United States ex rel. MacDowell v. Synnex Corp.

          ORDER RE MOTION FOR LEAVE TO FILE FOURTH AMENDED COMPLAINT

          WILLIAM ALSUP, UNITED STATES DISTRICT JUDGE

         INTRODUCTION

         In this False Claims Act action, qui tam relator moves for leave to file a fourth amended complaint. To the extent stated below, the motion is Granted.

         STATEMENT

         Previous orders have explained this case. In short, defendant Synnex Corporation sells office products to the federal government. In 1980, defendant entered into a contract with the government for the sale of electric power-supply products. The contract incorporated the Trade Agreements Act which necessitated 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 technology components in the United States. As a result of the agreement, Synnex imported products from APC by Schneider Electric (formerly known as American Power Conversion Corporation), which contained Huawei-manufactured parts. The complaint alleges Synnex offered for sale and sold power- supply products to the government under the MAS 70 contract knowing that they contained parts from APC that were manufactured in TAA noncompliant countries (Compl. ¶¶ 2, 6, 9, 43, 45).

         Relator Matthew MacDowell 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 successfully moved to unseal the complaint in February 2019, but declined to intervene. Relators then filed a public third amended complaint in April 2019, alleging violations of the False Claim Act. Defendant moved to dismiss the complaint. A September 2019 order granted the motion and allowed relator to seek leave to amend (Dkt. Nos. 1, 15, 44, 58, 69, 94, 114). Relator now moves for leave to file a fourth amended complaint. Defendant opposes.

         ANALYSIS

         Relator seeks to add detailed allegations regarding the TAA noncompliant products sold to the government. FRCP 15(a)(2) permits a party to amend its pleading with the court's leave, stating that “[t]he court should freely give leave when justice so requires.” In the FRCP 15 context, our court of appeals has instructed that “[f]ive factors are frequently used to assess the propriety of a motion for leave to amend: (1) bad faith, (2) undue delay, (3) prejudice to the opposing party, (4) futility of amendment[, ] and (5) whether plaintiff has previously amended his complaint.” Allen v. City of Beverly Hills, 911 F.2d 367, 373 (9th Cir. 1990). These factors weigh in favor of granting leave here.

         1. Particularity of Pleading.

         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) (Judge Koh).

         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.” To demonstrate sufficient particularity under FRCP 9(b), plaintiff must allege “the who, what, when, where, and how of the misconduct charged.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003).

         Here, the order granting defendant's motion to dismiss all of relator's claims did so on the ground that the complaint did not plead with adequate particularity that defendant had sold products and parts to the government that were TAA noncompliant. Specifically, relator did not adequately allege which noncompliant products from the offer to sale lists were sold to the government, when they were sold, who specifically sold them, and how they did so. Relator has now pled these details with sufficient particularity.

         The fourth amended complaint provides import records from 2011, records of shipments (and corresponding shipment dates) to Synnex from Asian countries in 2014 and 2015, the types of APC parts routinely included in shipments from the 2014 and 2015 records, and the types of products that were sold to the government, but allegedly misrepresented as originating from the United States.

         Defendant argues that of the hundreds of shipment details relator has provided from 2014 and 2015, only four shipments at most originated in TAA noncompliant countries, and that importantly, the shipments alleged to have originated in China from the list actually originated in Taiwan, a TAA-compliant country. Although it is true that most of foreign ports of lading listed in the complaint are in Taiwan, in closely examining the shipping details as well as the export numbers, it is adequately pled that some of the products in question originated from the Philippines or China, TAA noncompliant countries. In particular, the proposed amended complaint provides import records from 2011 in ...