United States v. DYNCORP INTERNATIONAL, LLC
1:16-cv-01473
| D.D.C. | May 19, 2017Background
- The State Department awarded DynCorp the CIVPOL Iraq contract to support training of the Iraqi civilian police; DynCorp subcontracted lodging and local labor to Corporate Bank Financial Services, Inc.
- DynCorp billed the government under both firm-fixed-price line items (labor through July 2007) and cost-reimbursable line items (hotels, labor after July 2007, and G&A); cost-reimbursable charges were payable only if "reasonable" under FAR cost principles.
- The United States alleges DynCorp knew Corporate Bank’s hotel and labor rates were inflated (internal emails calling rates "outrageous," reports of cheaper hotels nearby, lack of supporting documentation) but concealed that information and billed the government at those rates.
- Government contends DynCorp also accepted and submitted inflated G&A rates without justification and repeatedly justified prices in proposals as based on "historical data" or "vendor quote."
- DOJ sued under the False Claims Act (presentment and false-statement theories) and asserted common-law claims for unjust enrichment, payment by mistake, and breach of contract; DynCorp moved to dismiss.
- The court denied dismissal of the FCA claims (finding adequate allegations of falsity, materiality, scienter, and Rule 9(b) particularity), dismissed unjust-enrichment and payment-by-mistake claims to the extent they rely on cost-reimbursable charges, and retained the breach-of-contract claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether cost-reimbursable claims (hotels, labor after July 2007, G&A) are false under implied-certification (Escobar) | DynCorp submitted costs that were unreasonable and withheld that noncompliance with FAR reasonableness rules, making claims false and material | Unreasonableness is factual/subjective, not necessarily false; government’s post-payment audits show reasonableness is not material; plaintiff hasn’t plausibly alleged unreasonableness or scienter | Court: Allegations (internal statements, rate disparities, G&A anomalies) plausibly plead falsity, Escobar materiality, and scienter under implied-certification theory; FCA presentment claim survives |
| Whether fixed-price labor claims (before July 2007) are false | False price proposals ("historical data," "consistent with previous periods") fraudulently induced contract prices; claims false under fraudulent-inducement theory | FAR reasonableness provisions do not govern fixed-price items; alleged justifications were not false or not shown to have induced payment | Court: Implied-certification not applicable to fixed-price items, but fraudulent-inducement adequately pleaded for specified statements ("historical data," consistency), with scienter; FCA presentment claim survives |
| Whether FCA false-statement claim (Count II) meets intent/materiality requirements (pre-/post-FERA) | Even under pre-FERA intent rule, allegations show intent to get false claims paid; under post-FERA materiality text, materiality is satisfied | Pre-FERA required purpose to get claims paid; many challenged invoices pre-date FERA so pre-FERA standard should apply and not be met | Court: The complaint satisfies the higher pre-FERA intent standard as alleged; Count II survives; court declines to resolve the retroactivity question now |
| Whether fraud allegations satisfy Rule 9(b) particularity and statute-of-limitations bar | Complaint identifies categories, specific proposals/dates, exemplar invoices, and internal statements sufficient for particularity; tolling and DOJ ignorance alleged so claims not facially time-barred | Complaint lacks voucher-level specifics and fails to show when an "official" knew such that the 3-year accrual applies; many invoices are older than six years | Court: Rule 9(b) satisfied (categories plus representative examples are sufficient); statute-of-limitations dismissal premature because complaint not conclusively time-barred |
| Whether unjust enrichment and payment-by-mistake claims may proceed | For fixed-price periods, contract terms were fraudulently induced so quasi-contractual claims may proceed in the alternative | Existence of an express contract bars quasi-contractual recovery | Court: Quasi-contract claims allowed only as to fixed-price labor charges (where fraudulent inducement alleged); dismissed insofar as based on cost-reimbursable charges |
| Whether court has jurisdiction over breach-of-contract claim (CDA limits) | Fraud exception applies because same factual allegations support FCA claims, so District Court has jurisdiction | Contract Disputes Act limits jurisdiction to agency/COFC absent fraud; if FCA fails, CDA would bar | Court: Because FCA claims stand, fraud exception permits district-court jurisdiction; breach-of-contract claim remains |
Key Cases Cited
- Universal Health Servs. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016) (recognized implied-certification theory and articulated demanding materiality standard)
- United States v. Science Applications Int'l Corp., 626 F.3d 1257 (D.C. Cir. 2010) (D.C. Circuit's broader pre-Escobar formulation of implied certification and caution about collective-knowledge scienter)
- Allison Engine Co. v. United States ex rel. Sanders, 553 U.S. 662 (2008) (pre-FERA interpretation of false-statement provision requiring purpose to get a false claim paid)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for pleadings)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (Twombly pleading standard)
- Kowal v. MCI Commc'ns Corp., 16 F.3d 1271 (D.C. Cir. 1994) (Rule 9(b) description requirement: time, place, content of misrepresentations)
- United States ex rel. Bettis v. Odebrecht Contractors of Cal., Inc., 393 F.3d 1321 (D.C. Cir. 2005) (fraudulent-inducement theory: contract procured by fraud renders subsequent claims false)
- United States ex rel. Folliard v. CDW Tech. Servs., 722 F. Supp. 2d 20 (D.D.C. 2010) (discussing pre-/post-FERA intent and false-statement claims)