United States v. Capitol Supply, Inc.

• Decision Date: 19 April 2017
• Docket Number: Civil Action No. 10-1094 (BAH)
• Parties: UNITED STATES OF AMERICA, ex. rel. Louis Scutellaro, Plaintiff, v. CAPITOL SUPPLY, INC., Defendant.
• Court: U.S. District Court — District of Columbia

UNITED STATES OF AMERICA,ex. rel. Louis Scutellaro, Plaintiff, v. CAPITOL SUPPLY, INC., Defendant.

Civil Action No. 10-1094 (BAH)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

April 19, 2017

Chief Judge Beryl A. Howell

MEMORANDUM OPINION

The relator, Louis Scutellaro, brings this lawsuit against the defendant, Capitol Supply, Inc., pursuant to the qui tam provision of the False Claims Act ("FCA"), 31 U.S.C. § 3730(b)(1), alleging that the defendant falsely certified that the products it sold to federal agencies were manufactured in compliance with the Trade Agreements Act ("TAA"), 19 U.S.C. §§ 2501 et seq., and Buy American Act ("BAA"), 41 U.S.C. §§ 8301 et seq., which together require that products sold to the government come only from designated countries.¹ Rel.'s First Am. Compl. ("Rel.'s FAC") ¶¶ 10-20, ECF No. 27. The relator contends that thousands of the products sold by the defendant to the U.S. government came from non-designated countries. The United States intervened with respect to Fellowes brand document shredders, pursuant to 31 U.S.C.§ 3730(b)(4)(A). See generally U.S. First Am. Compl. in Partial Intervention ("U.S. FAC"), ECF No. 31.

Thus far, this litigation has spanned seven years. The relator filed his initial complaint in June 2010, see generally Rel.'s Compl., ECF No. 1, and the government subsequently served the defendant with two subpoenas duces tecum, in 2010 and 2011, to obtain country of origin ("COO") information for products sold by the defendant to federal agencies. U.S. Pet. Summ. Enf. OIG Subpoena ("U.S. Pet."), Ex. 1, Decl. of Crystal Johnson, Special Agent, OIG ("Johnson Decl.") ¶¶ 10, 12, Misc. No. 13-373 (BAH), ECF No. 1-1. The defendant, however, failed to comply fully with the subpoenas, leading this Court to grant the government's Petition for Summary Enforcement of the subpoenas. See generally Order Granting U.S. Pet., No. 13-mc-373-BAH, ECF No. 17; see also generally United States v. Capitol Supply, Inc. ("Capitol Supply"), 27 F. Supp. 3d 91 (D.D.C. 2014). When the defendant's failure to comply with the subpoenas persisted, the government moved for sanctions, and this Court entered a Conditional Order of Contempt against the defendant on August 6, 2014. See generally Order Granting in Part and Denying in Part U.S. Mot. Sanctions ("Civil Contempt Order"), No. 13-mc-373-BAH, ECF No. 27. Ultimately, the defendant filed a certification conceding that it had retained no COO information responsive to the subpoenas prior to July 2009 and only incomplete information thereafter. Def.'s Supp. Cert. at 1, Feb. 27, 2015, ECF No. 72-1. Discovery was then temporarily stayed for mediation, see Minute Order (dated Aug. 3, 2015), which proved unsuccessful.

The stay having been lifted, see Minute Order (dated Feb. 8, 2016), the parties have now filed a total of five motions. First, the relator and the government have each filed a motion for an adverse inference. See generally Relator's Mot. Adverse Inference ("Rel.'s Mot. Adv. Inf."),ECF No. 93; U.S. Mot. Adverse Inference ("U.S. Mot. Adv. Inf."), ECF No. 95. Second, the defendant has filed a motion for summary judgment predicated on the public disclosure bar. See Def.'s Supp. Mot. Summ. J. ("Def.'s MSJ"), ECF No. 92. The relator and the government also have each moved for summary judgment. U.S. Mot. Summ. J. ("U.S. MSJ"), ECF No. 94; Rel.'s Mot. Summ. J. ("Rel.'s MSJ"), ECF No. 96. For the reasons set forth below, the motions for adverse inference are granted, and all three motions for summary judgment are denied.

I. BACKGROUND

Given the longevity of this litigation, the procedural history is described after setting out the facts pertinent to the pending motions, which facts have also been summarized in a prior opinion. See Capitol Supply, 27 F. Supp. 3d 91, 93-94 (D.D.C. 2014).

A. Factual History

1. The Defendant's Business with the Federal Government

The defendant offers for sale to the federal government nearly one million products from thousands of manufacturers under various Federal Supply Schedule contracts with the General Services Administration ("GSA") through the GSA Advantage! website. Def.'s Opp'n U.S. Pet., Ex. 1, Decl. of Robert Steinman Supp. Opp'n U.S. Pet. ("Steinman Decl.") ¶¶ 2-3, Misc. No. 13-373 (BAH), ECF No. 8-1.² The defendant obtained its first contract with GSA in 1985 and, by 1996, the federal government was its primary source of business. Rel.'s SMF ¶¶ 8-9. As of April 2016, the defendant held eight federal contracts, six of which are GSA contracts. See Def.'s Omnibus Stmt. Genuine Issues of Material Fact ("Def.'s SMF") ¶ 9, ECF No. 114. During the pendency of this litigation, the government has renewed seven of the defendant's contracts, and awarded the defendant two new contracts. Id. ¶ 11.

The defendant entered into one of these contracts with GSA, Multiple Award Schedule Contract No. GS-02F-0100N, U.S. MSJ, Ex.1A, MAS Contract 0100N, ECF No. 94-3, on January 6, 2003. The contract, which permits the defendant to advertise and sell certain office supplies to various federal agencies through the GSA Advantage! website, is governed by specific regulations and provisions of the Federal Acquisition Regulation ("FAR"). These regulations require, inter alia, that all vendors selling products to federal agencies retain records regarding the COO of each of their products. MAS Contract 0100N at 64 (incorporating 48 C.F.R. § 52.225-5); Def.'s Am. Answer ¶ 10, ECF No. 54-1; Johnson Decl. ¶ 8a. Under the FAR applicable to MAS Contract 0100N, the defendant certifies that each "end product" sold is TAA compliant. See MAS Contract 0100N at 84-86; Def.'s SMF ¶ 6; see also 48 C.F.R. § 52.225-6(a) ("The offeror certifies that each end product, except those listed in paragraph (b) of this provision, is a U.S.-made or designated country end product, as defined in the clause of this solicitation entitled 'Trade Agreements.'"); 48 C.F.R. § 52.225-5(b) ("The Contractor shall deliver under this contract only U.S.-made or designated country end products except to the extent that, in its offer, it specified delivery of other end products in the provision entitled 'Trade Agreements Certificate.'"). In its invoices, however, the defendant does not expressly certify the COO for its products, or, for that matter, compliance with the TAA. Def.'s SMF ¶¶ 19-20.

Under MAS Contract 0100N, the defendant sold a variety of office supplies, including document shredders manufactured by Fellowes, Inc. ("Fellowes"), to a number of federal agencies through the GSA Advantage! website. U.S. FAC ¶¶ 8; Def.'s Am. Answer ¶ 8. The defendant obtained the goods from several suppliers, none of which expressly certified that the Fellowes document shredders were TAA compliant. See, e.g., U.S. MSJ, Ex. 6, United Stationers' Letter of Supply, ECF No. 94-9; id., Ex. 8, Tech Data Terms & Conditions of Sale,ECF No. 94-11; id., Ex. 7, Ingram Micro Letter of Supply and accompanying Fellowes Letter of Supply ("Ingram Micro Letter of Supply"), ECF No. 94-10.³

2. The Defendant's Tracking of COO Data

According to the defendant, its "computer system and management of COO information has significantly evolved over time." Def.'s SMF ¶ 21. When the defendant entered the office-products business in 2003, its only supplier was United Stationers. Id. ¶ 23. The original price list was compiled in a spreadsheet and a "rudimentary database in Microsoft Access was developed." Id. ¶ 24. United Stationers provided the defendant with COO data "approximately four times per year," and, accordingly, the defendant manually updated its COO information on a quarterly basis in the Microsoft Access database. Id. ¶¶ 25, 29.

Sometime in 2005 or 2006, over the course of more than one year, the defendant migrated its COO files from Microsoft Access to a more automated system housed on an "SQL Server." Id. ¶ 30. In order to track the COO of products offered for sale, suppliers transmitted the COO "data feeds" to the SQL server directly. Rel.'s MSJ, Ex. 4, Dep. of Stuart Fox ("Fox Dep.") at 38-40, ECF No. 96-8.⁴ The vendors had different "update schedules," and some information was updated "daily, some weekly, some monthly, some quarterly, and some only when [the vendor] sent [the defendant] new pricing." Def.'s SMF ¶ 31. According to the defendant, if a product was TAA non-compliant, the system was designed to prevent that product from being either advertised or sold through the GSA Advantage! website. Fox Dep. at 141:14-142:5; see also Def.'s SMF ¶ 33 ("When non-compliant COO information was detected (whether from a manufacture [sic], vendor, or the GSA itself), Capitol would seek a contract modification to have the product removed from the schedule and the GSA website."). The defendant later asserts, however, that under this system, "even though a product with non-compliant COO information may be listed for sale on the GSA website, if/when the product is ordered through the GSA website, Capitol's internal system will not process the sale because such products are identified as unavailable." Def.'s SMF ¶ 37. Given the differing descriptions of the defendant's handling of non-compliant products, the record is unclear whether the company's system actually prevents non-compliant products from being listed for sale on the GSA Advantage! website or from being sold.

Before June or July 2009, the historical COO data for the products offered for sale by the defendant under its GSA contracts was not retained in the system. Def.'s Supp. Cert. at 1; see also Steinman Decl. ¶ 6. Instead, it was overwritten as new data came in from each of the defendant's suppliers. Def.'s Supp. Cert. at 1; see also Steinman Decl. ¶ 6; Fox Dep. at 51-55. From July 2009 to November 2010, the defendant transitioned to a new system whereby COO information was "tracked by vendor and a history of what a vendor indicated was the COO was preserved on each update." Def.'s SMF ¶ 35. Although the defendant explains that...