Head v. the Kane Company

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
______________________________
UNITED STATES OF AMERICA, )
)
ex rel. )
)
ANTHONY HEAD )
)
Plaintiff, )
)
v. ) Civil Action No. 05-317 (GK)
)
THE KANE COMPANY, et al., )
)
Defendants. )
______________________________)

MEMORANDUM OPINION

Relator Anthony Head brings this qui tam action, pursuant to

the False Claims Act (“FCA”), 31 U.S.C. § 3729 et seq., against

Defendants Kane Company (“the Company”), Settles Associates, Inc.,

the Perara Group, Inc., Management Alternatives, Inc., Harris

Design Group, P.C., as well as Kane Company officers, John Kane,

Ronald Meliker, James Durfee, William Auchter, and Buck Whitman.1

Relator also brings breach of contract and state law tort claims

against Defendants Kane Company, John Kane, and Ronald Meliker.

The U.S. Government has intervened in Relator’s qui tam action

and brings suit for violations of the FCA against Defendants Kane

1
According to the docket, Defendants Settles Associates, Inc.,
the Perara Group, Inc., Management Alternatives, Inc., Harris
Design Group, P.C., as well as Kane Company officers, James Durfee,
William Auchter, and Buck Whitman have never been served by
Relator. Consequently, the Court does not have jurisdiction to
consider Relator’s claims against these Defendants.
Company and its subsidiaries, including Office Movers, Inc., and

Office Installers, Inc.

This matter is presently before the Court on Defendants’

Motion to Dismiss, (Nov. 15, 2010) [Dkt. No. 115], Relator’s Third

Amended Complaint, (“3d. Am. Compl.”) (Oct. 13, 2010) [Dkt. No.

113], and the United States’ Complaint in Intervention (“U.S.

Compl.”) (Apr. 27, 2009) [Dkt. No. 47], pursuant to Federal Rules

of Civil Procedure 12(b)(6) and 9(b).2 Upon consideration of the

Motion, Opposition, Reply, and the entire record herein, and for

the reasons set forth below, the Motion to Dismiss is granted in

part and denied in part.

I. Background3

Relator Anthony Head began working for Defendant Kane Company

on December 1, 1997. 3d. Am. Compl. ¶ 14. Defendant Kane Company is

a Maryland corporation providing office moving and other services

to corporate and government clients. Id. ¶ 16. Defendant John Kane

2
Defendants’ Motion to Dismiss the Third Amended Complaint has
been jointly brought by Defendants Kane Company, John Kane, and
Ronald Meliker. Unless otherwise noted, in this opinion the term
“Defendants” shall refer to the Kane Company, John Kane, and Ronald
Meliker.
3
For purposes of ruling on a motion to dismiss, the factual
allegations of the complaint must be presumed to be true and
liberally construed in favor of the plaintiff. Aktieselskabet AF
21. November 2001 v. Fame Jeans Inc., 525 F.3d 8, 15 (D.C. Cir.
2008); Shear v. Nat’l Rifle Ass’n of Am., 606 F.2d 1251, 1253 (D.C.
Cir. 1979). Therefore, the facts set forth herein are taken from
Relator’s Third Amended Complaint, the United States’ Complaint in
Intervention, and the undisputed facts in the record.

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is President and CEO of Kane Company, and Defendant Ronald Meliker

is Executive Vice President and COO of Kane Company. Id. ¶¶ 17, 19.

During his employment by the Company, Relator served in

various positions, including Project Manager Coordinator and Vice

President of various Kane Company subsidiaries. Id. In these

capacities, Relator attended various Company meetings, including at

the executive-level, and reviewed a number of Kane Company’s

government contracts. Id. ¶ 36.

Since at least 1980, Kane Company has entered into various

agreements, governed by the Service Contract Act (“SCA”), 41 U.S.C.

§ 351 et seq., to provide moving and other services to various

Government agencies. Id. ¶ 6. Beginning some time in 1998, Relator

learned that Kane Company had regularly failed to pay SCA-required

wage determinations on a number of these government contracts.4 Id.

¶¶ 36-44. On various occasions, Relator spoke to Kane Company

officers, including Defendants John Kane and Ronald Meliker, about

these problems. Id. To Relator’s knowledge, these officials took

no action to correct these practices. Id.

At different times between 2002 and 2005, Relator also

attended various executive-level meetings in which Kane Company

4
The SCA establishes minimum labor standards for service
contracts between the Government and private contractors. 41 U.S.C.
§ 351(a). Among other things, the SCA requires contractors to: (1)
pay “a minimum monetary wage” to employees who work on federal
contracts; and (2) provide “fringe benefits” to covered employees.
Id. § 351(a)(1) - (a)(2).

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officials, including Defendants John Kane and Ronald Meliker,

discussed the following illegal practices: (1) fraudulently billing

the Government for employee services that were not provided and

double billing for employee work;(2) overcharging the Government

for fuel costs; and (3) refraining from providing the “best price,”

i.e. the price paid by the Company’s comparable commercial

customers, as required by 48 C.F.R. § 552.215-72, when “negotiating

to enter” the Government’s General Services Administration (“GSA”)

Schedule or when submitting bids for GSA Schedule Contracts. Id. ¶¶

45-52.

In 2004, Relator met with Mary Perara, CEO of the Perara

Group, a member of the Small Business Administration’s (“SBA”)

Section 8(a) program for certified minority-owned businesses. Id.

¶ 53. At this meeting, the parties discussed a possible partnership

between Defendant Kane Company and the Perara Group on government

contracts reserved for Section 8(a) companies. Id. Following this

meeting, Relator did not recommend proceeding with the partnership,

since the Perara Group had no experience with the type of services

Defendant Kane Company provided. Id. After leaving Kane Company,

Defendant learned that the Perara Group had obtained several

Section 8(a) contracts with the Government. Id. ¶ 54. Relator

believed that Defendant Kane Company entered into an illegal

agreement with the Perara Group to perform most of the work on

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these contracts in exchange for a portion of the Section 8(a)

contract funds. Id. ¶¶ 54-55.

On January 10, 2005, Defendant Kane Company terminated Relator

for poor performance. Id. ¶ 14; Defendants’ Motion to Dismiss

Relator’s Second Amended Complaint and United States’ Complaint in

Intervention, 4 (“Defs.’ Mot.”) (Mar. 8, 2010) [Dkt. No. 82].

Approximately two weeks later, Relator and Defendant Kane Company

entered into a Separation Agreement in connection with Relator’s

termination. Defendant Kane Company’s Answer and Counterclaims, Ex.

A. ¶ 4 (July 24, 2009) [Dkt. No. 56-1].

On February 11, 2005, Relator filed a sealed Complaint in this

Court, which he subsequently amended on March 1, 2007 [Dkt. No.

15]. In these Complaints, Relator alleges that Defendants Kane

Company, John Kane, and Ronald Meliker violated the FCA by engaging

in the aforementioned fraudulent schemes.

On March 26, 2009, following a four year investigation into

Relator’s allegations, the United States intervened in this case

[Dkt. No. 45]. On April 27, 2009, the Government filed its

Complaint in Intervention. On July 24, 2009, Defendant Kane Company

filed an Answer and Counterclaims to the U.S. Complaint and

Relator’s First Amended Complaint [Dkt. No. 56], raising two

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affirmative defenses against the Government’s allegations and

twelve state law counterclaims against Relator.5

On February 16, 2010, Relator filed a Second Amended Complaint

[Dkt. No. 77], raising claims of unlawful retaliation under the

FCA, breaches of the Separation Agreement, and common law tort

claims against Defendants. On March 8, 2010, Defendants filed a

Motion to Dismiss Relator’s Second Amended Complaint and United

States’ Complaint in Intervention. On April 19, 2010, the United

States filed an Opposition to Defendants’ Motion to Dismiss (“U.S.

Opp’n”) [Dkt. No. 92]. On May 4, 2010, Relator filed an Opposition

to Defendants’ Motion to Dismiss (Rel. Opp’n) [Dkt. No. 94]. On May

7, 2010, Defendants filed a Reply in Support of Their Motion to

Dismiss (Defs.’ Reply) [Dkt. No. 95]. On May 27, 2010, Relator

filed a Notification of Supplemental Authority and Surreply to

Defendants’ Reply in Support of Their Motion to Dismiss

(“Surreply”) [Dkt. No. 98].

On October 13, 2010, Relator Head filed a Third Amended

Complaint, adding several new factual allegations and raising a

claim for injunctive relief to prevent Defendants from further

violating the Separation Agreement. On November 15, 2010,

Defendants filed a Motion to Dismiss Relator’s Third Amended

5
Defendants John Kane and Ronald Meliker did not join in
Defendant Kane Company’s counterclaims against Relator. On November
12, 2009, this Court dismissed nine of Defendants’ counterclaims
and one of their affirmative defenses [Dkt. No. 65].

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Complaint, responding to the new allegations raised in the Third

Amended Complaint and incorporating the arguments from their Motion

to Dismiss the Second Amended Complaint.6 On November 23, 2010,

Relator filed a Memorandum in Opposition (“Rel. Supp. Opp’n”) [Dkt.

No. 116]. On December 3, 2010, Defendants filed a Reply in Support

of Their Motion to Dismiss Relator’s Third Amended Complaint

(“Defs.’ Supp. Reply”)[Dkt. No. 117].7

6
On October 13, 2010 the Court dismissed Relator’s Second
Amended Complaint and granted his motion to file a Third Amended
Complaint. See Order Granting Relator’s Motion for Leave to File
Third Amended Complaint (“Oct. 13, 2010 Order”) [Dkt. No. 112].
This Court also issued an Order dismissing Defendants’ Motion to
Dismiss the Second Amended Complaint as moot (Dec. 9, 2010)[Dkt.
No. 118]. However, the Court permitted Defendants to include all
arguments from their Motion to Dismiss the Second Amended Complaint
in their Motion to Dismiss the Third Amended Complaint. Oct. 13,
2010 Order. The Court further indicated that any supplemental
briefing should only address Relator’s new allegations. Id.
Accordingly, in deciding Defendants’ Motion to Dismiss the Third
Amended Complaint, the Court will consider the parties’ arguments
relating to both the Second Amended and Third Amended Complaints.
7
On January 3, 2011, Defendants filed a Notice of Supplemental
Authority Related to Motions to Dismiss [Dkt. No. 119]. In addition
to apprising the Court of a recent D.C. Circuit case, this Notice
also contained extensive new arguments relating to the underlying
Motion. On January 13, 2011, the Government filed a Response to
Defendants’ “Notice of Supplemental Authority” [Dkt. No. 121]. On
January 14, 2011, Relator filed a Response to Defendants’ Notice of
Supplemental Authority Related to Motions to Dismiss [Dkt. No.
122]. On January 21, 2011, Defendants filed a Reply Regarding
Notice of Supplemental Authority [Dkt. No. 123].

The Supplemental Authority on which Defendants relied is
United States v. Science Applications Int’l Corp., 626 F.3d 1257,
1266 (D.C. Cir. 2010)[hereinafter “SAIC”]. Defendants have
misrepresented the holding and rationale of their supplemental
case, and the Court finds their arguments to be unpersuasive.

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II. Standard of Review

A. Rule 12(b)(6)

Under Rule 12(b)(6), a plaintiff need only plead “enough facts

to state a claim to relief that is plausible on its face” and to

“nudge[] [his or her] claims across the line from conceivable to

plausible.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

“[A] complaint [does not] suffice if it tenders naked assertions

devoid of further factual enhancement.” Ashcroft v. Iqbal, 129

S.Ct. 1937, 1949 (2009) (internal quotations omitted) (citing

Twombly, 550 U.S. at 557). Instead, the complaint must plead facts

that are more than “merely consistent with” a defendant’s

liability; “the pleaded factual content [must] allow[] the court to

draw the reasonable inference that the defendant is liable for the

misconduct alleged.” Id. at 1940 (citing Twombly, 550 U.S. at 556).

In deciding a Rule 12(b)(6) motion, the court may consider any

documents attached to or incorporated into the complaint, matters

of which the court may take judicial notice, and matters of public

record. E.E.O.C. v. St. Francis Xavier Parochial Sch., 117 F.3d

621, 624 (D.C. Cir. 1997).

“[O]nce a claim has been stated adequately, it may be

supported by showing any set of facts consistent with the

allegations in the complaint.” Twombly, 550 U.S. at 563. Under the

standard set forth in Twombly, a “court deciding a motion to

dismiss must . . . assume all the allegations in the complaint are

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true (even if doubtful in fact) . . . [and] must give the plaintiff

the benefit of all reasonable inferences derived from the facts

alleged.” Aktieselskabet, 525 F.3d at 17 (citations and internal

quotations omitted). See also Tooley v. Napolitano, 586 F.3d 1006,

1007 (D.C. Cir. 2009) (declining to reject or address the

government’s argument that Iqbal invalidated Aktieselskabet).

B. Rule 9(b)

Rule 9(b) requires that a “party [] state with particularity

the circumstances constituting fraud or mistake. Malice, intent,

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

generally.” Claims brought under the FCA state an action in fraud,

and therefore are subject to Rule 9(b)’s pleading requirements.

U.S. ex. rel. Williams v. Martin-Baker Aircraft Co., 389 F.3d 1251,

1256 (D.C. Cir. 2004).

Courts must not rigidly apply the requirements of Rule 9(b),

but rather should analyze the Rule on a case by case basis. U.S. ex

rel. Pogue v. Diabetes Treatment Centers of Am. Inc., 238 F. Supp.

2d 258, 269-70 (D.D.C. 2002). Thus, while some courts have required

greater specificity in the allegations of fraud, such heightened

pleading requirements may not be appropriate in each and every

case. Id. at 270.

In deciding Rule 9(b) cases, courts should also be guided by

the Rule’s purpose to “discourage the initiation of suits brought

solely for their nuisance value, and [to] safeguard potential

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defendants from frivolous accusations of moral turpitude . . . .

And because fraud encompasses a wide variety of activities, the

requirements of Rule 9(b) guarantee all defendants sufficient

information to allow for preparation of a response.” Martin-Baker,

389 F.3d at 1256 (citations and internal quotations omitted)

(alteration in original). 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.”

U.S. ex rel. Barrett v. Columbia/HCA Healthcare Corp., 251 F. Supp.

2d 28, 34 (D.D.C. 2003).

III. Analysis

Plaintiffs allege that various Defendants violated the FCA by

conspiring to and in fact defrauding the U.S. Government. 3d. Am.

Compl., Counts 1-3; U.S. Compl., Count 1.

In his Third Amended Complaint, Relator also brings the

following additional claims. First, Relator claims that Defendant

Kane Company violated Section 3730(h) of the FCA by retaliating

against him for his protected activities.8 3d. Am. Compl., Count 4.

8
In the Third Amended Complaint, Relator also raises an FCA
retaliation claim against Defendants John Kane and Robert Meliker.
3d. Am. Compl. ¶ 130. However, in his Motion papers, Relator
abandons this claim. Rel. Opp’n 40 n. 21. The Court, therefore,
will only consider Relator’s retaliation claim against Defendant
Kane Company.

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Second, Relator raises claims against Defendant Kane Company for

breach of the Separation Agreement, and also brings various tort

law claims against Defendants Kane Company, John Kane, and Ronald

Meliker. Id. Counts 5-12.9 Finally, Relator requests a temporary

restraining order, as well as preliminary and permanent injunctive

relief, enjoining Defendant Kane Company and its officers from

further breaching the Separation Agreement. Id. Count 13.

Defendants have moved to dismiss all the foregoing claims. In

his Opposition to Defendants’ Motion to Dismiss the Third Amended

Complaint, Relator has withdrawn his claim for injunctive relief in

Count 13. Rel. Supp. Opp’n 1 n.1. The Court, therefore, will

dismiss that Count with prejudice. The Court will now consider

Defendants’ arguments against Plaintiffs’ remaining claims.

A. Plaintiffs’ Fraud Claims Under the FCA

The FCA provides a civil penalty and treble damages against

any individual who: (1) knowingly presents or causes to be

presented a false or fraudulent claim for payment or approval by

the United States, 31 U.S.C. § 3729(a)(1); (2) knowingly makes,

9
In Counts 5-6, Relator raises two breach of contract claims
against Defendant Kane Company, alleging multiple violations of the
Separation Agreement. In Count 7, Relator raises defamation claims
against Defendants Kane Company, John Kane, and Robert Meliker.
Counts 8-11 raise claims for intrusion upon seclusion,
appropriation of likeness/name, and invasion of privacy against
Defendants Kane Company and John Kane. In Count 12, Relator brings
an abuse of legal process claim against Defendant Kane Company,
alleging that it filed twelve counterclaims against Relator for
improper purposes.

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uses, or causes to be made or used, a false record or statement

material to getting a false or fraudulent claim paid or approved by

the Government, id. § 3729(a)(2); or (3) conspires to defraud the

United States by getting a false or fraudulent claim allowed or

paid, id. § 3729 (a)(3).10 To enforce these and other provisions of

the FCA, a private person, known as a “relator,” may bring a civil

or “qui tam” action in the Government’s name. 31 U.S.C. §

3730(b)(1). If the Government decides to intervene, it shall then

have the primary responsibility for prosecuting the action,

although the relator may continue as a party to the case, subject

to certain limitations enumerated in the statute. Id. § 3730(c)(1).

Relying on the foregoing provisions, Relator alleges that

Defendants Kane Company, John Kane, and Ronald Meliker violated

Sections 3729(a)(1), (a)(2), and (a)(3) of the FCA by avoiding

payment of SCA-required wages to employees working on the Company’s

government contracts. 3d. Am. Compl. ¶¶ 103-15, 116-119, 125-26. In

10
In 2009, the FCA was amended by the Fraud Enforcement and
Recovery Act of 2009 (“FERA”), Pub. L. No. 111-21, 123 Stat. 1617.
Most of the FERA amendments went into effect on May 20, 2009 and
apply only to conduct occurring on or after that date. However,
FERA made certain amendments retroactive to June 7, 2008 and
applicable to all “claims” pending on or after that date. Id. at
Sec. 4(f). “Courts that have considered this clause have noted
[that] ‘claims’ refers only to a defendant’s request for payment,
and not to pending cases.” U.S. ex rel. Bender v. N. Am.
Telecomm’ns, Inc., 750 F. Supp. 2d 1, 5 (D.D.C. 2010). As the
parties in this case have not argued for application of the FERA
amendments and because these amendments do not affect resolution
of the instant Motion, the Court shall refer only to the pre-
amendment version of the FCA for the remainder of this opinion.

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its Complaint in Intervention, the Government joins in this

allegation, but brings its claim only against Defendant Kane

Company and its subsidiaries, including Office Movers and Office

Installers, Inc. See generally, U.S. Compl.

Defendants urge the Court to dismiss Plaintiffs’ FCA claims on

four grounds. First, Defendants argue that Plaintiffs “have not

pled the requisite objective false statement underlying their FCA

[Section 3729(a)] claims.”11 Defs.’ Reply 9. Second, Defendants

argue that Plaintiffs have not “demonstrate[d] that SCA compliance

was material to the Government’s decision to pay” under the Kane

Company’s government contracts. Id. at 14. Third, Defendants argue

that some of Relator’s conspiracy claims under Section 3729(a)(3)

must be dismissed pursuant to Rule 12(b)(6). Defs.’ Mot. 11 n.4;

Defs.’ Reply 15 n.16. Fourth, Defendants argue that all claims

brought by Plaintiffs under Section 3729(a) of the FCA must be

dismissed for failure to meet Rule 9(b)’s pleading requirements.

Defs.’ Mot. 8-11.

11
The Court notes that Defendants raise this argument, as well
as a number of others, for the first time in their reply brief. See
generally, Defs.’ Reply. Although “we have generally held that
issues not raised until the reply brief are waived,” Gen. Elec. Co.
v. Jackson, 610 F.3d 110, 123 (D.C. Cir. 2010)(citations and
internal quotations), these issues are not deemed to have been
waived since Relator was afforded the opportunity to respond to
Defendants’ arguments in his Surreply.

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 1. Plaintiffs Have Adequately Alleged “False Claims”
Under the FCA

Although Defendants rely on Rule 9(b) to argue that Plaintiffs

have failed to plead the “objective false statement[s]” underlying

their fraud claims, Defs.’ Reply 9-17, they are in actuality

raising a Rule 12(b)(6) challenge. U.S. ex rel. Folliard v. CDW

Tech. Servs., 722 F. Supp. 2d 20, 27-28 (D.D.C. 2010)(citation and

internal quotations omitted). Defendants argue that both Relator

and the Government fail to allege that “any” false claims were made

to the Government. It is axiomatic that a plaintiff bringing an

action for fraud under the FCA must, first and foremost, allege

that an actual “false claim” was presented to the Government. See

U.S. ex rel. Totten v. Bombardier Corp., 286 F.3d 542, 551 (D.C.

Cir. 2002) (holding that the FCA “attaches liability [] not to

underlying fraudulent activity, but to the claim for payment”)

(citation and internal quotations omitted).

The FCA defines “claims” to include “any request or demand,

whether under a contract or otherwise, for money or property which

is made to a contractor, grantee, or other recipient if the United

States Government provides any of the money or property which is

requested or demanded.” 31 U.S.C. § 3729(c). Congress has

emphasized that the FCA should be broadly interpreted “to reach all

types of fraud . . . that might result in financial loss to the

Government.” United States v. Neifert-White Co., 390 U.S. 228, 232,

8 S. Ct. 959 (1968). Accordingly,“‘[f]alse claims’ under the FCA

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take a variety of forms.” SAIC, 626 F.3d at 1266. These include:

(1) presentment claims; (2) fraudulent inducement claims; and (3)

false certification (express or implied) claims. See U.S. ex rel.

Bettis v. Odebrecht Contractors of Cal., Inc., 393 F.3d 1321, 1326

(D.C. Cir. 2005)(recognizing that claims based upon fraudulent

inducement are actionable under the FCA); SAIC, 626 F.3d 1257, 1266

(endorsing implied false certification theory as basis for FCA

claims in D.C. Circuit).

The elements of a presentment claim are that “(1) the

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

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

722 F. Supp. 2d at 26. Fraudulent inducement claims consist of

“claim[s] submitted to the Government under a contract which was

procured by fraud, even in the absence of evidence that the claims

were fraudulent in themselves.” Bettis, 393 F.3d at 1326. False

certification claims “rest[] on a false representation of

compliance with an applicable federal statute, federal regulation,

or contractual term.” SAIC, 626 F.3d at 1266.

While presentment claims consist of explicitly false or

fraudulent demands for payment, id., fraudulent inducement and

false certification claims do not depend on the existence of such

explicitly false payment requests. Instead, those two types of

claims require the making of initial false representations to the

Government. See Bettis, 393 F.3d at 1328 (fraudulent inducement);

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SAIC, 626 F.3d at 1266-67 (implied false certification). An initial

false representation occurs when a party makes promises at the time

of contracting that it intends to break. Bettis, 393 F.3d at 1329.

Relying on these forms of fraud, Plaintiffs allege that

Defendants submitted “false claims” to the Government. Defendants

contend, however, that Plaintiffs’ allegations fail to qualify as

“false claims” because: (1) they have not alleged any explicitly

false or fraudulent demands for payment on which to base a

presentment claim; and (2) they have not alleged any “[initial

false representation] or certification on which to base a fraud-in-

the-inducement or implied certification [claim].” Defs.’ Reply 9-

11, 12-16.12 Defendants’ arguments fail for the following reasons.

a. Plaintiffs’ Presentment Claims Adequately
Allege Explicitly False or Fraudulent Demands
for Payment

Defendants argue that Plaintiffs’ presentment claims do not

“identify” any explicitly false or fraudulent demands for payment

made by Defendants to the Government. Defs.’ Reply 9-11, 15-16.

This argument misstates the standard Plaintiffs must meet in a Rule

12(b)(6) motion. Although a plaintiff must, of course, provide

12
Defendants also argue that Plaintiffs’ allegations merely
claim breaches of contractual, statutory, or regulatory violations,
which are not actionable under the FCA. Defs.’ Reply 11-12. While
it is true that the FCA does not attach liability to these types of
breaches, U.S. ex rel. Hockett v. Columbia/HCA Healthcare, 498 F.
Supp. 2d 25, 70 (D.D.C. 2007), Plaintiffs’ allegations qualify as
cognizable claims under the FCA, for different reasons, as
demonstrated infra.

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evidence of these false statements at some point, she is not

required to do so at the early stages of litigation. See Krieger v.

Fadely, 211 F.3d 134, 136 (D.C. Cir. 2000) (holding that “using

Rule 12(b)(6) . . . to weed out what appear to be factually-

deficient cases may be incompatible with Rule 8”). Rather, to

survive a 12(b)(6) motion, plaintiff need only “plead factual

content that allows the court to draw the reasonable inference that

the defendant is liable for the misconduct alleged.” U.S. ex rel.

Westrick v. Second Chance Body Armor, Inc., 685 F. Supp. 2d 129,

133 (D.D.C. 2010) (citation and internal quotations omitted). In

short, the complaints “need not plead law or match facts to every

element of a legal theory.” Krieger, 211 F.3d at 136 (citation and

internal quotations omitted).

Plaintiffs’ presentment claims adequately allege the

existence of explicitly false or fraudulent demands for payment.

First, the Government clearly alleges that Defendant Kane Company

submitted explicitly false invoices to the Government under SCA

contracts. See U.S. Compl. ¶ 15. Second, Relator also alleges that

explicitly false demands for payment were made under several Kane

Company contracts governed by the SCA. See, e.g., 3d. Am. Compl. ¶¶

39-40. Finally, Relator’s claims regarding the fraudulent billing

of employee work and fuel surcharges are based, at least in part,

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on allegations that explicitly false bills were submitted to the

Government.13 See id. ¶¶ 46, 62, 65.

b. Plaintiffs’ Fraudulent Inducement and False
Certification Claims Adequately Allege Initial
False Representations

i. Fraudulent Inducement

Relator argues that, because Defendants originally obtained

various government contracts through fraud, the theory of

fraudulent inducement supports treating all subsequent demands for

payment pursuant to those contracts as “false claims.” Rel. Opp’n

13-15. Specifically, Relator’s allegations raise the reasonable

inference that Defendants implicitly made or caused to be made, in

the course of executing their government contracts, the following

false or fraudulent representations to the Government.

First, with regard to the SCA claims, Relator alleges that

Defendant Kane Company entered into numerous Government contracts,

intending to flout the contracts’ SCA wage requirements. See

generally, U.S. Compl. See also 3d. Am. Compl. ¶¶ 35-44, 56-61.

This allegation raises the reasonable inference that, in executing

13
Defendants argue that Relator’s claims for fraudulent
billing of employee work and fuel surcharges are not FCA claims,
“but [rather are] unjust enrichment claim[s] that [do] not hinge on
whether a false claim was presented to the United States.” Defs.’
Reply 14. However, Relator’s allegation that the Government was
billed for employee work that was not performed and overcharged for
fuel costs are, in fact, paradigmatic FCA claims. See SAIC, 626
F.3d at 1266 (“In the paradigmatic [FCA] case, a claim is false
because it involves an incorrect description of goods or services
provided or a request for reimbursement for goods or services never
provided.”)(citation and internal quotations omitted).

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these contracts, Defendant Kane Company, by and through its

officers, implicitly and falsely represented to the Government that

it would comply with the SCA.14

Second, with regard to Defendant Kane Company’s fraudulent

billing of employee work which was not performed, Relator alleges

that he participated in various executive-level meetings with Kane

Company officials in which “it was periodically discussed that

14
In challenging Plaintiffs’ SCA allegations, Defendants
primarily rely on U.S. ex rel. UNITE HERE v. Cintas Corp., 06-cv-
2413, 2008 WL 1767039 (N.D. Cal. Apr. 16, 2008). In that case,
relator relied on theories of fraudulent inducement and implied
false certification to allege that defendant violated the FCA by
“obtaining numerous contracts with the U.S. government under the
pretense that [defendant] would comply with the requirements of the
[SCA] and by falsely certifying that it had so complied.” Id. at
*1. The District Court for the Northern District of California
ultimately dismissed these claims under Rules 12(b)(6) and 9(b).

Defendants argue that UNITE HERE is “very similar” to the
instant case. Defs.’ Reply 13. However, the factual circumstances
in UNITE HERE are, in fact, very different from those presented in
this case. First, and most significantly, unlike Plaintiffs in
this case, relator in UNITE HERE failed to raise any allegation that
defendant initially obtained its government contracts “through
false statements or fraudulent conduct.” 2008 WL 1767039, at *9.
Second, relator in UNITE HERE lacked direct knowledge of
defendant’s alleged violations of the FCA and, consequently,
brought nearly all its claims based upon “information and belief.”
Id. at *3-4. By contrast, in this case, Plaintiffs’ allegations are
largely based on Relator’s personal knowledge of the SCA scheme.
See, e.g., 3d. Am. Compl. ¶ 56. Finally, while the Government has
intervened in the instant case, it declined to do so in UNITE HERE.
2008 WL 1767039, at *1. Although the Government’s failure to
intervene in a case is not dispositive, it deserves respect because
the Government makes such a decision “if, after assessing the
evidence presented by relator and conducting its own preliminary
investigation, it believes the action lacks merit.” U.S. ex rel.
Purcell v. MWI Corp., 209 F.R.D. 21, 26 (D.D.C. 2002).

-19-
there was misconduct concerning the billing and use of employees at

staff positions on two or more contracts for the same hours” and

“that there was a practice of employees at staff positions . . .

for Defendant Kane Company and its affiliates signing in on

government time sheets and then leaving the workplace to work on a

private sector project or other government job.” Id. This

allegation raises the reasonable inference that, in executing

government contracts, Defendant Kane Company, by and through its

officers, implicitly and fraudulently represented to the Government

that it would accurately bill for its services.

Third, with regard to Defendant Kane Company’s fraudulent

billing of fuel costs, Relator alleges that during executive-level

meetings in 2002-2003 he was told that “Defendant Kane Company

would be starting a new practice of adding an ‘energy surcharge’

for fuel. . . . However, Defendant Kane Company already

incorporated the fuel charge into its existing pricing and bills

submitted to the government.” Id. ¶ 47. This allegation raises the

reasonable inference that, in executing government contracts,

Defendant Kane Company, by and through its officers, implicitly and

fraudulently represented to the Government that it would accurately

bill for its fuel costs.

Fourth, with regard to Defendant Kane Company’s failure to

provide the GSA best price, Relator alleges that during executive-

level meetings in 2003 and 2004, several officers and employees of

-20-
Defendant Kane Company suggested that they “wanted to bill the

government under the GSA Schedule at higher rates than those

comparable commercial customers” and that they would “intentionally

withhold from the government these comparable commercial customers

who were provided [with] lower rates. . . . [so that] Kane company

could then negotiate to enter the GSA schedule at higher labor

rates than those provided to their best commercial customers.” Id.

¶ 49. These allegations raise the reasonable inference that, in

executing GSA contracts, Defendant Kane Company, by and through its

officers, implicitly and fraudulently represented to the Government

that it had provided accurate information for the GSA schedule.

Finally, with regard to Defendant Kane Company’s relationship

with the Perara Group, Relator alleges that: (1) the Kane Company

“used the Perara Group as a Section 8(a) ‘pass through’ such that

Office Movers, a Kane Company affiliate, can obtain money on

government contracts that are intended for SBA certified 8(a)

contractors,” id. ¶ 66; and (2) Defendant Kane Company, its

officers, and the Perara Group, Inc., knowingly made or caused to

be made “false statements to the SBA in which they certified or

caused others to certify that Defendant Perara Group [] was acting

in compliance with all pertinent laws and regulations, when in fact

[the Perara Group] was performing services for numerous government

agencies that it was not eligible to bid upon . . . .” Id. ¶ 121.

These allegations clearly and explicitly state that, in connection

-21-
with the Perara Group’s Section 8(a) government contracts,

Defendants implicitly made or caused to be made fraudulent

representations to the Government that the Perara Group would be

providing its services under those agreements.

ii. False Certification

The Government argues that “the subsequent invoices claiming

payment for satisfactory compliance with the [SCA] contract terms

create[d] implied false certification[s]” and thereby constitute

“false claims.”15 U.S. Opp’n 12-13. Like Relator, the Government

alleges that Defendant Kane Company entered into numerous

government contracts intending to ignore the SCA wage requirements.

See generally, U.S. Compl. These allegations raise the reasonable

inference that, in executing these contracts, Defendant Kane

Company, by and through its officers, implicitly and falsely

represented that it would comply with the SCA. The Government also

clearly alleges that Defendant Kane Company made express false

certifications of compliance with the SCA. Id. ¶¶ 13, 18

For the foregoing reasons, Relator and the Government have

adequately alleged the existence of “false claims.” The Court,

15
Like Relator, the Government claims that Defendant Kane
Company originally obtained the SCA contracts through fraudulent
inducement. U.S. Opp’n 12-13. However, the Government also
clearly relies on the theory of implied false certification to
argue that subsequent demands for payment under those contracts
constitute “false claims.” Id.

-22-
therefore, denies Defendants’ Motion to Dismiss Plaintiffs’ FCA

fraud claims on these grounds.

2. Plaintiffs Have Adequately Alleged that the SCA Is
Material

Defendants also urge dismissal of Plaintiffs’ SCA-based claims

on the grounds that “[plaintiffs] allege nothing to demonstrate

that [] SCA compliance was material to the Government’s decision to

pay under the contract.”16 Defs.’ Reply 14-16. While Defendants

present this challenge under Rule 9(b), their argument, again,

amounts to a Rule 12(b)(6) claim.

To state a claim under the FCA, a complaint must allege that

the false or fraudulent statements were material. Bender v. N. Am.

Telecomm’ns, Inc., 686 F. Supp. 2d 46, 49 (D.D.C. 2010)[hereinafter

“Bender II”]. Generally, a false claim is material if “it has a

natural tendency to influence agency action or is capable of

influencing agency action.” U.S. ex rel. Fago v. M & T Mortg.

Corp., 518 F. Supp. 2d 108, 118 (D.D.C. 2007) (citing United States

v. TDC Mgmt. Corp., 24 F.3d 292, 298 (D.C. Cir. 1994)). See also

U.S. ex rel. Ervin and Assocs., Inc., v. Hamilton Sec. Group, Inc.,

370 F. Supp. 2d 18, 45 (D.D.C. 2005) (holding that false claim is

material if “compliance with the presented claims must have been so

important to the contract that the government would not have

16
Defendants have not brought a materiality challenge to any
of Relator’s remaining fraud claims under the FCA.

-23-
honored the submission for payment on the claim if it were aware of

the violation”).

Defendants argue that Plaintiffs have failed to cite

contractual language establishing that “SCA compliance is a

mandatory condition for the Government to pay under any contract.”17

Defs.’ Reply 14, and have therefore “allege[d] nothing to

demonstrate that [] SCA compliance was material . . . .” Id.

Essentially, Defendants argue that, in order to establish

materiality, Relator and the Government must point to express

contractual language establishing that compliance with the SCA was

a mandatory condition of payment. This argument fails for two

reasons.

17
Defendants do acknowledge that the Government’s Complaint
includes express language regarding SCA compliance contained in a
2003 Kane Company GSA contract. See Defs.’ Reply 14. This contract
states that “[t]hese Labor Categories hourly rates are subject to
State of Alaska WD942107. These hourly rates shall be adjusted at
the Agency Task Order Level to comply with [Wage Determination]
Rates Specific to the designated geographic area, where
applicable.” U.S. Compl. ¶ 13. Defendants argue that because this
language does not expressly condition payment on compliance with
the SCA, it fails to establish the statute’s materiality. Defs.’
Reply 14. However, contrary to Defendants’ claims, as discussed
infra, materiality does not depend upon the existence of express
contractual language.

Defendants also contend that the Government cannot rely on
this contractual language “for five out of the eight years at issue
in this case (1998-2003), because the statement had not even been
made yet.” Id. However, the Government clearly presented this
contractual clause as simply one example of the type of language
included in Defendant Kane Company’s GSA contracts. See U.S. Compl.
¶¶ 12-13.

-24-
 First, Plaintiffs are not required under Rule 12(b)(6) to

provide such detailed factual evidence. As previously discussed,

all they must do at this early stage is plead the essential

elements of their claim. In this regard, the Government clearly

alleges that the SCA was material to its decision to pay. U.S.

Compl. ¶ 16. Relator also made allegations from which it can be

reasonably inferred that the SCA was material to the Government’s

payment decisions. See 3d. Am. Compl. ¶¶ 107, 114 (“The United

States reasonably relied upon Defendants[’] misrepresentations of

compliance and/or accuracy in paying all sums due and owing under

the [SCA] contracts . . . .”).18

Second, Defendants are incorrect that, under the FCA,

compliance with a statutory, regulatory, or contractual requirement

is material only if there is express contractual language linking

compliance to payment. In SAIC, our Court of Appeals directly

addressed this issue and concluded that materiality does not turn

on the presence of such express contractual language. In that case,

18
Both the Relator and the Government also cite to statutory
provisions that raise the reasonable inference that SCA compliance
was material to Defendant Kane Company’s government contracts. For
example, they both cite to SCA Section 351, which states that the
statute applies to Government contracts in excess of $2,500 “the
principal purpose of which is to furnish services in the United
States through the use of service employees,” 41 U.S.C. § 351. See
U.S. Compl. ¶ 9; 3d. Am. Compl. ¶ 27. The Government also cites to
48 C.F.R. 52.222-41, which was “incorporated into GSA multiple
award schedule contracts” obtained by Defendant Kane Company and
which subjects such contracts to the SCA’s requirements. U.S.
Compl. ¶ 14.

-25-
which involved an FCA claim based upon the theory of implied false

certification, the court held that:

The existence of express contractual language
specifically linking compliance to eligibility
for payment may well constitute dispositive
evidence of materiality, but it is not . . .
a necessary condition. The plaintiff may
establish materiality in other ways, such as
through testimony demonstrating that both
parties to the contract understood that
payment was conditional on compliance with the
requirement at issue.

SAIC, 626 F.3d at 1269. Accordingly, whether at the motion to

dismiss or merits stage of this litigation, Plaintiffs are not

required to point to express contractual language to establish that

SCA compliance was material to the Government’s decision to pay in

this case, and they “may establish materiality in other ways.”19 Id.

For the foregoing reasons, Plaintiffs have adequately alleged

that compliance with the SCA was material to the Government’s

19
Although the argument is not explicitly made, Defendants
suggest that violations of the SCA cannot generally form the basis
of a FCA claim because the statute does not require contractors to
submit a “certificate of compliance” in order to receive payment
under SCA contracts. Defs.’ Reply 13-15 & nn.13-14. However, in
rejecting this argument, the court in SAIC noted that “‘implied
false certification occurs when an entity has previously undertaken
to expressly comply with a law, rule, or regulation, and that
obligation is implicated by submitting a claim for payment even
though a certification of compliance is not required in the process
of submitting a claim.’” 626 F.3d at 1270 (citing Ebeid ex rel.
United States v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010)).
Accordingly, the SCA’s lack of a certification requirement does
not, in and of itself, prevent violations of the statute from being
the basis of an FCA claim.

-26-
decisions to pay under the SCA-regulated contracts. Accordingly,

the Court denies Defendants’ Motion to Dismiss Plaintiffs’ SCA

fraud claim for failure to allege materiality.

3. Relator’s FCA Conspiracy Claims Must Be Dismissed
in Part for Failure to State a Claim

Pursuant to Rule 12(b)(6), Defendants move to dismiss two of

Relator’s FCA conspiracy claims. First, Defendants urge dismissal

of the broad claim that Defendant Kane Company variously conspired

with Defendants John Kane and Ronald Meliker to violate the FCA.

Defs.’ Mot. 11 n.4. Second, Defendants argue that the claim that

Defendants conspired with the Perara Group to use the company as a

“pass through” for Section 8(a) contracts should be dismissed with

respect to Defendants John Kane and Ronald Meliker because the

Perara Group has not been served or appeared in this case. Defs.’

Reply 15 n.16.

Section 3729(a)(3) of the FCA attaches liability to anyone who

“conspires to defraud the Government by getting a false or

fraudulent claimed allowed or paid.” Although the FCA does not

define the term “conspiracy,” the “courts have held that general

civil conspiracy principles apply to FCA conspiracy claims.”

Westrick, 685 F. Supp. 2d at 140. In this case, two principles of

civil conspiracy law are central to evaluating Defendants’

challenge: (1) the intra-corporate conspiracy doctrine, Fago, 518

F. Supp. 2d at 117; and (2) the principle that a civil conspiracy

claim need not be brought against all co-conspirators, Ass’n for

-27-
Intercollegiate Athletics for Women v. Nat’l Collegiate Athletic,

558 F. Supp. 487, 498 (D.D.C. 1983).

Under the intra-corporate conspiracy doctrine, “a corporation

cannot conspire with its employees, and its employees, when acting

in the scope of their employment, cannot conspire among

themselves.” Fago, 518 F. Supp. 2d at 117. Here, there is no

dispute that Defendants John Kane and Ronald Meliker have been

employees of the Kane Company at all times relevant to Relator’s

conspiracy claim. Accordingly, Defendant Kane Company could not

have “conspired” with Defendants John Kane and Ronald Meliker to

violate the FCA. Therefore, the Court must grant Defendants’ Motion

and dismiss this part of Relator’s conspiracy claim under Count 3.

See 3d. Am. Compl. Count 3 ¶¶ 117-20, 123.

Additionally, it is well-settled that “all co-conspirators

need not be joined to permit any one or more to be held liable for

an unlawful conspiracy.” Ass’n for Intercollegiate Athletics for

Women, 558 F. Supp. at 498. Accordingly, the Perara Group’s absence

from this case does not preclude a claim from being brought against

Defendants John Kane and Ronald Meliker for allegedly conspiring

with the Group to use it as a “pass through” for Section 8(a)

contracts. While Defendant Kane Company also stands accused of

participating in that conspiracy, the intra-corporate conspiracy

doctrine does not apply “because there are alleged participants in

the conspiracy who are not employees” of the Company. Lerner v.

-28-
District of Columbia, 362 F. Supp. 2d 149, 165 (D.D.C. 2005). The

Court, therefore, denies Defendants’ Motion to Dismiss Defendants

John Kane and Ronald Meliker from this part of Relator’s conspiracy

claim under Count 3. See 3d. Am. Compl. Count 3 ¶¶ 121-22.

4. Plaintiffs’ Fraud Allegations Satisfy Rule 9(b)

Defendants also argue that all of Plaintiffs’ fraud

allegations under Section 3729(a) of the FCA lack the necessary

details to meet the particularity requirement of Rule 9(b).

According to Defendants, these missing details include: (1) “the

specific invoices, statements or records submitted to the

Government that were supposedly false or fraudulent;” (2) “the

particular government contracts to which these invoices,

statements, or records pertain;” (3) “the allegedly false or

fraudulent information within each such document;” (4) “which

Defendant allegedly submitted such document;” (5) “where and when

the alleged document submission occurred;” and (6) “the details of

the Government’s payment, if any, as a result of Defendants’

allegedly false statements.”20 Defs.’ Mot. 2. In response, Relator

20
With respect to Relator’s Complaint, Defendants further
expand on the detailed allegations that should have been, but were
not, provided: (1) “the dates of the contracts;” (2) “the services
to be provided under the contracts;” (3) “the locality in which the
contracts are to be performed;” (4) “the basis for Relator’s
assertion that the SCA’s wage determination requirements applied to
these contracts;” (5) “what wage, if any, Kane Company should have
paid to each worker;” (6) “what wage, if any, Kane Company actually
paid to each worker;” (7) “any information showing that Kane
Company knew or should have known the wage determination to be paid
(continued...)

-29-
and the Government argue that: (1) Defendants’ understanding of

Rule 9(b) requires Relator and the Government to “plead evidence

instead of allegations” and is divorced from this Circuit’s case

law; and (2) the claims satisfy this Circuit’s Rule 9(b) pleading

standard for cases involving fraudulent schemes. Rel. Opp’n 1, 18-

26; U.S. Opp’n 8-16.

As is well-established in this Circuit, “the simplicity and

flexibility contemplated by the rules must be taken into account”

in reviewing a complaint under Rule 9(b). U.S. ex rel. McCready v.

Columbia/HCA Healthcare, 251 F. Supp. 2d 114, 117 (D.D.C. 2003).

Most importantly, Rule 9(b)’s particularity requirement must be

harmonized with Federal Rule of Civil Procedure 8(a), which

requires that a complaint only contain a “short and plain

statement” of the claim. See U.S. ex rel. Joseph v. Cannon, 642

F.2d 1373, 1386 (D.C. Cir. 1981) (holding that “[t]he requirement

of particularity does not abrogate Rule 8, and it should be

harmonized with the general directives . . . of Rule

8 . . . .”)(citations and internal quotations omitted); Allen v.

Beta Constr., 309 F. Supp. 2d 42, 46 (D.D.C. 2004).

20
(...continued)
for each worker;” (8) “the identification of each document in which
the Kane Company certified that its performance under these
contracts complied with the SCA;” (9) “the invoices or other
statements Kane Company provided to the agency in order to procure
payment;” and (10) “the payment received.” Defs.’ Mot. 9-10.

-30-
 As Plaintiffs rightly argue, Defendants’ interpretation of

Rule 9(b) eviscerates this standard and, instead, requires

claimants to essentially provide detailed proof of their

allegations.21 It is, however, “inappropriate to require proof on

a 9(b) motion to dismiss.” Pogue, 238 F. Supp. 2d at 269. Rather,

at this early stage of the litigation, an “[FCA] plaintiff need not

allege with specificity every element of its cause of action if the

complaint contains allegations from which an inference may be drawn

that the plaintiff will produce evidence on the essential

elements.” U.S. v. Intrados/Int’l Mgmt. Group, 265 F. Supp. 2d 1,7

(D.D.C. 2002).

In contrast to Defendants’ narrow reading of Rule 9(b), its

language makes clear that “particularity [must be pled] only with

respect to the circumstances constituting fraud . . . .” Folliard,

722 F. Supp. 2d at 27 (emphasis in original) (citation and internal

quotations omitted). Furthermore, “[s]tating ‘with particularity

the circumstances constituting fraud’ does not necessarily and

always mean stating the contents of [the claim] . . . . It is the

21
Defendants argue that the level of Rule 9(b) particularity
that they seek has received support from “many cases.” Defs.’ Reply
5. However, Defendants cite to cases that are either from outside
this Circuit, and therefore are not binding on this Court (e.g.
UNITE HERE, 2008 WL 176703; Sanderson v. HCA-The Healthcare Co.,
447 F.3d 873 (6th Cir. 2006)), or that are from this jurisdiction
and do not support the stringent pleading standard Defendants
advocate (e.g. Martin-Baker, 389 F.3d 1251). In fact, Defendants
rely on one case, Allen, 309 F. Supp. 2d at 46, in which our
district court explicitly rejected an interpretation of Rule 9(b)
that is substantially similar to what Defendants urge here.

-31-
scheme in which particular circumstances constituting fraud may be

found that make it highly likely the fraud was consummated through

the presentment of false [claims].” U.S. ex rel. Grubbs v.

Kanneganti, 565 F.3d 180, 190 (5th Cir. 2009) (emphasis added).

Thus, where an FCA claim is based on a fraudulent “scheme,”

Rule 9(b) mandates only that the details of that scheme be stated

with particularity. See Folliard, 722 F. Supp. 2d at 30 (“‘[A]

relator’s complaint, if it cannot allege the details of an actually

submitted false claim, may nevertheless survive by alleging

particular details of a scheme to submit false claims paired with

reliable indicia that lead to a strong inference that claims were

actually submitted.’”(quoting Grubbs, 565 F.3d at 190)).

In such cases, plaintiffs must “set out the details of the

specific scheme and its falsehoods, as well as supply the time,

place, and content of false representations, and link that scheme

to claims for payment made to the United States.” McCready, 251 F.

Supp. 2d at 117 (citing Totten, 286 F.3d at 551-52). See Martin-

Baker, 389 F.3d at 1256 (holding that Rule 9(b) “require[s] that

the pleader . . . state the time, place and content of the false

misrepresentation, the fact misrepresented and what was retained or

given up as a consequence of the fraud . . . [and] to identify

individuals allegedly involved in the fraud”). Where a “scheme

spans several years,” “Rule 9(b) does not require plaintiffs to

allege every fact pertaining to every instance of fraud. . . .”

-32-
Martin-Baker, 398 F.3d at 1259. In particular, plaintiffs are not

required to “affix actual claims for payment to the complaint,”

Pogue, 238 F. Supp. 2d at 269, or to specifically name which

employees of a corporate defendant submitted the false claims,

Westrick, 685 F. Supp. 2d at 139. For fraudulent schemes that are

particularly complex or extensive, Rule 9(b)’s pleading

requirements may be further relaxed.22 Bender II, 686 F. Supp. 2d

at 52; U.S. ex rel. Harris v. Bernard, 275 F. Supp. 2d 7, 7-8

(D.D.C. 2003).

a. Plaintiffs’ SCA-Based Fraud Claims Satisfy
Rule 9(b)

Plaintiffs’ allegations regarding the SCA scheme plainly meet

Rule 9(b)’s requirements.23 Both Relator and the Government detail

22
Although several of our district courts have applied a
relaxed pleading standard in cases involving complex fraud schemes,
our Court of Appeals has yet to rule on the issue. See Martin-
Baker, 389 F.3d at 1258.
23
Defendants argue against application of Rule 9(b)’s relaxed
pleading standard, claiming that Plaintiffs’ alleged fraud schemes
are not complex. Defs.’ Reply 7 n.9. Defendants analogize this
case to Bender v. North American Telecommunications, Inc. in which
this Court concluded that Rule 9(b)’s pleading standard should not
be relaxed because relator had only alleged “a fairly simple scheme
to misrepresent completed work and falsify claims for payment.” 686
F. Supp. at 52. By contrast, the instant case involves schemes to
defraud the Government that allegedly involve innumerable contracts
and demands for payment made over a number of years. Therefore,
contrary to Defendants’ argument, this case involves multiple,
complex fraud schemes and justifies application of Rule 9(b)’s
relaxed pleading standard. See, e.g., Harris, 275 F. Supp. 2d 1
(applying Rule 9(b)’s relaxed pleading requirements to complex,
multi-year scheme to fraudulently bill the Government for medical
services).

-33-
the circumstances of the fraudulent scheme and the location, Kane

Company executive-level meetings, the Company’s government

contracts, and invoices submitted to the Government under those

contracts.24 U.S. Compl. ¶¶ 12, 20-29; 3d. Am. Compl. ¶¶ 36-44, 56-

60. With regard to time, the Government provides a specific time

period - from 1998-2003 and 2003-2006 - for the scheme. U.S. Compl.

¶ 12. While Relator provides a more open-ended time-period for the

fraudulent plan, alleging that it began in 199925 and continues to

“the present time,” even this lengthier time span is sufficient in

a case involving a complex, fraud scheme. 3d. Am. Compl. ¶¶ 6, 36.

See Harris, 275 F. Supp. 2d at 8 (allegations that complex fraud

scheme “began in 1993 and continues into the present” satisfies

Rule 9(b)); Pogue, 238 F. Supp. 2d at 268 (allegations that complex

fraud scheme occurred over a twelve year period satisfies Rule

9(b)).

24
Plaintiffs’ Complaints also provide information on the
geographic location where some of Defendant Kane Company’s SCA
contracts were performed. For example, Relator alleges that
Defendant Kane Company failed to pay wage determinations on a
“Department of Homeland Security contract in the District of
Columbia” and a “[Department of] Health and Human Services/APHIS
contract, including work performed in the District of Columbia.”
3d. Am. Compl. ¶ 57. In its Complaint in Intervention, the
Government specifically cites to a Kane Company contract with the
U.S. House of Representatives. U.S. Compl. ¶ 15.
25
Even though Relator’s Complaint contains allegations about
the SCA scheme that stretch back to 1998, he clearly states in
briefing on the Motion to Dismiss, that “the time period at issue
is from February 11, 1999 to the present. . . .” Rel. Opp’n 30
n.17.

-34-
 Both Relator and the Government also specifically identify

those Kane Company personnel involved in perpetrating the scheme,26

and detail the content of the false and fraudulent representations,

namely that the Company would comply with SCA requirements when, in

fact, it had no intention of doing so. U.S. Compl. ¶¶ 12-29; 3d.

Am. Compl. ¶¶ 36-44, 56-60.27

Both Relator and the Government also link Defendants’ false

statements to claims for payment made to the United States. U.S.

Compl. ¶¶ 10, 15, 18; 3d. Am. Compl. ¶¶ 104-05, 111-12. In fact,

on this issue, the Government provides far more detail than Rule

9(b) requires. This includes: (1) providing a sampling of

government contracts28 in which Defendant Kane Company failed to

26
In addition to Defendants John Kane and Ronald Meliker, the
other Kane Company officials allegedly involved in the scheme
include William Auchter (Vice President for Facilities), Mark
Cavanaugh (Chief Financial Officer), James Durfee (Vice President
of Marketing), John Middlebrooks (Vice President of Government
Sales), and Buck Whitman (Vice President of Sales). U.S. Compl. ¶¶
20-28; 3d. Am. Compl. ¶¶ 36-44. Relator also alleges that these
officials were variously involved in the other fraudulent schemes
described in the Third Amended Complaint.
27
In particular, the Government includes copies of two specific
contracts under which Defendant Kane Company purportedly falsified
its compliance with the SCA. U.S. Compl. ¶ 13, Ex A-1, A-2. Relator
also includes information on specific Kane Company contracts that
did not comply with the SCA’s requirements. See, e.g., 3d. Am.
Compl. ¶¶ 39-40, 60.
28
Defendants argue that the Government’s submission of sample
contracts does not meet Rule 9(b)’s pleading requirements. Defs.’
Reply 7-8. Citing Martin-Baker, Defendants claim that the D.C.
Circuit has “suggested” that pleading by statistical sample is not
permitted under Rule 9(b). Id. Martin-Baker does not, however,
(continued...)

-35-
comply with the SCA: (2) detailing the total amount paid by the

Government to Kane Company under those contracts, the amount

Defendant Kane Company underpaid employee wages and benefits under

these contracts, and the resulting financial loss to the

Government; and (3) invoices submitted by Defendant Kane Company to

the Government under some of these contracts. U.S. Compl. ¶ 15, Ex.

B-C. See also Folliard, 722 F. Supp. 2d at 27 (holding that “while

Rule 9(b)’s particularity requirement applies to the [contention]

that the request was fraudulent,” Rule 12(b)(6)’s “general

standards apply to the . . . existence of a request for payment”).

b. Relator’s Remaining Fraud Claims Satisfy Rule
9(b)

Relator’s remaining FCA claims have also been pled with

sufficient particularity under Rule 9(b).

28
(...continued)
make any such suggestion. By contrast, as Relator has correctly
pointed out, our district court has recognized that in FCA cases
involving complex fraud schemes pleading by statistical sample is
permitted under Rule 9(b). Harris, 275 F. Supp. 2d at 8.

In the alternative, Defendants argue that the Government’s
proffered contracts should not be treated as a statistical sample
because “[t]he Government has not asserted that the contracts
comprise a statistical sample of Defendants’ government contracts,
nor can it, given that all the contracts date from the last three
years (2003-2006) of the 1998-2006 time frame during which the
alleged fraudulent scheme occurred.” Defs.’ Reply 8 n.10. The
Government, however, clearly describes these contracts as
constituting a “sample.” U.S. Compl. ¶ 15. Because this is an issue
of fact, the Government’s allegation must be accepted as true in a
Rule 12(b)(6) motion to dismiss.

-36-
 First, with regard to the scheme to fraudulently bill for

employee work hours which were not performed, Relator’s Complaint:

(1) references two specific contracts for which Relator possesses

personal knowledge of Kane Company’s fraudulent billing; (2)

indicates that the scheme was discussed during monthly Kane Company

executive-level meetings that occurred while Defendant was “working

for Defendant Kane [Company];” (3) names specific Kane Company

officials involved in the scheme; and (4) connects this scheme to

demands for payment made to the Government. 3d. Am. Compl. ¶¶ 45-

46, 62.

Second, with regard to the scheme to fraudulently bill for

fuel costs, Relator’s Complaint: (1) indicates that the scheme was

discussed during the aforementioned Kane Company executive-level

meetings with the same Kane Company officials; (2) states that the

scheme occurred in 2002-2003 and 2005; (3) details the nature of

the scheme; and (4) connects the fraudulent plan to demands for

payment made to the Government. Id. ¶¶ 47-48, 65.

Third, with regard to the GSA best price scheme, Relator’s

Complaint: (1) details the nature of the scheme; (2) clearly

indicates that it was discussed in 2003 and 2004 at Kane Company

executive-level meetings and continues to the present time; (3)

names the specific Kane Company officials involved in the scheme;

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and (4) connects the scheme to demands for payment to the

Government. Id. ¶¶ 9, 49-52,63-64, 104, 111-12.29

29
Relator has made some allegations, including those regarding
the GSA best price and Perara Group schemes, on “information and
belief.” See, e.g., 3d. Am. Compl. ¶¶ 49, 54. Defendants argue
that, because these pleadings on “information and belief” do not
also allege “that the necessary information lies exclusively within
[] defendant’s control,” the Third Amended Complaint fails to meet
Rule 9(b)’s requirements. Defs.’ Reply 8. Although it is true that
Rule 9(b) permits pleadings on information and belief only where
plaintiff also alleges lack of access to necessary information,
Bender II, 686 F. Supp. 2d at 53, Defendants’ argument fails for
several reasons.

First, Defendants point to no authority establishing that
plaintiff must allege that the absent information is within
defendant’s “exclusive” control. In Martin-Baker, our Court of
Appeals held that, because plaintiffs bringing qui tam actions may
“often have difficulty getting access to their former employers’
documents,” they may be excused from meeting Rule 9(b)’s
particularity requirement by alleging lack of access to the
information. 389 F.3d at 1258. However, the court at no point
suggested that such information must be within defendant’s
“exclusive” control. See Kowal v. MCI Commc’n Corp., 16 F.3d 1271,
1279 n.3 (D.C. Cir. 1994) (“[P]leadings on information and belief
require an allegation that the necessary information lies within
the defendant’s control.”); Bender II, 686 F. Supp. 2d at 53
(same).

Second, Relator has clearly alleged lack of access to
necessary information in his briefing on the Motion to Dismiss.
Rel. Opp’n 37. While it is true that by and large the Third
Amended Complaint lacks any such allegation, for Rule 9(b)
purposes, courts have allowed plaintiffs to allege lack of access
to necessary information in their opposition briefs. Bender II, 686
F. Supp. 2d at 53 (“While it is generally understood that the
complaint may not be amended in 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.”(citation
and internal quotations omitted)). Thus, it is clear, based on this
case law, that Relator’s pleadings on “information and belief”
satisfy Rule 9(b).

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 Finally, with regard to the Perara Group scheme, Relator’s

Complaint: (1) details the nature of the scheme; (2) alleges the

specific contracts that were the subject of the scheme; (3) clearly

states that the scheme began after he left Kane Company and

continues “until the present time;” and (4) connects the fraudulent

scheme to demands for payment to the Government. Id. ¶¶ 10, 54, 55,

66, 104, 111-12. Although the Complaint does not specify the role

Defendants John Kane, Ronald Meliker, and other Kane Company

employees played in the fraudulent plan, given the other details

provided, Defendants are not disadvantaged by Relator’s failure to

include this information in his Complaint. Cf. Folliard, 722 F.

Supp. 2d at 32.

In sum, Plaintiffs’ allegations provide sufficient detail to

satisfy Rule 9(b)’s overriding purpose of guaranteeing Defendants

“‘sufficient information to allow for preparation of a response.’”30

Martin-Baker, 389 F.3d at 1256 (quoting Cannon, 642 F.2d at 1385).

“While significant details which will be necessary for plaintiff[s]

to succeed on the merits of the case are indeed absent, these

details are not necessary at this very preliminary stage of

litigation.” Allen, 309 F. Supp. 2d at 47 (emphasis in original).

Plaintiffs “must be allowed to fill in those details [through] the

30
Since Defendant Kane Company has already filed an Answer as
well as various affirmative defenses and counterclaims in this
case, it is now clear that the Company has received sufficient
notice to defend against Plaintiffs’ claims.

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discovery process . . . .” Id. Contrary to Defendants’ claim, these

allegations do not require Defendants to submit to overly

burdensome discovery or allow Plaintiffs to conduct a “fishing

expedition.” Defs.’ Reply 2,7. Rather, on the basis of Plaintiffs’

detailed allegations, the Court is confident that “[d]iscovery can

be pointed and efficient.” Folliard, 722 F. Supp. 2d at 33.

For the foregoing reasons, the Court concludes that

Plaintiffs’ fraud allegations meet the requirements of Rule 9(b).

Accordingly, the Court denies Defendants’ Motion to Dismiss

Plaintiffs’ FCA fraud claims on these grounds.

B. Relator’s Retaliation Claim Under the FCA Fails to State
a Claim under Rule 12(b)(6)

Relator has accused Defendant Kane Company of violating

Section 3730(h) of the FCA by retaliating against him in response

to his filing of the instant qui tam action and participation in

the Government’s investigation of this case. 3d. Am. Compl. ¶ 130.

These alleged retaliatory acts include: (1) the filing of

counterclaims in 2009 in this case against Relator that “had no

basis in fact;” (2) the making of defamatory and disparaging

statements in 2009 and 2010 about Relator to the press and other

third parties; and (3) Defendant John Kane’s alleged impersonation

of Relator and the posting of Relator’s phone number on the

website, Craigslist.com. 3d. Am. Compl. ¶¶ 72-97, 100, 129-132.

In response to Relator’s claim, Defendants argue that these

alleged retaliatory activities occurred well after Relator’s

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employment with Kane Company had ended and are, therefore, not

cognizable under Section 3730(h). Defs.’ Mot. 12-13; Defs.’ Supp.

Reply 2-5.

Under Section 3730(h) of the FCA, an employee who has been

discriminated against for engaging in a protected activity may

bring a civil action against her employer. The statute provides

that:

Any employee, contractor, or agent shall be
entitled to all relief necessary to make that
employee, contractor, or agent whole, if that
employee, contractor, or agent is discharged,
demoted, suspended, threatened, harassed, or
in any manner discriminated against in the
terms and conditions of employment because of
lawful acts done by the employee . . . in
furtherance of an action under this section or
other efforts to stop 1 or more violations of
this subchapter.

31 U.S.C. § 3730(h) (emphasis added).

While few courts have addressed whether Section 3730(h)

applies to cases of post-employment retaliation, this Court has

previously ruled on this issue. See U.S. ex rel. Head v. Kane Co.,

668 F. Supp. 2d 146, 152 n.5 (D.D.C. 2009). In that opinion, the

Court rejected the Government’s argument that Defendant Kane

Company’s counterclaims against Relator should be dismissed as

contrary to the “spirit” of Section 3730(h). Id. Specifically, the

Court held that “[b]ecause Head was terminated prior to the filing

of this Complaint, § 3730(h) does not apply to this action. ” Id.

As the issue was not central to the arguments made by the parties

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at that time, the Court did not discuss it in any detail. However,

having considered the parties’ recent round of briefing on this

issue, the Court will affirm its earlier holding and elaborate on

the reasons for reaching its conclusion.

In interpreting a statute, “courts must presume that a

legislature says in a statute what it means and means in a statute

what it says there.” Conn. Nat’l Bank v. Germain, 503 U.S. 249,

253-54, 112 S. Ct. 1146 (1992). In order to defeat application of

this cannon of statutory construction, a party must “show either

that, as a matter of historical fact, Congress did not mean what it

appears to have said, or that, as a matter of logic and statutory

structure, it almost surely could not have meant it.” Engine Mfrs.

Ass’n v. EPA, 88 F.3d 1075, 1089 (D.C. Cir. 1996).

In the Court’s earlier opinion, it emphasized the statutory

language of Section 3730(h), particularly the phrase “in the terms

and conditions of employment.” Head, 668 F. Supp. 2d at 152 n.5.

The plain language of this phrase clearly establishes that Section

3730(h) applies only to the employment context and, therefore,

cannot extend to claims for retaliatory action occurring solely

after a plaintiff has been terminated from his job.31 Relator has

31
Relator cites to a handful of FCA cases to bolster his
argument. Rel. Opp’n 41-42 n.23. However, these cases all involve
retaliation claims for unlawful termination, which obviously do
relate to the “terms and conditions of employment.” Therefore, they
are totally distinguishable and do not support Relator’s position.
Georgandellis v. Holzer Clinic, Inc., 2:08-cv-626, 2009 WL 1585772
(continued...)

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not provided the Court with any persuasive authority that would

support a contrary ruling.32

31
(...continued)
(S.D. Ohio June 5, 2009)(case involving FCA retaliation claim for
unlawful termination); Machado v. Sanjurjo, 559 F. Supp. 2d 67
(D.P.R. 2008)(same); Nguyen v. City of Cleveland, 121 F. Supp. 2d
643 (N.D. Ohio 2000) (same); U.S. ex rel. Kent v. Aiello, 836 F.
Supp. 720 (E.D. Cal. 1993) (same).
32
Relator relies heavily on cases construing the anti-
retaliation provisions of Title VII of the Civil Rights Act of
1964, 42 U.S.C. § 2000e-3, and of the Age Discrimination in
Employment Act (“ADEA”), 29 U.S.C. § 623. Rel. Opp’n 40-41. As
Relator accurately notes, some cases in this Circuit have
recognized post-employment retaliation claims, even those which did
not relate to the “terms and conditions of employment,” under these
statutes. See Rochon v. Gonzalez, 438 F.3d 1211 (D.C. Cir. 2006);
Passer v. Am. Chem. Soc’y, 935 F.2d 322 (D.C. Cir. 1991).

However, Relator has failed to demonstrate that this case law
mandates recognition of the kind of post-employment, non
employment-related FCA retaliation claim alleged in this case.

First, unlike the FCA, the retaliation provisions of Title VII
and the ADEA do not contain language limiting their scope to the
employment context. As Relator’s proffered case law demonstrates,
it is primarily for this reason that courts have construed the
anti-retaliation provisions of Title VII and the ADEA to include
actions beyond the terms and conditions of employment. See
Burlington N. and Santa Fe Ry., Co. v. White, 548 U.S. 53, 1265 S.
Ct. 2405 (2006) (holding that Title VII’s anti-retaliation
provision lacks language limiting the statute to “the terms and
conditions of employment,” and it therefore covers employer actions
that cause harm outside the workplace and that do not directly
affect employment).

Second, the Title VII and ADEA cases cited by Plaintiff which
have recognized post-employment retaliation, involve plaintiffs who
had raised discrimination and/or retaliation claims while still
employed. See Rochon, 438 F.3d 1211; Passer, 935 F.2d 322. By
contrast, in this case, Relator has not alleged that he engaged in
any FCA-protected activity while an employee at Kane Company, that
his 2005 termination by Kane Company was retaliatory, or that he
was otherwise discriminated against by Defendant Kane Company or
(continued...)

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 For the foregoing reasons, the Court holds that Section

3730(h) does not apply to retaliatory actions Defendant Kane

Company allegedly took against Relator after his employment with

the Company ended and which did not involve “the terms and

conditions of [his] employment.”33 Accordingly, the Court will grant

Defendants’ Motion and dismiss this claim for failure to state a

cause of action under Rule 12(b)(6).

C. Supplemental Jurisdiction over Relator’s State Law Claims
Is Proper

Defendants argue that the Court should decline to exercise

supplemental jurisdiction over Relator’s state law claims as those

claims “are not sufficiently related to the FCA claims.” Defs.’

Mot. 13 n.6; Defs.’ Reply 18-19 & n.19. Relator responds that

supplemental jurisdiction is proper because of “the overlap in

facts, witnesses, and parties.” Rel. Opp’n 2.

Although Relator’s Complaint does not specify the basis for

the Court’s jurisdiction over these claims, it is clear that 28

U.S.C. § 1367 provides such jurisdiction. Under that provision, “in

32
(...continued)
its officials while he was employed at the Company.
33
Relator also argues for recognition of his retaliation claim
on the grounds that “a primary purpose of anti-retaliation
provisions” is to maintain “unfettered access to statutory remedial
mechanisms.” Rel. Opp’n 41. While Relator has a strong policy
argument, “the court’s role is not to ‘correct’ the text so that it
better serves the statute’s purposes, for it is the function of the
political branches not only to define the goals but also to choose
the means for reaching them.” Engine Mfrs. Ass’n, 88 F.3d at 1089.

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any civil action of which the district courts have original

jurisdiction, the district courts shall have supplemental

jurisdiction over all other claims that are so related to claims in

the action within such original jurisdiction that they form part of

the same case or controversy under Article III of the United States

Constitution.”

In order for a federal and state law claim to form part of the

“same case of controversy,” the “claims must derive from a common

nucleus of operative facts.” United Mine Workers of America v.

Gibbs, 383 U.S. 715, 725, 86 S. Ct. 1130 (1966). Claims may be said

to “derive from a common nucleus of operative facts” where

plaintiff would be expected to try them all in one judicial

proceeding, such as when they involve common issues of proof and

the same witnesses. Id.; Reuber v. United States, 750 F.2d 1039,

1048 (D.C. Cir. 1984), overruled on other grounds by Kauffman v.

Anglo-Am. Sch. of Sofia, 28 F.3d 1223 (D.C. Cir. 1994). In

applying this standard, courts should be guided by considerations

of judicial economy as well as convenience and fairness to the

parties. Reuber, 750 F.2d at 1048.

In this case, Relator’s state law claims derive, in large

part, from allegations that Defendants took various unlawful

actions against Relator arising from his decision to bring the

instant qui tam action. 3d. Am. Compl. ¶¶ 72-97, 100, Counts 5, 7-

12. Relator’s FCA and state law claims, therefore, do arise from a

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common nucleus of facts and are properly tried in the same case.

Accordingly, principles of judicial economy and fairness to the

parties mandate the exercise of the Court’s supplemental

jurisdiction.

For the foregoing reasons, the Court denies Defendants’ Motion

to Dismiss Relator’s state law claims for lack of supplemental

jurisdiction.

IV. Conclusion

For all the reasons stated herein, Defendants’ Motion to

Dismiss is granted in part and denied in part. Specifically,

pursuant to Rule 12(b)(6), the Court grants Defendants’ Motion to

Dismiss Relator’s FCA retaliation claim as well as Relator’s claim

that Defendants Kane Company, John Kane, and Ronald Meliker

conspired together to violate the FCA. The Court denies, pursuant

to both Rule 9(a) and 12(b)(6), Defendants’ Motion to Dismiss

Plaintiffs’ remaining FCA fraud claims and Relator’s state law

claims.

An Order will accompany this Memorandum Opinion.

July 25, 2011 /s/
Gladys Kessler
United States District Judge

Copies via ECF to all counsel of record

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