In a February 4, 2016, decision, United States ex rel. Wall v. Circle C. Construction, LLC, the Sixth Circuit summarily rejected the government’s assertion that the measure of damages in a False Claims Act (FCA) suit involving a violation of prevailing wage rate requirements was the total amount paid for the work.  The Sixth Circuit’s rejection of the “total contract value” theory of damages in the prevailing wage rate context is a welcome development for FCA defendants who are faced with increasingly creative damages theories asserted by the government and the relator’s bar.

Circle C’s Army Contract

For a case that involved a relatively minor non-compliance with the prevailing wage rate requirements applicable to federal construction contracts, the Circle C. Construction case has a long history.  Circle C entered into a contract to construct warehouses at the U.S. Army base at Fort Campbell, located in Kentucky and Tennessee.  Pursuant to the Davis-Bacon Act, Circle C was required to pay electrical workers at least $19.19 per hour, plus a fringe benefit rate of $3.94 per hour.  Circle C was also required to submit certified payroll for itself and its subcontractors.

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The Ninth Circuit affirmed the district court’s dismissal of a relator who pleaded guilty to a felony that involved the same fraudulent conduct that gave rise to the relator’s qui tam suit in U.S. ex rel. Schroeder v. CH2M Hill. The FCA’s § 3730(d)(3) requires dismissal of a relator from a qui tam lawsuit and precludes the relator from any recovery in the lawsuit, “[i]f the relator has been convicted of criminal conduct arising from his or her role in the violation of section 3729.” In Schroeder, the Ninth Circuit concluded that this provision applied even to minor participants in the underlying alleged misconduct, who neither planned nor initiated the fraudulent scheme.

The relator, who was employed by the defendant government contractor, was involved in an underlying fraudulent scheme to bill the Department of Energy (DOE) by submitting false time cards to DOE for hourly work. After his interview by investigators, the relator pleaded guilty to a felony count of conspiracy to commit fraud. After his interview, but before pleading guilty, the relator filed suit under the FCA against his employer concerning the DOE fraud scheme. The United States intervened and moved to dismiss the relator from the lawsuit under § 3730(d)(3) as a result of his felony conviction.

Continue Reading Ninth Circuit Takes Hard Line against Relators Involved in FCA Wrongdoing

The D.C. Circuit reversed the district court’s dismissal of a serial relator’s qui tam lawsuit under the FCA’s first-to-file bar in U.S. ex rel. Heath v. AT&T, Inc., finding that the relator’s two qui tam lawsuits targeted factually distinct types of frauds. The D.C. Circuit further determined that the relator’s qui tam lawsuit satisfied the pleading requirements of Rule 9(b).

Continue Reading D.C. Circuit Reverses District Court Dismissal of Qui Tam Lawsuit

The False Claims Act (FCA) is just one of the handful of federal laws that government contractors must adhere to or they run the risk of prosecution by a federal agency, such as the DOJ or SEC. As cited in an article I recently co-authored, “[t]he civil penalty for FCA violations can be significant, with payments ranging from three times the damages incurred by the government, plus fines of $5,500, to $11,000 for each false claim that is filed or caused to be filed.”

In the article written with my colleagues Todd Overman, Bryan King and Robert Platt that was published by Westlaw Journal – Government Contracts, we outline the best practices a government contractor should follow during an internal investigation to obtain reliable findings and maintain credibility with government enforcement agencies.

The full article, “Contractors in the Crosshairs: Investigations Passing Government Scrutiny,” was published June 22 by Westlaw Journal – Government Contract and is available in the PDF.

Last month, the Sixth Circuit affirmed sanctions imposed by a district court against a relator and his counsel for bringing a frivolous False Claims Act (“FCA”) action. The ruling in United States ex rel. Jacobs v. Lambda Research, Inc., No. 14-3705, 2015 WL 1948247 (6th Cir. May 1, 2015) is a positive development for companies that have faced an increase in FCA actions in recent years. It also illustrates the use of a sanctions provision that is specific to FCA claims. Read the full analysis on the GovCon blog post “Relators Beware – Sanctions Upheld for “Vexatious” False Claims Act Suit.”

In a long-awaited ruling, the Supreme Court held that the Wartime Suspension Limitations Act (WSLA) does not toll the statute of limitations in civil FCA actions, as the WSLA applies only to criminal actions.  After lying dormant for more than 40 years, the WSLA had threatened to upend the FCA’s limitations period and expose defendants to open-ended and extensive liability for otherwise stale FCA claims.

Amended in 2008, the WSLA provides that the statute of limitations applicable to any offense involving fraud against the United States during a time of war or when Congress has enacted a specific authorization for the use of military force is suspended until five years after the termination of hostilities.  In a number of recent cases, relators had begun relying on the WSLA as a means to avoid dismissal of claims brought outside of the FCA’s limitations period.

Continue Reading Supreme Court Limits WSLA to Criminal Offenses

Employee severance packages and settlement agreements often include a broad waiver of any claims, known or an unknown, which an employee may have against the company.  Although such broad pre-filing releases are highly recommended, companies doing business with the government should be cautioned that these waivers do not always protect against False Claims Act (FCA) litigation.  A line of federal cases has established that these so-called “pre-filing releases” are sometimes unenforceable against suits filed by whistleblowers, or qui tam actions, for public policy reasons.

Continue Reading Enforceability of Employee Releases on Qui Tam Actions

Is late package delivery considered an FCA liability for government contractors? Bass, Berry & Sims attorneys analyzed the recent settlement between United Parcel Service Inc.’s (UPS) and the Department of Justice (DOJ) resolving allegations that UPS submitted false claims to the federal government related to the timeliness of package delivery. This case shows the range of conduct that can be considered when not satisfying the terms of a government contract. Read the full analysis on the GovCon blog post “UPS Settles Alleged FCA Violations for Failing to Deliver (On Time).”

On April 6, 2015, the Sixth Circuit delivered a costly blow to the United States government to the tune of $657 million when it issued its opinion in United States v. United Technologies Corporation and remanded the case back to the district court to review the damages award, yet again.

This was the second time that the Sixth Circuit heard arguments deriving from the United States False Claims Act case against Pratt & Whitney (“Pratt”), now owned by United Technologies, for false statements the company made when competing against GE Aircraft for contracts to build F-15 and F-16 jet engines. In 1983, in an attempt to outbid GE Aircraft and make it hard for the government to issue a split-award contract, Pratt misstated its projected costs and certified that the company’s bid included its “best estimates and/or actual costs.” After uncovering Pratt’s overstated costs projections, the government filed both an administrative action against the company in the Armed Services Board of Contract Appeals (“ASBCA”) under the Truth in Negotiations Act and a lawsuit in district court alleging violations of the False Claims Act.

Continue Reading United Technologies is Saved from $657 million False Claims Act Verdict by the Sixth Circuit

A Maryland-based construction company required to pay “prevailing wages” under a Federal government contract recently settled for $400,000 claims that it had violated the False Claims Act (“FCA”) by failing to properly supervise lower-level contractors in the payment of prevailing wages to their workers. The case serves as a reminder that government contractors who fail to ensure compliance with wage requirements – whether under the Davis-Bacon Act (“DBA”), Service Contract Act (“SCA”), or Walsh-Healy Public Contracts Act (“PCA”) – can face significant liability. It also highlights the ongoing expansion of the federal government’s battle against procurement fraud. Read the full analysis on the GovCon blog post “The Growing Risks of Non-Compliance with Wage Rate Determinations.”