Results for "triple canopy"
Subscribe to Results for "triple canopy"'s Posts

Fourth Circuit Decision in Triple Canopy Sets up Another Implied Certification Circuit Split

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.

(more…)




The Fourth Circuit Denies Triple Canopy’s Petition for Rehearing En Banc

We have previously posted about the United States Court of Appeals for the Fourth Circuit’s January 8 panel decision in U.S. ex rel. Badr v. Triple Canopy and its implications for “implied certification” False Claims Act (FCA) claims based on breaches of contract in the Fourth Circuit.  On Monday, March 9, the Fourth  Circuit denied Triple Canopy’s petition for rehearing en banc.  In seeking rehearing, Triple Canopy argued that, among other things, the Fourth Circuit’s decision expands the implied certification theory of FCA liability beyond the bounds recognized in other jurisdictions, rendering the Fourth Circuit an outlier:

Despite this clear and restrained jurisprudence, the panel decision embraced the theory of implied certification and expanded it beyond the bounds ever considered by this Court or applied by those circuits which recognize the theory. Under the panel’s theory, any knowing breach of contract is a violation of the FCA.

Further:

And by not even restricting viable implied certification claims to circumstances where compliance with a statute or contractual provision was an express condition of payment, the panel’s opinion abandoned that safeguard in favor of making every contract breach an FCA violation. This is a striking expansion of FCA liability, especially where this Court has repeatedly rejected such an outcome.

Triple Canopy cited the Western District of Virginia’s decision in Skinner v. Armet Armored Vehicles, Inc., on which we also recently posted, as an example of the potentially overly broad reach of the FCA in the Fourth Circuit after Triple Canopy.  While the arguments advanced in favor of rehearing were consistent with many of the criticisms the Triple Canopy opinion has drawn, the Fourth Circuit was not convinced, declining to revisit its decision.




Skinner v. Armet Armored Vehicles, Inc.: One District Court’s Attempt to Apply Triple Canopy

We recently posted about the Fourth Circuit’s decision in United States ex rel. Badr v. Triple Canopy, — F.3d —-, 2015 WL 105374 (4th Cir. Jan. 8, 2015).  In that case, the court explicitly recognized the implied certification theory of liability under the False Claims Act (FCA) and held that some contractual violations can give rise to implied certification claims.  We also noted that the decision failed to provide meaningful guidance for lower courts to determine which types of contractual violations can give rise to such claims.  On February 10, 2015, the U.S. District Court for the Western District of Virginia issued a decision that demonstrates the uncertainty following Triple Canopy.

The district court in Skinner v. Armet Armored Vehicles, Inc., No. 4:12-cv-00045, 2015 WL 540156 (W.D. Va. Feb 10, 2015), granted a motion for reconsideration of its prior dismissal of a relator’s implied certification claims under the FCA, ostensibly as a result of Triple Canopy.  While the district court acknowledged that Triple Canopy was not “a reversal of standing precedent” (in that previously, the viability of implied certification claims had simply been questioned in the Fourth Circuit), the district court determined that Triple Canopy provided sufficient cause to reconsider.  The Skinner court then held:

Following the language in Triple Canopy, Plaintiff alleged that [Defendants] made a request for payment and knowingly “withheld information about its noncompliance with material contractual provisions.”  Plaintiff alleged that [Defendants] knew that the vehicles for which it was billing the government did not meet the ballistic protection requirements of its contracts with the government.  Nevertheless, Defendants billed and collected for vehicles it knew did not meet the contract specifications.  Under the guidance of Triple Canopy, the allegations make out a claim for “implied certification” claims[sic] under the FCA.

The district court also rejected the defendants’ argument that Triple Canopy should be cabined to its facts, instead finding that “the language employed by the Court was inclusive; they set forth the elements of an implied certification claim generally.”

What the Skinner opinion does not do is something the Triple Canopy court did: analyze whether the contractual provisions allegedly breached were sufficient to state a claim under the FCA.  While the “common sense” materiality analysis the Triple Canopy court employed to answer this question imparted little guidance for future courts dealing with other facts, the district court in Skinner did not undertake a similar analysis.  Nor did the Skinner court evaluate whether the alleged contractual breaches were conditions of payment, the essential cornerstone of the falsity analysis in an implied certification case.

Instead, the Skinner court appears to construe Triple Canopy to mean that any knowing contractual violation is sufficient to plead a false claim.  Assuming a complaint makes a conclusory assertion that a contractual term is or was material, evaluating that assertion seems, in the Skinner court’s view, to be a question for another day: “Defendants are free to argue that those specifications were immaterial.  This does not change, for pleading [...]

Continue Reading




The Fourth Circuit’s Triple Canopy Decision: Implied Certification Versus “Garden-Variety” Breaches of Contract (and does the Government’s intervention decision matter to the analysis?)

The Fourth Circuit’s January 8, 2015 decision in United States ex rel. Badr v. Triple Canopy, Inc. is notable in several respects.  The decision announces the court’s explicit endorsement of the “implied certification” theory of False Claims Act (FCA) liability.  However, it leaves some uncertainty regarding how that theory is to be applied in courts within the Fourth Circuit.  The decision also contains language arguably suggesting that in such cases, Government-intervened FCA claims may have a higher likelihood of survival than FCA claims pursued exclusively by relators.

Triple Canopy contracted to provide security services at a military base in Iraq.  The Government’s complaint in intervention alleged that Triple Canopy’s employees did not possess the weapons qualifications they were required to have under the contract, that supervisors knew they were not qualified, and that they created false documents to hide the deficiencies.  The contract itself did not condition payment on compliance with the weapons qualification requirements.

The Fourth Circuit reversed the district court’s dismissal of the FCA claims.  While the Fourth Circuit acknowledged that the FCA cannot be used to “shoehorn” a breach of contract claim into a claim under the FCA, it held that noncompliance with a contractual term can give rise to an implied false certification claim under the FCA in some instances.  This holding in itself is not remarkable except inasmuch as the Fourth Circuit explicitly endorsed the implied certification theory of FCA liability for the first time.  What is notable, however, is the minimal guidance provided by the court regarding which types of contractual violations can support FCA claims.

Essentially sidestepping the FCA’s element of falsity, the court held that the elements of materiality and scienter are the best gatekeepers with respect to whether a contractual violation can give rise to a cognizable claim.  After finding the Government had easily pled scienter, the court then addressed materiality.  The court held that “common sense strongly suggests that the Government’s decision to pay a contractor for providing base security in an active combat zone would be influenced by knowledge that the guards could not, for lack of a better term, shoot straight.  In addition, Triple Canopy’s actions covering up the guards’ failure to satisfy the marksmanship requirement suggest its materiality.  If Triple Canopy believed that the marksmanship requirement was immaterial to the Government’s decision to pay, it was unlikely to orchestrate a scheme to falsify records on multiple occasions.”

While the court’s decision may have “common sense” appeal, it falls short of providing a clear standard for determining when a contractual violation can give rise to an FCA claim and when a violation is sufficiently benign that it cannot.  The Triple Canopy court was undoubtedly bothered by the idea of security forces lacking the requisite weapons training (as well as by the associated cover-up), but this begs the question of how the materiality determination should be made in other cases, when and by whom.

Triple Canopy stands in stark contrast to the clarity imparted by the Fourth Circuit’s own decision [...]

Continue Reading




District Court Decision Joins Ranks of FCA Cases Confirming Escobar’s Materiality Standard

On June 8, 2018, the US District Court for the Eastern District of Virginia granted in part a motion for summary judgement filed by a government contractor in an implied false certification case under the False Claims Act (FCA), holding that the relator failed to satisfy the Supreme Court’s materiality standard put forth in the historic Escobar case.

The defendant, Triple Canopy, is a government contractor that provides security services to government agencies overseas. As a result of its overseas services, Triple Canopy was the target of at least two qui tam complaints alleging FCA violations under an implied certification theory. As we previously reported, on May 16, 2017, after a years-long battle, the Fourth Circuit upheld FCA allegations against Triple Canopy, finding that that specific complaint met Escobar’s materiality standard (in part due to Triple Canopy’s attempts to conceal its wrongdoing and the government’s decision not to renew Triple Canopy’s contract once learning of the deficiencies).

The claims in this FCA complaint arose from a different government contract to provide security services at the US Embassy in Baghdad. While employed at Triple Canopy in 2015, the relator Bachert raised concerns about one employee’s routine weapons inspections and records related to those inspections, alleging they were falsified. An internal investigation and a State Department investigation did not substantiate all of Bachert’s claims, but Triple Canopy nevertheless cooperated in the investigation and took corrective actions in response to the allegations. The State Department did not withhold any payment or seek any repayment in connection with the relator’s allegations.

The relator then filed this qui tam action under the FCA on April 22, 2016, in which the government declined to intervene.  The relator asserted that Triple Canopy was liable under the FCA because it submitted claims for payment to federal agencies without disclosing its alleged inspection irregularities and records issues. In moving for summary judgment, Triple Canopy argued that the relator had not demonstrated these alleged issues were material to its payment under the State Department contract. The court agreed with Triple Canopy, finding that it “strains credulity to believe that those inspection reports were a factor in the government’s decision to make payment on the contract.” The court then squarely addressed the materiality standard under Escobar, holding that the “alleged falsehoods at issue . . . are the kind of ‘minor or insubstantial’ noncompliance that Escobar advises are not material.” The court went on to emphasize that the allegations were “insubstantial in relation to the overall size of the [contract],” pointing out that even if the allegations were true, the records involved accounted for only 0.3 percent of the total labor invoice to the government. Finally, the court noted that the State Department had considered the allegations raised by the relator, found them to be immaterial, and continued payment under the contract, which it described as “important factor(s)” in assessing materiality under Escobar and as “uniformly recognized” by circuit courts post-Escobar to substantially increase the relator’s burden in establishing materiality. [...]

Continue Reading




Recent Appellate Developments in “Implied Certification”

We have previously written several articles regarding the circuit courts’ application of the so-called “implied certification” theory of liability under the False Claims Act (FCA). That theory is the subject of a petition for certiorari in the case of United States v. Triple Canopy, on which we have previously reported.

Under the implied certification theory, a government contractor submits a false claim to the government by impliedly misrepresenting compliance with a legal obligation, upon which the government conditions payment.  Contractors do not affirmatively represent compliance with said legal obligation, but they are deemed to be aware of all legal obligations that condition payment upon their compliance. In February, the Fourth Circuit formally adopted the implied certification theory for the first time in United States v. Triple Canopy, Inc. It also joined the First and D.C. Circuits in rejecting defendants’ arguments that conditions of payment be “expressly stated.” The Fourth Circuit’s holding has demonstrated the difficulty in evaluating the existence of “implied” conditions of payment through at least one district court decision.

By contrast, in June, the Seventh Circuit decided United States v. Sanford-Brown, Ltd., becoming the first court of appeals to reject implied certification as a viable theory of falsity altogether, concluding that implied certification was inconsistent with the primary purpose of the FCA: curbing fraud against the government.

In the face of these inconsistencies, the losing parties in both Triple Canopy and Sanford-Brown have now sought further appellate review. Triple Canopy petitioned for certiorari on June 8, 2015.  The relator in Sanford-Brown, meanwhile, has petitioned for rehearing en banc, arguing that the panel’s decision should be reversed because no other court has rejected implied certification. The United States has signed onto the relator’s petition, filing an amicus brief in support of rehearing on July 9, 2015. A decision on both petitions is pending.

If the Supreme Court does take up Triple Canopy’s certiorari petition, we could see the Supreme Court speak to the viability and scope of implied certification for the first time. The significance of any Supreme Court pronouncement on this issue is massive. For example, FCA cases are often based upon allegations that health care providers have provided medically unnecessary care to Medicare and Medicaid beneficiaries (a theory of relief rooted in implied certification). Whether an FCA plaintiff can succeed in such a case is dependent on the validity of the implied certification theory – and whether and how courts conclude that a legal obligation is a condition of payment.

A Supreme Court ruling on implied certification could also impact FCA claims arising out of alleged Stark Law and alleged Anti-Kickback Statute (AKS) violations. As we noted last week in our discussion of the Tuomey case, implied certification cases relying on the Stark Law can result in astronomical damages calculations. And as we noted last month in our discussion of the government’s settlement with Hebrew Homes Health Network, Inc., the same is true for cases based upon AKS violations.

We will continue [...]

Continue Reading




BLOG EDITORS

STAY CONNECTED

TOPICS

ARCHIVES