United States Ex Rel. Shemesh v. CA, Inc.
2015 U.S. Dist. LEXIS 41012
| D.D.C. | 2015Background
- Relator Dani Shemesh, a former sales head at CA Software Israel Ltd. (a CA, Inc. subsidiary), alleges CA misrepresented its pricing and discount practices to the GSA when obtaining and renewing a Multiple Award Schedule (MAS) contract and failed to report larger commercial discounts as required by the Price Reduction Monitoring Clause.
- CA submitted Commercial Sales Practices (CSP) disclosures and letters to GSA (2001–2002) describing pricelist-based discounts and a modest maintenance fee reduction; CA later increased license discounts for the GSA but did not disclose widespread, deeper commercial discounts that often exceeded 50–90% off list.
- Relator supplies internal emails, pricing documents, and transactional examples (including sales to Israeli and U.S. commercial customers and a USDA BPA) suggesting the list prices were routinely ignored and maintenance fees were effectively lower for commercial customers because maintenance was tied to the actual (discounted) license price.
- Claims: two FCA counts — (1) presentment of false claims and (2) making/using false records/statements to get false claims paid — seeking recovery for alleged government overpayments (over $100M alleged). The United States intervened and limited its prosecution period to post-2006 conduct; relator adopted the government’s complaint in intervention.
- CA moved to dismiss under Rules 12(b)(6) and 9(b) arguing relator failed to plead contract violations, scienter, materiality, particularity, and that many claims are time-barred. The Court granted dismissal only for claims based on conduct before August 24, 2003, and denied the remainder.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Falsity under FCA for MAS-based claims | Shemesh: CA misled GSA about pricing/discount practices (CSPs, letters) and hid larger commercial discounts; contract was fraudulently induced so subsequent claims were false | CA: MAS rules do not impose a best-price guarantee; relator misreads contract and hasn’t identified specific contractual violations | Court: Accepting relator’s factual allegations, fraudulent inducement of the contract and failure to disclose required pricing info plausibly makes claims false; survives 12(b)(6) for post-2003 claims |
| Scienter (knowledge) | Shemesh: corporate pricing approvals, internal emails, senior officer statements and approval chains permit inference CA knew pricelist was not reflective of practice | CA: No specific individual tied to fraud; collective-knowledge insufficient per SAIC II | Court: Pleading facts allow reasonable inference of corporate knowledge at motion-to-dismiss stage; dismissal not warranted |
| Materiality | Shemesh: misrepresenting pricelist/pricing practices was material because the pricelist and disclosures informed the GSA’s award and pricing decisions and triggered Price Reduction Monitoring | CA: Any inaccuracy immaterial because Price Reduction Monitoring Clause independently protected government | Court: Misstatements about the pricelist were plausibly material, especially given CA failed to perform required reporting under the clause |
| Particularity under Rule 9(b) | Shemesh: detailed scheme, representative examples, documents, dates, and specific internal statements across years suffice for pleading fraud particulars | CA: Relator fails to identify which employees submitted false claims or made false statements to the government | Court: Given multi-year, complex scheme allegations and document-specific examples, Rule 9(b) satisfied without naming the exact employee for each claim |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (establishes plausibility standard for Rule 12(b)(6))
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (pleading must state a plausible claim)
- United States ex rel. Harrison v. Westinghouse Savannah River Co., 176 F.3d 776 (4th Cir.) (fraudulent inducement can sustain FCA claim)
- United States v. Science Applications Int’l Corp., 626 F.3d 1257 (D.C. Cir.) (rejects corporate "collective knowledge" as FCA scienter proof at trial)
- United States ex rel. Frascella v. Oracle Corp., 751 F. Supp. 2d 842 (E.D. Va.) (MAS contract pricing misrepresentations can support FCA claims)
- United States ex rel. Bettis v. Odebrecht Contractors of Cal., Inc., 393 F.3d 1321 (D.C. Cir.) (relief available for claims submitted under contract procured by fraud)