United States District Court, D. Maryland
Xinis, United States District Judge.
before the Court in this qui tam action is the
Motion to Dismiss filed by Defendants CASA de Maryland, CASA
in Action, Gustavo Torres, and Virginia Kase (collectively,
“Defendants”) (ECF No. 14). The matter has been
fully briefed, and no hearing is necessary. See D.
Md. Loc. R. 105.6. Upon consideration of the parties'
arguments, the Court GRANTS Defendants' motion.
CASA de Maryland, Inc. and its affiliate, Defendant CASA in
Action, Inc. (collectively, “CASA”) are nonprofit
organizations that provide advocacy and assistance to Latino
and immigrant communities in Maryland. ECF No. 1 ¶¶
4, 27. Plaintiff-relator Amalia Potter was employed as
CASA's Human Resources Manager from May 20, 2013, to
August 20, 2014. ECF No. 1 ¶¶ 3, 26. Defendant
Gustavo Torres is CASA's Executive Director and Defendant
Virginia Kase is its Chief Operations Officer. ECF No. 1
¶ 27. Potter reported to Kase. ECF No. 1 ¶ 38.
receives federal funds through the U.S. Department of
Education's (“DOE”) Fund for the Improvement
of Education, the DOE's Investment in Innovation Fund,
and the U.S. Department of Labor's (“DOL”)
Occupational Safety and Health Susan Harwood Training Grants
(collectively “government” or “government
funds”). ECF No. 1 ¶ 29. As a condition to
receiving these funds, CASA must complete Program
Participation Assurances (“PPAs”) on Office of
Management and Budget (“OMB”) Form SF 424B. CASA
must also provide annual financial status reports
(“FSPs”) using OMB Form SF 270. ECF No. 1
¶¶ 5, 6. Because CASA expended more than $500, 000
in federal awards in 2014, CASA was required to undergo an
audit for that fiscal year pursuant to OMB Circular A-133
(the “A-133 audit”). ECF No. 1 ¶ 55.
CASA's PPAs, FSPs, and in the Data Collection Form
submitted as part of the A-133 audit, CASA must certify that
it complies with “applicable requirements” of
federal law and regulations. ECF No. 1 ¶ 6. In
particular, the A-133 audit required CASA to identify the
federal funds that it received and expended, and to provide
“reasonable assurance” through internal controls
that “the auditee is managing Federal awards in
compliance with laws, regulations, and the provisions of
contracts or grant agreements that could have a material
effect” on the federal program under which funds are
received. CASA was also required to acknowledge that it
complied with laws, regulations, and other agreements related
to the government funds, and to otherwise assure that the
audit was properly performed and any audit findings are
corrected. ECF No. 1 ¶¶ 56, 57.
alleges that during an internal audit conducted in advance of
the A-133 audit, she discovered that CASA's I-9
forms for a number of its employees dating back
to the 1980s appeared deficient. ECF No. 1 ¶¶
41-43. Potter alerted Kase to the problems with the I-9
forms, and Kase instructed Potter to fix the issue going
forward as to new employees, but to do nothing with respect
to the historic deficiencies. ECF No. 1 ¶ 49.
2014, Potter was informed that CASA would be subject to an
A-133 audit for the preceding fiscal year. Potter thereafter
learned that employees' I-9 forms would be one of the
categories of employee records reviewed as part of the A-133
audit. ECF No. 1 ¶¶ 53, 60. To prepare for the
A-133 audit, Potter engaged in a “self-audit”
which revealed that 95-97% of all of the I-9s CASA had on
file, going back to the 1980s, were incomplete, and many
copies of identification documents attached to the I-9s were
either illegible or expired. ECF No. 1 ¶¶ 60- 64.
Potter asserts that she discussed these deficiencies again
with Kase and was instructed to fill out the I-9s herself.
ECF No. 1 ¶¶ 64-66. When Potter refused, Potter and
Kase then agreed that Potter would work with CASA management
to update the I-9s of CASA's current employees to ensure
that their I-9s were brought into compliance. ECF No. 1
¶¶ 67-73. Despite Potter's repeated attempts,
the I-9s were never updated. ECF No. 1 ¶¶ 74-80.
alleges that during her final attempt to address I-9
noncompliance, Kase “became irate” and accused
Potter of “overcomplicating matters.” ECF No. 1
¶ 78. Potter subsequently attempted to address the I-9
issue by sending an email to all CASA managers, requesting
the managers to direct their employees to bring I-9
documentation for recertification to an all-staff meeting.
Kase “chastised” Potter for this email because
Kase “did not want this to be a mass recertification at
open enrollment.” ECF No. 1 ¶¶ 79-80. Potter
was then fired. ECF No. 1 ¶¶ 82-83.
Potter's termination, CASA engaged an outside audit firm
to conduct the required A-133 audit for the fiscal year
ending on June 30, 2014. ECF No. 1 ¶¶ 92, 93. The
2014 Data Collection Form submitted pursuant to the audit was
signed by an authorized representative of CASA who certified
that “the information including in Parts I, II, and III
of this data collection form, in its entirety, are accurate
and complete.” ECF No. 1 ¶ 93. Potter asserts that
as part of this A-133 audit, CASA failed to “disclose
its widespread noncompliance with federal employee
eligibility regulations” (i.e., failure to
properly complete employees' I-9s), and thus the
certification in the 2014 Data Collection Form was false. ECF
No. 1 ¶ 94; see ECF No. 1 ¶¶ 7, 9
(CASA falsely certified compliance with applicable laws and
requirements and employed individuals without completing
required I-9 forms). Potter avers that the government
approved CASA's 2014 expenditures based on CASA's
representations in the Data Collection Form, and subsequently
approved additional awards. ECF No. 1 ¶ 96. Potter also
alleges that certifications made in PPAs on SF 424Bs and FSPs
on SF 270s similarly were false. ECF No. 1 ¶ 5.
on CASA's assertions in the Data Collection Form, PPAs,
and FSAs, Potter filed suit alleging violations of the False
Claims Act (“FCA”) (Count I), conspiracy to
violate the FCA (Count II), and retaliation in violation of
the FCA (Count III). Potter also alleges that she was
wrongfully terminated in violation of Maryland public policy
(Count IV) because she was fired in retaliation for urging
CASA to fix the deficient 1-9s, and for refusing to
improperly fill in I-9s. Potter also asserts that Defendants
retaliated against her by “defaming” and
“antagonizing” her, specifically by opposing her
application for unemployment insurance and providing negative
information about her to a prospective new employer. ECF No.
1 ¶ 88.
moved to dismiss, arguing that Potter did not allege
adequately that any employees with deficient I-9s worked on
government-funded programs, that CASA violated any rules
governing the relevant programs, or that she made reports of
false or fraudulent claims to CASA. See ECF No. 14-1
at 1-2. Defendants further argue that Potter has not stated a
claim for wrongful termination in violation of Maryland
public policy because the FCA already provides for civil
remedies for the same alleged violations. For the reasons
below, the Court will dismiss Counts I, II, and III without
prejudice and with leave to amend the Complaint consistent
with this opinion. Count IV will be dismissed with prejudice.
Standard of Review
reviewing a motion to dismiss pursuant to Federal Rule of
Civil Procedure 12(b)(6), a court must determine whether the
complaint includes facts sufficient to state a claim to
relief that is plausible on its face. Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007); Ashcroft v.
Iqbal, 556 U.S. 662, 678-79 (2009). A plaintiff must
plead facts to support each element of the claim to satisfy
the standard. See McCleary-Evans v. Maryland Dep't of
Transp., State Highway Admin., 780 F.3d 582, 585 (4th
Cir. 2015). In so assessing, the Court takes as true all
well-pleaded factual allegations and makes all reasonable
inferences in the plaintiff's favor. Philips v. Pitt
Cty. Mem. Hosp., 572 F.3d 176, 180 (4th Cir. 2009). The
Court does not credit conclusory statements or legal
conclusions, even when couched as allegations of fact.
See Iqbal, 556 U.S. 678-79; Giarratano v.
Johnson, 521 F.3d 298, 302 (4th Cir. 2008). Actions
brought under the FCA must meet the heightened pleading
requirements of Federal Rule of Civil Procedure 9(b). See
U.S. ex rel. Nathan v. Takeda Pharm. N. Am., Inc., 707
F.3d 451, 456 (4th Cir. 2013). This requires the plaintiff to
“state with particularity the circumstances
constituting fraud or mistake.” Fed.R.Civ.P. 9(b).
ruling on a Rule 12(b)(6) motion, the Court generally may not
consider extrinsic evidence. However, when a defendant
attaches a document to its motion to dismiss, the Court may
consider that document if it is “integral to and
explicitly relied on in the complaint” and the
plaintiff does not challenge its authenticity. Am.
Chiropractic Ass'n v. Trigon Healthcare, Inc., 367
F.3d 212, 234 (4th Cir. 2004); see also Philips, 572
F.3d at 180; Walker v. S.W.I.F.T. SCRL, 517
F.Supp.2d 801, 806 (E.D. Va. 2007) (“[W]here a
complaint in a fraud action references a document containing
the alleged material misrepresentations, the referenced
document may be considered part of the complaint.”).
This rule seeks to prevent a “situation in which a
plaintiff is able to maintain a claim of fraud by extracting
an isolated statement from a document . . . even though if
the statement were examined in the full context of the
document, it would be clear that the statement was not
fraudulent.” Am. Chiropractic Ass'n, 367
F.3d at 234 (internal marks and citation omitted).
Count I, Substantive Violation of the FCA
allows private litigants to bring actions on behalf of the
United States against any entity that makes false
representations to the government to secure government
funding. 31 U.S.C. § 3730(b). To state a claim under the
FCA, a plaintiff must allege (1) that there was a false
statement or fraudulent course of conduct; (2) that was made
or carried out with the requisite knowledge; (3) that was
material; and (4) that caused the government to pay out money
or to forfeit monies due. U.S. ex rel. Rostholder v.
Omnicare, Inc., 745 F.3d 694, 700 (4th Cir. 2014). For
an FCA claim to survive, the false or fraudulent statement
must be material to the government's decision to
provide funding. See Harrison v. Westinghouse Savannah
River Co., 176 F.3d 776, 785 (4th Cir. 1999)
(“Liability under each of the provisions of the False
Claims Act is subject to the further, judicially-imposed,
requirement that the false statement or claim be
material.”). A statement is material if it “has a
natural tendency to influence agency action or is capable of
influencing agency action.” Id. (internal
quotation marks and citation omitted). In the context of FCA
claims, the materiality requirement is a demanding one; it is
“intended to keep FCA liability from attaching to
noncompliance with any of potentially hundreds of legal
requirements in a contract.” United States v.
Triple Canopy, Inc., 857 F.3d 174, 178 (4th Cir. 2017),
cert. dismissed, 138 S.Ct. 370 (2017) (internal
quotation marks and citation omitted).
argue that Potter fails to state a claim as to both the
falsity and the materiality prongs of an FCA violation. ECF
No. 14-1 at 7-8. The ...