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United States ex rel. Shea v. Verizon Business Network Services Inc.

United States District Court, District of Columbia

November 15, 2012

UNITED STATES of America, ex rel. Stephen M. SHEA
v.
VERIZON BUSINESS NETWORK SERVICES INC.; Verizon Federal Inc.; MCI Communications Services, Inc. d/b/a Verizon Business Services; and Cello Partnership d/b/a Verizon Wireless, Defendants. and Stephen M. Shea, Plaintiffs,

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[Copyrighted Material Omitted]

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Christopher Bowmar Mead, Lance Alan Robinson, London & Mead, Washington, DC, for Plaintiff.

Randolph D. Moss, Jennifer M. O'Connor, Wilmer Cutler Pickering Hale & Dorr LLP, Washington, DC, for Defendant.

Arnold Mark Auerhan, United States Department of Justice, Doris Denise Coles-Huff, U.S. Attorney's Office for DC, Washington, DC, for Movant.

MEMORANDUM OPINION

GLADYS KESSLER, District Judge.

Relator Stephen M. Shea (" Plaintiff" or " Relator" ) brings this qui tam action against Verizon Business Network Services, Inc., Verizon Federal Inc., MCI Communications Services, Inc. d/b/a Verizon Business Services, and Cello Partnership d/b/a Verizon Wireless (" Defendants" or " Verizon" ) pursuant to the Federal False Claims Act (" FCA" ), 31 U.S.C. §§ 3729 et seq.

This matter is before the Court on Defendants' Motion to Dismiss the Second Amended Complaint [Dkt. No. 51]. Upon consideration of the Motion, Opposition, Reply, and the entire record herein, and for the reasons set forth below, Defendants' Motion to Dismiss is granted for lack of jurisdiction as to Relator and granted without prejudice as to the United States.

I. BACKGROUND[1]

Plaintiff filed his first qui tam complaint against Verizon on January 17, 2007. Civ. No. 1:07-cv-0111 (GK) (" Verizon I " ) [ Verizon I Dkt. No. 1, " 2007 Complaint" ]. The 2007 Complaint explained that the " action concern[ed] the knowing submission to the United States of certain prohibited surcharges under contracts to provide telecommunications services between defendant Verizon Communications Inc. (and its division Verizon Business) and the General Services Administration." 2007 Complaint ¶ 2. The United States intervened in the

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2007 lawsuit, and in February 2011 the parties reached a settlement agreement in which Verizon paid the United States $93.5 million. The settlement agreement did not include any admission of liability. The case was dismissed on February 28, 2011. [ Verizon I Dkt. No. 41].

Plaintiff filed the current case, a second qui tam complaint against Verizon on June 5, 2009. Civ. No. 1:09-cv-01050 (GK) (" Verizon II " ) [Dkt. No. 1, " 2009 Complaint" ]. On November 30, 2011, the United States informed the Court that it was " not intervening at this time" in the 2009 lawsuit. [Dkt. No. 26]. On July 26, 2012, Plaintiff filed his First Amended Complaint. [Dkt. No. 37]. On September 12, 2012 Plaintiff filed his Second Amended Complaint (" SAC" ), which is the current complaint in Verizon II and the subject of the Motion to Dismiss presently before the Court.

The Second Amended Complaint explains that " [t]his lawsuit is based on a scheme by [ ] [Verizon] to defraud the United States by knowingly billing the government for non-allowable surcharges...." SAC ¶ 1. Plaintiff claims that his knowledge of the fraud is " [b]ased on his experience consulting with large commercial telecommunications customers" and that, as a consultant, he " learned that most telecommunication carriers, including Worldcom, later named MCI Communications Corp., acquired by Verizon in 2006 (collectively ‘ MCI/Verizon’ ), had a custom and practice of charging [Non-Allowable Tax-Like Charges]." SAC ¶ 3. The Second Amended Complaint then alleges that " MCI/Verizon overcharged the United States, just like its commercial customers." SAC ¶ 4.

The Second Amended Complaint describes the following as the source of Plaintiff's insider knowledge: " In 2004, Shea received an MCI document indicating that the company was charging the government for regulatory fee surcharges, and various state taxes, including utility taxes, ad valorem/property taxes, and business, occupational, and franchise taxes." SAC ¶ 4. The Complaint further claims that " [a] former Verizon employee, who worked at the company for over 30 years and retired as a manager, senior staff consultant, confirmed that Verizon did not have a separate billing system for federal customers and commercial customers, and that Verizon's billing system did not have the capability to turn off the surcharges that were generally charged to all customers." SAC ¶ 27. The Second Amended Complaint then alleges that " [b]ased on Verizon's practice of improperly billing Non-Allowable Tax-Like Charges to commercial customers and the government, on information and belief, Verizon improperly billed for Non-Allowable Tax-Like Charges on the following federal telecommunication contracts [listing 20 contracts between Defendants and the U.S. government]." SAC ¶ 28.

On September 12, 2012, Defendants filed their Motion to Dismiss the Second Amended Complaint (" MTD" ). [Dkt. No. 51]. On September 27, 2012, Plaintiff filed his Opposition to Defendants' Motion to Dismiss the Second Amended Complaint (" Opposition" ). [Dkt. No. 54]. On October 9, 2012, Defendants filed their Reply in Support of their Motion to Dismiss the Second Amended Complaint (" Reply" ). ...


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