Pca Integrity Associates, LLP v. Nco Financial Systems Inc ( 2020 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
UNITED STATES ex rel. :
PCA INTEGRITY ASSOCIATES, LLP, :
:
Plaintiff, : Civil Action No.: 15-750 (RC)
:
v. : Re Document Nos.: 77, 79, 81, 85, 86,
: 87, 88, 89, 91, 92,
: 93, 98
NCO FINANCIAL SYSTEMS, INC., et al., :
:
Defendants. :
MEMORANDUM OPINION
GRANTING JOINT MOTION TO DISMISS CLAIMS AGAINST DEFENDANT WEST CORPORATION;
GRANTING DEFENDANTS’ MOTIONS TO DISMISS; DENYING AS MOOT DEFENDANT
CONSERVE’S MOTION FOR JUDICIAL NOTICE; DENYING AS MOOT RELATOR PCA
INTEGRITY’S MOTION FOR JUDICIAL NOTICE
I. INTRODUCTION
On May 20, 2015, Relator PCA Integrity Associates, LLP (“PCA Integrity” or “Relator”)
filed this lawsuit pursuant to the qui tam provision of the False Claims Act (“FCA”), 31 U.S.C. §
3730(b)(1). See Compl. ECF No. 1. Relator is a limited liability partnership that consists of
three unnamed partners with “personal knowledge of the false claims, statements, and
concealments alleged,” Am. Compl. ¶ 7, ECF No. 54, based on participation in an unidentified
private collection agency (“PCA”) “initiative working for certain PCAs” and Relator’s
“independent investigation to uncover false claims,” id. ¶ 29. The alleged false claims arise from
Defendants’ conduct pursuant to a multi-year contract awarded by the Department of Education
(“ED”). More specifically, PCA Integrity contends that three clusters of Defendants, consisting
of groups of prime contractors, subcontractors, and associated entities that it labels “co-
conspirator businesses,” along with unnamed John Doe Defendants, defrauded the government
of funds that were intended for small businesses under the terms of ED task orders awarded to
PCA prime contractors. After the government declined to intervene in this suit in October 2018,
Relator filed an amended complaint on March 28, 2019, in which it removed several defendants,
added two new allegedly affiliated businesses as defendants, and reasserted four counts under the
FCA for: (1) false presentation/false submission of a claim (31 U.S.C. § 3729(a)(1)(A)); (2) false
representation (31 U.S.C. § 3729(a)(1)(B)); (3) so-called “reverse” false claims (31 U.S.C. §
3729(a)(1)(G)); and (4) conspiracy to violate the FCA (U.S.C. § 3729(a)(1)(C)). Each of the
current Defendants moved to dismiss Relator’s claims. For the reasons set forth below, the Court
grants Defendants’ motions, but gives Relator leave to file an amended complaint. 1
II. BACKGROUND
A. Factual History 2
1. Regulatory Background
a. ED’s Debt Collection Service Contracting
This dispute arises from ED task orders issued to prime contractors as part of its debt-
collection and maintenance program. See Am. Compl. ¶¶ 6, 9–13. For nearly four decades, a
division of ED known as Federal Student Aid (“FSA”) has relied on PCA contractors to collect
and resolve defaulted student loans. Id. ¶ 6. ED contractors must comply with applicable
Federal Acquisition Regulations (“FAR”), 48 C.F.R. §§ 1 et seq., and also with ED’s Acquisition
Regulations, 48 C.F.R. §§ 3400 et seq. Id. ¶ 47. Within ED’s FSA, the Debt Collection Service
1
Although several Defendants request an oral hearing, the allowance of such hearings is
“within the discretion of the Court.” LCvR 7(f). Because the parties’ written briefings are
sufficient to resolve the instant motions, the Court declines to conduct oral hearings.
2
At the motion to dismiss stage, the Court views the evidence in the light most favorable
to Plaintiff. See United States v. Philip Morris Inc., 116 F. Supp. 2d 131, 135 (D.D.C. 2000)
(“At the motion to dismiss stage, the only relevant factual allegations are the plaintiffs’, and they
must be presumed to be true.”).
2
(“DCS”) manages “collection activities, including PCA contractors.” Id. ¶ 49. DCS is located in
Washington, D.C. Id. Its Contract Services Branch, which “monitors the performance of the
PCA contractors,” is based in Atlanta, Georgia. Id. DCS contracts are issued via task orders,
which serve as “ED’s contract under the umbrella of the” General Services Administration’s
schedule contract, which permits “ED and other federal agencies . . . [to] place orders.” Id. ¶ 50.
These contractual task orders “contain terms, conditions and work requirements, which are
defined in a Statement of Work.” Id. Potential contractors submit proposals in response to ED
solicitations. See id. ¶¶ 50–52 (discussing process by which “[o]ffers leading to contract
awards” are evaluated). ED’s contracting officers evaluate proposals based on factors that
include past performance, small business participation, and pricing by “two separate panels:
small business and unrestricted.” Id. ¶ 51.
Once task orders are awarded, because ED PCA contracts are “performance based and
highly competitive,” they are subject to a rigorous “measurement and reward system designed to
align” ED and PCA interests. Id. ¶ 53. The metric applied is the Competitive Performance and
Continuous Surveillance (“CPCS”) rankings. Id. CPSC scores matter to government contractors
because the long-term scores “are used to determine past performance and award extensions,”
and the scores are also used to assess a particular PCA’s performance relative to other PCAs and
thereby allocate quarterly bonuses. Id. ¶¶ 54, 56. The CPCS score is measured out of 100
points, with 10 points allocated based on administrative resolutions, 20 points allocated based on
total accounts serviced, and 70 points allocated based on dollars collected. Id. In addition,
because the Small Business Act “encourages prime contractors to award subcontracts to small
companies,” certain ED PCA task orders—like the ones at issue in this suit—contain incentives
for prime contractors to subcontract a percentage of their work to small business concerns. Id. ¶
3
7. These incentives can take the form of additional points added to the prime contractor’s CPCS
ranking. Id. ¶ 55.
Additionally, in furtherance of the government’s efforts to help “ensure the continued
vitality of small businesses,” id. ¶ 2, ED offers small businesses the opportunity to either
subcontract with existing ED PCA contractors or to contract directly via small business set aside
contracts, id. ¶ 57. Where subcontracting occurs, the subcontractor serves as a “vendor to ED
PCA prime contractors to work on core collection services.” Id.
On May 29, 2008, ED issued the PCA solicitation on which this case is based:
Solicitation No. ED-08-R-0052. Id. ¶ 52. Interested companies submitted proposals by June 26,
2008. Id. A total of twenty-two PCAs received ED contracts (e.g., task orders). Id. Of the
PCAs receiving such task orders, seventeen were “unrestricted” in size, and five were small, or
“set-aside” PCAs, id., reflecting the government’s efforts to provide “set-aside contracts . . .
exclusively for small businesses to bid on,” id. ¶ 2. 3 While the task orders were active, ED
provided incentives for prime contractors to subcontract “no less than 10% of their work to small
business concerns” by adding a five-point bonus to the CPCS score of any such PCA. Id. ¶ 55.
“The first transfer of accounts under this contract occurred in the first quarter of 2009,” id. ¶ 52,
and the task orders pertaining to unrestricted PCAs concluded in late April 2015, id. ¶ 60. On an
unspecified date, five PCAs received a two-year extension of the original task order, including,
as relevant here, Defendant Continental Service Group. Id.
Before the conclusion of the contracts that were issued in 2009, ED solicited and awarded
additional task orders. First, in July 2013, seeking to develop “task orders replacing both those
awarded in 2009,” ED published Solicitation No. ED-FSA-13-R-0010. Id. ¶ 61. This
3
Relator does not specify which of the PCA contractors received which form of task
order resulting from the 2008 ED solicitation.
4
procurement was cancelled in 2018, “in part because [ED] had learned of” the “widespread small
business fraud” alleged in this lawsuit. Id. ¶ 62. Separately, ED awarded new debt-collection
task orders set aside specifically for small businesses in September 2014. Id. ¶ 59. Defendant
“Co-Conspirator” Bass & Associates, P.C. was awarded one of these 2014 task orders. Id.
Before describing the Defendants’ identities in more detail, the Court will briefly summarize the
relevant principles of federal small business contracting that underpin Relator’s contentions.
b. Small Business Act and Federal Contracting
The Small Business Act (“SBA”) aims to provide small companies with “‘the maximum
practicable opportunity to participate in the performance’ of federal contracts.” Id. ¶ 63 (quoting
15 U.S.C. § 637(d)(1)). To ensure compliance with this objective, the SBA requires that—unless
otherwise specified—language concerning the federal government’s goal be included in every
federal prime contract. Id. ¶ 64. Each federal prime contract must also include the following
clause: “[t]he contractor hereby agrees to carry out this policy in the awarding of subcontracts to
the fullest extent consistent with the efficient performance of this contract.” Id. (quoting 15
U.S.C. § 637(d)(3)).
Furthermore, to be eligible to receive a contract, each federal prime contractor who meets
a threshold dollar amount must submit additional materials to the government. Id. ¶ 69 (citing
15 U.S.C. § 637(d)(4)(C); 49 C.F.R. § 19.702). Such prime contractors must submit a
subcontracting plan to the relevant contracting agency that (1) states the prime contractor’s
“percentage goals for the utilization” of small businesses, id. ¶ 65 (quoting 15 U.S.C. §
637(d)(4), (d)(6)), and (2) states “the total dollars planned to be subcontracted and a statement of
the total dollars planned to be subcontracted to” small businesses and other disadvantaged
businesses, id. ¶ 66 (quoting 49 C.F.R. § 19.704(a)(2)). A subcontracting plan by a prime
5
contractor whose bid is accepted is “included in and made a material part of the contract.” Id. ¶
71 (quoting 15 U.S.C. § 637(d)(4)(B) (emphasis removed)). Controlling federal regulations also
require the federal prime contractor to submit semi-annual reports that detail each of its
subcontracts with small businesses and “the extent of its compliance with its small business
subcontracting plan.” Id. ¶ 68 (citing 49 C.F.R. § 52.219-9). The “failure of any contractor or
subcontractor to comply in good faith with,” inter alia, “any plan required of such contractor
pursuant to the authority of [15 U.S.C. § 637],” such as the previously-described subcontracting
plan, is “a material breach of such contract or subcontract and may be considered in any past
performance evaluation of the contractor.” 15 U.S.C. § 637(d)(9); see also Am. Compl. ¶ 81
(citing 15 U.S.C. § 637(d)(9); 48 C.F.R. § 52.219-9(k)).
For purposes of assessing eligibility for government contracts, the size of a business is
determined by federal regulation. See 13 C.F.R. § 121.101 (defining SBA size standards that
determine “whether a business entity is small and thus, eligible for Government programs and
preferences reserved for ‘small business’ concerns”). The North American Industry
Classification System (“NAICS”) defines the relevant size standards by industry. Id. For federal
government contracting programs, “a concern must not exceed the size standard for the NAICS
code specified in the solicitation.” Id. § 121.402; see also Am. Compl. ¶ 83 (citing 13 C.F.R. §§
121.401–413). To determine the size of a concern, “SBA counts the receipts, employees, or
other measure of size of the concern whose size is at issue,” as well as those of any of its
affiliates. 13 C.F.R. § 121.103(a)(6); see also Am. Compl. ¶ 84 (citing 13 C.F.R. §
121103(a)(6)).
In this case, the industry that applies to ED’s PCAs task orders is “debt collection
services,” which is classified as NAICS code 561440. Am. Compl. ¶ 85. From the time of the
6
initial ED task order awarded in early 2009, id. ¶ 52, until January 7, 2013, a concern could
qualify as a small business entity pursuant to this code if its average annual receipts totaled no
more than $7 million over the most recent three-year period, id. ¶ 85. From January 7, 2013 to
July 2014, the operative size standard for NAICS code 561440 increased to $14 million, and on
July 14, 2014, it increased to $15 million. Id. An individual business is deemed affiliated with
another entity for these size calculations “when one controls or has the power to control the
other, or a third party or parties controls or has the power to control both.” 13 C.F.R. § 121.103;
Am. Compl. ¶ 89 (citing 13 C.F.R. § 121.103(a); U.S. Small Bus. Admin., A Handbook for Small
Business Liaison Officers (“SBLO Handbook”) 16 (2010),
https://www.sba.gov/sites/default/files/articles/Small_Business_Liaison_Officer_(SBLO)_Handb
ook_6_2010.pdf). 4 There is no firm rule to make such an affiliation determination; rather, it is
based on the SBA’s consideration of “the totality of the circumstances,” including “factors such
as ownership, management, previous relationships with or ties to another concern, and
contractual relationships.” 13 C.F.R. § 121.103(a)(2), (a)(5); see also Am. Compl. ¶ 92
(discussing applicable regulations).
The question of affiliation is at the heart of Relator’s allegations in the instant suit.
Affiliation determinations affect a business’s size, and determinations concerning the size of a
business affect eligibility for particular contracting and/or subcontracting opportunities. See 13
C.F.R. § 121.402; Am. Compl. ¶ 86. Thus, to state what is perhaps obvious, determining
whether a business is small requires consideration of any affiliation. Here, Relator’s allegations
of fraud hinge on the contention that several ED PCA prime contractors and their associated
subcontractors concealed the fact that the purportedly small business subcontractors were
4
Relator also cites to 49 C.F.R. § 19.101; however, because Title 49 refers to
transportation and because it contains no Section 19, the Court omits this citation.
7
affiliated with “co-conspirator” larger businesses, “making them ineligible to be claimed as small
businesses by the prime contractors on the ED PCA task orders.” Am. Compl. ¶ 9. To
contextualize the details of Relator’s factual allegations and associated claims for relief, the
Court next describes the parties and the relationship among them.
2. The Parties
a. Relator
Relator PCA Integrity is a general partnership registered in Delaware. Id. ¶ 26. This
entity is “not distinct from its [three] partners,” who have “personal knowledge of the false
claims, statements, and concealments” alleged. Id. ¶ 27. Relator identifies itself as “participants
in the PCA initiative working for certain PCAs,” which provided Relator with “direct knowledge
of the conduct alleged” that it also built up through an “independent investigation to uncover
false claims submitted to the United States.” Id. ¶ 29. Accordingly, PCA Integrity avers that it
is an original source of non-publicly disclosed information underpinning the claims, which it
voluntarily provided to the government before filing a complaint in this suit. Id. ¶¶ 28–29.
b. Defendants
PCA Integrity brings claims against three clusters of Defendants, with each group
consisting of a prime contractor, a subcontractor, and an allegedly affiliated “co-conspirator”
business.” 5 Id. ¶ 9.
More specifically, the operative amended complaint lodges allegations against the
following groups of Defendants: 6
5
In clustering Defendants in this manner, the Court follows Relator’s lead in its pleading,
see Am. Compl. ¶ 9 (describing “three distinct groups” of Defendants), and in the styling of its
oppositions to Defendants’ motions to dismiss, see ECF Nos. 95, 96, 97 (grouping oppositions to
Defendants’ arguments into three clusters). See also Part. Mot. Leave to File Omnibus Briefs in
Opposition 1, ECF No. 94 (identifying “three groups of Defendants” consisting of a prime
contractor, a subcontractor, and an allegedly affiliated business for each group).
8
Group 1 Group 2 Group 3
Alorica, Inc. (“Alorica”) /
Continental
Global Receivables
Service Group, Pioneer Credit
Solutions, Inc. (“GRSI”),
Prime Contractor Inc., d/b/a Recovery, Inc.
f/k/a West Asset
ConServe (“Pioneer”)
Management, Inc.
(“ConServe”)
(“WAM”) 7
Edgewater Consulting
Protocol Financial
Group, LLC, d/b/a Uniquity Financial, LLC
Subcontractor Service, LLC
Edgewater Financial (“Uniquity”)
(“Protocol”)
Services (“Edgewater”)
Allegedly State Collection
Bass & Associates, P.C. Professional Recovery
Affiliated Services, Inc.
(“Bass”) Consultants, Inc. (“PRC”)
Business (“State”)
In Group 1, ConServe, a collection and accounts receivable management services
provider that is headquartered in New York, was the prime contractor with ED. Id. ¶ 30–31.
ConServe “specializes in the higher education market.” Id. ¶ 30. The subcontractor defendant in
this cluster is Protocol, a Wisconsin-based debt collection firm that was incorporated in 2009 and
“identifies itself as a 100% woman-owned business located in a [traditionally economically
6
Relator’s amended complaint removed several Defendants and added two new
allegedly-affiliated businesses, Professional Recovery, Inc. and State Collection Service, Inc., as
Defendants. Compare Compl. 1–2, ECF No. 1, with Am. Compl. 1–2. The Court considers only
the facts and allegations presented in the amended complaint. See Pinson v. U.S. Dep’t of
Justice, 69 F. Supp. 3d 108, 113 (D.D.C. 2014) (citing Owens v. Republic of Sudan, 412 F. Supp.
2d 99, 117 (D.D.C .2006), aff’d and remanded on other grounds, 531 F.3d 884 (D.C. Cir. 2008);
6 Charles A. Wright, Arthur R. Miller & Mary Kane, Federal Practice and Procedure § 1476
(3d ed.) (“Once an amended pleading is interposed, the original pleading no longer performs any
function in the case.”).
7
The original prime contractor for this group was WAM, which was at the time a
division of West Corporation. Am. Compl. ¶¶ 32–33. Alorica acquired West Corporation’s
“agent services business, including [WAM],” in January 2015, id. ¶ 32, and WAM was
subsequently rebranded as GRSI, id. ¶ 35. The Court discusses Relator and Alorica/GRSI’s joint
motion to dismiss claims against Defendant West Corporation, ECF No. 77, infra Part IV.A. For
expositional clarity, the Court refers to WAM in discussing the factual allegations that involve
this prime contractor, since WAM was the operative entity at the time of the events alleged.
9
disadvantaged] HUBZone.” 8 Id. ¶ 37. The Chief Executive Officer (“CEO”) of Protocol is Tina
Hanson, and its President is Tracy Dudek, “both of whom hold key management positions with
Defendant State.” Id. The allegedly affiliated business, State, is a debt collection firm that is
headquartered in Wisconsin. Id. ¶ 40. State is run by Tom Haag, Tina Hanson’s “longtime
domestic partner.” Id.
In Group 2, Pioneer, a debt collection firm with offices in Florida, New Jersey, and New
York and headquarters in New York, was the prime contractor with ED. Id. ¶ 36. The
subcontractor defendant in this cluster is Edgewater, a debt collection services provider that
operates out of two branches in Washington State (incorporated 2010) and Arizona (incorporated
2011). Id. ¶ 39. The allegedly affiliated business, Bass, is a “woman-owned bankruptcy and
collections firm” headquartered in Arizona. Id. ¶ 42. Patricia Hoskins Bass founded Bass in
1990 and serves as its President and CEO. Id. The Bass and Edgewater headquarters are located
next door to one another in Tucson, Arizona. Id. ¶ 270.
In Group 3, WAM is an accounts-receivable management services provider that “has
provided collection services for the recovery of government and higher education debt for over a
decade.” Id. ¶ 33. The parent corporation of this entity at the time of the original ED contract
was West Corporation, which is headquartered in Nebraska. Id. ¶ 32. The subcontractor
defendant in this cluster is Uniquity, a debt collection firm created in 2011 that is headquartered
in Texas and has offices in North Carolina. Id. ¶ 38. Uniquity is led by its President, Jamie
Michael Cameron, and Geoffrey Miller and Stephen Miller are “Members.” Id. The allegedly
affiliated business, PRC, “provides debt collection and recovery services” to multiple sectors,
8
The HUBZone program was created by the Small Business Act of 1997 to set aside
contracts for small businesses located in areas that have traditionally “suffered from a lack of
investment.” Am. Compl. ¶¶ 102–104 (quoting S. Rep. No. 105-62, at 25 (1997)) (citing 13
C.F.R. § 126.200).
10
including the government. Id. ¶ 41. PRC was founded in 1979 by CEO Stephen Miller, and his
son Geoffrey Miller is its President. Id. PRC is headquartered in North Carolina at the same
address, 2700 Meridian Parkway, Suite 200, that houses one of Uniquity’s offices. Id. ¶¶ 38, 41.
In addition to these named Defendants, Relator’s amended complaint also brings claims
against “John Does #1-50,” a group that consists of “individuals, corporations, limited liability
companies, partnerships, trusts, or other lawful business entities through which Defendants do
business, and who are unknown co-conspirators who conspired with Defendants to perpetuate
the” alleged scheme, id. ¶ 43, and thereby cause the United States to suffer “financial harm,” id.
¶ 45. No further details are provided concerning the John Doe Defendants.
3. Relator’s Allegations
As its grouping of Defendants suggests, Relator’s factual allegations involve actions
taken by three distinct clusters of prime contractors, subcontractors, and allegedly associated
businesses. The basic form of the scheme is the same, in broad strokes, across each of the
categories (prime contractors, subcontractors, and allegedly associated businesses), though the
precise means by which Relator alleges it occurred is unique to each Defendant. Thus, the Court
will discuss Relator’s factual allegations concerning each of these categories before detailing the
specific factual allegations concerning each individual Defendant.
a. Factual Allegations Regarding Categories of Defendants
First, Relator alleges that each of the prime contractors—ConServe, WAM, and
Pioneer—“defrauded the government by falsely claiming credit for awarding millions of dollars
in subcontracts to businesses that were, in fact, other than small.” Id. ¶ 10. This scheme
benefited these prime contractors because submission of “false certifications to the government”
11
permitted each prime contractor to receive a higher CPCS score. Id. As a result, the
government:
was induced to (1) believe that the Prime Contractor Defendants were in
compliance with their small business subcontracting plans; (2) award subsequent
task order extensions, invitations to compete on a now-outstanding ED
solicitation for the same services, and, in the case of ConServe, an additional two-
year award extension; (3) pay Prime Contractor Defendants millions of dollars in
contractually-mandated monetary bonuses; and (4) provide those Defendants with
additional business volume, resulting in higher revenues and profits.
Id. ¶ 11.
In furtherance of this scheme, Defendants “made numerous material false statements and
certifications” to the government. Id. ¶ 13. For one, the required subcontracting plans
that the prime contractors each submitted to ED “falsely represented that they intended to
comply in good faith with their Subcontracting Plans.” Id. In addition, these prime
contractor defendants submitted “monthly invoice reports . . . for work allegedly
performed by small businesses” as well as “mandatory reports to the Government
regarding their utilization of small businesses in their subcontracts.” Id.
Second, Relator alleges that each of the subcontractor defendants—Protocol,
Edgewater, and Uniquity—falsely represented themselves to the government by claiming
eligibility for “awards on small business subcontracts when they were, in fact, ineligible
because each named Prime Contractor Defendant and/or Co-Conspirator Defendant was
‘affiliated’ with each of their respective Subcontractor Defendants under SBA rules and
regulations.” Id. ¶ 14. Each subcontractor defendant’s self-certification that it was a
small business led the United States to pay the associated prime contractor defendant,
“which then subcontracted work and diverted compensation” to the subcontractor
defendant. Id.
12
Finally, Relator alleges that each of the “co-conspirator” defendants—State, Bass,
and PRC—“were affiliated with their respective Subcontractor Defendants.” Id. ¶ 16.
Because these entities were affiliated, the subcontractor defendants were “ineligible small
businesses for purposes of the special subcontracting preferences under the ED PCA task
orders.” Id.
At bottom, then, all of the alleged fraud across the three categories of Defendants
hinges on the factual allegation of undisclosed affiliation and associated submission of
false claims and / or misrepresentations concerning business size. The Court next
summarizes Relator’s factual allegations concerning each of the Defendants, beginning
with the prime contractor defendant in the first group, then discussing the other entities in
that group, and then repeating this pattern for the second and third groups.
b. Factual Allegations Regarding Defendants
i. Group 1: ConServe, Protocol, and State
On an unspecified date, prime contractor defendant ConServe received the GSA contract
that “led to the award of the ED PCA task order.” Id. ¶ 132. ConServe was “required to
establish and implement a small business subcontracting plan,” which it “committed to
implementing” in good faith. Id.; see also id. ¶ 134. This plan, which “represented that a portion
of the work it subcontracted would go to small businesses,” id. ¶ 134, was “incorporated into the
ED PCA task order by reference and made a material part of the contract,” id. ¶ 132. Thereafter,
with an awareness of ED’s CPCS incentives for small business contracting, ConServe awarded a
subcontract to Protocol under the ED PCA task order. Id. ¶ 133. Protocol filed annual self-
certifications with the SBA indicating its status as a small business, with the most recent self-
certification made in 2014. Id. ¶¶ 186–87.
13
Protocol shares both location and personnel with State. The two businesses have the
same address, id. ¶ 140, and the point of contact for Protocol’s online certification in a
government database, SAM.gov, is the executive administrator at State, id. ¶ 141. Protocol’s
upper-level management, moreover, consists of several individuals who are also involved with
State. Id. ¶¶ 138–39. “For example, Tina Hanson is the Co-Owner and CEO of Protocol, while
also serving as Executive [Vice President (“VP”)] and Chief Strategy Officer for State.
Meanwhile, Tracy Dudek serves as the Co-Owner and President of Protocol, while
simultaneously working as the VP of Operations at State.” Id. ¶ 138. Ms. Hanson “frequently
holds herself out as a representative for State” in industry events and meetings, “going even so
far as handing out business cards” that list her “senior management position at State. Id. ¶ 139;
see also id. ¶ 146 (noting Ms. Hanson’s nomination for an award and relating her conversation
with State colleagues discussing why “she should accept the award as a Protocol employee”).
Upper-level Protocol management also exchanged emails using their State email addresses. Id.
¶¶ 163; 171–72. The two companies share more personal connections, as well: State’s CEO, Mr.
Haag, is the domestic partner of Protocol’s CEO and Co-Owner, Ms. Hanson. Id. ¶ 142. The
overlap among employees also includes other, non-managerial staff. See id. ¶¶ 153–55
(discussing the movement of employees from State to Protocol and the sharing of employees
across the two entities); id. ¶ 156 (May 14, 2013 email chain discussing sharing of employees
and what Protocol “had done in the past for others for Hubzone purposes”).
Furthermore, Protocol and State’s finances and communications indicate a connection
between the entities. First, “since Protocol was formed, State has managed all of Protocol’s
financial operations, including accounting and payroll.” Id. ¶ 147. Second, Protocol was able to
rely on State’s financial support as a safety net, as when, for instance, Mr. Haag lent Ms. Hanson
14
and Ms. Dudek the capital they required to form Protocol at a low interest rate and “was prepared
to forgive this loan entirely if Protocol had been unsuccessful.” Id. ¶ 148. This assistance
extended to resource-sharing: “[a]t least until May 2012, Protocol did not have” any utility bill
“in its own name and had not established its own relationships with vendors,” instead relying on
State for its infrastructure. Id. ¶¶ 158–159; id. ¶ 159 (documenting Protocol expense report
consisting of State form on which name was crossed out and replaced with Protocol’s name); id.
¶ 170 (documenting email notifying Ms. Hanson and Ms. Dudek that they would have pictures
taken for both entities’ websites on the same day and recommending that they bring two outfits).
Third, State provided Protocol with “cash infusion[s],” as evidenced by a March 3, 2010, email
requesting $25,000 to cover the cost of payroll. Id. ¶ 149. Finally, “Protocol hid its operating
expenses on State’s accounts,” as indicated in an April 27, 2009, email in which Ms. Hanson
informed Ms. Dudek that she should book trips taken on behalf of Protocol “under State.” Id. ¶
151. These financial interactions led Ms. Hanson to express concern, in a December 16, 2010,
email, that the Wisconsin Department of Financial Institutions would not relicense Protocol
given “[t]he way financials look today.” Id. ¶ 152.
Protocol’s co-founders also discussed how to respond to government inquiries concerning
the two entities. In 2013, when Ms. Hanson and Ms. Dudek pursued HUBZone certification (as
a small business operating in a traditionally disadvantaged area), the SBA “flagged State and
Protocol as potentially affiliated (and thus ineligible for HUBZone certification).” Id. ¶ 166. In
a July 10, 2013 email chain, the two women discussed how to indicate to the SBA that “there is
no affiliation” when “the owners of a HUBZone business have paid w2 positions at a different
company.” Id. Protocol ultimately withdrew its application for HubZone certification. Id. ¶
168. Subsequently, State and Protocol “reached a consensus to withhold” their managerial
15
agreement in response to a 2015 inquiry from a field auditor with the Wisconsin Department of
Workforce Development. Id. ¶ 169.
During this time, ConServe’s interactions with the companies indicate an awareness of
the close relationship between them. “From the time of Protocol’s inception,” Chris Lang, the
Vice President for Contract Administration at ConServe, “provided advice to State and
Protocol’s officers concerning the bare minimum of separation needed to maintain the
appearance of independence.” Id. ¶ 175. For instance, Mr. Lang advised Ms. Dudek in an
October 19, 2009, email that the use of State emails for Protocol business made some individuals
at ConServe “uneasy.” Id. ¶ 176. Nonetheless, the shared use of emails continued, id. ¶ 177, and
Mr. Lang emailed Ms. Dudek (who held positions at both companies) at both addresses on
August 18, 2011, to inquire about Protocol’s registration as a small business on the GSA website
ccr.gov, id. ¶ 179. Mr. Lang also corresponded with Ms. Dudek regarding Protocol: his May 10,
2012, email with Ms. Dudek concerning Protocol’s HUBZone certification revealed to him
Protocol’s plans to consider “all addresses” for employees in “the Beloit [HUBZone] from our
friends at State to see if anyone can transfer over and do some work for Protocol.” Id. ¶ 182.
Previously, on December 19, 2011, ConServe leadership had emailed Ms. Dudek to ask about
State’s new operations program. Id. ¶ 180. Moreover, breaking from what Mr. Lang represents
as ConServe’s “policy of reviewing audited financial statements from its subcontractors . . . [to]
ensure size and ownership,” ConServe never insisted on audited financial statements from
Protocol. Id. ¶ 181.
ii. Group 2: Pioneer, Edgewater, and Bass
Prime contractor Pioneer engaged in a substantially similar pattern of conduct, albeit with
distinct details, with subcontractor Edgewater and allegedly affiliated company Bass. At an
16
unspecified date, Pioneer was awarded the ED PCA task order and submitted a small business
subcontracting plan. Id. ¶ 237. This subcontracting plan “represented that a portion of the work”
that Pioneer “subcontracted would go to small businesses” and was incorporated into the task
order by reference, becoming a material part of the contract, id. ¶¶ 237–38. Pioneer then
“awarded Edgewater a subcontract under the ED PCA task order, effectively replacing” Bass “as
Pioneer’s sole subcontractor.” Id. ¶ 241; see also id. ¶ 246 (noting that Bass had served as a
small business subcontractor to Pioneer prior to the ED PCA task orders). Subcontractor
Edgewater has represented itself as a small business through its self-certifications “[a]t all times
material” to the instant allegations. Id. ¶ 242. Edgewater’s most recent self-certification, which
attests to its small business status, was made in 2014. Id. ¶ 282. It has also “self-certified to the
Government that, since at least 2009, its average annual receipts over the prior three years have
been less than the prior $7 million [NAICS] threshold (in effect from 2007 through January 6,
2013), the prior $14 million threshold (from January 7, 2013 through July 13, 2014), or the
current $15 million threshold.” Id. ¶ 242.
Initially, before Pioneer subcontracted with Edgewater, Pioneer and Bass made overtures
to continue their past contracting with respect to the ED contract. On January 16, 2009, Bass and
Pioneer “held a Kick-off Meeting” at which Patti Bass, her brother, Rob Hoskins, and
Aleksandra Radmanovic represented Bass; at this meeting, Pioneer was represented by
Collections Director Bryan Wiler as well as numerous other employees. Id. ¶ 248. On
November 6, 2009, Mr. Hoskins sent an email confirming a November 11–12, 2009, meeting
that would “focus on measuring performance on the ED subcontract between Pioneer and Bass.”
Id. ¶ 250. Between November 2009 and March 2010, however, both Pioneer and Bass
“acknowledged that Bass was no longer going to qualify as an eligible small business for
17
purposes of subcontracting under the ED PCA task order.” Id. ¶ 251. Ms. Bass’s own actions
with regard to a different subcontract confirm this conclusion: on April 12, 2010, she completed
a self-certification indicating that Bass “has average annual revenues for the past three years that
exceeded $7 million”—making Bass ineligible as a small business for debt collection services
under the relevant NAICS code. Id. ¶ 252. Less than ten days later, Pioneer’s Collection
Director, Mr. Wiler, emailed Ms. Bass stating that, due to Bass’s status as a large business,
Pioneer “had not ‘been able to identify a benefit to [it]’ in extending the subcontract” with Bass.
Id. ¶ 253. Mr. Wiler proceeded to ask which Bass employees would become Edgewater
employees. Id. ¶ 254.
Edgewater was then formally created. On April 23, 2010, Ms. Bass and Bass itself
“signed a Purchase and Sale Agreement with her brother, Mr. Hoskins, and Edgewater to sell the
‘Business Opportunity’ of subcontracting with Pioneer under the ED PCA task order” at a
purchase price of $1 million. Id. ¶ 255. That same day, Edgewater received a $1 million loan
from Bass. Id. Four years after this loan, Mr. Hoskins and Edgewater had not repaid it, and Ms.
Bass agreed to continued forbearance for $50,000 and the “promise of continued payments in the
future.” Id. ¶ 269. Pioneer was “fully aware” of this sale because Mr. Wiler had been
“coordinating the transition for the ED subcontract” since April 15, 2010. Id. ¶ 255. He did so
with the assistance of a Bass employee, to whom he explained that “[a]ll that will need to change
on the letters [to be sent to debtors as part of the ED collection efforts] is the name of the
company.” Id. ¶¶ 257–58.
Bass and Edgewater also share both a physical location and employees. First,
Edgewater’s principal place of business is located next door to Bass, in a building owned by Ms.
Bass since June 2010. Id. ¶ 270. In the fall of 2010, Ms. Bass signed building permit
18
applications for construction at this same address, listing office space for Bass as the stated use
of the property. Id.
Second, key personnel at Bass were “substantial[ly] involve[d]” with Edgewater, with
Pioneer’s knowledge. Id. ¶ 260. Ms. Radmonovic, who had participated in the original Pioneer-
Bass kick-off meeting, held a senior managerial role at Edgewater “since at least 2010” and, until
2014, she simultaneously served as Strategic Planning and Client Services Executive at Bass. Id.
¶ 261. At industry trade shows and on her LinkedIn profile, she indicates overlapping
employment. See id. (noting Bass affiliation at industry trade shows and ED PCA meetings in
2012 and 2013); id. ¶ 262 (reproducing LinkedIn profile that describes roles at Edgewater from
2010 to 2015 and roles at Bass from 2003 to 2015). In addition to Ms. Radmonovic, Mr.
Hoskins was affiliated with both companies and repeatedly discussed Edgewater business on his
Bass email account. Id. ¶¶ 263–67. In one such email on May 22, 2014, Mr. Hoskins indicated
to a Pioneer employee that he and Ms. Bass had engaged in conversations about “loaning”
collectors from Bass to Edgewater. Id. ¶ 266. In other communications with Mr. Wiler of
Pioneer, Mr. Hoskins forwarded ED’s feedback on Bass’s July 2015 quality control plan, and
Mr. Wiler responded by stating that Pioneer handled its oversight with Edgewater by ensuring
“compliance in the same exact fashion as if the work was being done by one of our own teams.”
Id. ¶ 267. Pioneer not only supported Edgewater in its words, but also more materially: “[o]ther
than the revenues received from Pioneer under the task order, Edgewater does not generate
much, if any, revenue.” Id. ¶ 274.
19
iii. Group 3: WAM, Uniquity, and PRC
Prime contractor WAM’s involvement with subcontractor Uniquity and allegedly
affiliated company PRC represents another iteration of this basic scheme. 9 As a condition of
receiving the contract that led to the award of ED PCA task order, WAM submitted a small
business subcontracting plan that became a material part of its contract with the government. Id.
¶¶ 195– 97. WAM then awarded Uniquity a subcontract under the ED PCA task order. Id. ¶
199. Uniquity’s most recent annual self-certification affirming its small business status was
made in 2013. Id. ¶ 230.
There are several connections between Uniquity and PRC. 10 Uniquity was created in
2011 by the shareholders of PRC “to assist lenders in the collection of student debt.” Id. ¶ 204.
9
Relator’s factual allegations at times refer to WAM as the prime contractor for this
group of Defendants, see, e.g., Am. Compl. ¶ 10 (discussing “prime contractor[s] . . . Global
Receivables Solutions, Inc. f/k/a West Asset Management, Inc.”), and at times refer to “Prime
Contractor Defendant West Corporation,” see, e.g., id. ¶ 195. Relator’s opposition states that the
“Amended Complaint exclusively references West Corporation in the factual allegations for the
sake of convenience.” Opp’n to Defs. Alorica/GRSI’s, Uniquity’s, and PRC’s Mot. Dismiss 34
n.11, ECF No. 97. As noted previously, West Corporation was the parent company of WAM
until 2015, when Alorica acquired West and WAM was rebranded as GRSI. Adding to this
confusion, in their reply brief, Defendants collectively refer to Alorica and GRSI as the “WAM
Defendants.” Alorica/GRSI Reply Supporting Mot. Dismiss (“Alorica/GRSI Reply”) 1, ECF
No. 104. Based on the relationship among the entities articulated in the amended complaint, the
Court construes WAM as the operative prime contractor during the time of the allegations. For
expositional clarity, the Court uses the term “WAM” only in discussing the factual allegations
against the prime contractor associated with this group of Defendants. The Court further
discusses these issues in addressing the parties’ joint motion to dismiss Defendant West. See
infra Part IV.A.
10
Relator’s factual allegations concerning Uniquity also include a number of statements
that Uniquity fraudulently mispresented its woman-owned small business (“WOSB”) status. See
Am. Compl. ¶¶ 208–212. Even granting Relator’s complaint the generous read it is due at this
stage of litigation, the Court cannot discern a connection between WOSB status and the alleged
false claims—based on misrepresentations concerning business size—that Relator contests in this
suit. See id. ¶¶ 229–36 (discussing how Uniquity, PRC, and West “[s]ubmitted or [c]aused the
[s]ubmission of [f]alse [c]laims to the United States Government” through its
“misrepresentations concerning Uniquity’s small business status”). Thus, the Court omits this
set of factual allegations.
20
These PRC shareholders “maintain a 48% equity interest” in Uniquity. Id. PRC has provided
support to Uniquity by “fund[ing] significant organizational and start-up costs” and providing
employees to “carr[y] out . . . [Uniquity’s] accounting and other administrative functions.” Id.
Due to PRC’s financial investments in PRC, PRC’s accountants have concluded that Uniquity “is
a variable interest entity” of PRC, a designation that requires Uniquity’s activities “to be
consolidated in the analysis of PRC’s financial statements.” Id. ¶ 205. Moreover, the two
companies have reported the same operating office address in Durham, North Carolina, and
Uniquity additionally lists the residence of PRC’s CEO as a business address. Id. ¶ 206.
Uniquity’s email correspondence and business interactions with WAM involved PRC on
several occasions. On June 21, 2011, Uniquity President Jamie Cameron introduced his
“business partner,” PRC President and Uniquity Member Geoff Miller, to individuals at WAM,
id. ¶ 215. On July 19, 2011, WAM requested additional financial information about Uniquity.
Id. ¶ 216. In response, Mr. Cameron suggested that WAM “could simply rely on the financial
information of the better-established PRC.” Id. A year and a half later, when WAM incurred
skip tracing expenses for which Uniquity was responsible, PRC remitted the funds to WAM. Id.
¶ 219. Additionally, when PRC’s comptroller emailed a WAM employee to request “a copy of
our 1099,” WAM’s employee began helping PRC to locate Uniquity’s 1099. Id. ¶¶ 220–21
(emphasis removed), 11 suggesting a working familiarity with both entities’ business operations.
See id. ¶ 220.
11
In addition to these factual allegations concerning the relationship between PRC and
Uniquity and WAM’s knowledge of this relationship, Relators contend that Uniquity and WAM
are affiliated through economic dependence. Am. Compl. ¶¶ 223–28. As Uniquity argues in its
reply brief, Relator’s opposition “did not oppose, and therefore concedes, Uniquity’s argument
that it could not have been affiliated with [WAM] by ‘economic dependence.’” Def. Uniquity’s
Reply Supporting Mot. Dismiss 4, ECF No. 109; see also Alorica/GRSI Reply 3 (“The
Opposition abandons half of the alleged grounds for finding affiliation—and the entire basis for
21
B. Procedural History
Relator initially filed this lawsuit on May 20, 2015. See Compl. The Government
declined to intervene on October 1, 2018. See U.S.’s Notice of Election to Decline Intervention,
ECF No. 31. The original complaint was then unsealed, see Oct. 9, 2018 Order, ECF No. 32, and
summonses were issued for Defendants Bass, ConServe, Edgewater, Pioneer, Protocol, Uniquity,
and West on February 2, 2019, see ECF No. 36. Relator filed an amended complaint on March
28, 2019, lodging claims against the same seven Defendants and adding Defendants Alorica,
State, and PRC. Am Compl. The amended complaint stated that Relator “voluntarily provided
the Government with the information upon which the allegations” in it “are based prior to the
filing of the Original Complaint in accordance with 31 U.S.C. § 3730(b)(2),” id. ¶ 28, the qui
tam provision of the False Claims Act.
This amended complaint includes four counts. Count I alleges that “Defendants
knowingly submitted, or caused to be submitted, false claims for payment to the United States, in
violation of 31 U.S.C. § 3729(a)(1)(A).” Id. ¶ 326. Count II alleges that Defendants “knowingly
used false records or statements to get false or fraudulent claims paid or approved by the United
States, in violation of the FCA, 31 U.S.C. § 3729(a)(1)(B). Id. ¶ 331. Count III alleges that
“Defendants knowingly conspired, and may still be conspiring, with the various entities and/or
persons alleged herein (as well as other unnamed co-conspirators) to commit acts in violation of
31 U.S.C. §§ 3729(a)(1) & a(2); 31 U.S.C. §§ 3729(a)(1)(A) & (a)(1)(b).” Id. ¶ 334. Finally,
asserting a Uniquity-WAM affiliation—by completely failing to address the lack of an
“economic dependence” (thus conceding this argument)). Under this Circuit’s clear precedent,
“if a party files an opposition to a motion and therein addresses only some of the movant’s
arguments, the court may treat the unaddressed arguments as conceded.” Texas v. U.S., 798 F.3d
1108, 1110 (D.C. Cir. 2015); see also De La Fuente v. DNC Servs. Corp., No. 18-cv- 336 (RC),
2019 WL 1778948, at *4 (D.D.C. Apr. 23, 2019). Because the Court treats these arguments as
conceded, it does not relate the underlying factual allegations.
22
Count IV alleges that “Defendants knowingly avoided or decreased their obligation to pay or
transmit money to the government,” thereby violating 31 U.S.C. § 3729(a)(1)(G). Id. ¶ 337.
Summonses were issued for the Defendants referenced in the amended complaint on April 1,
2019. See ECF No. 57.
The parties then filed multiple motions. Relator and Defendants Alorica and GRSI
jointly moved to dismiss the claims against Defendant West, asking the Court to grant a
dismissal agreement wherein Alorica/GRSI agreed to assume any liabilities arising as to
Defendant West due to the alleged conduct of WAM. See ECF No. 77. Each of the Defendants
also moved to dismiss Relator’s amended complaint. See Def. PRC’s Mot. Dismiss (“PRC
Mot.”), ECF No. 79, Def. Protocol’s Mot. Dismiss (“Protocol Mot.”), ECF No. 81, Def. Bass’s
Mot. Dismiss (“Bass Mot.”), ECF No. 85, Def. Alorica/GRSI’s Mot. Dismiss (“Alorica/GRSI
Mot.”), ECF No. 86, Def. Edgewater’s Mot. Dismiss (“Edgewater Mot.”), ECF No. 87, Def.
Pioneer’s Mot. Dismiss, ECF No. 88, Def. ConServe’s Mot. Dismiss (“ConServe Mot.”), ECF
No. 92, and Def. State’s Mot Dismiss (“State’s Mot.”), ECF No. 93. In addition, Defendant
ConServe moved for judicial notice, ECF No. 92, followed by Relator’s own motion for judicial
notice, ECF No. 98. These motions have been briefed and are ripe for the Court’s consideration.
III. LEGAL STANDARD
A. Federal Rule of Civil Procedure 12(b)(6)
The Federal Rules of Civil Procedure require that a complaint contain “a short and plain
statement of the claim” in order to give the defendant fair notice of the claim and the grounds
upon which it rests. Fed. R. Civ. P. 8(a)(2); accord Erickson v. Pardus, 551 U.S. 89, 93 (2007)
(per curiam). A motion to dismiss under Rule 12(b)(6) “tests the legal sufficiency of a
complaint” under that standard and asks whether the plaintiff has properly stated a claim.
23
Browning v. Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002). A court considering such a motion
takes the complaint’s factual allegations to be true and construes them liberally in the plaintiff’s
favor. See, e.g., United States v. Philip Morris, Inc., 116 F. Supp. 2d 131, 135 (D.D.C. 2000).
Nevertheless, “[t]o survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). This means that a plaintiff’s factual allegations “must be enough to raise a right to relief
above the speculative level, on the assumption that all the allegations in the complaint are true
(even if doubtful in fact).” Twombly, 550 U.S. at 555–56 (citations omitted). “Threadbare
recitals of the elements of a cause of action, supported by mere conclusory statements,” are thus
insufficient to withstand a motion to dismiss. Iqbal, 556 U.S. at 678. A court need not accept a
plaintiff’s legal conclusions as true, see id., nor must a court presume the veracity of legal
conclusions that are couched as factual allegations. See Twombly, 550 U.S. at 555.
B. Federal Rule of Civil Procedure 9(b) and the FCA
For FCA fraud actions, a heightened pleading standard applies. See United States ex rel.
Totten v. Bombardier Corp. (Totten I), 286 F.3d 542, 551 (D.C. Cir. 2002) (“[B]ecause the False
Claims Act is self-evidently an anti-fraud statute, complaints brought under it must comply with
Rule 9(b).”). In such a suit, it is not enough to comply with Rule 12(b)(6); rather, FCA
“plaintiffs must plead their claims with plausibility and particularity under Federal Rules of Civil
Procedure 8 and 9(b) by, for instance, pleading facts to support allegations of materiality.”
Universal Health Servs., Inc. v. United States (Universal Health Services), 136 S. Ct. 1989, 2004
n.6 (2016); see also Fed. R. Civ. P. 9(b) (requiring a party “alleging fraud or mistake” to “state
with particularity the circumstances constituting fraud or mistake”). That said, “[m]alice, intent,
24
knowledge, and other conditions of a person’s mind may be alleged generally.” Fed. R. Civ. P.
9(b). Thus, “‘[i]n an FCA fraud action, Rule 9(b) requires, at a minimum, that the pleader 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 ‘individuals allegedly involved in the
fraud.’” Pencheng Si v. Laogai Research Foundation (Si II), 71 F. Supp. 3d 73, 85 (D.D.C.
2014) (quoting Williams v. Martin-Baker Aircraft Co., Ltd., 389 F.3d 1251, 1256 (D.C. Cir.
2004)); see also United States ex rel. Landis v. Tailwind Sports Corp. (Landis), 51 F. Supp. 3d 9,
49 (D.D.C. 2014), on reconsideration in part, 160 F. Supp. 3d 253 (D.D.C. 2016), and clarified
on denial of reconsideration, No. 1:10-CV-00976 (CRC), 2016 WL 3197550 (D.D.C. June 8,
2016) (discussing pleading standard and quoting Williams, 389 F.3d at 1256); Totten I, 286 F.3d
at 551 (quoting 5 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure §
1297 (2d ed. 1990)). Put slightly differently, “the plaintiff must provide the ‘who,’ ‘what,’
‘when,’ and ‘where’ with respect to the circumstances of the fraud.” United States v. Comstor
Corp. (Comstor), 308 F. Supp. 3d 56, 68 (D.D.C. 2018) (quoting United States ex rel. Heath v.
AT & T, Inc. (Heath), 791 F.3d 112, 124 (D.C. Cir. 2015)). “This requirement of particularity
‘serve[s] to discourage[] the initiation of suits brought solely for their nuisance value, . . .
safeguards potential defendants from frivolous accusations of moral turpitude,’” Heath, 791 F.3d
at 123 (internal quotation marks omitted) (quoting Williams, 389 F.3d at 1256), and “ensure[s]
that defendants have adequate notice of the charges against them to prepare a defense,” Si II, 71
F. Supp. 3d at 85 (quoting United States ex. rel. McCready v. Columbia/HCA Healthcare Corp.,
251 F. Supp. 2d 114, 116 (D.D.C. 2003)).
25
C. Claims Brought under the FCA
The FCA’s qui tam provision, 31 U.S.C. § 3730(b)(1), permits private parties termed
“relators,” to sue on behalf of the government in order to redress false or fraudulent claims made
to the government. See Williams, 389 F.3d at 1254. However, in such a qui tam suit, conditions
apply in the form of the FCA’s public disclosure bar: “seeking to prevent suits ‘by those other
than an original source when the government already has enough information to investigate the
case’ or where ‘the information could at least have alerted law-enforcement authorities to the
likelihood of wrongdoing,’ the FCA’s public disclosure bar blocks qui tam suits that are ‘based
upon the public disclosure of allegations or transactions.’” United States ex rel. Doe v. Staples,
Inc. (Staples), 773 F.3d 83, 86 (D.C. Cir. 2014) (internal quotation marks omitted) (first quoting
United States ex rel. Davis v. District of Columbia, 679 F.3d 832, 836 (D.C. Cir. 2012), then
quoting 31 U.S.C. § 3730(e)(4)(A) (1986)); see also 31 U.S.C. § 3730(e)(4)(A).
This Circuit set forth the relevant analysis to determine whether there has been a public
disclosure in United States ex rel. Springfield Terminal Railway v. Quinn (Springfield Terminal),
14 F.3d 645 (D.C. Cir. 1994). Springfield Terminal provides a formula to solve the public
disclosure question: “if X + Y = Z, Z represents the allegation of fraud and X and Y represent its
essential elements. In order to disclose the fraudulent transaction publicly, the combination of X
and Y must be revealed, from which readers or listeners may infer Z, i.e., the conclusion that
fraud has been committed.” Id. at 654 (emphasis in original). Thus, “a qui tam action cannot be
sustained where both elements of the fraudulent transaction—X and Y—are already public, even
if the relator ‘comes forward with additional evidence incriminating the defendant.’” Staples,
773 F.3d at 86 (quoting Springfield Terminal, 14 F.3d at 655).
26
An exception to the public disclosure bar applies if the relator is an “original source” of
the information. “Original source” is defined by the statute as a person who either (1) “has
voluntarily disclosed to the Government the information on which allegations or transactions in a
claim are based,” prior to a “public disclosure” as defined by the statute, or (2) “has knowledge
that is independent of and materially adds to the publicly disclosed allegations or transactions,
and who has voluntarily provided the information to the Government before filing an action”
under the FCA’s qui tam provision. 31 U.S.C. § 3730(e)(4)(B).
In this case, Relator claims original source status and brings four FCA claims. 12 The
Court will next outline the operative legal standard for each of Relator’s claims in the instant suit
before turning to its analysis of Defendants’ motions to dismiss.
1. Presentment and False Statement Actions
The FCA, as amended, creates civil 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), or “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). These two clauses are
known as the “presentment clause” and the “false statement clause,” respectively. FERA’s 2009
amendments broaden the reach of both clauses. First, the changes to the presentment clause
“removed language requiring that the claim be presented to an officer or employee of the
government or armed forces.” Comstor, 308 F. Supp. 3d at 78 (citing FERA § 4(a)). Second,
12
Technically speaking, Relator’s amended complaint can be read as bringing eight
claims. On May 20, 2009, Congress amended the FCA by enacting the Fraud Enforcement and
Recovery Act of 2009 (“FERA”), Pub. L. No. 111-21, 123 stat. 1617. Relator suggests that the
claims may implicate both the pre- and post-amendment versions of the statute. See Am. Compl.
84 n.8 (“To the extent wrongdoing occurred prior to May 20, 2009, this Amended Complaint
should be deemed to include violations of the Federal False Claims Act prior to its recent
amendments, e.g., 31 U.S.C. § 3729(a)(1) (2006).”); id. at 85–86 nn.9–12 (same). The Court
thus discusses both versions of the statute, highlighting relevant differences as applicable.
27
the amended false statement clause “replaced the language of ‘false record or statement to get a
false or fraudulent claim paid or approved by the government’ with ‘statement material to a false
or fraudulent claim.’” Id. (quoting FERA § 4(a)). The amended presentment clause applies to
conduct occurring on or after May 20, 2009. FERA § 4(f). The amended false statement clause
applies retroactively to “all claims under the False Claims Act . . . that are pending on or after”
June 8, 2008. Id. at § 4(f)(1).
The presentment and false statement clauses are “complementary,” having been
“designed to prevent those who make false records or statements to get claims paid or approved
from escaping liability solely on the ground that they did not themselves present a claim for
payment or approval.” United States ex rel. Totten v. Bombardier Corp. (Totten II), 380 F.3d
488, 501 (D.C. Cir. 2004) (emphasis in original). The elements of these claims are that: “(1) the
defendant submitted or caused to be submitted a claim to the government, (2) the claim was
false, and (3) the defendant knew the claim was false.” United States ex rel. Tran v. Computer
Scis. Corp. (Tran), 53 F. Supp. 3d 104, 121–22 (D.D.C. 2014) (citation and alteration omitted).
A false claim can take several forms. “In the case of the ‘paradigmatic . . . factually false
claim,’ a claimant ‘submits information that is untrue on its face.’” United States ex rel. Morsell
v. Symantec Corp. (Morsell), 130 F. Supp. 3d 106, 118–19 (D.D.C. 2015) (quoting Kellogg
Brown & Root Servs., 800 F. Supp. 2d 143, 154 (D.D.C. 2011)); see also United States v.
Science Applications Int’l Corp. (SAIC), 626 F.3d 1257, 1266 (D.C. Cir. 2010). This Circuit also
accepts two additional theories of legal “falsity” that are relevant in this case: fraudulent
inducement and implied certification. See United States ex rel. Bettis v. Odebrecht Contractors
of Cal., Inc., 393 F.3d 1321, 1326–27 (D.C. Cir. 2005) (addressing “fraud-in-inducement theory
of liability under the FCA”); SAIC, 626 F.3d at 1266 (discussing Circuit’s endorsement of
28
implied certification theory as basis for FCA claims); see also Tran, 53 F. Supp. 3d at 117
(discussing potential bases for liability under the FCA); U.S. ex rel. Head v. Kane Co., 798 F.
Supp. 2d 186, 195–96 (D.D.C. 2011) (noting that FCA claims take several forms, including
fraudulent inducement and implied false certification, and citing Bettis, 393 F.3d at 1326; SAIC,
626 F.3d at 1266). The fraudulent inducement theory imposes liability “for each claim submitted
to the Government under a contract which was procured by fraud, even in the absence of
evidence that the claims were fraudulent in themselves.” Tran, 53 F. Supp. 3d 104, 117 (quoting
Bettis, 393 F.3d at 1326 (citing S. Rep. No. 99–345, at 9 (1986), reprinted in 1986 U.S.C.C.A.N.
5266, 5274)).
Alternatively, under the implied certification theory of liability, “the falsity of a claim for
payment rests on a false representation of compliance with an applicable federal statute, federal
regulation, or contractual term.” Comstor, 308 F. Supp. 3d at 79 (quoting United States ex rel.
McBride v. Halliburton Co. (McBride), 848 F.3d 1027, 1031 (D.C. Cir. 2017)); see also SAIC,
626 F.3d at 1266. “[U]nder the implied certification theory, a party can incur liability for
making claims under a contract while ‘withh[olding] information about its noncompliance with
material contractual requirements.’” Morsell, 130 F. Supp. 3d at 119 (quoting SAIC, 626 F.3d at
1269). However, “in order to establish liability[,] the plaintiff must prove that ‘compliance with
the legal requirement in question is material to the government’s decision to pay.’” McBride,
848 F.3d at 1031 (emphasis in original) (quoting SAIC, 626 F.3d at 1271). This Circuit has
“committed to ‘enforcing this [materiality] requirement rigorously’ to ‘ensure that government
contractors will not face onerous and unforeseen FCA liability as the result of noncompliance
with any of potentially hundreds of legal requirements established by contract.’” Id. (quoting
SAIC, 626 F.3d at 1271). The Supreme Court has, furthermore, underscored the need for courts
29
to be rigorous in their examination of implied certification theories and engage in “strict
enforcement of the Act’s materiality requirements.” Universal Health Services, 136 S. Ct. at
2002 (quoting SAIC, 626 F.3d at 1270). The same “strict enforcement” applies to the FCA’s
scienter, or knowledge, requirements. Id. “The requisite knowledge has two dimensions: The
plaintiff must show that the defendant “knows (1) that it violated a contractual obligation, and (2)
that its compliance with that obligation was material to the government’s decision to pay.”
Morsell, 130 F. Supp. 3d at 119–20 (quoting SAIC, 626 F.3d at 1271) (citing Heath, 791 F.3d at
125).
2. “Reverse” False Claim Actions
Relator also brings claims pursuant to the so-called “reverse” false claims clause of the
FCA, which addresses “any fraudulent conduct that ‘results in no payment to the government
when a payment is obligated.’” Si II, 71 F. Supp. 3d at 88 (citation omitted). This clause applies
to any person who “knowingly conceals or knowingly and improperly avoids or decreases an
obligation to pay or transmit money or property to the Government.” 31 U.S.C. § 3729(a)(1)(G).
The pre-FERA version of this clause imposed civil liability on any person who “knowingly
makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or
decrease an obligation to pay or transmit money or property to the Government.’” 31 U.S.C. §
3729(a)(7) (2006). The amended version of this clause is broader than the pre-FERA version of
the statute in two important ways. First, FERA “expanded the type of conduct underlying a
reverse false claim action to include presentment (i.e., making a claim-related submission) as
well as a material false statement, thereby mirroring sections 3729(a)(1)(A) and 3729(a)(1)(B).”
Si II, 71 F. Supp. 3d at 88–89 (citing S. Rep. No. 111–10, at 13–15 (2009)). “Second, it
broadened the relevant payment ‘obligation.’ . . . Whereas the pre-FERA version of the FCA did
30
not contain any definition of obligation,” id., FERA defines obligation as “an established duty,
whether or not fixed, arising from an express or implied contractual, grantor-grantee, or licensor-
licensee relationship, from a fee-based or similar relationship, from statute or regulation, or from
the retention of any overpayment,” 31 U.S.C. § 3729(b)(3).
3. Conspiracy Actions
Additionally, the FCA provides for civil liability for any person who “conspires to
commit a violation of” any of the above-described provisions. 31 U.S.C. § 3729(a)(1)(C). The
elements of this cause of action are: “(1) that ‘an agreement existed to have false or fraudulent
claims allowed or paid’ to the government, (2) that each alleged member of the conspiracy
‘joined that agreement,’ and (3) that ‘one or more conspirators knowingly committed one or
more overt acts in furtherance of the object of the conspiracy.’” Si II, 71 F. Supp. 3d at 89
(quoting United States ex rel. Miller v. Bill Harbert Int’l Constr., Inc., 608 F.3d 871, 899 (D.C.
Cir. 2010)). “General civil conspiracy principles apply to FCA conspiracy claims.” Kane, 798
F. Supp. 2d at 201 (quoting United States ex rel. Westrick v. Second Chance Body Armor, Inc.
(Westrick), 685 F. Supp. 2d 129, 140 (D.D.C. 2010)). Thus, for instance, there must be “some
underlying tortious act” for there to be a conspiracy. Halberstam v. Welch, 705 F.2d 472, 479
(D.C. Cir. 1983). In the FCA context, then, “there can be no liability for conspiracy where there
is no underlying violation of the FCA.” Si II, 71 F. Supp. 3d at 89 (citing United States ex rel.
Amin v. George Washington Univ. (Amin), 26 F. Supp. 2d 162, 165 (D.D.C. 1998)).
IV. ANALYSIS
Before turning to Defendant’s motions to dismiss, the Court will address two threshold
issues: first, the parties’ joint motion to dismiss Defendant West Corporation, and second,
Defendant Alorica’s and Defendant GRSI’s arguments concerning parent company liability.
31
A. Joint Motion to Dismiss Defendant West Corporation
As mentioned previously, the parties have jointly moved to dismiss with prejudice
Relator’s claims against Defendant West Corporation, the parent company to prime contractor
West Asset Management at the time of the original task order. See Joint Mot. Dismiss Claims
Against West Corp (“Joint Mot.”), ECF No. 77. The parties state that, pursuant to the 2015
Asset Contribution and Equity Purchase Agreement (“Purchase Agreement”) entered into by
Alorica and West, Alorica “assumed all liabilities of West related to WAM, including any
damages, penalties, or other relief, by way of judgment or settlement, that might arise with
respect to Relator’s claims against West” in this lawsuit;” “purchased and acquired all equity and
interests in WAM from West and later renamed it GRSI;” and “agreed to also assume any
liabilities, including any damages, penalties, or other relief, by way of judgment or settlement,
that might arise as to West based on the allegations set forth in the First Amended Complaint.”
Dismissal Agreement 1–2, ECF No. 77-1. The parties executed their dismissal agreement on
May 14, 2019. Id. at 5. The agreement provided that the parties would confer with the U.S.
government within ten days of execution, and the parties state that Relator has in fact conferred
with government counsel, “who has represented that the United States does not oppose such
dismissal.” Joint Mot. 1. This uncontested submission establishes that the United States, on
behalf of which Relators bring the instant suit, has consented to this dismissal. Thus, the Court
grants the motion to dismiss the claims against Defendant West with prejudice with respect to
Relator and without prejudice with respect to the U.S. government.
B. Defendant Alorica/GRSI Parent Company Liability
Defendant Alorica/GRSI raises a further argument related to this corporate restructuring,
contending that Relator has not provided any basis to assert liability against WAM’s parent
32
company (formerly West and now Alorica). Alorica/GRSI Mem. P. &. A. Supporting Mot.
Dismiss (“Alorica/GRSI Mem.”) 42, ECF No. 86. More specifically, Alorica/GRSI argues that
Relator has provided no factual allegations that suggest either (1) that the parent company was
directly involved with the subsidiary company or (2) that the parent company was an “alter ego”
of the subsidiary company. Id. at 42–43 (quoting United States ex rel. Hockett v. Columbia/HCA
Healthcare Corp. (Hockett), 498 F. Supp. 2d 25, 59–60 (D.D.C. 2007)). 13 Relator’s opposition
does not provide factual allegations to rebut this argument. Instead, PCA Integrity asserts that
“the practice of courts in this Circuit is to order discovery to illuminate alter ego disputes before
deciding dispositive motions which assert lack of jurisdiction over the alleged alter ego.”
Relator’s Brief in Opp’n to Alorica/GRSI’s, Uniquity’s, and PRC’s Motions to Dismiss (“Opp’n
to Alorica/GRSI, Uniquity, and PRC”) 33, ECF No. 97 (citing Richard v. Bell Atl. Corp., 946 F.
Supp. 54, 64 (D.D.C. 1996); United Mine Workers of Am. Int’l Union v. Arch Mineral Corp.,
145 F.R.D. 3, 6–7 (D.D.C. 1992); Labadie Coal Co. v. Black, 672 F.2d 92, 98 (D.C. Cir. 1982)).
For the following reasons, Defendants have the better argument.
The problem for Relator is the failure to present any facts at all that suggest either the
parent company’s direct role or that the parent company dominated the actions of the subsidiary
company. A court can “pierce the [corporate] veil” and hold a parent company liable for the
13
In addition, Alorica/GRSI suggests that the complaint’s use of the name “West
Corporation,” abbreviated to “West,” to refer to the prime contractor in this cluster represents a
“failure to clearly identify the entities it is alleging to have committed the fraud.” Alorica/GRSI
Mem. 42 & n.16. On Relator’s account, there is no such descriptive failure; rather, “the
Amended Complaint exclusively references West Corporation in the factual allegations for the
sake of convenience.” Opp’n to Alorica/GRSI, Uniquity, and PRC 34 n.11. Although the Court
agrees with Defendants that the initial references to “West” as the prime contractor are less
precise than ideal, when the amended complaint is parsed in context, Relator has the better
argument. On the Court’s read of the pleadings, construing all ambiguities in favor of the
pleader, it is apparent that Relator intends to reference WAM as the prime contractor and uses
“West” as shorthand.
33
actions of a subsidiary only where the parent ‘so dominated the subsidiary corporation as to
negate its separate personality.’” Hockett, 498 F. Supp. 2d at 60 (quoting AGS Int’l Servs. S.A. v.
Newmont USA Ltd., 346 F. Supp. 2d 64, 89 (D.D.C. 2004) (internal punctuation and quotation
omitted)); cf. Miller, 608 F.3d at 897 (“Under the alter ego theory, the court may ignore the
existence of the corporate form whenever an individual so dominates an organization as in reality
to negate its separate personality.” (quoting Founding Church of Scientology of Wash., D. C.,
Inc. v. Webster, 802 F.2d 1448, 1452 (D.C. Cir. 1986) (internal quotation marks omitted))). The
Circuit has set out “several factors” that are “helpful in deciding when to pierce the corporate
veil,” grouping them “under a two-prong test: (1) is there such unity of interest and ownership
that the separate personalities of the corporation and the individual no longer exist?; and (2) if
the acts are treated as those of the corporation alone, will an inequitable result follow?” Labadie
Coal, 672 F.2d at 96 (footnote omitted).
Under the first prong, a court considers “the degree to which formalities have been
followed to maintain a separate corporate identity.” Id. “To justify piercing the corporate veil
between a parent and a subsidiary, the parent’s control of the subsidiary must be ‘active and
substantial, but it need not be exclusive in a hypertechnical or day-to-day sense.’” IMark Mktg.
Servs., LLC v. Geoplast S.p.A., 753 F. Supp. 2d 141, 150–51 (D.D.C. 2010) (quoting Material
Supply Int’l, Inc. v. Sunmatch Indus. Co., 62 F. Supp. 2d 13, 20 (D.D.C. 1999); see also Valley
Fin., Inc. v. United States, 629 F.2d 162, 172 (D.C. Cir. 1980). Although there is no “rigid
standard of what constitutes ‘active and substantial’ control,” courts in this Circuit are “to
consider the following factors: (1) the nature of the corporate ownership and control; (2) failure
to maintain corporate minutes or adequate records; (3) failure to maintain the corporate
formalities; (4) a commingling of funds and other assets; (5) diversion of corporate funds or
34
assets to other uses; and (6) use of the same office or business location.” IMark Mktg. Servs.,
753 F. Supp. 2d at 150–51 (first quoting Material Supply Int’l, 62 F. Supp. 2d at 20, then citing
Labadie Coal, 672 F.2d at 97–99); see also United States v. Dynamic Visions, Inc., 220 F. Supp.
3d 16, 25 (D.D.C. 2016).
Under the second prong, a court considers “the basic issue of fairness under the facts.”
Labadie Coal, 672 F.2d at 96 (footnote omitted). This “practical” analysis is “based largely on a
reading of the particular factual circumstances,” with the “ultimate determination . . . dependent
upon the sound discretion of the trial judge.” Valley Fin., 629 F.2d at 172. In conducting this
analysis, a trial court “should consider the entire picture of the relationship between the two
corporations, including the many factors listed in the formalities prong of the test.” Shapiro,
Lifschitz & Schram, P.C. v. Hazard (Hazard), 90 F. Supp. 2d 15, 26 (D.D.C. 2000) (quoting
Labadie Coal, 672 F.2d at 99); see also IMark Mktg. Servs., 753 F. Supp. 2d at 152
(quoting Hazard, 90 F. Supp. 2d at 26).
Here, Relator’s argument fails at the first prong because PCA Integrity never presents any
factual allegations that would allow the Court to conclude that the parent company (formerly
West Corporation, now Alorica) exercised “active and substantial” control over the subsidiary
(formerly WAM, now GRSI). 14 Instead, Relator appears to assert that this issue is a “factual
dispute that is ill-suited to resolution on a motion to dismiss.” Opp’n to Alorica/GRSI, Uniquity,
and PRC 33. But the two cited district court cases, standing alone, do not establish that it is “the
practice of courts in this Circuit” to order discovery when faced with similar facts. 15 Id. Nor
14
If anything, the complaint’s factual allegations, which indicate that the two entities had
different business addresses and managers, cut the other way. See Am. Compl. ¶¶ 32–35.
15
In any event, this persuasive authority is not very persuasive here. In United Mine
Workers, the motion to dismiss was predicated “largely” on the assertion that the court lacked
personal jurisdiction over the parent company with respect to contracts entered into by
35
does the Court find support for such a routine practice in the Circuit’s decision to vacate a
decision and order discovery in Labadie Coal after conducting a detailed analysis of whether
“formalities ha[d] been followed to maintain a separate corporate identity.” 672 F.2d at 96, 97–
99 (assessing formalities). At the end of the day, then, Relator neither offers any binding
precedent nor any further argumentation beyond the bare statement that it “has pled sufficient
facts under either a direct or derivative theory of liability under which West and/or Alorica could
be found liable.” Opp’n to Alorica/GRSI, Uniquity, and PRC 34. This bald assertion is no more
than a legal conclusion without factual support, however, and cannot survive the motion to
dismiss.16 See Twombly, 550 U.S. at 555.
C. Presentment and False Statement Claims
Turning now to the merits of Defendants’ motions to dismiss, Defendants argue, inter
alia, that the presentment and false statement claims that form Count I and Count II,
respectively, of the amended complaint, see Am. Compl. ¶¶ 324–32, do not plausibly establish a
claim for relief with the particularity demanded by Rule 9(b)’s heightened pleading standard. 17
subsidiaries, such that the court needed to “decide questions of corporate structure that
implicate[d] the merits of the underlying [contract] claims.” 145 F.R.D. at 6–7. In this suit, the
merits of the underlying FCA claims are independent of the question of parent company liability.
In Richard v. Bell Atlantic Corporation, the court ordered discovery based upon its appraisal of
38 exhibits submitted by the Plaintiffs, some of which “suggest[ed] that it would not be proper . .
. to conclude that as a matter of undisputed material fact [the parent corporation] is not the
plaintiffs’ employer.” 946 F. Supp. at 64 (internal quotation marks omitted). In this suit, Relator
has submitted no exhibits or any other evidence (or even allegations) in support of its argument.
16
Should Relator file an amended complaint, it may add factual allegations that specify
(1) in what ways, if any, the parent company directly participated in the alleged activities of the
prime contractor subsidiary and/or (2) how the parent company otherwise dominated the
subsidiary company in a way that supports piercing the corporate veil between the two entities.
17
Because, as discussed previously, “presentment claims under § 3729(a)(1)(A) and false
statement claims under § 3729(a)(1)(B) follow ‘essentially the same legal analysis,’” the Court
considers these claims jointly. United States ex rel. Hutchins v. DynCorp Int’l, Inc. (Hutchins),
342 F. Supp. 3d 32, 48 (D.D.C. 2018) (quoting Tran, 53 F. Supp. 3d at 123).
36
Defendants also contend that Relator has failed to articulate, with the particularity required, the
materiality of any alleged false claim. For the forthcoming reasons, the Court agrees with
Defendants on both of these points and grants the motions to dismiss these claims.
1. Lack of Particularity in Pleading Basic Facts 18
A common thread throughout Defendants’ briefings is the contention that Relator did not
make sufficiently specific allegations concerning any individual Defendant’s presentation of
false claims to the government. Put simply, the argument is that Relator failed to allege the who,
what, where, and when of the fraud in the manner that Rule 9(b) demands. See Def. ConServe’s
Mem. P. & A. Supporting Mot. Dismiss (“ConServe Mem.”) 19, 30–33, ECF No. 91-1 (arguing
that “Relator fails to allege the who, what, where, and when of an actual false claim for payment
to the government.” (emphasis removed)); Protocol Mem. 1, 10–17 (detailing how “[t] he AC
fails to describe the content, dates, and other particularized information for critical claims”); Def.
State’s Mem. P. & A. Supporting Mot. Dismiss (“State Mem.”) 17–20, ECF No. 93-1
Even so, the Court recognizes that one core distinction between these claims involves
what suffices to make the required showing of scienter to establish liability under 31 U.S.C. §
3729(a)(1)(B). The legal standard turns on which version of the FCA—pre-or post-FERA—
applies. See Comstor, 308 F. Supp. 3d at 91 (FERA ‘amend[ed] the FCA to clarify and correct
erroneous interpretations of the law’ decided in Allison Engine [Co., Inc. v. United States ex rel.
Sanders, 553 U.S. 662 (2008)], including by eliminating the false statement provision’s intent
requirement.”). As the Court explains below, a major deficiency in the amended complaint is the
failure to state with particularity the timing of critical factual allegations that pertain to each
specific Defendant. The intervening changes in controlling statutes make this omission even
more problematic, as Defendant Protocol rightly notes. Def. Protocol’s Mem. P. & A.
Supporting Mot. Dismiss (“Protocol Mem.”) 11, ECF No. 81-1 (“The absence of times figure
more prominently in this case due to relevant shifts in the governing law.”). Thus, until Relator
clarifies the relevant timeline, permitting the Court to draw firmer conclusions concerning what
governing law to apply to the pending claims, the Court reserves judgment concerning scienter.
18
In the forthcoming analysis, the Court at times uses one Defendant to illustrate a
particular point. However, unless otherwise indicated, such discussion of a Defendant by way of
example does not mean that the issue is not equally applicable to all other similarly-positioned
Defendants (e.g., where the Court discusses Edgewater to highlight a point regarding the
subcontractor defendants, unless otherwise specified, a version of the issues identified also
applies to the other subcontractor defendants).
37
(describing how “Relator has failed to plead the ‘who, what, where, and when’ specifics of its
FCA claims and has not specified which Counts apply to which defendants”); Def. Pioneer’s
Mot. Dismiss (“Pioneer Mot.”) 31, ECF No. 88 (“[R]elator has not alleged facts identifying a
single false claim, false invoice, or false account; the date on which any false claim was
submitted to the U.S. government; or who submitted such a claim.”); Edgewater Mot. 8–9
(contesting Relator’s failure to establish “who, what, when, where, and how” “as it relates to
Edgewater”); Bass Mot. 6 (alleging same lack of specificity regarding Bass); Alorica/GRSI
Mem. 15–22 (“Throughout the Complaint, rather than plead particularized facts . . . Relator
makes general and conclusory assertions without identifying with specificity any false claims by
a WAM Defendant, any false record or statement submitted to the Government and attributable
to a WAM Defendant, or the actual operation of any fraudulent ‘scheme.’”); Def. Uniquity’s
Reply to Relator’s Opp’n Mot. Dismiss (“Uniquity Reply”) 1–2, ECF No. 109 (“Relator has
utterly failed to plead any facts regarding any supposed false representation made by Uniquity to
the ED.”); PRC Mot. 3 (attacking lack of specific examples in support of Relator’s “generic
position”). 19
Though styled as three separate oppositions to the three groups of Defendants, Relator’s
rebuttal comes down to essentially the same core arguments. First, clarifying that it is pursuing
both fraudulent inducement and false certification theories, PCA Integrity alleges that each of the
three prime contractors “fraudulently induced the government to enter the initial collection
contracts by falsely claiming that they would comply with their subcontracting plans.” Relator’s
Brief in Opp’n to ConServe’s, Protocol’s[,] and State’s Motions to Dismiss (“Opp’n to
19
Defendants Alorica/GRSI and Pioneer, respectively, submitted their memoranda along
with an unpaginated motion to dismiss as part of the same filing. See ECF Nos. 86, 88. The
Court refers to the original page numbers of these documents.
38
ConServe, Protocol, and State”) 26, ECF No. 95; Relator’s Brief in Opp’n to Pioneer’s,
Edgewater’s, and Bass’s Mot. Dismiss (“Opp’n to Pioneer, Edgewater, and Bass”) 27, ECF No.
96; Opp’n to Alorica/GRSI, Uniquity, and PRC 15. 20 Relator contends that, at this stage of
litigation, it does not need to “allege the existence of a request for payment with particularity,”
Opp’n to ConServe, Protocol, and State 28 (quoting United States ex rel. Folliard v. CDW Tech.
Servs., Inc. (Folliard), 722 F. Supp. 2d 20, 26–27 (D.D.C. 2010)), or to “plead the contents of
any particular claim for payment,” Opp’n to Pioneer, Edgewater, and Bass 28; Opp’n to
Alorica/GRSI, Uniquity, and PRC 16. With respect to Defendant ConServe, Relator further
asserts that it has indicated the timing of the alleged fraudulent inducement by stating that “the
PCAs submitted proposals by June 26, 2008, and ED ultimately contracted with 22 PCAs,
including ConServe, in the first quarter of 2009.” Opp’n to ConServe, Protocol, and State 27.
These same fraudulent representations, Relator appears to suggest, amount to implied false
certification each time that any of the Defendants “made, or caused to be made, false statements
regarding the Prime Contractor defendants’ compliance with these subcontracting plans.” Id. at
27–28.
In addition, with respect to Defendants Pioneer and WAM, Relator argues that it has
provided sufficient factual allegations to establish that each “defendant fraudulently induced the
government to enter into a contract,” which is enough to survive Defendants’ Rule 12(b)
20
Relator’s initial pleading makes allegations about “Defendants” in broad strokes and is
not a paragon of clarity regarding which claims and legal theories apply to which parties. Based
on the arguments made in Relator’s briefs in opposition, which specify that the fraudulent
inducement theory applies to the “Prime Contractor Defendants,” see Opp’n to ConServe,
Protocol, and State 26; Opp’n to Pioneer, Edgewater, and Bass 27; Opp’n to Alorica/GRSI,
Uniquity, and PRC 15, and which do not make any arguments concerning this theory of liability
with respect to any other categories of defendants, the Court concludes that Relator only intends
to put forth a fraudulent inducement argument for the prime contractor defendants (ConServe,
Pioneer, and WAM).
39
motions. Opp’n to Pioneer, Edgewater, and Bass 28 (quoting United States ex rel. Shemesh v.
CA, Inc. (Shemesh), 89 F. Supp. 3d 36, 47 (D.D.C. 2015)); Opp’n to Alorica/GRSI, Uniquity,
and PRC 16 (same). For Defendants Pioneer and WAM, Relator also asserts in a single footnote
that it satisfies even the “presentment theory of liability” because Rule 9(b) does not require the
relator “to plead representative samples of claims actually submitted to the government.” Opp’n
to Pioneer, Edgewater, and Bass 28 n.7 (quoting Heath, 791 F.3d at 123); Opp’n to
Alorica/GRSI, Uniquity, and PRC 15 n.6 (same).
Second, Relator maintains that the factual allegations provided satisfy Rule 9(b)’s
heightened pleading standard, properly construed. With respect to Defendants ConServe,
Protocol, State, Pioneer, Edgewater, and Bass, Relator argues that it has set forth facts that
establish “the circumstances constituting fraud,” and that is enough. Opp’n to ConServe,
Protocol, and State 29 (emphasis in original) (quoting Folliard, 722 F. Supp. 2d at 27); Opp’n to
Pioneer, Edgewater, and Bass 29 (same). With respect to Defendants WAM, Uniquity, and PRC,
Relator argues that it has set forth sufficient facts to satisfy Rule 9(b) because “[neither] the
theory of fraudulent inducement nor the theory of false certification require Relator to plead the
contents of any particular claim for payment, as the focus is on Defendants’ fraud surrounding
any such claim, not the claim itself.” Opp’n to Alorica/GRSI, Uniquity, and PRC 16 (quoting
United States ex rel. Hendow v. Univ. of Phoenix, 461 F.3d , 1166, 1174 (9th Cir. 2006)). In
support of this argument, Relator generally cites back to—for each group of Defendants— its
factual allegations in the amended complaint, which it contends substantiate the alleged scheme
to claim small business subcontracting credit by falsely certifying that the subcontractor
defendant in each group was a small business.
40
Third, Relator argues that it has in fact established the “who” for its presentment and
false statement claims against each category of defendant because it is not alleging individual
fraud; rather, it is alleging that each of the entities committed “fraud at the corporate level.”
Opp’n to ConServe, Protocol, and State 28 (quoting Heath, 791 F.3d at 125); Opp’n to Pioneer,
Edgewater, and Bass 29 (same); Opp’n to Alorica/GRSI, Uniquity, and PRC 16 (same). PCA
Integrity argues that its factual allegations plausibly suggest such corporate-level malfeasance.
See Opp’n to ConServ, Protocol, and State 29 (“Relator has sufficiently alleged that Defendants’
claims were false because Defendants sought payments, including bonuses and additional task
orders, by falsely certifying that legitimate small businesses were providing subcontracting
services to the federal government.”); Opp’n to Pioneer, Edgewater, and Bass 29 (asserting that
Relator need not identify specific individuals at the companies to advance such a theory); Opp’n
to Alorica/GRSI, Uniquity, and PRC 16 (same).
Relator’s arguments fill many pages, yet on the facts presented, ultimately prove
unavailing on both the fraudulent inducement and implied certification fronts. To sustain either
of these claims, Rule 9(b) requires the pleader in an FCA fraud action to, “at a minimum, . . .
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 ‘individuals allegedly involved in
the fraud.’” Si II, 71 F. Supp. 3d at 85 (quoting Williams, 389 F.3d at 1256). Here, despite
Relator’s contrary contentions, PCA Integrity’s pleading does not establish with the requisite
particularity the time and place of the false misrepresentations, what constitutes the allegedly
false claim for each discrete defendant, and what, precisely, “was retained or given up as a
consequence of the fraud.” Williams, 389 F.3d at 1256. The Court next considers what, more
41
specifically, is lacking under the fraudulent inducement and implied false certification theories
that Relator advances.
a. Fraudulent Inducement Theory
Taking Relator’s fraudulent inducement theory claim first, PCA Integrity paints a general
picture of a scheme wherein a prime contractor defendant submitted a subcontracting agreement
that falsely represented an intention to subcontract with small businesses. See, e.g., Opp’n to
ConServe, Protocol, and State 26. Again, the fraudulent inducement theory imposes liability
“for each claim submitted to the Government under a contract which was procured by fraud,
even in the absence of evidence that the claims were fraudulent in themselves.” Tran, 53 F.
Supp. 3d 104, 117 (quoting Bettis, 393 F.3d at 1326) (citing S. Rep. No. 99–345, at 9 (1986),
reprinted in 1986 U.S.C.C.A.N. 5266, 5274).
In this case, the trouble for Relator is the failure to connect several critical dots in the
alleged scheme, leaving the Court unclear as to what, precisely, was allegedly actionably false
and/or fraudulent. The first fundamental issue involves the terms of the agreement with ED
under the operative task order. At bottom, PCA Integrity’s allegations turn on a direct link
between the subcontracting plan and the fraud, based on the terms of ED’s contract with the
prime contractors. But Realtor does not establish, with particularity, that any of the prime
contractors were required to hire any small businesses at all in order to obtain a contract with
ED. The closest Relator comes is the statement that “ED ultimately contracted with 22 PCAs: 17
large (‘unrestricted’) PCAs and five small (‘set-aside’) PCAs.” Compl. ¶ 52. The fact that ED
contracted with some small PCAs does little to advance PCA Integrity’s case, though. Missing
are any particularized factual allegations establishing that, without a given prime contractor’s
alleged fraudulent misrepresentation at the time of contracting that it would hire small
42
businesses, that prime contractor could not have received a contract with ED. And without more
specificity, Relator’s claims are easily distinguished from a case in which, say, a set-aside
contract was reserved exclusively for a small business enterprise and a company misrepresented
its size to obtain a fraudulently-induced contract.
Instead of directly pleading such factual allegations with respect to each prime contractor
defendant, Relator gestures towards Defendants’ incentive structures. See Am. Compl. ¶ 7
(“Under the ED PCA task orders at issue in this case, PCAs were incentivized to subcontract no
less than 10% of their work to small business concerns.”); id. ¶¶ 53–60 (describing incentives in
general terms). But if such an incentive structure forms the basis for the alleged fraud, a lack of
particularity again plagues PCA Integrity’s pleading. On the Court’s best read of the factual
allegations, Relator relies on the following causal chain: given that (1) “ED PCA contracts are
performance-based and highly competitive,” id. ¶ 52, and a contracting party can gain extra
points in the CPCS ranking system that ED uses to award bonuses and extensions, id. ¶¶ 53–54,
(2) the incentive of a five-point bonus awarded to “a PCA that satisfied ED’s small business
subcontracting target,” id. ¶ 55, (3) led the prime contractor defendants to misrepresent their size
in order to obtain the five-point bonus and thereby receive further awards or consideration, id. ¶¶
10–11. Beyond sketching out this alleged scheme at a high level, however, Relator never
indicates what particular preferences were given to each prime contractor defendant in return for
a promise to meet the subcontracting target. 21 Nor, assuming for the sake of argument that
certain (unspecified) preferences were awarded to certain (unspecified) Defendants, does Relator
21
Even for Defendant ConServe, which Relator alleges “received a two-year award
extension” as a result of its “false and/or fraudulent representations and conduct,” Am. Compl. ¶
11, PCA Integrity does not link ConServe’s alleged initial misrepresentation to the extension.
Without far more detail to suggest that ConsServe received a five-point bonus as a result of its
initial representation to ED with respect to Protocol, and that this added component of its CPCS
score led ED to extend its award, Relator has not satisfied its pleading burden.
43
indicate that an initial statement at the time that the subcontracting agreement was submitted was
the reason why those parties received those preferences. Without more, the Court is left in the
dark regarding how, exactly, the prime contractors’ initial agreements with ED represent
statements that fraudulently induced the government to pay out claims.
This issue is compounded by the utter lack of information about what promises, if any,
were made in the subcontracting plan that is at the core of Relator’s alleged scheme, and what
subsequent claims, if any, were purportedly false. The complaint never says anything at all
about the subcontracting plan beyond the bare fact that it was submitted to ED. This information
is lacking at even a high level, not to mention at the level of detail that Rule 9(b) demands. What
if, for instance, a prime contractor defendant initially promised a particular small business
subcontracting target of 10%, exceeded this pledge by subcontracting 20% of its overall business
to qualified small businesses, and then it turned out that a subcontractor accounting for 5% of
overall business was not in fact small—would this amount to fraud? And what is the response of
the relevant government entities (ED and the Small Business Administration) in the mine run of
cases? Relator does not say. Moreover, based on Relator’s pleading and taking as true the
allegation that the small business subcontracting targets were approximately 10% during the
relevant time period, Am. Compl. ¶ 55, it appears in most instances that the prime contractor
bills ED for work performed by subcontractors that are not small. Relator never explains
whether, after submission of the initial subcontracting plan, each prime contractor’s bills to ED
indicate that any of the subcontracted work was performed by any small businesses. But because
it has omitted any information on this point, Relator has failed to establish that any such claims
are, in fact, false at all. Without far more facts concerning the subcontracting plan and promises
made therein, subsequent billing submissions for each prime contractor, and any rewards a
44
contractor received as a result of meeting or exceeding the goals set forth in the initial
subcontracting plan, the Court cannot determine what, if anything, provides the legal foundation
for Relator’s allegations of falsity under its fraudulent inducement theory of relief.
Thus, the Court is left without any factual allegations to support the contention that
ConServe, Pioneer, or WAM, respectively, acted fraudulently or violated an applicable
regulation at the time of submission of the purportedly false claim. See ConServe Mem. 2
(explaining that Relator has failed to establish that ConServe knew that Protocol was not a
qualifying small business at the time it submitted the subcontracting plan); Def. Pioneer’s Reply
Supporting Mot. Dismiss (“Pioneer Reply”) 7, ECF No. 106 (explaining that Pioneer cannot
possibly have made a fraudulent inducement by submitting a small business subcontracting plan
in 2008 when it did not learn that Bass no longer qualified until 2009 or 2010); Alorica/GRSI
Reply 10 (explaining that Uniquity did not exist until 2011, two years after the original 2009 ED
task order). In fact, without knowing what the prime contractors promised at the inception, it is
impossible to infer that any false claims were made at any point. Accordingly, PCA Integrity has
not set forth a plausible claim for relief under a fraudulent inducement theory of liability—let
alone a claim sufficient to meet Rule 9(b)’s heightened pleading standard.
b. Implied False Certification Theory
Turning now to PCA Integrity’s implied false certification theory of liability, such a
theory applies when an entity has made “a false representation of compliance with an applicable
federal statute, federal regulation, or contractual term.” Comstor, 308 F. Supp. 3d at 79 (quoting
United States ex rel. McBride v. Halliburton Co. (McBride), 848 F.3d 1027, 1031 (D.C. Cir.
2017)); see also SAIC, 626 F.3d at 1266.
45
Here, Relator’s arguments fall short because Relator misrepresents and muddles what is
required to allege a cognizable claim under controlling law. Even if Relator does not need to
“allege the existence of a request for payment for particularity,” PCA Integrity must plead with
particularity “the circumstances constituting fraud.” Folliard, 722 F. Supp. 2d at 26–27
(emphasis removed) (first quoting United States ex rel. Davis v. District of Columbia, 591
F. Supp. 2d 30, 37 (D.D.C. 2008), then quoting Fed. R. Civ. P. 9(b)). And again, this pleading
must satisfy the Rule 9(b) particularity standard by providing each Defendant with “notice of the
who, what, when, where, and how with respect to the circumstances of the fraud.” Tran, 53 F.
Supp. 3d at 123. Without these details, pled with the particularity that Rule 9(b) requires, the
Court cannot determine whether liability for fraudulent claims for payment properly attaches.
For the following reasons, PCA Integrity has not said enough to establish a claim for relief. 22
The core deficiency is straightforward: the face of the pleading does not establish
“where” or “when” the allegedly false claims occurred. For prime contractor defendants
ConServe, Pioneer, and WAM, the only indication of “where” requires multiple levels of
inference to discern that misleading or fraudulent statements were submitted to ED as part of
small business subcontracting plans, ostensibly in Washington, DC (though this is left implicit in
the amended complaint). Am. Compl. ¶¶ 132–36 (discussing ConServe); 195–99 (discussing
WAM); 237–42 (discussing Pioneer). No additional detail is provided that could elucidate the
location of these submissions or any other fraudulent claims or misrepresentations made or
caused to be made by the prime contractor defendants. Relator’s opposition briefs do not,
moreover, connect up other factual allegations to the subcontracting plans. As the Court just
discussed, Relator says next to nothing at all about the subcontracting plans or the promises
22
As noted previously, Relator must also establish materiality with the particularity
required to satisfy Rule 9(b). The Court discusses materiality infra Section IV.C.2.
46
allegedly contained therein. Instead, Relator again insists that PCA Integrity need not identify
any specific false claims for payment to survive Defendants’ motions to dismiss. See Opp’n to
ConServe, Protocol, and State 28; Opp’n to Pioneer, Edgewater, and Bass 28; Opp’n to
Alorica/GRSI, Uniquity, and PRC 16. Without more to identify the circumstances concerning
the alleged fraud, however, all that the Court has are legal conclusions couched as factual
allegations—far short of what Rule 12(b)(6), let alone Rule 9(b), demands. See Twombly, 550
U.S. at 555.
This lack of clarity concerning what, exactly, the prime contractors are alleged to have
done, and where they did it, is especially problematic because PCA Integrity also fails to clarify
when the actions occurred. Relator states that ED issued the original PCA solicitation on May
29, 2008, Am. Compl. ¶ 52, that interested companies submitted proposals by June 26, 2008, id.
and that “[t]he first transfer of accounts under this contract occurred in the first quarter of 2009,”
id., with the task orders pertaining to unrestricted PCAs concluded in late April 2015, id. ¶ 60.
Left unsaid, however, is when the subcontracting plan was submitted and when, if ever, the
prime contractor defendants made any further fraudulent misrepresentations. This specificity
concerning the circumstances of the alleged fraud is essential because the FCA “attaches
liability, not to underlying fraudulent activity, but to the claim for payment.” Totten I, 286 F.3d
at 551 (internal quotation marks and citation omitted) (quoting United States ex rel. Hopper v.
Anton, 91 F.3d 1261, 1266 (9th Cir. 1996)). The Court can vaguely infer, based on the alleged
facts, that they must have been submitted at some point between June 2008 (when ED issued its
solicitation) and the first quarter of 2009 (when the first transfer occurred); if not, then
ostensibly, the first transfer would not have taken place. But Rule 9(b) requires more than such
47
attenuated inferences. Because Relator has failed to provide more for the prime contractor
defendants, its pleading does not clear the particularity bar. 23
Though Relator offers comparatively more for the subcontractor defendants, PCA
Integrity’s pleading still comes up short. For the subcontractor defendants, Relator’s implied
certification theory rests on the assertion that “each Subcontractor defendant self-certified that it
was a small business in order to gain subcontract opportunities.” Am. Compl. ¶ 15. Consider,
by way of example, Defendant Protocol. PCA Integrity alleges that Protocol submitted annual
self-certifications to the SBA attesting to its small business status and last submitted a
certification in 2014, id. ¶ 186–87, yet Relator does not offer any additional discussion of the
self-certifications. PCA Integrity defends its factual allegations as sufficient, contending that this
suit is distinct from those such as Si II, wherein the “plaintiff was unable to identify any details
about the contents of certification.” Opp’n to ConServe, Protocol, and State 36 (citing 71 F.
Supp. 3d at 94). “In contrast,” Relator argues, “the Amended Complaint alleges numerous times
that Protocol’s self-certification contained the false representation that it was both a small
business and a WOSB,” such as the August 2011 statement by Protocol’s Tracy Dudek assuring
“ConServe that Protocol was registered in the government database as a self-certified small
business.” Id. (citing Am. Compl. ¶¶ 179, 186–88).
But for Protocol and for all of the subcontractor defendants, PCA Integrity’s analysis
speeds right past the operative legal principle: the need to plead, with particularity, the
23
Moreover, as the Court suggested previously and discusses with respect to the public
disclosure bar infra Part IV.E, the specific timing is even more important here because of
intervening changes in the underlying substantive law. Without clarity about the alleged dates of
the conduct, Defendants are left without the ability to discern which legal standards govern
Relator’s allegations. Cf. Si II, 71 F. Supp. 3d at 85 (quoting McCready, 251 F. Supp. 2d at 116)
(noting that Rule 9(b)’s application in FCA suits “ensure[s] that defendants have adequate notice
of the charges against them to prepare a defense”).
48
circumstances surrounding false claims that the Defendant made or caused to be made to the
government. Relator repeatedly insists that it has provided what Rule 9(b) demands, reiterating
versions of the theory that this Court “should ‘hesitate to dismiss’” its “complaint under Rule
9(b)” if it “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.” Opp’n to ConServe, Protocol, and State 7 (quoting Kane,
798 F. Supp. 2d at 193); see id. at 6–8; Opp’n to Alorica/GRSI, Uniquity, and PRC 15 n.6
(“[T]his Circuit has made clear that . . . [the relator] is not required ‘to plead representative
samples of the claims actually submitted to the government.’” (quoting Heath, 791 F.3d at 126)).
But Relator is mistaken: information about the particular circumstances at issue is lacking here.
Consider Protocol once more, by way of example. PCA Integrity never explains, let alone with
any particularity, how the 2011 statement, the 2014 certification, or any other alleged self-
certification meant that either Protocol or any other subcontractor defendant “knowingly
present[ed], or cause[d] to be presented, a false or fraudulent claim for payment or approval,” in
contravention of 31 U.S.C. § 3729(a)(1)(A) (emphasis added). If, as explained above, PCA
Integrity has failed to indicate which, if any, of the contractor defendants’ claims for payment
were false, it has likewise failed to show how the subcontractor defendants caused false claims to
be presented by the contractor defendants (PCA Integrity does not seem to allege that the
subcontractor defendants themselves submitted any claims for payment to ED).
Nor does PCA Integrity explain, with particularity, how the alleged self-certifications
indicate that the subcontractor defendants “knowingly ma[de], use[d], or cause[d] to be made or
used, a false record or statement material to a false or fraudulent claim,” in violation of 31 U.S.C.
§ 3729(a)(1)(B). On the Court’s best read of the sprawling amended complaint and subsequent
49
filings, Relator’s theory appears to be that each of the subcontractors made fraudulent self-
certifications because the subcontractors knew at the time of the self-certifications that they did
not comply with the controlling size rules for small businesses, yet represented that they did.
See, e.g., Am. Compl. ¶¶ 133 (discussing Protocol’s “false misrepresentations” that it was an
eligible small business), 184–89 (discussing Protocol’s self-certifications that it was a small
business despite its relationship with State). But the pages that all parties fill addressing possible
affiliation are a sideshow in this context. 24 The salient and antecedent Rule 9(b) point is that
Relator has not discussed the purported self-certifications themselves with adequate particularity,
especially when it comes to specifying the timing of each (which matters all the more because
the underlying NCAIS size threshold changed over time). What information did each self-
certification contain, and which aspects of it, specifically, were false? And how did the
subcontractors’ self-certifications relate to the claims for payment made by the contractors to
ED? Once again, Relator does not specify. Nor does PCA Integrity identify, beyond mentioning
24
The Court does not imply that the substantial ink spilled by Relator and Defendants
alike in addressing affiliation is unimportant in the final disposition of the suit. However, at this
juncture, it is not necessary to address these points because there is an even more basic problem:
the lack of required specificity concerning the allegedly fraudulent circumstances under which
the affiliation arguments arise. By way of analogy, if one seeks to determine whether or not a
description of the sun as dim has enough particularity to conclude that it refers to dawn and not
dusk, then it would be premature to engage in a fact-intensive inquiry to determine whether 5:00
and 8:45 AM are both early morning hours. Here, the Court finds there to be a lack of
particularity concerning the first issue: whether the facts allege, to the degree required by the
applicable pleading standard, enough about the basic conditions to discern whether it is dawn or
dusk. For the reasons articulated at length in the body of this memorandum opinion, Relator has
not done so. PCA Integrity does not substantiate its claims with concrete, factual allegations that
establish organization-wide actions taken to execute the alleged fraud within each defendant
entity, ideally connecting these allegations to one or two examples of a claim that the defendant
submitted, stated, or caused to be submitted or stated. See Heath, 791 F.3d at 126 (finding
pleading adequate where plaintiff did not identify details about specific payments, but did
“provide[] factual specificity concerning the type of fraud, how it was implemented, and the
training materials used, all of which [wa]s then corroborated by the concrete example of . . . [a]
Detroit audit documenting the very type of overbilling that follows the complaint’s pattern”).
Until this pleading requirement is satisfied, the Court reserves judgment concerning affiliation.
50
self-certifications and making vague references to the prime contractors’ associated “requests for
payment,” id. ¶ 193, any other allegedly problematic claims on which its implied false
certification theory rests, not to mention any indication of “substantial prediscovery evidence” of
facts, Kane, 798 F. Supp. 2d at 193, to substantiate any such allegations.
The lack of adequate factual allegations to satisfy Rule 9(b), moreover, do not end there.
By way of further illustration, consider Edgewater. For this subcontractor, Relator again relies
on the same conclusory legal assertions to back up its factual allegations, without even
attempting to connect the dots between the facts in the pleading and the alleged false claims. See
Opp’n to Pioneer, Edgewater, and Bass 28–29. These bare conclusory statements do not suffice
to establish how Edgewater made “claims under a contract while ‘withh[olding] information
about its noncompliance with material contractual requirements.’” Morsell, 130 F. Supp. 3d at
119 (quoting SAIC, 626 F.3d at 1269). Accordingly, without more specification regarding each
of the alleged self-certifications, when it was made, what discrete issue or issues each
problematic self-certification misrepresented, and what relationship such alleged
misrepresentation had to the claims for payment submitted by the contractor defendants, Relator
has not discharged its pleading burden for Protocol, Edgewater, or Uniquity.
Versions of these same issues recur, moreover, for the allegedly-affiliated defendants.
For example, consider Bass. Relator states a number of factual allegations—but not one of them
clarifies how, on PCA Integrity’s theory, Bass made claims to the government at all, or how it
caused Pioneer to submit false claims for payment to ED. As Bass puts the point, “Relator has
not identified a single false claim, nor any particular false invoice, nor any particular false
amount,” nor “the date on which any supposed false claim was submitted to the U.S.
government, who it was submitted by, or who caused it to be submitted.” Bass Mot. 6. This
51
omission is fatal to Relator’s allegations. And it recurs for every one of the allegedly-affiliated
defendants. Under this Circuit’s controlling law, an “‘implied false certification’ occurs ‘[w]hen
. . . a defendant makes representations in submitting a claim but omits its violations of statutory,
regulatory, or contractual requirements.” McBride, 848 F.3d at 1031 (alteration in original)
(emphasis added) (quoting Universal Health Services, 136 S. Ct. at 1999); see also Comstor, 308
F. Supp. 3d at 79. Without any facts alleging how any allegedly-affiliated defendant submitted
a claim or caused such a claim to be submitted, Relator has not established a plausible claim for
relief as required by Rule 12(b)(6) or Rule 9(b). 25
2. Failure to Plead Facts Sufficient to Meet the FCA’s Materiality Standard
Relator’s claim also falls short because the pleading does not establish the FCA’s
requirement of materiality with the particularity that Rule 9(b) demands. 26 See Universal Health
Services, 136 S. Ct. at 2004 n.6. In approaching this issue, the Court bears in mind the need to
police the materiality requirement “rigorously.” McBride, 848 F.3d at 1031 (quoting SAIC, 626
25
Given these glaring deficiencies and the lack of required detail concerning materiality,
which the Court discusses next, the Court need not consider Defendants’ arguments that Relator
does not make sufficiently clear “who” is behind the alleged fraud to conclude that PCA
Integrity has not stated, with particularity, its claims for relief. That said, should Relator file an
amended complaint, it should take care to specify how each entity institutionalized a unified
scheme in which “corporate levers were pulled,” Heath, 791 F.3d at 125, to perpetrate the
alleged fraudulent conduct. This specificity should detail both (1) which individuals took action
within each distinct corporate entity, and how these actions relate to the particular allegations of
fraud, and (2) which factual allegations relate to which charges against which Defendant(s),
rather than incorporating all facts by reference with respect to all Defendants.
26
As the Court discusses, the parties rely extensively on Universal Health Services, 136
S. Ct. 1989, in raising materiality arguments. In Universal Health Services, the Supreme Court
assumed that the post-FERA version of the law applied, notwithstanding the fact that some of the
claims at issue were submitted before the 2009 amendment to the FCA. Id. at 1998 n.1. In
McBride, this Circuit addressed claims brought under the pre-FERA version of the FCA and
assumed, as the parties had done, that the same standard articulated in Universal Health Services
applied to the dispute at hand. 848 F.3d at 1031 n.5. Here, as in McBride, the parties do not
argue that the Universal Health Services standard does not apply to any disputed conduct. Thus,
the Court assumes that the materiality requirements are the same under either the pre- and post-
FERA versions of the statute.
52
F.3d at 1271); Universal Health Services, 136 S. Ct. at 2002 (quoting SAIC, 626 F.3d at 1270)
(emphasizing, particularly in the context of implied certification theories of liability, the need for
“strict enforcement of the Act’s materiality requirements”). For the forthcoming reasons, the
deficiencies concerning materiality present another reason to dismiss Relator’s claims. Because
of the fact-bound nature of the demanding materiality inquiry, cf. Universal Health Services, 136
S. Ct. at 2004 n.6, the Court’s discussion focuses on two Defendants, Uniquity and PRC. That
said, the discussion of these parties should not be taken as a sign that the pleading passes muster
with respect to the other Defendants. To the contrary, the issues discussed apply more generally,
too, and the pleading falters on materiality grounds for all Defendants.
a. Defendant Uniquity
The parties clash over the proper application of the Supreme Court’s Universal Health
Services precedent, with each contending that it should clearly prevail on a proper application of
controlling law. The Universal Health Services Court affirmed that “the implied false
certification theory can be a basis for liability . . . when the defendant submits a claim for
payment that makes specific representations about the goods or services provided, but knowingly
fails to disclose the defendant’s noncompliance with a statutory, regulatory, or contractual
requirement[] [and] . . . the omission renders those representations misleading.” 136 S. Ct. at
1995. It further clarified that whether the legal requirements at issue were “expressly designated
as conditions of payment” is not dispositive in any consideration of materiality. Id. at 1996.
Rather, under the “demanding” materiality standard, “proof of materiality can include, but is not
necessarily limited to, evidence that the defendant knows that the Government consistently
refuses to pay claims in the mine run of cases based on noncompliance with the particular
statutory, regulatory, or contractual requirement.” Id. at 2003. Extrapolating from this principle,
53
the converse applies with equal force: the government’s payment of “a particular claim in full
despite its actual knowledge that certain requirements were violated” provides “very strong
evidence that those requirements are not material,” as does regular payment of “a particular type
of claim in full despite actual knowledge that certain requirements were violated,” without
signaling any “change in position.” Id. at 2003–04.
Relying heavily on this precedent, Uniquity argues that PCA Integrity has failed to “plead
that the false self-certification” representing its size, which it most recently submitted in 2013,
Am. Compl. ¶ 230, 27 “was material to the government’s decision to make payments under the
[ED] subcontract.” Def. Uniquity’s Mem. P. & A. Supporting Mot. Dismiss (“Uniquity Mem.”)
14, ECF No. 89-1. More specifically, Uniquity asserts that Relator has failed to (1) plead “any
express provision as a condition of payment;” id.; (2) establish that the government declines to
pay claims for a self-certification violation of the type alleged, id. at 15; (3) say anything about
“[w]hether the . . . [government] paid Uniquity despite knowing” the alleged facts, id. at 16; or
(4) indicate any change in government position during the nearly four years that the action has
been pending, id. at 17.
Relator, unsurprisingly, sees materiality rather differently. See, e.g., Opp’n to
Alorica/GRSI, Uniquity, and PRC 17–25. At the outset, PCA Integrity stresses that the
materiality inquiry asks “whether the conduct has ‘a natural tendency to influence, or [is] capable
of influencing, the payment or receipt of money or property,” id. at 17 (quoting Universal Health
Services, 136 S. Ct. at 2002). This standard, Relator asserts, is “far lower than but-for causation,
27
The Court takes the factual allegations in the amended complaint to be true and thus
accepts the statement that Uniquity, at a minimum, submitted an annual self-certification in
2013. Am. Compl. ¶ 230. However, because Relator refers to “self-certifications,” id. ¶ 231,
without stating the years of these submissions, the Court is left uncertain as to whether Relator
alleges self-certifications in other years.
54
or even a preponderance of the evidence that the government’s decision to pay would be
different.” Id. at 18. After recounting the Universal Health Services factors and noting that a
court is to consider whether “the requirements at issue go to ‘the very essence of the bargain’”
along with the other enumerated factors as part of a “holistic approach to determining
materiality,” PCA Integrity argues that all of the factors cut in its favor. Id. (first quoting
Universal Health Services, 136 S. Ct. at 2003 n.5, then quoting Comstor, 308 F. Supp. 3d at 85).
Relator builds up this holistic case in several parts. First, Relator highlights the factual
allegation “that the contracts at issue state that a . . . subcontractor’s failure to comply in good
faith with a subcontracting plan . . . constitutes a ‘material breach of the contract.” Id. at 18–19
(quoting Am. Compl. ¶ 80). Second, Relator points to the further factual allegation “that, in
2018, ED canceled the procurement at issue, ‘in part because it had learned of Defendants’
widespread small business fraud that had tainted its original task orders.’” Id. at 19 (quoting
Am. Compl. ¶ 62). Third, Relator contends that these “small-business subcontracting
requirements went to the heart of the bargain” because compliance with them “was the sole
factor in determining whether Defendants were entitled to incentive payments” and the
subcontracting plans “are material parts of the contracts at issue.” Id. Finally, Relator
distinguishes its suit from those that have assessed government knowledge by disputing that the
government “has ever had actual knowledge of Defendants’ wrongdoing,” as opposed to “mere
allegations of wrongdoing.” Id. at 19, 22–23. Relator adds, moreover, that the government’s
decision not to intervene is “irrelevant” to the materiality inquiry. Id. at 22.
Despite Relator’s multiple pages of arguments, Defendants have the upper hand in the
materiality debate. The basic problem is that, yet again, Relator fails to provide factual
allegations to substantiate what, precisely, about the alleged conduct of the prime contractor and
55
subcontractor is “material” in the sense contemplated by the FCA. Even taking the factual
allegations in Relator’s pleading to be true, and even accepting that a subcontracting plan by a
prime contractor (such as WAM) that is never described in any detail implicates a subcontractor
(such as Uniquity) in some fashion, it remains unclear how a “material breach of” the
subcontracting plan that was incorporated into ED’s contract with the prime contractor, see
Opp’n to Alorica/GRSI, Uniquity, and PRC 18–19, amounts to a condition of payment for the
subcontractor. Relator does not connect these dots, nor does it explain with any specificity how
the subcontractor self-certifications were a “misrepresentation” that was “material” to ED’s
“course of action.” Universal Health Services, 136 S. Ct. at 2001. Instead, PCA Integrity
reasserts the same theory of liability, devoid of factual particulars: it is not claiming that the
subcontractor is “subject to liability merely for violating any statutory or regulatory provision,”
but rather “alleg[ing] that Defendants fraudulently induced the government to enter into contracts
based on their misrepresentations regarding the subcontractor’s size, and that Defendants falsely
certified that they had complied with certain contractual and legal requirements.” 28 Opp’n to
Alorica/GRSI, Uniquity, and PRC 23–24. Without more, PCA Integrity’s claims amount to little
more than the sort of “[t]hreadbare recitals of the elements of a cause of action, supported by
mere conclusory statements,” that are insufficient to survive a motion to dismiss. Iqbal, 556 U.S.
at 678.
Additionally, Relator does not allege that the government “consistently refuses to pay
claims in the mine run of cases based on noncompliance with the particular statutory, regulatory,
or contractual requirement.” Universal Health Services, 136 S. Ct. at 2003. There are no factual
28
Relator’s use of “Defendants,” rather than targeted reference to facts and claims that
involve Defendant Uniquity, underscores the issue. Relator does not clarify, here or elsewhere,
how the fraudulent inducement argument that its pleading applied to the prime contractor
defendants would be salient with respect to the other categories of defendants.
56
allegations from which to draw the conclusion that the government has declined to pay this
category of claim after evidence of noncompliance, nor is there any indication that any specific
claims caused to be submitted by Uniquity or by any other subcontractor defendant were not paid
in full despite alleged noncompliance with an (unspecified) express or implicit legal requirement
imposed on WAM or on any other contractor defendant. 29 Rather than present such factual
allegations, PCA Integrity appears to contend that such factual substantiation does not exist here
because the government did not ever possess “actual knowledge of Defendants’ wrongdoing.”
Opp’n to Alorica/GRSI, Uniquity, and PRC 22. In other words, on the Court’s best read of
Relator’s argument, PCA Integrity asserts that it could not possibly provide factual allegations
that the government has not paid “claims in the mine run of cases based on noncompliance,”
Universal Health Services, 136 S. Ct. at 2003, because the government would have needed to
actually have known about Defendants’ wrongdoing, and here, the government only had “mere
allegations” of noncompliance. Id. (“[M]ere awareness of allegations concerning noncompliance
. . . is different from knowledge of actual noncompliance.” (quoting Universal Health Servs. v.
Escobar, 842 F.3d 103, 112 (1st Cir. 2016) (emphasis removed) (on remand from Supreme
Court))). Putting to the side the fact that Relator does not cite a single in-circuit case to support
this “actual knowledge” standard, see id. at 22–23, PCA Integrity’s actual knowledge argument
29
In addressing this point, the Court notes that Uniquity’s briefings refer to the Small
Business Association and not to ED or to the government more generally. Relator raises a valid
point by pushing back on Uniquity’s reliance on the Small Business Association’s relevance
here; as PCA Integrity rightly observes, “ED, not the SBA, issued the task orders at issue and
paid Defendants,” making it the relevant contracting agency. Opp’n to Alorica/GRSI, Uniquity,
and PRC 25. But even without taking any of Uniquity’s arguments concerning the Small
Business Association into account, Relator fails to provide any factual allegations to suggest that
ED “consistently refuses to pay claims in the mine run of cases based on noncompliance with the
particular statutory, regulatory, or contractual requirement.” Universal Health Services, 136 S.
Ct. at 2003. Combined with the other gaps identified here, this lack of substantiating facts means
that Relator does not establish the materiality required to make out a claim for relief.
57
betrays a subtle skewing of Universal Health Services’s directives. The point is not that the
government necessarily needed to have actual knowledge of alleged wrongdoing, but rather that
factual allegations indicating that “‘the Government pays [or refuses to pay] a particular claim in
full despite its actual knowledge that certain requirements were violated,’ or ‘regularly pays [or
refuses to pay] a particular type of claim in full despite actual knowledge that certain
requirements were violated,’” can speak to “the materiality of ‘the particular statutory,
regulatory, or contractual requirement’ underlying the relator’s claims.” Comstor, 308 F. Supp.
3d at 87 (quoting Universal Health Services, 136 S. Ct. at 2003–04). These considerations are
part of the holistic analysis. Rather than provide factual allegations as part of this holistic
analysis, though, Relator invokes its “actual knowledge” argument—which, as the Court just
discussed, falls flat.
Thus, the bottom line is that Relator has not provided particularized factual allegations
regarding the indicia of materiality. The issues include, but are not limited to, the lack of
specific support regarding the government’s non-payment of similar claims and the lack of
clarity concerning what Uniquity’s “express condition of payment” is in the first instance. Even
taking as true Relator’s allegation that ED cancelled contracts in 2018 based in part on the “taint”
of the type of conduct alleged here, this stand-alone, bald allegation does not provide factual
support to clarify what acts or omissions by Uniquity were likely to have led the government to
refuse to pay Uniquity (or WAM) under the original ED contract. Accordingly, Relator has
failed to provide enough to establish materiality under the FCA’s demanding standard for this
element of a claim for relief.
58
b. Defendant PRC
By way of further illustration, substantially the same is true for allegedly-affiliated
defendant PRC (and for all of the other allegedly-affiliated defendants, as this Court noted
previously). PRC raises a series of discrete points to argue that Relator’s pleading lacks the
requisite factual allegations to establish materiality. PRC argues, specifically, that Relator fails
to provide any factual allegations to establish (1) how “Uniquity’s misrepresented self-
certifications resulted in monies paid that the government would not have paid had the
misrepresentations been known,” Def. PRC’s Mem. P. & A. Supporting Mot. Dismiss (“PRC
Mem.”) 33 (citing Am. Compl. ¶¶ 231–32), ECF No. 79-1; (2) why the government would have
cared about the alleged misrepresentation so long as the collections were performed, given that
the contracted services at issue were “performance based,” id. (quoting Am. Compl. ¶ 53); (3)
that “Uniquity was the only small business concern subcontracted by [WAM] to provide
services,” such that WAM violated anything in its subcontracting terms,” or that WAM was even
contractually bound to contract with any small businesses at all, id. at 34; and (4) that “Uniquity
would not have received the subcontract were it not a small business concern,” id. Rather than
directly engage with any of these contentions, Relator once more offers conclusory statements
that these assertions are not appropriate considerations for a materiality analysis at the motion to
dismiss stage. See Opp’n to Alorica/GRSI, Uniquity, and PRC 24 (“To the extent these
arguments are relevant, they go to the issue of damages, not materiality.”); id. (“This contention
merely disputes the allegations set forth in the Amended Complaint, which is inappropriate on a
motion to dismiss.”).
But Relator’s attempt to write off these allegations as unsuitable at this procedural stage
is contrary to controlling law. The materiality inquiry is not merely suitable for disposition at
59
this stage; it is in fact a required part of the Court’s analysis of whether Relator has stated a claim
for relief under the FCA. Universal Health Services, 136 S. Ct. at 2004 n.6 (“False Claims Act
plaintiffs must also plead their claims with plausibility and particularity under Federal Rules of
Civil Procedure 8 and 9(b) by, for instance, pleading facts to support allegations of materiality.”).
Despite Relator’s contentions, the issue facing the Court is not whether the specific factual
allegations are true. Rather, what this Court must determine is whether there are any factual
allegations sufficient to suggest that the alleged misrepresentation was material in the sense that
it would have affected the government’s decision to pay PRC (or WAM). As discussed
previously, Relator has not provided sufficient factual allegations, and PCA Integrity’s
conclusory assertion that the bare pleading suffices to establish materiality is unavailing.
In addition, the pleading also fails to provide factual allegations that speak to the final
Universal Health Services factor: whether the government “regularly pays a particular type of
claim in full despite actual knowledge that certain requirements were violated.” 136 S. Ct. at
2003–04. In fact, the filings before the Court suggest that this factor cuts against Relator. As
PCA points out, the Small Business Administration has stated in the Federal Register that, out of
137 firms that misrepresented themselves as “being small for purposes of federal procurement
opportunities,” it was “unaware of any firms being penalized” under the relevant statute—15
U.S.C. § 645(d)—for this “fraudulent[] misrepresentati[on].” PRC Mem. 34–35 (quoting 80 FR
7533-01, 735 (2015)) (emphasis removed). As PRC explains, citing to Relator’s pleading, the
clearest basis for Relator’s allegations concerning “the illegality and seriousness of submitting
false certifications is premised upon 15 U.S.C. § 645.” PRC Reply Supporting Mot. Dismiss 11,
ECF No. 107 (citing Am. Compl. ¶¶ 79, 122, 123, 229). Logically, if the government has not
penalized firms for violations of this requirement, then it follows that it paid the firms despite
60
their fraudulent misrepresentations and did not consider these misrepresentations material. See
PRC Mem. 35. PCA Integrity never responds to this point at all, instead contending that the very
invocation of the Small Business Administration is a red herring. Opp’n to Alorica/GRSI,
Uniquity, and PRC 25.
The Court disagrees with Relator’s stance and finds this reference to the Federal Register
illuminating. 30 It seems unlikely that the government lacked actual knowledge of fraudulent
misrepresentations in all 137 of the instances that the Small Business Administration references.
And if the government has regularly proceeded in normal business relations with companies that
made misrepresentations under the same statutory provision that Relator invokes here to
establish the liability of the subcontractor and allegedly-affiliated defendants, then there is no
reason to believe that it would have modified its business relations with PRC (or the other
Defendants) under that same provision. In fact, there is no evidence that ED has done anything
with respect to the allegations in this case since they were first raised in 2015. 31 Thus, because
Relator has failed to address this point or to provide other factual allegations that specifically
pertain to either Defendant PRC or to any of the other Defendants, it has failed to establish
materiality here.
Given this failure to establish materiality and the pleading deficiencies identified
previously, the Court concludes that Relator has not made out a claim for relief that satisfies
30
The Court takes judicial notice of the Federal Register as a publicly-available
document. See Fed. R. Evid. 201(b).
31
Although Relator correctly indicates that there are many reasons that the Department of
Justice may or may not decide to pursue a qui tam suit, the allegations raised herein were
investigated, in part, by the Department of Education Office of General Counsel (a fact of which
Relator’s counsel is well aware, given his intimate involvement in the government’s
investigation). There is no indication that ED has taken any action, contractually,
administratively, or otherwise, as a result of the investigation.
61
Rule 12(b)(6) and Rule 9(b) for any of the Defendants with respect to its presentment and false
statement claims (Count I and Count II). 32
D. Reverse False Claim
As previously mentioned, in addition to its presentment and false statement claims,
Relator alleges that the named Defendants, as well as the John Doe Defendants, violated another
provision of the False Claims Act: the “reverse” false claims provision, codified as amended at
31 U.S.C. § 3729(a)(1)(G). Drawing on all the factual allegations in its pleading, Relator
contends that “Defendants knowingly avoided or decreased their obligation to pay or transmit
money to the government.” Am. Compl. ¶ 337. PCA Integrity alleges that, “[s]pecifically,
Defendants: (i) made, used, or caused to be made or used, records or statements to conceal,
avoid, or decrease obligations to the United States; (ii) the records or statements were in fact
false; and (iii) it knew the records or statements were false.” 33 Id. According to Relator, because
“the Amended Complaint specifically alleges facts that identify Defendants’ obligation to pay
various penalties arising from both federal and SBA regulations,” Opp’n to ConServe, Protocol,
and State 41; Opp’n to Pioneer, Edgewater, and Bass 35; Opp’n to Alorica/GRSI, Uniquity, and
PRC 42, and because the expanded definition of “obligation” under the post-FERA amendments
to the reverse claims provision sweeps in Defendants’ conduct, Opp’n to ConServe, Protocol,
and State 42; Opp’n to Pioneer, Edgewater, and Bass 35; Opp’n to Alorica/GRSI, Uniquity, and
32
Again, because of the fact-bound nature of the demanding materiality inquiry, cf.
Universal Health Services, 136 S. Ct. at 2004 n.6, the Court’s analysis has focused on Uniquity
and PRC to highlight concrete examples of the materiality deficiencies that plague Relator’s
pleading without filling pages with additional extremely similar descriptions of problems.
33
The Court is uncertain as to the antecedent for “it” in this sentence, since the preceding
noun is “Defendants” and Relator does not indicate which facts pertain to which Defendant(s) in
support of this claim.
62
PRC 42, Defendants are also liable under this provision of the FCA. 34 The core point is that,
under this theory of liability, Defendants have an “obligation to pay the government” that “arises
from contractual, statutory, and regulatory requirements,” Opp’n to ConServe, Protocol, and
State 41; Opp’n to Pioneer, Edgewater, and Bass 34; Opp’n to Alorica/GRSI, Uniquity, and PRC
41, even if those obligations involve the same alleged misrepresentations and/or other fraudulent
conduct that Relator alleges amount to violations of the 31 U.S.C. § 3729(a)(1)(A) and (B).
Defendants argue that, notwithstanding PCA’s purported specificity, Relator has failed to
allege any facts that support the elements of this claim. The crux of Defendants’ argument is that
the same conduct that creates liability under the other provisions of the FCA cannot also create
an actionable obligation under the reverse false claims provision. See ConServe Mem. 42
(“Relator has failed to identify any specific obligation by ConServe to pay the government.”);
Protocol Mem. 30 (“The Amended Complaint [f]ails [t]o [a]llege [a]ny [o]bligation to [p]ay the
[g]overnment in [s]upport of its [t]hreadbare [r]everse FCA [c]laim.”); State Mem. 32 (arguing
that Relator has failed “to state, with particularity or otherwise, any facts that would impose
liability for a reverse false claim”); Pioneer Mem. 35 (“Relator alleges no facts indicating that
Pioneer had a payment obligation to the U.S. Government, let alone that Pioneer somehow
fraudulently avoided such an obligation.”); Edgewater Mem. 20 (noting lack of factual
34
Relator’s Count IV contends that, to the extent wrongdoing occurred prior to May 20,
2009, th[e] Amended Complaint should be deemed to include violations of the “pre-FERA FCA,
e.g., 31 U.S.C. § 3729(a)(7) (2006).” Am. Compl. 86 n.11. However, Relator’s opposition
offers no arguments whatsoever to explain how the alleged facts are actionable under the pre-
FERA version of the reverse false claims provision, nor does Relator at any point challenge the
fact that Defendants appear to address the post-FERA version of this provision. See, e.g.,
Alorica/GRSI Mem. 23 (explicitly referencing only post-FERA version of claim). Thus,
following the parties’ lead in their briefings, the Court assumes arguendo that only the post-
FERA version of the statute is salient in considering the alleged conduct. In any event, because
this amended provision sweeps in more conduct, if the allegations fail under this standard, they
would also fall short under the earlier standard.
63
allegations concerning Edgewater and stating that “money obtained by the defendants
fraudulently,” in violation of another FCA provision, cannot form basis of obligation for reverse
false claim action); Bass Mem. 13 (“[T]here is no allegation that Bass owed money to the
government.”); Alorica/GRSI Mem. 23 (“The [r]everse FCA [c]laim [l]acks [r]equired
[p]articularity.”); PRC Mem. 9 (“Relator offers no facts supporting a § 3729(a)(1)(G) claim, i.e.
Count IV (the ‘reverse false claim’).”). For the following reasons, the Court grants Defendants’
motions to dismiss this claim.
A reverse false claim is one that “results in no payment to the government when a
payment is obligated.” Hoyte v. Am. Nat’l Red Cross, 518 F.3d 61, 63 n.1 (D.C. Cir. 2008)
(quoting United States ex rel. Bain v. Ga. Gulf Corp., 386 F.3d 648, 653 (5th Cir. 2004)). The
key issue here, and in many FCA suits under this provision, is what constitutes an “obligation.”
As previously noted, the post-FERA version of the reverse false claims action expands its reach
by, inter alia, adding an explicit definition of the term “to address what Congress saw as the
overly narrow interpretation of the word ‘obligation’ that some courts had adopted,” Si II, 71 F.
Supp. 3d at 89 (citing S. Rep. No. 111-10, at 13–15). The FCA, as amended, defines obligation
as “an established duty, whether or not fixed, arising from an express or implied contractual,
grantor-grantee, or licensor-licensee relationship, from a fee-based or similar relationship, from
statute or regulation, or from the retention of any overpayment.” 31 U.S.C. § 3729(b)(3).
Here, Defendants’ arguments appear at first glance to be about a lack of specificity in
Relator’s pleading. Digging deeper, however, the contention that Relator does not present any
specific obligation that amounts to an established duty to make a payment to the government
stems from a more fundamental underlying premise: the same alleged misrepresentations
(alleged material breach of the subcontracting plan, incorporated as material terms of contracts
64
with ED, and alleged false or misleading self-certifications in violation of controlling statutes
and regulations) cannot be the source of an actionable obligation under the statute. There is no
binding precedent addressing whether alleged breaches of contractual obligations such as those
at issue here give rise to post-FERA reverse false claim liability. 35 However, the Court looks for
guidance to the dispositions of a number of district courts in this circuit, all of which have
distinguished between conduct giving rise to obligations that are actionable under this provision
and the concealment of information that may be separately actionable under to the FCA’s
presentment and false claim provisions. These courts have “determined that [a] reverse false
claim may not rest . . . on the argument ‘that an obligation arose out of [the d]efendants’
concealment of their allegedly fraudulent activity,’ because ‘by this logic, just about any
traditional false statement or presentment action would give rise to a reverse false claim action;
after all, presumably any false statement actionable under sections 3729(a)(1)(A) or
3729(a)(1)(B) could theoretically trigger an obligation to repay the fraudulently obtained
money.’” United States ex rel. Riedel v. Bos. Heart Diagnostics Corp., 332 F. Supp. 3d 48, 82–
83 (D.D.C. 2018) (quoting United States ex rel. Groat v. Bos. Heart Diagnostics Corp., 255 F.
Supp. 3d 13, 32 (D.D.C. 2017), amended on reconsideration in part, 296 F. Supp. 3d 155
(D.D.C. 2017)); see also United States ex rel. Scollick v. Narula, 215 F. Supp. 3d 26, 41 (D.D.C.
2016); Si II, 71 F. Supp. 3d at 97; United States ex rel. Scott v. Pac. Architects & Engineers
(PAE), Inc., 270 F. Supp. 3d 146, 155 (D.D.C. 2017); United States v. Newman, No. CV 16-1169
(CKK), 2017 WL 3575848, at *9 (D.D.C. Aug. 17, 2017). The Court finds these constructions,
35
As the Landis court noted in construing the pre-FERA reverse false claims action,
“[t]he D.C. Circuit has not addressed whether an alleged breach of contract constitutes an
‘obligation’ to pay money to the government under the FCA reverse false claims provision.” 51
F. Supp. 3d at 56 (citing Hoyte, 518 F.3d at 69 n.6). The Circuit has not addressed this issue
post-FERA, either.
65
which are grounded in the logical interaction between different FCA causes of action,
compelling. Relator’s brief mentions no contradictory authority, nor does PCA Integrity in fact
cite to any legal authority in support of its contrary position.
What the Court is left with is the plain text of the amended complaint and Relator’s
conclusory legal assertions. This is not enough. Even construed in the light most favorable to it,
PCA Integrity’s pleading contains no factual allegations of specific obligations owed by
Defendants that are distinct from the same allegations of concealment involved in the other
claims. Relator’s opposing argument conflates two issues: whether an alleged breach of
contractual agreements and alleged misrepresentations in self-certifications might create
statutory or regulatory penalties, and whether there is an independent obligation to pay the
government. See Opp’n to ConServe, Protocol, and State 42; Opp’n to Pioneer, Edgewater, and
Bass 35; Opp’n to Alorica/GRSI, Uniquity, and PRC 42 (alleging that Defendants have a clear
“obligation to pay various penalties arising from both federal statute and SBA regulations”).
Apart from these allegations that penalties for statutory and regulatory violations are owed, no
other affirmative obligation to pay the government is indicated. Nor does Relator offer any
indication that the government has already assessed any penalties. Without more, however, there
is not enough to establish that Defendants have an obligation for an unassessed, contingent
regulatory penalty, even under the more expansive post-FERA FCA. Accord United States ex
rel. Simoneaux v. E.I. DuPont De Nemours & Co., 843 F.3d 1033, 1039 (5th Cir. 2016)
(“[U]nassessed regulatory penalties are not obligations under the FCA. . . . [W]here, as in this
case, a regulatory penalty has not been assessed and the government has initiated no proceeding
to assess it, there is no established duty to pay.”); United States ex rel. Kasowitz Benson Torres
LLP v. BASF Corp., 285 F. Supp. 3d 44, 53 (D.D.C. 2017) (“An unassessed, contingent penalty
66
is not an FCA ‘obligation’ subject to suit under the reverse false claims provision.”), aff’d, 929
F.3d 721 (D.C. Cir. 2019); cf. United States ex rel. Petras v. Simparel, Inc., 857 F.3d 497, 505
(3d Cir. 2017) (concluding that the term “obligation” under the post-FERA FCA
“does not include a duty that is dependent on a future discretionary act”).
The situation at hand is easily distinguishable, moreover from cases that have found a
plausible claim for reverse false claim liability. For instance, in Morsell, this Court was able to
specify a particular obligation such as the defendant’s “knowing[] fail[ure] to adjust the
Contract’s pricing terms [for pricing with the government] as required by the Price Reduction
Clause.” 130 F. Supp. 3d at 125. Unlike the company in Morsell, which was contractually
bound to follow controlling regulations by “notify[ing] the Government of any price reduction as
soon as possible, but not later than 15 calendar days after its effective date” and “modifying the
contract to reflect any price reduction which becomes applicable,” id. at 114 (internal quotation
marks and citations removed), Relator states no contractual or regulatory obligation that involves
a legally-required price reduction.
Accordingly, on the facts alleged, Relator has failed to plead the elements required to
make out a reverse false claim for any of the Defendants. 36
E. Conspiracy Claim
The remaining count in PCA Integrity’s pleading, Count III, brings a conspiracy charge,
again incorporating by reference all facts in the amended complaint and alleging that
“Defendants knowingly conspired, and may still be conspiring . . . to commit acts in violation of
36
Moreover, even if the Court accepted Relator’s theory and concluded that the same
predicate concealment that allegedly creates liability under other statutory provisions was itself
enough to give rise to possible liability here, these claims themselves suffer from the deficiencies
identified previously, all of which would recur with equal force in this context.
67
31 U.S.C. §§ 3729(a)(1) & (a)(2); 31 U.S.C. §§ 3729(a)(1)(A) & (a)(1)(B).” 37 Am. Compl. ¶
334. For the reasons set forth below, Relator fails to make out a claim for relief on this count.
First, civil conspiracy fundamentals provide grounds for dismissing this action. Although
the FCA does not define a conspiracy, courts have routinely applied civil conspiracy principles
to FCA conspiracy actions. See, e.g., United States v. Toyobo Co., 811 F. Supp. 2d 37, 50
(D.D.C. 2011); Westrick, 685 F. Supp. 2d at 140; United States ex rel. Durcholz v. FKW Inc.,189
F.3d 542, 545 n.3 (7th Cir. 1999) (citing United States v. Murphy, 937 F.2d 1032, 1039 (6th Cir.
1991)). For claims of civil conspiracy, there can be no liability for a conspiracy unless there is
an independently actionable ground for liability, Si II, 71 F. Supp. 3d at 98, whether that sounds
in tort law, see Halberstam, 705 F.2d at 477 (underlying tortious act is required to give rise to
civil conspiracy liability), or in the text of a statute, see Amin, 26 F. Supp. 2d at 165 (no
conspiracy where alleged activities consisted of entirely lawful pursuits). Because FCA liability
attaches to “the claim for payment,” Totten II, 286 F.3d at 551, there can by definition be no
ground for FCA liability unless Relator establishes the submission of an actionably false claim.
For the reasons detailed above, Relator has not pled facts that suffice to establish an underlying
false claim in this suit. Thus, Relator cannot raise a stand-alone conspiracy claim.
Moreover, as Defendants argue, the factual allegations in the pleading do not clear Rule
9(b)’s heightened pleading standard. See, e.g., ConServe Mem. 4, 11 (challenging nebulous,
imprecise nature of pleading and failure to identify any specific agreement involving ConServe);
State Mem. 34–35 (attacking complaint’s failure to provide any facts that indicate a specific
agreement between State and “any other Defendant to submit false claims or false statements to
37
Thus, to make the implicit, explicit, Count III alleges a conspiracy to violate both the
pre- and post-FERA versions of the FCA’s presentment and false statement provisions, but does
not allege a conspiracy to violate the FCA’s reverse false claims provision.
68
the government”); Pioneer Mem. 34 (“The Amended Complaint does not specify who were the
members of the alleged conspiracy” or “any facts as to the time, place, or nature of an alleged
conspiratorial agreement.”); Edgewater Mem. 20 (“[T]here is no identification of a single factual
averment that Edgewater actually entered into any . . . agreement [to further the alleged fraud]
with any of the other 10 defendants.”); Bass Mot. 12 (“Relator does not specify any facts as to
the time, place or nature of an alleged conspiratorial agreement.”); Alorica/GRSI Mem. 22
(contending that conspiracy count lacks any suggestion that WAM joined any agreement, “much
less the specific details (time, place, content, and the individuals involved) required by Rule
9(b)”); PRC Mem. 8 (“The ‘who, what, where, when’ is not clearly stated as required by the
pleading standard.”). This standard applies with equal force to an FCA conspiracy claim.
United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 193 (5th Cir. 2009) (discussing FC
Inv. Group LC v. IFX Markets, Ltd., 529 F.3d 1087, 1097 (D.C. Cir. 2008), which applied, in
context of jurisdictional analysis, Rule 9(b) pleading requirements to RICO conspiracy action);
Toyobo, 811 F. Supp. 2d at 51 (applying Rule 9(b) to FCA conspiracy claim). To see why,
consider the third element of this claim, which requires Relator to establish that “‘one or more
conspirators knowingly committed one or more overt acts in furtherance of the object of the
conspiracy.’” Si II, 71 F. Supp. 3d at 89 (quoting Miller, 608 F.3d at 899).
Here, assuming arguendo that Relator alleges three discrete conspiracies, each of which
involves the identified prime contractor, subcontractor, and allegedly-affiliated third party within
each of the three groups, Relator’s complaint contains insufficient particularity with respect to
each of the conspiracies. Apart from vague references to a “shared” “conspiratorial objective to
deceive” the U.S. about Defendants’ and co-conspirators’ “affiliated relationships with one
another, and with other parties,” Am Compl. ¶ 300, which occurred “from at least 2011 to the
69
present,” id. ¶ 302, Relator provides no factual allegations that indicate what the “overt acts”
were, when they occurred, or how they were “knowingly committed . . . in furtherance of the
object of the conspiracy.” Si II, 71 F. Supp. 3d at 89 (quoting Miller, 608 F.3d at 899). What,
specifically, did each of the parties purportedly agree to do, and when did they make this
agreement (e.g., how there could be an agreement to fraudulently induce a contract when the
alleged co-conspirator did not yet exist)? When and how, specifically, did at least one co-
conspirator knowingly commit at least one overt act in furtherance of this agreement? Relator
never says. But without saying more, with particularity, PCA Integrity has failed to discharge its
pleading burden. Thus, the Court dismisses this count.
F. The Public Disclosure Bar
One final substantive issue remains: whether Relator may pursue this qui tam action, or
whether, as Defendants argue, the FCA’s public disclosure bar coupled with the inability to
confirm Relator’s claimed “original source” status makes the action improper. See ConServe
Mem. 39–42; Protocol Mem. 32–33; State Mem. 36–38; Pioneer Mot. 32–33. Relator asserts
that the public disclosure bar is inapplicable here for two reasons: First, Defendants have failed
to establish that there has been a public disclosure of the allegations underlying the complaint in
the manner that the FCA and this Circuit’s law require. Opp’n to ConServe, Protocol, State 46–
47; Opp’n to Pioneer, Edgewater, and Bass 25. Second, according to Relator, even if the
material had been publicly disclosed, PCA Integrity qualifies as an original source of the
information and the bar does not apply. Opp’n to ConServe, Protocol, State 48–49; Opp’n to
70
Pioneer, Edgewater, Bass 26–27. For the following reasons, the Court declines to dismiss the
suit on public disclosure bar grounds. 38
Under this Circuit’s controlling law, there has been a public disclosure in the FCA
context if the essential elements of the allegation of fraud are revealed, “from which readers or
listeners may infer . . . the conclusion that fraud has been committed.” Springfield Terminal, 14
F.3d at 654. Where there has been such a public disclosure, this statutory bar “prevents suits by
those other than an ‘original source’” if “the government already has enough information to
38
Without ignoring the 2010 amendments that made the FCA’s public disclosure bar
non-jurisdictional, the Court assumes arguendo that the public disclosure bar is jurisdictional as
it applies to this law suit. Before the relevant amendment, the public disclosure bar was
considered jurisdictional based on the plain text of the statute. See 31 U.S.C. § 3730(e)(4)(A)
(2009) (“No court shall have jurisdiction over an action under this section based upon the public
disclosure of allegations or transactions.”); see also United States ex rel. Shea v. Verizon
Commc’ns, Inc. (Shea I), 160 F. Supp. 3d 16, 24–25 (D.D.C. 2015), aff’d sub nom. United States
ex rel. Shea v. Cellco P’ship (Shea II), 863 F.3d 923 (D.C. Cir. 2017) (quoting 31 U.S.C. §
3730(e)(4)(A); U.S. ex rel. Oliver v. Philip Morris USA Inc. (Oliver), 763 F.3d 36, 38 n.2 (D.C.
Cir. 2014)). The post-amendment statutory language, in notable contrast, eliminates this
jurisdictional language. See 31 U.S.C. § 3730(e)(4)(A) (2010) (“The court shall dismiss an
action or claim under this section, unless opposed by the Government, if substantially the same
allegations or transactions as alleged in the action or claim were publicly disclosed.”). “Thus,
when the amended version of § 3730(e)(4)(A) applies, public disclosure does not deprive the
Court of subject matter jurisdiction, but merely deprives the plaintiff of his claim.” Shea I, 160
F. Supp. 3d at 24 (citing Heath, 791 F.3d at 120; Avocados Plus Inc. v. Veneman, 370 F.3d 1243,
1249 (D.C. Cir. 2004)). Notwithstanding some signals that the “amendments do not apply to
pending suits filed before their enactment,” Oliver, 763 F.3d at 38 n.2, at least one district court
has engaged in a detailed analysis of retroactivity principles and concluded that “it is the date of
Defendants’ allegedly fraudulent conduct—not the date when litigation is filed—that governs
which” version of the public disclosure bar a court is to apply, Shea I, 160 F. Supp. 3d at 24
(citing United States ex rel. Atkinson v. Pa. Shipbuilding Co., 473 F.3d 506, 512–13 (D.C. Cir.
2007); United States ex rel. Lujan v. Hughes Aircraft Co., 162 F.3d 1027, 1031 (9th Cir. 1998)).
Here, as noted previously, there is a great deal of ambiguity concerning the alleged timing of
certain critical events. In the face of this ambiguity, the Court assumes without deciding that the
amendment refers to the date of the alleged conduct, making the public disclosure bar
jurisdictional for at least some of the allegations in this suit. In any event, if this is not the proper
construction, then, because the suit was filed after the operative date of the 2010 amendments on
March 20, 2010, the public disclosure bar is non-jurisdictional; if so, then it is an element of the
cause of action, and there are independent non-jurisdictional grounds on which to dismiss
Relator’s claims.
71
investigate the case” and to decide whether or not to prosecute, or “the information could at least
have alerted law-enforcement authorities to the likelihood of wrongdoing.” Oliver, 826 F.3d at
472; see also Staples, 773 F.3d at 88 (quoting Springfield Terminal, 14 F.3d at 654–55). To
qualify as an original source, the plaintiff-relator must either (1) “ha[ve] voluntarily disclosed to
the Government the information on which allegations or transactions in a claim are based,” prior
to a “public disclosure” as defined by the statute, or (2) “ha[ve] knowledge that is independent of
and materially adds to the publicly disclosed allegations or transactions” that have been
“voluntarily provided the information to the Government before filing an action” under the
FCA’s qui tam provision. 31 U.S.C. § 3730(e)(4)(B).
Here, Defendants contend both that the public disclosure bar applies, and that Relator
cannot properly claim original source status. On Defendants’ account, the public disclosure bar
applies because the Small Business Administration was on notice of a potential affiliation
between, at a minimum, the parties in the ConServe, Protocol, and State cluster several years
before Relator filed this suit. See ConServe Mem. 39–41; Protocol Mem. 32; State Mem. 37.
Assuming without deciding that this notice amounts to a public disclosure of the same issues
presented here, the Court nonetheless finds it premature to dismiss Relator’s claims on the basis
that PCA Integrity lacks original source status. 39 Defendants contend that Relator cannot
39
It bears repeating that the Court reserves judgment on the question of whether there
was a public disclosure in this case. This Circuit’s controlling law, as previously mentioned, sets
forth a clear test for public disclosure: “if X + Y = Z, Z represents the allegation of fraud and X
and Y represent its essential elements. In order to disclose the fraudulent transaction publicly,
the combination of X and Y must be revealed, from which readers or listeners may infer Z, i.e.,
the conclusion that fraud has been committed.” Springfield Terminal, 14 F.3d at 654 (emphasis
in original). Thus, “a qui tam action cannot be sustained where both elements of the fraudulent
transaction—X and Y—are already public, even if the relator ‘comes forward with additional
evidence incriminating the defendant.’” Staples, 773 F.3d at 86 (quoting Springfield Terminal,
14 F.3d at 655). Based only on the facts alleged in Relator’s pleading, the Court is not certain
72
possibly be an original source “because it was not formed as a legal entity until May 20, 2015—
two years after the public disclosure to the [Small Business Administration].” ConServe Mem.
41. But taking the facts in the complaint to be true, as the Court must in deciding a 12(b)(6)
motion to dismiss, Defendants’ argument falls flat. The uncontroverted facts indicate that
Relator consists of “participants in the PCA initiative” with “direct knowledge of the conduct
alleged.” Compl. ¶ 29. Defendants do not present any further factual assertions or legal
argumentation to explain why the Court should discredit PCA Integrity’s claims that it
“conducted an independent investigation to uncover false claims.” Id. On the record before the
Court, Relator may have voluntarily provided the government with information “independent
of,” and which “materially add[ed] to[,] the publicly disclosed allegations or transactions” before
filing the instant qui tam action, 31 U.S.C. § 3730(e)(4)(B). Because such conduct could qualify
PCA Integrity for original source status, and because Defendants do not present a compelling
reason that this statutory provision does not cover Relator’s conduct here, the Court declines to
dismiss the suit on public disclosure bar grounds. Instead, the Court resolves the issues before it
on the non-jurisdictional issue of failure to establish a claim for relief as required by Rules
12(b)(6) and 9(b) 40 and grants Defendants’ motions to dismiss Relator’s claims for the reasons
previously explained. 41
whether “the combination of X and Y” was revealed, thereby creating a public disclosure prior to
Relator’s alleged presentation of information to the government.
40
Again, the Court reserves judgment on whether the public disclosure bar is
jurisdictional in this suit given considerable ambiguity concerning the dates of operative events.
The Court need not confirm jurisdiction to rule on other grounds because the “requirement to
confirm jurisdiction at the outset controls ‘only when the existence of Article III jurisdiction is in
doubt,’ such that the court may leave an issue of statutory—as opposed to Article III—
jurisdiction undecided while proceeding to consider a non[-]jurisdictional ground.” Shea I, 748
F.3d at 346 (Srinivansan, J., concurring) (emphasis in original) (quoting Chalabi v. Hashemite
Kingdom of Jordan, 543 F.3d 725, 728 (D.C. Cir. 2008)). And when it comes to the FCA, even
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G. Dismissal Without Prejudice
One procedural matter remains: whether dismissal of Relator’s claims should be with or
without prejudice. Defendants ConServe, Protocol, State, Pioneer, Edgewater, Bass, and
Alorica/GRSI seek dismissal with prejudice. See ConServe Mem. 19; Protocol Mem. 38; State
Mem. 40; Edgewater Proposed Order 1, ECF No. 87-1; Bass Proposed Order 1, ECF No. 85-1;
Alorica/GRSI Mem. 43. Relator seeks leave to amend any pleading deficiencies. Opp’n to
ConServe, Protocol, and State 55; Opp’n to Pioneer, Edgewater, and Bass 35; Opp’n to
GRSI/Alorica, Uniquity, and PRC 42. For the following reasons, the Court will dismiss the
claims without prejudice. 42
the earlier version of “the public-disclosure bar at most established a statutory jurisdictional
limitation, not an Article III limitation.” Id.
In addition, until such time, if ever, that Relator amends its pleading to clarify where and
when the alleged conduct giving rise to liability occurred, the Court reserves judgment
concerning personal jurisdiction, which ConServe, Protocol, and State challenge, and venue,
which Protocol and State challenge, pursuant to Federal Rules of Civil Procedure 12(b)(2) and
12(b)(3), respectively. Defendants may reassert their original arguments in response to any
future pleading. However, if Relator decides to amend its complaint, it should note that the
Court believes that the allegations of personal jurisdiction are thin.
41
One final matter remains pending: the two motions for judicial notice by ConServe,
ECF No. 92, and Relator, ECF No. 98 respectively. ConServe filed an unopposed motion for the
Court to take judicial notice of a decisions by the Small Business Administration, Relator’s date
of formation, and information concerning Protocol’s certifications on sam.gov. See ECF No. 92.
Relator requests that the Court consider certification statements filed by Defendant Uniquity
between 2013–2015, ECF No. 98, which Defendant Uniquity contests on the grounds that the
allegations against it lodged in the amended complaint end in 2013, ECF No. 108. Because the
Court resolves the issues in the manner previously detailed, these motions are denied as moot.
Relator may include allegations concerning these matters in an amended complaint and
Defendants may re-raise the same arguments for dismissal, to the extent applicable, in any future
response to any such amended complaint. See Si I, No. CIV.A. 09-2388 KBJ, 2013 WL
4478953, at *2 (D.D.C. Aug. 21, 2013) (permitting defendants to re-present same arguments
after finding that relator’s complaint did not satisfy Rule 9(b) pleading standard).
42
Defendant Protocol has sought dismissal without prejudice on an additional ground not
previously discussed: improper service of process. Protocol Mem. 36–37 (alleging untimely
service in violation of Federal Rules of Civil Procedure Rule 4(m) and 12(b)(5) and seeking
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In this case, the Court dismisses Relator’s FCA claims due to the failure to satisfy
pleading standards. “Ordinarily, a plaintiff may overcome the failure to satisfy pleading
standards by amending her complaint.” Shea I, 160 F. Supp. 3d at 31 (citing Firestone v.
Firestone, 76 F.3d 1205, 1209 (D.C. Cir. 1996)). More specifically, under this Circuit’s
controlling law, “failure to plead fraud with particularity”—the basis on which this Court grants
Defendants’ motions—“does not support a dismissal with prejudice. To the contrary, leave to
amend is ‘almost always’ allowed to cure deficiencies in pleading fraud.” Firestone, 76 F.3d at
1209 (quoting Luce v. Edelstein, 802 F.2d 49, 56 (2d Cir. 1986)). Only if the trial court
“determines that ‘the allegation of other facts consistent with the challenged pleading could not
possibly cure the deficiency’” is dismissal with prejudice appropriate. Id. (quoting Jarrell v.
United States Postal Serv., 753 F.2d 1088, 1091 (D.C. Cir. 1985)). Here, because the allegation
of further facts might cure the identified deficiencies (although the Court has its doubts, given
the length of the investigation and Relator’s counsel’s central role in the investigation), the Court
sees no reason to deviate from the general rule. Thus, it grants the motions to dismiss without
prejudice and grants Relator leave to amend its complaint.
V. CONCLUSION
For the foregoing reasons, the Court GRANTS the parties’ joint motion to dismiss claims
against Defendant West Corporation (ECF No. 77); GRANTS Defendants’ motions to dismiss
(ECF Nos. 79, 81, 85, 86, 87, 88, 89, 91, and 93); DENIES AS MOOT Defendant ConServe’s
motion for judicial notice (ECF No. 92); and DENIES AS MOOT Relator PCA Integrity’s
motion for judicial notice (ECF No. 98). Relator may, within thirty days of this opinion, file an
dismissal without prejudice). Because the delay was short and Relator’s briefs suggest good
faith efforts to serve process, the Court declines to grant dismissal on this ground.
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amended complaint. An order consistent with this Memorandum Opinion is separately and
contemporaneously issued.
Dated: February 11, 2020 RUDOLPH CONTRERAS
United States District Judge
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