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United States ex rel. Cody v. Mantech International Corp.

United States District Court, E.D. Virginia, Alexandria Division

September 14, 2016

UNITED STATES OF AMERICA, ex rel, KEVIN CODY and MUGE CODY, Plaintiffs,
v.
MANTECH INTERNATIONAL CORPORATION, Defendant.

          MEMORANDUM OPINION

          Anthony J. Trenga United States District Judge

         Plaintiffs Kevin and Muge Cody, husband and wife, have filed a retaliation claim under the False Claims Act and the Defense Contractor Whistleblower Protection Act against their former employer, defendant ManTech International Corporation ("ManTech"). The Codys allege that ManTech retaliated against them for questioning the propriety of certain of ManTech's bidding practices in connection with a large government procurement contract from the United States Army, first by diminishing their responsibilities, then ultimately by terminating their employment.

         Following the completion of discovery, ManTech filed a motion for summary judgment which the Court took under advisement following a hearing on August 19, 2016. For the reasons stated herein, ManTech's motion will be GRANTED in part and DENIED in part. The motion will be GRANTED with respect to plaintiffs' claims for retaliation based on conduct other than the filing of this action on the grounds that, as a matter of law, plaintiffs did not otherwise engage in conduct that constituted "protected activity" for the purposes of a cognizable retaliation claim. The motion will be DENIED with respect to plaintiffs' claims for retaliation as a result of the filing of this qui tarn lawsuit. There is no dispute that plaintiffs' filing of this action constituted "protected activity" and that their subsequent termination constituted an "adverse" employment action. Accordingly, the case will proceed to trial on the issue whether plaintiffs' filing of this action was a "contributing factor" to their termination by ManTech.

         I. PROCEDURAL HISTORY

         Plaintiffs originally filed this qui tarn action under seal on December 12, 2013 in the United States District Court for the Central District of California alleging three causes of action against ManTech: (i) a violation of the False Claims Act, 31 U.S.C. §3729 et seq. (the "FCA") in the course of bidding for and performing a contract for the United States Army Tank-Automotive and Armaments Command ("TACOM"); (ii) retaliation in violation of the FCA, 31 U.S.C. §3730(h) for attempting to prevent ManTech's alleged FCA violations; and (iii) retaliation under the Dodd-Frank Wall Street Reform and Consumer Protection Act, 12 U.S.C. §§ 5301 et seq. See generally [Doc. No. 1].

         On November 18, 2014, the Government filed a notice declining to intervene in this action and the suit was unsealed on November 21, 2014. [Doc. Nos. 15, 16]. ManTech thereinafter filed a motion to transfer the case to this District, which the Central District of California granted by order dated February 9, 2015. [Doc. No. 29]. ManTech moved to dismiss plaintiffs' original complaint on February 25, 2016. [Doc. No. 35]. On March 16, 2016, plaintiffs filed their First Amended Complaint [Doc. No. 43] (the "Complaint"). In the Complaint, plaintiffs have eliminated any claim that ManTech had violated a substantive provision of the FCA and allege only claims for retaliation in violation of the FCA's anti-retaliation provision, 31 U.S.C. § 3730(h), and the Defense Contractor Whistleblower Protection Act ("DCWPA"), 10 U.S.C. § 2409.[1] ManTech moved for summary judgment on June 30, 2016 [Doc. No. 54] (the "Motion") and the Court held a hearing on the Motion on August 19, 2016 [Doc. No. 72].[2]

         II. FACTUAL RECORD

         Unless otherwise stated herein, the following are undisputed facts or are disputed facts viewed most favorably to plaintiffs:

         The Codys are former executives of ManTech, a multinational government contractor specializing in providing technological services to the United States Government, including its armed services. Kevin Cody began his employment with ManTech in 1990 and was terminated by ManTech effective March 20, 2015. Compl. ¶¶ 32, 255.[3] Muge Cody began her employment with ManTech in 2001 and was terminated effective July 1, 2015. Id. ¶¶ 37, 260. ManTech placed both the Codys on administrative leave on January 12, 2015, after being served in this action on January 8, 2015. The Codys remained on administrative leave until their respective terminations.

         The context surrounding the Codys' retaliation claims is ManTech's contract with the U.S. Army, through TACOM, for the maintenance in Afghanistan and Kuwait of Mine Resistant Ambush Protected ("MRAP") vehicles, which are designed to withstand improvised explosive devices and tactical ambushes. TACOM had awarded ManTech numerous sole source contracts with respect to that work since at least 2008, but in 2011, ManTech was required to compete for the continuation of its MRAP work. ManTech submitted its initial competitive bid on September 23, 2011. TACOM awarded ManTech the contract on May 31, 2012.[4] The awarded contract, Contract W56HZV-12-C-0127 (the "MRAP Contract" or the "Contract"), was a "cost-reimbursement" contract worth $2.85 billion in revenues to ManTech over five years and constituted at that time ManTech's largest and most lucrative contract. Management of the MRAP Contract was assigned to Kevin Cody's "business unit"; Muge Cody served as Program Manager for the Contract along with others in her Program Management Office ("PMO").

         A. The MRAP Contract Issues

         As of 2011, ManTech employees deployed in Afghanistan were paid for 84 hours of work each week (12 hours per day, 7 days per week). In addition to base pay, ManTech paid certain employees premiums for being deployed to hazardous and isolated locations. At that time, deployed employees were paid both a "Haz" premium and an "Iso" premium (collectively "Haz/Iso") for each of the 84 hours worked each week. For employees in Afghanistan, each of these premiums amounted to 35% of base pay. In order to lower its overall bid and thereby position itself more competitively, ManTech's initial September 2011 competitive bid proposal included costs for Haz/Iso premium for only 40 of the 84 hours that employees were working.

         Following the submission of initial bids, TACOM opened discussions with the offerors and utilized written Evaluation Notice Discussions ("ENDs") to clarify or revise certain aspects of the offerors' proposals. During this process, the Army questioned-via END Control Number END-MTT-CP-039A ("END 039A")-whether ManTech could retain its incumbent MRAP technician workforce to perform the Contract if it only paid Haz/Iso premiums on the first 40 hours worked each week rather than on all 84. After receiving TACOM's END 039A, ManTech proposed a "retention premium" that would be paid to incumbent employees during the first 14 months of contract performance to offset the reduction in Haz/Iso pay. ManTech represented that the cost of the retention premium would be included as part of its fringe benefits pool, categorized for accounting purposes as an "indirect cost." In that regard, ManTech had established in 2011, with government approval, a Global Contingency Operations ("GCO") cost center, which generated the applicable indirect rate for the MRAP Contract.[5] ManTech also projected a reduction in its direct labor ("DL") rates to the level at which it had most recently been able to hire employees on the existing contract.

         In response to ManTech's ongoing bid revisions with regard to END 039A, and specifically ManTech's proposal to include a retention premium to make up for the deficit in Haz/Iso pay, TACOM issued to ManTech another END: END Control Number END-MTT-CP-039B ("END 039B"). In END 039B, TACOM requested information regarding ManTech's "new 'Retention Premium' to incumbent employees with associated costs as part of its Fringe Pool." [Doc. No. 55, Ex. 1 at 1]. In response to this second END, ManTech disclosed that the retention premium had a projected cost of $37.9 million. [Ibid.]. In late April 2012, ManTech submitted a "final revised proposal" ("FRP") to TACOM incorporating those disclosures.

         TACOM awarded ManTech the MRAP Contract on May 31, 2012 and ManTech began performing under the Contract in that fall. Shortly after the Contract award, TACOM directed ManTech to "ramp up" its manpower to levels beyond those assumed in its initial contract bid and FRP due to increased troop activity in Iraq and Afghanistan. Later, in 2013, TACOM directed ManTech to decrease its labor force dramatically in connection with the "drawdown" of forces in Afghanistan. By letter dated October 29, 2013, ManTech formally requested approval to merge its GCO cost center with another indirect cost center, the IS cost center, retroactive to January 1, 2013. The Government approved this request by letter dated August 7, 2014.

         B. The Codys' Internal Communications Concerning ManTech's MRAP Contract Bids

         Both before and after the MRAP Contract award in May 2012, the Codys, and Kevin Cody in particular, raised issues concerning the extent to which ManTech had disclosed to the Army all of the costs it anticipated in connection with performance under the MRAP Contract. Beginning in early March 2012 through April 2012, Kevin Cody raised his concerns within ManTech while ManTech was in the process of revising its initial September 2011 proposal and responding to TACOM's END inquiries. Specifically, on March 6, 2012, during a meeting to discuss MRAP premium costs with Claude Etzler, ManTech's Vice President of Financial Operation and Compliance, Kevin Cody stated that the MRAP premium costs should be higher in ManTech's FRP to the Army. On March 22, 2012, Louis Addeo, President of ManTech's Technical Services Group, sent an e-mail to Kevin Cody in which he asked Cody for a "position paper" concerning the impending MRAP bid, including, in particular, "what is [the] issue, how are we addressing, what is [the] consensus, what are your concerns, other?" Later that day, Cody replied that "[t]he plan as agreed earlier this week takes monies out of the [direct labor] rate and places an added 'premium' in the Fringe [benefit] pool... [direct labor] rates have been driven down by our attempt to get closer to bid 'compensation, ' there is no group of employees looking to work in Afghanistan for <$100K." In his response, Cody additionally acknowledged that ManTech "satisfied TACOM with our response to END [039B]." Finally, Cody observed that "[a]t this time, I believe that outside of BU[6] and [Muge Cody's division] I may be the only one concerned. All others seem too concerned with lowering the bid price." [Doc. No. 65, Exs. 1, 9].

         Two days later, on March 24, 2012, Kevin Cody sent an e-mail to the MRAP team in which he stated "I am advocating that we remain at our February price submission" but further acknowledged that "we finally satisfied the Government... with our response to [END 039B] .. . (proof of satisfaction is no further ENs issued)[.]" [Id., Ex. 10]. Later that evening, the MRAP team held a conference call, memorialized in March 25 e-mail minutes from Bonnie Cook, ManTech's Senior Vice President of Business Operations. In that e-mail, Cook stated that based on the previous evening's conference call, "we will proceed as follows: 1) revise [direct labor] rates for our current avg.[;] 2) include retention premiums for the first 14 months of performance to keep all employees['] comp packages whole." She also wrote: "[f]inal notes for the record-Kevin [Cody] emphasized his concerns regarding the risks identified above as well as his position on the total comp required for performance behind month 14." [Id., Ex. 11].

         The next morning, March 25, 2012, Cody wrote to the team stating "[t]he bottom line is changing our internal negotiated rates and compensation increases risk to our proposal... [t]here is no real reduction in marketplace compensation. [I]t is artificial as it is based on the DL, which is only one component of three (DL, hours, and Haz/Iso rates) that drive total compensation for . .. personnel." [Ibid.]. Approximately two hours later, Cody e-mailed Addeo separately, stating that "[t]he proper way to address the reduction in compensation would be to reduce the $ value added as a 'premium, ' which is where the reduction occurred. I feel the team does not want to do this as they are looking to still reduce to a target that changed." [Id. Ex. 12]. Cody concluded by stating that "[b]ottom line, there is a risk to changing our price; it took us too many ENs and discussions for us to satisfy the Government." [Doc. No. 55, Ex. 3].

         The next day, March 26, Cody sent another "point paper" to Addeo expressing his thoughts. Later that morning, however, Addeo gave the green light to the MRAP team to "proceed with the current recommendation on the table, " despite Cody's concerns and observations. [Doc. No. 65, Ex. 14]. Cody reacted to this decision in an e-mail to Addeo in which he stated that "I would have expected that [I] would be included in an objective discussion. For the record note that the proposal on the table does not include all the $s to make employees whole. It contains $27m of $39m ... I still believe we have injected risk by changing what we have finally defended; time will tell... hopefully no further ENs." [Ibid.].

         From March 26, 2012 until April 17, 2012, there do not appear in the record any further communications from either Kevin or Muge Cody concerning the MRAP Contract. On April 17, as ManTech was finalizing its FRP for submission to TACOM, Bonnie Cook wrote an e-mail to Kevin Cody stating that "[w]e have reviewed any additional steps we could take to reduce our pricing, especially in light of the drawdown [of ground forces in Afghanistan]. Attached is a proposed pricing approach for the FRP submittal." [Doc. No. 65, Ex. 15]. Early the next morning, April 18, Kevin Cody replied that "[w]e should not take one element of compensation, DL, and state that we have hired personnel at the compensation package that will be derived during the future contract. We have had this discussion many times before. Bottom line[] is any reduction in our price in FPR [sic] will increase our risk, and ultimately result in the Government raising our bid." [Ibid.]. In her reply to Kevin Cody, Cook stated:

What we believe occurred on the [competitive] bid is that [the other bidder] made assumptions about the drawdown. That is a fact based in reality now and a changed condition from what existed when the [] bid process began. We have not ever addressed the drawdown in our solutioning for this bid and there is no doubt other bidders did. We need to stay focused on the source selection process.

[Doc. No. 65, Ex. 16]. The next day, April 19, in another e-mail to the MRAP team, Kevin Cody stated that he "[w]as looking at the DL rates again, and realize that the DL rates for the first 14 months ... did not have the fringe applied ... I am not advocating that we hold at the current bid, I just want to ensure total transparency." [Ibid.].[7] The MRAP team decided to proceed with a reduced labor rate, without the revisions that Kevin Cody had been advocating. On April 24, 2012, ManTech submitted its FRP with that pricing. TACOM awarded ManTech the MRAP Contract on May 31, 2012, and the Contract began in September 2012. In sum, the Codys' concerns are summarized in a January 29, 2013 e-mail to ManTech's compliance department in which Kevin Cody wrote:

... ManTech failed to adequately increase the premium fringe rate, with the result that millions of dollars that should have been included in the proposal were not included. The rate was not adequate to cover known expenses.
I have since learned that the proposed fringe rate is in fact inadequate and rates have outpaced the bid as I suspected. I also have shared my concerns that DL rates were too low in the proposal because they were based on greening efforts prior to proposal and award.[8]
Muge and I both shared our concerns that the costs proposed to cover indirect personnel were insufficient because it only showed 14 personnel in PMO when there were 60. I believe that these failures during the proposal period and after award have impacted Man Tech's [i]ntemal/financial controls and accounting.

[Doc. No. 55, Ex. 5].[9]

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Codys allege that almost immediately after TACOM awarded ManTech the MRAP Contract in May 2012, ManTech began to retaliate against them. See generally Compl. &para;&para; 143-52. Beginning in May 2012, ManTech excluded Kevin Cody from meetings which he normally would have attended and assigned another employee to oversee a different government contract proposal which Cody normally would have supervised. During fall 2012, while ManTech was beginning to execute the newly-awarded MRAP Contract, ManTech failed to provide the resources Muge Cody required to perform her duties as a PMO officer overseeing the Contract. Then, on December 19, 2012, ManTech informed Kevin Cody that it was removing the MRAP Contract from within his business unit due to an internal reorganization.[10] This transfer of the MRAP Contract reduced revenues in Kevin Cody&#39;s business unit from approximately $500 million to $20 million. ManTech also, on December 19, 2012, relocated Muge Cody&#39;s PMO division into a separate business unit, separating Muge Cody from her MRAP oversight responsibilities.[11] In January 2013, the Codys heard rumors that ManTech's executives were stating that they planned to resign. Additionally, Muge Cody began to be excluded from various meetings and communications, and was subjected to an "unusually high level of scrutiny." Compl. ΒΆΒΆ 199, 205, 207. On January 29, 2013, the Codys each sent e-mails to Terry Myers, ManTech's Senior Vice President of Compliance, and Steve Wynne, Senior Compliance Officer. In those e-mails, the Codys stated that they had no intention to resign but were concerned about ...


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