United States District Court, S.D. California
UNITED STATES OF AMERICA, ex. rel. JAVIER LIM, Plaintiff-Relator,
SALIENT FEDERAL SOLUTIONS INC., a corporation, BRAD ANTLE, an individual, J.D. KUHN, an individual and DOES 1-100 inclusive, Defendants.
ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANTS' MOTION TO DISMISS [DKT. NO. 21]
Gonzalo P. Curiel United States District Judge.
the Court is Salient Federal Solutions, Inc. and Salient CRGT
Holdings, Inc. (“Defendants”) Motion to Dismiss.
Dkt. No. 21. This motion to dismiss was filed on March 15,
2018. On April 5, 2018, Plaintiff-Relator Javier Lim filed a
response in opposition and an affidavit to support that
opposition. Dkt. No. 23-24. Defendants filed a Reply on April
20, 2018. Dkt. No. 25.
move pursuant to Rule 12(b)(6) to dismiss Count IV of his
complaint on the grounds that Relator's Complaint fails
to allege facts to support the essential elements of his
False Claims Act (“FCA”) retaliation claim.
Defendants move to dismiss Counts I-III of the Complaint with
regard to a set of allegations related to 2015 General and
Administrative Expenses for failure to plead with
particularity under Rule 9(b).
to Civil Local Rule 7.1(d)(1), the Court finds the matter
suitable for adjudication without oral argument. For the
reasons set forth below, the Court will GRANT in PART
and DENY in PART Defendants' Motion to Dismiss.
motion to dismiss under Federal Rule of Civil Procedure
12(b)(6) tests the sufficiency of a complaint. Navarro v.
Block, 250 F.3d 729, 732 (9th Cir. 2001). Dismissal is
proper where there is either a “lack of a cognizable
legal theory” or “the absence of sufficient facts
alleged under a cognizable legal theory.” Balisteri
v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th
Cir. 1990). To survive a motion to dismiss, the plaintiff
must allege “enough facts to state a claim to relief
that is plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007). While a plaintiff
need not give “detailed factual allegations, ” a
plaintiff must plead sufficient facts that, if true,
“raise a right to relief above the speculative
level.” Id. at 545. “[F]or a complaint
to survive a motion to dismiss, the non-conclusory
‘factual content, ' and reasonable inferences from
that content, must be plausibly suggestive of a claim
entitling the plaintiff to relief.” Moss v. U.S.
Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009).
reviewing a motion to dismiss under Rule 12(b)(6), the court
must assume the truth of all factual allegations and must
construe all inferences from them in the light most favorable
to the nonmoving party. Thompson v. Davis, 295 F.3d
890, 895 (9th Cir. 2002); Cahill v. Liberty Mut. Ins.
Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Legal
conclusions, however, need not be taken as true merely
because they are cast in the form of factual allegations.
Ileto v. Glock, Inc., 349 F.3d 1191, 1200 (9th Cir.
2003); W. Mining Council v. Watt, 643 F.2d 618, 624
(9th Cir. 1981). Moreover, a court “will dismiss any
claim that, even when construed in the light most favorable
to plaintiff, fails to plead sufficiently all required
elements of a cause of action.” Student Loan Mktg.
Ass'n v. Hanes, 181 F.R.D. 629, 634 (S.D. Cal.
is an anti-fraud statute and requires fraud allegations such
that complaints alleging FCA violations must fulfill the
requirements of Rule 9(b). Bly-Magee v. California,
236 F.3d 1014, 1018. Under Rule 9(b), a heightened pleading
standard applies to complaints alleging fraud, requiring that
they state “with particularity the circumstances
constituting fraud or mistake.” Cafasso v. Gen.
Dynamics C4 Sys., 637 F.3d 1047, 1054 (9th Cir. 2011).
To satisfy Rule 9(b), a pleading must identify the
“who, what, when, where, and how of the misconduct
charged, ” as well as “what is false or
misleading about [the purportedly fraudulent] statement and
why it is false. Id. at 1055 Claims of fraud or
mistake--including FCA claims--must be plead with
particularity and must also plead plausible allegations under
Ashcroft v. Iqbal, 556 U.S. 662 (2009). Id.
filed this FCA action under seal on April 4, 2016. Dkt. No.
1. On February 23, 2018, the United States declined to
intervene in the case. Dkt. No. 13. That same day, this Court
ordered that the Complaint be unsealed and served upon the
Javier Lim was a project control analyst for Defendants
between May 2008 and October 9, 2015. Compl. ¶ 9.
Defendant Salient Federal Solutions was a Delaware
corporation that serves as a prime contractor and
subcontractor for the United States Government and is a
subsidiary of Salient CRGT Holdings, Inc. Id.
¶¶ 10-11. Brad Antle was Chief Executive Officer of
Salient and is the current CEO of Salient CRGT and allegedly
approved the false claims submitted to the United States.
Id. ¶ 12. J.D. Kuhn was the Vice President of
Finance and Corporate Controller of Salient and now serves as
Senior Vice President and Controller of Salient CRGT.
Id. ¶ 13. Kuhn allegedly ordered the false claims
to be submitted to the United States and participated in
prohibited uses of the General and Administrative
(“G&A”) Expenses Pool. Id. ¶
Overhead and Fringe Benefit Rate Scheme
April 2012, Salient was awarded a Global Command Terrestrial
Communications Support Contract that was a “Cost Plus
Fixed Fee” contract. Id. ¶¶ 17-19.
Such contracts allow government contractors to charge actual
costs of labor, plus a fixed percentage to be applied to the
total cost of labor, with the fixed percentage to be applied
determined by the labor pool that provided services for that
particular contract. Id. ¶¶ 20-21. In
2015, Defendants submitted their 2014 Incurred Cost Claims to
a Defense Contract Audit Agency for approval and payment.
Defendants indicated that they had used an indirect labor
pool that provided for a payment on a management overhead
rate of 21.00% of the total labor (“Legacy
Management” pool). Id. ¶ 24. Plaintiff
alleges that Defendants actually used a labor pool that
should have only provided for an 8.10% fixed overhead charge
(“International” pool), resulting in an
overcharge to the United States of $709, 468.63. Id.
¶¶ 25-26. Plaintiff alleges that in August of 2015,
his supervisor and Director of Information of Systems, Jeremy
Ross, approached relator and told him to change the GCTC
contract fixed pool numbers from the International pool to
Legacy Management pool. Id. ¶ 30. Plaintiff
went to Director of Accounting Scott Thatcher, and asked why
he was told to change the organization numbers. Id.
¶ 31. Thatcher responded that “it's obvious
they are trying to charge the government at a higher
rate.” Similarly, Ross responded “it sure looks
that way” in response to a question by Plaintiff as to
whether the company was trying to bill the United States at a
higher rate. Id. ¶ 33. Plaintiff alleges that
at least two other major contracts applied the wrong pool
information to overcharge the United States. Id.
2010 General and Administrative Expense Pool (“2010
G&A Expense Pool”) Allegations
alleges that in 2010 the entirety of pricing specialist
Miranda Marlow's annual salary was submitted to the
G&A pool as costs when Ms. Marlow had actually been out
for three months of family medical leave. Id.
¶¶ 44-46. Plaintiff alleges that a claim was
submitted to the United States that included an entire
year's worth of salary. Id. ¶ 46. Plaintiff
alleges that he filed a ...