United States District Court, E.D. Virginia, Alexandria Division
UNITED STATES OF AMERICA ex rel LYLE BEAUCHAMP, et al, Plaintiffs,
ACADEMI TRAINING CENTER, INC., et al, Defendant.
Ellis, United States District Judge
issue on a motion for judgment on the pleadings in this False
Claims Act ("FCA")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
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.
Academi Training Center, Inc. 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
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. 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.
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.
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).
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
standard for a motion for judgment on the pleadings is
equivalent to the familiar
Iqbal/Twombly 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).
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.
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 ...