United States of America ex rel. Frederic P. Zotos v. Town of Hingham

United States District Court

District of Massachusetts

)

UNITED STATES OF AMERICA and )

COMMONWEALTH OF MASSACHUSETTS, )

ex rel. FREDERIC P. ZOTOS, )

)

Plaintiffs, ) Civil Action No.

) 19-12002-NMG

v. )

)

TOWN OF HINGHAM et al., )

)

Defendants. )

)

MEMORANDUM AND ORDER

GORTON, J.

Frederic P. Zotos (“Zotos” or “Relator”), an attorney

representing himself, brings this qui tam action on behalf of

the United States of America and the Commonwealth of

Massachusetts under the federal False Claims Act, 31 U.S.C. §§

3729(a)(1)(A)-(C) (“the FCA”), and the Massachusetts False

Claims Act, M.G.L. ch. 12, §§ 5B(a)(1)-(3) (“the MFCA”).

Zotos alleges that the Town of Hingham (“the Town”) and

several of its administrators and officers (collectively, “the

defendants”) violated the FCA and MFCA by: 1) posting speed

limit signs ultra vires; 2) knowingly submitting, or causing to

be submitted, claims for payment which falsely represented that

defendants had complied with all applicable laws and

regulations; and thereby 3) fraudulently inducing the United

States and the Commonwealth to pay millions of dollars for

highway and transportation projects.

Defendants have filed a joint motion to dismiss (Docket No.

21) which is currently pending before the Court. For the

following reasons, the motion will be allowed.

I. Background

A. Prior Litigation

Zotos has been the plaintiff in two previous actions

brought in this Court against the Town and related defendants.

See Zotos v. Town of Hingham, No. 12-11126-JGD, 2013 U.S. Dist.

LEXIS 134123 (D. Mass. Sep. 19, 2013) ("Zotos I"); Zotos v. Town

of Hingham, et al., No. 13-CV-13065-DJC, 2016 U.S. Dist. LEXIS

195835 (D. Mass. March 25, 2016) ("Zotos II"). In both of those

cases, Zotos challenged the legitimacy of certain speed limit

signs posted in the Town of Hingham.

In Zotos I, the district court published a lengthy decision

dismissing the action and the First Circuit Court of Appeals

(“the First Circuit”) affirmed the dismissal. Zotos I, 2013 U.S.

Dist. LEXIS 134123, aff’d, No. 13-2308 (1st Cir. 2015). Zotos

filed Zotos II prior to the First Circuit's decision in Zotos I

and the district court issued a carefully crafted opinion

dismissing that action as well. Zotos II, 2016 U.S. Dist. LEXIS

195835, at *14.

In addition to the lawsuits Zotos filed as a plaintiff, he

has also served as an attorney in two other civil actions in

which the plaintiff, Nicholas Belezos, alleged statutory and

constitutional violations with respect to a speeding ticket

issued by the Town.

In Belezos v. Board of Selectmen of the Town of Hingham,

the Massachusetts Superior Court for Plymouth County allowed the

defendants' motion for judgment on the pleadings which was then

upheld on appeal by the Massachusetts Appeals Court on the

grounds that plaintiff had waived his right to contest the

infraction “at the heart of [the] dispute”. Belezos v. Board of

Selectmen of Hingham, 2017 Mass. App. Unpub. LEXIS 1005, at *3-

4, 92 Mass. App. Ct. 1114 (Mass. App. Ct. 2017). The

Massachusetts Supreme Judicial Court denied plaintiff's

application for further appellate review.

The same plaintiff, again represented by Zotos, brought

substantially similar claims in federal court which, after the

filing of a motion to dismiss and multiple motions for

reconsideration, were dismissed by another session of this Court

because they were barred by the doctrine of claim preclusion.

See Belezos v. Board of Selectmen of Hingham, No. 17-12570-MBB,

2019 U.S. Dist. LEXIS 205938 (D. Mass. Nov. 27, 2019) (“Belozos

II”).

B. The Pending Case

1. The Parties

Relator Frederic Zotos is a licensed attorney residing in

Cohasset, Massachusetts. The Town of Hingham is a municipality

located in Massachusetts. The remaining defendants were all

administrators and/or officers of the Town at times relevant to

the complaint: Roger Fernandes was a Town Engineer, Thomas Mayo

was a Town Administrator, Ted Alexiades was a Town

Accountant/Finance Director and Town Administrator, Kevin Paicos

was a Town Administrator and Susan Nickerson was a Town

Accountant.

2. Speed Limit Signs

The complaint includes a lengthy recitation of various

federal and state laws and regulations pertaining to the

establishment of speed limit signs. In particular, the federal

highway administrator has approved a 2009 Manual on Uniform

Traffic Control Devices (“MUTCD”) which sets standards for the

establishment of speed limit signs and advisory speed plaques.

According to other federal regulations, any permanent or

temporary traffic control devices installed as part of a

federal-aid project “shall conform to the MUTCD”. The federal

highway administrator can withhold or withdraw funds for highway

projects from states if they “violate[] or fail[] to comply with

the Federal laws or the regulations . . . with respect to a

project”.

Massachusetts has also enacted several statutes and

regulations with respect to the establishment and maintenance of

traffic signs. For instance, M.G.L. ch. 90, § 18 authorizes the

special regulation of speed limits and the posting of such speed

limit signs on roadways in Massachusetts. Pursuant to M.G.L.

ch. 85, § 2, the Massachusetts Department of Transportation

(“MassDOT”) promulgates various regulatory standards about speed

limits and signs. Those regulations require, inter alia, posted

signage to comply with the MUTDC (as well as the Commonwealth’s

2012 amendments to those standards), explain the kinds of

statutory and special speed limits authorized under M.G.L. ch.

90, §§ 17 and 18, and set out procedures for posting new speed

limit signs and advisory speed plaques.

Zotos avers that, as of March, 2012, the Town posted at

least 26 speed limit signs without following applicable federal

and state regulations for the establishment of those limits.

Furthermore, Zotos alleges that, as of March, 2012, the Town

posted multiple advisory speed plaques in violation of

applicable regulations. He asserts that the Town has enforced

such signs without authority and has ignored traffic studies and

reports which indicate that the selected speed limits are

improper.

3. Chapter 90 Reimbursements

The complaint seeks to connect the Town’s purportedly ultra

vires posting of speed limit signs with certain funds provided

by the federal government and/or the Commonwealth as part of

highway and transportation aid programs. The Commonwealth of

Massachusetts (“the Commonwealth”) provides funding for local

transportation projects pursuant to M.G.L. ch. 90, § 34

(“Chapter 90”). Under Chapter 90, the Commonwealth reimburses

municipalities and other qualifying entities for up to 100% of

the cost of approved projects.

Zotos contends that the Town, in connection with a variety

of Chapter 90 projects, entered into two contracts with the

Commonwealth, submitted 24 separate Chapter 90 Reimbursement

Forms to the District Office of the MassDOT’s Highway Division

and submitted several Chapter 90 Final Reports. The complaint

identifies certifications included in those contracts and

reimbursement forms which defendants signed despite their

alleged failure to comply with regulations pertaining to speed

limit signs.

For instance, in 2007, the Town entered into a ten-year

contract with the Massachusetts Highway Department related to

its work on Chapter 90 projects in which it certified its

current and continuing compliance with “all legal requirements

governing performance of this Contract” whether or not such laws

or requirements were specifically cited. In 2017, the Town

executed a replacement contract in which it again certified that

it would ”comply with all applicable state laws and

regulations”.

Throughout the time period covered by those contracts,

defendants submitted two dozen Chapter 90 Reimbursement Forms to

the District Office of the MassDOT Highway Division. Those

reimbursement requests documented the Town’s qualifying

expenditures on previously approved Chapter 90 projects. The

requests also contained several certifications, namely: 1) a

Municipal Highway Officer’s Certification stating that costs

were incurred “in conformance with the Massachusetts Highway

Department Policies”, 2) an Accounting Officer’s Certification

that the forms submitted by the Town conformed with “all

applicable statutes and regulations” and 3) a Duly Authorized

Municipal Official’s Certification certifying the same.

Finally, the Town submitted multiple Chapter 90 Final

Reports that each included a joint certification by the

Municipal Highway Officer, Accounting Officer and Duly

Authorized Municipal Official “that the Municipality has

complied with all applicable statutes and regulations” while

incurring the project costs for which it sought reimbursement.

In July, 2012, Zotos sent a letter to Richard Davey, the

Secretary of Transportation and Chief Executive Officer of the

MassDOT. Zotos requested that, inter alia, the MassDOT withhold

or withdraw funds provided to the Town under Chapter 90 because

it had posted unauthorized speed limit signs. He also asked

that the MassDOT dispatch personnel to Hingham to take down

those signs. After the MassDOT rejected his request through its

General Counsel, Zotos wrote a second letter to the MassDOT

stating that he thought its response was inadequate.

According to the complaint, defendants have fraudulently

induced the Commonwealth to pay about $7.3 million of Chapter 90

funds to the Town by submitting reimbursement requests

containing false representations about their regulatory

compliance.

4. Federal-Aid Highway Program Reimbursements

Zotos also avers that defendants caused the Commonwealth to

submit false claims to the Federal Highway Administration

(“FHWA”) with respect to projects administered under the

Federal-Aid Highway Program (“FAHP”). According to the

complaint, the federal government typically reimburses states

for FAHP projects as follows: 1) the FHWA notifies states about

the balance of available funds; 2) states make formal requests

and begin projects (e.g. by engaging various contractors to work

on those projects); 3) contractors work on the approved projects

and bill the states; 4) states, having incurred the cost of

paying such bills, send vouchers for payment to the FHWA; and 5)

the FHWA certifies those claims and submits them to the Treasury

which disburses funds to the state.

Relator claims that states now submit vouchers for payment

electronically through the Rapid Approval and State Payment

System (“RASPS”) which replaced a “legacy” system that used a

specific form, FHWA Form PR-20. He submits that Form PR-20

included a certification, to be signed by an authorized official

of the state highway agency, stating that:

[c]ost [sic] shown in this voucher have been incurred

in accordance with terms of project agreements;

applicable State and Federal laws or regulations; and

that no claim has previously been submitted for costs

claimed.

The complaint describes two FAHP projects that began in

Hingham in 2018. MassDOT/Federal-Aid Project No. 600518 was

scheduled to begin in 2018 and be completed by 2020 (“Project

No. 600518”). It was intended to improve several intersections,

install a new traffic signal system and make other improvements

for drivers, bicyclists and pedestrians. MassDOT purportedly

submitted 19 invoices, including 76 vouchers for payment, via

RASPS for work done in connection with the project and received

about $425,000 in funds from the federal government.

MassDOT/Federal-Aid Project No. 607309 was also scheduled

to begin in 2018 and be completed by 2020 (“Project No. 607309”

and, collectively with Project No. 600518, “the 2018 Hingham

projects”). It was designed to address safety and capacity

issues at ramps by introducing additional traffic signals and

making other improvements. MassDOT is alleged to have submitted

45 invoices, including 221 vouchers for payment, via RASPS for

work done in connection with the project and received about

$2,885,000 in funds from the federal government.

In total, therefore, the complaint alleges that the MassDOT

submitted, and received payment for, about $3.3 million in

claims to the federal government for the 2018 Hingham projects.

II. Motion to Dismiss

A. Legal Standard

To survive a motion to dismiss under Fed. R. Civ. P.

12(b)(6), the subject pleading must contain sufficient factual

matter to state a claim for relief that is actionable as a

matter of law and “plausible on its face.” Ashcroft v. Iqbal,

556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly,

550 U.S. 544, 570 (2007)). A claim is facially plausible if,

after accepting as true all non-conclusory factual allegations,

the court can draw the reasonable inference that the defendant

is liable for the misconduct alleged. Ocasio-Hernandez v.

Fortuno-Burset, 640 F.3d 1, 12 (1st Cir. 2011).

When rendering that determination, a court may consider

certain categories of documents extrinsic to the complaint

“without converting a motion to dismiss into a motion for

summary judgment.” Freeman v. Town of Hudson, 714 F.3d 29, 36

(1st Cir. 2013) (citing Watterson v. Page, 987 F.2d 1, 3 (1st

Cir. 1993)). For instance, a court may consider documents of

undisputed authenticity, official public records, documents

central to a plaintiff’s claim and documents that were

sufficiently referred to in the complaint. Watterson, 987 F.2d

at 3.

A court may not disregard properly pled factual allegations

in the complaint even if actual proof of those facts is

improbable. Ocasio-Hernandez, 640 F.3d at 12. Rather, the

court’s inquiry must focus on the reasonableness of the

inference of liability that the plaintiff is asking the court to

draw. Id. at 13.

B. Application

1. Claim Preclusion and Issue Preclusion

As an initial matter, defendants contend that the doctrines

of issue preclusion and claim preclusion bar Relator from

bringing this qui tam action. They point to the extensive

litigation that Zotos has initiated or in which he has been

involved with respect to the Town’s authority to post and

enforce speed limit signs. According to defendants, state and

federal courts have repeatedly held that the Town did not post

such signs ultra vires.

The Court recognizes that claims similar to those asserted

by Zotos in this case have been heard and rejected by other

courts but it acknowledges Zotos’ response that this case is

different because he has filed it on behalf of the federal

government and the Commonwealth as well as on his own behalf.

Thus, the United States and the Commonwealth purportedly remain

“real part[ies] in interest” with a viable financial stake in

this action even though they have not intervened and are not

parties. U.S. ex rel. Eisenstein v. City of New York, New York,

556 U.S. 928, 934–35 (2009). According to Zotos, the presence

of those real governmental parties in interest prevents the

application of claim and/or issue preclusion here.

Neither Relator nor defendants cite First Circuit caselaw

in direct support of their respective positions. The Seventh

Circuit Court of Appeals, however, has addressed a similar issue

and held that

the resolution of personal employment litigation does

not preclude a qui tam action, in which the relator

acts as a representative of the public. The special

status of the United States counsels against reflexive

transfer of rules of preclusion from private to public

litigation.

United States ex rel. Lusby v. Rolls-Royce Corp., 570 F.3d 849,

852 (7th Cir. 2009); see also United States ex rel. Sorenson v.

Wadsworth Bros. Constr. Co., 2019 U.S. Dist. LEXIS 95329, at *5-

7 (D. Utah June 5, 2019) (holding that the presence of the

federal government as a real party in interest in a qui tam

action cannot “be ignored for purposes of collateral estoppel”).

The Court finds, therefore, that neither claim nor issue

preclusion bar this action.

2. Federal and State False Claims Acts

Defendants next contend that Zotos has failed to plead a

violation of the FCA or MFCA because he has not demonstrated the

materiality of the alleged misrepresentations or the scienter of

the defendants. Defendants also suggest that Relator’s claims

are deficient under the heightened pleading requirements of Fed.

R. Civ. P. 9(b). For the reasons stated below, the Court

concludes that Relator’s claims are inadequate under both the

FCA and the MFCA.

a. Materiality

The United States Supreme Court has held that, in order to

be actionable under the FCA,

a misrepresentation about compliance with a statutory,

regulatory, or contractual requirement must be

material to the Government’s payment decision[.]

Universal Health Servs. v. United States ex rel. Escobar, 579

U.S. 176, 192 (2016) (Escobar I); see also U.S. ex rel. Loughren

v. Unum Grp., 613 F.3d 300, 307 (1st Cir. 2010) (noting that the

First Circuit has “long held that the FCA is subject” to a

materiality requirement).

The MFCA also requires proof that an alleged

misrepresentation was material to the government’s decision. See

Commonwealth ex rel. Minarik v. Tresca Bros. Concrete, Sand &

Gravel, Inc., 1784-CV-02608-BLS2, 2021 Mass. Super. LEXIS 5, at

*6 (Jan. 25, 2021); see also United States ex rel. Martino-

Fleming v. S. Bay Mental Health Centers, 540 F. Supp. 3d 103,

116, n.5 (D. Mass. May 19, 2021) (explaining that courts rely on

FCA caselaw to interpret the MFCA).

The materiality standard is “rigorous” and “demanding”.

Escobar I, 579 U.S. at 192, 194. The FCA is not:

a vehicle for punishing garden-variety breaches of

contract or regulatory violations. A

misrepresentation cannot be deemed material merely

because the Government designates compliance with a

particular statutory, regulatory, or contractual

requirement as a condition of payment. Nor is it

sufficient for a finding of materiality that the

Government would have the option to decline to pay if

it knew of the defendant’s noncompliance.

Id. at 194.

A misrepresentation about compliance with statutory,

regulatory or contractual requirements is material only if: 1)

it likely would be important to a reasonable recipient in

“determining his choice of action” or 2) if the defendant knew

it would actually be important to the choice of action of a

particular recipient. Escobar I, 579 U.S. at 193 (citation

omitted). The First Circuit has held that the touchstone of

that inquiry is whether the misrepresentation “is sufficiently

important to influence the behavior of the recipient.” United

States ex rel. Escobar v. Universal Health Servs., Inc., 842

F.3d 103, 110 (1st Cir. 2016) (“Escobar II”) (citation omitted).

Courts assess the materiality of such a misrepresentation

pursuant to a holistic analysis that includes three primary

factors, none of which is dispositive: 1) whether the government

expressly identified compliance with particular requirements as

a condition of payment, 2) whether the government nevertheless

paid a claim despite knowing that those requirements were

violated and 3) whether the noncompliance in question is “minor

and insubstantial” or goes to “the very essence of the bargain”.

See Escobar I, 579 U.S. at 193-195, 193 n.5.

In this case, Relator alleges that defendants certified (or

caused to be certified) their compliance with all applicable

laws and regulations in connection with certain contracts and

reimbursement forms despite their failure to comply with

regulations pertaining to the establishment and maintenance of

speed limit signs in the Town of Hingham. He asserts that

compliance, or lack thereof, with regulations is “the textbook

example” of a material misrepresentation. Zotos concludes that

it is “hard to imagine” that the federal government would have

paid the Commonwealth, or that the Commonwealth would have paid

the Town, but for the purportedly misleading certifications.

According to Relator, there is an actionable

misrepresentation in this case because: 1) defendants did not

comply with certain regulations, 2) they nevertheless submitted

broad certifications which attested to their compliance with all

applicable regulations and 3) those certifications were a

prerequisite to the payment of funds. That expansive framing of

materiality, however, has been specifically rejected by the

United States Supreme Court:

[I]f the Government required contractors to aver their

compliance with the entire U.S. Code and Code of

Federal Regulations, then under this view, failing to

mention noncompliance with any of those requirements

would always be material. The False Claims Act does

not adopt such an extraordinarily expansive view of

liability.

Id. at 196.

In evaluating the materiality of defendants’ alleged

misrepresentations in the case at bar, therefore, the Court

rejects Relator’s expansive and conclusory theory of liability

and instead considers the alleged misrepresentations under the

holistic analysis established by the Supreme Court in Escobar I.

i. Contracts and Reimbursement

Requests Related to the Commonwealth’s

Program

As described above, Zotos asserts that defendants made

material misrepresentations in contracts and reimbursement

request forms that they submitted to the Commonwealth with

respect to Chapter 90 projects. Even assuming that the

defendants posted unauthorized speed limit signs, and assuming

that such misconduct was within the scope of the certifications

at issue, the Court concludes that defendants’ purported

misrepresentations were not material.

Although the certifications submitted to the Commonwealth

may have been a prerequisite for the Town receiving

reimbursements, those certifications do not expressly identify

any specific laws or regulations pertaining to speed limit

signs. And even if particular provisions had been expressly

identified, the alleged noncompliance of defendants was, in any

event, “minor [and] insubstantial”. Escobar I, 579 U.S. at 194.

The “essence of the bargain” pursuant to which the Town received

Chapter 90 funds was that the Town incurred costs in connection

with actual work done on approved projects and that the

Commonwealth reimbursed those costs. Id. at 193, n.5. The

complaint does not allege that the Town failed to carry out the

work or incur the costs for which it submitted reimbursement

requests.

Furthermore, Zotos claims that he alerted the MassDOT about

defendants’ posting and maintenance of purportedly ultra vires

speed limit signs in July, 2012. The Commonwealth denied

Relator’s request to withhold funds from the Town and, in the

aftermath of that correspondence, continued to appropriate

Chapter 90 funding to the Town. That funding in spite of

defendants’ alleged violations is “strong evidence” that the

requirements were not material to the Commonwealth’s decision-

making. Escobar I, 579 U.S. at 195.

This Court concludes that defendants’ alleged

misrepresentations to the Commonwealth about their compliance

with regulations on speed limit signs were not therefore

material under the holistic and demanding standard articulated

in Escobar I.

ii. Invoices and Vouchers Related to

the Federal-Aid Highway Program

A similar analysis applies to Relator’s allegation that

defendants caused the MassDOT to submit misleading invoices and

vouchers to the federal government in connection with the 2018

Hingham projects.

It is unclear from the complaint whether the MassDOT

actually submitted any signed copies of Form PR-20, including

certifications, in connection with either of the 2018 Hingham

projects. To the contrary, Relator has merely alleged that Form

PR-20 was used at some point, that the MassDOT submitted some

vouchers for reimbursement to the federal government in

connection with the 2018 Hingham projects (with or without Form

PR-20) and that defendants’ alleged misconduct would have

rendered the certification on Form PR-20 false.

That juxtaposition of defendants’ alleged misconduct, the

certification included on Form PR-20 and the federal funding of

the pertinent projects supports, at most, a speculative

inference that defendants may have caused the MassDOT to submit

a false statement to the FHWA. In United States ex. rel. Kelly

v. Novartis Pharms. Corp., the First Circuit explained that

“evidence and arguments [which] proceed more by insinuation” are

too speculative to support a claim that defendants caused a

third-party to submit false claims. 827 F.3d 5, 14-15 (1st Cir.

2016) (citing United States ex rel. Rost v. Pfizer, Inc., 507

F.3d 720, 733 (1st Cir. 2007)). Thus, the complaint here does

not allege defendants’ purported fraud with the requisite level

of specificity. Id. at 13-14 (holding that allegations of

“illegal conduct alone” and/or “that a fraudulent claim was

presumably submitted” are insufficient).

Even if the complaint had adequately alleged that

defendants caused the MassDOT to submit misleading

certifications to the federal government, the purported

misrepresentations about defendants’ compliance with speed limit

sign regulations would not be material. First, there is no

express indication on Form PR-20 that compliance with

regulations related to the establishment of speed limit signs

was necessary for federal funding. Furthermore, by 2018,

Relator had publicly initiated several lawsuits with respect to

defendants’ alleged noncompliance but the federal government

nevertheless provided funding for the 2018 Hingham projects.

Finally, the “essence” of the FAHP funding bargain was that

the MassDOT incurred permissible costs on FAHP projects that

were duly reimbursed. Escobar I, 579 U.S. at 193 n.5. There are

no allegations in the complaint to suggest that work on approved

projects was falsified or that duplicate costs were claimed.

One cannot infer from the complaint that misrepresentations, if

any, about defendants’ compliance with regulations on speed

limit signs were “sufficiently important” to affect the federal

government’s funding decisions about the 2018 Hingham projects.

Escobar II, 842 F.3d at 110.

ORDER

For the foregoing reasons, defendants’ motion to dismiss

(Docket No. 21) is ALLOWED.

So ordered.

_/s/ Nathaniel M. Gorton____

Nathaniel M. Gorton

United States District Judge

Dated: July 21, 2023