United States District Court, N.D. California, San Jose Division
ORDER DENYING RELATORS' MOTION FOR LEAVE TO FILE
FOURTH AMENDED COMPLAINT Re: Dkt. No. 78
H. KOH United States District Judge
Vincent Hascoet (“Hascoet”) and Philippe Desbois
“Relators”), on behalf of the United States of
America (the “United States”) and the State of
California (“California”) (collectively, the
“Government Plaintiffs”), sued Safran Group, S.A.
(“Safran Global”), Morpho, S.A. a.k.a. Safran
Identity & Security, S.A. (“Safran
Security”), and Safran U.S.A., Inc. (“Safran
USA”) (collectively, “Defendants”) for
violation of the federal False Claims Act
(“FCA”), 31 U.S.C. § 3729 et seq.,
and the California False Claims Act (“California
FCA”), Cal. Gov't Code § 12651 et
seq. Before the Court is Relators' Motion for Leave
to File Fourth Amended Complaint Adding Additional
Safran/Morpho Subsidiaries in U.S. (“Motion for Leave
to File a Fourth Amended Complaint”). ECF No. 78
(“Mot.”). Pursuant to Civil Local Rule 7-1(b),
the Court finds this matter appropriate for resolution
without oral argument and vacates the hearing scheduled for
May 11, 2017. Having considered the submissions of the
parties, the relevant law, and the record in this case, the
Court DENIES Relators' Motion for Leave to File Fourth
case is an FCA and California FCA qui tam action in
which Relators are suing Defendants on behalf of the United
States and California. Relators are allegedly former
employees of Defendants, insiders, who bring this action to
recover on fraudulent claims for payment allegedly submitted
to the United States and California. Specifically, Relators
allege that Defendants sold the United States and California
Russian fingerprint identification technology while
representing it to be French technology. Additionally,
Relators allege that Defendants expressly or impliedly
certified that Defendants had complied with the Sherman
Antitrust Act, 15 U.S.C. §§ 1-7, and The Trade
Agreements Act of 1979 (“Trade Act”), 19 U.S.C.
§§ 2501-581, even though Defendants were allegedly
in violation of both statutes. The Court first describes the
corporate structure of Defendants and related entities as
alleged in the Third Amended Complaint (“TAC”),
then describes Relators' relationship with Defendants,
and finally describes the violations alleged in the TAC.
allege that Defendant Safran Global is a corporation that was
formed under the laws of France in 2005 through the merger of
Sagem Securite SA. (“Sagem”) and Snecma S.A.
(“Snecma”). TAC ¶ 9. Although Safran Global
was allegedly formed through the merger of Sagem and Snecma,
Relators allege that both Sagem and Snecma continue to
operate as subsidiaries of Safran Global. Id. Sagem
“develops and supplies high-precision opto-mechanical,
electronics, and optical solutions for defense, astronomy,
research, and industry applications worldwide.”
Id. ¶ 12. Snecma “designs, develops,
produces and markets engines for civil and military aircraft,
launch vehicles and satellites.” Id.
Safran USA is a Delaware corporation that is 97.5% owned by
Safran Global and 2.5% owned by Defendant Safran Security.
Id. ¶ 10. Defendant Safran Security is a French
corporation and, until May 2016, was named “Morpho,
” “Morpho Group, ” or “Morpho,
S.A.” Id. ¶ 13. Safran Security is 75%
owned by Safran Global and 25% owned by Safran USA.
Id. Relators allege that Safran Global does business
in the United States and in California as Safran USA and
Safran Security. Id. ¶ 10.
allege that they were employees of Defendants and entities
related to Defendants. Id. ¶ 4 (“Both are
former employees [of] entities of [Safran Global].”).
Relator Desbois is a French national who lives in Russia.
Id. ¶ 4. Desbois worked for Defendants or
entities related to Defendants from November 2007 to
September 2014. Id. ¶ 6. Specifically, Desbois
first was the Chief Financial Officer (“CFO”) in
the Russian branch of Safran Global. Id. Later,
Desbois served as the Chief Executive Officer
(“CEO”) of “Morpho
Russia.” Id. Desbois' job at
“Morpho Russia” ended in September 2014, and it
is unclear from the TAC whether he quit or was terminated.
Hascoet is also a French national who lives in Russia.
Id. ¶ 4. From July 23, 2012 to May 31, 2014,
Hascoet was the Deputy Director of the Russian branch of a
company named PowerJet. Id. ¶ 7. PowerJet was a
“joint venture” between Snecma and another
company named “NPO Saturn.” Id. Relators
provide no further detail about PowerJet or NPO Saturn.
Relators allege that Hascoet wrote a “comprehensive
report” for Snecma in which he outlined “myriad
acts of bribery, unlawful gifts, bogus transactions, tax
evasion, and false certifications of compliance with
laws.” Id. The TAC does not specify whether
these actions in the report occurred in PowerJet alone or
occurred as part of Safran Global's operations more
generally. Relators allege that Hascoet's employment was
terminated due to his “complaints and reports about
these compliance issues.” Id.
their tenures at Defendants and entities related to
Defendants, Hascoet and Desbois “engaged in extensive
professional communications with one another regarding
compliance issues, ” including the issues that are the
focus of the instant suit. Id. Allegedly,
“Desbois and Hascoet also closely collaborated in
regard to communicating with the United States Securities
& Exchange Commission (“SEC”) regarding
Defendants' serious issues of noncompliance.”
on this alleged insider information, Relators make three
allegations as the basis of their FCA and California FCA
claims. First, Relators allege that Defendants sold
fingerprint identification products created by Safran
Security to the United States and California. Id.
¶ 14. Relators allege that Defendants falsely claimed
that the technology used in the Safran Security fingerprint
identification technology was French technology when it was
actually Russian technology. Id. ¶ 16. Relators
allege that they learned of this misrepresentation because
Sagem, one of the two companies that merged to become Safran
Global and now acts as a subsidiary of Safran Global, entered
a technology license agreement with Papillon ZAO
(“Papillon”) in which Papillon licensed its
technology to Sagem. Id. ¶ 18. The licensing
agreement states that the technology that was licensed to
Sagem was Russian technology. Id. ¶ 18.
Allegedly, this Russian technology became part of the Safran
Security fingerprint identification products. Id.
Relators allege that Defendants and Papillon reached an
agreement where they would “divide up the world market
for fingerprint identification products, and would not
compete in each other's market.” Id.
¶ 31. Relators allege that this agreement violated the
Federal Acquisition Regulation and the Sherman Antitrust Act,
15 U.S.C. §§ 1-7. Id. ¶ 32. This
violation allegedly rendered Defendants' claims false
because Defendants had made written representations to the
United States and California that certified compliance with
the Federal Acquisition Regulations and the Sherman Antitrust
Relators allege that Defendants “routinely and
regularly falsely certified, in writing, ” that
Defendants were in compliance with the Trade Act, 19 U.S.C.
§§ 2501-2581. Allegedly, products are only Trade
Act compliant if they are made in the United States or one of
the designated countries listed in the Code of Federal
Regulations, 48 C.F.R. 25.003. Id. ¶ 34. Russia
is not one of the designated countries, which allegedly
renders Defendants' representations false.
February 17, 2015, Relators filed the instant suit in the
Northern District of California under seal. ECF No. 1. The
case was assigned to Magistrate Judge Howard Lloyd. On April
19, 2016, the United States declined to intervene in the
instant suit. ECF No. 5. On July 29, 2016, California also
declined to intervene. ECF No. 13.
August 5, 2016, the instant suit was unsealed. On August 10,
2016, Relators filed a first amended ...