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False Claims Act Statistics, News & Analysis

Escobar Gives Relators a "Shot" at Implied False Certification Claim

Adding to the number of post-Escobar opinions already issued, the U.S. District Court for the Eastern District of Virginia recently denied a motion for judgment on the pleadings on the issue of whether an implied false certification claim was sufficiently pled under Escobar in United States ex. rel. Beauchamp v. Academi Training Center Inc., No. 11-cv-371 (E.D.Va. Nov. 30, 2016). The Beauchamprelators alleged that the defendant, a private security company, falsely certified compliance with its contract with the U.S. State Department when it billed the government for warzone security guards who did not meet weapons certification requirements. Relying on Escobar, the court found the relators sufficiently pled that the defendant had made specific misrepresentations about the services it provided and these misrepresentations were material to the government’s decision to pay the defendant.

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High Court Knocks Out Mandatory Dismissal but Leaves Circuit Split on Standard Intact

We last wrote about State Farm & Casualty Company v. United States ex rel. Rigsby (No. 15-513) to report on oral arguments, where the parties (and the government) battled over the standard to be applied in determining whether a qui tam action should be dismissed based on a relator’s violation of the FCA seal requirement. We put our money on the Court declining to require automatic dismissal – and we were right.

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I Knowingly Drank Coffee With Cream Today . . .

Because I knew both that I was drinking coffee and that it contained cream. The Sixth Circuit applied similar reasoning in its most recent False Claims Act decision, U.S. ex. rel. Harper v. Muskingum Watershed Conservancy District, No. 15-4406, 2016 WL 6832974 (6th Cir. Nov. 21, 2016), in which it decided—as a matter of first impression—construction of the FCA’s scienter requirements for a reverse false claim (31 U.S.C. § 3729(a)(1)(G)) and a conversion  (31 U.S.C. § 3729(a)(1)(D)), as amended in 2009 by the Fraud Enforcement and Recovery Act (“FERA”). Construing the FCA’s reverse false claim prohibition against knowingly avoiding an obligation to the United States, the court held that liability will attach only if the offender knows both of the obligation and that he avoided it. Similarly, to be liable for a conversion under the FCA, the offender must know both that he caused to be delivered “less than all” of certain property to the government and also that the property at issue belongs to the government. With these holdings, the Harper court reaffirmed the important threshold scienter distinctions separating an ordinary breach of contract from a violation of the FCA.

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Broad New DoD Cybersecurity Rule Could Put Defense Contractors at Risk for FCA Allegations

In late October, the Department of Defense (DoD) published the Network Penetration Reporting and Contracting for Cloud Services Final Rule (the Rule). The Rule amended Defense Federal Acquisition Regulation Supplement (DFARS) 252.204-7012, a clause that must be incorporated in all solicitations and contracts, except commercial-items contracts. See 81 FR 72986 (October 21, 2016). While ostensibly designed to require cybersecurity protections for unclassified defense-related information and to establish reporting requirements for cyber incidents, the Rule also imposes considerable compliance hurdles for contractors and could create FCA pitfalls.

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A Cause for Corporate Thanksgiving: 4th Circuit Announces False Claims Act Successor Liability Not Subject to Lenient "Substantial Continuity" Rule

Just in time for next week’s Thanksgiving holiday, asset-purchasers who are – or should be – concerned with a seller’s potential FCA culpability have something for which to be thankful. In an opinion published Tuesday, United States ex rel. Bunk v. Government Logistics N.V., No. 15-1088, 2016 WL 6695787 (4th Cir. Nov. 15, 2016), the Fourth Circuit announced that the government or relator, seeking recovery from the wrongdoer’s corporate successor-in-interest, cannot rely upon the relaxed “substantial continuity” theory. Instead, the FCA plaintiff must articulate a theory of liability on the more-difficult-to-meet traditional common law. This decision appears to be one of first impression among circuit-level courts.

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