United States District Court, N.D. California
ORDER RE MOTION TO DISMISS, REQUESTS FOR JUDICIAL
NOTICE, AND VACATING HEARING
WILLIAM ALSUP UNITED STATES DISTRICT JUDGE.
False Claims Act action, defendant moves to dismiss qui
tam relator's third amended complaint. For the
foregoing reasons, defendant's motion is
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).
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.
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.”
Public Disclosure Rule.
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.
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).
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).
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.