UNITED STATES EX REL ELLIOTT v. FRAZIER AVIATION INC (2026)

MEMORANDUM ORDER

(Granting in Part and Denying in Part Motion to Stay Pending Arbitration; Denying Motions to Dismiss)

Relator Heather Elliott (“Relator”), on behalf of the United States, brings this False Claims Act (“FCA”), discrimination and retaliation case against Defendants Frazier Aviation, Inc. (“Frazier Aviation”) and Robert L. Frazier III (“Bob Frazier” or “Mr. Frazier”) (collectively, “Defendants”). This matter comes before the Court on Defendants' motions to dismiss Relator's Fifth Amended Complaint (ECF Nos. 105, 106) and Frazier Aviation's Motion to Stay Proceedings Pending Arbitration (ECF No. 109 (“Motion to Stay”)) (collectively, the “Motions”). Defendants contend that the Fifth Amended Complaint (ECF No. 99) fails to state a claim on any of its sixteen counts. Frazier Aviation also argues that all proceedings in this matter should be stayed pending arbitration of Counts V to XVI, which arise out of Relator's employment with Frazier Aviation, given the existence of a binding arbitration clause in Relator's employment contract. The Motions have been fully briefed and stand ripe for the Court's resolution.¹

For the reasons set forth below, the Court GRANTS IN PART and DENIES IN PART Frazier Aviation's Motion to Stay (ECF No. 109). The Court STAYS all proceedings related to Counts V through XVI of the Fifth Amended Complaint pending arbitration of the underlying employment-related claims for ninety (90) days. The Court further finds that Relator pleaded sufficient facts to plausibly state the remaining FCA claims and DENIES Defendants' motions to dismiss (ECF Nos. 105, 106) Counts I through IV accordingly. This matter shall proceed to discovery on these counts.

I. BACKGROUND

A. Factual Background

Relator's Fifth Amended Complaint (ECF No. 99 (“Fifth Amended Complaint” or “5AC”)) sets forth a complex and interconnected set of allegations spanning nearly 500 paragraphs and accusing Defendants of a broad range of misconduct, only some of which proves relevant to the underlying legal claims. At this stage, the Court must accept as true the facts set forth in the Fifth Amended Complaint. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Limiting its recitation to those allegations relevant to the instant Motions and construing the allegations in the light most favorable to Relator, as it must, the Court provides the following factual overview.

Relator's lawsuit targets Defendant Frazier Aviation, a government contractor specializing in the manufacture of structural parts for defense aircraft platforms, as well as its CEO and Chairman, Robert (Bob) L. Frazier III. (5AC ¶¶ 31–32, 38.) Relator joined Frazier Aviation as Vice President of Strategic Growth in August 2022, following a substantial career in the defense and aerospace industries. (Id. ¶¶14, 16.) In her new role, Relator handled sales for government accounts and trained employees on Federal Acquisition Regulations (“FAR”) and other regulatory schemes, among other responsibilities. (Id. ¶ 17.)

1. Government Contracting-Related Allegations

As part of their solicitation and performance of government contracts, Defendants allegedly engaged in two related illegal schemes. The first of these schemes involved the manufacture and sale of military aircraft parts by bidding on Government contracts using another entity's Commercial And Government Entity (“CAGE”) code without authorization. (Id. ¶ 2.) CAGE Codes allow the United States Government (the “Government”) to identify the supplier of parts and, for certain aircraft parts, to confirm a contractor's authority to manufacture or supply parts pursuant to a given contract. (Id. ¶¶ 78–80, 83.) As such, CAGE codes ensure that critical military parts are manufactured only by vetted sources possessing the necessary infrastructure, technical capacity and controls. (Id. ¶ 82.)

Before 2020, Frazier Aviation was licensed by Lockheed Martin (“Lockheed”), a large security and aerospace company with extensive military contracts, to manufacture and supply spare parts for certain aircraft platforms, including the C130 Hologram platform. (Id. ¶¶ 134–36, 138.) As part of this licensing agreement, Frazier Aviation could bid on certain contracts using Lockheed's CAGE code. (Id. ¶ 138.) However, Frazier Aviation, at Bob Frazier's direction, opted out of its licensee status with Lockheed in 2020. (Id. ¶ 139.) As a result, Frazier Aviation lost its authorization to bid on solicitations for C130 parts using Lockheed's CAGE codes, and Lockheed explicitly instructed Frazier Aviation to stop using its CAGE codes for these purposes. (Id. ¶¶ 139, 146.)

Despite Lockheed's instructions and the loss of its licensee status, Frazier Aviation continued to bid on government contracts, representing that it was manufacturing parts under Lockheed's CAGE code. (Id. ¶ 152.) Frazier Aviation also dual-certified parts under both Lockheed's CAGE Code and its own, suggesting that it still constituted an approved supplier for Lockheed parts without informing the Government that it no longer possessed the required authorization to manufacture parts for certain programs. (Id. ¶¶ 150, 152, 154.) Relator alleges that these omissions and misrepresentations constituted intentional calculations to mislead Government officials into awarding contracts to Frazier Aviation and accepting delivery of parts in the false belief that the parts came from a Lockheed licensee. (Id. ¶ 154.)

Relator also alleges a second scheme involving the unapproved use of subcontractors. (Id. ¶ 198.) Defendant Frazier Aviation routinely outsourced the manufacture of aviation parts for the Government to subcontractors, assembling the final products for delivery at its own facility. (Id. ¶ 200.) Upon delivery, Defendants would not inform the Government about Frazier Aviation's use of subcontractors, sometimes removing markings from the sides of its products that would have indicated this fact. (Id. ¶¶ 198, 213.)

Relator alleges that Defendants' subcontracting practices implicated the Government's Source Approval Request (“SAR”) process. (Id. ¶ 126.) This process constitutes a mechanism used by Government agencies, including the Department of Defense and the Department of Homeland Security, to approve specific manufacturers, manufacturing sites and parts processes before such manufacturers may submit specific bids to the Government. (Id. ¶ 45.) SAR applications must be site specific, and their approval applies only to the precise location and procedures reviewed for that particular application. (Id. ¶ 46.) Shifting production to a site other than the one listed in a given SAR application renders the SAR approval invalid and the resulting products nonconforming or “counterfeit.” (Id. ¶¶ 46, 229.)

Relator also alleges that Defendants routinely filed Certificates of Conformance (“CoCs”) with the Government upon delivery of its products. (Id. ¶ 73.) These CoCs attest that the relevant supplies or services conform to all applicable contract requirements. (Id. ¶ 73.) Various provisions of the Federal Acquisitions Regulations (“FAR”) impose such requirements on contractors; they require contractors to perform inspections of all supplies delivered under the relevant contract and obligate those contractors to take appropriate action if nonconforming parts are discovered, as well as require those contractors to impose the same quality standards onto its subcontractors. (Id. ¶¶ 66, 69.)

Despite its use of subcontractors, Frazier Aviation failed to amend its SAR applications to reflect this fact. (Id. ¶ 126.) Nor did Defendants fulfill their obligations under the relevant FAR provisions. (Id. ¶ 42.) And despite their failure to comply with SAR and FAR requirements, Defendants continually filed CoCs attesting — untruthfully — that Frazier Aviation complied with all applicable contract requirements, with Defendant Bob Frazier pressuring employees to sign off on CoCs despite knowing that the attestations therein were not truthful. (Id. ¶¶ 43, 126, 193, 261, 263.)

To help facilitate these schemes, Defendants engaged in several deceptive and manipulative practices. Relator points to several contracts and purchase orders entered into by Defendants that misrepresented the source and authenticity of Defendants' parts. (Id. ¶¶ 210–12.) These contracts include Federal Contract Award SPE4A721D0134 for the supply of a “guide shoe assembly” to the Defense Logistics Agency (“DLA”), a product for which Frazier Aviation did not, at the time, possess the necessary production machinery. (Id. ¶ 211(b).) Frazier Aviation did not revise its SAR for this part to obtain approval before subcontracting out the product's manufacture. (Id. ¶ 212.) Further, despite lacking licensee status, Frazier Aviation repeatedly used and shared with the Government a screenshot of Lockheed Martin's supplier portal webpage, suggesting that it continued to hold licensee status with Lockheed. (Id. ¶ 181–82.) Defendant Bob Frazier also used an altered Lockheed authorization letter to suggest that Frazier Aviation retained the authorization to build parts for Lockheed's C130 Hologram program, providing this letter to the DLA, among others. (Id. ¶¶ 184–85.) Mr. Frazier also pressured Relator to quote part numbers using the Lockheed CAGE code, despite Relator informing him of her discomfort in doing so. (Id. ¶¶ 195, 197.) In such situations, he would tell her to “quote what I tell you to quote,” that it was his name on the building, not hers, and that he could “do what he wants.” (Id.)

In the summer of 2022, the United States Navy conducted a site survey of Frazier Aviation to verify its Critical Safety Item (“CSI”) approval. (Id. ¶ 230.) In its Survey Finding (the “Finding”), the Navy concluded that Frazier violated the Aviation Group Safety Item Management Handbook and SAR requirements by subcontracting manufacturing to unapproved sources, among other shortfalls. (Id.) The Navy's Finding identified multiple instances of subcontracting the manufacture of parts out to non-approved manufacturers, including with regard to part 3317793-1 — the same part at issue in the guide shoe assembly contract discussed above. (Id. ¶ 231.) The report concluded that “[t]he ․ approved SAR package ․ indicated that the manufacturing would be performed by Frazier Aviation, but instead the manufacturing was performed by an unapproved source․” (Id. (citing Survey Finding Number 23162-NA (01-05) at 1).) As a result of its findings, the Navy terminated Defendants' permission to sell the part at issue to the Navy pending mitigation and imposed other sanctions unless and until mitigation occurred. (Id. ¶ 236.)

2. Employment-Related Allegations

Relator also alleges facts concerning her employment with Frazier Aviation. Relator suffers from rheumatoid arthritis. (Id. ¶ 271.) Before assuming her position with Frazier Aviation, she requested accommodations related to her medical condition, including the flexibility to attend medical appointments as needed. (Id.) In the absence of an HR department, Bob Frazier oversaw all personnel matters as they related to Relator in his role as her supervisor. (Id. ¶¶ 37, 270.) In that capacity, Mr. Frazier approved Relator's requested accommodations. (Id. ¶ 271.) Relator, based in Virginia, worked remotely for Frazier Aviation, which is headquartered in California. (Id. ¶¶ 13, 33.)

Upon assuming her position, Bob Frazier began making frequent comments about Relator's medical condition, both to her and to other employees. (Id. ¶ 273.) For several months, Mr. Frazier began every email to Relator with the phrase “I hope your health is ok,” which made Relator feel uncomfortable. (Id. ¶ 274.) Additionally, two months into her employment, Mr. Frazier commented to an existing client in front of Relator that “[y]ou have no idea what this lady goes through. She's a real trooper.” (Id. ¶¶ 275–76.) Relator alleges that this comment “reduced [her] to her disability” and failed to give proper regard to her “professional capabilities.” (Id. ¶ 277.)

Relator's rheumatoid arthritis and other health issues required her to request time off for doctor's appointments and treatments during her employment with Frazier Aviation. (Id. ¶ 280.) In response to these requests, Mr. Frazier “bec[ame] upset and directly interrogate[d Relator ․] for details of why she needs to be away from the office for those times.” (Id.) In one instance, Mr. Frazier insisted on knowing the nature of an upcoming procedure, which involved surgery to correct a ruptured breast implant. (Id. ¶ 285.) Several days later, a different executive at Frazier Aviation commented to Relator that he had heard about her upcoming surgery and that he “hoped it was nothing serious.” (Id. ¶ 286.) Bob Frazier later texted Relator a link to an article discussing links between breast implants and cancer. (Id. ¶ 289.)

In February 2023, Relator joined a Zoom call and overheard Mr. Frazier speaking negatively about her to two other executives, stating “I am sick of her bitching, I am just about over this, and I am tired of her constantly complaining. She thinks she knows everything.” (Id. ¶¶ 292–93.) In or around March 2023, Relator made an EEOC inquiry. (Id. ¶ 264.) Around the same time, Mr. Frazier began to exclude Relator from weekly production meetings. (Id. ¶ 291). Relator alleges that these actions by Bob Frazier created a hostile work environment. (Id. ¶ 296.) She ultimately filed an EEOC charge against Frazier Aviation and Bob Frazier for disability and gender-based discrimination, as well as retaliation, on June 29, 2023. (Id. ¶ 297.)

Frazier Aviation received notification of Relator's EEOC complaint at the end of July 2023. (Id. ¶ 298.) Subsequently, Relator stopped receiving communications from any individuals at Frazier Aviation, and her work emails began to be automatically forwarded to another executive. (Id. ¶¶ 299–300.) Approximately two weeks later, Relator received a one-year review from Frazier Aviation's Senior VP of Sales, indicating that she was being placed on a 90-day improvement plan with a subsequent performance review. (Id. ¶¶ 301–02.) Later that month, Relator submitted her resignation letter with an effective date of September 8, 2023. (Id. ¶ 310.) After Relator submitted her letter but before she left her position, Bob Frazier made disparaging remarks about Relator to others in the military aviation industry, including that Relator was difficult to work with and did not perform as promised, and that Frazier Aviation had fired her. (Id. ¶¶ 313–19.)

B. Procedural Background

Having filed an EEOC complaint in July 2023, Relator filed a second complaint on October 25, 2023, with three agencies: the EEOC, the Virginia Office of Civil Rights, and the California Civil Rights Department.² (Id. ¶ 323.) These complaints alleged discrimination based on disability and gender, as well as retaliation. (Id.) On November 7, 2023, the California Civil Rights Department issued a Determination and Amended Notice of Right to Sue letter to Relator. (Id. ¶ 324.) Relator received a similar notice from the Virginia Office of Civil Rights on January 30, 2024. (Id. ¶ 326.) The EEOC followed suit on July 10, 2024. (Id. ¶ 327.)

Relator filed the instant action under seal on July 7, 2023. (ECF No. 1.) While under seal, Relator amended her complaint three times. (ECF Nos. 10, 16, 24.) On April 10, 2025, the United States of America (the “Government”) filed a notice of non-intervention, (ECF No. 31), and the Court unsealed Relator's complaint and ordered service upon Defendants. (ECF No. 32.) Relator filed her Fourth Amended Complaint on July 18, 2025, (ECF No. 42), adding two defendants whom she later voluntarily dismissed. (ECF No. 58.) After Defendants filed motions to dismiss and a motion to stay proceedings pending arbitration, Relator moved the Court for leave to file a Fifth Amended Complaint due to “inaccuracies in the operative complaint.” (ECF No. 92.) The Court granted Relator's motion. (ECF No. 98.)

Relator's Fifth Amended Complaint alleges that Defendants violated the FCA by presenting or causing the presentation of false or fraudulent claims when they improperly used Lockheed's CAGE codes without authorization (Count I) and when they misrepresented their use of subcontractors to the Government (Count III). (5AC ¶¶ 328–34; 342–48.) Relator further alleges that Defendants violated the FCA by knowingly making or causing to be made false records or statements material to those false or fraudulent claims (Counts II, IV). (Id. ¶¶ 335–41; 349–55.) In addition, Relator brings various discrimination and retaliation claims against Defendants under state and federal law (Counts V-XVI). (Id. ¶¶ 356–484.)

Defendants filed the instant motions to dismiss the Fifth Amended Complaint on January 26, 2026, (ECF Nos. 106, 107), along with a Joint Motion for Leave to Correct Filings Related to the Motion to Stay Proceedings Pending Arbitration (ECF No. 104 (“Joint Motion”)), which sought leave to update the parties' previous filings in conjunction with Defendant Frazier Aviation's previously filed motion to stay (ECF No. 75). The Court granted the Joint Motion and docketed the parties' updated filings. (ECF Nos. 108, 109–11.) Relator filed opposition briefs to the motions to dismiss (ECF Nos. 112, 113), and Defendants replied (ECF Nos. 115, 116), rendering all three Motions ripe for the Court's review.

II. LEGAL STANDARDS

A. Motion to Stay Pending Arbitration

Under Section 3 of the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1 et seq., courts must stay judicial proceedings where “the issue involved in such suit or proceeding is referable to arbitration under [․ a written arbitration] agreement.” 9 U.S.C. § 3; see Adkins v. Labor Ready, Inc., 303 F.3d 496, 500 (4th Cir. 2002) (“This stay-of-litigation provision is mandatory.”). Entitlement to such a stay “depends on the validity, enforceability, and scope of the arbitration clause.” Sunbelt Residential Acquisitions, LLC v. Crowne Lake Assocs., Ltd. P'ship, No. 1:20CV401, 2021 WL 512228, at *3 (M.D.N.C. Feb. 11, 2021), report and recommendation adopted, 2021 WL 7186398 (M.D.N.C. Mar. 2, 2021) (citing Wilkerson v. Nelson, 395 F. Supp. 2d 281, 285–86 (M.D.N.C. 2005)). While federal courts lack the authority to compel arbitration outside of their respective district, the obligation to stay proceedings pending arbitration remains intact even where the intended locus of the arbitration falls outside of that district's borders. See Shanferoke Coal & Supply Corp. v. Westchester Serv. Corp., 293 U.S. 449, 453 (1935) (“there is no reason to imply that the power to grant a stay is conditioned upon the existence of power to compel arbitration in accordance with section 4 of the act”); see also Am. Heart Disease Prevention Found, v. Hughey, No. 96-1199, 106 F.3d 389 (table), 1997 WL 42714, at *5 (4th Cir. Feb. 4, 1997) (unpublished) (noting that a federal court in Virginia, “[a]s a proper and convenient forum,” could grant a Section 3 stay despite an agreement to arbitrate in New Jersey); S. Concrete Prods., Inc. v. ARCO Design/Build, Inc., No. 1:11CV194, 2012 WL 1067906, at *8 (W.D.N.C. Mar. 29, 2012) (issuing a Section 3 stay pending resolution of arbitration proceedings in Missouri).

While district courts must stay proceedings of “any issue referable to arbitration” under Section 3 of the FAA, staying non-arbitrable claims constitutes a discretionary decision “pursuant to [courts'] inherent power to control their own dockets.” Hetrick v. link Corp., No. 1:23CV961, 2024 WL 1417952, at *3 (E.D. Va. Apr. 2, 2024) (first citing 21 Williston on Contracts § 57:63 (4th ed.); and then citing Leyva v. Certified Grocers of Cal, Ltd., 593 F.2d 857, 865 (9th Cir. 1979)); see Am. Recovery Corp. v. Computerized Thermal Imaging, Inc., 96 F.3d 88, 97 (4th Cir. 1996) (“[T]he decision to stay the litigation of non-arbitrable claims or issues is a matter largely within the district court's discretion”). This Court considers the following factors in exercising its discretion to order such a stay: (1) the interests of judicial economy; (2) hardship and equity to the moving party if the action is not stayed; (3) potential prejudice to the non-moving party; (4) the existence of common questions of fact and law between the two proceedings; (5) the risk of inconsistent or confusing results; (6) the predominance of arbitrable issues in the civil suit; and (7) the relative merit of the non-arbitrable claims. Hetrick, 2024 WL 1417952, at *3 (citations omitted). The party requesting the stay bears the burden to “justify it by clear and convincing circumstances outweighing potential harm to the party against whom it is operative.” Williford v. Armstrong World Indus., Inc., 715 F.2d 124, 127 (4th Cir. 1983).

B. Motions to Dismiss

A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of a complaint; it does not serve as the means by which a court will resolve factual contests, determine the merits of a claim or address potential defenses. Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992). In considering a motion to dismiss, the Court accepts the well-pleaded allegations in the complaint as true and views the facts in the light most favorable to the plaintiff. Mylan Lab'ys, Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993). However, “the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” Iqbal, 556 U.S. at 678.

Under the Federal Rules of Civil Procedure, a complaint or counterclaim must state facts sufficient to “ ‘give the defendant fair notice of what the ․ claim is and the grounds upon which it rests[.]’ ” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). As the Supreme Court opined in Twombly, a complaint or counterclaim must state “more than labels and conclusions” or a “formulaic recitation of the elements of a cause of action,” though the law does not require “detailed factual allegations.” Id. (citations omitted). Ultimately, the “[f]actual allegations must be enough to raise a right to relief above the speculative level,” rendering the right “plausible on its face” rather than merely “conceivable.” Id. at 555, 570. Plausibility, in turn, “simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of illegal [conduct].” Id. at 556. The facts alleged must be sufficient to “state all the elements of [any] claim[s].” Bass v. E.I. DuPont de Nemours & Co., 324 F.3d 761, 765 (4th Cir. 2003) (first citing Dickson v. Microsoft Corp., 309 F.3d 193, 213 (4th Cir. 2002); and then citing Iodice v. United States, 289 F.3d 270, 281 (4th Cir. 2002)).

Where a complaint alleges fraud, a heightened pleading standard applies. Fed. R. Civ. P. 9(b). Iqbal and its progeny interpret Federal Rule of Civil Procedure 8(a)(2), which requires pleadings to “contain a ‘short and plain statement of the claim showing that the pleader is entitled to relief.’ ” Iqbal, 556 U.S. at 677-78 (quoting Fed. R. Civ. P. 8(a)(2)). However, a party “alleging fraud” must also “state with particularity” the circumstances of the fraud that she pleads. Fed. R. Civ. P. 9(b). “[B]ecause False Claims Act claims are fraud claims,” Rule 9(b)'s “higher standard” applies. United States ex rel. Nicholson v. MedCom Carolinas, Inc., 42 F.4th 185, 194 (4th Cir. 2022).

Rule 9(b) requires plaintiff-relators to plead the “who, what, when, where, and how” of their FCA claims. Id. at 195. More broadly, Rule 9(b) seeks to “provide defendants with fair notice of claims against them and the factual ground upon which they are based.” McCauley v. Home Loan Inv. Bank, F.S.B., 710 F.3d 551, 559 (4th Cir. 2013). The Court “should hesitate” to dismiss a complaint if it is satisfied, at the pleading stage, that the plaintiff “has substantial prediscovery evidence” of “the particular circumstances” constituting fraud, and if the defendant has notice of those particular circumstances. Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 784 (4th Cir. 1999).

III. ANALYSIS

A. Motion to Stay

The Court turns first to Frazier Aviation's Motion to Stay. (ECF No. 109.) Frazier Aviation seeks a stay of Plaintiff's employment-related claims (Counts V–XVI) pursuant to Section 3 of the FAA. (Id. at 8.³ ) Additionally, Frazier Aviation asks the Court to exercise its discretion and stay all remaining counts (Counts I–IV) pending resolution of arbitration proceedings as to Counts V–XVI under its inherent authority to control its docket. (Id. at 8, 12 (citing Am. Recovery Corp., 96 F.3d at 97).)

1. Mandatory Stay of Counts V–XVI under the FAA

The Court begins its analysis by considering Frazier Aviation's request for a mandatory stay of Relator's employment-related counts under 9 U.S.C. § 3. Before assessing the validity, enforceability and scope of the relevant arbitration clause, the Court briefly addresses two threshold issues: (a) the lack of a motion to compel arbitration in this matter and (b) the applicable body of law.

a. Lack of Motion to Compel Arbitration

Relator disputes the propriety of Frazier Aviation's motion for a stay pending arbitration where, as here, Defendants did not also file a motion to compel arbitration. (ECF No. 110 at 12–14.) Relator argues that an order staying this action would be “based on speculation,” because “no court is presently considering whether these claims are arbitrable at all.” (Id. at 13.) Further, since Frazier Aviation has not filed a motion to compel “in the proper forum, a stay would serve only to delay this litigation indefinitely without advancing the arbitration it invokes.” (Id.) Finally, Relator argues that, because this Court sits outside the district where the parties have agreed to arbitrate and therefore lacks the authority to compel arbitration under 9 U.S.C. § 4, “this Court should refuse to engage in a substantive review of the Arbitration Agreement itself at all, saving that task for the proper jurisdiction.” (Id. at 13–14.)

Relator's arguments fail to supplant 9 U.S.C. § 3's unambiguous text. That provision sets forth only two predicate conditions before a court “shall” stay proceedings: the court must be “satisfied that the issue involved in such suit or proceeding is referable to arbitration” under a written arbitration agreement, and the court must be acting “on application of one of the parties.” 9 U.S.C. § 3. Nowhere does the statutory text suggest, let alone require, that another court be presently considering the arbitrability of the claims at issue. Nor does Relator provide any legal authority for its suggestion that the Court should abstain from adjudicating the merits of Frazier Aviation's motion to stay and “sav[e] that task” for another jurisdiction. (ECF No. 110 at 14.) Indeed, as numerous courts have recognized, the absence of jurisdiction to compel arbitration in no way negates this Court's ability to stay an action properly before it, not to mention its duty to do so under Section 3's mandatory language. See, e.g., Sea Spray Holdings, Ltd. v. Pali Fin. Group, Inc., 269 F. Supp. 2d 356, 363 (S.D.N.Y. 2003) (holding that the court has authority to order a stay under Section 3 despite the locus of arbitration being in another district); Am. Heart Disease Prevention Found., 1997 WL 42714 at *5 (finding that a federal district court in Virginia could grant a Section 3 stay despite the parties' agreement to arbitrate in the District of New Jersey and despite the fact that defendant “sought only to stay the lawsuit, not compel arbitration.”). While the Court recognizes its lack of authority to compel arbitration under Section 4 where the agreed-upon locus of arbitration lies in California, that authority is not implicated where, as here, Frazier Aviation moves solely for a stay under Section 3. The Court therefore rejects Relator's arguments.

b. Choice of Law

The Court turns next to resolving what body of law it must apply to assess the validity of Relator's employment contract as a whole and its arbitration clause in particular.⁴ Relator asserts that California state law should apply, citing Coady v. Nationwide Motor Sales Corp., 32 F.4th 288 (4th Cir. 2022), for the proposition that courts resolve these questions “according to state-law principles of contract formation and interpretation,” and emphasizing that Defendant Frazier Aviation, Inc. “is headquartered in California and the Employment Agreement selected Los Angeles as the jurisdiction to resolve all disputes arising from” the agreement. (ECF No. 110 at 14.) Frazier Aviation, by contrast, argues that Virginia law governs the contract, highlighting the absence of a choice-of-law clause in the agreement and citing Virginia law's application of the lex loci contractus principle, “whereby the law of the state where the contract was formed governs.” (ECF No. 111 at 12 (quoting Cent. Laundry, LLC v. Illinois Union Ins. Co., 578 F. Supp. 3d 781, 789 (E.D. Va. 2022), aff'd, No. 22-1075, 2023 WL 1256580 (4th Cir. Jan. 31, 2023)).) Formation of the contract, in turn, stands premised on “where the final act necessary to make the contract binding occurs,” which Defendant implies occurred in Virginia. (Id.)

“In Virginia, while questions of breach are determined by the law of the place of performance, the validity, interpretation, or construction of a contract is governed by the substantive law of the lex loci contractus — the place of contracting.” O'Ryan v. Dehler Mfg. Co., 99 F. Supp. 2d 714, 718 (E.D. Va. 2000); see Lexie v. State Farm Mut. Auto. Ins. Co., 469 S.E.2d 61, 63 (Va. 1996) (“Generally, the nature, validity, and interpretation of ․ contracts [ ] are governed by the law of the place where made.”). Here, Relator's employment agreement with Frazier Aviation manifests that it was first signed by Relator on July 28, 2022, and then countersigned by Frazier Aviation's agent on August 3, 2022. (ECF No. 109-2 at 10.) The parties agree that Frazier Aviation and its offices are located in California. (5AC ¶ 33; ECF No. 109 at 21 n.9 (explaining that “the relevant witnesses and documents are primarily located in California, where Frazier is headquartered, Mr. Frazier and most Frazier employees reside, and the alleged acts underlying Plaintiff's claims reportedly took place.”) On the basis of these facts, the Court concludes that Frazier Aviation's signature constituted the final act of formation, and that this act took place in California. Consequently, the Court will apply California law when assessing the validity and enforceability of the arbitration clause.

c. Validity and Enforceability of the Arbitration Clause

The Court begins its assessment of the arbitration clause's validity and enforceability by reviewing the parties' conflicting arguments on these issues.

Relator challenges the validity of the arbitration clause on multiple grounds. As a threshold matter, Relator contests the validity of the contract as a whole, asserting that it was “never fully formed” due to handwritten notations allegedly made by Defendant Bob Frazier after Relator signed and returned the agreement, which Relator asserts “undermin[e] acceptance and mutual assent.” (ECF No. 110 at 15.) Plaintiff next argues that the arbitration clause also lacks validity, because it is both procedurally and substantively unconscionable. As to procedural unconscionability, Relator argues that the arbitration agreement qualifies as “adhesive,” since Defendants “presented the employment agreement as a non-negotiable condition of hire.” (Id. at 17.) The arbitration clause's errant designation of the arbitral forum as the “Alternate Resolution Center” (rather than the “Alternative Resolution Centers”) increases that unconscionability, since it deprived Relator of “adequate notice of any arbitration rules.” (Id. at 18.) As to substantive unconscionability, Relator argues that the employment agreement creates an “impermissibly one-sided scheme,” whereby state and federal statutory claims stand subject to arbitration while Frazier Aviation may freely litigate trade-secret and confidentiality claims in court. (Id. at 19.) In addition, Relator asserts that the agreement “imposes punitive fee-shifting” by providing the prevailing party at arbitration with attorneys' fees and court costs, thereby exerting a “chilling effect on Relator's ability to enforce her legal rights.” (Id. at 20.) Relator also argues that the agreement's designated arbitral forum renders the arbitration agreement substantively unconscionable as well, since it would require Relator to “absorb the increased costs” of traveling from her home in Virginia to California. (Id. at 21.) Relator further claims that the arbitral forum's arbitration rules qualify as substantively unconscionable under California law, since they require litigants to “bear expenses they otherwise would not be required to bear in court,” such as pro rata fees and costs and filing fees, and since the forum's “control over arbitrator appointment creates structural bias in favor of the repeat player.” (Id. at 23–24.) Finally, Relator argues that these “multiple independent defects” require invalidation of the entire agreement, since “unconscionability permeates the Agreement” and severance of deficient provisions would fail to cure these pervasive problems. (Id. at 22.)

Frazier Aviation disagrees with Relator on all fronts. As to the contract's overall validity, Frazier Aviation asserts that Relator's assent to the contract was “manifest” and not “undermined by [Relator's] dubious claims of non-acceptance or confusion.” (ECF No. 111 at 11.) While conceding that “certain handwritten additions” were made to the contract, Frazier Aviation insists that any such additions fail to invalidate the agreement as a whole, and certainly fail to invalidate the arbitration clause, which Relator initialed and which does not feature any such annotations. (Id. at 13.) Concerning procedural unconscionability, Frazier Aviation rejects Relator's adhesion argument, pointing to Relator's own allegations, in her Fifth Amended Complaint, that she was able to successfully negotiate accommodations for her disability into her employment agreement. (Id. at 15–16 (citing 5AC ¶ 271).) Defendant also refutes Relator's notice argument, pointing out that if Relator had run a simple Google search for the admittedly misspelled “Alternate Resolution Center,” Google would have pointed her to the intended forum, which posts its rules on its website. (Id. at 17.) Regarding Relator's substantive unconscionability arguments, Defendant asserts that the agreement affects both parties' access to remedies evenly, that attorneys' fees are routinely awarded by arbitrators, and that the choice of forum is not “unduly oppressive,” since hearings may be conducted virtually. (Id. at 19–20.) Finally, Defendant rejects Relator's objections concerning the arbitral forum's rules as disingenuous, given the availability of various methods to appoint an arbitrator, including party stipulation, and given that Relator's arguments concerning filing fees and pro rata cost sharing under California law stand preempted by the FAA. (Id. at 21.)

The Court agrees with Frazier Aviation and finds the arbitration agreement valid and enforceable. Relator's threshold claim that her employment contract is unenforceable due to lack of mutual assent remains spurious at best. As she herself represents, Relator “accepted the job offer” furnished by Defendant, indicating offer and acceptance (5AC ¶ 271). Relator does not deny initialing each page of the agreement and signing the final page; indeed, her signature appears on each page in the version of the agreement filed with the Court. (ECF No. 109-2 at 2–13.) Further, none of the pages that set forth the arbitration agreement contain any of the handwritten notations that purportedly undermine the mutuality of the contract. (Id. at 7-8.) To the extent that Mr. Frazier's notations on the contract undermine the validity of any specific provisions, those provisions could be severed under the Agreement's severability clause, (id. ¶ 16), leaving the arbitration clause (and the rest of the contract) intact and unaffected.

The Court also rejects Relator's claims of procedural unconscionability. Relator concedes that she negotiated various aspects of her contract, (SAC ¶ 271), wholly undermining her claims of adhesion and procedural unconscionability on that basis. Further, the Court finds Relator's claim of procedural unconscionability on the basis of minor typographical errors in the arbitral forum's name without merit, given the ease with which Relator could (and apparently did) ascertain the proper identity of the forum.

Relator's arguments regarding the arbitration agreement's substantive unconscionability similarly lack merit. The Court finds no basis for Relator's claim that the Employment Agreement creates an “impermissibly one-sided scheme” by permitting “the Company to seek judicial remedies for alleged breaches of confidentiality” while requiring arbitration of all controversies or claims relating to the contract. (ECF No. 110 at 19 (citing Employment Agreement ¶¶ 9, 12).) The Employment Agreement's provisions concerning the availability of injunctive relief for confidentiality breaches expressly apply to “[e]ach of the parties,” not just to Defendant. (ECF No. 109-2 at 6–7.) Nothing about this provision appears to be one-sided, let alone “impermissibly” so. The Court also rejects Relator's argument that the arbitration clause's language permitting recovery of attorneys' fees and costs renders the agreement to arbitrate substantively unconscionable. Even without deciding whether California's law on this matter stands preempted by the FAA (which Frazier Aviation strenuously contests), the Agreement's fee-shifting language, which stands “collateral to the main purposes of the contract,” can be easily excised under the Agreement's severability clause, leaving the bulk of the arbitration clause — and, most importantly, the parties' stipulation to binding arbitration for disputes arising out of or relating to the Agreement — fully intact and enforceable. Armendariz v. Found. Health Psychcare Servs., Inc., 6 P.3d 669, 696 (Cal. 2000).⁵

Relator's remaining arguments also fail. Relator's claim that the Agreement's designation of a California arbitral forum proves “unduly oppressive” to her as a Virginia resident lacks merit in light of the arbitral forum's rules expressly providing that hearings can be conducted by telephone or videoconference. (ECF No. 111-3 at 8.) Relator's claim that the arbitral forum's control over which arbitrators it appoints creates “structural bias” fares no better. As Frazier Aviation correctly highlights, the arbitral forum offers various options for how arbitrators can be appointed. (Id. at 6.) Finally, Relator's arguments on the basis of California law concerning pro rata cost sharing stand “clearly ․ preempted by the FAA.” Mitchell v. HCL Am., Inc., 190 F. Supp. 3d 477, 496 (E.D.N.C. 2016).

For all of these reasons, the Court finds the arbitration clause in Relator's employment agreement valid and enforceable. The Court therefore proceeds to the final part of its inquiry: whether the claims at issue (Counts V-XVI) fall within the arbitration agreement's scope.

d. The Arbitration Agreement's Scope

Paragraph 12 of Relator's employment agreement with Frazier Aviation sets forth the following arbitration provision:

In the event any controversy or claim arises out of or relating to this Employment Contract, or the construction, interpretation, validity, or performance of this Employment Contract, or the breach thereof and resulting litigation, the prevailing party shall be entitled to recovery as part of any Judgment rendering therein its reasonable attorney's fees and Court costs from the other party. In the event of any such dispute the parties hereby stipulate to binding arbitration by the Alternate Resolution Center (“ARC”) of Los Angeles[.]

(ECF No. 109-2 at 7–8.)

Relator argues that her discrimination and retaliation-related claims do not fall within the scope of this arbitration clause, because they do not “aris[e] out of or relat[e] to” the employment contract or qualify as issues concerning its construction, interpretation, validity, performance or breach. (ECF No. 110 at 24.) Rather, her claims “arise from independent statutory duties imposed by federal and state law” that “exist apart from the contract.” (Id.) Nor do any of her claims “required construing the contract's terms on commissions, sales goals, or other employment provisions.” (Id.)

Frazier Aviation counters by pointing to the arbitration clause's “far-reaching” language and by highlighting case law that suggests that arbitration clauses containing such broad language should be presumed to cover any related claims or grievances. (ECF No. 109 at 15 (citing Maldini v. Marriott Int'l Inc., 140 F.4th 123, 136 (4th Cir. 2025)).) Frazier Aviation also highlights the absence of any clear evidence that Relator's employment claims are excluded from the agreement's broad reach. (Id.) Finally, Defendant urges the Court, if it retains “any doubts concerning the scope” of the arbitration agreement, to resolve those doubts in favor of arbitration, in line with the FAA's general presumption. (ECF No. 111 at 23 (citing Murray v. United Food & Com. Workers Int'l Union, Loc. 400, 289 F.3d 297, 301 (4th Cir. 2002)).)

This Circuit's caselaw does not provide a clear answer to the question of whether broadly-worded arbitration clauses necessarily apply to statutory discrimination claims. A recent district court opinion summarizes the conflicting strands of thought:

[C]ourts are split on the issue of whether statutory discrimination claims fall within the scope of arbitration clauses with “arising out of or related to” language. On the one hand, the Fourth Circuit has characterized arbitration clauses that contain this phrase as “broad” and “capable of an expansive reach.” Mey [v. DIRECTV, LLC], 971 F.3d [284,] 292 [(4th Cir. 2020)] (quoting Am. Recovery Corp., 96 F.3d at 93). And, of course, the FAA codifies a “heavy presumption of arbitrability,” which requires “that when the scope of the arbitration clause is open to question, a court must decide the question in favor of arbitration.” Id. (quoting Levin [v. Alms and Assocs., Inc.], 634 F.3d [260,] 266 [(4th Cir. 2011)]). On the other hand, the Fourth Circuit found in Brown [v. Trans World Airlines, 127 F.3d 337 (4th Cir. 1997)] that statutory discrimination claims fell outside the scope of an arbitration clause using similar language because “none of the substantive provisions in the agreement reaches beyond the agreement to cover disputes arising under [anti-discrimination] laws,” and because the parties did not agree to arbitrate “all disputes arising out of the employment relationship,” albeit in the context of a collective bargaining agreement. 127 F.3d at 341–42; see also Norman [v. Call-A-Nurse, LLC, No. 1:16CV1388,] 2017 WL 10844694, at *4 [(M.D.N.C. Aug. 11, 2017)].

Tiedeman v. EyeOne P.L.C., No. 5:23-MC-011, 2024 WL 2059085, at *6 (W.D. Va. May 8, 2024).

The Fourth Circuit most recently analyzed the reach of similar contractual language in the context of a class-action waiver clause in Maldini v. Marriott Int'l, Inc., 140 F.4th 123, 135–36 (4th Cir. 2025). There, the court addressed whether “ ‘arising out of or related to’ language” in a waiver provision covered the plaintiffs' statutory consumer-protection and negligence claims, thereby precluding them from bringing such claims on behalf of a class. Id. The court reaffirmed an earlier holding that such language “sweeps especially broadly, embracing every dispute between the parties having a significant relationship to the contract regardless of the label attached to the claims.” Id. at 136 (emphasis added) (internal quotation omitted). Under this framework, the court held that the waiver provision applied with full force to the consumer-protection and negligence claims in question, since “[w]hether or not the plaintiffs' non-contract claims relate to the [relevant] Contract, they seem clearly to relate to the [relevant] Program.” Id. The court found that this link served as “enough to bring their claims under the broad umbrella of the class waiver's ‘arising under or related to’ clause.” Id. at 136–37.

Applying the framework used in Maldini and considering the “heavy presumption of arbitrability” in close cases, the Court finds that Relator's statutory discrimination claims qualify as claims “aris[ing] out of or relating to this Employment Contract.” (ECF No. 109-2 at 7–8.) Under Maldini's formulation, Relator's claims need only show a “significant relationship to the contract.” 140 F.4th at 136. Such a relationship exists in this case. Relator's allegations of discrimination and retaliation involve various incidents where Defendants' allegedly unlawful behavior concerned or implicated specific aspects of Relator's Employment Agreement. These include provisions governing her working hours (ECF No. 109-2 at 3; see 5AC ¶¶ 280–85; 287–88 (alleging hostility and potential retaliation in response to concerns around Relator's work schedule)); her client services responsibilities (ECF No. 109-2 at 2; see 5AC ¶¶ 275–77 (alleging discriminatory behavior in an interaction between Bob Frazier, Relator and a senior employee of an existing client)); her ability to “cooperate with other sales personnel” (ECF No. 109-2 at 4; see 5AC ¶ 293 (alleging discriminatory behavior in response to Relator's interactions with colleagues and her workplace behavior)); and her ability to perform her contractually-expected job requirements (ECF No. 109-2 at 2; see 5AC ¶ 321 (citing her “inability to successfully do her job” as a result of Defendants' actions)). To the extent that the Employment Agreement also encompasses Bob Frazier's pre-employment promise that Relator's “requested accommodation would be acceptable,” (5AC ¶ 271), her allegations that Defendant Frazier “[a]cted in a hostile manner when Relator requested time off for doctor's appointments and treatments” related to her accommodation further implicate the Employment Agreement. Given these close links between Relator's employment-related claims and the underlying Employment Agreement, as well as the broad “arises out of or relating to” language in the arbitration agreement and the general presumption in favor of arbitrability under federal law, the Court finds that Relator's statutory discrimination claims fall within the scope of the parties' arbitration agreement and are therefore subject to arbitration in accordance with that agreement.

For all of these reasons, the Court finds (1) the parties' arbitration agreement valid and enforceable, and (2) that Relator's employment-related claims (Counts V–XVI) fall within the scope of that arbitration agreement. Consequently, pursuant to 9 U.S.C. § 3, the Court stays all proceedings concerning these claims pending arbitration for ninety (90) days.

2. Discretionary Stay of Counts I–IV Pending Arbitration of Counts V–XVI

Having stayed Relator's employment-related counts pursuant to Section 3 of the FAA, the Court proceeds to evaluate whether it should exercise its discretion to stay the remaining counts of the Fifth Amended Complaint pending arbitration of Counts V–XVI.

Frazier Aviation advocates for a stay of Relator's non-arbitrable claims for several reasons. First, it argues that the FCA claims in Counts I–IV “are inextricably linked” with the arbitrable claims, involving “the same Defendant[s], common questions of fact and law, and common documentary and testimonial evidence.” (ECF No. 109 at 18, 20.) Further, it cites “the long-standing practice of courts in this Circuit,” as well as the Court's interest in judicial economy and what it alleges to be “fatal defects” in Relator's FCA claims in support of its position. (Id. at 18, 21, 23.) Relator responds that Frazier Aviation “significantly overstates the extent of factual and legal overlap” between the two sets of claims, citing the “distinct and substantial factual inquiries required to prove violations of the FCA” in support of her argument. (ECF No. 110 at 25–26.) Relator also asserts that she would experience hardship and prejudice as a result of additional delays resulting from a stay, along with other arguments based on the factors typically considered by this Court in such cases. (Id. at 25–28.)

Having considered the applicable factors, the Court agrees with Relator and finds that Frazier Aviation fails to meet its burden in justifying a stay of Relator's FCA claims by clear and convincing circumstances outweighing the potential harm such a stay might pose to Relator. Williford, 715 F.2d at 127. While Frazier Aviation correctly highlights that one of Relator's statutory retaliation claims implicates legal questions related to FCA liability, the Court finds that the remainder of Relator's employment claims bear little to no relation to the Fifth Amended Complaint's FCA counts. As set forth in the Fifth Amended Complaint and discussed above, Relator's discrimination and retaliation claims involve allegations regarding discriminatory and retaliatory behavior directed at her personally within a workplace environment. By contrast, her FCA charges against Defendants involve a discreet set of facts and address Defendants' actions and representations to their clients, largely directed towards the United States Government. The Court fails to see any “inextricable link” between the two groups of claims on the facts or the law. The Court's finding that the two sets of claims remain largely unrelated also undermines Frazier Aviation's argument that allowing Relator's FCA claims to proceed would create a risk of inconsistent or confusing results, given their limited legal and factual overlap with her stayed employment claims. In addition, Relator's FCA-related allegations comprise the vast majority of the Fifth Amended Complaint and their merits would not be resolved in any way by the arbitration. As such, the Court finds that staying Counts I–IV would not serve the purpose of conserving judicial resources, instead further delaying resolution of Relator's claims. Such a delay would also negatively impact Frazier Aviation's detriment, undermining any argument that the Court's unwillingness to order a discretionary stay would impose a hardship on the company.

For all of these reasons, the Court denies Frazier Aviation's request for a discretionary stay of Relator's FCA-related claims (Counts I–IV). These counts will remain active and pending before the Court.

B. Motions to Dismiss

Having stayed proceedings related to the Fifth Amended Complaint's arbitrable employment claims pending arbitration of those claims, the Court proceeds to consider Defendants' motions to dismiss as to the non-stayed FCA claims.

1. Legal Standards

The False Claims Act (“FCA”), 31 U.S.C. §§ 3729 et seq., serves to “incentivize whistleblowers to come forward when they become aware of fraud against the government, and to protect them from retaliation when they do.” United States ex rel. Sheldon v. Allergan Sales, LLC, No. 24-1793, 2026 WL 706428, at *2 (4th Cir. Mar. 19, 2026) (internal quotation omitted). First enacted in the wake of the Civil War, Congress “substantially strengthened the Act with the passage of the False Claims Act of 1986, and further strengthened it with the Fraud Enforcement and Recovery Act of 2009.” United States ex rel. Wheeler v. Acadia Healthcare Co., Inc., 127 F.4th 472, 479 (4th Cir. 2025). The FCA “punishes companies that have committed fraud in government contracts and serves an important function in deterring other companies from doing the same.” Sheldon, 2026 WL 706428, at *2. In so doing, the FCA's “focus remains on those who present or directly induce the submission of false or fraudulent claims.” Universal Health Servs., Inc. v. United States ex rel. Escobar, 579 U.S. 176, 182 (2016) (citing 31 U.S.C. § 3729(a)).

Relator's Fifth Amended Complaint charges Defendants with violating two FCA provisions related to the submission of false or fraudulent claims: 31 U.S.C. § 3729(a)(1)(A) and (B). The first of these provisions imposes liability on any person who “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval.” 31 U.S.C. § 3729(a)(1)(A). The second imposes the same on anyone who “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.” 31 U.S.C. § 3729(a)(1)(B). The statute defines the term “claim” in relevant part as “any request or demand, whether under a contract or otherwise, for money or property ․ that is presented to an officer, employee, or agent of the United States.” 31 U.S.C. § 3729(b)(2)(A).

In interpreting this statutory language, the Fourth Circuit has held that, to survive a motion to dismiss for failure to state a claim under either Section 3729(a)(1)(A) or (B), a whistleblower or “relator” must “allege four elements: (1) there was a false statement or fraudulent course of conduct; (2) made or carried out with the requisite scienter; (3) that was material; and (4) that caused the government to pay out money or to forfeit moneys due.” United States ex rel. Taylor v. Boyko, 39 F.4th 177, 188 (4th Cir. 2022) (cleaned up). “Failure to adequately allege any of these elements dooms a claim.” Id. (internal citation omitted).

Significantly, the first of these elements, falsity, “encompasses ․ fraudulent misrepresentations, which include certain misleading omissions.” Escobar, 579 U.S. at 187. “The FCA does not require literal falsity.” United States ex rel. Bloomfield v. Engineered Structures, Inc., 755 F. Supp. 3d 950, 957 (E.D. Va. 2024). Rather, “half-truths — representations that state the truth only so far as it goes, while omitting critical qualifying information — can [also] be actionable misrepresentations” under the Act. Escobar, 579 U.S. at 188. Such an approach comports with the common-law meaning of fraud, which the FCA incorporates by its use of the term “fraudulent.” Id. at 187.

To this end, the Supreme Court has expressly recognized the “implied false certification” theory of liability for FCA claims. Id. at 181. Under that theory, “liability can attach when the defendant submits a claim for payment that makes specific representations about the goods or services provided, but knowingly fails to disclose the defendant's noncompliance with a statutory, regulatory, or contractual requirement.” Id. Under such circumstances, “liability may attach if the omission renders those representations misleading.” Id. In the Court's words, “[w]hat matters is ․ whether the defendant knowingly violated a requirement that the defendant knows is material to the Government's payment decision.” Id. Violations of such requirements may trigger liability “even if they were not expressly designated as conditions of payment.” Id.

Defendants act with the requisite scienter for FCA liability if they (1) have “actual knowledge of the [falsity of the] information”; (2) act “in deliberate ignorance of the truth or falsity of the information”; or (3) act “in reckless disregard of the truth or falsity of the information.” Taylor, 39 F.4th at 197 (quoting 31 U.S.C. § 3729(b)(1)(A)). Importantly, “ ‘no proof of specific intent to defraud’ is required.” Id. (quoting 31 U.S.C. § 3729(b)(1)(B)) (cleaned up).

The FCA defines “material” to mean “having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property.” 31 U.S.C. § 3729(b)(4). “Materiality looks to the effect on the likely or actual behavior of the recipient of the alleged misrepresentation.” Escobar, 579 U.S. at 193 (cleaned up). “The failure to follow a ‘minor or insubstantial’ requirement ․ does not suffice to show materiality.” Wheeler, 127 F.4th at 489 (quoting Escobar, 579 U.S. at 194). In opinions discussing materiality post-Escobar, the Fourth Circuit has cited the following factors as supporting a finding of materiality: the defendant's “own actions in covering up the noncompliance,” United States ex rel. Badr v. Triple Canopy, Inc., 857 F.3d 174, 178 (4th Cir. 2017); the rejection of similar claims by the Government under similar circumstances absent the misrepresentation, United States v. Walgreen Co., 78 F.4th 87, 93 (4th Cir. 2023), and the application of “common sense.” Triple Canopy, 857 F.3d at 178; Wheeler, 127 F.4th at 490. The court recently reaffirmed its earlier holding that “the very act of falsifying records to feign compliance with requirements suggests that [the company] itself thought that those requirements were material.” Wheeler, 127 F.4th at 491 (quoting Walgreen Co., 78 F.4th at 94).

Finally, to satisfy the fourth and final element of an FCA claim under 31 U.S.C. § 3729(a)(1)(A) or (B), a relator must “allege facts demonstrating that the defendant's behavior ‘caused the government to pay out money or to forfeit moneys due (i.e., that involved a ‘claim’).’ ” Bloomfield, 755 F. Supp. 3d at 958–59 (quoting Taylor, 39 F.4th at 188).

Relator asserts four substantive FCA counts: two under 31 U.S.C. § 3729(a)(1)(A) for knowingly presenting or causing to be presented false or fraudulent claims for payment or approval, and two under 31 U.S.C. § 3729(a)(1)(B) for knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim. (5AC ¶¶ 328–55.) Relator asserts two schemes of misconduct, each of which forms the basis of one count under each statutory provision, for a total of two counts per scheme. Since the elements that Relator must establish remain essentially identical under both § 3729(a)(1)(A) and (B), the Court addresses each pair of claims that relates to the same scheme — i.e., Counts I and III, and Counts II and IV — together.

2. Cage Code Theory of Liability (Counts I and III)

The Court considers first whether Relator has adequately pled FCA claims under her “CAGE code” theory of liability. As explained above, Relator must plausibly plead that (1) there was a false statement or fraudulent course of conduct; (2) made or carried out with the requisite scienter; (3) that was material; and (4) that caused the government to pay out money or to forfeit moneys due. Taylor, 39 F.4th at 188. Relator must also plead her claims with sufficient particularity to satisfy the heightened pleading standard imposed by Rule 9(b). Nicholson, 42 F.4th at 194.

Having carefully considered the complex factual and legal context, the Court finds that Relator satisfies the minimum requirements for stating valid FCA claims under her “CAGE code” theory in Counts I and III, plausibly pleading all four required elements of an FCA violation. The Court addresses each element in turn.

As to falsity, Relator alleges that Frazier “made materially false statements to the government when it used Lockheed Martin's CAGE codes ․ to bid upon solicitations, enter into contracts, provide CoCs, and present claims for payment on ․ parts it was not authorized to manufacture or otherwise provide.” (5AC ¶ 145.) Relator alleges specific facts concerning Defendants' decision not to renew Frazier Aviation's licensee agreement with Lockheed for the C130 Hologram Program. (Id. ¶¶ 155–60; see also ECF No. 106 at 11 (Defendants providing context confirming the veracity of these allegations).) These facts, in turn, substantiate Relator's allegations that Defendants lacked the authority to render bids or otherwise enter contracts with the Government for parts related to this program using Lockheed's CAGE code. (5AC ¶¶ 2, 172, 330, 344.) Relator specifically alleges that despite terminating the licensee agreement, Defendants nonetheless used Lockheed Martin's CAGE codes in bids on such contracts, thereby falsely representing to the Government that Frazier Aviation remained an authorized Lockheed licensee. (Id. ¶¶ 152, 172, 180, 211.c.) Relator also specifically alleges that Defendants submitted a modified and expired Lockheed Martin authorization letter in support of its bids under Lockheed's CAGE codes. (Id. ¶¶ 153, 184–87, 344.) Indeed, Defendants provided copies of the relevant contracts, and one, dated after Defendants terminated their licensee status with Lockheed, still lists Lockheed's CAGE code alongside Frazier's, (ECF No. 105-5 at 6), while another includes a notation that “Frazier ․ is an approved vendor for Lockheed Martin” at a time when it was not. (ECF No. 105-4 at 3.) These contracts further support Relator's allegations that Frazier falsely represented its licensee status to the Government, improperly using Lockheed's CAGE code in support of claims against the Government treasury. Viewing all of these allegations together and in the light most favorable to Relator, the Court finds that these facts sufficiently establish a “false statement or fraudulent course of conduct” by Defendants, satisfying the FCA's falsity element.⁶

Relator also pleads sufficient allegations to establish scienter. Relator alleges that Defendants made the relevant representations knowingly. (Id. 153, 330, 344.) In support, she cites specific facts, including Defendant Bob Frazier's directives to disregard the lack of an ongoing licensing agreement with Lockheed and any concerns to that effect, such as those concerns expressed to Mr. Frazier by Relator herself. (Id. ¶¶ 20, 194–97, 278.) Relator also specifically alleges that Mr. Frazier personally modified the Lockheed authorization letter to intentionally mislead the Government. (Id. ¶ 186.) Paired with the previously discussed allegations surrounding Defendants' decision not to renew their licensing agreement with Lockheed, (id. ¶¶ 155–60), the Court finds these allegations sufficient to establish that Defendants acted, at the very least, with “reckless disregard of the truth or falsity of the information” in representing Frazier Aviation as a Lockheed licensee on certain C130 Hologram program-related bids, satisfying the scienter requirement. Taylor, 39 F.4th at 197.

As to materiality, Relator alleges that Defendants' use of Lockheed's CAGE codes constituted a material factor in the Government's decision to pay them for the requisite aircraft parts, and that the Government would not have approved and paid Defendants but for Defendants' misrepresentations regarding their licensee status. (5AC ¶¶ 331–32.) These assertions stand supported by Relator's extensive allegations concerning the Government's routine reliance on CAGE codes to “establish sourcing authority” and “validate that awards are being made to approve[d] sources.” (Id. ¶¶ 80, 83.) Further, Relator asserts that Defendants continued to use Lockheed's CAGE codes despite deliberately ending their licensee relationship and despite Lockheed's express prohibition, facts which corroborate her allegations of materiality. (Id. ¶¶ 139, 146.) By using Lockheed's codes while knowing that they could not do so lawfully, and by providing a fraudulent authorization to suggest that they remained licensed by Lockheed to manufacture and sell C130 parts, Defendants' affirmative “actions in covering up the[ir] noncompliance” support the inference that Defendants were aware of the materiality of listing Lockheed's CAGE Code in bids to the Government, since they would have had no other reason to engage in such machinations. Triple Canopy, Inc., 857 F.3d at 178; see Walgreen, 78 F.4th at 94 (finding that “the very act of falsifying records to feign compliance with requirements suggests that [the defendant] itself thought that those requirements were material”). The Court again notes the express reference to Frazier Aviation as “an approved vendor for Lockheed Martin” in one of the relevant contracts effective after the date of its termination as a Lockheed licensee. (ECF No. 105-4 at 3.) The fact that the contract included such a statement further supports Relator's assertion that characterizing Frazier Aviation as an approved vendor for Lockheed parts was necessary and material in order to obtain payment from the Government. Accordingly, the Court finds that Defendants' misrepresentations qualify as materially false or fraudulent under the FCA.

Finally, Relator's Fifth Amended Complaint sufficiently alleges that Defendants submitted false or fraudulent claims to the Government for which they were paid. Relator cites the existence of several specific contracts and the repeated delivery of parts to the Government pursuant to those and other contracts. (5AC ¶¶ 145, 187, 211.) These allegations, paired with the common sense inference that Defendants would not have presented such specialized and expensive parts to the Government without demanding payment upon delivery, provide sufficiently “reliable indicia that lead to a strong inference that claims were actually submitted.” Wheeler, 127 F.4th at 493; see Josephs v. Amentum Servs. Inc., No. SAG-25-01477, 2025 WL 3223772, at *10 (D. Md. Nov. 19, 2025), motion to certify appeal denied, No. CV SAG-25-01477, 2026 WL 183543 (D. Md. Jan. 23, 2026) (finding that it would “stretch the imagination to believe that [the defendant] was directing this scheme ․ [and] providing those items [in question] to the government, but then not billing the government for the items.”).

The Court briefly addresses Defendants' main arguments for dismissal of Counts I and III, all of which lack merit. As to falsity, Defendants challenge Relator's allegations in several ways, arguing that Relator fails to allege a false claim under her CAGE Code theory, because she does not identify “any contractual requirement violated by Frazier for any contract relevant to her CAGE Code theory.” (ECF No. 105 at 20–21.) Frazier Aviation also suggests that Relator fails to sufficiently allege that the goods impermissibly advertised under Lockheed's CAGE code were not, in fact, manufactured at an earlier time when Frazier Aviation constituted a licensed dealer, despite Frazier Aviation's lack of a manufacturing license at the time that the relevant contracts were executed. (Id. at 21–22 (arguing that Relator “fails to allege (1) when Frazier purportedly manufactured the surplus materials [advertised in the contract] or (2) that Frazier was not a Lockheed-authorized manufacturer at the time of manufacture, which necessarily preceded the contract award.”).) The Court rejects these arguments in the face of the Fifth Amended Complaint's specific allegations regarding Defendants' misrepresentations as to Frazier Aviation's licensee status, allegations which stand corroborated by statements contained within Defendants' relevant contracts. Relator's specific and particularized allegations of fraud raise a reasonable expectation that discovery will reveal evidence showing that Defendants illegally employed Lockheed's CAGE codes and altered authorization letters in order to submit fraudulent claims to, and receive eventual payment from, the Government. Twombly, 550 U.S. at 556. Defendants' factual disagreements as to the scope and purpose of the contracts lend themselves more appropriately to resolution at summary judgment, not at the motion-to-dismiss stage.

Defendants also argue that Relator fails to plead her CAGE code theory with sufficient particularity under Rule 9(b). (ECF No. 105 at 25–27.) To the extent that Defendants assert a lack of particularity in Relator's falsity allegations, the Court rejects this argument in light of its earlier discussion concluding that Relator sufficiently established this element by invoking specific misrepresentations within contracts, fraudulent use of CAGE codes, and Bob Frazier's directives to ignore relevant legal obligations. Frazier Aviation's argument that Relator fails to allege presentment of the false or fraudulent claim to the Government with sufficient particularity also fails. A relator sufficiently alleges presentment if she either “aver[s] ‘with particularity that specific false claims were presented to the government for payment’, or plead[s] ‘a pattern of conduct’ that would have necessarily led to the submission of false claims.” United States ex rel. Fadlalla v. DynCorp Int'l LLC, 402 F. Supp. 3d 162, 189 (D. Md. 2019) (quoting United States ex rel. Grant v. United Airlines Inc., 912 F.3d 190, 197 (4th Cir. 2018)). Relator's allegations allow the Court to infer that Defendants have submitted false claims to the Government under both avenues. Based on Relator's specific allegations involving government contracts actually awarded to Defendants and parts actually delivered to the Government, and viewing these allegations in the light most favorable to Relator, the Court easily infers that Defendants actually submitted specific claims for payment in conjunction with discrete contracts that it obtained through its unlawful use of Lockheed's CAGE codes. Further, the Court finds that, when viewed through the lens of common sense, Defendants' fraudulent bidding scheme, which resulted in contracts, necessarily would have led Defendants to submit the false claims in question.⁷ Finally, the Court notes the Fourth Circuit's discussion of Rule 9(b)'s underlying purposes, namely to ensure that defendants receive “sufficient information to formulate a defense” and to protect defendants from frivolous suits, fishing expeditions and unnecessary reputational harm. Harrison, 176 F.3d at 784. Relator's CAGE code allegations provide Defendants with ample notice of the nature of the alleged violations; as evidenced by Defendants' robust briefing, her allegations provided Defendants with more than enough information to formulate a full-throated defense. Further, the Court notes that the Fifth Amended Complaint indicates that the Government has likewise conducted parallel investigations and made specific findings regarding Defendants' schemes at issue, (see, e.g., 5AC ¶¶ 230–36), further demonstrating that Relator's action is not frivolous nor are her allegations unsubstantiated. As such, the Court finds that the Fifth Amended Complaint and its CAGE code-based theory of FCA liability include sufficiently particularized allegations that satisfy both Rule 9(b)'s express requirements and its animating purposes.

The Court also rejects Frazier Aviation's remaining argument that Relator's CAGE code-based counts should be dismissed for impermissible group pleading. (ECF No. 105 at 26–27.) Relator's Fifth Amended Complaint stands replete with specific allegations as to Frazier Aviation, which submitted bids and filed SARs, and Bob Frazier, who directed employees to continue using Lockheed's CAGE codes, instructed others to incorrectly quote parts, and who oversaw all related processes. (See, e.g., 5AC ¶¶ 170, 172–91, 194–97, 203–04, 211–12, 215–20, 222, 230–35, 248–51, 258–63.) These allegations sufficiently delineate the required individual participation at this stage of the litigation before discovery further supplements the record.

For all of these reasons, the Court finds that Counts I and III of the Fifth Amended Complaint plausibly allege the required elements of an FCA violation and that Relator pleads her FCA claims under both counts with sufficient particularity. The Court therefore denies Defendants' motions to dismiss as to Counts I and III.

3. Subcontracting Scheme Theory of Liability (Counts II and IV)

The Court finally turns to Counts II and IV, in which Relator asserts FCA claims against Defendants based on a “subcontracting scheme” theory. While not a model of clarity, the Court understands Relator's argument under this theory to proceed as follows. Defendant Frazier Aviation purportedly used subcontractors to produce parts for Government contracts and then submitted these parts to the Government without indicating that it had not produced these parts itself. (5AC ¶¶ 201, 203.) To the extent that its parts entailed critical components, Frazier Aviation was required to, and did, submit Source Approval Requests (“SARs”) to obtain approval of its own manufacturing sites and processes. (Id. ¶¶ 46, 210.) However, Frazier Aviation never amended these SARs to reflect its use of subcontractors and to obtain approval for its subcontractors' processes. (Id. ¶ 210.) When submitting the finished parts, Frazier Aviation did not disclose its use of subcontractors. (Id. ¶ 205.) In failing to do so, Defendants implicitly certified to the Government that they produced the respective parts in accordance with all applicable requirements. (Id. 207.) Defendants also expressly certified, in Certificates of Compliance (“COCs”) submitted with their deliveries, that the parts had been manufactured “in accordance with all applicable requirements.” (Id. ¶ 205); FAR 52.246-15 (2026). However, these implied and express certifications of compliance were false, given that Defendants had neither amended their SARs nor obtained new ones reflecting their use of subcontractors. (Id. ¶ 201.) These false certifications, in turn, gave rise to false or fraudulent claims and constituted false records or statements material to a false or fraudulent claim, respectively, subjecting Defendants to liability under the FCA. (Id. ¶¶ 337; 351.)

For the reasons set forth below, the Court finds that Relator also adequately pleads FCA violations under Counts II and IV through its “subcontracting scheme” theory. Relator alleges — albeit implicitly — that Frazier Aviation engaged in procurement activities that required it to file SARs. (5AC ¶¶ 201, 206, 212.) Relator also alleges that it constitutes a “Government requirement” that SARs be “truthful, facility specific, and current.” (Id. ¶ 125.) Consequently, military agencies grant SAR approvals on a site and process-specific basis; any changes in the approved processes — such as shifting production to a subcontractor's facility — require a new SAR application and approval. (Id. ¶¶ 47, 201.) As to Defendants, Relator specifically alleges that in the SAR applications it submitted, Frazier Aviation did not disclose that it used subcontractors, even though it used subcontractors to manufacture goods under contracts where SARs were required, and it submitted the finished parts to the Government without disclosing its use of said subcontractors. (Id. ¶¶ 126, 206.) Relator provides a specific example of Defendant's practice of hiding its use of subcontractors, where Defendants obtained a SAR, used a subcontractor and subsequently failed to revise the SAR and obtain approval for the use of amended processes. (Id. ¶ 212.) Relator alleges that Frazier Aviation's misrepresentations in its SARs and CoCs were material to the Government's decisions to pay Defendants for their products. (Id. ¶ 206.) To demonstrate the materiality of Defendant's misrepresentations regarding its use of subcontractors, Relator points to the United States Navy's Site Survey at Frazier Aviation, where the Navy specifically flagged that the relevant “approved SAR package ․ indicated that the manufacturing would be performed by Frazier Aviation, but instead ․ was performed by an unapproved source,” which it highlighted as a “major” nonconformance with its approval processes “that negatively impacts a Critical Characteristic” or creates other potentially serious dangers to the individual “using, maintaining or depending upon the supplies or services.” (Id. ¶¶ 230–33.) The Navy's finding caused it to terminate Defendant's ability to sell the part at issue directly to the Navy pending mitigation. (Id. ¶¶ 230–33; 236.)

These allegations suffice to render Relator's FCA claims concerning Defendants' unsanctioned and undisclosed use of subcontractors plausible and sufficiently particular. As already discussed, under the implied false certification theory of FCA liability, “when a defendant submits a claim, it impliedly certifies compliance with all conditions of payment.” Escobar, 579 U.S. at 180. If that claim “fails to disclose the defendant's violation of a material statutory, regulatory, or contractual requirement ․ the defendant has made a misrepresentation that renders the claim ‘false or fraudulent.’ ” Id. (quoting U.S.C. § 3729(a)(1)(A)). Importantly, the Supreme Court emphasized that “[w]hat matters is not the label the Government attaches to a requirement, but whether the defendant knowingly violated a requirement that the defendant knows is material to the Government's payment decision.” Id. at 181.

Here, Relator adequately alleges that Defendants withheld information concerning their noncompliance with a requirement that they knew was material to the Government's payment decision: truthful compliance with SAR requirements.⁸ Relator adequately alleges that Defendants were under an obligation to submit truthful, facility specific and current SARs, and that the failure to disclose their use of subcontractors would invalidate the existing SAR and require the submission of a new one under the Government's applicable approval processes. (5AC ¶¶ 47, 125, 201.) Relator also pleads sufficient facts to establish that Defendant Frazier Aviation both implicitly and expressly certified to the Government — falsely — that it had complied with all “applicable requirements” by (1) submitting its products without disclosing its violation of the SAR requirements and (2) filing CoCs to the same effect. (Id. ¶¶ 126, 198, 201, 205, 212, 261, 263.)

As to scienter, Relator adequately alleges that Defendants knowingly violated a requirement that they knew was material to the Government's payment decision. As a general matter, Relator pleads that Defendants engaged in the subcontracting scheme knowingly. (Id. ¶¶ 337, 351.) Further, Relator's allegations demonstrate that Defendants complied with SAR rules as to their own processes, allowing the inference that Defendants knew both (1) what was required of them under the SAR process and (2) how their failure to submit amended SARs violated these known obligations. Relator further substantiates her general allegations with specific allegations that Defendant Bob Frazier was aware that the company made incorrect certifications and took actions to obscure any indication that subcontractors had manufactured the products being provided to the Government. (Id. ¶¶ 194, 197, 213, 220, 258–63.) These specific allegations render plausible Relator's claim that Defendants knowingly sought to pass off subcontractor work as their own. As such, and taken together, the Court finds that these allegations establish that Defendants knowingly violated a requirement that they knew was material to the Government's payment decision, meeting the standard for an implied false certification claim.

Relator also pleads sufficient facts to satisfy the “rigorous materiality requirement” for FCA claims. Escobar, 579 U.S. at 181. The materiality of using unauthorized sources to manufacture products, in violation of SAR requirements, stands evidenced by the Navy's 2022 Site Survey, which classified Frazier Aviation's use of unauthorized sources to manufacture its products as “Major – a nonconformance that negatively impacts a Critical Characteristic, or that would result in hazardous or unsafe conditions.” (5AC ¶¶ 233, 236.) As a result of these violations (along with others), the Navy terminated Defendants' ability to sell the relevant parts pending mitigation. (Id. ¶ 236.) Pursuant to the Fourth Circuit's reasoning in Walgreen, these adverse actions taken by the Government pursuant to a finding of misconduct closely resembling the charged FCA violation strongly support a finding of materiality. 78 F.4th at 93. Such a finding stands further supported by common sense. Triple Canopy, 857 F.3d at 178. As Relator alleges in detail, the SAR process serves an important gatekeeping function to ensure technical, quality and security standards for military contracts, including for critical safety items. (5AC ¶¶ 47, 55.) Common sense dictates that knowingly undermining a rigorous pre-certification requirement in the sensitive context of military contracts would immediately raise flags and at the very least pause, if not adversely impact, the Government's decision to pay for a product. While mindful of the Supreme Court's insistence on a rigorous materiality standard in implied certification cases, Escobar, 579 U.S. at 190, this Court finds that the facts alleged by Relator sufficiently support the theory's applicability here, particularly in light of the documented response by the U.S. Navy upon learning of Defendants' misconduct in a related instance.

Finally, the Court finds that Relator adequately alleges that Defendants' fraudulent actions when subcontracting the manufacture of parts under the contracts in question must have led to a submission of a false claim on the Government treasury. Relator alleges that “[b]ut for Defendants' submission of false claims, the [G]overnment would not have approved and paid the claims.” (5AC ¶ 339.) The specific nature of the contracts asserted — for high dollar amounts in a niche industry, (see id. ¶ 187 (referencing a contract valued at $1.3 billion)) — along with Defendants' documented presentation of completed parts to the Government, as evidenced by the Navy's Site Survey, substantiate this allegation and lead to the common sense inference that Defendants subsequently submitted claims for payment pursuant to their performance of the contract. As before, the Court finds that it would “stretch the imagination” to believe that Defendants would not seek payment for work done over the course of several years under multi-year, high-dollar contracts. Josephs, 2025 WL 3223772 at *10.

Defendants lodge similar objections to those raised against Relator's CAGE code-based claims. Frazier Aviation begins by attacking Relator's allegations of falsity, claiming that “none of the contracts requires that Frazier supply the relevant part according to a particular SAR” and that Relator failed to identify “any such regulatory requirement pertaining to SARs that tie to the contracts identified in the 5AC.” (ECF No. 105 at 19.) Stated differently, Defendants argue that “Relator identifies no regulation or contractual term ⁹ requiring compliance with any SAR-related disclosure or approval obligation when subcontracting.” (ECF No. 106 at 8.) The Court disagrees. Relator sufficiently alleges that Defendants, at least in some instances, were required to (and did) submit SAR packages as a condition of obtaining a Government contract, and that the Government expected Defendants' SARs to remain updated and accurate in order to maintain manufacturing approval. (5AC ¶¶ 47, 125, 201, 206, 212.) These allegations stand supported not just by Relator's specific citations to different military procurement manuals, but also by the U.S. Navy's finding that Frazier Aviation's failure to list a subcontractor as part of its SAR package constituted a “major” nonconformance warranting suspension of the contract. (Id. ¶¶ 230–33.) As such, the Court finds that Relator sufficiently alleged that Frazier Aviation's compliance with SAR obligations constituted a required, material condition of at least some of its Government contracts, and that therefore, a claim for payment concomitant with, and induced by, misrepresentations hiding its actual noncompliance with SAR requirements constitutes a false claim for FCA purposes.

Defendant Bob Frazier also argues that Relator “alleges no facts that DLA has withheld or refused payment on any claim submitted under” Frazier Aviation's contract for shoe assembly parts, “despite the Navy's purported discovery of SAR violations.” (ECF No. 106 at 31.) Defendant's argument fails to undermine the import of the Navy's finding of a “major” nonconformance, which Relator alleges resulted in suspension of deliveries. (5AC ¶¶ 233, 236.) The Navy's forceful response speaks to the materiality of compliance with SAR requirements. As such, the Court refuses Defendant's invitation to further raise the materiality bar and finds instead that Relator's allegations stand sufficient, at the motion-to-dismiss stage, to establish “that the Government would not have paid [Frazier Aviation's] claims had it known [Frazier Aviation] was not providing” the services as promised in its SAR package. Wheeler, 127 F.4th at 490.

Defendants reassert that Relator's complaint lacks sufficient particularity under Rule 9(b). (ECF No. 105 at 24–26.) As before, the Court finds that the details provided by Relator suffice not only to meet Rule 9(b)'s textual requirements, but more importantly, to satisfy the rule's animating purposes. By pointing to a host of specific actions taken by Defendants in conjunction with specific contracts for specific products, the Fifth Amended Complaint provides Defendants with more than “sufficient information to formulate a defense.” Harrison, 176 F.3d at 784. Nor do Relator's allegations implicate Rule 9(b)'s concerns regarding frivolity and unwarranted damage to a defendant's reputation, given the corroborating investigations of similar conduct by investigative units of the United States Armed Forces. (See, e.g., 5AC ¶¶ 219, 230.) Finally, the detailed nature of Relator's pleading amply demonstrates that she already possesses substantial records concerning the subject of this litigation, rendering this case a far cry from the scenario where “all of the facts are learned after discovery.” Harrison, 176 F.3d at 784. In light of the specific allegations discussing the “who, what, when, where, and how” of the alleged FCA violations, and given the Court's findings concerning the Fifth Amended Complaint's conformance with Rule 9(b)'s animating purposes, the Court remains satisfied that Relator has pled her allegations with sufficient particularity. Nicholson, 42 F.4th at 195; see also id. (noting that courts “should hesitate to dismiss a complaint under Rule 9(b) if the court is satisfied (1) that the defendant has been made aware of the particular circumstances for which she will have to prepare a defense at trial, and (2) that plaintiff has substantial prediscovery evidence of those facts.”).

Finally, Defendant Bob Frazier argues that Relator fails to sufficiently allege the scienter element as to him personally, asserting that the Fifth Amended Complaint “mentions Mr. Frazier's direct involvement only in limited circumstances” and fails to “allege he had any knowledge of the conduct discussed in the Navy survey findings.” (ECF No. 106 at 32.) The Court disagrees. An individual may be held liable under the FCA when he directly participates in, or otherwise satisfies the elements of, the alleged fraud. United States ex rel. Davis v. Prince, 2011 WL 13092085, at *3 (E.D. Va. June 23, 2011); see also United States ex rel. Decesare v. Americare in Home Nursing, No. 1:05CV696, 2011 WL 607390, at *8 (E.D. Va. Feb. 10, 2011) (reaffirming that, to show sufficient involvement for FCA liability purposes, a complaint must allege more than that the defendant served as the company's CEO). Relator offers sufficiently specific allegations concerning Defendant Bob Frazier to plausibly allege FCA liability against him personally, in addition to her allegations against his company. Relator alleges that Mr. Frazier made the decision to opt his company out of Lockheed Martin licensee status, demonstrating his knowledge of the company's lack of authorization to bid under the expired license. (5AC ¶¶ 158–60.) She also alleges that he exercised “direct control” over the fraudulent schemes at issue in this case, (id. ¶ 40), and provides numerous specific allegations illustrating his direct involvement in final bid-related decision-making, certifying compliance with applicable Government regulations and submitting finished parts. (Id. ¶¶ 43, 170, 180–86, 213–20, 258.) Relator also alleges that she raised concerns about the improper use of the Lockheed CAGE code to Mr. Frazier, and that he dismissed her objections, instructing her to “quote what I tell you to quote.” (Id. ¶ 20.) Further, Relator specifically alleges that Mr. Frazier instructed her to bid on parts for which the company lacked approval or authorization to bid, and that he pressured her to quote part numbers using Lockheed's CAGE code without authorization. (Id. ¶¶ 170, 178, 195–97.) These allegations suffice to establish that Defendant Bob Frazier directly participated in the fraud at issue and possessed the requisite scienter for liability under the FCA.

For all of these reasons, the Court finds that Relator's allegations within Counts II and IV of her Fifth Amended Complaint plausibly allege the required elements for an FCA claim and that Relator pleads her claims under both counts with sufficient particularity. The Court therefore denies Defendants' motions to dismiss these counts.

IV. CONCLUSION

For the foregoing reasons, the Court hereby GRANTS IN PART and DENIES IN PART Frazier Aviation's Motion to Stay (ECF No. 109). The Court STAYS all proceedings related to Counts V through XVI of the Fifth Amended Complaint pending arbitration of the underlying employment-related claims for ninety (90) days. The Court will consider extending this stay subject to Defendants filing a motion to compel arbitration in the appropriate forum. If no such motion is filed within ninety (90) days of this Order's entry, the Court will lift the stay.¹⁰

As to Counts I through IV, the Court finds that Relator pleaded sufficient facts to plausibly state a claim and DENIES Defendants' motions to dismiss these claims (ECF Nos. 105, 106). The Court also DENIES Defendant Bob Frazier's Motion for a Hearing (ECF No. 107). This matter shall proceed to discovery on Counts I through IV.

It is so ORDERED.

FOOTNOTES

1.   Defendant Bob Frazier moves the Court for a hearing on his Motion to Dismiss. (ECF No. 107.) The Court finds that the parties have adequately briefed all relevant issues and that a hearing will not aid the Court's resolution of the issues presented. Accordingly, the Court DENIES Mr. Frazier's motion for a hearing (ECF No. 107) and decides the Motions on the papers.

2.   Relator alleges that she filed a complaint with “California FEHA.” (5AC ¶ 323.) The acronym “FEHA” refers to California's Fair Employment and Housing Act, the state statute that governs employment discrimination claims. See, e.g., Blount v. Northrup Grumman Info. Tech. Overseas, Inc., No. 1:14CV919, 2014 WL 5149704, at *2 (E.D. Va. Oct. 14, 2014) (granting motion to stay claims under FEHA pending arbitration). Employment-related complaints under that statute must be submitted to California's Civil Rights Department. Civil Rights Department, State of California, Complaint Process, https://calcivilrights.ca.gov/complaintprocess/ [https://perma.cc/79WG-8A2J]. The Court thus construes Relator's allegations to indicate that she filed a complaint to California's Civil Rights Department.

3.   The Court employs the pagination assigned to all court filings by the CM/ECF docketing system.

4.   Though the Federal Arbitration Act creates substantive federal law around issues of arbitrability, “arbitration must be contracted for, and courts apply ordinary state law contract principles to determine whether a valid arbitration agreement exists.” Hetrick Companies LLC v. IINK Corp., 710 F. Supp. 3d 467, 482 (E.D. Va. 2024) (citing First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995)); see also Three Rivers Motors Co. v. Ford Motor Co., 522 F.2d 885, 889 n.5 (3d Cir. 1975) (“Applicability of the Erie doctrine is not dependent on the jurisdictional basis” in diversity or federal question jurisdiction cases) (first citing Maternally Yours v. Your Maternity Shop, 234 F.2d 538, 540–41 n.1 (2d Cir. 1956); and then citing Hart and Wechsler, The Federal Courts and the Federal System 766–68 (2d Ed. 1973)). The Court thus looks to Virginia choice-of-law rules to decide which state's laws should govern its assessment of the validity of the parties' contract as a whole and the arbitration agreement in particular.

5.   Under California law, severance of unconscionable provisions from a contract is generally appropriate “[i]f the illegality is collateral to the main purpose of the contract, and the illegal provision can be extirpated from the contract by means of severance or restriction.” Armendariz, 6 P.3d at 696. “[C]ourts will generally sever illegal provisions and enforce a contract when nonenforcement will lead to an undeserved benefit or detriment to one of the parties that would not further the interests of justice,” particularly “when there has been full or partial performance of the contract.” Id. at 696, 699.

6.   Courts have recognized that such statements qualify as false claims under the FCA even if they merely served to induce a contract on which claims were later paid, but did not constitute a part of the formal claim for payment itself. See, e.g., U.S. ex rel. Jefferson v. Roche Holding AG, 489 F. Supp. 3d 418, 429 (D. Md. 2020) (“Under a fraud-in-the-inducement theory, a defendant violates the FCA if it submits claims to the government under a contract which was procured by fraud, even in the absence of evidence that the claims were fraudulent in themselves.”) (internal quotation omitted).

7.   Defendant Bob Frazier's argument that Relator's “acknowledgment that permissible bidding could occur in certain situations defeats any inference that an alleged pattern of conduct ‘necessarily’ resulted in false claims,” (ECF No. 106 at 25), fails to alter the Court's assessment where, as here, Relator pleads specific instances of Frazier Aviation using unauthorized CAGE codes to bid and successfully procure contracts unlawfully — which would necessarily result in presentment of false or fraudulent claims to the Government.

8.   To the extent that Relator seeks to assert her subcontracting-related FCA claims on the basis that Defendants' CoCs falsely certified compliance with other contractual or regulatory requirements, the Court finds such an argument unavailing. As previously discussed, Relator asserts that Defendants submitted CoCs, which certify that the submitting contractor “furnished the supplies or services called for by” the appropriate contract “in accordance with all applicable requirements.” FAR 52-246-15 (emphasis added). In her discussion of relevant FAR provisions concerning the use of subcontractors, Relator points to FAR 46.317, which requires that a clause concerning the reporting of nonconforming items be included in all contracts for items “subject to higher-level quality standards in accordance with the clause at 52.246-11” and items determined to be “critical items.” FAR 46.317. That clause, in turn, requires contractors to notify the Contracting Officer “within 60 days of becoming aware or having reason to suspect ․ that any end item, component, subassembly, part, or material contained” in items “for delivery to, or for, the Government is counterfeit or suspect counterfeit.” FAR 52.246-26(b)(2). This regulation defines “counterfeit item” as, among other things, “an unlawful or unauthorized reproduction, substitution, or alteration that has been knowingly mismarked, misidentified, or otherwise misrepresented to be an authentic, unmodified item from the original manufacturer.” FAR 52.246-26(a) (emphasis added). Under this interconnected set of regulations, a contractor certifying that it furnished goods “in accordance with all applicable requirements” on any contract involving items of “higher-level quality standards” or “critical items” thus implicitly attests that it complied with the obligation to notify the Contracting Officer of any item “misrepresented to be an authentic, unmodified item from the original manufacturer.”However, Relator fails to plead that this interlocking set of regulations was incorporated into any of the contracts in question, and that CoCs were specifically submitted in conjunction with any such contract. As such, Relator fails to plead this theory with sufficient particularity for purposes of Rule 9(b). The Court only finds that Relator has successfully pleaded her SAR-related theory.

9.   The Court notes some ambiguity in the controlling case law as to the type of requirement that must be violated to establish a false claim under the FCA. The Supreme Court in Escobar considered a defendant's failure to disclose noncompliance with “statutory, regulatory, or contractual requirements.” 579 U.S. at 190. Yet, in the same opinion, the Court also emphasized that “[w]hat matters is not the label the Government attaches to a requirement, but whether the defendant knowingly violated a requirement that the defendant knows is material to the Government's payment decision.” Id. at 181 (emphasis added).Relator's Fifth Amended Complaint fails to definitively specify whether SAR requirements, which represent agency-imposed pre-certification rules, qualify as “statutory, regulatory or contractual requirements.” Nevertheless, this Court follows the Supreme Court's functionalist approach and recognizes noncompliance with SAR requirements as a valid basis for FCA liability. Relator's allegations regarding the importance and function of SAR requirements, along with the Navy's termination of Defendants as an approved manufacturer upon finding that Defendants failed to comply with these requirements, support a conclusion that Defendants' noncompliance with applicable SAR requirements constitutes a material violation of Defendant's contracting agreement with the Government that would impact the Government's payment decision. As such, the Court finds that Defendants' false certification of compliance with all “applicable requirements” when executing Government contracts includes SAR requirements and thus falls within Escobar's definition, regardless of what “label” Defendants attach to them.

10.   The burden to apprise the Court of whether an appropriate motion to compel has been filed within the ninety-day window shall lie with Relator.

David J. Novak, United States District Judge