The district court dismissed a qui tam suit alleging the defendant falsely represented its pricing through the Federal Strategic Sourcing Initiative program. The relator alleged that the defendant, an authorized FSSI vendor, purportedly offered FSSI pricing through its government buyer’s website, when in reality the website reflected the higher pricing available on its GSA Schedule contract. The court dismissed the complaint, finding the relator had not shown that any purchases were made through the website. While the relator plausibly alleged the website pricing was knowingly inaccurate, the court found he had not demonstrated any actual purchases had been made. The court reasoned that agency buyers simply could have found lower pricing elsewhere. Without any indication purchases had been made, the court could not connect the fraud to the presentment of any false claims. The court also dismissed the relator’s claim of retaliation. While the relator alleged he was terminated after raising his concerns to the company CEO, the court found the complaint lacked a specific timeline showing the dates of the defendant’s FSSI participation, the relator’s reporting, and his termination.
Ellison Systems Inc. d/b/a Shoplet.com moved to dismiss a qui tam complaint alleging it falsely presented its pricing to agency customers through the Federal Strategic Sourcing Initiative program.
Relator David Harris was employed as a senior vice president of sales for Ellison Systems, which sells office supplies through a website called Shoplet.com. During the time of Harris’ Shoplet was one of 24 authorized vendors under the Federal Strategic Sourcing Initiative. Generally, products available through the FSSI program were available for a lower price than the same products offered through GSA’s Schedule contracts.
When Harris was hired, he was told to focus on steering government customers through Shoplet’s separate website for GSA purchases. However, an outside sales representative later informed Harris that prices for goods on gsa.shoplet.com did not match. Upon investigating, Harris discovered that gsa.shoplet.com employed misleading and deceptive practices to induce contracting officers to pay higher, non-FSSI prices.
According to Harris, a contracting officer might shop with Shoplet because it is an approved FSSI vendor, assuming that his agency would get the benefit of FSSI prices. However, Harris alleged that Shoplet instead offered the standard GSA prices, which were higher. Harris also noted that the contract access fee (CAF) for the GSA Schedules was lower than that of the FSSI program. The effective CAF for FSSI goods is 2 percent of sales under the program, while for other GSA schedule goods, Shoplet pays just .75 percent.
For example, Harris alleged that gsa.shoplet.com listed Hammermill recycled copy paper at a price of $41.29 per carton, when the FSSI price for the paper should be just $33.48. Harris maintained that Shoplet intentionally failed to place FSSI logos or GSA logos on its sales items, to conceal whether the item had been priced at the more favorable FSSI rate. According to the complaint, Shoplet made thousands of sales to the federal government under GSA pricing when it was required to provide FSSI pricing, netting millions of dollars in illicit profits. Further, after Shoplet was removed as an authorized FSSI vendor in August 2016, it continued to identify itself as an authorized vendor on its website. After Harris raised his concerns to Shoplet’s CEO, his employment was terminated. This lawsuit followed and the defendant moved to dismiss.
In Count I and II, the relator alleged the direct presentment of false claims and the knowing use of false statements to support those claims. Harris alleged that Shoplet maintained two sets of prices and wrongfully took steps to steer contracting officers to website listings that would ask them to pay the higher pricing, when they were lawfully entitled to the more favorable pricing.
However, the court found the allegations lacked sufficient detail. For example, the complaint failed to allege any specific false claim that was presented to the government for payment. The example it provided, using Hammermill recycled copy paper, did not include the time, place, or amount of any particular transaction in which a federal CO actually purchased the paper at the non-FSSI price. Further, even taken in the light most favorable to Harris, the complaint did not allege a pattern of conduct that would necessarily have led to the presentment of false claims to the government for payment.
While the complaint was unclear, the court found it appeared to allege that Shoplet’s websites advertised the same goods at two different prices, the GSA schedule pricing and the FSSI pricing and that Shoplet attempted to steer contracting officers to the higher-priced GSA schedule items. As described, that scheme would not necessarily result in any contracting officer paying the higher prices—the CO might recognize the discrepancy between Shoplet’s own websites and refuse to pay the higher price, or the CO might comparison shop with another FSSI vendor and purchase the product at the more reasonable price offered by that site. The court found that Harris merely concluded that Shoplet made thousands of sales without providing a factual basis for this conclusion. Therefore, the court found Harris failed to meet the pleading standard and dismissed Counts I and II.
In Count III, Harris alleged unlawful employment retaliation in response to his protected activity. However, the court again found he failed to make his claim. Harris alleged he notified Shoplet’s CEO that Shoplet was violating federal contracting laws, in an attempt to stop FCA violations. However, the court found Harris failed to show how disclosing this information to the CEO would further his potential FCA claim. In addition, while the complaint stated Harris threatened to report this violation, it provided no facts to support this assertion.
Further, the allegations did not contain sufficient facts regarding the timeline of events to permit a reasonable inference that Shoplet was still engaged in the alleged FCA violations as of the time of Harris’s presentation to the CEO. The complaint alleged Harris made his presentation in August 2016, the same month Shoplet was removed as an authorized FSSI vendor. However, the sequence of events was not specified. The complaint further alleged that after its FSSI status was stripped, Shoplet continued to identify itself as an FSSI vendor on the gsa.shoplet.com website, but also did not set out a timeline for that misidentification. Without more specific dates, the court could not ascertain whether, as of the time of Harris’s presentation to Shoplet’s CEO, Shoplet still enjoyed authorized vendor status, or alternatively whether it represented itself as holding such status despite having it revoked.
According to the court, if neither of these situations existed at the time of the presentation, Harris could not plausibly allege he engaged in efforts to stop 1 or more violations of the FCA via his presentation to Ellison, since the alleged scheme is contingent upon Shoplet’s use or representation of FSSI authorized vendor status to deceive contracting officers into paying higher-than-FSSI rates. The court noted that plausibility is a low bar, but explained that the complaint lacked any specific facts about timing and therefore undermined its viability. The court dismissed the retaliation claims as well, and gave the relator leave to amend the complaint to address the deficiencies.
