United States of America v. ASG Solutions Corporation

Filing 23

ORDER Adopting 18 Report and Recommendation. Petitioners Petition to enforce the United States Attorneys Office Civil Investigative Demand No. 0457-0716-03 is Granted. Signed by Judge M. James Lorenz on 7/18/2018. (sjt)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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UNITED STATES OF AMERICA,

Case No.: 3:17-cv-01224-L-BGS

Petitioner,

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v.

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ORDER ADOPTING REPORT AND
RECOMMENDATION

ASG SOLUTIONS CORPORATION,
Respondent.

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Pending before the Court is Respondent ASG Solutions Corporation

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(“Respondent”) Objections [Doc. 19] to Magistrate Judge Bernard G. Skomal’s Report

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and Recommendation (“R&R” [Doc. 18]) recommending that this Court grant Petitioner

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United States of America’s (“Petitioner”) Petition [Doc. 1] to enforce a False Claims Act

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civil investigative demand. The Court has reviewed de novo the Petition, Respondent’s

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Response [Doc. 10], Petitioner’s Reply [12], Judge Skomal’s R&R, Respondent’s

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Objections, and Petitioner’s Reply [Doc. 20] to Respondent’s Objections. For the

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following reasons, the Court OVERRULES Respondent’s Objections and ADOPTS

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Judge Skomal’s R&R.

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3:17-cv-01224-L-BGS

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The facts and procedural history of this case were accurately presented in Judge

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Skomal’s R&R, which the Court need not repeat in full here. By way of background,

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Petitioner is investigating whether Respondent has violated the False Claims Act by

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falsely representing that it qualified for participation in the HUBZone program, which

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reserves some government contracting opportunities for small businesses that meet

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certain criteria. One criteria of the HUBZone program is that a small business hire a

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certain percentage of its workforce from HUBZones, which are historically underutilized

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business zones.

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In the course of this investigation, Respondent used its subpoena powers under 31

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U.S.C. §§ 3729–3733 to issue a Civil Investigative Demand (“CID” [Doc 1-2 Ex. 1].) In

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its CID, Respondent demanded twenty two categories of documents, most of which

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concern the composition of Respondent’s workforce. (Id.) Respondent has provided

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Petitioner with a number of documents responsive to the CID, but full compliance has not

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yet been achieved. Respondent has often gone non-responsive to Petitioner’s repeated

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requests for certain categories of documents and has refused to issue a Certificate of

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Compliance as required by both the CID and 31 U.S.C. § 3733(f). Petitioner therefore

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petitioned this Court for an order compelling Respondent’s compliance with the CID. In

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his R&R, Judge Skomal recommended that the Court grant Petitioner’s Petition.

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Respondent timely raised two objections to Judge Skomal’s R&R.

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ASG’s first objection is that timesheets for employees who did not charge to any

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HUBZone related contract are not relevant. This objection is unpersuasive because one

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way a company can achieve HUBZone program eligibility is by drawing at least 35% of

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its employees from residents of HUBZones. 13 C.F.R. § 126.200 (b)(iv)(3). To

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determine whether the 35% criterion is met, Petitioner would seem to need evidence of

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both (1) the number of HUBZone residents employed by a company (the “numerator”)

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and (2) the total number of persons the company employees (the “denominator”).

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Timesheets from employees working on non-HUBZone contracts are thus relevant

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because all such employees factor into the denominator. To the extent employees
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3:17-cv-01224-L-BGS

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working on non-HUBZone contracts reside in HUBZones, they would also be relevant to

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the numerator. The Court therefore OVERRULES this objection.

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Respondent’s second objection is that production of timecards for employees

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working on Non-HUBZone contracts would constitute an undue burden. Part of the

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undue burden argument centers on Respondent’s assertion that some of the requested

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documents might no longer exist. This argument is unpersuasive in light of Respondent’s

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failure to produce a certificate of compliance. If in fact some of the requested documents

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do not exist, Respondent shall comply with the CID and 31 U.S.C. § 3733(f) by

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providing a sworn certificate indicating all requested documents have either been

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provided or do not exist.

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Nor is the Court persuaded by Respondent’s argument that production of the

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requested documents would constitute an undue burden because compliance could

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require many hours of staff time and effort to search for and collect 10,000 or more pages

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of documents. (Wiezerba Decl. [Doc. 19–1] ¶ 7.) The only evidence presented in

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support of this argument is hearsay declaration testimony in which Respondent’s counsel

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says Respondent relayed this information to him. This evidence, which is

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unaccompanied by any legal citation or argument, is not sufficient to demonstrate that

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CID compliance would unduly burden Respondent. The Court therefore OVERRULES

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this objection.

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Finally, Respondent requests that, as an alternative to ordering compliance with the

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CID, the Court stay this proceeding for ninety days to allow the parties to resolve the

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matter between themselves. The Court denies this request. Petitioner served the CID on

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August 9, 2017. Since that time, the parties have met and conferred multiple times with

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the aim of resolving this matter without judicial intervention. These meet and confer

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efforts appear to have stalled because, according to Petitioner, Respondent is not making

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a good faith effort to comply with the CID and has continually gone unresponsive to

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Petitioner’s communications. The Court therefore finds a stay unwarranted.

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3:17-cv-01224-L-BGS

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CONCLUSION & ORDER
For the foregoing reasons, the Court OVERRULES Respondent’s Objections,
ADOPTS Judge Skomal’s Report and Recommendation, and orders as follows:
 Petitioner’s Petition to enforce the United States Attorney’s Office Civil

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Investigative Demand No. 0457-0716-03 is GRANTED. Within thirty days of the

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entry of this order Respondent shall fully comply with the CID and provide

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Petitioner with a sworn certificate of compliance.

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IT IS SO ORDERED.

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Dated: July 18, 2018

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