oliverio, Hodgson Russ’s False Claims Act Practice Group leader, said, “This decision will have lasting implications for other whistleblowers across the state and likely the country. As the court noted, it is counterintuitive to think that Congress would impede states’ abilities to protect themselves, and the states’ taxpayers, against fraud by intending such a pre-emption.”

In addition to Oliverio, other lead Hodgson Russ partners representing the plaintiffs are Joseph V. Sedita and John L. Sinatra, Jr.