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Omnipol v. Worrell

United States District Court, M.D. Florida, Tampa Division

October 16, 2019

OMNIPOL, a. S. and ELMEX PRAHA, a. S., Plaintiffs,



         This cause comes before the Court pursuant to the Motions to Dismiss the Amended Complaint filed by Defendants Christopher Worrell, James Brech, and the United States on behalf of Defendants Bryan Siedel, Amy Strother, and Kirk Bristol, filed on August 9, 2019, August 23, 2019, and August 30, 2019, respectively. (Doc. ## 76, 86, 91). Plaintiffs Omnipol, a.S. and Elmex Praha, a.S. filed responses in opposition to all of the Motions, and the United States filed a reply. (Doc. ## 87, 95, 98, 102). For the reasons explained below, all of the Motions are granted and Plaintiffs' Amended Complaint is dismissed without leave to amend.

         I. Background

         On April 3, 2019, Plaintiffs filed their original Complaint against these Defendants and four others: Multinational Defense Services, LCC, Angelo Saitta, Lisa Saitta, and Robert Para, alleging a fraudulent scheme between the officers and employees of Purple Shovel, LLC, and civilian contracting employees at the U.S. Special Operations Command (SOCOM). (Doc. # 1). In their original Complaint, Plaintiffs brought claims for fraud, civil theft, unjust enrichment, state and federal racketeering violations, and attorneys' fees. (Id.). Worrell, Multinational Defense, Angelo Saitta, and Lisa Saitta moved to dismiss the original Complaint. (Doc. ## 9, 12, 36).

         On July 12, 2019, the Court held a hearing on the pending motions to dismiss. (Doc. # 62). The Court denied the motions to the extent they argued that the original Complaint was a shotgun pleading or failed to name an indispensable party, but it granted the motions on the basis that the original Complaint failed to comply with Federal Rule of Civil Procedure 9(b) and failed to state a claim under Federal Rule of Civil Procedure 12(b)(6). (Doc. # 59).

         At the hearing, the Court explained that the allegations in the original Complaint failed to state a claim for fraud against the moving Defendants because the original Complaint failed to meet Rule 9(b)'s heightened pleading standard. (Doc. # 79 at 19). The Court further found the Plaintiffs' civil theft allegations to be “speculative” and conclusory.” (Id. at 21, 33). As to the unjust enrichment claim against Worrell, the Court explained that the claim “lacks sufficient detail” because it failed to describe certain key dates. (Id. at 46-47). The state and federal racketeering claims were not sufficiently pled because “the Complaint is not specific enough regarding Worrell's involvement in the scheme. [The racketeering counts] lump Christopher Worrell with Benjamin Worrell, Para, and Brech. It's too difficult to determine what Mr. Worrell actually did based on the facts alleged, and not enough specificity is provided regarding the time, place, and manner of the allegedly fraudulent scheme.” (Id. at 47-48). As to the racketeering conspiracy claim, the Court found that “there is nothing in the Complaint that establishes a single conversation between the Worrells, Para, Brech, Multinational Defense, and the Saittas.” (Id. at 30-31). Finally, the Court dismissed the claim for attorneys' fees because attorneys' fees are typically a remedy and not a stand-alone claim. (Id. at 31-32). The Court did, however, grant Plaintiffs leave to amend. (Doc. # 59).

         On July 26, 2019, Plaintiffs filed an Amended Complaint. (Doc. # 70). As in the original Complaint, the Amended Complaint alleges the existence of two interrelated fraudulent schemes. First, Plaintiffs allege a multi-year “fraudulent scheme that targeted and fleeced” SOCOM. (Id. at 2). According to Plaintiffs, Purple Shovel is a company formed by non-party Benjamin Worrell, Christopher Worrell, and Brech that was licensed to engage in international arms transactions and was the “vehicle” for the fraud. (Id. at 2, 8, ¶¶ 5-6, ¶ 21). Purple Shovel has since filed for bankruptcy and is not a party to this action. (Doc. # 7).

         Plaintiffs allege that Siedel, Strother, and Bristol, as civilian contracting officers at SOCOM, issued contracts to Purple Shovel to deliver arms and ammunition to SOCOM. (Doc. # 70 at 2, ¶¶ 12-14, ¶¶ 28-30). The supplies provided by Purple Shovel were allegedly “defective” and had “little to no value, ” but Siedel, Strother, and Bristol nonetheless helped them pass SOCOM inspection in exchange for alleged kickbacks. (Id. at 2, ¶¶ 31-38).

         Second, Plaintiffs allege that Purple Shovel became ineligible to receive further SOCOM contracts. (Id. at 2-3, ¶¶ 39-46). So Defendants began bringing unwitting subcontractors, such as Omnipol and Elmex, into the scheme because these subcontractors were capable of delivering supplies that met SOCOM's quality standards. (Id. at 3, ¶¶ 47-50). As part of this scheme, Plaintiffs allege that, on June 7, 2016, Siedel, Strother, and Bristol issued a “partial SOCOM contract” to Purple Shovel for 7, 500 AK-47 assault rifles. (Id. at ¶¶ 51-53). Pursuant to that contract (the “SOCOM Contract”), SOCOM would pay Purple Shovel $2, 984, 250. (Id.).

         On May 3, 2017, “Benjamin Worrell, as CEO of Purple Shovel, notified [Elmex] by email that they were hired as the subcontractor” on the SOCOM Contract, and Elmex then selected Omnipol as the supplier on the contract. (Id. at ¶¶ 54-55). Both Elmex and Omnipol are companies registered in the Czech Republic. (Id. at ¶¶ 10-11).

         On June 26, 2017, Benjamin Worrell sent Plaintiffs a Cooperation Agreement between Plaintiffs and Purple Shovel “memorializing their agreement under the awarded subcontract.” (Id. at ¶ 56). The Cooperation Agreement provided that Purple Shovel would pay Elmex via wire transfer within 10 days of Purple Shovel receiving payment from SOCOM. (Id. at ¶ 61). According to Plaintiffs, Benjamin Worrell signed the Cooperation Agreement on behalf of Purple Shovel. (Id.).

         On July 20, 2017, SOCOM accepted delivery of the weapons. (Id. at ¶ 57). On July 27, 2017, Elmex invoiced Purple Shovel for the total amount due under the Cooperation Agreement, $2, 984, 250. (Id. at ¶ 58). Plaintiffs allege that Benjamin Worrell, as CEO of Purple Shovel, “agreed by mail, email, and telephone to pay Plaintiffs the $2, 984, 250 provided to Purple Shovel from SOCOM, ” and that Benjamin Worrell also provided to Plaintiffs an “End Use Certificate from SOCOM, verifying that this subcontract was pursuant to a SOCOM contract and that payment would be made by SOCOM.” (Id. at ¶¶ 59-60). According to Plaintiffs, “[o]nce SOCOM paid Purple Shovel for the weapons, Defendants diverted the subcontract proceeds to an unnamed co-conspirator, ” who then disbursed the funds among all Defendants.[1] (Id. at ¶¶ 62, 72, 77-79, 93(e)).

         Based on these allegations, Plaintiffs bring claims for fraud (Count I), civil theft (Count II), unjust enrichment (Count III), state racketeering violations (Count IV), violations of the federal Racketeer Influenced and Corrupt Organizations Act (RICO) (Count V), RICO conspiracy (Count VI), and attorneys' fees (Count VII).[2] (Id. at 17-29).

         On August 30, 2019, the United States filed three Notices of Substitution, stating that the United States was to be substituted for Defendants Siedel, Strother, and Bristol pursuant to the Westfall Act, 28 U.S.C. § 2679, on Counts I through IV and VII. (Doc. ## 88-90). The United States attached to each Notice a certification from the United States Attorney for the Middle District of Florida stating that Siedel, Strother, and Bristol were acting within the course and scope of their federal employment at the time of the alleged incidents giving rise to the Amended Complaint. (Doc. ## 88-1, 89-1, 90-1).

         Christopher Worrell and Brech (the Purple Shovel Defendants) each filed a Motion to Dismiss the Amended Complaint or, In the Alternative, For More Definite Statement, to which Plaintiffs responded. (Doc. ## 76, 86, 87, 95). The United States, on behalf of Siedel, Strother, and Bristol (the Federal Defendants) filed one consolidated Motion to Dismiss the Amended Complaint. (Doc. # 91). Plaintiffs responded, and the United States replied. (Doc. ## 98, 102). The Motions are now ripe for review.

         II. Legal Standard

         For allegations of fraud, a plaintiff must “state with particularity the circumstances constituting fraud[.]” Fed.R.Civ.P. 9(b). “The particularity rule serves an important purpose in fraud actions by alerting defendants to the precise misconduct with which they are charged and protecting defendants against spurious charges of immoral and fraudulent behavior.” United States ex rel. Atkins v. McInteer, 470 F.3d 1350, 1359 (11th Cir. 2006) (internal quotation marks omitted).

         Under Rule 9(b), plaintiffs must allege (1) precisely what statements were made in what documents or what oral misrepresentations were made; (2) the time, place, and person responsible for the statement; (3) the content of such statements and the manner in which these statements misled the plaintiff; and (4) what the defendants gained by the alleged fraud. Brooks v. Blue Cross & Blue Shield of Fla., Inc., 116 F.3d 1364, 1371, 1380-81 (11th Cir. 1997). In other words, to satisfy Rule 9(b), a plaintiff must establish the who, what, when, where, and how of the fraud. Mizarro v. Home Depot, Inc., 544 F.3d 1230, 1237 (11th Cir. 2008). In cases involving multiple defendants, a complaint alleging fraud must “reasonably notify the defendants of their purported role in the scheme” and “inform each defendant of the nature of his alleged participation in the fraud.” Brooks, 116 F.3d at 1381.

         On a motion to dismiss pursuant to Rule 12(b)(6), the Court accepts as true all the allegations in the complaint and construes them in the light most favorable to the plaintiff. Jackson v. Bellsouth Telecomms., 372 F.3d 1250, 1262 (11th Cir. 2004). Further, the Court favors the plaintiff with all reasonable inferences from the allegations in the complaint. Stephens v. Dep't of Health & Human Servs., 901 F.2d 1571, 1573 (11th Cir. 1990). But,

[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level.

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations omitted). Courts are not “bound to accept as true a legal conclusion couched as a factual allegation.” Papasan v. Allain, 478 U.S. 265, 286 (1986). Furthermore, “[t]he scope of review must be limited to the four corners of the complaint.” St. George v. Pinellas Cty., 285 F.3d 1334, 1337 (11th Cir. 2002).[3]

         III. Analysis

         All Defendants seek dismissal of the Amended Complaint for failure to meet the pleading standards enunciated in Rules 8, 9(b), and 12(b)(6). See (Doc. ## 76, 86, 91). However, before turning to this issue, the Court must address the Government's argument that Counts I through IV and VII should be dismissed as against the Federal Defendants for lack of subject-matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1). (Doc. # 91 at 1-2, 7, 10).

         A. Subject-Matter Jurisdiction

         The United States argues that, once it filed the Notices of Substitution, it was, by operation of law, substituted for Strother, Siedel, and Bristol as Defendant for Counts I through IV and VII, pursuant to the Westfall Act, 28 U.S.C. § 2679(d). (Doc. # 91 at 1 n.1). What's more, the Government argues that, under the Federal Tort Claims Act (FTCA), the Plaintiffs' exclusive remedy is against the United States on their state-law claims. (Id. at 9). And because the FTCA does not waive sovereign immunity for claims based on fraud, the Government submits that the Court should dismiss Counts I through IV and VII against the Federal Defendants for lack of subject-matter jurisdiction. (Id. at 9-10). The Government also argues that dismissal for lack of subject-matter jurisdiction is appropriate here because Plaintiffs have failed to exhaust their administrative remedies. (Id. at 11-12). The Government concedes that the FTCA does not govern Counts V and VI, Plaintiffs' claims for alleged violations of the federal RICO statutes. (Id. at 10 n.8).

         In their response, Plaintiffs vehemently object to the Government's certification that the Federal Defendants were acting within the scope of their employment. (Doc. # 98 at 4). According to the Plaintiffs, “[b]ased on this objection, the Government is not a proper party to this action and [the] FTCA does not apply.” (Id.). Plaintiffs point out that, under applicable law, the Government's certification is not dispositive. (Id. at 7). Plaintiffs argue that Siedel, Strother, and Bristol are the proper parties to this action because none of them were acting within the scope of their employment when carrying out the fraudulent schemes because the Federal Defendants' actions were not meant to serve their employer, the Government, but were meant purely to enrich themselves. (Id. at 5, 8, 9, 10). Plaintiffs request leave to conduct jurisdictional discovery and an evidentiary hearing on this issue. (Id. at 11, 12).

         In its reply, the Government argues that substitution of the United States was proper under the Westfall Act and that Plaintiffs have not met their burden to challenge the United States Attorney's certification. (Doc. # 102 at 1, 3-4). The Government argues that, to overcome the certification, Plaintiffs must come forward with evidence proving, by a preponderance of the evidence, that the employees were acting outside the scope of their employment. (Id. at 4). Because Plaintiffs have offered no specific evidence, or even a forecast of specific evidence, to contradict the certification, no discovery or hearing is needed. (Id. at 5).

         1. The Westfall Act and Whether Substitution of the United States is Proper

         When a federal employee is sued, the Westfall Act allows the United States Attorney General to certify that such federal employee defendant was acting within the scope of his or her office or employment at the time of the incident out of which the claim arose. 28 U.S.C. § 2679(d)(1). Upon the Attorney General's certification, any civil action commenced upon such a claim against a federal employee in a federal district court “shall be deemed an action against the United States, ” and the United States “shall be substituted as the party defendant.” Id. The authority to make such certification has been delegated to the United States Attorney for the district where the civil action is brought. 28 C.F.R. § 15.4. When such certification is made, the civil action “shall proceed in the same manner as any action against the United States filed pursuant to [28 U.S.C. § 1346(b)] and shall be subject to the exceptions and limitations applicable to those actions.” 28 U.S.C. § 2679(d)(4).

         Upon the certification of the Attorney General, the federal employee is dismissed from the action, and the United States is substituted as defendant in the employee's place. Osborn v. Haley, 549 U.S. 225, 230 (2007). Indeed, “[i]f the action is commenced in a federal court, and the Attorney General certifies that the employee ‘was acting within the scope of his office or employment at the relevant time,' the United States must be substituted as the defendant.” Id. at 241 (quoting 28 U.S.C. § 2679(d)(1)) (internal alterations omitted) (emphasis added). Thereafter, the litigation is governed by the FTCA. Id. at 230.

         However, both the Eleventh Circuit and the U.S. Supreme Court have held that the Attorney General's certification decision is subject to judicial review. Gutierrez de Martinez v. Lamagno, 515 U.S. 417, 431, 434 (1995) (determining that the Attorney General's certification “does not conclusively establish as correct the substitution of the United States as defendant in place of the employee”); see also Id. at 432 (“[T]he Attorney General's scarcely disinterested certification on that matter is by statute made the first, but not the final word.”); S.J. & W. Ranch, Inc. v. Lehtinen, 913 F.2d 1538, 1542, 1544 (11th Cir. 1990), amended by 924 F.2d 1555 (11th Cir. 1991) (concluding that a plaintiff “is entitled to litigate the question of whether the employee was acting within the scope of his employment when the challenged conduct occurred”).

         If a plaintiff challenges the scope-of-employment certification, the district court must review the certification de novo. Lehtinen, 913 F.2d at 1543 (explaining that the district court should not defer to the Attorney General's certification but should instead review the question de novo). Whether an employee's actions are within the scope of his employment for purposes of the Westfall Act involves a question of law as well as a question of fact, and is an issue governed by the law of the state where the incident occurred. Id. at 1542.

         In the course of the district court's de novo review, the Attorney General's certification serves as prima facie evidence that the employee conduct at issue occurred within the scope of employment. Id. at 1543. “The burden of altering the status quo by proving that the employee acted outside the scope of employment is, therefore, on the plaintiff.” Id.

         “In conducting this de novo review, the question of whether a given act falls within the scope of employment is highly fact-specific, and turns on the unique circumstances of the case at bar.” Hendrix v. Snow, 170 Fed.Appx. 68, 82 (11th Cir. 2006) (internal alterations omitted). Significantly, the Supreme Court has explained that the United States “must remain the federal defendant in the action unless and until the District Court determines that the employee, in fact, and not simply as alleged by the plaintiff, engaged in conduct beyond the scope of his employment.” Osborn, 549 U.S. at 231 (emphasis in original).

         Here, Plaintiffs have challenged the Attorney General's certification and argue that the Federal Defendants were acting outside the scope of their employment in committing the acts alleged in the Amended Complaint. Thus, this Court must review de novo whether the Federal Defendants' conduct was within the scope of their employment. See Lehtinen, 913 F.2d at 1543. The Court is entitled to treat the U.S. Attorney's certification as prima facie evidence that the Federal Defendants' conduct occurred within the scope of their employment at SOCOM and, thus, Plaintiffs have the burden of showing that the Federal Defendants' acted outside the scope of their employment, such that substitution would be improper. See Id.

         The parties disagree, however, on how Plaintiffs may make this showing. Plaintiffs rely on the allegations in their Amended Complaint and seek jurisdictional discovery and an evidentiary hearing to adduce further evidence on this issue. The Government maintains that, because Plaintiffs have not come forward at this stage with any evidence or a forecast of specific evidence, discovery should not be allowed and the certification and substitution should stand.

         While the Eleventh Circuit in Lehtinen remanded for the district court to permit the plaintiff “full discovery on the scope question” and ordered the district court to conduct a de novo hearing on the scope-of-employment issue, 913 F.2d at 1544, “nothing mandates that a district court allow discovery and hold an evidentiary hearing before ruling on a section 2679 certification.” Glover v. Donahoe, 626 Fed.Appx. 926, 930 (11th Cir. 2015); see also Pritchett v. Milstid, 891 F.Supp. 1541, 1544 (S.D. Ala. 1995) (“The Eleventh Circuit has not suggested, however, that an evidentiary hearing is required or that discovery must be permitted every time the Attorney General's certification is challenged.”). The question, then, is what serves to unlock the limited discovery that Plaintiffs seek - is it merely the allegations in the Amended Complaint, taken as true, or is there an extra showing that Plaintiffs must first make? The Court could not locate, nor do the parties point to, any Eleventh Circuit case law on this issue. Other Circuit Courts of Appeal have taken different approaches.

         The Court of Appeals for the District of Columbia Circuit has written: “Because the plaintiff cannot discharge [his] burden without some opportunity for discovery, the district court may permit limited discovery and hold an evidentiary hearing to resolve a material factual dispute regarding the scope of the defendant's employment.” Stokes v. Cross, 327 F.3d 1210, 1214 (D.C. Cir. 2003). To unlock this limited discovery, the plaintiff need only plead facts that, taken as true, would establish that the defendants' actions exceeded the scope of their employment. Id. at 1215.

         Likewise, the Third Circuit has determined that, where an Attorney General's certification clashes with the allegations in the complaint, “the plaintiff should be permitted reasonable discovery and should then be called upon to come forward, as if responding to a motion for summary judgment, with competent evidence supporting the facts upon which he would predicate liability, as well as any other facts necessary to support a conclusion that the defendant acted beyond the scope of his employment.” Melo v. Hafer, 13 F.3d 736, 747 (3d Cir. 1994).

         The Fourth Circuit, however, has laid out a different process for district courts to follow:

When the certification is challenged, it serves as prima facie evidence and shifts the burden to the plaintiff to prove, by a preponderance of the evidence, that the defendant federal employee was acting outside the scope of his employment. . . .
Moreover, the plaintiff's submission must be specific evidence or the forecast of specific evidence that contradicts the Attorney General's certification decision, not mere conclusory allegations and speculation. If the plaintiff's evidence is sufficient to carry the burden of proof, the defendant federal employee or the Government may come forward with evidence in support of the certification. At this point, the district court may permit (and limit) any needed discovery. Thereafter, the district court must determine whether there are any genuine issues of fact material to the scope-of-employment decision, and, if so, it may conduct an evidentiary hearing to resolve these factual issues. Once any factual issues are resolved, the district court should weigh the evidence on each side to ...

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