USA ex rel Brandon Barrick v. Parker-Migliorini International et al
MEMORANDUM DECISION granting 35 Motion to Dismiss. Signed by Judge Dee Benson on 12/21/15. (jlw)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
UNITED STATES OF AMERICA EX REL.
MEMORANDUM DECISION AND
INTERNATIONAL, LLC; PARKER
INTERNATIONAL, INC. aka PMI FOODSUSA; COTTONWOOD TRADING, LLC;
FORTUNA FOODS, LLC; JOHN AND
JANE DOES 1-10,
Case No. 2:12-cv-00381-DB
District Judge Dee Benson
Defendants Parker-Migliorini International, LLC, Parker International Inc., Cottonwood
Trading, and Fortuna Foods, LLC have motioned for the court to dismiss the above captioned
case in its entirety pursuant to Rules 9(b), 12(b)(1), and 12(b)(6) of the Federal Rules of Civil
Procedure. (Dkt. No. 35.) On December 9, 2015, the Court heard oral argument on the motion.
At the hearing, Defendants were represented by Mark Gaylord. Plaintiff and Relator Brandon
Barrick (Barrick) was represented by James Bradshaw. At the conclusion of the hearing, the
Court took the motion under advisement. Now being fully advised, the Court renders the
following Memorandum Decision and Order.
The Amended Complaint is a declined qui tam action brought by Barrick, a former
employee of the Defendants, who is asserting three causes of action under the False Claims Act
(FCA). (Dkt. No. 21.) Barrick contends that false export certificates were obtained for U.S. beef
products which claim they were destined for Costa Rica, Honduras, and Moldova when the true
destinations were either Japan or China. (Id. at ¶ 1.)
Defendants are a global company that provide “product procurement, sales, and
logistics;” (Dkt. No. 35, p. 8–9) including supplying the needs of local wholesale markets by
offering “beef, pork, and poultry to customers throughout the world.” (Id. at 9.)
To understand Barrick’s alleged scheme, it is necessary to understand how the
exportation of meat and poultry is regulated in the United States. There are two departments
within the United States Department of Agriculture (USDA) that are responsible for overseeing
mandatory inspection of all meat products—the Food Safety and Inspection Service (FSIS) and
the USDA Agriculture Marketing Services (AMS). (Dkt. No. 21, ¶ 25.)
FSIS is responsible for inspecting meat and poultry prior to export to ensure the meat
complies with the USDA’s standards. (Id. at ¶ 27). AMS develops Export Verification, or EV,
programs to ensure meat certified for export is compliant with the specific standards of the
receiving country where the receiving country has more rigorous standards than the USDA. (Id.
at ¶ 28.)
Several countries have higher importation standards for U.S. meat than what is required
by the USDA for domestic use in the United States. Additionally, several countries have
blocked the importation of U.S. meat altogether. Relevant to Barrick’s claims, Japan bans the
importation of U.S. beef aged more than twenty months (Id. at ¶ 42(e)), Hong Kong has
historically placed strict specifications on the importation of U.S. beef (Id. at ¶ 43(a)-(h)), and
China has an absolute ban on U.S. beef importation. (Id. at ¶ 44(a).) Conversely, countries like
Costa Rica, Honduras, and Moldova have minimal requirements for the importation of U.S. beef.
(Id. at ¶¶ 49, 53.)
To export beef products from the United States, Defendants obtain export certificates
from the meat packing facility. (Id. at ¶¶ 30, 66(h).) Meat packing facilities obtain export
certificates from FSIS by undergoing a FSIS inspection. (Id. at ¶ 27.) FSIS doesn’t charge for
the inspection of meat during regular business hours as long as the receiving country has the
same or lesser inspection requirements as the USDA. (Id. at ¶ 32). If the destination country has
stricter inspection standards, like Japan, FSIS charges an hourly rate for a Voluntary Inspection.
(Id. at ¶¶ 34–36.)
The scheme alleged by Barrick involves the inspection process; specifically, how the
Defendants obtained export certificates. Barrick alleges two separate schemes:
• 1. Defendants receive an order originating in Japan. (Id. at ¶ 66).
• 2. Defendants place an order with one of a variety of meat packing facilities,
informing the facility that the destination of the meat is Costa Rica or Honduras. (Id.)
• 3. The meat receives a free inspection, pursuant to FSIS’s regulations. (Id.)
• 4. Once the export certificates are obtained, the meat is shipped to Costa Rica or
Honduras, repackaged, and then shipped to Japan. (Id.)
• 1. Defendants receive an order originating in China. (Id. at ¶ 82.)
• 2. Defendants place an order with one of a variety of meat packing facilities,
informing the facility that the destination of the meat is Moldova. (Id.)
• 3. The meat receives a free inspection, pursuant to FSIS’s regulations. (Id.)
• 4. Once the export certificates are obtained, Defendants change the shipping
manifestations to Hong Kong. (Id.)
• 5. Once the meat arrives in Hong Kong, Defendants use smugglers to traffic the
meat into China. (Id. at ¶ 83.)
Barrick contends that the loss to the government occurs when Defendants obtain a FSIS
inspection and exportation certificate for free where Defendants would be required to pay for a
FSIS inspection for countries like Japan or Hong Kong. (Id. at ¶ 59.) According to Barrick,
Defendants bear the burden of any inspection costs. (Id. at ¶ 66(h).)
On April 20, 2012, Barrick filed the original FCA complaint under seal and subsequently
provided a copy to the government so that the government could determine whether or not to
intervene. (Dkt. No. 1.) After Barrick’s disclosure to the government, the FBI obtained a search
warrant and performed an “investigation and raid” of the Defendants’ businesses. (Dkt. No. 21,
¶ 91.) On November 14, 2013, one month after the FBI raid, Barrick was terminated from his
employment. (Id. at ¶ 92.) Further, as a result of the FBI’s investigation Defendants plead guilty
to one count of violating 21 U.S.C. § 611(b)(5), a misdemeanor. (Id. at ¶ 9, n.2.)
In deciding a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil
Procedure, the Court presumes the truth of all well-pleaded facts in the complaint, but need not
consider conclusory allegations. Tal v. Hogan, 453 F.3d 1244, 1252 (10th Cir. 2006), cert.
denied, 549 U.S. 1209 (2007). The Court is not bound by a complaint's legal conclusions,
deductions and opinions couched as facts. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 565
(2007). Further, though all reasonable inferences must be drawn in the non-moving party's
favor, a complaint will only survive a motion to dismiss if it contains “enough facts to state a
claim to relief that is plausible on its face.” Id. 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.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).
Additionally, for a claim to proceed under the FCA, the plaintiff must satisfy the
heightened pleading standards of Rule 9(b) of the Federal Rules of Civil Procedure. See United
States ex rel. Lemmon v. Envirocare of Utah, Inc., 614 F.3d 1163, 1167 (10th Cir. 2010). Rule
9(b) demands that when “alleging fraud or mistake, a party must state with particularity the
circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9. “Rule 9(b) does not require that
a complaint set forth detailed evidentiary matter as to why particular defendants are responsible
for particular statements, or that the allegations be factually or legally valid. Instead, Rule 9(b)
requires that the pleadings give notice to the defendants of the fraudulent statements for which
they are alleged to be responsible.” Schwartz v. Celestial Seasonings, Inc., 124 F.3d 1246, 1253
(10th Cir. 1997) (citations omitted).
CLAIM ELIGIBILITY UNDER THE FCA
“The FCA ‘covers all fraudulent attempts to cause the government to pay out sums of
money.’” Lemmon, 614 F.3d at 1167 (citations omitted). Section 3730(b) of the FCA permits
qui tam actions, which allow an individual plaintiff to sue on behalf of the government. Once a
qui tam action is filed, the government may intervene and take over the plaintiff’s case. 31
U.S.C. § 3730(b)(2). If the government declines to intervene, the plaintiff or “relator” may
proceed while sharing any recovery with the government. 31 U.S.C. § 3730(c)(3). In this case,
on February 19, 2015, the government declined to intervene; therefore, Barrick is proceeding as
a relator under the FCA. (Dkt. No. 21, ¶ 10.)
Barrick raises three claims under the FCA. First, Barrick alleges a reverse false claim
under 31 U.S.C. § 3729(a)(1)(G). (Id. at ¶ 94–101.) Second, Barrick alleges a false claims
conspiracy under 31 U.S.C. § 3729(a)(1)(C). (Id. at ¶¶ 102–110.) Finally, Barrick alleges
Defendants fired Barrick in retaliation for his FCA reporting activities in violation of § 31 U.S.C.
§ 3730(h). (Id. at ¶¶ 111–14.).
I. Application of Rule 9(b) to Barrick’s Reverse False Claim and FCA Conspiracy Claim
Under the FCA, “any person who . . . knowingly makes, uses, or causes to be made or
used, a false record or statement material to an obligation to pay or transmit money or property to
the Government, or knowingly conceals or knowingly and improperly avoids or decreases an
obligation to pay or transmit money or property to the Government . . . is liable to the United
States Government . . . .” 31 U.S.C. § 3729(a)(1)(G). Also known as a reverse false claim, §
3729(a)(1)(G) provides a civil cause of action, which can result in a penalty per violation of the
FCA and treble damages. See 31 U.S.C. § 3729(a)(1). Additionally, § 3729(a)(1)(C) provides
for liability where a party “conspires to commit a violation of” § 3729(a)(1)(G).
Defendants provide the Court four grounds on which to dismiss all of or part of Barrick’s
reverse false claim and conspiracy claim, including failure to meet the particularity requirements
of Rule 9(b). (See generally Dkt. No. 35.) The Court finds that Barrick has failed to satisfy the
heightened pleading burden of Rule 9(b); therefore, it is unnecessary for the Court to examine
the Defendants’ alternative grounds for dismissal.
In the context of the FCA, the Tenth Circuit has held, “Rule 9(b) requires that a plaintiff
set forth the ‘who, what, when, where and how’ of the alleged fraud.” United States ex rel.
Sikkenga v. Regence Bluecross Blueshield of Utah, 472 F.3d 702, 727 (10th Cir. 2006) (citations
omitted); Lemmon, 614 F.3d at 1172 (finding the plaintiff satisfied Rule 9(b) by alleging the
who, what, when, and where of the defendant’s alleged fraud); United States ex rel. Blyn v.
Triumph Group, Inc., Case No. 2:12-cv-922, 2015 WL 5593893, at *9 (D. Utah Sept. 22, 2015).
Mere reference to a “general scheme or methodology” is insufficient to satisfy Rule 9(b). United
States ex rel. Schwartz v. Costal Healthcare Group, Inc., No. No. 99-3105, 2000 WL 1595976,
at * 6 (10th Cir. 2000) (unpublished). An FCA claim should be dismissed if the relator fails to
identify “any person, place or time when an actual false claim or other illegal activity occurred.”
Barrick cites United States ex rel. Lemmon v. Envirocare of Utah, Inc., 614 F.3d 1163
(10th Cir. 2010) and United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180 (5th Cir. 2009)
for the proposition that Rule 9(b) is relaxed under the 2009 amendments to the FCA. (Dkt. No.
39, p. 8.) The Tenth Circuit has yet to expressly adopt a relaxed application of Rule 9(b) in FCA
cases. See Lemmon, 614 F.3d at 1172. However, the Fifth Circuit has permitted FCA actions to
proceed if the plaintiff alleges the “particular details of a scheme to submit false claims paired
with reliable indicia that lead to a strong inference that claims were actually submitted.” Grubbs,
565 F.3d at 190.
The Court does not need to determine which standard is applicable to Barrick’s FCA
claims because under either standard, Barrick’s claims fail to meet the demands of Rule 9(b).
The Amended Compliant merely recites a “general scheme or methodology” whereby
Defendants allegedly avoided an obligation owing to the government. Schwartz, 2000 WL
1595976, at *6. Specifically, Barrick’s Amended Compliant fails to allege beyond generality
“who” was responsible for the alleged false statements, “when” the alleged false statements
occurred, and “how” the Defendants’ statements were fraudulent. Moreover, under the Fifth
Circuit’s relaxed application of Rule 9(b), Barrick’s allegations still fail. Barrick has not
provided the Court with any facts that would provide a “strong inference” that the Defendants
used false statements to avoid an obligation to the government.
A. Who, When, and How of Defendants’ Fraud
“Rule 9(b) requires that a complaint set forth the identity of the party making the false
statements, that is, which statements were allegedly made by whom.” Schwartz, 124 F.3d at
1253; Williams v. Martin-baker Aircraft Co., 389 F.3d 1251, 1257 (D.C. Cir. 2004) (affirming
the dismissal of an FCA case for failing to plead “who precisely was involved in the fraudulent
activity”). The Amended Complaint fails to identify, beyond sweeping generality, any
individual who made a false statement to the government. For example, Barrick alleges:
In making its order, defendants tell the meat packing facility that the product is to
be shipped, not to Japan, but to a specified facility in a sham destination country,
usually Costa Rica or Honduras;
Defendants place this order falsely specifying the destination country as Costa
Rica or Honduras.
(Dkt. No. 21, ¶ 66(d), (e).)
In making its order, defendants declare that the beef is to be shipped to a specified
destination within the Eastern European country of Moldova . . . .
(Id. at ¶ 82(c).)
Barrick’s Amended Complaint does not identify a single employee of the Defendants or
department within one of the Defendants’ entities that was responsible for one of these alleged
false statements. (See generally Dkt. No. 21.) Arguably, Defendants’ various entities are made
up of hundreds, if not thousands, of employees. At a minimum, Rule 9(b) demands that Barrick
identify the employee or employees responsible for the alleged false claims under the FCA.
Barrick alleges that “through his own efforts of reviewing, analyzing and comparing
financial records and other business documents of the [Defendants]”, Barrick was able to
discover Defendants’ fraud. (Dkt. No. 21, ¶¶ 59–60.) If Barrick had such intimate access to
Defendants’ books and records, he theoretically should be able to point to at least one transaction
where he can identify the source of the false statement. Without more specificity regarding
“who” was responsible for the alleged false statements, Barrick has failed to satisfy the
heightened pleading burden of Rule 9(b).
Rule 9(b) demands that Barrick provide the Court when, approximately, Defendants’
alleged violations of the FCA occurred. Lemmon, 614 F.3d at 1172 (upholding an FCA pleading
where “Plaintiffs documented the dates on which specific violations took place and the dates on
which payment requests were submitted”). Barrick alleges that from 2004 to 2012, Defendants
shipped “banned U.S. beef products” into Japan and China while purposefully avoiding FSIS
inspection fees. (Dkt. No. 21, ¶¶ 65, 76, 81.) Barrick’s general allegations of the timing of
Defendants’ illicit activity are insufficient under Rule 9(b). Barrick’s eight-year time frame
potentially implicates a multitude of transactions and fails to place Defendants’ on notice of
Barrick’s allegations. See Schwartz, 124 F.3d at 1253; Sikkenga, 472 F.3d at 726–27.
Rule 9(b) also requires Barrick to provide the Court “well-pleaded facts” alleging
fraudulent conduct that goes beyond “conclusory allegations.” Sikkenga, 472 F.3d at 726; United
States ex rel. Ellsworth v. United Bus. Brokers of Utah, LLC, No. 2:09-cv-353, 2011 WL
1871225, at *3 (D. Utah May 5, 2011). Specifically, Barrick “must provide [the Court] details
regarding how the alleged conduct was fraudulent and the content of the fraudulent conduct . . .
.” Ellsworth, 2011 WL 1871225, at *3 (emphasis in original). In Ellsworth, this Court
dismissed an FCA claim where the plaintiff failed to allege the “content” of the false statements
allegedly submitted to the government. Id. The Court noted that merely reciting that the
defendant submitted a “false statement” was insufficient under Rule 9(b). Id.
Like the plaintiff in Ellsworth, Barrick has failed to identify the content of the false
statements allegedly submitted to the government. Barrick merely uses conclusory statements
that Defendants have been shipping “banned U.S. beef products” into Japan and China since
2004. (Dkt. No. 21, ¶¶ 65, 76, 81.) Barrick doesn’t identify the specific type of beef shipped,
the quantity of beef shipped, or why FSIS would consider the beef ineligible for importation by
Hong Kong or Japan. Simply reciting the conclusion Defendants shipped “banned U.S. beef” is
insufficient to provide Defendants’ the type of notice demanded by Rule 9(b).
Further, Barrick fails to show the Court how Defendants’ alleged misrepresentations were
fraudulent. See Ellsworth, 2011 WL 1871225, at * 4 (noting, “rather than using conclusory
statements that the financial representations were fraudulent, the court needs details showing
how the representations were fraudulent”). For example, if Defendants truthfully disclosed the
true country of origin as Japan or Hong Kong (or China), the Court is left wondering what
obligation was fraudulently avoided. When an export certificate is requested, can FSIS
determine based on the information provided that beef is ineligible for shipment to Japan or
Hong Kong, deny the application, and therefore the Defendants never incur a FSIS inspection
fee? Barrick has failed to plead facts with particularity that describe how the Defendants’
alleged scheme results in a fraudulent avoidance of an obligation owed to the government.
B. Indicia of Reliability Standard
The Fifth Circuit has noted that the “‘time, place, contents, and identity’ standard is not a
straitjacket for Rule 9(b). Rather, the rule is context specific and flexible and must remain so to
achieve the remedial purpose of the False Claim Act.” Grubbs, 565 F.3d at 190. In doing so, the
Fifth Circuit held that an FCA complaint could survive a Rule 9(b) challenge “by alleging
particular details of a scheme to submit false claims paired with reliable indicia that lead to a
strong inference that claims were actually submitted.” Id. (emphasis added). Even if the Court
were to entertain the Fifth Circuit’s relaxed application of Rule 9(b), Barrick’s claims still fail to
plead with fraud particularity.
In Grubbs, the plaintiff alleged that the defendants disclosed to him their fraudulent
billing scheme for billing patient visits that never actually occurred and “instructed him on how
he was to contribute to the scheme.” Id. at 184. The plaintiff was able to point to specific
conversations he had with the defendants, the nursing staff, and the hospital administrator
regarding alleged improper billing. Id. In finding the plaintiff survived Rule 9(b), the Grubbs
The complaint sets out the particular workings of a scheme that was
communicated directly to the relator by those perpetrating the fraud. Grubbs
describes in detail, including the date, place, and participants, the dinner meeting
at which two doctors in his section attempted to bring him into the fold of their
on-going fraudulent plot. He alleges his first-hand experience of the scheme
unfolding as it related to him, describing how the weekend on-call nursing staff
attempted to assist him in recording face-to-face physician visits that had not
occurred. Also alleged are specific dates that each doctor falsely claimed to have
provided services to patients and often the type of medical service or its Current
Procedural Terminology code that would have been used in the bill.
Id. at 191–92 (emphasis added).
Unlike Grubbs, Barrick is unable to point to specific facts that show the Court he had
“first-hand experience of the [Defendants] scheme as it related to him.” Id. Barrick does not
identify specific conversations he had with the Defendants’ employees that lead him to discover
Defendants’ fraud. (See generally Dkt. No. 21.) Barrick cannot point to particular reports or
documents that form the basis of his theory that Defendants used false statements to avoid an
obligation to the government. (Id.) Moreover, as aforementioned, Barrick fails to point to dates,
places, and participants in Defendants’ alleged fraud.
Barrick contends that the Defendants’ guilty plea, coupled with Barrick’s general
allegations, is sufficient under Rule 9(b). (Dkt. No. 39, p. 13.) In the Amended Complaint,
Barrick notes that Defendants plead guilty to one count of violating 21 U.S.C. § 611(b)(5). (Dkt.
No. 21, ¶ 9, n.2.) However, Defendants’ guilty plea is insufficient to cure Barrick’s deficient
pleading. Defendants’ statement in advance of plea merely recites, generally, how the
Defendants’ committed a single violation of § 611(b)(5) by altering the country of destination on
a shipper’s certificate. (Dkt. No. 39-1, p. 3.) The guilty plea does not confirm Barrick’s theory
that Defendants knowingly misinformed their meat packing facilities of the meat’s destination
country in order to avoid FSIS inspection fees. (Dkt. No. 21, ¶¶ 66, 82.)
In short, Barrick provides a theory as to how Defendants avoided an obligation to the
government; however, facts—not theories—make lawsuits. Therefore, the Court finds that
Barrick’s claims under § 3729(a)(1)(G) and § 3729(a)(1)(C) are dismissed without prejudice
pursuant to Rule 9(b). Further, the Court expresses serious reservations as to whether the
Amended Complaint satisfies even the Rule 8 pleading standard, but finds it is unnecessary to
reach Rule 8 considering the Court’s application of Rule 9.
II. Barrick’s FCA Retaliation Claim
The FCA’s anti-retaliation provision provides relief to any employee who:
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 [the FCA].
31 U.S.C. § 3730(h)(1) (emphasis added). To sustain a claim under § 3730(h), a whistleblower
or employee must “plausibly allege facts showing that: (1) the employee engaged in protected
activity; (2) the employer received notice of the employee’s protected activity; and (3) the
employer discriminated against or discharged the employee for engaging in protected activity.”
United States ex rel. Feaster v. Dopps Chiropractic Clinic, LLC, No. 13-1453-EFM-KGG, 2015
WL 6801829, at *7 (D. Kan. Nov. 5, 2015). 1
In 2009, the FCA’s anti-retaliation provision was amended. See The Fraud Enforcement and
Recovery Act of 2009, Pub. L. 111-21, § 3730, 123 Stat. 1617, 1624–25 (2009). The Tenth Circuit has
To adequately plead notice, Barrick is required to provide the Court “‘facts which would
demonstrate that [D]efendants had been put on notice that [Barrick] was either taking action in
furtherance of a qui tam action or assisting in an FCA action brought by the government.’”
Sikkenga, 472 F.3d at 729 (citations omitted); McBride v. Peak wellness Ctr., Inc., 688 F.3d 698,
704 (10th Cir. 2012); Feaster, 2015 WL 6801829, at *7. “Notice may be provided in a number
of ways: for example, by informing the employer of ‘illegal activities’ that would constitute
fraud on the United States, . . . by warning the employer of regulatory noncompliance and false
reporting of information to a government agency, . . . or by explicitly informing the employer of
an FCA violation.” McBride, 688 F.3d at 704 (citations omitted).
The Amended Complaint alleges that the FBI conducted a raid of the Defendants’
business based on the information provided by Barrick and, one month later, Barrick was
terminated form his employment. (Dkt. No. 21, ¶¶ 91–92.) While the timing of Barrick’s
termination is suspect, the FCA demands that the Defendants be on notice of Barrick’s protected
activity to engage in retaliation within the meaning of § 3730(h). The Amended Complaint fails
to allege that the Defendants had notice of Barrick initiating an FCA action. (Id.) Therefore,
Barrick’s § 3730(h) retaliation claim is dismissed pursuant to Rule 12(b)(6) without prejudice for
failure to state a claim on which relief may be granted.
yet to interpret the new language found in § 3730(h). However, the plain language of § 3730(h) suggests
that the FCA still requires the employer be on notice of the employee’s protected activity. See Feaster,
2015 WL 6801829 at *7. Section 3730(h) forbids retaliation when an employee engages in an act that is
in “furtherance of an action” under the FCA. 31 U.S.C. § 3730(h). To prove retaliatory motive, §
3730(h) demands that the employee be terminated “because of lawful acts” performed by the employee
under the FCA. Id. By definition, Defendants must be on notice that Barrick is the source of the FCA
complaint for the Defendants to be liable for retaliating against Barrick.
Barrick’s claims under § 3729(a)(1)(G) and § 3729(a)(1)(C) of the FCA are dismissed
without prejudice pursuant to Rule 9(b). Barrick’s § 3730(h) retaliation claim is dismissed
without prejudice pursuant to Rule 12(b)(6). Defendants’ motion to dismiss is GRANTED.
Dated: December 21, 2015.
BY THE COURT:
United States District Judge
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