United States District Court, D. Minnesota
UNITED STATES OF AMERICA ex rel. JOHN CHRISTIE, Plaintiff,
MODERN MANUFACTURING AND ENGINEERING, INC. and HUE VAN LIEN, Defendants.
Nathaniel F. Smith and Susan M. Coler, HALUNEN LAW, for John
F. Baldwin, MOSS & BARNETT, PA, for defendants.
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS'
MOTION TO DISMISS
R. TUNHEIM CHIEF JUDGE
case involves an action for damages and civil penalties under
the Federal False Claims Act, 31 U.S.C. §§
3729-3733 (“FCA”). Relator John Christie, on
behalf of the United States, alleges that Modern
Manufacturing and Engineering, Inc. (“MME”) and
its owner Hue Van Lien (collectively
“Defendants”) falsely represented that MME
followed required quality control processes in manufacturing
parts to fulfill government contracts and subcontracts and
falsely represented MME's status as a Small Disadvantaged
Business (“SDB”) for purposes of government
contracting. Presently before the Court is Defendants'
Motion to Dismiss pursuant to Federal Rule of Civil Procedure
Christie fails to plead allegations of fraud with sufficient
particularity, the Court will grant Defendants' motion
and dismiss the action without prejudice.
John Christie has been working for MME as a parts inspector
since 2013, inspecting parts to ensure compliance with
contractual requirements. (Compl. ¶¶ 11, 77, Sept.
7, 2016, Docket No. 1.) MME is a manufacturing company with
its principal offices in Brooklyn Park, Minnesota.
(Id. ¶ 14.) MME provides “milling,
turning, and engineering services to a variety of contracting
partners, including Alliant Techsystems (ATK), L3
Communications, Lockheed Martin, and Rockwell Collins”
and manufactures parts used for aerospace, commercial,
military, and medical applications. (Id. ¶ 12.)
MME reported about $21 million in sales for 2012, and
Christie estimates that 50 percent of its sales are to the
Government. (Id. ¶ 13.) Hue Van Lien is the
owner and CEO of MME. (Id. ¶ 15.) He is an
Asian Pacific American. (Id.)
Government Compliance Regulations 1. Inspection
United States requires its contractors to meet various
inspection standards, such as the Federal Acquisition
Regulations (“FAR”). (See Id.
¶¶ 29-33.) Contracts involving “complex or
critical items” require compliance with higher-level
quality standards, which include a parts-inspection
requirement dictated by MIL-STD-1916. (Id.
¶¶ 35-39.) MIL-STD-1916 is the currently approved
Department of Defense Test Methods Standard for Acceptance of
Product. (Id. ¶ 45.) When referenced in a
contract, MIL-STD-1916 applies to the prime contractor
“and should be extended to subcontractors or vendor
facilities.” (Id. ¶ 47.) It requires
contractors “to submit deliverables that conform to
requirements and to generate and maintain sufficient evidence
of conformance.” (Id. ¶ 48 (quoting
MIL-STD-1916 Foreward, ¶ 7).)
requires contractors to perform sampling inspection in
accordance with certain standards unless the contractor has
submitted an alternate acceptance method. (Id.
¶ 50 & n.3.) Section 4.2 sets out various sampling
plans, indexed by verification levels and lot or production
interval size. (Id. ¶¶ 50-52.) The purpose
of inspecting sample sizes is to identify nonconforming units
and implement corrective action for that portion of the lot
to ensure that the government receives “only products
that conform with all contract requirements and
specifications.” (Id. ¶¶ 55-58.)
Verification of Conformance
contracts require verification of conformance under 48 C.F.R.
§ 52.246-15 in the form of a Certificate of Conformance.
(Id. ¶ 40.) In some cases, the FAR allows these
certificates to be used instead of source inspection at the
discretion of the contracting officer. (Id. ¶
41 (citing FAR § 46.504).)
Small Disadvantaged Business Status
regulations require contractors intending to do business with
the Government to submit and maintain accurate information in
a central database called the System for Award Management
(“SAM”). (Id. ¶ 60.) The SAM record
“includes a series of representations and
certifications by the participating business to verify
eligibility to bid on federal government contracts set aside
for small businesses of various types.” (Id.
¶¶ 62-63.) For a business claiming SDB status, the
SAM record includes a certification that the business is SDB
certified by the Small Business Administration
(“SBA”) and that “no material change in
disadvantaged ownership and control has occurred since [the
business's] certification.” (Id. ¶ 64
(quoting FAR § 52.212-3(c)(10)(i)(A)).)
qualify as an SDB, a company must show that it is controlled
by a socially and economically disadvantaged individual.
(Id. ¶ 72 (citing 15 U.S.C. § 637(a)(4);
13 C.F.R. § 124.1002(b)(3)).) Asian Pacific Americans
are presumed to be socially disadvantaged. (Id.) To
qualify as economically disadvantaged, an individual must
show diminished capital and credit opportunities.
the SAM, the SBA generates an internal database of small
businesses called the Dynamic Small Business Search
(“DSBS”). (Id. ¶ 67.) Government
entities use the SAM and the DSBS to identify potential
businesses that meet requirements for particular government
contracts and to publish solicitations for bids in databases
that are accessible to SAM-registered entities. (Id.
¶¶ 68-69.) Vendors submitting bids on government
contracts must include relevant representations and
certifications, including status as an SDB, either in the bid
or through its SAM record. (Id. ¶¶ 70-71.)
Any time a business willfully seeks and receives an award
intended for SDBs by ...