U.S. ex rel. J. Cooper v. Bernard Hodes, Civ.A. No. 03-2436 (RMU).

• Citation: 422 F.Supp.2d 225
• Decision Date: 23 March 2006
• Docket Number: Civ.A. No. 03-2436 (RMU).
• Parties: UNITED STATES of America, ex rel. J. COOPER & ASSOCIATES, INC., Plaintiff, v. BERNARD HODES GROUP, INC., Cass Communications, Inc., and J. Walter Thompson Co., Defendants.
• Court: United States District Courts. United States District Court (Columbia)

422 F.Supp.2d 225

UNITED STATES of America, ex rel. J. COOPER & ASSOCIATES, INC., Plaintiff, v. BERNARD HODES GROUP, INC., Cass Communications, Inc., and J. Walter Thompson Co., Defendants.

Civ.A. No. 03-2436 (RMU).

United States District Court, District of Columbia.

March 23, 2006.

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Cyrus E. Phillips, IV, Washington, DC, for Plaintiff.

Kenneth Lee Blalack, II, O'Melveny & Myers LLP, Washington, DC, for Defendants.

Brian J. Sonfield, Export-Import Bank of the United States Office of the General Counsel, Washington, DC, for Movant.

MEMORANDUM OPINION

URBINA, District Judge.

GRANTING THE DEFENDANTS' MOTION TO DISMISS AND FOR ATTORNEYS' FEES AND EXPENSES

I. INTRODUCTION

This case comes before the court on the defendants' motion to dismiss and for attorneys' fees and expenses. The plaintiff alleges that the defendants misrepresented themselves as small or disadvantaged businesses in violation of the False Claims Act ("FCA"), 31 U.S.C. §§ 3729 et seq., to obtain orders from the Immigration and Naturalization Service ("INS") for advertising and public relations services. Because the plaintiffs claims are based on publicly disclosed information, of which the plaintiff is not the original source, the court grants the defendants' motion to dismiss for lack of subject-matter jurisdiction. In addition, because the plaintiffs lawsuit qualifies as frivolous and vexatious, the court awards the defendants attorneys' fees and expenses pursuant to 31 U.S.C. § 3730(d)(4).

II. BACKGROUND

A. Factual Background

Plaintiff J. Cooper and Associates, Inc. is a small, disadvantaged vendor eligible to participate in the Small Business Administration's ("SBA") Section 8(a) program¹ Am. Compl. ¶ 3. In July 1995, the INS awarded the plaintiff a contract under the Section 8(a) program to perform advertising and public relations services to support the INS's initiative to significantly increase the size of its workforce. Id. ¶ 8; Defs.' Mot. at 4. In November 1995, however, the INS began issuing orders to other vendors to fulfill its advertising needs. Defs.' Mot. at 5-6. Specifically, the INS placed advertising orders with defendants Bernard Hodes Group, Inc. ("Hodes") and Cass Communications, Inc. ("Cass") in November 1995, and with defendant J. Walter Thompson Co. ("JWT") in February 1996.² Id. at 7.

On January 7, 1997, after the plaintiffs contract terminated, the plaintiff sent a letter to the United States Department of Justice's Office of the Inspector General ("OIG") stating that "several large white firms misrepresented themselves as being `small and disadvantaged' in order to obtain contracts with the [INS]," and that, "this fraud took place with the INS' [sic.] contract and program people's knowledge."<sup>3</sup> Defs.' Mot. at 6; Am. Compl. ¶ 9; Pl.'s Opp'n, Attach. 1 ("Cooper Decl."), Ex. L On August 7, 1997, the OIG issued a report ("the OIG Report") of an investigation regarding allegations that the INS "commingled advertising funds that were earmarked for a specific 8(a) or small and disadvantaged advertising contract." Am. Compl. ¶ 12; Am. Compl., Attach. 2 at 6538; Defs.' Mot. at 10. Attached to the OIG Report was a Memorandum of Investigation ("MOI") summarizing a July 15, 1997 interview with an INS employee discussing "allegations that certain businesses had received `small business' status, when these companies did not meet the requirements as `small businesses.'" Defs.' Mot. at 10-11 (citing Am. Compl., Attach. 2 at 6546). During the interview, the INS employee stated that each of the defendant vendors "verified their `small business' status verbally" when questioned by the INS. Am. Compl., Attach. 2 at 6547.

On December 8, 1997, the plaintiff filed suit in the United States Court of Federal Claims against the INS, alleging that the SBA and the INS violated their statutory and contractual obligations by discontinuing the contract with the plaintiff and issuing advertising orders related to the INS's hiring initiative to other businesses. Am. Compl. ¶ 10; Defs.' Mot. at 8. The Court of Federal Claims dismissed the suit without prejudice to allow the plaintiff to exhaust administrative remedies. J. Cooper & Assocs., Inc. v. United States, 47 Fed. Cl. 280 (2000). On May 31, 2000, the plaintiff filed another complaint against the INS for breach of contract and breach of the implied covenant of good faith and fair dealing. Am. Compl. ¶ 10. The Court of Federal Claims dismissed the plaintiff's complaint with prejudice on July 12, 2002. J. Cooper & Assocs., Inc. v. United States, 53 Fed.Cl. 8 (2002); Defs.' Mot. at 9. The plaintiff appealed to the Court of Appeals for the Federal Circuit, which affirmed the lower court's decision. J. Cooper & Assocs., Inc. v. United States, 65 Fed.Appx. 731 (2003).

B. Procedural Background

Before ruling on the pending motion, the court takes a step back to review the somewhat tangled procedural posture of this case. On November 25, 2003, the plaintiff filed this qui tam⁴ lawsuit on behalf of the United States against the defendants. Compl ¶¶ 1, 2. On April 18, 2005, the defendants filed a motion to dismiss the complaint and for attorneys' fees, costs, and expenses. Stipulation and Order Dismissing Pl.'s Unjust Enrichment Claim and Defining Papers to be Considered on Defs.' Mot. to Dismiss the Am. Compl. ("Stipulation") at 1. On May 12, 2005, the plaintiff filed a brief and affidavit in opposition to the defendants' motion to dismiss, and subsequently filed an amended complaint which added, inter alia, a claim for unjust enrichment. Id. at 1-2. As a result of this filing, confusion arose among the parties regarding which motions and corresponding documents remained at issue. To clarify for the court the relevant documents in resolving the defendants' motion to dismiss the amended complaint, the parties stipulated and agreed that: (1) the unjust enrichment count is dismissed with prejudice, (2) the defendants' motion to dismiss the original complaint is withdrawn, (3) the only motion before the court is the defendants' motion to dismiss the amended complaint.⁵ Id. at 2-3. The court now turns to the defendants' motion.

III. ANALYSIS

The defendants move to dismiss the plaintiffs amended complaint under Federal Rule of Civil Procedure 12(b)(1) or, in the alternative, Federal Rule of Civil Procedure 12(b)(6). Defs.' Mot. at 1. Courts should consider Rule 12(b)(1) jurisdictional challenges before Rule 12(b)(6) challenges. United States ex rel. Settlemire v. Dist. of Columbia, 198 F.3d 913, 920 (D.C.Cir.1999) (citing United States ex rel. Kreindler & Kreindler v. United Techs. Corp., 985 F.2d 1148, 1155-56 (2d Cir.1993)). Accordingly, the court addresses the defendants' Rule 12(b)(1) challenge first.

A. Legal Standards

1. Legal Standard for a Motion to Dismiss Pursuant to Rule 12(b)(1)

Federal courts are courts of limited jurisdiction and the law presumes that "a cause lies outside this limited jurisdiction." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994); St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-89, 58 S.Ct. 586, 82 L.Ed. 845 (1938); see also Gen. Motors Corp. v. Envtl. Prot. Agency, 363 F.3d 442, 448 (D.C.Cir.2004) (noting that "[a]s a court of limited jurisdiction, we being, and end, with an examination of our jurisdiction").

Because "subject-matter jurisdiction is an `Art. III as well as a statutory requirement[,] no action of the parties can confer subject-matter jurisdiction upon a federal court.'" Akinseye v. Dist. of Columbia, 339 F.3d 970, 971 (D.C.Cir.2003) (quoting Ins. Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982)). On a motion to dismiss for lack of subject-matter jurisdiction pursuant to Rule 12(b)(1), the plaintiff bears the burden of establishing that the court has subject-matter jurisdiction. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). The court may dismiss a complaint for lack of subject-matter jurisdiction only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Empagran S.A. v. F. Hoffman-LaRoche, Ltd., 315 F.3d 338, 343 (D.C.Cir.2003) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)).

Because subject-matter jurisdiction focuses on the court's power to hear the claim, however, the court must give the plaintiffs factual allegations closer scrutiny when resolving a Rule 12(b)(1) motion than would be required for a Rule 12(b)(6) motion for failure to state a claim. Macharia v. United States, 334 F.3d 61, 64, 69 (D.C.Cir.2003); Grand Lodge of Fraternal Order of Police v. Ashcroft, 185 F.Supp.2d 9, 13 (D.D.C.2001). Moreover, the court is not limited to the allegations contained in the complaint. Hohri v. United States, 782 F.2d 227, 241 (D.C.Cir.1986), vacated on other grounds, 482 U.S. 64, 107 S.Ct. 2246, 96 L.Ed.2d 51 (1987). Instead, to determine whether it has jurisdiction over the claim, the court may consider materials outside the pleadings. United States ex rel. Herbert v. Nat'l Acad. of Scis., 974 F.2d 192, 197 (D.C.Cir.1992).

2. Legal Standard for the False Claims Act

The FCA imposes liability for civil penalties and treble damages on anyone who submits or causes false claims to be submitted to the federal government. 31 U.S.C. § 3729. The FCA defines "claim" to include a request for payment made to a contractor; grantee, or other recipient if the federal government provides any portion of the money or property that is requested or demanded, or if the federal government will reimburse such contractor, grantee, or other recipient for any portion of the money or property that is requested or demanded. 31 U.S.C. § 3729(c). Further, the statute proscribes only false claims, that is, actual...