U.S. v. Intrados/International Management Group

• Decision Date: 14 August 2003
• Docket Number: No. CIV.A. 01-0769(RMU).,CIV.A. 01-0769(RMU).
• Citation: 277 F.Supp.2d 55
• Parties: UNITED STATES of America, Plaintiff, v. The INTRADOS/INTERNATIONAL MANAGEMENT GROUP et al., Defendants.
• Court: U.S. District Court — District of Columbia

277 F.Supp.2d 55

UNITED STATES of America, Plaintiff, v. The INTRADOS/INTERNATIONAL MANAGEMENT GROUP et al., Defendants.

No. CIV.A. 01-0769(RMU).

United States District Court, District of Columbia.

August 14, 2003.

MEMORANDUM OPINION

GRANTING THE PLAINTIFF'S MOTION TO DISMISS THE DEFENDANTS' COUNTERCLAIM WITHOUT PREJUDICE AND INVITING THE PARTIES TO BRIEF THE OPTION OF A LIMITED STAY OF PROCEEDINGS

URBINA, District Judge.

I. INTRODUCTION

This qui tam action arises from our nation's privatization of foreign commerce markets. The United States ("the plaintiff" or "the government") brings suit under the False Claims Act ("FCA"), as amended, 31 U.S.C. §§ 3729-3733, and various common-law theories. The defendants assert a counterclaim for recoupment,¹ alleging that the plaintiff is in breach of contract. The matter now comes before the court on the plaintiff's motion to dismiss the defendants' counterclaim pursuant to Federal Rule of Civil Procedure 12(b)(1) for want of subject-matter jurisdiction. The plaintiff contends that it has not waived sovereign immunity from suit and that the defendants have failed to exhaust their administrative remedies as required under the Contract Disputes Act ("CDA"), as amended, 41 U.S.C. §§ 601-613. Because the defendants' counterclaim is compulsory under Rule 13(a), the court concludes that the plaintiff's assertion of sovereign immunity is not a bar to their counterclaim. The court, however, determines that the defendants did not exhaust the administrative protocol under the CDA before filing their counterclaim and therefore dismisses the counterclaim without prejudice for want of subject-matter jurisdiction. Additionally, because a limited stay of these proceedings would allow the defendants time to comply with the necessary administrative process, the court invites the parties to brief the option of a limited stay pending the defendants' exhaustion of administrative remedies.

II. BACKGROUND

A. Factual Background

The United States has financed privatization-policy and transaction initiatives involving foreign commerce markets since the early 1980s. Compl. ¶ 7. In collaboration with host nations, it has developed privatization programs in countries such as Poland, Honduras, and Jamaica. Id. The United States also supports initiatives to privatize civilian and defense industries in the newly independent states ("NIS") of the former Soviet Union, and has contracted with private companies to provide the technical assistance necessary to implement these privatization projects. Id. ¶ 8.

In connection with this effort, the plaintiff entered into an agreement with defendant Intrados/International Management Group and the individual defendants, Fariborz Ghadar, Margaret Ghadar, and Liz De Tuerk Ghadar (collectively "the defendants") for them to provide training services in several of the now-independent former-Soviet states. Id. ¶ 9. Specifically, in 1994 the plaintiff issued contract number NIS 110-005-C-00-4011-00 to the defendants for the awarded amount of $8,165,855.00 ("the contract"). Id. The contract obligates the defendants to train mid-level government officials on the privatization of markets and other economic reforms that would ease the transition from command-and-control economies to their capitalistic market-based counterparts. Id. According to the contract, the defendants may seek reimbursement from the plaintiff, separate from the awarded amount, for certain allowable costs incurred in connection with the contract work. Id. ¶¶ 9-10; Defs.' Mot. to Dismiss ("Defs.' Mot.") Ex. A (Contract § B). The contract expressly requires the defendants to follow certain procedures, including the calculation of invoices pursuant to set mathematical formulas, when submitting invoices for reimbursement. Compl. ¶¶ 10-12; Defs.' Mot. at 3.

The plaintiff asserts that, from November 1994 to October 1996, the defendants routinely and knowingly submitted false or fraudulent invoices and incurred-cost submissions to the plaintiff, seeking reimbursement for costs that are impermissible under the contract and the applicable federal-procurement regulations. Compl. ¶¶ 13-14. In addition, the plaintiff alleges that, on October 22, 1996, the defendants submitted a false incurred-cost submission regarding the same improper expenditures. Id. ¶ 15. The plaintiff further claims that the individual defendants generated false corporate records, general ledgers, and other accounting data that concealed the personal nature of the unallowable costs by accounting for them as "salaries," "overhead," or "travel allowances." Id. ¶¶ 17-18. Given that each of the invoices contain an implied certification that the sum claimed is properly due under the contract pursuant to the plaintiff's procurement regulations, the plaintiff regards the implied certifications submitted by the defendants as false. Id. ¶¶ 19-20.

In response to these allegations, the defendants filed a counterclaim for recoupment, asserting that the plaintiff breached the contract by allegedly "fail[ing] to pay invoices properly submitted by [the defendants] for work performed under the [] contract." Countercl. ¶ 2. The defendants specifically assert that, on or about March 31, 1997, following their completion of a "task order for performance in the country of Moldova" ("the Moldova task order"), the plaintiff demanded that the defendants continue their work in Moldova for an additional four-and-a-half months pending the award of a separate contract and task order. Id. ¶ 8. The defendants add that not only did the plaintiff's contracting officer authorize extensions of the Moldova task order, but that the contracting officer's representative "threatened that if [the defendants] stopped working in Moldova, [they] would never work for the U.S. government again." Id. The defendants allegedly incurred $77,317.00 in additional expenses while performing the Moldova task order during that additional period. Id. ¶ 9. The defendants contend that the plaintiff improperly refused to pay them a total of $525,049.00, inclusive of the expenses relating to the Moldova task order.² Id. ¶¶ 9-10.

B. Procedural History

The plaintiff commenced this action by filing its complaint on April 10, 2001. On May 3, 2002, after having requested and secured leave to late-file a response to the complaint, the defendants filed a motion to dismiss asserting that their submitted invoices are not false as a matter of law, that the complaint is not pled with the particularity required by Rule 9(b), and that the applicable statutes of limitations bar the plaintiff's claims. Defs.' Mot. at 5-14. On August 2, 2002, the court granted in part and denied in part the defendants' motion to dismiss, concluding that some of the plaintiff's claims were indeed time barred.³ United States v. Intrados/Int'l Mgmt. Group, 265 F.Supp.2d 1, 10, 13-14 (D.D.C. 2002). On August 22, 2002, the defendants filed an answer to the plaintiff's complaint, which also included their counterclaim for recoupment based on the amounts allegedly owed to them by the plaintiff under the contract. Answer & Countercl. In response, the plaintiff filed its motion to dismiss the defendants' counterclaim. The court now addresses the plaintiff's motion to dismiss the defendants' counterclaim.

III. ANALYSIS

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

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). On a motion to dismiss for lack of subject-matter jurisdiction pursuant to Rule 12(b)(1), the counterclaimant bears the burden of establishing that the court has subject-matter jurisdiction. Evans v. B.F. Perkins Co., 166 F.3d 642, 647 (4th Cir. 1999); Rasul v. Bush, 215 F.Supp.2d 55, 61 (D.D.C.2002) (Kotelly, J.) (citing McNutt v. Gen. Motors Acceptance Corp., 298 U.S. 178, 182-83, 56 S.Ct. 780, 80 L.Ed. 1135 (1936)). The court may dismiss a counterclaim for lack of subject-matter jurisdiction only if "`it appears beyond doubt that the [counterclaimant] 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 counterclaim's 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 counterclaim. 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 counterclaim, the court may consider materials outside the pleadings. Herbert v. Nat'l Acad. of Scis., 974 F.2d 192, 197 (D.C.Cir.1992).

B. The Court Grants the Plaintiff's Motion to Dismiss Without Prejudice

1. The Defendants' Counterclaim is Compulsory

The court begins its analysis with a determination of whether the defendants present a proper recoupment counterclaim and, if so, whether the counterclaim is compulsory. Courts have held that "[t]o establish a recoupment claim, the defendant must meet three requirements: (1) the claim must arise from the same transaction or occurrence as the government's suit; (2) the relief sought must be of the same kind or nature as the [government's] requested relief; and (3) any damages...