Trinity Industries filed its appeal brief before the U.S. Court of Appeals for the Fifth Circuit in U.S. ex rel. Harman v. Trinity Industries on March 21, 2016, appealing “the largest judgment in the 150-year history of the False Claims Act.” In its appeal brief, Trinity argues that the relator’s case failed every element of the False Claims Act (FCA), including materiality, falsity, scienter and false claim. According to Trinity, the applicable regulatory agency, the Federal Highway Administration (FHWA), expressly approved the expenditure of federal funds at issue after the submission of the claims in question. Thus, the Fifth Circuit’s decision in the case will be instructive on whether agency guidance issued after the presentment of an allegedly false claim prevents materiality or legal falsity of the claim. This question is particularly relevant to industries such as health care, where regulatory guidance often changes in light of updated evidence or changes in industry practice.
The relator in the case is a competitor of Trinity, a highway guardrails manufacturer. The federal government, through the FHWA, reimburses state transportation departments for certain highway construction expenses, including installation of safety guardrails. In order to be eligible for reimbursement, guardrails must be crash-tested and accepted by the FHWA. Defendant Trinity had obtained such acceptance for its ET Plus guardrail units in 1999. In 2005, Trinity then modified the design of the ET Plus units. The relator alleged that Trinity did not disclose these modifications to the approved guardrails. The relator thus argued that the underlying claims for reimbursement for installation of the modified guardrails were false claims because they were founded on misrepresentations that the modified guardrails complied with the underlying FHWA regulations. (more…)