MacDowell v. Synnex Corporation

Background

This False Claims Act case concerns Synnex Corporation’s sales of office and technology products to the federal government. The complaint alleges that some products contained parts made in countries that did not comply with the Trade Agreements Act, even though records allegedly represented the products as originating from the United States or another compliant country.

Matthew MacDowell filed the action in 2012. After the United States declined to intervene, MacDowell filed a public third amended complaint. In September 2019, the court granted Synnex’s motion to dismiss and allowed MacDowell to seek permission to amend. MacDowell then moved for leave to file a fourth amended complaint, and Synnex opposed the motion.

Analysis

The court applied Federal Rule of Civil Procedure 15(a)(2), which generally directs courts to allow amendments when justice requires. The court considered factors including bad faith, delay, prejudice, whether amendment would be futile, and the plaintiff’s prior amendments. It concluded that these factors favored granting leave.

The court focused on whether the proposed complaint alleged the fraud with enough detail under Rule 9(b). The earlier dismissal had found that MacDowell had not adequately identified which noncompliant products were sold to the government, when they were sold, who sold them, and how the sales occurred.

The proposed fourth amended complaint supplied import records from 2011, shipment records from 2014 and 2015, shipment dates, product information, and details about products allegedly sold to the government. The court acknowledged that the connection between some 2011 imports and later government sales was weak, but found the allegations sufficient at the pleading stage. The court concluded that the complaint provided particular details of an alleged scheme along with reliable indications that false claims may have been submitted.

The court also rejected Synnex’s argument that the proposed allegations concerned open-market sales generally outside the Trade Agreements Act’s requirements. The products were alleged to be listed on the federal supply schedule, so the court concluded they were not open-market items for purposes of the allegations.

Finally, Synnex argued that the public-disclosure bar prevented the amended complaint. The court noted that an earlier order had found the bar applicable but had also found that the original-source exception applied, subject to proof. The court stated that MacDowell alleged information learned during his employment with a Synnex product reseller, rather than relying primarily on inferences drawn from public information.

Disposition

Judge William Alsup granted MacDowell’s motion for leave to file a fourth amended complaint, to the extent stated in the order. MacDowell was ordered to file it as a separate docket entry by December 5 at noon, and Synnex’s answer was due by December 30 at noon. The order did not decide whether MacDowell would ultimately prevail on the False Claims Act claims.