United States Of America v. Able Moving & Storage Inc.

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

Case No. 20-cv-23242-BLOOM/Otazo-Reyes

UNITED STATES OF AMERICA ex rel.

SEDONA PARTNERS LLC,

Plaintiff/Relator,

v.

ABLE MOVING & STORAGE, INC.; ARPIN

VAN LINES, INC.; CARTWRIGHT

INTERNATIONAL VAN LINES, INC.;

COLEMAN AMERICAN MOVING SERVICES,

INC.; DEWITT COMPANIES LIMITED, LLC;

HILLDRUP COMPANINES, INC.; J.K. MOVING

& STORAGE INC.; MAYFLOWER TRANSIT,

LLC; NEW WORLD VAN LINES, INC.;

PARAMOUNT TRANSPORTATION SYSTEMS;

PAXTON VAN LINES, INC.; and WESTERN

EXPRESS FORWARDING, LLC,

Defendants.

__________________________________________/

ORDER ADOPTING MAGISTRATE JUDGE’S

REPORT AND RECOMMENDATIONS

THIS CAUSE is before the Court upon Defendant J.K. Moving & Storage, Inc.’s (“J.K.”)

Motion to Dismiss First Amended Complaint, ECF No. [150] (“J.K.’s Motion”), Defendants Able

Moving & Storage, Inc. (“Able”), Arpin International Group, Inc. (“Arpin”), Coleman American

Moving Services, Inc. (“Coleman”), Hilldrup Companies, Inc. (“Hilldrup”), New World

International, Ltd. (“New World”), Paramount Transportation Systems (“Paramount”), Paxton

Van Lines, Inc. (“Paxton”), and Western Express Forwarding, LLC’s (“Western Express”)

(collectively, “Able Group Defendants”) Joint Motion to Dismiss the First Amended Complaint,

ECF No. [153] (“Able Group Defendants’ Motion”), and Defendant Cartwright International Van

Lines, Inc.’s (“Cartwright”) Motion to Dismiss Amended Complaint, ECF No. [162]

(“Cartwright’s Motion”). With regard to J.K.’s Motion, Relator Sedona Partners LLC (“Relator”

or “Sedona”) filed a Response in Opposition, ECF No. [170] (“Response to J.K.”), to which J.K.

filed a Reply, ECF No. [175] (“J.K.’s Reply”). With regard to the Able Group Defendants’ Motion,

Relator filed a Response in Opposition, ECF No. [173] (“Response to Able Group”), to which the

Able Group Defendants filed a Reply, ECF No. [186] (“Able Group Defendants’ Reply”). With

regard to Cartwright’s Motion, Relator filed a Response in Opposition, ECF No. [171] (“Response

to Cartwright”), to which Cartwright filed a Reply, ECF No. [187] (“Cartwright’s Reply”).

Magistrate Judge Alicia Otazo-Reyes issued a Report and Recommendations (“R&R”),

recommending that the Motions to Dismiss be granted with leave to replead. See ECF No. [207].

Relator timely filed objections, ECF No. [212] (“Relator’s Objections”), arguing that the Motions

to Dismiss should not be granted. J.K., Able Group Defendants, and Cartwright (collectively,

“Defendants”) timely filed a joint objection, ECF No. [211] (“Defendants’ Objection”), seeking

clarification that Relator’s leave to replead will be subject to Eleventh Circuit precedent that

prohibits any information obtained through discovery from being used in an amended complaint.1

The Parties filed their respective Responses to the Objections, ECF Nos. [214], [215]. The Court

has conducted a de novo review of the R&R and the record in this case in accordance with 28

U.S.C. § 636(b)(1)(C). See Williams v. McNeil, 557 F.3d 1287, 1291 (11th Cir. 2009) (citing 28

U.S.C. § 636(b)(1)). For the reasons set forth below, the Court determines that Relator’s

1 The remaining Defendant, DeWitt Companies Limited, LLC (“DeWitt”), filed a separate Motion to

Dismiss, ECF No. [155], which was denied as moot after DeWitt and Relator filed a Joint Notice of

Proposed Settlement, ECF Nos. [201], [208]. However, on January 13, 2022, Relator reported that Relator

is no longer willing to enter into a settlement with DeWitt and requested that DeWitt be allowed to re-file

its Motion to Dismiss. See ECF No. [213]. DeWitt filed a Motion for Reconsideration requesting that the

Court consider DeWitt’s Motion to Dismiss rather than order DeWitt to re-file its Motion to Dismiss. See

ECF No. [217]. Because this Order dismisses Relator’s FAC, DeWitt’s Motion to Dismiss, upon re-filing

or upon reconsideration, would be denied as moot since it pertains to the FAC. DeWitt may file a renewed

Motion to Dismiss if and when Relator files its second amended complaint. Any references in this Order to

“Defendants” is to the ten (10) Defendants, and not DeWitt.

Objections are without merit and that Defendants’ Objection is without merit. The Court thus

adopts the R&R.

I. BACKGROUND

On August 20, 2021, Relator filed the First Amended Complaint (“FAC”), asserting two

counts against all Defendants: (1) presenting false claims in violation of the False Claims Act

(“presentment claim”); and (2) making or using false records or statements material to payment or

approval of payment in violation of the False Claims Act (“make-or-use claim”). See generally

ECF No. [149]. The FAC alleges that Defendants submitted “low-ball bids” from 2008 to 2018 to

obtain shipping contracts from the United States Department of State (“DOS”). ECF No. [149]

¶¶ 5-6. According to the FAC, Defendants then submitted false foreign flag waivers, claiming that

there were no U.S. flag vessels available and requesting permission to use foreign flag vessels. See

id. ¶ 7. The use of cheaper foreign flag vessels, rather than more expensive U.S. flag vessels,

allowed Defendants to earn a profit despite the low-ball bids. See id. ¶¶ 70-72. Relator alleges that

Defendants’ use of foreign flag vessels in such a manner fraudulently circumvented the “America

First” policy. See id. ¶ 9.

On December 16, 2021, Magistrate Judge Otazo-Reyes issued her R&R, recommending

that the Motions to Dismiss be granted with one opportunity to replead. See ECF No. [207] at 17.

The R&R states that: (1) the FAC is a shotgun pleading; (2) Relator failed to plead fraud with

particularity as required by Rule 9(b); (3) Defendants’ low-ball bids do not support Relator’s FCA

claims; (4) Relator does not state a presentment claim or a make-or-use claim; and (5) Relator has

not overcome the public disclosure bar. See id. at 14-17. On December 30, 2021, Relator filed its

Objections, arguing that Magistrate Judge Otazo-Reyes erred because: (1) the FAC is not a shotgun

pleading; (2) the R&R did not apply the the Rule 9(b) pleading standard appropriately; and (3) the

public disclosure bar does not apply in this case. See ECF No. [212] at 5. On the same date,

Defendants filed their joint Objection, in which Defendants do not object to the R&R but seek

clarification that Relator’s leave to replead will be in accordance with Eleventh Circuit precedent

that prohibits Relator from using discovery materials as the factual basis for its amended

complaint. See ECF No. [211] at 2. On January 13, 2022, the Parties filed their respective

Responses to the Objections. See ECF Nos. [214], [215].

II. LEGAL STANDARD

a. Objections to Magistrate Judge’s R&R

“In order to challenge the findings and recommendations of the magistrate judge, a party

must file written objections which shall specifically identify the portions of the proposed findings

and recommendation to which objection is made and the specific basis for objection.” Macort v.

Prem, Inc., 208 F. App’x 781, 783 (11th Cir. 2006) (quoting Heath v. Jones, 863 F.2d 815, 822

(11th Cir. 1989)) (alterations omitted). The objections must also present “supporting legal

authority.” S.D. Fla. L. Mag. J.R. 4(b). The portions of the report and recommendation to which

objection is made are reviewed de novo only if those objections “pinpoint the specific findings that

the party disagrees with.” United States v. Schultz, 565 F.3d 1353, 1360 (11th Cir. 2009); see also

Fed. R. Civ. P. 72(b)(3). If a party fails to object to any portion of the magistrate judge’s report,

those portions are reviewed for clear error. Macort, 208 F. App’x at 784 (quoting Johnson v. Zema

Sys. Corp., 170 F.3d 734, 739 (7th Cir. 1999)); see also Liberty Am. Ins. Grp., Inc. v. WestPoint

Underwriters, L.L.C., 199 F. Supp. 2d 1271, 1276 (M.D. Fla. 2001). A district court may accept,

reject, or modify a magistrate judge’s report and recommendation. 28 U.S.C. § 636(b)(1).

b. Shotgun Pleading

“A complaint that fails to articulate claims with sufficient clarity to allow the defendant to

frame a responsive pleading constitutes a ‘shotgun pleading.’” Lampkin-Asam v. Volusia

Cnty. Sch. Bd., 261 F. App’x. 274, 277 (11th Cir. 2008) (quoting Byrne v. Nezhat, 261 F.3d 1075,

1128-29 (11th Cir. 2001)). Overall, shotgun pleadings do not establish a connection between “the

substantive count and the factual predicates . . . [and] courts cannot perform their gatekeeping

function with regard to the averments of [the plaintiff’s claim].” Wagner v. First Horizon Pharm.

Corp., 464 F.3d 1273, 1279-80 (11th Cir. 2006). The Eleventh Circuit has identified four types of

shotgun pleadings:

The most common type—by a long shot—is a complaint containing multiple counts

where each count adopts the allegations of all preceding counts, causing each

successive count to carry all that came before and the last count to be a combination

of the entire complaint. The next most common type, at least as far as our published

opinions on the subject reflect, is a complaint that does not commit the mortal sin

of re-alleging all preceding counts but is guilty of the venial sin of being replete

with conclusory, vague, and immaterial facts not obviously connected to any

particular cause of action. The third type of shotgun pleading is one that commits

the sin of not separating into a different count each cause of action or claim for

relief. Fourth, and finally, there is the relatively rare sin of asserting multiple claims

against multiple defendants without specifying which of the defendants are

responsible for which acts or omissions, or which of the defendants the claim is

brought against. The unifying characteristic of all types of shotgun pleadings is that

they fail to one degree or another, and in one way or another, to give the defendants

adequate notice of the claims against them and the grounds upon which each claim

rests.

Merch. One, Inc. v. TLO, Inc., No. 19-CV-23719, 2020 WL 248608, at *3 (S.D. Fla. Jan. 16, 2020)

(quoting Weiland v. Palm Beach Cty. Sheriff’s Office, 792 F.3d 1313, 1321-23 (11th Cir. 2015)

(footnotes omitted)).

Shotgun pleadings are condemned by the Eleventh Circuit, which has specifically

instructed district courts to dismiss shotgun pleadings as “fatally defective.” B.L.E. v. Georgia,

335 F. App’x. 962, 963 (11th Cir. 2009) (citations omitted). According to the Eleventh Circuit,

“[s]hotgun pleadings, whether filed by plaintiffs or defendants, exact an intolerable toll on the trial

court’s docket, lead to unnecessary and unchanneled discovery, and impose unwarranted expense

on the litigants, the court and the court’s parajudicial personnel and resources. Moreover, justice

is delayed for the litigants who are ‘standing in line,’ waiting for their cases to be heard.” Jackson

v. Bank of Am., N.A., 898 F.3d 1348, 1356-57 (11th Cir. 2018) (quoting Cramer v. Fla., 117 F.3d

1258, 1263 (11th Cir. 1997)).

“Generally, when ‘a more carefully drafted complaint’ might state a claim, the plaintiff

must be given a chance to amend before dismissal.” Hollis v. W. Acad. Charter, Inc., 782 F. App’x

951, 955 (11th Cir. 2019) (quoting Bryant v. Dupree, 252 F.3d 1161, 1163 (11th Cir. 2001)).

“However, the district court need not provide such an opportunity where the plaintiff has

repeatedly failed to cure deficiencies in his complaint through previous amendments or where

amendment would be futile.” Id. (quoting Bryant, 252 F.3d at 1163).

c. Rule 9(b) Pleading Standard

Generally, Rule 8 of the Federal Rules of Civil Procedure requires that a pleading contain

“a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ.

P. 8(a)(2). Although a complaint “does not need detailed factual allegations,” it must provide

“more than labels and conclusions, and a formulaic recitation of the elements of a cause of action

will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); see Ashcroft v. Iqbal, 556 U.S.

662, 678 (2009) (explaining that Rule 8(a)(2)’s pleading standard “demands more than an

unadorned, the-defendant-unlawfully-harmed-me accusation”). In the same vein, a complaint may

not rest on “‘naked assertion[s]’ devoid of ‘further factual enhancement.’” Iqbal, 556 U.S. at 678

(quoting Twombly, 550 U.S. at 557 (alteration in original)).

In addition to Rule 8(a)’s short and plain statement requirement, Rule 9(b) imposes a

heightened pleading standard for claims sounding in fraud: “In alleging fraud or mistake, a party

must state with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b).

Rule 9(b) thus forces a plaintiff to “offer more than mere conjecture,” U.S. ex rel. Clausen v.

Laboratory Corp. of America, Inc., 290 F.3d 1301, 1313 (11th Cir. 2002), and “requires that a

complaint plead facts giving rise to an inference of fraud,” W. Coast Roofing & Waterproofing,

Inc. v. Johns Manville, Inc., 287 F. App’x. 81, 86 (11th Cir. 2008). This requirement is intended

to alert defendants to the “precise misconduct with which they are charged.” Durham v. Bus. Mgmt.

Associates, 847 F.2d 1505, 1511 (11th Cir. 1988) (quoting Seville Indus. Mach. Corp. v. Southmost

Mach. Corp., 742 F.2d 786, 791 (3d Cir. 1984)); see also Ziemba v. Cascade Int’l, Inc., 256 F.3d

1194, 1202 (11th Cir. 2001) (“The particularity rule serves an important purpose in fraud actions

by alerting defendants to the precise misconduct with which they are charged and protecting

defendants against spurious charges of immoral and fraudulent behavior.” (internal quotation and

citation omitted)). The Eleventh Circuit has held that a party satisfies the particularity requirement

for fraud when the pleading sets forth: (1) precisely what statements were made; (2) the time and

place of each statement and the person responsible for making (or in the case of omissions, not

making) it; (3) the content of such statements and the manner in which they caused the plaintiff to

be misled; (4) what the defendants obtained as a result of the fraud. See Zarrella v. Pac. Life Ins.

Co., 755 F. Supp. 2d 1231, 1236 (S.D. Fla. 2011) (citing Ziemba, 256 F.3d at 1202).

d. FCA and the Public Disclosure Bar

The FCA imposes liability on any person who:

(A) knowingly presents, or causes to be presented, a false or fraudulent claim for

payment or approval;

(B) knowingly makes, uses, or causes to be made or used, a false record or statement

material to a false or fraudulent claim;

31 U.S.C. § 3729(a)(1).

In regard to a presentment claim, the Eleventh Circuit has held that “a relator must allege

the actual submission of a false claim” and “offer some indicia of reliability . . . to support the

allegation of an actual false claim for payment being made to the government.” Carrel v. AIDS

Healthcare Found., Inc., 898 F.3d 1267, 1275 (11th Cir. 2018) (internal quotation marks and

citation omitted). In regard to a make-or-use claim, the Eleventh Circuit has determined that an

“FCA relator must allege: (1) a false record or statement; (2) the defendant’s knowledge of the

falsity; (3) that the defendant made, used, or caused to be made or used a false statement or record;

(4) for the purpose to conceal, avoid, or decrease an obligation to pay money to the government,

and; (5) the materiality of the misrepresentation.” See U.S. ex rel. Matheny v. Medco Health Sols.,

Inc., 671 F.3d 1217, 1224 (11th Cir. 2012). Further, “[i]n order to plead the submission of a false

claim with particularity, a relator must identify the particular document and statement alleged to

be false, who made or used it, when the statement was made, how the statement was false, and

what the defendants obtained as a result.” See id. at 1225.

The FCA has a public disclosure bar that forecloses FCA claims based on publicly

disclosed information, unless the relator is the original source of the information. The FCA states

in relevant part:

(A) 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). The FCA further defines “original source” as follows:

(B) For purposes of this paragraph, “original source” means an individual who

either

(i) prior to a public disclosure under subsection (e)(4)(a), has voluntarily

disclosed to the Government the information on which allegations or

transactions in a claim are based, or

(2) [sic] who has knowledge that is independent of and materially adds to the

publicly disclosed allegations or transactions, and who has voluntarily provided

the information to the Government before filing an action under this section.

31 U.S.C. § 3730(e)(4)(B). The Eleventh Circuit has held that if the relator’s allegations have been

publicly disclosed and are “substantially the same” as the information in public disclosures, then

the claims must be dismissed, unless the relator is the original source of the information. See U.S.

ex rel. Osheroff v. Humana Inc., 776 F.3d 805, 812 (11th Cir. 2015) (quoting 31 U.S.C.

§ 3730(e)(4) (2010)) (applying a modified three-prong test for the public disclosure bar).

III. ANALYSIS

a. Relator’s Objections

Relator raises three objections to the R&R: (1) the FAC is not a shotgun pleading; (2) the

FAC meets Rule 9(b) pleading standards as applied in FCA cases; and (3) the public disclosure

bar does not apply to this case. See ECF No. [212] at 5. The Court addresses each objection in

turn.

i. Shotgun Pleading

First, the Able Group Defendants argue that the FAC is a shotgun pleading in their Motion

to Dismiss. See ECF No. [153] at 10. According to the Able Group Defendants, the FAC combines

claims against eleven (11) separate, unrelated Defendants under both counts without specifying

how each Defendant committed each purported act. See id.2 In its Response to the Able Group

2 J.K.’s Motion to Dismiss argues that the FAC is a “vague and conclusory group pleading,” but does not

expressly argue that the FAC is a shotgun pleading. See ECF No. [150] at 21.

Defendants, Relator contends that the FAC pleads Relator’s claims with sufficient particularity but

does not otherwise address the group pleading practice. See ECF No. [173] at 13-19.

The R&R finds that the FAC is a shotgun pleading because Relator makes general

allegations against Defendants as a group, without pointing to any specific conduct for each

Defendant. See ECF No. [207] at 14. In regard to the low-ball bids, the FAC only references five

(5) Defendants. See id. (citing ECF No. [149] ¶ 53). Relator’s comparison of U.S. flag vessels

costs, foreign flag vessels costs, and low-ball bids only references seven (7) Defendants. See id.

(citing ECF No. [149] at ¶¶ 54-69, 74). In regard to the fraudulent waiver requests, the R&R notes

that the FAC fails to proffer a single fraudulent waiver request and instead presents a mock-up of

a general waiver request form and a form signed by a DOS employee. See id. (citing ECF No.

[149] ¶ 41). In its Objections, Relator argues that the FAC refers to all Defendants generically

because Relator is making the same claims against all Defendants. See ECF No. [212] at 16.

Relator argues that “[t]he fact that defendants are accused collectively does not render the

complaint deficient.” See id. (citing Kyle K. v. Chapman, 208 F.3d 940, 944 (11th Cir. 2000)).

The Court agrees with Relator to the extent that Relator argues that the FAC may allege

claims against Defendants collectively without being considered a shotgun pleading. However, as

the R&R cforrectly notes, the FAC is a shotgun pleading, not solely because Relator asserts claims

against Defendants collectively, but because Relator “makes general allegations against

Defendants as a group, without pointing to any specific conduct on the part of any of them.” ECF

No. [207] at 14 (emphasis added). The failure to point to specific conduct on the part of each of

the Defendants is fatal because Defendants do not have “adequate notice of the claims against

them and the grounds upon which each claim rests.” Weiland, 792 F.3d at 1323. While a complaint

may accuse defendants of the same misconduct collectively, the complaint must nonetheless

include specific allegations against each defendant such that each defendant has adequate notice

of the grounds upon which the claims against it rest. Here, the FAC alleges in a conclusory manner

that all Defendants submitted low-ball bids and yet fails to identify certain Defendants’ low-ball

bids. See ECF No. [207] at 14. Further, the two “examples” of false foreign flag waiver request

forms – which are a mock-up waiver form and a signed waiver form not attributed to any particular

Defendant – do not give adequate notice of the grounds for the claims against each Defendant in

regard to the false foreign flag waiver requests. ECF No. [149] ¶ 41. Relator’s chart – that allegedly

shows how some Defendants abandoned their fraudulent scheme and increased their rates after

DOS implemented stricter waiver requirements – notably shows that some Defendants’ rates

actually decreased, stayed the same, or increased only slightly. See ECF No. [149] ¶ 74. As such,

the FAC is an impermissible shotgun pleading subject to dismissal.

ii. Rule 9(b) Pleading Standard

Second, each Motion to Dismiss argues that the FAC fails to allege fraud with particularity

as required by Rule 9(b). See ECF Nos. [150] at 19-20, [153] at 10, and [162] at 11. According to

Defendants, the heightened pleading standard of Rule 9(b) applies in this case, and the FAC fails

to plead the ‘who,’ ‘what,’ ‘where,’ ‘when,’ and ‘how’ of the claims against each Defendant. See

ECF Nos. [153] at 11; [162] at 13. Relator argues that for FCA claims, the Rule 9(b) pleading

standard “should not abrogate the concept of notice pleading.” ECF No. [170] at 10 (emphasis

omitted). According to Relator, the Rule 9(b) standard and Rule 8 standard should be considered

together, such that “Rule 8’s pleading standard is supplemented but not supplanted by Federal Rule

of Civil Procedure 9(b).” ECF No. [170] at 11 (citing Urquilla-Diaz v. Kaplan University, 780

F.3d 1039, 1051 (11th Cir. 2015)) (emphasis omitted). Relator also argues that, unlike healthcare

FCA cases involving several payers, this case only involves one payer – the DOS – and therefore,

the manner in which the heightened pleading standard was applied in certain healthcare FCA cases

is inapposite. See ECF No. [171] at 14 (distinguishing U.S. ex rel. Atkins v. McInteer, 470 F.3d

1350 (11th Cir. 2006)).

The R&R recognizes that the pleading standards of Rule 8(a) are to be “supplemented but

not supplanted” by Rule 9(b) in FCA actions and determines that, as a shotgun pleading, the FAC

fails to meet the pleading standards. See ECF No. [207] at 13 (citing Urquilla-Diaz, 780 F.3d at

1051), 15-16 (noting the lack of false foreign flag waiver forms). In its Objections, Relator

reiterates the arguments in its Responses and emphasizes that false foreign flag waivers are not

necessary to meet the Rule 9(b) pleading standard. See ECF No. [212] at 17. According to Relator,

the Court must apply Rule 9(b) on a nuanced case-by-case approach and consider “alternative

means” to satisfy the pleading standards. See id. at 16-17 (citing U.S. ex rel. Mastej v. Health

Mgmt. Assocs., Inc., 591 F. App’x. 693, 704 (11th Cir. 2014); quoting Durham v. Bus. Mgmt.

Assocs., 847 F.2d 1505, 1512 (11th Cir. 1988)). Relator argues that the quote from New World’s

executive, the resignation of New World’s president, and J.K.’s increased rates after DOS began

emphasizing U.S. flag vessel requirements suffice as alternative means that provide reliable indicia

of the fraudulent scheme. See id. (citing ECF No. [149] ¶¶ 78-80).

As an initial matter, the Court agrees with both Relator and Magistrate Judge Otazo-Reyes

who each recognize that in FCA actions, the pleading standards of Rule 8(a) should be

“supplemented but not supplanted” by Rule 9(b). ECF Nos. [170] at 11 (citing Urquilla-Diaz, 780

F.3d at 1051), [207] at 13 (same).3 However, after applying Rule 9(b) to supplement but not

3 The Court disagrees with Relator’s argument that the Court cannot consider how courts have applied the

Rule 9(b) pleading standard in healthcare FCA cases. As Defendants correctly argue, courts interpreting

FCA issues in the healthcare context have relied on non-healthcare cases and vice versa. See ECF No. [214]

at 10; see also Universal Health Servs., Inc. v. U.S., 579 U.S. 176, 194 (2016) (a healthcare FCA case citing

a non-healthcare FCA case, U.S. ex rel. Marcus v. Hess, 317 U.S. 537 (1943)); Urquilla-Diaz v. Kaplan

supplant Rule 8(a) and adopting a nuanced case-by-case approach, the Court is not persuaded by

Relator’s objection that the FAC satisfies the pleading standards. In this case, both FCA claims

rely on the allegation that eleven (11) Defendants submitted “thousands of false foreign flag

waivers” from 2008 to 2018. ECF No. [149] ¶¶ 7, 83, 89. Yet, Relator does not include a single

false foreign flag waiver from any Defendant in its FAC. As such, Relator fails to adequately allege

the actual submission of a false waivers, the falsity of Defendants’ waivers, and scienter to properly

assert Relator’s presentment claim. See Carrel, 898 F.3d at 1275; 31 U.S.C. § 3729(a)(1)(A). By

failing to include false foreign flag waivers, the FAC also fails to identify the particular statement

alleged to be false, who made or used the statement, when the statement was made, or how the

statement was false to properly assert Relator’s make-or-use claim. See Matheny, 671 F.3d at 1224-

25; 31 U.S.C. § 3729(a)(1)(B).

Further, while Relator cites Mastej, 591 F. App’x. 693, to argue that alternative means may

be used to meet the pleading standard in some cases, see ECF No. [212] at 16-17, the alternative

means Relator sets forth here are not sufficient for several reasons. First, the relator in Mastej was

an insider in the defendant corporation and had firsthand knowledge of the defendant corporation’s

submission of false claims. See id. at 708. However, in this case, Relator alleges to be an insider

in the transportation service provider (“TSP”) industry and does not allege to be an employee of

any specific Defendant or Defendants. See ECF No. [149] ¶ 13. The court in Mastej made clear

that an insider in the relevant industry was not enough and that the relator had to be an insider in

the defendant corporation. See Mastej, 591 F. App’x. at 709-10 (dismissing a subset of relator’s

claims that concerned events that took place after the relator ended his employment with the

defendant corporation). This Court similarly determines that without further alleging firsthand

University, 780 F.3d 1039, 1051 (11th Cir. 2015) (a non-healthcare FCA case citing a healthcare FCA case,

United States ex rel. Clausen v. Lab. Corp. of Am., 290 F.3d 1301 (11th Cir. 2002)).

knowledge as an insider for a particular Defendant or Defendants, Relator cannot rely on its alleged

firsthand knowledge and fail to provide other reliable evidence of the submission of false foreign

flag waivers. Moreover, Relator’s allegations regarding two (2) Defendants – New World and J.K.

– are not sufficient alternative means to meet the pleading standard because those allegations alone

do not allege that all of the Defendants independently submitted false foreign flag waivers and that

all of the Defendants knew that the foreign flag waivers were false when they were submitted for

approval. See ECF No. [149] ¶¶ 78-80.4

The Court also notes that the lack of any false foreign flag waivers cannot be overlooked

in this case given Relator’s arguments. Relator concedes that the low-ball bids alone do not

establish a false claim under the FCA because an underbid is not a false claim, and argues that the

low-ball bids in conjunction with the “improper certification of [the] unavailability of U.S. carriers

in securing government contracts” create a fraudulent scheme that violates the FCA. See ECF No.

[170] at 13-14 (emphasis in original). Relator repeatedly emphasizes that “this case is not about

the bids alone.” See id. at 14, [173] at 15, [171] at 16, n.2. However, without any false foreign flag

waivers establishing the “improper certification of [the] unavailability of U.S. carriers,” Relator

fails to allege the necessary elements to establish a fraudulent scheme for either FCA claim. Put

differently, without false foreign flag waivers, the FAC only alleges low-ball bids, which do not

establish an FCA claim.5 Therefore, the FAC must be dismissed.6

4 Such allegations are not even sufficient for Relator’s claims against New World and J.K. since the

allegations do not establish that the foreign flag waivers were false or that New World and J.K. knew that

the foreign flag waivers were false when they submitted the waivers for approval.

5 Even if Relator adequately alleged the existence of foreign flag waivers submitted by each Defendant,

Relator failed to allege that there were no U.S flag vessels at the time the foreign flag waivers were

submitted in order to adequately allege the falsity of the foreign flag waivers. See U.S. ex rel. Matheny v.

Medco Health Sols., Inc., 671 F.3d 1217, 1224 (11th Cir. 2012).

6 Although Relator refers to Section 4 of the R&R in its Objections, Relator does not elaborate on its

objection to Section 4 and instead broadly argues that its claims are pled with sufficient particularity. See

ECF No. [212] at 16-19. The Court reiterates that “[i]n order to challenge the findings and recommendations

iii. Public Disclosure Bar

Third, the Motions to Dismiss argue that the public disclosure bar applies. According to

Defendants, Relator’s claims are based on publicly disclosed information, and Relator is not the

original source of the information. See ECF Nos. [150] at 9, [153] at 20, [162] at 19. As such,

Defendants argue that the public disclosure bar applies to preclude Relator’s claims and that the

original source exception does not save Relator’s claims. See id. Relator responds that the public

disclosure bar is not applicable because the information Relator relied on was from Transportation

Management Services Solutions (“TMSS”), which does not produce a “report” and is not “public.”

ECF Nos. [170] at 17-18, [173] at 19-20, [171] at 18-19. Relator argues further in two of the three

Responses to the Motions to Dismiss that, if the TMSS information is considered a public

disclosure and a report for the purposes of the public disclosure bar, then Relator is an “original

source as an insider in the industry with details relating to the schemes of fraudulent submissions”

such that the original source exception applies. ECF Nos. [170] at 18, n.2, [171] at 19, n.2.

The R&R finds that Relator’s arguments are unpersuasive because Relator only makes a

conclusory assertion that is insufficient to overcome the public disclosure bar through the original

source exception. See ECF No. [207] at 17 (quoting U.S. ex rel. Brown v. BankUnited Trust 2005-

1, 235 F. Supp. 3d 1343, 1358 (S.D. Fla. 2017) (quoting U.S. ex rel. Hafter D.O. v. Spectrum

of the magistrate judge, a party must file written objections which shall specifically identify the portions of

the proposed findings and recommendation to which objection is made and the specific basis for objection.”

Macort v. Prem, Inc., 208 F. App’x 781, 783 (11th Cir. 2006). Nonetheless, to the extent that Relator objects

to Section 4 by reference, the Court agrees with the R&R that the claims alleged are not pled with sufficient

specificity given the shotgun nature of the pleading that does not give adequate notice of the claims against

each Defendant and the grounds upon which each claim rests. See ECF No. [207] at 16. As indicated above,

the FAC does not adequately plead a presentment claim by failing to allege, for each Defendant, the

submission of a false claim, the falsity of the bids and waiver requests, and scienter. See id. The FAC does

not adequately plead a make-or-use claim by failing to allege, for each Defendant, the submission of a false

statement, scienter, materiality, and the payment of any money by the United States. See id. Relator must

plead all elements, other than scienter, with particularity. See Fed. R. Civ. P. 9(b).

Emergency Care, Inc., 190 F.3d 1156, 1162 (10th Cir. 1999))). In its Objections, Relator explains,

for the first time, that the TMSS system only contains information about the winning bids, not the

higher costs of using a U.S. flag vessel or the lower costs of using a foreign flag vessel. See ECF

No. [212] at 21-22. In light of the non-public information regarding the actual costs, Relator argues

that the public disclosure bar does not apply. See id. Relator also argues that, even if the public

disclosure bar were applicable, Relator is the original source of the non-public information

regarding the actual costs, and the original source exception applies. See id. at 23. Relator further

argues that the Brown case that the R&R relies on is inapposite because the court in Brown applied

the pre-2010 version of the FCA. See id. (distinguishing Brown, 235 F. Supp. 3d at 1353).

The Court agrees with the overall conclusion in the R&R. As an initial matter, the Court

notes that Relator and the Able Group Defendants correctly argue that the amended version of the

public disclosure bar applies. See ECF No. [153] at 20, n.17, [212] at 23.7 The Eleventh Circuit,

in reviewing a district court’s decision on a motion to dismiss based on the amended public

disclosure bar, asked whether “the allegations in the complaint are substantially the same as (rather

than based upon) allegations or transactions contained in public disclosures.” U.S. ex rel. Osheroff

7 The statute of limitations for FCA claims is enumerated in 31 U.S.C. § 3731(b).

A civil action under section 3730 may not be brought--

(1) more than 6 years after the date on which the violation of section 3729 is committed,

or

(2) more than 3 years after the date when facts material to the right of action are known or

reasonably should have been known by the official of the United States charged with

responsibility to act in the circumstances, but in no event more than 10 years after the date

on which the violation is committed, whichever occurs last.

31 U.S.C. § 3731(b). Pursuant to the statute, an FCA claim cannot be brought for violations that took place

more than ten (10) years prior, possibly less in this case. This case was filed on August 4, 2020. See ECF

No. [1]. Assuming for the moment that the maximum time limit applies, any FCA claim before August 4,

2010, is time-barred. The public disclosure bar was amended on March 3, 2010. Therefore, any claim that

is not time-barred in this case is subject to the amended public disclosure bar. As such, the amended public

disclosure bar applies in this case.

v. Humana Inc., 776 F.3d 805, 812 (11th Cir. 2015) (internal quotation marks omitted) (quoting

31 U.S.C. § 3730(e)(4) (2010)) (applying a modified three-prong test). In this case, it is apparent

that the FAC does not distinguish between information that has been publicly disclosed and

information that has not been publicly disclosed. It is only in the Objections that Relator identifies

information that has not been publicly disclosed – namely, the higher costs of using a U.S. flag

vessel and the lower costs of using a foreign flag vessel. See ECF No. [212] at 21-22. Further, the

FAC does not set forth how Relator arrived at the cost figures if not from TMSS. See generally

ECF No. [149]. Based on the FAC alone, it appears that Relator relied solely on TMSS information

to assert its FCA claims, and the allegations in the FAC are therefore substantially the same as

allegations or transactions contained in public disclosures.8

However, Relator may proceed if the original source exception applies. As stated above,

the amended version of the public disclosure bar’s original source exception states, in relevant

part:

(B) For purposes of this paragraph, “original source” means an individual who

either

(i) prior to a public disclosure under subsection (e)(4)(a), has voluntarily

disclosed to the Government the information on which allegations or

transactions in a claim are based, or

(2) [sic] who has knowledge that is independent of and materially adds to the

publicly disclosed allegations or transactions, and who has voluntarily provided

the information to the Government before filing an action under this section.

8 Though not stated expressly, it appears that Judge Otazo-Reyes considered the TMSS information to be

publicly disclosed information because the R&R addresses the original source exception, which is relevant

only if the public disclosure bar applies. See ECF No. [207] at 16-17. The Court similarly considers TMSS

information to be a publicly disclosed information for the purposes of the public disclosure bar since it is a

report that is widely available to all TMSS users. See U.S. ex rel. Sanchez v. Abuabara, No. 10-61673-CIV,

2012 WL 1999527, (S.D. Fla. June 4, 2012) (adopting a broad meaning of the term “report” as “something

that gives information” or a “notification”); U.S. ex rel. Mistick PBT v. Housing Auth. Of City of Pittsburg,

186 F.3d 376, 383, n.3 (3d Cir. 1999) (holding that public disclosures do not require public accessibility);

Malhotra v. Steinberg, 770 F.3d 853, 858 (9th Cir. 2014) (holding that a disclosure need not be made to the

public at large to be considered “public”).

31 U.S.C. § 3730(e)(4)(B) (2010). In its Objections, Relator does not argue that the first prong of

the original source exception applies and instead claims that the original source exception applies

because of the second prong. See ECF No. [212] at 23. As such, the Court examines whether the

FAC includes sufficient allegations that Relator has knowledge that is independent of and

materially adds to the publicly disclosed allegations or transactions. Upon a review of the FAC, it

is once again apparent that Relator merely includes a conclusory allegation that Relator is “an

insider in the TSP business and has direct and independent knowledge of the information on which

these allegations are based.” ECF No. [149] ¶ 13. As the R&R correctly observes, such a

conclusory allegation does not adequately establish that the original source exception applies. As

stated above, it is only within the Objections that Relator specifically identifies independent and

material information about actual costs. See ECF No. [212] at 21-22. The FAC also does not allege

how Relator arrived at the cost figures for which it claims to be the original source. See generally

ECF No. [149]. Therefore, because the FAC does not include sufficient allegations to overcome

the public disclosure bar or to apply the original source exception, Relator’s claims must be

dismissed.

b. Defendants’ Objection

The R&R states that Relator is entitled to one opportunity to correct the deficiencies in the

FAC. See ECF No. [207]. In Defendants’ Objection, Defendants seek to clarify whether Relator’s

leave to replead will be subject to Eleventh Circuit precedent that prohibits any information

obtained through discovery from being used in an amended complaint. See ECF No. [211] at 2

(citing Bingham v. HCA, 783 F. App’x 868 (11th Cir. 2019)). Relator responds that Defendants

improperly request an advisory opinion. See ECF No. [215] at 2 (citing Texas v. United States, 523

U.S. 296, 300 (1998) (holding that an issue “is not ripe for adjudication if it rests upon contingent

future events”) (internal quotation marks omitted)).

The Court agrees that Relator should be given an opportunity to replead. The Court also

agrees with Relator that Defendants’ Objection is premature. As Relator correctly notes, the

Bingham case that Defendants rely upon concerned a motion to strike information obtained

through discovery in an amended complaint. See 783 F. App’x 868. If the issue does becomes ripe

for the Court’s consideration, Defendants may similarly file a motion to strike relevant portions of

the amended complaint, and the Court will address the issue then.9

IV. CONCLUSION

In sum, upon a comprehensive review, the Court finds Magistrate Judge Otazo-Reyes’

R&R to be well reasoned and correct. The Court agrees with the analysis in the R&R and concludes

that J.K.’s Motion to Dismiss, Able Group Defendants’ Motion to Dismiss, and Cartwright’s

Motion to Dismiss should be granted.

Accordingly, it is ORDERED and ADJUDGED as follows:

1. The R&R, ECF No. [207], is ADOPTED.

2. J.K.’s Motion to Dismiss, ECF No. [150], is GRANTED.

3. The Able Group Defendants’ Motion to Dismiss, ECF No. [153], is GRANTED.

4. Cartwright’s Motion to Dismiss, ECF No. [162], is GRANTED.

5. The FAC, ECF No. [149], is DISMISSED WITHOUT PREJUDICE with leave to

amend.

9 To the extent that Relator argues that the Court should not follow Eleventh Circuit precedent set forth in

Bingham and instead rely on non-binding cases that contravene the Eleventh Circuit’s holding on Bingham,

see ECF No. [215] at 2, n.2, the Court is not persuaded. The Court will address the issue if it becomes ripe

and appropriately follow applicable Eleventh Circuit precedent.

Case No. 20-cv-23242-BLOOM/Otazo-Reyes

6. IfRelator can, in good faith, set forth an amended complaint in keeping with the Court’s

Order, Relator shall do so no later than February 9, 2022.

7. Relator’s request that DeWitt be allowed to re-file DeWitt’s Motion to Dismiss the

FAC, ECF No. [213], is DENIED AS MOOT.

8. DeWitt’s Motion for Reconsideration, ECF No. [217], is DENIED AS MOOT.

DONE AND ORDERED in Chambers at Miami, Florida, on January 19, 2022.

BETH BLOOM

UNITED STATES DISTRICT JUDGE

Copies to:

Counsel of Record

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