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United States ex rel Head v. Kane Co.

November 12, 2009

UNITED STATES OF AMERICA, EX. REL. ANTHONY HEAD PLAINTIFF,
v.
THE KANE COMPANY, ET. AL., DEFENDANTS.



The opinion of the court was delivered by: Gladys Kessler United States District Judge

MEMORANDUM OPINION

Relator Anthony Head ("Relator" or "Head") brings this qui tam suit under the False Claims Act, 31 U.S.C. §§ 3729 et seq. ("FCA"), on behalf of the United States against Defendant Kane Company ("Defendant" or "Kane Company"), a Maryland corporation that specializes in providing moving services and other logistics to government agencies. Also named as Defendants are Office Movers, Inc., a subsidiary of Kane Company, and Management Alternatives, Harris Design Group, Settles Associates, and Perara Group, which subcontracted work to Kane Company. The United States intervened as Plaintiff in this suit on March 26, 2009. On July 24, 2009, Defendant Kane Company filed an Answer in which it asserted twelve counterclaims against Relator Head.

This matter is before the Court on the United States' Motion to Strike Affirmative Defense and to Dismiss Defendants' Counterclaims [Dkt. No. 60], and on Relator Head's Motion to Dismiss Defendant's Counterclaims [Dkt. No. 59]. Upon consideration of the Motions, Opposition, Replies, and the entire record herein, and for the reasons set forth below, the Motion to Strike is granted, and the Motions to Dismiss Defendant's Counterclaims are granted in part, and denied in part. Defendant Kane Company is granted leave to amend counterclaims one through four, six, seven, nine, and ten.

I. BACKGROUND

Relator Head is a former employee of Defendant Kane Company. From 1997, when he was first hired, until his termination for poor performance on January 10, 2005, Head held a number of sales positions. His last position, to which he was promoted in 2003, was Vice President for Government Sales. Compl. ¶ 13. On February 11, 2005, based on his experience with Defendants' practices in bidding on and performing government contracts, Head filed a sealed Complaint in this Court alleging a number of violations of the FCA.

First, Head alleges that Kane Company knowingly submitted bills, invoices, and demands for payment to federal agencies for contracts entered into pursuant to the Services Contract Act, 41 U.S.C. §§ 351-58 ("SCA"), without paying its employees the prevailing wage required under that statute. Defendants Management Alternatives, Harris Design Group, and Settles Associates, which were the general contractors on these contracts, are alleged to have falsely certified their and subcontractor Kane Company's compliance with the SCA. Compl. ¶ 4-6.

Second, Head alleges that Defendants defrauded federal agencies by billing the same hours worked by employees to two or more projects, thus charging government clients for hours worked on other projects. Compl. ¶ 7. Third, Head alleges that Defendant Kane Company submitted General Services Administration ("GSA") schedules for contracts which included prices higher than those charged to private sector clients, contrary to GSA's "best price" requirement. Compl. ¶ 8. Fourth, Head alleges that Defendant Office Movers, Inc. improperly relied upon Defendant Perara Group's Section 8(a) status under the Small Business Act, 15 U.S.C. § 631 et seq. ("SBA"), to procure contracts for which it was not otherwise eligible. Compl. ¶ 9. Finally, Head alleges that Defendant Kane Company, by and through its officers, knowingly double-charged energy surcharges to federal agencies. Compl. ¶ 10.

Approximately two weeks after filing his sealed Complaint, Head and Kane Company entered into a Separation Agreement arising out of Head's termination. Def.'s Answer, Ex. A. First, ¶ 3 of the Agreement provided that any correspondence or other records concerning the Company's operation was the sole property of Kane Company, and Head warrantied that he had turned over, or promptly would turn over, any such property in his custody or control. Second, the parties agreed in ¶ 4 that they would not "make any oral or written statement or take any other action which disparages or criticizes the other party." Id. ¶ 4. Third, in ¶ 10 of the Agreement, Head and Kane Company released each other from claims and liabilities arising from the terminated employment relationship and agreed to indemnify each other for damages arising out of a breach of the Agreement. Id. ¶¶ 6, 8.

In March 2009, after conducting its own investigation into these allegations for more than four years, the United States intervened as Plaintiff. In response, Defendant Kane Company raised two affirmative defenses against the Government: laches, and the applicability of the statute of limitations to those contractual dealings that occurred more than ten years ago. Kane Company also counter-claimed*fn1 against Head for defamation, tortious interference with economic advantage, intentional interference with contract, intentional interference with prospective economic advantage, malicious prosecution, libel, slander, breach of contract, and fraud.*fn2 Finally, Defendant sought contractual indemnification from Head for any liability under the FCA, pursuant to ¶ 10 of the 2005 Separation Agreement, and injunctive relief against any further violation of the Agreement.

The United States moved to dismiss the affirmative defense of laches, arguing that it is not applicable to the United States, and to dismiss the counterclaims against Head as void against public policy.*fn3 Head also moved to dismiss the counterclaims as void against public policy and for a failure to state a claim under Federal Rule of Civil Procedure 12(b)(6).

II. MOTION TO STRIKE AFFIRMATIVE DEFENSE OF LACHES

In its Answer to the United States' Intervenor Complaint, Kane Company argues that the government has "slept on its rights" by waiting four years after Head filed suit to intervene, and therefore is barred from pursuing this action. Def.'s Answer 6. The United States moved under Federal Rule of Civil Procedure 12(f) to strike this defense.

Motions to strike are not generally favored. However, "[t]he motion should be granted where it is clear that the affirmative defense is irrelevant and frivolous and its removal from the case would avoid wasting unnecessary time and money litigating the invalid defense." SEC v. Gulf & Western Indus., Inc., 502 F. Supp. 343, 344 (D.D.C. 1980) (citation omitted).

It is well established that "laches or neglect of duty on the part of officers of the government is no defense to a suit by it to enforce a public right or protect a public interest." Utah Power & Light Co. v. United States, 243 U.S. 389, 409, 37 S.Ct. 387, 61 L.Ed. 791 (1917). See also United States v. Summerlin, 310 U.S. 414, 416, 60 S.Ct. 1019, 84 L.Ed. 1283 (1940) (it is "well settled that the United States is not... subject to the defense of laches in enforcing its rights"); Illinois Cent. R.R. Co. v. Rogers, 253 F.2d 349, 353 (D.C. Cir. 1958) ("No rule is better established than that the United States are not bound by limitations or barred by laches where they are asserting a public right.") (internal quotation omitted); United States v. Philip Morris, Inc., 300 F. Supp. 2d 61, 72-73 (D.D.C. 2004) (discussing rule in Summerlin).

In this case, the United States is clearly acting in the public interest by seeking to hold Defendants accountable under the FCA. Furthermore, Kane Company failed to present any argument in opposing the Motion to Strike; therefore the issue may be properly regarded as conceded. See FDIC v. Bender, 127 F.3d 58, 67-68 (D.C. Cir. 1997). For these reasons, the doctrine of ...


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