Citations
- 308 F. Supp. 3d 56
Full opinion text
BERYL A. HOWELL, Chief Judge
The relator, Brady Folliard, initiated this lawsuit, pursuant to the qui tam provision of the False Claims Act ("FCA"), 31 U.S.C. § 3730(b)(1), seven years ago, against two defendants, Westcon Group, Inc. ("Westcon") and one of its wholly-owned subsidiaries, Comstor Corporation ("Comstor"), alleging that the defendants, along with another wholly-owned subsidiary of Westcon, Westcon North America Inc. ("Westcon NA"), sold to the U.S. government "thousands of" mostly unspecified products made by Cisco Systems, Inc. ("Cisco") that originated in non-designated countries in violation of the Trade Agreement Act ("TAA"), 19 U.S.C. §§ 2501 et seq. Rel.'s Third Am. Compl. ("TAC") ¶¶ 1-2, 143, ECF No. 65. These allegations were initially predicated on the relator's "direct and independent knowledge" gained from his position as a Strategic Account Executive for Insight Public Sector Inc. ("Insight"), a company that partnered with the defendants "on multiple sales." Compl. ¶ 10, ECF No. 1; TAC ¶ 5. After almost five years of investigation and the defendants' production of data documenting over $123 million in sales, as well as 49 charts, each of which "encompasses hundreds of pages" of Cisco's product information, see TAC ¶¶ 137-38; see also id. , Ex. 17-17F, Defs.' Produced Sales Data, ECF Nos. 65-19-24; id. , Ex. 18, Cisco Production Cover Letter (dated Apr. 19, 2013) ("Cisco Production Letter"), ECF No. 65-25, the United States declined to intervene, see U.S.'s Not. Election Decline Intervention ("U.S.'s Not.") at 1, ECF No. 43. The operative Third Amended Complaint seeks treble damages and civil penalties of "not less than $5,500 and not more than $11,000 for each violation of" the FCA by the defendants "from 2005 and continuing to the present." TAC ¶¶ 1, 182-99; id. 47-48. The defendants have moved to dismiss the Relator's Third Amended Complaint, pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), on grounds that: (1) the "claims are based on, and substantially similar to, prior public disclosures," for which the relator is not an "original source," and therefore are barred, under 31 U.S.C. § 3730(e)(4), Defs.' Mot. Dismiss Rel.'s TAC ("Defs.' Mot.") at 1-2, ECF No. 67; and (2) the Third Amended Complaint fails to state a plausible claim for relief under the FCA or satisfy the particularity requirements of Federal Rule of Civil Procedure 9(b), id. at 2-3. For the reasons set forth below, the defendants' motion is granted, and this case is dismissed.
I. BACKGROUND
The relator alleges that the defendants submitted false claims and false statements to the U.S. government under two Federal Supply Schedule ("FSS") contracts awarded to the defendants by the General Service Administration ("GSA") authorizing the defendants' sale to the federal government of information technology ("IT") products. TAC ¶¶ 3, 7, 10, 37. Summarized below is the relevant factual history, as alleged in the Third Amended Complaint and its twenty attachments, followed by the procedural history of this litigation.
A. Factual History
1. The Defendants' Business with the Federal Government
For over two decades, the defendants have used two FSS contracts to offer for sale to the federal government "thousands of" Cisco products. Id. ¶¶ 7-11, 143. These products are largely unidentified in the Third Amended Complaint, except for nineteen "representative" examples of purchase orders, reflecting 46 transactions for items delivered to the federal government between September 29, 2008, and December 12, 2013. Id. ¶¶ 116-35 (discussing two purchase orders), 145-81 (discussing seventeen additional purchase orders). The first FSS contract at issue, designated as GS-35F-4389G, was entered in 1996, by defendant Comstor, which is "one of the primary distributors of Cisco products." Id. ¶ 6, 41; id. , Ex. 1, Comstor Contract GS-35F-4389G ("Comstor Contract"), ECF No. 65-2. Indeed, "almost all of Comstor's sales through" this contract "involve[d] Cisco products." Id. ¶¶ 7-8. Prior to March 17, 2010, Comstor "was the sole authorized FSS contract holder for Cisco products," and, thus, "any GSA sales of Cisco products had to come from Comstor directly" or from a smaller vendor with which Comstor had partnered, or else "an unauthorized source." Id. ¶¶ 45, 55. In 2010, Comstor "ceased to exist and simply became Westcon." Id. ¶ 45 n.6.
The second FSS contract at issue, designated as GS-35F-0563U, has been held by Westcon NA since 2008, and is the vehicle through which the defendants presently sell IT products, including Cisco products, either directly or through partners. Id. ¶¶ 10-11, 45; see also id. , Ex. 2, Westcon Contract GS-35F-0563U ("Westcon Contract"), ECF No. 65-3. Based on data from 2006 through 2012 for both contracts, nearly $500 million of the defendants' $600 million dollars in GSA sales during the time period were attributable to Cisco products. Id. ¶ 12. As noted, those products are not identified in the Third Amended Complaint, but the "representative" examples include computer related materials and supplies, such as flash drives, routers, and switch ports. See id. , Ex. 19, Source Documents ("Rel.'s Sales Source Docs."), ECF No. 65-26; id., Ex. 20, Source Country-of-Origin Documents ("Rel.'s COO Source Docs."), ECF No. 65-27.
The defendants' contracts are governed by the TAA, 19 U.S.C. §§ 2501 et seq. , which "implements numerous multilateral and bilateral international trade agreements and other trade initiatives." TAC ¶ 58; see also Westcon Contract at 9 (requiring compliance with TAA); Comstor Contract at 6 (same). Under the TAA and its implementing regulations, the Federal Acquisition Regulations ("FAR"), items sold through GSA FSS contracts must be "U.S.-made or designated country end products." TAC ¶ 58. The FAR defines "end product" as "those articles, materials, and supplies to be acquired under the contract for public use." Id. ¶ 59 (quoting FAR 52.225-5(a) ). The FAR also provides a list of designated countries, including signatories to the World Trade Organization ("WTO") Government Procurement Agreement ("GPA") and to bilateral trade agreements with the U.S. See id. ¶¶ 75-76 (citing FAR 52.225-5(a) ). Countries such as China and Malaysia, which are not on the FAR list, are identified by exclusion as non-designated countries. Id. ¶¶ 75-76. For the purposes of the TAA, an end product is "U.S.-made" or from a "designated country" when the item was completely manufactured, grown, or produced, or else "substantially transformed" in the U.S. or a designated country. Id. ¶ 77 (citing 19 U.S.C. § 2518(4)(B) ; 19 C.F.R. § 177.22(a) ).
The FAR imposes on vendors, such as the defendants, a general obligation to sell under the FSS contract "only U.S.-made or designated country end products," id. ¶ 72 (citing FAR 52.225-5(b) ), and a continuing obligation to certify that each end product sold through a FSS contract is TAA compliant, id. ¶ 67 (citing FAR 52.225-6(a) ("The offeror certifies that each end product, except those listed in paragraph (b) of this provision, is a U.S.-made or designated country end product, as defined in the clause of this solicitation entitled 'Trade Agreements.' ") ). Should the defendants seek to sell an end product that is not from a designated country, the defendants must identify the item to the GSA before offering the item for sale. Id. ¶ 69 (citing FAR 52.225-6(b) ("The offeror shall list as other end products those supplies that are not U.S.-made or designated country end products.") ).
The defendants may also sell to the U.S. Government, without violating the TAA, "open market" items that are not included on the pricelists accompanying the FSS contracts, even when those items originate in non-designated countries. Id. ¶¶ 87-88 & n.10; see also Westcon Contract at 12 (allowing for sale of open market items, "also known as incidental items, noncontract items, non-Schedule items, and items not on [an FSS] contract"); Comstor Contract at 8-9 (same). The FAR permits vendors to procure these non-contract, "open-market" items in the interest of "administrative convenience," as long as specified requirements under FAR 8.402(f) are met, including requirements for publicizing proposed contract actions and engaging in competitive procedures. TAC ¶ 89-94.
2. The Relator's Business with the Defendants
At all times relevant to the instant litigation, the relator worked as a Strategic Account Executive at Insight, a "Value Added Reseller" ("VAR") that has partnered with the defendants to sell IT products to federal agencies. Id. ¶ 5, 101-02. As a VAR, Insight "combine[s], configure[s], and sell[s] computer products manufactured by other companies in specifically-designed configurations to meet the needs of their customers." Id. ¶ 103. In essence, VARs are "middle-men in the supply chain between the technology manufacturers and their ultimate customers." Id. ¶ 104. The defendants partner with VARs and other smaller vendors to facilitate sales either through prime contractor/subcontractor agreements, in which the sub-contractor or "authorized dealer" is not required to maintain its own GSA schedule contract, or through Contractor Team Arrangements ("CTA"), in which both parties maintain GSA schedule contracts, although not necessarily for the same products. Id. ¶ 46-54. Here, the relator, "on numerous occasions," sold Cisco products through the defendants' FSS contracts, "both as an authorized dealer ... and through CTAs with Defendants." Id. ¶ 107.
Through his work selling the defendants' products, the relator "routinely accessed" country-of-origin ("COO") charts, which "Cisco regularly created," and "list[ed] product numbers and country-of-origin information for thousands of Cisco products." Id. ¶ 108. Cisco provides these charts to vendors, including the relator's employer, Insight, so that the vendors may "check the Country of Origin to comply with government regulations in selling products to the government." Id. ¶ 109. In reviewing such COO charts alongside the defendants' pricelists and the purchase orders processed by Insight under the defendants' FSS contracts, the relator began to suspect that the defendants were failing to comply with the TAA in two ways. Id. ¶ 111-13; see also id. , Ex. 15, Decl. Brady Folliard, Strategic Account Exec., Insight Public Sector ("Folliard Decl."), ECF No. 65-16 (explaining review process). First, he found the defendants "were including non-TAA-compliant products on their FSS contract pricelists," and that they "in fact sold" such products "to the United States Government by concealing the products' true COO information." Id. ¶¶ 111-12. Second, the relator came to believe that the defendants "routinely circumvented their TAA-compliance obligations by marking certain end products from non-designated countries as 'open market,' but then selling those products outside the open market protocol outlined in FAR 8.402." Id. ¶ 113.
To illustrate the relator's discovery of the defendants' "misconduct," the Third Amended Complaint cites two example purchase orders that Insight placed under the defendant Weston's GSA FSS contract in 2010 and 2011. Id. ¶¶ 116-17, 126 (citing id. , Ex. 14, Purchase Order (dated Sept. 24, 2010), ECF No. 65-15; id. , Ex. 16, Purchase Order (dated July 28, 2011), ECF No. 65-17); Folliard Decl. Eight of the nine items identified in the Third Amended Complaint as sold through these two purchase orders were listed as "open market" items, and one item is described as an "end product." See id. ¶¶ 117-35. The relator alleges that he determined, upon review of Cisco COO charts, that the items had always originated in non-specified non-designated countries. Id. ¶¶ 122, 127-35. Based on the relator's understanding of the FAR's treatment of "open market" items of certain monetary values, the Third Amended Complaint claims that these eight items, along with the one identified end product, should have been TAA-compliant and that the defendants engaged in fraudulent activities by selling these items from non-compliant countries. Id. ¶¶ 95, 135 (citing FAR 8.405-1(b) ("micro-purchase threshold") ).
B. Procedural History
Before filing his original Complaint, on April 15, 2011, the relator disclosed to the United States the substance of his allegations that the defendants "are selling products to the United States Government that did not originate in designated countries under the [TAA], and therefore are making material false statements and presenting false claims to the United States Government for payment." Compl. ¶ 9; TAC ¶ 136. While the complaint remained under seal, the United States investigated the relator's allegations, including by issuing a civil investigative demand ("CID") to the defendants to obtain "sales data and supporting documentation for the relevant time period." TAC ¶ 136. The government also requested COO charts from Cisco "for all products Cisco offered for sale since January 2000." Id. ¶ 137. In response, the defendants provided data, from 2008 through 2011, for $123,531,232.29 in sales under the two GSA contracts, as well as 49 quarterly COO charts, covering most of the period between January 2000 and September 2012. Id. ¶ 136-37 & n.14. The government shared these materials with the relator, prompting the relator to amend his complaint for the first time on May 30, 2014. Id. ¶ 140; see generally First Am. Compl., ECF No. 27.
On January 29, 2016, almost five years after the relator initiated his qui tam suit, the United States filed notice of its decision to decline intervention. U.S.'s Not. at 1. Thereafter, on March 4, 2016, both the relator's original Complaint and First Amended Complaint were unsealed. Order at 1, ECF No. 46. After the relator filed a Second Amended Complaint, see Second Am. Compl., ECF No. 48, the defendants moved to dismiss, and their motion was considered at a hearing on January 24, 2017, see Min. Order (dated Jan. 25, 2017). At the close of the hearing, the relator was allowed to amend his complaint a third time, resulting in the denial, as moot, of the defendants' then-pending first motion to dismiss. Id.
The Third Amended Complaint, filed on February 23, 2017, asserts four claims against each defendant for violations of two versions of two provisions of the FCA, both before and after those two provisions were amended by the Fraud Enforcement Recovery Act ("FERA"), Pub. L. No. 111-21, 123 Stat. 1617 (2009). The first two counts allege in almost identical language that the defendants violated the FCA's "presentment provision" by "knowingly submitt[ing], and caus[ing] to be submitted" to the government "false or fraudulent claims for payment and reimbursement" that the government paid, "unaware of the falsity of the ... claims made by the Defendants," regarding country-of-origin information. TAC ¶¶ 182-189. Count I alleges the FCA's presentment provision, in 31 U.S.C. § 3729(a)(1) (2008), was violated by defendants' claims submitted "before May 20, 2009," and Count II alleges the same for claims submitted "after May 20, 2009," in violation of 31 U.S.C. § 3729(a)(1)(A) (2009). See id. Similarly, the remaining two counts assert virtually identical claims under pre- and post-FERA amendment versions of the FCA's "false statement clause." Id. ¶¶ 190-99. Count III alleges that the defendants "knowingly made, used or caused to be made or used, material false statements to obtain" payments from the government for false claims made "before June 7, 2008," in violation of 31 U.S.C. § 3729(a)(2) (2008), and Count IV alleges the same for false claims made "after June 7, 2008," in violation of 31 U.S.C. § 3729(a)(1)(B) (2009). Id. ¶¶ 190-99. All four counts are based on allegations that the defendants sold non-TAA compliant end products, resulting in over $8 million in sales "attributable to fraud." Id. ¶¶ 143, 184, 188, 193, 198. The relator alleges that the non-compliant products at issue fall into two categories: (1) products on the defendants' FSS pricelists for which the country-of-origin information was falsified, see id. ¶¶ 56-86; and (2) products incorrectly marked "open market," which were not and should have been compliant with the TAA, see id. ¶¶ 87-100.
The defendants have again moved to dismiss these claims.
II. LEGAL STANDARD
A. Federal Rule of Civil Procedure 12(b)(1)
" 'Federal courts are courts of limited jurisdiction,' possessing 'only that power authorized by Constitution and statute.' " Gunn v. Minton , 568 U.S. 251, 256, 133 S.Ct. 1059, 185 L.Ed.2d 72 (2013) (quoting Kokkonen v. Guardian Life Ins. Co. of Am. , 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994) ). Indeed, federal courts are "forbidden... from acting beyond our authority," NetworkIP, LLC v. FCC , 548 F.3d 116, 120 (D.C. Cir. 2008), and, therefore, have "an affirmative obligation 'to consider whether the constitutional and statutory authority exist ... to hear each dispute,' " James Madison Ltd. by Hecht v. Ludwig , 82 F.3d 1085, 1092 (D.C. Cir. 1996) (citation omitted).
To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction, the plaintiff bears the burden of establishing the court's jurisdiction by a preponderance of the evidence. See Lujan v. Defs. of Wildlife , 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). When considering a motion under Rule 12(b)(1), the court must accept as true all uncontroverted material factual allegations contained in the complaint and "construe the complaint liberally, granting plaintiff the benefit of all inferences that can be derived from the facts alleged, ... and upon such facts determine jurisdictional questions." Am. Nat'l Ins. Co. v. FDIC , 642 F.3d 1137, 1139 (D.C. Cir. 2011) (internal quotation marks and citations omitted). Although the court is required "to take as true all well-pled factual allegations within [the] complaint," the court must "disregard any legal conclusions, legal contentions couched as factual allegations, and unsupported factual allegations within the complaint." Gulf Coast Mar. Supply, Inc. v. United States , 867 F.3d 123, 128 (D.C. Cir. 2017). In evaluating subject matter jurisdiction, the court may look beyond the complaint to "undisputed facts evidenced in the record, or the complaint supplemented by undisputed facts plus the court's resolution of disputed facts." Banneker Ventures, LLC v. Graham , 798 F.3d 1119, 1129 (D.C. Cir. 2015) (quoting Herbert v. Nat'l Acad. of Scis. , 974 F.2d 192, 197 (D.C. Cir. 1992) ).
B. Federal Rule of Civil Procedure 12(b)(6)
To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the "complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Wood v. Moss , --- U.S. ----, 134 S.Ct. 2056, 2067, 188 L.Ed.2d 1039 (2014) (quoting Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ). A claim is facially plausible when the plaintiff pleads factual content that is more than " 'merely consistent with' a defendant's liability," and "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 556-57, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ); see also Rudder v. Williams , 666 F.3d 790, 794 (D.C. Cir. 2012). Although "detailed factual allegations" are not required to withstand a Rule 12(b)(6) motion, a complaint must offer "more than labels and conclusions" or "formulaic recitation of the elements of a cause of action" to provide "grounds" for "entitle[ment] to relief," Twombly , 550 U.S. at 555, 127 S.Ct. 1955 (alteration in original), and "nudge[ ] [the] claims across the line from conceivable to plausible," id. at 570, 127 S.Ct. 1955 ; see Banneker Ventures , 798 F.3d at 1129 ("Plausibility requires more than a sheer possibility that a defendant has acted unlawfully ....") (internal quotation marks and citation omitted). Thus, "a complaint [does not] suffice if it tenders 'naked assertion[s]' devoid of 'further factual enhancement.' " Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly , 550 U.S. at 557, 127 S.Ct. 1955 ) (second alteration in original).
As when considering a motion to dismiss for lack of subject matter jurisdiction, the court must accept all factual allegations in the complaint as true for the purposes of the motion, "even if doubtful in fact," Twombly , 550 U.S. at 555, 127 S.Ct. 1955 ; see also Harris v. D.C. Water & Sewer Auth. , 791 F.3d 65, 68 (D.C. Cir. 2015), "but is not required to accept the plaintiff's legal conclusions as correct," Sissel v. U.S. Dep't of Health & Human Servs. , 760 F.3d 1, 4 (D.C. Cir. 2014). In addition, courts "ordinarily examine" other sources "when ruling on Rule 12(b)(6) motions to dismiss, in particular, documents incorporated into the complaint by reference, and matters of which a court may take judicial notice." Tellabs, Inc. v. Makor Issues & Rights, Ltd. , 551 U.S. 308, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007).
C. Federal Rule of Civil Procedure 9(b)
To withstand a motion to dismiss for failure to state a fraud claim, including a claim under the FCA, the plaintiff must meet the pleading standard set out in Federal Rule of Civil Procedure 9(b), which provides that "a party must state with particularity the circumstances constituting fraud or mistake." FED. R. CIV. P. 9(b) ; see also Universal Health Servs., Inc. v. United States ex rel. Escobar ("Escobar "), --- U.S. ----, 136 S.Ct. 1989, 2004 n.6, 195 L.Ed.2d 348 (2016) ("False Claims Act plaintiffs must also plead their claims with plausibility and particularity under Federal Rules of Civil Procedure 8 and 9(b)."); United States ex rel. Totten v. Bombardier Corp. ("Totten I "), 286 F.3d 542, 551-52 (D.C. Cir. 2002) ("[B]ecause the False Claims Act is self-evidently an anti-fraud statute, complaints brought under it must comply with Rule 9(b)."). This heightened pleading standard is designed to "discourage[ ] the initiation of suits brought solely for their nuisance value, and safeguard[ ] potential defendants from frivolous accusations of moral turpitude," as well as "guarantee all defendants sufficient information to allow for preparation of a response." United States ex rel. Heath v. AT & T, Inc. ("Heath "), 791 F.3d 112, 123 (D.C. Cir. 2015) (first alteration in original) (quoting United States ex rel. Williams v. Martin-Baker Aircraft Co., Ltd. ("Williams "), 389 F.3d 1251, 1256 (D.C. Cir. 2004) ).
The plaintiff must plead with sufficient particularity "the time, place and content of the false misrepresentations, the fact misrepresented and what was retained or given up as a consequence of the fraud." Williams , 389 F.3d at 1256 (quoting Kowal v. MCI Commc'ns Corp. , 16 F.3d 1271, 1278 (D.C. Cir. 1994) ); see also United States ex rel. Shea v. Cellco P'ship ("Shea "), 863 F.3d 923, 936 (D.C. Cir. 2017). In other words, the plaintiff must provide the "who," "what," "when," and "where" with respect to the circumstances of the fraud, so that the defendant is put on "fair notice of the fraud of which it is accused." See Heath , 791 F.3d at 124.
III. DISCUSSION
The defendants present three grounds for dismissing the relator's Third Amended Complaint. First, they argue that the Third Amended Complaint is barred, under 31 U.S.C. § 3730(e)(4), because the alleged fraud has been publicly disclosed previously, and the relator is not an original source. Defs.' Mem. Supp. Mot. Dismiss ("Defs.' Mem.") at 8-17, ECF No. 67-1. Second, according to the defendants, the Third Amended Complaint fails to state a claim upon which relief can be granted, under either the FCA's presentment provision or the false statement provision, because the Third Amended Complaint lacks plausible allegations of falsity, materiality, and scienter. Id. at 18-33, 37 n.11. Finally, the defendants contend the Third Amended Complaint fails to plead facts of the alleged fraudulent scheme with the particularly required to put the defendants on notice under Rule 9(b). Id. at 33-40. These challenges are addressed seriatim .
A. The Public Disclosure Bar is Not Triggered
The defendants contend that the Third Amended Complaint must be dismissed under the FCA' public disclosure bar because the allegations of fraud were disclosed in the relator's complaints in prior qui tam lawsuits and in the government's response to the relator's FOIA request. Defs.' Mem. at 9. Further, the defendants argue that the relator cannot overcome the bar because he has not demonstrated that he is "an original source." Id. at 13. As explained below, after describing the framework for analyzing the public disclosure bar, the relator's claims are not barred on this basis.
1. The Public Disclosure Bar Framework
"The FCA encourages insiders to expose fraudulent conduct, but does not reward relators who seek to profit by bringing suits to complain of fraud that has already been publicly disclosed." United States ex rel. Oliver v. Philip Morris USA Inc. ("Oliver I "), 763 F.3d 36, 39 (D.C. Cir. 2014) ; see also United States ex rel. Springfield Terminal Ry. Co. v. Quinn ("Springfield Terminal "), 14 F.3d 645, 651 (D.C. Cir. 1994) ("The history of the FCA qui tam provisions demonstrates repeated congressional efforts to walk a fine line between encouraging whistle-blowing and discouraging opportunistic behavior."). To that end, the FCA contains a public disclosure bar, codified at 31 U.S.C. § 3730(e)(4)(A), that "limits the ability of a private party to bring a qui tam suit where the fraud is already publicly known," unless the claims are brought by the Attorney General or an "original source" of the information underlying the claims. Oliver I , 763 F.3d at 39 ; Shea , 863 F.3d at 927 ("The bar prohibits private parties from bringing suit based on a fraud already disclosed through identified public channels (unless the relator is 'an original source of the information')." Thus, "[t]he FCA sets up a two-part test for determining jurisdiction." United States ex rel. Findley v. FPC-Boron Emps.' Club , 105 F.3d 675, 681 (D.C. Cir. 1997). First, the court must determine whether the information underlying the allegations and transactions has been publicly disclosed through enumerated channels. See Springfield Terminal , 14 F.3d at 651. "If-and only if-the answer to the first question is affirmative, will the court then proceed to the original source inquiry." Id. (internal quotation marks and citation omitted); see also Oliver I , 763 F.3d at 39 n.3 ("Because we conclude that the information supporting Oliver's claim had not been publicly disclosed, we do not reach the question whether Oliver was an 'original source.' ").
Section 3730(e)(4)(A) was amended, effective March 23, 2010, as part of the Patient Protection and Affordable Care Act, see Patient Protection and Affordable Care Act, Pub. L. No. 111-148, § 10104(j)(2), 124 Stat. 119, 901-02 (2010). The pre-amendment version of § 3730(e)(4)(A), enacted in 1986, provided:
No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.
31 U.S.C. § 3730(e)(4)(A) (1986). As amended, section 3730(e)(4)(A) currently provides:
The court shall dismiss an action or claim under this section, unless opposed by the Government, if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed-
(i) in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party;
(ii) in a congressional, Government Accountability Office, or other Federal report, hearing, audit, or investigation; or
(iii) from the news media,
unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.
31 U.S.C. § 3730(e)(4)(A) (2010).
As a threshold matter, the parties agree that the 2010 amendment is not retroactive, and thus the alleged conduct occurring prior to March 23, 2010, which covers the bulk of the relevant sales, would be subject to the pre-amendment version of the public disclosure bar, while later alleged conduct would be subject to the post-amendment version. See Defs.' Mem. at 8 n.2; Rel.'s Opp'n Defs.' Mot. Dismiss ("Rel.'s Opp'n") at 9, ECF No. 69; see also TAC ¶ 12 ("[T]he vast majority of those sales occurred in the early years ... 2006 and 2007."). Among the changes to the public disclosure bar resulting from the amendment is that while the pre-2010 public disclosure bar was expressly jurisdictional, the 2010 amendment omits the jurisdictional language and states only that a court must "dismiss" a case falling under the public disclosure bar. "Thus, when the amended version of § 3730(e)(4)(A) applies, public disclosure does not deprive the Court of subject matter jurisdiction, but merely deprives the plaintiff of his claim." United States ex rel. Shea v. Verizon Commc'ns, Inc. , 160 F.Supp.3d 16, 24 (D.D.C. 2015), aff'd sub nom. United States ex rel. Shea v. Cellco P'ship , 863 F.3d 923 (D.C. Cir. 2017).
Nonetheless, under both the pre- and post-amendment versions of § 3730(e)(4)(A), a court must decide if either "the allegation of fraud itself" or "the transactions that give rise to an inference of fraud" have been publicly disclosed. United States ex rel. Oliver v. Philip Morris USA Inc. ("Oliver II "), 826 F.3d 466, 471 (D.C. Cir. 2016) (emphases added); Shea , 863 F.3d at 933 ; see also 31 U.S.C. § 3730(e)(4)(A) (1986) ("No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions ...." (emphasis added) ). " 'Transaction' in this sense 'refers to two or more elements that, when considered together, give rise to an inference that fraud has taken place.' " Oliver II , 826 F.3d at 471 (quoting Oliver I , 763 F.3d at 40 ).
The D.C. Circuit has set out a now familiar formula to assess whether a transaction was publicly disclosed: "[I]f X + Y = Z, Z represents the allegation of fraud and X and Y represent its essential elements. In order to disclose the transaction publicly, the combination of X and Y must be revealed, from which readers or listeners may infer Z, i.e. , the conclusion that fraud has been committed." Springfield Terminal , 14 F.3d at 654 (emphases in original); Shea , 863 F.3d at 933 ("If the allegation of fraud (Z) is not itself in the public domain, then the bar applies only if both X and Y are publicly known.").
Applied to the facts of this case, the transaction would be the fact that the defendants were selling TAA non-compliant products to the government (X), plus the fact that the defendants falsely certified that they were complying with the TAA (Y), which permits the inference that the defendants committed fraud (Z). See Oliver II , 826 F.3d at 471 ; see also Springfield Terminal , 14 F.3d at 655 ("Fraud requires recognition of two elements: a misrepresented state of facts and a true state of facts." (emphasis in original) ). If either X and Y, or Z, was in the public domain before the relator brought this action, then the plaintiff's claims, under the applicable version of the public disclosure bar, cannot proceed. See Oliver II , 826 F.3d at 471.
2. The Purported Public Disclosures do not Trigger the Bar
The defendants contend, without distinguishing the analysis for pre- and post-amendment sales under § 3730(e)(4)(A), that the Z element in this case, i.e. , the fraud alleged, was " 'based upon' and substantially similar' to the allegations of fraud raised in earlier qui tam actions." Defs.' Mem. at 10. Since "there is a comparable 'allegation' of fraud in the prior public disclosures," the defendants reason that "the D.C. Circuit's X + Y = Z formulation ... is not applicable." Defs.' Reply Supp. Mot. Dismiss ("Defs.' Reply") at 4, ECF No. 71. The relator responds that his earlier qui tam actions "do not implicate these Defendants in any way," and the Third Amended Complaint "is based exclusively on information that is independent of any FOIA request or response." Rel.'s Opp'n at 10-17. The Court agrees with the relator: none of his prior complaints provide the basis for the allegations in the instant matter.
At the outset, the defendants summarize their understanding of the "core allegation of fraud in the instant suit: "that Comstor-allegedly the sole authorized FSS contract holder for Cisco products prior to March 17, 2010-sold Cisco products to the government that were manufactured in non-designated countries and therefore violated the [TAA]." Defs.' Mem. at 10. The relator does not dispute this summary of his fraud allegations but contests that he "previously asserted these same allegations relating to the sale of purportedly non-compliant Cisco products to the government in [the] earlier qui tam actions in this district against multiple re-sellers." Id. ; accord Rel.'s Opp'n at 11.
The defendants point to three prior actions filed by the relator and, yet, provide analysis of the public disclosure bar as it pertains to only two of those complaints. See Defs.' Mem. at 10-12 (discussing Defs.' Mot., Ex. B, Compl. ("World Wide Technologies Compl."), ¶¶ 18-19, 21, ECF No. 67-4; id. , Ex. C, Compl. ("Apptis Compl."), ¶¶ 18-19, 21, ECF No. 67-5). Examination of these two qui tam complaints, which were both voluntarily dismissed by the relator shortly after the government declined intervention, see Gov't's Not. Election Decline Intervention, Folliard v. Apptis, In c. ("Apptis "), Civ. No. 08-320 (EGS) (D.D.C. Feb. 12, 2010), ECF No. 11; Not. of Voluntary Dismissal, Apptis , (D.D.C. Feb. 23, 2010), ECF No. 13; Gov't's Not. Election Decline Intervention, Folliard v. World Wide Technologies, Inc. ("World Wide Technologies "), Civ. No. 08-761 (ESH) (D.D.C. June 1, 2008), ECF No. 10; Not. of Voluntary Dismissal, World Wide Technologies , (D.D.C. June 4, 2010), ECF No. 14, demonstrate the weakness of the defendants' position.
The complaints in Apptis and World Wide Technologies use almost identical language to allege that the defendants submitted false claims and made false statements to the U.S. government "in connection with improper pricing and the selling of non-compliant products," in violation of the TAA. See Apptis Compl. ¶¶ 4, 22-32; World Wide Technologies Compl. ¶¶ 4, 22-32. Each defendant allegedly sold Cisco products as "a certified partner of Cisco Systems" to the government through Solutions for Enterprise-Wide Procurement ("SEWP") contracts that required compliance with the TAA. Apptis Compl. ¶¶ 7, 14; World Wide Technologies Compl. ¶¶ 7, 14. The relator, in preparing government proposals for his employer, Insight, another Cisco partner, "became familiar with Cisco products being offered for sale by" each defendant, including the "Cisco products that were produced in non-designated countries." World Wide Technologies Compl. ¶¶ 15, 18; Apptis Compl. ¶¶ 15, 18. "He learned of these products by communicating with his supervisors who had been in contact with Cisco representative about proposals and by communicating directly with a Cisco Representative about certain products." World Wide Technologies Compl. ¶ 18; Apptis Compl. ¶ 18. More "specifically," he exchanged emails with Steve Marcellino, the Government Programs Coordinator for Comstor, which company is described as "a designated point of sale for Cisco Systems." World Wide Technologies Compl. ¶ 19; Apptis Compl. ¶ 19. The relator reviewed the information obtained from the email exchange alongside product lists he had obtained through his own work with each company to determine that the defendants were "selling several non-compliant Cisco products through SEWP in violation of the TAA." World Wide Technologies Compl. ¶ 21; Apptis Compl. ¶ 21.
Turning now to the public-disclosure-bar analysis, the complaints in Apptis and World Wide Technology do not actually make any allegations or provide any information about the sales by the instant defendants. Nonetheless, the defendants contend that the Third Amended Complaint is barred because the relator's complaints in Apptis and World Wide Technologies "specifically identified Comstor as the designated point of sale for the purportedly non-compliant Cisco products," and "identified Comstor employee Steve Marcellino as the 'Cisco Representative' providing him information regarding the alleged sale of Cisco products in violation of the TAA." Defs.' Mem. at 11 (emphasis in original). Thus, in the defendants' view, the allegations in the present qui tam lawsuit have previously been disclosed. Id. at 12. The relator counters that the public disclosure bar has not been triggered because "while [the] prior qui tam complaints reference the fact that the various named defendants all sold Cisco products as authorized re-sellers for Westcon and Comstor, Relator did not allege that Defendants themselves took part in a conspiracy to defraud the Government, or engaged in any other misconduct." Rel.'s Opp'n at 10. The relator is correct.
In considering whether the allegations in the instant action are "substantially similar to" or "based upon" the allegations in the three prior qui tam cases, the key question is "whether the publicly disclosed information could have formed the basis for a governmental decision on prosecution, or could at least have alerted law-enforcement authorities to the likelihood of wrongdoing." United States ex rel. Settlemire v. District of Columbia ("Settlemire "), 198 F.3d 913, 918 (D.C. Cir. 1999) (internal quotation marks omitted); see also United States ex rel. Davis v. District of Columbia ("Davis I "), 679 F.3d 832, 836 (D.C. Cir. 2012). Here, the defendants contend that law enforcement would have been alerted to the wrongdoings alleged in the instant action because the relator's "prior qui tam actions identified Comstor by name; alleged that Comstor's authorized re-sellers were selling non-TAA compliant Cisco products to the government; and that the same Comstor employee confirmed that the products being sold to the government were non-compliant." Defs.' Reply at 6 (emphasis in original).
The aspects of the complaints in the relator's other qui tam cases highlighted by the defendants obscure the fundamental fact that those prior complaints assert no allegations against the defendants. First, only two of the qui tam complaints even identify the defendants by name, and, in doing so, they only mention Comstor as "a designated point of sale for Cisco products." Apptis Compl. ¶ 19; World Wide Technologies Compl. ¶ 19. The filings say nothing about the defendants' involvement in the alleged fraudulent scheme. Second, and relatedly, the allegations against the resellers are not directly linked to Comstor, especially since Comstor is alleged to be "a designated point of sale," Apptis Compl. ¶ 19; World Wide Technologies Compl. ¶ 19, and not the designated point of sale. Finally, the fact that a Comstor representative confirmed the products being sold were non-compliant does not create an inference that Comstor participated in any scheme to defraud the government, but rather suggests that the defendants were being helpful in working with a vendor to try to comply with TAA requirements. See Rel.'s Opp'n at 11 ("The fact that some Cisco products are manufactured in non-designated countries was never a secret ..., [and] Relator asked the Comstor employee about the TAA-compliance status of certain Cisco products in order 'to avoid violating the TAA.' ") (quoting Defs. Mem. at 11).
To be sure, the defendants need not be named in the public disclosures to trigger the bar, see, e.g., United States ex rel. Hockett v. Columbia/HCA Healthcare Corp. , 498 F.Supp.2d 25, 48 (D.D.C. 2007) (finding where prior public disclosures "alleged that certain specific Columbia facilities had engaged in certain specific techniques for defrauding Medicare," and "many other facilities, not named therein, had engaged in similar fraudulent practices," a qui tam suit against a "not named" Columbia facility for Medicare fraud was barred), and the bar can be triggered even when "a qui tam suit [is] 'even partly based upon publicly disclosed allegations or transactions.' " United States ex rel. J. Cooper & Assocs., Inc. v. Bernard Hodes Grp. , Inc., 422 F.Supp.2d 225, 235 n. 10 (D.D.C. 2006) (quoting United States ex rel. Precision Co. v. Koch Indus. , 971 F.2d 548, 552 (10th Cir. 1992) ) (rejecting "plaintiff's argument that its qui tam claim is not 'based upon' information in [a report] merely because the Report does not mention actual payments or claims for payment."). Nonetheless, the instant case is distinguished from such situations because none of the qui tam complaints previously filed by the relator suggested "other" entities complicit in the alleged fraud scheme, or, more importantly, alleged that the instant defendants were involved in the alleged fraud. Rel.'s Opp'n at 10. Indeed, contrary to the defendants' argument that the relator here "simply 'provid[es] "more specific details' " or 'reveal[s] specific instances of fraud where the general practice has already been publicly disclosed,' " Defs.' Mem. at 10 (quoting Oliver II , 826 F.3d at 472 (quoting Settlemire , 198 F.3d at 919 (D.C. Cir. 1999) ) ), the Third Amended Complaint targets the defendants for the first time as being involved in fraudulent activity violative of the FCA, even though the alleged manner of execution of the fraud scheme allegedly was also used by the defendants named in the other cases.
Thus, the relator's earlier filed qui tam actions would not have meaningfully alerted any government investigator of the fraud presently alleged. See Settlemire , 198 F.3d at 918 ; see also United States v. CSL Behring, L.L.C. , 855 F.3d 935, 942-44 (8th Cir. 2017) (noting "[i]n order to bar claims against a particular defendant, the public disclosures relating to the fraud must either explicitly identify that defendant as a participant in the alleged scheme, or provide enough information about the participants in the scheme such that the defendant is identifiable " as a participant in that scheme) (alteration and emphasis in original) (internal citation omitted); United States ex rel. Dig. Healthcare, Inc. v. Affiliated Comput. Servs., Inc., 778 F.Supp.2d 37, 49-51 (D.D.C. 2011) (explaining that "while the government may be aware of fraud and improper payments being made by participants in the Medicaid program on a general level, it was not 'squarely on the trail' of the defendant," where the purported public disclosures "reveal some important background information," but do "not rise to the level of 'allegations or transactions' ") (quoting United States ex rel. Fine v. Sandia Corp. , 70 F.3d 568, 571 (10th Cir.1995) ); cf. Davis I , 679 F.3d at 836 (applying public disclosure bar where an earlier "report revealed to the public" an allegation pertaining specifically to the defendant "and provided ample reason for the government to investigate further").
For these reasons, the defendants' arguments regarding the relator's prior qui tam actions provide no basis for dismissing the claims as barred by the public disclosure bar.
B. The Relator Fails to State a Claim for Relief
The Third Amended Complaint focuses on two categories of allegedly non-compliant Cisco products that the defendants sold to the federal government: products sold through the defendants' GSA FSS contracts and products "incidental" to the contracts, which the relator argues were improperly identified as "open market" items. TAC ¶¶ 9, 11. The relator bases these allegations on his review of 49 quarterly Cisco COO charts for the period covering January 2000 to September 2012, and data for over $123 million in the defendants' sales, which charts and data were obtained during the government's five-year investigation and provided to the relator. See id. ¶¶ 136-40. Although the Third Amended Complaint purports to cover an almost thirteen-year time period of "2005 and continuing to the present" and alleges that "thousands of [Cisco] end products" were sold, in violation of the TAA, the relator relies on only 46 "representative examples" of transactions from nineteen different purchase orders, covering a five-year period between September 29, 2008, and December 12, 2013. See id. ¶¶ 1, 116, 143, 145. The defendants assert that the Third Amended Complaint fails to meet the pleading requirements under Rules 12(b)(6) and 9(b). See Defs.' Reply at 23. The defendants are correct, as explained below.
1. Liability under the FCA
The relator has plead claims under both the presentment and false statement provisions of the FCA for both pre- and post-FERA amendment conduct. Specifically, the relator alleges, in Counts I and II, violations of the pre-FERA presentment clause for claims submitted prior to May 20, 2009, and of the post-FERA presentment clause for claims submitted after May 20, 2009, respectively; and, in Counts III and IV, violations of the pre-FERA false statement clause for statements made prior to June 7, 2008, and of the post-FERA false statement clause for statements made after June 7, 2008, respectively.
In its current form, the FCA provides for civil liability for anyone who: (1) "knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval," 31 U.S.C. § 3729(a)(1)(A) ; or (2) "knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim," § 3729(a)(1)(B). The "presentment clause," in 31 U.S.C. § 3729(a)(1)(A), and "false statement clause," § 3729(a)(1)(B), have always been "complementary," as they were "designed to prevent those who make false records or statements to get claims paid or approved from escaping liability solely on the ground that they did not themselves present a claim for payment or approval." United States ex rel. Totten v. Bombardier Corp. ("Totten II "), 380 F.3d 488, 501 (D.C. Cir. 2004) (emphasis in original). In amending the presentment clause, formerly codified at 31 U.S.C. § 3729(a)(1), FERA removed language requiring that the claim be presented to an officer or employee of the government or armed forces. FERA § 4(a). The FERA amendment to the false statement clause, formerly codified at 31 U.S.C. § 3729(a)(2), replaced the language of "false record or statement to get a false or fraudulent claim paid or approved by the government" with "statement material to a false or fraudulent claim." FERA § 4(a). The presentment clause was made effective the day of enactment, May 20, 2009, and the false statement amendment clause was made retroactive to June 7, 2008. FERA § 4(f). In alleging claims under these provisions or any other provision of the FCA, the relator must satisfy Rule 9(b)'s heightened pleading standard. See Heath , 791 F.3d at 123 ; Totten I , 286 F.3d at 551-52.
Given the similarity of the conduct prohibited by both provisions of the FCA, the parties do not meaningfully distinguish them in their briefing. For organizational clarity, the presentment claims in Counts I and II are addressed first before turning to the false statement claims in Counts III and IV.
2. Relator's Presentment Claims
To bring a claim under the presentment provision of the FCA, a relator must allege factual allegations plausibly showing that the defendant submitted "[1] a claim to the government, [2] that the claim was false, and [3] that the defendant knew that the claim was false.' " United States ex rel. Davis v. District of Columbia ("Davis II "), 793 F.3d 120, 124 (D.C. Cir. 2015) (quoting United States ex rel. Hampton v. Columbia/HCA Healthcare Corp. , 318 F.3d 214, 218 (D.C. Cir.2003) ). The falsity must also be material to the government's decision to pay in order to be actionable under the FCA. See Escobar , 136 S.Ct. at 1996 ; see also United States v. Sci. Applications Int'l Corp. ("SAIC "), 626 F.3d 1257, 1269 (D.C. Cir. 2010). While conceding the first element as to submission of claims to the government, the defendants vigorously dispute the sufficiency of the allegations as to the other two elements. See generally Defs.' Mem. at 18-33; Rel.'s Opp'n at 18-19. The Third Amended Complaint sufficiently alleges that the defendants presented false claims with respect to certain end products, but the relator has not adequately pled that the claims presented were material to the federal government's decision to pay, or that the defendants "knowingly" presented the false claims. Consequently, neither count, as detailed below, survives the defendants' dismissal motion.
"In the paradigmatic case, a claim is false because it 'involves an incorrect description of goods or services provided or a request for reimbursement for goods or services never provided.' " SAIC , 626 F.3d at 1266 (quoting Mikes v. Straus , 274 F.3d 687, 697 (2d Cir. 2001), abrogated on other grounds by Escobar , 136 S.Ct. 1989 ) ). Alternatively, however, "a plaintiff may proceed under the so-called 'certification' theory of liability," under which "the falsity of a claim for payment rests on a false representation of compliance with an applicable federal statute, federal regulation, or contractual term." United States ex rel. McBride v. Halliburton Co. ("McBride "), 848 F.3d 1027, 1031 (D.C. Cir. 2017) (internal quotation marks and citations omitted). "False certifications can be either express or implied." SAIC , 626 F.3d at 1266. "An expressly false claim is, as the term suggests, a claim that falsely certifies compliance with a particular statute, regulation or contractual term, where compliance is a prerequisite to payment." Mikes , 274 F.3d at 698. An "implied false certification" occurs "[w]hen ... a defendant makes representations in submitting a claim but omits its violations of statutory, regulatory, or contractual requirements." McBride , 848 F.3d at 1031 (alteration in original) (quoting Escobar , 136 S.Ct. at 1999 ). The Third Amended Complaint alleges that the defendants made "express and implied false certifications of compliance with contractual and regulatory requirements," TAC ¶ 2; see also id. ¶ 86, but, for the most part, the parties do not discuss the two forms of false certification separately. Instead, the parties' analysis relies on the standard for alleging implied false certifications, which therefore is this Court's focus.
The D.C. Circuit has explained that implied false certification claims for the underlying claim for payment at issue need not include "express contractual language specifically linking compliance to eligibility for payment." SAIC , 626 F.3d at 1269. A showing "that the contractor withheld information about its noncompliance with material contractual requirements" is sufficient to state such a claim. Id. Both the Supreme Court and the D.C. Circuit, however, have instructed that "courts should continue to police expansive implied certification theories 'through strict enforcement of the Act's materiality and scienter requirements.' " McBride , 848 F.3d at 1031 (quoting Escobar , 136 S.Ct. at 2002 (quoting SAIC , 626 F.3d at 1270 ) ). The sufficiency of the relator's factual allegations regarding falsity, materiality and scienter are addressed in that order.
a) Falsity
The defendants argue broadly that the relator has failed to "plead facts sufficient to allege falsity" for three reasons: (1) generally, the relator "relied on outdated country-of-origin charts that do not correspond to the dates of the alleged transactions"; (2) for configurable items, the relator improperly "examined the origin of individual items rather than the end products into which they were 'substantially transformed' "; and (3) for "non-contract, open market items," the relator "failed to allege any factual or legal basis to conclude that government purchases of [this category of items] from Defendants were in any way unlawful or otherwise improper." Defs.' Mem. at 18.
In response to the defendants' first argument regarding the relator's reliance on outdated quarterly COO charts, the relator explains that he used the "most reliable and complete COO data available." Rel.'s Opp'n at 23. Nonetheless, the defendants contend that the relator's use of quarterly Cisco charts are "temporally disconnected" from the defendants' sales data and cannot be a reliable source to show the defendants sold end products under the GSA FSS contracts from non-designated countries, in violation of the TAA. See Defs.' Reply at 9; Rel.'s Opp'n at 21-22. Although the defendants acknowledge that "five transactions, out of 46" refer "to COO charts dated within the same quarter as the transactions," Defs.' Reply at 10 n.6, they point out that otherwise the Third Amended Complaint relies "on outdated and inapplicable COO charts for its analysis of virtually all transactions referenced in the [Third Amended Complaint], including some COO charts that were more than three years removed from the date of the transaction alleged in the [Third Amended Complaint]," id. at 10 (emphasis in original). As support, the defendants provide a helpful chart "summarizing [the] dated nature of country-of-origin charts alleged by Relator relative to dates of Purchase Orders at issue." Defs.' Mem. at 20 (citing Defs.' Mot., Ex. D, Chart of Time COO Charts and Applicable Purchase Orders, ECF No. 67-6).
The relator does not dispute that "a temporal gap exists between the dates of certain transactions and the applicable COO charts for the products involved in those transactions," but rather argues that "some products did not appear on every quarterly Cisco COO chart" and, in any event, "every COO chart on which products involved in sales discussed in the Complaint appeared, those products were always sourced only from non-designated countries." Rel.'s Opp'n at 20-21 (emphasis in original). He further avers that his "allegations are substantiated by the most reliable and complete COO data available for the products at issue-the COO data directly from manufacturer Cisco," and he "has matched this COO data to sales and invoice data provided by Defendants-another presumably reliable source of data." Rel.'s Opp'n at 23. Accepting that the relator conducted the COO analysis using the best source documents made available to him supports a plausible inference that the defendants sold at least some non-compliant end products through their GSA FSS contracts with implied false certifications. See Iqbal , 556 U.S at 678, 129 S.Ct. 1937.
This conclusion is consistent with that of other cases, in which the relator in this case and another relator have used the same methodology of cross-referencing COO charts with sales data or product lists to allege the defendants in those cases sold non-compliant end products. See, e.g., United States ex rel. Folliard v. Synnex Corp. ("Synnex "), 798 F.Supp.2d 66, 80 (D.D.C. 2011) (finding that "facts create a strong inference that a false claim was submitted" where relator compared product and country-of-origin lists); United States ex rel. Folliard v. CDW Tech. Servs. , Inc., 722 F.Supp.2d 20, 23, 29 (D.D.C. 2010) (determining that the relator had sufficiently alleged the existence of a false claim where his complaint was based on a review of vendor products lists, indicating country of origin, alongside a list of 140 end products allegedly sold by defendants); United States ex rel. Berkowitz v. Automation Aids ("Berkowitz "), No. 13 C 08185, 2017 WL 1036575, at *6 (N.D. Ill. Mar. 16, 2017) (where relator "put[ ] together his suit by combining product lists (specifying the origin of the products) received in the course of his ordinary business with data regarding products sold by the Defendants," the court found it could "reasonably infer ... that the Defendants sold supplies made in non-designated countries to the government") (internal quotation marks and citation omitted). Despite the temporal disconnect of some, or even the majority, of the COO charts, the periods overlap with some purchase orders, as the defendants concede, to support a finding that the relator has plausibly alleged that the instant defendants sold some non-compliant end products, particularly when granting the relator "the benefit of all inferences that can be derived from the facts alleged." Synnex , 798 F.Supp.2d at 81 (quoting Kowal , 16 F.3d at 1271 ).
With respect to the defendants' second falsity argument, the relator has not created such a plausible inference with respect to items Cisco labeled as "configurable options," as opposed to "end products." The parties agree that the defendants sold at least some configurable option items from non-designated countries, but also that the TAA is concerned with the country-of-origin information of "end products," as distinct from "configurable options." See Defs.' Mem. at 21 (citing FAR 52.225-6 ; 19 U.S.C. § 2518(4)(B) ; 19 C.F.R. § 177.22(a) ); Rel.'s Opp'n at 25; see also Westcon Contract ¶ 8 (requiring TAA compliance for end products); Comstor Contract ¶ 8 (same). The distinction between "end product" and "configurable option" product is relevant in assessing falsity. Cisco's COO charts, which are attached to the Third Amended Complaint, highlight this distinction and state that Cisco defines a "configurable option" as an item that "is not orderable by itself and may be considered a configurable option of an end product," in which "case, the country of origin of the corresponding end product would apply." Defs.' Mem. at 22 (citing, e.g. , Rel.'s COO Source Docs. at 14-16). In other words, "configurable options" are items that have not yet been "substantially transformed" into end products and thus need not individually, for the purposes of government procurement, originate in a designated country.
The defendants provide another helpful chart identifying 22 "configurable option" products included within the Third Amended Complaint's example purchase orders. See Defs.' Mot., Ex. E, Chart of Alleged Transactions Involving Configurable Options at 1-2, ECF No. 67-7 (providing chart of 22 products). This list was compiled by reviewing the relator's exhibits, including the Cisco COO charts, and identifying those items marked by Cisco with a "Note 1 designation," which the Cisco COO charts explain were sold as "configurable options." See Defs.' Mem. at 22-23.
As to these configurable option items, the relator unpersuasively contends that these items were line items in the defendants' purchase orders, reflecting their sale "on an a la carte basis" and "before being incorporated into end products." Rel.'s Opp'n at 25 (emphasis in original). As such, according to the relator, "the items were never 'transformed into a new and different article of commerce,' and therefore, had not been substantially transformed." Id. (quoting 19 U.S.C. § 2518(4)(B) ). Yet, the relator provides no additional information to support the allegations that the defendants were selling configurable options as end products on an individual basis, and he ignores the possibility, as raised by the defendants, that the government ordered the items "solely for incorporation by Cisco into Cisco end products prior to delivery to the government." Defs.' Reply at 12.
The relator's own exhibits state that a configurable option's country of origin is determined by the end product, see, e.g. , Rel.'s COO Source Docs. at 14-16, not the configurable item itself. Without any other factual allegations to show the co