United States v. Comstor Corp.

          MEMORANDUM OPINION

          BERYL A. HOWELL CHIEF JUDGE

         Brady Folliard brought this action, as a relator, pursuant to the qui tam provision of the False Claims Act (“FCA”), 31 U.S.C. § 3730(b)(1), against Westcon Group, Inc. and one of its wholly-owned subsidiaries, Comstor Corporation, alleging that the two defendants sold Cisco Systems, Inc. (“Cisco”) products to the United States government, which products originated in non-designated countries, in violation of the Trade Agreement Act (“TAA”), 19 U.S.C. § 2501 et seq. Rel.'s Third Am. Compl. (“TAC”) ¶¶ 1-2, ECF No. 65. The operative Third Amended Complaint was dismissed, however, for failing to state a claim for relief. The relator now seeks reconsideration of the Court's order, pursuant to Federal Rule of Civil Procedure 59(e), arguing that the dismissal is manifestly unjust. For the reasons explained below, the relator has not shown the need for amendment and the motion is denied.

         I. BACKGROUND

         The background of this FCA case is fully set out in the Court's prior opinion. See United States ex rel. Folliard v. Comstor Corp., 308 F.Supp.3d 56, 63-67 (D.D.C. 2018). Only a brief overview of the relevant facts is necessary here. For two decades, the defendants have supplied the federal government with Cisco products through two Federal Supply Schedule (“FSS”) contracts. TAC ¶¶ 7-11. Transactions under each contract must comply with the TAA. See TAC ¶ 58; see also TAC, Ex. 1, Comstor Contract GS-35F-4389G (“Comstor Contract”) at 6, ECF No. 65-2 (requiring compliance with TAA); TAC, Ex. 2, Westcon Contract GS-35F-0563U (“Westcon Contract”) at 9, ECF No. 65-3 (same). The TAA and its implementing regulations, the Federal Acquisition Regulations (“FAR”), require that items sold through an FSS contract must be “U.S.-made or designated country end products.” TAC ¶ 72 (citing FAR 52.225-5(b)). End products are “those articles, materials, and supplies to be acquired under the contract for public use.” Id. ¶ 59 (citing FAR 52.225-5(a)). For purposes of the TAA, an end product originates from a country if “it is wholly the growth, product, or manufacture of that country, ” or if it “has been substantially transformed into a new and different article of commerce” in that country. Id. ¶ 77 (citing 19 U.S.C. § 2518(4)(B) and 19 C.F.R. § 177.22(a)). Vendors selling to the federal government through an FSS contract have a continuing obligation to certify compliance with the TAA. Id. ¶ 67 (citing FAR 52.225-6(a)). A separate provision of the FAR regulates the federal government's “open-market” purchases, meaning purchases incidental to an FSS contract. Open-market purchases are permissible only upon satisfaction of FAR 8.402(f). See TAC ¶¶ 87-88.

         The Third Amended Complaint alleged that the defendants falsely certified TAA compliance for Cisco products sold to the federal government and thereby violated the FCA. TAC ¶¶ 143, 182-189, 193, 198. The FCA's presentment provision creates liability for “any person who knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval.” 31 U.S.C. § 3729(a)(1)(A). Additionally, the FCA's false statement provision creates liability for “any person who … knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.” Id. § 3729(a)(1)(B).^[1]

         The relator's case “relies on the so-called ‘certification theory' of liability, or alternatively ‘legally false certification.'” United States v. Sci. Applications Int'l Corp. (“SAIC”), 626 F.3d 1257, 1266 (D.C. Cir. 2010) (quoting Mikes v. Straus, 274 F.3d 687, 697 (2d Cir. 2001)). Under the certification theory, “a claim for payment is false when it rests on a false representation of compliance with an applicable federal statute, federal regulation, or contractual term. False certifications can be either express or implied. Courts infer implied certifications from silence ‘where certification was a prerequisite to the government action sought.'” Id. (quoting United States ex. rel. Siewick v. Jamieson Sci. & Eng'g, Inc., 214 F.3d 1372, 1376 (D.C. Cir. 2000)).

         The defendants moved to dismiss the Relator's Third Amended Complaint, pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), on grounds that: (1) the “claims are based on, and substantially similar to, prior public disclosures, ” for which the relator is not an “original source, ” and therefore are barred, under 31 U.S.C. § 3730(e)(4), Defs.' Mot. Dismiss Rel.'s TAC (“Defs.' Mot. Dismiss”) at 1-2, ECF No. 67; and (2) the Third Amended Complaint did not state a plausible claim for relief under the FCA or satisfy the particularity requirements of Federal Rule of Civil Procedure 9(b), Id. at 2-3.

         The defendants' first argument was unpersuasive. See Folliard, 308 F.Supp.3d at 69-77. The second argument, however, prevailed. A claim under the FCA's presentment provision must allege “that a defendant submitted (1) a claim to the government, (2) that the claim was false, and (3) that the defendant knew that the claim was false.'” Id. at 79 (quoting United States ex rel. Davis v. District of Columbia, 793 F.3d 120, 124 (D.C. Cir. 2015)). The alleged falsity must have been material to the government's willingness to pay to be actionable under the FCA. Id. (citing Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S.Ct. 1989, 1996 (2016) (“Escobar I”) and SAIC, 626 F.3d at 1269). Likewise, to succeed on a claim under the FCA's false-statement provision, “a plaintiff must allege that (1) the defendant made or used a record or statement; (2) the record or statement was false; (3) the defendant knew it was false; and (4) the record or statement was material to a false or fraudulent claim.” Id. at 92 (quoting United States ex rel. Keaveney v. SRA Int'l, Inc., 219 F.Supp.3d 129, 153 (D.D.C. 2016)).

         The Third Amended Complaint adequately pleaded falsity as to some of the defendants' transactions, Id. at 80-81, but failed to do so as to sales for what the parties call “configurable options, ” Id. at 81-82, and as to open-market sales, Id. at 82-84. Independently, the Third Amended Complaint was dismissed for failing adequately to plead either materiality, Id. at 84- 88, or scienter, Id. at 88-91.

         Now, pursuant to Federal Rule of Civil Procedure 59(e), the relator seeks to alter or amend the order dismissing the Third Amended Complaint, see Rel.'s Mot. Alter or Am. J. (“Rel.'s Mot.”), ECF No. 77, which motion is ripe for review.

         II. LEGAL STANDARD

         Rule 59(e) of the Federal Rules of Civil Procedure authorizes motions “to alter or amend a judgment, ” Fed.R.Civ.P. 59(e), as a “limited exception to the rule that judgments are to remain final, ” Leidos, Inc. v. Hellenic Republic, 881 F.3d 213, 217 (D.C. Cir. 2018). A motion under Rule 59(e) may be granted only in three circumstances: “(1) if there is an intervening change of controlling law; (2) if new evidence becomes available; or (3) if the judgment should be amended in order to correct a clear error or prevent manifest injustice.” Id. (internal quotations marks omitted); see also Exxon Shipping Co. v. Baker, 554 U.S. 471, 486 n.5 (2008) (“Rule 59(e) permits a court to alter or amend a judgment, but it may not be used to relitigate old matters, or to raise arguments or present evidence that could have been raised prior to the entry of judgment.” (internal quotation marks omitted)); District of Columbia v. Doe, 611 F.3d 888, 896 (D.C. Cir. 2010) (“Rule 59(e) motions are aimed at reconsideration, not initial consideration.” (quoting Nat'l Ecological Found. v. Alexander, 496 F.3d 466, 477 (6th Cir.2007)). Whether to grant such a motion is within the district court's discretion. Messina v. Krakower, 439 F.3d 755, 758 (D.C. Cir. 2006). With these limits, “[r]econsideration of a judgment after its entry is an extraordinary remedy which should be used sparingly.” Mohammadi v. Islamic Republic of Iran, 782 F.3d 9, 17 (D.C. Cir. 2015) (internal quotation marks omitted).

         The relator argues only that the Court's order must be amended to avoid manifest injustice. Rel.'s Mem. Supp. Mot. Alter or Am. J. (“Rel.'s Mem.”) at 2, ECF No. 77-1; Rel.'s Reply Supp. Mot. Alter or Am. J. (“Rel.'s Reply”) at 1-2, ECF No. 80. “[M]anifest injustice ‘does not exist where … a party could have easily avoided the outcome, but instead elected not to act until after a final order had been entered.'” Leidos, 881 F.3d at 217 (quoting Ciralsky v. CIA, 355 F.3d 661, 665 (D.C. Cir. 2004)). Instead, upsetting a final judgment requires “at least (1) a clear and certain prejudice to the moving party that (2) is fundamentally unfair in light of governing law.” Id. (internal quotation marks omitted).

         III. DISCUSSION

         Neither the law nor the record has changed since the defendants' motion to dismiss was granted. Instead, the relator argues that dismissing the complaint is manifestly unjust because doing so prejudiced the relator's interest in pursuing this action. Rel.'s Mem. at 2; Rel.'s Reply at 2. As the relator views governing law, the Third Amended Complaint adequately pleaded that the defendant falsely certified compliance with conditions of government contracting, that the defendants' false certifications were material to receiving payment, and that the defendant had ...