United State of America ex rel v. Tiversa Holding Corp. et al.
Filing
85
OPINION AND ORDER......The August 10 motions to dismiss are granted as to Counts One and Two, in part without prejudice and in part with prejudice, as explained above. The motions to dismiss are otherwise denied. (Signed by Judge Denise L. Cote on 10/17/2018) (gr)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------------X
:
UNITED STATES OF AMERICA ex rel.
:
MICHAEL J. DAUGHERTY,
:
:
Plaintiff,
:
:
-v:
:
TIVERSA HOLDNG CORP., TIVERSA INC.,
:
TIVERSA GOVERNMENT INC., and ROBERT
:
BOBACK,
:
:
Defendants.
:
:
----------------------------------------X
14cv4548(DLC)
OPINION AND ORDER
APPEARANCES:
For the relator:
James W. Hawkins
James W. Hawkins, LLC
11339 Musette Circle
Alpharetta, Georgia 30009
For defendants Tiversa Holding Corp., Tiversa Inc., and Tiversa
Government Inc.:
Steven W. Zoffer
Dickie, McCamey & Chilcote
Two PPG Place, Suite 400
Pittsburgh, Pennsylvania 15222
For defendant Robert Boback:
Brandon J. Verdream
Robert J. Ridge
Jonathan D. Klein
Clark Hill PLC
830 Third Avenue, Suite 200
New York, New York 10022
DENISE COTE, District Judge:
Michael J. Daugherty, relator, brings this qui tam action
under the False Claims Act, 31 U.S.C. § 3729 et seq. (“FCA”)
against Tiversa Holding Corporation, Tiversa Inc., and Tiversa
Government Inc. (collectively “Tiversa”) and against Robert
Boback, a former Tiversa executive.
The defendants have moved
to dismiss the Amended Complaint (“FAC”) for lack of
jurisdiction under Rule 12(b)(1); for failure to state a claim
under Rule 12(b)(6); and for failure to state fraud with
particularity under Rule 9(b).
For the reasons given below, the
motions are granted in part.
Background
In 1996, Daugherty founded a urology health center, LabMD,
Inc. (“LabMD”).
Tiversa uses peer-to-peer file sharing
applications to find leaked files, and offers cybersecurity
services to prevent leaks.
Daugherty claims that the defendants
targeted LabMD and that, when LabMD declined to pay for
Tiversa’s services, the defendants caused an FTC administrative
action against LabMD that resulted in LabMD shutting down.
The following facts are taken from the FAC and documents
attached to it.
Broadly, the FAC alleges that Tiversa found
digital files with sensitive information on domestic computers
through Internet file-sharing applications, doctored those files
to make them appear to have been found on computers in foreign
countries, falsely claimed to the Government that the files were
found on foreign computers, and thereby obtained (1) a contract
2
from the Transportation Security Administration (“TSA”) for
cybersecurity protection services, and (2) grant payments from
the Department of Homeland Security (“DHS”).
I. The TSA Contract
The FAC alleges that in 2011, Tiversa found sensitive
information related to aircraft computers on a computer of a TSA
employee in Denver, Colorado.
Boback instructed an employee of
Tiversa to create a report falsely making it “appear that the
sensitive information was spreading through peer-to-peer
networks.”
In late spring or summer of 2011, Boback met with
representatives of DHS and TSA in Arlington, Virginia.
The FAC
pleads “[o]n information and belief” that “one of the
individuals with whom Boback met was Greg Maier, Chief
Information Technology Security Operations for DHS.”
“Boback
showed Maier and others” the false report and stated falsely
that “sensitive search procedures for aircraft computers had
been found on computers in foreign countries.”
The defendants
then entered into a contract between Tiversa and TSA for “a
monitoring service to detect sensitive information inadvertently
or intentionally disclosed or posted on a network” (the “TSA
Contract”).
The contract was signed on August 3, 2011 and
provided for payment of $324,000 to Tiversa for services over
one year.
The contract was extended for another year in August
3
2012, with an additional payment to Tiversa of $324,000.
II. The DHS Grant
In September 2006, DHS awarded a grant (the “DHS Grant”) to
Dartmouth College (“Dartmouth”).
Professor M. Eric Johnson,
then a director of a center at Dartmouth’s business school,
engaged Tiversa to partner with him in implementing Dartmouth’s
work on the DHS Grant.
Johnson published a paper in February 2009 using money from
the DHS Grant (the “Johnson Paper”).
The FAC alleges that the
Johnson Paper falsely states that a LabMD file was found on a
computer where Johnson “had found other dangerous data” (the
“LabMD File”).
On April 29, 2008, Johnson sent an email (the
“April 2008 Email”) to a Tiversa employee that included the
following:
We are coming well on the medical files -- finished
going through all the files. We are working on the
report now. We turned up some interesting stuff -not as rich as the banks, but I guess that could be
expected. Any chance you could share a couple other
of your recent medical finds that we could use to
spice up the report? You told me about the one
database you[] found that could really boost the
impact of the report. Certainly will coordinate with
you on the report and release.
“In response to Johnson’s request” in the April 2008 Email,
Tiversa sent Johnson the LabMD File.
Johnson and Dartmouth did
not notify DHS that the Johnson Paper included false statements
about the source of the LabMD File.
4
Dartmouth received $29,650,000 from the DHS Grant between
2006 and 2014.
Recipients of grant money from DHS are required
to submit “timely, complete and accurate quarterly progress
reports to DHS.”
Dartmouth and Johnson submitted progress
reports without disclosing the false statements regarding the
LabMD File.
Procedural History
The Complaint in this action was filed under seal on June
24, 2014.
The case remained sealed pending the determination of
the United States regarding whether to intervene.
§§ 3730(b)(2)-(4).
See 31 U.S.C.
The United States declined to intervene by
notice dated March 20, 2018.
The docket and the Complaint were
unsealed in April 2018.
Defendants filed motions to dismiss the Complaint on July
3, 2018.
An Order filed July 5 directed Daugherty to file an
amended complaint or to oppose the motions to dismiss by July
27, and noted that “[i]t is unlikely that [Daugherty] will have
a further opportunity to amend.”
Daugherty responded to the
motions to dismiss by filing the FAC on July 27.
New motions to
dismiss were filed on August 10, and became fully submitted on
September 14.
5
Discussion
To survive a motion to dismiss for failure to state a
claim, a complaint “must plead sufficient factual content to
allow a factfinder to draw the reasonable inference that the
defendant is liable for the misconduct alleged.”
Allen v.
Credit Suisse Sec. (USA) LLC, 895 F.3d 214, 222 (2d Cir. 2018)
(citation omitted).
A court may “consider only those facts
alleged in the complaint, and must draw all reasonable
inferences in favor of the plaintiff.”
Wilson v. Dynatone
Publ’g Co., 892 F.3d 112, 117 (2d Cir. 2018).
“A complaint is
deemed to include any written instrument attached to it as an
exhibit or any statements or documents incorporated in it by
reference.”
Nicosia v. Amazon.com, Inc., 834 F.3d 220, 230 (2d
Cir. 2016) (citation omitted).
A court may also consider
“matters of which judicial notice may be taken.”
Kalyanaram v.
Am. Ass’n of Univ. Professors at N.Y. Inst. of Tech., Inc., 742
F.3d 42, 44 n.1 (2d Cir. 2014) (citation omitted).
In addition, because the FCA “is an anti-fraud statute,”
Daugherty “must plead fraud with particularity pursuant to
Federal Rule of Civil Procedure 9(b).”
U.S. ex rel. Polansky v.
Pfizer, Inc., 822 F.3d 613, 617-18 (2d Cir. 2016).
“To satisfy
this Rule, a complaint alleging fraud must (1) specify the
statements that the plaintiff contends were fraudulent, (2)
identify the speaker, (3) state where and when the statements
6
were made, and (4) explain why the statements were fraudulent.”
United States ex rel. Ladas v. Exelis, Inc., 824 F.3d 16, 25 (2d
Cir. 2016) (citation omitted).
I. The TSA Contract Claims
Counts Three and Four of the FAC assert that the defendants
violated the FCA when they obtained the TSA Contract.
The
defendants have moved to dismiss these claims for a variety of
reasons.
For the following reasons, the motions are denied.
A. The Elements of an FCA Claim
The FCA imposes liability on “any person who,” inter alia,
“knowingly presents, or causes to be presented, a false or
fraudulent claim for payment or approval; [or] knowingly makes,
uses, or causes to be made or used, a false record or statement
material to a false or fraudulent claim.”
§§ 3729(a)(1)(A)-(B).
31 U.S.C.
To state a claim under the FCA, a relator
must allege that the “defendants (1) made a claim, (2) to the
United States government, (3) that is false or fraudulent, (4)
knowing of its falsity, and (5) seeking payment from the federal
treasury.”
United States ex rel. Kirk v. Schindler Elevator
Corp., 601 F.3d 94, 113 (2d Cir. 2010) (citation omitted), rev’d
on other grounds, 563 U.S. 401 (2011).
The term “claim” is
defined in the statute as, inter alia, “any request . . . for
money . . . that . . . is presented to an officer, employee, or
agent of the United States.”
31 U.S.C. § 3729(b)(2)(A).
7
There are two theories of fraud cognizable under the FCA:
factual falsity and legal falsity.
See Mikes v. Straus, 274
F.3d 687, 696-97 (2d Cir. 2001), abrogated in part on other
grounds by Universal Health Servs., Inc. v. United States ex
rel. Escobar, 136 S. Ct. 1989 (2016) (“Escobar”).
Factually
falsity involves “an incorrect description of goods or services
provided or a request for reimbursement for goods or services
never provided.”
Mikes, 274 F.3d at 697.
Legal falsity is
where a claim is “predicated upon a false representation of
compliance with a federal statute or regulation or a prescribed
contractual term.”
Id. at 696.
Daugherty brings two FCA claims arising out of the TSA
Contract, based respectively on § 3729(a)(1)(A) and
§ 3729(a)(1)(B).
The FAC contains adequate allegations of a
factual falsity in the defendants’ procurement of the TSA
Contract.
The FAC alleges that Boback sought to obtain money
from the Government in exchange for Tiversa’s services.
The FAC
further alleges that Boback presented a document to the TSA that
he knew was false, namely a report prepared at Boback’s
direction that misrepresented the IP address associated with a
TSA file found on a peer-to-peer file sharing application.
These allegations plausibly allege a violation of the FCA.
The FAC also pleads fraud with particularity.
The FAC
specifies that the fraudulent statement was a Tiversa report
8
that falsified the IP address at which a TSA file was found.
The specific false statements in the report were (1) that the
TSA file was “spreading through peer-to-peer networks” and (2)
that the TSA file had been “found on computers in foreign
countries.”
The speaker is identified as Boback.
The statement
was conveyed to TSA employees at a meeting that occurred in
Arlington, Virginia in “late spring or summer of 2011.”
These
allegations are specific enough to pass muster under Rule 9(b).
The defendants principally argue that, because the identity
of the TSA officials with whom Boback met is not specifically
alleged, the fraud claims fail to plead fraud with
particularity.
Not so.
Daugherty has pleaded that Boback met
with TSA officials during a specified period, has specifically
described the allegedly false statements made by Boback to the
TSA, and has attached the resulting TSA Contract for Tiversa’s
cybersecurity services to the FAC.
These allegations are
sufficient to plead fraud.
B. The Public Disclosure Bar
FCA claims may not be brought if the allegations or
transactions underlying the suit were previously disclosed
publicly.
See 31 U.S.C. § 3730(e)(4).
This provision is the
public disclosure bar, and it was amended in 2010.
See Patient
Protection and Affordable Care Act, Pub. L. No. 111-148 § 10104,
124 Stat. 119, 901-902 (2010).
It currently provides in
9
relevant part as follows:
The court shall dismiss an action or claim under this
section . . . if substantially the same allegations or
transactions as alleged in the action or claim were
publicly disclosed . . . .
31 U.S.C. § 3730(e)(4) (2012).
Prior to 2010, the public disclosure bar provided that
“[n]o court shall have jurisdiction” over an action under the
FCA where the allegations or transactions had been publicly
disclosed.
31 U.S.C. § 3730(e)(4)(A) (2006).
The pre-2010
public disclosure bar thus restricted a court’s jurisdiction to
hear FCA claims.
See United States ex rel. Chorches v. Am. Med.
Response, Inc., 865 F.3d 71, 80 (2d Cir. 2017) (“Chorches”).
But, the current public disclosure bar is “no longer
jurisdictional in nature.”
Id.
As a result, prior public
disclosure for claims governed by the post-2010 FCA must be
analyzed under Rule 12(b)(6), not Rule 12(b)(1).1
This distinction is significant for at least three reasons.
First, a court may resolve factual disputes and consider
extrinsic evidence when resolving a Rule 12(b)(1) motion, but
may not do so when resolving a Rule 12(b)(6) motion unless the
documents are incorporated in the pleading. See Nicosia, 834
F.3d at 230-31 (Rule 12(b)(6)); Carter v. HealthPort Tech., LLC,
822 F.3d 47, 57 (2d Cir. 2016) (Rule 12(b)(1)). Second, a
dismissal pursuant to Rule 12(b)(1) is without prejudice,
whereas a dismissal pursuant to Rule 12(b)(6) is with prejudice.
See Katz v. Donna Karan Co., 872 F.3d 114, 121 (2d Cir. 2017)
(Rule 12(b)(1)); Berrios v. N.Y.C. Housing Auth., 564 F.3d 130,
134 (2d Cir. 2009) (Rule 12(b)(6)). Third, “the party invoking
the jurisdiction of the court has the burden of proof in a
12(b)(1) motion, in contrast to a 12(b)(6) motion, in which the
1
10
This case was filed in 2014, and the TSA Contract claims
are premised on conduct that occurred beginning in 2011.
Accordingly, the current public disclosure bar applies to these
claims.
The public disclosure bar requires a claim to be dismissed
if “substantially the same allegations or transactions . . .
alleged in the action or claim” have been “publicly disclosed”
in “a Federal criminal, civil, or administrative hearing in
which the Government or its agent is a party,” in “a
congressional, Government Accountability Office, or other
Federal report, hearing, audit, or investigation,” or “from the
news media,” with one exception.
31 U.S.C. § 3730(e)(4)(A).
The public disclosure bar does not apply if “the person bringing
the action is an original source of the information.”
Id.
The parties debate whether a number of federal hearings and
investigations, as well as a book published by Daugherty in
2013,2 constitute public disclosures within the meaning of
§ 3730(e)(4)(A).
Most of these activities occurred after the
filing of the original complaint in this action; some are also
actions between private parties, which cannot generate public
defendant has the burden of proof.”
318 F.3d 113, 128 (2d Cir. 2003).
Lerner v. Fleet Bank, N.A.,
Although it is arguable whether Daugherty’s book is susceptible
of judicial notice, Daugherty attached it to his opposition
brief.
2
11
disclosures within the meaning of the current public disclosure
bar.
See id. § 3730(e)(4)(A)(i) (limiting public disclosures to
those revealed in a “hearing in which the Government or its
agent is a party”).
The remaining documents -- litigation
between LabMD and the FTC, and a book published by Daugherty in
2013 -- do not disclose “substantially the same allegations or
transactions” as those underlying the TSA Contract claims.
The D.C. Circuit has interpreted the phrase “allegations or
transactions” as follows:
[T]he term “allegation” connotes a conclusory
statement implying the existence of provable
supporting facts. The term “transaction” suggests an
exchange between two parties or things that
reciprocally affect or influence one another. On the
basis of plain meaning, and at the risk of belabored
illustration, if X + Y = Z, Z represents the
allegation of fraud and X and Y represent its
essential elements. In order to disclose the
fraudulent transaction publicly, the combination of X
and Y must be revealed, from which readers or
listeners may infer Z, i.e., the conclusion that fraud
has been committed. The language employed in
§ 3730(e)(4)(A) suggests that Congress sought to
prohibit qui tam actions only when either the
allegation of fraud or the critical elements of the
fraudulent transaction themselves were in the public
domain.
United States ex rel. Springfield Terminal Ry. Co. v. Quinn, 14
F.3d 645, 653-54 (D.C. Cir. 1994) (“Springfield”) (emphasis in
Springfield) (citation omitted).
Here, the allegation of fraud
by Tiversa on the TSA is not made directly in the FTC litigation
or in Daugherty’s book.
Indeed, the TSA does not appear to be
12
mentioned in these sources.
Nor do these sources disclose the
essential elements of Daughtery’s allegation of fraud.
requires recognition of two elements:
facts and a true state of facts.”
original).
“Fraud
a misrepresented state of
Id. at 655 (emphasis in
The defendants have not shown that the true state of
facts -- that Tiversa falsified a TSA file’s IP address -- was
made public before 2014.
Accordingly, at least one critical
element of the fraudulent transaction was not publicly
disclosed.
As a result, the motions to dismiss are denied as to
Counts Three and Four of the FAC.
II. The DHS Grant Claims
The defendants move to dismiss Counts One and Two of the
FAC, premised on the DHS Grant, for lack of jurisdiction,
contending that the pre-2010 public disclosure bar applies to
those claims.
The defendants also move to dismiss for failure
to state a claim and for failure to plead fraud with
particularity.
For the reasons that follow, Counts One and Two
are dismissed in part with prejudice and in part without
prejudice.
A. Public Disclosure Bar
The parties dispute whether the current or pre-2010 version
of the public disclosure bar applies to the DHS Grant claims.
For the following reasons, the pre-2010 version applies to the
portion of these claims where payment was made by the Government
13
before March 23, 2010, the effective date of the 2010 FCA
amendment.
In addition, the motions to dismiss the pre-March
2010 portions of Counts One and Two for lack of jurisdiction are
granted.
The DHS Grant claims are premised on a grant that was paid
by DHS from 2006 to 2014.
Beginning in 2009, Dartmouth and
Johnson submitted quarterly progress reports to DHS which
falsely represented the research methodology being used.
The
FAC thus alleges a scheme that did not conclude until well after
the 2010 amendment to the public disclosure bar.
This presents
the problem of which public disclosure bar applies to the claims
in the FAC.
Neither the Second Circuit nor the Supreme Court
has addressed whether the 2010 amendment to the FCA is
retroactive.
Relevant precedent, however, dictates that it is
not.
In Hughes Aircraft Co. v. United States ex rel. Schumer,
520 U.S. 939 (1997), the Supreme Court addressed the effect of a
1986 amendment to the FCA on a case filed after that amendment
took effect but premised on conduct that occurred prior to the
amendment.
Id. at 946.
The Court held that the 1986 amendment
did not apply, because of the “principle that the legal effect
of conduct should ordinarily be assessed under the law that
existed when the conduct took place.”
Id. (citation omitted).
In so holding, the Court explained that the “presumption against
14
retroactive legislation” controls “unless Congress has clearly
manifested its intent to the contrary.”
Id.
More recently, the
Court noted that the 2010 FCA amendment to the public disclosure
bar “makes no mention of retroactivity.”
Graham Cty. Soil &
Water Conserv. Dist. v. United States ex rel. Wilson, 559 U.S.
280, 283 n.1 (2010) (“Wilson”).
Accordingly, the 2010 amendment
to the public disclosure bar is not retroactive.
An FCA claim accrues “on the date the claim is made, or, if
the claim is paid, on the date of payment.”
United States ex
rel. Kreindler & Kreindler v. United Tech. Corp., 985 F.2d 1148,
1157 (2d Cir. 1993) (“Kreindler”) (citation omitted).
Further,
“the number of assertable FCA claims is . . . measured . . . by
the number of fraudulent acts committed by the defendant.”
Id.
The public disclosure bar amendment took effect on March 23,
2010, Wilson, 559 U.S. at 283 n.1, and the FAC alleges that
false claims were presented to DHS both before and after that
date.
Thus, the pre-2010 version of the public disclosure bar
applies to fraudulent claims paid by the Government before March
23, 2010, and the current version applies to claims paid after
that date, or presented after that date and never paid.
Because the pre-2010 public disclosure bar limits
jurisdiction, it must be resolved as to FCA claims accruing
before March 23, 2010.
See Kreindler, 985 F.2d at 1155-56.
pre-2010 version of the public disclosure bar provides as
15
The
follows:
(A) No court shall have jurisdiction over an action
under this section based upon the public disclosure of
allegations or transactions in a criminal, civil, or
administrative hearing, in a congressional,
administrative, or Government Accounting Office
report, hearing, audit, or investigation, or from the
news media, unless the action is brought by the
Attorney General or the person bringing the action is
an original source of the information.
(B) For purposes of this paragraph, “original source”
means an individual who has direct and independent
knowledge of the information on which the allegations
are based and has voluntarily provided the information
to the Government before filing an action under this
section which is based on the information.
31 U.S.C. § 3730(e)(4) (2006).
The allegations supporting the DHS Grant claims are that
Professor Johnson conspired with Tiversa to falsify the origin
of the LabMD File, falsely reported the origin of that file in
the Johnson Paper, and submitted progress reports to DHS that
did not disclose that the LabMD File was not found in accordance
with the search protocol.
elements:
facts.”
“Fraud requires recognition of two
a misrepresented state of facts and a true state of
Springfield, 14 F.3d at 655 (emphasis in original).
A
motion filed by LabMD in 2014 in an FTC action against it
contains the following allegation:
The LabMD File “was stolen
by Tiversa from a LabMD computer, given to Dartmouth College to
16
spice up its report, and then given to the FTC . . . .”3
This
constitutes a public disclosure in an administrative proceeding
of the “true” state of facts on which the DHS Grant claims are
based -- that Tiversa and Johnson lied when they claimed that
the LabMD File was found in accordance with the DHS Grant search
protocol.
Accordingly, the Court only has jurisdiction over the
pre-March 2010 portions of the DHS Grant claims if Daugherty was
an original source.
To be an original source, Daugherty must have “(1) had
direct and independent knowledge of the information on which the
allegations are based, (2) voluntarily provided such information
to the government prior to filing suit, and (3) directly or
indirectly been a source to the entity that publicly disclosed
the allegations on which the suit is based.”
United States v.
N.Y. Medical College, 252 F.3d 118, 120 (2d Cir. 2001).
A
relator “does not satisfy the first requirement if a third party
is the source of the core information upon which the qui tam
complaint is based.”
Id. at 121 (citation omitted).
Daugherty’s opposition brief states that “LabMD . . . would not
learn about Tiversa’s fraudulent representations before April 2,
2014, when Richard Wallace, a former Tiversa employee, blew the
whistle on Tiversa.”
This statement indicates that Wallace
See Respondent’s Motion to Dismiss at 8 n.8, In re LabMD, Inc.,
FTC Docket No. 9357 (filed May 27, 2014), https://www.ftc.gov/
system/files/documents/cases/140527respmtndismiss.pdf.
3
17
informed LabMD that Tiversa had made false statements to the
Government about the source of the LabMD File.
Daugherty is not an original source.
Accordingly,
The portions of Counts One
and Two that allege false claims prior to March 23, 2010 are
dismissed for lack of jurisdiction.
B. Materiality
Because the current public disclosure bar is nonjurisdictional, the defendants’ arguments for dismissing the
post-March 2010 portions of the DHS Grant claims may be
considered in any order.
For the reasons that follow, Counts
One and Two are dismissed in their entirety with prejudice for
failure to plead materiality.
Materiality is defined in the FCA as “having a natural
tendency to influence, or be capable of influencing, the payment
or receipt of money or property.”
31 U.S.C. § 3729(b)(4).
Materiality “cannot be found where noncompliance is minor or
insubstantial.”
Escobar, 136 S. Ct. at 2003.
[P]roof of materiality can include, but is not
necessarily limited to, evidence that the defendant
knows that the Government consistently refuses to pay
claims in the mine run of cases based on noncompliance
with the particular statutory, regulatory, or
contractual requirement. Conversely, if the
Government pays a particular claim in full despite its
actual knowledge that certain requirements were
violated, that is very strong evidence that those
requirements are not material. Or, if the Government
regularly pays a particular type of claim in full
despite actual knowledge that certain requirements
were violated, and has signaled no change in position,
18
that is strong evidence that the requirements are not
material.
Id. at 2003-04.4
The FAC pleads only in a conclusory fashion that the
Government refuses to pay grants due to falsified methodology.
The FAC cites general policies of the United States Government
stating that compliance with grant conditions is important to
the Government.
Under Escobar, this is insufficient.
Further, it is implausible that the false statement -- the
source of the LabMD File -- would have been material to the
grant.
period.
DHS paid over $29 million to Dartmouth over an 8-year
The Johnson Paper, published in 2009, analyzed “1,654
documents” found on peer-to-peer file sharing applications.5
The
DHS Grant and the Johnson Paper were both significantly wider
ranging than the LabMD File.
It is implausible that falsifying
a single IP address would materially affect the Government’s
decision to pay Dartmouth.
Although Escobar was an appeal from the grant of a motion to
dismiss, see 136 S. Ct. at 1998, the discussion quoted above
addresses the evidentiary burdens that would apply at later
stages of litigation. The Court made clear, however, that
“plaintiffs must also plead their claims with plausibility and
particularity under Federal Rules of Civil Procedure 8 and 9(b)
by, for instance, pleading facts to support allegations of
materiality.” Id. at 2004 n.6.
4
Because the Johnson Paper is referred to extensively in the FAC
and attached to the FAC, it may properly be considered on a
motion to dismiss for failure to state a claim.
5
19
III. The FCA Conspiracy Claim
The FAC also alleges that the defendants conspired to
violate the FCA.
Defendants solely attack this claim on the
ground that Daugherty’s other claims fail.
Because Counts Three
and Four of the FAC survive, the motions to dismiss are denied
as to the FCA conspiracy claim in Count Five.
Conclusion
The August 10 motions to dismiss are granted as to Counts
One and Two, in part without prejudice and in part with
prejudice, as explained above.
The motions to dismiss are
otherwise denied.
Dated:
New York, New York
October 17, 2018
____________________________
DENISE COTE
United States District Judge
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