United States District Court, District of Columbia
UNITED STATES OF AMERICA, ex rel. PATRICIA SCOTT and JOHN L. TUDBURY, Plaintiffs,
v.
PACIFIC ARCHITECTS AND ENGINEERS PAE, INC. dba PAE Government Services, Inc, aka PAE Group, Defendant.
MEMORANDUM OPINION
COLLEEN KOLLAR-KOTELLY UNITED STATES DISTRICT JUDGE.
In this
action under the False Claims Act (“FCA”), 31
U.S.C. §§ 3729-3733, Relators Patricia Scott and
John L. Tudbury principally allege that Defendant Pacific
Architects and Engineers, Inc. (“PAE”) engaged in
improper billing practices in Beirut, Lebanon pursuant to a
police training contract awarded by the U.S. Department of
State. Pending before the Court is Defendant's Motion to
Dismiss the Fourth Amended Complaint, ECF No. 64, brought
pursuant to Federal Rules of Civil Procedure 9(b) and
12(b)(6). Upon consideration of the pleadings, [1] the relevant
legal authorities, and the record for purposes of the pending
motion, the Motion to Dismiss is GRANTED.
Defendant's Motion seeks to have dismissed eight of the
Fourth Amended Complaint's nine counts. As explained
below, those eight counts are hereby DISMISSED WITH
PREJUDICE.
I.
BACKGROUND
The
following factual narrative is gleaned from the allegations
in the Fourth Amended Complaint. The allegations are taken as
true solely for purposes of the pending motion and only
insofar as they do not contradict the documents upon which
they necessarily rely.
Defendant
is a “company operating in 45 countries that has many
contracts with the United States for logistics, construction,
services including peace keeping, justice programs, capacity
building, and international policing programs.” Fourth
Am. Compl. ¶ 8. Since 2007, the Department of
State's Bureau of International Narcotics and Law
Enforcement Affairs (“INL”) has awarded Defendant
contracts to provide police training and administrative
services in Beirut, Lebanon, among other locations around the
world. Id. ¶ 9. Relator Scott worked for
Defendant in Lebanon from February to August 2011 as a Human
Resource and Administrative Manager. Fourth Am. Compl. Ex. A
¶ 3. Relator Tudbury worked for Defendant in Lebanon
from October 2009 to October 2011 as an International Police
Trainer. Fourth Am. Compl. Ex. B ¶ 3. The crux of
Relators' Complaint is that from approximately December
2007 to December 2011, Defendant submitted false claims for
reimbursement, on a monthly basis, pursuant to the police
training contract awarded by INL. See Fourth Am.
Compl. ¶ 11. Relators allege that this conduct was
facilitated by two PAE employees: Thomas Barnes, who was
Deputy Program Manager in Lebanon, and Dan Moritz, who was a
Program Manager in Lebanon. Id. ¶ 12.
Relators
allege a variety of improprieties. The chief allegation is
that Defendant routinely falsified forms used to record the
hours worked by its personnel and to seek compensation when
invoicing the government. Id. ¶ 16. Relators
also allege that Defendant hired personnel in Lebanon who did
not meet the minimum requirements for their jobs.
Id. ¶¶ 42-48. They further allege that
drivers paid for by the government were used by
Defendant's employees-in particular, Mr. Barnes-for
recreational purposes unrelated to government work.
Id. ¶ 49. Relators claim that Defendant
encouraged employees to purchase airfare in violation of the
Fly America Act, 49 U.S.C. § 40118. Id.
¶¶ 50-56. They allege that Defendant failed to pass
reimbursement money down to its employees after it received
money from the government to pay for employee medical
examinations. Id. ¶¶ 76-79. Moreover,
Relators allege that Defendant “billed products for
more than cost such that the government was overbilled for
parts.” Id. ¶ 80. Relators also allege
that Defendant engaged in a “pattern and
practice” of similar fraud at other international sites
beyond the Lebanon site where both Relators worked.
Id. ¶¶ 81-88. Lastly, Relator Patricia
Scott alleges that she was terminated in retaliation for her
efforts to investigate the activities described above.
Id. ¶¶ 57-75.
II.
PROCEDURAL HISTORY
The
procedural history of this case is complex. Disagreement
between the parties regarding the timing and effect of
procedural developments has been the cause of numerous
motions, hearings, and general delay. To prevent further
delay, and to aid in the disposition of the present Motion to
Dismiss, the Court here provides a detailed account of this
action's history.
Relators
filed their original Complaint under seal on November 20,
2013. Sealed Original Compl., ECF No. 1. Relators filed their
First Amended Complaint on March 13, 2014. First Am. Compl.,
ECF No. 9. In response to Defendant's Motion to Dismiss,
Relators sought and were granted leave to file a Second
Amended Complaint, which they filed on August 15, 2016.
Second Am. Compl., ECF No. 30. Defendant again moved to
dismiss, and the Court issued a Memorandum Opinion and Order
that dismissed without prejudice “Relators'
[reverse FCA] claim pursuant to section 3729(a)(1)(G), and
Relator Tudbury's [employment retaliation] claim pursuant
to section 3730(h).” Sept. 13, 2017 Mem. Op. and Order,
ECF No. 36, at 16.
The
parties have expressed disagreement regarding the September
13, 2017 Memorandum Opinion and Order's effect on
Relators' action. Defendant's view is that the Court
dismissed the reverse FCA and Tudbury retaliation claims,
found the claim of timesheet fraud in Lebanon to be plausible
and particular, and expressed no opinion as to whether
Plaintiffs' other claims were sufficiently pled under
Rule 8 or 9(b). Def.'s Mem. at 4. Relators agree that the
reverse FCA and Tudbury retaliation claims were dismissed,
but they interpret the Memorandum Opinion and Order as
finding all the other Lebanon claims sufficiently pled.
Relators explain:
Defendant is arguing that the Court previously did not
address the substantive claims of the 2AC in overruling the
Motions to Dismiss other than the time sheet fraud in
Lebanon. This is a deceptive argument. It is clear that the
Court was well aware of Relators' allegations of False
Claims Act violations concerning fraud schemes in Lebanon
involving: overbilling on parts; improper hiring; misuse of
company equipment; charging more than permitted for flights;
and failing to reimburse employees for required medical
examinations.
Opp'n at 11 (citation omitted).
Believing
the Memorandum Opinion and Order to have found that the
various “fraud schemes” listed above were
sufficiently pled, Relators see Defendant's present
Motion to Dismiss-which raises both old and new arguments
challenging whether the “fraud schemes” are
sufficiently pled-as improperly successive under Rule 12(g).
See Id. at 13. Relators opine that “[r]ather
than limit its Motion to those matters not previously
decided, the Defendant has now sought to relitigate the
previous 12(b)(6) motions as to all claims[.]”
Id. at 2.
The
Court now provides clarification. In its September 13, 2017
Memorandum Opinion and Order, the Court dismissed
Relators' reverse FCA claim and the claim of retaliation
against John Tudbury. See Sept. 13, 2017 Mem. Op.
and Order, ECF No. 36, at 1-2, 16-17. The Court found that
Relators had stated a viable claim regarding retaliation
against Patricia Scott. See id. The Court also found
that “Relators [had] stated viable claims pursuant to
sections 3729(a)(1)(A) and 3729(a)(1)(B)[.]”
Id. at 16-17. The Court's use of the plural
“claims” did not imply that all of
Relators' allegations related to the cited sections were
sufficiently pled. The Court's Memorandum Opinion noted
exactly which of Relators' many allegations were
sufficiently pled under sections 3729(a)(1)(A) and
3729(a)(1)(B); the only allegation on which the Court
expressed an opinion was that of improper billing for hours
not worked in Lebanon. The Court explained:
Relators have stated a plausible claim under section
3729(a)(1)(A) that meets the requirements of Rule 9(b). In
particular, Relators have plausibly alleged that over the
course of several years, Defendant billed time to the federal
government for hours that were not actually worked by its
personnel in Lebanon. . . . The Court also finds that
Relators have stated a viable claim pursuant to section
3729(a)(1)(B) . . . This claim is ‘complementary'
to one under section 3729(a)(1)(A) . . . The principal
difference between the two claims is that section
3729(a)(1)(A) imposes liability for false claims, while
section 3729(a)(1)(B) imposes liability for a knowingly false
‘record or statement that was material to a false or
fraudulent claim.' . . . Here, for the reasons
already stated, Relators have plausibly alleged, with
sufficient particularity, that Defendant submitted fraudulent
billing statements and claims to the federal government.
Id. at 9-11 (emphasis added). The only
“reasons already stated” at that point in the
Memorandum Opinion were those related to improper billing for
hours not worked in Lebanon. The Court's analysis had not
yet touched upon the other “fraud schemes”
regarding unqualified employees, driver transportation,
airline tickets, medical reimbursements, parts overbilling,
or activities at sites beyond Lebanon. The Court's
silence as to whether the other “fraud schemes”
were sufficiently pled is made clear at several places
throughout the Memorandum Opinion and Order. For example, the
Court explained that “many of the counts merely
state[d] different theories of recovery under the same
statutory section. To the extent that the Court determine[d]
that a statutory claim can proceed on at least one theory of
liability, it offer[ed] no opinion as to the viability of the
other theories alleged in the complaint.” Id.
at 8. Accordingly, in opining that Relators had stated viable
claims pursuant to sections 3729(a)(1)(A) and 3729(a)(1)(B),
the Court was affirming that the allegations of timesheet
fraud in Lebanon were sufficiently pled, but it was
expressing no opinion as to the other allegations.
Because
the Court did not rule on the other allegations in its
previous September 13, 2017 Memorandum Opinion and Order,
Defendant's present arguments about these other
allegations- renewed in the present Motion to Dismiss the
Fourth Amended Complaint-do not violate the prohibition of
Rule 12(g) against the filing of successive motions. Any new
arguments Defendant raises regarding these other allegations
are also permissible. “[I]n a limited number of cases,
the district court has exercised its discretion to permit a
second preliminary motion to present a Rule 12(b)(6)
defense.” Sierra v. Hayden, No. 16-1804, 2019
U.S. Dist. LEXIS 136553, at *24 (D.D.C. Aug. 13, 2019)
(internal quotation marks and alterations omitted) (quoting
Lindsey v. United States, 448 F.Supp.2d 37, 55
(D.D.C. 2006)). “A court is most likely to permit a
second such motion if ‘the problem [Rule] 12(g) was
designed to prevent-unnecessary delay-[is] not a
concern.'” Id. (alteration in original)
(quoting Stoffels v. SBS Commc'ns, Inc., 430
F.Supp.2d 642, 648 (W.D. Tex. 2006)). Here, unnecessary delay
is not a concern; in fact, by allowing and addressing any new
arguments from Defendant about issues that have not yet
received a ruling, the Court is able to significantly advance
the progress of this litigation. Requiring Defendant to raise
any such new arguments in a separate motion for judgment on
the pleadings would be an unnecessary waste of the both the
Court's and the parties' resources.
At a
status conference on November 20, 2017, as explained by
Relators, the Court “discussed with counsel that the
ruling [in its Memorandum Opinion and Order regarding the
Second Amended Complaint] was not meant to address the claims
outside Lebanon.” Opp'n at 2. The Court stated:
“I've looked through the second amended complaint,
and it's my opinion that it relates solely to the Lebanon
contract . . . my feeling is that it's not specific
enough as to these other countries.” Def.'s Mem.
Ex. 4 (Nov. 20, 2017 Hearing Tr.) at 3:25-4:2, 8:23-9:2. The
Court allowed Relators to file a Third Amended Complaint to
add more specifics relating to their allegation that fraud
was also committed at other sites beyond Lebanon.
See Am. Scheduling and Procedures Order, ECF No. 45,
at 5; Second Am. Scheduling and Procedures Order, ECF No. 48,
at 5.
After
Relators filed the Third Amended Complaint, ECF No. 49,
Defendant filed its Motion to Dismiss the Third Amended
Complaint, ECF No. 50, arguing that a government audit
alleged by Relators had triggered the “public
disclosure bar” of the False Claims Act. See
Def.'s Mot. To Dismiss Third Am. Compl., ECF No. 51, at
28-31. Shortly thereafter, and before the deadline for their
opposition to that pending Motion to Dismiss, Relators filed
their Motion to Amend, ECF No. 52. The Court summarized
Relators' Motion to Amend in its September 13, 2018
Memorandum Opinion and Order: “The primary question is
whether Relators may drop their paragraph 41 allegation of a
State Department audit, which allegation they attribute to
‘a mistake by counsel in the Third Amended
Complaint.'” Sept. 13, 2018 Mem. Op. and Order, ECF
No. 62, at 7. Without expressing an opinion on the merits of
the public disclosure arguments, the Court allowed Relators
to file a Fourth Amended Complaint to “walk back their
allegations” of a government audit. Id. The
Court warned Relators that it expected them to have
thoroughly “reviewed the Third Amended Complaint for
any deficiencies and made the necessary edits in their Fourth
Amended Complaint.” Id. at 2. Moreover,
“[t]he Court likewise expect[ed] that the Fourth
Amended Complaint, the fifth iteration of Relators'
pleading, [would] be the operative complaint for purposes of
moving forward with Defendant's Motion to Dismiss and
that no further need to amend will arise prior to
discovery.” Id. The Court further observed
“what appear[ed] to be a pattern: Relators file a
version of the Complaint; Defendant moves to dismiss; and
Relators seek to amend to correct an infirmity, either before
or after the Court's disposition of the motion to
dismiss. This cycle occurred with Relators' First,
Second, and Third Amended Complaints.” Id. at
2 n.2.
Relators
filed their Fourth Amended Complaint, ECF No. 63, and
Defendant responded by filing the present Motion to Dismiss,
ECF No. 64. At long last, after six years and five
complaints, the Court is able to rule on the vast majority of
Relators' claims.
III.
LEGAL STANDARD
A.
Rule 12(b)(6) Motion to Dismiss for Failure to State a
Claim
Defendant
moves to dismiss Relators' claims for “failure to
state a claim upon which relief can be granted”
pursuant to Federal Rule of Civil Procedure 12(b)(6).
“[A] complaint [does not] suffice if it tenders
‘naked assertion[s]' devoid of ‘further
factual enhancement.'” Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 557 (2007)). Rather, a complaint
must contain sufficient factual allegations that, if accepted
as true, “state a claim to relief that is plausible on
its face.” Twombly, 550 U.S. at 570. “A
claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Iqbal, 556 U.S. at 678.
In
assessing plausibility, a court may consider “the facts
alleged in the complaint, documents attached as exhibits or
incorporated by reference in the complaint, ” and
“documents upon which the plaintiff's complaint
necessarily relies even if the document is produced not by
the plaintiff in the complaint but by the defendant in a
motion to dismiss.” Ward v. District of Columbia
Dep't of Youth Rehab. Servs., 768 F.Supp.2d 117, 119
(D.D.C. 2011) (internal quotation marks omitted) (quoting
Gustave-Schmidt v. Chao, 226 F.Supp.2d 191, 196
(D.D.C. 2002); Hinton v. Corr. Corp. of Am., 624
F.Supp.2d 45, 46 (D.D.C. 2009)). A court may consider such
documents without converting the motion to dismiss to a
motion for summary judgment. See Vanover v. Hantman,
77 F.Supp.2d 91, 98 (D.D.C. 1999), aff'd, 38
Fed.Appx. 4, 2002 WL 1359630 (D.C. Cir. 2002).
For
purposes of the pending motion, the Court shall consider the
Statements of Material Disclosure by relators Patricia Scott
and John L. Tudbury in ECF No. 66. These Statements are
expressly incorporated by reference in the Fourth Amended
Complaint and are attached (by subsequent docket entry) as
exhibits thereto. See Fourth Am. Compl. ¶ 25.
The Court shall also consider the exhibits to Defendant's
Memorandum in Support of Motion to Dismiss. Relators'
Complaint necessarily relies upon these documents, and many
of them are explicitly referenced in-but not attached
to-Relators' Fourth Amended Complaint.
B.
Pleading a Fraud Claim Pursuant to Rule 9(b)
“Complaints
brought under the FCA must also comply with Rule 9(b).”
United States ex rel. Landis v. Tailwind Sports
Corp., 51 F.Supp.3d 9, 49 (D.D.C. 2014). Rule 9(b)
states that “[i]n alleging fraud or mistake, a party
must state with particularity the circumstances constituting
fraud or mistake.” Fed.R.Civ.P. 9(b). “Reading
Rule 9(b) together with Rule 8's requirement that
allegations be ‘short and plain,' the D.C. Circuit
has required plaintiffs to ‘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,' and to ‘identify
individuals allegedly involved in the fraud.'”
United States ex rel. Morsell v. Symantec Corp., 130
F.Supp.3d 106, 117 (D.D.C. 2015) (citation omitted) (quoting
United States ex rel. Williams v. Martin-Baker Aircraft
Co., Ltd., 389 F.3d 1251, 1256 (D.C. Cir.
2004)). “Put more colloquially, an FCA plaintiff must
identify the ...