United States ex rel. Scott v. Pacific Architects and Engineers (Pae), Inc.

          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 ...