United States District Court, District of Columbia
UNITED STATES OF AMERICA, ex rel. KEAVENEY, et al. Plaintiffs,
SRA INTERNATIONAL, INC., et al. Defendants.
G. Sullivan Judge.
Tam Relators Kevin Keaveney and Margot Brennan
(collectively “Relators”) allege violations of
the False Claims Act (“FCA”), 31 U.S.C. §
3729-3733, against Defendants SRA International, Systems
Research and Applications Corporation (collectively
“SRA”) and Triton Services (collectively
“Defendants”). Am. Compl., ECF No. 32 at 71-79.
Relators allege that, to secure a Department of Defense
(“DOD”) contract, Defendants made numerous false
statements to the government. Id. Defendants SRA and
Triton move to dismiss Relators' Complaint for failure to
state a claim under Federal Rule of Civil Procedure 12(b)(6)
and for failure to plead with particularity as required under
Federal Rule of Civil Procedure 9(b). SRA Mot. Dismiss, ECF
No. 35; Triton Mot. Dismiss, ECF No. 38. Upon review of
Defendants' motions, the responses and replies thereto,
and for the reasons discussed below, Defendants' Motions
to Dismiss are GRANTED in part and DENIED in part.
7, 2013, Relators filed their Complaint, Compl., ECF No. 1,
and on February 23, 2015, the United States filed a Notice of
Election to Decline Intervention. ECF No. 14. Defendants were
served with the Amended Complaint on August 19, 2015, and on
October 16, 2015, Defendants filed the two motions to dismiss
pursuant to Rules 12(b)(6) and 9(b) that are now before this
Court. SRA Mot. Dismiss, ECF No. 35; Triton Mot. Dismiss, ECF
Amended Complaint, Relators allege that Defendants engaged in
a wide array of conduct that ultimately led to the submission
of false claims to the government, including that Defendants:
(1) made misrepresentations and concealed key information
from their proposals to fraudulently induce the government to
enter into the contract (Count I); (2) charged excessive
pass-through fees for subcontractor labor (Count II); (3)
made misrepresentations in monthly status reports and other
submissions to the government (Counts III and IV); (4)
inflated invoices and charged the government for services
that were never rendered (Count V); and (5) implemented a
kickback scheme wherein Defendants shared the proceeds of
their allegedly fraudulent conduct amongst themselves (Count
VI). Am. Compl., ECF No. 32 ¶¶ 121-150.
Relationship Between the Parties
Kevin Keaveney is the President of K2 Global Solutions, Inc.
(“K2GS”), a defense contracting company that
supplies a variety of services to federal entities, including
strategic planning, risk analysis, predictive modeling,
defense readiness systems and data analysis. Id.
¶ 4. Mr. Keaveney has extensive experience in the
national security sector and has developed a range of
products and strategic management systems that have been
widely adopted by the United States military. Id.
¶¶ 12-16. These products include, inter
alia, the Army Reserve Expeditionary Force
(“AREF”), a doctrinal and strategic management
system used by the Army Reserve, and an automated version of
AREF known as the Army Reserve Pool Based Sourcing
(“ARPBS”). Id. ¶¶ 12-14.
Relator Margot Brennan is an officer of K2GS. Id.
Systems Research and Applications Corporation is a
wholly-owned subsidiary of Defendant SRA International, Inc.
and serves as SRA's primary contract vehicle with the
U.S. government. Id. ¶ 6. In 2007, SRA entered
into a joint venture named “Project Galaxy” with
Defendant Triton Services, Inc. (“Triton”), a
subcontractor. Id. ¶ 8. To perform the
contract, Triton engaged various second-tier subcontractors,
including K2GS, Tiber Creek Consulting, Inc. (“Tiber
Creek”), Concurrent Technologies Corporation
(“CTC”), and an individual named Jim Song.
June to October 2005, Mr. Keaveney worked as a contractor for
the DOD reporting to Joseph Angello, the Director of the
Office of the Undersecretary of Defense, Personnel and
Readiness, Readiness, Programming and Assessments.
Id. ¶ 15. In February 2007, after Mr.
Keaveney's contract expired, Mr. Angello requested Mr.
Keaveney's assistance to continue the ARPBS and other
military projects Mr. Keaveney had developed. Because Mr.
Angello required Mr. Keaveney to procure his own contract
vehicle, Mr. Keaveney approached Triton, a pre-approved
subcontractor for various Department of Defense prime
contractors. Id. ¶ 18. Triton's Chief
Executive Officer, Larry Stack, informed Mr. Keaveney that
Triton would use one of its existing prime contracting
relationships, ultimately its relationship with SRA, to
obtain the requisite contract vehicle. Id. ¶
Defendants' Contracts with the U.S. Department of Defense
2003, the Department of Defense awarded Galaxy Scientific
Corporation (“Galaxy”), a future subsidiary of
SRA, a contract to provide analytic services and software.
Id. ¶ 19. Galaxy teamed with Triton in early
2007 to become the prime contractor for an additional
contract anticipated to be let in May 2007. Id. In
March 2007, Mr. Angello met with Triton, Mr. Keaveney and
another DOD representative to discuss the anticipated
contract. Id. ¶ 20. At this meeting, the
participants discussed Mr. Keaveney's future role, the
structure of the prospective contract, limits on Triton's
pass-through rates, and the roles of second-tier
13, 2007, Triton and SRA submitted a proposal, called a Task
Execution Plan (“TEP” or “task
proposal”), to the DOD outlining their anticipated work
on the contract. Id. ¶ 23. The TEP highlighted
Mr. Keaveney's role as “Technical Team
Leader” and detailed the six discrete tasks to be
performed. Id. Defendants' proposal was
ultimately successful and SRA and Triton secured the task
order. Id. ¶ 24. On May 6, 2008, Defendants
submitted a “follow-on” TEP to the DOD to request
additional funds for the second half of the contract's
base year and the following two option years. Id.
¶ 35. The 2008 TEP was largely similar to the 2007 TEP.
Id. To keep the government apprised of their
progress under the contract, Defendants submitted Monthly
Status Reports (“MSRs”). Id. ¶ 59.
In late 2008, Defendants removed Mr. Keaveney, K2GS and Tiber
Creek from the contract and replaced them with Triton
employees. Id. ¶¶ 39-42; 138.
STANDARD OF REVIEW
Federal Rule of Civil Procedure 12(b)(6)
motion to dismiss under Rule 12(b)(6) tests the legal
sufficiency of a complaint. Browning v.
Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002). The
pleading must contain a “short and plain statement of
the claim showing that the pleader is entitled to
relief.” Ashcroft v. Iqbal, 556 U.S.
662, 677-78 (2009). The pleading standard does not require
detailed factual allegations, but should be “more than
an unadorned, the-defendant-unlawfully-harmed-me
accusation.” Id. at 678. Naked assertions
without factual enhancements or formulaic recitations of the
elements of a cause of action will not suffice. Id.
Rather, to survive a motion to dismiss, a complaint
“must contain sufficient factual matter . . . to
‘state a claim to relief that is plausible on its
face.'” Id. Plausibility entails that the
plaintiff has pled factual content that is not merely
consistent with liability but allows the Court to draw a
reasonable inference that the defendant is liable for the
alleged misconduct. Id.
considering a 12(b)(6) motion, the Court should liberally
view the complaint in the plaintiff's favor, accepting
all factual allegations as true, and giving the plaintiff the
benefit of all inferences that can be drawn therefrom.
Redding v. Edwards, 569 F.Supp.2d 129, 131
(D.D.C. 2008) (citing Kowal v. MCI Commc'ns
Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994)).
Federal Rule of Civil Procedure 9(b)
9(b) requires that when alleging fraud, “the
circumstances constituting fraud or mistake... be stated with
particularity.” Fed.R.Civ.P. 9(b). Complaints brought
under the False Claims Act are subject to Rule 9(b)'s
heightened pleading requirements. See U.S.
ex rel. Totten v. Bombardier, 286
F.3d 542, 551-52(D.C. Cir. 2002)(“Every circuit to
consider the issue has held that, because the False Claims
Act is self-evidently an anti-fraud statute, complaints
brought under it must comply with Rule 9(b).”). That
said, a plaintiff “need not allege the
existence of a request for payment with
particularity...Rule 9(b) requires particularity only with
respect to the circumstances constituting
fraud[.]” U.S. ex rel. Folliard v. CDW Tech.
Servs., Inc., 722 F.Supp.2d 20, 27 (D.D.C.
2010) (emphasis in original).
this threshold, plaintiffs must “state the time, place
and content of the false misrepresentations, the fact
misrepresented and what was retained or given up as a
consequence of the fraud.” U.S.
ex rel. Williams v. Martin-Baker
Aircraft Co., 389 F.3d 1251, 1256 (D.C. Cir. 2004)
(internal citations omitted). Pleaders must also identify the
individuals allegedly involved in the fraud. Id. The
particularity requirement discourages nuisance suits,
safeguards defendants from frivolous accusations, and
guarantees that defendants receive sufficient information to
allow them to prepare a response. U.S.
ex rel. Joseph v. Cannon, 642 F.2d
1373, 1385 (D.C. Cir. 1981).
“must not rigidly apply the requirements of Rule 9(b),
but rather should analyze the Rule on a case by case
basis.” U.S. ex rel.
Head v. Kane Co., 798 F.Supp.2d 186, 193
(D.D.C. 2011). Courts should “hesitate to dismiss a
complaint under Rule 9(b) if the court is satisfied (1) that
the defendant has been made aware of the particular
circumstances for which she will have to prepare a defense at
trial, and (2) that plaintiff has substantial prediscovery
evidence of those facts.” U.S. ex
rel. Barrett v. Columbia/HCA Healthcare
Corp., 251 F.Supp.2d 28, 34 (D.D.C. 2003). A complaint
“can pass muster under the Rule 12(b)(6) threshold yet
fail to comply with the strictures of Rule 9(b).”
Anderson v. USAA Cas. Ins. Co., 221 F.R.D. 250, 252
n.3 (D.D.C. 2004). Thus Courts consider first whether the
relator has pled the relevant claim, and then turn to whether
the relator has “pled the circumstances of the fraud
with particularity.” Folliard, 722 F.Supp.2d
False Claims Act
FCA, 31 U.S.C. §§ 3729-3733, imposes a civil
penalty and treble damages on any individual who
“knowingly presents, or causes to be presented, to an
officer or employee of the United States Government...a false
or fraudulent claim for payment or approval” or
“a false record or statement to get a false or
fraudulent claim paid or approved by the Government.”
31 U.S.C. § 3729(a). The FCA defines “claims” to
include “any request or demand, whether under a
contract or otherwise, for money or property[.]” 31
U.S.C. § 3729(c). Under the statute, a private party,
commonly called a “relator, ” is empowered to
bring a qui tam action on behalf of the government.
The Government may elect to intervene in qui tam
actions, but where it declines to do so (as in this case),
the Relators may proceed and, if successful, collect a large
portion of any recovery. Martin v. Arc of
Dist. of Columbia, 541 F.Supp.2d 77, 81 (D.D.C.
2008) (citing U.S. ex rel.
Williams v. Martin-Baker Aircraft Co., 389
F.3d 1251, 1254 (D.C. Cir. 2004)). False Claims may take a
variety of forms, including: (1) presentment claims; (2)
fraudulent inducement claims; and (3) false certification
claims. Head, 798 F.Supp.2d at 195. A subcontractor
may be liable under the statute “even when it did not
itself present any false claims to the government if it
engaged in a fraudulent scheme that induced the government to
pay claims submitted by the contractor.”
Toyobo, 811 F.Supp.2d at 45.
make several arguments in support of their Motions to
Dismiss: (1) Relators' Amended Complaint is barred by the
statute of limitations; (2) Relators' Amended Complaint
failed to comply with FCA pre-filing requirements; (3)
Relators fail to state a claim for fraudulent inducement; (4)
Relators fail to state a presentment claim for various
phantom expenses, pass-through fees and purported kickback
scheme; and (5) Relators fail to state a material false
statement claim. Each argument will be addressed in turn.
Relators claims in the Amended Complaint relate back to
original complaint and thus are not barred by the statute of
first argue that the claims alleged in Relators' Amended
Complaint are barred by the FCA's six year statute of
limitations because the Relators' Amended Complaint
“advances several new alleged false claims or false
statements, i.e. theories of liability, that are not
encompassed within the original Complaint.” SRA Mot.
Dismiss, ECF No. 35 at 8(citing to a purported eleven alleged
new claims); Triton Mot. Dismiss, ECF No. 38 at 7-8. Relators
maintain that the six Counts in the Amended Complaint
“relate back to the original complaint, since the legal
claims and the basic factual allegations are substantively
identical to the original complaint . . . .”
Relators' Opp'n, ECF No. 42 at 41.
precludes civil actions filed “more than 6 years after
the date on which the violation . . . is committed.” 31
U.S.C. § 3731(b)(1). The alleged violations in this case
occurred between June 2007 and November 2008, while the
Amended Complaint was filed more than six years later on
August 19, 2015. See Am. Compl., ECF No. 32.
However, under Rule 15(c)(1)(B), “an amendment to a
pleading relates back to the date of the original pleading
when . . . the amendment asserts a claim or defense that
arose out of the conduct, transaction or occurrence set out -
or attempted to be set out - in the original pleading.”
Fed.R.Civ.P. 15(c)(1)(B). The Court of Appeals for the
District of Columbia Circuit (“Court of Appeals”)
has held that, in making the determination of whether an
amendment relates back to the date of the original complaint,
courts should consider whether the allegations in the amended
complaint relate to the same contract at issue in the
original complaint. U.S. ex rel.
Miller v. Bill Harbert Int'l
Constr., Inc., 608 F.3d 871, 882, 908 (D.C.
Cir. 2010) (per curiam) (holding that amended claims
related to two distinct contracts were not “fairly
encompass[ed]” by the claims in original complaint,
which were based on a third contract, were “unique and
no two involved the same ‘conduct, transaction, or
occurrence.'”); see also J.B. Helmer,
False Claims Act: Whistleblower Litigation at 618
(6th ed. 2012) (noting that a relator must often rush to file
the initial complaint and that amendment provides the
“opportunity to craft the allegations of the complaint
more carefully” and should be construed to relate back
under Rule 15 as long as the amended allegations “arise
out of the conduct or occurrences set forth or attempted to
be set forth in the initial complaint.”).
review of the Amended Complaint confirms that the same six
counts pled in the Amended Complaint are also pled in the
original complaint. See Comparison of Amended
Complaint against Original Complaint, ECF No. 35-3. Moreover,
the changes reflect Relators' effort to enhance the level
of factual detail. See id. Relying on
Miller, Defendants argue that the mere fact
Relators' complaints concern the same underlying contract
is insufficient to invoke the relation back doctrine. SRA
Mot. Dismiss, ECF No. 35 at 9. However, Defendants'
argument is not persuasive. In Miller, the Court of
Appeals considered whether claims based on two separate
contracts properly related back to the claims initially pled
that arose from a third contract. 608 F.3d at 882. The Court
of Appeals noted that the three contracts at issue were
“similar only in that each was funded” by the
same source and concerned work related to sewer systems,
ultimately concluding that the “differences among [the
contracts] are significant.” Id. at 881. By
contrast, both the amended and original complaints here
clearly address the same underlying contract and arise out of
the same conduct. See SRA Mot. Dismiss, ECF No. 35
at 9 (conceding that “the connection to the subject
task order” is a “commonality” between
Relators' complaints). Further, Defendants' argument
that the Amended Complaint advances several new
“theoretical” bases of liability is inaccurate in
light of the fact that the six counts provided in the
original complaint remain the same. See id.; Am.
Compl., ¶ 121-150. The Court finds that Relators'
Amended Complaint “expand[s] upon or clarif[ies] facts
previously alleged” and thus properly relates back to
the original complaint. United States v.
Hicks, 283 F.3d 380, 388 (D.C. Cir. 2002)(citing 6A
Charles Alan Wright & Arthur R. Miller, Federal Practice
and Procedure § 1504, at 84 (2d ed. 1990)). Because the
Amended Complaint relates back to the original complaint, it
was timely filed under Rule 15.
Relators Amended Complaint complies with FCA pre-filing
also argue that the Amended Complaint should be dismissed for
failure to comply with 31 U.S.C. § 3730(b)(2), which
requires all FCA complaints to be filed under seal. SRA Mot.
Dismiss, ECF No. 35 at 9; Triton Mot. Dismiss, ECF No. 38 at
7-8. Relators respond that the statutory requirement to file
the Complaint under seal applies only ...