USA et al v. KForce Government Solutions, Inc. et al
Filing
68
ORDER denying 66 Motion for Reconsideration; granting 24 motion to dismiss. Count I is dismissed with prejudice as to Turner and without prejudice as to the United States; Count II is dismissed with prejudice; Counts III, IV and V are dismissed without prejudice because the Court declines to exercise supplemental jurisdiction over Turner's state law claims; and the Clerk is directed to close the file. Signed by Judge Charlene Edwards Honeywell on 11/10/2014. (AEB)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
USA and WILLIAM TURNER,
Plaintiffs,
v.
Case No: 8:13-cv-1517-T-36TBM
KFORCE GOVERNMENT SOLUTIONS,
INC. and KFORCE, INC.,
Defendants.
___________________________________/
ORDER
This matter comes before the Court upon the Defendants’ Motion to Dismiss Amended
Complaint (Doc. 24). Plaintiff filed a timely response and a hearing was held on August 26, 2014.
The Court, having considered the motion and being fully advised in the premises, will grant
Defendants’ Motion to Dismiss Amended Complaint.
I.
Plaintiff’s Factual Allegations 1
Plaintiff William Turner was formerly employed by Defendant KForce Government
Solutions, Inc. (“KGS”) as its Executive Vice President and Chief Operations Officer. Doc. 18 at
¶ 7. KGS is a wholly owned subsidiary of KForce Government Holdings, Inc., which in turn is a
wholly owned subsidiary of Defendant KForce, Inc. (“KFORCE”). Id. at ¶ 11. KGS earns most, if
not all, of its revenue from contracting work with the United States government, through one or
more of its departments and agencies. Id. at ¶ 12.
1
The facts are presented as alleged by Plaintiff because “[w]hen considering a motion to dismiss filed pursuant to
Federal Rule of Civil Procedure 12(b)(6), the court must accept all of the plaintiff's [factual] allegations as true,
construing them in the light most favorable to the plaintiff.” Sallah ex rel. MRT LLC v. Worldwide Clearing LLC,
860 F. Supp. 2d 1329, 1333 (S.D. Fla. 2011) citing Pielage v. McConnell, 516 F. 3d 1282, 1284 (11th Cir. 2008).
On or about December 15, 2009, KGS was suspended from participating in new and
renewed Federal government business and was thereafter proposed to be “debarred” from doing
Federal contracting work. Id. at ¶ 13. On or about December 29, 2009, KGS entered into an
Administrative Agreement with the United States Department of the Interior, which terminated
KGS’ suspension and resulted in KGS no longer being considered for debarment. Id. at ¶ 14. As a
condition of that Administrative Agreement, KGS was required to return $78,892.32 to the
Department of the Interior, and to enhance its existing compliance programs, training and controls.
Id. at ¶ 14. The Administrative Agreement had a term of 3 years. Id. at ¶ 14. However, it was
amended and extended through September 30, 2013 due to a continued lack of completeness of a
compliance program as determined by the Monitor and the Department of Interior. Id. at ¶ 15.
Under the Administrative Agreements, a third party Monitor was appointed to supervise
compliance with the Agreements (hereinafter “the Monitor”). Id. at ¶ 17. The KGS Compliance
Program is administered by KFORCE, through KFORCE associates and leaders, on behalf of
KGS. Id. at ¶ 15.
On or about February 2, 2011, KGS hired Plaintiff/Relator William Turner to serve as its
Strategic Development Officer and Senior Vice President, at an annual salary of $200,000 per
year, plus participation in the KGS Management Bonus Pool. Id. at ¶ 18. Turner was hired due to
his sales, delivery and strategic planning experience including his understanding of Federal
compliance issues and KGS’s need to come into full compliance with the Administrative
Agreements. Id. at ¶ 19. On or about April 10, 2012, KGS promoted Turner to Executive Vice
President and Chief Operations Officer. Id. at ¶ 20. Turner’s compensation was increased to
$230,000 per year, and he continued his participation in the KGS Management Bonus Pool. Id. at
¶ 20. In his new role, Turner’s mandate was to ensure KGS was compliant with all Federal
2
regulations and requirements applicable to KGS as a Federal contractor in addition to other duties
assigned. Id. at ¶ 21. During the course of Turner’s employment with KGS, he identified numerous
areas in which KGS was not in compliance with a variety of requirements applicable to federal
contractors. Id. at ¶ 22.
Indirect Cost Formulations are used by Federal Contracting Officers’ auditors to forecast
the contractors’ rates (provisional or final) on all contracts and are meant to closely approximate
what contractors anticipate their actual cost rates will be for that upcoming year. Id. at ¶ 26.
Contractors are required to monitor their actual costs, compare them to final or Provisional Rates
and throughout accounting periods, “true up” or adjust their invoices to the Federal Government
accordingly. Id. at ¶ 26. Incurred cost submissions and requests for Provisional Rates are required
to be submitted in accordance with the Federal Acquisition Regulations (“FAR”). Id. at ¶ 26. If a
Contractor’s actual cost rates are lower that their final or Provisional Rates, the contractor owes
money back to the Federal Government. Id. at ¶ 27. If a Contractor’s actual cost rates are higher
than their final or Provisional Rates, a supplemental invoice must be provided to the Federal
Government, and a large discrepancy between actual and Provisional Rates may cause the Federal
Government and/or the Defense Contract Audit Agency (“DCAA”) to conduct an audit to
determine the reason for the lack of financial management. Id. at ¶ 28.
Turner alleges that KGS’s violations of FAR included KGS’s failure to submit revised
provisional rates from 2009 through 2011 and, as a result, using 2009 provisional rates throughout
2009, 2010 and 2011. Id. at ¶ 23.
Turner first identified this issue to Defendants in or about June 2011, and thereafter this
issue was addressed numerous times in emails, in meetings with the boards of directors, and
meetings with Defendants’ executive leaders. Id. at ¶ 24. However, Defendants were already aware
3
of KGS’s improper continued use of 2009 provisional rates prior to commencement of Turner’s
employment. Id. at ¶ 25. Defendants responded to concerns over inaccurate DCAA final or
provisional rates by assigning inexperienced project analysts, resulting in many inaccuracies in
KGS’s 2012 Provisional Rate Submittal. Id. at ¶ 29.
In an email by KGS President Larry Grant dated June 29, 2012 to KFORCE executives
Bill Sanders and Joseph Liberatore, Grant advised that KGS was substantially under-running its
provisional rates, but advised against reporting that fact to the Federal Government for fear a large
discrepancy might trigger a DCAA audit. Id. at ¶ 32. Mr. Grant indicated his concern that such an
audit would uncover other problems with KGS’s finances, such as improper time charges in KGS’
Time and Expense System. Id. at ¶ 32.
KGS had “parked” costs in KGS onsite pools to cover for KGS customer onsite rates which
were increasing during fiscal years 2009 through 2011. Id. at ¶ 33. This concealment of costs in
the KGS onsite pool had the intended effect of keeping KGS customer site rates steady, allowing
KGS to appear to remain cost competitive in one cost pool but resulting in higher costs in the KGS
customer site pool. Id. at ¶ 33. Further, KGS wrote off other cost overruns expressly for the purpose
of fraudulently concealing them from the government so as to continue to appear cost competitive
on a critical and highly profitable contract with the Defense Threat Reduction Agency (DTRA)
known as HDTRA1-10-D-0001-0005, which had already received a negative Contractor
Performance Assessment Report (“CPAR”). Id. at ¶ 33.
Since inception of KGS, KFORCE has concealed and/or misappropriated home allocation
costs in order to be price competitive and at its discretion, cover KFORCE commercial costs across
its corporate holdings which include KGS. Id. at ¶ 37.
4
KGS and KFORCE, through their executive leadership, conspired to divert KGS assets,
paid for by its U.S. Government customers, toward commercial uses so as to benefit KFORCE,
without providing a credit back to KGS. Id. at ¶ 38. Assets purchased by government monies may
not be used or diverted to private or commercial purposes or gain without a credit for the value of
such use being issued back as compensation for the use of such asset. Id. at ¶ 39. One such KGS
asset was a facility in San Antonio Texas, which KFORCE used to conduct commercial recruiting
activities; including the use of all facilities, assets and office equipment. Id. at ¶ 40.
Another instance of diversion of KGS assets involved KFORCE’s use of KGS to absorb
startup, execution and support costs for commercial contracts and KGS providing personnel for
KFORCE’s commercial benefit. Id. at ¶ 41. KFORCE never gave any credits back to KGS for its
use of facilities, or KGS’ absorbing startup costs or providing personnel for KFORCE commercial
endeavors. Id. at ¶ 42. Turner believes that KFORCE and KGS did not separately account for KGS
expenses incurred which related to KFORCE’s commercial endeavors. Id. at ¶ 43.
Those costs therefore were included in KGS general overhead and administrative costs,
and became part of KGS’s “indirect costs”, which in turn were charged to, and paid by the Federal
government through KGS’s government contracts. Id. at ¶ 43. Turner frequently attempted to
persuade KFORCE and KGS to separately account for such KGS costs incurred for primarily
private commercial work, so as to segregate them from KGS indirect costs, but without success.
Id. at ¶ 44. The end result of this activity was to “siphon off” KFORCE’s costs for engaging in
pursuing, bidding on, winning and performing private commercial work, while keeping the
revenues of such work within KFORCE. Id. at ¶ 45. Those siphoned off commercial costs then
became part of KGS’ indirect costs, and were billed to, and paid by the Federal government,
leading to the United States government effectively subsidizing the costs of KFORCE’s
5
commercial contracts. Id. at ¶ 45. KFORCE and KGS engaged in this “siphoning off” of costs with
respect to contracts with KFORCE commercial customers including USAA, British Petroleum,
and Washington Metro Transit Authority. Id. at ¶ 46. Turner estimates that the costs KGS incurred
in pursuing these contracts was approximately $10 million dollars. Id. at ¶ 46.
KFORCE eventually created a division called Kforce Professional Solutions for the express
purpose of using KGS assets and personnel to perform commercial work, which was billed out
through KFORCE, the costs of which were included in KGS’ indirect costs and were improperly
billed to, and paid by the United States government. Id. at ¶ 47. KFORCE and KGS incurred many
more costs pursuing and bidding upon other contracts which KFORCE did not win, yet those costs
also became part of KGS’s indirect costs, and were improperly billed to, and paid by the Federal
government. Id. at ¶ 48.
Turner alleges that Defendants have violated Cost Accounting Standards (“CAS”) through
their failure and refusal to follow consistent accounting methodologies with respect to home office
allocations, resulting in inaccurate invoices being issued to U.S. Government customers. Id. at ¶
50. Defendants’ failure to make accurate incurred cost submissions since the inception of KGS as
a legal entity has resulted in virtually every single invoice it has submitted to U.S. Government
customers during the last six years being inaccurate and based on incorrect and false cost data. Id.
at ¶ 50.
At Turner’s insistence, KFORCE brought in a former retired and independent DCAA
auditor in or about July 2012 to assist KFORCE in identifying and noting corrective actions for its
financial organization, systems and processes. Id. at ¶ 51. During that audit, the auditor found flaws
in practices and processes, however, the auditor was not granted access to the actual financial
numbers. Id. at ¶ 51. At Turner’s insistence, KFORCE brought in a third party audit firm in or
6
about November of 2012 to assist in the development of new and accurate DCAA provisional
rates. Id. at ¶ 52. During that audit firm’s investigation, they discovered numerous and serious
flaws in KGS’ management of finances, financial controls, and lack of consistent financial
practices. Id. at ¶ 52.
Turner provided updates of the lack of financial controls and violations to KGS’s Board of
Directors and KFORCE executive leadership during executive and Board of Director quarterly
meetings. Id. at ¶ 53. In or about June 2012, KFORCE CEO David Dunkel presented himself to
KGS Executive and Senior Leadership and apologized for the lack of financial management
controls. Id. at ¶ 53.
As of the date of termination of Turner’s employment in December 2012, Defendants had
taken no action to correct the audit firm’s multiple findings, and upon information and belief, the
lack of financial controls and inaccurate invoicing of the Federal Government is continuing to date.
Id. at ¶ 54. During 2010, 2011, and 2012, KFORCE intentionally overstated KGS’s value by
releasing false future expected profits figures, known to be unattainable. Id. at ¶ 55.
During a subsequent audit, KFORCE executive Bill Sanders instructed Turner and Grant
to support those false future expected profits figures in communications with auditors, which
Turner refused to do. Id. at ¶ 56. KGS was eventually forced to take an impairment of $65.3 million
dollars as a result, and upon information and belief, that impairment did not adequately correct the
false impression KFORCE and KGS gave. Id. at ¶ 57. Turner believes that KFORCE went through
a phase two impairment review. Id. at ¶ 58.
Throughout Turner’s employment with Defendant KGS, he received repeated exemplary
performance evaluations and positive comments regarding the performance of his duties. Id. at ¶
7
59. Turner has never been warned, reprimanded, reproved or criticized in any way for the manner
in which he performed his duties, or for compliance related issues. Id. at ¶ 60.
On or about December 6, 2012, in a meeting with Grant and KFORCE General Counsel
Bill Josey, Sanders stated that although Turner had done nothing wrong, and only had been doing
his job to correct compliance issues at KGS, Grant should fire Turner, and if Grant did not fire
Turner, then Grant himself would be fired. Id. at ¶ 63.
On or about December 7, 2012, Turner’s employment was terminated in a telephone
conference between Turner, Josey and Robin Roett (KFORCE’s Director of Human Resources).
Id. at ¶ 66. At this time, Josey informed Turner he was being terminated as the result of information
uncovered during compliance oversight activities. Id. at ¶¶ 67-68. Josey stated that Defendants
were in possession of information that Turner’s actions were jeopardizing KGS’s performance
under the Administrative Agreements. Id. at ¶ 69. Josey also stated that Defendants were in
possession of information that Turner’s actions were in opposition to the requirements of the
Administrative Agreements and that Turner failed to implement a close integration of the
Compliance Officer into Turner’s leadership team. Id. at ¶¶ 70-71. Josey informed Turner that
Grant knew about the termination and had authorized it. Id. at ¶ 73.
Turner believes that after his termination one or more representatives of Defendants
informed the Monitor overseeing compliance with KGS’s Administrative Agreements that Turner
had been terminated due to lack of performance, compliance violations and/or violation of the
provisions of the Administrative Agreements. Id. at ¶ 74. Further, Turner believes that after his
termination, one or more representatives of Defendants informed third parties and persons
employed and active in the Federal Contracting industry and community that Turner had been
terminated a) by Larry Grant personally; b) for performance reasons, or otherwise for “cause”; c)
8
for compliance related reasons; and/or d) that Turner was personally being considered for
debarment from any future Federal contracting work. Id. at ¶ 75.
Upon information and belief, no “compliance oversight activities”, or other good faith
investigation had taken place into Turner’s performance prior to termination of Turner’s
employment. Id. at ¶ 76. Turner believes that Josey had not been authorized by KGS to terminate
Turner, but rather was following the instructions from KFORCE. Id. at ¶ 77. Turner also believes
that at the time Josey told Turner he was fired, no one had informed KGS executive leadership, or
the KGS Board of Directors, nor had anyone at KGS authorized Turner’s termination. Id. at ¶ 78.
Soon after his termination, Turner received over a dozen unsolicited communications from
other members of the small and tightly knit Federal Contracting industry indicating that they had
received information that Turner had been terminated for performance problems, compliance
concerns and in at least one case that Turner himself was being considered for debarment from
future Federal Contracting work. Id. at ¶ 81. Turner believes that such allegations originated from
Defendants KFORCE and KGS and their employees. Id. at ¶ 82.
II.
Standard of Review
To survive a motion to dismiss, a pleading must include a “short and plain statement of the
claim showing that the pleader is entitled to relief.” Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009)
(quoting Fed. R. Civ. P. 8(a)(2)). Labels, conclusions and formulaic recitations of the elements of
a cause of action are not sufficient. Id. (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555
(2007)). Furthermore, mere naked assertions are not sufficient. Id. A complaint must contain
sufficient factual matter, which, if accepted as true, would “state a claim to relief that is plausible
on its face.” Id. (quoting Twombly, 550 U.S. at 570). “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.” Id. (citation omitted). The court, however, is not
9
bound to accept as true a legal conclusion labeled as a “factual allegation” in the complaint. Id.
“[O]nly a complaint that states a plausible claim for relief survives a motion to dismiss.” Id.
(citation omitted).
III.
Discussion
A. Disclosure of Amended Complaint
First, Defendants argue that, prior to filing, Turner was required to disclose his amended
complaint to the United States for review and consideration pursuant to 31 U.S.C. § 3730(b)(2).
Doc. 24 at p. 6. However, “the plain language of § 3730(b)(2) refers only to ‘the complaint,’ not
amended or subsequent complaints. This fact has been recognized by other courts.” United States
ex rel. Branch Consultants, L.L.C. v. Allstate Ins. Co., 668 F. Supp. 2d 780, 803 (E.D. La. 2009).
See also United States ex rel. Milam v. Regents of the Univ. of Cal., 912 F. Supp. 868, 890 (D. Md.
1995); United States ex rel. Mikes v. Straus, 931 F. Supp. 248, 259-61 (S.D.N.Y. 1996); Wisz v.
C/HCA Dev., Inc., 31 F. Supp. 2d 1068, 1069 (N.D. Ill. 1998). “[E]ven assuming for the sake of
argument that [Plaintiff] violated the requirements of § 3730(b)(2), numerous courts have held that
such requirements are not jurisdictional and their violation does not require dismissal of the
complaint.” Branch Consultants, L.L.C., 668 F. Supp. 2d at 803. Thus, the Amended Complaint
will not be dismissed on this basis.
B. Count I
In Count I, Plaintiff alleges violations of the False Claims Act, 31 U.S.C, §§ 3729, et seq.
(“FCA”). The qui tam provision of the FCA authorizes private persons to initiate civil actions
alleging fraud perpetrated on the United States. 31 U.S.C. § 3730(b). “If, as here, the Government
declines intervention in the action, the relator can proceed with the claim and recover between 25
and 30 percent of any monies recovered plus reasonable expenses and attorneys' fees and costs.”
10
United States ex rel. Heater v. Holy Cross Hosp., Inc., 510 F. Supp. 2d 1027, 1030 (S.D. Fla. 2007)
(citing 31 U.S.C. § 3730(d)). 2
To establish a claim under section 31 U.S.C. § 3729(a)(1)(A) of the FCA, a relator
must plead three elements: (1) a false or fraudulent claim; (2) which was presented,
or caused to be presented, by the defendant to the United States for payment or
approval; (3) with the knowledge that the claim was false. . . . To establish a claim
under section 31 U.S.C. § 3729(a)(1)(B) of the FCA, a relator must also plead three
elements: "(1) the defendant made a statement in order to receive money from the
government, (2) the statement was false, and (3) the defendant knew it was false."
U.S. ex rel. McGinnis v. OSF Healthcare Sys., Case No. 11-cv-1392, 2014 U.S. Dist. LEXIS
89167, 16-17 (C.D. Ill. July 1, 2014) (internal citations omitted).
A complaint alleging a violation of the FCA must meet the particularity
requirements of Rule 9(b). See Corsello, 428 F.3d at 1012. To satisfy this
requirement, "the complaint must allege facts as to time, place, and substance of
the defendant's alleged fraud, and the details of the defendants' allegedly fraudulent
acts, when they occurred, and who engaged in them." Id. (quoting United States ex
rel. Clausen v. Lab. Corp. of Am., Inc., 290 F.3d 1301, 1310 (11th Cir. 2002))
(internal quotation marks and alterations omitted). Additionally, the complaint
must contain "some indicia of reliability" that a fraudulent claim was actually
submitted to the government. Id. at 1012, 1014. "Liability under the False Claims
Act arises from the submission of a fraudulent claim to the government, not the
disregard of government regulations or failure to maintain proper internal policies."
Id. at 1012 (citation omitted).
Jallali v. Nova Southeastern Univ., Inc., 486 Fed. Appx. 765, 766 (11th Cir. 2012).
Here, Plaintiff alleges that Defendants submitted false claims to the government in the form
of invoices that were based on incorrect provisional rates. Plaintiff argues that, while the invoices
themselves were not fraudulent on their face, they were based on fraudulent provisional rates. Both
parties have directed the Court to Dyer v. Raytheon Co. for an explanation of the billing process
at issue here. “The government establishes a provisional cost billing rate at the beginning of each
year so that [the contractor] can recover its costs over the course of the year despite the fact that it
2
Although the Government declined to intervene in this case, it has filed a statement of interest regarding the instant
motion to dismiss and has requested that, if Count I is dismissed, it be dismissed without prejudice as to the United
States. See Doc. 38 at p. 2.
11
does not yet know the actual amount of its indirect costs for the year.” United States ex rel. Dyer
v. Raytheon Co., Civil Action No. 08-10341-DPW, 2013 U.S. Dist. LEXIS 135691, 85 (D. Mass.
Sept. 23, 2013). The government establishes this rate and the contractor “periodically invoices the
government based on the provisional cost billing rate throughout the year, rather than billing based
on its actual costs.” Id.
At the end of the year, Raytheon calculates is actual costs and submits final
indirect cost rate proposals for each relevant business. These final proposals
include a representation, required by FAR, see 48 C.F.R. 42.703-2, that,
[a]ll costs included in this proposal . . . are allowable in accordance
with the cost principles of the Federal Acquisition Regulation (FAR)
and its supplements applicable to the contracts to which the final
indirect cost rates will apply; and . . . [t]his proposal does not include
any costs which are expressly unallowable under applicable cost
principles of FAR or its supplements.
The Defense Contract Audit Agency ("DCAA") then audits the final proposal
for potentially unallowable costs and makes a recommendation to the Defense
Contract Management Agency ("DCMA") officer, who makes the final
decisions on any remaining questions concerning the allowability of costs. See
48 C.F.R. 42.705-1(b). Once the audit is complete, [the contractor] and the
government negotiate the final indirect cost rate for the year and [the contractor]
issues a final set of invoices designed to account for any discrepancy between
the provisional billing rate and the final one. See id.
Id. at 86.
Here, Turner alleges that Defendants – rather than the government – established the
provisional rates, and did so in a fraudulent manner by using old rates and/or incorporating inflated
estimates of indirect costs. Turner concedes that the submission of provisional rates does not
qualify as “submission of a claim” under the FCA.
Instead, Turner claims that submission of the invoices, based on the provisional
cost billing rate, throughout the year amounts to submission of false claims under the FCA. Turner
concedes that the invoices themselves do not contain any false or fraudulent information, but
12
asserts that they are “false claims” because they are based on the fraudulent information presented
in the provisional rate submissions. The Dyer court specifically disagreed with this theory stating
that “each invoice bills the government at the established provisional billing rate until the end-ofyear final application invoices which are designed to account for any discrepancies.” 2013 U.S.
Dist. LEXIS 135691 at 87. See also Massachusetts v. Schering-Plough Corp., No. 03-11865, 2011
U.S. Dist. LEXIS 108650, 2011 WL 4436969, *3 (D. Mass. Sept. 23, 2011). “If there is any
implied certification, it could only be that the invoices accurately reflect the agreed-upon
provisional billing rate.” 2013 U.S. Dist. LEXIS 135691 at 89. “As a result, they cannot and do
not falsely represent or certify compliance with federal billing regulations. . . .” Id.
Turner encourages this Court to reject the reasoning in Dyer and hold that submission of
the invoices constitutes submission of a false claim under the FCA. Turner does not, however,
offer any authority for this position. As noted in Dyer and admitted by Turner, the invoices
themselves are not false or fraudulent. Furthermore, the government knows when receiving these
invoices that they are not for actual costs incurred. The invoices are based on the agreed upon
provisional rates. Thus, the submission of the invoices cannot support a claim under the FCA.
Plaintiff also alleges that the final proposals may have contained false information
regarding indirect costs, if they were submitted. This supposition cannot support a claim under the
FCA. The Eleventh Circuit’s holding in Klusmeier v. Bell Constructors, Inc., 469 Fed. Appx. 718
(11th Cir. 2012) is instructive here. In Klusmeier the Court rejected claims by a relator who had
no personal knowledge of the actual submission of invoices. See Jallali, 486 Fed. Appx. at 766767. Here, Turner admits having no knowledge of whether any final proposals or invoices were
even submitted, and certainly has no knowledge of the content of such documents. Thus, he cannot
state an FCA claim based on the year-end proposals or invoices. Without specific facts to support
13
submission of a false claim by either defendant, Count I cannot proceed. See United States ex rel.
Atkins v. McInteer, 470 F.3d 1350, 1357 (11th Cir. 2006). 3
Turner suggests that his claim is similar to those in United States ex rel. Walker v. R&F
Properties of Lake Cty., Inc., 433 F.3d 1349 (11th Cir. 2005) and Hill v. Morehouse Medical
Assocs., Inc., Case No. 02-14429, 2003 U.S. App. LEXIS 27956 (11th Cir. Aug. 15, 2003), and he
should be able to proceed under that precedent. However, in neither case did the relator allege an
FCA claim on invoices that admittedly were not fraudulent. See United States ex rel. Heater v.
Holy Cross Hosp., Inc., 510 F. Supp. 2d 1027, 1035-1036 (S.D. Fla. 2007) (internal footnote and
citations omitted). Moreover, unlike the relators in Walker and Hill, Turner has admitted that he
does not even know if the final invoices (the only documents that might actually be considered
“claims”) were sent to the government, let alone whether they were false or fraudulent. Thus, the
instant case is not analogous to either Walker or Hill, and certainly is not controlled by them.
Without any knowledge of the final invoices at all, Turner cannot provide “indicia of reliability”
to satisfy the Rule 9 pleading requirements. Accordingly, Count I must be dismissed for failure to
state a claim.
In his response and at the hearing, Turner requested leave to file a second amended
complaint. “Ordinarily, a party must be given at least one opportunity to amend before the district
court dismisses the complaint.” Corsello v. Lincare, Inc., 428 F.3d 1008, 1014 (11th Cir. 2005).
Leave to amend, however, need not be granted where, inter alia, amendment would be futile. Id.
Given that the facts previously plead by Turner preclude a claim under the FCA, leave to amend
would be futile. Furthermore, Turner’s request to amend is deficient because he fails to describe
3
Congress amended the FCA in May of 2009 with the Fraud Enforcement and Recovery Act ("FERA"), Pub. L. No.
111-21, 123 Stat. 1617 (2009). Among other things, FERA re-designated § 3729(a)(1) as § 3729(a)(1)(A), and redesignated § 3729(a)(2) as § 3729(a)(1)(B). These amendments do not change the requirement that there must be
submission of a false claim under the act.
14
the substance of his proposed amendment. See Klusmeier, 469 Fed. Appx. at 722. Thus, Count I
will be dismissed with prejudice as to Turner and without prejudice as to the United States. See
United States ex rel. Williams v. Bell Helicopter Textron, Inc., 417 F.3d 450, 455-456 (5th Cir.
2005).
C. Count II
In Count II Turner asserts an FCA retaliation claim brought pursuant to 31 U.S.C. §
3730(h) which does not require a showing of fraud and therefore need not meet heightened
pleading requirements of Fed. R. Civ. P. 9(b). Mendiondo v Centinela Hosp. Med. Ctr., 521 F3d
1097 (9th Cir. 2009). Instead, FCA retaliation claims must meet Fed. R. Civ. P. 8(a) notice
pleading standard. Id.
Turner alleges that Defendants are “jointly and severally liable” for retaliation pursuant to
31 U.S.C. § 3730 which states, in pertinent part:
Any employee, contractor, or agent shall be entitled to all relief necessary to make
that employee, contractor, or agent whole, if that employee, contractor, or agent is
discharged, demoted, suspended, threatened, harassed, or in any other manner
discriminated against in the terms and conditions of employment because of lawful
acts done by the employee, contractor, agent or associated others in furtherance of
an action under this section or other efforts to stop 1 or more violations of this
subchapter [31 USCS §§ 3721 et seq.].
31 U.S.C. § 3730(h)(1) (2014).
In order to survive a motion to dismiss, a complaint alleging FCA retaliation claims
brought pursuant to 31 U.S.C. §3730(h)(1) . . . must contain factual allegations that
if proven would establish that 1) the Relator was acting in furtherance of an FCA
enforcement action or other efforts to stop violations of the FCA [(“protected
conduct”)], 2) the employer knew Relator was engaged in protected conduct, and
3) the employer was motivated to take an adverse employment action against the
Relator because of the protected conduct.
McGinnis, 2014 U.S. Dist. LEXIS 89167, 34-35.
15
With regard to protected conduct, the Amended Complaint contains allegations that Turner
made internal reports about the allegedly improper provisional rates being used by KGS.
Generally, this would be a sufficient allegation to survive a motion to dismiss. See, e.g., Marbury
v. Talladega College, Case No. 1:11-cv-03251-JEO, 2014 U.S. Dist. LEXIS 7635, 37 I.E.R. Cas.
(BNA) 1147 (N.D. Ala. Jan. 22, 2014). However, as Turner’s counsel repeatedly noted during the
hearing on this matter, by making these reports Turner was just doing his job. Turner alleges that
he was hired with the specific mandate “to ensure KGS was compliant with all Federal regulations
and requirements applicable to KGS as a Federal contractor in addition to other duties assigned.”
Doc. 18 at ¶ 21. “[C]ourts have held that employees whose complaints fall within the scope of
their job duties must provide their employers with clear notice of their intent to pursue an FCA
action in order to satisfy the second element of a retaliation action under the statute.” Sicilia v.
Boeing Co., 775 F. Supp. 2d 1243, 1254 (W.D. Wash. 2011). See also Mack v. Augusta-Richmond
County, 148 Fed. Appx. 894, 897 (11th Cir. 2005) (citing Maturi v. McLaughlin Research Corp.,
413 F.3d 166, 173 (1st Cir. 2005)("Where an employee's job responsibilities involve overseeing
government billings or payments, his burden of proving that his employer was on notice that he
was engaged in protected conduct should be heightened. Yet, such an employee can put his
employer on notice 'by any action which . . . [,regardless of his job duties,] would put the employer
on notice that [FCA] litigation is a reasonable possibility.'")).
Here, there are no allegations that Turner put Defendants on notice of his alleged
whistleblowing activities. Instead, Turner has affirmatively represented that he was “just doing his
job.” Accordingly, there are no, and can be no, factual allegations to support a finding that Turner
engaged in protected conduct and this claim cannot stand.
16
Moreover, Turner cannot allege that his employer was motivated to take an adverse
employment action against him because of the alleged protected conduct. In the Amended
Complaint Plaintiff alleges that he was employed by KGS only, but that KFORCE employees
misrepresented their authority and terminated Turner’s employment over the objections of KGS.
Plaintiff’s counsel argues that Turner must be allowed to bring this claim against KFORCE
because he cannot allege retaliation against KGS as it did not take the adverse employment action.
However, Plaintiff has found no authority that would permit liability on the part of KFORCE for
an allegedly adverse employment action against another entity’s employee. Plaintiff requested
leave to amend so that he may incorporate his allegations regarding piercing the corporate veil into
Count II, however, such incorporation would be futile.
[T]o "pierce the corporate veil" [] the plaintiff must prove that:
(1) the shareholder dominated and controlled the corporation to such an extent that
the corporation's independent existence, was in fact non-existent and the
shareholders were in fact alter egos of the corporation;
(2) the corporate form must have been used fraudulently or for an improper
purpose; and
(3) the fraudulent or improper use of the corporate form caused injury to the
claimant.
Molinos Valle Del Cibao, C. por A. v. Lama, 633 F.3d 1330, 1349 (11th Cir. 2011). “Over and
above formal ownership, ‘the parent corporation's control must 'amount to total domination of the
subservient corporation, to the extent that the subservient corporation manifests no separate
corporate interests of its own and functions solely to achieve the purposes of the dominant
corporation.’” Lobegeiger v. Celebrity Cruises, Inc., 869 F. Supp. 2d 1350, 1353-1354 (S.D. Fla.
2012) (quoting Baker v. Raymond Int'l, Inc., 656 F.2d 173, 181 (5th Cir. 1981)). Typically, a court
will pierce the corporate veil when a corporation does not have funds to satisfy a judgment, so that
17
corporations may not hide assets by simply passing them to other individuals or entities. In re Air
Crash near Rio Grande P.R. on December 3, 2008, Case No. 11-md-02246-KAM, 2013 U.S. Dist.
LEXIS 57270, 18 (S.D. Fla. April 22, 2013).
Turner’s allegations regarding piercing the corporate veil indicate that KFORCE controlled
KGS only with regard to the termination of Turner’s employment. See Doc. 18 at ¶¶ 247-267.
Turner has not made factual allegations which suggest that KGS manifests no separate corporate
interests of its own and functions solely to achieve the purposes of KFORCE. In fact, Plaintiff
alleged that KGS’ president, Larry Grant, refused to follow instructions from KFORCE and that
the entities conspired with each other in the alleged schemes. Plaintiff does not allege that
KFORCE was dominating KGS, but instead claims that when KGS would not do what KFORCE
wanted, KFORCE falsely claimed to have authority to act on behalf of KGS and “terminated”
Turner’s employment with KGS. Even if Turner could allege facts to show domination, he has no
legal support for his contention that piercing the corporate veil would mean that KFORCE could
be held liable for alleged retaliation that KGS itself could not be held liable for under the FCA.
Ultimately, Plaintiff has conceded any retaliation claim against KGS and cannot support such a
claim against KFORCE. Accordingly, Count II will be dismissed with prejudice.
D. Counts III, IV and V
Because the Court has disposed of all federal claims, and the only claims remaining are
those brought under Florida statutory or common law, the Court declines to exercise supplemental
jurisdiction over these claims. Therefore, Turner’s remaining state-law claims will be dismissed
without prejudice to being refiled in an appropriate state court. See 28 U.S.C. § 1367(c)(3)
(“district courts may decline to exercise supplemental jurisdiction over a claim under subsection
(a) if . . . (3) the district court has dismissed all claims over which it has original jurisdiction.”).
18
The Supreme Court has advised that “in the usual case in which all federal-law claims are
eliminated before trial, the balance of factors to be considered under the pendent jurisdiction
doctrine-judicial economy, convenience, fairness, and comity-will point toward declining to
exercise jurisdiction over the remaining state-law claims.” Carnegie-Mellon Univ. v. Cohill, 484
U.S. 343, 350 n.7 (1988).
IV.
Plaintiff’s Motions to Amend
While this Motion to Dismiss was pending and subsequent to the hearing, Plaintiff filed
motions for leave to file a second amended complaint. See Docs. 60, 61 and 66. The first motion
was replaced by an amended motion, which was denied for failure to attach the proposed amended
complaint to the motion. See Doc. 65. Plaintiff then filed a motion for reconsideration of the order
denying leave to amend. See Doc. 66. Defendants have responded to that motion. See Doc. 67.
The Court has reviewed the proposed second amended complaint and has determined that
the amendment would be futile. See Corsello v. Lincare, Inc., 428 F.3d 1008 (11th Cir. 2005)
(denying motion for leave to amend in a False Claims Act case because the amendments would
have been futile). As discussed above, it is Plaintiff’s own allegations that defeat his claims under
the FCA. Layering additional allegations on top of those does not save those claims. Even
considering those additional allegations, Plaintiff has no facts to support submission of a false
claim by Defendants.
Accordingly, it is hereby ORDERED AND ADJUDGED that:
1.
Defendants' Motion to Dismiss Amended Complaint (Doc. 24) is GRANTED.
2.
Count I is dismissed with prejudice as to Turner and without prejudice as to the
United States;
3.
Count II is dismissed with prejudice;
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4.
Counts III, IV and V are dismissed without prejudice because the Court declines to
exercise supplemental jurisdiction over Turner’s state law claims;
5.
Plaintiff’s Motion for Reconsideration (Doc. 66) is DENIED; and
6.
The Clerk is directed to close the file.
DONE AND ORDERED in Tampa, Florida on November 10, 2014.
Copies to:
Counsel of Record and Unrepresented Parties, if any
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