Government May Have Continued to Pay Warzone Contractor Due to Urgent Need, but Those Payments Still Undercut the Relator’s Materiality Argument; United States District Court for the Southern District of New York No. 16 Civ. 1960 (LLS), U.S. Hassan Foreman v. AECOM, et al.

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The district court denied the relator’s motion for leave to file a fifth amended complaint in his qui tam case alleging AECOM defrauded the Department of Defense under its contracts for maintenance and operational support overseas. The court previously dismissed the case after finding the government was aware of the alleged fraud and yet continued to pay invoices and extend AECOM’s contract, rendering the allegations not material to the government’s decision to pay. The relator argued the government was not aware of the extent of the fraudulent conduct, but the court held these new allegations were merely an extension of those already dismissed. The relator also argued that it was plausible the government continued to pay AECOM due to the difficulty of replacing a contractor in a war zone, but the court found this possible scenario did not change the fact that the government knew of the issues with contract compliance and still continued to pay. Finally, the relator argued that the defendants’ efforts to avoid or correct contract violations demonstrated that the conduct was material, but the court explained that efforts to comply with contract language, without more, cannot support a showing of materiality.

Relator Hassan Foreman moved to alter the court’s decision granting a motion to dismiss his qui tam case, or for relief from the judgment, and for permission to file a fourth amended complaint.

In his complaint, Foreman alleged that AECOM, AECOM Government Services Inc., AC First LLC, and AECOM/GSS Ltd. violated their obligations under the Army’s Maintenance and Operational Support contract. Generally, Foreman alleged that AECOM: (1) engaged in improper labor billing, (2) inflated reports of man-hour utilization rate, (3) engaged in improper purchasing, tracking, and returning of government property, (4) entered into a “crony” contract with Bluefish, a payroll processing company, and (5) committed travel violations.

In their motion to dismiss, the defendants argued that Foreman’s allegations were disclosed in various defense agency and inspector general audits, and were therefore barred by the public disclosure bar. The court found that most of the documents were not publicly disclosed and declined to dismiss under the public disclosure bar. However, the court concluded that the reports undercut the relator’s argument regarding materiality, because the issues he raised were known to the government and because the government did not stop payments or seek to recoup payments.

Foreman moved for leave to amend and file a fourth amended complaint, but the court denied the request. Foreman now filed these motions.

First, the relator argued that the court should alter or grant relief from judgment and permit him to file a Fourth Amended Complaint because: 1) he did not unduly delay in seeking leave to amend; 2) he has not engaged in bad faith and does not have a dilatory motive; 3) he has not repeatedly failed to cure deficiencies with prior amendments; 4) the defendants will not be prejudiced by the amendment; and 5) the amendment is not futile.

In response, the defendants argued that Foreman already moved to vacate judgment and that Rule 59(e) does not authorize successive motions. Second, the defendants argued that Foreman already possessed the documents underlying his new allegations when he filed the third amended complaint, and that he therefore his motion is unduly delayed. The relator argued that he did not receive the documents supporting his amendments until after he opposed defendants’ motion to dismiss, and therefore had no opportunity to include those documents in any prior version of the complaint. The defendants also argued that amendment would be futile.

Regardless of the other issues, the court agreed that the relator’s proposed amendments would not cure the deficiencies in the complaint and would therefore be futile.

The proposed amended complaint contained additional allegations that the defendants submitted inaccurate timesheets that billed for hours employees did not work, failed to accurately report their staff hour utilization rate, failed to properly track recoverable items, and gave advance notice to employees of audits. However, those acts were the same as alleged in the dismissed third complaint, which the court determined were not material as the government had been put on notice of the alleged fraud and yet continued to pay invoices.

In its proposed amended complaint, the relator argued that it was plausible that the government continued to pay AECOM because services provided in a war zone are particularly difficult to replace. However, the court held that this scenario did not change the fact that the government had knowledge of the alleged fraud while repeatedly extending and awarding contracts to AECOM.

The relator also argued that the government was unaware of the scope of AECOM’s failure to comply with these requirements or its cover-up of violations, but the court explained it had already addressed that argument. While the relator argued the government did not know the extent of the fraud, the court concluded that these new allegations were merely an extension of the prior claims.

The court found that the other proposed amendments to establish materiality were the same argument the relator already raised in opposition to the defendants’ motion to dismiss and in his motion for reconsideration. For example, the relator argued that the defendants’ actions to correct or prevent violations demonstrated materiality, but the court already held that efforts to comply with contract provisions—while important—do not meet the demanding standard for materiality.

The court also rejected arguments concerning the government’s settlement agreement with a different defense contractor and intervention in a separate action against AECOM for claims submitted to the Federal Emergency Management Agency, finding them irrelevant to the consideration of materiality in this case. The court also found that amending the remaining claims would be futile. Absent exceptional circumstances, the court concluded that providing the relator the opportunity to file a fifth amended complaint would be futile.