Head v. the Kane Company

• Court: District Court, District of Columbia
• Decided: November 12, 2009
• Docket: Civil Action No. 2005-0317
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ______________________________ UNITED STATES OF AMERICA, ) ) ex. rel. ) ) ANTHONY HEAD ) ) Plaintiff, ) ) v. ) Civil Action No. 05-317 (GK) ) THE KANE COMPANY, et. al., ) ) Defendants. ) ______________________________)

MEMORANDUM OPINION

Relator Anthony Head (“Relator” or “Head”) brings this qui tam

suit under the False Claims Act, 31 U.S.C. §§ 3729 et seq. (“FCA”),

on behalf of the United States against Defendant Kane Company

(“Defendant” or “Kane Company”), a Maryland corporation that

specializes in providing moving services and other logistics to

government agencies. Also named as Defendants are Office Movers,

Inc., a subsidiary of Kane Company, and Management Alternatives,

Harris Design Group, Settles Associates, and Perara Group, which

subcontracted work to Kane Company. The United States intervened

as Plaintiff in this suit on March 26, 2009. On July 24, 2009,

Defendant Kane Company filed an Answer in which it asserted twelve

counterclaims against Relator Head.

This matter is before the Court on the United States’ Motion

to Strike Affirmative Defense and to Dismiss Defendants’

Counterclaims [Dkt. No. 60], and on Relator Head’s Motion to Dismiss Defendant’s Counterclaims [Dkt. No. 59]. Upon

consideration of the Motions, Opposition, Replies, and the entire

record herein, and for the reasons set forth below, the Motion to

Strike is granted, and the Motions to Dismiss Defendant’s

Counterclaims are granted in part, and denied in part. Defendant

Kane Company is granted leave to amend counterclaims one through

four, six, seven, nine, and ten.

I. BACKGROUND

Relator Head is a former employee of Defendant Kane Company.

From 1997, when he was first hired, until his termination for poor

performance on January 10, 2005, Head held a number of sales

positions. His last position, to which he was promoted in 2003,

was Vice President for Government Sales. Compl. ¶ 13. On February

11, 2005, based on his experience with Defendants’ practices in

bidding on and performing government contracts, Head filed a sealed

Complaint in this Court alleging a number of violations of the FCA.

First, Head alleges that Kane Company knowingly submitted

bills, invoices, and demands for payment to federal agencies for

contracts entered into pursuant to the Services Contract Act, 41

U.S.C. §§ 351-58 (“SCA”), without paying its employees the

prevailing wage required under that statute. Defendants Management

Alternatives, Harris Design Group, and Settles Associates, which

were the general contractors on these contracts, are alleged to

-2- have falsely certified their and subcontractor Kane Company’s

compliance with the SCA. Compl. ¶ 4-6.

Second, Head alleges that Defendants defrauded federal

agencies by billing the same hours worked by employees to two or

more projects, thus charging government clients for hours worked on

other projects. Compl. ¶ 7. Third, Head alleges that Defendant

Kane Company submitted General Services Administration (“GSA”)

schedules for contracts which included prices higher than those

charged to private sector clients, contrary to GSA’s “best price”

requirement. Compl. ¶ 8. Fourth, Head alleges that Defendant

Office Movers, Inc. improperly relied upon Defendant Perara Group’s

Section 8(a) status under the Small Business Act, 15 U.S.C. § 631

et seq. (“SBA”), to procure contracts for which it was not

otherwise eligible. Compl. ¶ 9. Finally, Head alleges that

Defendant Kane Company, by and through its officers, knowingly

double-charged energy surcharges to federal agencies. Compl. ¶ 10.

Approximately two weeks after filing his sealed Complaint,

Head and Kane Company entered into a Separation Agreement arising

out of Head’s termination. Def.’s Answer, Ex. A. First, ¶ 3 of

the Agreement provided that any correspondence or other records

concerning the Company’s operation was the sole property of Kane

Company, and Head warrantied that he had turned over, or promptly

would turn over, any such property in his custody or control.

Second, the parties agreed in ¶ 4 that they would not “make any

-3- oral or written statement or take any other action which disparages

or criticizes the other party.” Id. ¶ 4. Third, in ¶ 10 of the

Agreement, Head and Kane Company released each other from claims

and liabilities arising from the terminated employment relationship

and agreed to indemnify each other for damages arising out of a

breach of the Agreement. Id. ¶¶ 6, 8.

In March 2009, after conducting its own investigation into

these allegations for more than four years, the United States

intervened as Plaintiff. In response, Defendant Kane Company

raised two affirmative defenses against the Government: laches,

and the applicability of the statute of limitations to those

contractual dealings that occurred more than ten years ago. Kane

Company also counter-claimed1 against Head for defamation, tortious

interference with economic advantage, intentional interference with

contract, intentional interference with prospective economic

advantage, malicious prosecution, libel, slander, breach of

contract, and fraud.2 Finally, Defendant sought contractual

1 Because Head has sued on behalf of the United States, the real party in interest, Defendant’s “counterclaims” could be considered cross-claims or even third-party claims. The classification, however, is not outcome-determinative. United States v. Bill Harbert Intn’l Constr., Inc., 505 Fed. Supp. 2d 20, n.1 (D.D.C. 2007). 2 As Head points out in his Motion to Dismiss, under Maryland law a claim for “tortious interference with economic advantage” is properly called “tortious interference with economic relations.” Rel.’s Mot. to Dismiss 16-17. Defendant Kane Company has not clarified whether its counterclaims are brought under District of (continued...)

-4- indemnification from Head for any liability under the FCA, pursuant

to ¶ 10 of the 2005 Separation Agreement, and injunctive relief

against any further violation of the Agreement.

The United States moved to dismiss the affirmative defense of

laches, arguing that it is not applicable to the United States, and

to dismiss the counterclaims against Head as void against public

policy.3 Head also moved to dismiss the counterclaims as void

against public policy and for a failure to state a claim under

Federal Rule of Civil Procedure 12(b)(6).

II. MOTION TO STRIKE AFFIRMATIVE DEFENSE OF LACHES

In its Answer to the United States’ Intervenor Complaint, Kane

Company argues that the government has “slept on its rights” by

waiting four years after Head filed suit to intervene, and

therefore is barred from pursuing this action. Def.’s Answer 6.

The United States moved under Federal Rule of Civil Procedure 12(f)

to strike this defense.

Motions to strike are not generally favored. However, “[t]he

motion should be granted where it is clear that the affirmative

defense is irrelevant and frivolous and its removal from the case

2 (...continued) Columbia or Maryland law. For the purposes of ruling on the Motions, the Court will adopt the terminology used by Defendant in its counterclaims. 3 The Government invoked Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) in its Motion to Dismiss, but the argument in its supporting papers was limited to the public policy issue.

-5- would avoid wasting unnecessary time and money litigating the

invalid defense.” SEC v. Gulf & Western Indus., Inc., 502 F. Supp.

343, 344 (D.D.C. 1980) (citation omitted).

It is well established that “laches or neglect of duty on the

part of officers of the government is no defense to a suit by it to

enforce a public right or protect a public interest.” Utah Power

& Light Co. v. United States, 243 U.S. 389, 409, 37 S.Ct. 387, 61

L.Ed. 791 (1917). See also United States v. Summerlin, 310 U.S.

414, 416, 60 S.Ct. 1019, 84 L.Ed. 1283 (1940) (it is “well settled

that the United States is not ... subject to the defense of laches

in enforcing its rights”); Illinois Cent. R.R. Co. v. Rogers, 253

F.2d 349, 353 (D.C. Cir. 1958) (“No rule is better established than

that the United States are not bound by limitations or barred by

laches where they are asserting a public right.”) (internal

quotation omitted); United States v. Philip Morris, Inc., 300 F.

Supp. 2d 61, 72-73 (D.D.C. 2004) (discussing rule in Summerlin).

In this case, the United States is clearly acting in the

public interest by seeking to hold Defendants accountable under the

FCA. Furthermore, Kane Company failed to present any argument in

opposing the Motion to Strike; therefore the issue may be properly

regarded as conceded. See FDIC v. Bender, 127 F.3d 58, 67-68 (D.C.

Cir. 1997). For these reasons, the doctrine of laches is held to

be inapplicable to this claim and the United States’ Motion to

Strike is granted.

-6- III. MOTION TO DISMISS DEFENDANTS’ COUNTERCLAIMS

The United States and Head also move to dismiss Defendant’s

twelve counterclaims against Head. Both argue that the

counterclaims are void as against public policy, since they could

have the effect of discouraging private citizens from filing qui

tam suits under the False Claims Act. In addition, Head argues

that Kane Company has failed to plead sufficient facts in support

of its counterclaims, and asks this Court to dismiss them under

Federal Rule of Civil Procedure 12(b)(6).4

A. Counterclaims Which Are Dismissed as Void Against Public Policy

4 Head also argues that those counterclaims not related to enforcement of the Separation Agreement are “contractually barred,” as Kane Company released Head from all “actions, causes of action, suits . . . known or unknown, suspected or unsuspected, arising from, in connection with, or in any way pertaining to [his] employment with [Defendant].” Rel. Head’s Mot. 9-10 (citing ¶ 6 of the 2005 Separation Agreement, Def.’s Opp’n Ex. A). This argument is limited to counterclaims one through seven and ten, as counterclaims eight, nine, eleven, and twelve are related to enforcement of the Agreement. However, counterclaims one through seven and ten--which include those for defamation, tortious interference with economic advantage, intentional interference with contract, intentional interference with prospective business advantage, malicious prosecution, libel, slander, and fraud--are all based on alleged statements made by Head in the course of this proceeding or to third parties. Kane Company does not make clear in its Opposition whether these statements allegedly occurred before or after Head’s termination on January 10, 2005. Thus, the argument will not be addressed until Defendant amends its counterclaims to meet the Rule 12(b)(6) standard. Once sufficient facts have been pled, whether those counterclaims are “arising from, in connection with, or in any way pertaining to [Head’s] employment,” and thus contractually barred, will be considered.

-7- The moving parties make two public policy arguments in support

of their Motions to Dismiss. First, they argue that counterclaims

eight and nine (the two counterclaims for breach of the 2005

Separation Agreement) should be dismissed because the Agreement is

contrary to public policy. Specifically, the moving parties argue

that a private agreement may not be enforced when its terms, which

here relate to the return of company property and to disparagement,

would have the effect of preventing individuals from furnishing

evidence to the government or making allegations under the FCA,

since this would unduly frustrate the Act’s purpose. Pl.’s Mot. 5-

11; Rel.’s Mot. 10-14. Second, the movants argue in the

alternative that United States ex. rel. Miller v. Bill Harbert

Intn’l Constr., 505 F. Supp. 2d 20 (D.D.C. 2007) (“Harbert”),

compels dismissal of all of Defendant’s counterclaims.

1. Counterclaim Eight Is Dismissed as Void Against Public Policy; Counterclaim Nine Is Not Dismissed as Void Against Public Policy

The movants argue that the Separation Agreement between Head

and Kane Company is unenforceable on grounds of public policy, and

therefore counterclaims eight and nine must be dismissed.

Counterclaim eight alleges breach of contract for Head’s ongoing

failure to return an email to Kane Company, in violation of ¶ 3 of

the Separation Agreement. The email, dated January 3, 2000, was

sent by Head to Mark Cavanaugh, Kane Company’s Chief Financial

Officer at the time, and raised the issue of Kane Company’s failure

-8- to pay the wage determination. Head filed the email in this

proceeding as Exhibit 2 to his Complaint. Counterclaim nine

alleges breach of contract for Head’s violation of ¶ 4 of the

Agreement, which prohibits disparagement of Kane Company. Kane

Company alleges that Head made “oral and written disparaging

comments about the company, its managements [sic] and its

employees.” Def.’s Answer ¶¶ 68-71.

In the absence of an expression of Congressional intent to the

contrary, a private agreement is unenforceable on grounds of public

policy if its enforcement is clearly outweighed by a public policy

against such terms. Town of Newton v. Rumery, 480 U.S. 386, 107

S.Ct. 1187, 94 L.Ed.2d 405 (1987); United States v. Northrop Corp.,

59 F.3d 953, 958-59 (9th Cir. 1995) (discussing rule in FCA case

where private agreement which provided for release of relator’s

claims was held unenforceable); Restatement (Second) of Contracts

§ 178(1) (2009). The purpose of the FCA is “to discourage fraud

against the government” and, “[c]oncomitantly, the purpose of the

qui tam provision of the Act is to encourage those with knowledge

of fraud to come forward.” Neal v. Honeywell, Inc., 826 F. Supp.

266, 269 (N.D. Ill. 1993) (citing H.R.Rep. No. 660, 99th Cong., 2d

Sess., 22 (1986)).

Applying this standard, Defendant’s counterclaim based on

Head’s ongoing failure to return the January 3, 2000 email to Kane

Company is void as against public policy. The FCA requires that

-9- relators serve upon the United States “written disclosure of

substantially all material evidence and information the person

possesses” in order to enable the government’s own investigation to

proceed expeditiously.5 31 U.S.C. § 3730(b)(2) (2008). Enforcing

a private agreement that requires a qui tam plaintiff to turn over

his or her copy of a document, which is likely to be needed as

evidence at trial, to the defendant who is under investigation

would unduly frustrate the purpose of this provision. Cf. X Corp.

v. John Doe, 805 F. Supp. 1298, n.24 (E.D. Va. 1992) (noting that

a Confidentiality Agreement would be void as against public policy

if, when enforced, it would prevent “disclosure of evidence of a

fraud on the government”). Therefore, Defendant’s counterclaim

eight (breach of contract - failure to return company property),

must be dismissed as contrary to public policy.

Counterclaim nine (breach of contract - failure to refrain

from disparagement), however, is based upon disparaging statements

that Head allegedly made to third parties not involved in this

litigation, and not statements made in this proceeding or during

the Government’s investigation. Def.’s Opp’n 13-14. Enforcing the

Agreement under counterclaim nine would not implicate Head’s

5 The United States also argues that Defendant’s counterclaims are contrary to “the spirit” of 31 U.S.C. § 3730(h), which prohibits retaliation in the form of discharge, demotion, suspension, threats, harassment, or other discrimination “in the terms and conditions of employment.” 31 U.S.C. § 3730(h) (2008). Because Head was terminated prior to the filing of this Complaint, § 3730(h) does not apply to this action.

-10- ability to bring this suit, and so does not involve the same public

policy concerns as counterclaim eight. Therefore, the Motion to

Dismiss counterclaim nine as void as against public policy must be

denied. However, there is a remaining question, discussed below,

as to whether Defendant properly alleged the elements of this claim

in its pleading.

2. Counterclaim Eleven Is Dismissed as Void Against Public Policy; Counterclaims Nine, Twelve, Five, Six, Seven, and Ten Are Not Dismissed as Void Against Public Policy

The United States and Relator Head rely on Harbert, the major

and most recent case in this Court, to argue that the remaining

counterclaims should be dismissed as contrary to public policy.

The court in Harbert drew a careful distinction between those

counterclaims that were and that were not permitted in FCA suits.

Guided principally by the unavailability of contribution and

indemnification for a defendant under the FCA, and drawing upon

judicial precedent, the District Court summarized the law as

follows: “[A]n FCA defendant found liable of FCA violations may

not pursue a counterclaim that will have the equivalent effect of

contribution or indemnification.” Harbert, 505 F. Supp. 2d at 26.6

6 The court in Harbert recognized that, while any potential liability for events connected to a FCA suit could chill a relator from bringing suit, a blanket rule prohibiting a defendant from bringing any counterclaim would raise “real due process concerns.” Id. at 27.

-11- However, counterclaims based on independent damages, or claims

the success of which does not require a finding that the defendant

is liable, may be maintained. Id. at 26-27. Such claims fall into

two categories: First, there are those counterclaims where “the

conduct at issue is distinct from the conduct underlying the FCA

case.” Second, there are those counterclaims where “the

defendant’s claim, though bound up in the facts of the FCA case,

can only prevail if the defendant is found not liable in the FCA

case.” Id. at 27 (emphasis in original). In contrast, a

counterclaim is impermissible if it depends upon a finding that the

defendant is liable under the FCA, as it would then have the

equivalent effect of a claim for contribution or indemnification.

a. Counterclaims Nine and Twelve Are Permissible Under Category One

Counterclaims nine (breach of the 2005 Separation Agreement’s

non-disparagement provision) and twelve (injunctive relief relating

to the breach of contract) fall under the first category of

permissible counterclaims. Because liability turns on whether Head

made disparaging or critical statements to third parties in

violation of his contractual obligations after this suit was filed

and completely apart from this proceeding, they do not implicate

Defendant’s liability under the FCA.

b. Counterclaims One, Five, Six, Seven, and Ten Are Permissible Under Category Two

-12- The second category of permissible counterclaims (where the

defendant must be found not liable) includes counterclaims one

(defamation), five (malicious prosecution), six (libel), seven

(slander), and ten (fraud). See id. at 28 (naming libel,

defamation, malicious prosecution, and abuse of process as examples

of permissible counterclaims under the FCA). The defamation,

libel, and slander counterclaims depend upon a finding that Kane

Company is not liable under the FCA, since truth is a defense under

both Maryland and District of Columbia law. Moldea v. New York

Times Co., 15 F.3d 1137, 1142 (D.C. Cir. 1994) (noting defense of

truth to defamation claims under District of Columbia law); Batson

v. Shiflett, 325 Md. 684, 726 (1992) (noting defense of truth to

defamation claims under Maryland law). Similarly, counterclaim ten

(fraud) requires a finding that, prior to signing the Separation

Agreement, Head had “misrepresented Kane or dealt with any third

party in bad faith” when he alleged Kane’s violation of the FCA.

Def.’s Opp’n 14. Finally, counterclaim five (malicious

prosecution) requires a showing that the proceeding was resolved in

favor of the party bringing the claim, which is the equivalent of

a showing that the FCA defendants were found not liable. See

Shulman v. Miskell, 626 F.2d 173, 175 (D.C. Cir. 1980).

c. Counterclaims Two, Three, and Four Will Be Permissible Under Either Category One or Two

Counterclaims two (tortious interference with economic

advantage), three (intentional interference with contract), and

-13- four (intentional interference with prospective business advantage)

would be permissible under category one if none of the elements of

these causes of action implicate Defendant’s liability under the

FCA. That question turns on an analysis of Maryland and District

of Columbia law. Because the parties have not fully briefed that

issue, it is premature for decision. Therefore, it cannot be said

with certainty that counterclaims two, three, and four fall under

category one.

However, even if it were determined that counterclaims two,

three, and four implicate Defendant’s liability under the FCA, the

counterclaims would still be permissible because they fall under

category two. The only elements in these causes of action that

possibly require a finding as to Defendant’s liability under the

FCA are those that require the interference to be with a “lawful”

business, and that the interference be done without right or

justification.7 Thus, the required finding, if any, would be that

Kane Company was not liable under the FCA. Under either analysis,

7 For the elements of each cause of action, see Spengler v. Sears, Roebuck & Co., 878 A.2d 628, 641 (Md. App. 2005) (tortious interference with economic relations claim under Maryland law); Paul v. Howard Univ., 754 A.2d 297, 309 (D.C. 2000) (tortious interference with contract claim under District of Columbia law); Blondell v. Littlepage, 968 A.2d 678, 696 (Md. App. 2009) (tortious interference with contract claim under Maryland law); Bennett Enters., Inc. v. Domino's Pizza, Inc., 45 F.3d 493, 499 (D.C. Cir. 1995) (tortious interference with economic advantage claim under District of Columbia law); Carter v. Aramark Sports and Entertainment Services, Inc., 835 A.2d 262, 279-80 (Md. App. 2003) (intentional interference with business relations claim under Maryland law).

-14- then, counterclaims two, three, and four would be permissible.

Therefore, the Motion to Dismiss these counterclaims as contrary to

public policy is denied.

d. Counterclaim Eleven (Contractual Indemnification) Is Dismissed

In contrast, Defendant’s counterclaim for contractual

indemnification pursuant to ¶ 10 of the 2005 Separation Agreement

clearly falls within the category of those counterclaims not

permitted by the FCA. Defendant seeks to hold Head liable for any

damages arising from the pending FCA claims. Def.’s Opp’n 16.

Even if the FCA claims arose, as alleged, from Head’s “willful

misconduct” or from his having breached the Separation Agreement,

liability for violations of the FCA may not be shifted to the

relator. Harbert, 505 F. Supp. 2d at 26-28. In light of the clear

prohibition against counterclaims for contribution or

indemnification, Defendant’s eleventh counterclaim is dismissed

with prejudice.

B. Counterclaims Which Are Dismissed Pursuant to Federal Rule of Civil Procedure 12(b)(6)

Head also seeks to dismiss the remaining ten counterclaims

under Federal Rule of Civil Procedure 12(b)(6). These include

counterclaims one (defamation), two (tortious interference with

economic advantage), three (intentional interference with

contract), four (intentional interference with prospective economic

advantage), five (malicious prosecution), six (libel), seven

-15- (slander), nine (breach of contract - failure to refrain from

disparagement), ten (fraud), and twelve (injunctive relief).

To survive a motion to dismiss under Rule 12(b)(6), a

plaintiff need only plead “enough facts to state a claim to relief

that is plausible on its face” and to “nudge[ ] [his or her] claims

across the line from conceivable to plausible.” Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 570 (2007). “[O]nce a claim has been stated

adequately, it may be supported by showing any set of facts

consistent with the allegations in the complaint.” Id. at 563. A

complaint will not suffice, however, if it “tenders ‘naked

assertions’ devoid of ‘further factual enhancement.’” Ashcroft v.

Iqbal, 129 S.Ct. 1937, 1948 (2009) (citing Twombly, 550 U.S. at

557).

Under the Twombly standard, a “court deciding a motion to

dismiss must not make any judgment about the probability of the

plaintiff's success . . . must assume all the allegations in the

complaint are true (even if doubtful in fact) . . . [and] must give

the plaintiff the benefit of all reasonable inferences derived from

the facts alleged.” Aktieselskabet AF 21. November 2001 v. Fame

Jeans, Inc., 525 F.3d 8, 17 (D.C. Cir. 2008) (internal quotation

marks and citations omitted).

1. Counterclaims Dependent Upon Relator Head’s Statements

Eight of Defendant’s remaining ten counterclaims are based

upon the allegation that Head made false statements alleging Kane

-16- Company’s liability under the FCA, whether as a part of this

proceeding or in subsequent statements to third parties other than

the government. These include counterclaims one (defamation), two

(tortious interference with economic advantage), three (intentional

interference with contract), four (intentional interference with

prospective economic advantage), six (libel), seven (slander), nine

(breach of contract - failure to refrain from disparagement), and

ten (fraud).8

To the extent that Defendant relies upon any allegation made

by Head in pleadings filed in this Court or in support of the

government’s investigation, its counterclaims are barred by

absolute privilege. Finkelstein, Thompson & Loughran v. Hemispherx

Biopharma, Inc., 774 A.2d 332, 338 (D.C. 2001) ("Along with the

overwhelming majority of the States, the District of Columbia has

long recognized an absolute privilege for statements made

preliminary to, or in the course of, a judicial proceeding, so long

as the statements bear some relation to the proceeding"); Brown v.

Collins, 402 F.2d 209, 212 (D.C. Cir. 1968); Restatement (First) of

Torts § 587 (2009).

Defendant does not deny, however, that the absolute privilege

doctrine applies to the statements made in this proceeding.

Instead, Defendant asserts that its counterclaims are based on

8 The counterclaim for fraud in the inducement alleges that Head misrepresented, at the time he entered into the Separation Agreement, whether he had “misrepresented Kane or dealt with any third party in bad faith.” Def.’s Opp’n 14.

-17- statements made by Head at some unspecificed point in time to

unspecified third parties. Def.’s Opp’n 3, 5, 6. Yet Defendant

has alleged no facts in support of its claim that Head made any

such statements, and does not claim to have knowledge of any

evidence of such statements having been made. Id. at 6. Such bare

assertions do not nudge Defendant’s claims across the line “from

conceivable to plausible.”

Further, the allegation fails to meet the standard for a

defamation claim facing a motion to dismiss in Armenian Assembly of

America, Inc. v. Cafesjian, 597 F. Supp. 2d 128, 137 (D.D.C. 2009),

upon which Kane Company itself relies, that it include at least

“enough information ‘to apprise’ [the party accused] of the persons

or category of persons to whom the defamatory statements were made

. . . .” Given Defendant’s failure to assert any facts in support

of its allegation that Relator Head made statements to third

parties, counterclaims one (defamation), two (tortious interference

with economic advantage), three (intentional interference with

contract), four (intentional interference with prospective economic

advantage), six (libel), seven (slander), nine (breach of contract

- failure to refrain from disparagement), and ten (fraud) must be

dismissed for failing to state a claim under Rule 12(b)(6).

Defendant, however, requests leave to amend any such deficient

counterclaims in lieu of dismissal. Def.’s Opp’n n.3. Under

Federal Rule of Civil Procedure 15(a), leave to amend shall be

-18- freely given when justice so requires. Caribbean Broad. Sys., Ltd.

v. Cable & Wireless P.L.C., 148 F.3d 1080, 1083-85 (D.C. Cir.

1998). In exercising its discretion, the trial court may consider,

among other factors, undue delay, dilatory motive on the part of

the movant, and undue prejudice to the opposing party by virtue of

allowing the amendment. Hammerman v. Peacock, 607 F. Supp. 911,

917 (D.D.C. 1985). As none of these factors appear to be present,

and because the arguments made by the United States and Head in

opposing the request for leave to amend are not persuasive,

Defendant is granted leave to amend counterclaims one through four,

six, seven, nine, and ten in order to cure any factual deficiencies

in the pleadings, including, but not limited to, insufficient facts

supporting the allegation that Head made disparaging or defamatory

statements to third parties.

2. Counterclaim Five (Malicious Prosecution) Is Dismissed

Defendant also counterclaims for malicious prosecution. Under

Maryland law, a claim for malicious prosecution only applies in

criminal proceedings, and therefore is not properly brought in this

action. Southern Mgmt. Corp. v. Taha, 378 Md. 461, 479 (2003).

Under District of Columbia law, a malicious prosecution claim may

be brought in both civil and criminal proceedings. See Brown v.

Carr, 503 A.2d 1241 (D.C. 1986). One of the prima facie elements

of the claim under D.C. law, however, is that the underlying suit

must have been first terminated in favor of the claimant. Shulman

-19- v. Miskell, 626 F.2d at 175 (explaining requirement on the theory

that, “if the malicious prosecution plaintiff were permitted to sue

before he had prevailed in the original action, inconsistent

judgment might be entered on the same question between the same

parties”). Given this, Defendant’s claim is premature, as the

current action brought under the FCA has yet to be decided. The

counterclaim for malicious prosecution is therefore dismissed

without prejudice.

3. Defendant’s Counterclaim for Injunctive Relief Is Not Dismissed

The last remaining counterclaim is Defendant’s request for an

injunction prohibiting Head from further breaching the Separation

Agreement. Def.’s Answer ¶¶ 84-88. In effect, this “counterclaim”

is a request for a particular remedy—injunctive relief—based on

Kane Company’s two counterclaims for breach of the Separation

Agreement. The first counterclaim for breach of contract, related

to Head’s failure to return the January 3, 2000 email to Kane

Company, has been dismissed as contrary to public policy. The

second counterclaim for breach of contract, related to Head’s

alleged statements to third parties, however, has not yet been

dismissed, pending Defendant’s amendment of its counterclaims.

Thus, the Motion to Dismiss Defendant’s request for injunctive

relief is denied without prejudice.

IV. CONCLUSION

-20- For the reasons set forth above, the United States’ Motion to

Strike Affirmative Defense under Federal Rule of Civil Procedure

12(f) is granted, and the United States’ and Relator Head’s Motions

to Dismiss Defendant’s Counterclaims are granted as to

counterclaims five (malicious prosecution), eight (breach of

contract - failure to return company property), and eleven

(contractual indemnification). Defendant is granted leave to amend

counterclaims one (defamation), two (tortious interference with

contract), four (intentional interference with prospective economic

advantage), six (libel), seven (slander), nine (breach of contract

- failure to refrain from disparagement), and ten (fraud). An

Order will accompany this Memorandum Opinion.

/s/ November 12, 2009 Gladys Kessler United States District Judge

Copies to: attorneys on record via ECF

-21-