United States ex rel. Knisely v. Cintas Corp.

298 F.R.D. 229, 88 Fed. R. Serv. 3d 327, 2014 WL 983468, 2014 U.S. Dist. LEXIS 33249
CourtDistrict Court, E.D. Pennsylvania
DecidedMarch 14, 2014
DocketCivil Action No. 10-1193
StatusPublished
Cited by7 cases

This text of 298 F.R.D. 229 (United States ex rel. Knisely v. Cintas Corp.) is published on Counsel Stack Legal Research, covering District Court, E.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States ex rel. Knisely v. Cintas Corp., 298 F.R.D. 229, 88 Fed. R. Serv. 3d 327, 2014 WL 983468, 2014 U.S. Dist. LEXIS 33249 (E.D. Pa. 2014).

Opinion

MEMORANDUM

DALZELL, District Judge.

Relator Douglas Knisely (“Knisely”) brings this action under the False Claims Act (hereinafter “FCA”), 31 U.S.C. § 3729 et seq., alleging that Cintas Corporation, Inc. (“Cin-tas”) submitted false claims to the United States for payment for shredding services that failed to comply with size specifications in Cintas’s Government contracts. Knisely also alleges that Cintas violated the Lanham Act, 15 U.S.C. § 1125(a), by misrepresenting its compliance with government shredding contracts in order to win other shredding business. Before us are Cintas’s motion to dismiss, Knisely’s opposition thereto, Cintas’s reply and Knisely’s surreply. For the reasons detailed below, we will grant Cintas’s motion in part and deny it in part.

I. Background

A. The Parties

Knisely owns and operates Knisely Security LLC which through a subsidiary provides shredding services in central Pennsylvania. First Amended Complaint (“FAC”) at ¶¶ 17-19. Cintas is a publicly-traded $4 billion (revenue) company that offers nationwide shredding services through one of its four subsidiaries. Id. ¶¶42, 44, 45, 48. Knisely Security and Cintas are direct competitors in central Pennsylvania. Id. ¶250. In 2010, relator Knisely brought this qui tam action under seal, pursuant to the False Claims Act, against Shred-It USA, Inc., Iron Mountain, Inc., and Cintas, alleging that each defendant knowingly submitted false claims for payment for shredding services that failed to comply with the size specifications mandated in their contracts with the Government. Id. ¶¶ 1-5. The False Claims Act encourages those with knowledge of fraud against the Government to bring an action as individuals and on behalf of the Government in exchange for a share of any recovery — including civil penalties for each false claim and up to three times the Government’s damages. FAC ¶¶ 13-15.

On March 12, 2012, the Government notified the Court of its decision not to intervene. We subsequently unsealed the First Amended Complaint on November 27, 2012. On December 21, 2012, Iron Mountain reached a settlement with Knisely and the United States and we therefore dismissed it from the case. On April 11, 2013, Shred-It also settled with Knisely and the United States [233]*233and we subsequently dismissed it as well.1 On August 14, 2013 we ordered Knisely to serve the unsealed amended complaint on Cintas.

We have federal question jurisdiction pursuant to 28 U.S.C. § 1331 and 31 U.S.C. § 3732(a) as Knisely brings his claims pursuant to the False Claims Act.

B. Relator’s Allegations

1. False Claims Act Violations

In his complaint Knisely alleges that Cin-tas has been providing document shredding services under a General Services Administration (“GSA”) schedule to government agencies since at least 2004. FAC ¶¶ 71, 82, 160.2 Federal agencies may use a vendor once the GSA accepts that vendor’s offer in response to a GSA solicitation. Id. ¶¶ 77, 81. A vendor who chooses to submit an offer in response to a GSA solicitation agrees to the terms and conditions of the contract identified in the solicitation. Id. ¶ 78.

The GSA requirements for shredding and other so-called Destruction Services cover less than three pages of the 165-page document known as a Multiple Award Schedule (“MAS” or “schedule”) that solicits vendors for all manner of goods and services. Id. ¶ 84, see also FAC, Ex. A at 22. Destruction services include:

[O]n-site and off-site services of classified and unclassified paper documents, materials and magnetic media. The methods for destruction services may be obtained through these destruction options: shredding (e.g., paper documents, folders, newspapers, catalog, magazines) disintegration (e.g., microfilm, microfiche, ID cards, VHS tapes, audio cassettes, CD ROM, floppy disks, computer tapes and computer hard drives) and incineration (e.g., paper documents, maps, files, envelopes, manuals, newspapers, catalogs, magazines, blue prints).

FAC Ex. A at 22-23.

The purpose of this segment of the MAS is “to provide Federal agencies with a customized plan for destroying government documents that is unique and cost effective to their needs.” Id. at 23. The contract provides that “[tjhese services may be used on a nonmandatory basis” by government agencies and “may be performed at the contractor’s facilities or the ordering agency’s facilities.” Id. Federal law obliges each federal agency “to establish and maintain” its own program to manage and dispose of agency records. FAC ¶ 54 (citing 44 U.S.C. § 3102). The National Archives and Records Administration (“NARA”) oversees each agency’s document and record disposition programs while the GSA is responsible for overseeing economy and efficiency in records management. Id. ¶ 57.

The GSA schedule states in relevant part, The following methods for [Destruction Services] may be obtained through these material destruction options[:]
A) SHREDDING: Include both on-site and off-site for shredding services, which is designed to handle a variety of classified and unclassified materials. Shredders shall be designed to produce residue particle size not exceeding 1/32 inch in width with a 1/64-inch tolerance by % inch in length. There is no need to separate paper grades or remove staples, clips or other bindings.

FAC Ex. A at 23 (emphasis supplied).3

Vendors must also certify destruction with a signed certificate showing the date of destruction and the material destroyed that must be signed by “the individuals designated to destroy and witness the destruction.” Id. at 24. “Destruction officials shall be required to know, through their personal [234]*234knowledge, that such material was destroyed” and, “[i]f required, the contractor must destroy Government material in accordance with record disposition schedules established by the agency.” Id.

Knisely’s qui tam claim hinges on his assertion that the Government “clearly and unambiguously requires that document shredding services provided to United States government agencies through [the] GSA Schedule [ ] must use shredders designed to produce residue particles” no larger than the size described above. FAC ¶ 87. He alleges that the import of this size constraint arises from the difference between on-site mobile shredders and off-site equipment. Id. ¶ 100. Federal agency customers typically deposit documents for shredding into locked consoles throughout their offices, which the shredding vendor empties into an on-site mobile truck or carries off-site to do the shredding. Id. ¶¶ 98, 99.

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298 F.R.D. 229, 88 Fed. R. Serv. 3d 327, 2014 WL 983468, 2014 U.S. Dist. LEXIS 33249, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-ex-rel-knisely-v-cintas-corp-paed-2014.