Head v. the Kane Company ( 2009 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
______________________________
UNITED STATES OF AMERICA, )
)
ex. rel. )
)
ANTHONY HEAD )
)
Plaintiff, )
)
v. ) Civil Action No. 05-317 (GK)
)
THE KANE COMPANY, et. al., )
)
Defendants. )
______________________________)
MEMORANDUM OPINION
Relator Anthony Head (“Relator” or “Head”) brings this qui tam
suit under the False Claims Act, 31 U.S.C. §§ 3729 et seq. (“FCA”),
on behalf of the United States against Defendant Kane Company
(“Defendant” or “Kane Company”), a Maryland corporation that
specializes in providing moving services and other logistics to
government agencies. Also named as Defendants are Office Movers,
Inc., a subsidiary of Kane Company, and Management Alternatives,
Harris Design Group, Settles Associates, and Perara Group, which
subcontracted work to Kane Company. The United States intervened
as Plaintiff in this suit on March 26, 2009. On July 24, 2009,
Defendant Kane Company filed an Answer in which it asserted twelve
counterclaims against Relator Head.
This matter is before the Court on the United States’ Motion
to Strike Affirmative Defense and to Dismiss Defendants’
Counterclaims [Dkt. No. 60], and on Relator Head’s Motion to
Dismiss Defendant’s Counterclaims [Dkt. No. 59]. Upon
consideration of the Motions, Opposition, Replies, and the entire
record herein, and for the reasons set forth below, the Motion to
Strike is granted, and the Motions to Dismiss Defendant’s
Counterclaims are granted in part, and denied in part. Defendant
Kane Company is granted leave to amend counterclaims one through
four, six, seven, nine, and ten.
I. BACKGROUND
Relator Head is a former employee of Defendant Kane Company.
From 1997, when he was first hired, until his termination for poor
performance on January 10, 2005, Head held a number of sales
positions. His last position, to which he was promoted in 2003,
was Vice President for Government Sales. Compl. ¶ 13. On February
11, 2005, based on his experience with Defendants’ practices in
bidding on and performing government contracts, Head filed a sealed
Complaint in this Court alleging a number of violations of the FCA.
First, Head alleges that Kane Company knowingly submitted
bills, invoices, and demands for payment to federal agencies for
contracts entered into pursuant to the Services Contract Act, 41
U.S.C. §§ 351-58 (“SCA”), without paying its employees the
prevailing wage required under that statute. Defendants Management
Alternatives, Harris Design Group, and Settles Associates, which
were the general contractors on these contracts, are alleged to
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have falsely certified their and subcontractor Kane Company’s
compliance with the SCA. Compl. ¶ 4-6.
Second, Head alleges that Defendants defrauded federal
agencies by billing the same hours worked by employees to two or
more projects, thus charging government clients for hours worked on
other projects. Compl. ¶ 7. Third, Head alleges that Defendant
Kane Company submitted General Services Administration (“GSA”)
schedules for contracts which included prices higher than those
charged to private sector clients, contrary to GSA’s “best price”
requirement. Compl. ¶ 8. Fourth, Head alleges that Defendant
Office Movers, Inc. improperly relied upon Defendant Perara Group’s
Section 8(a) status under the Small Business Act, 15 U.S.C. § 631et seq. (“SBA”), to procure contracts for which it was not
otherwise eligible. Compl. ¶ 9. Finally, Head alleges that
Defendant Kane Company, by and through its officers, knowingly
double-charged energy surcharges to federal agencies. Compl. ¶ 10.
Approximately two weeks after filing his sealed Complaint,
Head and Kane Company entered into a Separation Agreement arising
out of Head’s termination. Def.’s Answer, Ex. A. First, ¶ 3 of
the Agreement provided that any correspondence or other records
concerning the Company’s operation was the sole property of Kane
Company, and Head warrantied that he had turned over, or promptly
would turn over, any such property in his custody or control.
Second, the parties agreed in ¶ 4 that they would not “make any
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oral or written statement or take any other action which disparages
or criticizes the other party.” Id. ¶ 4. Third, in ¶ 10 of the
Agreement, Head and Kane Company released each other from claims
and liabilities arising from the terminated employment relationship
and agreed to indemnify each other for damages arising out of a
breach of the Agreement. Id. ¶¶ 6, 8.
In March 2009, after conducting its own investigation into
these allegations for more than four years, the United States
intervened as Plaintiff. In response, Defendant Kane Company
raised two affirmative defenses against the Government: laches,
and the applicability of the statute of limitations to those
contractual dealings that occurred more than ten years ago. Kane
Company also counter-claimed1 against Head for defamation, tortious
interference with economic advantage, intentional interference with
contract, intentional interference with prospective economic
advantage, malicious prosecution, libel, slander, breach of
contract, and fraud.2 Finally, Defendant sought contractual
1
Because Head has sued on behalf of the United States, the
real party in interest, Defendant’s “counterclaims” could be
considered cross-claims or even third-party claims. The
classification, however, is not outcome-determinative. United
States v. Bill Harbert Intn’l Constr., Inc., 505 Fed. Supp. 2d 20,
n.1 (D.D.C. 2007).
2
As Head points out in his Motion to Dismiss, under Maryland
law a claim for “tortious interference with economic advantage” is
properly called “tortious interference with economic relations.”
Rel.’s Mot. to Dismiss 16-17. Defendant Kane Company has not
clarified whether its counterclaims are brought under District of
(continued...)
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indemnification from Head for any liability under the FCA, pursuant
to ¶ 10 of the 2005 Separation Agreement, and injunctive relief
against any further violation of the Agreement.
The United States moved to dismiss the affirmative defense of
laches, arguing that it is not applicable to the United States, and
to dismiss the counterclaims against Head as void against public
policy.3 Head also moved to dismiss the counterclaims as void
against public policy and for a failure to state a claim under
Federal Rule of Civil Procedure 12(b)(6).
II. MOTION TO STRIKE AFFIRMATIVE DEFENSE OF LACHES
In its Answer to the United States’ Intervenor Complaint, Kane
Company argues that the government has “slept on its rights” by
waiting four years after Head filed suit to intervene, and
therefore is barred from pursuing this action. Def.’s Answer 6.
The United States moved under Federal Rule of Civil Procedure 12(f)
to strike this defense.
Motions to strike are not generally favored. However, “[t]he
motion should be granted where it is clear that the affirmative
defense is irrelevant and frivolous and its removal from the case
2
(...continued)
Columbia or Maryland law. For the purposes of ruling on the
Motions, the Court will adopt the terminology used by Defendant in
its counterclaims.
3
The Government invoked Federal Rules of Civil Procedure
12(b)(1) and 12(b)(6) in its Motion to Dismiss, but the argument in
its supporting papers was limited to the public policy issue.
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would avoid wasting unnecessary time and money litigating the
invalid defense.” SEC v. Gulf & Western Indus., Inc., 502 F. Supp.
343, 344 (D.D.C. 1980) (citation omitted).
It is well established that “laches or neglect of duty on the
part of officers of the government is no defense to a suit by it to
enforce a public right or protect a public interest.” Utah Power
& Light Co. v. United States, 243 U.S. 389, 409, 37 S.Ct. 387, 61
L.Ed. 791 (1917). See also United States v. Summerlin, 310 U.S.
414, 416, 60 S.Ct. 1019, 84 L.Ed. 1283 (1940) (it is “well settled
that the United States is not ... subject to the defense of laches
in enforcing its rights”); Illinois Cent. R.R. Co. v. Rogers, 253
F.2d 349, 353 (D.C. Cir. 1958) (“No rule is better established than
that the United States are not bound by limitations or barred by
laches where they are asserting a public right.”) (internal
quotation omitted); United States v. Philip Morris, Inc., 300 F.
Supp. 2d 61, 72-73 (D.D.C. 2004) (discussing rule in Summerlin).
In this case, the United States is clearly acting in the
public interest by seeking to hold Defendants accountable under the
FCA. Furthermore, Kane Company failed to present any argument in
opposing the Motion to Strike; therefore the issue may be properly
regarded as conceded. See FDIC v. Bender, 127 F.3d 58, 67-68 (D.C.
Cir. 1997). For these reasons, the doctrine of laches is held to
be inapplicable to this claim and the United States’ Motion to
Strike is granted.
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III. MOTION TO DISMISS DEFENDANTS’ COUNTERCLAIMS
The United States and Head also move to dismiss Defendant’s
twelve counterclaims against Head. Both argue that the
counterclaims are void as against public policy, since they could
have the effect of discouraging private citizens from filing qui
tam suits under the False Claims Act. In addition, Head argues
that Kane Company has failed to plead sufficient facts in support
of its counterclaims, and asks this Court to dismiss them under
Federal Rule of Civil Procedure 12(b)(6).4
A. Counterclaims Which Are Dismissed as Void Against Public
Policy
4
Head also argues that those counterclaims not related to
enforcement of the Separation Agreement are “contractually barred,”
as Kane Company released Head from all “actions, causes of action,
suits . . . known or unknown, suspected or unsuspected, arising
from, in connection with, or in any way pertaining to [his]
employment with [Defendant].” Rel. Head’s Mot. 9-10 (citing ¶ 6 of
the 2005 Separation Agreement, Def.’s Opp’n Ex. A). This argument
is limited to counterclaims one through seven and ten, as
counterclaims eight, nine, eleven, and twelve are related to
enforcement of the Agreement.
However, counterclaims one through seven and ten--which
include those for defamation, tortious interference with economic
advantage, intentional interference with contract, intentional
interference with prospective business advantage, malicious
prosecution, libel, slander, and fraud--are all based on alleged
statements made by Head in the course of this proceeding or to
third parties. Kane Company does not make clear in its Opposition
whether these statements allegedly occurred before or after Head’s
termination on January 10, 2005. Thus, the argument will not be
addressed until Defendant amends its counterclaims to meet the Rule
12(b)(6) standard. Once sufficient facts have been pled, whether
those counterclaims are “arising from, in connection with, or in
any way pertaining to [Head’s] employment,” and thus contractually
barred, will be considered.
-7-
The moving parties make two public policy arguments in support
of their Motions to Dismiss. First, they argue that counterclaims
eight and nine (the two counterclaims for breach of the 2005
Separation Agreement) should be dismissed because the Agreement is
contrary to public policy. Specifically, the moving parties argue
that a private agreement may not be enforced when its terms, which
here relate to the return of company property and to disparagement,
would have the effect of preventing individuals from furnishing
evidence to the government or making allegations under the FCA,
since this would unduly frustrate the Act’s purpose. Pl.’s Mot. 5-
11; Rel.’s Mot. 10-14. Second, the movants argue in the
alternative that United States ex. rel. Miller v. Bill Harbert
Intn’l Constr., 505 F. Supp. 2d 20 (D.D.C. 2007) (“Harbert”),
compels dismissal of all of Defendant’s counterclaims.
1. Counterclaim Eight Is Dismissed as Void Against
Public Policy; Counterclaim Nine Is Not Dismissed
as Void Against Public Policy
The movants argue that the Separation Agreement between Head
and Kane Company is unenforceable on grounds of public policy, and
therefore counterclaims eight and nine must be dismissed.
Counterclaim eight alleges breach of contract for Head’s ongoing
failure to return an email to Kane Company, in violation of ¶ 3 of
the Separation Agreement. The email, dated January 3, 2000, was
sent by Head to Mark Cavanaugh, Kane Company’s Chief Financial
Officer at the time, and raised the issue of Kane Company’s failure
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to pay the wage determination. Head filed the email in this
proceeding as Exhibit 2 to his Complaint. Counterclaim nine
alleges breach of contract for Head’s violation of ¶ 4 of the
Agreement, which prohibits disparagement of Kane Company. Kane
Company alleges that Head made “oral and written disparaging
comments about the company, its managements [sic] and its
employees.” Def.’s Answer ¶¶ 68-71.
In the absence of an expression of Congressional intent to the
contrary, a private agreement is unenforceable on grounds of public
policy if its enforcement is clearly outweighed by a public policy
against such terms. Town of Newton v. Rumery, 480 U.S. 386, 107
S.Ct. 1187, 94 L.Ed.2d 405 (1987); United States v. Northrop Corp.,
59 F.3d 953, 958-59 (9th Cir. 1995) (discussing rule in FCA case
where private agreement which provided for release of relator’s
claims was held unenforceable); Restatement (Second) of Contracts
§ 178(1) (2009). The purpose of the FCA is “to discourage fraud
against the government” and, “[c]oncomitantly, the purpose of the
qui tam provision of the Act is to encourage those with knowledge
of fraud to come forward.” Neal v. Honeywell, Inc., 826 F. Supp.
266, 269 (N.D. Ill. 1993) (citing H.R.Rep. No. 660, 99th Cong., 2d
Sess., 22 (1986)).
Applying this standard, Defendant’s counterclaim based on
Head’s ongoing failure to return the January 3, 2000 email to Kane
Company is void as against public policy. The FCA requires that
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relators serve upon the United States “written disclosure of
substantially all material evidence and information the person
possesses” in order to enable the government’s own investigation to
proceed expeditiously.5 31 U.S.C. § 3730(b)(2) (2008). Enforcing
a private agreement that requires a qui tam plaintiff to turn over
his or her copy of a document, which is likely to be needed as
evidence at trial, to the defendant who is under investigation
would unduly frustrate the purpose of this provision. Cf. X Corp.
v. John Doe, 805 F. Supp. 1298, n.24 (E.D. Va. 1992) (noting that
a Confidentiality Agreement would be void as against public policy
if, when enforced, it would prevent “disclosure of evidence of a
fraud on the government”). Therefore, Defendant’s counterclaim
eight (breach of contract - failure to return company property),
must be dismissed as contrary to public policy.
Counterclaim nine (breach of contract - failure to refrain
from disparagement), however, is based upon disparaging statements
that Head allegedly made to third parties not involved in this
litigation, and not statements made in this proceeding or during
the Government’s investigation. Def.’s Opp’n 13-14. Enforcing the
Agreement under counterclaim nine would not implicate Head’s
5
The United States also argues that Defendant’s counterclaims
are contrary to “the spirit” of 31 U.S.C. § 3730(h), which
prohibits retaliation in the form of discharge, demotion,
suspension, threats, harassment, or other discrimination “in the
terms and conditions of employment.” 31 U.S.C. § 3730(h) (2008).
Because Head was terminated prior to the filing of this Complaint,
§ 3730(h) does not apply to this action.
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ability to bring this suit, and so does not involve the same public
policy concerns as counterclaim eight. Therefore, the Motion to
Dismiss counterclaim nine as void as against public policy must be
denied. However, there is a remaining question, discussed below,
as to whether Defendant properly alleged the elements of this claim
in its pleading.
2. Counterclaim Eleven Is Dismissed as Void Against
Public Policy; Counterclaims Nine, Twelve, Five,
Six, Seven, and Ten Are Not Dismissed as Void
Against Public Policy
The United States and Relator Head rely on Harbert, the major
and most recent case in this Court, to argue that the remaining
counterclaims should be dismissed as contrary to public policy.
The court in Harbert drew a careful distinction between those
counterclaims that were and that were not permitted in FCA suits.
Guided principally by the unavailability of contribution and
indemnification for a defendant under the FCA, and drawing upon
judicial precedent, the District Court summarized the law as
follows: “[A]n FCA defendant found liable of FCA violations may
not pursue a counterclaim that will have the equivalent effect of
contribution or indemnification.” Harbert, 505 F. Supp. 2d at 26.6
6
The court in Harbert recognized that, while any potential
liability for events connected to a FCA suit could chill a relator
from bringing suit, a blanket rule prohibiting a defendant from
bringing any counterclaim would raise “real due process concerns.”
Id. at 27.
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However, counterclaims based on independent damages, or claims
the success of which does not require a finding that the defendant
is liable, may be maintained. Id. at 26-27. Such claims fall into
two categories: First, there are those counterclaims where “the
conduct at issue is distinct from the conduct underlying the FCA
case.” Second, there are those counterclaims where “the
defendant’s claim, though bound up in the facts of the FCA case,
can only prevail if the defendant is found not liable in the FCA
case.” Id. at 27 (emphasis in original). In contrast, a
counterclaim is impermissible if it depends upon a finding that the
defendant is liable under the FCA, as it would then have the
equivalent effect of a claim for contribution or indemnification.
a. Counterclaims Nine and Twelve Are Permissible
Under Category One
Counterclaims nine (breach of the 2005 Separation Agreement’s
non-disparagement provision) and twelve (injunctive relief relating
to the breach of contract) fall under the first category of
permissible counterclaims. Because liability turns on whether Head
made disparaging or critical statements to third parties in
violation of his contractual obligations after this suit was filed
and completely apart from this proceeding, they do not implicate
Defendant’s liability under the FCA.
b. Counterclaims One, Five, Six, Seven, and Ten Are
Permissible Under Category Two
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The second category of permissible counterclaims (where the
defendant must be found not liable) includes counterclaims one
(defamation), five (malicious prosecution), six (libel), seven
(slander), and ten (fraud). See id. at 28 (naming libel,
defamation, malicious prosecution, and abuse of process as examples
of permissible counterclaims under the FCA). The defamation,
libel, and slander counterclaims depend upon a finding that Kane
Company is not liable under the FCA, since truth is a defense under
both Maryland and District of Columbia law. Moldea v. New York
Times Co., 15 F.3d 1137, 1142 (D.C. Cir. 1994) (noting defense of
truth to defamation claims under District of Columbia law); Batson
v. Shiflett, 325 Md. 684, 726 (1992) (noting defense of truth to
defamation claims under Maryland law). Similarly, counterclaim ten
(fraud) requires a finding that, prior to signing the Separation
Agreement, Head had “misrepresented Kane or dealt with any third
party in bad faith” when he alleged Kane’s violation of the FCA.
Def.’s Opp’n 14. Finally, counterclaim five (malicious
prosecution) requires a showing that the proceeding was resolved in
favor of the party bringing the claim, which is the equivalent of
a showing that the FCA defendants were found not liable. See
Shulman v. Miskell, 626 F.2d 173, 175 (D.C. Cir. 1980).
c. Counterclaims Two, Three, and Four Will Be
Permissible Under Either Category One or Two
Counterclaims two (tortious interference with economic
advantage), three (intentional interference with contract), and
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four (intentional interference with prospective business advantage)
would be permissible under category one if none of the elements of
these causes of action implicate Defendant’s liability under the
FCA. That question turns on an analysis of Maryland and District
of Columbia law. Because the parties have not fully briefed that
issue, it is premature for decision. Therefore, it cannot be said
with certainty that counterclaims two, three, and four fall under
category one.
However, even if it were determined that counterclaims two,
three, and four implicate Defendant’s liability under the FCA, the
counterclaims would still be permissible because they fall under
category two. The only elements in these causes of action that
possibly require a finding as to Defendant’s liability under the
FCA are those that require the interference to be with a “lawful”
business, and that the interference be done without right or
justification.7 Thus, the required finding, if any, would be that
Kane Company was not liable under the FCA. Under either analysis,
7
For the elements of each cause of action, see Spengler v.
Sears, Roebuck & Co., 878 A.2d 628, 641 (Md. App. 2005) (tortious
interference with economic relations claim under Maryland law);
Paul v. Howard Univ., 754 A.2d 297, 309 (D.C. 2000) (tortious
interference with contract claim under District of Columbia law);
Blondell v. Littlepage, 968 A.2d 678, 696 (Md. App. 2009) (tortious
interference with contract claim under Maryland law); Bennett
Enters., Inc. v. Domino's Pizza, Inc., 45 F.3d 493, 499 (D.C. Cir.
1995) (tortious interference with economic advantage claim under
District of Columbia law); Carter v. Aramark Sports and
Entertainment Services, Inc., 835 A.2d 262, 279-80 (Md. App. 2003)
(intentional interference with business relations claim under
Maryland law).
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then, counterclaims two, three, and four would be permissible.
Therefore, the Motion to Dismiss these counterclaims as contrary to
public policy is denied.
d. Counterclaim Eleven (Contractual Indemnification)
Is Dismissed
In contrast, Defendant’s counterclaim for contractual
indemnification pursuant to ¶ 10 of the 2005 Separation Agreement
clearly falls within the category of those counterclaims not
permitted by the FCA. Defendant seeks to hold Head liable for any
damages arising from the pending FCA claims. Def.’s Opp’n 16.
Even if the FCA claims arose, as alleged, from Head’s “willful
misconduct” or from his having breached the Separation Agreement,
liability for violations of the FCA may not be shifted to the
relator. Harbert, 505 F. Supp. 2d at 26-28. In light of the clear
prohibition against counterclaims for contribution or
indemnification, Defendant’s eleventh counterclaim is dismissed
with prejudice.
B. Counterclaims Which Are Dismissed Pursuant to Federal
Rule of Civil Procedure 12(b)(6)
Head also seeks to dismiss the remaining ten counterclaims
under Federal Rule of Civil Procedure 12(b)(6). These include
counterclaims one (defamation), two (tortious interference with
economic advantage), three (intentional interference with
contract), four (intentional interference with prospective economic
advantage), five (malicious prosecution), six (libel), seven
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(slander), nine (breach of contract - failure to refrain from
disparagement), ten (fraud), and twelve (injunctive relief).
To survive a motion to dismiss under Rule 12(b)(6), a
plaintiff need only plead “enough facts to state a claim to relief
that is plausible on its face” and to “nudge[ ] [his or her] claims
across the line from conceivable to plausible.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007). “[O]nce a claim has been stated
adequately, it may be supported by showing any set of facts
consistent with the allegations in the complaint.” Id. at 563. A
complaint will not suffice, however, if it “tenders ‘naked
assertions’ devoid of ‘further factual enhancement.’” Ashcroft v.
Iqbal, 129 S.Ct. 1937, 1948 (2009) (citing Twombly, 550 U.S. at
557).
Under the Twombly standard, a “court deciding a motion to
dismiss must not make any judgment about the probability of the
plaintiff's success . . . must assume all the allegations in the
complaint are true (even if doubtful in fact) . . . [and] must give
the plaintiff the benefit of all reasonable inferences derived from
the facts alleged.” Aktieselskabet AF 21. November 2001 v. Fame
Jeans, Inc., 525 F.3d 8, 17 (D.C. Cir. 2008) (internal quotation
marks and citations omitted).
1. Counterclaims Dependent Upon Relator Head’s
Statements
Eight of Defendant’s remaining ten counterclaims are based
upon the allegation that Head made false statements alleging Kane
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Company’s liability under the FCA, whether as a part of this
proceeding or in subsequent statements to third parties other than
the government. These include counterclaims one (defamation), two
(tortious interference with economic advantage), three (intentional
interference with contract), four (intentional interference with
prospective economic advantage), six (libel), seven (slander), nine
(breach of contract - failure to refrain from disparagement), and
ten (fraud).8
To the extent that Defendant relies upon any allegation made
by Head in pleadings filed in this Court or in support of the
government’s investigation, its counterclaims are barred by
absolute privilege. Finkelstein, Thompson & Loughran v. Hemispherx
Biopharma, Inc., 774 A.2d 332, 338 (D.C. 2001) ("Along with the
overwhelming majority of the States, the District of Columbia has
long recognized an absolute privilege for statements made
preliminary to, or in the course of, a judicial proceeding, so long
as the statements bear some relation to the proceeding"); Brown v.
Collins, 402 F.2d 209, 212 (D.C. Cir. 1968); Restatement (First) of
Torts § 587 (2009).
Defendant does not deny, however, that the absolute privilege
doctrine applies to the statements made in this proceeding.
Instead, Defendant asserts that its counterclaims are based on
8
The counterclaim for fraud in the inducement alleges that Head
misrepresented, at the time he entered into the Separation
Agreement, whether he had “misrepresented Kane or dealt with any
third party in bad faith.” Def.’s Opp’n 14.
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statements made by Head at some unspecificed point in time to
unspecified third parties. Def.’s Opp’n 3, 5, 6. Yet Defendant
has alleged no facts in support of its claim that Head made any
such statements, and does not claim to have knowledge of any
evidence of such statements having been made. Id. at 6. Such bare
assertions do not nudge Defendant’s claims across the line “from
conceivable to plausible.”
Further, the allegation fails to meet the standard for a
defamation claim facing a motion to dismiss in Armenian Assembly of
America, Inc. v. Cafesjian, 597 F. Supp. 2d 128, 137 (D.D.C. 2009),
upon which Kane Company itself relies, that it include at least
“enough information ‘to apprise’ [the party accused] of the persons
or category of persons to whom the defamatory statements were made
. . . .” Given Defendant’s failure to assert any facts in support
of its allegation that Relator Head made statements to third
parties, counterclaims one (defamation), two (tortious interference
with economic advantage), three (intentional interference with
contract), four (intentional interference with prospective economic
advantage), six (libel), seven (slander), nine (breach of contract
- failure to refrain from disparagement), and ten (fraud) must be
dismissed for failing to state a claim under Rule 12(b)(6).
Defendant, however, requests leave to amend any such deficient
counterclaims in lieu of dismissal. Def.’s Opp’n n.3. Under
Federal Rule of Civil Procedure 15(a), leave to amend shall be
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freely given when justice so requires. Caribbean Broad. Sys., Ltd.
v. Cable & Wireless P.L.C., 148 F.3d 1080, 1083-85 (D.C. Cir.
1998). In exercising its discretion, the trial court may consider,
among other factors, undue delay, dilatory motive on the part of
the movant, and undue prejudice to the opposing party by virtue of
allowing the amendment. Hammerman v. Peacock, 607 F. Supp. 911,
917 (D.D.C. 1985). As none of these factors appear to be present,
and because the arguments made by the United States and Head in
opposing the request for leave to amend are not persuasive,
Defendant is granted leave to amend counterclaims one through four,
six, seven, nine, and ten in order to cure any factual deficiencies
in the pleadings, including, but not limited to, insufficient facts
supporting the allegation that Head made disparaging or defamatory
statements to third parties.
2. Counterclaim Five (Malicious Prosecution) Is
Dismissed
Defendant also counterclaims for malicious prosecution. Under
Maryland law, a claim for malicious prosecution only applies in
criminal proceedings, and therefore is not properly brought in this
action. Southern Mgmt. Corp. v. Taha, 378 Md. 461, 479 (2003).
Under District of Columbia law, a malicious prosecution claim may
be brought in both civil and criminal proceedings. See Brown v.
Carr, 503 A.2d 1241 (D.C. 1986). One of the prima facie elements
of the claim under D.C. law, however, is that the underlying suit
must have been first terminated in favor of the claimant. Shulman
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v. Miskell, 626 F.2d at 175 (explaining requirement on the theory
that, “if the malicious prosecution plaintiff were permitted to sue
before he had prevailed in the original action, inconsistent
judgment might be entered on the same question between the same
parties”). Given this, Defendant’s claim is premature, as the
current action brought under the FCA has yet to be decided. The
counterclaim for malicious prosecution is therefore dismissed
without prejudice.
3. Defendant’s Counterclaim for Injunctive Relief Is
Not Dismissed
The last remaining counterclaim is Defendant’s request for an
injunction prohibiting Head from further breaching the Separation
Agreement. Def.’s Answer ¶¶ 84-88. In effect, this “counterclaim”
is a request for a particular remedy—injunctive relief—based on
Kane Company’s two counterclaims for breach of the Separation
Agreement. The first counterclaim for breach of contract, related
to Head’s failure to return the January 3, 2000 email to Kane
Company, has been dismissed as contrary to public policy. The
second counterclaim for breach of contract, related to Head’s
alleged statements to third parties, however, has not yet been
dismissed, pending Defendant’s amendment of its counterclaims.
Thus, the Motion to Dismiss Defendant’s request for injunctive
relief is denied without prejudice.
IV. CONCLUSION
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For the reasons set forth above, the United States’ Motion to
Strike Affirmative Defense under Federal Rule of Civil Procedure
12(f) is granted, and the United States’ and Relator Head’s Motions
to Dismiss Defendant’s Counterclaims are granted as to
counterclaims five (malicious prosecution), eight (breach of
contract - failure to return company property), and eleven
(contractual indemnification). Defendant is granted leave to amend
counterclaims one (defamation), two (tortious interference with
economic advantage), three (intentional interference with
contract), four (intentional interference with prospective economic
advantage), six (libel), seven (slander), nine (breach of contract
- failure to refrain from disparagement), and ten (fraud). An
Order will accompany this Memorandum Opinion.
/s/
November 12, 2009 Gladys Kessler
United States District Judge
Copies to: attorneys on record via ECF
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