REPLY MEMORANDUM IN SUPPORT OF … in reply to the Relators' opposition to and in further support of its motion to dismiss the Complaint filed by Plaintiffs William Robin Hood ("Hood")

Case 1:11-cv-00774-RMC Document 21 Filed 03/14/13 Page 1 of 24

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA, ex rel. WILLIAM ROBIN HOOD, et al.,

Plaintiffs/Relators,

v.

SATORY GLOBAL, INC. [Satory Global, LLC]

Defendant.

CIVIL ACTION NO. 11-77 4 (RMC)

REPLY MEMORANDUM IN SUPPORT OF DEFENDANT'S MOTION TO DISMISS RELATORS' COMPLAINT

Pursuant to Fed. R. Civ. P. 12(b)(6) and LCvR 7(d), Defendant Satory Global, LLC

("Satory"), incorrectly identified as "Satory Global, Inc." in the caption ofthis matter, states as

follows in reply to the Relators' opposition to and in further support of its motion to dismiss the

Complaint filed by Plaintiffs William Robin Hood ("Hood") and Troy R. Maxon ("Maxon")

("Relators"):

FACTUAL BACKGROUND

On April 22, 2011, Relators Hood and Maxon filed their original complaint alleging that

Satory violated 31 U.S. C. §§ 3729(a)(1)(A), (a)(1)(B) and 3730(h) of the False Claims Act

("FCA"). 1 Additionally, the Relators asserted claims for wrongful termination in violation of

public policy and breach of contract under D. C. law. Dkt. No. 1. As required by the FCA, after

filing their Complaint under seal the Relators presented a copy of the Complaint and disclosed

1 On March 8, 2013, Satory was contacted by Plaintiff Hood's wife and was informed that Plaintiff Hood had passed away earlier that same week. Counsel for Satory, as a professional courtesy, so notified Plaintiffs' counsel.

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"substantially all material evidence and information" relating to the allegations asserted in their

complaint to the Department of Justice ("DOJ"). 31 U.S. C. § 3730(b )(2). On October 17, 2012,

after more than a year of investigation, the DOJ declined to intervene in this matter. Dkt. No. 12.

Subsequently, this Court ordered the case be unsealed on October 19, 2012. Dkt. No. 13. After

more than a year from their original filing, the Relators attempted service of their original

Complaint on Satory on January 9, 2013? On February 19, 2013, Satory filed its motion to

dismiss all claims pursuant to Fed. R. Civ. P. 12(b)(6) and 9(b). The Relators filed their

opposition on March 7, 2013.

At the outset, it is important to note that Satory categorically denies all allegations of

wrongdoing and notes the many factual inaccuracies contained in the Relators' Complaint and

opposition, specifically in the Relators' factual background at pages 1-5. In their opposition, the

Relators go to great lengths to regurgitate the unfounded and unsupported accusations contained

in their original Complaint in an effort to establish that they have met their heightened burden

under Rule 9(b ). They notably do not mention the existence of additional or supporting evidence

behind their naked accusations. As discussed in Satory' s motion to dismiss and as will be

discussed in more detail below, this is not sufficient to meet their burden under Fed. R. Civ. P.

9(b ). Ultimately, this is simply a case of disgruntled former employees now trying to couch their

employment grievances as a violation of the False Claims Act.

Here, Hood served as an at-will employee at Satory from August 2010 until March 2011.

See Compl. ~~ 17, 73. Maxon, also an at-will employee, worked at Satory from September 2010

2 The January 9, 2013 service inadvertently did not include a copy of the Complaint or the Government's notice of election to decline intervention. Thus, the parties agreed to file a consent motion for an extension of time for Satory to answer or otherwise respond to the Relators' complaint. The motion was granted by this Court on January 28, 2013.

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until he voluntarily resigned in March 2011. See Compl. ~~ 18, 68. During the Relators'

employment with Satory, Satory worked as a sub-contractor to Access Systems, Inc. ("Access")

on the Information Technology Support Services ("ITSS-3") Project for the U.S. Department of

Justice ("DOJ"). See Compl. ~~ 3, 4.

In this case, the Relators allege that Satory incorrectly billed the Government during the

period of"August 2010 to present."3 See Compl. ~~ 37, 39, 75, 77. Additionally, the Relators

claim that Satory was engaged in a "scheme" to better position Satory to receive "no-competition

task orders" and organized its employees in a manner that "was time consuming, costly, and

inefficient." See Compl. ~~ 28, 30. Additionally, the Relators claim that they were "discharged,

suspended, threatened, harassed, and in other manners discriminated against in the terms and

conditions of employment by Satory" because of their "investigation for this action." Compl. ~

82. As such, the Relators contend that Satory violated 31 U.S. C. §§ 3729(a)(1)(A), (a)(1)(B) and

§ 3730(h) of the FCA. Finally, the Relators claim that they were discharged in violation of

public policy for complaining about alleged violations of the FCA and that Satory breached its

alleged employment contracts with Hood and Maxon. Compl. ~~ 87, 88, 91.

LEGAL STANDARD

Pursuant to Rule 12(b )( 6) of the Federal Rules of Civil Procedure, a court may dismiss a

complaint where the complaint fails to set forth claims upon which relief can be granted. Fed. R.

Civ. P. 12(b )(6) (2013). Although the federal pleading standard "does not require 'detailed

factual allegations,"' it does require more than "an unadorned, the-defendant-unlawfully

harmed-me accusation." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atlantic Corp.

3 Satory avers that it is actually no longer engaged in the ITSS-3 Contract and has not been since November 2012.

3


v. Twombly, 550 U.S. 544, 555 (2007)).

Therefore,

[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to "state a claim to relief that is plausible on its face." A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a "probability requirement," but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are "merely consistent with" a defendant's liability, it "stops short of the line between possibility and plausibility of' entitlement to relief"'

Id (internal citations omitted). Under this standard, the court "need not accept inferences drawn

by plaintiffs if such inferences are unsupported by the facts set out in the complaint." Kowal v.

MCI Commc 'ns Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994). When "plaintiffs ... have not

nudged their claims across the line from conceivable to plausible, their complaint must be

dismissed." Twombly, 550 U.S. at 570.

Additionally, the heightened pleading standard ofRule 9(b) ofthe Federal Rules of Civil

Procedure requires that "in alleging fraud or mistake, a party must state with particularity the

circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b) (2013). Thus, as the Relators

acknowledge, because the False Claims Act is "self-evidently an anti-fraud statute," complaints

filed under the FCA must comply with Rule 9(b ). See United States ex rel. Totten v. Bombardier

Corp., 286 F.3d 542, 551-52 (D.C. Cir. 2002). To plead a fraud claim with particularity as

required by Rule 9(b ), a relator must "state the time, place, and contents of the false

representations, the facts misrepresented, and what was obtained or given up as a consequence of

the fraud." US. ex rel. Bender v. N Am. Telecomms., Inc., 750 F. Supp. 2d 1, 5 (D.D.C. 2010),

aff'd, 2013 U.S. App. LEXIS 1887 (D.C. Cir. Jan. 23, 2013).

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ARGUMENT

As can be seen from the Relators' Complaint and opposition, the Relators have no

additional facts to support their inadequate pleading. Thus, because the Relators have failed to

plead a violation of the FCA and claim for retaliation under the FCA, Counts I, II, III, and IV of

the Complaint should be dismissed with prejudice. Additionally, because the Relators have

failed to state a claim upon which relief can be granted, Counts V, VI, and VII should also be

dismissed with prejudice.

I. COUNTS I, II, AND III OF THE RELATORS' COMPLAINT FAIL TO STATE A CLAIM UPON WHICH RELIEF CAN BE GRANTED.

Counts I, II, and III of the Relators' Complaint should be dismissed in their entirety for

failing to plead fraud with particularity as required by Rule 9(b ). Indeed, the Relators admit that

Rule 9(b)' s heightened pleading standard applies and that it requires that a plaintiff alleging a

False Claims Act violation must "specify the time, place, and content of the alleged falsehood."

Relators' Opposition to Satory's Motion to Dismiss ("Relators' Opp'n") at 7. Additionally, the

Relators acknowledge that a plaintiff pleading fraud should possess "substantial prediscovery

evidence ofthosejacts."' Relators' Opp'n at 8 (emphasis added). As is clear from a review of

the Relators' Complaint, the Relators' general and unsupported allegations of wrongdoing and

their speculation as to Satory' s billing practices do not demonstrate the existence of "substantial

prediscovery evidence" and, furthermore, are ultimately insufficient to meet Rule 9(b)' s

heightened pleading standard.

A. COUNTS I AND II OF THE COMPLAINT FAIL TO MEET RULE 9(b)'s HEIGHTENED PLEADING REQUIREMENTS.

As noted in Satory' s motion to dismiss, and undisputed by the Relators, the FCA

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"attaches liability, not to the underlying fraudulent activity or to the government's wrongful

payment, but to the 'claim for payment.' Therefore, a central question in False Claims Act cases

is whether the defendant ever presented a 'false or fraudulent claim' to the government."

Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 785 (4th Cir. 1999) (quoting

United States v. Rivera, 55 F.3d 703, 709 (1st Cir. 1995)). Thus, as the Relators admit, to

adequately plead a claim under 31 U.S.C. § 3729(a)(l)(A), Hood and Maxon must allege that

"(1) the defendant submitted a claim to the government, (2) the claim was false, and (3) the

defendant knew the claim was false." See United States v. DRC, Inc., 856 F. Supp. 2d 159, 167

(D.D.C. 2012) (referencing United States ex rel. Harris v. Bernad, 275 F. Supp. 2d 1, 6 (D.D.C.

2003)). Under the FCA, a plaintiffs complaint must provide "the details of the specific scheme

and its falsehoods, as well as supply the time, place, and content of false representations, and link

that scheme to claims for payment made to the United States." United States ex rel. Barrett v.

Columbia/HCA Healthcare Corp., 251 F.Supp.2d 28, 35 (D.D.C. 2003). Ultimately, the

Relators' vague allegations of wrongdoing on the part of Satory do not come close to meeting the

heightened pleading requirements of Rule 9(b ).

While the Relators take great lengths to describe an alleged scheme whereby Satory

"configured servers" and "erect[ ed] obstacles" to benefit the company, a claim Satory

vehemently denies, they once again self-servingly conclude that "invoices were submitted along

with a Form DD 250, or equivalent document, certifying that SATORY's billing conformed to

the contract." Relators' Opp'n at 10. Again, the Relators' suggest that because they alleged that

Satory "submitted invoices under the contract on or about every two weeks", they have satisfied

their burden under Rule 9(b). See Relators' Opp'n at 12. This is not so. Putting aside the fact

that their allegations are factually inaccurate in that Satory actually submitted correct and

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accurate invoices once a month- not bi-weekly- the Relators again ask the Court to make the

illogical assumption that because Satory submitted invoices and because the Relators allege, with

no support, that Satory employees performed work outside of the purview of the DOJ contract, it

is more likely than not that Satory submitted fraudulent invoices. This simply does not conform

with the heightened requirements ofRule 9(b). See Klusmeier v. Bell Constructors, Inc., 469

Fed. Appx. 718, 721 (11th Cir. 2012) (holding that the court "decline[d] to make ... an

assumption" that defendant submitted invoices for "non-compliant work" where the "Relators

allege[ d] details as to how [defendant] violated its contracts, and allege[ d] some details as to

when the monthly invoices were submitted ... [but] fail[ed] to establish that the contract

violations actually resulted in the submission of false claims.").

Here, the Relators' readily admit that they had no access to and have no knowledge of

Satory's invoices and billing practices. See Relators' Opp'n at 13. Thus, by their own admission

they lack personal knowledge to support any allegation that Satory submitted requests for non

compliant work. See Klusmeier, 469 Fed. Appx. at 722 (finding that the relators "personal

knowledge of contract violations [did] not support the allegation that [defendant] submitted

requests for non-compliant work" where one of the relators lacked "the type of knowledge that

[would] normally support an FCA complaint" because while the relator "allege[ d] he was present

on the construction site and observed some of the contract violations, his personal knowledge of

the contract violations [was] not relevant to whether [defendant] submitted fraudulent claims

related to those contract violations."). Based "upon information and belief," the Relators claim

that Satory submitted fraudulent bills to the Government. See Compl. ,m 37, 75, 77. However,

while courts have recognized that a plaintiff may make allegations of fraud on the basis of

personal knowledge or on "information and belief," "allegations of fraud made on information

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and belief are also subject to the additional requirement that 'the complaint set[] forth the facts

on which the belief is founded." United States ex rel. Karvelas v. Melrose-Wakefield Hasp., 360

F.3d 220, 226 (1st Cir.), cert denied, 543 U.S. 820 (2004), (citing Doyle v. Hasbro Inc., 103 F.3d

186, 194 (1st Cir. 1996)). The Relators have not provided this required foundation.

The Relators' seem to argue that their status as "technology experts", and not members of

the finance department, excuses them from meeting the heightened pleading standards of Rule

9(b). See Relators' Opp'n at 13. First, the Relators' reliance on United States ex rel. Williams v.

Martin-Baker Aircraft Co., 389 F.3d 1251 (D.C. Cir. 2004) is misplaced. The court in United

States ex rel. Williams recognized that the D.C. Circuit "provides an avenue for plaintiffs unable

to meet the particularity standard because defendants control the relevant documents"; however,

the court specifically noted that "plaintiffs in such straints may allege lack of access in the

complaint." Id at 1258 (emphasis added). Additionally, this exception has been applied in very

limited situations and has not been widely accepted among other circuits. Nowhere in the

Relators' Complaint do they plead such lack of access. Moreover, the Relators' opposition to

Satory' s motion to dismiss is premised on the notion that they have adequately pled an FCA

violation, not that they lack access to meet the particularity standard. However, they now seek to

rely on an exception specifically for plaintiffs who are unable to meet and have acknowledged

that they are unable to meet the particularity standard. The court in United States ex rel.

Williams specifically noted that the relator "advance[ d] lack of access for the first time [on

appeal] --far too late for [the court] to consider such a claim." Id Ultimately, the Relators may

not seek to amend their Complaint through their opposition to Satory' s motion to dismiss and the

court's holding in United States ex rel. Williams is not applicable to the instant action.

More importantly, "[o]ne ofthe [further] purposes ofRule 9(b) is to discourage the filing

8


of complaints as a pretext for discovery of unknown wrongs. [A relator's] contention that

discovery will unearth information tending to prove his contention of fraud is precisely what

Rule 9(b) attempts to discourage." Wood ex rel. United States v. Applied Research Assocs., 328

Fed. Appx. 744, 747 (2nd Cir. 2009) (citing Madonna v. United States, 878 F.2d 62, 66 (2nd Cir.

1989)). The Relators maintain that they have met their burden because they generally alleged (i)

that invoices were submitted between October and December 2010 and (ii) the individuals

purportedly responsible for billing. However, the Relators' failure to allege the amount of the

claims, the number of claims presented or the dates on which such allegedly fraudulent claims

were submitted is fatal to their claim. See United States ex rel. Seal I v. Lockheed Martin Corp.,

429 Fed. Appx. 818, 820 (11th Cir. 2011) (dismissing relator's complaint where relator failed to

"allege the amount of the claims, the number of claims presented [and] the dates on when such

claims were made.").

Ultimately, "Rule 9(b)' s directive that 'the circumstances constituting fraud or mistake

shall be stated with particularity' does not permit a False Claims Act plaintiff merely to describe

a private scheme in detail but then to allege simply and without any stated reason for his belief

that claims requesting illegal payments must have been submitted, were likely submitted, or

should have been submitted to the Government." United States ex rel. Atkins v. Mclnteer, 470

F.3d 1350, 1357 (11th Cir. 2006) (citing United States ex rel. Clausen v. Lab. Corp. of Am., 290

F.3d 1301 (11th Cir. 2002)). Thus, while the Relators emphasize their generalized hodgepodge

allegations of an alleged scheme to defraud, their Complaint, by their own admission, fails to

meet the minimum pleading requirements for the actual presentment of any false claims. See id

(dismissing FCA claim where"[ n ]o amounts of charges were identified. No actual dates were

alleged. No policies about billing or even second-hand information about billing practices were

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described").

Again, while Relators claim that they have adequately pled a violation of the FCA

because they alleged that Satory billed the Government "twice a month in October, November,

and December 2010", they misunderstand their burden. Relators' Opp'n at 11. Ultimately, the

Relators' burden is not to allege that Satory submitted bills to the Government, but rather to

plead that Satory submitted fraudulent bills to the Government. Fatally, nowhere in their

Complaint do the Relators allege with any particularity the details surrounding any purportedly

fraudulent bills that were submitted. In fact, the Relators readily acknowledge that they do not

have knowledge of Satory' s billing practices! See Relators' Opp'n at 13. Thus, contrary to their

requirement under the law, the Relators have not established that they have "substantial

prediscovery evidence" to support their claim that Satory submitted fraudulent invoices. See

United States ex rel. Barrett, 215 F. Supp. 2d at 34 (internal citations omitted) (emphasis added).

The Relators attempt to distinguish their case from the many FCA cases that have been

dismissed for failing to plead fraud with particularity by focusing upon their allegations that

Satory allegedly performed non-government work on government property and configured

government resources for Satory's benefit. See Relators' Opp'n at 11-13. Even taking the

Relators' pled allegations as true, the Relators still have not alleged with requisite particularity

that Satory ever submitted false or fraudulent bills. The Relators argue that because they have

provided some particular allegations, that serves to meet their burden. However, the Relators

have not shown that they have personal knowledge of Satory' s billing practices, how much

Satory allegedly overbilled the Government, or even the number oftimes Satory overbilled the

Government. Moreover, the Relators provide no link that explains or supports their concocted

theory that because Satory allegedly performed non-DOJ work, it also submitted fraudulent

10


invoices to the Government. Without providing particularized details regarding the presentment

of fraudulent claims to the Government, the Relators have failed to meet their burden under the

law of alleging a violation of the FCA in accordance with Rule 9(b ). United States ex rel.

Karvelas, 360 F.3d at 232 (recognizing that while "[u]nderlying schemes and other wrongful

activities that result in the submission of fraudulent claims are included in the 'circumstances

constituting fraud or mistake' that must be pled with particularity pursuant to Rule 9(b ), ... such

pleadings invariably are inadequate unless they are linked to allegations, stated with particularity,

of the actual false claims submitted to the government that constitute the essential element of an

FCA qui tam action.") (emphasis added).

Quite simply, the Relators cannot meet their burden under Rule 9(b) by simply describing

a scheme to defraud and then alleging that Satory submitted invoices to the Government, without

providing the critical link that the invoices Satory submitted were fraudulent. See United States

ex rel. Brown v. Aramark Corp., 519 F. Supp. 2d 68, 74 (D.D.C. 2008) (citing United States ex

rel. Karvelas, 360 F.3d at 232) (holding that a "'relator must provide details that identify

particular false claims for payment that were submitted to the government."'). As such, Counts I

and II ofthe Relators' Complaint alleging a violation under 31 U.S.C. § 3729(a)(1)(A) should be

dismissed.

B. COUNT III OF THE COMPLAINT SHOULD BE DISMISSED FOR FAILING TO PLEAD FRAUD WITH PARTICULARITY.

As noted in Satory's motion to dismiss, Section 3729(a)(1)(B) attaches FCA liability to a

defendant who prepares or uses a false record or statement material to a false or fraudulent claim,

even if that defendant did not actually submit either the claims or the statement to the

government. See United States ex rel. Folliard v. Hewlett-Packard Co., 272 F.R.D. 31, 35

(D.D.C. 2011). However, to properly plead a Section 3729(a)(1)(B) violation, a relator "must

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nevertheless allege that a false claim does, in fact, exist, even if it was not submitted directly to

the government by the defendant." Id Thus, to succeed under a 31 U.S. C. § 3739(a)(1)(B)

claim, the D.C. Circuit has recognized that a relator must provide particularized information

regarding the statements made by the defendant in support of the alleged false claim in order to

meet the heightened pleading requirements of Rule 9(b ). This particularized information

includes "the time, place, and content of the false misrepresentations, the fact misrepresented and

what was retained or given up as a consequence of the fraud. We also require pleaders to

identify the individuals allegedly involved in the fraud." United States ex rel. Williams v.

Martin-Baker Aircraft Co., 389 F.3d 1251, 1256 (D.C. Cir. 2004) (internal citations omitted).

Again, in their opposition the Relators self-servingly allege that they have met their

pleading requirement because they "provided the names of employees who [allegedly] billed

work to the DOJ contract while actually working in DOJ offices at the 2Con building on

corporate matters unrelated to the DOJ, 'for weeks in October, November, and December' of

2010, and the managers who instructed them to do so." Relators' Opp'n at 14-15. However, this

does not accurately reflect the Relators' Complaint. In point of fact, the Relators allege that non

DOJ work was performed at the 2Con building. See Relators' Compl. ~ 36. The Relators then

allege, with no support and none ofthe required particular details, that "[u]pon information and

belief, Satory billed 40 hours to the DOJ contract every week, and while actively involved

almost every day in the private SATORY corporate business development effort during normal

business hours that were billed to DOJ." See Relators' Compl. ~ 37. The Relators provide no

details as to the alleged fraudulent invoices that were submitted, including the amount which the

Government was overbilled, the dates on which the invoices were submitted, or even the

individuals who certified the invoices.

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While the Relators allege that Satory submitted "Form DD 250" with its invoices, this is

factually inaccurate and further proof of the Relators' overall lack of knowledge and foundation.

Moreover, the Relators have failed to allege with any particularity that Satory knowingly used or

caused to be made or used a false record or statement that was material to a false or fraudulent

claim. See 31 U.S.C. § 3729(a)(1)(B). The generalized and conclusory assertions contained in

the Relators' Complaint do not satisfy the pleading requirements of the FCA. Here, the Relators

provide nothing in the way of time, place, or contents of any purportedly false representations,

nor identify a false record or statement that was material to supporting a false or fraudulent

claim. As such, Count III should be dismissed for failing to state a claim upon which relief can

be granted.

II. COUNT IV OF THE COMPLAINT SHOULD BE DISMISSED FOR FAILING TO STATE A CLAIM UPON WHICH RELIEF CAN BE GRANTED.

As noted in Satory' s motion to dismiss, under the FCA, an employee who has been

discriminated against for engaging in protected activities under the FCA may bring a civil action

against his or her employer under the FCA. See 31 U.S. C. § 3729(h). To make out a claim of

retaliation under the FCA, an employee must demonstrate that "(1) he engaged in protected

activity, that is, 'acts done ... in furtherance of an action under this section'; and (2) he was

discriminated against 'because of that activity.' To establish the second element, the employee

must in turn make two further showings. The employee must show that: (a) 'the employer had

knowledge the employee was engaged in protected activity'; and (b) 'the retaliation was

motivated, at least in part, by the employee's engaging in [that] protected activity."' United

States ex rel. Williams, 389 F.3d at 1260. Moreover, in order to properly plead a retaliation

claim under the FCA, "a plaintiff must allege that there was a violation of the statute, i.e., the

presentment of a false or fraudulent claim to the federal government." Sharma v. Dist. of

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Columbia, 881 F. Supp. 2d 138, 2012 U.S. Dist. LEXIS 110773, at *10 (D.D.C. Aug. 8, 2012).

The Relators' argue in their opposition that they have adequately pled a claim of

retaliation under the FCA because "simply collecting information that could lead to an action

under the False Claims Act is sufficient to bring one's conduct within the anti-retaliation

provisions ofthe Act." Relators' Opp'n at 16. They claim that they have met their burden

because they allegedly informed various Satory employees that the Development Lab would

create an unfair advantage and create an opportunity for Satory to bill more hours for DOJ work

than needed. See Relators' Opp'n at 16-17. However, notably absent from Relators' Complaint

is an allegation that either Hood or Maxon were "investigating false or fraudulent claims aimed

at extracting money from the government." Relators' Opp'n at 16 (citing United States ex rel.

Barrett., 251 F. Supp. 2d at 38).

In order to succeed under a FCA retaliation claim, "the employee must, at least to some

degree, couch her concerns or investigation in terms of funds her employer fraudulently obtained

from the government." Luckey v. Baxter Healthcare Corp., 2 F. Supp. 2d 1034, 1055 (N.D. Ill.

1998), aff'd, 183 F. 3d 730 (7th Cir. 1999). Again, the Relators have only alleged a scheme

whereby a company possibly could defraud the Government, not a situation whereby Satory

actually did defraud the Government. As the Relators' readily acknowledge, to succeed under a

retaliation claim a relator must show that he or she engaged in an investigation regarding false or

fraudulent claims. See Relators' Opp'n at 16; see also United States ex rel. Karvelas, 360 F.3d

at 237 (recognizing that "conduct protected by the FCA is limited to activities that 'reasonably

could lead' to an FCA action; in other words, investigations, inquiries, testimonies, or other

activities that concern the employer's knowing submission of false or fraudulent claims for

payment to the government.").

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It is clear that the Relators' have no information and conducted no investigation

specifically targeted to disclosing any fraud on the part of Satory. See Kakeh v. United Planning

Org., 655 F. Supp. 2d 107, 117 (D.D.C. 2009) (finding that "an employee engages in protected

activity when he discloses fraud and corruption, as opposed to making a 'complaint about mere

regulatory compliance."'). In their Complaint, while the Relators' claim they complained about

alleged contractual inconsistencies and presumed ethical conflicts, importantly, they have not

alleged that they undertook or participated in an investigation to disclose fraud or engaged in

activity protected under the FCA. See United States ex rel. Karvelas, 360 F.3d at 237 (finding

that relator did not engage in protected activity where he "pointed out to his superiors all the way

to the president, the inadequate staffing, inconsistent administrative treatment orders, the absence

of blood gas quality control, and inappropriate documentation in the administration of care and

treatment of patients throughout the Hospital, as well as the failure to meet regulatory standards

which are required for reimbursement by Medicare and Medicaid.").

As the Relators have not alleged that they engaged in any protected activity under the

FCA nor have they established that Satory had any knowledge that they were engaged in any

alleged protected activity as defined under the FCA, Count IV of the Complaint should be

dismissed for failing to state a claim upon which relief can be granted.

III. COUNT V SHOULD BE DISMISSED FOR FAILING TO STATE A CLAIM UPON WHICH RELIEF CAN BE GRANTED.

As noted in more detail in Satory' s motion to dismiss, the Relators claim in Count V of

their Complaint that they were terminated in violation of public policy under D.C. law. As the

Relators' readily admit, "courts in the District of Columbia have created several public policy

exceptions to the [at-will employment] rule where the employee's discharge offends some

'mandate of public policy' that is 'firmly anchored in either the Constitution or in a statute or

15


regulation which clearly reflects the particular public policy being relied upon and ... [that]

policy arise[s] from a statute or regulation that does not provide its own remedy."' Brown v.

Dist. ofColumbia, Civil Action No. 12-799 (RJL), 2013 U.S. Dist. LEXIS 12678, at *19-20

(D.D.C. Jan. 28, 2013) (citing Carson v. Sim, 778 F. Supp. 2d 85, 97 (D.D.C. 2011)).

Importantly, "'[w]here the very statute creating the relied-upon public policy already contains a

specific and significant remedy for the party aggrieved by its violation,' the plaintiff may not

invoke the exception to the at-will employment." Elemary v. Holzmann, 533 F. Supp. 2d 116,

136 (D.D.C. 2008) (citing Nolting v. Nat'l Capital Group, Inc., 621 A.2d 1387, 1390 (D.C.

1993)). Thus, because the Relators' are relying on the FCA to support their wrongful

termination claim under D.C. law and because the FCA provides a "specific and significant

remedy," Hood and Maxon may not invoke the exception to at-will employment under D.C. law

and Count V should be dismissed with prejudice. Id

Misunderstanding the applicability ofD.C.'s exception to at-will employment, the

Relators argue that their claim for wrongful termination is merely an alternative pleading to their

claim for retaliation under the FCA. See Relators' Opp'n at 18. However, it is clear from the

face of their Complaint that the Relators are not pleading an alternative claim for relief because

they are in fact not relying on a separate and different statute or regulation. Rather, the Relators

are relying on the FCA to support their wrongful termination claim in violation ofD.C. law. See

Compl. ~ 87 (alleging in support of their wrongful termination claim that "SATORY engaged in

a concerted effort to violate the clear public policy of the United States and the District of

Columbia as expressed in the False Claims Act"). Significantly, the Relators have cited no case

law to support their position that they may allege a claim of wrongful termination in violation of

public policy under D.C. law when the very statute they rely on provides for its own specific and

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significant remedy.

In sum, under applicable D.C. law, because the FCA provides for a "specific and

significant remedy", the Relators may not invoke the public policy exception to the at-will

employment doctrine. See Elemary, 533 F. Supp. 2d at 136; Nolting, 621 A.2d at 1389

(declining to recognize public policy tort where such a remedy would not afford "the only

possibility for compensation for [appellant's] claimed injury"); Kassem v. Wash. Hasp. Ctr., 513

F.3d 251, 255 (D.C. Cir. 2008) (finding that plaintiffs wrongful termination claim was rightfully

dismissed because "the deficiency in [the plaintiffs] wrongful discharge claim is ... that the

District's own common law extinguishes it when the statute giving rise to the public policy at

issue contains an alternative remedy") (emphasis in original); Kakeh v. United Planning Org.,

537 F. Supp. 2d 65,72 (D.D.C. 2008) (holding, in a D.C. False Claims Act case, that the public

policy exception to at-will employment "does not apply 'where the very statute creating the

relied-upon public policy already contains a specific and significant remedy for the party

aggrieved by its violation."'); Hicks v. Ass'n of Am. Med Colleges, 503 F. Supp. 2d 48, 55

(D.D.C. 2007) (recognizing that when an act creates its own remedy, "the statutory remedy is

presumed to be exclusive."). As such, the Relators have failed to state a claim for termination in

violation of public policy and Count V of their Complaint should be dismissed with prejudice.

IV. COUNT VI SHOULD BE DISMISSED FOR FAILING TO ALLEGE A VIABLE CAUSE OF ACTION FOR BREACH OF CONTRACT.

The Relators also contend that Satory breached an alleged employment contract with

them when Hood was laid off and when Maxon voluntarily resigned. See Compl. ,m 90-93. The

Relators now try to amend their Complaint through their opposition by alleging not that Satory

breached a contract by terminating Hood and Maxon, but rather that Satory breached an offer

17


letter by "refusing to ever place Hood in the position of SharePoint Administrator" and "by

placing [Maxon] in the position ofLab Manager rather than SharePoint Solutions Architect."

Relators' Opp'n at 19-20. However, Count VI oftheir Complaint clearly reads that "SATORY

breached its employment contracts with ROBIN and MAXON" and as a result "ROBIN and

MAXON suffered loss of employment." See Compl. ~~ 91-92. For the Relators to now claim

that their breach of contract claim lies not in their departure from Satory, but rather in the duties

assigned to them during their employment, is in direct conflict with their Complaint.

It is clear under D.C. law that "[u]nder the at-will employment doctrine, the employment

relationship can be terminated by either party for any reason, or no reason, at any time."

Hopkins v. Blue Cross & Blue Shield Ass 'n, Civil Action No. 10-900 (JDB), 2010 U.S. Dist.

LEXIS 134730, at *8 (D.D.C. Dec. 21, 2010). "Termination of employment, then, does not

breach an at-will employment contract, because by its very terms the agreement contemplates

that either party may end the employment relationship, with or without cause." Daisley v. Riggs

Bank, NA., 372 F. Supp. 2d 61, 67 (D.D.C. 2005). Importantly, the Realtors do not dispute that

as at-will employees they cannot maintain an action for breach of contract based on their alleged

termination of employment. Thus, Count VI should be dismissed for failing to state a claim

upon which relief may be granted.

Even assuming, for the purposes of this motion only, that the Relators did not allege a

breach of contract claim based on termination, the Relators provide no case law to support their

contention that Satory breached any contract with Hood or Maxon based on the duties and

assignments they performed during their employment with Satory. To prevail on a breach of

contract claim, the Relators must establish and therefore plead: "(1) a valid contract between the

parties; (2) an obligation or duty arising out ofthe contract; (3) a breach ofthat duty; and (4)

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damages caused by the breach." Tsintolas Realty Co. v. Mendez, 984 A.2d 181, 187 (D.C. 2009).

Satory does not concede the existence of a contract between Satory and Hood and Maxon. The

Relators posit that a contract exists because Satory allegedly had an obligation to provide

relocation expenses to Maxon and Hood and that Maxon and Hood were bound by

confidentiality agreements. See Relators' Opp'n at 19. First, nowhere in the Relators'

Complaint do they adequately plead the existence of a contract. As discussed in Satory' s motion

to dismiss, Hood alleges that he received an "Offer Letter and Relocation Agreement" on August

2010. See Compl. ~ 14. Maxon merely contends that he traveled from Oregon to Washington,

D.C. as a "result of a promise of employment and the execution of an employment contract with

Satory." See Compl. ~ 14. Moreover, the offer letters issued to Hood and Maxon clearly state

that they are at-will employees and that they "[would] not be entered into a contract of

employment." Satory Mot. Dismiss, Exhibit 1; Satory Mot. Dismiss, Exhibit 2. Thus, by merely

pleading the existence of an offer letter, the Relators have not establish the existence of a

contract and as such Count VI should be dismissed with prejudice.

Secondly, in support of their contention that a contract exists, the Relators argue that the

terms of the offer letter obligated Sa tory to compensate Hood and Maxon for relocation

expenses. See Relators' Opp'n at 19. This is factually incorrect. A clear reading ofthe offer

letters at issue establish that Hood and Maxon "may receive" a payment for relocation expenses.

However, any obligation to pay relocation expenses was created through an entirely separate

agreement, which was made clear in the offer letter. In fact, Satory and Hood and Maxon did

enter into separate agreements regarding relocation expenses. See Satory Mot. Dismiss, Exhibit

3; Satory Mot. Dismiss, Exhibit 4. Here, the Relators do not allege that Satory breached its

obligation to pay relocation expenses. In reality, Satory generously compensated both Maxon

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and Hood for their relocation expenses.

However, even if the Relators had adequately pled the existence of an employment

contract, which Satory denies, they still have failed to plead a breach of contract claim under the

law. To establish a claim for breach of contract based on modification of job duties, the Relators

must show that their "actual duties differed from the duties agreed upon between the parties set

forth in [their] Employment Contract." Washington v. Thurgood Marshall Acad, 2006 U.S.

Dist. LEXIS 40318 (D.D.C. June 19, 2006). Both Maxon and Hood's offer letters clearly state

that they were hired as "Associates I" and that, in addition to responsibilities related to the roles

SharePoint Administrator and SharePoint Solutions Architect, their duties would included a

variety of other tasks and assignments. See Satory Mot. Dismiss, Exhibit 1 (noting that in

addition to other duties, Hood's duties would include "assisting in post-deployment support;

supporting the management of the OCIO collaboration services organizations; assisting with the

management and improvement of SharePoint environments (development, test, test &

integration, pre-production, and production); and participating in deployment of SharePoint

solutions and integration with enterprise systems & applications."); see Satory Mot. Dismiss,

Exhibit 2 (noting that in addition to other duties, Maxon's duties would include "supporting the

Architecture team in designing collaboration capabilities in client environments, supporting

infrastructure initiatives in client environments, guiding team members' professional

development, and supporting corporate business development initiatives.").

More importantly, both offer letters extended to Maxon and Hood clearly were general

offers of employment and specifically noted that their "position and that these activities and

services may change." Id Here, it is clear that the Relators' offer letters, which Satory does not

concede were employment contracts, were general offer letters and nothing more. Additionally,

20


the description ofHood and Maxon's responsibilities were flexible and open-ended.

Consequently, the Relators' breach of contract claim, which emanates from general descriptions

contained in their offer letters, must be dismissed. Id (finding the plaintiff could not support a

breach of contract claim where her duties and responsibilities were "flexible and open ended"

and that the "unilaterally modified" responsibilities plaintiff complained of fell under the

contract provisions requiring plaintiff fulfill "other appropriate responsibilities.")

Ultimately, because both Maxon and Hood were at-will employees and received general

offers of employment, they cannot maintain a cause of action for breach of contract based on

unilateral modification of job duties or based on their termination and as such Count VI should

be dismissed with prejudice.

V. COUNT VII SHOULD BE DISMISSED FOR FAILING TO ALLEGE A VIABLE CLAIM.

The Relators admit that punitive damages is available to a plaintiff as a remedy and is not

a free-standing cause of action. See Relators' Opp'n at 20; see also Cadet v. Draper &

Goldberg, PLLC, Civil Action No. 05-2105 (JDB), 2007 U.S. Dist. LEXIS 72504, at *48-49

(D.D.C. Sept. 28, 2007) (dismissing plaintiffs final count because punitive damages is a remedy

and not a freestanding ground for relief). As a result, Count VII should be dismissed.

As an aside, as noted in Satory' s motion to dismiss, Relators have failed to plead a

violation of the law and as such they are not entitled to punitive damages. The standard for

establishing entitlement to punitive damages in the District of Columbia is "rigorous." Rosenthal

v. Sonnenschein Nath & Rosenthal, 985 A.2d 443, 455 (D.C. 2009), cert. denied 131 S. Ct. 475

(2010). Thus, "'[t]o sustain an award ofpunitive damages, the plaintiff must prove, by a

preponderance of the evidence, that the defendant committed a tortious act, and by clear and

21


convincing evidence that the act was accompanied by conduct and a state of mind evincing

malice or its equivalent."' UMWv. Moore, 717 A.2d 332,341 (D.C. 1998) (citing Jonathan

Woodner Co. v. Breeden, 665 A.2d 929 (D.C. 1995), reh'gdenied, 681 A.2d 1097 (D.C. 1996)).

Thus, Relators are not entitled to punitive damages and Count VII should be dismissed.

VI. RELATORS SHOULD NOT BE GRANTED LEAVE TO AMEND.

Satory recognizes that "' [ o ]rdinarily, a party must be given at least one opportunity to

amend before the district court dismisses the complaint."' Klusmeier, 469 Fed. Appx. at 722

(citing Corsello v. Lincare, Inc., 428 F.3d 1008, 1014 (11th Cir. 2005)). However, leave to

amend does not need to be granted "'(1) where there has been undue delay, bad faith, dilatory

motive, or repeated failure to cure deficiencies by amendments previously allowed; (2) where

allowing amendment would cause undue prejudice to the opposing party; or (3) where

amendment would be futile."' Id

Here, the Relators have not alleged that they have any additional information to save the

many deficiencies found in their Complaint. Moreover, they did not request leave to amend their

Complaint in the almost two years since they originally filed their Complaint with this Court

outside of the catch-all phrase at the conclusion of their opposition to Satory' s motion to dismiss.

See Relators' Opp'n at 20; see also United States ex rel. Karvelas, 360 F.3d at 242 (recognizing

that "a district court has no obligation to invite a plaintiff to amend his or her complaint when the

plaintiff has not sought such amendment.") (citing Wagner v. Daewoo Heavy Indus. Am. Corp.,

314 F.3d 541, 542 (11th Cir. 2002) as holding that "[a] district court is not required to grant a

plaintiff leave to amend his complaint sua sponte when the plaintiff, who is represented by

counsel, never filed a motion to amend nor requested leave to amend before the district court.").

22


The fact that the Relators sought, in the alternative, for leave to file an amended

complaint without following proper procedures warrants dismissal with prejudice on all claims.

See Rollins v. Wackenhut Servs., 703 F.3d 122, 130 (D.C. Cir. 2012) (citing Belzian v. Hershon,

434 F.3d 579, 582 (D.C. Cir. 2006) (upholding 12(b)(6) dismissal with prejudice and denial of

leave to amend where plaintiff did not file a motion for leave to amend her complaint, but rather

"requested leave to amend as an alternative argument in her opposition to the [defendant's]

motions to dismiss. 'A bare request in an opposition to a motion to dismiss -without any

indication of the particular grounds on which amendment is sought - does not constitute a

motion within the contemplation ofRule 15(a)"'). Additionally, D.C. District Court Local Civil

Rule 15.1 requires that a motion for leave to amend be "accompanied by an original ofthe

proposed pleading as amended." LCvR 15 .1. Thus, because the Relators have "not indicated

that [they] will be able to plead sufficient facts to state a claim for relief' and cannot "allege

additional facts that would cure the deficiencies in [their] complaint, in addition to failing to

comply with local rules regarding amendment, the Relators should not be granted leave to amend

and the Complaint should be dismissed with prejudice. Id at 131 (citing Belizan, 434 F.3d at

584).

CONCLUSION

For all the foregoing reasons and those discussed in Satory's motion to dismiss, the

Relators' Complaint fails to allege any cause of action against Satory- whether under the FCA

or D.C. law- upon which Satory may be held liable. Consequently, this Court should dismiss

the Relators' Complaint in its entirety with prejudice.

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Dated: this 14th day ofMarch, 2013 Respectfully submitted,

By: /s/ David A Rosenberg

David A Rosenberg D.C. Bar No. 433405

FORD & HARRISON LLP 1300 19th Street, N.W., Suite 300 Washington, DC 20036 Telephone: (202) 719-2000 Facsimile: (202) 719-2077 E-mail: [email protected]

Attorneys for Defendant Satory Global, LLC.

CERTIFICATE OF SERVICE

I hereby certify that, on this 14th day ofMarch, 2013, I electronically filed the foregoing DEFENDANT'S REPLY MEMORANDUM IN SUPPORT OF MOTION TO DISMISS with the Court using the CM/ECF system which will then send electronic notification of the filing to the following:

J. Michael Hannon Daniel Crowley 1901 18th Street, NW Washington, DC 20009 Attorneys for Qui Tam Plaintiffs

Brian P. Hudak Assistant United States Attorney 55 5 Fourth Street, NW Washington, D.C. 20530 Attorney for Plaintiff United States of America

DC: 113035.1

24

/s/ David A Rosenberg David Rosenberg

Documents

REPLY MEMORANDUM IN SUPPORT OF … in reply to the Relators' opposition to and in further support of its motion to dismiss the Complaint filed by Plaintiffs William Robin Hood ("Hood")