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United States ex rel. Beauchamp v. Academi Training Center, Inc.

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

December 1, 2016

UNITED STATES OF AMERICA ex rel LYLE BEAUCHAMP, et al, Plaintiffs,
v.
ACADEMI TRAINING CENTER, INC., et al, Defendant.

          MEMORANDUM OPINION

          T.S. Ellis, United States District Judge

         At issue on a motion for judgment on the pleadings in this False Claims Act ("FCA")[1]case is whether relators' second amended complaint ("SAC") adequately alleges an implied false certification claim under 31 U.S.C. § 3729(a)(1)(A), as required by the Supreme Court's decision in Universal Health Services, Inc. v. United States ex rel. Escobar, 136 S.Ct. 1989 (2016). After full briefing and oral argument, a bench ruling issued answering this question in the affirmative, and an Order issued denying the motion for judgment on the pleadings. United States ex rel. Beauchamp v. Academi Training Ctr., Inc., No. 1-11-cv-371 (E.D. Va. Nov. 18, 2016) (Order). This Memorandum Opinion records the reasons in support of that Order.

         I.

         The facts pertinent to defendant's motion for judgment on the pleadings may be succinctly summarized from relators' SAC, defendant's answer, and the documents referred to therein. Those facts are as follows.

         Defendant Academi Training Center, Inc.[2] is a private security company that entered into a contract with the U.S. State Department to provide protective security services for U.S. diplomats and other government officials in Afghanistan. The individuals who provide protective services under that Worldwide Personal Protective Services ("WPPS") contract are known as "protective service personnel" ("PRS"). Relators Lyle Beauchamp and Warren Shepherd worked for defendant as PRSs in Afghanistan in various roles, such as shift leader and operations chief.

         Relators' SAC alleges that defendant submitted false weapons qualifications reports to the government and that defendant fraudulently billed the government for the services of PRSs who had not fulfilled the WPPS contract's weapons qualifications requirement.[3] Specifically, the WPPS contract requires defendant's PRSs to qualify with all of the firearms used on security details, and to requalify with those firearms every three months. For instance, the contract describes the roles of various types of PRSs, including "shift leader/team leader" and "protective security specialists." Under the contract, both types of PRSs must "maintain weapons qualifications as outlined in this contract" for five types of firearms, including two belt-fed machine guns. The WPPS contract provides for specific qualification procedures, and PRSs must achieve a certain score with each firearm in order to requalify. The WPPS contract further requires firearms instructors to oversee the requalification tests and to submit all scores to the government. Under the WPPS contract, PRSs who fail any requalification test are allowed two opportunities to requalify; a third failure results in permanent disqualification from serving as a PRS under a State Department contract and being sent back to the United States.

         Relators allege that defendant repeatedly failed to follow proper qualification procedures for the two machine guns that PRSs must requalify with under the WPPS contract, and that many times defendant's firearms instructors did not even require PRSs to fire those two weapons. The machine guns are particularly difficult to operate because they are heavy, automatic weapons that require PRSs to control the number of rounds fired in a burst while avoiding "no-shoot" targets that simulate civilians. PRSs must also fire one of the machine guns while moving. Relators allege that, rather than properly administering the firearms requalification tests, defendant's firearms instructors simply fabricated scores for the tests and recorded those fake scores on official government scorecards. Defendant allegedly then submitted those fake scorecards to the government, thereby falsely certifying that PRSs requalified on certain firearms when they in fact had not.

         Relators further allege that defendant fraudulently billed the government for defendant's PRSs, who were not properly qualified on various firearms and therefore ineligible to serve under the WPPS contract. Specifically, defendant claimed payment for the services of various PRSs under the WPPS contract by submitting invoices to the government that listed the number of PRSs in various roles that defendant used in a given month and the price of each PRS. For example, an invoice submitted by the parties sought payment for 540 "shift leaders, " each costing $819.99, which totals to $442, 794.60. That invoice also sought payment for 54 of the firearms instructors who were allegedly fabricating the PRSs' scorecards; at a cost of $796.43 each, the total claim for the instructors came out to $43, 007.22. Besides using job titles such as "shift leaders" and "firearms instructor" in the invoice, defendant also repeatedly used the billing code "PSS" to seek payment for protective security specialists (a particular type of PRS).

         As relevant here, relators bring a claim against defendant under 31 U.S.C. § 3729(a)(1)(A), which makes it unlawful knowingly to present, or to cause to be presented, to the government a "false or fraudulent claim for approval." 31 U.S.C. § 3729(a)(1)(A). Defendant filed a motion for judgment on the pleadings under Rule 12(c), Fed. R. Civ. P., on the ground that relators' claim can proceed only under the implied false certification theory of liability, and that relators' claim fails to meet the requirements for that theory established in Escobar.[4]

         II.

         The standard for a motion for judgment on the pleadings is equivalent to the familiar Iqbal/Twombly[5] plausibility standard governing motions to dismiss under Rule 12(b)(6), Fed.R.Civ.P. See Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999). In addition, relators must satisfy the heightened pleading requirements under Rule 9(b), Fed. R. Civ. P., because they are alleging fraud. United States ex rel. Nathan v. Takeda Pharm. N. Am., Inc., 707 F.3d 451, 455-56 (4th Cir. 2013). The parties have submitted excerpts from the WPPS contract and an invoice defendant submitted to the government, which may be considered because they are integral to the SAC and neither party disputes the authenticity of these documents. See Massey v. Ojaniit, 759 F.3d 343, 347-48 (4th Cir. 2014).

         Under the implied false certification theory, "when a defendant submits a claim [to the government], it impliedly certifies compliance with all conditions of payment, " and, accordingly, if that "claim fails to disclose the defendant's violation of a material statutory, regulatory, or contractual requirement, ... the defendant has made a misrepresentation that renders the claim 'false or fraudulent'" under 31 U.S.C. § 3729(a)(1)(A). Escobar, 136 S.Ct. at 1995. Although doubts existed as to the validity and scope of the implied false certification theory prior to Escobar, the Supreme Court in Escobar dispelled that doubt, holding that the implied false certification theory "can be a basis for [FCA] liability." Id. at 1998-99, 2001. In reaching this result, the Supreme Court reasoned that the use of the term "fraudulent" in § 3729(a)(1)(A) incorporated the common-law understanding that "fraud... encompasse[s] certain misrepresentations by omission, " and not just "express falsehoods." Id. at 1999. Importantly, and pertinent here, the Supreme Court made clear that the implied false certification theory can serve as a basis for liability, at least where the relator shows (i) that "the claim does not merely request payment, but also makes specific representations about the goods or services provided, " and (ii) that "the defendant's failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths." Id. at 2001. Defendant contends that relators' § 3729(a)(1)(A) claim fails both of those requirements.

         A.

         Defendant first argues that relators have not pleaded sufficient facts showing that defendant made "specific representations" to the government about the services provided by defendant's PRSs. Id. at 2001. In particular, defendant argues that the PRS billing codes and job titles in the invoices defendant submitted to the government represented only that the PRSs satisfied certain job qualifications which are not in dispute, such as years of experience and language proficiency, and did not represent to the government that defendant's PRSs complied with the contractual weapons qualifications requirement. That argument fails because the billing codes and job titles in the invoices, when viewed in conjunction with the WPPS ...


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