On February 25, 2016, the United States District Court for the Eastern District of Virginia dismissed a False Claims Act (FCA) case alleging that PAE Government Services (PAE) intentionally overcharged the Department of State (DOS) for bottled water supplied to various facilities in Iraq.  United States of America ex rel. Anthony Garzione, 2016 WL 775780 (E.D. Va. 2/25/2016).  Even though PAE allegedly chose the highest bidder when it awarded a subcontract for the water and terminated the relator, Anthony Garzione, when Garzione complained, the court dismissed claims that PAE violated the FCA and retaliated against Garzione.  According to the court, the Federal Acquisition Regulations (FAR) required only that PAE award the subcontract at a “reasonable price.”  Id. at *5-6.  Garzione came forward with nothing in his complaint to show that the highest bid was objectively “unreasonable.”  Id.  For the same reason, Garzione did not engage in protected activity when he raised complaints.  Id. *8.

In 2013, DOS awarded PAE a contract to supply “life support and logistical function” at embassies and consulates throughout Iraq.  The contract included “food and supplies,” among other things.  Id. *1.  For the first year of the contract, PAE supplied very small quantities of bottled water to DOS facilities through a subcontract with Taylors International Services, Inc. (Taylors).  In 2014, however, DOS modified the contract to require PAE to supply much greater quantities of bottled water.  PAE immediately issued a request for bid proposals, which ultimately included the following:  a bid from Taylors for $3.65 per case for Pearl brand water; a bid from Pearl itself for $3.50 per case; and a bid from AWI for $1.18 per case.  Id.

PAE chose Taylors.  Garzione complained and sought to solicit other companies to fill the subcontract. Eventually, the complaint alleges, PAE supervisors began to treat Garzione with hostility, excluded him from meetings and communications, and eventually fired him in February 2015.  Id. *2.  Throughout it all, the subcontract for bottled water remained with Taylors.

Garzione sued, raising three claims. Counts I and II alleged that PAE “falsely certified” that it had complied with the requirements of the FAR to seek the payment of only “reasonable” prices.  As the district court explained, “[t]his claim is based on the legal theory that PAE’s costs for bottled water were necessarily not ‘reasonable’ because it selected Taylors[.]”  Id. *3. Under Count III, Garzione alleged that he engaged in “protected activity” when he questioned PAE’s selection of Taylors and was terminated in retaliation for doing so.  Id.

With little trouble, the district court dismissed all three counts.

First, the court dismissed Counts I and II.  To begin, the court rejected Garzione’s allegations that Taylors’ prices were unreasonable, observing that Garzione did not cite “any authority for the proposition that the highest bid constitutes an ‘unreasonable price’[.]”  Id. at *5.  In addition, the court rejected an argument that PAE had made false statements to the government by impliedly certifying, when it submitted invoices, that the price paid for bottled water was reasonable when, [...]

Continue Reading