U.S. ex rel. Hong v. Newport Sensors, Inc., 2016 U.S. Dist. LEXIS 188295 (C.D. Cal. May 19, 2016):

PROCEEDINGS: (IN CHAMBERS) ORDER GRANTING DEFENDANTS' MOTION TO DISMISS THE SECOND AMENDED COMPLAINT AND DENYING AS MOOT DEFENDANTS' MOTION TO STRIKE (Doc. 52)

Before the Court is a Motion to Dismiss and Motion to Strike the Second Amended Complaint filed by Defendants Maria Q. Feng and Newport Sensors, Inc. (Mot., Doc. 52.) Juan Hong, a Law Corporation, opposed as the relator in this action, and Defendants replied. (Opp., Doc. 59; Reply, Doc. 61.) The Court finds this matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; C.D. Cal. R. 7-15. Accordingly, the hearing set for May 20, 2016, at 2:30 p.m., is VACATED. For the reasons stated below, the Court GRANTS Defendants' Motion to Dismiss and DENIES AS MOOT Defendants' Motion to Strike.

I. BACKGROUND

The Second Amended Complaint alleges the following facts: Relator Juan Hong, a Law Corporation filed this qui tam action on its own behalf and on behalf of the United States under the civil False Claims Act. (SAC ¶ 1, Doc. 50.) Defendant Newport Sensors, Inc. is [*2]  a privately held, for-profit corporation. (Id. ¶ 9.) Defendant Maria Q. Feng is the founder and chief executive officer of Newport, and she is the principal investigator in all the projects relevant to this case. (Id. ¶ 10.) Feng was a full-time tenured professor in the Department of Civil and Environmental Engineering at the University of California, Irvine. (Id. ¶¶ 8, 11.) In 2012, Feng became a professor of Civil Engineering and Engineering Mechanics at Columbia University. (Id. ¶ 12.)

At issue are allegedly false statements made by Newport and Feng "in connection with their submission of proposals and reports" that resulted in the following grants:

   1) A 2009 grant to Newport Sensors from the Department of Defense, for $2,380,712, Contract No. W911QY-09-C-0035. The project performance period is from January 19, 2009 to October 31, 2013, and the project involves "Smart Armor Insert, Crack Detection, Sensor Tape, Sensor Key, Real-Time, In-Situ, Low-Cost, Inspection[.]"

   2) A 2009 grant to Newport Sensors from the National Institute of Standards and Technology for $2,498,000. The project performance period is from February 1, 2009 to January 31, 2012, and the project involves research [*3]  and development of a "Microwave Thermoelectric Imager for Corrosion Detection and Monitoring In Reinforced Concrete[.]"

   3) A 2007 grant to Newport Sensors from the Department of Transportation for $100,000. This project involves research and development of "Microwave Thermoreflectometry for Corrosion Detection in Concrete[.]"

   4) A 2007 Phase I grant to Newport Sensors from the Department of Defense for $69,996. This project involves "Smart Small Arm Protective Inserts."

   5) A 2009 Phase II grant to Newport Sensors from the Department of Defense for $361,692. This project involves "Smart Small Arm Protective Inserts."

   6) A 2003 grant to Newport Sensors regarding microwave imaging technology for $2,300,126. The project performance period is from October 1, 2003 to September 30, 2006, and the project involves "Microwave Imaging Technology for Condition Assessment of FRP Composites."

(Id. ¶¶ 3, 4.) Proposals were sent to the Department of Defense and the Department of Transportation through the Small Business Innovation Research program. (Id. ¶ 3.) Proposals were sent to the National Institute of Science and Technology through the Technology Innovation Program. (Id.)

The goal of the Small Business [*4]  Innovation Research program is to provide increased opportunities for small businesses to participate in research and development. (Id. ¶ 15.) Through this program, government agencies distribute funds to small businesses by (1) determining suitable projects and research topics within the SBIR program, (2) issuing small business innovation research solicitations, (3) receiving and evaluating proposals, and (4) awarding federal funds to qualified participants. (Id. ¶ 17.) SBIR funds are competitively awarded to small businesses based on scientific and technical merit as well as potential commercialization. (Id. ¶ 20.) The program is comprised of "three distinct contract phases." (Id. ¶ 21.) Phase I contracts determine the feasibility of new technology and are awarded in amounts up to $100,000. (Id.) Phase II contracts are awarded only to successful Phase I participants and are for continuing commercial applications of new technology and products. (Id. ¶ 22.) Phase III contracts provide private sector or non-SBIR federal agency funding for the patenting, marketing, licensing, manufacturing, or commercializing of Phase II projects. (Id. ¶ 23.) For both Phase I and Phase II SBIR contracts, [*5]  the primary employment of the principal investigator must be with the small business firm at the time of the award and during the conduct of the proposed effort. (Id. ¶ 43.) Primary employment means that more than one-half of the principal investigator's time is spent with the small business, and it precludes full-time employment at another organization. (Id.)

The NIST's Technology Innovation Program solicits high-risk, high-reward research and development proposals for financial assistance. (Id. ¶ 28.) Single companies and joint ventures may apply for TIP funding. (Id. ¶ 29.) NIST reserves the right to reject a proposal should information raise a reasonable doubt as to the responsibility of the proposer. (Id. ¶ 32.) Moreover, a university employee cannot establish a company and contract back to his or her university. (Id. ¶ 34.) Doing so would present a conflict of interest. (Id.) Huang alleges that even if Feng did not contract back to UC Irvine, her participation in the project is an "indirect 'contract back'" because of her full-time employment with the university. (Id. ¶ 35.)

Newport, at the direction of Feng, allegedly entered into SBIR and TIP agreements with DOD, DOT, and NIST [*6]  by falsely certifying that Feng was a principal investigator. (Id. ¶ 42.) The relator alleges that given Feng's full-time employment with UC Irvine, she could not have been primarily employed by Newport when it applied for the SBIR grants. (Id. ¶ 44.) The relator also alleges that Feng's commitment as a principal investigator at more than 0% to the two NIST grant projects constituted "false certification" due to her full-time employment with the University. (Id. ¶ 31.) The relator asserts that the DOD, DOT, and NIST "would not have paid the submitted claims had it known of Newport's non-compliance with the regulation on Feng's primary employment." (Id. ¶ 44.) Finally, the relator asserts that Feng violated the University of California's policy on Conflict of Commitment and Outside Activities of Faculty Members. (See id. ¶¶ 47-56.)

On August 2, 2013, the relator filed a qui tam action against Newport and Feng pursuant to the False Claims Act. (Compl., Doc. 1.) On July 10, 2015, the Government declined to intervene in this qui tam action. (Gov't Mem. at 1, Doc. 27.) On September 29, 2015, the relator filed a First Amended Complaint. (FAC, Doc. 30.) In the FAC, the relator asserted the [*7]  following claims: (1) presentation of false claims under the False Claims Act, 31 U.S.C. § 3729(a)(1)(A), and (2) making or using false records or statements under the False Claims Act, 31 U.S.C. § 3729(a)(1)(B). (Id. ¶¶ 43-48.) On February 11, 2016, this Court granted Defendants' Motion to Dismiss the First Amended Complaint and dismissed all the relator's claims with leave to amend. (Doc. 46.) The Court found that the FAC (1) failed to allege falsity under the FCA as to the NIST contracts and (2) failed to plead with particularity under Federal Rule of Civil Procedure 9(b). (Id. at 6-10.)

On March 2, 2016, the relator timely filed a Second Amended Complaint. (SAC.) Defendants now move to dismiss the SAC and to strike certain allegations. In addition to similar arguments made in their prior Motion to Dismiss, Defendants now assert that the relator's claims are impermissibly based on matters that have been publicly disclosed.

II. LEGAL STANDARD

A defendant may move to dismiss an action for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1). Fed. R. Civ. P. 12(b)(1). "Dismissal for lack of subject matter jurisdiction is appropriate if the complaint, considered in its entirety, on its face fails to allege facts sufficient to establish subject matter jurisdiction." In re Dynamic Random Access Memory (DRAM) Antitrust Litig., 546 F.3d 981, 984-985 (9th Cir. 2008). In considering a Rule 12(b)(1) motion, the Court "is not [*8]  restricted to the face of the pleadings, but may review any evidence, such as affidavits and testimony, to resolve factual disputes concerning the existence of jurisdiction." McCarthy v. United States, 850 F.2d 558, 560 (9th Cir. 1988). "The party asserting [] subject matter jurisdiction bears the burden of proving its existence." See Chandler v. State Farm Mut. Auto. Ins. Co., 598 F.3d 1115, 1122 (9th Cir. 2010). "The plaintiff 'bears the burden of establishing subject matter jurisdiction by a preponderance of the evidence.'" United States ex rel. Mateski v. Raytheon Co., 816 F.3d 565, 569 (9th Cir. 2016) (quoting United States v. Alcan Elec. & Eng'g, Inc., 197 F.3d 1014, 1017 (9th Cir. 1999)).

III. REQUEST FOR JUDICIAL NOTICE

Defendants request that we take judicial notice of the following seven exhibits: an SBIR award listing database, an NIST projects brief index, a NIST awards listing, copies of Feng's faculty profile on UC Irvine and Columbia University's websites, a Freedom of Information Act response to the relator by the U.S. Department of Commerce (NIST), and a 2011 Form 8-K Report submitted to the Securities and Exchange Commission by Drayton Richdale Corporation. (See RJN, Doc. 53; Reply RJN, Doc. 63.)

Under Federal Rule of Evidence 201, a fact is appropriate for judicial notice if it is not subject to reasonable dispute in that it is (1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy [*9]  cannot reasonably be questioned. Fed. R. Evid. 201(b). A court "must take judicial notice if a party requests it and the court is supplied with the necessary information." Fed. R. Evid. 201(c)(2). Defendants emphasize that they request judicial notice of these exhibits "not for the truth of the information stated," but "merely to show that [the] information was publicly available." (RJN at 4.) We find that the above exhibits are appropriate for judicial notice for this limited purpose. See Freeney v. Bank of Am. Corp., No. CV 15-02376 MMM (PJWx), 2015 WL 4366439, at *13 (C.D. Cal. July 16, 2015) ("Courts routinely take judicial notice of documents available on government websites." (citation omitted)); Reese v. Malone, 747 F.3d 557, 570 n.8 (9th Cir. 2014) (taking judicial notice of a university website); In re Am. Apparel, Inc. Shareholder Litig., 855 F. Supp. 2d 1043, 1064 (C.D. Cal. 2012) (taking judicial notice of documents obtained by submitting a FOIA request, as these are matters of public record).

The relator opposes this request for judicial notice because (1) the Deitz Declaration to which the exhibits are attached never declared his statement to be true and correct, (2) Defendants fail to identify when the UC Irvine faculty profile was viewed or downloaded, and (3) the same profile includes a disclaimer that it is "inactive" and the "[i]nformation displayed . . . may be inaccurate and/or out-of-date," which indicates that the provided content [*10]  is subject to reasonable dispute. (Opp. at 5-6, 7.) We find these arguments unavailing. First, we observe that the declaration is properly sworn and certified; it contains a verification under penalty of perjury and indicates that each attached exhibit is "a true and correct copy." (See Deitz Decl., Doc. 54; Supp'l Deitz Decl., Doc. 62.) Second, we note that the UC Irvine disclaimer is immaterial, as Defendants request judicial notice "simply to show that the information contained within is publicly available." (Reply at 11.) Thus, the alleged truth of the information is not at issue in this action, and the existence of this information in the public domain is not subject to reasonable dispute. Finally, we find that any dispute over the date when the UC Irvine profile was viewed or downloaded is immaterial. The relator does not dispute the authenticity of the other six exhibits provided by Defendants, and substantively similar information as to Feng's employment with UC Irvine was publicly available online in the provided Columbia University faculty profile, (Deitz Decl. Ex. 5, Doc. 54), as well as the 2011 SEC 8-K report, (Supp'l Deitz Decl. Ex. A, Doc. 62). The Internet Archive's Wayback Machine shows that [*11]  the Columbia University profile was publicly available as early as December 2012. A court "may take judicial notice on its own," Fed. R. Evid. 201(c)(1), and district courts in this circuit have routinely taken judicial notice of content from the Internet Archive's Wayback Machine pursuant to this rule, as we do here. See Erickson v. Nebraska Machinery Co., No. 15-cv-01147-JD, 2015 WL 4089849, at *1 n.1 (N.D. Cal. July 6, 2015) (collecting cases); Under A Foot Plant, Co. v. Exterior Design, Inc., No. 6:14-cv-01371-AA, 2015 WL 1401697, at *2 (D. Or. Mar. 24, 2015) (collecting cases); Wallack v. Idexx Laboratories, Inc., No. 11-cv-2996-GPC (KSC), 2015 WL 5943844, at *16 (S.D. Cal. Oct. 13, 2015).

***

IV. CONCLUSION

For the foregoing reasons, Defendants' Motion to Dismiss is GRANTED. The relator's FCA claims are therefore DISMISSED WITH PREJUDICE. Because the Court grants the Motion to Dismiss, it DENIES AS MOOT Defendants' Motion to Strike.