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