United States District Court, E.D. Missouri, Eastern Division
UNITED STATES OF AMERICA ex rel. STEVE FUTRELL AND DAVID GORNSTEIN, Plaintiffs,
E-RATE PROGRAM, LLC, Defendant.
MEMORANDUM AND ORDER
RICHARD WEBBER SENIOR UNITED STATES DISTRICT JUDGE
matter comes before the Court on Defendant E-Rate Program,
LLC's Motion for Judgment on the Pleadings [ECF No. 48].
December 2014, Plaintiffs/Relators Steve Futrell and David
Gornstein (“Relators”), filed this qui
tam action on behalf of the United States, asserting
Defendant E-Rate Program, LLC (“Defendant”)
violated the False Claims Act (“FCA”), 31 U.S.C.
§ 3729, by intentionally and knowingly submitting false
claims to defraud the United States government. Relators are
former employees of Defendant. Defendant filed a Motion to
Dismiss Relator's First Amended Complaint, which the
Court granted on August 10, 2016. On September 9, 2016,
Relators filed its Second Amended Complaint
(“Complaint”). The action seeks to recover
damages and civil penalties on behalf of the United States
government arising from Defendant submitting false or
fraudulent claims to obtain funds from the federal Library
Universal Service Support Program, commonly known as the
“E-Rate Program.” The Complaint alleges Defendant
submitted false or fraudulent claims to the United States
government by failing to comply with the E-Rate Program's
competitive bidding and document retention requirements. The
United States chose not to intervene in this case and is
therefore not a party, but it is a real party in interest.
The FCA is the United States' primary tool to redress
fraud on the government. Thus, the United States has a keen
interest in the development of the law in this area and in
the correct application of the law in this case.
moves this Court, pursuant to the Federal Rules of Civil
Procedure (“FRCP”) 12(h)(2)(B) and 12(c), to
dismiss Relators' Complaint with prejudice. Defendant
argues the Complaint should be dismissed because Relators
fail to state a claim against Defendant under the FCA, 31
U.S.C. §§ 3729 et seq., because the E-Rate
Program is not subject to the protections of the FCA. On June
6, 2017, the United States submitted a Statement of Interest
in response to Defendant's Motion for Judgment on the
E-Rate Program was established by the 1996 Telecommunications
Act and regulations promulgated by the Federal Communications
Commission (“FCC”). It is administered by the
Universal Services Administrative Company
(“USAC”) under the direction of the FCC. The USAC
is responsible for ensuring applicants and service providers
comply with the E-Rate Program's rules and regulations.
The USAC is an independent non-profit organization which has
been designated by the FCC to administer the E-Rate Program.
The E-Rate Program is funded by mandatory contributions of
interstate telecommunications carriers. See 47
U.S.C. § 254(d); 47 C.F.R. § 54.706.
motion for judgment on the pleadings, the Court accepts the
allegations in the complaint as true. The following facts are
alleged in Relators' complaint.
E-Rate Program helps schools and libraries obtain affordable
telecommunication services, broadband internet access and
internal network connections. The rules and regulations
require competitive bidding for the services funded by the
federal government. [ECF No. 36 ¶ 5]. The rules and
regulations also require document retention evincing the
competitive bidding process for the services. Id.
contracted with numerous schools and school districts to
assist in obtaining funds under the E-Rate Program. This
included providing assistance with the regulations for
compliance with the competitive bidding requirements and
assistance with completing the paperwork required to request
and obtain funds under the E-Rate Program. Defendant's
representatives certified compliance with the E-Rate Program
requirements for the school systems without ensuring there
was retention of supporting documentation to evidence
competitive bidding. Defendant did not follow the
requirements for competitive bidding, falsely certified
competitive bidding occurred, and failed to retain supporting
documentation for competitive bidding.
motion, Defendant argues Relators failed to state claim for
relief, because the E-Rate Program, administered by the USAC
and funded by the Universal Service Fund (“USF”),
is not subject to the protections of the FCA. Therefore, it
believes the Complaint must be dismissed.
of the Federal Rules of Civil Procedure allows the Court to
dismiss an action for failure to state a claim. Under Rule
12(h)(2)(B), a motion to dismiss for failure to state a claim
may be brought by a motion under Rule 12(c). Rule 12(c)
provides “[a]fter the pleadings are closed-but early
enough not to delay trial-a party may move for judgment on
Court applies the same standard in a 12(c) motion as applied
in a 12(b)(6) motion to dismiss. See NCMIC Ins. Co. v.
Blalock, No. 4:05CV805 HEA, 2005 WL 1926233, at *2 (E.D.
Mo. Aug. 10, 2005) (citing Westcott v. Omaha, 901
F.2d 1486, 1488 (8th Cir. 1990)). The Court will grant the
motion “if it is clear that no relief could be granted
under any set of facts that could be proved consistent with
the allegations.” Id. On a motion for judgment
on the pleadings, the Court “accepts as true all facts
pleaded by the non-moving party and grants all reasonable
inferences from the pleadings in favor of the non-moving