United States v. Winn Cos.

UNITED STATES OF AMERICA ex rel. Monica McLamore, Plaintiff, v. WINN COMPANIES d/b/a Winn Properties, et al., Defendants.

Civil Action No. 16-cv-1274 (TSC)

United States District Court, District of Columbia

December 30, 2022

MEMORANDUM OPINION

TANYA S. CHUTKAN, UNITED STATES DISTRICT JUDGE

Plaintiff-Relator Monica McLamore brings this False Claims Act (“FCA”) suit, 31 U.S.C. § 3729 et seq. against Defendants Winn Managed Properties (“Winn”) and Atlantic Terrace Limited Partnership (“Atlantic Terrace”), alleging that Defendants submitted false claims to the U.S. Department of Housing and Urban Development (“HUD”) about the living conditions of “Section 8” subsidized units including her own, at her apartment complex.^[1]See ECF No. 32, Sec. Amend. Compl. For the reasons below, the court will GRANT Defendants' Motion to Dismiss Plaintiff-Relator's Second Amended Complaint.

I. BACKGROUND

Plaintiff-Relator was a resident of Atlantic Terrace from 2002 until 2019. Sec. Amend. Compl. ¶ 6. Atlantic Terrace is a subsidized rental property in the District of Columbia owned and operated by Defendant Winn. Id. ¶¶ 9, 11. Atlantic Terrace allegedly receives funding under 42 U.S.C. § 1437(o), “Section 8,” a federal housing assistance program that disburses funds through local Public Housing Authorities (“PHAs”) to participating unit owners who provide affordable housing. Id. ¶¶ 7, 15, 16. As a Section 8 participant, Plaintiff-Relator typically paid thirty percent of her monthly rent to Defendants; the rest was paid by the federal government. Id. ¶ 10.

To receive Section 8 funding, Defendants must execute Housing Assistance Payments (“HAP”) contracts with PHAs. Id. ¶¶ 34, 35; ECF No. 32-2, Ex. 2 at 1. Under the terms of HAP contracts, unit owners promise to comply with the Health Quality Standards (“HQS”) pursuant to the Fair Housing Act (“FHA”), 42 U.S.C. § 3601. Id. ¶ 36; ECF No. 32-3, Ex. 3 at 7. The HQS mandate that each dwelling within an affordable building be “structurally sound, habitable, and in good repair,” free of health and safety hazards, have “no evidence of infestation by rats, mice, or other vermin,” “have proper ventilation,” and “be free of mold.” Sec. Amend. Compl. ¶ 38 (quoting 24 C.F.R. 5.703) (internal quotation marks omitted). Further, the HAP contract states that “[t]he PHA shall not make any housing assistance payments if the contract unit does not meet the HQS, unless the owner corrects the defect within the period specified by the PHA and the PHA verifies the correction.” Id. ¶ 36 (citing Ex. 2. at 4).

Plaintiff-Relator claims her apartment was “unsafe and unsanitary” due to mold, vermin, insects, unmaintained electrical appliances, including heating and air conditioning units, and other unsafe conditions. Id. ¶¶ 17-32, 50. She alleges that Defendants knew about these defects since 2002,^[2]because she made “numerous requests for redress,” to no avail. Id. ¶ 51. For example, Plaintiff-Relator states that she contacted Monique Lilly-Moore, the “resident manager of Atlantic Terrace,” in 2012 to inform her of flooding and mold in her unit, but “no repairs or remediation ever occurred.” Id. ¶ 52-53.

Plaintiff-Relator alleges that despite informing Atlantic Terrace management about these defects, Defendants executed two HAP contracts-one in 2004 and another in 2016-falsely certifying that Atlantic Terrace rental units were “in compliance with FHA regulations.” Id. ¶ 51, 55-56. First, she alleges that on November 1, 2004, Winn Co. Managing General Partner Arthur M. Winn signed a HAP contract falsely certifying that rental units were in “decent, safe and sanitary condition”. Id. ¶ 41; Ex. 3. Second, that Michael T. Putzinger “signed a renewal [HAP] contract on behalf of Atlantic Terrace to receive federal funding” on January 26, 2016, Sec. Amend. Compl. ¶ 46; Ex. 4, and Michelle Porter signed as an “authorized agent” on behalf of HUD,^[3]Ex. 4.

Plaintiff-Relator's theory of liability appears to be that Defendants violated the FCA by deliberately concealing Atlantic Terrace's HQS violations from HUD “for the purpose of obtaining HUD approval and federal payments.” Id. ¶ 49, 58. Following the court's Order warning Plaintiff-Relator that her first amended complaint lacked “particularity,” April 17, 2020, Order at 2-3, she now alleges that Defendants submitted false documents to HUD in 2004 and 2016, id. at 41-45, 46-49.

Defendants moved to dismiss Plaintiff-Relator's Second Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state an FCA claim, lack of subject matter jurisdiction,^[4] failure to properly allege fraud, and because Plaintiff's claim is precluded by the FCA's public disclosure bar, 31 U.S.C. § 3730(e)(4)(A). Defs.' Mot. to Dismiss, ECF No. 34; Defs.' Mem. in Supp., ECF No. 34-1 at 7-24.

II. LEGAL STANDARD

A. Subject Matter Jurisdiction

At all stages of a case, a plaintiff bears the burden of establishing subject matter jurisdiction by a preponderance of the evidence. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992). A court must “assume the truth of all material factual allegations in the complaint and ‘construe the complaint liberally, granting plaintiff[s] the benefit of all inferences that can be derived from the facts alleged.'” Am. Nat'l Ins. Co. v. FDIC, 642 F.3d 1137, 1139 (D.C. Cir. 2011) (quoting Thomas v. Principi, 394 F.3d 970, 972 (D.C. Cir. 2005)). However, “a court may consider such materials outside the pleadings as it deems appropriate to resolve the question whether it has jurisdiction to hear the case.” Scolaro v. D.C. Bd. of Elections & Ethics, 104 F.Supp.2d 18, 22 (D.D.C. 2000) (citing Herbert v. Nat'l Acad. of Scis., 974 F.2d 192, 197 (D.C. Cir. 1992)).

B. Rule 12(b)(6) Dismissal and Rule 9(b) Fraud

To survive a motion to dismiss pursuant to Federal rule of Civil Procedure 12(b)(6), the complaint must contain sufficient factual allegations to “state a claim to relief that is plausible on its face[,]” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007), meaning “the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “However, the court need not accept inferences . . . [that] are unsupported by the facts set out in the complaint. Nor must the court accept legal conclusions cast in the form of factual allegations.” Kowal v. MCI Commc'ns Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994). Generally, a court does not consider materials beyond the pleadings, but it may consider “the facts alleged in the complaint, documents attached as exhibits or incorporated by reference in the complaint, or documents upon which the plaintiff's complaint necessarily relies even if the document is produced not by the plaintiff in the complaint but by the defendant in a motion to dismiss[.]” Ward v. D.C. Dep't of Youth Rehab. Servs., 768 F.Supp.2d 117, 119-20 (D.D.C. 2011) (internal quotation marks and citations omitted).

Moreover, Federal Rule of Civil Procedure 9(b), which applies to FCA actions, provides: “In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake ....” Fed.R.Civ.P. 9(b). To satisfy the requirements of Rule 9(b), a complaint must “set[] forth in sufficient detail the time, place, and manner” of the defendant's “scheme to defraud” the government.” U.S. ex rel. Heath v. AT&T, Inc., 791 F.3d 112, 123 (D.C. Cir. 2015)).

III. ANALYSIS

A. Statute of Limitations and Relation Back Amendment

“Section 3731(b) of the FCA establishes a two-pronged statute of limitations for FCA actions.” U.S. ex rel. Purcell v. MWI Corp., 254 F.Supp.2d 69, 73 (D.D.C. 2003) (citing 31 U.S.C. § 3731). An FCA action may not be brought “more than 6 years after the date” of the FCA violation, 31 U.S.C. § 3731(b)(1), or “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,” id. § 3731(b)(2), “whichever occurs last,” id. § 3731(b).

Once an action has been filed, however, Rule 15(c) “governs when an amended pleading ‘relates back' to the date of a timely filed original pleading and is thus itself timely even though it was filed outside an applicable statute of limitations.” Krupski v. Costa Crociere S. p. A., 560 U.S. 538, 541 (2010). Claims asserted in the amended pleading may relate back if:

(A) the law that provides the applicable statute of limitations allows relation back;

(B) the amendment asserts a claim or defense that arose out of the conduct, transaction, or occurrence set out-or attempted to be set out-in the original pleading; or

(C) the amendment changes the party or the naming of the party against whom a claim is asserted, if Rule 15(c)(1)(B) is satisfied and if, within the period provided by Rule 4(m) for serving the summons and complaint, the party to be brought in by amendment:

(i) received such notice of the action that it will not be prejudiced in defending on the merits; and

(ii) knew or should have known that the action would have been brought against it, but for a mistake concerning the proper party's identity.

Fed. R. Civ. P. 15(c)(1)(A)-(C).

“[A]mendments that expand upon or clarify facts previously alleged will typically relate back[,]” but claims that “significantly alter the nature of a proceeding by injecting new and unanticipated claims” are far less likely to relate back. United States v. Hicks, 283 F.3d 380, 388 (D.C. Cir. 2002). If the amendment is “so substantial that it cannot be said...