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United States v. Dyncorp International LLC

United States District Court, District of Columbia

October 4, 2017

UNITED STATES OF AMERICA, Plaintiff,
v.
DYNCORP INTERNATIONAL LLC, Defendant.

          MEMORANDUM OPINION

          ELLEN SEGAL HUVELLE, United States District Judge

         The United States has sued DynCorp International, a government contractor, asserting violations of the False Claims Act (“FCA”), 31 U.S.C. § 3729 et seq., and common law causes of action for unjust enrichment, payment by mistake and breach of contract. The claims arise out of DynCorp's alleged overcharging for services provided to the government. DynCorp's answer asserted several affirmative defenses, four of which the government has now moved to strike. For the reasons explained below, the Court will grant the motion to strike in part and deny it in part.

         BACKGROUND

         The facts of this case are available in this Court's Memorandum Opinion, United States v. DynCorp Int'l, LLC, No. 16-1473, 2017 WL 2222911 (D.D.C. 2017), granting DynCorp's motion to dismiss in part and denying it in part. In brief, DynCorp provided lodging, security, transportation and other services to support the Iraqi civilian force through a contract awarded by the United States Department of State (“DOS”). (Compl. ¶¶ 32-37.) DynCorp subcontracted some services through Corporate Bank Financial Services, Inc. (“Corporate Bank”) even though, the government asserts, “DynCorp knew that the rates provided by Corporate Bank . . . were unreasonable.” (Id. ¶ 4.) The government alleges that “DynCorp knowingly made material false statements and key omissions about unreasonable labor rates that distorted its negotiations with the State Department.” (Id. ¶ 64.) Further, the government claims that “[b]y misrepresenting and omitting information reflecting the true nature and bases of Corporate Bank's rates, DynCorp skewed price negotiations with the State Department and caused the State Department to agree to higher contract prices than it otherwise would have.” (Id. ¶ 6.)

         DynCorp moved to dismiss the government's claims. (Def.'s Mot. Dismiss, ECF No. 10.) The Court concluded that for both the FCA presentment claim and false statement claim, the government had adequately pled falsity, materiality, and scienter under an implied certification theory for the cost-reimbursable charges and a fraudulent inducement theory for the fixed-price charges. DynCorp Int'l, 2017 WL 2222911, at *3. The Court dismissed claims for unjust enrichment and payment by mistake to the extent they were based on cost-reimbursable charges. Id.

         DynCorp subsequently filed its answer, (ECF No. 27), which included twelve affirmative defenses. In response, the government took the unusual step of moving to strike four of these defenses, arguing that they “are legally invalid or improperly pled.” (Mot. Strike at 1, ECF No. 31.) Two of the four defenses-the fifth and the sixth-relate to an audit conducted by the Defense Contract Audit Agency (“DCAA”) and DynCorp's settlement with DOS. DynCorp argues that if the government found the contract prices reasonable, it cannot now be allowed to revisit that determination. (See Answer at 29-31.) The seventh defense raises the applicable statute of limitations under 31 U.S.C. § 3735(b)(1). The ninth defense asserts that the government breached its contract with DynCorp before DynCorp allegedly violated the FCA and that the government engaged in inequitable conduct, thus precluding this suit. (Id. at 31-32.)

         ANALYSIS

         As to DynCorp's affirmative defenses of waiver and equitable estoppel (fifth defense), accord and satisfaction (sixth defense), laches as asserted against liability (seventh defense) and inequitable conduct (ninth defense), the Court grants the motion to strike because these defenses are precluded as a matter of law. This determination, however, does not speak to the potential evidentiary relevance of the DCAA audit or DOS's settlement with DynCorp. The Court declines to strike the statute of limitations defense, the laches defense insofar as it pertains to prejudgment interest (seventh defense) and the breach of contract defense (ninth defense). As to each defense, the Court's decision applies to both the FCA and the common law claims.

         STANDARD OF REVIEW

         Although “a motion to strike is a drastic remedy that courts disfavor, ” United States ex rel. Landis v. Tailwind Sports Corp., 308 F.R.D. 1, 4 (D.D.C. 2015), Federal Rule of Civil Procedure 12(f) permits courts to “strike insufficient defenses or ‘any redundant, immaterial, impertinent, or scandalous matter.'” Landis, 308 F.R.D. at 4 (quoting Fed.R.Civ.P. 12(f)). Whether to do so “is vested in the trial judge's sound discretion.” Id. (quoting Gates v. District of Columbia, 825 F.Supp.2d 168, 169 (D.D.C. 2011)).

         A motion to strike may prove useful “when the parties disagree only on the legal implications to be drawn from uncontroverted facts.” 5C Charles Alan Wright, Arthur R. Miller, Federal Practice & Procedure § 1381 (3d ed. 2011). But, a motion to strike should only be granted “if the insufficiency of the defense is [] clearly apparent.” Id. And even when the defense presents “a purely legal question, federal courts are very reluctant to determine disputed or substantial issues of law on a motion to strike.” Id.; see also, e.g., Reis Robotics USA, Inc. v. Concept Indust., Inc., 426 F.Supp.2d 897, 905 (N.D. Ill. 2006) (“Before granting a motion to strike an affirmative defense, the Court must be convinced that there are no unresolved questions of fact, that any questions of law are clear, and that under no set of circumstances could the defense succeed.”).

         I. Waiver, Estoppel, and Accord and Satisfaction (Fifth and Sixth Defenses)

         The government has moved to strike DynCorp's fifth and sixth defenses, which assert that the United States “waived, and is estopped from asserting, any claim that [DynCorp]'s charges for Corporate Bank's services or facilities were unreasonable or in any way improper” (Answer at 29), and that the government's claims “are barred by an accord and satisfaction, and release” as a result of the DCAA audit and the settlement with DOS. (Answer at 30-31.) This Court will grant the government's motion as to these two defenses, but this is not to be construed as a ruling that the issue of the reasonableness of the charges is not relevant.

         Although “the fundamental principle of equitable estoppel applies to government agencies, as well as private parties, ” the standard for estopping the government is “an exacting one.” United States v. Honeywell Int'l, Inc., 841 F.Supp.2d 112, 114 (D.D.C. 2012). “To apply equitable estoppel against the government, a party must show that (1) ‘there was a “definite” representation to the party claiming estoppel, ' (2) the party ‘relied on its adversary's conduct in such a manner as to change his position for the worse, ' (3) the party's ‘reliance was reasonable' and (4) the government ‘engaged in affirmative misconduct.'” Morris Commc'ns, Inc. v. FCC, 566 F.3d 184, 191 (D.C. Cir. 2009). At bottom, “even if equitable estoppel does apply to the [g]overnment, any such application ...


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