United States Ex Rel. Elms v. Accenture LLP

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 07-1361
UNITED STATES OF AMERICA ex rel. PETER M. ELMS,
Plaintiff - Appellant,
v.
ACCENTURE LLP,
Defendant - Appellee.
Appeal from the United States District Court for the District of
Maryland, at Greenbelt. Roger W. Titus, District Judge.
(8:04-cv-04077-RWT)
Argued: May 13, 2009 Decided: July 22, 2009
Before DUNCAN, Circuit Judge, HAMILTON, Senior Circuit Judge,
and Malcolm J. HOWARD, Senior United States District Judge for
the Eastern District of North Carolina, sitting by designation.
Affirmed in part, reversed in part, and remanded by unpublished
per curiam opinion.
ARGUED: Stephen Z. Chertkof, HELLER, HURON, CHERTKOF, LERNER,
SIMON & SALZMAN, PLLC, Washington, D.C., for Appellant. Joseph
H. Young, HOGAN & HARTSON, Baltimore, Maryland, for Appellee.
ON BRIEF: Douglas B. Huron, HELLER, HURON, CHERTKOF, LERNER,
SIMON & SALZMAN, PLLC, Washington, D.C., for Appellant.
Nicholas G. Stavlas, Allison J. Caplis, HOGAN & HARTSON,
Baltimore, Maryland, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
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PER CURIAM:
Peter Elms appeals the district court’s dismissal of this
qui tam action brought under the Federal False Claims Act, 31
U.S.C. §§ 3729-3733 (2000) (the “FCA”) in which it is alleged
that his employer, Accenture LLP (“Accenture”), submitted false
claims to the government in connection with a cost-plus contract
and alleging that he was terminated in retaliation for engaging
in protected activity under the FCA. Because this court
concludes that Elms has pled sufficient facts to satisfy Rule 8
of the Federal Rules of Civil Procedure as to the retaliation
claim but has not pled sufficient facts to satisfy Rule 9(b) as
to the fraud claim, we affirm in part and reverse in part and
remand this matter to the district court for further proceedings
as to the retaliation claim.
I.
The facts of this case arise out of a contract between
Accenture, an international consulting and technology firm, and
the federal government regarding the FVAP Secure Electronic
Registration and Voting Experiment (“SERVE”), an initiative
headed by the Department of Defense for registering and voting
on the internet. The SERVE contract was a cost-plus-fixed-fee
contract, with the fee in this particular contract being nine
and one-half percent. The provisions of the contract expressly
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exempt certain named subcontractors, including Avanade, an
affiliate in which Accenture held a controlling interest, from
the cost-plus-fixed-fee provisions. Instead, the contract
contemplates that Accenture will pay for Avanade’s services at
the “Time and Materials” rate, which includes profit. Accenture
then bills the government at this “Time and Materials” rate.
Elms, who designed the software for the SERVE contract, was
assigned as Project Manager for the contract. Although he felt
he was better suited to be Chief Technical Architect (“CTA”) for
the project, that position was staffed by someone from Avanade.
Elms’ superior, Meg McLaughlin, informed Elms that they were
going to staff the project with as many Avanade personnel as
possible in order to maximize profit. When Elms asked for an
explanation of how using Avanade personnel on the project
maximized profit, McLaughlin explained that Accenture paid full
rates for the Avanade employees and passed that cost along to
the government, but Accenture would then receive a rebate of
fifty percent or more from Avanade, thereby boosting the
profits. In August 2002, Elms expressed concern to McLaughlin
that the Avanade rebate did not seem ethical and asked if the
rebate would be a problem with the government auditors.
McLaughlin told Elms that she would seek a fuller explanation
and get back to him, but not to worry about it. She never gave
him an explanation.
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In September 2008, Elms discussed his concerns about the
rebates with Adrian Wilcox, who was responsible for Client
Financial Management at Accenture. Wilcox stated that he did
not fully understand how the system worked, but that fifty
percent of Accenture’s payment to Avanade “came back to the job”
to boost the bottom-line profit margin. Elms also expressed
concerns to Wilcox about what government auditors would think of
such a system, and Wilcox assured him that the government
auditors would only match invoices to payments and that any
accounting documents showing a rebate would be internal to the
firm.
Elms alleges that it soon became clear that the Avanade
personnel were not up to the challenge of working on SERVE.
Elms requested that McLaughlin replace some of the Avanade
project personnel with more qualified staff from Accenture, but
McLaughlin told Elms that they needed to keep as many Avanade
personnel on the project as possible to maintain a higher profit
margin.
In early 2003, Elms again questioned McLaughlin about the
personnel staffing the project. This time he insisted on
removal of the Chief Technical Architect, an Avanade employee,
whom he believed to be unqualified for the position. Shortly
thereafter, he was informed that he was being removed as Project
Manager. Elms then proposed that he assume the Chief Technical
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Architect role. McLaughlin refused, saying this would result in
an unacceptably low profit margin. Elms protested, accusing
Accenture of “short-changing” the government. On April 15,
2003, Elms’ employment was terminated.
Elms filed the complaint in this matter on December 30,
2004 alleging violations of the FCA and the Age Discrimination
in Employment Act (“ADEA”). After the United States declined to
intervene, the district court unsealed the complaint in June
2006. Accenture moved to dismiss the complaint. The district
court granted Accenture’s motion to dismiss, concluding that
Elms had failed to meet the heightened pleading requirements on
his fraud claim, that he had not alleged sufficient facts to
make out a retaliation claim, and that his ADEA claim was time
barred. ∗ Elms has not appealed the dismissal of his ADEA claim.
∗
Prior to the dismissal of his claims, Elms moved to amend
his complaint, consistent with a proffer he filed in response to
Accenture’s motion to dismiss. The district court denied the
motion to amend as futile. In his reply brief, appellant
attempts to challenge the district court’s denial of his motion
to amend. However, appellant waived his right to challenge on
appeal the district court’s denial of his motion to amend the
complaint because he raised no contention in the Argument
section of his opening brief that the district court abused its
discretion in denying his motion to amend the complaint.
United States v. Al-Hamdi, 356 F.3d 564, 571 n. 8 (4th Cir. 2004)
(“It is a well settled rule that contentions not raised in the
argument section of the opening brief are abandoned.”).
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II.
We review de novo the district court’s order granting
Accenture’s Rule 12(b)(6) motion to dismiss. Parrington v. Am.
Int’l Specialty Lines Ins. Co., 443 F.3d 334, 338 (4th Cir.
2006); Franks v. Ross, 313 F.3d 184, 192 (4th Cir. 2002).
A.
The FCA imposes civil liability on any person who
“knowingly presents, or causes to be presented to [the United
States government] a false or fraudulent claim for payment or
approval” or who “knowingly makes, uses, or causes to be made or
used, a false record or statement to get a false or fraudulent
claim paid or approved by the Government.” 31 U.S.C. §
3729(a)(1), (2). This court has established the following test
for FCA liability: “(1) whether there was a false statement or
fraudulent course of conduct; (2) made or carried out with the
requisite scienter; (3) that was material; and (4) that causes
the government to pay out money or to forfeit moneys due (i.e.,
that involved a ‘claim’).” Harrison v. Westinghouse Savannah
River Co., 176 F.3d 776, 788 (4th Cir. 1999).
A claim of fraud under the FCA, like fraud claims
generally, is subject to the heightened pleading standard of
Rule 9(b) of the Federal Rules of Civil Procedure which requires
that a plaintiff “state with particularity the circumstances
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constituting fraud or mistake.” Fed. R. Civ. P. 9(b). In his
pleading, therefore, Elms was required to allege “the time,
place, and contents of the false representations, as well as the
identity of the person making the misrepresentation and what he
obtained thereby.” Harrison, 176 F.3d at 784.
Elms’ FCA claim fails to meet the heightened standard
imposed by Rule 9(b). While Elms alleges that a scheme existed
between Accenture and Avanade, whereby Avanade would rebate
approximately fifty percent of Accenture’s payments to Avanade,
Elms fails to allege with specificity the “who, what, when,
where and how” of the rebate scheme. At most, Elms alleges (i)
that there was a cost-plus contract with a nine and one-half
percent markup, (ii) that Accenture used personnel from Avanade
and paid full rates for the Avanade employees, which it passed
along to the government, and (iii) that Accenture later received
a rebate or credit of fifty percent or more from Avanade, which
Accenture did not credit to the government. Elms, however,
fails to allege specifics of any single credit or rebate and
provides no detail of his conclusory allegations that Accenture
engaged in fraudulent billing practices. Although Elms alleges
that Accenture affirmatively misrepresented that it was
Accenture’s “established practice” to pay Avanade at full value
for its services and that it was not getting any rebates, Elms
does not attribute this alleged misrepresentation to any
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Accenture employee or identify where or when any such
representation was made.
Plaintiff submitted only one invoice (which, ironically,
was signed by plaintiff) and failed to allege with particularity
any alleged rebate or credit. While Elms contends that the
evidence is within the possession of Accenture and the United
States, this does not excuse the lack of specificity with which
plaintiff has pled his FCA fraud claim. In fact, Rule 9(b) is
aimed at such fishing expeditions: “The clear intent of Rule
9(b) is to eliminate fraud actions in which all the facts are
learned through discovery after the complaint is filed.”
Harrison, 176 F.3d at 789. The district court, therefore,
properly dismissed plaintiff’s fraud claim under the FCA.
B.
Plaintiff also brought a claim for retaliation under the
FCA, asserting that he was dismissed from the project and,
subsequently, the company because he engaged in protected
activity. The FCA’s statutory ban on retaliation provides a
cause of action for
[a]ny employee who is discharged, demoted, suspended,
threatened, harassed, or in any other manner
discriminated against in the terms and conditions of
employment by his or her employer because of lawful
acts done . . . in furtherance of an action under this
section, including investigation for, initiation of,
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testimony for, or assistance in an action filed or to
be filed under this section.
31 U.S.C. § 3730(h). Courts have interpreted FCA-protected
activity broadly to cover not only the filing of a qui tam suit
but also a variety of actions aimed at ascertaining whether or
not a fraud has been committed that would give rise to a
possible FCA suit. United States ex rel. Yesudian v. Howard
Univ., 153 F.3d 731, 739-40 (D.C. Cir. 1998).
Unlike the fraud claim, a retaliation claim is not subject
to the heightened pleading standard of Rule 9(b); therefore,
plaintiff need only satisfy Rule 8’s notice pleading
requirements to survive a motion to dismiss. Fed. R. Civ. P. 8.
We conclude that plaintiff has alleged sufficient facts to
survive a Rule 12(b)(6) motion to dismiss on the retaliation
claim. Elms has sufficiently alleged that he suffered
retaliation, i.e., his employment was terminated as a result of
action taken in the course of investigating a fraud against the
United States. Elms has alleged a fraudulent rebate scheme in
his complaint, even if those allegations do not survive the
heightened pleading standard of Rule 9. He also alleges that
when he learned how Accenture was using Avanade to make a higher
return than the nine and one-half percent specified in the FVAP
contract, he was concerned about the legality of the rebate
scheme and “expressed his misgivings” to McLaughlin, as well as
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to the accountant assigned to the project. (JA-010). Finally,
Elms alleges that he insisted on removing the Chief Technical
Architect from Avanade but that before Elms could remove him,
Elms himself was removed as Project Manager. When McLaughlin
refused to make Elms the CTA, Elms told her that Avanade was
“short-changing the government.” (JA-010). Shortly after this
conversation, Elms was fired. Elms has alleged that he took
action in furtherance of a qui tam suit, that his employer knew
of these actions, and that he was terminated as a result. These
allegations are sufficient to put defendant on notice of the
nature of plaintiff’s retaliation claim and therefore survive
dismissal under Rule 12(b)(6).
CONCLUSION
We affirm the district court’s ruling that Elms’ fraud
claim under the FCA fails to meet the heightened pleading
standard of Rule 9(b). However, we conclude that Elms has
properly alleged a retaliation claim under the FCA, and
therefore reverse the district court’s dismissal of Elms’
retaliation claim and remand this matter to the district court
for further proceedings not inconsistent with this opinion.
AFFIRMED IN PART,
REVERSED IN PART,
AND REMANDED
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