Estes Forwarding Worldwide Llc v. CuellarMOTION to Dismiss for Lack of Jurisdiction or, in the alternative,to Transfer to the ED of CAE.D. Va.December 29, 2016Page 1 of 12 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Richmond Division ESTES FORWARDING WORLDWIDE LLC, ) ) Plaintiff, ) v. ) Case No. 3:16-cv-853 ) MARCELO S. CUELLAR, ) ) Defendant. ) DEFENDANT’S MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION OR IMPROPER VENUE OR, IN THE ALTERNATIVE, TO TRANSFER TO THE EASTERN DISTRICT OF CALIFORNIA Defendant Marcelo S. Cuellar, through his counsel, brings this Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(2) (for lack of personal jurisdiction) and 12(b)(3) (for improper venue). Defendant requests that the Complaint filed against him be dismissed without prejudice to allow Plaintiff to refile its claims as counterclaims in the Eastern District of California or, the alternative, to transfer to the Eastern District of California pursuant to 28 U.S.C. § 1404 and in support states as follows. LEGAL STANDARD Parties seeking dismissal based on a forum selection clause in a contract do so through a Federal Rule of Civil Procedure 12(b)(3) motion. Sucampo Pharms., Inc. v. Astellas Pharma, Inc., 471 F.3d 544, 550 (4th Cir. 2006). In addressing a motion pursuant to Rule 12(b)(3), a court may consider evidence outside of the pleadings. If a forum selection clause renders venue improper, a court may either dismiss the action or transfer it pursuant to 28 U.S.C. § 1406. SJW Concrete, LLC v. 52 Eighty Partners, LLC, 2016 WL 659101, at *2 (E.D.Va., 2016) citing W. Refining Yorktown, Inc. v. BP Corp. N. Am., Inc., 618 F. Supp. 2d 513, 515 (E.D. Va. 2009). Case 3:16-cv-00853-HEH Document 7 Filed 12/29/16 Page 1 of 12 PageID# 36 Page 2 of 12 INTRODUCTION Cuellar was employed by plaintiff from January of 2010 until February 10, 2015 when he was terminated. EFW’s Complaint, Doc. 1, ¶ 18, 27. On March 18, 2013 (during his employment) Cuellar filed a qui tam lawsuit against several parties, including the plaintiff in this action, pursuant to the qui tam provisions of the federal False Claims Act, 31 U.S.C. § 3729 et seq. The qui tam action was filed in the U.S. District Court for the Eastern District of California as case number 2:13-cv-0539. A true and accurate copy of the docket entries from that case is attached as Cuellar’s Exhibit 1. 1 On February 9, 2016, a First Amended Complaint was filed in Cuellar’s qui tam action. A true and accurate copy of the First Amended Complaint is attached as Cuellar’s Exhibit 2. The First Amended Complaint included three causes of action under the federal False Claims Act (for the alleged knowing submission of false claims to the United States) and two claims for unlawful retaliation arising out of Estes Forwarding’s termination of Cuellar’s employment in 2015. Id., ¶¶ 12, 124-131. On or about April 22, 2016 the United States Department of Justice intervened in counts one through three in the qui tam action; that same day the parties in the qui tam action executed a settlement and release agreement. A true and accurate copy of the settlement agreement is attached to this motion as Exhibit 3. The agreement provided by Menlo and EFW would pay a total of $13 million to settle Cuellar’s allegations. Id. A press release was issued by the U.S. Attorney’s Office for the Eastern District of California on May 3, 2016.2 The settlement agreement executed in the qui tam case includes a broadly-worded mutual release. That is, Cuellar released Estes from an extraordinarily broad category of claims, 1 Defendant asks the Court to take judicial notice of these three exhibits, all of which are public records, only for purposes of this Motion to Dismiss or Transfer. 2 https://www.justice.gov/usao-edca/pr/menlo-worldwide-services-inc-and-its-subcontractor-estes-pay-us-13- million-resolve Case 3:16-cv-00853-HEH Document 7 Filed 12/29/16 Page 2 of 12 PageID# 37 Page 3 of 12 controversies, obligations, and liabilities, and Estes released Cuellar from the same broad extraordinarily broad categories of claims. Exempted from the claims and defenses released by the parties were all claims or defenses pertaining to Cuellar’s retaliation claims, which were then and are now pending in the Eastern District of California. Pages 12 and 13 of the settlement agreement contain the release of Cuellar by defendants in that case. Exhibit 3, ¶¶ 12-13. To be clear, certain of the allegations made against Cuellar in the Complaint filed by EFW arose after the settlement agreement was signed and were therefore not released. What has been released, among other things, is the right of EFW to assert the Confidentiality Agreement as a basis for jurisdiction in this district and in this division. Moreover, the Settlement Agreement (which contains its own venue and forum selection clause) is now the only contractual arrangement between the parties For these reasons among others, Cuellar seeks dismissal of the Complaint for lack of personal jurisdiction and for improper venue. Cuellar seeks dismissal of EFW’s claims without prejudice so that those claims can be re-filed, if at all, as counter-claims to Cuellar’s anti- retaliation lawsuit, which is currently pending in the Eastern District of California. ARGUMENT I. THERE IS NO BASIS FOR PERSONAL JURISDICTION BECAUSE OF THE ALLEGED CHOICE OF VENUE PROVISION IN THE CONFIDENTIALITY AGREEMENT. Estes alleges that forum is proper in this district and in this division for two reasons. First, Estes asserts that venue here is valid because of the choice of venue clause in Cuellar’s confidentiality agreement. Complaint, ¶ 4. Second, it relies on the Virginia long-arm statute, found at Virginia Code § 8.01-328.1 et seq. Although Estes does not specify which part of the long-arm statute it relies upon, it appears to allege that Cuellar caused a tortious injury in the Case 3:16-cv-00853-HEH Document 7 Filed 12/29/16 Page 3 of 12 PageID# 38 Page 4 of 12 Commonwealth by his actions outside the Commonwealth such that he is subject to jurisdiction under the long arm statute. Id. A. EFW RELEASED CUELLAR FROM THE CONTRACT GENERALLY, AND WAIVED ALL OF CUELLAR’S “OBLIGATIONS” AS WELL AS ANY “RIGHT” EFW MAY HAVE AGAINST CUELLAR ARISING FROM THE CONTRACT OR FROM ANY OTHER SOURCE. By the settlement and release agreement executed on April 22, 2016, EFW expressly released all claims against Cuellar “from the beginning of time through the effective date of this agreement.” Exhibit 3, ¶ 9(b). The waiver of claims includes a “full and final” release from any “contract” including contractual claims, whether express or implied. Id. By that same provision EFW released all “rights” it had against Cuellar flowing from the contract and all “obligations” imposed on Cuellar by operation of the contract. Id. This would include the “right” of EFW to insist on litigation in this division and district, as well as Cuellar’s “obligation” to litigate in this division and in this district. Thus, to the extent that EFW bases its jurisdictional allegations on the forum selection clause in the confidentiality agreement, those allegations are barred by the release executed by EFW on April 22, 2016. B. THE SETTLEMENT AND RELEASE AGREEMENT EXECUTED BY THE PARTIES ON APRIL 22, 2016 CLEARLY GIVES CUELLAR THE RIGHT TO POSSESSES INFORMATION PROHIBITED BY CONFIDENTIALITY AGREEMENT CUELLAR SIGNED IN 2010. The settlement and release agreement conflicts with the terms of the Confidentiality Agreement and gives other clear indicators that it was the final agreement between the parties. For example, paragraph 7 of the confidentiality agreement clearly provides that Cuellar, like other former employees of plaintiff, is not authorized to keep any copies of any information belonging to EFW. Exhibit 1 to EFW’s Complaint, Doc. 1. The settlement agreement however gives Cuellar a clear-cut right to possess the same types of information he is prohibited from Case 3:16-cv-00853-HEH Document 7 Filed 12/29/16 Page 4 of 12 PageID# 39 Page 5 of 12 possessing under the terms of the confidentiality agreement. Exhibit 3, ¶ 24. Cuellar is entitled to possess “all documents and materials (including paper documents, e-mails, and electronically stored information) obtained from Defendants through any means…” Id. ¶ 24(a). Cuellar’s rights in this regard terminate “[W]ithin 30 days following the resolution of all claims not released in this Agreement and final dismissal of the case with prejudice after any and all appeals…” Id. As argued in more detail below, to the extent Cuellar has allegedly violated his duty regarding the information he is entitled to possess, that duty must have arisen under the terms of the settlement agreement between the parties and venue for these claims is proper in the Eastern District of California. C. THE RELEASE AGREEMENT EXECUTED BETWEEN THE PARTIES PROVIDES THAT EXCLUSIVE JURISDICTION FOR ANY DISPUTE RELATING TO THE SETTLEMENT AGREEMENT IS IN THE U.S. DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA. The settlement agreement between the parties provides, in paragraph 17, that “[T]his Agreement constitutes the complete agreement between the Parties.” Id. The release agreement executed by the parties also contains a warrant and certification by Cuellar that he has not disclosed any “internal company documents and materials” to any third party except the U.S. Department of Justice and other agencies of the United States. Exhibit 1, ¶ 23(a). The agreement includes within the category of “documents and materials” any “paper documents, emails, and electronically stored information.” Id. Relator therefore certified as part of the settlement that he has not shared with any third party the spreadsheets at issue in this litigation. EFW’s Complaint, on the other hand, alleges that Cuellar has engaged in various acts that could be in violation of the Settlement Agreement between the parties. Complaint, ¶¶67-76; 80-89. To Case 3:16-cv-00853-HEH Document 7 Filed 12/29/16 Page 5 of 12 PageID# 40 Page 6 of 12 the extent that Cuellar has engaged in any of the acts alleged in the Complaint, those acts would clearly be in violation of the settlement agreement in place between the parties. Pursuant to paragraph 16 of that agreement, the exclusive jurisdiction over any dispute arising out of the agreement is the United States District Court for the Eastern District of California. Exhibit 1, ¶ 16. As a result of that, proper venue over this claim would be in the Eastern District of California. II. THIS COURT LACKS PERSONAL JURISDICTION OVER CUELLAR. A. CUELLAR LACKS SUFFICIENT CONTACTS WITH VIRGINIA TO WARRANT THE EXERCISE OF PERSONAL JURISDICTION HERE. Federal courts exercise personal jurisdiction in the manner provided by state law. Cooper Materials Handling, Inc. v. Tegeler, 2014 WL 4748915 (E.D.Va. 2014). Determining whether personal jurisdiction exists involves two steps: (1) whether the state's long-arm statue authorizes the exercise of jurisdiction and, if so (2) whether the exercise of jurisdiction is consistent with the Due Process Clause of the Fourteenth Amendment. Id. The Virginia long-arm statute is, like the long arm statute of her sister states, intended to authorize personal jurisdiction to the fullest extent permitted under the Due Process Clause. Therefore, the Court need only consider whether the Plaintiff has made a prima facie showing that Defendant has constitutionally sufficient minimum contacts with Virginia. National Corporate Housing, Inc. v. Ayres, 2012 WL 1081170 (E.D.Va.2012). On the allegations in the Complaint, as well as the other materials, Cuellar has not had sufficient minimum contacts with Virginia. At the outset Cuellar notes that plaintiff has not specified the specific clause of the long-arm statute on which it relies. Doc. 1, ¶ 4. The bare-bones allegations of the Complaint state only that Cuellar took actions “purposefully aimed at, and directed to, EFW such that Defendant should have foreseen being brought into litigation in this district.” Id. Ostensibly, therefore, Case 3:16-cv-00853-HEH Document 7 Filed 12/29/16 Page 6 of 12 PageID# 41 Page 7 of 12 EFW relies on Virginia Code § 8.01-328.1(A)(4), which providers for long arm jurisdiction over any person: “[C]ausing tortious injury in this Commonwealth by an act or omission outside this Commonwealth if he regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in this Commonwealth…” Virginia Code § 8.01-328.1. Cuellar did not “regularly solicit business” or “engage in any other persistent course of conduct” such that he would have the minimum contacts that would satisfy due process. Other Courts in this district have considered which party made contact first, and where it made that contact, as one factor in this analysis. On the allegations of this case, Cuellar was working for a different employer in the same San Francisco location, and doing the same work, before he began working for EFW. Doc. 1, ¶¶ 17-18. When Menlo (the prime contractor) decided to terminate the contract with Cuellar’s former employer, EFW hired Cuellar. Id. Cuellar did not reach out to a Virginia company seeking employment, but vice versa. B. THE DUE PROCESS CLAUSE OF THE FOURTEENTH AMENDMENT MUST ALSO BE SATISFIED. Assuming, for the purposes of argument, that the requirements of Virginia's long-arm statute are satisfied, due process must also be satisfied. Specifically, the defendant must have sufficient “minimum contacts” with Virginia so that requiring him to defend his interests in Virginia would not “offend ‘traditional notions of fair play and substantial justice.” See International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945). Jurisdiction is constitutionally appropriate where a defendant has “purposefully directed” its activities at a forum, and the litigation “arise[s] out of or relate[s] to’ those activities.” See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). Case 3:16-cv-00853-HEH Document 7 Filed 12/29/16 Page 7 of 12 PageID# 42 Page 8 of 12 But where contacts are “isolated,” the “reasonable foreseeability of litigation in the forum is substantially diminished.” Affinity Memory & Micro, Inc. v. K & Q Enterprises, Inc., 20 F.Supp.2d 948 (E.D.Va.1998) citing Rudzewicz. The Complaint does not allege any such contacts, isolated or otherwise, and the Complaint should be dismissed for lack of personal jurisdiction. C. TO THE EXTENT EFW BASES JURISDICTION ON ITS CFAA ALLEGATIONS, THERE IS NO ALLEGATION THAT CUELLAR ACCESSED A COMPUTER OR NETWORK IN THIS DISTRICT OR DIVISION. EFW has also brought claims under the CFAA and the Virginia Computer Crimes statute. EFW’s Complaint, Doc. 1. Importantly, none of those allegations provide any support for venue in this Court because there are no allegations that Cuellar ever accessed any computer or network belonging to EFW, let alone accessing any computer or network in this division or in this district. Much to the contrary, plaintiff alleges that EFW was not even allowed to install its own IT infrastructure at the site where Cuellar worked. Complaint, ¶ 20. It was this restriction on EFW’s IT infrastructure that caused Cuellar to create the Google Drive account in the first place. Id., ¶ 22. Plaintiff later alleges that a MacBook with a Google Chrome internet browser was used to access the Google drive in one instance and in a later instance that a Windows device running a Google Chrome browser was used. Complaint, ¶¶ 31, 37. There is no allegation that either of these devices belonged to EFW. Nor is there any allegation that Cuellar accessed a network belonging to EFW. There are no allegations in the Complaint about Cuellar’s contacts with EFW’s computers, networks, or email that would establish venue here. III. THE COMPLAINT SHOULD BE DISMISSED WITHOUT PREJUDICE TO ALLOW PLAINTIFF TO RE-FILE ITS CLAIMS AS COUNTER-CLAIMS OR, IN THE ALTERNATIVE, TRANSFERRED TO THE CENTRAL DISTRICT OF CALIFORNIA PURSUANT TO 28 U.S.C. § 1404. Case 3:16-cv-00853-HEH Document 7 Filed 12/29/16 Page 8 of 12 PageID# 43 Page 9 of 12 The United States Code provides that “[f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought.” 28 U.S.C. § 1404(a). The decision of whether to transfer an action under § 1404(a) is committed to the sound discretion of the district court. JTH Tax, Inc. v. Lee, 482 F.Supp.2d 731, 735 (E.D.Va.,2007) citing In re Ralston Purina Co., 726 F.2d 1002, 1005 (4th Cir.1984); Verosol B.V. v. Hunter Douglas, Inc., 806 F.Supp. 582, 592 (E.D.Va.1992). In determining whether to transfer an action, the Court considers: “(1) the weight accorded to plaintiff's choice of venue; (2) witness convenience and access; (3) convenience of the parties; and (4) the interest of justice. Plumbers & Pipefitters Nat'l Pension Fund v. Plumbing Servs., Inc., 791 F.3d 436, 444 (4th Cir. 2015). A. THE WEIGHT ACCORDED TO THE PLAINTIFF’S CHOICE OF VENUE. Normally a plaintiff’s choice of venue is afforded substantial weight; however, the amount of weight varies depending on the significance of the contacts between the venue chosen by Plaintiff and the underlying cause of action. Board of Trustees v. Sullivant Ave. Properties, LLC, 508 F.Supp.2d 473, 477 (E.D.Va. 2007). More weight will be naturally be afforded to cases with strong contacts between the Plaintiff’s chosen venue and the cause of action. Id., at 477. Where, as here, there are more or less no contacts between the chosen forum and the cause of action, this factor will be afforded little weight. B. THE CONVENIENCE OF THE PARTIES AND THE CONVENINCE OF THE WITNESSES WEIGH IN FAVOR OF THE FEDERAL DISTRICT COURT IN CALIFORNIA HEARING EFW’S CLAIMS. A transfer to the Eastern District of California will not entail any inconvenience to any party. Much to the contrary, the parties are currently in litigation in that Court and the litigation is in the early stages. After counts one through three of his qui tam case were settled, Cuellar’s Case 3:16-cv-00853-HEH Document 7 Filed 12/29/16 Page 9 of 12 PageID# 44 Page 10 of 12 retaliation claims under the federal FCA and California state law remain pending. That litigation is still in the early stages and EFW has not yet filed an answer or grounds of defense, although EFW’s Motion to Dismiss Cuellar’s anti-retaliation complaint was heard and is currently under consideration by Judge Mueller. Cuellar’s Exhibit 1. EFW has California counsel and Mr. Coulter, their Virginia counsel in this case, has already been admitted pro hac vice. Cuellar’s Exhibit 1, page 7. EFW is also a relatively large company that, by its own allegations, “[D]oes business around the globe.” EFW’s Complaint, Doc. 1, ¶5. There will therefore be no inconvenience to either party by litigating EFW’s claims in California. C. THE INTERESTS OF JUSTICE ALSO WEIGHT IN FAVOR OF LITIGATION IN THE FEDERAL DISTRICT COURT IN CALIFORNIA. Finally, the interests of justice weigh in favor of litigating EFW’s claims in California. Judge Mueller has experience with this case, as she has been responsible for it since 2013. Moreover, certain claims brought by EFW – primarily the claim brought under the Defend Trade Secrets Act of 2016 – will necessarily involve details from the qui tam claims, as individuals have a right to obtain documents from their employers under the terms of the DTSA in some circumstances. Additionally, Cuellar may well wish to file a Supplemental Complaint in his retaliation case under Fed. R. Civ. P. 15 to include EFW’s Virginia case against him as an additional retaliatory act in violation of 31 U.S.C. § 3730(h); the doctrine of “claim-splitting” may well preclude Cuellar from filing an anti-retaliation counterclaim against EFW in Virginia. Cuellar lives in Washington state, several hundred miles from the Court where his claims are pending. The U.S. District Court for the Eastern District of Virginia, by way of contrast, is almost 3,000 miles from Cuellar’s home. Litigation in this district and in this division would work a considerable hardship on him and every other witness and would involve expensive and time consuming travel. During his employment with plaintiffs, defendant worked only in Case 3:16-cv-00853-HEH Document 7 Filed 12/29/16 Page 10 of 12 PageID# 45 Page 11 of 12 California in the San Francisco metro area. Cuellar, and all co-workers who used the Google Drive account, are all located in Northern California. Any third-party witnesses necessary for EFW to prosecute its claims will be in the Northern California area. The interests of justice are in favor of transfer or dismissal without prejudice. CONCLUSION For the reasons set forth above, Cuellar asks this Court to either dismiss the pending Complaint filed against him by EFW without prejudice to allow EFW to re-file its claims in California or, alternatively, to transfer this action to California. Cuellar requests a hearing on his Motions if the Court deems that acceptable. Respectfully submitted, Marcelo S. Cuellar /s/ Zachary A. Kitts Zachary A. Kitts Virginia State Bar #47052 Justin Gilbert Virginia State Bar #74083 Counsel for Defendant K&G Law Group, PLLC 3554 Chain Bridge Road, Suite 100 Fairfax, Virginia 22030 zkitts@kglawpllc.com Telephone: 703-649-5500 Fax: 703-649-6363 Case 3:16-cv-00853-HEH Document 7 Filed 12/29/16 Page 11 of 12 PageID# 46 Page 12 of 12 CERTIFICATE OF SERVICE I hereby certify that on December 29, 2016 I electronically filed the foregoing Motion to Dismiss or Transfer with the Clerk of Court using the CM/ECF system, which will send a notification of such filing (NEF) to the following: Thomas A. Coulter, 919 East Main Street, Twenty-Fourth Floor Richmond, Virginia 23219. ___/s/ Zachary A. Kitts Zachary A. Kitts Virginia State Bar # 47052 Justin Gilbert Counsel for Defendant K&G Law Group, PLLC 3554 Chain Bridge Road, Suite 100 Fairfax, VA 22030 zkitts@kglawpllc.com Case 3:16-cv-00853-HEH Document 7 Filed 12/29/16 Page 12 of 12 PageID# 47 Case 3:16-cv-00853-HEH Document 7-1 Filed 12/29/16 Page 1 of 5 PageID# 48 Case 3:16-cv-00853-HEH Document 7-1 Filed 12/29/16 Page 2 of 5 PageID# 49 Case 3:16-cv-00853-HEH Document 7-1 Filed 12/29/16 Page 3 of 5 PageID# 50 Case 3:16-cv-00853-HEH Document 7-1 Filed 12/29/16 Page 4 of 5 PageID# 51 Case 3:16-cv-00853-HEH Document 7-1 Filed 12/29/16 Page 5 of 5 PageID# 52 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Michael A Hirst, Esq. CA Bar #131034 michael.hirst@hirstlawgroup.com HIRST LAW GROUP, P.C. 200 B Street, Suite A Davis, CA 95616 Tel: (530) 756-7700 Fax: (530) 756-7707 Attorneys for Plaintiff-Relators Richard Ricks and Marcelo Cuellar UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA UNITED STATES OF AMERICA ex rel. RICHARD RICKS AND MARCELO CUELLAR, Plaintiffs, v. MENLO WORLDWIDE GOVERNMENT SERVICES, LLC; MENLO LOGISTICS, INC.; CON-WAY INC.; XPO LOGISTICS, INC.; ESTES FORWARDING WORLDWIDE LLC; ESTES EXPRESS LINES; and DOES 1 through 25, Defendants. CASE 2:13-CV-0539-KJM-AC FIRST AMENDED COMPLAINT DEMAND FOR JURY TRIAL FILED UNDER SEAL PURSUANT TO 31 U.S.C. § 3730(b)(2) First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 1 of 35 PageID# 53 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Plaintiffs Richard Ricks (“Ricks”) and Marcelo Cuellar (“Cuellar”), through their counsel Hirst Law Group, P.C., and on behalf of the United States of America, allege as follows: I. NATURE OF THIS ACTION 1. Beginning in 2007, Defendants Menlo Worldwide Government Services, LLC, Menlo Logistics, Inc., Con-way Inc., now acquired by XPO Logistics, Inc. (collectively “Menlo”), Estes Forwarding Worldwide LLC, Estes Express Lines (collectively “Estes”), and Menlo’s other subcontractors (“Doe Subcontractors”) (Menlo, Estes and Doe Subcontractors are collectively referred to as “Defendants”), have knowingly submitted, caused the submission of, and conspired to submit, false and fraudulent claims to the United States in their work under the Defense Transportation Coordination Initiative (“DTCI”). 2. Under the DTCI Contract (“Contract”), Defendants have defrauded the government by submitting false claims for inflated charges to which they are not entitled. Among other conduct, Defendants have knowingly and substantially: (1) overcharged for the actual line haul costs of shipping military freight, claiming the freight was shipped by air when the freight was actually shipped by ground; (2) overcharged for higher accessorial surcharges in connection with freight shipments, including charging for higher air fuel surcharges instead of lower ground fuel surcharges when the freight was actually shipped by ground; and (3) overcharged for other accessorial surcharges in connection with shipments, including charging a higher amount for over-dimensional surcharges for air shipments when the freight was actually shipped by ground, and even when, on numerous occasions, the freight was ineligible for an oversize surcharge at all when shipped by ground. 3. In addition, Defendants have also defrauded the government by: (4) overcharging for expedited shipments, through which other accessorial surcharges were wrongfully inflated; (5) overcharging for truckload shipments by rounding up in charging for mileage, instead of rounding to the closest mile, which includes rounding down when appropriate; (6) overcharging for higher fuel surcharge rates for diverted freight by selecting the highest rate in effect on either the pickup date or diversion date, whichever was higher, rather than applying only the fuel surcharge rate in effect on the pickup date; and (7) overcharging for less than truckload 1First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 2 of 35 PageID# 54 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 shipments by using an inflated weight for such shipments. 4. Moreover, Defendant Menlo has defrauded the government by knowingly failing to perform its contractual duties to audit, monitor, and coordinate freight shipments for the benefit of the government and to ensure that shipment charges are reasonable and appropriate. Despite knowing that Estes and Doe Subcontractors have been overcharging the government under the DTCI, and despite allowing that conduct to continue, Menlo received and retained substantial payments, including bonus payments, to which it knew it was not entitled. 5. The law and public policy encourage whistleblowers to report on, and help to stop, fraud perpetrated against the government. Nonetheless, when Defendant Estes discovered that Relator Cuellar had provided information about Defendants’ fraud to the United States, in violation of law and public policy, Estes wrongfully retaliated against Cuellar by immediately firing him. 6. Defendants’ knowing submission of false and fraudulent claims for payment, and wrongful retaliation against Cuellar for reporting the fraud, constitute violations of the federal False Claims Act, 31 U.S.C. §§ 3729 et seq. (“FCA”or “Act”). As a result of their fraudulent conduct, Defendants have caused the United States to sustain a direct loss of funds and damage to its interests. 7. The FCA was originally enacted at the request of President Lincoln during the Civil War, when the president believed that the Union Army was being defrauded by contractors. The Act was substantially amended by Congress in 1986 and 2009 to enhance the government’s ability to recover losses sustained as a result of fraud. At those times, Congress determined that fraud against the government was pervasive and that the FCA, which Congress described as the primary tool for combating government fraud, was in need of reform. Congress intended that the amendments create incentives for individuals with knowledge of fraud against the United States to disclose the information without fear of reprisals or government inaction, and to encourage the private bar to commit legal resources to prosecute fraud on the government's behalf. 8. Among other things, the FCA prohibits: knowingly presenting, or causing to be presented, a false or fraudulent claim for payment or approval; knowingly making, using, or 2First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 3 of 35 PageID# 55 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 causing to be made or used, a false record or statement material to a false or fraudulent claim; and conspiring to defraud the government. 31 U.S.C. §§ 3729(a)(1)(A), (a)(1)(B), (a)(1)(C). Additionally, it prohibits knowingly making or using, or causing to be made or used, a false or fraudulent record or statement material to an obligation to pay or transmit money or property to the government, or knowingly concealing, or knowingly and improperly avoiding or decreasing an obligation to pay or transmit money or property to the government. 31 U.S.C. §§ 3729(a)(1)(G). Any person who violates the FCA is liable for a civil penalty of up to $11,000 for each violation, plus three times the loss sustained by the United States. 31 U.S.C. § 3729(a); 64 Fed. Reg. 47099, 47103 (1999). The FCA also prohibits retaliation against a person who provides information about the fraud to the government, and mandates that such a person be entitled to all relief necessary to make that person whole. 31 U.S.C. § 3730(h)(1). 9. The statute allows any person having information about an FCA violation to bring an action on behalf of the government and to share in any recovery obtained. The Act requires that the complaint be filed under seal for a minimum of 60 days, without service on the Defendants during that time, to allow the government time to conduct its own investigation and to determine whether to join the suit. 10. Based on the FCA, qui tam plaintiffs Ricks and Cuellar (collectively “Relators” or “Plaintiffs”) seek to recover all available damages, civil penalties, and other relief for the violations alleged herein, in every jurisdiction to which Defendants’ misconduct has extended. II. PARTIES 11. Relator Richard Ricks is a United States citizen who resides in California. He is the former President and Chief Executive Officer of EXP Logistics Solutions, Inc. (“EXP”). EXP was a subcontractor to Menlo for air shipments under the DTCI Contract during the period August 2008 to December 2009, when Menlo replaced EXP with Estes. 12. Relator Marcelo Cuellar, previously identified as “John Doe,” is a United States citizen who currently resides in Washington. Cuellar worked for Estes from January 2010 until February 10, 2015, at the Defense Distribution Depot in Tracy, California, first as Operations Coordinator and later as Supervisor of Logistics. On February 10, 2015, after Estes’ counsel 3First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 4 of 35 PageID# 56 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 learned that Cuellar had provided information about the fraud to the United States, it immediately and wrongfully terminated Cuellar. 13. Defendant Menlo Worldwide Government Services, LLC, is a limited liability company established in Delaware, registered to do business in California as well as other states. Upon information and belief, Menlo Worldwide Government Services, LLC, is a subsidiary of Menlo Logistics, Inc., which is itself a subsidiary of Con-way Inc., previously a public-traded company listed on the New York Stock Exchange. Menlo Worldwide Government Services, LLC’s principal office in California is located at 2855 Campus Drive, San Mateo, California. 14. Defendant Menlo Logistics, Inc., is a corporation established in Delaware and registered to do business in California as well as other states. It is one of three operating units of Con-way Inc. Menlo Logistics, Inc., operates under the assumed name of Menlo Worldwide Logistics. The company’s principal office in Delaware is listed as 2711 Centerville Road, Suite 400, Wilmington, Delaware. 15. Defendant Con-way Inc., is a Delaware corporation with headquarters located at 2211 Old Earhart Road, Suite 100, Ann Arbor, Michigan. On October 30, 2015, Defendant XPO Logistics, Inc., announced that it had consummated an agreement to acquire Con-way Inc. 16. Defendant XPO Logistics, Inc., is a Delaware corporation with headquarters located at Five Greenwich Office Park, Greenwich, Connecticut. Defendant Con-way Inc., is now a wholly-owned subsidiary of XPO Logistics, Inc., a public-traded company listed on the New York Stock Exchange. 17. Defendant Estes Forwarding Worldwide LLC, is a limited liability company established in Virginia on April 6, 2007. Its principal office is located at 1100 Commerce Road, Richmond, Virginia. Upon information and belief, it is a subsidiary of Estes Express Lines. 18. Defendant Estes Express Lines is a family owned and operated freight transportation provider incorporated in Richmond, Virginia. Its principal office is located at 3901 West Broad Street, Richmond, Virginia. 19. The identities of the remaining Doe Defendants (Doe Subcontractors) who have knowingly submitted false and fraudulent claims to the government are presently unknown to 4First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 5 of 35 PageID# 57 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Relators. All listed Defendants and such additional Doe Defendants served as contractors, agents, partners, and/or representatives of one and another in the fraud, concealment, and submission of false and fraudulent claims, as well as the wrongful retention of overpayments, and were acting within the course, scope and authority of such contract, agency, partnership and/or representation for the conduct described herein. III. JURISDICTION AND VENUE 20. This Court has jurisdiction of the subject matter of this action pursuant to 28 U.S.C. § 1331 and 31 U.S.C. § 3732, the latter of which specifically confers jurisdiction on this Court for actions brought pursuant to 31 U.S.C. §§ 3729 and 3730. 21. Under 31 U.S.C. § 3730(e), there has been no public disclosure of the allegations or transactions in this Complaint. To the extent there has been any such disclosure, Relators Ricks and Cuellar constitute “original sources” pursuant to 31 U.S.C. § 3730(e)(4). Prior to any public disclosure, Ricks and Cuellar voluntarily disclosed to the government the information on which the allegations or transactions discussed herein are based; they have knowledge independent of, and that materially adds to, any publicly disclosed allegations or transactions; and this information was provided to the government before this action was filed. 22. Personal jurisdiction and venue are proper in this district pursuant to 28 U.S.C. §§ 1391(b) and 1395(a), and 31 U.S.C. § 3732(a), as one or more of the Defendants or their agents can be found, reside, transact business, or otherwise engaged in fraudulent conduct within the district. IV. BACKGROUND A. Defense Transportation Coordination Initiative 23. The Defense Transportation Coordination Initiative was a massive initiative by the United States Department of Defense (“DOD”) to manage distribution of military freight in the continental United States. Defense Industry Daily, “DTCI: Changing Military Shipping in the USA - and Beyond” (August 26, 2007), at 1. The United States Transportation Command, Department of Defense, described the DTCI as: [A] CONUS [Continental United States] freight initiative aimed at increasing 5First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 6 of 35 PageID# 58 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 operational effectiveness and at the same time obtaining efficiencies. The premise is that DoD will increase operational effectiveness ... [and] also includes obtaining efficiencies through best business practices such as increased consolidations and mode conversions. DOD Agency Report, DTCI Information Paper, May 3, 2004, at 1. B. Contract Awarded to Menlo Worldwide Government Services, LLC 24. On August 17, 2007, a full year after receiving and reviewing bids from numerous entities, including Federal Express and UPS, the United States Transportation Command announced the awarding of the competitively bid DTCI Contract, HTC711-07-D-0032, to Menlo. In winning the bid to be the government’s Contractor (also called the DTCI “Coordinator”), Menlo undertook to manage all DOD freight movements in the continental United States under the DTCI with the goal of maximizing efficiencies and reducing costs. Commercial Carrier Journal News, August 20, 2007. As described in the Defense Industry Daily, the premise “is for DoD to competitively award a long-term contract with a world class transportation coordinator ... [and] save up to 20%, as [the coordinator] manages, consolidates, and optimizes freight movements.” DTCI: Changing Military Shipping in the USA - and Beyond, August 26, 2007. 25. The DTCI Contract is a Federal Acquisition Regulation (“FAR”) Part 15, indefinite- delivery, requirements-type contract, which includes fixed-price, cost-reimbursement, award fee, and award term-option provisions. DTCI - Billing-Payment-Audit Plan, Version 1.0, November 30, 2007, at 4. The Contract was valued at $1.635 billion and consisted of a three-year base period, with four option years. Defense Industry Daily, DTCI: Changing Military Shipping in the USA - and Beyond, at 1. 26. In April 2015, after experiencing problems with Menlo and its subcontractors as described herein, the United States dropped the DTCI and Menlo as the transportation Coordinator, with a two-year phase out of the Contract currently in effect. V. SUMMARY OF THE FRAUD 27. After its selection as Coordinator to manage the shipment of military freight under the DTCI, Menlo contracted with Estes, as well as other subcontractors, to have the freight 6First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 7 of 35 PageID# 59 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 transported by various shipment “modes,” including by “air” (in an airplane) and by “surface” or “ground” transportation (in a truck). The Government agreed to pay Menlo hefty management services fees for its coordination work, and Menlo has received $131,708,257 as of December 2015 for such services. But under the Contract and the DTCI federal regulations (“Regulations”), apart from those fees, the government is to pay only for the actual costs of the shipments themselves. In its winning bid for the Contract, Menlo proposed, and the government accepted, maximum charges – called “Not To Exceed” (“NTE”) rates under the Contract – which were the maximum charges that the government could be billed for each air shipment, and a lower maximum charge that the government could be billed for each truck shipment. Menlo and Estes were both well aware of these maximums, of course. In their own contracts with each other, Menlo and Estes negotiated and established set rates for specific air shipments and lower set rates for specific truck shipments to fit within the Government’s contractually accepted maximum charges. Under the DTCI Contract and Regulations, the actual, agreed upon shipment charges between Menlo and Estes are the actual charges that should be billed to the United States by Menlo for the shipment of freight by its subcontractor Estes. 28. Whenever military freight under the DTCI needs to be shipped, base transportation officers electronically contact Menlo, supply information on the freight, and advise Menlo the date by which the shipment needs to arrive at its destination, called the "Mandatory Delivery Date" ("MDD"). Menlo then selects the mode of transportation (for example air, truckload, or less than truckload) for the shipment and issues a tender to a subcontractor, such as Estes. The tender identifies the freight and the MDD, and offers the freight for shipment by a specific mode selected by Menlo in the tender. The tender also lists the specific, prearranged and pre-negotiated price between Menlo and its subcontractor for that mode. 29. For all freight shipped throughout the United States under the DTCI, the government only sends the shipment information to Menlo, the DTCI Coordinator. The government does not receive or review any shipment information from Menlo’s subcontractors, like Estes, who actually move the freight. Estes submits its shipment claims to Menlo and Menlo submits claims for payment to the United States. By not receiving the subcontractor cost information itself, the 7First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 8 of 35 PageID# 60 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Government was set up to be defrauded by Menlo and Estes. Over many years, Defendants have regularly charged the government for shipments by air and related accessorial charges at the highest shipment rates, when the freight was actually delivered by truck and entitled only to lower payments. 30. The DTCI Contract and Regulations are abundantly clear: unlike some commercial contracts, payments for shipment of freight under the DTCI depend on the mode (i.e., air, truck, less than truckload) by which the freight is transported. Each mode has numerous different NTEs that are mode specific. Defendants’ false charges for air shipments always exceeded the actual charges in their contracts for ground deliveries and even exceeded the maximum NTE charges allowed by the Government for ground shipments. 31. Menlo and Estes have defrauded the government by knowingly submitting false invoices for inflated air mode shipment charges when the freight was actually shipped by ground, generally by the less than truckload ("LTL") mode, which was eligible only for a much lower charge to the Government than shipment of freight by air. Moreover, in addition to falsely submitting claims about the mode of shipment, Defendants have knowingly inflated the charges to the Government for various accessorial surcharges, including charges for shipment of oversized freight and for fuel surcharges -- both of which charges differ significantly under the DTCI based on whether the freight was shipped by air or ground. VI. PRE-BID SOLICITATION INFORMATION ABOUT THE CONTRACT 32. Menlo understood before it ever bid on the Contract that charges to the government under the DTCI program were based on the mode of shipment used to transport the freight. The DTCI Contract and Regulations make clear that the mode used to ship freight controls the charges that can be submitted to the Government. For example, Section G-7 of the DTCI contract provides: The authorized ordering officer [transportation officer at each base] will submit requests for transportation to the contractor [eventually Menlo] electronically (see Part I, Section C, PWS, Table 6). The contractor will respond to the request for shipment electronically. The response will include the estimated shipment charge, comprised of the appropriate transportation not-to-exceed (NTE) rate established at contract award by mode/route (Attachment 1), and any required accessorial charges (Attachment 2 and Appendix B of the PWS). 8First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 9 of 35 PageID# 61 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Contract, § G-7 (emphasis added to "by mode."). As reflected in the provision above: the Government transportation officer identifies the freight to be shipped (by sending a form 219); Menlo reviews the shipping information and issues the estimated shipping charge for no more than the NTE maximum for the specific mode of shipment Menlo selects, plus any associated accessorial surcharges for that mode (by sending a form 220); and Menlo then issues a tender to its selected subcontractor to ship the freight for the pre-negotiated payment amount between Menlo and the subcontractor established for that mode of shipment, plus the accessorial surcharges. The G-7 Contract provision continues in the next sentence: The contractor will submit a NTE rate for anticipated carrier freight costs based on the shipment offering without assumption of risk for subsequent optimization opportunities. Id. 33. The above provision highlights the Government's interest in "optimization" opportunities -- obtaining whatever savings can be realized by finding a cheaper mode of shipment. The Contract does not force Menlo to find a cheaper mode if one is not available. Thus, Menlo does not need to submit an NTE rate that represents a lower cost mode (for example, LTL) if that mode cannot be used to meet the MDD. In other words, Menlo does not have to "assum[e] the risk for subsequent optimization opportunities." It may select the mode it thinks is necessary to meet the MDD. If a subsequent optimization opportunity can be found, then additional savings will be realized by the Government; if not, the freight will be shipped pursuant to the original offering, Menlo will bill the Government for the actual costs of shipment for that mode plus any accessorial surcharges for that mode, and Menlo will pay its subcontractor that amount. 34. Before it even bid on the Contract, and long before it was selected as the Coordinator, Menlo understood all of this. The Questions from bidders and Answers from the Government following the original Solicitation, HTC711-060R-001, became formally incorporated into the Solicitation as Amendment 0001. The amendment included questions from Menlo and other bidders, and answers from the DOD, before any bids to become the DTCI 9First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 10 of 35 PageID# 62 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Coordinator were received. Question 10 of the Questions and Answer makes the meaning of Section G-7 abundantly clear: 10. Reference Section G-7. What does "without assumption of risk for subsequent optimization opportunities" mean? [Answer:] The NTE rate submitted is based on the initial offering and should not take into consideration "possible" consolidation or mode changes after pick-up. This mitigates the risk to the contractor as the initial offering assumes a less-than-optimal mode, e.g., LTL rate vice TL rate. The actual invoice will then reflect the actual rate from optimization and mode conversion. HTC711-060R-001, Amendment 001, Question 10 (emphasis added). As with the other DTCI Contract provisions and Regulations discussed below, the Government's answer to this question cannot be understood to suggest anything other than that the mode of shipment matters, and that the Government's contractor (Menlo) must "submit an invoice that reflects the actual rate from optimization [following] a mode conversion." Similarly, in Question 33, another bidder asked what would happen to payment for a shipment when "a contractor initiates a mode change (ex: as a result of optimization)." The Government explained that when the mode of shipment is changed: The Contractor will invoice for the actual costs paid based on the mode of transportation actually used. HTC711-060R-001, Amendment 001, Question 33 (emphasis added). 35. Before ever bidding on the Contract, Menlo understood, and before ever beginning work on the Contract, Estes understood, that under the DTCI, the Government is supposed to benefit from lower charges whenever a shipment can be “optimized” -- can be shifted to a lower cost mode. Similarly, under the DTCI Contract, the Government will (and does) also pay the higher charges when a more expensive mode shift becomes necessary. Instead, in thousands of instances, Menlo and Estes shifted to a lower cost mode but nonetheless knowingly submitted a claim to the government for the higher charge. VII. CONTRACT PROVISIONS RELATING TO TRANSPORTATION SERVICES 36. Menlo’s transportation coordination services include determining the appropriate mode based on the freight characteristics, equipment type, and the mandatory delivery date. Contract HTC711-07-D-0032, at 29. As discussed above, under the DTCI, freight can be moved 10First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 11 of 35 PageID# 63 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 through a variety of modes, including by air, motor, rail, and water. Motor transportation may be by a complete truck load (“TL”) or by less than a truckload (“LTL”). Material shipped by LTL is typically combined with other LTL shipments. For TL shipments, mileage is a component in determining the appropriate basic shipment charge, or “line haul” amount; under the Contract, mileage is determined by the Defense Table of Official Distances in effect on the date of shipment pick-up. For LTL shipments, mileage is not a factor; instead, the weight of the item is a component in determining the appropriate line haul charge. Contract HTC711-07-D- 0032, at 95. 37. In addition to the line haul charge, a separate accessorial fuel surcharge may be billed to the government for air and ground shipments, and these surcharge rates, calculated separately for air and ground transportation, regularly change based upon the price of fuel. In addition, the Contract provides that the government may be charged for an accessorial over- dimensional (“oversized”) surcharge when a shipped item exceeds certain dimensions. These dimensions differ for ground and air shipments. The amount of the oversize surcharge for ground delivery is calculated per mile based upon the freight’s length, width, and height and is subject to a minimum charge of $125. For air delivery, the oversize surcharge is 30% of the base line haul amount. Schedule of Accessorial Charges, Accessorial Rate Table, at 5. 38. Additional accessorial charges apply to expedited shipments. Expedited shipments include those that require delivery the same day or next day before a normal delivery cycle. Contract, Performance Work Statement, Part 1, Section C, § 1.4.5.17. 39. The costs for transportation services are provisionally paid and subject to post- payment Contract audit for allowable cost determination in accordance with the Contract provisions. DTCI Billing-Payment-Audit Plan, November 30, 2007, at 4 through 13. 40. Contract Line Item Number (“CLIN”) 2 pertains to shipment costs. The Contract specifies that payment for these costs will be based upon actual costs, up to the maximum NTE rates that were negotiated between the government and Menlo prior to contract award. Contract HTC711-07-D-0032, at 3. 41. Contract provisions also provide that Menlo is responsible for accounting for the 11First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 12 of 35 PageID# 64 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 reasonableness and validity of its subcontractor’s claimed costs for shipments and the charges it submits to the government: Auditing (1) The contractor is responsible for accounting for costs consistently and for maintaining records, including supporting documentation, adequate to demonstrate that costs claimed have been incurred, are reasonable, allocable to the contract, and comply with the statements in the applicable special provisions herein. Contract, Part I, Section H-10(h). 42. Thus, the Contract specifies how the contractor will submit invoices for actual costs when the mode of transportation changes: The contractor shall invoice for the actual cost of transportation, taking into consideration any achieved optimization opportunities, up to the transportation NTE rate established in the BoL, or the revised transportation NTE rate if a mode change results. Contract, Part I, Section G-7 (emphasis added). VIII. DTCI REGULATIONS A. Transportation Regulations 43. The Defense Transportation Regulation 4500.9-R, Part II, Cargo Movement, Chapter 213, prescribes responsibilities and procedures involving shipments under the DTCI Contract. The regulations set forth several operating provisions applicable to Menlo’s work and billing under the Contract, including the following: Mode determination based on stated shipper requirements and the Mandatory Delivery Date (MDD). (1) DTCI’s PWS [Performance Work Statement] directs the Coordinator to select the mode based on the MDD, therefore, the shipper [government personnel] will no longer identify a transportation mode (truck, rail, and air) prior to offering the shipment for movement. DTCI is considered a Mode Neutral Program since the shipper only determines when the freight must arrive at its next destination using only a MDD. Based on the MDD and other requirements (e.g., accessorial) submitted by the shipper through the shipper system, the Coordinator will select the most efficient transportation mode to meet the shipper’s requirement. In the event the shipment must be delivered the same day or next day, expedited service will be used. Expedited service does not always mean the shipment must travel by air. In many cases, surface transportation can be used to meet the delivery requirement at a much-reduced cost to the Government. Defense Transportation Regulation 4500.9-R, Part II, Chapter 213, § B.1.c.(1) (effective July 12First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 13 of 35 PageID# 65 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2008) (emphasis added). 44. Additional regulations specify that the Coordinator will notify the government shipper as to the actual carrier of the shipment: The DTCI Coordinator may employ multi-brokering of freight to achieve required efficiencies of the program. The Coordinator is responsible for notifying the shipping activity concerning carriers load schedules (e.g., which carrier gets loaded). This is accomplished using EDI [Electronic Data Interchange] 220 DTCI Transportation Service Responses from the Coordinator. The 220 returned to the shipper will show the actual carrier’s SCAC [Standard Carrier Alpha Code] and any equipment identifiers. Defense Transportation Regulation 4500.9-R, Part II, Chapter 213, § E.3.b.(1). 45. The regulations also contain certain billing and payment requirements, namely that shipment costs are provisionally paid and subject to audit for allowability: Due to the unique nature of the DTCI shipment rating process and related FAR based cost reimbursement provisions incorporated into the DTCI contract, the CO [government’s Contracting Officer] will not have the capability to validate actual line-haul shipment costs. These costs will be provisionally paid (i.e., contingent liabilities) and subject to post-payment contract audit for allowable cost determination. Defense Transportation Regulation 4500.9-R, Part II, Chapter 213, § E.8.c (emphasis added). B. Federal Acquisition Regulations 46. The FAR sets forth rules that govern the United States’ purchases of goods and services. The guiding principle of the FAR is to deliver the “best value” product or service to the United States while maintaining the public’s trust and fulfillment in public policy objectives. FAR 1.102(a). Under the FAR, all participants must exercise “sound business judgment in providing the best value product or service to meet the customer’s needs.” FAR 1.102-1(d). “Best value” is defined as “the expected outcome of an acquisition that, in the government’s estimation, provides the greatest overall benefit in response to the requirement.” FAR 2.101. IX. CERTIFICATIONS 47. Menlo is required to submit a Standard Form 1034, Public Voucher, containing the monthly Summary Invoice detail for DTCI shipment transactions for each applicable shipper location. Contract, Part I, Contract Administration Data, Section G-7. This form’s certification states that: 13First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 14 of 35 PageID# 66 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 “Pursuant to authority vested in me, I certify that this voucher is correct and proper for payment.” X. ALLEGATIONS 48. Relators incorporate by reference and reallege as though fully set forth herein all preceding paragraphs. A. False Billings for Air Shipments When the Freight is Shipped by Ground 49. Since 2007 and continuing through their work under the DTCI, Defendants Menlo, Estes, and Doe Defendants have knowingly submitted, caused the submission of, and conspired to submit false and fraudulent claims to the United States by falsely overcharging the government for higher air shipment charges when the freight was actually delivered by ground, including higher air fuel surcharges and higher air oversized surcharges, even on occasions when the freight delivered by ground did not qualify at all for an oversize surcharge. Defendants have submitted or caused the submission of false claims to the government for transportation costs that they knew were fraudulent, not reasonable, and not permitted under the Contract or Regulations. Defendants obtained cost savings by using ground shipments instead of air shipments and applied those savings to benefit Defendants, at the expense of the government. The substantial profits earned by Defendants at the government’s expense conflicted with a core objective of the DTCI Contract -- reduced transportation costs for the United States. Instead, the government was falsely billed for, and paid for, fraudulently inflated charges under the Contract. 1. False Line Haul Charges 50. As discussed above, the Contract establishes thousands of routes for shipments by both air and truck transportation. The routes are called “line hauls” and the Contract contains the maximum NTE amounts, set forth separately by mode, that the Government may be charged for each line haul shipment. However, the Contract is clear that, regardless of the NTEs for each mode, the government may be charged only for the actual costs incurred for each line haul. Those actual costs are the contract rates that Menlo and Estes agreed to for each line haul, by mode, for shipment of military freight under the DTCI contract. Estes’ contractual rates with Menlo include the profits that Estes negotiated for each line haul, for each mode. Menlo is not 14First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 15 of 35 PageID# 67 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 permitted by the Contract to obtain any profit from the shipments. The government is to be charged the actual costs of shipment, which must be below or equal to the NTE maximum for the selected mode and line haul. 51. On thousands of occasions, Menlo has tendered a shipment to Estes for air delivery, but Menlo and Estes both knew that Estes changed the initial mode and shipped the freight by truck. Defendants have knowingly submitted false claims for higher air line haul charges instead of the actual, lower costs for ground line haul shipments. The air line haul billings are more than the actual costs of the ground shipments and even more than the maximum NTE rates the government agreed to accept for shipments by ground. 52. Menlo knows that a change in the delivery mode will, and did, affect the cost to the government. In a January 12, 2012 email (emphasis added), the government’s Anna Gensler, HQDLA Transportation Policy, states to Bradley Goertzen at Menlo and numerous others: Menlo is doing the right thing by actively mode shifting or evaluating each load against LTL and TL rates independent of how the mode is passed to them and making the routing based on which mode provides the cheapest cost for the service required. 53. In another email (emphasis added), Menlo is praised for changing the mode of delivery to achieve a cost savings for the Government: On 1 Apr, DTCI's 2nd day of operations at DDPW (Puget Sound) … DLA's legacy shipper system (DSS) recommended a typical Less Than Truckload (LTL) surface shipment. DTCI's contracted rate for LTL would have been $125.20 with Yellow Freight. However, Menlo's load planners identified a "deferred air" rate with Panther Express for $93.60 that still met the Mandatory Delivery Date (MDD) of 9 Apr. Even though counterintuitive (air freight is almost always thought to be the more expensive option), Menlo's effort here saved the government $31.60. Although this is a relatively small savings on only one effort, at full implementation (over 40,000 shipments per month), these types of savings add up to huge numbers in the aggregate! Defendants knew that a change in mode could save costs for the Government, and understood that the Government would pay only the actual costs based on the shipment mode. As made clear from the outset, in the solicitation materials: “The Contractor will invoice for the actual costs paid based on the mode of transportation actually used.” HTC711-060R-001, Amendment 001, Question 33 (emphasis added). 15First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 16 of 35 PageID# 68 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2. False Air Fuel Surcharges 54. The Accessorial Rate Table, dated March 2008, is contained in Attachment 1, Section J, of the DTCI Contract. The fuel surcharge (Code "405"), shown at the top of page 1, varies depending on the price of fuel. For ground transportation, the Military Surface Deployment and Distribution Command ("SDDC") publishes the fuel surcharge policy and the fuel-related adjustment amounts for various time periods. For air transportation, the United States Transportation Command ("USTRANSCOM") publishes the fuel surcharge policy and adjustment amounts. 55. The fuel surcharge accessorial is an additional charge to the government that is applied to the specific mode of shipment. The fuel surcharge rates are determined each week or month, differ for air and ground shipments, and typically range between 6 and 39 percent of the line haul amount. Generally the air fuel surcharge rate is higher than the ground fuel surcharge rate. Thus, for a ground delivery, a ground fuel surcharge rate (of 20 percent, for example) would be applied under the Contract to the applicable ground line haul amount and an additional 20 percent of the ground line haul amount could be charged to the government for the ground fuel surcharge. For an air shipment, the air fuel surcharge rate (of 25 percent, for example) would be applied to the air line haul amount and an additional 25 percent of the air line haul amount could be charged to the government for the air fuel surcharge. 56. For thousands of shipments, Defendants have charged the government for an accessorial air fuel surcharge for shipments of freight by truck. For a majority of such shipments, the air fuel surcharge rate was higher than the ground fuel surcharge rate. Moreover, the air fuel surcharge rate has been applied to the much higher air line haul amount. Instead, the lower ground fuel surcharge rate should have been charged to the lower ground line haul amount. In engaging in such conduct, Defendants have knowingly submitted false and fraudulent claims for accessorial fuel surcharges. 57. For example, on one occasion, government Contracting Officer Belfield Collymore (“Collymore”) became aware that Menlo had billed for an air fuel surcharge when the freight was shipped by ground. Collymore told Michael Nadolski (“Nadolski”), Menlo’s Director of 16First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 17 of 35 PageID# 69 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Contracts, that Menlo must bill for the actual mode utilized, and that Menlo should refund the difference. Nadolski agreed and told Collymore that he would ask Brad Goertzen at Menlo to start identifying shipments where this may have occurred for purposes of repaying the government. Nonetheless, Menlo failed to take any action to identify such shipments and never repaid the government. 58. Thereafter, in a June 1, 2012, email from Nadolski to Cindy Chmiel at Menlo, Nadolski further confirmed his understanding that an air fuel surcharge should not apply when the freight has been shipped by ground: To the extent we know how the carrier actually moved the freight the correct FSC [fuel surcharge] rate should apply. However, many times we don't know so we are at the mercy of the carrier. However, once the Gov brings it [to] our attention we are required to make the adjustment. To date, no such adjustment or repayment has been made by Menlo. 3. False Air Oversized Surcharges 59. The Contract provides for an accessorial surcharge when a shipped item exceeds certain dimensions. Contract, G-7. The provisions addressing oversized freight, contained in the Contract's Appendix B, define oversized freight by mode. 60. A comparison of the Contract’s oversized payment authorization readily shows that for air shipments, freight is deemed to be oversized and entitled to the oversized surcharge payment when the item exceeds much smaller dimensions than would be required for ground shipments. Ground Oversize Air Oversize Length 576 inches (48 feet) 125 inches Width 102 inches (8 feet 6 inches) 88 inches Height 162 inches (13 feet 6 inches) 59 inches Length Plus Girth 300 inches 61. The Contract further provides, by mode, the applicable accessorial surcharge for oversized freight (Code “520"). Contract's Accessorial Rate Table, Attachment 1, Section J. The oversize surcharge amounts for ground shipment (“Motor”) are shown on pages 3 and 4 of this table; the oversize surcharge amount for “Air” shipments is shown on page 5. While the 17First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 18 of 35 PageID# 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ground oversize surcharge payments vary by different sizes, with a $125 minimum payment, the air oversize surcharge payment is always 30 % of the air line haul amount. Similarly, Menlo's contract with Estes also sets forth the oversize information by mode. For ground shipments, the oversized surcharge payment is calculated per mile based upon the freight's length, width, and height and is subject to a minimum payment of $125. For air shipments, the oversized surcharge payment is 30% of the line haul cost. 62. The Contract determines what constitutes "oversized" by separate measurements for air and ground modes. It then provides for a separate accessorial payment based on the specific mode used to ship the oversized freight. Defendants have knowingly defrauded the government with regard to oversized surcharges, as well as line haul charges and fuel surcharges, by billing for air oversized surcharges when the freight was delivered by ground and not entitled to the air oversize surcharge payment. 63. Numerous examples exist of Defendants’ billing the government for air oversized surcharges when there was no basis to do so. For example, in Bill of Lading 12A2ADBC, Estes shipped freight by ground from Barstow, California to Groton, Connecticut with pickup on May 17, 2012, and delivery on May 21, 2012. The item measured 48 inches in length, 52 inches in width, and 74 inches in height. Although none of those dimensions qualify for an oversized surcharge in a ground shipment, Menlo and Estes nonetheless billed the Government $1,890.99 for an air oversize surcharge, apparently because the height exceeded 59 inches for an air shipment. (The surcharge was computed at 30% of the base line haul amount of $6,303.30, with 30% as the oversize surcharge for an air shipment.) 64. No justification exists to charge the Government under the DTCI Contract for an air oversized surcharge for regular-sized freight delivered by ground. The Contract expressly specifies, by mode, the specific measurements that qualify for an oversized surcharge, with different measurements for air and ground modes, and different payments for those modes. B. Other Fraudulent Claims Submitted to the Government 1. False Claims for Expedited Shipments 65. Defendants have also knowingly submitted, caused the submission of, and conspired 18First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 19 of 35 PageID# 71 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 to submit false and fraudulent claims by inflating accessorial surcharges charged to the government for “expedited” shipments. 66. In July 2008, the government added a provision allowing accessorial surcharges for the expedited delivery of freight, including shipments that require delivery the same day or next day before a normal delivery cycle. Contract, Performance Work Statement, Part 1, Section C, § 1.4.5.17. For expedited air shipments, the accessorial rate, called the “EXP accessorial” was 150% of the air line haul amount. For ground shipments, the EXP accessorial surcharge was 20% of the ground line haul amount. However, instead of applying the EXP accessorial rates only to the air or ground line haul amounts, Defendants applied the EXP accessorial rates to the line haul amounts and to the other accessorials involved in the shipment. For example, if the government requested an expedited shipment of oversized freight with an air line haul amount of $500, Defendants appropriately increased the air line haul amount by 150% to $1,250; however, they then inappropriately also applied the air fuel surcharge amount (assume 24%) to the larger, increased line haul amount of $1,250, for an additional $300; and they then also inappropriately applied the oversized surcharge rate of 30% to the $1,250, as well, for another $375. Thus, in this example, the total charges to the government for the expedited shipment would be $1,925 ($1,250 + $300 + $375 = $1,925). However, the EXP accessorial rate of 150% should have been applied to the $500 air line haul amount only, resulting in an additional charge of $750 for the EXP accessorial, for a total of $1,250 for the line haul shipment. The 24% air fuel surcharge and the 30% air oversized surcharge should have been applied to the $500 original line haul amount only, resulting in correct charges of $120 and $150, respectively. Thus, the correct total charge for the shipment should have been $1,520 ($1,250 + $120 + $150 = $1,520) , not the falsely inflated $1,925 charge. 2. False Claims for Rounding Up Mileage 67. Defendants have also knowingly submitted, caused the submission of, and conspired to submit false and fraudulent claims by rounding up mileage for freight moved by TL. For TL shipments, mileage is a component in determining the appropriate ground line haul amount. The contract requires that the mileage be based upon the Defense Table of Official Distances 19First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 20 of 35 PageID# 72 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 (“DTOD”) in effect on the date of shipment pick-up. Such distances are to be rounded to the nearest mile. www.defensetravel.dod.mil/site/faqdtod.cfm. Instead, Defendants have routinely rounded up to the next higher mile. For example, if the DTOD listed mileage as 615.1 miles, Defendants have rounded up the mileage to 616 miles. There was no effort to round down to the actual, closest mile, because rounding down would not have maximized the payments to Defendants. Such fraudulent maximization of payments was inappropriate and done at the expense of the government. 3. False Claims for Using Higher Fuel Surcharge Rates for Diverted Shipments 68. Defendants have also knowingly submitted, caused the submission of, and conspired to submit false and fraudulent claims by using a higher fuel surcharge rate that was applicable on the day that the government directed that the shipment be diverted, or re-consigned, to another location. Defendants should have applied the fuel surcharge rate in effect on the original pick-up date for the freight. The correct fuel surcharge rate, the rate on the day of pick-up, was used by Defendants only if it was higher than the rate on the day of the diversion request. Again, Defendants’ intent was to maximize their payments from the government, even though such fraudulent maximization of payments was inappropriate and done at the government’s expense. 4. False Billings for Increasing the Weights of Shipments 69. Defendants have also knowingly submitted, caused the submission of, and conspired to submit false and fraudulent claims by increasing the weights of LTL shipments. The government initially weighs the freight before shipment. However, in numerous instances, Estes has re-weighed the freight and increased the billed amount to the government based on an falsely inflated weight, resulting in a higher charge to the government. C. Failing to Provide Required Services for the Benefit of the Government 70. As stated above, the government selected Menlo as the DTCI Coordinator in August 2007. Under the Contract, Menlo was responsible for managing DOD freight shipments with the goal of maximizing efficiencies and reducing shipment costs for the United States. DOD regulations require Menlo “to select the most efficient transportation mode to meet the government’s requirements.” Defense Transportation Regulation 4500.9-R, Part II, Chapter 20First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 21 of 35 PageID# 73 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 213, § B.1.c.(1). As Menlo knows, “[i]n many cases, surface transportation [rather than air shipments] can be used to meet the delivery requirement at a much-reduced cost to the Government.” Id. Under the Contract, the government may only be billed for the actual costs of shipment, based on the actual mode used to transport the freight. See, e.g., Contract, Part I, Section G-7. Menlo has knowingly failed to meet its contractual obligations to the United States by, among other things, billing the government for air shipment line haul amounts, air fuel surcharges, and other air accessorial surcharges, when the freight could have been shipped, and indeed was shipped, by ground transportation. The Contract provides that Menlo will receive between $13,241,688 and $14,899,680 each year for its transportation coordination services. In total, for work from August 2007 through December 2015, Menlo received in excess of $131 million for its shipment coordination work. Contract, at 2, 5, 8, 11, 14, 17, 21. In addition, under the Contract, Menlo is entitled to a potential, discretionary Award Fee, and has received $10,973,005 for such payments through December 2015. All of these payments to Menlo would not have been made if the government had known of its fraud, and Menlo has retained such payments despite knowing that it is not entitled to them. D. Opportunity to Engage in the Fraud 71. Under the Contract, the MDD is extended for shipments over the weekend and for oversized freight. Defense Transportation Regulation, Part II, Chapter 213, § B.1.d.(2). As such, if the pick up date is late in the week, typically a Thursday, Friday, or a weekend, Estes and Menlo know that the freight can be delivered by ground at a lower cost and still make the MDD. Estes therefore instructs its selected carrier to ship the freight by ground, typically by LTL. However, instead of passing along to the United States the savings from optimizing the freight for ground delivery, Estes submits its invoice to Menlo using a charge for air shipment. As a result, Menlo pays Estes and bills the government for an amount that was computed using an air line haul amount, along with other air accessorial surcharges, even though both Menlo and Estes know that the lower applicable ground rate and ground accessorial surcharges should have been billed. Menlo’s other subcontractors (Doe Subcontractors), in addition to Estes, have similarly defrauded the government. 21First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 22 of 35 PageID# 74 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 E. Examples of False Claims 72. Thousands of false claims have been submitted by Defendants to the United States as described above. Several examples are set forth herein. For example, for Bill of Lading (“BOL”) 12C69DJC, the government requested pick up at the San Joaquin Distribution Center (“SJDC”) on Thursday, October 25, 2012, for delivery to Corpus Christi, Texas, by October 30, 2012. Menlo billed the government and paid Estes an air shipment charge of $541.22, but Estes paid only $163.53 to a separate carrier to ship the freight by ground. 73. For BOL 12C69GJC, the government requested pick up at SJDC on October 25, 2012, for delivery to Anniston, Alabama, by October 30, 2012. Menlo billed the government and paid Estes an air shipment charge of $877.63, but Estes paid only $354.81 to ship the freight by ground. 74. For BOL 12C6A1JC, the government requested pick up at SJDC on October 25, 2012, for delivery to Fort Stewart, Georgia, by October 30, 2012. Menlo billed the government and paid Estes an air shipment charge of $2,308.93, but Estes paid only $864.14 to ship the freight by ground. 75. Three additional examples involve shipments with pick up at the SJDC on Sunday, November 11, 2012, when the transportation was done by FedEx. For BOL 12C99QJC, the government requested pick up at SJDC on November 11, 2012, for delivery to Holloman AFB, New Mexico, by November 15, 2012. Menlo billed the government and paid Estes an air shipment charge of $1,342.77, but Estes only paid FedEx $636.56 to deliver the shipment by ground. 76. For BOL 12C99RJC, the government requested pick up at SJDC on November 11, 2012, with delivery to Altus AFB, Oklahoma, by November 15, 2012. Menlo billed the government and paid Estes an air shipment charge of $746.17, but Estes only paid FedEx $280.29 to deliver the shipment by ground. 77. For BOL 12C99XJC, the government requested pick up at SJDC on November 11, 2012, with delivery to Gulfport, Mississippi, by November 16, 2012. Menlo billed the government and paid Estes an air shipment charge of $1,291.72, but Estes only paid FedEx 22First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 23 of 35 PageID# 75 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 $572.82 to deliver the shipment by ground. 78. Other examples show false claims for shipments from various military depots across the United States, all of which were billed using air rates when the shipments were actually transported by ground. For example, for BOL 12A2ADBC, the government requested pick up from the Los Angeles, California depot DDBC, on Thursday, May 17, 2012, for next day delivery to Groton, Connecticut. For this over-dimensional shipment, for which additional time for delivery was allowed, Menlo billed the government and paid Estes an air shipment charge of $10,148.31, but Estes paid only $1,701.13 to deliver the shipment by ground. 79. The freight in BOL 12A2ADBC measured 48 inches in length, 52 inches in width, and 74 inches in height. A height greater than 59 inches is allowed an oversize surcharge for an air shipment. An air oversize surcharge amount was charged to the government at 30% of the base line haul amount of $6,303.30, or $1,890.99. However, the freight’s measurements did not meet the criteria for oversize in a ground shipment, which are 48 feet in length, 102 inches in width, and 162 inches in height. Thus, for this shipment, the Defendants fraudulently charged the government for both an inflated line haul amount (for a supposed air delivery) and an inflated oversize surcharge (for a supposed oversized air delivery), when the freight was delivery by ground and did not qualify for a ground oversize surcharge. 80. For BOL 12A11TBC, the government requested a pick up from DDBC on Wednesday, March 14, 2012, for next day delivery to Philadelphia, Pennsylvania. For this over- dimensional shipment, for which additional time for delivery was allowed, Menlo billed the government and paid Estes an air shipment charge of $4,217.40, but Estes paid only $599.70 to deliver the shipment by ground. 81. For BOL 11A1PPJF, the government requested a pick up from DDBC on Friday, April 8, 2011, for a 3-day delivery to Jacksonville, Florida. Menlo billed the government and paid Estes an air shipment charge of $903.81, but Estes paid only $468.08 to deliver the shipment by ground. 82. False billings were also submitted, for example, on shipments from Hill Air Force Base (“Hill AFB”) in Utah. For BOL 216798O2, the government requested a pick up from Hill 23First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 24 of 35 PageID# 76 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AFB on Thursday, February 18, 2010, for a 2-day delivery to Atlanta, Georgia. Menlo billed the government and paid Estes an air shipment charge of $513.83, but Estes paid only $252.50 to deliver the shipment by ground. 83. For BOL 11AC4QHU, the government requested a pick up from Hill AFB on Friday, November 4, 2011, for a 3-day delivery to McGuire AFB, New Jersey. Menlo billed the government and paid Estes an air shipment charge of $525.16, but Estes paid only $208.08 to deliver the shipment by ground. 84. For BOL 11AC3GHU, the government requested a pick up from Hill AFB on Friday, November 4, 2011, for a 3-day delivery to Pittsburgh, Pennsylvania. Menlo billed the government and paid Estes an air shipment charge of $309.06, but Estes paid only $92.49 to deliver the shipment by ground. 85. Additional false billings were submitted, for example, on shipments from New Cumberland, Pennsylvania. For BOL 355289SP, the government requested a pick up from the New Cumberland depo on Thursday, October 14, 2010, for next day delivery to Sacramento, California. The destination site required an appointment for delivery, for which additional time for delivery was allowed. Menlo billed the government and paid Estes an air shipment charge of $1,988.19, but Estes paid only $694.23 to deliver the shipment by ground. 86. For BOL 12AYT1SP, the government requested a pick up from the New Cumberland depot on Wednesday, May 16, 2012, for a 2-day delivery to Dallas/Fort Worth, Texas. Menlo billed the government and paid Estes an air shipment charge of $913.02, but Estes paid only $169.04 to deliver the shipment by ground. 87. Additional examples demonstrate the Defendants’ knowledge of false billings for air line haul charges, as well as air oversize surcharges, when the items were shipped by ground. For example, in BOL 14ACUKJC, the government requested a pick up of a item, an “angle, structural,” from SJDC on Tuesday, April 8, 2014, for delivery to the Fleet Industrial Supply Center, in Portsmouth, Virginia. It measured 288 inches in length, 3 inches in width, and 3 inches in height. In an email, dated April 8, 2014, Glenn Privette (“Privette”), Operations - Estes Forwarding Worldwide, notified Anthony Marinaro (“Marinaro”), Transportation Manager - 24First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 25 of 35 PageID# 77 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Menlo Government Services, that the shipment was too long for delivery by air: “The above listed VLO is too long to fly commercially....” Marinaro replied in an email that same day that he had spoken to the pick up base and received permission for a later delivery date, allowing 6 days, from Tuesday, April 8, to Monday, April 14: “I just spoke to DDJC and Monday is approved.” 88. Estes shipped the item by ground. Irrespective of the fact that both Menlo and Estes knew that the item was too long to be moved by air, Estes billed Menlo, and Menlo paid Estes, for an air line haul amount ($96.41), an air fuel surcharge rate of 27% of the air line haul amount ($26.03), and an air oversize surcharge rate of 30% of the air line haul amount ($28.92). Thus, the total amount billed was $151.36. However, Estes’ costs for the shipment were only $2.55, which included a credit, or discount, of $92.25, believed to be related to its affiliated company, Estes Express Lines. The freight, with a length of 288 inches, did not even qualify as oversized for ground delivery, for which the item must measure greater than 576 inches in length. 89. Two additional examples of false billings for both air line haul amounts and air surcharges consist of identical freight shipped from SJDC to different, but close, destinations. In an email, dated April 15, 2014, Privette informed Marinaro that: “These 2 shipments are too heavy to fly commercially and too tall to fly on cargo...”. He stated that: “I can have them there on Monday, 4/21,” six days after pick-up. Marinaro replied that he would “add tracking events.” The two identical items were described as “BAND SAW, AIRCRAFT E.” One item, Shipment HWJ2J202519461615, hereafter referred to as “Shipment 1615," was to be delivered to the Material Processing Center in Norfolk, Virginia, on April 21, 2014. The second item, Shipment HWJ2J202519461611, hereafter referred to as “Shipment 1611," was to be delivered to the Naval Weapons Station outside Williamsburg, Virginia, on April 21, 2014. 90. For Shipment 1615, Estes paid its third party shippers a total of $570.45 to deliver the item by ground and charged a total of $1,793.40 for shipment by air, which Menlo paid. Estes’ charge included an air fuel surcharge of $308.42, or 27% of the air line haul amount of $1,142.29. It also included an air oversized surcharge of $342.69, or 30% of the air line haul amount. For Shipment 1611, Estes paid its third party shippers a total of $678.98 and charged a 25First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 26 of 35 PageID# 78 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 total of $1,793.40 for shipment by air, which Menlo paid. Estes’ charge included an air fuel surcharge of $308.42, or 27% of the air line haul amount of $1,142.29, and an air oversize surcharge of $342.69, or 30% of the air line haul amount. As both Menlo and Estes knew, these two ground shipments were fraudulently charged to the government as air shipments, with air fuel surcharges, and air oversized surcharges. Yet none of the shipments even met the qualifications for a ground oversized surcharge. 91. As another example, on April 19, 2010, James Ford (Estes) sent an email to Shannon Booth (Estes) with a cc to Lisa Flores (Menlo) regarding freight to be shipped. Ford asks Booth about the freight. Booth states that the freight is oversized and provides to Ford and Flores the specific freight dimensions. Ford then emails Flores with a cc to Booth and states: Lisa - 194 length! I cannot fly this. Will have to move ground. Looking at … a 3 to 4 business day transit. (emphasis added). Flores (Menlo) responds: No just get it there as soon as you can, do you need me to add the 520 [an oversize surcharge] if it's going ground??? Ford (Estes) responds: "Yes." Flores (Menlo) then states: "Resending back to you as a 3-day air with 520 added." (emphasis added). The email exchange reflects Defendants’ lack of concern for how the government will be charged under the DTCI Contract. Both Estes and Menlo know, as they state, that this freight will be delivered by ground because it is too large for delivery by air. Nonetheless, Menlo offers to re-send the tender to Estes as an air delivery, and to also include an oversized accessorial surcharge, even though the dimensions do not qualify for a ground oversized surcharge and both Menlo and Estes know the freight will be delivered by ground. 92. In order to comply with the DTCI Contract and Regulations, whenever the mode of transportation is changed from air to ground, the lower ground shipment rates must be applied. Contract, Part I, Section G-7 (emphasis added) (“The contractor shall invoice for the actual cost of transportation, taking into consideration any achieved optimization opportunities, up to the transportation NTE rate established in the BoL, or the revised transportation NTE rate if a 26First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 27 of 35 PageID# 79 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 mode change results.”). Defendants did not notify the government of such mode changes and the lower rates that should apply. 93. Furthermore, Contract terms require Menlo to complete a pre-audit of all carrier invoices. Contract, Performance Work Statement, Part 1, Section C § 1.4.4.5. Such carrier invoices must be audited accurately for several factors, including but not limited to, the “contractor’s contracted rates.” Contract, Performance Work Statement, Part 1, Section C § 1.4.4.5.2.1. Finally, FAR 52.203-13(b)(3)(i)(B) requires Menlo to “timely disclose in writing to the Inspector General, with a copy to the Contracting Office whenever, in connection with the award, performance, or closeout of the Contract or any subcontract thereunder, the Contractor has credible evidence that a principal, employee, agent, or subcontractor of the Contractor has committed . . . [a] violation of the civil False Claims Act.” 94. Defendants are aware of the DTCI Contract requirements, the FCA, and their responsibilities under the law. Michael Nadolski, Menlo's Director of Contracts, explained his understanding of the DTCI Contract when he testified under oath, under penalty of perjury, in an arbitration deposition in July 2011. Nadolski testified that when Menlo receives a shipment order from the Government with a mandatory delivery date, it tenders an offer to one of Menlo's subcontractors, and includes "a particular mode" in the tender: MDD dates are determined -- they are mandatory delivery dates. They are established by the government. What they mean is that is the date on which the government requires the particular shipment to be at the receiving installation. Menlo manages to those MDDs. Those MDDs, once established by the government, we use in order to establish a particular mode and level of service that is required to meet that MDD. Transcript of Deposition of Michael Nadolski in Menlo Worldwide Government Services, LLC v. Limitless International, Inc., dated July 20, 2011, in JAMS Ref: 1100063090 ("Nadolski Depo"), at 66-67 (emphasis added). 95. Nadolski then explained that a subcontractor is not entitled to receive payment based on the tender from Menlo, but rather only based on the actual shipment provided: That if they accept -- accepted the shipment, we would calculate the estimated cost of that shipment based on service requested. That was the basic -- one side of the basis for use of those rates. The other side was to be used for invoicing, at which point we expected to be invoiced for the services that were actually 27First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 28 of 35 PageID# 80 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 provided, irrespective of what was requested. . . . I would expect that the carrier would invoice based on the service that was actually provided. . . . Within the contract and within the FAR, there is a concept of allowable costs and payment. Part of that has to do with what's reasonable, what's allowable, what's allocable to a particular transaction. Under the reasonable standard is the test of did that rate correspond to the services actually provided. Nadolski Depo, at 173-75 (emphasis added). 96. Nadolski then states that to charge otherwise, for a service that was not provided, is a violation of the FCA: That's important because to continue to charge a higher rate than the services provided, knowing that the Government is not being charged appropriately under the FAR, creates a violation of the False Claims Act, which then subjects the company and the individuals to certain charges and criminal actions or civil actions for mischarging the Government. Nadolski Depo, at 176 (emphasis added). The DTCI Contract and Regulations are clear, and Nadolski was clear about them. The Government could be charged only for the “services actually provided” and the actual costs of shipment, based on the actual mode of delivery. To “continue to charge a higher rate than the services provided, knowing that the Government is not being charged appropriately ... creates a violation of the False Claims Act.” That is precisely the fraudulent conduct in which Defendants have engaged. 97. Defendants’ knowingly fraudulent and false billings under the Contract and Regulations are violations of the FCA and have resulted in substantial losses to the government. F. Retaliation Against Relator Cuellar 98. Marcelo Cuellar was terminated by Estes on February 10, 2015. On that day, he was called into a meeting with three of Estes’ attorneys, including Cheryl Barnes (“Barnes”) and Thomas Coulter, who came to the Tracy depot where Cuellar worked. Estes’ counsel informed Cuellar that they wanted to ask him questions because Estes had received a subpoena from the government and they were interviewing employees about the matters included in the subpoena. The attorneys confronted Cuellar with several screen shots of folders on his work computer. 28First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 29 of 35 PageID# 81 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 They demanded that Cuellar explain what was in each of the folders. 99. Cuellar explained the contents of each of the folders and the attorneys asked Cuellar if he had sent any of the contents of those folders to anyone other than Defendant Menlo. In responding to one question, Cuellar stated that at his prior job, he sent all freight by air as he was trained to do. That process changed when he was hired by Estes. Cuellar stated that he was trained at Estes to, whenever possible and particularly on Thursday and Friday, put the freight for shipment on a truck. 100. Immediately after his meeting with the attorneys concluded, Cuellar was approached by Barnes who informed Cuellar that this was his last day of work at Estes. Barnes told Cuellar that he was being terminated supposedly because he had: (1) taken vacation time in May 2015 for which he was paid (but supposedly should not have been) and (2) declined supervisor Todd Pierchal’s (“Pierchal’s”) verbal request in late January to attend a training course in Virginia. 101. The reasons given for Cuellar’s termination are entirely pretextual. The real reason Cuellar was terminated was because he assisted the government in putting a stop to the fraud. 102. Prior to taking the vacation time noted by Barnes, Cuellar had given a written leave request to his supervisor, Tim Joachim, who had signed the request indicating that the leave was approved. 103. Concerning the training course, Cuellar had been attending the University of Phoenix after work since October 2013 and had informed Estes of this when he started the school program. When Pierchal requested that Cuellar attend one particular training in Virginia, Cuellar explained to Pierchal that he had classes each Wednesday, and had school assignment meetings that he would need to attend. If he did not do so, he would not receive school credit. Pierchal did not require Cuellar to attend the training because it would conflict with his school work, and Cuellar received no further comments from anyone at Estes regarding the Virginia training until the day he was terminated. 104. Estes knew or suspected that Cuellar had furnished the government with information about Estes’ fraud, which led to Estes’ receipt of a government subpoena. Estes 29First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 30 of 35 PageID# 82 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 terminated Cuellar in retaliation for blowing the whistle on the fraud. Defendant Estes’ conduct, as set forth above, violates the FCA, federal and California public policy, and California Labor Code § 1102.5. Count I False Claims Act 31 U.S.C. § 3729(a)(1)(A) and (a)(1)(B) (Against All Defendants) 105. Relators repeat and reallege each and every allegation contained in the preceding paragraphs as though fully set forth herein. 106. This is a claim for treble damages and penalties under the False Claims Act, 31 U.S.C. §§ 3729, et seq., as amended. 107. Through the acts described above, Defendants have knowingly presented or caused to be presented, false or fraudulent claims for payment or approval, within the meaning of 31 U.S.C. § 3729(a)(1)(A). 108. Through the acts described above, Defendants have knowingly made, used, or caused to be made or used, false records or statements material to false or fraudulent claims, within the meaning of 31 U.S.C. § 3729(a)(1)(B). 109. The United States, unaware of the falsity of the records, statements and claims made or caused to be made by Defendants, paid and continues to pay claims that would not be paid but for Defendants’ unlawful conduct. 110. As a result of the Defendants’ acts, the United States has been damaged, and continues to be damaged, in a substantial amount to be determined at trial. 111. Additionally, the United States is entitled to the maximum penalty of $11,000 for each and every violation of 31 U.S.C. § 3729(a)(1)(A) and 31 U.S.C. § 3729(a)(1)(B) as described herein. 30First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 31 of 35 PageID# 83 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Count II False Claims Act 31 U.S.C. § 3729(a)(1)(C) (Against All Defendants) 112. Relators repeat and reallege each and every allegation contained in the preceding paragraphs as though fully set forth herein. 113. This is a claim for penalties and treble damages under the False Claims Act, 31 U.S.C. §§ 3729, et seq., as amended. 114. Through the acts described above, Defendants and Doe Defendants, acting together in concert, conspired to defraud the United States within the meaning of 31 U.S.C. § 3729(a)(1)(C). 115. As a result, the United States, unaware of the fraudulent conduct of Defendants, paid and continues to pay claims that would not be paid but for Defendants’ unlawful conduct. 116. By reason of the Defendants’ acts, the United States has been damaged, and continues to be damaged, in a substantial amount to be determined at trial. 117. Additionally, the United States is entitled to the maximum penalty of $11,000 for each and every violation of 31 U.S.C. § 3729(a)(1)(C) as described herein. Count III False Claims Act 31 U.S.C. § 3729(a)(1)(G) (Against All Defendants) 118. Relators repeat and reallege each and every allegation contained in the preceding paragraphs as though fully set forth herein. 119. This is a claim for penalties and treble damages under the False Claims Act, 31 U.S.C. §§ 3729, et seq., as amended. 120. Through the acts described above, Defendants knowingly made or used, or caused to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the United States, or knowingly concealed, or knowingly and improperly avoided or decreased an obligation to pay or transmit money or property to the United States within the 31First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 32 of 35 PageID# 84 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 meaning of 31 U.S.C. § 3729(a)(1)(G). 121. As a result, monies were lost to the United States through the non-payment or non-transmittal of money or property owed to the United States by the Defendants, and the United States sustained costs and damages. 122. By reason of the Defendants’ acts, the United States has been damaged, and continues to be damaged, in a substantial amount to be determined at trial. 123. Additionally, the United States is entitled to the maximum penalty of $11,000 for each and every violation of 31 U.S.C. § 3729(a)(1)(G) as described herein. Count IV False Claims Act - Retaliation 31 U.S.C. § 3730(h) (Against Estes) 124. Relator repeats and realleges each and every allegation contained in the preceding paragraphs as though fully set forth herein. 125. Through investigating and reporting the fraudulent conduct of Defendants, Relator was terminated by Defendant Estes, because of lawful acts done by the Relator in furtherance of an action under section 31 U.S.C. § 3729. 126. Relator is entitled to all relief necessary to make him whole, including reinstatement with the same seniority to the position he had before the unlawful termination, 2 times the amount of back pay lost, interest on the back pay, and compensation for any special damages sustained as a result of the discrimination. Count V Wrongful Termination in Violation of Public Policy and California Labor Code § 1102.5 (Against Estes) 127. Relator John Doe repeats and realleges each and every allegation contained in the preceding paragraphs as though fully set forth herein. 128. In doing the things herein alleged, Defendant Estes threatened, harassed, and discriminated against Relator in the terms and condition of his employment and ultimately 32First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 33 of 35 PageID# 85 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 terminated that employment. 129. This conduct was in violation of public policies pursuant to various state and federal laws, and to punish Relator for his opposition to Estes’ fraudulent and illegal practices. 130. In doing the things herein alleged, Defendant violated California Labor Code § 1102.5 by retaliating against Relator and ultimately terminating his employment. 131. As a direct and proximate cause of Defendants’ wrongful conduct, Relator has sustained and will sustain the loss of salary, as well as interest thereon. Relator has also suffered other damages, including, but not limited to, valuable employee benefits. Additionally, the actions of Defendant were carried out in a deliberate manner in conscious disregard of the rights of Relator and were malicious, despicable, and were intended to harm him. Relator is therefore entitled to punitive damages against Defendant in an amount sufficient to punish Defendant, and to deter future similar misconduct. PRAYER FOR RELIEF WHEREFORE, Relators pray for judgment against the Defendants as follows: 1. That Defendants cease and desist from violating the False Claims Act, 31 U.S.C. §§ 3729 et seq.; 2. That this Court enter judgment against Defendants in an amount equal to three times the amount of damages the United States has sustained because of Defendants’ actions, plus a civil penalty of $11,000 for each violation of 31 U.S.C. § 3729; 3. That Relators be awarded the maximum amount allowed pursuant to 31 U.S.C. § 3730(d); 4. That, as a result of Defendant’s unlawful employment actions, Relator Cuellar receive all relief necessary to make him whole pursuant to federal and state causes of action for wrongful employment conduct, retaliation, and termination, including 31 U.S.C. § 3730(h); 5. That, as a result of Defendant’s violation of public policy and violation of California Labor Code § 1102.5, Relator Cuellar receive all relief necessary to make him whole; 6. That Defendant Estes pay exemplary damages in an amount sufficient to punish said Defendant and to deter future similar misconduct; 33First Amended Complaint Filed Under Seal Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 34 of 35 PageID# 86 1 7. That Relators be awarded all costs of this action, including attorneys' fees, costs and 2 expenses; and 3 8. That Relators recover such other and further relief as the Court deems just and proper. 4 DEMAND FOR JURY TRIAL 5 Pursuant to Rule 38 ofthe Federal Rules of Civil Procedure, Relators hereby demand a 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 trial by jury. Dated: 2! q 11 {o First Amended Complaint Filed Under Seal ichael A. Hirst, Esq. HIRST LAW GROUP, P.C. 200 B. Street, Suite A Davis, CA 95616 Tel: 530-756-7700 Fax: 530-756-7707 michael.hirst@hirstlawgroup.com Counsel for Plaintiffs/Relators Richard Ricks and Marcelo Cuellar 34 Case 3:16-cv-00853-HEH Document 7-2 Filed 12/29/16 Page 35 of 35 PageID# 87 Case 3:16-cv-00853-HEH Document 7-3 Filed 12/29/16 Page 1 of 25 PageID# 88 Case 3:16-cv-00853-HEH Document 7-3 Filed 12/29/16 Page 2 of 25 PageID# 89 Case 3:16-cv-00853-HEH Document 7-3 Filed 12/29/16 Page 3 of 25 PageID# 90 Case 3:16-cv-00853-HEH Document 7-3 Filed 12/29/16 Page 4 of 25 PageID# 91 Case 3:16-cv-00853-HEH Document 7-3 Filed 12/29/16 Page 5 of 25 PageID# 92 Case 3:16-cv-00853-HEH Document 7-3 Filed 12/29/16 Page 6 of 25 PageID# 93 Case 3:16-cv-00853-HEH Document 7-3 Filed 12/29/16 Page 7 of 25 PageID# 94 Case 3:16-cv-00853-HEH Document 7-3 Filed 12/29/16 Page 8 of 25 PageID# 95 Case 3:16-cv-00853-HEH Document 7-3 Filed 12/29/16 Page 9 of 25 PageID# 96 Case 3:16-cv-00853-HEH Document 7-3 Filed 12/29/16 Page 10 of 25 PageID# 97 Case 3:16-cv-00853-HEH Document 7-3 Filed 12/29/16 Page 11 of 25 PageID# 98 Case 3:16-cv-00853-HEH Document 7-3 Filed 12/29/16 Page 12 of 25 PageID# 99 Case 3:16-cv-00853-HEH Document 7-3 Filed 12/29/16 Page 13 of 25 PageID# 100 Case 3:16-cv-00853-HEH Document 7-3 Filed 12/29/16 Page 14 of 25 PageID# 101 Case 3:16-cv-00853-HEH Document 7-3 Filed 12/29/16 Page 15 of 25 PageID# 102 Case 3:16-cv-00853-HEH Document 7-3 Filed 12/29/16 Page 16 of 25 PageID# 103 Case 3:16-cv-00853-HEH Document 7-3 Filed 12/29/16 Page 17 of 25 PageID# 104 Case 3:16-cv-00853-HEH Document 7-3 Filed 12/29/16 Page 18 of 25 PageID# 105 Case 3:16-cv-00853-HEH Document 7-3 Filed 12/29/16 Page 19 of 25 PageID# 106 Case 3:16-cv-00853-HEH Document 7-3 Filed 12/29/16 Page 20 of 25 PageID# 107 Case 3:16-cv-00853-HEH Document 7-3 Filed 12/29/16 Page 21 of 25 PageID# 108 Case 3:16-cv-00853-HEH Document 7-3 Filed 12/29/16 Page 22 of 25 PageID# 109 Case 3:16-cv-00853-HEH Document 7-3 Filed 12/29/16 Page 23 of 25 PageID# 110 Case 3:16-cv-00853-HEH Document 7-3 Filed 12/29/16 Page 24 of 25 PageID# 111 Case 3:16-cv-00853-HEH Document 7-3 Filed 12/29/16 Page 25 of 25 PageID# 112
