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

In its January 8 decision in United States v. Triple Canopy, Inc., the Fourth Circuit reiterated its acceptance of the implied certification theory of False Claims Act (“FCA”) liability.  Under the FCA, a contractor can face steep financial penalties for knowingly making false statements in order to get fraudulent claims paid or approved by the Government.  Conventionally, the false statement underlying an FCA violation was clear – for example, an invoice for more hours than were worked or for a service that was never performed.  Some federal appellate courts, however, have adopted the theory of implied certification, allowing a court to find an FCA violation based on certifications implicit in a payment request, for example, compliance with a material contract provision. 

It was employing this theory that the Fourth Circuit reversed the dismissal of an FCA complaint against Triple Canopy, despite the lack of an objectively false statement in the contractor’s invoices.  This decision potentially broadens the already unsure landscape of the theory of implied certification.  It may open government contractors up to FCA liability despite accurate claims for payment if the contractor does not disclose its noncompliance with a contractual requirement.   This expands traditional implied certification FCA cases because it may open the door to FCA liability if a contractor submits a claim for payment and fails to disclose noncompliance with almost any contract provision, regardless of whether it is explicitly required for payment.

Continue Reading Off the Mark?: Fourth Circuit Reverses FCA Dismissal Using Implied Certification Theory