United States of America et al v. Casa De Maryland et al
Filing
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MEMORANDUM OPINION AND ORDER denying 24 Motion for Reconsideration; granting 27 Motion to Dismiss; dismissing with prejudice 25 Amended Complaint; directing the Clerk to close this case. Signed by Judge Paula Xinis on 10/1/2018. (jf3s, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
UNITED STATES OF AMERICA, ex rel.,
AMALIA POTTER,
Plaintiffs,
v.
CASA DE MARYLAND, et al.,
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Civil Action No. PX-16-0475
Defendants.
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MEMORANDUM OPINION AND ORDER
Pending before the Court in this qui tam action is the Motion to Dismiss the Amended
Complaint filed by Defendants CASA de Maryland, CASA in Action, Gustavo Torres, and
Virginia Kase (collectively, “Defendants” or “CASA”). ECF No. 27. Also pending is the
Motion for Reconsideration filed by Plaintiff-Relator Amalia Potter. ECF No. 24. The matters
are fully briefed, and no hearing is necessary. See D. Md. Loc. R. 105.6. Upon consideration of
the parties’ arguments, the Court GRANTS Defendants’ motion and DENIES Plaintiff’s motion.
I.
Background
This case was the subject of the Court’s prior Memorandum Opinion and Order, so the
Court will not repeat the matters previously discussed in detail. See ECF Nos. 22, 23.
Potter maintains that her former employer, CASA de Maryland, Inc. and its affiliate,
CASA in Action, Inc., violated the False Claims Act (“FCA”) by certifying that CASA had
complied with all “applicable” laws and regulations in connection with federal grant monies it
received, even though CASA had not fully and properly completed I-9 employment verification
forms for all of its employees. Potter specifically alleges that CASA made false claims to the
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Government during an audit triggered by CASA’s receipt of Government funds (the “A-133
Audit”), and in grant-related documents called Program Participation Assurances (“PPAs”) and
Financial Status Reports (“FSPs”), in which CASA certified that it had complied with
“applicable” laws, regulations, and grant provisions governing the programs under which CASA
received Government funding. When Potter tried to address the deficient I-9 forms with CASA,
she faced resistance and then was fired.
In its prior Memorandum Opinion, the Court dismissed Potter’s substantive FCA and
FCA conspiracy claims because Potter failed to aver facts to support a plausible inference that
CASA falsely represented or omitted information to the Government relating to incomplete or
deficient I-9 forms, or that such false representations or omissions would have been material to
the Government’s decision whether to grant funding to CASA. ECF No. 22 at 6–13. The Court
also dismissed Potter’s FCA retaliation claim because at best, the Complaint showed that CASA
knew about Potter’s concerns regarding I-9 compliance, but the Complaint did not include
sufficient facts to support the objective reasonableness of Potter’s view that CASA was violating
the FCA, or that CASA was on notice of FCA-protected activity. ECF No. 22 at 15–18.
The Court granted Potter leave to amend her Complaint to cure the pleading deficiencies
identified in her FCA claims. The Court particularly noted that the Complaint was bereft of any
facts showing that CASA made any materially false statements or material omissions regarding
I-9 employee verifications in the A-133 Audit, in PPAs, or in FSPs, and directed Potter to amend
the Complaint to add such facts, if possible. Potter was also directed to provide additional facts
related to her allegedly protected conduct sufficient to make out a retaliation claim. The Court
dismissed Potter’s state-law wrongful termination claim with prejudice.
2
Potter has now amended her Complaint, but adds no facts regarding representations or
omissions made to the Government during the A-133 Audit, in PPAs, or in FSPs, related to the
completion of I-9 forms. Nor has Potter included any facts to show how the claimed I-9
deficiencies were material to the Government’s decision to pay CASA federal grant monies.
Rather, Potter’s new factual allegations concern the circumstances under which she discovered
CASA’s I-9 noncompliance and how she confirmed her suspicion that CASA’s methods for
addressing deficient I-9 forms contravened other legal requirements. Potter also provides further
detail about her communications with CASA regarding the proper way to correct employees’ I-9
forms. See ECF No. 25 ¶¶ 61, 62, 66, 68, 69, 70, 73, 74, 78.
Defendants move to dismiss the Amended Complaint, arguing that Potter’s amendments
did not cure the deficiencies identified by the Court. See generally ECF No. 27. In response,
Potter contends that because an A-133 Audit requires review of employee I-9 forms and the I-9
forms were not properly completed, any CASA certifications regarding compliance with the A133 Audit requirements must have been false. ECF No. 28-1 at 7.1 Potter contends that the I-9
forms necessarily were material to the Government’s decision to grant funding because the A133 Audit includes a review of I-9s. ECF No. 28-1 at 8. Potter also argues that her Amended
Complaint sufficiently supports her contention that she was engaged in FCA-protected conduct
and terminated because of that conduct. ECF No. 28-1 at 8–11. Separately, Potter moves the
Court to alter or amend the dismissal with prejudice of her wrongful discharge claim (Count IV
of her initial Complaint), arguing that she was indeed terminated for her refusal to amend the I9s in a manner which would constitute a crime. See ECF No. 24.
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The Court notes that Potter does not rely on any new factual allegations in the Amended Complaint to
support her argument.
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The Court discusses each motion in turn. For the reasons that follow, the Court will grant
Defendants’ motion to dismiss, and deny Potter’s motion for reconsideration.
II.
Motion to Dismiss
When reviewing a motion to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(6), the Court must determine whether the complaint includes facts sufficient to state a
claim to relief that is plausible on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007);
Ashcroft v. Iqbal, 556 U.S. 662, 678–79 (2009). A plaintiff must plead facts to support each
element of the claim to satisfy the standard. See McCleary-Evans v. Maryland Dep’t of Transp.,
State Highway Admin., 780 F.3d 582, 585 (4th Cir. 2015). In so assessing, the Court takes as
true all well-pleaded factual allegations and makes all reasonable inferences in the plaintiff’s
favor. Philips v. Pitt Cty. Mem. Hosp., 572 F.3d 176, 180 (4th Cir. 2009). The Court does not
credit conclusory statements or legal conclusions, even when couched as allegations of fact. See
Iqbal, 556 U.S. 678–79; Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008). Actions
brought under the FCA must “state with particularity the circumstances constituting fraud or
mistake.” Fed. R. Civ. P. 9(b); see U.S. ex rel. Nathan v. Takeda Pharm. N. Am., Inc., 707 F.3d
451, 456 (4th Cir. 2013).
In deciding a motion brought under Rule 12(b)(6), the Court generally may not consider
extrinsic evidence. However, the Court may consider any documents attached to a motion to
dismiss if they are “integral to and explicitly relied on in the complaint,” and authenticity is not
challenged. Am. Chiropractic Ass’n v. Trigon Healthcare, Inc., 367 F.3d 212, 234 (4th Cir.
2004); see also Philips, 572 F.3d at 180; Walker v. S.W.I.F.T. SCRL, 517 F. Supp. 2d 801, 806
(E.D. Va. 2007) (“[W]here a complaint in a fraud action references a document containing the
alleged material misrepresentations, the referenced document may be considered part of the
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complaint.”). This rule seeks to prevent a “situation in which a plaintiff is able to maintain a
claim of fraud by extracting an isolated statement from a document . . . even though if the
statement were examined in the full context of the document, it would be clear that the statement
was not fraudulent.” Am. Chiropractic Ass’n, 367 F.3d at 234 (internal marks and citation
omitted).
A. Substantive FCA Violation (Count I) and Conspiracy to Violate the FCA (Count
II)
The FCA allows private litigants to bring actions on behalf of the United States against
any entity that makes false representations to the federal Government in connection with a claim
for payment from the Government. 31 U.S.C. §§ 3729, 3730(b). To state a claim under the
FCA, a plaintiff must allege (1) a false statement or fraudulent course of conduct; (2) which was
material to the Government determination to pay a claim; (3) made or carried out with the
requisite knowledge; (4) that caused the Government to pay out money or to forfeit monies due.
U.S. ex rel. Rostholder v. Omnicare, Inc., 745 F.3d 694, 700 (4th Cir. 2014).
A false statement is material if it “has a natural tendency to influence agency action or is
capable of influencing agency action.” Harrison v. Westinghouse Savannah River Co., 176 F.3d
776, 785 (4th Cir. 1999) (internal quotation marks and citation omitted). In the context of FCA
claims, the materiality requirement is a demanding one; it is “intended to keep FCA liability
from attaching to noncompliance with any of potentially hundreds of legal requirements in a
contract.” United States v. Triple Canopy, Inc., 857 F.3d 174, 178 (4th Cir. 2017), cert.
dismissed, 138 S. Ct. 370 (2017) (internal quotation marks and citation omitted); see U.S. ex rel.
De Cesare v. Americare In Home Nursing, 757 F. Supp. 2d 573, 586 (E.D. Va. 2010) (“Only
materially false certifications—those that would lead the government to make payments it would
not otherwise have made—are actionable.” (internal quotation marks and citations omitted,
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emphasis added)). If Government funding is conditioned on compliance with a legal
requirement and that compliance has been falsely certified, an FCA action is available.
Harrison, 176 F.3d at 786. However, the noncompliance at issue must be “a prerequisite” to
securing Government funding, and the defendant must have falsely “certified such compliance”
to obtain such funding. Id. at 787; see Universal Health Servs., Inc. v. U.S. ex rel. Escobar, 136
S. Ct. 1989, 2001 (2016).
Where, as here, an entity fails to disclose that it may not be in full compliance with all
rules and regulations, any such omission regarding “violations of statutory, regulatory, or
contractual requirements” will support FCA liability only when the omissions render the
remaining representations “misleading with respect to the goods or services provided.”
Universal Health, 136 S. Ct. at 1999. Put differently, “a misrepresentation about compliance
with a statutory, regulatory, or contractual requirement must be material to the Government’s
payment decision in order to be actionable under the False Claims Act.” Id. at 2002; see
Andrews v. City of Norfolk, No. 2:16CV681, 2017 WL 4837707, at *8 (E.D. Va. Oct. 23, 2017).
On this point, Potter has added no facts to the Amended Complaint regarding the contents
of CASA’s PPAs and FSPs that permit a reasonable inference that any information was
communicated in these forms regarding employee I-9s. Nor does the Amended Complaint
provide any further detail on what the A-133 auditors were in fact told about I-9 records and how
such information, if truthfully presented, would have affected the outcome of the Audit or the
Government’s payment decisions. See Universal Health, 136 S. Ct. at 2003–04 (“proof of
materiality can include, but is not necessarily limited to, evidence that the defendant knows that
the Government consistently refuses to pay claims . . . based on noncompliance with the
particular . . . requirement”); Triple Canopy, 857 F.3d at 178–79; U.S. ex rel. Wilson v. Kellogg
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Brown & Root, Inc., 525 F.3d 370, 378 (4th Cir. 2008); ECF No. 22 at 7–12. When accepting all
facts as true and in the light most favorable to Potter, the Amended Complaint establishes
CASA’s noncompliance with I-9 requirements, but allows for no inference that CASA was
required to disclose I-9 noncompliance and yet failed to do so. Nor did Potter add any facts to
show that, even if such information were required and withheld, the information was material to
the Government’s funding determinations. See Carlson v. DynCorp Int’l LLC, 657 F. App’x
168, 173 (4th Cir. 2016). Because Potter has failed to cure these deficiencies after ample
guidance from the Court, the FCA claim (Count I) and FCA conspiracy claim (Count II), which
is predicated on the viability of the substantive FCA claim, are dismissed with prejudice. See
U.S. ex rel. Godfrey v. KBR, Inc., 360 F. App’x 407, 413 (4th Cir. 2010); Allison Engine Co.,
Inc. v. U.S. ex rel Sanders, 553 U.S. 662, 672–73 (2008).
B. FCA Retaliation (Count III)
As discussed in the Court’s prior Memorandum Opinion, Potter’s FCA retaliation claim
rests largely on the theory that she was terminated because of her efforts to fix CASA’s I-9
employee certification problem, and thus prevent an FCA violation. 2 An employee’s efforts to
stop a substantive FCA violation may constitute protected conduct if the employee is “motivated
by an objectively reasonable belief that the . . . employer is violating, or soon will violate, the
FCA.” Carlson, 657 F. App’x at 172 (emphasis added); see also Nifong v. SOC, LLC, 234 F.
Supp. 3d 739, 752–53 (E.D. Va. 2017). The plaintiff also must plausibly aver that the employer
was on notice of the employee’s concern about a potential FCA violation. See Layman v. MET
Labs., Inc., No. RDB-11-03139, 2012 WL 4018033, at *6 (D. Md. Sept. 12, 2012) (quoting U.S.
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In its initial Memorandum Opinion, the Court also identified a potential retaliation claim premised on
Potter’s post-termination disclosure to the Department of Justice, but noted that Potter had not pleaded facts
sufficient to infer that her disclosure involved FCA-related activity, or that Defendants knew of Potter’s disclosure.
ECF No. 22 at 15–16. Potter has added no new facts about this disclosure, and so the Court will not revisit this
theory of liability.
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ex rel. Ackley v. Int’l Bus. Machs. Corp., 110 F. Supp. 2d 395, 401 (D. Md. 2000)); U.S. ex rel.
Parks v. Alpharma, Inc., 493 F. App’x 380, 388 (4th Cir. 2012); Irving v. PAE Gov’t Servs., Inc.,
No. 1:16CV1617, 2017 WL 4999563, at *4 (E.D. Va. Nov. 1, 2017). A plaintiff’s statements
“clearly couched in terms of concerns and suggestions” to her employer, as opposed to “threats
or warnings of FCA litigation,” are insufficient to constitute notice. Parks, 493 F. App’x at 389–
90; see Irving, 2017 WL 4999563, at *7.
Potter’s Amended Complaint remains deficient because Potter fails to plausibly aver how
her concerns regarding CASA’s I-9 procedures support an objectively reasonable belief that
CASA was about to violate the FCA by failing to disclose the I-9 deficiencies to the
Government. To be sure, the Amended Complaint adds further detail about how Potter engaged
in due diligence, conducted research to ascertain the proper way to fix CASA’s I-9 problem, and
communicated her findings to CASA supervisors. See ECF No. 25 ¶¶ 66–69, 71, 73, 74, 76–78.
However, CASA’s rejection of Potter’s recommendations does not support the conclusion that
CASA made any “fraudulent representation to the government in an attempt to protect CASA’s
grant funding, which is the type of false claim prohibited by the FCA.” ECF No. 25 ¶66. Nor
does Potter offer facts in support of her assertion that CASA’s proposed way to fix the I-9
problem amounted to “criminal fraud, for which she could be held personally liable.” ECF No.
25 ¶ 70.
Accordingly, even with the additional facts taken as true and most favorably to Potter, the
Court cannot infer that incomplete I-9s and CASA’s proposed methods for addressing those
deficiencies would amount to an FCA violation. Although Potter may be able to show that the I9s were deficient and that Defendants’ proposed methods to fix them were less than ideal, this is
a different matter than whether any of CASA’s three representations to the Government at issue
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(the A-133 Audit, the PPAs and the FSPs) at all related to CASA’s I-9s. Without this critical
connection, the Court cannot conclude that Potter’s views regarding an imminent FCA violation
related to the I-9s were objectively reasonable. See Nifong, 234 F. Supp. 3d at 753–54
(employee could not have reasonably believed that an FCA violation was imminent when claim
had not yet been submitted and efforts were being made to correct errors); Carlson, 657 F. App’x
at 173 (belief in FCA violation not reasonable when plaintiff failed to articulate a “mechanism
by which” the alleged inaccuracies “could later result in the government being fraudulently over
billed”). This missing link alone is sufficient for dismissal of Potter’s retaliation claim.
Additionally, the Amended Complaint does not allow for an inference that CASA was on
notice that Potter was concerned about a potential false or fraudulent claim. Although Potter
informed CASA generally that “the I-9 deficiencies, if not properly cured, could jeopardize
CASA’s government funding and could even result in debarment from future funding when the
auditors discovered the issue,” ECF No. 25 ¶ 78, Potter adds no facts to show how her statements
should have alerted CASA to any concerns Potter had regarding a false or fraudulent claim, as
opposed to Potter’s belief that the Government may choose not to award CASA future grants if
CASA’s I-9 problems were not adequately addressed. Cf. Universal Health, 136 S. Ct. at 2004
(government’s right not to provide funds is not equivalent to a claim being false or fraudulent
under the FCA). Because Potter has failed to cure the FCA retaliation claim, it likewise is
dismissed with prejudice.
III.
Motion to Alter or Amend
Potter asks the Court to reconsider its dismissal with prejudice of her state-law wrongful
termination claim. Potter styles her motion as one for reconsideration, but does not specify the
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provision under which she moves. The Court treats the motion as brought pursuant to Federal
Rule of Civil Procedure 59(e). The Court denies Potter’s requested relief.
A motion under Federal Rule of Civil Procedure 59(e) may be granted on three limited
grounds: (1) to accommodate an intervening change in controlling law; (2) to account for new
evidence not previously available; or (3) to correct a clear error of law or prevent manifest
injustice. See United States ex rel. Becker v. Westinghouse Savannah River Co., 305 F.3d 284,
290 (4th Cir. 2002) (citing Pac. Ins. Co. v. Am. Nat’l Fire Ins. Co., 148 F.3d 396, 403 (4th Cir.
1998)), cert. denied, 538 U.S. 1012 (2003). A Rule 59(e) motion “may not be used to relitigate
old matters, or to raise arguments or present evidence that could have been raised prior to the
entry of judgment.” Pac. Ins. Co., 148 F.3d at 403 (quoting 11 Wright et al., Federal Practice
and Procedure § 2810.1, at 127–28 (2d ed. 1995)). “In general, ‘reconsideration of a judgment
after its entry is an extraordinary remedy which should be used sparingly.’” Id. (quoting Wright
et al., supra, § 2810.1, at 124).
As explained in the Court’s prior Memorandum Opinion, to state a claim for wrongful
discharge, a plaintiff must allege plausibly (1) that she was discharged; (2) that the basis for the
discharge violated some clear mandate of Maryland public policy; and (3) that a nexus exists
between the plaintiff’s allegedly protected conduct and the decision to discharge her. See Yuan
v. Johns Hopkins Univ., 452 Md. 436, 451 (Md. Ct. App. 2017) (internal marks and citation
omitted). The purpose of the tort is “to provide a remedy for otherwise unremedied violations of
public policy.” Porterfield v. Mascari II, Inc., 374 Md. 402, 423 (Md. Ct. App. 2003). As to
wrongful termination claims, courts must “limit[ ] judicial forays into the wilderness of
discerning public policy without clear direction from a legislature or regulatory source.” Szaller
v. Am. Nat. Red Cross, 293 F.3d 148, 151 (4th Cir. 2002) (quoting Milton v. IIT Research Inst.,
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138 F.3d 519, 523 (4th Cir. 1998)). Accordingly, such claims are allowed sparingly, and must be
narrowly circumscribed. See Porterfield, 374 Md. at 423.
Potter argues that reconsideration is warranted because, contrary to the Court’s opinion,
Potter was terminated for refusing to violate the law, as she would be forced to do if she
participated in CASA’s proposed I-9 recertification plan. See ECF No. 24-1 at 2–3. Potter now
argues that CASA’s plan to have HR assistant Rocio Llera handle the I-9 re-certifications would
effectively amount to a criminal violation of 8 U.S.C. § 1324c, and Potter, through her role as
Llera’s supervisor, would have been implicated in this criminal offense. See ECF No. 24-1 at 3.
Accordingly, Potter now maintains that her refusal to go along with CASA’s plan, and thus assist
in a § 1324c violation, is what led to her termination, and forms the basis of a wrongful discharge
claim. The Court disagrees.
8 U.S.C. § 1324c, entitled “Penalties for Document Fraud,” in part prohibits an
individual “knowingly and willfully fail[ing] to disclose, conceal[ing], or cover[ing] up the fact
that they have, on behalf of any person, and for a fee or other remuneration, prepared or assisted
in preparing an application which was falsely made . . . for immigration benefits.” 8 U.S.C.
§ 1324c(e)(1). Potter appears to assert that she would have had a statutory duty to disclose
CASA’s I-9 issue, or else to violate this provision, if she allowed Llera to perform employee I-9
re-certifications, which Potter believed to be too complicated for Llera to handle. See ECF No.
24-1 at 3; ECF No. 25 ¶ 85. Potter’s claim is untenable.
First, Potter has pleaded no facts to support that either she or Llera were in jeopardy of
violating § 1324c(e)(1). No facts, for example, demonstrate that Potter or Llera were going to
assist in “preparing an application falsely made.” 8 U.S.C. § 1324c(e)(1) (emphasis added). The
Amended Complaint instead simply avers that Llera would be part of CASA’s recertification
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process in a manner with which Potter disagreed. Nor does Potter allege any facts that
demonstrate she or Llera would fill out applications for immigration benefits in exchange for a
fee or other remuneration, requisite elements according to the plain language of § 1324c(e)(1).
Cf. Perez v. United States, No. 09-CR-1153 (MEA), 2017 WL 1628902, at *1 (S.D.N.Y. May 1,
2017) (discussing criminal charge under § 1324c(e)(1) for defendant “failing to disclose her role
in preparing baseless applications [for a fee] for lawful United States resident status, in violation
of Title 8, United States Code, Section 1324c(e)(1).”). Potter’s “concern” about Llera’s ability to
handle employee I-9 re-certifications is a far cry from averring facts sufficient to support a
theory that she was terminated for refusing to violate §§ 1324c or 1324c(e)(1). Accordingly,
Potter has not plausibly alleged that she was fired for refusing to violate § 1324c, or because she
would have a statutory duty to disclose any wrongful conduct under § 1324c(e)(1). Potter’s
motion for reconsideration is DENIED.
III.
Conclusion and Order
For the reasons above, and for the reasons expressed in the Court’s prior Memorandum
Opinion and Order in this case, it is this 1st day of October, 2018, by the United States District
Court for the District of Maryland, ORDERED that:
1.
The Motion for Reconsideration filed by Plaintiff AMALIA POTTER (ECF No. 24) BE,
and the same hereby IS, DENIED;
2.
The Motion to Dismiss filed by Defendants CASA DE MARYLAND, INC., CASA IN
ACTION, INC., VIRGINIA KASE, and GUSTAVO TORRES (ECF No. 27) BE, and the same
hereby IS, GRANTED;
3.
The Amended Complaint filed by Plaintiff AMALIA POTTER (ECF No. 25) BE, and the
same hereby IS, DISMISSED WITH PREJUDICE;
4.
The Clerk is directed to transmit copies of this Memorandum Opinion and Order to
counsel for the parties; and
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5.
The Clerk is directed to CLOSE this case.
10/2/2018
Date
/S/
Paula Xinis
United States District Judge
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