The district court partially denied the defendants’ motion to dismiss, finding the plaintiffs plausibly asserted their former employer falsified direct labor hour reports when billing the government for services. The court found the plaintiffs satisfactorily demonstrated the who, when, where, and how of the scheme, and showed the reports were material to the government’s decision to pay invoices and to payment levels on future contract options. The court also denied a motion to dismiss a claim of violations of the Trafficking Victims Protection Reauthorization Act, finding the plaintiffs adequately pled the defendants failed to provide work visas and had confiscated their passports, and therefore were working overseas under duress. The court granted the motion to dismiss several claims, finding the plaintiffs had failed to connect falsified labor hour reporting to a government database and the TVPRA violations to the submission of false claims.
ManTech International Corporation moved to dismiss claims alleging it violated the False Claims Act by submitting falsified information about the qualifications of their employees and the number of hours they work, as well as false information about the company’s compliance with the Trafficking Victims Protection Reauthorization Act.
Relators Larry Hawkins, William Randall Hayes, Clinton Sawyer, James Locklear, and Kent Nelson brought the lawsuit against their former employer alleging multiple violations of the FCA and TVPRA under the firm’s contact with the Army under the Mine Resistant Ambush Protected vehicle program in Kuwait.
In the fall of 2012, the plaintiffs were hired by ManTech to perform on the contract. In May 2013, Hayes, Sawyer, Nelson, and Locklear were fired from ManTech on the grounds that the labor hours they reported were too low. Hawkins left ManTech in May 2015. They filed their joint qui tam complaint in December 2015 and in September 2017, the government declined to intervene. ManTech moved to dismiss.
ManTech challenged the claims’ sufficiency in the areas of falsity, materiality, particularity, and scienter. ManTech also argued some claims were barred by the public disclosure bar. Regarding the TVPRA, the defendants argued the relators failed to state a claim and that the claim was preempted by the Defense Base Act. The court addressed each count in order.
In Count I, the plaintiffs alleged ManTech both underreported and overreported direct labor hours. Specifically, they alleged that: (1) ManTech managers would order employees to use inaccurate labor codes to classify time spent on MRAP vehicles, thereby deflating their direct labor hours to conceal inefficiencies; and (2) ManTech would alter timesheets to reflect higher or lower labor hours and reported those inaccurate hours to the United States.
ManTech moved to dismiss, arguing that the claim was not adequately pled with particularity and that the relators had not sufficiently stated the elements of a claim. Specifically, the defendants argued the relators had not identified who perpetrated the fraud and how the false certifications were linked to payments made by the government. They also asserted there were no allegations regarding the allegedly false invoices ManTech submitted.
However, the court disagreed. First, the court found the relators sufficiently alleged that contract payments were premised, at least in part, on the direct labor hours expended. The contract at issue was a level-of-effort cost-plus-fixed-fee contract. Under this type of contract, the parties agree to an expected level of effort and payment is based on effort, rather than results. The contract provided that if the work did not require the expected number of direct labor hours, the government would be entitled to a pro-rated reimbursement of the fixed-fee specified in the contract. And, if labor hours were overreported, as is alleged here, the court found it plausible that ManTech was overpaid since the government may have been entitled to reimbursement.
The court also found that the contract provided that subsequent awards would be priced based on the contractor’s actual experience, and therefore the number of labor hours reported under the initial term could affect the fees reported in subsequent periods. The court found it plausible that inflating the amount of labor hours led to costs that were higher than they should have been.
Further, the court found that ManTech was required to certify the number of labor hours expended. Read together, the court found that the solicitation and contract provisions gave rise to the plausible inference that payment for the contract was premised, at least in part, on the number of direct labor hours reported to the government.
The court also held the relators sufficiently alleged that ManTech falsely reported or falsely categorized its employees’ labor hours in submissions to the government. Plaintiff Hayes alleged that his supervisor ordered him and other employees to misreport their labor hours. When Hayes refused, he was demoted and his replacement instructed his subordinates to misreport their time. Plaintiff Sawyer described a similar experience, and provided a document reflecting the number of his labor hours reported to the government, including dates when ManTech reported he worked more than 24 hours in a single day. Plaintiff Hawkins alleged he was present when ManTech managers deliberately lied to government officials regarding the efficiency of the ManTech employees and the amount of labor hours reported. Hawkins also alleged that he witnessed managers alter the record of employees’ labor hours.
While the plaintiffs did not provide specific invoices, the court found they had pled sufficient facts to create an inference that requests for payment or invoices based on false direct labor hours were submitted to the government. Thus, the complaint sufficiently alleged the “how” and “what” of the claim. The court also found the relators sufficiently established when and where the fraud took place. While they did not identify specific individuals who engaged in the fraud, the court explained that was not required to survive a motion to dismiss, because the alleged fraud occurred at the corporate level.
The court also held the plaintiffs had sufficiently pled each element of an FCA violation. They alleged that the defendants made false statements to the government when reporting direct labor hours; falsely certified compliance with contractual obligations; and provided details of the scheme. The court also held the plaintiffs satisfied the materiality element, as they demonstrated how the actual number of labor hours expended bore upon the fixed cost of the contract and how the number of direct labor hours would affect the value of Contract options and/or any entitlement to reimbursement. Those allegations supported the inference that the number of labor hours reported were material to the government’s payments to ManTech.
Finally, the court found the plaintiffs adequately pled scienter, as they alleged ManTech managers actively ordered employees to misreport and miscategorize their time. They also alleged that ManTech management falsely reported labor hours at meetings with Army officials. These allegations support the inference that ManTech managers knew that the labor hours were false or, at minimum, that the company acted recklessly.
In Count II, the plaintiffs alleged the defendants violated the FCA by intentionally and/or recklessly submitting inaccurate data into the “SAMS-E” system, a comprehensive system for tracking the life cycle of critical hardware. According to the plaintiffs, ManTech was required to submit employees’ labor hours and the time codes associated with those hours into the SAMS-E system, and that those hours were false in amount or category. The plaintiffs alleged the government experienced financial injury due to the false information entered into the system, which the Department of Defense uses to track equipment life, order parts, manage maintenance requests, and compile readiness reports. According to the plaintiffs, ManTech provided junk data the government relied upon for those purposes, causing injury, and made implicit certifications that it complied with the requirement to enter accurate data into SAMS-E.
However, the court found the plaintiffs had not shown how the SAMS-E system itself was relevant to the contractor’s claims for payment or payments made by the United States to ManTech. Specifically, they did not show that the SAMS-E system was the method by which ManTech certified its number of direct labor hours as it was required to do under the contract. Because the complaint did not tie the SAMS-E system to the contract or the claims for payment, the court found no basis to conclude that the alleged false data entries were material. Therefore, the court granted the motion to dismiss Count II.
In Count III, the plaintiffs alleged that ManTech falsely certified the qualifications of mechanics who did not have the requisite engineering experience, in order to have its claims for payment approved. According to the plaintiffs, the contract required ManTech to provide mechanics who were adequately trained to efficiently and effectively provide MRAP repair and maintenance services. However, ManTech provide employees who previously had been fast food employees, beauticians, and youth offenders, who did not have the requisite engineering experience. The plaintiffs also alleged the company hired third parties to take and pass the mechanic competency test. According to the plaintiffs, these unqualified workers performed inefficiently, resulting in significant overbilling. They alleged that had the United States known that ManTech provided unqualified workers, it would have canceled the contract and denied payments.
In their motion to dismiss, the defendants argued this material was previously disclosed and was therefore barred by the public disclosure bar and that the plaintiffs failed to state a claim. The court found the relators failed to state a claim under the FCA, so did not consider whether the public disclosure bar applied. The court explained that the relators failed to show ManTech made any specific representations about the qualifications of their mechanics in its requests for payments. Further, the relators did not show that employee qualifications would have been material to the agency’s decision to pay, nor provide evidence the government would have canceled the contract.
The court also found the relators failed to plead this count with sufficient particularity, as they did not identify a timeframe for this fraud nor sufficient detail about how it was perpetrated. For example, they did not allege that ManTech submitted false waiver requests for the training requirements or that employees simply did not go through the training. They also did not identify who was hired to take competency tests, or when or where, or even that ManTech was aware that this happened. Therefore, the court dismissed Count III.
In Count V, the plaintiffs alleged ManTech violated the FCA by violating the TVPRA, because they certified their compliance with the TVPRA when they submitted requests for payment. However, the court found the plaintiffs did not show where ManTech specifically certified its compliance with TVPRA requirements in order to receive payments. While the plaintiffs sufficiently pled the materiality of such a certification, they failed to show where it was made. The plaintiffs conceded they did not have invoices or certification statements, but argued that that certification was required under the law and the contract; that they sufficiently alleged violations of the TVPRA; that ManTech received payments from the U.S. government; and had the government known of the alleged trafficking violations, it could have terminated the contract or withheld payment. The plaintiffs argued this gave rise to a plausible inference that ManTech made false claims for payment, but the court found it insufficient.
In Count IV, the plaintiffs alleged specific violations of the TVPRA outside the FCA. They alleged that ManTech confiscated their passports; did not obtain proper work visas for them, meaning they worked in Kuwait illegally; forced them to go on “visa runs” to neighboring countries to obtain fresh tourist stamps in their passports; , and threatened to impose exorbitant fees if they terminated their employment contracts early, in violation of the TVPRA.
The plaintiffs also asserted that if they did not go on “visa runs” or work overtime, ManTech would terminate their employment, thereby triggering the economic consequences, or report them to Kuwaiti officials. Because they were afraid of being reported, the plaintiffs feared they could not complain about the working conditions, including working in an environment filled with chemicals and toxic fumes and devoid of safety precautions. They also alleged they worked difficult schedules without any overtime pay.
The defendants argued the plaintiffs failed to state a claim under the TVPRA because they were not personally threatened with deportation or any other adverse legal consequences by ManTech in order to induce them to take, or refrain from taking, some action. However, the court noted the TVPRA does not require explicit threats. It is enough that the employer intended the victims to believe that serious harm would befall them if they left. Reading the allegations in the most favorable light, the court found the plaintiffs had stated a plausible claim.
The defendants next argued that this claim was preempted by the Defense Base Act, which limits liability and recovery for employers and employees working overseas in support of military forces. However, the court explained that this claim arose under the TVPRA, not any claim for workers’ compensation for death or injury. While the plaintiffs raised issues with respect to their being forced to work around toxic chemicals, the court found it was not clear whether they intended to pursue a claim on that basis. However, they did intend to pursue restitution in the form of lost wages arising out of the alleged trafficking violation, because they were allegedly forced to work overtime with no additional pay. The court found that kind of harm is not preempted by the DBA, and denied the motion to dismiss.
