Motion for Partial Summary — United States ex rel. James R. Berkley v. Ocean State, LLC (Dkt. 64, D.R.I.)

Summary

The relator's motion for partial summary judgment under Fed. R. Civ. P. 56, filed January 6, 2025 as Document 64 in C.A. No. 1:20-cv-00538-JJM-PAS in the U.S. District Court for the District of Rhode Island, against Ocean State, LLC, New Harbor Capital and Fyzical Acquisition Holdings, LLC. The relator asks the Court to find that Ocean State and Fyzical Holdings falsely certified compliance with the PPP size and affiliation rules because, together with their affiliates, each had more than 500 employees and no affiliation waiver applied. The motion also seeks rulings on scienter, materiality, New Harbor Capital's liability for causing the claims, damages measured by the government's entire expenditures, and the public disclosure bar defense. A footnote states that the relator does not seek summary judgment on the separate necessity certification claim.

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Case 1:20-cv-00538-JJM-PAS         Document 64        Filed 01/06/25      Page 1 of 3 PageID #:
                                         2370



                           UNITED STATES DISTRICT COURT
                         FOR THE DISTRICT OF RHODE ISLAND


 UNITED STATES OF AMERICA ex rel.
 JAMES R. BERKLEY,
                   Plaintiff,

                  vs.                              C.A. No. 1:20-cv-00538-JJM-PAS
 OCEAN STATE, LLC,
 NEW HARBOR CAPITAL FUND LP, NEW
 HARBOR CAPITAL FUND II LP,
 NEW HARBOR CAPITAL MANAGEMENT
 LP, BLUEPRINT TEST PREPARATION,
 LLC, FYZICAL ACQUISITION
 HOLDINGS, LLC,

                          Defendants.


            RELATOR’S MOTION FOR PARTIAL SUMMARY JUDGMENT

       Pursuant to Fed. R. Civ. P. 56, plaintiff-relator, James R. Berkley (“Relator”), moves for

partial summary judgment against defendants, Ocean State, LLC (“Ocean State”), New Harbor

Capital Fund LP (“NHC Fund 1”), New Harbor Capital Fund II LP (“NHC Fund II”), and New

Harbor Capital Management LP (“NHC Management” and collectively with NHC Fund I and

NHC Fund II, “New Harbor Capital”) and Fyzical Acquisition Holdings, LLC (“Fyzical

Holdings”) (collectively, the “MSJ Defendants”), as to the following issues in this case brought

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

   1. That Ocean State and Fyzical Holdings submitted false claims to obtain federal funds by
      falsely certifying in their applications under the United States Small Business
      Administration’s (“SBA”) Paycheck Protection Program (“PPP”) that they complied with
      the PPP size and affiliation rules, which was a condition for eligibility for the PPP loans,
      because, together with their affiliates, Ocean State and Fyzical Holdings each had more
      than 500 employees and no affiliation waiver applied and then by falsely certifying that the
      loan funds were used to pay costs that were eligible for forgiveness and avoiding an
      obligation to repay the PPP funds to which they were not entitled;
Case 1:20-cv-00538-JJM-PAS             Document 64        Filed 01/06/25       Page 2 of 3 PageID #:
                                             2371



    2. That Ocean State and Fyzical Holdings knowingly (i.e., with the requisite scienter)
       submitted false claims and records and avoided an obligation to repay the PPP funds
       because their conduct and the information presented to them by lawyers, other
       professionals, government entities, and New Harbor Capital conclusively shows that Ocean
       State and Fyzical Holdings had actual knowledge, acted with deliberate ignorance, or, at a
       minimum, acted in reckless disregard of the truth or falsity of the claims and records
       submitted;

    3. That Ocean State and Fyzical Holdings’ false certifications of eligibility were material to
       the government’s payment decision and to their payment obligations because the
       certifications were a condition of obtaining the PPP loans and forgiveness and thus go to
       the heart of the bargain because without the certifications there would be no payments, and
       Ocean State and Fyzical Holdings knew this;

    4. That New Harbor Capital, through its direction, control and/or participation in the claims
       process, knowingly caused Ocean State and Fyzical Holdings to submit false claims and
       records and is thus liable under the FCA;

    5. That as a matter of law the measure of damages for the MSJ Defendants’ FCA violations
       is the entirety of the government’s expenditures for claims resulting from the false PPP
       loan applications; and

    6. That the MSJ Defendants’ public disclosure bar affirmative defense fails because they
       have not identified a single source of alleged public disclosure concerning the allegations
       or transactions alleged by Relator concerning: (i) Ocean State and Fyzical Holdings’ false
       certifications of compliance with the PPP size and affiliation rules and repayment
       avoidance; or (ii) New Harbor Capital’s direction and control of Ocean State and Fyzical
       Holdings’ PPP applications or loans.1


    As grounds for this motion, Relator relies on the Memorandum of Law, Statement of

Undisputed Material Facts in Support of Relator’s Motion for Summary Judgment, and the

Affidavit of Eric E. Renner filed herewith. For all of the reasons articulated therein, Relator

respectfully requests that the Court grant this motion in its entirety.




1
 With this motion, Relator does not seek summary judgment on its separate claim that Ocean State, Fyzical
Holdings and defendant Blueprint Test Preparation, LLC (“Blueprint”), with New Harbor Capital’s
knowledge, direction and oversight, also violated the FCA by falsely certifying in their PPP applications
that the PPP loans were “necessary” to support their ongoing operations and were unable to access other
sources of available liquidity.
Case 1:20-cv-00538-JJM-PAS           Document 64       Filed 01/06/25      Page 3 of 3 PageID #:
                                           2372



                                              Respectfully submitted,


                                              /s/ Eric E. Renner
                                              Eric E. Renner (#7481)
                                              DUFFY & SWEENEY, LTD
                                              321 South Main Street, Suite 400
                                              Providence, RI 02903
                                              Phone: 401-457-1803
                                              Fax: 401-457-0701
                                              erenner@duffysweeney.com

                                              Attorneys for Plaintiff-Relator,
                                              United States of America ex rel James R. Berkley

Date: January 6, 2025



                                CERTIFICATE OF SERVICE

        I hereby certify that on the 6th day of January, 2025, a true copy of the foregoing document
was filed through the ECF system and will be sent electronically to the registered participants as
identified on the Notice of Electronic Filing (NEF) and copies will be mailed to those indicated as
non-registered participants.


                                              /s/ Eric E. Renner


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