United States District Court, D. Colorado
UNITED STATES OF AMERICA ex rel. JOHN SIMPSON, Plaintiffs,
LEPRINO FOODS DAIRY PRODUCTS COMPANY, a Colorado corporation, Defendant.
ORDER AFFIRMING IN PART AND ADOPTING IN PART THE
RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE NINA Y.
CHRISTINE M. ARGUELLO United States District Judge.
matter is before the Court on the Recommendation of United
States Magistrate Judge Nina Y. Wang (Doc. # 70), wherein she
recommends that this Court grant Defendant Leprino Foods
Dairy Products Company's Motion to Dismiss Plaintiff John
Simpson's Complaint (Doc. # 28). Both parties timely
filed objections to the Recommendation, essentially
challenging it in its entirety. (Doc. ## 72, 73.) The Court must
therefore review the issues de novo and, in so doing,
“may accept, reject, or modify the recommended
disposition[.]” Fed.R.Civ.P. 72(b)(3). Having conducted
the required de novo review, the Court concludes that
dismissal of the Complaint with prejudice is appropriate.
Judge Wang's Recommendation provides an extensive
recitation of the factual and procedural background in this
case. The Recommendation is incorporated herein by reference.
See 28 U.S.C. § 636(b)(1)(B); Fed.R.Civ.P.
72(b). Thus, the factual background of this dispute will be
repeated only to the extent necessary to address the
Leprino Foods Dairy Products Family (Leprino) sells cheese to
the United States through two component agencies of the
United States Department of Agriculture (USDA). (Doc. # 1 at
¶ 8.) Since 2004, the Government has awarded contracts
in excess of $644 million to Leprino to purchase lite and
low-moisture part-skim mozzarella cheese. (Id. at
¶ 19.) To qualify as mozzarella cheese, the cheese must
originate from dairy plants that have been surveyed and
awarded the USDA's “C17” plant code.
(Id. at ¶¶ 11, 56-57.) The USDA's C17
code is only appropriate when the dairy plant at issue
produces mozzarella cheese that strictly conforms to the Food
and Drug Administration's (FDA) standard of identity for
mozzarella and other regulatory requirements for production
of mozzarella cheese. (Id. at ¶ 60.)
Simpson is a Field Inspector with the Dairy Plant Survey
Program within the USDA. (Id. at ¶ 23.) In the
course of his employment, Mr. Simpson inspected Leprino's
dairy plant in Greeley, Colorado and determined, starting in
2013, that the cheese produced there did not comply with the
FDA's standard of identity regulations for mozzarella
cheese. (Id. at ¶ 25.) Mr. Simpson specifically
contends that Leprino adds, into its molten cheese, sodium
hexametaphosphate (sodium hex), which is not one of the six
ingredients that may be used to make mozzarella cheese under
FDA standards. (Id. at ¶¶ 18-19.) Another
field inspector with the USDA reported similar concerns
related to Leprino's plants in Tracy, California and Fort
Morgan, Colorado in late 2014. (Id. at ¶ 94;
Doc. # 28-1.) The USDA later communicated these concerns to
Leprino. (Doc. # 1-7.) Mr. Simpson avers that Leprino's
processes and ingredients are still non-compliant with FDA
February 2016, Mr. Simpson commenced this lawsuit against
Leprino, bringing one count under the False Claims Act, 31
U.S.C. §§ 3729(a)(1)(A)-(B). (Doc. # 1 at
¶¶ 110-115.) He primarily alleges that, since 2004,
Leprino has fraudulently concealed from the Government that
(1) its production methods and ingredients disqualify it from
being designated “approved” under the FDA for
sale to and use in Government programs; and (2) its
mozzarella cheese does not meet the FDA's standard of
identity regulations. (Id. at ¶ 71.) In April
2017, the Government declined to intervene in this action.
(Doc. # 11.)
2017, Leprino moved for dismissal of the Complaint pursuant
to Federal Rules of Civil Procedure 8(a), 9(b), and 12(b)(6).
(Doc. # 28.) Mr. Simpson opposed dismissal (Doc. # 40); and
Magistrate Judge Wang heard oral argument on the motion (Doc.
# 58). After thoroughly considering the parties'
arguments and applicable law, Magistrate Wong recommended
that Mr. Simpson's Complaint be dismissed for failure to
adequately plead the FCA claim under Federal Rule of Civil
Procedure 9(b). Upon de novo review, this Court agrees.
REQUIREMENTS FOR PLEADING FRAUD
9(b) provides: “In all averments of fraud or mistake,
the circumstances constituting the fraud or mistake shall be
stated with particularity. Malice, intent, knowledge, and
other conditions of a person's mind may be alleged
generally.” Fed.R.Civ.P. 9(b); U.S. ex rel.
Sikkenga v. Regence Bluecross Blueshield of Utah, 472
F.3d 702, 726 (10th Cir. 2006). Following the
“straightforward language” of Rule 9(b), the
Tenth Circuit has held that “Rule 9(b) requires only
the identification of the circumstances constituting fraud,
and that it does not require any particularity in connection
with an averment of intent, knowledge or condition of
mind.” Schwartz v. Celestial Seasonings, Inc.,
124 F.3d 1246, 1252 (10th Cir. 1997) (citing
Seattle-First Nat'l Bank v. Carlstedt, 800 F.2d
1008, 1011 (10th Cir. 1986)).
Rule 9(b) permits intent, knowledge, or condition of mind to
be averred generally, courts have repeatedly required
plaintiffs to plead the circumstances constituting fraud and
the factual basis that gives rise to a strong inference of
fraudulent intent. Kramer v. Time Warner, Inc., 937
F.2d 767, 776 (2nd Cir. 1991). “[W]hile Rule 9(b)
permits scienter to be demonstrated by inference, this
‘must not be taken for license to base claims of fraud
on speculation and conclusory allegations.'” In
re United Telecommunications, Inc., Sec. Litig., 781
F.Supp. 696, 702 (D. Kan. 1991) (quoting O'Brien v.
Nat'l Prop. Analysts Partners, 936 F.2d 674, 676 (2d
9(b) must also be read in conjunction with Rule 8 which calls
for pleadings to be “simple, concise, and direct, ...
and to be construed as to do substantial justice.”
See Schwartz, 124 F.3d at 1252; see also
Seattle-First, 800 F.2d at 1011. But even under a
liberal application of Rule 8, plaintiffs must still provide
some factual support for the conclusions of fraudulent
intent. Seattle-First Nat'l Bank, 800 F.2d at
1011; Romani v. Shearson Lehman Hutton, 929 F.2d
875, 878 (1st Cir. 1991); Turner & Boisseau, Chtd. v.
Marshall Adj. Co., 1989 WL 18812, at *2 (D. Kan. 1989)
(“Knowledge and intent may be averred generally as long
as the complaint provides a sufficient factual basis to
support an inference of knowledge and intent.”). Simply
stated, Rule 9(b) requires plaintiff to set forth “the
circumstances constituting fraud or mistake, ”
including “the time, place, and contents of the false
representation, the identity of the party making the false
statements and the consequences thereof.”
Seattle-First Nat'l Bank, 800 F.2d at 1011- 12;
Schwartz, 124 F.3d at 1252 (citations omitted).
complaint fails to satisfy these pleading requirements, Rule
12(b)(6) provides that a defendant may move for dismissal.
Fed.R.Civ.P. 12(b)(6). In deciding a motion under Rule
12(b)(6), the court must “accept as true all
well-pleaded factual allegations ... and view these
allegations in the light most favorable to the
plaintiff.” Casanova v. Ulibarri, 595 F.3d
1120, 1124 (10th Cir. 2010) (quoting Smith v. United
States, 561 F.3d 1090, 1098 (10th Cir. 2009)). However,
a plaintiff may not rely on mere labels or conclusions,
“and a formulaic recitation of the elements of a cause
of action will not do.” Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 555 (2007).