United States ex rel. Daugherty v. Tiversa Holding Corp.
342 F. Supp. 3d 418
S.D. Ill.2018Background
- Relator Michael Daugherty (former LabMD founder) alleges Tiversa and exec Robert Boback falsified origins of sensitive files found via peer-to-peer searches to induce federal payments and contracts.
- Tiversa allegedly doctored a TSA-related report in 2011 (misstating IP/origin) and used it to secure a TSA cybersecurity contract (two one-year payments of $324,000).
- Separately, Tiversa provided a LabMD file to Professor M. Eric Johnson (Dartmouth) for a DHS-funded project; the Johnson Paper and quarterly DHS progress reports allegedly misrepresented the file’s provenance. Dartmouth received about $29.65 million under the DHS grant.
- Daugherty brought a sealed qui tam FCA action in 2014; the United States declined to intervene in 2018 and the complaint was unsealed.
- Court considered motions to dismiss under Rule 12(b)(1), 12(b)(6), and Rule 9(b) (fraud particularity), and addressed the pre- and post-2010 versions of the FCA public-disclosure bar and the FCA materiality requirement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether TSA-contract-based FCA claims plead false/fraudulent claims and satisfy Rule 9(b) | Daugherty: Boback presented a knowingly false Tiversa report (misstated IP/foreign origin) to TSA to obtain contract payments | Defendants: Complaint lacks particularity as to which TSA officials were told and when; public disclosures bar claim | Court: Denied dismissal — factual falsity and Rule 9(b) requirements met for TSA claims; public-disclosure bar does not preclude these claims |
| Whether DHS-grant-based FCA claims are barred by public disclosure for pre-2010 payments | Daugherty: He is an original source and claims survive | Defendants: Pre-2010 public-disclosure bar applies to claims arising from payments before March 23, 2010 and deprives court of jurisdiction unless relator is original source | Court: Pre-2010 bar applies to claims for payments before 3/23/2010; Daugherty not original source (learned core facts from whistleblower), so pre-2010 portions dismissed for lack of jurisdiction |
| Whether post-2010 DHS-grant claims plead materiality under Escobar and survive Rule 12(b)(6) | Daugherty: False provenance of LabMD file was material to DHS’s grants and progress reports | Defendants: Alleged falsity (single file provenance) is immaterial given scope/size of grant and government’s continuing payments; pleading is conclusory | Court: Dismissed post-2010 DHS claims with prejudice for failure to plead materiality — implausible that single-file provenance would influence DHS payments |
| Whether conspiracy claim under FCA survives if substantive claims survive | Daugherty: Conspiracy alleged tied to substantive FCA violations | Defendants: Conspiracy fails if underlying FCA claims fail | Court: Conspiracy claim survives (Count Five) because TSA-based substantive claims survive |
Key Cases Cited
- Allen v. Credit Suisse Sec. (USA) LLC, 895 F.3d 214 (2d Cir.) (pleading standard — factual inferences for Rule 12(b)(6))
- United States ex rel. Ladas v. Exelis, Inc., 824 F.3d 16 (2d Cir.) (Rule 9(b) fraud particularity requirements)
- U.S. ex rel. Polansky v. Pfizer, Inc., 822 F.3d 613 (2d Cir.) (FCA is an anti-fraud statute requiring Rule 9(b) pleading)
- Mikes v. Straus, 274 F.3d 687 (2d Cir.) (distinguishing factual falsity and legal falsity under FCA)
- United States ex rel. Kreindler & Kreindler v. United Tech. Corp., 985 F.2d 1148 (2d Cir.) (accrual and counting of FCA claims tied to dates of claim/payment)
- Hughes Aircraft Co. v. United States ex rel. Schumer, 520 U.S. 939 (U.S.) (presumption against retroactivity of statute amendments)
- United States ex rel. Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645 (D.C. Cir.) (interpretation of "allegations or transactions" for public-disclosure bar)
- Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (U.S.) (materiality standard for FCA claims)