NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS MAY 8 2019
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES EX REL. MARK No. 16-56015
DEFATTA,
D.C. No.
Plaintiff, 2:08-cv-07284-GW-CT
and
MEMORANDUM*
MARK DEFATTA, Qui Tam,
Plaintiff-Appellant,
v.
UNITED PARCEL SERVICE, INC.,
Delaware; et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the Central District of California
George H. Wu, District Judge, Presiding
Argued and Submitted April 9, 2019
Pasadena, California
Before: GRABER and BYBEE, Circuit Judges, and ARTERTON,** District
Judge.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The Honorable Janet Bond Arterton, United States District Judge for
the District of Connecticut, sitting by designation.
Appellant Relator Mark DeFatta, a UPS employee, brought claims on behalf
of the government alleging that Defendants, all United Parcel Service, Inc.
(“UPS”) entities, committed fraud on the government as part of their “Air-in-
Ground” practice, whereby UPS ships some Next Day Air or Second Day Air
(together, “Air”) packages using only surface transportation methods. Relator
alleged (1) that Defendants fraudulently induced shipping contracts between UPS
and the government by making false representations in its responses to the
government’s request for proposal (“RFP”); (2) that Defendants submitted facially
false invoices which fraudulently overcharged the government for Air shipments
that actually traveled via surface transportation; and (3) that Defendants submitted
claims which falsely implied certification of compliance with Air Mobility
Command Freight Traffic Rules Publication No. 5 (“AFTRP No. 5”), all in
violation of the False Claims Act (FCA), 31 U.S.C. §§ 3729 et seq. The district
court granted Defendants’ motion to dismiss, and Relator appeals. Reviewing de
novo, see Skilstaf, Inc. v. CVS Caremark Corp., 669 F.3d 1005, 1014 (9th Cir.
2012), we affirm.
1. The district court correctly dismissed Relator’s claim that Defendants
fraudulently induced government contracts by making false representations on
their response to the RFP. Relator argues that UPS was obligated to disclose UPS
Ground service in its response to the RFP, and that the failure to do so was a false
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representation which induced the schedule contract and tenders in violation of the
FCA.
The RFP sought “Commercial Services for the Domestic Express Delivery
Services for Same Day, Next Day, Two Day or Three Day Delivery.” Although
UPS Ground shipments within certain distances will be delivered within one, two,
or three days, UPS Ground does not guarantee delivery within those time frames
regardless of the package’s origin or destination for all or 95% of United States
ZIP Codes, as the RFP required. Therefore, the district court correctly concluded
that UPS Ground was not responsive to the RFP because it did not meet the RFP’s
express requirements, and Defendants’ decision not to offer UPS Ground service in
their response to the RFP was neither fraudulent nor misleading. Absent
identification of any false statement made by Defendants, Relator has not stated a
claim for fraudulent inducement under the FCA. See U.S. ex rel. Hendow v. Univ.
of Phx., 461 F.3d 1166, 1174 (9th Cir. 2006).
2. The district court correctly dismissed Relator’s claim that Defendants
submitted facially false invoices for Air shipments. Relator argues that Defendants
fraudulently overcharged the government by invoicing for Air services while
transporting those invoiced packages by surface transportation.
However, UPS retained discretion to choose the transportation method —
i.e., truck or airplane — regardless of the service selected — i.e., Ground or Air —
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and tied the type of fuel surcharge to the service selected, not to the transportation
method actually used. Thus, Defendants’ use of surface transportation methods for
some Air shipments and their method of calculating fuel surcharges were
consistent with the governing contracts and were not misleading. The invoices are
therefore neither false nor fraudulent on their face, and Relator has neither
“identif[ied] representative examples of false claims” nor “allege[d] ‘particular
details of a scheme to submit false claims paired with reliable indicia that lead to a
strong inference that claims were actually submitted,’” as is required to state an
FCA claim. Ebeid ex rel. U.S. v. Lungwitz, 616 F.3d 993, 998–99 (9th Cir. 2010)
(quoting U.S. ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 190 (5th Cir. 2009)).
Given the heightened pleading standard for fraud claims under Federal Rule of
Civil Procedure 9(b), which requires a relator to “state with particularity the
circumstances constituting fraud or mistake,” Cafasso, U.S. ex rel. v. Gen.
Dynamics C4 Sys., Inc., 637 F.3d 1047, 1054–55 (9th Cir. 2011) (quoting Fed. R.
Civ. P. 9(b)), Relator has failed to state a claim for fraudulent overcharge under the
FCA.
3. The district court correctly dismissed Relator’s claim that Defendants
falsely implied certification with AFTRP No. 5. AFTRP No. 5 established rules to
“govern the freight services of all air freight carriers doing business with” the
Department of Defense (“DOD”) and required that carriers “bill the Government at
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the rate applicable to the actual service performed.” Relator argues that for many
contracts between the government and Defendant UPS Supply Chain Solutions,
Inc. (“UPS SCS”), which were covered by AFTRP No. 5, Defendants nonetheless
subjected covered shipments to their “Air-in-Ground” practices, charging the
government for Air service but shipping packages using only surface transportation
methods, in violation of AFTRP No. 5’s requirement.
To survive a Rule 9(b) motion to dismiss, a complaint alleging
implied false certification must plead with particularity allegations
that provide a reasonable basis to infer that (1) the defendant
explicitly undertook to comply with a law, rule or regulation that is
implicated in submitting a claim for payment and that (2) claims were
submitted (3) even though the defendant was not in compliance with
that law, rule or regulation.
Ebeid, 616 F.3d at 998. Under that heightened standard, Relator has not pled
sufficient detail to support a reasonable inference that UPS SCS participated in the
“Air-in-Ground” practice. Further, he has made no specific or particular allegations
that UPS SCS itself subjected shipments to the “Air-in-Ground” practices, nor has
he made any specific or particularized allegations that such shipments were
subjected to “Air-in-Ground” practices after transfer from UPS SCS to UPS. He
relies instead on conclusory generalizations about the relationship between UPS
and UPS SCS and the broad application of the “Air-in-Ground” program. Such
allegations are insufficient to survive a motion to dismiss Relator’s implied false
certification claims.
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AFFIRMED.
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FILED
United States ex rel. DeFatta v. United Parcel Serv., Inc., No. 16-56015
MAY 08 2019
GRABER, Circuit Judge, concurring: MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
I concur but would affirm for a more fundamental reason. In my view, the
district court lacked jurisdiction because Relator revealed no non-public
information. Accordingly, the district court lacked subject matter jurisdiction. 31
U.S.C. § 3730(e)(4) (2008); see Schindler Elevator Corp. v. United States ex rel.
Kirk, 563 U.S. 401, 404 n.1 (2011) (holding that 2010 amendments to the public
disclosure bar do not apply to cases then pending); Malhota v. Steinberg, 770 F.3d
853, 858 (9th Cir. 2014) (holding that the public disclosure bar is triggered when
the underlying information already was in the public realm).