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United States v. Intrados/International Management Group

August 2, 2002

UNITED STATES OF AMERICA, PLAINTIFF,
v.
THE INTRADOS/INTERNATIONAL MANAGEMENT GROUP ET AL., DEFENDANTS.



The opinion of the court was delivered by: Ricardo M. Urbina, United States District Judge

Document No. 13

MEMORANDUM OPINION GRANTING IN PART AND DENYING IN PART THE DEFENDANTS' MOTION TO DISMISS

I. INTRODUCTION

This action involves our nation's privatization of foreign commerce markets. The United States of America ("the plaintiff" or "the government") brings suit under the False Claims Act ("FCA"), as amended, 31 U.S.C. § 3729 et seq., and under the common-law theories of payment-by-mistake, unjust enrichment, and fraud. The defendants have filed a motion to dismiss the complaint pursuant to Federal Rules of Civil Procedure 9(b) for failure to plead fraud with particularity and 12(b)(6) for failure to state a claim on which relief could be granted since the defendants' accounting invoices are not fraudulent and since the applicable statutes of limitations bars the plaintiff's claims. Upon consideration of the parties' submissions and the relevant law, the court grants in part and denies in part the defendants' motion to dismiss.

II. BACKGROUND

A. Factual Background

This nation has financed privatization policy and transaction initiatives involving foreign commerce markets since the early 1980s. Compl. ¶ 7. In collaboration with host nations, the United States developed privatization programs in countries such as Poland, Honduras, and Jamaica. Id. In that vein, the United States specifically supports initiatives to privatize civilian and defense industries in the newly independent states of the former Soviet Union. Id. ¶ 8. As such, the plaintiff contracted with private companies to provide the technical assistance necessary to implement its privatization project in these new independent states of the former Soviet Union. Id.

In connection with this effort, the plaintiff entered into a series of contracts with the Intrados Management Group, Fariborz Ghadar, Margaret Ghadar, and Liz De Tuerk Ghadar (the "defendants") to have them provide training services in several of the new independent states of the former Soviet Union. Id. ¶ 9. At issue here is contract number NIS110-005-C-00-4011-00, which was issued to the defendants in 1994 for the amount of $8,165,855.00 ("contract"). Id. The contract provides that the defendants would train mid-level government officials on the privatization of markets and other economic reforms that would ease the transition from command-and-control economies to market-based systems that are premised on notions of capitalism. Id.

According to the contract, along with the awarded amount of $8,165,855.00, the plaintiff authorized the defendants to seek reimbursement from the plaintiff for any allowable costs incurred by the defendants in connection with the contract work. Id. ¶¶ 9-10; Defs.' Mot. to Dismiss, Ex. A (Contract § B). The contract requires the defendants to follow certain rules when submitting invoices for reimbursement, including submitting invoices calculated under mathematical formulas prescribed by the contract. Id. at 3. Accordingly, the defendants must submit invoices to the plaintiff that are calculated as a multiple of direct labor and the plaintiff will reimburse the defendants based on the provisional rates enumerated in the contract. *fn1 Id.

Section 52.216-7 of the Federal Acquisition Regulation, as amended, 48 C.F.R. § 52.216-7, defines the term "allowable cost," which is incorporated into the contract's terms. *fn2 Compl. ¶ 11. The contract also contains the plaintiff's procurement regulation. *fn3 Id. ¶ 12.

The plaintiff pleads that from November 1994 to October 1996, the defendants routinely and knowingly submitted false or fraudulent invoices and an incurred cost submission to the plaintiff, seeking reimbursement for costs that were not allowed under the contract and the applicable federal procurement regulations. Id. ¶¶ 13-14. Specifically, the plaintiff pleads that the defendants submitted false or fraudulent claims totaling $574,669.59 in unallowable costs *fn4 on the following dates: November 25, 1994, December 8, 1994, December 13, 1994, March 15, 1995, April 10, 1995, and September 30, 1996. Pl.'s Opp'n to Defs.' Mot. to Dismiss ("Pl.'s Opp'n") at 18. *fn5 In addition, the complaint states that on October 22, 1996, the defendants submitted a false incurred cost submission to the plaintiff regarding the improper expenditures. Compl. ¶ 15.

The plaintiff's complaint further asserts that the individual defendants generated false corporate records, general ledgers, and other accounting data that concealed the personal nature of the unallowable costs and accounted for them as "salaries," "overhead," or "travel allowances." Id. ¶¶ 17-18. As a result, the plaintiff states that it did not learn of the false claims until a Defense Contract Agency audit ("DCA audit") was performed in 1998. Id. ¶ 18.

According to the plaintiff, each invoice submitted by the defendants contains an implied certification that the sum claimed was proper and due under the contract pursuant to the plaintiff's procurement regulations. Id. ¶ 19. The plaintiff charges that the implied certifications submitted by the defendants are, therefore, false because they contain charges for personal items not allowed under the contract. Id. ¶ 20.

B. Procedural History

The plaintiff commenced this action by filing its complaint on April 10, 2001. More than one year later and after seven joint motions for extensions of time, *fn6 the defendants filed their motion to dismiss the complaint on May 3, 2002, asserting that the invoices are not false as a matter of law, the complaint is not pled with the particularity required by Federal Rule of Civil Procedure 9(b), and that the applicable statutes of limitations bars the plaintiff's claims.

III. ANALYSIS

A. Legal Standards

1. Federal Rule of Civil Procedure 12(b)(6)

For a complaint to survive a Rule 12(b)(6) motion to dismiss, it need only provide a short and plain statement of the claim and the grounds on which it rests. FED. R. CIV. P. 8(a)(2); Conley v. Gibson, 335 U.S. 41, 47 (1957). A motion to dismiss under Rule 12(b)(6) tests not whether the plaintiff will prevail on the merits, but instead whether the plaintiff has properly stated a claim. FED. R. CIV. P. 8(a)(2); Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), reversed on other grounds by Harlow v. Fitzgerald, 457 U.S. 800 (1982). The plaintiff need not plead the elements of a prima-facie case in the complaint. Swierkiewicz v. Sorema N.A., 534 U.S. 506 (2002) (holding that a plaintiff in an employment-discrimination case need not establish her prima-facie case in the complaint); Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1114 (D.C. Cir. 2000). Thus, the court may dismiss a complaint for failure to state a claim only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations. Hishon v. King & Spalding, 467 U.S. 69, 73 (1984); Atchinson v. District of Columbia, 73 F.3d 418, 422 (D.C. Cir. 1996). In deciding such a motion, the court must accept all the complaint's well-plead factual allegations as true and draw all reasonable inferences in the non-movant's favor. Scheuer, 416 U.S. at 236.

2. Federal Rule of Civil Procedure 9(b)

An FCA complaint must comply with Federal Rule of Civil Procedure 9(b)'s requirement that circumstances constituting fraud or mistake be stated with particularity. FED. R. CIV. P. 9(b); United States ex rel. Totten v. Bombardier Corp., 286 F.3d 542, 551 (D.C. Cir. 2002). The circumstances that must be pled with specificity are matters such as the time, place, and contents of the false representations, since the rule is chiefly concerned about the elements of fraud. Totten, 286 F.3d at 551. (citing Wright & Miller, Fed. Practice & Proc. § 1297 (2d ed. 1990)).

The particularity requirement, however, does not abrogate the requirements of Rule 8, and it should be harmonized with the general directives in subdivisions (a) and (e) of Rule 8 that the pleadings contain a short and plain statement of the claim or defense and that each averment be simple, concise, and direct. FED. R. CIV. P. 8; United States ex rel. v. Cannon, 642 F.2d 1373, 1386 (D.C. Cir. 1981). Furthermore, a plaintiff need not allege with specificity each element of his cause of action if it contains allegations from which an inference may be drawn that the plaintiff will produce evidence on the essential elements. United States v. Bouchy, 860 F. Supp. 890, 893 (D.D.C. 1994) (Harris, J.).

In sum, to satisfy the requirements of Rule 9(b), an FCA complaint must set forth an adequate factual basis for the plaintiff's allegations that the defendant-contractor(s) submitted false claims (or false statements to get false claims paid), including a more detailed description of the ...


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