Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_15-cv-00689/USCOURTS-caed-1_15-cv-00689-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Petition for Removal

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

SIERRA VIEW LOCAL HEALTH CARE 

DISTRICT,

Plaintiff,

v.

INFLUENCE HEALTH, INC.,

Defendant.

No. 1:15-cv-00689-JAM-SAB

ORDER DENYING DEFENDANT’S MOTION 

TO DISMISS AND MOTION TO STRIKE

Plaintiff Sierra View Local Health Care District

(“Plaintiff”) has amended its California False Claims Act 

(“CFCA”) cause of action in an attempt to comply with the 

heightened pleading standard required for fraud claims. 

Plaintiff’s First Amended Complaint (“FAC”) now includes three 

CFCA claims (Doc. #26). Defendant Influence Health, Inc. 

(“Defendant”) moves to dismiss Plaintiff’s CFCA claims (Doc. #29)

and to strike portions of Plaintiff’s FAC (Doc. #30). Plaintiff 

opposes both motions (Docs. ## 35, 36). For the reasons 

discussed below, the Court finds that Plaintiff has clarified its 

CFCA claims and has properly alleged facts sufficient to put 

Defendant on notice of the allegations against it. Accordingly, 

Case 1:15-cv-00689-DAD-SAB Document 42 Filed 02/05/16 Page 1 of 9
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the Court DENIES Defendant’s motion to dismiss Plaintiff’s sixth, 

seventh, and eighth causes of action. The Court also DENIES 

Defendant’s motion to strike. 

I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND

On February 26, 2010, Plaintiff entered into a Software 

License Agreement (“License Agreement”) to purchase software 

modules from Defendant. FAC ¶ 5. The parties amended the 

License Agreement with Add-on Order #1, Change-order #1, and 

Change-order #2. Id. The parties also entered into a Software 

Maintenance Agreement (“Maintenance Agreement”). Id.

In April 2011, Defendant submitted notices of completion for 

the software modules to Plaintiff’s project manager. Id. ¶ 7. 

Plaintiff alleges that at least five of the modules were not 

complete at the time Defendant submitted the notices of 

completion. Id. ¶ 10. Four of the modules were allegedly never 

completed. Id. Plaintiff alleges that in May 2011, Defendant 

began wrongfully billing Plaintiff maintenance fees for modules 

that were not complete. Id. ¶ 11. 

Three years after Plaintiff started paying the maintenance 

fees, Plaintiff discovered that only four of the twelve modules 

it purchased from Defendant were actually functioning. Id. ¶ 17. 

In September 2014, Plaintiff verbally and in writing requested a 

reduction in maintenance fees, but Defendant refused. Id. ¶ 18. 

Plaintiff then stopped paying the maintenance fees. Id. 

In January 2015, Plaintiff’s counsel demanded a refund of 

maintenance fees in writing and notified Defendant of Plaintiff’s 

claim that Defendant had violated the False Claims Act. Id.

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¶ 19. 

On April 9, 2015, Plaintiff filed suit against Defendant 

(Doc #1). Defendant moved to dismiss each cause of action (Doc. 

#5). The Court granted in part and denied in part Defendant’s 

motion to dismiss. The Court dismissed Plaintiff’s CFCA claim 

with leave to amend. Plaintiff then filed its FAC, which 

includes four separate claims for breach of contract, one claim 

for unjust enrichment, and three claims for violation of the 

CFCA. FAC at 1. Defendant moved to dismiss Plaintiff’s sixth, 

seventh, and eighth causes of action for violation of the CFCA. 

Mot. to Dismiss at 1. 

II. OPINION

A. Legal standard for pleading a CFCA claim

An entity violates the CFCA when it “knowingly presents or 

causes to be presented a false record or statement material to a 

false or fraudulent claim.” Cal. Gov’t Code § 12651(a)(1). 

“Knowingly” includes having “actual knowledge” of the 

information, acting with “deliberate ignorance of the truth or 

falsity of the information,” or acting with “reckless disregard 

for the truth or falsity of the information.” Id. § 12650(b)(3). 

“Proof of specific intent to defraud is not required.” Id. 

“Claim” means “any request or demand, whether under contract or 

otherwise, for money, property, or services.” Id. § 12650(b)(1).

Claims brought under the CFCA must meet the heightened 

pleading standards of Federal Rule of Civil Procedure 9(b). 

California ex rel. Mueller v. Walgreen Corp., 175 F.R.D. 638, 639 

(N.D. Cal. 1997). “Under Rule 9(b), the circumstances

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constituting fraud or mistake shall be stated with particularity, 

but intent may be averred generally.” United States v. Sequel 

Contractors, Inc., 402 F. Supp. 2d 1142, 1147 (C.D. Cal. 2005) 

(citing Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 

F.2d 1393, 1401 (9th Cir. 1986)) (internal quotation marks 

omitted). The pleader must also “state the time, place, and 

specific content of the false representations as well as the 

identities of the parties to the misrepresentation.” Schreiber, 

806 F.2d at 1401. Allegations under the CFCA must be specific 

enough “to give defendants notice of the particular misconduct so 

that they can defend against the charge.” Cnty. of Santa Clara 

v. Astra U.S., Inc., 428 F. Supp. 2d 1029, 1036 (N.D. Cal. 2006). 

B. Analysis

Defendant argues that each of Plaintiff’s three CFCA claims 

are “beset by the same two maladies”: first, Plaintiff has 

failed to plead its CFCA claims with the specificity required 

for fraud claims in federal court; and second, Plaintiff’s CFCA 

claims are “wholly duplicative” of Plaintiff’s breach of 

contract claims. Mot. to Dismiss at 4.

1. Plaintiff’s Claims Meet the Specificity 

Requirement

As to Defendant’s first argument, i.e. that Plaintiff has 

failed to allege the “who, what, where, and when” of the 

purported fraud, Plaintiff responds by specifically identifying 

the “who, what, where, and when” for each of its CFCA claims. 

Opp. at 6-8. Regarding “who,” Plaintiff argues that alleging 

that Influence Health, Inc. committed the fraud is sufficient. 

Id. at 6. Plaintiff argues that “[s]ince this is a corporate 

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fraud claim . . . the individual employees of the Defendants 

[sic] need not be alleged.” Id. Plaintiff cites to Wool v. 

Tandem Computers, Inc., 818 F.2d 1433, 1439 (9th Cir. 1987) for 

this proposition. Id. In Wool, however, the Plaintiff

identified three individual officers who were involved in the 

alleged fraud. 

Plaintiff has not alleged the names or job titles of any of 

Defendant’s employees who may be involved in the alleged fraud. 

However, at least one California appellate court has held that a 

plaintiff stated a claim under the False Claims Act even though 

the plaintiff did not allege the names or titles of the 

employees engaged in the alleged fraud. Wells v. One2One 

Learning Found., 2009 WL 426216, at *8 (Cal. Ct. App. Feb. 20, 

2009). The Wells court stated that “the purpose of the 

particularity requirement is to allow the defendant to 

understand fully the nature of the charge made.” Id. (internal 

quotation marks omitted). The court in Wells held that the 

plaintiff had satisfied that purpose, even without alleging 

specific names of employees who engaged in the alleged fraud. 

Id. Here, therefore, Plaintiff’s CFCA claims cannot be 

dismissed solely because Plaintiff has not yet identified which 

individual employees engaged in the alleged fraud.

Plaintiff also outlines the “what,” “when,” and “where” for 

each of its claims. Opp. at 6-8. For Plaintiff’s sixth cause 

of action, Plaintiff explains that the parties modified the

contract and “expressly agreed that no maintenance fees would be 

invoiced for the sleep lab.” FAC ¶ 70. Plaintiff then alleges 

that beginning on May 1, 2011 (the “when”), Defendant began 

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charging Plaintiff monthly maintenance fees. Id. As to the 

“where” Plaintiff argues that “[t]he complaint makes it clear 

that the false claims were presented to Sierra View . . . 

located in Tulare County, California.” Opp. at 6. The Court 

agrees; such allegations are sufficient to put Defendant on 

notice of “where” the alleged fraud occurred. 

As to the “what” in Plaintiff’s seventh cause of action, 

Plaintiff alleges that “each invoice for maintenance fees 

submitted by Defendant . . . includes a demand for payment of 

maintenance fees for the four modules . . . which Defendant 

never completed.” FAC ¶ 88. Plaintiff alleges that the 

maintenance fees paid on incomplete modules totals $81,000. Id.

¶ 90. For Plaintiff’s eighth cause of action, Plaintiff alleges 

that Defendant charged Plaintiff maintenance fees on the modules 

before Plaintiff accepted the modules. Id. ¶¶ 96, 97. These 

allegations explain “what” the alleged fraud is and allow the 

Defendant to fully understand the charges against it. 

Overall, Plaintiff’s FAC provides more factual detail about 

the alleged misconduct than Plaintiff’s original complaint. 

Though Defendant argues that the allegations in Plaintiff’s FAC 

are just as insufficient as its allegations in the original 

complaint, the Court disagrees. Plaintiff has provided 

Defendant notice of what it believes constitutes fraud in 

violation of the CFCA. Defendant has sufficient information to 

conduct its own investigation and discovery to mount a defense 

to the CFCA claims. Dismissal on this ground is therefore not 

warranted. 

//

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2. Plaintiff’s CFCA claims are not duplicative

Defendant next argues that Plaintiff’s CFCA claims should 

be dismissed because they are duplicative of Plaintiff’s breach 

of contract claims. Mot.to Dismiss at 6. Plaintiff responds to 

this argument by citing to three cases in which the plaintiff 

brought both a FCA or CFCA claim and a breach of contract claim. 

Opp. at 3-4. Defendant argues that each of the cases that 

Plaintiff cites to is irrelevant. Reply at 4. 

One of the cases is, indeed, irrelevant. In United States 

v. Sequel Contractors, Inc., the plaintiff brought a breach of 

contract claim and a claim for violation of the CFCA. 402 F. 

Supp. 2d 1142, 1146 (C.D. Cal. 2005). The court, however, did 

not address whether plaintiff could bring both of those causes 

of action based on the same facts. The other two cases, 

however, are relevant to the “duplication” issue. In San 

Francisco Unified Sch. Dist. ex rel. Contreras v. Laidlaw 

Transit, Inc., the court addressed the issue of whether “a 

request for payment under a contract . . . can form the basis 

for a CFCA claim.” 182 Cal. App. 4th 438, 448 (2010), as 

modified on denial of reh'g (Mar. 25, 2010). The Laidlaw court 

held that a request for payment under a contract where the 

company requesting payment had not complied with an aspect of 

the contract can serve as a basis for a CFCA claim. Id. at 453. 

In Stacy & Witbeck, Inc. v. City & Cty. of S.F., the court 

specifically stated that contract claims are not “expressly

excluded from the application of the FCA.” 47 Cal. App. 4th 1, 9 

(1996). While these cases do not explicitly state that a 

plaintiff can bring both a breach of contract claim and a CFCA 

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claim, they do indicate that a CFCA claim can arise from an 

alleged failure to comply with a contract. 

Additionally, the “scienter” or “knowledge” requirement of 

the CFCA distinguishes CFCA claims from breach of contract 

claims. See United States ex rel. Morsell v. Symantec Corp.,

2015 WL 5449795, at *9 (D.D.C. Sept. 10, 2015) (“The knowledge 

requirement helps ‘ensure that ordinary breaches of contract are 

not converted into FCA liability.’”) (citing United States v. 

Sci. Applications Int'l Corp., 626 F.3d 1257, 1271 (D.C. Cir. 

2010)). The difference between Plaintiff’s breach of contract 

claims and its CFCA claims is the inclusion of the “knowledge”

element with the CFCA claims. Regarding Plaintiff’s breach of 

contract claims, Plaintiff alleges that Defendant charged fees 

on modules in violation of the contract. Compl. at 9-15. 

Regarding its CFCA claims, however, Plaintiff alleges that 

Defendant billed Plaintiff for modules that Defendant knew were 

never completed. Id. at 18-27. Plaintiff’s allegations 

regarding Defendant’s knowledge of the status of the modules 

distinguishes Plaintiff’s breach of contract claims from its 

CFCA claims. The Court finds, therefore that Plaintiff’s

contract and CFCA claims are not duplicative and this action 

will proceed on all the causes of action in the FAC.

C. Defendant’s Motion to Strike 

Defendant argues that the Court must strike Plaintiff’s 

references to treble damages and civil penalties in its FAC 

because seeking such remedies is “in derogation of the specific 

language of the governing contract.” Notice of Mot. to Strike 

at 1. Defendant argues that a clause in the License Agreement 

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prohibits either party from recovering treble damages or 

penalties. Mot. to Strike at 2. The Court, however, has not 

determined that the License Agreement is enforceable. 

Determining whether the limitation of remedies clause in the 

License Agreement is enforceable would require the Court to 

interpret the contract, which is inappropriate at this stage in 

the litigation. Gardner v. RSM & A Foreclosure Servs., LLC, 

2013 WL 1129392, at *3 (E.D. Cal. Mar. 18, 2013)(“[I]t is 

inappropriate at the motion to dismiss stage for [the] Court to 

interpret the parties’ contract and evaluate the viability of 

[the] [p]laintiff’s claims based on the terms of the 

contract.”). Defendant’s motion to strike is denied. 

III. ORDER

For the reasons set forth above, the Court DENIES 

Defendant’s motion to dismiss and motion to strike. Defendant 

shall file its Answer to the FAC within twenty days of the date 

of this Order. 

IT IS SO ORDERED.

Dated: February 5, 2016

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