Garzione v. PAE Government Services, Inc.

Filing 30

MEMORANDUM OPINION. Signed by District Judge Anthony J Trenga on 2/25/2016. (dvanm, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Alexandria Division
UNITED STATES OF AMERICA ex rel.
ANTHONY GARZIONE,

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Plaintiff,
v.

PAE GOVERNMENT SERVICES, INC.,
Defendant.

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Civil Action No. 1: l 5-cv-833 (AJT/JFA)

MEMORANDUM OPINION

In this False Claims Act ("FCA") case, relator plaintiff Anthony Garzione alleges that
defendant PAE Government Services, Inc. ("PAE") intentionally overcharged the United States
Department of State ("DOS" or the "Government") for bottled water supplied to various
facilities in Iraq, then terminated plaintiff in retaliation for questioning the propriety of the
subcontractor selection process. PAE moves to dismiss this action pursuant to Federal Rules of
Civil Procedure l 2(b)( 6) and 9(b) on the grounds that, as alleged, it did not violate the FCA as a
matter of law and that plaintifr s investigation concerning the bidding process did not constitute
protected activity. For the reasons stated below, the Motion to Dismiss will be granted.

I. BACKGROUND
Unless otherwise noted, the following facts are as alleged in plaintiffs Amended
Complaint [Doc. No. 15] ("Comp I.").
At all material times herein, plaintiff was employed at PAE as a Program Subcontracts
Manager. In July 2013, DOS awarded PAE an "indefinite-delivery, indefinite quantity" Prime
Contract known as "SAQMMA-13-D-0120" (the "Prime Contract"). Under the Prime Contract,
PAE was to provide "life support and logistical function" at various DOS sites in Iraq, including

embassies, consulates, and Government encampments. Compl. ilil 7-8. Specifically, its
contractual responsibilities included "the procurement of food and supplies, storage, preparation,
serving, and cleaning of food facilities, among other life support and logistical duties." Id. ~ 10.
PAE selected Taylors International Services, Inc. ("Taylors") as the subcontractor to provide
food supplies in support of a program called "BAGHDAD LiFE SUPPORT SERVICES
("BLiSS") under section B. 7 of the Prime Contract. Id. il 22. Under its originally awarded
subcontract, Taylors provided a relatively small quantity of bottled water as part of its provision
of food services. Id.

il 23.

However, from July 2013 until July 2014, the Department of

Defense's Defense Logistics Agency ("DLA") provided most of the bottled water to the
Government for use at the facilities in Iraq. Id.

il 24.

During the summer of2014, DLA announced that it would cease providing bottled water
for the Iraqi sites after December 31, 2014.

Id.~

25. Following that announcement, the

Government issued a Task Order or contract modification under the Prime Contract for PAE to
provide any required bottled water not supplied by DLA and specified minimum standards for
the bottled water. Id.

il~

26-28. Around July or August 2014, PAE issued a request for bid

proposals for a limited supply of 4,000 bottles of water for quality testing from potential
subcontractors interested in obtaining the subcontract to provide the bottled water previously
supplied by DLA. Id.

il 29.

Plaintiff was not involved in issuing this request for bids.

Id.~

30.

However, "in July or August [he] was asked by Taylors's [sic] representatives what became of
the bidding process," then thereafter "investigated bottled water supplier options" and "reviewed
the bids to supply the 4,000 bottles of water from nine or so potential suppliers." Id.

ilil 30-33.

Those bids included a quoted price from Taylors of $3.65 per case of "Pearl brand water," a

2

quoted price from Pearl itself of $3 .50 per case, 1 and a quoted price from AWI of $1.18 per case.
Id.~

34.
In September 2014, PAE "submitted a response to the DOS' Task Order [to PAE]

naming Taylors as the subcontractor that would supply bottled water." Id.

~

43. PAE also issued

a "Notice to Proceed" to Taylors for the procurement of bottled water through the end of
November 2014, without a specified amount.

Id.~

38; see also [Doc. No. 19, Ex. C]. Taylors

provided bottled water under the Prime Contract in September, October, and November 2014;
Taylors billed PAE for the bottled water at $3.65 per case, and accordingly PAE filed claims
with the Government for the bottled water. Compl. ~~ 46, 48.
Plaintiff questioned PAE supervisors about Taylors' selection given that its quoted price
was higher than that offered by the other suppliers and was told that "Taylors was simply best
suited to receive the contract."

Id.~~

40-41. Thereafter, and despite PAE's already-issued

subcontract award to Taylors, plaintiff "informed his supervisor that he intended to reissue the
competition for bottled water suppliers for the longer term contract that would apply after
November 2014."

Id.~

42. Towards that end, he inquired as to the feasibility of adding Pearl as

a subcontractor and continued soliciting bottled water bids in Fall 2014 for the longer term
contract that would cover the period after November 2014, anticipated to last for up to four
years, with additional option years. Id.

~~

50, 52, 55, 70. On December 2, 2014, plaintiff

arranged to have another vendor, A WI, deliver water for testing and on December 3, 2014 issued
a Notice to Proceed to Taylors to test the water supplied by A WI. Id.

1

~~

66-67. At this point,

Paragraph 34 of the Complaint alleges that in "July or August 2014" Pearl originally quoted
PAE with a price of $3.50 per case of bottled water. Paragraph 52 alleges that Pearl's quoted
price in October 2014 was $3.60 per case. It is unclear from the Amended Complaint whether
Pearl indeed quoted a higher price in October 2014 than in "July or August 2014."
3

PAE supervisors intervened and confirmed that Taylors had been selected to supply the bottled
water for the period after November 2014 as well. Id.~ 70.
Throughout the fall of 2014, plaintiff expressed concerns over Taylors' selection because
of its price relative to other bidders. He understood, however, that "PAE had awarded the
contract through November 30 under pressure to fill the void left by the Defense Logistics
Agency stopping deliveries and accordingly, Taylors had been selected since they were the
primary subcontractor providing food services." Compl. ~~ 40, 58-60, 65, 69. Plaintiffs
supervisors originally indicated that they understood his concerns and goals, but by November
2014, they "began treating Garzione with extreme hostility."

Id.~~

61,100-25. Specifically,

PAE's Director of Iraq Operations told plaintiff to "not interfere with the bottled water contract
or other contracts."

Id.~

119. Plaintiff "reported this abusive behavior to PAE supervisors, but

they refused to address it." Id.

if 121.

Meanwhile, plaintiff continued to solicit other

subcontractors for the post-2014 contract period, and "complain[] to his supervisors" only to be
"ignored." Id.

~

69. After plaintiff "repeatedly" questioned his supervisors about the Taylors

subcontract, expressed concern as to the price of bottled water under that subcontract, and
solicited other bids, he was treated in a hostile manner at work, "exclude[d] ... from meetings
and communications," had his responsibilities removed, and was finally terminated in February
2015, purportedly based on internal performance reviews.

Id.~~

112-25.

Plaintiff originally filed his Complaint on June 30, 2015 [Doc. No. 1] and amended it on
December 8, 2015 [Doc. No. 15].2 In essence, and as discussed below, plaintiff claims that PAE
2

Pursuant to 31 U.S.C. § 3730(b)(2), this action was initially filed under seal while the
Government considered whether to intervene. On September 17, 2015, the Government filed a
"Notice of Election to Decline Intervention" [Doc. No. 2] and accordingly on September 18,
2015, the Court unsealed the case [Doc. No. 3]. On November 17, 2015, defendant filed a
Motion to Dismiss [Doc. No. 6], in response to which plaintiff filed his Amended Complaint on
4

violated the FCA when it filed claims for payment under the Prime Contract that included
requests for payment of costs incurred for bottled water supplied by Taylors and also when it
terminated him after questioning Taylors' selection.
II. STANDARD OF REVIEW
A motion to dismiss a complaint under Federal Rule of Civil Procedure 12(b)(6) should
be granted unless the complaint "state[s] a claim to relief that is plausible on its face." United

States v. Triple Canopy, 775 F.3d 628, 634 (4th Cir. 2015) (quoting Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009)); see also Bell At/. Corp. v. Twombly, 550 U.S. 544, 563 (2007). This "requires
a plaintiff to demonstrate more than 'a sheer possibility that a defendant has acted unlawfully."'

Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir. 2009) (quoting Iqbal, 556 U.S. at 678).
In considering a Rule l 2(b )(6) motion, the Court must construe the complaint, read as a
whole, in the light most favorable to the plaintiff and take the facts asserted therein as true.

LeSueur-Richmond Slate Corp. v. Fehrer, 666 F.3d 261, 264 (4th Cir. 2012). In addition to the
complaint, the Court may also examine documents "attached to the motion to dismiss, so long as
they are integral to the complaint." Philips v. Pitt Cty. Mem 'l Hosp., 572 F.3d 176, 180 (4th Cir.
2009) (citing Blankenship v. Manchin, 471 F.3d 523, 526 n.1 (4th Cir. 2006)).
The general pleading standard requires that the complaint contain "a short and plain
statement of the claim showing that the pleader is entitled to relief ... [and that] give[s] the
defendant fair notice of what the claim is and the grounds upon which it rests." Anderson v. Sara

Lee Corp., 508 F.3d 181, 188 (4th Cir. 2007) (internal quotations omitted); see also Fed. R. Civ.
P. 8(a)(2). Twombly established that the "plain statement" must "possess enough heft"-that is,
"factual matter"-to set forth grounds for the plaintiffs entitlement to relief "that is plausible on
December 8, 2015 [Doc. No. 15]. On December 28, 2015, defendant filed its Motion to Dismiss
the Amended Complaint [Doc. No. 18].
5

its face." 550 U.S. at 557, 570. The complaint must contain sufficient factual allegations that,
taken as true, "raise a right to relief above the speculative level" and "across the line from
conceivable to plausible." Walters v. McMahen, 684 F.3d 435, 439 (4th Cir. 2012) (internal
citations and quotations omitted). Put another way, the facial plausibility standard requires
pleading of "factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged." Robertson v. Sea Pines Real Estate Co., 679
F .3d 278, 287 (4th Cir. 2012) (internal quotations omitted). "A pleading that offers labels and
conclusions[,] a formulaic recitation of the elements of a cause of action ... [or] naked assertions
devoid of further factual enhancement" will not suffice. Iqbal, 556 U.S. at 678.
Thus the Court is "not bound to accept as true a legal conclusion couched as a factual
allegation." Walker v. Prince George's Cty., Md., 575 F.3d 426, 431 (4th Cir. 2009) (citations
omitted); see also Iqbal, 556 U.S. at 678 ("[T]he tenet that a court must accept as true all of the
allegations contained in a complaint is inapplicable to legal conclusions."). Accordingly, in
order to survive a Rule l 2(b)(6) motion to dismiss, the complaint must present sufficient nonconclusory factual allegations to support reasonable inferences of the plaintiffs entitlement to
relief and the defendant's liability for the unlawful act or omission alleged. Aziz v. Alco/ac, Inc.,
658 F.3d 388, 391 (4th Cir. 2011) (citations omitted).
III. ANALYSIS
In his three-count Amended Complaint, plaintiff alleges in Count I, the presentation of a
false claim in violation of31 U.S.C. §§ 3729(a)(l) and (a)(l)(A) (Compl. ~~ 126-30); in Count
II, the making or using of false records or statements to cause a claim to be paid in violation of
31 U.S.C. §§ 3729(a)(l) and (a)(l)(A)
31 U.S.C. §§ 3729-33

(id.~~

(id.~~

131-32); and in Count III, retaliation in violation of

133-41). Briefly summarized, plaintiff claims in Counts I and II
6

that PAE filed false claims when it "falsely certified" that it had complied with the requirements
of the Prime Contract and Federal Acquisition Regulations to seek payment of only "reasonable"
prices. That claim is based on the legal theory that PAE' s costs for bottled water were
necessarily not "reasonable" because it selected Taylors to provide the increased requirements
for bottled water under the Prime Contract-initially through November 2014-even though
Taylors submitted the highest bid, then extended Taylors' performance period without another
round of competitive bidding. As to Count III, plaintiff contends that he engaged in "protected
activity" when he questioned PAE's selection of Taylors for the subcontract and was unlawfully
terminated in retaliation for that protected activity.
Defendant moves to dismiss Counts I and II under Federal Rule of Civil Procedure
l 2(b)(6) on the grounds that the Amended Complaint fails to state a claim upon which relief can
be granted and under Federal Rule 9(b) on the grounds that plaintiff has failed to plead fraud
with sufficient particularity. More specifically, PAE contends that under the facts alleged, even
if accepted as true, it did not fail to comply with any alleged contractual requirement; it did not
violate any of the federal procurement regulations on which plaintiff relies; it did not "falsely
certify" any specific level of compliance, as plaintiff contends; and that in any event, it did not
act with the requisite scienter. As to Count III, defendant moves to dismiss on the grounds that
as alleged, plaintiff did not engage in "protected activity" as he must in order to bring a
retaliation claim under the FCA.

A.

Defendant's procurement responsibilities under FAR

Defendant's Prime Contract with the Government is governed by the Federal Acquisition
Regulations ("FAR"), codified at 48 C.F.R. § 31 et seq. The crux of plaintiffs Amended
7

Complaint is that PAE presented false or fraudulent claims because it included in its invoices to
the Government subcontractor costs for bottled water from Taylors without complying with two
specific provisions of the FAR: 48 C.F.R. § 52.244-5 ("FAR 52") and 48 C.F.R. §§ 31.201-2 and
-3 (collectively, "FAR 31"). 3
As a preliminary matter, it is not clear whether any of the relied-upon regulations in fact
govern, as plaintiff alleges, the award of the increased bottled water requirement. After DLA
"determined that it would no longer supply bottled water" (Compl. if 25) under the Prime
Contract, the Government issued a Task Order to PAE for increased bottled water under the
previously-awarded Prime Contract, ostensibly without any solicitation of competitive bids.
Thereafter, in September 2014, PAE directed Taylors to provide the bottled water which it had
been directed by DOS to supply under the Prime Contract. At that time, PAE had already
selected Taylors as the subcontractor "to provide food supply ... under Section B.7 of the Prime
Contract," including, by plaintiffs own admission, bottled water, albeit of a relatively small
quantity.

Id.~~

22-23. It is therefore unclear whether PAE was, in the first place, obligated to

solicit further bids from vendors other than Taylors before directing Taylors to increase its
supply of bottled water. 4

3

48 C.F .R. § 52.244-5 governs "Competition in Subcontracting" and states, in part: "The
Contractor shall select subcontractors (including suppliers) on a competitive basis to the
maximum practical extent consistent with the objectives and requirements of the contract." 48
C.F.R. § 31.201-2 governs "Determining allowability [of a cost] and states "[a] cost is allowable
only when the cost complies with all of the following requirements: (1) reasonableness ...." 48
C.F.R. § 31.201-3 governs "Determining reasonableness" and states that "[a] cost is reasonable
if, in its nature and amount, it does not exceed that which would be incurred by a prudent person
in the conduct of competitive business."

4

In this regard, the critical issue would appear to be whether PAE's "Notice to Proceed" to
Taylors "materially departed" from the scope of Taylors' initially-awarded subcontract, given
that the product was identical and only the quantity increased. See infra n.6.
8

In any event, plaintiff alleges that PAE did in fact solicit competitive bids and therefore
was required to comply with the competitive bidding regulations codified in the FAR. The
Amended Complaint alleges that PAE' s award of the initial Notice to Proceed in September
2014 was preceded by a solicitation of "nine or so" competing bids for bottled water. Id.~ 32.
Plaintiff does not allege that the Notice to Proceed was improper because of an insufficient
number of competing bids. Rather, plaintiff contends that because Taylors' price was the
highest, PAE' s selection of Taylors essentially negated any bidding process on a "competitive
basis." See [Doc. No. 22 at 16] ("the intentional selection of higher-priced equivalent options
cannot constitute 'competition' ... [because] intentionally selecting the higher-priced option
without justification is not competition within the meaning of FAR or the Prime Contract"). In
short, plaintiff points to Taylors' bid price as the basis for its claim that PAE submitted false
claims.
The regulations applicable to what is required by way of a "competitive process" and
what constitutes a "reasonable" price are general and by their terms confer a great deal of
discretion and judgment on the selecting contractor. 5 Plaintiff has not cited any authority for the
5

For example, the FAR does not define "competitive basis." But the parties appear to be in
agreement that the term should be given the meaning adopted by the Federal Circuit. See ResCare, Inc. v. United States, 735 F.3d 1384, 1388 (Fed. Cir. 2013) (defining competition as
"rivalry between two or more businesses striving for the same customers or market") (internal
citations omitted); see also Mgmt. & Training Corp. v. United States, 118 Fed. Cl. 155, 164-65
(Fed. Cl. 2013) ("The definition of 'competition' does not require unrestricted competition, but
merely that at least two contestants vie for some opportunity"). As to price, 48 C.F .R. § 31.2013(b)(2) states that "[ w]hat is reasonable depends upon a variety of considerations and
circumstances including ... [g]enerally accepted sound business practices [and] arm's length
bargaining" and FAR 15 states that normally "adequate price competition establishes a fair and
reasonable price." See also Afghan Am. Army Servs. Corp. v. United States, 90 Fed. Cl. 341, 355
(Fed. Cl. 2009) (noting that FAR 15 looks to "adequate price competition" to determine whether
costs are "fair and reasonable" and stating that "[t]he proper techniques for engaging in a
reasonableness analysis include evaluating cost elements, including the necessity for and
reasonableness of proposed costs") (internal citations omitted).
9

proposition that the highest bid constitutes an "unreasonable price" whose selection invalidates
an otherwise valid competitive bidding process. Indeed, 48 C.F.R. § 15.404-l(b)(2)(i) ("FAR
15") provides that "[n]ormally, adequate price competition establishes a fair and reasonable
price"; and one can readily imagine a wide range of relevant considerations other than the price
itself, including some which plaintiff admits he understood might apply, in determining whether
a price for supplying vital supplies in an active war zone was "reasonable," including incidental
costs to the Government and a vendor's existing presence and experience in a hostile
environment. For these reasons, the Court finds that plaintiff has not alleged facts sufficient to
make plausible his claim that PAE's selection of Taylors failed to comply with any applicable
federal bidding regulations because of its bid price.
Likewise, plaintiff has failed to allege facts to make plausible his claim that extending
Taylors' performance beyond November 2014 also violated applicable procurement regulations
because PAE did not solicit a new round of bids for that extension. Whether the extension-or
"modification"--0f the September 2014 subcontract award to Taylors constituted a new
procurement depends on whether it "materially depart[ ed] from the scope of the original
procurement." Ceradyne, Inc. v. United States, 103 Fed. Cl. 1, 13 (Fed. Cl. 2012). 6 In making
that determination, a court must analyze, among other factors, "whether the modification
substantially changes the type of product or service being delivered or performed, the quantity of
the product or service, the performance period, and the costs as between the original contract and
the modified contract." Id. at 13. "[I]f the court concludes as a matter oflaw that the
6

In Ceradyne, the Court of Federal Claims ultimately rejected the claim that a contract
modification "was a material departure from the scope of the original competition" where except
for quantity, the contract, as modified, was "identical" to the prior contract and the products
"were otherwise to be produced to the same specifications, at the same reasonable unit price, in
the same period of time." Id. at 14.
10

modification was contemplated in the original procurement and the type of work, quantity,
performance period, and costs have not been substantially changed" then the modification does
not "materially depart" from the scope of the original contract as it must in order to require a new
bidding procedure. Id. In that regard, courts have recognized that modifications to an existing
award that simply increase the quantity ordered at the same unit price do not require the
government to conduct a new competition for the increased quantity. Id.; see also AT&T

Comm 'ns v. Wiltel, Inc., 1 F.3d 1201, 1207 (Fed. Cir. 1993) (''An important factor in
determining the scope of the original competition is whether the solicitation for the original
contract adequately advised offerors of the potential for the type of changes during the course of
the contract that in fact occurred. or whether the modification is of a nature which potential
offerors would reasonably have anticipated") (internal citation omitted).
PAE's September 23, 2014 "Notice to Proceed" to Taylors confirmed that Taylors "ha[d]
been awarded the U.S. State Departments [sic] requirement for bottled water and a Modification
under Taylor's [sic] Subcontract ... with PAE will be forthcoming." [Doc. No. 19 Ex. C].
Plaintiff has not alleged facts sufficient to make plausible any claim that the modification
"materially departed" from the scope of the Taylors' initial selection in September 2014 to
satisfy PAE's increased bottled water obligation under the Prime Contract.
In any event, even if plaintiff had sufficiently alleged such facts, the Amended Complaint
fails to state a claim because it has not alleged facts that make plausible any contention that PAE
made a "false statement" in connection with the presentation of a claim. Plaintiff does not allege
any specific false statement that PAE actually made, 7 but rather relies on the "implied

7

For example, as alleged in the Amended Complaint, the Prime Contract entitled PAE to recover
its "actual incurred costs that the Contracting Officer determines is allowable under [FAR 31 ]."
11

certification" theory of liability to establish falsity. Under the rubric of that theory, plaintiff
contends that when PAE submitted invoices that included its costs for bottled water procured
from Taylors, it impliedly certified that the price paid for the bottled water was "reasonable"
when it was, in fact, not "reasonable."
In the context of the FCA, the "implied certification" theory of liability has been
recognized in various formulations. As it has taken shape within the Fourth Circuit, "a claim for
payment is false when it rests upon a false representation of compliance with an applicable
contractual term." United States v. Triple Canopy, Inc., 775 F.3d 628, 635 (4th Cir. 2015)
(internal citations and alterations omitted). "Implied certification" liability is sufficiently pled
when a party "alleges that the contractor, with the requisite scienter, made a request for payment
under a contract and withheld information about its noncompliance with material contractual
requirements." Id. at 636 (internal citations omitted). Therefore "the pertinent inquiry is
whether, through the act of submitting a claim, a payee [here, PAE] knowingly and falsely
implied that it was entitled to payment." Id. at 637.
Plaintiff has failed to sufficiently adduce facts that PAE withheld information about its
noncompliance with material contractual requirements, or any other conditions for payment.
Neither the Prime Contract nor the relevant Task Order required PAE to certify or represent as a
condition of payment that it had complied with any applicable procurement regulations
pertaining to subcontractor selection, or that Taylors' bottled water price was "reasonable."8 Nor

Compl. ~ 13. Plaintiff does not allege that PAE submitted costs that were not "actually incurred"
or otherwise submitted any invoices that were factually false.
8
Plaintiffs implied certification theory also appears to be somewhat at odds with both the terms
of the Prime Contract and the FAR. For example, as alleged in the Amended Complaint, the
Prime Contract entitled PAE to recover its "actual incurred costs that the Contracting Officer
determines is allowable under FAR 31.201-2." Compl. ~ 13. Because a cost is allowable under
FAR 31 only when it complies with the requirement of "reasonableness," it would appear that
12

is compliance with those regulations necessarily bound up with the substance of PAE's
contractual performance obligation to provide bottled water of an acceptable quality or quantity.
Cf Triple Canopy, 775 F.3d at 637-38 (holding that because a security guard's marksmanship

ability was central to the prime contractor's performance obligations, it had "impliedly certified"
compliance with that contractual obligation). Here, plaintiff points to no specific contract term
that PAE has violated. Plaintiff has therefore failed to allege facts sufficient to make plausible
his claim that PAE presented a false claim under an implied certification theory of FCA liability.

B.

Defendant's scienter as required under the False Claims Act

The Amended Complaint also fails to allege facts that make plausible any claim that PAE
acted with the requisite scienter in presenting false claims. In order to state a claim for an FCA
violation, a plaintiff must establish that there was intent on the part of the defendant to present a
false claim. 32 U.S.C. § 3729(a)(l ); U.S. ex. rel. Owens v. First Kuwaiti Gen. Trading &
Contracting Co., 612 F .3d 724, 728 (4th Cir. 2010). A plaintiff need not show "specific intent to

defraud," but at a minimum, must establish that a defendant acted with "reckless disregard of the
truth or falsity of the information." Id; see also Allison Engine Co. v. U.S. ex rel. Sanders, 553
U.S. 662, 671-72 (2008) (scienter requires "that the defendant made a false record or statement
for the purpose of getting a 'false or fraudulent claim paid or approved by the Government"')
(quoting 31 U.S.C. § 3729(a)(2)).
Given the nature of the regulations relied upon by plaintiff-including their lack of
specificity and the broad discretion afforded contractors in determining the required level of bid
competition and the "reasonableness" of a subcontract price-and regardless of whether PAE

payment is conditioned upon the Contracting Officer's determination of "reasonableness," not
PAE's "certification" of reasonableness as a condition for payment. See also FAR 15 ("The
contracting officer is responsible for evaluating the reasonableness of the offered prices").
13

complied with those regulations, plaintiff has not alleged facts that make plausible his claim that
PAE knew that its submitted costs were not "reasonable." Nor are the facts sufficient to make
plausible a claim that PAE acted in "reckless disregard of the truth or falsity" of its compliance
with applicable regulations or the "reasonableness" of its submitted costs. In sum, the Court
finds that plaintiff has failed to sufficiently allege that PAE acted with scienter in purportedly
violating the FCA, and therefore, his claims fail on this additional ground.

C.

Federal Rule 9(b)'s particularity requirement

For the above reasons, the Amended Complaint also necessarily fails to meet Rule 9(b)'s
well-established heightened pleading requirements. In addition to failing to allege that PAE
acted with the requisite scienter, plaintiff also fails to allege the "who, what, when, where and
how of the alleged fraud." Mclain v. KBR, Inc., No. 1:08-cv-499, 2014 WL 310818, at *5 (E.D.
Va. July 7, 2014) aff'd 612 Fed. App'x 187 (4th Cir. 2015). See also Harrison v. Westinghouse

Savannah River Co., 176 F .3d 776, 783-84 (4th Cir. 1999); 5 Charles Alan Wright and Arthur R.
Miller, FEDERAL PRACTICE AND PROCEDURE: Civil § 1297' "Pleading Fraud with Particularity-In
General" (3d ed. 2015). Counts I and II accordingly fail on this final independent ground.

D.

Plaintifrs retaliation claim

The Court also finds that plaintifrs retaliation claim is insufficient as a matter oflaw. In
1986, Congress amended the FCA to include an anti-retaliation provision to protect
whistleblowers. See 31U.S.C.§3730(h)(l). This provision provides a cause of action to "[a]ny
employee ... 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 ... in furtherance of an action under [the FCA]." Id. A successful claim for
retaliation under Section 3730(h) requires the plaintiff to establish three basic elements: that (1)
14

he engaged in "protected activity" by acting to prevent a violation of the FCA; (2) his employer
knew of these acts; and (3) his employer took adverse action against him as a result of these acts.
Zahodnick v. Int'l Bus. Mach. Corp., 135 F.3d 911, 914 (4th Cir. 1997). An employee must not
necessarily file a qui tam suit to engage in "protected activity." Eberhardt v. Integrated Design

& Constr., Inc., 167 F.3d 861, 867 (4th Cir. 1999). However, the whistleblower's activity "must
concern 'false or fraudulent claims,' or it is not protected activity under the FCA." Glynn v.
EDO Corp., 710 F.3d 209, 214 (4th Cir. 2013) (quoting Eberhardt, 167 F.3d at 868).
In order for activity to be "protected," "an employee's opposition to fraud [must] take[]
place in a context where 'litigation is a distinct possibility, when the conduct reasonably could
lead to a viable FCA action, or when ... litigation is a reasonable possibility."' Mann v. Heckler
& Koch Def, Inc., 630 F.3d 338, 344 (4th Cir. 2010) (quoting Eberhardt, 167 F.3d at 869). The

court in Heckler went on to explain that "[t]he distinct possibility standard is an objective one"
which requires that "protected activity relate to company conduct that involves an objectively
reasonable possibility of an FCA action ... from the perspective of the facts known by the
employee at the time of the protected conduct." Id. at 344-45. Moreover, it must be
remembered that "[c]orrecting [federal bidding] regulatory problems may be a laudable goal, but
one not actionable under the FCA in the absence of actual fraudulent conduct." Id. at 346 (citing
U.S. ex rel. Hopper v. Anton, 91 F.3d 1261, 1269 (9th Cir. 1996)); see also U.S. ex rel. Connor v.
Salina Reg'/ Health Ctr., Inc., 543 F.3d 1211, 1219 (10th Cir. 2008) (federal bidding violations
are not actionable under the FCA absent fraud). To that end, courts have recognized that, the
"distinct possibility" standard notwithstanding, "[s]imply reporting [a] concern of a mischarging
to the government to his supervisor does not suffice to establish" that a whistleblower plaintiff
was engaging in "protected activity." Lee v. Computer Sci. Corp., No. 1:14-cv-581, 2015 WL
15

778995, at *6 (E.D. Va. Feb. 24, 2015) (citing Robertson v. Bell Helicopter Textron, Inc. , 32
F.3d 948, 95 1 (4th Cir. 2010)).
Here, plain ti ff has fa iled to plead anything more than hi s subjective be lief that PAE had
expanded Taylors' subcontract in violation of applicable procu rement regulations. But as
discussed above, plaintiff has not all eged facts that make plausible that there was an "objectively
reasonable" possibility that PAE was engaged in fraudulent conduct, such that a "viab le" FCA
claim was a "dist inct possibi lity." Plaintiff therefore fai ls to suffic iently allege that he engaged
in "protected activ ity" under 3 1 U.S.C. § 3730(h). Nor has plaintiff alleged facts sufficient to
make plausible that PAE knew that plaintiff had engaged in activity intended to uncover or
prevent fraud ulent activity. At most, plaintiff alleges that he placed PAE on notice that he
disagreed with Taylors' selection and that he thought the process utili zed for that selection was
flawed and that PAE might be able to obtain a better price. In sum , the Court finds that plain ti ff
has not sufficiently alleged that he was terminated in retaliation fo r protected activ ity. 9
IV. CONCLUSION

For the above reaso ns, the Court finds and concludes that plaintiff has failed to state a
claim under the False Claim s Act, as all eged in Counts I, IT and

rr of the Amended Complaint.

Accordingly, defendant's Motion to Dismiss must be granted, and the case dismissed.
An appropriate Order will issue.

Alexandria, Vi rginia
February 25, 20 16
9

Anthony J.
United Stat

Given the above findings with respect to the fi rst two elements of plaintiffs retaliation claim,
the Court decl ines to determine whether the Amended Complaint adequately alleges a sufficient
causal connection between plaintifr s claimed protected activity and his termination.
16