On May 16, 2017, the US Court of Appeals for the Fourth Circuit issued a decision in US ex rel. Badr v. Triple Canopy, Inc. In this case, the government had contracted with a private security company to provide guards at a military airbase in Iraq. Although the applicable contract required the guards to have certain marksmanship scores, the defendant (as alleged by the relator and the government) failed to employ guards with the requisite qualifications.
The Fourth Circuit’s recent decision is the continuation of a years-long battle between the plaintiffs and Triple Canopy over whether the operative complaint adequately pleads violations of the False Claims Act. The Fourth Circuit previously held that the complaint had done so, but after Triple Canopy petitioned the Supreme Court for certiorari, the Supreme Court remanded the case back to Fourth Circuit for reconsideration in light of the high court’s recent Escobar decision.
The question presented to the Fourth Circuit was whether the government had met the pleading requirements for a False Claims Act action relying upon the implied certification theory. Under Escobar, a plaintiff stating an implied certification claim must allege that a contractor made specific representations about the goods or services provided, but knowingly failed to disclose its noncompliance with a statutory, regulatory or contractual requirement that is material to the government’s payment decision.
Triple Canopy argued that it made no specific representations to the government when it requested payment for the services it had provided; rather, it simply submitted an invoice requesting payment. In doing so, Triple Canopy asked the court to reach a conclusion similar to the Ninth Circuit’s holding in US ex rel. Kelly v. Serco Inc. In Kelly, the Ninth Circuit concluded that a mere request for payment does not contain representations specific enough to satisfy the pleading requirements in an implied certification case.
Although without any reference to the Ninth Circuit’s holding in Kelly, the Fourth Circuit declined to adopt its holding. Instead, the Fourth Circuit determined that “anyone reviewing Triple Canopy’s invoices would probably—but wrongly—conclude that Triple Canopy had complied with core contract requirements”; here, that Triple Canopy had employed qualified guards, despite no allegation about any representations contained in those invoices. Accordingly, the court held, the operative complaint sufficiently alleged that Triple Canopy had defrauded the government by failing to disclose its contractual noncompliance in its claims for payment.
By breaking with the Ninth Circuit, the Triple Canopy decision sets up a circuit split that may require yet another pronouncement by the Supreme Court regarding the implied certification theory.