A relator alleged three companies fraudulently obtained COVID-19 response contracts by misrepresenting employee qualifications and using “bait-and-switch” staffing tactics. The defendant moved to dismiss. The court found the fraudulent inducement and retaliation allegations were plausible under the False Claims Act. It therefore ruled that the relator sufficiently pleaded the claims and denied the motion to dismiss.
United States v. Applied Memetics LLC, No. 5:21-cv-270
- Claims – The relator alleged three affiliated companies made false statements and submitted false claims to secure COVID-19 response services contracts and receive payments. The companies also engaged in a “bait-and-switch” hiring scheme, whereby they listed qualified employees on bid proposals but staffed projects with less qualified personnel. The relator further alleged retaliation and an individual claim for wrongful termination of public policy under Vermont law for raising concerns about the fraudulent conduct. Companies moved to dismiss, arguing failure to plead fraud with particularity under Rule 9(b) and failure to state valid claims under Rule 12(b)(6).
- The FCA claim – The Court held the relator sufficiently alleged fraud. Defendants argued that the relator failed to demonstrate a lack of access to this information to justify pleading on information and belief. However, though she lacked direct access to bids, the relator had provided detailed accounts of false statements through colleague admissions (such as the companies knowingly misrepresenting their staffing capabilities, fake project staffing, and failing to comply with their contractual duties). Rule 9(b) was satisfied as facts were peculiarly within the defendants’ knowledge.
- Materiality –The court held the defendant’s misrepresentations were material. The contracts required public health expertise and HIPAA/CLIA compliance, but staff incompetence caused breaches.
- Retaliation Claim – The relator’s internal complaints about fraud constituted protected activity. Adverse actions (exclusion from meetings, role changes, increased workload) occurred close to her complaints. The court found these allegations sufficiently supported an inference of retaliation.
The relator was represented by Monica H. Allard, Timothy C. Doherty, Jr., Tristram J. Coffin (Downs Rachlin Martin PLLC). The companies were represented by Barry Coburn, Marc Eisenstein (Coburn Greenbaum & Eisenstein PLLC); Christina E. Nolan, Hannah C. Waite (Sheehey Furlong & Behm P.C.).
–Case summary by Alice Song, Pub K Extern