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Fourth Circuit Affirms Dismissal of Ex-Employee’s Retaliation Suit

On August 22, 2016, the US Court of Appeals for the Fourth Circuit issued a decision in Carlson v. DynCorp International LLC, affirming the district court’s dismissal of an ex-employee’s retaliation suit under the False Claims Act’s (FCA) anti-retaliation provision, 31 U.S.C. § 3730(h).  While the Fourth Circuit concluded that the district court applied a standard “rendered erroneous by recent amendments to the statute,” the court nonetheless affirmed the district court’s decision dismissing the case.

Scott Carlson (Carlson) was employed by private military contractor DynCorp International LLC (DynCorp).  Because DynCorp had substantial government contracts, it was subject to certain accounting and billing standards dictated by the Office of Federal Procurement Policy.  Carlson alleged that DynCorp engaged in improper billing practices on existing government contracts, including one with the US Agency for International Development (USAID), by hiding indirect and overhead costs in an unbillable code.  Carlson further alleged that DynCorp fraudulently obtained a new contract from USAID because DynCorp’s bid on the new contract contained a false certification that DynCorp was complying with the accounting and billing standards of the Office of Federal Procurement Policy.  Carlson claims that after raising the issue with management, DynCorp terminated him.  Carlson filed his FCA suit for retaliatory termination in the Eastern District of Virginia.  The district court dismissed Carlson’s case with prejudice for failure to state a claim. (more…)




Fifth Circuit Enforces High Rule 9(b) Bar in Affirming Dismissal of Implied Certification Case

In U.S. ex rel Gage v. Davis S.R. Aviation, LLC, the U.S. Court of Appeals for the Fifth Circuit confirmed the high degree of specificity needed to successfully plead a claim under the False Claims Act (FCA). Affirming the lower court’s dismissal on Rule 9(b) grounds, the court held that a plaintiff who alleged that certain government contractors defrauded the government by improperly reselling salvaged aircraft parts failed to plead the “who, what, when, where and how” of the alleged scheme. Specifically, the court held that plaintiffs who assert a false claim based on a failure to meet a contractual provision must allege the exact contractual provision that was breached and set forth the exact nature of that breach.

The plaintiff claimed that the defendants had salvaged certain aircraft parts from a crashed civilian aircraft and resold the allegedly defective parts to the U.S. government for use in military aircraft. As the plaintiff had not alleged that the defendants had expressly certified that the parts sold to the government complied with any statute, regulation or contractual provision, the Fifth Circuit assumed, without deciding, that implied certification is a valid theory of FCA liability. Even under that relaxed standard, however, the court found the plaintiff’s allegations lacking.

The court held that the plaintiff had failed to allege that any implied false certification was material because the plaintiff had not identified any specific contractual provision that the parts sale had violated. The plaintiff alleged that the re-use of salvaged parts violated several provisions of the Federal Acquisition Regulation (FAR) and the Defense Federal Acquisition Regulation Supplement (DFARS). While some courts have held that a violation of federal regulations can form the basis of an FCA claim, here, the Fifth Circuit held that the plaintiff had not sufficiently alleged that these regulations were applicable or that they had been incorporated into the contract under which the government purchased the parts.

The plaintiff argued that, while he had not seen the contract because it was classified, the contract must contain the FAR and DFARS provisions, because such inclusion was mandatory in government contracts. But the court rejected that contention, noting regulatory provisions stating that the inclusion of FAR and DFARS provisions may be waived. Thus, because the plaintiff had no basis to allege with certainty that these provisions were included in the contract, he could not allege that the contract had been breached. Therefore, the court held, the plaintiff had no basis to claim that the alleged violation of the FAR and DFARS provisions were material to the government’s decision to pay. According to the court, the plaintiff’s claim was “necessarily speculative” without “particularized and plausible identification” of the contractual provision allegedly violated.

The court’s holding re-affirms the high level of pleading detail needed to pursue a claim under the implied certification theory of FCA liability.




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