United States Ex Rel. Head v. Kane Co.
798 F. Supp. 2d 186
D.D.C.2011Background
- Relator Anthony Head worked for Kane Company starting Dec 1, 1997; Kane Company is a Maryland contractor providing moving services to government and corporate clients.
- Head learned that Kane Company regularly failed to pay Service Contract Act wage determinations on various government contracts beginning in 1998–2003; he alerted Kane Company officers who allegedly took no action.
- Between 2002–2005, Kane Company executives allegedly discussed illegal practices: fraudulent billing for employee services, double billing, overcharging fuel costs, and failing to provide the “best price” under GSA/8(a) contracts.
- In 2004, Head discussed a potential partnership with the Perara Group (an SBA Section 8(a) firm); Head later learned the Perara Group obtained several Section 8(a) contracts and suspected a “pass through” arrangement.
- On Jan 10, 2005, Head was terminated for alleged poor performance; approximately two weeks later, Kane Company and Head signed a Separation Agreement.
- In 2009 the United States intervened in the FCA action; subsequent amended complaints added retaliation, breach of Separation Agreement, and state-law claims; Defendants moved to dismiss under Rule 12(b)(6) and 9(b), with the court presiding on those issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FCA claims are adequately pled as false claims | Head and the Government allege presentment, fraudulent inducement, and false certification theories. | Defendants argue failure to allege explicit false claims and initial representations. | FCA claims adequately pled; presentment, fraudulent inducement, and false certification theories survive. |
| Whether SCA compliance was material to payment | SCA compliance was material; government relied on misrepresentations in paying under SCA contracts. | Materiality requires express contractual language or explicit link to payment. | SCA materiality adequately alleged; materiality shown by evidence and SAIC guidance. |
| Whether FCA conspiracy claims against Kane Company and individuals survive | Head asserts intra-corporate and cross-party conspiracies to defraud the government. | Intra-corporate conspiracy doctrine bars Kane with its employees; Perara group not necessary joined for all conspirators. | Dismissal of intra-corporate conspiracy with Kane, John Kane, and Meliker; denial to dismiss conspiracies with Perara group where non-employees involved. |
| Whether FCA claims satisfy Rule 9(b) particularity requirements | Schemes described with time, place, persons, and link to government payments. | Rule 9(b) requires more precise pleading of each false claim. | FCA fraud claims satisfy Rule 9(b) given detailed scheme allegations and public records; relaxed standard applied for complex schemes. |
| Whether retaliation claim under § 3730(h) is cognizable post-employment | Head alleges post-employment retaliation for protected activity. | § 3730(h) applies to terms and conditions of employment; post-employment actions do not qualify. | Retaliation claim under § 3730(h) dismissed for failure to state a claim. |
Key Cases Cited
- U.S. ex rel. Bettis v. Odebrecht Contractors of Cal., Inc., 393 F.3d 1321 (D.C. Cir. 2005) (illustrates presentment, fraudulent inducement, and false certification theories under FCA)
- SAIC, U.S. ex rel. S.A.I.C. v. United States (SAIC), 626 F.3d 1257 (D.C. Cir. 2010) (recognizes implied false certification and materiality standards under FCA)
- Totten v. Bombardier Corp., 286 F.3d 542 (D.C. Cir. 2002) (clarifies FCA liability attaches to claims for payment, not underlying fraud)
- United States v. Neifert-White Co., 390 U.S. 228 (Supreme Court 1968) (broadly defines 'claims' under FCA to include government payment requests)
- U.S. ex rel. Folliard v. CDW Tech. Servs., 722 F. Supp. 2d 20 (D.D.C. 2010) (applies Rule 9(b) to FCA complex-scheme pleading and permitting non-specific evidence at 12(b)(6))
- Martin-Baker Aircraft Co. v. United States District Court, 389 F.3d 1251 (D.C. Cir. 2004) (provides standard for pleading under Rule 9(b) in FCA cases)