False Claims Act

Last year, the Supreme Court’s watershed Escobar ruling altered the landscape of False Claims Act litigation when it declared that the FCA’s materiality requirement presented a “demanding” barrier to plaintiffs alleging contractual non-compliance. In the 15 months since that time, lower courts have issued a steady stream of rulings interpreting and refining this standard. In the latest—and perhaps most consequential—of these rulings, the Fifth Circuit overturned a $663 million FCA jury award on materiality grounds in the bellwether case of U.S. ex rel. Harman v. Trinity Industries, Inc. While the outcome may not be a surprise given the trend in recent decisions addressing the FCA’s materiality requirement—not to mention an earlier Fifth Circuit ruling involving a strikingly similar issue—Trinity serves as a forceful reminder of the formidable barrier to recovery presented by the materiality requirement.
Continue Reading Trinity: Divine Fifth Circuit Ruling Gives FCA Defendants Reason for Praise

In Universal Health Services v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016), the Supreme Court changed the landscape for False Claims Act litigation. The Court endorsed implied certification liability, but set a high bar for demonstrating the materiality of a violation of law, regulation, or…
Continue Reading Introducing Covington’s Escobar Tracker

Two years ago, in Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, the Supreme Court interpreted the “first-to-file” bar of the False Claims Act (“FCA”) in a manner that seemingly authorizes relators to pursue qui tam suits based upon the same allegations made in previously dismissed FCA actions.  On remand from the Supreme Court, the Fourth Circuit recently issued an opinion in Carter in which it took a similarly text-based approach, but reached a different conclusion, holding that the FCA’s first-to-file bar should be interpreted in a manner that promotes finality and prevents copycat lawsuits.  These opinions demonstrate the importance of carefully assessing the FCA’s statutory text in litigation.
Continue Reading The FCA’s First-to-File Bar and The Enduring Importance of Textualism

In a recent False Claims Act (“FCA”) case, United States ex rel. Louis Scutellaro v. Capitol Supply, Inc., the U.S. District Court for the District of Columbia held that the defendant’s failure to retain Country of Origin (“COO”) documentation for the products it sold to the government entitled the relator and the government to an adverse inference that the defendant did not comply with the Trade Agreements Act (“TAA”).  This ruling highlights the consequences of poor document retention practices and could have far-reaching effects in FCA cases and beyond.
Continue Reading The Perils of Bad Recordkeeping: A Lack of Country of Origin Documentation Results in Adverse Inference of Non-Compliance with the Trade Agreements Act

Under a new FAR rule, standard language in confidentiality agreements could lead to disqualification from contracting or False Claims Act liability.
Continue Reading New FAR Rule: Government May Disqualify Contractors Who Use Standard Confidentiality Language with Employees and Subcontractors

A U.S. District Court recently dismissed a False Claims Act (FCA) qui tam action alleging that numerous GSA Schedule contractors violated their obligations under the Trade Agreements Act (TAA), resulting in the submission of false claims under the “implied certification” theory of FCA liability.  As discussed further below, the court’s decision — United States ex rel. Berkowitz v. Automation Aids, No. 13-C-08185, 2017 WL 1036575 (N.D. Ill. Mar. 12, 2017) — is important for at least two reasons:

  1. The court found that “often” it is “tougher” to satisfy the heightened pleading requirements of Federal Rule of Civil Procedure 9(b) when FCA allegations are based on an implied certification theory.
  2. The court held that, when dealing with conduct arising from a “sprawling federal procurement statutory and regulatory framework” (like the TAA), general allegations of non-compliance may support a breach-of-contract claim, but are insufficient in an FCA case. Rather, “specific allegations” about the fraudulent scheme are needed.

This decision comes at a particularly opportune time for contractors, given the likelihood of increased TAA and Buy American Act (BAA) enforcement during the Trump Administration and the corresponding potential uptick in whistleblower FCA activity involving these country-of-origin issues.
Continue Reading Common Sense Prevails: “Tougher” To Satisfy Rule 9(b) Standard in “Implied Certification” FCA Case Arising from GSA Schedule Contractors’ Alleged TAA Non-Compliance

Two years ago, when the Supreme Court addressed the “first-to-file” bar of the False Claims Act (FCA) in Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, it predicted that its holding might “produce practical problems,” as “[t]he False Claims Act’s qui tam provisions present many interpretive challenges, and it is beyond our ability in this case to make them operate together smoothly like a finely tuned machine.”  Immediately validating this prediction, upon remand of the Carter case, a new interpretative challenge emerged in the same case regarding the first-to-file bar.  That challenge was presented to the Fourth Circuit in oral argument last week.
Continue Reading First-To-File Rule of the False Claims Act Continues to Present Interpretive Challenges

Federal contractors who require employees to sign confidentiality agreements—including those selling only commercial products or in small quantities—need to examine their agreements closely. For the last two years, the government has sought to prohibit confidentiality agreements that restrict employees’ ability to report fraud, waste, or abuse to “designated investigative or law enforcement representative[s]” for federal agencies authorized to receive that information.”[1]  Most recently, the Department of Defense issued a new class deviation on November 14, 2016 prohibiting DoD from using funds from recent appropriations to contract with companies using overbroad confidentiality agreements.[2]  While these restrictions may not be new, the deviation’s broad application and significant consequences mean that contractors should give close scrutiny to ensure any agreements with employees comply with the prohibition.
Continue Reading Confidentiality Agreements Continue To Pose Potential Compliance Trap for Contractors

Last week, the United States Supreme Court heard argument in State Farm Fire & Casualty Co. v. United States ex rel. Rigsby over the False Claims Act’s (FCA) “seal requirement.”  The controversy highlights an important statutory tool for government contractors who face allegations of making false claims for payment.  It also provides important lessons for those seeking to bring such allegations.
Continue Reading Supreme Court Hears Argument Over False Claims Act’s Seal Requirement