Court Opinion

ID: 2663797
Source: CourtListenerOpinion
Date Created: 2014-04-04 02:40:07.011606+00
Date Added: 2024-06-11T13:04:02.938644
License: Public Domain

UNITED STATES DISTRICT COURT
                   FOR THE DISTRICT OF COLUMBIA

______________________________
                              )
UNITED STATES OF AMERICA,     )
                              )
               Plaintiff,     )
                              )
               v.             )      Civil Action No. 09-1458 (RWR)
                              )
FIRST CHOICE ARMOR &          )
EQUIPMENT, INC. et al.,       )
                              )
               Defendants.    )
______________________________)

                   MEMORANDUM OPINION AND ORDER

     The government filed a complaint against defendants First

Choice Armor & Equipment, Inc., its founder Edward Dovner,

Dovner’s wife and First Choice’s president and sole shareholder

Karen Herman, Exotic Cars LLC, Excel Aviation, LLC, and MRSA

Jets, LLC, alleging violations of the False Claims Act (“FCA”),

31 U.S.C. §§ 3729-33, and fraudulent conveyances under the

Federal Debt Collection Procedures Act (“FDCPA”), 28 U.S.C.

§ 3001 et seq., as well as claims of common law breach of

contract, payment by mistake, and unjust enrichment in connection

with the sale of Zylon body armor.   The defendants have moved to

dismiss.   Because the government has sufficiently alleged its FCA

and fraudulent conveyance claims, and because the government’s

FCA allegations also form the basis for its breach of contract

claim, the defendants’ motion to dismiss will be denied with

respect to these claims.    Because the government alleges the
                                  - 2 -

existence of an express contract with First Choice for direct

agency and GSA purchases of bulletproof vests, the payment by

mistake and unjust enrichment claims against First Choice will be

dismissed with respect to these purchases but not with respect to

state, local, or tribal purchases.        The motion to dismiss the

unjust enrichment claim against Dovner and Herman also will be

denied.

                               BACKGROUND

     The complaint alleges the following facts.        First Choice

purchased the synthetic fiber “Zylon” for use in the manufacture

of bulletproof vests, which it sold between early 2000 and

August 2005.   (Compl. ¶¶ 25-26.)    First Choice contracted with

Lincoln Fabrics Ltd., which wove Zylon fiber into fabric for use

in First Choice vests.   (Id. ¶ 26.)       “From 2000 to 2005, First

Choice’s marketing emphasized thin and lightweight Zylon vests as

a critical element of its sales pitch to the United States’ body

armor market.”   (Id. ¶ 29.)     First Choice sold vests to federal

agencies and to state, local, and tribal law enforcement

authorities under the Bullet Proof Vest Grant Partnership Act

(“BPVGPA”) Program, under which the federal government reimbursed

these authorities for up to fifty percent of the costs of the

body armor.    (Id. ¶¶ 15-24.)   During the time it sold its Zylon

vests, First Choice issued an industry-standard five-year

warranty on them.   (Id. ¶ 30.)     The federal government paid First
                               - 3 -

Choice at least $2.47 million for more than 7,000 Zylon vests.

(Id. ¶¶ 17, 21.)

     The government alleges that beginning in 2001, First Choice

and Dovner learned that raw Zylon degraded as it aged and when it

was exposed to light, heat, and humidity.   In July 2001, Toyobo,

the manufacturer of Zylon, informed First Choice and Dovner that

Zylon’s tensile strength decreased in high heat and humidity (id.

¶ 35), and DSM, a Dutch company that manufactured Zylon products,

announced that it was postponing introducing Zylon products to

market because of concerns about its ballistics resistance.    (Id.

¶ 34.)   Toyobo informed First Choice and Dovner in August 2001

and then again in November 2001 that the “degradation problem was

worse than Toyobo had first indicated.”   (Id. ¶¶ 36, 38.)    In

October 2003, Toyobo disclosed to First Choice and Dovner data

from fiber strength tests Toyobo conducted on woven Zylon ––

which approximated more closely the condition of Zylon in First

Choice’s vests than did raw Zylon –– showing more serious

degradation than Toyobo’s data on raw Zylon had suggested.    (Id.

¶ 45.)

     First Choice sought guidance from Cheung Lie Ting, the

ISO 9000 quality specialist for Lincoln Fabrics,1 about how to

     1
       “The ISO 9000 Standards are a set of guidelines created by
the International Organization for Standardization that assure
that businesses meet certain quality control and management
standards.” (Compl. ¶ 2 n.1.)
                                  - 4 -

respond to the degradation data, and Ting “recommended that First

Choice [add more] layers of ballistic resistant materials to

compensate for the Zylon degradation.”    (Id. ¶¶ 2, 37.)

Additionally, Doug Van der Pool, First Choice’s Vice President of

Sales, reported to Dovner that other manufacturers were modifying

their Zylon vests to compensate for the degradation.       (Id.

¶¶ 41, 44.)    “But First Choice and Dovner ignored th[ese]

warning[s], failed to add any more protective layers, and

continued to market their Zylon vests as suitable for ballistic

protection and as the thinnest and lightest vests available on

the market.”   (Id. ¶ 2.)   And, in August 2003, “First Choice

issued a press release claiming that its vests were different

from that of the competition . . . and were thicker and had

higher ariel density than the competition’s vests.”    (Id. ¶ 43.)

     First Choice discontinued sales of its 100% Zylon vests in

April 2004 and discontinued sales of all Zylon vests in

August 2005.   (Id. ¶¶ 46, 47.)    After learning of the

government’s investigation regarding Zylon, Dovner and Herman

removed more than $5 million from First Choice, causing the

company to become insolvent.   (Id. ¶ 50.)    The government alleges

that Dovner and Herman used these funds to purchase a Ferrari, a

Maserati, and a private jet.   (Id. ¶¶ 51-55.)

     The government filed this complaint asserting claims against

First Choice and Dovner for FCA violations involving presenting
                                - 5 -

fraudulent claims (Count 1) and making false statements

(Count 2), against First Choice for common law breach of contract

(Count 3) and payment by mistake (Count 4), and against First

Choice, Dovner and Herman for common law unjust enrichment

(Count 5) and for making fraudulent conveyances (Counts 6, 7, 8).

The defendants have moved under Federal Rule of Civil Procedure

12(b)(6) to dismiss for failure to state a claim and to

sufficiently plead with particularity the FCA and fraudulent

conveyance counts, and for failure to state a claim the payment

by mistake and unjust enrichment counts.     The defendants also

have moved under Rule 12(b)(1) to dismiss for lack of subject-

matter jurisdiction the breach of contract count.

                             DISCUSSION

I.   FAILURE TO STATE A CLAIM

     In evaluating a Rule 12(b)(6) motion, a court “‘may consider

only the facts alleged in the complaint, any documents either

attached to or incorporated in the complaint and matters of which

[a court] may take judicial notice.’”     Trudeau v. FTC, 456 F.3d
178, 183 (D.C. Cir. 2006) (quoting EEOC v. St. Francis Xavier

Parochial Sch., 117 F.3d 621, 624 (D.C. Cir. 1997)).     A court

considering a Rule 12(b)(6) challenge must accept as true any

facts alleged by the plaintiff and grant all reasonable

inferences drawn from those facts.      Browning v. Clinton, 292 F.3d
235, 242 (D.C. Cir. 2002).   “To survive a motion to dismiss, a
                                 - 6 -

complaint must contain sufficient factual matter, accepted as

true, to ‘state a claim to relief that is plausible on its

face.’”   Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting

Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)).        A

plaintiff must plead “factual content that allows the court to

draw the reasonable inference that the defendant is liable for

the misconduct alleged.”   Id.

     Rule 9(b) applies to FCA actions.       United States ex rel.

Totten v. Bombardier Corp., 286 F.3d 542, 551-52 (D.C. Cir. 2002)

(noting that every circuit to consider the issue has held that

Rule 9(b) applies to FCA complaints).      It provides that “[i]n

alleging fraud or mistake, a party must state with particularity

the circumstances constituting fraud or mistake.      Malice, intent,

knowledge, and other conditions of a person’s mind may be alleged

generally.”   Fed. R. Civ. P. 9(b).      Motions to dismiss for

failure to plead fraud with sufficient particularity are

evaluated in light of the overall purposes of Rule 9(b) to

“ensure that defendants have adequate notice of the charges

against them to prepare a defense[,]” United States ex rel.

McCready v. Columbia/HCA Healthcare Corp., 251 F. Supp. 2d 114,

116 (D.D.C. 2003), discourage “suits brought solely for their

nuisance value” or as “frivolous accusations of moral

turpitude[,]” United States ex rel. Joseph v. Cannon, 642 F.2d
1373, 1385 (D.C. Cir. 1981), and “‘protect reputations of . . .
                               - 7 -

professionals from scurrilous and baseless allegations of

fraud[.]’”   Id. at 1385 n.103 (alteration in original) (quoting

Felton v. Walston & Co., Inc., 508 F.2d 577, 581 (2d Cir. 1974)).

     Rule 9(b) does not abrogate Rule 8, and must be read in

light of Rule 8's requirement that allegations be simple,

concise, and direct, and short and plain statements of each

claim.   Joseph, 642 F.2d at 1386; see also United States ex rel.

Pogue v. Diabetes Treatment Ctrs. of Am., Inc., 238 F. Supp. 2d
258, 269 (D.D.C. 2002) (“While . . . Rule 9(b) requires more

particularity than Rule 8, . . . Rule 9(b) does not completely

vitiate the liberality of Rule 8.”).   In an FCA action, Rule 9(b)

requires 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.”   United

States ex rel. Williams v. Martin-Baker Aircraft Co., Ltd., 389
F.3d 1251, 1256 (D.C. Cir. 2004) (quoting Kowal v. MCI

Communic’ns Corp., 16 F.3d 1271, 1278 (D.C. Cir. 1994)).    “In

sum, although Rule 9(b) does not require plaintiffs to allege

every fact pertaining to every instance of fraud when a scheme

spans several years, defendants must be able to ‘defend against

the charge and not just deny that they have done anything

wrong.’”   Id. at 1259 (quoting United States ex rel. Lee v.

SmithKline Beecham, Inc., 245 F.3d 1048, 1052 (9th Cir. 2001));
                                - 8 -

accord McCready, 251 F. Supp. 2d at 116 (reasoning that a court

“‘should hesitate to dismiss a complaint under Rule 9(b) if the

court 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’” (quoting Harrison v.

Westinghouse Savannah River Co., 176 F.3d 776, 784 (4th Cir.

1999))).

     A.     Presenting false claims

     The FCA created a cause of action against anyone who

“knowingly presents, or causes to be presented, to an officer or

employee of the United States Government . . . a false or

fraudulent claim for payment or approval[.]”   31 U.S.C.

§ 3729(a)(1) (2000).2   See also United States ex rel. Siewick v.

Jamieson Sci. & Eng’g, Inc., 214 F.3d 1372, 1374 (D.C. Cir.

2000).    “[T]he elements of section 3729(a)(1) are (1) the

defendant submitted a claim to the government, (2) the claim was

false, and (3) the defendant knew the claim was false.”    United

     2
       Congress amended the FCA in the Fraud Enforcement and
Recovery Act of 2009, altering slightly the language in the
presentment provision. The amendment of the presentment
provision took “effect on the date of enactment of this Act and
shall apply to conduct on or after the date of enactment[.]”
P.L. 111-21, § 4 at 1625. Since the alleged conduct here
occurred before 2009, the provision as amended in 2009 does not
apply here, and references in this opinion to § 3729(a)(1) are to
the pre-amendment version.
                                - 9 -

States ex rel. Harris v. Bernad, 275 F. Supp. 2d 1, 6 (D.D.C.

2003).

     The defendants argue that the government has not alleged

sufficiently the falsity of any claim.   (Def.’s Mot. to Dismiss

(“Def.’s Mot.”) at 7.)   A claim may be false under the FCA if it

is either factually or legally false.    United States v. Sci.

Applications Int’l Corp., 555 F. Supp. 2d 40, 49 (D.D.C. 2008)

(“SAIC I”).   A claim can be “factually false if it invoices for

services that were not rendered” or incorrectly describes goods

or services provided.    United States ex rel. Hockett v.

Columbia/HCA Healthcare Corp., 498 F. Supp. 2d 25, 64 (D.D.C.

2007).   Alternatively, a claim is legally false if it contains an

express false certification –– that is, “a claim that falsely

certifies compliance with a particular statute, regulation or

contractual terms, where compliance is a prerequisite for

payment.”   Id. (internal quotations marks omitted).   A claim also

may be legally false under an implied certification theory.      Id.

One way to plead a false claim under this theory is to plead

“that the contractor withheld information about its noncompliance

with material contractual requirements.”3   United States v. Sci.

     3
       Another way is to plead that the government would not have
paid funds to a party had it known of a violation of a law or
regulation, and “the claim submitted for those funds contained an
implied certification of compliance with the law or regulation
and was fraudulent.” United States ex rel. Barrett v.
Columbia/HCA Healthcare Corp., 251 F. Supp. 2d 28, 33 (D.D.C.
2003).
                               - 10 -

Applications Int’l Corp., 626 F.3d 1257, 1269 (D.C. Cir. 2010)

(“SAIC III”).    A contractual requirement can be considered

material if “both parties to the contract understood that payment

was conditional on compliance with the requirement at issue.”

Id.; see also United States v. TDC Mgmt. Corp., Inc., 288 F.3d
421, 426 (D.C. Cir. 2002) (noting that withholding “‘information

critical to the decision to pay’” is a false claim (quoting Ab-

Tech Constr., Inc. v. United States, 31 Fed. Cl. 429, 434 (Fed.

Cl. 1994))).

     The government alleges that it believed it was purchasing

vests that met the industry-standard five-year warranty against

defects.    (See Compl. ¶¶ 17-18, 30.)   Additionally, the

government alleges that the defendants failed to disclose

information that revealed that the vests degraded more quickly

than First Choice represented in its marketing materials and that

cast doubt on the vests’ ability to satisfy the five-year

warranty.   (See id. ¶¶ 2, 33-41, 43-47.)    The defendants “knew

. . . that the Zylon bullet-proof vests First Choice sold were

defective and degraded more quickly than First Choice and Dovner

represented.”   (Id. ¶ 2.)   Ting warned the defendants to add

additional layers to their vests, but the defendants “failed to

add any more protective layers, and continued to market their

Zylon vests as suitable for ballistic protection and as the

thinnest and lightest vests available on the market.”    (Id.)
                                  - 11 -

Further, the government would not have paid or reimbursed the

claims for payment for the First Choice Zylon vests if it “had

known that the Zylon in the vests degraded much more rapidly than

disclosed[.]”4      (Compl. ¶18; see also id. ¶¶ 22, 24.)

       Because the government does not allege in the complaint that

the defendants invoiced for services not rendered or described

incorrectly the goods First Choice provided, the government has

not pled that the defendants submitted a factually false claim.

Nor has the government pled an express false certification claim,

since the complaint does not allege that any of the relevant

contracts contained express provisions requiring five-year

warranties against defects.      Rather, the government has pled that

it understood to be a condition of payment the requirement that

the vests satisfy the five-year industry standard warranty by

remaining fit for use as body armor for five years.         (Id. ¶¶ 30,

57.)       Although the government does not state directly in its

       4
       Although the defendants argue that the government has
failed to state a claim under § 3729(a)(1) because the
allegations underlying Count 1 of the complaint fail to include
the word “material” (Def.’s Mot. at 8), the defendants cite no
authority for the proposition that the word “material” carries
such talismanic import. Rather, to satisfy the materiality
requirement, a complaint must allege merely “that the government
would not have honored the claim presented to it if it were aware
of the violation.” Barrett, 251 F. Supp. 2d at 33. The
government’s allegations that it would not have paid for the
vests had it known about Zylon’s degradation are sufficient to
satisfy this requirement. See United States v. Honeywell Int’l
Inc., Civil Action No. 08-961 (RWR), 2011 WL 2672624, at *4-5
(D.D.C. July 8, 2011).
                              - 12 -

complaint that the defendants also understood such requirements

to be conditions of payment, when construed in the light most

favorable to the government, the allegations that even when

presented with the degradation data, First Choice made no change

in how it marketed its vests or in the length of the warranty are

sufficient to plead that the defendants also understood payment

to be conditioned upon compliance with these requirements.      Thus,

these allegations are sufficient to satisfy the materiality

requirement and to state an implied certification claim with

respect to a contractual condition.    See United States v.

Honeywell Int’l Inc., Civil Action No. 08-961 (RWR), 2011 WL
2672624, at *5 (D.D.C. July 8, 2011).    The government sets out in

detail the time, place, and content of the false representations

and identifies individuals allegedly involved in the fraud, such

that its allegations satisfy the requirements of Rule 9(b).

     The defendants argue that the government has misconstrued

the relevant warranty as one that guaranteed service for five

years and that First Choice warranted only that it would replace

or repair a defective shield within five years of its retail

purchase.   (Def.’s Mot. at 7 n.1.)    The defendants cite in

support of their argument a warranty that they have attached to

their motion to dismiss.   (Id., Ex. A.)    This warranty is not

attached to the complaint and need not be considered in assessing

whether the complaint adequately pleads a cause of action.
                              - 13 -

See St. Francis Xavier Parochial Sch., 117 F.3d at 624 n.3

(refusing to consider materials not attached to the pleadings

when reviewing district court ruling on a motion to dismiss).

Moreover, even if the defendants had claimed –– which they have

not –– that the warranty they cite was standard for the sales of

all First Choice vests, the defendants’ argument raises questions

of fact that are more appropriately resolved after discovery

closes, such as the scope of the warranty and whether First

Choice issued that precise warranty upon each vest sale.   See

Thompson v. Fathom Creative, Inc., 626 F. Supp. 2d 48, 52-53

(D.D.C. 2009) (noting that pre-discovery summary judgment motions

are disfavored).   Thus, these factual issues will not be resolved

at the motion to dismiss stage of the litigation, where the

plaintiff’s factual allegations are accepted as true.

See Honeywell, 2011 WL 2672624, at *5.

     B.   False statements

     The government alternatively pleads a claim under 31 U.S.C.

§ 3729(a)(1)(B), which creates a cause of action against anyone

who “knowingly makes, uses, or causes to be made or used, a false

record or statement material to a false or fraudulent claim.”

This false statements provision of the FCA was enacted in 2009

when the Fraud Enforcement and Recovery Act (“FERA”) amended the

previous version which had created a cause of action against

anyone who “knowingly makes, uses, or causes to be made or used,
                               - 14 -

a false record or statement to get a false or fraudulent claim

paid or approved by the Government.”     31 U.S.C. § 3729(a)(2)

(2000).   FERA provided for § 3729(a)(1)(B)’s retroactive

application “to all claims under the False Claims Act . . . that

are pending on or after” June 7, 2008.     P.L. 111-21, § 4 at 1625.

The word “claims,” as it applies in the relevant provision,

refers to “a defendant’s request for payment” and not to “civil

actions for FCA violations.”   United States v. Sci. Applications

Int’l Corp., 653 F. Supp. 2d 87, 107 (D.D.C. 2009), vacated in

part and remanded on other grounds by SAIC III, 626 F.3d 1257.

     The defendants argue that since § 3729(a)(1)(B) cited in

Count 2 applies only to claims for payment pending on or after

June 7, 2008, which post-dates all claims alleged in the

complaint, Count 2 must be dismissed.     (Def.’s Mot. at 9.)

However, that no requests for payment at issue here were pending

after June 7, 2008 does not warrant dismissing the false

statement count.   The unamended § 3729(a)(2) provision admittedly

applies to the claims for payment.      See Honeywell, 2011 WL
2672624, at *7 n.7.   Even though the complaint erroneously cites

and employs some text from the amended statutory provision, the

complaint provides ample notice to the defendants that the

government is bringing claims under the FCA’s false statement

provision.   See Delfani v. U.S. Capitol Guide Bd., Civil Action

No. 03-949 (RWR), 2005 WL 736644, at *5 n.6 (D.D.C. Mar. 31,
                              - 15 -

2005) (declining to dismiss causes of action asserted “under the

wrong statutory citations” because “plaintiff’s allegations are

sufficient to put defendant on notice of her claims, and given

the liberal pleading . . . standards set forth in Rule[] 8”).

     Section 3729(a)(2) attaches FCA liability to a defendant who

prepares in support of a claim a statement it knows to be a

misrepresentation, even if that defendant did not actually submit

either the claims or the statement to the government.    United

States ex rel. Totten v. Bombardier Corp., 380 F.3d 488, 501

(D.C. Cir. 2004) (noting that “(a)(2) is complementary to (a)(1),

designed to prevent those who make false records or statements

. . . from escaping liability solely on the ground that they did

not themselves present a claim for payment or approval”); see

also Harris, 275 F. Supp. 2d at 6 (noting that “the main purpose

of section 3729(a)(2) is to remove any defense that the

defendants themselves did not submit false claims to the

government”).   To prove a violation of the false statements

provision, “a plaintiff must show that (1) the defendant created

a record and used this record to get the government[] to pay its

claim, (2) the record was false, and (3) the defendants knew that

the record was false.”   Harris, 275 F. Supp. 2d at 6.    The

defendants do not argue that the government’s allegations are

insufficient to satisfy these requirements.   The government has
                              - 16 -

pled adequately a violation of the unamended false statements

provision.

C.   Equitable claims

     The defendants argue that the government cannot

simultaneously proceed on its FCA claims and its claims of

payment by mistake and unjust enrichment.    (Def.’s Mot. at 11.)

Rule 8(d)(2) allows a plaintiff to plead alternative theories of

liability.   Accordingly, “at the motion-to-dismiss stage, courts

in this district . . . have permitted the government to proceed

with claims alleging FCA violations as well as claims for unjust

enrichment or payment by mistake.”     United States ex rel. Purcell

v. MWI Corp., 254 F. Supp. 2d 69, 79 (D.D.C. 2003).     However, “it

does not appear that the D.C. Circuit has [wavered] from the rule

that ‘there can be no claim for unjust enrichment when an express

contract exists between the parties.’”    SAIC I, 555 F. Supp. 2d

at 59-60 (quoting Albrecht v. Comm. on Employee Benefits of Fed.

Reserve Employee Benefits Sys., 357 F.3d 62, 69 (D.C. Cir.

2004)).   Allegations in a complaint that an express contract

existed between the parties, therefore, preclude a plaintiff from

proceeding on alternative theories of FCA liability and unjust

enrichment or payment by mistake.    See Purcell, 254 F. Supp. 2d

at 79.

     Here, the government acknowledges that its complaint alleges

the existence of an express contract between First Choice and the
                                - 17 -

United States with respect to vest purchases through the GSA

program and through agencies’ direct purchases.   However, the

government’s complaint does not allege an express contract

between First Choice and the government with respect to vests

that state, local, and tribal authorities purchased under the

BPVGPA.   (U.S. Resp. to Defs.’ Mot to Dismiss (“U.S. Resp.”) at

18; Compl. ¶¶ 17, 23.)    The defendants’ motion to dismiss the

payment by mistake count and the unjust enrichment count as to

First Choice therefore will be granted with respect to purchases

through the GSA program and direct agency purchases and denied

with respect to purchases under the BPVGPA.   Because the

government’s complaint does not allege an express contract

between the government and defendants Dovner and Herman, the

defendants’ motion to dismiss the unjust enrichment claim will be

denied with respect to these defendants.

     D.      Fraudulent conveyances

     The FDCPA provides “the exclusive civil procedures for the

United States . . . to obtain, before judgment on a claim for a

debt, a remedy in connection with such claim.”    28 U.S.C.

§ 3001(a).    The government alleges claims under 28 U.S.C.

§ 3304(a)(1), which provides that

     a transfer made or obligation incurred by a debtor is
     fraudulent as to a debt to the United States which
     arises before the transfer is made or the obligation is
     incurred if . . . the debtor makes the transfer or
     incurs the obligation without receiving a reasonably
     equivalent value in exchange for the transfer or
                              - 18 -

     obligation; and . . . the debtor is insolvent at that
     time or the debtor becomes insolvent as a result of the
     transfer or obligation[.]

The government also alleges claims under 28 U.S.C. § 3304(b)(1),

which provides that “a transfer made or obligation incurred by a

debtor is fraudulent as to a debt to the United States, whether

such debt arises before or after the transfer is made or the

obligation incurred, if the debtor makes the transfer or incurs

the obligation” either “with actual intent to hinder, delay, or

defraud a creditor[,]” 28 U.S.C. § 3304(b)(1)(A), or

     without receiving a reasonably equivalent value in
     exchange for the transfer or obligation if the debtor
     . . . was engaged or was about to engage in a business
     or transaction for which the remaining assets of the
     debtor were unreasonably small in relation to the
     business or transaction; or . . . intended to incur, or
     believed or reasonably should have believed that he
     would incur, debts beyond his ability to pay as they
     became due.

28 U.S.C. § 3304(b)(1)(B).

           1.   Debt

     The defendants argue that the government has failed to state

a claim under the FDCPA because the defendants did not owe a debt

to the government, as required by 28 U.S.C. § 3304.    (Def.’s Mot.

at 13.)   A debt is defined by the FDCPA as including “an amount

that is owing to the United States on account of a . . . penalty

[or] damages[.]”   28 U.S.C. § 3002(3)(B).   Because the FDCPA

allows the United States to obtain a remedy before judgment on a

claim or a debt, the government can proceed under the statute
                               - 19 -

when it alleges against a defendant claims under the FCA,

regardless of whether judgment has been entered on those claims.

See United States ex rel. Doe v. DeGregorio, 510 F. Supp. 2d 877,

883-84 (M.D. Fla. 2007).   Conceptually, a party that violates the

FCA incurs a debt to the government as soon as the government

pays the fraudulent claim.   Id.   Thus, by alleging that the

defendants submitted false claims and made false statements under

the FCA, the government sufficiently alleges the existence of a

debt under the FDCPA.5

          2.   Particularity

     The defendants also argue that the government’s allegations

with respect to the FDCPA counts do not satisfy Rule 9(b)’s

particularity requirements because many of the government’s

allegations are on information and belief.   (Def.’s Mot. at 16-

17; Compl. ¶¶ 50-55.)    Although no court in this circuit or

district appears to have applied Rule 9(b) to fraudulent

conveyance claims under the FDCPA, other courts have applied the

particularity requirements to such claims.   See, e.g., United

States v. Maxwell, 189 F. Supp. 2d 395, 399 (E.D. Va. 2002).

Assuming that the particularity requirement applies to the

     5
       To the extent that the defendants argue that the warranty
on their vests prevented them from owing a debt to the government
unless and until First Choice refused to repair or replace a
defective vest, this argument raises questions of fact about the
scope of the applicable warranty that cannot be resolved
appropriately before discovery. See supra I(A).
                               - 20 -

government’s fraudulent conveyance claims, “pleadings on

information and belief require an allegation that the necessary

information lies within the defendant’s control[.]”    Kowal, 16
F.3d at 1279 n.3.

     Here, the government’s complaint contains no such

allegation.   However, “‘[w]hile it is generally understood that

the complaint may not be amended by legal memoranda that are

submitted as opposition to motions for dismissal . . . courts

have allowed, for Rule 9(b) purposes, a party to supplement its

complaint through such legal memoranda for the sake of judicial

economy.’”    United States ex rel. Bender v. N. Am. Telecommc’ns,

Inc., 686 F. Supp. 2d 46, 53 (D.D.C. 2010) (alteration in

original) (quoting Shekoyan v. Sibley Int’l Corp., 217 F. Supp.
2d 59, 73 (D.D.C. 2002)); see also United States ex rel. Head v.

Kane Co., Civil Action No. 05-317 (GK), 2011 WL 3010610, at *13

n.29 (D.D.C. July 25, 2011) (noting that “for Rule 9(b) purposes,

courts have allowed plaintiffs to allege lack of access to

necessary information in their opposition briefs”).    The

government asserts in its opposition to the defendants’ motion to

dismiss that all of the information the government alleged in its

complaint on information and belief is “in Defendants’

possession[.]”   (U.S. Resp. at 23.)    Thus, the government’s

allegations satisfy the particularity requirement with respect to

its fraudulent conveyance claims.
                                - 21 -

II.   SUBJECT-MATTER JURISDICTION

      The defendants move under Rule 12(b)(1) to dismiss the

breach of contract count for lack of subject-matter jurisdiction,

arguing that the Congress Disputes Act (“CDA”), 41 U.S.C. § 601

et seq., establishes a comprehensive administrative scheme for

resolving government contract disputes, and that federal district

courts lack jurisdiction over breach of contract claims subject

to the CDA.   (Def.’s Mot. at 10.)   “On a motion to dismiss for

lack of subject-matter jurisdiction pursuant to Rule 12(b)(1),

the plaintiff bears the burden of establishing that the court has

subject-matter jurisdiction.”    Larsen v. U.S. Navy, 486 F. Supp.
2d 11, 18 (D.D.C. 2007); see also Moms Against Mercury v. FDA,

483 F.3d 824, 828 (D.C. Cir. 2007).

      Although the “CDA provides the exclusive avenue for relief

for all . . . contract claims against the United States[,]” A&S

Council Oil Co., Inc. v. Lader, 56 F.3d 234, 236 (D.C. Cir.

1995), “the CDA jurisdictional limits contain an explicit

exception for ‘any claim involving fraud.’”   United States v.

Kellogg Brown & Root Servs., Inc., Civil Action No. 10-530 (RCL),

2011 WL 3303486, at *13 (D.D.C. Aug. 3, 2011) (quoting 41 U.S.C.

§ 605(a)).    The CDA exception applies to claims “involving fraud”

and not merely to claims “of fraud” or “for fraud.”   “The use of

this broader language reflects a congressional intent to except

from CDA exclusivity not only causes of action for fraud in
                              - 22 -

particular, but also actions the factual bases of which are

intertwined with allegations of fraud.”    United States v. Unified

Indus., Inc., 929 F. Supp. 947, 950-51 (E.D. Va. 1996).     Since

the same factual allegations form the basis for both the

government’s FCA claims and breach of contract claims, the CDA

jurisdictional limit does not bar the government’s breach of

contract claim.   See Kellogg Brown & Root Servs., Inc., 2011 WL
3303486, at *13 (denying motion to dismiss for lack of subject

matter jurisdiction the government’s breach of contract claim

where FCA claim remained pending).     The defendant’s motion to

dismiss the breach of contract claim therefore will be denied.

                       CONCLUSION AND ORDER

     The government has sufficiently alleged its FCA and

fraudulent conveyance claims, and the CDA does not create a

jurisdictional bar to the government’s breach of contract claim.

Because the government pleads the existence of an express

contract with First Choice for direct agency and GSA purchases of

bulletproof vests, the government cannot state a claim for

payment by mistake or for unjust enrichment against First Choice

with respect to these purchases.   Accordingly, it is hereby

     ORDERED that the defendants’ motion [10] to dismiss be, and

hereby is, GRANTED with respect to the payment by mistake and

unjust enrichment counts as to defendant First Choice for direct

agency and GSA purchases, and DENIED in all other respects.
                         - 23 -

SIGNED this 29th day of August, 2011.

                         __________/s/_______________
                         RICHARD W. ROBERTS
                         United States District Judge