Adams v. Dell Computer Corporation

District Court, District of Columbia·Decided October 8, 2020·No. Civil Action No. 2015-0608·Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA ex rel.

PHILLIP M. ADAMS,

Plaintiff/Relator,

Civil Action No. 15-cv-608 (TFH)

v.

DELL COMPUTER CORPORATION, et al., Defendants.

MEMORANDUM OPINION

Plaintiff-Relator Phillip M. Adams brings this qui tam lawsuit on behalf of himself and the United States of America against Dell Computer Corporation and fifteen other Dell entities (collectively, Dell or Defendants). Mr. Adams alleges that Dell violated the False Claims Act (FCA), 31 U.S.C. § 3729, et seq., by knowingly selling hundreds of millions of dollars of computer systems to the United States government that contained undisclosed security vulnerabilities. Mr. Adams labels those vulnerabilities as a “Hardware Trojan.” The United States declined to intervene in the litigation and Dell moved to dismiss for failure to state a claim under Federal Rules of Civil Procedure 8(a), 9(b), and 12(b)(6). For the following reasons, the Court will grant Defendants’ motion and dismiss the amended complaint.

I. BACKGROUND

Dell is a “multinational company that delivers worldwide innovative technology, business solutions and services.” Mot. to Dismiss First Am. Compl. (Mot.) [Dkt. 59] at 10. 1

1 Page references to Defendants’ motion to dismiss refer to the electronic case filing (ECF) page number.

Mr. Adams is “an internationally-recognized expert in computer hardware and software systems” who “has published numerous books and articles concerning operating systems and computer architecture and has been awarded numerous patents and patents pending from the United States Patent and Trademark Office for inventions and breakthroughs in the computer area.” Am. Compl. [Dkt. 49] ¶ 5(a). Mr. Adams alleges that he conducted an “independent investigation” into the existence of Hardware Trojans2 in computer systems sold by Dell to the United States government. Id. ¶¶ 5(b), 22. During his investigation, he allegedly created “unique methods and tools” to identify the Hardware Trojans. Id. ¶ 5(b). The Hardware Trojan is a “cybersecurity hardware vulnerability [that] can be (1) exploited maliciously to deny the Government use of the Affected Computer Systems based on criteria selected by those exploiting the vulnerability; or (2) triggered unwittingly by users or software developers with the same denial-of-use effect.” Id. ¶ 9.

According to Mr. Adams, Dell “directly or indirectly presented false claims for payment to the Government for Dell Defendants’ Affected Computer Systems . . . and made and used false records and statements in support of their false claims for payment.” Id. ¶ 7. Specifically, the Affected Computer Systems sold by Dell included system control chips that included legacy functions, which the United States government did not want or need the system control chip to contain. Id. ¶ 12. An example of a legacy system is programing to recognize a floppy disk drive. Even though government computers no longer contain or have the need to connect to floppy disk drives, the system control chip includes a legacy floppy disk controller. That legacy floppy disk controller is accessible and functional, but not used by the Affected Computer

2 Hardware Trojan is a term used and defined by Mr. Adams. The Court uses the term because it reflects the language of the Amended Complaint.

System because no floppy disk is present. Mr. Adams contends that these unused, but available, functions permit exploitation of the Affected Computer System. Id. ¶ 15.

On April 22, 2015, Mr. Adams filed his qui tam complaint against Dell. Compl. [Dkt. 1].

The United States declined to intervene on September 23, 2015. Notice of Declination [Dkt. 5]. Mr. Adams filed an amended complaint on July 29, 2016. Am. Compl. [Dkt. 49]. On September 19, 2016, Defendants moved to dismiss. See Mot. Mr. Adams opposed and Defendants replied. See Mem. of P. & A.’s in Opp’n to Mot. to Dismiss First Am. Compl. (Opp’n) [Dkt. 62]; Reply Mem. of P. & A.’s in Supp. of Mot. to Dismiss First Am. Compl. (Reply) [Dkt. 64]. On April 26, 2017, the Court heard oral argument on the motion. Since the motion hearing, each party has filed a notice of supplemental authority which prompted an opposition and reply. 3 The motion is ripe for review.

II. LEGAL STANDARD

A. Motion to Dismiss Under Rule 12(b)(6)

Rule 8 of the Federal Rules of Civil Procedure mandates that a complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). When a party invokes Rule 12(b)(6) to challenge a complaint for failing to state a claim for relief pursuant to Rule 8, the Court must assess the complaint to determine whether it contains sufficient facts that, when accepted as true, evidence a claim that is “plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007); accord Ashcroft v. Iqbal, 556

3 See Notice of Suppl. Authority Relevant to the Dell Defs.’ Mot. to Dismiss First Am. Compl. [Dkt. 65]; Relator’s Response to Dell’s Notice of Suppl. Authority and Notice of Additional Suppl. Authority [Dkt. 66]; The Dell Defs.’ Resp. to Relator’s Notice of Additional Suppl. Authority [Dkt. 67]; Relator’s Notice of Suppl. Authority [Dkt. 69]; The Dell Defs.’ Resp. to Relator’s June 22, 2020, Notice of Suppl. Authority [Dkt. 70]; Relator’s Reply to the Dell Defs.’ Resp. to Relator’s June 22, 2020 Notice of Suppl. Authority [Dkt. 72].

U.S. 662, 679 (2009). “[T]he pleading standard Rule 8 announces does not require ‘detailed factual allegations,’ but it demands more than an unadorned, the-defendant-unlawfully-harmed- me accusation.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555). “A pleading that offers ‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause of action will not do.’” Id. (quoting Twombly, 550 U.S. at 555). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. A court must treat the complaint’s factual allegations as true, “even if doubtful in fact.” Twombly, 550 U.S. at 555. But a court need not accept as true legal conclusions set forth in a complaint. Iqbal, 556 U.S. at 678. “In determining whether a complaint states a claim, the court may consider the facts alleged in the complaint, documents attached thereto or incorporated therein, and matters of which it may take judicial notice.” Stewart v. Nat’l Educ. Ass’n, 471 F.3d 169, 173 (D.C. Cir. 2006).

B. Motion to Dismiss under Rule 9(b)

The FCA is an anti-fraud statute, so this Circuit and every other circuit to consider the issue has held that complaints brought under the FCA must comply with Rule 9(b)’s pleading requirements. United States ex rel. Totten v. Bombardier Corp. (Totten I), 286 F.3d 542, 551-52 (D.C. Cir. 2002) (citing Bly-Magee v. California, 236 F.3d 1014, 1018 (9th Cir. 2001); United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir. 1997); Gold v. Morrison-Knudsen Co., 68 F.3d 1475, 1476-77 (2d Cir. 1995)). Rule 9(b) requires that “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.”

The D.C. Circuit has explained that “‘the pleader must state the time, place and content of the false misrepresentations, the fact misrepresented and what was retained or given up as a

consequence of the fraud.’” Kowal v. MCI Commc’ns Corp., 16 F.3d 1271, 1278 (D.C. Cir. 1994) (quoting United States ex rel. Joseph v. Cannon, 642 F.2d 1373, 1385 (D.C. Cir. 1981)); see also United States ex rel. Williams v. Martin-Baker Aircraft Co., Ltd., 389 F.3d 1251, 1256 (D.C. Cir. 2004); Totten I, 286 F.3d at 552.

III. ANALYSIS4

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