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United States ex rel Liotine v. CDW Government

September 29, 2009


The opinion of the court was delivered by: Herndon, Chief Judge


I. Introduction

On January 19, 2005 Plaintiff Liotine filed a two Count Complaint against Defendant CDW Government, Inc., ("CDW-G") pursuant to False Claims Act, 31 U.S.C. § 3729 et seq. ("FCA"). Count I alleges that CDW-G engaged in fraudulent conduct in connection with its sales to the General Sales Administration ("GSA"). Specifically, under Count I Plaintiff alleges that Defendant charged the Government for shipping when the contracts provided for free shipping, overcharged the Government for other shipping rates, overcharged the Government by failing to offer the "most favored customer" pricing as required by the contract, failed to remit proper amount of Industrial Funding Fee ("IFF"), sold items to the Government even though CDW-G was not an authorized seller, and sold non-trade compliant items. Count II alleges that CDW-G retaliated against Plaintiff in violation of the FCA.

In his Complaint, Plaintiff alleges that he worked for Defendant CDW-G from March 20, 1997 to July 7, 2001*fn1 as a customer service representative, shipper, and a sales representative (Id. at ¶7). Plaintiff, acting as a sales representative, received and filled purchase orders from government agencies, including GSA and U.S. Mint (Id. at ¶ 8). The Government contracts with Defendant provided free ground shipping and reduced expedited shipping for both GSA and the U.S. Mint (Id. at ¶ 38). Plaintiff claims that CDW-G and its sales representatives, in order to maximize its gross profits, increased the price of products being sold to GSA. Defendant further charged the GSA for shipping costs and increased expedited shipping costs (Id. at ¶ 46-61). Further, CDW-G also increased shipping costs on items sent to the U.S. Mint. (Id. at ¶¶ 63-67). Plaintiff alleges that the U.S. Mint was continually overcharged for shipping over the course of two years (Id.). During the Spring of 2001, Plaintiff alleges that Defendant began withholding IFF from GSA by failing to determine the shipments were being sent to the GSA through their computer software (Id. at ¶¶ 49-52). Plaintiff further alleges that he has knowledge of the fraudulent statements and actions towards the Government and is the original source of those allegations (Id. at ¶ 10). Plaintiff alleges that while employed by Defendant, he began contacting Simon Fritz of the U.S. Mint regarding the actions Defendant was committing against the U.S. Mint (Id. at ¶¶ 32-33).

Now before the Court is Defendant CDW-G's motion to dismiss Count I of Relator's Complaint pursuant to FEDERAL RULES OF CIVIL PROCEDURE 12(c) and 12(b)(1) (Doc. 70). Defendant argues that Plaintiff has failed to state Count I with particularity pursuant to Rule 9(b) as he fails to identify a single false claim or when such claims were made and to which government entity was involved. Defendant further argues that even if Plaintiff has met his burden under Rule 9(b), the Court lacks subject matter jurisdiction over Count I due to the FCA's public disclosure bar. Defendant argues that Plaintiff's allegations regarding freight charges was published in an article in January 2002 and his allegations regarding discounts and administrative fees came from CDW-G's own disclosures to the government and thus Plaintiff could not be an "original source" of these allegations. Plaintiff Relator has filed a response to Defendant's motion (Doc. 82). Defendant has filed a reply (Doc. 84). Plaintiff has further supplemented his response (Doc. 95) to which Defendant has filed a response (Doc. 96). Defendant has also supplemented its motion to dismiss with new case law which it claims supports its position that Plaintiff's Count I should be dismissed pursuant to the public disclosure bar (Doc. 97). Plaintiff has filed a response to that supplement (Doc. 98) to which Defendant has filed a reply (Doc. 99).

The Government has also filed a response (Doc. 80). While the Government has not taken a position as to the arguments presented in Defendant's motion to dismiss, the Government asks that should the Court dismiss Count I that the dismissal be without prejudice to the Government so that the Government's interest in the matter will not be harmed. The Government states that it has not completed its investigation of Plaintiff's claims and has not determined whether it will pursue any future action against Defendant.

Based on the following, the Court DENIES Defendant's motion to dismiss (Doc. 70).

II. Discussion

A. Objection to Filing Under Seal

The Court, as an initial matter, notes that Relator has filed an Objection to CDW-G filing its memorandum in support of its motion to dismiss under seal. In order for a document to be filed under seal a party must demonstrate "good cause to seal any part of the record." Citizens First National Bank of Princeton v. Cincinnati Insurance Co., 178 F.3d 943 (7th Cir. 1999); see also Union Oil Company of California v. Leavell, 220 F.3d 562 (7th Cir. 2000). The Court agrees with Plaintiff Relator that Defendant CDW-G has failed to show any cause for filing its Memorandum in Support (Doc. 71) and its Reply Memorandum (Doc. 84) under seal. Therefore, the Court will unseal the stated documents.

B. Motion to Strike Footnote 32 and Exhibit A

Plaintiff has also filed a motion to strike "Footnote 32" and "Exhibit A" from CDW Government, Inc.'s reply memorandum (Doc. 90). Plaintiff argues that Footnote 32 and Exhibit A should be stricken because they are not a proper method for attacking evidence and support an "unsupported proposition." Footnote 32 of CDW-G's Reply states that Plaintiff Realtor's affidavit "should be afforded no weight because it is not credible" and offers Exhibit A, a customer list which CDW-G argues is the same customer list which led to Relator's discharge for stealing documents. Plaintiff Relator has not cited any case law or other authority for striking Exhibit A or Footnote 32, nor does the Court find any reasons for striking Defendant CDW-G's argument in Footnote 32 or Exhibit A. Therefore, the Court DENIES Plaintiff Relator's motion to strike "Footnote 32" and "Exhibit A" from CDW-G's reply memorandum (Doc. 90). The Court also DENIES Plaintiff's request to vacate the stay on discovery pending the resolution of Defendant CDW-G's motion to dismiss.

C. Motion to Strike Exhibit D

Defendant CDW-G has also filed a motion to Strike Exhibit D of Plaintiff Relator's response in opposition to Defendant's motion to dismiss Count I of the Complaint and Portions of the opposition related to Exhibit D (Doc. 86). Specifically, Defendant CDW-G move to strike Exhibit D and Relator's opposition related to the Exhibit (pages 4-6 of Doc. 82) because it is related to a November 2007 settlement presentation CDW-G made to the Department of Justice and is not admissible. CDW-G argues ...

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