Court Opinion

ID: 2664871
Source: CourtListenerOpinion
Date Created: 2014-04-04 06:36:42.755283+00
Date Added: 2024-06-11T12:19:31.050176
License: Public Domain

UNITED STATES DISTRICT COURT
                       FOR THE DISTRICT OF COLUMBIA

 UNITED STATES OF AMERICA, ex                    )
 reI. BRADY FOLLIARD,                            )
                                                 )
                      Plaintiff,                 )
                                                 )     Civil Case No. 07-1969 (RJL)
               v.                                )
                                                 )
 HEWLETT-PACKARD COMPANY,                        )
                                                 )
                      Defendant.

                             MEMORANDUM OPINION
                                                 tt-
                              (January   -L/-,
                                       2011) [#23]

      Plaintiff-realtor Brady Folliard ("realtor" or "Folliard") brings this qui tam action

under the False Claims Act ("FCA"), 31 U.S.C. §§ 3729 et seq., on behalf of the United

States, against Hewlett-Packard Company ("defendant" or "HP"). Now before the Court

is the defendant's Motion to Dismiss. After careful review of the pleadings, the relevant

law, and the entire record, the defendant's motion is GRANTED.

                                     BACKGROUND

      Defendant HP is an information and technology products and services company

that sells to the United States government under the General Services Administration

("GSA") Multiple Awards Schedule and under the Solutions for Enterprise- Wide

Procurement ("SEWP") contract managed by the National Aeronautics and Space

Administration ("NASA"). First Amed. Comp!. ("Comp!.") ~12. In addition to NASA,

other federal agencies can purchase information technology products from HP under the

NASA SEWP contract. Id.     ~13.   Indeed, since 1992, HP had sold information technology
products and services under the NASA SEWP contract to NASA as well as other federal

agencies.) ld.

       NASA SEWP contracts are covered by the Trade Agreements Act, which

generally prohibits the United States government from purchasing products that

originated in non-designated countries, except in certain circumstances. ld.       ~~16,    22.

Vendors may list products from non-designated countries if the country of origin is

truthfully identified. ld.   ~22.   This allows individual contracting offers to review and

apply the limited circumstances when purchase of a product from a non-designated

country is permitted. ld. China is a non-designated country. ld.        ~18.

       During the relevant time period, Folliard worked as a Strategic Account Executive

at Insight Public Sector ("IPS"), selling information technology products and services to

federal government agencies across the country. ld.       ~11.   IPS is known in the industry as

a Value Added Reseller, or VAR, because it is a business that combines, configures, and

sells computer products but does not manufacture any product itself. ld.        ~~24-25.    IPS is

an authorized selling agent for HP on the SEWP contract. ld.        ~29.   As part of his

employment with IPS, realtor became familiar with the products HP sold under the

SEWP contract, which are listed on the NASA SEWP webpage, along with each

) Specifically, from July 30, 2001 until April 20, 2007, HP sold information technology
products and services to federal agencies under Contract No. NAS5-01139. Compl. ~13.
On May 1,2007, HP executed a second NASA SEWP contract, Contract No.
NNG07DAI7B, which is valid through April 30, 2014. ld. Realtor estimates that
between 1992 and 2007, HP sold approximately $620 million in products and services to
the United States government, and that over the last 10 years, HP has provided
approximately $1 billion in goods and services to government customers in the District of
Columbia. ld.
                                                 2
product's country of origin. Id. ~~29-30. In 2007, realtor identified 38 HP products that

are incorrectly identified as originating in a designated country; according to realtor,

these products are, in fact, from China, a non-designated country. Id.     ~~31-33.

       According to Folliard, each time HP listed these products on the NASA SEWP

website, which it did in 2007, 2008, and 2009, HP knowingly made a material false

statement, causing, in turn, submission of a false claim each time one of the mis-

identified products was purchased. Id.   ~34.   In his complaint, realtor claims that "[i]t is

highly likely that some or all of these products were purchased by the Government,

especially those with the 'B-21' ending [in the product ID number], because, based upon

Plaintiffs experience, products with the suffix 'B-21' are commonly used and purchased

in Government Information Technology applications." Id.        ~40.   As such, Folliard

contends that HP has violated 31 U.S.C. §§ 3729(a)(l) and (a)(2) (2008) of the FCA, as

well as 31 U.S.C. §§ 3729(a)(l)(A) and (a)(l)(8) (West 2010) of the FCA, as amended

by the Fraud Enforcement Recovery Act of 2009 ("FERA").

       Folliard filed his initial complaint under seal on November 1,2007. On December

9,2009, having not yet heard from the government, the case was unsealed. On February

3,2010, the United States filed notice that it did not intend to intervene in this matter.

That same day, realtor filed his First Amended Complaint, which is the subject of

defendant's Motion to Dismiss.

                                         ANALYSIS

       A court may dismiss all or part of a complaint that "fail[s] to state a claim upon

which relief can be granted." Fed. R. Civ. P. 12(b)(6). In considering a motion to

                                                3
dismiss, the court may only consider "the facts alleged in the complaint, any documents

either attached to or incorporated in the complaint and matters of which [the court] may

take judicial notice." E.E. 0. C. v. St. Francis Xavier Parochial Sch., 117 F.3d 621, 624

(D.C. Cir. 1997). To survive a motion to dismiss made pursuant to Rule 12(b)(6), a

complaint must "plead[] factual content that allows the court to draw the reasonable

inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 129

S.Ct. 1937, 1949 (2009). In evaluating a Rule 12(b)(6) motion, the Court construes the

complaint "in favor of the plaintiff, who must be granted the benefit of all inferences that

can be derived from the facts alleged." Schuler v. United States, 617 F.2d 605, 608 (D.C.

Cir. 1979) (internal quotation marks omitted). However, factual allegations, even though

assumed to be true, must still "be enough to raise a right to relief above the speculative

level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Moreover, the Court

"need not accept inferences drawn by plaintiffI] if such inferences are unsupported by the

facts set out in the complaint. Nor must the court accept legal conclusions cast in the

form of factual allegations." Kowal v. MCI Commc 'ns Corp., 16 F.3d 1271, 1276 (D.C.

Cir.1994).

       A plaintiff alleging fraud, such as one suing under the FCA, must also "state with

particularity the circumstances constituting fraud [.]" Fed. R. Civ. P. 9(b); United States

ex reI. Williams v. Martin-Baker Aircraft Co., 389 F.3d 1251, 1256 (D.C. Cir. 2004)

(citing United States ex reI. Totten v. Bombardier Corp., 286 F.3d 542, 551-52 (D.C. Cir.

2002)). The particularity requirement allows the defendant to "defend against the charge

and not just deny that they have done anything wrong." Williams, 389 F.3d at 1259

                                             4
(quotations omitted). Accordingly, to survive a motion to dismiss, a complaint pleading

fraud must "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

must] identify individuals allegedly involved in the fraud." Id. at 1256 (internal

quotations and citations omitted).

       HP argues that the complaint must be dismissed in its entirety because it fails to

identify: (1) any false claims submitted to the United States by HP; (2) the date of any

such claims; (3) the content of any such claims; (4) the products for which the

government was actually billed; (5) any individuals involved in the alleged fraud; and (6)

the length of time between the alleged fraudulent practice and submission of claim for

payment. 2 I agree.

       Folliard lists four counts in his complaint, but in essence claims two FCA

violations. Because the FCA was amended in 2009 by FERA, Folliard includes two

counts for each statutory violation, alleging one each under the current statute as well as

its prior version. 3 As another member of this Court has recently noted, however, the

FERA changes to § 3729(a)(1) and (a)(2) are not material to a presentment claim to the

2 Folliard urges the Court to take judicial notice of the 54 exhibits attached to his
opposition to HP's motion. However, as the facts included in the exhibits and their
accuracy is subject to reasonable dispute, the Court declines to do so in this case and does
not consider the exhibits.
3 The FCA was amended by FERA on May 20,2009. Pub. L. No. 111-21 § 4(a), 123
Stat. 1617, 1621 (2009). All of the amendments to the FCA took effect immediately
except for subsection 3729(a)(1)(B), which took effect on June 7, 2008. Specifically,
Folliard claims that HP violated 31 U.S.C. § 3729(a)(1) prior to May 20, 2009, and the
amended version, 31 U.S.C. § 3729(a)(1)(A), after May 20, 2009; and that HP violated
31 U.S.C. § 3729(a)(2) prior to June 7,2008 and the amended version, § 3729(a)(1)(B)
after June 7, 2008.
                                             5
United States government. United States ex rel. Folliard v. CDW Technology Servs.,

Inc., 722 F. Supp. 2d. 20, 25-26 (D.D.C. 2010) (Huvelle, J.).4

       A. Counts I and II

       Count I and Count II of the complaint allege submission to the government of

false claims for payment-Count I as a violation of the pre-FERA FCA subsection (a)(l),

and Count II as a violation of the post-FERA FCA subsection (a)(l)(A). Because that

section of the FCA "attaches liability, not to underlying fraudulent activity, but to the

claim for payment," a realtor "must set forth an adequate factual basis for his allegations

that the [defendant] submitted false claims ... including a more detailed description of

the specific falsehoods that are the basis for his suit" to satisfy the heightened pleading

requirements. Totten, 286 F.3d at 551-52; 31 U.S.c. § 3729 (a)(l) and 31 U.S.C.

§ 3729(a)(l)(A) (imposing liability on a person who "knowingly presents, or causes to be

presented" a false or fraudulent claim); see also Allison Engine Co. v. United States ex

reI. Sanders, 553 U.S. 662, 671 (2009) (contrasting § 3729(a)(2), which does not require

submission of the false claim to the government, with § 3729(a)(l), which does).

       In this case, as HP points out, realtor does not identify a single false claim

submitted to the government for payment. While Folliard has alleged that HP

"knowingly submitted, and caused to be submitted, false or fraudulent claims for

4The United States argues that FERA strengthened the FCA such that the amended
version of the FCA imposes liability for presentment of a false claim for payment by
either the federal government or the recipient of federal funds. United States Stmt of
Interest [Dkt. #28] at 5 (citing S. Rep. No. 111-10 and 10-15 (2009)). In this case,
however, that distinction is without consequence as Folliard has only alleged presentment
of false claims to the federal government.
                                              6
payment and reimbursement by the United States Government" and the United States

paid these false claims (CompI. ~~44, 48), he has failed to plead any facts supporting this

bald recitation of the statute. Instead, Folliard merely argues that it is reasonable to infer

that the government purchased at least some of the 38 products whose country of origin

was misidentified, and that in selling those products HP caused a false claim to be

submitted. But Folliard has not even alleged such a sale. To say the least, such

speculative inferences are not sufficient to raise Folliard's "right to relief above the

speculative level," as required by Twombly. 550 U.S. at 553.

       Undaunted, Folliard argues that he need not plead actual submission of a false

claim because he alleges "particular details of a scheme to submit false claims paired

with reliable indicia that led to a strong inference that claims were actually submitted."

Pl.'s Opp'n 24-25 (quoting United States ex reI. Grubbs v. Kanneganti, 565 FJd 180,

190 (5th Cir. 2009»; see also Folliard, 722 F. Supp. 2d at 26-27. However, I do not find

Folliard's assertions to be reliable indicia that the claims were actually submitted.

Folliard does not point to anything other than the general popularity of some of the

products on his list to support the allegation that a false claim was submitted to the

government. There is nothing to indicate that the government did, in fact, purchase any

of these products from HP. Moreover, even assuming that Folliard had met his burden in

pleading the submission of a false claim, the complaint fails to identify who made the

false claims, when those claims were made, and any additional details about the content

                                              7
of the claims, and thus fails to meet the requirements of Rule 9(b) on these grounds as

welI. 5 Accordingly, Counts I and II must be dismissed.

       B. Counts III and IV

       Count III and Count IV allege that in misrepresenting the country of origin of its

products, HP "knowingly made, used, or caused to be made or used, material false

statements to obtain Federal Government payment for false or fraudulent claims" in

violation ofpre-FERA § 3729(a)(2) and post-FERA § 3729(a)(l)(8). CompI.             ~~53,   58.

Like Counts I and II, both Counts III and IV lack the required specificity to satisfy

realtor's pleading burden and must also be dismissed.

       As to Count III, a violation of § 3729(a)(2) requires "that the defendant made a

false record or statement for the purpose of getting a 'false or fraudulent claim paid or

approved by the Government.'" Allison Engine, 553 U.S. at 671 (quoting 31 U.S.C. §

3729(a)(2) (2008)). Unlike § 3729(a)(l), the defendant need not present the false claim

directly to the government to be liable; instead, the defendant must only intend for the

government to pay the claim. ld. at 669. However, to properly plead a § 3729(a)(2)

violation, a plaintiff must nevertheless allege that a false claim does, in fact, exist, even if

it was not submitted directly to the government by the defendant. As discussed above,

5 Folliard also argues that he should be entitled to post-pleading discovery under the Rule
11 (b )(3) exception because he has illustrated a high likelihood of uncovering evidence
necessary for a ruling in his favor. However, as courts in this and other jurisdictions have
noted, the heightened pleading standards of Rule 9(b) serve in part to prevent the filing of
a complaint as a means of discovering an unknown wrong. See, e.g., Martin v. Arc 0/ the
District o/Columbia, 541 F. Supp. 2d 77,83 (D.D.C. 2008); United States ex ref. Stinson,
Lyons, Gerlin & Bustamante, P.A. v. Blue Cross Blue Shield a/Georgia, Inc., 755 F.
Supp. 1040, 1052 (S.D. Ga. 1990). Allowing Folliard to proceed to post-pleading
discovery under Rule 11 (b )(3) would directly contravene this purpose.
                                               8
such allegations are completely absent from the complaint at issue. Moreover, under the

heightened Rule 9(b) requirements, the plaintiff must plead additional details about who

made the false statements and when they were made, which F olliard has failed to do.

Accordingly, Count III must be dismissed.

       For the same reasons, Count IV must also be dismissed. Though the parties

dispute whether the retroactivity language of the FERA amendment applies to claims for

payment pending as of June 7, 2008, or to court cases pending as of that date,6 even

assuming that § 3729(a)(l)(B) applies to realtor's claims, Count IV, which alleges the

same violation as Count III, must be dismissed for the same reasons previously discussed

as to Count III.

       In sum, as the defendant points out, F olliard' s complaint consists of little more

than a list of 38 HP products available for sale on the NASA SEWP website that

mistakenly identity the country of origin. Folliard does not provide any information as to

whether any of these products were, in fact, purchased by the United States; instead, he

speculates that because at least some of the products with similar item number suffixes

are "commonly used and purchased," it is therefore highly likely that at least some of the

6 The amendment states, in relevant part, that "subparagraph (B) of section 3 729( a)( 1) of
title 31, United States Code, as added by subsection (a)(1), shall take effect as if enacted
on June 7, 2008, and apply to all claims under the False Claims Act (31 U.S.C. 3729 et
seq.) that are pending on or after that date." FERA, Pub. L. No. 111-21, § 4(f)(1), 123
Stat. at 1625 (2009) (emphasis added). Note, however, that members of this Court have
held on multiple occasions that "claims" refers to claims for payment, and not pending
court cases. See, e.g., United States ex rei. Westrick v. Second Chance Body Armor, Inc.,
709 F. Supp. 2d 52, 55 (D.D.C. 2010) ("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."') (quotation omitted); United States ex rei. Bender v. North Am. Teiecomm.,
Inc., 686 F. Supp. 2d 46,49 n.4 (D.D.C. 2010).
                                              9
products were purchased by the government. See Compi.       ~40.   As discussed above,

because Folliard has not-and in all likelihood, cannot-allege the facts required to state

a claim under Rule 9(b), each count of F olliard' s complaint must be dismissed. 7

                                      CONCLUSION

       For all the foregoing reasons, the defendant's Motion to Dismiss is GRANTED.

An appropriate order shall accompany this memorandum opinion.

7 This action will be dismissed with prejudice as to all parties. Realtor filed his initial
complaint in November 2007, and had over two years to conduct additional discovery
and amend the current complaint. The United States also had over two years to elect to
intervene or to prepare a complaint in this matter and declined. Accordingly, this action
shall be dismissed with prejudice as to both realtor and the United States.
                                             10