Last month the United States Court
of Appeals for the Fourth Circuit (which has Federal Court appellate
jurisdiction for Virginia, North Carolina, South Carolina, West Virginia,
Maryland and the District of Columbia) clarified a number of aspects of Federal
False Claim actions. The case is United
States, et al. v. Triple Canopy, Inc., Nos. 13-2190 and 13-2191, decided
January 8, 2015, and involves a whistleblower (“qui tam”) claim by an ex-employee of a security contractor, Triple
Canopy, respecting Triple Canopy security service contracts with the Federal
Government.
The whistleblower, a medic named Omar Badr, claimed that
Triple Canopy had knowingly provided non-qualified guards, asked him to falsify
related records, and then when he refused falsified them and invoiced for the non-conforming
services. The Attorney General elected to intervene and proceed with the action
after it was filed by Badr, and then filed an amended complaint alleging
additional violations, and bringing several common law claims against Triple
Canopy. The district court dismissed the False Claims Act claims and common law
claims, as well as the whistleblower’s claims, and the appeal resulted.
Reviewing the district court’s decisions “de novo” (anew;
the applicable review standard), the Fourth Circuit reversed several aspects of
the district court’s decision, and in the process clarified the pleading (and
proof) standards applicable to False Claims Act (“FCA”) actions. Particularly
of note as being clarified by the court are the following:
-
Implied Certifications: The Fourth
Circuit clarified that false claims
include falsehoods by silence, and that such “implied” certifications (as
opposed to affirmative representations) arise when the contractor’s silence infers
the contractor has met contractual prerequisites for the Government action
being induced (in that case, the prerequisites for payment). The court
clarified that the silence must go to a “material” (as opposed to minor) contractual
requirement though; in that case the non-qualification of the guards being held
as material by the court.
-
Whistleblower as Plaintiff: The Fourth
Circuit clarified that the whistleblower
remains a proper party plaintiff claimant even after the Attorney General
elects to intervene and proceed with the action. The district court had
held that the whistleblower’s claims were superseded by the Government’s
claims; but the Fourth Circuit reversed holding the whistleblower had the right
to continue as a party in the action subject to the limitations in FCA Code
Sec. 3730(c)(2); which the court noted the district court was free to consider
on remand.
-
False Records Claim Basis: The Fourth
Circuit clarified that the Government was
not required to have actually reviewed or relied upon the false record to
support a false records claim. The district court had focused on the actual
effect of the false statement rather than its potential effect, but the Fourth
Circuit held that – in appropriate circumstances – a record is false if it has
the potential to influence Government
payment; even if the Government ultimately did not review the record. Additionally,
the court expressly declined to adopt the view that such implied
representations can only give rise to FCA claims when the condition is
expressly designated as a condition for payment; but that not every part of the
contract can be assumed as a condition of payment – leaving the question of
materiality for case by case analysis.
As part of its analysis, the court noted the importance of
construing the FCA as a “strong remedy” when one was needed to confront fraud
upon the government. While noting that its decisions in Triple Canopy might be
“prone to abuse” by efforts to turn minor contractual violations into FCA
claims, the court noted the FCA purposes overrode that concern and further
noted the available remedies for any such “abusive litigation.”
How the Fourth Circuit’s decision in Triple Canopy expands FCA
claims, and whistleblower actions in particular, remains to be seen; but it clearly
seems to widen the door of FCA action-ability, and should serve as a caution to
any Federal contractor respecting both what is said, and not said, to the
Government throughout contractual performance.
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