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United States ex rel. MacDowell v. Synnex Corp.

United States District Court, N.D. California

September 12, 2019

UNITED STATES ex rel MATTHEW MACDOWELL, Plaintiff,
v.
SYNNEX CORPORATION, Defendant.

          ORDER RE MOTION TO DISMISS, REQUESTS FOR JUDICIAL NOTICE, AND VACATING HEARING

          WILLIAM ALSUP UNITED STATES DISTRICT JUDGE.

         INTRODUCTION

         In this False Claims Act action, defendant moves to dismiss qui tam relator's third amended complaint. For the foregoing reasons, defendant's motion is Granted.

         STATEMENT

         Defendant Synnex Corporation sells office products to the federal government. Relator Matthew MacDowell is an individual suing on behalf of the United States. In 1980, defendant entered into a contract (Multiple Award Schedule 70) with the government for the sale of electric power supply products. The contract incorporates the Trade Agreements Act which necessitates end products sold to the United States Government be manufactured in certain countries. In 2006, Synnex entered into a contract with Huawei Technologies Co., Ltd., a Chinese technology corporation, to sell information technology infrastructure components in the United States. The complaint alleges that as a result of the agreement, Synnex imported products from APC by Schneider Electric (formerly known as American Power Conversion Corporation). These products contained Huawei-manufactured parts. The complaint further alleges Synnex offered for sale and sold power-supply products to the government under MAS 70 knowing that they contained parts from APC that were manufactured in TAA non-compliant countries (Compl. ¶¶ 1, 6, 9, 14, 43, 47, 67, 68).

         Relator filed the instant action in August 2012 in the United States District Court for the District of Columbia, followed by an amended complaint in February 2014 and a second amended complaint in January 2017, all under seal. During this time, various extensions of time allowed the United States to consider whether to intervene. A transfer sent the action to the United States District Court for the Northern District of California in January 2019. The government moved to unseal the complaint in February 2019, but declined to intervene. The motion was granted. Relators then filed a public third amended complaint in April 2019, alleging violations of the False Claim Act. Defendant now moves to dismiss and relator opposes (Dkt. Nos. 1, 15, 44, 60, 69). Pursuant to our Local Civil Rule 7-1(b), this order finds relator's motion suitable for submission without oral argument and hereby vacates the September 26 hearing.

         ANALYSIS

         To allege a False Claims Act claim for relief, there must be a “(1) a false statement or fraudulent course of conduct, (2) made with scienter, (3) that was material, causing (4) the government to pay out money or forfeit moneys due.” United States v. Safran Grp., S.A., No. 15- CV-00746-LHK, 2017 WL 3670792, at *9 (N.D. Cal. Aug. 25, 2017). Furthermore, because the complaint alleges fraud, it is subject to a heightened pleading standard under FRCP 9(b) which requires “a party [to] state with particularity the circumstances constituting fraud or mistake.”

         1. Public Disclosure Rule.

         Defendant moves to dismiss all of relator's claims on the grounds that the complaint is based on two publicly disclosed federal lawsuits thereby triggering the public disclosure bar. Prior to 2010, the public disclosure bar applied if the following three requirements were met: (1) the disclosure at issue occurred through one of the channels specified in the statute; (2) the disclosure was ‘public'; and (3) the relator's action is ‘based upon' the allegations or transactions publicly disclosed.” 37 U.S.C. § 3730(e)(4)(A) (2006). Following a 2010 amendment, the public disclosure bar requirements were changed so that “based upon” is defined as “substantially the same as, ” and the “original source” exception was expanded.

         The first lawsuit was filed in the United States District Court, District of Massachusetts by qui tam relator Christopher Crennen in 2006 against various companies including Synnex. The 2006 complaint alleged defendants offered for sale computer and electronic products through the GSA from non-designated countries that did not comply with the TAA in violation of the False Claims Act. The allegations regarding Synnex specifically identified non-compliant printers and a computer. (Br. Ex. A, B).

         The second lawsuit was filed in the United States District Court, District of Columbia by qui tam relator Brady Folliard in 2007 against a variety of companies including Synnex. The 2007 complaint alleged Synnex sold Hewlett-Packard products that originated in China through the GSA's MAS in violation of the TAA. Folliard then filed a second amended complaint in 2008 alleging substantially the same claims. Folliard filed a third amended complaint in 2010 alleging substantially the same claims but specifically identified that the contract in question was MAS 70. (Br. Ex. C, D, E).

         It is undisputed the first two elements of the public disclosure bar test are met. Civil hearings, including the pleadings and other materials filed in civil litigation remain one of the channels specified in the statute that may be subject to the public disclosure bar. Furthermore, the disclosures were public as the documents in the two lawsuits were publicly filed. The main point of contention between the parties is whether the relator's action is based upon or substantially similar to the allegations or transactions publicly disclosed in the two lawsuits and whether the original source exception applies.

         A. ...


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