Lw Construction of Charleston, LLC v. United States

In the United States Court of Federal Claims

No. 14-960C

Filed: July 31, 2018

* * * * * * * * * * * * * * * * **

LW CONSTRUCTION OF *

CHARLESTON, LLC, * Motion for Leave to Amend;

* Delay; False Claims Act;

Plaintiff, * Common Law Fraud; Unjust

* Enrichment; Statute of

v. * Limitations; 28 U.S.C. § 2415;

* 28 U.S.C. § 2501; 31 U.S.C.

UNITED STATES, * § 3731; Service Disabled

* Veteran Owned Small

Defendant. * Business.

*

* * * * * * * * * * * * * * * * **

William A. Scott, Pederson & Scott, P.C., Charleston, SC, for plaintiff. With him

was James L. Werner, of counsel, Parker Poe Adams & Bernstein, LLP, Columbia, South

Carolina.

Erin K. Murdock-Park, Trial Attorney, Commercial Litigation Branch, Civil

Division, United States Department of Justice, Washington, D.C., for defendant.1 With her

1 Approximately one week after the case was filed by plaintiff LW Construction of

Charleston, LLC, (LW) on October 8, 2014, Jeffrey Lowry, a trial attorney in the

Commercial Litigation Branch of the Civil Division of the Department of Justice entered

his notice of appearance as the attorney of record on behalf of the United States in the

above-captioned case. On September 22, 2017, Erin Murdock-Park, also a trial attorney

in the Commercial Litigation Branch of the Civil Division of the Department of Justice, filed

a notice of appearance “as attorney of record for the United States” in the above-

captioned case. Following Ms. Murdock-Park’s September 22, 2017 notice of

appearance, Mr. Lowry and Ms. Murdock-Park interchangeably filed documents before

the court in the above-captioned case on behalf of defendant. For example, according to

the docket for the above-captioned case, on October 13, 2017, Ms. Murdock-Park filed,

on behalf of the United States, defendant’s motion for leave to amend currently at issue

before the court. On December 20, 2017, also according to the docket for the above-

captioned case, Mr. Lowry filed, on behalf of the United States, defendant’s reply in

support of its motion for leave to amend. Pursuant to Rule 83.1(c) of the Rules of the

Court of Federal Claims (RCFC), “[a] party may have only one attorney of record in a

case at any one time,” and “[a]ny attorney assisting the attorney of record must be

designated ‘of counsel.’” RCFC 83.1 (2018). On April 5, 2018, Ms. Murdock-Park filed a

second notice of appearance, in which she stated that she was the “attorney of record for

were Jeffrey Lowry, Trial Attorney, Commercial Litigation Branch, Civil Division, Martin

F. Hockey, Jr., Deputy Director, Commercial Litigation Branch, Civil Division, Robert E.

Kirschman, Jr., Director, Commercial Litigation Branch, Civil Division, and Chad A.

Readler, Acting Assistant Attorney General, Civil Division.

OPINION

HORN, J.

Before the court is a motion by the defendant, the United States of America, “for

leave of Court to amend its previously filed answer in order to assert a new affirmative

defense of common law fraud, to assert fraud counterclaims pursuant to common law and

to the False Claims Act, 31 U.S.C. §§ [sic] 3729,” and to add a counterclaim for unjust

enrichment. Previously, in its amended answer to plaintiff’s amended complaint, filed on

January 12, 2016, defendant had asserted a counterclaim for liquidated damages and for

reprocurement costs in the amount of $1,703,353.22, stemming from the VA’s

reprocurement of a construction contract for the Fort Jackson National Cemetery (the Fort

Jackson contract) after the VA terminated LW from performing on the Fort Jackson

contract for default. Defendant now seeks to “bring counterclaims which allege that the

plaintiff, LW Construction of Charleston, LLC (LW), misrepresented its status as a service-

disabled veteran-owned small business (SDVOSB) in order to receive an award for the

construction project at Fort Jackson National Cemetery, an award reserved for legitimate

SDVOSBs.” According to defendant’s October 13, 2017 proposed amended answer,

defendant seeks to assert four counterclaims and an affirmative defense of common law

fraud. The first counterclaim, for common law fraud, seeks damages, to be determined at

trial, that were caused by plaintiff’s alleged, material misrepresentation of its SDVOSB

status when it submitted its proposal for and was awarded the Department of Veterans

Affairs’ (VA) construction contract for the Fort Jackson National Cemetery, contract no.

VA101CFM-C-0042, the underlying contract at issue in the above-captioned case. The

second counterclaim seeks civil penalties under the False Claims Act (FCA), “31 U.S.C.

§ 3729(a)(1)(2006) and, as amended, 31 U.S.C. § 3729(a)(1)(A),”2 for each of the twenty-

the United States.” Ms. Murdock-Park, however, stated in her April 5, 2018 notice of

appearance, unlike in her September 22, 2017 notice of appearance, that the “prior

attorney of record, Jeffrey Lowry, should be terminated from the case.” On April 5, 2018,

the court terminated Mr. Lowry as the attorney of record for the United States.

2In its motion for leave to amend, defendant’s second and third proposed counterclaims

are brought pursuant to the FCA. In its motion for leave to amend, defendant cites to 31

U.S.C. § 3729(a)(1)(A) (2012), and its former version at 31 U.S.C. § 3729(a)(1) (2006),

as the sections under the FCA applicable to its second proposed counterclaim. Defendant

also cites to 31 U.S.C. § 3729(a)(1)(B) (2012), and its former version at 31 U.S.C.

§ 3729(a)(2) (2006), as the sections under the FCA applicable to its third proposed

counterclaim. Defendant, however, should not be citing to 31 U.S.C. § 3729(a)(1) (2006)

as support for its second counterclaim, nor should defendant be citing to 31 U.S.C.

§ 3729(a)(2) (2006) as support for its third counterclaim, because the 2006 version of the

FCA is not applicable to any of defendant’s proposed FCA counterclaims. Instead, the

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five allegedly false claims3 requesting payment submitted by plaintiff to the VA in

connection with the Fort Jackson contract. The third counterclaim seeks civil penalties

under a different provision of the FCA, “31 U.S.C. § 3729(a)(2)(2006) and, as amended,

31 U.S.C. § 3729(a)(1)(B),” for each of the twenty-five allegedly false claims submitted by

plaintiff.4 The fourth counterclaim, for unjust enrichment, seeks return of all money paid

by the VA to plaintiff derived from the allegedly fraudulently obtained Fort Jackson

contract. Plaintiff opposes defendant’s motion for leave to amend its answer with an

affirmative defense and the new counterclaims because, according to plaintiff, the motion

is “(i) untimely; (ii) filed solely to gain a negotiating advantage; (iii) prejudicial to LW; and

(iv) futile.”

applicable version of the FCA to defendant’s proposed FCA counterclaims is the current

version of the FCA, 31 U.S.C. § 3729 (2012), which incorporates the amendments to the

FCA that occurred in 2009. The FCA was amended in 2009. See Fraud Enforcement and

Recovery Act of 2009, Pub. L. No. 111–21, § 4(a), 123 Stat. 1617, 1621. The

amendments are treated “as if enacted on June 7, 2008, and apply to all claims under the

False Claims Act (31 U.S.C. 3729 et seq.) that are pending on or after that date.” Id. at

§ 4(f), 123 Stat. at 1625; see also AEY, Inc. v. United States, 114 Fed. Cl. 619, 633 (2014)

(“The amended provision, 31 U.S.C. § 3729(a)(1)(B), took effect as if enacted on June 7,

2008 and applies to all claims under the False Claims Act that were pending on or after

that date.”). Thus, although defendant states in its proposed amended answer that it is

seeking FCA counterclaims pursuant, in part, to the 2006 version of the FCA, because all

of plaintiff’s alleged false claims were submitted for payment, as according to defendant,

beginning in 2009, the 2006 version of the FCA does not apply to defendant’s proposed

FCA counterclaims. Instead, the amendments to the FCA enacted in 2009 and the current

version of the FCA codified at 31 U.S.C. § 3729, are applicable to defendant’s FCA

counterclaims. See AEY, Inc. v. United States, 114 Fed. Cl. at 633.

3 According to defendant’s reply brief in support of its motion for leave to amend, plaintiff

“submitted invoices for payment on 22 occasions between 2009 and 2012, each of which

is a separate false claim.” Also, according to defendant’s reply brief, plaintiff submitted

three additional certified claims for payment on February 17, 2015, September 15, 2015,

and September 24, 2015 in connection with the Fort Jackson contract, which “each

represent separate FCA violations.” Defendant alleges that plaintiff submitted a total of

twenty-five false claims. The plaintiff does not dispute defendant’s calculation regarding

the number of claims.

4 “The difference between § 3729(a)(1) and § 3729(a)(2) [of the FCA],” the two separate

provisions of the FCA under which defendant in the above-captioned case is seeking to

assert two separate FCA counterclaims, “is that the former [§ 3729(a)(1)] imposes liability

for presenting a false claim, while the latter [§ 3729(a)(2)] imposes liability for using a

false record or statement to get a false claim paid.” Jana, Inc. v. United States, 34 Fed.

Cl. 447, 449 (1995).

3

BACKGROUND

Statutory Background of the VA’s SDVOSB Set-Aside Program.

Before addressing the defendant’s pending motion for leave to amend, a review of

the relevant statutory background regarding the VA’s SDVOSB set-aside program, and a

chronology regarding plaintiff’s establishment in 2008 and history to the present, as well

as the procedural history of the above-captioned case is helpful.

On December 26, 2006, Congress passed the Veterans Benefits, Healthcare, and

Information Act of 2006, Pub. L. No. 109-461, 120 Stat. 3403 (2006), which created a

new mandate for the VA to set-aside competitive procurements for SDVOSBs when two

or more such businesses were likely to compete for a particular contract award. Under

this Act, the VA was required to maintain a database of eligible SDVOSB entities, which

was called VetBiz Vendor Information Pages (VIP), available at www.VetBiz.gov. In 2007,

the VA issued guidance requiring contractors to register in the VIP database before

contract award in order to be eligible for the award of a VA SDVOSB contract. At the time,

the contractor, however, did not have to register in the VIP database before submitting

an offer for a SDVOSB set-aside contract. According to a June 19, 2007 Department of

Veterans Affairs memorandum regarding the “Veterans First Contracting Program,”

attached to defendant’s reply in support of its motion for leave to amend, at the time,

contracting officers only were required to “ensure businesses are registered in VetBiz.gov

Vendor Information Pages (VIP) database and otherwise responsible prior to making

award.”

On May 19, 2008, however, the VA issued an interim rule requiring that contractors

not only register in the VIP database, but also submit “information establishing that the

business is owned and controlled by eligible parties.” VA Veteran-Owned Small Business

Verification Guidelines, 73 Fed. Reg. 29,024 (May 19, 2008). The interim rule also stated

that the “Department of Veterans Affairs will examine the information provided by the

owners and approve or disapprove applications for ‘verified’ status.” Id. According to a

Government Accountability Office Report (GAO Report) dated March 19, 2009, which

defendant attached to its reply brief in support of its motion for leave to amend, despite

the VA’s 2008 interim rule, the VA only would begin requiring its contracting officers to

award set-aside contracts to “verified” SDVOSBs by “May 2009 at the earliest,” which

was when the VA anticipated finalizing its rulemaking with regard to the SDVOSB set-

aside program. Until at least May 2009, as stated in the GAO Report, contractors

competing for SDVOSB set-aside contracts, according to VA policy at that time, “only

have to be registered in VA’s database to receive set-aside or sole-source awards.” In

fact, the VA did not publish its final rule until February 8, 2010. See VA Veteran-Owned

Small Business Verification Guidelines, 75 Fed. Reg. 6098 (Feb. 8, 2010).

The verification process for the VA’s SDVOSB set-aside program changed once

again when Congress passed the Veterans Small Business Verification Act of 2010, Pub.

L. No. 111-275, § 104, 124 Stat. 2864, 2867 (2010 Verification Act) on October 13, 2010,

which occurred, according to the government, “[a]fter the GAO began reporting on abuse

4

of the SDVOSB program, including from awarding contracts to large businesses that

misrepresented their status at the expense of legitimate SDVOSBs.” According to the

2010 Verification Act, a contractor had to submit documentation to the VA’s Center for

Veterans Enterprise (CVE) that demonstrated its eligibility for the SDVOSB program

within 90 days of receiving notice, or else be removed from the VIP database. Once it

received a “verified” status from the VA, the contractor then would be included in the

government’s database of eligible SDVOSB contractors.

September 11, 2008: LW is formed.

According to LW’s operating agreement, attached as an exhibit to the

government’s proposed amended answer, Louis White, Sidney A. Brantley and Gary D.

Brantley entered into a limited liability company agreement to form LW on September 11,

2008. Both parties state in their filings before the court that Mr. White is a “disabled

veteran.” According to LW’s operating agreement, Louis White had a 51% company

interest and had made a capital contribution of $510.00, Sidney Brantley had a 25%

company interest and had made a capital contribution of $250.00, and Gary Brantley had

a 24% company interest and had made a capital contribution of $240.00. Notably, the

operating agreement states in the management section that “the Members shall have full,

exclusive and complete discretion in the management and control of the Company and

shall make all decisions affecting its business and affairs.” The operating agreement

further states that “all members must consent in writing in order that any of the

powers set forth below may be exercised,” and then details a laundry list of powers

regarding management of the company, including but not limited to the power “[t]o

execute all agreements and other documents necessary to implement the purposes of

the Company, and to take such actions as may be necessary to consummate the

transactions contemplated thereby,” “[t]o invest funds of the Company,” and “[t]o hire,

supervise and terminate on behalf of the Company all independent contractors and

employees . . . .” (emphasis in original).

2009: LW self-certifies as a SDVOSB and bids on the Fort Jackson contract.

On March 30, 2009, the VA issued solicitation number VA-101-09-RP-0100 for

offers to perform the construction of Phase 1B of the Fort Jackson National Cemetery

(the Fort Jackson solicitation). The solicitation stated that “[t]his procurement is a Service-

Disable[d] Veteran-Owned Small Business (SDVOSB) set-aside,” and that “[t]he

SDVOSB must be registered in the Central Contractor Registration (CCR) database. . .

prior to award and must also be registered as a SDVOSB firm at the VetBiz Vendor

Information Pages [VIP].” According to the declaration of the VA contracting officer,

Robert Capers, who was also the source selection authority for the award of the Fort

Jackson contract, he “was required to determine whether or not LW was a qualified

service-disabled veteran-owned small business (SDVOSB) and eligible for the award of

the contract.” According to Mr. Capers’ declaration, “the VA was required to review both

the information in the Central Contractor Registration system, as well as the VA’s Vendor

Information Pages database.” According to Mr. Capers, “[u]pon reviewing both databases

we determined that LW had self-certified that they met the requirements for an SDVOSB.”

5

The government attached a declaration to its reply in support of its motion for leave

to amend that was signed by Benjamin Ward, who states in his declaration that he is the

Chief of Risk and Compliance at the CVE at the VA and is “required to review and analyze

records maintained by CVE relating to the evaluation of contractors for eligibility in the

Veterans First Contacting [sic] Program.” Mr. Ward’s declaration also notes that LW

registered as a SDVOSB on VIP “sometime before June 5, 2009.” Additionally, according

to Mr. Ward’s declaration, “LW did not submit any documentation to CVE to support its

SDVOSB status before that date.” Mr. Ward’s declaration also states that LW “first

submitted documentation to CVE to support its SDVOSB status was [sic] on June 5,

2009.[5] The only document submitted at that time was the VA form 0877 wherein Louis

White certified that he owned 51 percent of LW and that LW was owned and controlled

by a service-disabled veteran.” Also according to the declaration of Mr. Ward, LW

submitted an application to have CVE verify its SDVOSB status on August 25, 2009.

According to a January 14, 2009 letter from the VA to LW that was attached to LW’s

response brief in the above-captioned case, however, the VA indicated that LW has “been

verified and added to the verified Veteran business database at www.VetBiz.gov.” Mr.

Ward states in his declaration, however, that the January 14, 2009 date on the VA’s letter

must be incorrect because “CVE did not review LW’s verification application until August

25, 2009.” According to Mr. Ward’s declaration, “CVE notified LW on January 14, 2010

that LW would be listed as verified on the Vendor Information Pages database.” Mr. Ward

also states in his declaration that,

[b]ased upon CVE’s records and my knowledge of CVE’s past practices,

CVE examined and verified LW’s SDVOSB status based upon Mr. White’s

representation of 51 percent ownership, LW’s business license, and a

review of available information in the Central Contractor Registration

Database, LW’s SBA profile, LW’s Duns and Bradstreet report, the Online

Certifications and Representations Application, and the USA Spending

database.

On April 29, 2009, Mr. White, on behalf of LW, submitted LW’s proposal in

response to the Fort Jackson solicitation along with an April 29, 2009, signed cover letter

to the VA. The government states in its reply in support of its motion for leave to amend

that LW did not provide its operating agreement to the government as part of its proposal

to the VA.6 In its technical proposal, LW stated that it “is a full-service General Contractor

5Based on the regulatory framework discussed above, LW must have registered as an

SDVOSB before June 2, 2009, the date on which it was awarded the Fort Jackson

contract.

6 According to LW’s response to the motion for leave to amend, LW did submit its

operating agreement to the VA in 2011, two years after it submitted its proposal for the

Fort Jackson contract. LW asserts in its sur-reply to the motion for leave to amend,

however, that the copy of the operating agreement the VA received in 2011 was the “same

one it had since 2008.” LW does not explain whether the VA received a copy of LW’s

operating agreement in 2008 or in 2009 when the solicitation was issued and when the

Fort Jackson contract was awarded.

6

specializing in federal projects as a Service-Disabled Veteran-Owned Small Business.

The members of LW Construction have been in the construction industry over 75 years

collectively.” LW’s technical proposal also provided an overview of personnel at LW who

would be working on the Fort Jackson contract, which consisted of the following six

individuals: Louis White, Sidney Brantley, and Gary Brantley, the three founders and

managing members of LW, as well as Ronald Brantley, the project superintendent,

Stephen Allen, the assistant project superintendent, and Christina McAlhaney, the

estimator. LW’s technical proposal also contained an “Organizational Chart for Proposed

Staff” that displayed Louis White, Sidney Brantley, and Gary Brantley at the top of the

chart. All three individuals were labeled “Managing Member,” and designated to be at the

“Home Office.” Only Louis White also was labeled as “Project Manager.” The technical

proposal also included the resumes for the six individuals. Louis White’s resume had a

heading stating that he was “Managing Member/Project Manager” of LW. According to

the resume, Mr. White was simultaneously working at LW as “Managing Member,” as well

as, at Brantley Construction Company, LLC as “Project Manager.” Mr. White’s resume

also stated that he “will be able to commit 85% of his time to the construction phases of

this project.”

Sidney Brantley’s resume stated that he was a “Managing Member” of LW. Sidney

Brantley’s resume also stated that he was presently working as a managing member of

LW and president of Brantley Construction Company, LLC. His resume further stated that

Sidney Brantley had previously worked at Brantley Construction Company, Inc. as its

president from 1997 to September 2005. In addition, Sidney Brantley’s resume stated

that he had obtained a B.S. in civil engineering in 1969 from The Citadel and an M.S. in

civil engineering in 1973 from Clemson University.

Gary Brantley’s resume stated that he was a “Managing Member” of LW, and that

he was presently working as managing member at LW and as the “Managing

Partner/Project Manager” of Brantley Construction Company, LLC, and had previously

worked at Brantley Construction Company, Inc. as the “Vice President/Corporate

Secretary/Project Manager” from 1986 to September 2005. Gary Brantley’s resume

further stated that:

He is responsible to the day to day operations of Brantley construction and

LW Construction. He monitors project objectives, company policies,

procedures and performance standards of all field personnel, monitor [sic]

material, labor and supply procurements, as well as management and

distribution of equipment.

The resume for Ronald Brantley, LW’s project superintendent, stated that he was

at the “Present” working for both LW and Brantley Construction Company, LLC for

“Special Projects” and had previously worked at Brantley Construction Company, Inc. as

the “Vice President/Project Manager” from 1977 to 2002. It also stated that “Ron Brantley

will be assigned full time to the site and will perform all the Project Superintendent duties.”

7

The resume for Christina McAlhaney, the proposed estimator, stated that she

worked at “Present” for Brantley Construction Company, LLC, and had previously worked

at Brantley Construction Company, Inc. from 1994 to September 2005. The resume did

not state that she was employed at LW at the time LW’s proposal was submitted, but it

did state that she “[w]ill become employed upon receipt of contract.”

According to the resume for Stephen Allen, the proposed assistant project

superintendent, Mr. Allen is the only individual who was included in LW’s proposal as a

LW team member who had not worked previously for Brantley Construction Company,

LLC or Brantley Construction Company, Inc. The resume did not state that Mr. Allen was

employed by LW at the time LW’s proposal was submitted to the VA for the Fort Jackson

contract. The resume stated, however, that Stephen Allen “[w]ill become employed upon

receipt of contract.”

According to plaintiff’s sur-reply in response to defendant’s motion for leave to

amend filed on January 26, 2018, between the time LW submitted its proposal and LW

was awarded the Fort Jackson contract, “Government representatives interviewed Louis

White about disclosures in the Proposal,” and specifically “questioned White because his

phone number was at Brantley Construction Company.” Plaintiff also states in its sur-

reply brief that “Mr. White informed the Government that he still worked for Brantley, and

would continue to work for Brantley until LW was awarded a contract.”

On June 2, 2009, LW, as a SDVOSB contractor, was awarded the Fort Jackson

contract no. VA101CFM-C-0042, Project Number 930CM2002B, for the expansion

improvements to the VA’s cemetery at Fort Jackson, South Carolina for an amount of

$10,273,000.00 with an initial completion date of December 18, 2010. The work “generally

included site work, new sidewalks and roads, construction of an administrative building,

a maintenance building, two committal shelters, new utility infrastructure, a flag placard

facility, decorative fencing, construction of ten columbarium units, concrete crypts,

installation of an irrigation system, and landscaping.” According to plaintiff, and based on

the bond document, “STANDARD FORM 25A,” (capitalization in original), attached to

LW’s response to the motion for leave to amend, dated November 21, 2017, it appears

that one day after contract award, on June 3, 2009, LW provided to the VA payment and

performance bond information. The “Indemnity Disclosure” document, included with LW’s

standard form 25A, stated that the indemnitors on the “performance” bond were (1) LW

Construction of Charleston, LLC, (2) Brantley Construction Company, Inc., (3) BCC

Holdings, L.P., (4) Brantley Management, LLC, and (5) Brantley Construction Services,

LLC D/B/A Brantley Construction Company, LLC.

October 24, 2011: LW is decertified as a SDVOSB.

According to plaintiff’s brief filed in response to defendant’s motion for leave to

amend, “[s]ometime in early 2011, the VA removed LW from the VetBiz website,” which,

according to plaintiff, prompted LW to contact the VA regarding its SDVOSB status.

According to a June 21, 2011 email from Gary Brantley to VetBiz Vendor Information

Pages, attached to LW’s response brief, LW “began sending e-mails to vip@va.gov in

8

early June requesting an update” regarding LW’s SDVOSB verification by the VA.

(underline in original). The June 21, 2011 email from Gary Brantley to VetBiz Vendor

Information Pages also stated that, “we [LW] are currently bidding SDVOSB projects” and

such “work is critical to the survival of LW.” Based on a June 24, 2011 email from Gary

Brantley to Chuck Southern, who, according to the email, was the manager of the VA’s

SDVOSB verification program, Gary Brantley followed up with the VA and wrote, “LW

Construction of Charleston, LLC is a SDVOSB.” He also wrote that, “[w]e have been told

that we are ‘verified’ as a SDVOSB. However, recently we are not sure as our company

does not appear in the VetBiz Vender Information Pages at vip.vetbiz.gov.” Following

LW’s emails, LW submitted information on the company and its members to the VA on

July 11, 2011, including, according to plaintiff’s response brief, “LW’s general contractor

license; resumes of Louis White, Sidney Brantley, Gary Brantley, Bert Bailey and Don

Houghton; financial information including Mr. White’s tax returns, LW’s tax returns (form

1120S), and LW’s payroll information; LW’s lease agreements; LW’s Operating

Agreement; and Articles of Organization.” Then, according to plaintiff’s response brief,

the VA twice more requested additional information from LW, on August 23, 2011 and

August 31, 2011. According to plaintiff’s response brief, LW responded to the August 23,

2011 request and provided the VA with the following information:

Sidney A. Brantley’s 1040 Tax Return 2009 & 2010; Gary D. Brantley’s 1040

Tax Return 2009 & 2010; 8300 Dorchester LLC Tax Return 2009 & 2010;

Brantley Management, LLC Tax Return 2008 & 2009; McQueen Street, LLC

Tax Return 2009 & 2010; Shellmore Investors Tax Return 2009 & 2010;

Brantley Pratt, LLC Tax Return 2009 & 2010; B&B Construction of

Charleston, Inc. Tax Return 2009 & 2010; Olivewood Properties, LLC Tax

Return 2009 & 2010; and 2466 Clements Ferry Rd, LLC Tax Return 2009

& 2010.

According to plaintiff’s response brief, LW responded to the August 31, 2011 request and

provided the VA with “Sidney A. Brantley’s W-2; Gary D. Brantley’s W-2; Lisa G.

Brantley’s W-2; Joan S. Brantley’s W-2; Brantley Construction Company, Inc. Tax Return

2008 & 2009; BCC Holdings, LP Tax Return 2008 & 2009.”

On October 24, 2011, CVE wrote to Mr. White, informing him that “your Disabled-

Service Veteran-owned small business (SDVOSB), LW Construction of Charleston, LLC

(LWCC), has been denied for inclusion in the VA VetBiz Vendor Information Pages (VIP)

Verification Program.” CVE explained that “[t]he decision is based upon the results of

CVE review of your organizing documents, publicly available information of your business

conducted by CVE representatives on September 28, 2011.” CVE found that Mr. White

had “valid Service-Disabled status from VA and that you [Mr. White] own at least 51% of

the concern.” The CVE found that “after reviewing your VIP profile and other information

available,” CVE was “unable to conclude that you satisfy the requirements set forth in 38

CFR Part 74[7].” The CVE stated that “[a]s part of the verification process to determine

7“38 CFR Part 74,” refers to 38 C.F.R. §§ 74.1‒74.29 (2018), the part of the United States

Code which codifies the VA’s small business regulations, including 38 C.F.R. § 74.2,

9

ownership and control requirements identified under 38 CFR Part 74, a review of LWCC

records was conducted,” and “consisted of an extensive review of financial records and

interviews of company personnel.” The CVE then indicated:

According to the LWCC Operating Agreement dated 09/11/2008, it

identifies you [Louis White] as having 51%; Sidney Brantley 25% and Gary

Brantley 24% control of LWCC. However, Section 6.01 and 6.02 states that

Members can only be removed by majority consent of Members. Also

Members shall have full, exclusive, and complete discretion in the

management and control of the company and shall make all decisions

affecting its business and affairs. In Section 11.01 of the Operating

Agreement it states only with the consent of all Members, no Member may

assign, sell, transfer, liquidate, encumber, or in any way alienate, all or part

of the company interest. The language in the company’s documents is

binding. Since it is very apparent that LWCC Operating Agreement prohibits

you full control of LWCC, CVE determined [sic] has determined that LWCC

does not meet the requirements of 38 CFR § 74.4(i)(1).

The CVE stated that “[g]iven the evidence listed above, CVE finds issues with regard to

control and therefore, cannot reasonably conclude that you, the Service-Disabled Veteran

manage the day-to-day decisions and are [not] influenced by another business

relationship and do not meet the requirements of 38 CFR § 74.4,” and that, therefore,

“CVE cannot conclude that LWCC meets the requirements of a service disabled Veteran

owned small business as identified within 38 CFR Part 74.” Consequently, on October

24, 2011, CVE found that LW’s “business will be ineligible to participate in Veterans Frist

Contracting Program opportunities with the VA,” and stated that LW’s “profile will be

removed from the VetBiz VIP database.”

On November 21, 2011, Mr. White wrote the director of CVE, requesting

“reconsideration for inclusion in the VA VetBiz Vendor Information Pages (VIP)

Verification Program.” Mr. White wrote that LW had modified its operating agreement “to

comply with Ownership and Control requirements for Service-Disabled Veteran-Owned

Small Business.” Mr. White also wrote that “I am a retired service disable [sic] Air Force

[sic] and have already loss [sic] three months of bidding new projects while this verification

process has been going on,” and that, “I now run the risk of losing LW Construction unless

I can resolve this matter quickly.”

On March 1, 2012, CVE rejected LW’s request for reconsideration and affirmed

that LW did not satisfy the requirements of a SDVOSB. CVE explained that Section 11.01

of LW’s operating agreement states that “all members must be in agreement to transfer

any of the membership interest in the company.” The CVE then explained that the final

denial is “based upon a review and evaluation of the original file as well as the letter

requesting reconsideration and accompanying documents.”

which sets out the VA’s “eligibility requirements a concern must meet for VetBiz

Verification Program.” See 38 C.F.R. § 74.2 (2018).

10

Despite LW’s decertification from SDVOSB status on October 24, 2011, LW

continued to perform on the Fort Jackson contract. As explained by the government in its

reply in support of its motion for leave to amend, “[a]lthough the VA contracting staff

assigned to the Fort Jackson project learned that LW had subsequently lost its SDVOSB

status several years after the award of the contract, they did not believe a contractor’s

subsequent loss of SDVOSB status had any effect on a contract awarded in 2009.”

Plaintiff similarly states in its response brief that, “SDVOSB status is determined as of the

date of an offer to the government. Once an award is made, the contractor is entitled to

continue performance and receive payment even if its status changes during contract

performance.” (citing 13 C.F.R. § 125.15(e)(1); 38 C.F.R § 74.11(c)).

According to plaintiff, “[b]y September 10, 2011, the VA had issued time extensions

on the Fort Jackson Project for a total of 350 days, with a then current completion date of

December 3, 2011.” Plaintiff also states that, as of August 25, 2011, “VA had approved

pay applications 1 through 15,” and that “the contract was 90% complete.” Despite LW’s

loss of SDVOSB status on October 24, 2011, LW continued to perform and the VA

continued to pay LW. On February 23, 2012, according to plaintiff, the VA paid LW

through Pay Application 20, which showed that work was 97% complete overall.

According to the government, “[b]y February 22, 2012, the VA had stopped approving

payment requests from LW . . . because of LW’s failure to meet the contract’s scheduling

requirements.”

According to the declaration of VA contracting officer, Susan Lam-Sinclair, dated

December 20, 2017, submitted as an exhibit to the government’s reply in support of its

motion for leave to amend, “[s]ince June 2012 I [Ms. Lam-Sinclair] have served as the

contracting officer responsible for the VA’s contract with LW Construction of Charleston,

Contract No. VA101CFM-C-0042.” According to Ms. Lam-Sinclair’s declaration:

During the fall of 2012, I became increasingly involved in issues of contract

performance that are the subject of my final decisions.[8] At that time,

through my own experiences, I began to suspect that LW was not meeting

its contractual requirement for a service-disabled veteran-owned small

business to perform 15% of the contract labor and that the work was actually

8 The final decisions Ms. Lam-Sinclair refers to in her December 20, 2017 declaration are

the two final decisions she issued as the contracting officer on the Fort Jackson contract.

In particular, Ms. Lam-Sinclair stated in her December 20, 2017 declaration that:

In that role [as contracting officer], I was responsible for the October 16,

2013 final decision to terminate the VA’s contract with LW Construction of

Charleston (LW) for the construction of Phase 1B of the cemetery at the

Fort Jackson National Cemetery. I was also responsible for the final

decision denying the claim submitted by LW on September 15, 2015 that

requested money and contract time for alleged changes and delays that LW

believes excused its failure to perform.

11

being performed by Brantley Construction. In December of 2012, I referred

the matter to the VA’s Office of Inspector General (OIG). Despite my referral

and requests for more information, I did not receive any response from OIG

concerning the results of its investigation. Before I terminated LW’s contract

for default, I again contacted OIG but did not receive any information about

its investigation.

Ms. Lam-Sinclair also stated in her declaration that, “[h]ad I known that LW obtained the

contract through fraud, I would have terminated the contract on that basis.”

On August 7, 2013, as evidenced by an email thread attached as exhibits to

plaintiff’s response brief to the motion for leave to amend, Jeffrey L. Wehrmann, a VA

senior resident engineer at the Fort Jackson National Cemetery, forwarded to Ms. Lam-

Sinclair and to four other individuals at the VA an article titled, “VA slow to clean up broken

veterans preference contracting mess.” According to this article, which is included in the

body of the email, the “VA is now verifying the qualifications of those claiming to be

operators of Service-Disabled, Veteran-Owned Small Businesses.” The article discussed

the VA’s recent effort to verify contractors’ self-representation of SDVOSB status in light

of a history of fraudulent misrepresentations by contractors. The article also stated,

“[r]ecent studies by the Government Accountability Office and the VA’s inspector general

question the agency’s claims that it has rooted out hucksters who lie about their service

records or control of businesses to win lucrative federal set-aside and sole-source

contracts.” Ms. Lam-Sinclair responded to Mr. Wehrmann’s email that had forwarded the

article and stated that: “This program is a mess. I turned [sic] LW and two other firms and

he [sic] has not been addressed.” In a separate email also dated August 7, 2013 and

attached to plaintiff’s response brief to the motion for leave to amend, Mr. Wehrmann

wrote to Ms. Lam-Sinclair and noted:

And as you may, or may not remember or heard, in the Fall of 2011 LWC

[LW of Charleston] lost their SBA Certification and couldn’t bid SDVOB [sic]

contracts until they got that back in place. They were discovered to have in

their charter that Louis [White], the supposed Managing Member setting at

50% or lower, not the required 51%. The SBA made them rework and

resubmit their charter and reapply with him being 51% sometime in 2012

and frankly that was after the loss of many subcontractors, loss of suppliers

and loss of employees too. I didn’t hear that that [sic] got reinstated fully but

I do know that they went back to bidding small business work so I assume

it got straightened out, but not for sure. That wouldn’t have played a part in

this contract anyway. That’s what Dana I. told me when I had discussed

with him.

Ms. Lam-Sinclair responded to Mr. Wehrmann’s earlier email about “LWC” that “if they

[LWC] lost their SDVOSB status after award, it would not play a part as Dana[9] stated.”

9 According to plaintiff’s response to defendant’s motion for leave to amend, the “Dana”

referred to in this email chain is “Dana Ivey,” “another [VA] contracting officer.” Plaintiff

12

According to the letter from the Ms. Lam-Sinclair to LW, dated October 16, 2013,

and attached to plaintiff’s most recent amended complaint, the VA terminated the Fort

Jackson contract for default on October 16, 2013. Ms. Lam-Sinclair stated in the letter

that the Fort Jackson contract was “terminated for default based on project schedule and

performance deficiencies.” Ms. Lam-Sinclair explained:

LW was awarded this fixed price contract on June 2, 2009. Notice to

Proceed was issued on June 26, 2009 establishing an original completion

date of December 10, 2009. Subsequent contract modifications added 625

calendar days changing the contract completion date to September 4, 2012.

LW is now 402 calendar days beyond this completion date. And, I have

determined LW will not successfully complete the contract by the current

completion date of October 30, 2013 – VA accepted and established this as

the completion date based on LW’s proposed schedule in its September 9,

2013 Response to VA’s Show Cause Notice.

Ms. Lam-Sinclair also noted in the October 16, 2013 letter that LW had “experienced

consistent performance deficiencies,” in areas of work required under the Fort Jackson

contract, such as landscaping, repairing and replacing lawn irrigation valves, correcting

for building concrete deficiencies, and replacing defective columbarium caps. Ms. Lam-

Sinclair further stated that “[b]eause LW continues to have performance deficiencies, I

have no confidence in LW to successfully complete this project.” Ms. Lam-Sinclair

reiterated that because LW had also missed eleven of twelve “critical milestones” from

LW’s “September 4, 2013 schedule, I [Ms. Lam-Sinclair] have no confidence in LW to

successfully complete this project.” Ms. Lam-Sinclair further stated that “[t]his termination

for default is VA’s last resort. VA made numerous attempts to resolve contractual issues

by ensuring LW was aware of contract concerns and providing LW an opportunity to

address the issue(s),” which included the VA sending LW four letters of concern, two

show cause notices, and a cure notice.

February 27, 2014: Landmark Construction Company files suit against LW in the

United States District Court for the District of South Carolina.

On February 27, 2014, Landmark Construction Company, a civil construction

contracting firm which had subcontracted with LW to perform work on the Fort Jackson

contract, whose officers and shareholders were Frederick B. and Cynthia A. Mixson, filed

suit in the United States District Court for the District of South Carolina, Columbia division,

against LW and Travelers Casualty and Surety Company of America (Travelers), the

surety on the Fort Jackson contract. In that suit, Case No. 3:14-cv-00542-CMC, Landmark

Construction Company alleged that LW had “wrongfully failed and refused to pay

Landmark the balance of the Subcontract” and “the cost of performing the extra work that

is properly due and owing,” by:

provides no additional information regarding the identity of Dana Ivey, nor does the record

currently before the court.

13

(1) failing to properly coordinate and schedule the work on the Project;

(2) grossly mismanaging the Project to Landmark’s detriment; (3)

intentionally, negligently and actively interfering with the orderly progress of

Landmark’s work; (4) restricting and preventing Landmark’s access to

designated work areas; (5) failing to schedule and coordinate the work on

the Project in a reasonable manner and to grant reasonable time extensions

and constructively changing the Subcontract; (6) wrongfully failing and

refusing to pay subcontract balance and legitimate claims for extra-

contractual work; (7) conducting and condoning improper and unreasonable

inspections; (8) wrongfully and unreasonably rejecting work completed by

Landmark in accordance with the contract documents; (9) wrongful and

unreasonably [sic] interpretation of contract plans and specifications that

resulted in additional costs to Landmark; (10) dictating or otherwise

interfering with the means and methods of construction which were to be

exclusively within the control of Landmark; and (11) breaching its implied

covenants of good faith and fair dealing implied in all contracts.

Landmark Construction Company alleged that it was entitled to recover $2,000,000.00 in

damages from LW. Landmark Construction Company also alleged that Travelers was

liable for $2,000,000.00 of the $10,273,000.00 labor and materials payment bond that it

had issued on June 3, 2009 on behalf of LW because “Landmark has fulfilled all conditions

of the Bond necessary for Landmark to recover under the same. Under the terms and

conditions of the Bond, L-W’s failure to pay Landmark renders Travelers liable on the

Bond.” The Stipulation of Dismissal with Prejudice filed in Case No. 3:14-cv-00542-CMC

on August 17, 2015 indicates that the case was resolved through mediation.

May 8, 2014: Frederick and Cynthia Mixson filed a qui tam suit against LW in the

United States District Court for the District of South Carolina.

On May 8, 2014, Frederick B. Mixson and Cynthia A. Mixson filed a qui tam suit

against LW, Brantley Construction Company, Inc., Brantley Construction Services,

Sidney A. Brantley, Gary D. Brantley, Ron Brantley, and Louis White, in the United States

District Court for the District of South Carolina, seeking “treble damages and civil

penalties arising from the Defendants’ false statements and false claims in violation of the

Civil False Claims Act, 31 U.S.C. §§ 3729 et seq.” (emphasis in original). As noted above,

the Mixsons were the officers and shareholders of Landmark Construction Company, a

subcontractor to LW performing on the Fort Jackson contract. The Mixsons, however,

brought the May 2014 qui tam suit on behalf of themselves as “citizens of the United

States,” and “based on their direct, independent, and personal knowledge,” not on behalf

of Landmark Construction Company. The Mixsons alleged:

In 2008, the Brantley Brothers conspired with Louis White to establish a

Limited Liability Company to obtain SDVOSB status and compete for

SDVOSB set-aside contracts. In furtherance of this enterprise, these

individuals established the defendant L W [sic]. LW held itself out at all times

as a corporation which was owned, operated, managed and controlled by

14

White; however, at all times relevant to the allegations of this complaint, LW

was, in reality, operated, managed, and controlled by and through the

Brantley Brothers and/or the Brantley Entities.

The Mixsons also alleged:

[T]he Brantley Brothers and/or the Brantley Entities provided the following

services to LW: a) accounting and bookkeeping; b) office space and

sharing; c) common employees and labor force; d) equipment and tools; e)

insurance and surety bonding; f) banking and legal services; g) license

qualifications and supervision, management and day to day operation and

control; and h) operating capital and financing.

The Mixsons further alleged:

[T]he funds and revenues of LW were commingled and effectively controlled

by the Brantley Entities. Defendant Louis White made few, if any of the

management decisions of LW. The Brantley Brothers and/or the Brantley

Entities determined which construction projects to bid, preparation of the

project estimates, management of the projects and coordination of

subcontractors and material suppliers, scheduling, preparation of

subcontracts, payment application submissions and approvals and all of the

primary day to day management decisions of LW. In legal matters and

disputes, the Brantley Brothers and/or the Brantley Entities represented LW

exclusively in a managerial and ownership capacity and displayed full

authority and discretion to make the day to day business decisions of LW.

Neither the Brantley Brothers nor the Brantley Entities are eligible or

qualified to perform SDVOSB set-aside contracts with the United States. All

defendants in this action engaged in creating LW as a false front SDVOSB

qualified contractor in order to allow the Brantley Brothers and/or the

Brantley Entities to obtain federal funds and monies for which they did not

properly qualify.

In addition, the Mixsons alleged that defendants “falsely and fraudulently” entered

into the “SDVOSB set-aside contract . . . with the United States for the construction of the

Fort Jackson National Cemetery in Columbia, South Carolina,” as well as five other,

unrelated, SDVOSB set-aside contracts with the United States between 2010 and 2011.

According to the Mixsons, “LW and the other Defendants falsely executed more that [sic]

20 change orders for the Cemetery Project and numerous progress payment

applications,” and that “[e]ach of the change orders and payment applications and the

contract or bid itself constitutes a false claim to the United States.” The Mixsons then

alleged that, “[t]he United Sates [sic] has paid LW and the other Defendants in excess of

ten million dollars based upon their false claims and the Defendants are liable . . . for

each false claim including each change order, progress payment and the bid for the

project . . . .”

15

On April 22, 2014, before the Mixsons filed their qui tam suit in the United States

District Court for the District of South Carolina on May 8, 2014, the Mixsons had submitted

a “Joint Pre-Filing Disclosure Statement Of Frederick B. Mixson and Cynthia A. Mixson”

to and “for the benefit of the United States Attorney in Columbia, South Carolina and [to]

the Civil Fraud Division of the United States Justice Department in Washington, D.C.,

pursuant to the qui tam provisions of the False Claims Act.” The joint pre-filing disclosure

statement submitted to the United States Attorney and to the Civil Fraud Division of the

Department of Justice (DOJ) alleged that LW, Brantley Construction Company, Inc.,

Brantley Construction Services, Sidney Brantley, Gary Brantley, Ron Brantley, and Louis

White had fraudulently misrepresented LW’s SDVOSB status in order to obtain the Fort

Jackson SDVOSB, set-aside contract. The Mixsons also attached eleven exhibits to their

joint pre-filing disclosure statement to support their allegation that LW had fraudulently

misrepresented its SDVOSB status when bidding on the Fort Jackson contract, which

included: “LW Construction of Charleston, LLC licensing documents obtained from

Contractor’s Licensing Board, S.C. Department of Labor, License & Regulation’ [sic],”

attached as Exhibit H to the joint pre-filing disclosure statement, “LW Construction of

Charleston, LLC organizational documents obtained from South Carolina Secretary of

State,” attached as Exhibit I to the joint pre-filing disclosure statement, and audio

recordings from a March 11, 2014 meeting and from a April 21, 2014 meeting between

Gary and Sidney Brantley and the Mixsons, attached as Exhibits F and G.

On August 21, 2014, before LW filed its October 8, 2014 complaint in this court,

the United States filed without explanation, a brief Notice of Election to Decline

Intervention in the Mixsons’ qui tam suit. The government alleges, however, in its reply in

support of its current motion for leave to amend in the above-captioned case that, “[i]n

response to the qui tam suit, the United States Attorney’s Office for the District of South

Carolina conducted an investigation concerning the relators’ allegations.”

The government states in its reply in support of its motion for leave to amend that,

“[a]mong other things, the U.S. Attorney’s Office, along with the VA OIG, reviewed the

SDVOSB documents maintained by CVE and interviewed the relators.” The government

also states in its reply that “[i]n addition, investigators from the VA OIG and the

Department of Defense Office of Inspector General interviewed Mr. White.” The

government then states in its reply to the current motion for leave to amend that ultimately,

“the US Attorney’s Office . . . declined to intervene in what appeared to be a qui tam suit

being brought by a disgruntled subcontractor seeking leverage to obtain a settlement in

the separate district court case.”

2014: The DOJ begins a criminal investigation into LW and its relationship with the

Brantleys.

According to plaintiff, “[s]ometime in 2014, the Department of Justice started a

criminal investigation into LW and its relationship with the Brantleys.” Based on the record

before the court, it is not exactly clear when in 2014 the DOJ began, or when the DOJ

16

ended, its criminal investigation into LW, and the parties provide no specific dates.10 The

record before the court, however, suggests that the DOJ’s criminal investigation was

underway as of October 30, 2014, when the DOJ requested the United States District

Court for the District of South Carolina to issue a subpoena to Patrick Luciano, a certified

public accountant, to testify before a grand jury in the United States District Court for the

District of South Carolina. The subpoena was signed by Robin Blume, the Clerk of the

Court of the United States District Court for the District of South Carolina on October 30,

2014. The subpoena stated that John Potterfield, Assistant United States Attorney, had

requested the subpoena. The subpoena also stated that Mr. Luciano was to provide

“printed and certified copies” of the following records to Special Agent Doyle Mullis, of the

United States Department of Defense, Office of Inspector General, Defense Criminal

Investigative Service in South Carolina:

all records related to Gary D. Brantley . . . , Sidney A. Brantley . . . , and

Louis W. White . . . , to include any of your communications with Gary D.

Brantley, Sidney A. Brantley, Louis W. White, Chris Hilliard, or any other

person with, or representing, LW Construction of Charleston, LLC; Brantley

Construction Company, Inc[.]; Brantley Construction Services; . . . from

September 2008 to present. Provide all records pertaining to the

establishment and management of LW Construction of Charleston, LLC, to

include records pertaining to LW Construction of Charleston, LLC obtaining

Federal Government contracts from September 2008 to present. Provide all

records pertaining to any services or activities conducted by Brantley

Construction Company, Inc.; Brantley Construction Services, LLC; or any

of their affiliates (hereinafter, the Brantley companies) from September

2008 to present regarding Federal Contracts that the owners, managers,

employees, contractors, or consultants of the Brantley companies advised

on, assisted with, or obtained for themselves, from September 2008 to

present.

October 8, 2014: LW files the above-captioned case.

On October 8, 2014, LW filed the case currently before this court and asserted in

its original complaint a claim of “wrongful termination of the [Fort Jackson] contract by the

VA” when the VA terminated LW for default on October 16, 2013. LW also requested in

its original complaint that the termination for default be converted to a termination for

convenience and to recover “attorneys’ fees and costs relating to this action.” As

discussed above, on October 16, 2014, Jeffrey Lowry, an attorney in the Commercial

Litigation Branch, Civil Division, of the DOJ in Washington, D.C., entered his notice of

appearance as the attorney of record for the defendant in the above-captioned case. On

December 8, 2014, the government filed its original answer to the complaint, but did not

10 According to the government’s December 20, 2017 reply in support of its motion for

leave to amend, after the investigation by the DOJ, and after no criminal charges were

filed against LW, there was “no longer an active criminal investigation” by the DOJ into

LW.

17

file a counterclaim or assert any affirmative defenses at that time. After an initial

conference with the parties, the court issued a scheduling Order, establishing a close of

discovery date for August 3, 2015 and a trial date for November 2, 2015.

On January 26, 2015, the parties filed a Joint Preliminary Status Report in the

above-captioned case, that, among items, notified the court of pending, related cases that

were proceeding “in connection with the contract at issue in this case,” including “two

Miller Act cases currently pending in United States District Court for the District of South

Carolina,” and a “Qui Tam action that is currently pending in United States District Court

for the District of South Carolina.” With regard to the qui tam action, “United States of

America ex rel., Frederick B. Mixson and Cynthia A. Mixson v. LW Construction of

Charleston, LLC, et al., Civil Action No. 3:14-cv-01859-JFA,” the parties indicated in the

Joint Preliminary Status Report to this court that “[t]he Government [had] declined to

intervene in that case.” (emphasis in original). The parties also stated that “[t]he Relators

claim that LW conspired to form the Service Disabled Veteran Owned Small Business

(SDVO SB) to obtain Government projects, and that it was controlled by the minority

members of the company, as opposed to being controlled by the Service Disabled

Veteran majority member.” The Joint Preliminary Status Report filed in the current case

before this court stated that “LW also understands that there is a criminal investigation

relating to LW’s status as a SDVO SB, and control of the company,” and that “[t]he parties

are unware of how that investigation may affect this case.” In particular, the parties stated

that, “[i]n the event that the discovery proceedings in this case interfere with the criminal

investigation or the conclusion of the investigation is necessary to assert any fraud

counter-claims, the Defendant may request that the Court stay further proceedings.” The

Joint Preliminary Status Report also stated that the parties were “unaware of what effect

the false claim issues may have on this case.”

On February 17, 2015, LW submitted a signed, certified, claim for payment to the

contracting officer for the Fort Jackson contract, seeking payment for alleged contract

changes, delays, and other disputed items and an extension of the contract end date

through October 16, 2013, for 407 additional days. On June 16, 2015, in light of LW’s

recently submitted claim for payment on February 17, 2015 and after conferring with the

parties, the trial originally scheduled for November 2, 2015 was postponed. The court,

however, ordered that regarding the existing claims in the complaint, “document discovery

shall continue, but the parties may defer the taking of any depositions.” 11 On September

11 “[T]here must exist a contracting officer’s final decision [regarding a contractor’s claim

for payment] (either actual or deemed denial) before a contractor can challenge such a

decision in the Court of Federal Claims.” Tidewater Contractors, Inc. v. United States, 107

Fed. Cl. 779, 783 (2012); see also England v. The Swanson Grp., Inc., 353 F.3d 1375,

1379 (Fed. Cir. 2004) (“[J]urisdiction over an appeal of a contracting officer’s decision is

lacking unless the contractor’s claim is first presented to the contracting officer and that

officer renders a final decision on the claim.”); James M. Ellett Constr. Co. v. United

States, 93 F.3d 1537,1541-42 (Fed. Cir. 1996) (“[F]or the court to have jurisdiction under

the CDA [Contract Disputes Act], there must be both a valid claim, a term the act leave

undefined, and a contracting officer’s final decision on that claim.”). Therefore, under the

18

15, 2015, LW submitted a revised signed and certified claim to the VA contracting officer

on the Fort Jackson contract seeking entitlement to $5,370,514.97. On September 24,

2015, LW submitted a second, signed and certified claim also to the VA contracting officer

on the Fort Jackson contract seeking entitlement to $216,477.86 for additional alleged

changes to the contract.

On August 17, 2015, the government filed its notice of consent to the Mixsons’

voluntary dismissal of their qui tam action, and on that same day, the Mixsons filed their

stipulation of dismissal in their qui tam action, which was subsequently dismissed, without

prejudice.12 In October and November of 2015, Ms. Lam-Sinclair, the contracting officer

for the Fort Jackson contract at the VA issued final decisions denying LW’s contract

claims for payment. On November 23, 2015, LW filed a motion for leave to amend its

complaint in this court, which was granted by the court. On December 15, 2015, LW filed

an amended complaint, asserting the following three claims: (1) “wrongful termination” of

the Fort Jackson contract, (2) “entitlement [for an equitable adjustment] under the

changes clause,” of the Fort Jackson contract for the “additional cost incurred as a result

of the changes” made by the VA to the Fort Jackson contract, and (3) “breach of contract”

by the VA of the Fort Jackson contract by:

a. providing defective plans and specifications;

b. failing to issue changes as required by the Changes Clause;

c. failing to extend the performance period required by the Changes Clause;

d. wrongfully assessing liquidated damages;

e. failing to pay for work completed by LW;

f. failing to pay LW as required by the Payments Clause;

g. wrongfully terminating LW for default;

h. failing to cooperate;

i. breaching its obligation of good faith and fair dealings;

j. failing to provide information necessary to complete the Project; and

Contract Disputes Act, 41 U.S.C. §§ 7101 et seq. (2012), this court lacked subject matter

jurisdiction to decide the merits of plaintiff’s February 17, 2015 claim because the VA

contracting officer for the Fort Jackson contract had not yet issued a final decision on the

February 17, 2015 claim when plaintiff filed its complaint in this court on October 8, 2014.

12The government must consent to a dismissal of an action brought pursuant to Section

3729 of the FCA, such as the Mixsons’ qui tam suit. According to 31 U.S.C. § 3730(b)(1),

A person may bring a civil action for a violation of section 3729 for the

person and for the United States Government. The action shall be brought

in the name of the Government. The action may be dismissed only if the

court and the Attorney General give written consent to the dismissal and

their reasons for consenting.

31 U.S.C. § 3730(b)(1) (2012).

19

k. failing to meet with LW in order to resolve issues so that work could be

completed.

LW requested in its amended complaint a finding that:

(1) the termination for default was improper;

(2) the termination for default must be converted to a termination for

convenience;

(3) LW is entitled to the changes and the extension pursuant to the Changes

Clause as set forth herein;

(4) The VA breached the contract;

(5) LW is entitled to compensation in the amount of $5,586.992.83 and an

extension of the contract performance period until October 16, 2013; and

(6) LW is entitled to interest on the claims, attorneys’ fees and costs, and

for such other and further relief as this Court deems just and proper.

On January 12, 2016, the government filed its first amended answer to LW’s

amended complaint and counterclaimed for liquidated damages and the cost of

reprocurement. At this time, the government did not assert any affirmative defenses or

fraud counterclaims, or a counterclaim of unjust enrichment.

October 13, 2017: DOJ files the pending motion for leave to amend its answer and

assert counterclaims and an affirmative defense.

The October 13, 2017 motion for leave to amend defendant’s answer, the current

motion before the court, seeks to assert an affirmative defense of common law fraud and

the following four counterclaims: (1) common law fraud, (2) a counterclaim under the FCA

for LW’s alleged presentation of twenty-five false claims for payment to the VA, (3) a

counterclaim under the FCA for LW’s alleged use of a false record or statement when it

submitted twenty-five false claims for payment to the VA, and (4) unjust enrichment.

According to the government: “In November 2015, counsel for the Government” in

the above-captioned case had “conferred with the United States Attorney’s Office

regarding the Government’s decision to decline to intervene in the qui tam action.”

(emphasis in original). Government counsel asserts that,

[b]ased on that discussion, given the decision by the U.S. Attorney’s Office

not to intervene in the qui tam action, or file charges in the criminal case,

there did not appear to be any reason for the Government’s counsel in this

case to raise a fraud defense or to pursue a fraud counterclaim [earlier].

(emphasis in original). In particular, the government attorney states in its reply in support

of its motion for leave to amend that “we did not believe there was much evidence of fraud

and initially concluded the fraud claims need not be pursued.” That position on the part of

the government changed during the course of continuing discovery, as described below.

20

As established with the parties, document discovery in the above-captioned case

continued from November 2015 through November 2016. Depositions began in South

Carolina during the week of November 14, 2016. According to the government in its reply

in support of its motion for leave to amend,

[a]fter attending the first deposition taken by LW, on November 15, 2016,

and meeting Louis White and Gary Brantley, counsel for the Government

began to suspect that it was more likely than not that the Brantleys

exercised control over both the ultimate decision making of LW as well as

Mr. White.

The government states, “[t]hat same day, the Government renewed its investigation into

LW’s SDVOSB status.”

On March 16, 2017, the government issued discovery requests to LW seeking

documents and information related to LW’s SDVOSB status. The government requested

production of “all documents presented by LW Construction or its representatives to the

Department of Veterans Affairs from 2008 to the present for the purposes of establishing

or verifying its status as a Service-Disabled Veteran-Owned Small Business;” “all joint

venture agreements, teaming agreements, contracts, subcontracts, or other agreements

entered into between LW Construction and Brantley Construction;” “all communications

from or to Gary Brantley, Ron Brantley, and or Louis White concerning the formation,

ownership, and management of LW Construction through October 16, 2013;” “all

documents describing or establishing the management and operations of LW

Construction;” and “[a]ny employment agreement or contract between LW Construction

and Gary Brantley,” “Ron Brantley,” and “Louis White.”

On March 23, 2017, government counsel received documents from the VA’s

Center for Verification and Evaluation (previously known as the VA’s Center for Veterans

Enterprise) related to CVE’s denial of LW’s SDVOSB status in 2011. Notably, the

government attorney states in its reply in support of its motion for leave to amend that

after reviewing CVE’s investigation results and its decision, “it became apparent that not

only did LW not qualify for SDVOSB status in 2011 – the sole issue CVE was examining

– LW was not a legitimate SDVOSB when it bid on the Fort Jackson contract.” The

government states in its reply in support of its motion for leave to amend:

We later obtained documents in March 2017 from CVE and VA OIG [Office

of Inspector General], organizations not involved in the administration of the

contract, that established that the idea for the formation of LW was

proposed by the Brantleys, that Louis White did not put any significant

amount of money into the company, that LW was operated out of the same

building as Brantley Construction, that Brantley Construction employees

identified the work LW was to bid on, and that Louis White had lied to CVE

investigators when he told them in 2011 that each of the principals of the

company had put $250,000 into the company.

21

On April 17, 2017, LW responded to the government’s March 16, 2017 discovery

request, but did not provide the requested documents related to LW’s SDVOSB status,

with the exception of its proposal for the Fort Jackson contract, and argued that such

requests were “not relevant or reasonably intended to lead to the discovery of relevant

information relating to any claim or defense in this case.” Defendant’s reply in support of

its motion for leave to amend states:

After receiving LW’s [discovery] response, we began the process to obtain

authority for the fraud counterclaim within the Department of Justice, which

required the coordination with and approval from multiple sections of the

Department. Although the issue of fraud was clear [as of April 17, 2017], the

coordination with various branches within the Department of Justice’s Civil

Division required more time than anticipated as we internally deliberated a

variety of issues related to this case.

From July 2017 through September 2017, defendant continued to depose LW’s

witnesses13 and, according to defendant, during these depositions, “we continued to learn

information that demonstrated fraud.” Defendant states:

We learned from the deposition of Christina McAlhaney,[14] an employee of

Brantley Construction, that Brantley Construction employees were seeking

business opportunities and assembling bids for LW, and that Sidney

Brantley made the ultimate decision regarding whether Brantley

Construction or LW would bid on the project.

Defendant also states that it learned through the depositions of Gary Brantley, Sidney

Brantley, and Louis White:

[T]hat LW was funded entirely through loans provided by Brantley-affiliated

firms that were passed off as personal loans from the owners. We also

learned that Brantley employees eventually took over completion of the Fort

Jackson contract without any formal subcontract or notice to the VA. Finally,

13 Regarding the depositions, plaintiff states in its response to the government’s motion

for leave to amend that plaintiff deposed eleven VA fact witnesses by February 16, 2017

and that the government deposed eight fact witness between July 19, 2017 and October

13, 2017.

14As described above, based on the resume for Christina McAlhaney, submitted by LW

as part of its proposal regarding its “project personnel experience” for the Fort Jackson

contract, in 2009, Ms. McAlhaney was an employee at Brantley Construction Company,

LLC at the time of contract bidding for the Fort Jackson contract. The resume states,

however, that Ms. McAlhaney “[w]ill become employed upon receipt of contract.” This

statement in Ms. McAlhaney’s resume appears to refer to the fact that she would be

employed by LW upon LW’s award of the Fort Jackson contract.

22

among other items referenced in our motion for leave, we learned that

Sidney Brantley currently owns 98 percent of LW, purchased from Mr. White

for “a couple dollars.”

According to defendant’s reply in support of its motion for leave to amend, on September

18, 2017,15 government counsel received authority from within the DOJ to file fraud

counterclaims to the amended complaint filed by plaintiff, as well as to assert an

affirmative defense. Thereafter, on October 13, 2017, defendant prepared and filed

defendant’s motion for leave to amend its earlier answer, based on “the increasing

evidence that LW is not now and never was owned or controlled by Louis White.”

DISCUSSION

Defendant’s October 13, 2017 motion for leave to amend its answer seeks the

court’s permission to add fraud counterclaims, an unjust enrichment counterclaim, and

an affirmative defense of common law fraud. Plaintiff argues in its supplemental brief that

the government’s common law fraud counterclaim is a “mirror image” of its affirmative

defense of common law fraud. Defendant’s proposed common law fraud counterclaim

and the affirmative defense of common law fraud are almost identically pled in

defendant’s proposed amended answer, but for the fact that defendant’s proposed

affirmative defense is a claim for a set-off, whereas defendant’s proposed common law

fraud counterclaim seeks to obtain damages “in a substantial amount to be determined

at trial.” For example, under both the common law fraud counterclaim and the affirmative

defense of common law fraud in the proposed amended answer, defendant alleges that

“LW made material misrepresentations of fact” in order to obtain “a contract with the

United States,” and that “[t]he United States awarded LW a contract based on LW’s

material misrepresentations and made substantial payments of money in justifiable

reliance upon LW’s representations.” Defendant also alleges that under both the common

law fraud counterclaim and affirmative defense of common law fraud that had LW not

made “material misrepresentations of fact, it would not have received a contract with the

United States or been entitled to any of the contractual amounts it now seeks.” Defendant,

however, is not asking for a determination at this time regarding the validity of the fraud

counterclaims, unjust enrichment counterclaim, or affirmative defense. Rather, in its

motion for leave to amend, defendant merely requests a chance to be heard on the

additional counterclaims and an affirmative defense included in defendant’s proposed

amended answer.

Pursuant to RCFC 15(a), once twenty-one days after service of a responsive

pleading has passed, as is the case currently before the court, “a party may amend its

pleading only with the opposing party’s written consent or the court’s leave.” RCFC 15(a)

15 Defendant indicates in its October 13, 2017 motion for leave to amend that “[o]n

September 18, 2017, we received the necessary authorizations, and subsequently

informed LW and the Court of our intent to file this motion and to assert our affirmative

defense and counterclaim.” Defendant, however, states in its reply brief that it received

the necessary authorization from the DOJ on September 19, 2017.

23

(2018). Such leave should be freely given when “justice so requires.” Id. “[T]he grant or

denial of an opportunity to amend is within the discretion of the District Court.” Foman v.

Davis, 371 U.S. 178, 182 (1962); see also Tamerlane, Ltd. v. United States, 550 F.3d

1135, 1147 (Fed. Cir. 2008) (“‘The decision to grant or deny a motion for leave to amend

. . . lies within the sound discretion of the trial court.’” (quoting Insituform Techs., Inc. v.

Cat Contracting, Inc., 385 F.3d 1360, 1372 (Fed. Cir. 2004))); Datascope Corp. v. SMEC,

Inc., 962 F.2d 1043, 1045 (Fed. Cir. 1992) (“The grant or denial of leave to amend the

complaint is within the discretion of the district court, and will be reversed only for an

abuse of discretion.” (internal citation omitted)); Mitsui Foods, Inc. v. United States, 867

F.2d 1401, 1403 (Fed. Cir. 1989) (“It is well established that the grant or denial of an

opportunity to amend pleadings is within the discretion of the trial court.”); Simons v.

United States, 75 Fed. Cl. 506, 508 (2007) (“Under RCFC 15(a), a party may only amend

a pleading once as a matter of course; all subsequent amendments are within the

discretion of the trial court.” (citing RCFC 15(a); Mitsui Foods, Inc. v. United States, 867

F.2d at 1403)).

RCFC 15 “is liberally construed, and courts generally grant leave to amend if there

is no ‘apparent or declared reason’ not to permit amendment.” Sonoran Tech. & Prof’l

Servs., LLC v. United States, 133 Fed. Cl. 401, 403 (2017) (quoting A & D Auto Sales,

Inc. v. United States, 748 F.3d 1142, 1158 (Fed. Cir. 2014)). As the United States Court

of Appeals for the Federal Circuit has recognized, reasons to deny leave to amend

include, “undue delay, bad faith or dilatory motive on the part of the movant, repeated

failure to cure deficiencies by amendments previously allowed, undue prejudice to the

opposing party by virtue of allowance of the amendment, futility of amendment, etc.” Te-

Moak Bands of W. Shoshone Indians v. United States, 948 F.2d 1258, 1260 (Fed. Cir.

1991) (quoting Foman v. Davis, 371 U.S. at 182); see also Zenith Radio Corp. v. Hazeltine

Research, Inc., 401 U.S. 321, 330–31 (1971) (“[I]n deciding whether to permit such an

amendment, the trial court was required to take into account any prejudice that Zenith

[the nonmovant] would have suffered as a result . . . .”); Shell Oil Co. v. United States,

No. 2017-1695, 2018 WL 3446960, at *11 (Fed. Cir. July 18, 2018) (“[A]mendments are

not allowed where they result in undue delay or prejudice.” (quoting Cencast Servs., L.P.

v. United States, 729 F.3d 1352, 1363 (Fed. Cir. 2013))); (A & D Auto Sales, Inc. v. United

States, 748 F.3d at 1158 (“In the absence of any apparent or declared reason—such as

undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to

cure deficiencies by amendments previously allowed, undue prejudice to the opposing

party by virtue of allowance of the amendment, futility of amendment, etc.—the leave

sought should, as the rules require, be ‘freely given.’” (quoting Foman v. Davis, 371 U.S.

at 182)); Sonoran Tech. & Prof’l Servs., LLC v. United States, 133 Fed. Cl. at 403 (“The

Court should deny leave to amend if there is evidence of delay, bad faith, repeated failure

to correct a complaint’s deficiencies, undue prejudice to the opposing party, or if the

amendment would be futile.”). “The existence of any one of these criteria is sufficient to

deny a motion to amend, the theory being that the amendment would not be necessary

to serve the interests of justice under such circumstances.” Christofferson v. United

States, 77 Fed. Cl. 361, 363 (2007) (quoting Spalding & Son, Inc. v. United States, 22 Cl.

Ct. 678, 680 (1991)).

24

Generally, “[a] party should move to amend its pleading ‘as soon as the necessity

for altering the pleading becomes apparent,’ i.e., ‘at the earliest opportunity.’” Hanover

Ins. Co. v. United States, 134 Fed. Cl. 51, 60 (2017) (quoting Alta Wind I Owner–Lessor

C v. United States, 125 Fed. Cl. 8, 11 (2016)). Defendant is attempting to assert an

affirmative defense of common law fraud in its proposed amended answer in addition to

its four proposed counterclaims. RCFC 8(c)(1) states that “[i]n responding to a pleading,

a party must affirmatively state any avoidance or affirmative defense, including: . . . fraud

. . . .” RCFC 8(c)(1) (2018). Failure to plead an affirmative defense may result in waiver

of that defense. See Pei-Herng Hor v. Ching-Wu Chu, 699 F.3d 1331, 1337-38 (Fed. Cir.

2012) (stating that failure to plead the affirmative defense of estoppel can result in waiver

pursuant to Federal Rule of Civil Procedure 8(c)(1), which is parallel to RCFC 8(c)(1),

when applying the law of the United States Court of Appeals for the Fifth Circuit); see also

Stockton E. Water Dist. v. United States, 70 Fed. Cl. 515, 528 (2006) (“The general rule

is that affirmative defenses are waived when not pleaded in the answer.”). “The

determinative factor” in deciding whether a party has waived its affirmative defense is

“whether there is ‘unfair surprise or prejudice’” to the opposing party. Shell Oil Co. v.

United States, 123 Fed. Cl. at 719 (quoting Entergy Nuclear Fitzpatrick, LLC v. United

States, 93 Fed. Cl. 739, 746 (2010), aff’d, 711 F.3d 1382 (Fed. Cir. 2013)).

“[M]ere delay, without some showing of prejudice, bad faith, or futility is insufficient

to deny a motion to amend a complaint.” Alaska v. United States, 15 Cl. Ct. 276, 280

(1988) (finding that delay of thirteen months in seeking to amend complaint, by itself, did

not constitute undue delay requiring denial of motion for leave to amend); see also

Hanover Ins. Co. v. United States, 134 Fed. Cl. at 61 (finding that, absent a showing of

prejudice, a delay of approximately seven months after production of documents giving

rise to alleged fraud against government did not warrant denying government’s motion

for leave to file an amended answer asserting a Special Plea in Fraud defense and fraud

counterclaims under Contract Dispute Act’s anti-fraud provision and FCA); Meyer Grp.,

Ltd. v. United States, 115 Fed. Cl. 645, 649 (2014) (finding that defendant’s delay for

seeking leave to amend twelve months after filing its original answer and six months after

plaintiff filed an amended complaint, was, by itself, insufficient reason to warrant denial of

leave to amend); Katzin v. United States, 115 Fed. Cl. 618, 621 (2014) (finding that there

was no undue delay when case was less than two years old and discovery was still

underway, although fact discovery had closed within the past few days); Veridyne Corp.

v. United States, 86 Fed. Cl. 668, 681 (2009) (finding that the government’s approximately

three-year delay in obtaining critical information for additional proposed fraud

counterclaims from contracting agency did not warrant denial of government’s motion for

leave to amend to add fraud counterclaims when contractor’s additional expenses and

burden of discovery did not rise to level of prejudice required to deny amendment).

There are cases, however, in which delay alone was found to have warranted

denial of a motion for leave to amend when such delay is “significant.” Te-Moak Bands of

W. Shoshone Indians of Nevada v. United States, 948 F.2d at 1262 (“[C]ourts have not

hesitated to deny motions to amend that have been filed after significant delay.”). A

significant delay is one that is “measured in years.” Meyer Grp., Ltd. v. United States, 115

Fed. Cl. at 649 (quoting Cooke v. United States, 79 Fed. Cl. 741, 742 (2007));

25

see also Cencast Servs., L.P. v. United States, 729 F.3d 1352 at 1363-64 (affirming trial

court’s holding that the delay was unreasonable when plaintiff failed to raise its newly

pleaded theory for over fifteen years after it was aware of the theory and five years after

it could have first raised the theory in response to a government counterclaim); Te-Moak

Bands of W. Shoshone Indians of Nevada v. United States, 948 F.2d at 1263 (finding that

the tribal bands’ eight year delay in filing exceptions to the government’s supplemental

accounting report to amend original accounting petition constituted undue delay); Shell

Oil Co. v. United States, 123 Fed. Cl. 707, 727 (2015) (finding that the government’s

motion for leave to amend its answer to assert an affirmative defense, one fraud

counterclaim under the Special Plea in Fraud statute, 28 U.S.C. § 2514 (2012), and one

counterclaim under the antifraud provision of the Contract Settlement Act of 1944, 41

U.S.C. § 119 (repealed in 2011) in its answer filed approximately seven years ago in

2008, was untimely and prejudicial to the plaintiffs when the government “was on notice”

of plaintiffs’ related insurance coverage litigation that gave rise to the alleged fraud since

1992, approximately twenty-three years before filing its motion for leave in 2015), aff’d,

2018 WL 3446960 (Fed. Cir. July 18, 2018); Rockwell Automation, Inc. v United States,

70 Fed. Cl. 114, 124 (2006) (“[T]he government has failed to satisfy its burden of justifying

why it took eight years from March 1997 before it sought to add affirmative defenses.”).

“Merely proving that other cases allowed longer delays . . . does not suffice to

demonstrate entitlement to amendment. Delay must be justified.” Alfa Laval Separation,

Inc. v. United States, 47 Fed. Cl. 305, 314 (2000) (finding that plaintiff who prevailed in

bid protest was not entitled to amend complaint to add claim for proposal preparation

costs, when there was a two-year delay in seeking amendment, and plaintiff failed to

justify the delay). In addition, the moving party bears the burden of justifying its delay.

See Te-Moak Bands of W. Shoshone Indians of Nevada v. United States, 948 F.2d at

1263; Sonoran Tech. & Prof’l Servs., LLC v. United States, 133 Fed. Cl. at 404 (“The

‘party seeking to amend its complaint after significant delays bears the burden of justifying

the delay.’” (citing Cupey Bajo Nursing Home, Inc. v. United States, 36 Fed. Cl. 122, 132

(1996))).

“Undue prejudice may be found when an amended pleading would cause unfair

surprise to the opposing party, unreasonably broaden the issues, or require additional

discovery.” Cooke v. United States, 79 Fed. Cl. at 742–43 (citing Huaschild v. United

States, 53 Fed. Cl. 134 (2002)). “Mere annoyance and inconvenience . . . however, are

insufficient bases to warrant a denial of a motion to amend.” St. Paul Fire & Marine Ins.

Co. v. United States, 31 Fed. Cl. 151, 153 (1994) (“Although, in the case at bar, further

minuscule time-invoking discovery may appropriately ensue, due to defendant’s

introduction of two additional witnesses, the aggregate effect of this extension of

discovery, particularly in the absence of a firm trial date or a trial date in the distant future,

does not rise to the level of undue prejudice.”); see also Alaska v. United States, 15 Cl.

Ct. at 280 (finding that the government was not unduly prejudiced by plaintiff’s motion for

leave to amend its complaint when government failed to explain what other potential

hardships it would suffer other than “potentially extensive discovery,” which, in light of trial

date having not been scheduled, was only a “vexing inconvenience”). Further, “[t]he cost,

even to plaintiff as a small business, and burden of undertaking additional discovery do

26

not substantiate the level of prejudice needed to overcome the liberal standard of RCFC

15(a)(2).” Veridyne Corp. v. United States, 86 Fed. Cl. at 681. The burden to prove undue

prejudice is on the non-moving party. See id. (“[T]he burden to demonstrate prejudice is

plaintiff’s . . . .”). Although amendments filed late in litigation are not automatically

prejudicial, an amended pleading is more likely to cause prejudice “the further a case has

progressed before the amendment is filed.” King v. United States, 119 Fed. Cl. 51, 55

(2014) (citing Laber v. Harvey, 438 F.3d 404, 427 (4th Cir. 2006)).

“When futility is asserted as a basis for denying a proposed amendment, courts do

not engage in an extensive analysis of the merits of the proposed amendments.” St. Paul

Fire & Marine Ins. Co. v. United States, 31 Fed. Cl. at 155. Instead, “courts simply decide

whether a party’s proposed amendment is facially meritless and frivolous, i.e., ‘Where

futility is proposed as a basis for denying amending a complaint, courts will discern

whether a pleading is frivolous and insufficient on its face or has been adequately

addressed in the prior complaint.’” Id. (emphasis in original) (quoting Alaska v. United

States, 15 Cl. Ct. at 280). “This court has found that granting leave to amend a pleading

would be futile if the amended complaint would fail to state a claim upon which relief can

be granted . . . or if the proposed amendment would fail for lack of jurisdiction or is facially

meritless and frivolous.” Chapman v. United States, 130 Fed. Cl. 216, 219 (2017) (internal

quotation omitted); see also Marchena v. United States, 128 Fed. Cl. 326, 330 (2016) (“A

proposed amendment is futile if it would not survive a motion to dismiss.”); Meyer Grp.,

Ltd. v. United States, 115 Fed. Cl. at 650 (“A counterclaim must contain facts sufficient to

state a claim to relief that is plausible on its face to survive a motion to dismiss under Rule

12(b)(6).” (internal quotations omitted)); Shoshone Indian Tribe of the Wind River

Reservation, Wyo. v. United States, 71 Fed. Cl. 172, 176 (2006) (“A motion to amend

may be deemed futile if a claim added by the amendment would not withstand a motion

to dismiss.”). As the United States Court of Appeals for the Federal Circuit stated:

When a party faces the possibility of being denied leave to amend on the

ground of futility, that party must demonstrate that its pleading states a claim

on which relief could be granted, and it must proffer sufficient facts

supporting the amended pleading that the claim could survive a dispositive

pretrial motion.

Kemin Foods, L.C. v. Pigmentos Vegetales Del Centro S.A. de C.V., 464 F.3d 1339,

1354-55 (Fed. Cir. 2006); see also Vivid Techs., Inc. v. Am. Sci. & Eng’g, Inc., 200 F.3d

795, 802 (Fed. Cir. 1999) (stating that “speculation” about the ultimate disposition of a

counterclaim is not an appropriate basis for denying a motion for leave to file an amended

counterclaim).

For example, “[a] claim that is barred by the statute of limitations would be futile.”

Chapman v. United States, 130 Fed. Cl. at 219. The “statute of limitations is a

jurisdictional issue in the Court of Federal Claims.” TS Infosys., Inc. v. United States, 36

Fed. Cl. 570, 572 (1996); see also Martinez v. United States, 333 F.3d 1295, 1316 (Fed.

Cir. 2003) (“It is well established that statutes of limitations for causes of action against

the United States, being conditions on the waiver of sovereign immunity, are jurisdictional

27

in nature.”), cert. denied, 540 U.S. 1177 (2004); L-3 Commc’n Integrated Sys., L.P. v.

United States, 79 Fed. Cl. 453, 461 (2007); Tyger Constr. Co. Inc. v. United States, 28

Fed. Cl. 35, 47 (1993). “In ruling on a jurisdictional motion, the court considers whether

the ‘facts reveal any possible basis on which the non-movant might prevail,’” such that

“the claimant is entitled to offer evidence to support the claims.” TS Infosys., Inc. v. United

States, 36 Fed. Cl. at 572 (quoting W.R. Cooper Gen. Contractor, Inc. v. United States,

843 F.2d 1362, 1364 (Fed. Cir. 1988)) (plaintiff’s motion to dismiss government’s

counterclaims under the FCA, Contract Disputes Act, and Forfeiture of Fraudulent Claims

Act denied when timely filed within six years of date on which government had made final

payment).

Plaintiff argues that defendant’s motion for leave to amend its answer should be

denied because:

The government’s motion was filed more than six (6) years after the VA had

determined LW was not an eligible SDVOSB; more than four (4) years after

the contracting officer “reported” LW over concerns with its SDVOSB

certification; more than three (3) years after the DOJ declined to intervene

in the Mixson Qui Tam action; and almost exactly three (3) years since the

original Complaint in this case was filed.

Plaintiff also argues that granting defendant’s motion for leave to amend would be futile

and result in undue prejudice and that the motion for leave to amend was filed for an

improper purpose.

I. Plaintiff’s allegations of futility regarding defendant’s proposed

counterclaims.

First, plaintiff argues that allowing the government’s proposed common law fraud,

FCA, and unjust enrichment counterclaims to proceed would be futile based on applicable

statutes of limitations and an inability to survive motions to dismiss, even if the proposed

counterclaims were to be allowed.

a. Common law fraud counterclaim

Plaintiff argues that to allow defendant’s proposed amended answer to include a

common law fraud counterclaim to proceed would prove futile because of a time-bar

under the general six-year statute of limitations for claims brought in the Court of Federal

Claims, as set forth in 28 U.S.C. § 2501 (2012). The statute at 28 U.S.C. § 2501 states

that “[e]very claim of which the United States Court of Federal Claims has jurisdiction

shall be barred unless the petition thereon is filed within six years after such claim first

accrues.” 28 U.S.C. § 2501. According to plaintiff, more than six years has passed since

LW allegedly mispresented its SDVOSB status when bidding on the Fort Jackson contract

in 2009.

28

The United States Court of Claims, a predecessor court to the current United

States Court of Appeals for the Federal Circuit, generally held that a counterclaim brought

by the government, including a common law fraud counterclaim, such as being asserted

by defendant in its proposed amended answer, is not subject to the six-year statute of

limitations at 28 U.S.C. § 2501 because, based on the language of the statute, the six-

year time-bar applies to claims brought against the government, not counterclaims

brought by United States. See Rhoades v. United States, 222 Ct. Cl. 611, 613 n.1 (1980)

(rejecting plaintiff’s assertion that the six-year time-bar in 28 U.S.C. § 2501 bars the

government’s counterclaim because 28 U.S.C. § 2501 does not apply to claims brought

by the government, and instead, noting that “the section specifically governing claims

brought by the Government is 28 U.S.C. § 2415.” (emphasis in original)); Jankowitz v.

United States, 209 Ct. Cl. 489, 533 F.2d 538, 548 n.11 (1976) (“Plaintiff’s contention that

28 U.S.C. [§] 2501 (1970) applies to counterclaims by the United States must be rejected.”

(citing Dugan & McNamara, Inc. v. United States, 130 Ct. Cl. 603, 611, 124 F. Supp. 650,

652 (1954))); Erie Basin Metal Prods., Inc. v. United States, 138 Ct. Cl. 67, 74, 150 F.

Supp. 561, 566 (1957) (“There is no limit of time within which the Government must bring

a common law action of fraud.”); Dugan & McNamara, Inc. v. United States, 130 Ct. Cl.

at 611 (“Plaintiff’s insistence that a counterclaim is a claim within the meaning of the term

‘claim’ as used in Section 2501, and thus subject to the application of the limitation of that

section against the Government as well as the claimant, cannot be supported.” (internal

reference omitted)). The United States Court of Appeals for the Federal Circuit, in an

unpublished opinion, which appears to be the only on-point decision issued by the Federal

Circuit on the topic to date, also stated that:

[S]ince the Court of Federal Claims may only hear claims against the

government, § 2501 governs claims against the government. The

counterclaim is a claim by the government and is controlled by the

limitations periods set forth in § 2415 (titled, “Time for commencing actions

brought by the United States”). As a result, the Government’s counterclaim

[seeking to recover wages that it had erroneously paid to cross-appellant, a

serviceman, during his civil conferment] is not barred by § 2501.

Strand v. United States, 706 F. App’x 996, 1001 (Fed. Cir. 2017) (emphasis in original).16

Thus, this court, in line with these previous decisions, including the recent unpublished

16Over the years, there have been a few judges of this court who have applied a six-year

statute of limitations at 28 U.S.C. § 2501 to an assertion of a government counterclaim.

Those cases, however, specifically have dealt with a government counterclaim arising

under the Special Plea in Fraud statute at 28 U.S.C. § 2514 (2012), also known as the

Forfeiture of Fraudulent Claims Act, which states that:

A claim against the United States shall be forfeited to the United States by

any person who corruptly practices or attempts to practice any fraud against

the United States in the proof, statement, establishment, or allowance

thereof. In such cases the United States Court of Federal Claims shall

specifically find such fraud or attempt and render judgment or forfeiture.

29

Federal Circuit Strand decision, agrees that the statute of limitations set forth in 28 U.S.C.

§ 2501 does not bar, in and of itself, the government from proposing its common law fraud

counterclaim, which, as discussed further below, is permitted by the exception in 28

U.S.C. § 2415(f) (2012).

Plaintiff, however, also argues that to allow the government to amend its answer

to include a common law fraud counterclaim would be futile because it is time-barred

under the general six-year statute of limitations applicable to contract claims brought by

the United States in any federal court in 28 U.S.C. § 2415(a) (2012), which states:

[E]very action for money damages brought by the United States or an officer

or agency thereof which is founded upon any contract express or implied in

law or fact, shall be barred unless the complaint is filed within six years after

the right of action accrues or within one year after final decisions have been

rendered in applicable administrative proceedings required by contract or

by law, whichever is later.

28 U.S.C. § 2415(a). The government responds that 28 U.S.C. § 2415(f), however,

exempts the government’s common law fraud counterclaim from the general statute of

limitations in § 2415(a). The statute at 28 U.S.C. § 2415(f) provides:

The provisions of this section shall not prevent the assertion, in an action

against the United States or an officer or agency thereof, of any claim of the

United States or an officer or agency thereof against an opposing party, a

co-party, or a third party that arises out of the transaction or occurrence that

is the subject matter of the opposing party’s claim. A claim of the United

28 U.S.C. § 2514; see also Shell Oil Co. v. United States, 123 Fed. Cl. at 727 (“[T]he six-

year statute of limitations in 28 U.S.C. § 2501 applies to FFCA [Forfeiture of Fraudulent

Claims Act] claims alleged under 28 U.S.C. § 2514 now bars the Government from

litigating a FFCA claim in this case.”); TS Infosys., Inc. v. United States, 36 Fed. Cl. at

574 (applying the six-year statute of limitations under 28 U.S.C. § 2501 to the

government’s Special Plea in Fraud counterclaim); SGW, Inc. v. United States, 20 Cl. Ct.

174, 181 (1990) (finding that general six-year statute of limitations under 28 U.S.C. § 2501

applied to the government’s Special Plea in Fraud counterclaim). In the case currently

before the court, the government, in its motion for leave to amend, is not seeking a

counterclaim pursuant to the Special Plea in Fraud statute. Notably, other judges of this

court have disagreed with this line of cases which suggests that a government’s Special

Plea in Fraud counterclaim can be subject to the six-year statute of limitations under 28

U.S.C. § 2501, and instead, have found that the six-year statute of limitations at 28 U.S.C.

§ 2501 is inapplicable to a government’s fraud counterclaim under the Special Plea in

Fraud statute. See Am. Heritage Bancorp v. United States, 56 Fed. Cl. at 606 (“[W]hen

28 U.S.C. § 2501 is read in light of 28 U.S.C. § 2415, there is no statute of limitations

applicable to the government’s Special Plea in Fraud counterclaim.”); see also Jana, Inc.

v. United States, 34 Fed. Cl. at 452 (“The special plea in fraud under 28 U.S.C. § 2514 is

not subject to the statute of limitations.”).

30

States or an officer or agency thereof that does not arise out of the

transaction or occurrence that is the subject matter of the opposing party’s

claim may, if time-barred, be asserted only by way of offset and may be

allowed in an amount not to exceed the amount of the opposing party’s

recovery.

28 U.S.C. § 2415(f).

This court’s precedent supports the government’s view. As a judge of this court

explained in American Heritage Bancorp v. United States:

According to the government, the only potentially applicable statute of

limitations for contract claims brought by the United States, is 28 U.S.C.

§ 2415(a); however, Section 2415(f) expressly provides that the six-year

limitation on such actions does not prevent the assertion of any claim “of

the United States . . . against an opposing party . . . that arises out of the

transaction or occurrence that is the subject matter of the opposing party’s

claim.” 28 U.S.C. § 2415(f).

Am. Heritage Bancorp. v. United States, 56 Fed. Cl. at 606 (emphasis in original) (holding

that because the government’s counterclaim related to the subject matter of plaintiff’s

case, the government’s counterclaim was not subject to the six-year statute of limitations

set forth in 28 U.S.C. § 2415(a)); see also Jana, Inc. v. United States, 34 Fed. Cl. at 451

(“Common law causes of action, such as those asserted in the third, fourth, fifth, tenth,

eleventh, and twelfth counterclaims, are not governed by the six-year statute of limitations

on claims by the government arising from a contract, 28 U.S.C. § 2415(a), if they arise

from the same transaction or occurrence that is the subject matter of the opposing party’s

claim [against the United States].” (internal citation and quotations omitted; alteration in

original)). A government’s counterclaim that directly relates to the contract that is at issue

in the operative case is a counterclaim that arises out of the “transaction or occurrence

that is the subject matter of the opposing party’s claim” pursuant to 28 U.S.C. § 2415(f).

See 28 U.S.C. § 2415(f); see also Simmonds Precision Prod., Inc. v. United States, 212

Ct. Cl. 305, 316, 546 F.2d 886, 892 (1976) (“Since the plaintiff raised the subject matter

of the contract in its claim, defendant is entitled to assert a counterclaim arising out of

those same contracts.”); Jana, Inc. v. United States, 34 Fed. Cl. at 451 (finding that the

Navy’s common law counterclaims against publisher of technical manuals that brought

action to recover from United States for denied claims on contract with Navy were not

subject to any statute of limitations since they arose from same contracts as plaintiff

publisher’s claims).

Based on the record currently before the court, the government is proposing a

common law fraud counterclaim, alleging that LW fraudulently misrepresented its

SDVOSB status when bidding on and performing the Fort Jackson contract. As previously

noted, plaintiff alleges that the government’s proposed common law fraud counterclaim

is barred by the six-year statute of limitations at 28 U.S.C. § 2415(a) for contract actions

filed by the United States in federal court. A common law fraud claim, however, is an

31

action that sounds in tort. See Brown v. United States, 105 F.3d 621, 623 (Fed. Cir.)

(holding that taxpayer’s claim for a “fraudulent assessment” is “grounded upon fraud,”

and, thus, a tort claim), reh’g denied (Fed. Cir. 1997); Kant v. United States, 123 Fed. Cl.

614, 616-17 (2015) (stating that claims for “fraud” sound in tort); Outlaw v. United States,

116 Fed. Cl. 656, 662 (2014) (finding that plaintiff’s claims, “fraud and coercion are tort

claims” over which the court had no jurisdiction); Schweitzer v. United States, 82 Fed. Cl.

592, 595 (2008) (stating that a claim of “common law fraud” sounds in tort). 17 Thus,

contrary to plaintiff’s assertion, the government’s claim for common law fraud would not

be governed by the six-year statute of limitations contained in § 2415(a) for contract

actions but under the three-year time-bar in § 2415(b) for tort actions. See 28 U.S.C.

§ 2415(b) (“[E]very action for money damages brought by the United States or an officer

or agency thereof which is founded upon a tort shall be barred unless the complaint is

filed within three years after the right of action first accrues . . . .”); see also United States

v. Intrados/Int’l Mgmt. Grp., 265 F. Supp. 2d 1, 14 (D.D.C. 2002) (holding that the

government’s “common-law fraud” claim was subject to the three-year limitations period

for tort actions under 28 U.S.C. § 2415(b)). The general time-bar contained in 28 U.S.C.

§ 2415(b), however, does not apply in the current case because of the exemption in 28

U.S.C. § 2415(f), given that the fraud alleged by defendant is related to the very contract

which forms the basis of plaintiff’s complaint. Because the six-year statute of limitations

exception in 28 U.S.C. § 2415(f) applies to defendant’s motion to amend its answer to

17 It is well-established that under the Tucker Act, this court does not have general

jurisdiction to hear tort claims against the United States. See 28 U.S.C. § 1491(a)(1)

(2012) (“The United States Court of Federal Claims shall have jurisdiction . . . in cases

not sounding in tort.”); see also Keene Corp. v. United States, 508 U.S. 200, 214 (1993)

(“[T]ort cases are outside the jurisdiction of the Court of Federal Claims today.”); Brown

v. United States, 105 F.3d at 623 (“The Court of Federal Claims is a court of limited

jurisdiction. It lacks jurisdiction over tort actions against the United States.”); Bobka v.

United States, 133 Fed. Cl. 405, 412 (2017) (“[Plaintiff] also alleges that the government

engaged in tortious conduct, e.g., fraud, negligence, and defamation. . . . This court,

however does not have jurisdiction over allegations based in tort.” (internal reference

omitted; emphasis in original) (citing Rick’s Mushroom Serv. v. United States, 521 F.3d

1338, 1343 (Fed. Cir. 2008))); Khalil v. United States, 133 Fed. Cl. 390, 392 (2017);

Leffebre v. United States, 129 Fed. Cl. 48, 53 (2016); Kant v. United States, 123 Fed. Cl.

at 616. Nonetheless, this court has jurisdiction to hear a common law fraud counterclaim

when brought by the United States, as is the case currently before the court, pursuant to

28 U.S.C. § 1503, which states that “[t]he United States Court of Federal Claims shall

have jurisdiction to render judgment upon any set-off or demand by the United States

against any plaintiff in such court.” 28 U.S.C. § 1503 (2012); see also Barrett Refining

Corp. v. United States, 242 F.3d 1055, 1062-63 (Fed. Cir. 2001) (citing Cont’l Mgmt., Inc.

v. United States, 208 Ct. Cl. 501, 506, 527 F.2d 613, 616 n.2 (1975) (noting that pursuant

to 28 U.S.C. § 1503, the government could bring a counterclaim sounding in tort even

though the court would not have jurisdiction over such a claim if brought by a plaintiff));

Tennessee Mech. Inst., Inc. v. United States, 145 Ct. Cl. 344 (1959) (“Hence, under 28

U.S.C. [§] 1503, the Court of Claims can grant a judgment to the United States on a

counterclaim based upon plaintiff’s tortious conduct.”).

32

include a common law fraud counterclaim, defendant is not time-barred under 28 U.S.C.

§ 2415 from asserting its common law fraud counterclaim. See Am. Heritage Bancorp v.

United States, 56 Fed. Cl. at 606.

Plaintiff next argues that allowing the government’s amended answer, which

includes defendant’s proposed common law fraud counterclaim, to proceed would be

futile because the government “cannot establish reasonable and justifiable reliance on a

representation by LW” of its SDVOSB status “which the Government had reason to know

was not accurate or true.” Plaintiff appears to be arguing that because LW believes that

the government cannot prove by “clear and convincing” evidence that it justifiably relied

on LW’s representation of its SDVOSB status, to allow the government’s common law

fraud counterclaim would ultimately prove futile. Although defendant ultimately will have

to prove the elements of its common law fraud counterclaim by clear and convincing

evidence in order to prevail on the merits, see Madison Servs., Inc. v. United States, 94

Fed. Cl. 501, 510 (2010) (stating that the “clear and convincing evidence standard” is the

“traditional heightened standard for proving common law fraud”), for purposes of

reviewing defendant’s motion for leave to amend its answer, the salient inquiry is not

whether defendant is likely to prevail on the merits, but whether the “claim added by the

amendment would not withstand a motion to dismiss.” Shoshone Indian Tribe of the Wind

River Reservation, Wyo. v. United States, 71 Fed. Cl. at 176; Jasmine Int’l Trading &

Servs., Co. W.L.L. v. United States, 120 Fed. Cl. 577, 584 (2015). At this pleading stage,

“speculation about the ultimate disposition of the claim is not an appropriate basis for

refusing the pleading.” Vivid Tech., Inc. v. Am. Sci. & Eng’g, Inc., 200 F.3d at 802.

Therefore, the court does not decide the ultimate decision on this issue, but instead

focuses on the elements of common law fraud.

To assert a cognizable common law fraud claim, the government must allege the

following five elements of common law fraud:

(1) a representation of a material fact, (2) the falsity of that representation,

(3) the intent to deceive or, at least, a state of mind so reckless as to the

consequences that it is held to the equivalent of intent (scienter), (4) a

justifiable reliance upon the misrepresentation by the party deceived, which

induces him to act thereon, and (5) injury to the party deceived resulting

from reliance on the misrepresentation.

Jasmine Int’l Trading & Servs., Co. W.L.L. v. United States, 120 Fed. Cl. at 582–83

(quoting Unigene Lab., Inc. v. Apotex, Inc., 655 F.3d 1352, 1359 (Fed. Cir. 2011)). In the

context of the information currently before the court in Case No. 14-960C, contrary to

plaintiff’s position, the government’s proposed amended answer sufficiently alleges,

although it does not yet establish, the elements of a common law fraud claim.

Defendant’s proposed, amended answer states:

 “LW made material misrepresentations of fact, with knowledge of, or

in reckless disregard of, their truth, in order to obtain a contract with the

United States.”

33

 “LW intended that the United States rely upon the accuracy of the

false representations referenced above.”

 “The United States awarded LW a contract based on LW’s material

misrepresentations and made substantial payments of money in justifiable

reliance upon LW’s representations.”

 “Absent LW’s material misrepresentations of fact, it would not have

received a contract with the United States or been entitled to any of the

contractual amounts it now seeks.”

 “LW’s actions caused the United States to be damaged in a

substantial amount to be determined at trial.”

Defendant also specifically alleges in is proposed amended answer that Mr. White and

the Brantley Brothers had the “intent” to fraudulently mispresent LW’s SDVOSB status.

The proposed amended answer states:

 “On or before September 11, 2008, Sidney Brantley approached Mr.

White with a proposal to set up a new company that would be a separate

legal entity from Brantley Construction and for which the Brantley brothers

would provide the financial backing. In exchange for his cooperation in

forming this new company, the Brantley brothers would give Mr. White 51%

ownership.”

 “In this conversation, or related conversations, Sidney Brantley

explained to Mr. White that one of the goals of the company would be to

obtain government contracts set aside for veterans, and that Mr. White’s

status as a service-disabled veteran would be of assistance in obtaining

these contracts.”

 “Mr. White agreed to this proposal.”

 “Sidney and Gary Brantley’s intent in establishing LW was to allow

LW and Brantley Construction and the Brantley Companies to participate in

and profit from contracts that would be awarded by the Federal Government

on a set-aside basis to SDVOSBs. As Gary Brantley testified at his

deposition, they both helped Mr. White and LW with the hope that ‘we could

– could make some money on it . . . I mean, that’s – we’re in business to

make money.’”

Plaintiff argues in its sur-reply to defendant’s motion for leave to amend that the

government’s common law fraud counterclaim, if allowed, would prove futile because the

“Government had the reasonable opportunity to know the truth (about LW’s qualification

as an SDVOSB)” because LW had provided the VA in its proposal for the Fort Jackson

34

contract with “direct information reflecting the relationship between Louis White and

Brantley Construction[18] and the individual Brantleys, as well as information about the

ownership, operations and possible control of LW.” The evidence currently before the

court, however, does not establish that the government knew that LW had misrepresented

its SDVOSB when it bid on and was awarded the Fort Jackson contract so as to negate

a finding of justifiable reliance. At the time LW’s proposal was evaluated and LW was

awarded the Fort Jackson contract, the government was relying on LW’s self-certification

of its SDVOSB status. It appears that there exists at least a question as to whether LW

was a legitimate SDVOSB when it bid on and received the Fort Jackson contract pursuant

to the applicable regulations at that time.19 In 2009, when LW bid on and was awarded

the Fort Jackson contract, the VA was not required to verify that a contractor was actually

a bona-fide SDVOSB, and only had to verify that the contractor had registered as a

SDVOSB on the VIP database and Central Contractor Registration system before the VA

awarded a SDVOSB set-aside contract. The agency could rely on the good faith

authenticity of the offerors’ and awardee’s asserted SDVOSB status as registered.

According to the declaration of Mr. Ward, as previously noted, upon reviewing the VIP

and the Central Contractor Registration system, the VA “determined that LW had self-

certified that they met the requirements for an SDVOSB,” and “[b]ased on LW’s

representation that it was eligible for the contract, I [Mr. Ward] awarded LW Contract No.

VA101CFM-C-0042 [the Fort Jackson contract].” Because the Fort Jackson contract was

a SDVOSB set-aside contract, if LW had fraudulently registered and misrepresented its

SDVOSB status in order to obtain the Fort Jackson contract, or other similar SDVOSB

contracts, and was awarded and accepted the contract on the basis of its SDVOSB status,

that could be found to be a false representation of a material fact which could form the

basis of a valid fraud counterclaim. Further, the information in LW’s proposal for the Fort

18Plaintiff does not indicate if plaintiff is referring to Brantley Construction Company, Inc.

or Brantley Construction Company, LLC.

19 The 2009 applicable regulation stated:

Service-disabled veteran-owned small business concern is a business not

less than 51 percent of which is owned by one or more service-disabled

veterans, or in the case of any publicly owned business, not less than 51

percent of the stock of which is owned by one or more service-disabled

veterans; the management and daily business operations of which are

controlled by one or more service-disabled veterans, or in the case of a

veteran with a permanent and severe disability, a spouse or permanent

caregiver of such veteran. In addition, some businesses may be owned and

operated by an eligible surviving spouse. Reservists or members of the

National Guard disabled from a disease or injury incurred or aggravated in

the line of duty or while in training status also qualify.

38 U.S.C. § 74.1 (2009).

35

Jackson contract, does not establish that the government knew or reasonably should

have known that LW had misrepresented its SDVOSB status when plaintiff self-registered

as a SDVOSB, submitted its proposal, or accepted the award for the Fort Jackson

contract. LW’s proposal for the Fort Jackson contract stated that LW is a “full-service

General Contractor specializing in federal projects as a Service-Disabled Veteran-Owned

Small Business.” LW’s proposal also stated that Louis White, a service-disabled Air Force

veteran, in addition to being a managing member of LW, along with Sidney and Gary

Brantley, would be the “Project Manager” for the Fort Jackson contract and “will be able

to commit 85% of his time to the construction phases of this project.”

There is also no clarity in the record currently before the court that the attorneys in

the United States Attorney’s Office in Columbia, South Carolina, who received and

reviewed the Mixsons’ joint-pre filing disclosure statement and qui tam complaint, and the

attorneys in the Civil Fraud Division of the DOJ in Washington, D.C., who received a copy

of the Mixsons’ joint pre-filing disclosure statement before the Mixsons’ qui tam suit was

filed, had knowledge that LW had misrepresented itself at the time the contract was

awarded. The record before the court indicates that United States Attorney’s Office in

Columbia, South Carolina concluded that it did not have sufficient evidence to pursue

fraud claims against LW, as evidenced by the Notice of Election to Decline Intervention

filed by the United States Attorney’s Office in Columbia, South Carolina in the Mixsons’

qui tam suit. Moreover, no criminal charges were filed against LW after review by the

DOJ. Indeed, defendant’s counsel in the above-captioned case has asserted numerous

times in defendant’s filings in support of defendant’s motion for leave to amend that,

initially, the then DOJ Washington based attorney counsel of record for defendant, Jeffrey

Lowry, relied on the conclusions of the United States Attorney’s Office in Columbia, South

Carolina that there were insufficient facts to bring fraud claims against LW. According to

defendant, despite the filing of the Mixsons’ subsequently dismissed qui tam lawsuit, only

in April 2017, following LW’s response to the government’s document discovery requests

and subsequent depositions in the current case did defendant’s attorney of record

reevaluate and initiate the process for getting approval from DOJ supervisors to file a

motion for leave to amend the answer to include fraud counterclaims, an affirmative

defense of common law fraud, and an unjust enrichment counterclaim. Based on the

record before the court, the court finds that defendant has sufficiently alleged its proposed

common law fraud counterclaim, which would not fail based on the futility of proceeding

further. See Jasmine Int’l Trading & Servs., Co. W.L.L. v. United States, 120 Fed. Cl. at

584 (finding that the government sufficiently alleged its common law fraud counterclaim

to survive a motion to dismiss); see also Shoshone Indian Tribe of the Wind River

Reservation, Wyo. v. United States, 71 Fed. Cl. at 178 (rejecting the argument that

proposed amended pleading was not sufficiently pled to survive motion to dismiss and,

instead, granting motion for leave to amend). Therefore, allowing the amendment and

proceeding on defendant’s proposed common law fraud counterclaim is not futile and

defendant’s common law fraud counterclaim is permitted to go forward.

36

b. FCA counterclaims

With regard to defendant’s proposed FCA counterclaims, plaintiff argues that to

pursue defendant’s proposed FCA counterclaims also would be futile because “the

government cannot establish that any alleged misrepresentations by LW were material

as required by Universal Health Services, Inc. v. United States, 136 S. Ct. 1989, 2003-

04, 195 L. Ed. 2d 348 (2016),” because “the VA consciously decided to continue paying

LW, and to direct LW to continue performance, including performing new and additional

work, despite [the] VA’s actual knowledge that LW’s SDVOSB status had been revoked”

in 2011. Defendant responds that this LW argument “hinges solely on the VA’s revocation

of its SDVOSB status in October 2011,” and that the materiality inquiry should not hinge

on the VA’s October 2011 revocation of LW’s SDVOSB status. Defendant argues that the

proper inquiry for the court should be “whether LW’s assertions that it was an SDVOSB,

upon which the VA relied when making the contract award, were material to the award of

that contract.” Defendant further argues, that contrary to plaintiff’s position, the VA did not

pay LW under the Fort Jackson contract with “‘actual knowledge’” that LW allegedly

fraudulently misrepresented its SDVOSB status when it submitted its proposal for the Fort

Jackson contract (citing Universal Health Servs., Inc. v. United States, 136 S. Ct. 1989,

2003).

The FCA at 31 U.S.C. § 3729, provides:

(a) Liability for certain acts.--

(1) In general.--Subject to paragraph (2), 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;

(C) conspires to commit a violation of subparagraph (A), (B), (D), (E), (F),

or (G);

(D) has possession, custody, or control of property or money used, or to be

used, by the Government and knowingly delivers, or causes to be delivered,

less than all of that money or property;

(E) is authorized to make or deliver a document certifying receipt of property

used, or to be used, by the Government and, intending to defraud the

Government, makes or delivers the receipt without completely knowing that

the information on the receipt is true;

(F) knowingly buys, or receives as a pledge of an obligation or debt, public

property from an officer or employee of the Government, or a member of

the Armed Forces, who lawfully may not sell or pledge property; or

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

or statement material to an obligation to pay or transmit money or property

37

to the Government, or knowingly conceals or knowingly and improperly

avoids or decreases an obligation to pay or transmit money or property to

the Government,

is liable to the United States Government for a civil penalty of not less than

$5,000 and not more than $10,000,[20] as adjusted by the Federal Civil

Penalties Inflation Adjustment Act of 1990 (28 U.S.C. [§] 2461 note; Public

Law 104-410), plus 3 times the amount of damages which the Government

sustains because of the act of that person.

...

(b) Definitions.--For purposes of this section--

20 The DOJ, by regulation, “has increased the penalties for FCA violations to a minimum

of $5,500.00 and a maximum of $11,000.00.” Alcatec, LLC v. United States, 100 Fed. Cl.

502, 526 n.13 (2011) (citing 28 C.F.R. § 85.3(a)(9)); see also Veridyne Corp. v. United

States, 105 Fed. Cl. 769, 808 n.30, modified, 107 Fed. Cl. 762 (2012), aff’d in part, rev’d

in part, 758 F.3d 1371 (Fed. Cir.), reh’g and reh’g en banc denied (Fed. Cir. 2014);

Federal Civil Penalties Inflation Adjustment Act of 1990, Pub. L. No. 101-410, 104 Stat.

890; Civil Monetary Penalties Inflation Adjustment, 64 Fed. Reg. 47,099–01, 47,104 (Aug.

30, 1999). The regulation at 28 C.F.R. § 85.3 states:

For all violations occurring on or before November 2, 2015, and for

assessments made before August 1, 2016, for violations occurring after

November 2, 2015, the civil monetary penalties provided by law within the

jurisdiction of the respective components of the Department, as set forth in

paragraphs (a) through (d) of this section, are adjusted as provided in this

section in accordance with the inflation adjustment procedures prescribed

in section 5 of the Federal Civil Monetary Penalties Inflation Adjustment Act

of 1990, Pub. L. 101–410, as in effect prior to November 2, 2015. The

adjusted penalties set forth in paragraphs (a), (c), and (d) of this section are

effective for violations occurring on or after September 29, 1999, and on or

before November 2, 2015, and for assessments made before August 1,

2016, for violations occurring after November 2, 2015. For civil penalties

assessed after August 1, 2016, whose associated violations occurred after

November 2, 2015, see the adjusted penalty amounts in section 85.5.

(a) Civil Division.

...

(9) 31 U.S.C. 3729(a), False Claims Act, violations: minimum from

$5,000 to $5,500; maximum from $10,000 to $11,000.

28 C.F.R. § 85.3 (2018). The court has the discretion to impose penalties within the

statutory range. See Morse Diesel Int’l, Inc. v. United States, 79 Fed. Cl. 116, 125 (2007),

recons. denied, 81 Fed. Cl. 311 (2008).

38

(1) the terms “knowing” and “knowingly” --

(A) mean that a person, with respect to information--

(i) has actual knowledge of the information;

(ii) acts in deliberate ignorance of the truth or falsity of the information; or

(iii) acts in reckless disregard of the truth or falsity of the information; and

(B) require no proof of specific intent to defraud;

(2) the term “claim”--

(A) means any request or demand, whether under a contract or otherwise,

for money or property and whether or not the United States has title to the

money or property, that--

(i) is presented to an officer, employee, or agent of the United States; or

(ii) is made to a contractor, grantee, or other recipient, if the money or

property is to be spent or used on the Government’s behalf or to advance a

Government program or interest, and if the United States Government--

(I) provides or has provided any portion of the money or property requested

or demanded; or

(II) will reimburse such contractor, grantee, or other recipient for any portion

of the money or property which is requested or demanded . . . .

31 U.S.C. § 3729 (2012) (emphasis in original); see also U.S. ex rel. Heath v. AT & T,

Inc., 791 F.3d 112, 115 (D.C. Cir. 2015) (“The False Claims Act, 31 U.S.C. §§ 3729 et

seq., broadly proscribes the knowing or reckless submission of false claims for payment

to the federal government or within a federally funded program.”).

Defendant is seeking to assert counterclaims in the above-captioned case

pursuant to 31 U.S.C. §§ 3729(a)(1)(A), (B) of the FCA, which, as noted above, makes a

person liable 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)(A), (B). There is no explicit requirement in the statute that the

false or fraudulent claim for payment submitted pursuant to either subsection (a) or (b)

listed above contain a “material misrepresentation.” See id. Nonetheless, the United

States Supreme Court explained in Universal Health Services, Inc. v. United States, 136

S. Ct. 1989 (2016) that the materiality of a party’s misrepresentation could play a role in

determining whether a claim is false or fraudulent under the “implied false certification

theory” of liability of the FCA. As the Supreme Court explained,

39

[a]ccording to this theory, when a defendant submits a claim, it impliedly

certifies compliance with all conditions of payment. But if that claim fails to

disclose the defendant’s violation of a material statutory, regulatory, or

contractual requirement, so the theory goes, the defendant has made a

misrepresentation that renders the claim “false or fraudulent” under

§ 3729(a)(1)(A).

Universal Health Servs., Inc. v. United States, 136 S. Ct. at 1995. In Universal Health

Services, Carmen Correa and Julio Escobar, parents of Yarushka Rivera, who died after

receiving mental health treatment by individuals at a counseling center called Arbour

Counseling Services, owned and operated by Universal Health Services, brought a qui

tam action against Universal Health Services. See id. at 1997. After Ms. Rivera’s passing,

Ms. Correa and Mr. Escobar found out few Arbour employees “were actually licensed to

provide mental health counseling and that supervision of them was minimal,” and that of

Yarushka’s treating physicians, “only one was properly licensed.” Id.

Ms. Rivera’s parents alleged in their qui tam complaint filed in the United States

District Court for the District of Massachusetts that,

Universal Health had violated the False Claims Act under an implied false

certification theory of liability. The operative complaint asserts that

Universal Health (acting through Arbour) submitted reimbursement claims

that made representations about the specific services provided by specific

types of professionals, but that failed to disclose serious violations of

regulations pertaining to staff qualifications and licensing requirements for

these services. Specifically, the Massachusetts Medicaid program requires

satellite facilities to have specific types of clinicians on staff, delineates

licensing requirements for particular positions (like psychiatrists, social

workers, and nurses), and details supervision requirements for other staff.

See 130 Code Mass. Regs. §§ 429.422–424, 429.439 (2014). Universal

Health allegedly flouted these regulations because Arbour employed

unqualified, unlicensed, and unsupervised staff. The Massachusetts

Medicaid program, unaware of these deficiencies, paid the claims.

Universal Health thus allegedly defrauded the program, which would not

have reimbursed the claims had it known that it was billed for mental health

services that were performed by unlicensed and unsupervised staff.

Universal Health Servs., Inc. v. United States, 136 S. Ct. at 1997–98 (footnote omitted).

The United States District Court for the District of Massachusetts, although embracing the

false certification theory, dismissed the Escobars’ qui tam complaint because “none of

the regulations that Arbour violated was a condition of payment.” Id. at 1998. The United

States Court of Appeals for the First Circuit reversed in part and remanded. See id. The

Supreme Court, “granted certiorari to resolve the disagreement among the Courts of

Appeals over the validity and scope of the implied false certification theory of liability.” Id.

The Supreme Court explained that the United States Court of Appeals for the Seventh

Circuit had rejected the implied false certification theory, “reasoning that only express (or

affirmative) falsehoods can render a claim ‘false or fraudulent’” under the FCA while

“[o]ther courts have accepted the theory, but limit its application to cases where

40

defendants fail to disclose violations of expressly designated conditions of payment,”

while others “hold that conditions of payment need not be expressly designated as such

to be a basis for False Claims Act liability.” Id. at 1998-99. The Supreme Court stated:

We first hold that the implied false certification theory can, at least in some

circumstances, provide a basis for liability. By punishing defendants who

submit “false or fraudulent claims,” the False Claims Act encompasses

claims that make fraudulent misrepresentations, which include certain

misleading omissions. When, as here, a defendant makes representations

in submitting a claim but omits its violations of statutory, regulatory, or

contractual requirements, those omissions can be a basis for liability if they

render the defendant’s representations misleading with respect to the

goods or services provided.

Id. at 1999. The Supreme Court explained that “misleading omissions” that Universal

Health Services made were “misleading half-truths” that “can be actionable

misrepresentations.” Id. at 2000. In particular, Universal Health Services’ claims for

Medicaid reimbursement were “more than merely demand for payment.” Id. Instead,

by submitting claims for payment using payment codes that corresponded

to specific counseling services, Universal Health represented that it had

provided individual therapy, family therapy, preventive medication

counseling, and other types of treatment. Moreover, Arbour staff members

allegedly made further representations in submitting Medicaid

reimbursement claims by using National Provider Identification numbers

corresponding to specific job titles. And these representations were clearly

misleading in context.

Id. The Supreme Court then held that, contrary to Universal Health Services’ position, the

implied false certification theory should not be narrowly applied so that a party faces

liability “only if it fails to disclose the violation of a contractual, statutory, or regulatory

provision that the Government expressly designated a condition of payment.” Id. at 2001.

The Supreme Court explained that a “statement that misleadingly omits critical facts is a

misrepresentation irrespective of whether the other party has expressly signaled the

importance of the qualifying information.” Id. The Supreme Court also noted that not every

“undisclosed violation” is an actionable FCA claim but must “be material to the

Government’s payment decision in order to be actionable under the False Claims Act.”

Id. at 2002. The Supreme Court explained that “materiality standard is demanding” and

that “materiality ‘look[s] to the effect on the likely or actual behavior of the recipient of the

alleged misrepresentation.’ 26 R. Lord, Williston on Contracts § 69:12, p. 549 (4th ed.

2003) (Williston).” Id. (alteration in original). The Supreme Court also stated:

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. Materiality, in addition,

41

cannot be found where noncompliance is minor or insubstantial. See United

States ex rel. Marcus v. Hess, 317 U.S. 537, 543, 63 S. Ct. 379, 87 L. Ed.

443 (1943) (contractors’ misrepresentation that they satisfied a non-

collusive bidding requirement for federal program contracts violated the

False Claims Act because “[t]he government’s money would never have

been placed in the joint fund for payment to respondents had its agents

known the bids were collusive”); see also Junius Constr., 257 N.Y., at 400,

178 N.E., at 674 (an undisclosed fact was material because “[n]o one can

say with reason that the plaintiff would have signed this contract if informed

of the likelihood” of the undisclosed fact).

In sum, when evaluating materiality under the False Claims Act, the

Government’s decision to expressly identify a provision as a condition of

payment is relevant, but not automatically dispositive. Likewise, proof of

materiality can include, but is not necessarily limited to, evidence that the

defendant knows that the Government consistently refuses to pay claims in

the mine run of cases based on noncompliance with the particular statutory,

regulatory, or contractual requirement. Conversely, if the Government pays

a particular claim in full despite its actual knowledge that certain

requirements were violated, that is very strong evidence that those

requirements are not material. Or, if the Government regularly pays a

particular type of claim in full despite actual knowledge that certain

requirements were violated, and has signaled no change in position, that is

strong evidence that the requirements are not material.

Universal Health Servs., Inc. v. United States, 136 S. Ct. at 2003–04.

In the instant case, the defendant’s proposed FCA counterclaims should not, at

this stage of the proceedings, be considered futile for a lack of a material

misrepresentation. The relevant inquiry is not whether the government will absolutely

prevail on the merits of its FCA counterclaims, but whether “if a claim added by the

amendment would not withstand a motion to dismiss.” Shoshone Indian Tribe of the Wind

River Reservation, Wyo. v. United States, 71 Fed. Cl. at 176. Based on the record

currently before the court, the VA had restricted competition for the Fort Jackson contract

only to eligible SDVOSBs. The solicitation for the Fort Jackson contract stated that the

“procurement is a Service-Disable Veteran-Owned Small Business (SDVOSB) set-aside,”

and that “[o]ffers received from concerns that are not service-disabled veteran-owned

small business concerns shall not be considered.” (emphasis added). The Fort Jackson

solicitation makes clear that, but for LW’s representation that it was a SDVOSB, the VA

would not have considered LW’s proposal for the award of the Fort Jackson contract.21

21As noted above, the Supreme Court in Universal Health Services, Inc. indicated that “if

the Government pays a particular claim in full despite its actual knowledge that certain

requirements were violated, that is very strong evidence that those requirements are not

material.” Universal Health Servs., Inc. v. United States, 136 S. Ct. at 2003-04. The court

42

Although plaintiff alleges that “any representations by LW about its SDVOSB status

after October 2011 cannot be considered fraudulent” because the VA had decertified

LW’s SDVOSB status in 2011, there is no indication before the court that the VA’s

decertification of LW’s status in 2011 is dispositive in this case as to the materiality of

LW’s alleged misrepresentation of its SDVOSB status when it bid on and was awarded

the Fort Jackson contract in 2009. As defendant states, “the sole issue CVE was

examining” in 2011 when LW was decertified was whether LW qualified as a SDVOSB in

2011, not whether LW had mispresented its SDVOSB status in 2009, when LW submitted

its proposal and was awarded the Fort Jackson contract. According to applicable

regulations at the time, a contractor’s status as a SDVOSB is relevant to the contracting

agency’s handling of the procurement process when the contractor submits its proposal

for a SDVOSB set-aside contract and is awarded a contract. Subsequent changes to a

contractor’s SDVOSB status would not necessarily impact the contractor’s ability to

continue to perform on a previously awarded contract. According to the regulations

regarding contracting with the federal government by a SDVOSB, as promulgated by the

Small Business Administration (SBA), a “concern,” i.e., a contractor,

that represents itself and qualifies as an SDVO [service disabled veteran

owned] SBC [small business concern] at the time of initial offer (or other

formal response to a solicitation), which includes price, including a Multiple

Award Contract, is considered an SDVO SBC throughout the life of that

contract. This means that if an SDVO SBC is qualified at the time of initial

offer for a Multiple Award Contract, then it will be considered an SDVO SBC

for each order issued against the contract, unless a contracting officer

requests a new SDVO SBC certification in connection with a specific order.

Where a concern later fails to qualify as an SDVO SBC, the procuring

agency may exercise options and still count the award as an award to an

SDVO SBC.

13 C.F.R. § 125.18(e)(1) (2018); see also NEIE, Inc. v. United States, No. 13-164C, 2013

WL 6406992, at *20 (Fed. Cl. Nov. 26, 2013) (unpublished opinion) (“[T]he FAR only

requires that a contractor meet the eligibility requirements for an SDVOSB at the time of

offer.” (emphasis in original)). Even plaintiff acknowledges in its response brief to

defendant’s motion for leave to amend its answer that a subsequent change in a

contractor’s SDVOSB status while performing on a contract does not necessarily require

the VA to terminate the contract. Plaintiff states in its response brief that, “[o]nce an award

is made, the contractor is entitled to continue performance and receive payment even if

its status changes during contract performance.” Whether the government knew or should

have known that LW had misrepresented its SDVOSB status when it bid on the Fort

Jackson contract is the operative issue, not whether LW was allowed to continue to

perform on the Fort Jackson contract once LW’s SDVOSB status was revoked in 2011.

notes, however, there is no evidence in the record that the VA had actual knowledge that

LW was not a SDVOSB when it submitted its proposal for the Fort Jackson contract or

when it received the contract award.

43

The court, therefore, finds that defendant has met materiality concerns with respect to all

of defendant’s proposed FCA counterclaims. See Shoshone Indian Tribe of the Wind

River Reservation, Wyo. v. United States, 71 Fed. Cl. at 178.

Plaintiff also argues that the government’s proposed FCA counterclaims cannot be

pursued by defendant because they are time-barred under the statute of limitations set

forth in the FCA. Defendant responds in its reply in support of its motion for leave to

amend that “each claim for payment by LW to the Government is its own FCA claim with

a separate statute of limitations inquiry.” Defendant then states that:

LW cannot establish that all of the Government’s FCA claims are time-

barred. LW submitted invoices for payment on 22 occasions between 2009

and 2012, each of which is a separate false claim. The statute of limitations

period for each of these invoices is six years after the date of the fraudulent

submissions, thus, at the very least, all 4 invoices for payment made to LW

on or after October 13, 2011 are within the statute of limitations. 31 U.S.C.

§ 3731(b)(1). Moreover, the three additional claims LW filed in this case—

on February 17, 2015, September 15, 2015, and September 24, 2015—

each represent separate FCA violations. These FCA violations are clearly

not time-barred even under LW’s flawed interpretation of section 3731(b).

(emphasis in original). The government also responds in its supplemental brief that “even

if recovery for some of LW Constructions [sic] false claims would be time-barred under

section 3731 in an affirmative claim, the Government still has the right to raise those time-

barred claims in response to LW’s complaint pursuant to 28 U.S.C. § 2415(f).” Plaintiff

responds in its supplemental brief that the exception contained in 28 U.S.C. § 2415(f)

does not supersede other statute of limitations, such as statute of limitations set forth in

the FCA. Thus, according to plaintiff, 28 U.S.C. § 2415(f) does not have “any application

to or impact” on the FCA statute of limitations.

As an initial matter, the government correctly asserts in its reply brief that each

claim for payment by LW to the government can be its own FCA claim resulting in a

separate statute of limitations inquiry. “[C]laims submitted pursuant to a fraudulently

obtained contract are FCA violations even if the claims themselves do not contain false

statements.” Veridyne Corp. v. United States, 758 F.3d 1371, 1379 (Fed. Cir.) (citing

United States ex rel. Marcus v. Hess, 317 U.S. 537, 543-44 (1943)), reh’g and reh’g en

banc denied (Fed. Cir. 2014). Based on the government’s reply brief, “LW submitted

invoices for payment on 22 occasions between 2009 and 2012.” Additionally, based on

the evidence currently before the court, LW filed three certified claims for payment to the

VA contracting officer for the Fort Jackson contract since it filed the above-captioned case

on October 8, 2014. The twenty-two invoices and three certified claims for payment are

each a “claim” for purposes of the FCA. See 31 U.S.C. § 3729(b)(2)(A) (“the term ‘claim’

. . . means any request or demand, whether under a contract or otherwise, for money or

property and whether or not the United States has title to the money or property . . . .”);

see also Veridyne Corp. v. United States, 758 F.3d at 1380 (stating that each of

Veridyne’s 127 invoices for payment submitted to the agency on a government contract

44

was considered a separate “claim” for purposes of the FCA, and affirming the award of

$11,000.00 for each of the 127 claims). Thus, defendant alleges that LW, potentially could

be liable for a total of twenty-five false claims.

Defendant asserts that, pursuant to 28 U.S.C. § 2415(f), the government may bring

counterclaims that are otherwise time-barred by the more general terms of the FCA

statute of limitations. 28 U.S.C. § 2415 is the statute of limitations regarding certain

causes of action brought by the United States in federal court titled: “Time for commencing

actions brought by the United States.” See 28 U.S.C. § 2415 (2012). Pursuant to

subsection (a), the United States has six years to file an “action for money damages”

which is “founded upon any contract express or implied in law or fact.” 28 U.S.C.

§ 2415(a). Pursuant to subsection (b), the United States has three years to file an “action

for money damages” which is founded “upon a tort.” 28 U.S.C. § 2415(b). Pursuant to

subsection (d), the United States has six years to file an

action for the recovery of money erroneously paid to or on behalf of any

civilian employee of any agency of the United States or to or on behalf of

any member or dependent of any member of the uniformed services of the

United States, incident to the employment or services of such employee or

member.

28 U.S.C. § 2415(d). Subsection (f) of 28 U.S.C. § 2415 states that, regardless of the

time-bars contained in Section 2415, the United States can still assert any other claims

that arises from the subject matter at issue in the original case as a counterclaim. See 28

U.S.C. § 2415(f). As previously noted, subsection (f) states:

The provisions of this section shall not prevent the assertion, in an action

against the United States or an officer or agency thereof, of any claim of the

United States or an officer or agency thereof against an opposing party, a

co-party, or a third party that arises out of the transaction or occurrence that

is the subject matter of the opposing party’s claim. A claim of the United

States or an officer or agency thereof that does not arise out of the

transaction or occurrence that is the subject matter of the opposing party’s

claim may, if time-barred, be asserted only by way of offset and may be

allowed in an amount not to exceed the amount of the opposing party’s

recovery.

Id.22

22 The court notes in that Jana, Inc. v. United States, a judge of this court did dismiss the

government’s FCA counterclaims she found time-barred under the FCA without even

raising the possibility that 28 U.S.C. § 2415(f) could potentially allow the government to

bring an otherwise time-barred FCA counterclaim, as defendant alleges in the current

case before the court. See Jana, Inc. v. United States, 34 Fed. Cl. at 452 (granting

plaintiff’s motion to dismiss government’s FCA counterclaims that were time-barred under

the FCA six-year statute of limitations).

45

As noted above, Section 2415 sets general time-bars for the government to file

contract, tort, or wage recovery actions in federal court. See 28 U.S.C. § 2415. The statute

also states that “the provisions of this section [28 U.S.C. § 2415] shall not prevent the

assertion” by the United States of a counterclaim under certain conditions. See 28 U.S.C.

§ 2415(f) (emphasis added). Subsection (f) does not address whether or not the

government may bring counterclaims that are time-barred pursuant to other statutes of

limitations, such as the FCA statute of limitations at 31 U.S.C. § 3731 (2012).

Whether defendant’s proposed FCA counterclaims are potentially time-barred is

determined by the FCA statute of limitations at 31 U.S.C. § 3731, which states that a “civil

action” brought pursuant to the FCA 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). In other words,

[s]ix years . . . is the minimum statute of limitations period under the statute.

. . . This six-year period may be increased by three years if the violation is

not reasonably known after the date of the commission of the violation. . . .

In any event, the statute of limitations cannot exceed ten years after the

date that the violation was committed.

TS Infosys., Inc. v. United States, 36 Fed. Cl. at 572 (emphasis in original; internal

citations omitted).

As previously noted, defendant states in its reply in support of its motion for leave

to amend, and with which facts LW does not take issue, that LW submitted twenty-two

invoices for payment to the VA on the Fort Jackson contract between 2009 and 2012,

before the contract was terminated on October 16, 2013 and submitted three certified

claims for payment to the VA contracting officer on February 17, 2015, September 15,

2015, and September 24, 2015, after the contract was terminated for default and after

LW filed the above-captioned case. Defendant alleges in its reply that the twenty-two

invoices and three certified claims for payments are each a false claim under the FCA,

and thus, collectively, there are twenty-five potentially false claims. As to the timing of the

twenty-five potentially false claims, defendant states in its reply in support of its motion

46

for leave to amend that seven of the twenty-five false claims, i.e., four invoices and three

certified claims for payment, were submitted on or after October 13, 2011 and are,

therefore, within the FCA six-year statute of limitations, working backwards from the date

that defendant filed its motion for leave to amend the answer on October 13, 2017. The

remaining eighteen false claims, which, according to the defendant’s reply in support of

its motion for leave to amend, were submitted before October 13, 2011, might be

considered as untimely under the FCA statute of limitations. The FCA statute of

limitations’ “minimum limitations period” is six years in which to file from the date of the

alleged violation, which, in the above-captioned case, is the date that LW submitted each

of the twenty-two invoices and filed the three certified claims for payment to the VA on

the Fort Jackson contract. See 31 U.S.C. § 3731(b)(1). Because six years had not passed

from when LW filed its four invoices for payment, which allegedly each occurred “on or

after October 13, 2011,” and filed its three certified claims for payment to the VA in 2015,

to when defendant filed its motion for leave to amend on October 13, 2017, defendant is

not time-barred under the FCA statute of limitations from bringing these seven claims.

Defendant’s FCA counterclaims for LW’s eighteen pre October 13, 2011 submitted

claims for payment submitted to the VA, normally would be time-barred under the FCA’s

six-year period for filing a claim under the FCA because each of these eighteen claims

for payment were submitted by LW to the VA more than six years before defendant filed

its motion for leave on October 13, 2017.23 Nonetheless, according to defendant, the

government could bring FCA counterclaims regarding these eighteen claims for payment

pursuant to the FCA’s statute of limitations tolling provision at 31 U.S.C. § 3731(b)(2),

which states:

A civil action under section 3730 may not be brought— . . . (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 . . . .

31 U.S.C. § 3731(b)(2).

The FCA does not define “official of the United States charged with responsibility

to act in the circumstances” referenced in 31 U.S.C. § 3731(b)(2).24 Nor has case law

23As noted above, the Fraud Enforcement and Recovery Act, although enacted in 2009,

was treated “as if enacted on June 7, 2008, and applies to all claims under the False

Claims At (31 U.S.C. 3729 et seq.) that are pending on or after that date.” See Fraud

Enforcement and Recovery Act, § 4(f), 123 Stat. at 1625. As the Fort Jackson contract

was awarded on June 2, 2009, all claims would be within the amended and current

version of the FCA.

24The legislative history of the False Claims Amendment Act, the act which amended the

FCA by adding 31 U.S.C. § 3731(b)(2), the tolling provision at issue, does not provide

clarity as to the meaning of “official of the United States.” The section of the relevant

Senate Report states:

47

provided a clear answer as to which government official(s) qualifies as an “official of the

United States charged with responsibility to act in the circumstances.” A judge of this court

previously held that the “official of the United States” refers to an official of the Civil

Division of the DOJ. See Jana, Inc. v. United States, 34 Fed. Cl. at 451 n.6 (“[T]he

discovery that triggers 31 U.S.C. § 3731(b)(2) is not knowledge of the fraud by any

government official, but knowledge of the fraud by an official having the authority to initiate

litigation under the Act, generally considered to be an official at the Civil Division of the

Department of Justice, which has exclusive litigating authority under the False Claims

Act, 31 U.S.C. § 3730(a).” (emphasis in original)).

Other judges in various federal courts, for example, are divided on whether the

“official of the United States” refers specifically to an official within the Civil Division of the

DOJ or to any government employee. Compare United States v. Macomb Contracting

Corp., 763 F. Supp. 272, 274 (M.D. Tenn. 1990) (“The ‘official of the United States

charged with responsibility’ could only have been the appropriate official of the Civil

Division of the Department of Justice, which alone has the authority to initiate litigation

under the Act.”), with United States ex rel. Kreindler & Kreindler v. United Techs. Corp.,

777 F. Supp. 195, 205 (N.D.N.Y. 1991) (“The facts material to relator’s cause of action

were known in 1979 by the senior [Army] officials in charge of the Black Hawk project.

Thus, those facts were known, or reasonably should have been known, by officials with

the responsibility to act.”).

From the record before the court, the DOJ was alerted to LW’s possible fraud on

April 22, 2014, when the Mixsons provided their joint pre-filing disclosure statement

regarding their proposed qui tam suit to the United States Attorney’s Office in Columbia,

South Carolina and to the Civil Fraud Division of the DOJ in Washington, D.C. and then

on May 8, 2014, when the Mixsons filed their qui tam complaint in the United States

District Court of the District of South Carolina. At that time, however, the DOJ concluded

that the government would not join the Mixsons’ qui tam suit and did not initiate action

against LW based on the allegations of fraud. Pursuant to the tolling provision of the FCA

statute of limitations, 31 U.S.C. § 3731(b)(2), the DOJ had three years from April 22, 2014

or May 8, 2014 to file FCA counterclaims regarding the eighteen claims LW submitted to

Subsection (b) of section 3731 of title 31, as amended by section 3 of the

bill, would include an explicit tolling provision on the statute of limitations

under the False Claims Act. The statute of limitations does not begin to run

until the material facts are known by an official within the Department of

Justice with the authority to act in the circumstances.

S. Rep. No. 345, 99th Cong., 2d Sess. 30 (1986), reprinted in 1986 U.S.C.C.A.N. 5266,

5295 (emphasis added). In the same Senate Report, the Senate also used broader

language, stating, “the subcommittee added a modification of the statute of limitations to

permit the Government to bring an action within 6 years of when the false claim is

submitted (current standard) or within 3 years of when the Government learned of a

violation, whichever is later.” S. Rep. No. 345 at 15, 1986 U.S.C.C.A.N. at 5280.

48

the VA before October 13, 2011, making the DOJ’s statute of limitations filing deadline

April 22, 2017 or May 8, 2017, both before defendant sought leave to amend its answer

on October 13, 2017. Given the decision by the DOJ at the time, however, after review of

the Mixsons’ submissions and lawsuit, not to join the Mixsons’ qui tam la

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