United States of America et al v. Washington Closure Hanford LLC et al

Filing 267

ORDER RULING ON PENDING DISMISSAL MOTIONS AND OTHER MOTIONS, AND AMENDING THE CASE CAPTION granting in part and denying in part 183 Motion to Dismiss; granting in part and denying in part 185 Motion to Dismiss for Failure to State a Claim; gran ting in part and denying in part 193 Motion to Bifurcate; denying 194 Motion to Dismiss for Failure to State a Claim; granting in part and denying in part 195 Motion to Dismiss for Failure to State a Claim; denying 196 Motion to Dismiss for Failure to State a Claim; granting in part and denying in part 198 Motion to Dismiss for Failure to State a Claim. Signed by Senior Judge Edward F. Shea. (AY, Case Administrator)

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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WASHINGTON

4
5
6
7

UNITED STATES OF AMERICA, ex rel.,
SALINA SAVAGE, SAVAGE LOGISTICS,
LLC,

v.

9
10
11
12
13
14

ORDER RULING ON PENDING DISMISSAL
MOTIONS AND OTHER MOTIONS, AND
AMENDING THE CASE CAPTION

Plaintiffs,

8

No. CV-10-5051-EFS

WASHINGTON CLOSURE HANFORD LLC;
FEDERAL ENGINEERS AND
CONSTRUCTORS, INC.; PHOENIX
ENTERPRISES NW, LLC; DENNIS
HOUSTON; BERNIE LAVERENTZ; JONETTA
EVERANO; DOES I-V; PHOENIX-ABC
JOINT VENTURE; ACQUISITION
BUSINESS CONSULTANTS; JESSICA
MORALES; SAGE TEC LLC; and LAURA
SHIKASHIO,

15
Defendants.
16
17
The old proverb, “It’s not what you know but who you know,” is
18
at the heart of the assertions brought by the United States’ and the
19
Relators

Salina

Savage

and

her

business

Savage

Logistics.

The

20
Plaintiffs allege that Defendants took their personal connections a
21
step too far in order to gain a financial benefit, i.e., Defendants
22
reached agreement amongst themselves to establish a façade of small,
23
disadvantaged businesses that applied for, and were awarded small24
business government contracts by the prime contractor while the work
25
under the contracts was actually performed by a large business rather
26
ORDER - 1

1

than

the

small

business.

2

benefitted from this arrangement: the “façade” small business (PENW,

3

Phoenix-ABC,

4

performing the vast majority of the work; the larger subcontractor

5

(FE&C) whom performed the work was able to perform paid work on a

6

project that it otherwise would have been unable to be awarded; and

7

the prime contractor (WCH) reported to the United States that it

8

subcontracted a greater portion of its work to small, disadvantaged

9

businesses

and

then

Sage

it

Tec)

truly

All

was

did,

involved

awarded

thereby

businesses

the

financially

subcontract

satisfying

its

without

small,

10

disadvantaged business set-aside obligations under its contract with

11

the United States and statutory and regulatory law.

12

One may ask what is the harm of encouraging small businesses to

13

partner with larger businesses on complicated government projects? The

14

United States and the Relators assert that harm arises when the true

15

nature and purpose of the business arrangement is undisclosed, thereby

16

causing the awarded contract and related invoicing to be based on

17

false misrepresentations to the United States.

18

façade business arrangements violate the letter and spirit of the

19

Small Business Act:

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21
22
23
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25
26

Further, here, the

The essence of the American economic system of private
enterprise is free competition. Only through full and free
competition can free markets, free entry into business, and
opportunities for the express and growth of personal
initiative
and
individual
judgment
be
assured.
The
preservation and expansion of such competition is basic not
only to the economic well-being but to the security of this
Nation.
Such security and well-being cannot be realized
unless the actual and potential capacity of small business
is encouraged and developed. It is the declared policy of
the Congress that the Government should aid, counsel,
assist, and protect, insofar as is possible, the interests
of small-business concerns in order to preserve free
ORDER - 2

competitive enterprise, to insure that a fair proportion of
the total purchases and contracts or subcontracts for
property and services for the Government (including but not
limited to contracts or subcontracts for maintenance,
repair, and construction) be placed with small-business
enterprises, to insure that a fair proportion of the total
sales of Government property be made to such enterprises,
and to maintain and strengthen the overall economy of the
Nation.

1
2
3
4
5
6

15 U.S.C. § 631.

7

allege that Defendants not only contravened the Small Business Act but

8

in so doing made false and fraudulent misrepresentations that caused

9

financial

10

harm

In this lawsuit, the Relators and the United States

to

the

United

States,

thereby

violating

the

False

Claims Act, 31 U.S.C. §§ 3729-3733.
A hearing occurred in the above-captioned matter on August 14,

11
12

2014.1

13

Washington Closure Hanford (WCH) and Dennis Houston’s (collectively,

14

“WCH Defendants”) Motion to Dismiss Relator’s Third Amended Complaint,

15

ECF

16

Phoenix-ABC A Joint Venture (“Phoenix-ABC”), and Jonetta Everano’s

17

(collectively, “PENW Defendants”) Motion to Dismiss Plaintiffs’ Third

18

Amended Complaint, ECF No. 185; 3) WCH Defendants’ Motion to Dismiss

19

the

20

Defendant Federal Engineers & Constructors, Inc. (FE&C) and Bernie

No.

Before

183;

United

2)

the

Court

Defendants

States’

were

several

Phoenix

Complaint

in

motions:

Enterprises

Intervention,

1)

Defendants

Northwest

ECF

No.

(PENW),

194;

4)

21
1

22
23
24
25
26

Tyler Tornabene and Vanessa Waldref appeared on behalf of the
United States of America, while Bruce Babbitt appeared on behalf of
Relator Salina Savage, who was present, and Relator Savage Logistics.
Attorneys present for Defendants were Marisa Bavand (Washington
Closure Hanford and Dennis Houston), Mark Bartlett (Federal Engineers
and Constructors and Bernie Laverentz), Tyler Storti (Phoenix
Enterprises Northwest, Phoenix-ABC A Joint Venture, and Jonetta
Everano), Shea Meehan (Acquisition Business Consultants and Jessica
Morales), and Bradford Axel (Sage Tec and Laura Shikashio).
ORDER - 3

1

Laverentz’s

2

Relators Third Amended Complaint, ECF No. 195; 5) FE&C Defendants’

3

Motion

4

Claims, ECF No. 196; 6) Defendants’ Acquisition Business Consultants,

5

Inc.

6

Motion to Dismiss Plaintiffs’ Third Amended Complaint, ECF No. 198;

7

and

8

Intervened Claims and to Further Bifurcate Non-Intervened Claims, ECF

9

No. 193.2 After hearing from counsel and reviewing the record and

10

relevant legal authority, the Court is fully informed. For the reasons

11

set forth below, the Court denies Defendants’ motions to dismiss the

12

United States’ claims, denies the Defendants’ motions to dismiss the

13

Relators’ FCA claims relating to the IU2&6 Projects against WCH, FE&C,

14

and PENW, and the Phoenix-ABC HUBZone contracts against WCH, FE&C,

15

PENW, Phoenix-ABC, and ABC, grants the Defendants’ motions to dismiss

16

the Relator’s other FCA and state-law claims, and grants Defendants’

17

request to bifurcate the United States’ claims from the Relators’

18

claims, with the United States’ claims proceeding to trial first.

19

///

20

///

21

///

22

///

23

//

to

(collectively,

Dismiss

(ABC)

7)

WCH

and

the

Jessica

Defendants’

“FE&C

United

States’s

Morales’

Motion

Defendants”)

Truck

Motion

and

(collectively,

to

Bifurcate

Pup

“ABC

to

Dismiss

Subcontract

Defendants”)

Intervened

and

Non-

24
2

25
26

The Sage Tec Defendants joined the other Defendants’ motions

to dismiss. ECF No. 197.

ORDER - 4

1

/

2

A.

Background3
The U.S. Department of Energy (DOE) manages and oversees clean-

3
4

up of nuclear waste at the Hanford nuclear reservation.

5

¶¶ 3.3 & 6.2.

6

many

7

nuclear experiments and manufacture equipment were built in close

8

proximity to the Columbia River and therefore there is a concern that

9

nuclear waste is contaminating the Columbia River and the groundwater.

10

of

the

ECF No. 157

Clean-up of the nuclear waste is a critical mission as
Hanford

Site

reactors

and

buildings

used

to

conduct

Id. ¶ 6.3.

11

In 2005, as part of the restoration and cleanup effort, DOE

12

awarded the River Corridor Closure (RCC) Contract, Contract No. DE-AC-

13

6-05RL 14655, to Washington Closure Hanford (WCH), a large business

14

owned

15

Companies, Ltd. ECF No. 168 ¶ 3.12; ECF No. 157 ¶¶ 3.5 & 6.4. The RCC

16

Contract was a multi-billion dollar, ten-year, cost-plus-incentive-fee

17

prime contract, which reimbursed WCH for its incurred material and

18

labor costs. ECF No. 157 ¶¶ 6.6 & 6.7. The United States paid WCH

19

through

20

reimbursement

21

incentive

by

URS

a

Corporation,

DOE-funded

fees

of

its
in

line

Bechtel

of

incurred

excess

of

National,

credit

from

allowable
its

Inc.,

which

costs.

incurred

and

WCH
Id.

costs

CH2M

drew
WCH

through

Hill

down
earned
cost-

22
3

23
24
25
26

The "background" section is based on the factual allegations

contained in the Relator’s Third Amended Complaint, ECF No. 168, and
the United States’ Complaint, ECF No. 157, which are assumed true at
this time, see Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009).

ORDER - 5

1

performance incentive fees and schedule-performance incentive fees.

2

Id. As of December 2013, WCH had claimed and received $85,670,945 in

3

incentive fees from the United States under the RCC Contract. Id. ¶

4

6.8.

5

1.

6

To

Subcontracting by WCH
the

RCC

7

Contract, WCH subcontracted much work to FE&C, a large business.

ECF

8

No.

9

businesses, such as FE&C, WCH was statutorily required to engage in

168

assist

¶

it

3.13.

with

In

completing

addition

work

to

required

subcontracting

under

work

to

large

10

good-faith efforts to subcontract work to small businesses.4

11

as a condition to being considered for the RCC Contract, WCH submitted

12

its Small Business Subcontracting Plan (“Subcontracting Plan”) to DOE,

13

in

14

businesses,

15

disadvantaged small businesses, consistent with the Small Business

which

WCH

established

including

goals

woman-owned

to

subcontract

small

work

businesses

In fact,

to

small

and

other

16
4

17
18
19
20
21
22
23
24
25

The WCH’s prime contract included the following language, as set

forth in 15 U.S.C. § 637(d)(1):
It is the policy of the United States that small business
concerns, small business concerns owned and controlled by
veterans, small business concerns owned and controlled by
service-disabled veterans, qualified HUBZone small business
concerns, small business concerns owned and controlled by
socially and economically disadvantaged individuals, and
small business concerns owned and controlled by women,
shall
have
the
maximum
practicable
opportunity
to
participate in the performance of contracts let by any
Federal agency, including contracts and subcontracts for
subsystems, assemblies, components, and related services
for major systems.
See ECF No. 157 ¶ 5.7.

26
ORDER - 6

1

Act,

2

52.219-8 and 52.219.9. ECF No. 168 ¶¶ 4.1 & 4.2; ECF No. 157 ¶¶ 5.8 &

3

6.9. In the Subcontracting Plan, WCH identified categories of projects

4

for small businesses, including soils excavation and backfill.

5

No. 168 ¶ 4.2.

6

constitute a material breach of the RCC Contract and could impose WCH

7

to liquidated damages and reduced incentive-fee payments. ECF No. 157

8

¶¶ 5.11, 6.10, & 6.11; ECF No. 168 ¶ 4.5.

9

15

U.S.C.

§

637,

and

Federal

Acquisition

Regulations

(FAR)

ECF

A failure to abide by the Subcontracting Plan could

Accordingly,

there

were

financial

incentives

for

WCH

to

10

subcontract work to small, disadvantaged businesses. Yet, FE&C desired

11

to be awarded work as well. Therefore, beginning in 2009, Bernie

12

Laverentz as FE&C’s Vice President, and WCH’s Contracting Officer

13

Dennis

14

(facades) for FE&C, whereby a façade small business would be awarded a

15

small,

16

perform the subcontracted work and thereby financially profit from the

17

work. ECF No. 168 ¶¶ 3.10 & 7.1. WCH benefitted from its favored

18

relationship with FE&C and the façade small businesses as it would be

19

able to report to DOE that it met its Subcontracting Plan small-

20

business requirements and therefore avoid up to a $9 million penalty,

21

while at the same time receive incentive fees. Id. ¶¶ 1.5 & 3.10.

Houston

agreed

disadvantaged

to

work

business

toward

setting

subcontract

by

up

WCH

front

but

companies

FE&C

would

22

The first two small businesses that Mr. Laverentz approached

23

declined to serve as facades for FE&C. Id. ¶¶ 7.2-7.7. Mr. Laverentz

24

then approached Jonetta Everano, who had been a WCH employee from

25

2004-2007 and thereafter was an FE&C employee. Id. ¶ 3.7.

26

agreed to begin a small business, which she named Phoenix Enterprises
ORDER - 7

Ms. Everano

1

NW, LLC (PENW), which would apply for RCC small-business subcontracts.

2

Id. ¶ 3.14. PENW was owned 51% by Ms. Everano and 49% by FE&C. Id. ¶¶

3

7.2-7.7; ECF No. 157 ¶ 6.14. Ms. Everano, who remained a full-time

4

employee of FE&C, did not invest money in PENW but rather FE&C loaned

5

most of the 51% interest to Ms. Everano out of PENW’s future earnings.

6

ECF No. 168 ¶¶ 7.8, 7.14, & 7.19. PENW had no assets, address, or

7

telephone number.

8

2.

Truck and Pup Subcontract

9

In April 2009, WCH solicited requests for proposal (RFP) for the

entailed transporting direct-loaded bulk materials from 100 Area Waste

12

Sites to the Environmental Restoration Disposal Facility.

13

¶¶ 7.10 & 7.15; ECF No. 157 ¶ 6.13 (RFP number R009166A00).

14

noted

15

disadvantaged small businesses, were eligible to bid on, be awarded,

16

and perform the work.

17

2009, PENW submitted a proposal for the Truck and Pup Subcontract.

18

Through this process, Ms. Everano certified that PENW was a small,

19

woman-owned business eligible to compete for this small, disadvantaged

20

business subcontract.

22

Salina

Subcontract

the

under

subcontract

Savage,

the

was

a

RCC

project

11

that

Pup

The

Truck

21

and

Contract.5

10

“set

aside,”

ECF No. 168
This RFP

meaning

only

ECF No. 168 ¶ 7.15; ECF No. 157 ¶ 6.13. In May

ECF No. 157 ¶ 6.14; ECF No. 168 ¶ 7.20.
the

owner

and

principal

officer

of

Savage

Logistics, LLC, filed a protest with the Small Business Administration

23
5

24
25
26

WCH delayed the posting of the Truck and Pup Subcontract until

PENW completed its “small, woman-owned business” formation documents.
ECF No. 168 ¶ 7.38.

ORDER - 8

1

(SBA) contending that PENW was not a small business because of its

2

affiliation with FE&C and therefore not eligible to compete for the

3

Truck and Pup Subcontract.6 ECF No. 168 ¶¶ 3.1 & 7.24; ECF No. 157 ¶

4

6.15.

5

awarded

6

subcontract into its Costpoint accounting system as a small-business

7

award. ECF No. 168 ¶ 7.23; ECF No. 157 ¶¶ 6.15 & 6.17.

Notwithstanding the pending SBA protest, in June 2009, WCH
PENW

the

Truck

and

Pup

Subcontract

and

entered

this

8

Approximately ten days later, the SBA determined that PENW was

9

not eligible for the Truck and Pup Subcontract because it was not a

10

small, woman-owned business given its affiliation with FE&C. ECF No.

11

157 ¶ 6.16; ECF No. 168 ¶¶ 7.8 & 7.24. Notwithstanding the SBA’s

12

determination, WCH proceeded to award the Truck and Pup Subcontract to

13

PENW, but it advised DOE that it would not claim any small-business

14

credit for the Truck and Pup Subcontract, and WCH removed the Truck

15

and Pup Subcontract as a small-business award in its Costpoint system.

16

ECF No. 157 ¶ 6.18; ECF No. 157 ¶ 6.17; see also ECF No. ¶¶ 7.25 &

17

7.33. Based on the assurance that WCH would not take small-business

18

credit for the Truck and Pup Subcontract, DOE permitted the Truck and

19
6

20
21
22
23
24
25
26

Because Ms. Savage filed a protest with the Small Business

Administration regarding PENW, WCH threatened Ms. Savage that it would
not award Savage Logistics any subcontracts to perform work at the
Hanford site if she brought forward claims that WCH wrongfully awarded
subcontracts;

WCH

has

failed

to

award

any

subcontracts

to

Savage

Logistics since her challenge to the award of the Truck and Pup
Subcontract to PENW. ECF No. 168 ¶¶ 1.13 & 7.26-28.

ORDER - 9

1

Pup Subcontract to PENW to stand even though the subcontract had not

2

been competitively bid to large businesses as well.7 ECF No. 157 ¶

3

6.17; ECF No. 168 ¶ 7.35. Not only did PENW benefit from being awarded

4

a contract that was not competitively bid, but PENW also obtained

5

“insider” information from WCH and FE&C regarding the length of the

6

hauling contract and therefore was able to bid a lower price than

7

Savage Logistics, which was not privy to this information when it

8

prepared its proposal. ECF No. 168 ¶ 7.37.

9

Modifications totaling over $2 million were later made to the

10

Truck and Pup Subcontract. With full knowledge that PENW was not a

11

small business for purposes of the Truck and Pup Subcontract, WCH

12

awarded

13

without a competitive bidding process and treated these subcontract

14

modifications as small-business subcontracts on its semi-annual small

15

business

16

submitted to DOE in support of its contractual requirements regarding

this

Truck

and

subcontract

Pup

Subcontract

reports

and

modification

balanced

work

scorecards

to

that

PENW

WCH

17
7

18
19
20
21
22
23
24
25
26

WCH’s tactical decision to initially solicit bids for a small-

business subcontract and then later change the designation of the
subcontract
businesses

to
to

a

non-restricted

compete

for

the

subcontract
Truck

and

did
Pup

not

permit

large

Subcontract,

which

resulted in higher bids and corresponding financial loss to the United
States.

ECF

No.

168

¶

8.7;

see

also

15

U.S.C.

§

632(w)(1)

(Presumption of loss to the United States when a business other than a
small business willfully sought and received a small-business award by
misrepresentation).

ORDER - 10

1

the Subcontracting Plan. As a result of reporting these modifications

2

as small-business subcontracts to DOE, WCH received incentive fees for

3

its small-business subcontracts. ECF No. 157 ¶¶ 6.18-6.21 (see ¶ 6.21

4

for chart identifying specific Truck and Pup Subcontract modifications

5

which were awarded to PENW and treated by WCH as subcontracts to

6

small, woman-owned business, totaling almost $3 million). Furthermore,

7

WCH knowingly claimed payment from DOE for Truck and Pup Subcontract

8

work under the small-business classification. ECF No. 157 ¶¶ 6.22 &

9

7.33 (detailing monthly invoices).

10

During the work for the awarded Truck and Pup Subcontract and

11

the modifications thereto, PENW and FE&C submitted billing invoices to

12

WCH;

13

business. ECF No. 168 ¶ 7.40.

these

billing

invoices

represented

that

PENW

was

a

small

14

3.

15

In approximately May 2009, WCH advertised a project set aside

16

for small, disadvantaged businesses: the Remedial Action of the 100 IU

17

2 and 100 IU 6 Waste Sites (“100 IU2&6”). ECF No. 168 ¶ 7.46. During

18

Ms. Savage’s SBA size protest of PENW, WCH canceled the procurement

19

for the 100 IU2&6 Project, but then proceeded to hold a site visit on

20

the cancelled 100 IU2&6 Project.

21

100 IU2&6 Project

Id. ¶¶ 7.46 & 7.47.

Thereafter, WCH re-advertised the small, disadvantaged business

22

subcontract

23

attended the site visit on the canceled procurement, which included

24

PENW but not Savage Logistics. Id. ¶ 7.47. The contract for the 100

25

IU2&6 Project (contract #C011535AOO) was awarded to PENW on September

26

23, 2009, with knowledge by WCH that PENW was not a small, woman-owned
ORDER - 11

for

the

100

IU2&6

Project,

but

only

to

bidders

who

1

business, nor in a legal mentor-protégé relationship with FE&C, but

2

rather merely serving as a façade for FE&C. Id. ¶ 7.49. Work, which

3

was

4

performed on the 100 IU2&6 Contract, and related modifications, until

5

March 2011. Id. ¶ 7.53. In relation to this work, PENW submitted

6

invoices and documents to WCH to receive payment under the small-

7

business

8

payments from DOE for the small-business subcontract. Id. ¶ 7.53.

9

predominantly

On

done

subcontract,

September

1,

by

and

FE&C,

WCH

2009,

in

WCH

totaling

turn

sent

considered

over

$15

invoices

whether

million

and

was

received

hauling

work

10

related to the 100 IU2&6 Project could be sole-sourced to PENW rather

11

than bid out for competition. Id. ¶ 7.54.

12

signed a Non-Competitive (Sole Source) Justification Form, under FAR

13

52.244-2, for the 100 IU2&6 Project, contending that the schedule for

14

the 100 IU2&6 Project was in jeopardy and therefore a sole-source

15

contract to PENW for the related hauling was necessary. ECF No. 168 ¶¶

16

7.55-7.57. The form prepared by WCH, stated:

17
18
19
20

On April 22, 2010, WCH

PENW is a small, disadvantaged, woman owned business with
proven performance, safety and quality programs; and the
experience required for the described services on this
project. In May 2009, PENW was awarded a competitively bid
WCH transportation subcontract and over the past 12 months
has developed a mature safety culture while performing this
scope for WCH at several remedial waste sites (100H, 100D,
and IU2&6).

21
ECF No. ¶ 7.59. WCH then took credit under its Subcontracting Plan
22
with DOE for the IU2&6 Project: the initial IU2&6 Contract, the sole23
source IU2&6 hauling contract, and modifications thereto (100-C-7 for
24
Concrete Removal, 600 149 UXO and PU Vault Demolition, and 100 D & H),
25
as awards to a small, woman-owned business, with full knowledge that
26
ORDER - 12

1

PENW was not a small, disadvantaged woman-owned business. ECF No. 168

2

¶¶ 7.62-72; ECF No. 157 ¶ 7.2 (listing dates and contracts upon which

3

WCH falsely claimed that PENW was a small business to DOE) & ¶ 7.4.

4

Because of WCH’s false representations regarding PENW, the United

5

States,

6

otherwise would not have. ECF No. 157 ¶ 7.5.

7

4.

8

through

In

DOE,

paid

money

under

the

RCC

Contract

that

it

Phoenix-ABC A Joint Venture
the

summer

of

2010,

PENW

began

a

joint

venture

with

9

Acquisition Business Consultants (ABC): Phoenix-ABC A Joint Venture

10

(“Phoenix ABC”). ECF No. 168 ¶¶ 3.17 & 7.76. ABC was started by

11

Jessica Morales in 2009 and was initially headquartered in Wasilla,

12

Alaska. Id. ¶¶ 3.15 & 3.16.

13

Phoenix-ABC sought to qualify as a HUBZone contractor so that it

14

could compete for HUBZone subcontracts at Hanford,8 and participate in

15

the WCH mentor-protégé program. However, neither PENW nor ABC nor

16

Phoenix-ABC qualified as a HUBZone business. Id. ¶¶ 7.74-7.77. In

17
8

18
19
20
21
22
23
24
25
26

The Small Business Reauthorization Act of 1997 created the HUBZone

program, whereby a subcontract set aside for a HUBZone small business
can be awarded to a contractor who qualifies as a HUBZone contractor.
13

C.F.R.

§

126.200.

WCH’s

Subcontracting

Plan

incorporated

FAR

52.219-9(e)(4), which requires WCH to confirm that a subcontractor,
which represents itself as a HUBZone small business, is listed as a
HUBZone small business on the Central Contractor Registration database
or by contacting the Small Business Administration.
6.4.

ORDER - 13

ECF No. 168 ¶

1

addition, neither PENW nor ABC had been in business for at least two

2

years, a requirement of the mentor-protégé program.9 Id. ¶ 7.77.
A

3

question

was

sent

to

DOE

regarding

what

the

two-year

4

requirement meant for each of the joint-venture participants, ABC and

5

PENW. DOE responded: “Given that the firms that make up the joint

6

venture individually have met the requirements of AL 2005-08 and DEAR

7

919.70,

8

arrangement to proceed.” ECF No. 168 ¶ 7.82. However WCH, PENW, ABC,

9

and Phoenix-ABC knew that the DOE’s understanding that both PENW and

10

ABC met the two-year requirement was erroneous; this error was not

11

brought to DOE’s attention by these entities. Id. ¶¶ 7.78-7.82

that

then

Nonetheless,

12

should

suffice

Phoenix-ABC

to

applied

enable

to

be

the

part

mutually

of

the

desired

mentor-

13

protégé program, and was accepted. Id. ¶ 4.10. Thereafter, “mentor”

14

WCH

15

“protégé” Phoenix-ABC without confirming that Phoenix-ABC qualified

16

for HUBZone status with the CCR or the Small Business Administration.

17

Id. ¶¶ 7.83 & 7.84, 7.89. This multi-million dollar contract was

18

classified by WCH as a small woman-owned HUBZone business contract,

19

thereby

20

subcontracting goals. Id. ¶ 7.90.

21
22
23
24
25

awarded

9

a

master

permitting

WCH

contract

to

C016925A00

reach

its

without

competition

Subcontracting

Plan

to

HUBZone

DOE regulations establish a qualified mentor-protégé program,

and set out the requirements, including that an eligible protégé has
to be an independent business that has been operating for at least two
years prior to applying for enrollment in the mentor-protégé program.
ECF No. 168 ¶ 4.10; 48 C.F.R. § 919.70.

26
ORDER - 14

1

5.

Sage Tec

2

WCH’s small-business collusion extended to another business that

3

FE&C partnered with and performed work for: Sage Tec, LLC. ECF No. 168

4

¶ 7.94; ECF No. 157 ¶¶ 6.24-6.105. Sage Tec was formed in February

5

2009, eight days after PENW was formed, and utilized the same business

6

address as PENW (at that time), Phoenix-ABC A Joint Venture, and FE&C.

7

Laura

8

Construction Services, Larry Burdge, is the owner, president, and sole

9

employee of Sage Tec. ECF No. 168 ¶¶ 3.19 & 7.85.

Shikashio,

who

is

the

wife

of

FE&C’s

Vice

President

of

10

On May 18, 2010, WCH issued RFP No. R015600A00 for Remedial

11

Action for 100-C-7 and 100-C-7:1 Waste Sites (“100 Area RFP”) on a

12

restricted basis to small, disadvantaged businesses. ECF No. 157 ¶

13

6.28. The subcontract contemplated in the 100 Area RFP required a

14

subcontractor

15

facilities, equipment, tools, materials, and supplies necessary to

16

complete

17

prequalification questionnaire to potential small-business vendors,

18

which among other things, required the potential offerors to have at

19

least three years of experience performing earthwork and grading work

20

and two years of experience handling waste. Id. ¶ 6.31.

the

to

furnish

scope

of

all

work.

management,

Id.

¶

supervision,

6.30.

WCH

labor,

provided

a

21

Sage Tec submitted its commercial and technical proposals for

22

the 100 Area project to WCH on July 19, 2010. ECF No. 157 ¶¶ 6.36 &

23

6.48.

24

Sage Tec’s or Ms. Shikashio’s ability to perform the sought-after

25

subcontracted work but advised that it would partner with FE&C. Id. ¶

26

6.40. As part of this proposal, Ms. Shikashio signed a Representations

Sage Tec’s 100 Area Technical Proposal did not describe either

ORDER - 15

1

and Certifications, falsely claiming that Sage Tec was a woman-owned

2

small business and would so act if awarded the contract. Id. Sage Tec

3

submitted its best and final offer to WCH on August 12, 2010, and then

4

submitted a revised commercial proposal on November 2, 2010. Id. ¶

5

6.51.
WCH evaluated Sage Tec’s and the other four offerors’ proposals.

6
7

Id. ¶¶ 6.36 & 6.47.

8

its

9

Project, WCH entered into the 100 Area Subcontract (Subcontract No.

10

C015600A00) in December 2010 with Sage Tec, a contract worth over $4

11

million.

12

WCH knew that Sage Tec was a façade for FE&C and not a small, woman-

13

owned business because:

small,

Despite knowing that Sage Tec was merely lending

woman-owned

business

name

and

status

to

the

100

Area

ECF No. 168 ¶ 7.96; ECF No. 157 ¶¶ 6.27, 6.41, 6.54, & 6.55.

14



Sage Tac had no relevant experience in handling nuclear waste;

15



Sage Tec had no equipment;

16



Sage Tec had no employees other than Ms. Shikashio, who has a

17

degree in social sciences;

18



19

Sage

Tec

merely

adopted

FE&C’s

Quality

Assurance

Program,

having none of its own; and

20



Several FE&C personnel were listed by Sage Tec in its 100 Area

21
Technical

Proposal

as

those

who

would

hold

management

and

22
supervisory positions on the subcontract if Sage Tec was awarded
23

the project.10

24
10

25
26

An email sent by a WCH employee in April 2011 recognizes the true

nature of Sage Tec and FE&C’s relationship and the fact, which all WCH

ORDER - 16

1

ECF No. 157 ¶¶ 6.34, 6.40, 6.42, & 6.43.

2

which had explicitly advised that it was a new business, did not

3

satisfy the yearly requirements that WCH required for a potential

4

offeree on the 100 Area RFP.
Yet,

5

WCH

falsely

acceptable,

WCH also knew that Sage Tec,

ECF No. 157 ¶¶ 6.29-6.34.

represented

to

responsive,

DOE

that

Sage

responsible

Tec

offeree

was

the

with

the

6

technically

7

lowest evaluated price. Id. And as was apparent during WCH’s review of

8

Sage Tec’s proposal, FE&C has performed the majority of the work that

9

was awarded to Sage Tec.

ECF No. 168 ¶ 7.97. By using employees from

10

FE&C, Sage Tec merely paid invoices from FE&C for the charge out rate

11

of any of FE&C’s employees used by Sage Tec; FE&C continued to pay the

12

full wages and benefits of any of their employees used by Sage Tec.

13

ECF No. 157 ¶ 6.58.
Later

14

in

2012,

WCH

awarded

another

multimillion

dollar

15

subcontract to Sage Tec, with full knowledge again that FE&C employees

16

would perform the work, which included safely removing radiological

17

and

18

structures, by utilizing FE&C equipment. Id. ¶¶ 6.62-6.64 & 6.73-6.77.

19
20
21
22
23
24
25
26

chemical

waste

sites,

pipelines,

tank

farms,

and

below

grade

knew, that Sage Tec was not providing its own equipment or employees
to perform the 100 Area Subcontract:
Sage Tec is proposing a 7.5% fee for passing through FE&C’s
bid. . . I think it is reasonable to negotiate a lower rate
since they are not adding any value to the contract other
than a small business name. . . That is something the Doug
will need to negotiate . . . since we do not have authority
to do so.
ECF No. 157 ¶ 6.57 (ellipses in original); see also id. ¶¶ 6.56 6.59,
& 6.61.

ORDER - 17

1

This

2

Proposal (RFP No. R025228A00) and was set aside by WCH for small,

3

disadvantaged

businesses.

4

available

eight

5

including Sage Tec and PENW.

6

qualified businesses, WCH received proposals from Sage Tec and one

7

other company. Id. ¶ 6.67.

8
9
10
11
12

project

to

was

advertised

of

Id.

nine

by

¶¶

WCH

in

6.65

its

&

businesses

300

6.66.

that

WCH

Area

WCH
had

Request

made

this

for

RFP

prequalified,

Id. ¶ 6.66. From this group of pre-

In connection with Sage Tec’s proposal, Ms. Shikashio submitted
written Clarification No. 1, which stated:
Sage Tec LLC, as the lead Offeror on this RFP, shall be
responsible for performing approximately 26.8% of the total
amount of the Base Work with its own organization. Listed
below are the major Base Work task areas for which Sage Tec
will perform in part or in whole:
-

13
14
15
16
17

Mobilization Submittals
Mobilization/Set Up
Demobilization
Key Personnel
Design
Civil Surveying
Engineering
Insurance
Bonding

18

ECF No. 157 ¶ 6.92.

19

perform 26.8% of the work was false based on Sage Tec’s lack of

20

equipment and lack of employees (other than Ms. Shikashio) and working

21

arrangement with FE&C. Id. ¶¶ 6.93-6.95. WCH knew that Sage Tec would

22

simply again act as a facade for FE&C, providing its woman-owned small

23

business status to FE&C. Id. ¶¶ 6.81, 6.82, & 6.98. Because of Sage

24

Tec’s reliance on FE&C, it was able to submit an offer that was $6

25

million lower than the other offer. Id. ¶ 6.96. On October 2012, WCH

26
ORDER - 18

WCH knew that the assertion that Sage Tec would

1

entered into the 300 Area Subcontract (Subcontract No. C025228A00)

2

with Sage Tec for over $15 million. Id. ¶¶ 6.99-6.102, 6.105.
Sage Tec submitted monthly and final invoices to WCH in order to

3
4

receive

payment

5

Subcontracts. Id. ¶¶ 7.15-7.18. These false claims for payment to WCH

6

were ultimately paid or reimbursed by DOE to WCH. Id. ¶¶ 7.19-7.21.

7

Yet, without Sage Tec’s false and/or fraudulent representations on its

8

100 Area Technical and Commercial Proposals and its 300 Area Technical

9

and Commercial Proposals, regarding its classification as a woman-

10

owned small business, which would perform at least 15% of the work,

11

DOE would not have paid the money it did under the RCC Contract. ECF

12

No.

13

invoices and associated drawdowns against DOE line of credit).

157

¶¶

for

7.6-7.9,

work

completed

7.11-7.15,

&

during

7.33

the

100

(identifying

and

300

WCH’s

Area

monthly

14

6.

15

Under the RCC Contract, WCH provided DOE with semi-annual small

16

business subcontract reports every six months in order to update DOE

17

as

18

Subcontracting Plan. ECF No. 157 ¶¶ 7.24 & 7.25 (identifying each

19

semi-annual small business subcontract report that contains a false

20

and/or fraudulent record or statement). Also as required by the RCC

21

Contract, WCH provided DOE with balanced scorecards for each fiscal

22

year. ECF No. 157 ¶ 7.29.

23

identified subcontracts to the identified small businesses in these

24

reports

25

reduction but rather paid WCH incentive fees for reaching its small-

to

Impact on DOE

WCH’s

and

26
ORDER - 19

progress

scorecards,

in

meeting

and

the

goals

established

in

the

DOE understood WCH to have awarded the

therefore

did

not

charge

WCH

a

fee

1

business subcontracting goals.

ECF No. 157 ¶¶ 7.29-7.32 & 7.37-7.39

2

(listing WCH quarterly fee invoices).

3

7.

Lawsuits

4

The Relators, Salina Savage and Savage Logistics, initiated this

5

False Claims Act (FCA) qui tam lawsuit in 2010. ECF No. 1. Pursuant to

6

federal

7

United States an opportunity to investigate and decide whether it

8

would

9

complaint.

statute,

intervene

this

lawsuit

before

was

Defendants

initially

were

sealed

served

to

with

permit

the

the

Relators’

The United States initially declined to intervene in 2011,

10

ECF No. 7, and the qui tam lawsuit proceeded against the then-named

11

Defendants

12

Everano.

13

filed.

WCH,

Mr.

Houston,

FE&C,

Mr.

Laverentz,

PENW,

and

Ms.

Discovery proceeded and motions for summary judgment were

14

Before the summary-judgment motions were ruled on, the Relators

15

amended their complaint to add FCA claims as to Phoenix-ABC, ABC, Ms.

16

Morales, Sage Tec, and Ms. Shikashio.

17

the

18

following

claims:

19

claiming,

or

20

modifications on the Truck & Pup Subcontract held by PENW, 2) WCH,

21

Sage

22

submitting false claims to DOE whereby WCH falsely claimed woman-owned

23

small business credit for 100 Area and 300 Area subcontracting work,

24

3) WCH breached the RCC Contract by failing to comply or carry out in

25

good

United

Tec,

faith

26
ORDER - 20

States

elected
1)

causing

and

the

Ms.

WCH
to

to
and

be

ECF No.

intervene
FE&C

violated

submitted,

Shikashio

Subcontracting

violated

Plan,

in

and

small

by

4)

140. In August 2013,
part,
the

asserting
FCA

business

the

FCA

unjust

by

by

the

falsely

credit

for

knowingly

enrichment

and

1

payment-by-mistake against Defendants WCH, FE&C, Sage Tec, and Ms.

2

Shikashio. ECF No. 157.

3

The Relators were given leave to file an amended complaint in

4

light of the United States’ intervention decisions. ECF No. 166. On

5

January 10, 2014, the Relators filed their Third Amended Complaint

6

(TAC),

7

intervened in by the United States against WCH, Mr. Houston, FE&C, Mr.

8

Laverentz, PENW, Ms. Everano, ABC, Phoenix-ABC, and Ms. Morales. ECF

9

No. 168. In addition to FCA claims against the Defendants, Relators

10

assert 1) Defendants WCH, Mr. Houston, FE&C, Mr. Laverentz, PENW, and

11

Ms. Everano intentionally interfered with a contract, 2) Defendants

12

violated Washington’s Consumer Protection Act, RCW 19.86 et al, and 3)

13

WCH retaliated against Savage Logistics. Id.

pursuing

All

14

their

Defendants

FCA

seek

claims

dismissal

as

of

to

matters

both

that

the

were

United

not

States’

15

complaint and the Relators’ TAC under Federal Rule of Civil Procedure

16

12(b)(6) for the complaints’ purported failure to comply with Rule 8

17

and Rule 9(b)’s pleading standards. Briefing and oral argument ensued.

18

B.

Dismissal

19

1.

Standard

20

Defendants

seek

dismissal

of

the

Relators’

and

the

United

21

States’ complaints under Federal Rule of Civil Procedure 12(b)(6). A

22

Rule

23

satisfies pleading standards. Navarro v. Block, 250 F.3d 729, 732 (9th

24

Cir. 2001).

25

and Rule 9(b).

12(b)(6)

26
ORDER - 21

motion

to

dismiss

challenges

whether

the

complaint

Here, the pleading standards are governed by both Rule 8

1

Rule 8 requires the complaint to contain “a short and plain

2

statement

of

the

claim

showing

that

the

pleader

is

[plausibly]

3

entitled to relief.” Fed. R. Civ. P. 8(a)(2); see Bell Atl. Corp. v.

4

Twombly, 550 U.S. 544, 570 (2007) (setting forth the plausibility

5

standard).

6

the merits; instead it requires “more than a sheer possibility” of

7

success on the merits.

Plausibility does not require a probability of success on

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

8

To determine whether the complaint contains a statement showing

9

that the pleader is plausibly entitled to relief, the court first

10

identifies the elements of the plaintiff’s claim and then determines

11

whether those elements can be proven on the alleged facts. Id. at 663.

12

When conducting this analysis, the court accepts the alleged factual

13

allegations in the complaint as true and construes the pleadings in

14

the light most favorable to the plaintiff, and considers judicially

15

noticeable documents and contracts referenced in the complaint, but

16

the court may disregard factual allegations that are contradicted by

17

matters

18

Sheppard v. David Evans & Assocs., 694 F.3d 1045, 1051 (9th Cir.

19

2012); Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir.

20

2001); see Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir.

21

2001) (identifying what documents a court can consider at the Rule

22

12(b)(6) stage).

properly

subject

to

judicial

notice

or

filed

exhibits.

23

Defendants also argue that the complaints fail to satisfy Rule

24

9(b)’s particularity requirement. Rule 9(b) requires a complaint to

25

“state

26

mistake.” Fed. R. Civ. P. 9(b). To satisfy this standard, the fraud-

with

ORDER - 22

particularity

the

circumstances

constituting

fraud

or

1

based claims must “be specific enough to give defendants notice of the

2

particular misconduct so that they can defend against the charge and

3

not just deny that they have done anything wrong.” Vess v. CibaGeigy

4

Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (quotation and citation

5

omitted). Thus, “[a]verments of fraud must be accompanied by the who,

6

what, when, where, and how of the misconduct charged.”

7

and citation omitted). A party may, however, plead allegations of

8

“[m]alice, intent, knowledge, and other conditions of a person’s mind

9

more generally.”

Id. (quotation

Fed. R. Civ. P. 9(b).

10

2.

11

With these standards in mind, the Court turns to analyzing the

12

Authority and Analysis

sufficiency of the plead claims.
a.

13

FCA Claims

14

Both the United States and the Relators allege False Claims Act

15

(FCA) violations. The Relators agree that for those FCA claims being

16

pursued by the United States through its intervention the Relators are

17

no longer the party litigating those claims.11 The Relators continue

18

their FCA claims to which the United States did not intervene. The

19

Court focuses its FCA analysis first on the United States’ FCA claims.
i.

20

United States’ FCA Claims

21

The United States asserts the following FCA claims: 1) WCH, Sage

22

Tec, and Ms. Shikashio violated the FCA through the process of WCH

23
11

24
25
26

Even though the Relators may not litigate the intervened

claims, the Relators may recover 15-25% of the amount recovered by the
United States. See 31 U.S.C.A. § 3730(d).

ORDER - 23

1

awarding small-business contracts to Sage Tec, which these Defendants

2

knew was not a small business but rather a facade for FE&C, whereby

3

Sage Tec and FE&C received payment on the subcontracted work and WCH

4

took

5

subcontracts, and 2) WCH and FE&C violated the FCA through the 2009

6

Truck and Pup Subcontract modifications as they knew that PENW was a

7

small-business façade for FE&C, but WCH nonetheless awarded the small-

8

business modifications to PENW and then took small-business credit for

9

Modifications 2 through 5. These Defendants contend that the complaint

and

received

to

allege

small-business

sufficient

facts

credit

10

fails

to

11

from

satisfy

DOE

the

for

FCA’s

these

scienter,

materiality, and causation requirements.

12

A defendant is liable under the FCA if it: “knowingly presents

13

or causes to be presented, a false or fraudulent claim for payment or

14

approval,” 31 U.S.C. § 3739(a)(1)(A), or “knowingly makes, uses, or

15

causes to be made or used, a false record or statement material to a

16

false or fraudulent claim,” id. § 3739(a)(1)(B). This FCA analysis

17

requires

18

(scienter), 2) presentation (or making or use, or causes such action)

19

of a false or fraudulent claim or statement, and 3) materiality.

20

the

satisfaction

of

a

number

of

elements:

1)

knowledge

As to knowledge, a defendant acts knowingly if it has actual

21

knowledge,

22

disregard

23

“Innocent mistakes, mere negligent misrepresentations and differences

24

in interpretations” do not constitute knowingly false statements. U.S.

25

ex rel. Hopper v. Anton, 91 F.3d 1261, 1267 (9th Cir. 1996).

26
ORDER - 24

deliberate
as

to

the

ignorance
truth

of

of
the

the

statement,

statement.

Id.

or
§

reckless

3729(b)(1).

1

The falsity requirement is satisfied if it is an “intentional,

2

palpable lie.” Id. A claim is “any request or demand, whether under a

3

contract or otherwise, for money or property and whether or not the

4

United States has title to the money or property,” presented to the

5

United States or to a contractor, if the money or property is to be

6

spent or used on the United States’ behalf. 31 U.S.C. § 3729(b)(2). A

7

false statement or course of conduct is material if it impacts the

8

government’s decision to pay out moneys to the claimant. United States

9

ex rel. Hendow v. Univ. of Phoenix, 461 F.3d 1166, 1172 (9th Cir.

10

2006).

11

Case law indicates that these FCA elements can be satisfied

12

through either an express false certification or an implied false

13

certification—both

14

express

15

compliance with a law, rule, or regulation as part of the process

16

through which the claim for payment is submitted. Ebeid ex rel. United

17

States v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010). An implied

18

false certification occurs when an entity has previously undertaken to

19

expressly comply with a law, rule, or regulation, and that obligation

20

is

21

certification

22

submitting

23

certification,

24

representative examples of false claims to support every allegation,”

25

rather “use of representative examples is simply one means of meeting

26

the pleading obligation” to allege “‘particular details of a scheme to

false

are

alleged

in

occurs

when

certification

implicated

ORDER - 25

which

by
of

the

submitting
compliance

claim.
the

Id.

a

claim

is

not

To

prove

plaintiff

is

for

the
a

here.

defendant

certifies

payment

required
either

not

complaints

in

even
the

means

required

though

process
of

to

a

An

a
of

false

“identify

1

submit false claims paired with reliable indicia that lead to a strong

2

inference

3

(quoting United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 190

4

(5th Cir. 2009)).

5

that

claims

were

actually

submitted.’”

Id.

at

998-99

Focusing first on the Sage Tec-related FCA claim, the United

6

States

has

7

invoices, and other documents wherein it claims that the respective

8

Defendant presenting that document (or causing it to be submitted)

9

either expressly or impliedly misrepresented that Sage Tec was a small

10

business. The United States identifies that Sage Tec made false or

11

fraudulent records or statements pertaining to its purported small,

12

disadvantaged

13

Proposals under the 100 Area and 300 Area RFPs, and its invoices to

14

WCH. As to WCH, the United States alleges that WCH made false or

15

fraudulent records or statements pertaining to Sage Tec’s purported

16

small, disadvantaged business status on the 300 Area Subcontract, its

17

semi-annual small business subcontract reports, its balanced scorecard

18

reports, monthly invoices, and quarterly invoices for Interim Fee

19

Payments. The United States also alleges that FE&C, Sage Tec, and Ms.

20

Shikashio caused to be submitted the WCH monthly invoices from and

21

including November 2010 forward. The allegations in the United States’

22

complaint pertaining to this Sage-Tec scheme are pled with sufficient

23

particularity as to put each of these Defendants on notice of the

24

alleged fraudulent claim and their involvement in such fraudulent

25

claim. Finally, the United States alleges that the express and implied

26

false claims and statements regarding Sage Tec’s small business status
ORDER - 26

identified

business

the

proposals,

status

on

the

subcontracts,

Technical

modifications,

and

Commercial

1

and the work it was purportedly performing under the awarded small

2

business contracts were material to the United States’ payment of

3

monies under the RCC contract to WCH.

4

the motions to dismiss as to the United States’ FCA claims against

5

Defendants WCH, FE&C, Sage Tec, and Ms. Shikashio related to Sage Tec.
As

6

to

the

United

States’

FCA

Accordingly, the Court denies

claims

against

WCH

and

FE&C

7

relating to the Truck and Pup Subcontract modifications, the Court

8

finds these allegations are sufficiently pled.

9

United States’ complaint identifies each RFP wherein the United States
that

10

claims

11

business to DOE. ECF No. 157. The United States also alleges that both

12

WCH and FE&C submitted, or caused these false claims to be submitted,

13

to DOE, and these false claims were material to DOE’s payment on the

14

monthly invoices and quarterly fee invoices. Accordingly, the Court

15

denies the motions to dismiss as to the United States’ FCA claims

16

against

17

modifications.

WCH

WCH

and

ii.

18

and

FE&C

FE&C

falsely

relating

to

claimed

Table 7.2 in the

the

that

Truck

PENW

and

was

Pup

a

small

Subcontract

The Relators’ Non-Intervened FCA Claims

19

The Relators seek to pursue their non-intervened FCA claims,

20

which pertain to the 1) initial Truck and Pup Subcontract awarded to

21

PENW (brought against WCH, Mr. Houston, FE&C, Mr. Laverentz, PENW, and

22

Ms.

23

against WCH, Mr. Houston, FE&C, Mr. Laverentz, PENW, and Ms. Everano),

24

and 3) Phoenix-ABC’s HUBZone contract awards (brought against WCH, Mr.

25

Houston, FE&C, Mr. Laverentz, PENW, Ms. Everano, ABC, Phoenix-ABC, and

26

Ms. Morales).

Everano),

ORDER - 27

2)

the

100

IU2&6

Project

awarded

to

PENW

(brought

1

Beginning with the initial Truck and Pup Subcontract, the Court

2

determines the TAC fails to plead a FCA claim as to the initial award

3

of the Truck and Pup Subcontract to PENW.

4

PENW

5

Subcontract,

6

eligible to compete for the contract, which was set aside for a small,

7

disadvantaged business. However, after the SBA determined that PENW

8

was not a small business for purposes of this award, WCH did not take

9

small-business credit for this initial Truck and Pup Subcontract.

10

Therefore, any invoices submitted by PENW, FE&C, and WCH in relation

11

to the initial Truck and Pup Subcontract award did not cause the

12

United States to pay out monies to these entities with the mistaken

13

belief that the Truck and Pup Subcontract was set aside for a small

14

business. Accordingly, the Court finds that the TAC fails to satisfy

15

Rule

16

dismisses this claim.12

and

8

in

Ms.

Everano

which

completed

contained

regard

to

the

a

a

bid

false

initial

The TAC does identify that
for

the

Truck

and

Pup

that

PENW

was

certification

Truck

and

Pup

Subcontract

and

17

In relation to the 100 IU 2&6 Project, the Court finds the TAC

18

alleges with sufficient particularity an FCA claim against PENW, FE&C,

19

and WCH. The TAC identifies that PENW submitted a bid for the IU2&6

20

Project

21

business, that PENW, FE&C, and WCH sent invoices for work performed on

22

this

in

which

it

small-business

identified

set

aside

itself

contract,

as

a

that

small,

WCH

disadvantaged

completed

forms

23
12

24
25
26

This ruling does not impact the relevance of the initial Truck

and Pup Subcontract and the related agreements and actions of the
parties to the later Truck and Pup Subcontract modifications.

ORDER - 28

1

justifying sole-sourcing work to PENW knowing that the schedule was

2

not in jeopardy, and that WCH took credit under its Subcontracting

3

Plan for the cost of the 100 IU2&6 remediation contract and the sole-

4

source 100 IU2&6 transportation contract.

5

false or fraudulent misrepresentations as being material to the United

6

States’ payment of monies. In this regard, Defendants’ motions to

7

dismiss are denied. However, the TAC does not identify with sufficient

8

particularity that Ms. Everano, Mr. Houston, or Mr. Laverentz made (or

9

caused to be made) a false or fraudulent misrepresentation pertaining

10

to the 100 IU2&6 Project; therefore, the Relators’ 100 IU2&6 Project

11

FCA claim is dismissed as to these Defendants.

The TAC identifies these

12

Finally, as to the TAC’s FCA claim pertaining to the Phoenix-

13

ABC’s HUBZone contracts, which are brought against WCH, Mr. Houston,

14

FE&C, Mr. Laverentz, PENW, Ms. Everano, ABC, Phoenix-ABC, and Ms.

15

Morales,

16

particularity as to WCH, PENW, ABC, and Phoenix-ABC, but not as to Mr.

17

Houston, FE&C, Mr. Laverentz, Ms. Everano, or Ms. Morales. The TAC

18

identifies

19

without any competition and that the contract was for a small woman-

20

owned HUBZone business, and alleges that WCH and Phoenix-ABC (and its

21

co-venturers) knew that Phoenix-ABC did not qualify as a small woman-

22

owned HUBZone business.

23

Phoenix-ABC (and its co-venturers) knowingly made or caused to be

24

made,

25

material to a fraudulent claim for payment under the awarded contract,

26

and that WCH also knowingly presented or caused to be presented, a

a

ORDER - 29

the

Court

that

false

WCH

finds

awarded

statement

the

claim

Phoenix-ABC

is

pled

the

with

identified

sufficient

contract

The allegations sufficiently identify that

regarding

its

business

entity

that

was

1

false or fraudulent claim for payment or approval from DOE relating to

2

the HUBZone contracts. In this regard, Defendants’ motions to dismiss

3

are denied. The TAC fails however to pled with particularity that Mr.

4

Houston, FE&C, Mr. Laverentz, Ms. Everano, and Ms. Morales were the

5

individuals or entity that made the false claims relating to this

6

HUBZone FCA claim.

7

dismiss this HUBZone FCA claim are granted.
b.

8

In this regard, these Defendants’ motions to

The USAO’s Non-FCA Claims

9

The USAO also asserts 1) that WCH breached the RCC Contract by

10

failing to comply or carry out in good faith the Subcontracting Plan,

11

and

12

against

13

submit that the unjust-enrichment and payment-by-mistake claims must

14

be dismissed because there is a governing express contract. The Court

15

declines at this stage to dismiss the unjust-enrichment and payment-

16

by-mistake

17

necessary to determine whether these claims are duplicative of the

18

breach-of-contract

19

Intern, Inc., 643 F. Supp. 2d 1256 (W.D. Wash. 2009). Accordingly, in

20

this regard, the Defendants’ motions to dismiss are denied.

2)

an

unjust-enrichment

WCH,

claims.

c.

21

FE&C,

Sage

Discovery

claim

The

23

and

and

against

and

a

Ms.

payment-by-mistake

Shikashio.

further

WCH.

These

dispositive

See

Vernon

v.

claim

Defendants

motions

Quest

are

Comms.

The Relators’ Non-FCA Claims
i.

22

Tec,

claim

Relator

Intentional Interference with Contract Claim
asserts

an

intentional-interference-with-contract

24

claim.

To state a claim for tortious interference with a contractual

25

relationship or business expectancy, the complaint must allege: “[1]

26

the

existence

ORDER - 30

of

a

valid

contractual

relationship

or

business

1

expectancy; [2] that defendants had knowledge of that relationship;

2

[3]

3

termination of the relationship or expectancy; [4] that defendants

4

interfered for an improper purpose or used improper means; and [5]

5

resultant damages.”

6

Wn.2d 133, 156–57 (1997).

an

intentional

interference

inducing

or

causing

a

breach

or

Leingang v. Pierce Cty. Med. Bureau Inc., 131

7

Under the facts alleged in the Relators’ complaint, the Court

8

finds that a valid contractual relationship or business expectancy is

9

missing. The Relators did not have a contractual right or business

10

expectancy

11

modifications thereto) or the other subcontracts at issue in this

12

lawsuit. “An invitation to bid on a public contract is not an offer to

13

contract

14

Chehalis, 97 Wn.

15

bid,

16

contractual relationship or expectancy. Accordingly, the Court grants

17

Defendants’ motions to dismiss the Relators’ claim for intentional

18

interference with a contract.

or

but

be

a

The

awarded

the

solicitation

Truck

for

an

and

offer.”

Pup

Subcontract

Hadaller

v.

(or

Port

of

App. 750, 755–56 (1999). Accordingly, the Relators’

potential

ii.

19
20

to

Relators

bid,

on

a

public

contract

did

not

create

a

Consumer Protection Act, RCW 19.86
allege

that

Defendants

violated

Washington’s

21

Consumer Protection Act (CPA), RCW 19.86. To state a CPA claim, the

22

Relators must show “an unfair or deceptive act or practice; occurring

23

in trade or commerce; public interest impact; injury to the plaintiff

24

in his or her business or property; [and] causation.” Hangman Ridge

25

Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wn.2d 778, 780

26

(1986) (numbering of elements omitted). All elements must be present;
ORDER - 31

1

a finding that any element is missing is fatal to the claim. Id. at

2

793.

3

At dispute is whether the Relators’ complaint alleges sufficient

4

facts to satisfy the public-interest factor, i.e., whether the alleged

5

acts had the capacity to deceive a substantial portion of the public.

6

See Goodyear Tire & Rubber Co. v. Whiteman Tire, Inc., 86 Wn. App.

7

732, 744 (1997). “When the transaction is a private dispute . . . and

8

not

9

interest in the subject matter. There must be a likelihood additional

a

consumer

have

transaction,

been

will

more

the

public

12

competitor,

13

general. Evergreen Moneysource Mortg. Co. v. Shannon, 167 Wash. App.

14

242, 261 (2012).

impact

the

same

show

“[C]onduct that is not directed at the public, but, rather, at a
to

in

to

11

capacity

injured

difficult

persons

the

be

is

10

lacks

or

it

fashion.”

public

interest

Id.

in

The Court finds the Relators’ complaint fails to satisfy the

15
16

CPA’s

public-interest

17

subcontractors’ conduct of allegedly conspiring in order to permit

18

FE&C to perform the contracted work with the small business serving as

19

a façade, thereby financially benefitting the involved businesses, is

20

conduct that is not directed at the public, but rather is aimed at the

21

competing

22

practice relates to work on a public project, the unfair practice

23

lacks

24

alleged false statements and/or misrepresentations were directed at

25

DOE,

26

businesses compete for these Hanford-area related contracts, which

the

not

ORDER - 32

proposing

capacity

American

requirement.

subcontractors.

to

impact

consumers.

the

WCH’s,

FE&C’s,

Although

public

in

Furthermore,

the

and

alleged

general.

given

the

that

façade

unfair

Defendants’

very

few

1

require

2

process that is directed at the public.

technical

skill

and

experience,

this

is

not

bidding

Thus, the Relators’ complaint fails to satisfy the CPA’s public-

3
4

much

interest element.

Accordingly, the Relators’ CPA claim is dismissed.

iii. Retaliation

5

In the TAC, the Relators allege a claim for retaliation under 31

6
7

U.S.C. § 3730(h) against WCH.

At the August 2014 hearing, Relators’

8

counsel advised that the Relators are voluntarily dismissing this

9

claim.

Accordingly, the WCH Defendants’ motion to dismiss is granted

10

in this regard.

11

C.

Bifurcation

12

WCH Defendants ask the Court to bifurcate the case into three

13

separate trials: 1) Trial 1 to resolve the Relators’ claims pertaining

14

to the Truck and Pup Contract that were not intervened by the United

15

States; 2) Trial 2 to resolve the Relators’ claims pertaining to

16

Phoenix-ABC and its eligibility to participate in the DOE Mentor-

17

Protégé Program and as a HUBZone concern that were not intervened by

18

the United States; and 3) Trial 3 to resolve the United States’ claims

19

pertaining to the modifications to the Truck and Pup Contract and Sage

20

Tec.13 ECF No. 193 at 1. The WCH Defendants propose the Relators’ non-

21

intervened claims (proposed Trials 1 and 2) should proceed to trial

22

before the United States’ claims because of the extensive litigation

23
13

24
25
26

WCH Defendants’ bifurcation motion is joined by the Sage Tec

Defendants, ECF No. 210; the ABC Defendants, ECF No. 208; the FE&C
Defendants, ECF No. 207; and the PENW Defendants, ECF No. 206.

ORDER - 33

1

and

discovery

2

recommend that discovery should proceed in this case on one track but

3

agrees with the United States’ request to bifurcate the case for

4

trial: intervened claims and non-intervened claims, with the United

5

States’ claims proceeding first to trial. ECF Nos. 204 & 205.
A

6

court

already

done

possesses

the

for

those

discretion

claims.

to

Id.

The

bifurcate

Relators

trial

“[f]or

7

convenience, to avoid prejudice, or to expedite and economize.”

8

R. Civ. P. 42(b); see Hangarter v. Provident Life & Acc. Ins. Co., 373

9

F.3d 998, 1021 (9th Cir. 2004) (“Rule 42(b) . . . confers broad
upon

the

10

discretion

11

deferring

12

quotations

13

Williams, 245 F.2d 397, 404 (8th Cir. 1957) (same); Bowie v. Sorrell,

14

209 F.2d 49, 51 (4th Cir. 1953) (same).

costly
and

and

district

court

unnecessary

citations

to

bifurcate

proceedings

omitted));

Chicago,

.

a

trial,

Fed.

.

.

.”

R.I.

&

P.R.

thereby

(internal
Co.

v.

15

Because the Court dismissed the Relators’ claims pertaining to

16

the initial Truck and Pup Subcontract, trifurcation is now moot. After

17

considering each parties’ position and arguments in support thereof,

18

the Court concludes that bifurcation of the United States’ claims and

19

the

20

States’ claims proceeding first to trial. In light of the narrowed

21

remaining claims, the Court believes that discovery should proceed on

22

one track as to all claims.

23

from the parties regarding discovery and pretrial motions.

24

D.

25
26

Relators’

remaining

claims

are

appropriate,

with

the

United

However, the Court encourages briefing

Conclusion
For

the

above-given

reasons,

the

Court

permits

the

United

States’ claims to continue (and will proceed to trial first): the FCA
ORDER - 34

1

claim

2

Shikashio, the FCA claim related to the Truck and Pup Subcontract

3

modifications 2-5 against WCH and FE&C, and the pled non-FCA claims;

4

and the Court permits the Relators’ following claims to continue: the

5

FCA claim related to the 100 IU2&6 Project against WCH, FE&C, and

6

PENW, and the FCA claim related to HUBZone contracts against WCH,

7

PENW, ABC, and Phoenix-ABC. In summary, IT IS HEREBY ORDERED:

8

related

1.

The

to

Sage

WCH

Tec

against

Defendants’

WCH,

Motion

to

FE&C,

Sage

Dismiss

Tec,

and

Relator’s

Ms.

Third

9

Amended Complaint, ECF No. 183, is DENIED IN PART (FCA

10

claim pertaining to the 100 IU2&6 Project and Phoenix-ABC

11

HUBZone contracts as to WCH) AND GRANTED IN PART (FCA claim

12

pertaining to the initial Truck and Pup Subcontract for

13

both WCH Defendants, FCA claims pertaining to the 100 IU2&6

14

Project

15

Houston, and state-law claims).

16

2.

Phoenix-ABC

HUBZone

contracts

as

to

Mr.

The WCH Defendants’ Motion to Dismiss the United States’
Complaint in Intervention, ECF No. 194, is DENIED.

17
18

and

3.

The

FE&C

Defendants

Motion

to

Dismiss

Relators

Third

19

Amended Complaint, ECF No. 195, is DENIED IN PART (FCA

20

claims pertaining to the 100 IU2&6 Project and Phoenix-ABC

21

HUBZone contracts as to FE&C) AND GRANTED IN PART (FCA

22

claim pertaining to the initial Truck and Pup Subcontract

23

for both FE&C Defendants, FCA claims pertaining to the 100

24

IU2&6 Project and Phoenix-ABC HUBZone contracts as to Mr.

25

Laverentz, and state-law claims).

26
ORDER - 35

1

4.

Subcontract Claims, ECF No. 196, is DENIED.

2
3

The FE&C Defendants’ Motion to Dismiss U.S.’s Truck and Pup

5.

The PENW Defendants’ Motion to Dismiss Plaintiffs’ Third

4

Amended Complaint, ECF No. 185, is DENIED IN PART (FCA

5

claim pertaining to the 100 IU2&6 Project as to PENW, and

6

Phoenix-ABC HUBZone contracts as to PENW and Phoenix-ABC)

7

AND GRANTED IN PART (FCA claim pertaining to the initial

8

Truck and Pup Subcontract for both PENW Defendants, FCA

9

claims pertaining to the 100 IU2&6 Project and Phoenix-ABC

10

HUBZone contracts as to Ms. Everano, and state-law claims).

11

6.

The ABC Defendants’ Motion to Dismiss Plaintiffs’ Third

12

Amended Complaint, ECF No. 198, is DENIED IN PART (FCA

13

claim pertaining to Phoenix-ABC HUBZone contracts as to

14

ABC) AND GRANTED IN PART (FCA claim pertaining to Phoenix-

15

ABC

16

claims).

17

7.

HUBZone

contracts

as

to

Ms.

Morales,

and

state-law

The WCH Defendants’ Motion to Bifurcate Intervened and Non-

18

Intervened Claims and to Further Bifurcate Non-Intervened

19

Claims, ECF No. 193, is GRANTED IN PART (bifurcation) AND

20

DENIED IN PART (order of trials).

21

8.

Within three weeks of entry of this Order, the parties

22

shall submit joint or individual notices regarding proposed

23

dates

24

regarding the efficient resolution of this lawsuit.

25

9.

for

discovery

and

ORDER - 36

and

any

other

matter

The case caption shall be amended to reflect the remaining
Defendants and the separate:

26

trial,

UNITED STATES OF AMERICA, ex rel., SALINA SAVAGE, SAVAGE
LOGISTICS, LLC,

1
2

Plaintiffs,
3
v.
4
WASHINGTON CLOSURE HANFORD LLC; FEDERAL ENGINEERS AND
CONSTRUCTORS, INC.; PHOENIX ENTERPRISES NW, LLC; PHOENIXABC JOINT VENTUTE; and ACQUISITION BUSINESS CONSULTANTS,

5
6

Defendants,
_________________________________________

7

UNITED STATES OF AMERICA, ex rel., SALINA SAVAGE, SAVAGE
LOGISTICS, LLC,

8
9

United States as Intervening Plaintiff,
10
v.
11
WASHINGTON CLOSURE HANFORD LLC; FEDERAL ENGINEERS AND
CONSTRUCTORS, INC.; SAGE TEC LLC; and LAURA SHIKASHIO,

12

Defendants.

13
14

///

15

///

16

///

17

//

18

/

19
20
21

IT IS SO ORDERED.

The Clerk's Office is to enter this Order and

provide a copy to counsel.
DATED this 6th day of October 2015.

22
s/Edward F. Shea
EDWARD F. SHEA
Senior United States District Judge

23
24
25
26
Document1

ORDER - 37