United States ex rel. Tran v. Computer Scis. Corp.

• Decision Date: 03 July 2014
• Docket Number: Civil Action No. 11–cv–0852 KBJ
• Court: U.S. District Court — District of Columbia
• Parties: United States of America ex rel. Tien H. Tran, Plaintiff, v. Computer Sciences Corporation, et al., Defendants.

53 F.Supp.3d 104

United States of America ex rel. Tien H. Tran, Plaintiff
v.
Computer Sciences Corporation, et al., Defendants.

Civil Action No. 11–cv–0852 KBJ

United States District Court, District of Columbia.

Signed July 3, 2014

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Jennifer A. Short, U.S. Attorney's Office for the District of Columbia, Washington, DC, Nathan M. Peak, Ashcraft & Gerel, LLP, Landover, MD, for Plaintiff.

Kristen Elizabeth Ittig, Arnold & Porter, McLean, VA, Mark Douglas Colley, Emma V. Broomfield, Suzanne M. Sivertsen, Arnold & Porter LLP, Maurice Albert Bellan, Franklin Darley Annand, McGuireWoods LLP, John S. Darden, Squire Patton Boggs, Washington, DC, for Defendants.

MEMORANDUM OPINION

KETANJI BROWN JACKSON, United States District Judge

Relator Tien H. Tran (“Relator” or “Tran”) brings this action under the False Claims Act (“FCA”), 31 U.S.C. §§ 3729 –33 (2013), seeking to challenge the contracting practices of Defendant Computer Sciences Corporation (“CSC”) with respect to a particular government contract. Under the contract at issue, CSC agreed to serve as a prime contractor with respect to certain information technology (“IT”) work to be performed for the United States Citizenship and Immigration Service (“USCIS”), and CSC also promised to make a good faith effort to subcontract a certain percentage of the IT work to be performed under the contract to qualified small businesses. The complaint alleges that, rather than comply with its obligations under the contract, CSC set up a scheme in which it would subcontract work to qualified small businesses, such as Defendant Sagent Partners, LLC (“Sagent”), and as a condition of the subcontract, those small businesses would agree to further subcontract the work to large businesses that CSC trusted, such as Defendant Modis, Inc. (“Modis”), in exchange for a small fee. (First Amended Complaint (“Compl.”), ECF No. 4, ¶¶ 3–4.) According to the complaint, this “pass-through” scheme violated several provisions of the FCA insofar as it permitted CSC to report to the government that the company had met its small business subcontracting goals when, in reality, large businesses were performing the substantive work under the contract. (Id. ¶¶ 4–6.)

Before this Court at present are three motions to dismiss, one filed by each of the three Defendants. Although each Defendant offers a different rationale for dismissing the particular charges that pertain to it, all argue that Relator has failed to state a claim upon which relief can be granted for the purpose of Federal Rule of Civil Procedure 12(b)(6) and that Relator has failed to plead fraud with the requisite particularity as Federal Rule of Civil Procedure 9(b) requires. Because this Court concludes that some of the claims that Relator has made against Defendants CSC and Modis are viable and properly pled when the complaint is liberally construed, but that none of Relator's claims against Defendant Sagent are sufficiently alleged, the Court will DENY IN PART and GRANT IN PART CSC and Modis's motions to dismiss, and will GRANT Sagent's motion to dismiss in full, as explained further below. What remains of this case are Relator's contentions that (1) CSC has presented false claims for payment to the government in connection with the government contract at issue and made material

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false statements in support of those claims; (2) CSC fraudulently induced the government into awarding it that contract; (3) Modis caused CSC to present the false claims and to make the material false statements; and (4) CSC and Modis conspired to commit these violations of the FCA. A separate order consistent with this opinion will follow.

I. BACKGROUND

A. Initial Relationship Between the Parties

The Department of Homeland Security (“DHS”) maintains a program through which the agency identifies “prime contractors” that are qualified to perform specific contracts for IT services that DHS and any of its constituent agencies—including USCIS—require. (Compl. ¶ 21 (describing DHS's Enterprise Acquisition Gateway for Leading Edge Solutions (“EAGLE”) program).) Defendant CSC is an approved EAGLE prime contractor. (Id. at 19.) Each contract awarded under the EAGLE program is broken down into a series of “task orders” of limited duration, and at the end of the prescribed period for each task order, DHS awards a new task order through a competitive bidding process amongst EAGLE-approved prime contractors. (Id. ¶ 19.)

CSC has been the recipient of task orders on a particular USCIS contract (the “Prime Contract”) since the early 2000s. (Id. ) Under the Prime Contract, CSC is required to provide IT personnel to USCIS to work on a variety of technology initiatives. (Id. ¶ 52.) In order to provide the necessary personnel to USCIS for each task order awarded under the Prime Contract, CSC entered into subcontracting relationships with various other companies in the business of providing IT personnel. (Id. ¶ 56.) Defendant Modis was one of these companies. (Id. ¶¶ 13, 56.) According to the complaint, Modis is a large business (id. ¶ 13) that is the subcontractor CSC most heavily relied upon to provide personnel to CSC, which in turn placed those persons with USCIS in order to fulfill its obligations under the Prime Contract. (Id. ¶ 57.)

Significantly, Modis also relied on subcontracting to provide the personnel that CSC required from it for the Prime Contract. Infotran, a small business owned by Relator Tran, was one of the companies with which Modis had a subcontracting agreement. (Id. ¶ 74.) Modis and Infotran entered into this agreement in April of 2006. (Id. ) According to the complaint, the subcontracting agreement between Modis and Infotran contained a non-compete clause that stated that Infotran could not enter into any direct contractual relationship with CSC while it maintained its subcontracting agreement with Modis (and for one year thereafter). (Id. )

Thus, initially, CSC operated as the prime contractor placing personnel with USCIS under the Prime Contract, Modis was a direct subcontractor of CSC, and Infotran was a second-tier subcontractor who had a contractual relationship only with Modis, but provided personnel to Modis whom Modis then designated to perform work for CSC under the Prime Contract.¹

B. The September 2008 Task Order And CSC's Small Business Subcontracting Plan

As noted above, the Prime Contract was awarded periodically in the form of task orders that were subject to competitive

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bids that EAGLE-approved prime contractors submitted. In May of 2008, CSC bid on a task order under the Prime Contract that is hereinafter referred to as the “September 2008 Task Order.” (Id. ¶¶ 3, 58.) As a part of its bid, CSC included a “Small Business Subcontracting Plan” in which it represented that, if it was awarded the task order, a minimum of 40% of the money that it paid out to subcontractors for personnel supplied to perform work under the task order would go to qualified “small business concerns.” (Id. ¶ 59.)² According to the complaint, if CSC had not included the Small Business Subcontracting Plan in its bid, then it would not have been eligible to compete for the September 2008 Task Order. (Id. ¶ 62.) CSC was eventually awarded the task order—valued at over $200 million—on September 29, 2008. (Id. ¶ 63.)

Under the September 2008 Task Order and the applicable federal contracting regulations (specifically, 48 C.F.R. § 52.219–9(1) ), CSC was also required to submit to USCIS semi-annual “Individual Subcontract Reports” (“ISRs”) and “Summary Subcontractor Reports” (“SSRs”) detailing CSC's compliance with its Small Business Subcontracting Plan. (Id. ¶ 37.) The complaint alleges that “[i]n order for a particular Small Business to count towards the goals set out in [the] Small Business Subcontracting Plan, the Small Business must actually perform the work described in the subcontracting plan—the work cannot be performed by a second tier subcontractor or by an entity that is not a Small Business.” (Id. ) Additionally, the complaint alleges that the Prime Contract required CSC to submit invoices periodically to USCIS for the amounts due to CSC from its work on the Prime Contract. (Id. ¶¶ 185–86.) The complaint further states that CSC in fact did submit such invoices, and that those invoices were paid. (Id. )

C. The “Pass–Through” Proposal

The complaint alleges that neither CSC nor Modis qualify as “small business concerns” under the criteria that the Small Business Administration has set forth. (Id. ¶¶ 12–13.) Thus, the personnel that CSC sourced from Modis could not count towards CSC's small business subcontracting goals under the September 2008 Task Order. (Id. ¶¶ 6, 10.) According to the complaint, Ken Harvey, CSC's program manager for the Prime Contract, recognized in the run-up to CSC's bid for the September 2008 Task Order that CSC would have to find a way to increase the percentage of its subcontracting that went to qualified small business concerns in order to win the task order. (Id. ¶ 77.) The complaint asserts that, to remedy this problem,...