Due to the government’s increased focus on domestic preference requirements – for example, through President Trump’s formal policy and action plan for agencies to “scrupulously monitor, enforce, and comply” with the so-called “Buy American Laws,” and Congress’s proposed legislation to make certain Buy American requirements more robust – contractors should not be surprised if there
[A modified version of this blog post was published in Law360.]
Last month, Senators Dan Sullivan (R-AK) and Maria Cantwell (D-WA) introduced legislation to “improve the requirement to purchase domestic commodities or products” under the National School Lunch Program (the “NSLP”) and the School Breakfast Program (the “SPB”). Even if this legislation fails to make it out of Committee, it signals a continued trend to strengthen the “Buy American” requirement under these programs.…
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
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:
- 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.
- 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
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
The Fourth Circuit recently held, in an unpublished opinion, that the anti-retaliation or “whistleblower” provisions of the False Claims Act (“FCA”) protect an individual’s efforts to stop a contractor from violating the FCA, even when there is no “distinct possibility” of litigation. This “distinct possibility” standard was adopted prior to 2009 when the whistleblower provision protected employee activity that was in furtherance of an FCA action, “including investigation for, initiation of, testimony for, or assistance” in an FCA action. Under that version of the whistleblower provision, courts had held that a retaliation suit under the FCA would only pass muster if “an employee engages in protected activity when litigation is a distinct possibility, when the conduct reasonably could lead to a viable FCA action, or when . . . litigation is a reasonable possibility.” Amendments to the FCA in 2009 and 2010, however, broadened coverage of the whistleblower provision, creating two prongs of protected activity: (1) “lawful acts done by the employee . . . in furtherance of an action under [the FCA]”; and (2) “other efforts to stop 1 or more violations” of the FCA. 31 U.S.C. § 3730(h). In this case, Carlson v. Dyncorp Int’l LLC, the Fourth Circuit held that the “distinct possibility” standard does not apply to the second prong of the whistleblower provision, as that prong was intended to be broader than the first prong. This case may open the door to broader liability for contractors who take adverse employment actions against employees who attempt to stop or prevent conduct that the employee reasonably believes to be in violation of the FCA. Notably, in Carlson, the Fourth Circuit nevertheless affirmed the district court’s dismissal of plaintiff’s retaliation lawsuit because the plaintiff was alleging that his contractor-employer was under-billing the government and he could not reasonably believe that that practice would lead to a violation of the FCA. …
Continue Reading Employee Efforts to Stop Employer FCA Violation is Protected Activity Even When No Distinct Possibility of FCA Litigation, says Fourth Circuit
On May 3, 2016, the U.S. Railroad Retirement Board (“RRB”) issued an interim final rule adjusting civil False Claims Act (“FCA”) and Program Fraud Civil Remedies Act (“PFCRA”) monetary penalty amounts for the RRB. The interim final rulemaking resulted in an increase of the PFCRA maximum to $10,781 and a new FCA range of $10,781-$21,563. Because the adjustment was mandated to all federal agencies, contractors can expect to see civil penalties rise for all agencies with which they contract, all effective by August 1, 2016. This includes the FCA, Office of Safety and Health Administration violations, and the Foreign Corrupt Practices Act.
Continue Reading Civil Penalties Across All Federal Agencies Set to Increase Significantly by August 2016
On December 3rd, the Department of Justice released its annual summary of recoveries in False Claims Act (FCA) cases. Although down from last year’s $5.69 billion, this year’s recoveries of $3.5 billion demonstrate the power that the government wields to drive settlements of fraud allegations. Of the $3.5 billion, $1.1 billion in recoveries are attributable to settlements and judgments in cases alleging false claims for payments under government contracts. A good portion of these settlements likely were driven by claims of false implied certifications.
For many years, federal courts have grappled with the issue of whether factually accurate claims submitted to the government for payment can nevertheless be “false or fraudulent,” pursuant to an implied certification theory, because of an underlying violation of law. On December 4th, the Supreme Court granted certiorari in a case that should decide whether this theory of liability is valid. …
Continue Reading High Court to Resolve Split of Authority on “Implied” False Claims
On October 31, 2015, the U.S. Court of Federal Claims (CoFC) in Horn & Associates, Inc. v. United States (No. 08-415C) rejected three fraud-based counterclaims that were filed by the U.S. Government in response to a breach of contract action brought by the plaintiff, Horn & Associates (Horn), through a certified claim under the Contract Disputes Act (CDA). The counterclaims were asserted under the Special Plea in Fraud statute, the False Claims Act, and the CDA, respectively. The CoFC dismissed the claims because the Government could not establish that Horn had intended for its certified claim to deceive the Government.
Horn is a cautionary tale for government contractors that submit certified claims under the CDA. As discussed below, Horn was vulnerable to fraud counterclaims because its certified claim was “prepared and presented  in an unorthodox and unfamiliar manner,” with a confusing quantification and presentation of damages. Although the CoFC dismissed the counterclaims, its opinion could be limited to its particular facts, which involved an unusually difficult calculation of damages. A lesson to be learned, however, is that government contractors might avoid such confusion (and such opportunistic counterclaims) by having sufficient clarity and transparency in the preparation and presentation of their certified claims.
Continue Reading Contractor Defeats Government’s Opportunistic Allegations of Fraud
Following an 8-2 en banc decision issued by the United States Court of Appeals for the Eighth Circuit earlier this month, potential relators may think twice before bringing their False Claims Act (“FCA”) qui tam suits in the Eighth Circuit. In Rille v. PricewaterhouseCoopers LLP, No. 11-3514 (8th Cir. Oct. 5, 2015), the Court vacated a district court order awarding two relators a percentage of the Government’s settlement of an FCA qui tam suit in which it had intervened, holding that when the government intervenes in an FCA action brought by a relator, and then settles both the claim brought by the relator and a different claim that does not overlap factually with the relator’s claim, the relator is entitled only to a share of the settlement of the claim that he brought. The Court remanded the case to the district court to analyze whether there was factual overlap between the claims settled by the Government and the claims brought by the relators.
Continue Reading No Money for Nothing — Eighth Circuit Limits Relators’ Ability to Recover a Share of Government Settlements of Qui Tam Suits