United States ex rel. Morsell v. Symantec Corp.

• Decision Date: 10 September 2015
• Docket Number: Civil Action No.: 12–00800 (RC)
• Court: U.S. District Court — District of Columbia
• Parties: United States ex rel. Lori Morsell, Plaintiff, v. Symantec Corporation, Defendant.

130 F.Supp.3d 106

United States ex rel. Lori Morsell, Plaintiff,

v.Symantec Corporation, Defendant.

Civil Action No.: 12–00800 (RC)

United States District Court, District of Columbia.

Signed September 10, 2015

Christopher Bowmar Mead, Lance Alan Robinson, Mark London, London & Mead, Washington, DC,

Anne B. Perry, David Lloyd Douglass, Jonathan S. Aronie, Alexander Wood Major, Sheppard Mullin Richter & Hampton LLP, Washington, DC, for Defendant.

MEMORANDUM OPINION

RUDOLPH CONTRERAS

, United States District Judge

GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS; DENYING THE UNITED STATES' MOTION FOR PARTIAL SUMMARY JUDGMENT

I. INTRODUCTION

In the course of her work at Symantec Corporation, Lori Morsell came to believe that her employer had violated certain contractual obligations to the United States. She subsequently filed this qui tam action as Relator against Symantec under the False Claims Act. The United States, California, and Florida intervened, and Relator elected to assert claims on behalf of New York. All plaintiffs filed a joint complaint. Presently before the Court are Symantec's motion to dismiss the complaint and the United States' motion for partial summary judgment. Because the United States adequately pleads all of its claims but California, Florida, and Relator fail to do so, the Court grants in part and denies in part Symantec's motion to dismiss. Because there are genuine disputes of material fact as to all issues presented in the United States' motion for partial summary judgment, the Court denies that motion in full.

II. FACTUAL BACKGROUND¹

A. Negotiation of the Contract

Symantec Corporation provides software and services in the areas of security, storage, and backup. See Omnibus and Restated Complaint and Complaint in Intervention ("Omnibus Complaint") ¶ 20, ECF No. 41. The instant dispute arises out of Symantec's negotiation and performance of a Multiple Award Schedule ("MAS") contract for supplying a range of products, licenses, and services to the federal government (the "Contract" or "GSA Contract"). See id. ¶¶ 21, 55, 56.

MAS contracts enable the General Services Administration ("GSA") to streamline federal government procurement by providing pre-negotiated maximum prices and other terms that govern all subsequent purchases covered by the contract. See id. ¶¶ 33–35. The GSA establishes federal regulations governing solicitations, negotiations, and contracts executed under the MAS program. See id. ¶¶ 39–52. These regulations prescribe standard questions contained in MAS solicitations, in response to which the offeror must disclose certain information in a Commercial Sales Practice Format, known as the offeror's "CSPs." See id. ¶¶ 41–42; 48 C.F.R. § 515.408

(MAS Requests for Information); id. § 515.408, fig. § 515.4 (Instructions for the Commercial Sales Practices Format). Additionally, an offeror seeking an MAS contract must provide information that is "current, accurate, and complete" as of fourteen calendar days prior to submission. Seeid. § 515.408, fig. 515.4. For their part, GSA contracting officers are required to "seek to obtain the offeror's best price (the best price given to the most favored customer)." Id. § 538.270(a). To this end, contracting officers must "compare the terms and conditions of the [offeror's response to the] MAS solicitation with the terms and conditions of agreements with the offeror's commercial customers." Id. § 538.270(c); see also Omnibus Compl. ¶¶ 31–52 (reviewing MAS regulatory scheme).

In February 2006, in response to the GSA's solicitation for the Contract, Symantec submitted an initial offer containing its CSPs. See Omnibus Compl. ¶¶ 41, 58. Consistent with applicable regulations, the solicitation asked in Question 3 whether the discounts and concessions offered by Symantec to the Government were "equal to or better than [its] best price ... offered to any customer acquiring the same items regardless of quantity or terms and conditions." Omnibus Compl. ¶ 59; CSPs, Def.'s Attach. A, ECF No. 46–1.² In response to this question, Symantec checked the box for "NO." Id.

Question 4(a) directed Symantec to disclose information in the standard CSP format about its discounting practices. See CSPs, Def.'s Attach. A. To comply with this requirement, Symantec attached several charts. See Omnibus Compl. ¶ 61. One chart purported to describe the frequency of non-published discounts by magnitude for 2005 sales ("Frequency Chart"). Seeid. ¶ 64.a. The Frequency Chart showed that in 2005, Symantec offered non-published discounts of over 40% only very rarely—less than 3% of the time. Seeid. ¶ 65. Moreover, the chart showed that in 0.02% of sales, Symantec offered discounts ranging from 91–100%. See CSPs, Def.'s Attach. A.

The Frequency Chart, however, included numerous published discounts, in addition to the non-published discounts it purported to reflect. This erroneous inclusion of published discounts caused Symantec to understate the frequency of discounts above 40% (and, for the same reason, to inflate the frequency of discounts below 40%). See Omnibus Compl. ¶¶ 101, 102. Had the Frequency Chart included only non -published discounts, it would have shown that in 2005, Symantec provided non-published discounts above 40% over 20% of the time—not merely 3%. Seeid. ¶ 103. Symantec knew of the Frequency Chart's inclusion of published discounts, among other inaccuracies. See id. ¶¶ 108–12.

A second chart purported to set forth the types of reasons for Symantec's non-published discounts and the frequency of each type ("Reason Code Chart"). Seeid. ¶ 64.b. According to the Reason Code Chart, a sizeable plurality (47%) of non-standard discounts resulted from proration of service agreements and adjustments to enterprise license agreements, and Symantec offered non-standard discounts for "other" reasons not specified in the chart relatively infrequently—only 7% of the time. See id. ¶¶ 67, 68; see also CSPs, Def.'s Attach. A. A third chart purported to report the level of management approval required at various discount magnitudes ("Management Approval Chart"). See Omnibus Compl. ¶ 64.c. For instance, according to the Management Approval Chart, all discounts greater than 50% required approval by a Regional Vice President. Seeid. ¶ 69.

In actuality, however, both the Reason Code Chart and Management Approval Chart were inaccurate. The charts were generated using data from "eSPA"—Symantec's system for approving non-published discounts. See id. ¶¶ 81, 99.³ In 2005, however, over 9,000 commercial orders receiving non-published discounts were not processed through the eSPA system. Seeid. ¶ 99. Accordingly, neither the Reason Code Chart nor Management Approval Chart accounted for these orders. Symantec knew at the time that eSPA was an ineffective system for monitoring discounts. See id. ¶¶ 100, 104–07.

Question 4(b) asked whether "any deviations" from Symantec's disclosed policies and practices "ever result in better discounts (lower prices) or concessions than indicated." Id. ¶ 59; CSPs, Def.'s Attach. A.⁴ Symantec responded "NO." Id. The February 2006 offer containing the CSPs was signed by Symantec's Senior Director of Public Sector Business Operations Kim Bradbury. See Omnibus Compl. ¶ 56.

During the subsequent MAS contract negotiation, Bradbury submitted various materials to GSA contracting officer Gwen Dixon elaborating on the pricing offered by Symantec. In October 2006, Bradbury emailed Dixon a presentation purporting to give "an overview of new discounting policies and procedures for all products sold by Symantec Corporation" ("October 2006 Presentation"). Id. ¶ 72. The October 2006 Presentation mentioned five buying programs—(a) Express, (b) Government, (c) Academic, (d) Rewards, and (e) Enterprise Options—along with the requirements for purchasing at different pricing levels or "bands" within each program. Id. ¶¶ 73–75. According to the October 2006 Presentation, in order to obtain Rewards program pricing, customers had to accumulate points based on the volume of their purchases and were required to make a minimum initial purchase amounting to 6,000 points. See id. ¶¶ 78, 79. The points, moreover, expired after two years. Seeid. ¶ 80. Bradbury also provided Dixon with documents stating that Symantec's "Government buying program" enjoyed a discount of 0% to 16% off of "Commercial MSRP." Id. ¶ 87.⁵ Lastly, Bradbury averred that "[a]ny deviations from published discounts require management approval," and that "[d]eviations must be documented and approved in accordance with ... guidelines," such as meeting competition and market segment penetration. Id. ¶ 90.

These disclosures were allegedly false or incomplete. First, the "Commercial MSRP" that Symantec used as a baseline for communicating the offered discounts was derived solely from the Express program pricelist and did not reflect prices for all of Symantec's commercial customers. Seeid. ¶ 88. Symantec further failed to disclose to the GSA that pricing under the Rewards buying program was better than that offered through the Express, Government, and Academic programs. See id. ¶¶ 76–77, 85, 115. Symantec also did not explain how customers accumulated points, or how easily commercial customers could qualify for Rewards pricing by earning at worst one point for every five dollars spent. Seeid. ¶ 116. Symantec did not disclose documented exceptions to the Rewards program rules—the minimum initial purchase requirement, points needed to enjoy better pricing bands, and the two-year validity period for points. Seeid. ¶ 118. Lastly, Symantec failed to disclose any information about its rebate programs. See id. ¶¶ 62, 77, 123. Symantec had contemporaneous knowledge of all of these inaccuracies. See id. ¶¶ 119–26.

On January 25, 2007, Symantec sent Dixon its Final Proposal Revision for the Contract. Seeid. ¶ 93.⁶ Symantec stated therein that "all commercial business practices have been fully disclosed and are current, accurate...