Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-alnd-5_13-cv-00830/USCOURTS-alnd-5_13-cv-00830-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 31:3729 False Claims Act

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UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ALABAMA

NORTHEASTERN DIVISION

UNITED STATES OF AMERICA, 

ex. rel. PHILIP MARSTELLER and 

ROBERT SWISHER,

Plaintiffs/Relators,

v.

LYNN TILTON, et al.,

Defendants.

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Civil Action Number

5:13-cv-830-AKK

MEMORANDUM OPINION

Relators Phillip Marsteller and Robert Swisher pursue this action pursuant to 

the False Claims Act (“FCA”), 31 U.S.C. § 3729 et seq., alleging that their former 

employer, MD Helicopters, Inc., and its Chief Executive Officer, Lynn Tilton, 

submitted false claims and made materially false statements in the process of 

obtaining government contracts for the manufacture of helicopters for the United 

States Army’s Non-Standard Rotary Aircraft Project Office (“NSWRA”). In a 

nutshell, Relators allege that Tilton offered gratuities and employment to Norbert 

Vergez—the project manager in charge of NSWRA—in violation of federal laws 

incorporated in the contracts. Vergez purportedly accepted these offers, including 

an offer of employment at MD and Patriarch Partners, LLC (“Patriarch”), a debt 

and equity investment and management company that Tilton founded and 

FILED

 2016 Mar-31 PM 05:23

U.S. DISTRICT COURT

N.D. OF ALABAMA

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manages. According to Relators, in exchange for the gratuities and offer of 

employment, Vergez facilitated MD Helicopters Inc.’s (“MD”) submission of

inflated pricing information in its bids with NSWRA, and later, MD purportedly 

withheld information about its relationship with Vergez when it submitted claims 

for payment. These actions purportedly constitute violations of 31 U.S.C. §

3729(a)(1)(A) and (B) on the part of MD, Tilton, and Patriarch (collectively 

“Defendants”) (Counts I-V). Doc. 57. Finally, Relators assert that MD, Tilton, 

Vergez, and Patriarch conspired to defraud the government in violation of 31 

U.S.C. § 3729(a)(1)(C) (Count VI). Id. In the present motion, Defendants move to 

dismiss the action on the grounds that Relators’ claims do not meet the pleading 

requirements of Federal Rule of Civil Procedure 12(b)(6).1 Doc. 65 (*SEALED*). 

For the reasons below, the motion is due to be granted.

I. STANDARD OF REVIEW

Federal Rule of Civil Procedure 8(a) requires that a pleading stating a claim 

for relief provide “a short and plain statement of the claim showing that the pleader 

is entitled to relief.” Where a complaint fails to make such a statement, Federal 

Rule of Civil Procedure 12(b)(6) permits dismissal. To survive a motion to dismiss 

under Rule 12(b)(6), “a complaint must contain sufficient factual matter, accepted 

 1 Vergez has joined the motion and moved to dismiss the claims against him. See doc. 63. The court agrees

with Vergez that “nowhere in the Complaint is it alleged that [he] submitted, facilitated or prepared any false claim 

to the Government. . . [n]or does the Complaint allege that [he] made any false statement to the Government in 

support of a false claim.” Doc. 63 at 2. Therefore, Vergez’s motion is due to be granted. 

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as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 

U.S. 662, 677 (2009) (citations and internal quotation marks omitted). A complaint 

states a facially plausible claim for relief “when the plaintiff pleads factual content 

that allows the court to draw the reasonable inference that the defendant is liable 

for the misconduct alleged.” Id. (citation omitted). The complaint must establish 

“more than a sheer possibility that a defendant has acted unlawfully.” Id.; see also 

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (“Factual allegations must be 

enough to raise a right to relief above the speculative level . . . .” (citation 

omitted)). The Eleventh Circuit instructs that Rule 12(b)(6) “‘does not impose a 

probability requirement at the pleading stage,’ but instead ‘simply calls for enough 

fact to raise a reasonable expectation that discovery will reveal evidence of’ the 

necessary element[s].” Watts v. Fla. Int’l Univ., 495 F.3d 1289, 1295-96 (11th Cir. 

2007) (quoting Twombly, 550 U.S. at 555). Ultimately, this inquiry is a “contextspecific task that requires the reviewing court to draw on its judicial experience 

and common sense.” Iqbal, 556 U.S. at 678. While the court accepts all factual 

allegations in the complaint as true, legal conclusions unsupported by factual 

allegations are not entitled to that assumption of truth. Id.

Further, because it is “‘well settled’ and ‘self-evident’ that the FCA is ‘a 

fraud statute,’” a claim under the FCA must meet the heightened pleading standard 

of Federal Rule 9(b). U.S. ex rel. Clausen v. Lab. Corp. of Am., 290 F.3d 1301, 

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1309 (11th Cir. 2002). Rule 9(b) provides that a claimant must plead fraud with 

“particularity”:

In all averments of fraud or mistake, the circumstances constituting 

fraud or mistake shall be stated with particularity. Malice, intent, 

knowledge, and other condition of mind of a person may be averred 

generally.

Fed. R. Civ. P. 9(b). Requiring particularity under Rule 9(b) “serves an important 

purpose in fraud actions by alerting defendants to the precise misconduct with 

which they are charged and protecting defendants against spurious charges of 

immoral and fraudulent behavior.” Ziemba v. Cascade Int’l, Inc., 256 F.3d 1194, 

1202 (11th Cir. 2001) (quoting Durham v. Bus. Management Assocs., 847 F.2d 

1505, 1511 (11th Cir.1988)) (citation and internal quotation marks omitted). 

Significantly, a FCA complaint satisfies Rule 9(b) if it sets forth “facts as to time, 

place, and substance of the defendant’s alleged fraud, specifically the details of the 

defendants’ allegedly fraudulent acts, when they occurred, and who engaged in 

them.” Hopper v. Solvay Pharm., Inc., 588 F.3d 1318, 1324 (11th Cir. 2009)

(citations and internal quotation marks omitted). 

II. FACTUAL BACKGROUND

NSWRA is headquartered at the Redstone Arsenal in Huntsville, Alabama as 

part of the U.S. Army Aviation and Missile Command (“AMCOM”). Doc. 57 at 

13. As a major defense acquisition program, NSWRA’s mission is to “consolidate 

under a single service-level Project Management Office the procurement, 

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sustainment, and technical support of non-standard rotorcraft for the Department of 

Defense, allied countries under foreign military sales (FMS) contracts[,] or as 

directed by the Office of the Secretary of Defense.” Id. Relators’ allegations are 

related to five FMS contracts for the manufacture of helicopters for allied 

countries: the Afghani Air Force in March and September 2011 (Counts I and II), 

the El Salvadorian Air Force in December 2011 (Count III), the Saudi Arabian 

National Guard in June 2012 (Count IV), and the Costa Rican government in 

December 2012 (Count V). Id. When MD submitted proposals to NSWRA for

these contracts, Vergez served as NSWRA’s Project Manager. Id. at 13-14. In that 

capacity, Vergez purportedly was “personally and substantially involved in 

managing the process of issuing, selecting, negotiating, pricing, and awarding all 

of the FMS contracts obtained by MD that are at issue in this [action].” Id. at 14. 

Allegedly, Tilton, MD’s CEO, offered employment and transportation on Tilton’s 

private jet “to influence Vergez to act in MD’s favor as NSWRA’s program 

manager.” Id. 

From April 2011 onward, “it was commonly known among several MD 

employees that Tilton intended to hire Vergez upon his Army retirement.” Id. 

Consistent with Tilton’s plan, between April 2011 and the spring of 2012, Tilton 

and Vergez at various times “discussed the subject of Vergez’[s] employment to 

begin . . . following Vergez’s anticipated retirement.” Doc. 57 at 16. By spring 

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2012, Vergez and Tilton purportedly “reached an . . . understanding . . . that 

Vergez would be hired by either MD or Patriarch to work for . . . MD’s facility in 

Mesa, Arizona” at “a beginning salary that was more than twice what Vergez was 

receiving as his active duty base pay.” Id. By that summer, Vergez had purportedly 

signed an employment agreement with Patriarch to direct MD’s Civil and Military 

Programs. Id. at 27. In December 2012, Tilton purportedly announced to MD’s 

employees at a plant-wide meeting at MD’s Mesa, Arizona facilities that “a very 

special person who had been very influential in MD’s receipt of Army contracts 

would be joining the MD team.” Id. at 29. Shortly thereafter, “MD issued a revised 

Organizational Chart showing Vergez as the head of all MD Programs.” Id. 

However, “to obscure Vergez’[s] employment arrangement at MD, Tilton created 

the illusion on paper that Vergez was a Patriarch employee, with a Patriarch title, 

based out of Patriarch’s offices in New York.” Id. at 30.

In addition to the job offer, Tilton purportedly “provided free private 

transportation to Vergez aboard her jet” while negotiations for the El Salvador

contract were ongoing. Id. at 19. Relators allege that Tilton’s behavior constituted 

bribery and that MD had an obligation to disclose these unethical acts, and that 

such disclosures were a “material condition” of each of the contracts. See docs. 31, 

34, 37, 40, 43. By failing to make these disclosures, Defendants allegedly 

submitted false claims to the government (Counts I-V). See id. Also, in conjunction 

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with the El Salvador, Saudi, and Costa Rican contracts, MD allegedly failed to 

provide accurate pricing information in compliance with the Truth in Negotiations 

Act (Counts III-V). Id. at 37, 40, 43. Finally, Defendants allegedly conspired to 

defraud the Government (Count VI). Id. at 44.

III. ANALYSIS

Defendants contend that dismissal is warranted on all claims. The court 

addresses each claim in turn. 

A. False claims under Section 3729(a)(1)(A) and (B)— (Counts I-V)

Sections 3729(a)(1)(A) and (B) create a cause of action against “any person 

who . . . (A) knowingly presents, or causes to be presented, a false or fraudulent 

claim for payment or approval; [or] (B) knowingly makes, uses, or causes to be 

made or used, a false record or statement material to a false or fraudulent claim.” 

Relevant here, Relators contend that their complaint properly alleges that 

Defendants submitted false claims to the government under an “implied 

certification” theory.

2 Doc. 71 at 20.

 2 In their brief opposing the motion to dismiss, Relators also argue a “fraud in the inducement” theory. Doc. 

71 at 33. Allegedly, Defendants “fraudulently induced the Government to enter into sole-source contracts for 

commercial items by concealing the fact [that] its prices . . . were [inflated] . . . and by falsely agreeing to comply 

with the contracting ethics.” Id. Relators further contend that “[c]ommon sense counsels that the government would 

never enter into a contract if the contractor truthfully announced that it had not, and did not intend to, comply with 

the mandatory Contractor Code of Business Ethics set forth in FAR 52.203-13.” Id. at 34. This claim fails because

the Amended Complaint does not plead a fraud in the inducement theory. See generally doc. 57; St. George v. 

Pinellas County, 285 F.3d 1334, 1337 (11th Cir. 2002) (In a motion to dismiss, “the scope of the review must be 

limited to the four corners of the complaint.”). Moreover, the arguments advanced by Relators in support of this 

theory are similar to those they make for their implied certification and TINA claims, and, as such, fail for the same 

reasons stated below. See infra III.A. Finally, as outlined in their brief, see doc. 71 at 33–34, Relators’ fraud in the 

inducement claim fails to meet the particularity standard of Fed. R. Civ. P. 9(b). 

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1. Implied certification

Under this theory, “the FCA is violated where compliance with a law, rule, 

or regulation is a prerequisite to payment but a claim is made when a participant 

has engaged in a knowing violation.” U.S. ex rel. Keeler v. Eisai, Inc., 568 F. 

App’x 783, 799 (11th Cir. 2014); see also McNutt v. Haleyville Medical Supplies, 

Inc., 423 F.3d 1256, 1259-60 (11th Cir. 2005) (allegations of kickbacks can create 

FCA liability where compliance with the Anti–Kickback Statute is a prerequisite 

for payment under the Medicare Program)3

; U.S. ex rel. Compton v. Circle B 

Enterprises, Inc., No. CIV.A 7:07-CV-32(HL), 2010 WL 942293, at *7 (M.D. Ga. 

Mar. 11, 2010) (“If the payee submits an invoice for payment while knowingly 

violating a contractual provision, statute, or regulation, then he may have 

submitted a false claim.”). The relevant laws here for Relators’ implied 

certifications of compliance theory are 48 C.F.R. §52.203-13 (Contractor Code of 

Business Ethics and Conduct) and 10 U.S.C. §2306a (Truth in Negotiations Act). 

a. Contractor Code of Business Ethics and Conduct, 48 C.F.R. §52.203-13

Relevant to Counts I-V, the parties agree that all of the FMS contracts at 

issue incorporated 48 C.F.R. §52.203-13, which requires contractors to disclose 

 3 In McNutt, the Government identified with particularity alleged kickbacks that disqualified defendants’ 

claims from reimbursement under the Medicare Program—but, the defendants nevertheless submitted the 

disqualified claims for reimbursement. 423 F.3d at 1257-1259. The court concluded that “[w]hen a violator of 

government regulations is ineligible to participate in a government program and that violator persists in presenting 

claims for payment that the violator knows the government does not owe, that violator is liable, under the [FCA], for 

its submission of those false claims.” Id. at 1259.

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any “credible evidence that a principal, employee, [or] agent . . . had committed . . 

. a violation of Federal criminal law involving fraud, conflict of interest, bribery, or 

gratuity violations found in Title 18 of the United States Code.” 48 C.F.R. §

52.203-13(b)(3)(i)(A). Based on this provision, Relators allege that Defendants

violated 18 U.S.C. § 201 by bribing a public official in conjunction with each of 

the FMS contracts, and by failing to disclose evidence of the purportedly unethical 

conduct pursuant to § 52.203-13. Allegedly, § 52.203-13 was a “material 

contractual requirement” and a condition to payment under the FMS contracts, and 

Defendants purportedly violated §52.203-13 by submitting false claims under an 

implied certification theory. 

i. Whether compliance with § 52.203-13 is a express prerequisite to

payment under the contracts

Defendants counter that—even if they failed to disclose the so-called 

unethical conduct—compliance with § 52.203-13 is not an express “prerequisite to 

payment” under the FMS contracts because the contracts do not expressly 

condition payment on compliance. To support their position, Defendants direct the 

court to caselaw holding that noncompliance with the statute or regulation may 

form the basis of an FCA claim under an implied certification theory only where 

the government expressly conditioned payment on compliance with a statute or 

regulation. See U.S. ex. rel. Ortolano v. Amin Radiology, No. 5:10–cv–583–Oc–

PRL, 2015 WL 403221 at *8 (M.D. Fla January 28, 2015) (citing United States ex 

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rel. Steury v. Cardinal Health, Inc., 735 F.3d 202, 207 n. 3 (5th Cir. 2013); Mikes 

v. Straus, 274 F.3d 687, 700 (2d Cir. 2001)). Under this approach, to establish that 

compliance with a statute or regulation is “condition of payment,” Relators are

“required to plead that the government . . . would have necessarily terminated the 

Contract [or withheld payment] based on [MD’s] violations of FAR [§ 52.203-

13].” Circle B, 2010 WL 942293, at *8.4 The United States take issue with the

express condition approach and notes that recent cases have rejected the Mikes v. 

Strauss line of cases and asks this court not to adopt this approach. See doc. 70 at 

5–7. The court declines the Government’s invitation because it is contrary to case 

law. Specifically, in U.S. ex rel. Keeler v. Eisai, Inc., 568 F. App’x 783, 799 (11th 

Cir. 2014), the Relator alleged that Defendants submitted reimbursement claims to 

the government that falsely certified compliance with federal law. Id. at 798. In 

evaluating this claim, the Eleventh Circuit discussed implied certification and 

articulated that: “an implied certification theory . . . recognizes that the FCA is 

 4 In Circle B, which is particularly instructive, the Middle District of Georgia addressed whether a 

government contract that incorporated a Financial Acquisition Regulation conditioned payment on compliance with 

that regulation. Id. at *8. After reviewing the contract and the regulation at issue, the court noted the lack of any 

“express language in the [c]ontract” prohibiting government payment in the event of noncompliance. Id. at *9. 

Similarly, the court found that the regulation “[did] not contain any express prohibition of government payment 

based on noncompliance,” or any provision that “expressly requires a contractor to comply with [the regulation] in 

order to be paid.” Id. at *10. As a result, the court concluded that compliance with regulation was not a condition of 

payment. Id. In contrast, the court reached a different conclusion regarding the Anti-Kickback Statute (“AKA”), 

which also applied to the contracts in that case, and which the court found “expressly” conditioned payment on 

compliance: 

The AKA expressly states that [it] is illegal for a person to include any kickback in a claim for 

payment to the government. It is clear that the statute prohibits government payment for a 

kickback . . . [and] allows the government to refuse to pay the kickback . . . . It follows then that 

an invoice submitted for payment which includes the cost of a kickback constitutes a false claim 

because the government is prohibited from paying the amount of the kickback.

Id.

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violated where compliance with a law, rule, or regulation is a prerequisite to 

payment but a claim is made when a participant has engaged in a knowing 

violation.” Id. at 799 (emphasis added).

Turning to the specific contentions in this case, the court notes that Relators 

are generally correct that § 52.203-13 is mandatory in “subcontracts that have a 

value in excess of $5.5 million and performance period of more than 120 days.” 48 

C.F.R. § 52.203-13(d); doc. 71 at 27. However, as Defendants correctly point out, 

Relators overlook that no provision in § 52.203-13 expressly conditions payment 

upon compliance with the regulation; rather, § 52.203-13 merely sets forth 

minimum standards for requiring contractors to “[e]xercise due diligence to 

prevent and detect criminal conduct” and “[o]therwise promote an organizational 

culture that encourages ethical conduct and a commitment to compliance with the 

law.” 48 C.F.R. § 52.203-13. Moreover, having carefully reviewed the March 2011 

Afghani contract, December 2011 El Salvador contract, the June 2012 Saudi

contract, and the December 2012 Costa Rica contract, the court notes that there is 

no provision in any of them that prohibits payment in the event of noncompliance 

with § 52.203-13.

5 See docs. 65-2, 65-4, 65-6, 65-8 (*SEALED*). With respect to

the September 2011 Afghani contract, while the court does not have the contract 

 5 The court may review these contracts in deciding the motion because Plaintiffs reference it in the

complaint and it is “central to the plaintiff’s claim.” Brooks v. Blue Cross and Blue Shield of Fla., Inc., 116 F.3d 

1364, 1369 (11th Cir. 1997) (citing Venture Assocs. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 431 (7th Cir. 

1993)).

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before it, Relators’ complaint contains no allegation establishing that the contract 

expressly made compliance with § 52.203-13 a condition to payment. Thus, under

the “express condition of payment” approach, Relators’ claim under § 3729(a) 

would fail under an implied certification theory. See Circle B, 2010 WL 942293, at 

*10.

ii. Whether compliance with § 52.203-13 is a material 

contractual requirement 

Even if the court does not adopt the “express condition of payment”

approach, the Relators’ implied certification claim still fails due to their failure to 

show that compliance with § 52.203-13 was a “material contractual requirement.”

Doc. 57 at 31, 34, 37, 38, 41. While “[t]he existence of express contractual 

language specifically linking compliance to eligibility for payment may well 

constitute dispositive evidence” that compliance is a prerequisite to payment, 

express language “is not . . . a necessary condition” to sustain an allegation of false 

claims under an implied certification theory. United States v. Sci. Applications Int’l 

Corp., 626 F.3d 1257, 1269 (D.C. Cir. 2010); see also United States v. Triple 

Canopy, Inc., 775 F.3d 628, 636 (4th Cir. 2015). Instead, “to establish the 

existence of a ‘false or fraudulent’ claim on the basis of implied certification of a 

contractual condition, the FCA plaintiff . . . must show that the contractor withheld 

information about its noncompliance with material contractual requirements.” Sci. 

Applications Int’l Corp., 626 F.3d at 1269 (emphasis added). To meet this burden, 

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an FCA plaintiff must allege the implied certification “had a natural tendency to 

influence, or be capable of influencing, the Government’s decision to pay.” Triple 

Canopy, Inc., 775 F.3d at 637. For example, “materiality may be established . . .

through testimony demonstrating that both parties to the contract understood that 

payment was conditional on compliance with the requirement at issue.” Id. 

(quoting SAIC, 626 F.3d at 1269) (internal quotation marks omitted). 

Relators’ claims fail under the “material contractual requirement” because

aside from the conclusory allegations that Defendants violated “material 

contractual requirements,” Relators have not pleaded any particularized facts 

tending to show the existence of “objective requirements” in the contract that MD 

“failed to provide,” or that MD “continued to bill the Government with the 

knowledge that it was not providing the contract’s requirements.” 775 F.3d at 638. 

An example from the District of Columbia Circuit of the types of claims that fall 

under the “material contractual requirement” approach is instructive: 

Consider a company that contracts with the government to 

supply gasoline with an octane rating of ninety-one or higher. 

The contract provides that the government will pay the 

contractor on a monthly basis but nowhere states that supplying 

gasoline of the specified octane is a precondition of payment. 

Notwithstanding the contract’s ninety-one octane requirement, 

the company knowingly supplies gasoline that has an octane 

rating of only eighty-seven and fails to disclose this discrepancy 

to the government. The company then submits pre-printed

monthly invoice forms supplied by the government-forms that 

ask the contractor to specify the amount of gasoline supplied 

during the month but nowhere require it to certify that the 

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gasoline is at least ninety-one octane. So long as the 

government can show that supplying gasoline at the specified 

octane level was a material requirement of the contract, no one 

would doubt that the monthly invoice qualifies as a false claim 

under the FCA despite the fact that neither the contract nor the 

invoice expressly stated that monthly payments were 

conditioned on complying with the required octane level.

SAIC, 626 F.3d at 1270. Along the same lines, the Fourth Circuit in Triple Canopy

addressed a government contract for providing security on a military base in an 

active combat zone where the contract required that security officers undergo 

weapons training prior to serving as a security officer on a military base (“the 

marksmanship requirement”). Triple Canopy, 775 F.3d at 632. The complaint 

alleged that the contracts referred to the marksmanship requirement as a 

“responsibility” that the defendant must fulfill under the contract. Id. at 637. The 

complaint also contained “an abundance of allegations that [the contractor] did not 

satisfy [the marksmanship] requirement, and, instead, undertook a fraudulent 

scheme that included falsifying records to obscure its failure.” Id. The court 

concluded that the complaint sufficiently alleged that compliance with this 

contractual requirement was a prerequisite to payment because “common sense 

strongly suggests that the Government’s decision to pay a contractor for providing 

base security in an active combat zone would be influenced by knowledge that the 

guards could not, for lack of a better term, shoot straight.” Id. at 637–38. 

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In the case of the FMS contracts at issue here, Relators have not alleged 

facts demonstrating that compliance with § 52.203-13 was material to the 

agreements under circumstances similar to Triple Canopy or SAIC. Therefore, with 

respect to the allegations surrounding § 52.203-13, the court concludes that 

Relators do not adequately plead their § 3729(a)(1) claims under an implied 

certification theory using either the “express condition of payment” or the 

“material requirement” approaches.

6

b. Truth in Negotiations Act (“TINA”) 

In Counts III, IV, and V, Relators allege that MD failed to provide accurate 

pricing data pursuant to the TINA in conjunction with the El Salvador, Saudi, and 

Costa Rica contracts. Doc. 57 at 35, 38, 41. The parties generally agree that the 

FMS contracts are commercial, see doc. 71 at 30-31, meaning that under TINA,

“certified cost or pricing data are not required to be submitted.” 10 U.S.C. §

2306a(d)(1). Nonetheless, for commercial contracts, the Government’s

“contracting officer shall require submission of data other than certified cost or 

pricing data to the extent necessary to determine the reasonableness of the price of 

 6 Relators also generally base their implied certification theory claims on Defendants’ alleged violations of 

numerous other regulations and statutes, including 48 C.F.R. §§ 52.203-03 (Gratuities), 52.212-4 (Contract Terms 

and Conditions—Commercial Items), and 41 U.S.C. §§ 2103 and 2104. The court has reviewed these provisions and 

finds that none of them condition payment on compliance. Furthermore, none of the FMS contracts make 

compliance with these provisions an express condition of payment. See Circle B, 2010 WL 942293 at *9. Moreover, 

Relators’ complaint does not state a plausible claim under Triple Canopy or SAIC by demonstrating that the 

provisions relate to a material requirement of the contract. As other courts have cautioned, the “material contractual 

requirement” articulation of the implied certification theory “is prone to abuse” by parties seeking “to turn the 

violation of minor contractual provisions into an FCA action.” SAIC, 626 F.3d at 1270; see also Triple Canopy, 775 

F.3d at 637. 

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the contract.” Id. With the goal of “plac[ing] government and private contractors in 

roughly equal positions during contract negotiations[,] . . . TINA prevents 

contractors from withholding cost or pricing information from the 

government.” Aerojet Solid Propulsion Co. v. White, 291 F.3d 1328, 1330 (Fed. 

Cir. 2002). Since 1986, TINA has included an express definition of “cost and 

pricing data”: “all facts that . . . a prudent buyer or seller would reasonably 

expect to affect price negotiations significantly.” 10 U.S.C. § 2306a(h)(1).

In this case, Relators contend that they “have knowledge . . . that the 

contracting officer for one or more of the contracts at issue required such noncertified cost and pricing data,” and that MD, in submitting its proposals, provided 

the officer with inflated prices, “thereby misleading the officer.” Doc. 71 at 32. In 

particular, with respect to the El Salvador contract, Relators indeed allege that 

“AMCOM requested that MD provide a sales history (i.e., information on the 

prices at which the same or similar items had previously been sold to other 

commercial customers),” and that MD allegedly “only provided the Army [with] 

information” regarding “October 11, 2011 sale of an MD 500E to the Columbus, 

Ohio Police Department for the base price of $1,802,282, but did not disclose any 

prior sales” of helicopters, including one for a lower base price of $1,550,000. 

Doc. 57 at 18. Along the same lines, for the Costa Rica contract, MD’s Chief 

Operating Officer allegedly “‘cherry-picked’ higher priced commercial purchase 

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agreements between MD and its commercial customers to provide to the Army for 

its price evaluation, specifically failing to disclose an original purchase agreement 

for [a particular aircraft] and substituting it with a purchase agreement for the same 

aircraft that showed a higher price.”7 Id. at 28. Finally, with respect to the Saudi 

contract, Relators generally allege that “MD did not provide all the historical 

commercial pricing data that was necessary for the Army to effectively evaluate 

price reasonableness.”8 Id. at 24. In light of MD’s failure to provide accurate 

pricing information for these three contracts, Relators allege that the Army “was 

deprived of its ability to effectively negotiate a reasonable and lower price[,] which 

caused the agreed base price for each aircraft to be higher than it would have been 

if MD had fully complied with the Army’s request for pricing data.” Id. at 18-19. 

Accepting these allegations as true, the court concludes Relators have not 

sufficiently alleged that compliance with TINA is a prerequisite to payment as 

required to sustain their implied certification theory. Specifically, the alleged 

 7 For the Costa Rican contract, Relators generally state that MD failed to provide pricing information for 

approximately eleven previous helicopter sales that were the “same or similar,” doc. 57 at 28, but the complaint does 

not allege any particular information about any of these previous sales, when they occurred, or the base price for 

each. Moreover, Relators’ allegation that MD failed “to disclose an original purchase agreement for a Helicentro 

replacement aircraft SN RN083” and substituted the purchase agreement with one “for the same aircraft that showed 

a higher price,” id., does not support their purported misrepresentations because even assuming that the Government 

requested pricing information for previous sales of “same or similar” helicopters, as pleaded, Relators’ allegations 

regarding a “Helicentro replacement aircraft SN RN083” do not tend to show a misrepresentation regarding the

different aircraft in the Costa Rican contract—two “MD 600N” helicopters. See id. 

8 Because TINA states that the Government’s “contracting officer shall require submission of data . . . to 

the extent necessary to determine the reasonableness of the price of the contract. . .,” 10 U.S.C. § 2306a(d)(1), 

Relators’ failure to allege that the Government actually requested pricing data for this contract dooms their claim.

See doc. 57 at 25 (stating only that the Government “overlooked” obtaining the pricing information).

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TINA violations do not satisfy the express condition of payment approach and

Relators’ complaint does not demonstrate that the pricing requirements of TINA 

were material to the contracts. See United States v. Triple Canopy, Inc., 775 F.3d 

628, 636 (4th Cir. 2015); United States v. Sci. Applications Int’l Corp., 626 F.3d 

1257, 1269 (D.C. Cir. 2010).

For all of these reasons, the court concludes that Relators’ allegations fail to 

state a plausible claim under an implied certification theory.

B. Section 3729(a)(1)(C)—Conspiracy (Count VI)

In light of the decision to grant the motion to dismiss the other claims, the 

motion to dismiss count VI is also due to be granted. See U.S. ex rel. Potra v. 

Jacobson Companies, Inc., No. 1:12-CV-01600-WSD, 2014 WL 1275501, at *4 

(N.D. Ga. Mar. 27, 2014) (where relators’ allegations of false claims fail, “their 

claim that the Defendants conspired to violate the FCA necessarily fails”).

IV. CONCLUSION

For all these reasons, the court finds that the motion to dismiss is due to be 

granted.

9 A separate order will be entered in accordance with this opinion. 

 9 At the end of their brief, Relators request leave to amend if the court “grants some or all of the 

Defendants’ motions to dismiss. . .” Doc. 71 at 35. “[T]here is no rule that every request to amend must be granted,”

Panther Partners Inc. v. Ikanos Communications, Inc., 347 F. App’x 617, 620 (2d Cir. 2009), and “[i]t is within the 

court’s discretion to deny leave to amend. . . when [as here] leave is requested informally in a brief filed in 

opposition to a motion to dismiss,” Chechele v. Scheetz, 466 F. App’x 39, 41 (2d Cir. 2012). Although Relators’ first 

amended complaint, in response to Defendants’ initial motion to dismiss, failed to cure the deficiencies and there is 

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DONE the 31st day of March, 2016.

 

_________________________________

ABDUL K. KALLON

UNITED STATES DISTRICT JUDGE

 

no reason for the court to expect that a second amended complaint would cure these pleading defects, the court will 

reserve making a decision until after a motion is filed and it has had an opportunity to review the proposed 

amendment. 

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