False Claims Act

Over the past year, the big news for companies doing or considering business in Iran has been the scaling back of U.S. and EU economic sanctions. Many global businesses are now permitted to operate in this once prohibited market. Before we celebrate too enthusiastically, however, let’s stop for a moment to consider a potential challenge for some companies trying to capitalize on this new opportunity.

This time, we are focusing on a conundrum specific to companies that contract with the U.S. government.Continue Reading Iran on Your Mind? The FAR Should Be, Too.

Civil Investigative Demands (CIDs) are powerful pre-litigation tools the government frequently utilizes to investigate potential allegations of FCA liability. CIDs can be broad and invasive, time-consuming and expensive. What’s a company to do upon receipt of a CID? Is there any recourse? Unfortunately, neither case law nor published guidance offers the recipient much in the way of a formal, timely mechanism to challenge the scope or appropriateness of a CID. Nevertheless, there are certain practical steps one can take to reduce a CID’s scope that, in turn, will reduce disruption and expenses associated with CID compliance.
Continue Reading The Civil Investigative Demand: An Increasingly Aggressive Investigative Tool and Common-Sense Scope-Reduction Strategies

On June 23, 2016, the General Services Administration (GSA) released a final rule that will result in the most significant change to the GSA Federal Supply Schedules (FSS) program in the last two decades. 81 FR 41103 (New Rule). The New Rule introduces a transactional data reporting element to the FSS program, effectively replacing the current requirements relating to Commercial Sales Practices (CSP) disclosures and the Price Reduction Clause (PRC).

Under current FSS regulations, contractors are required to submit CSP disclosures with their initial offer for a FSS contract, which includes a broad disclosure of discounts the contractor offers to commercial customers for similar products and services. The CSP disclosures are used to identify a “tracking customer,” which consists of a customer or category of customers that will be tracked to identify pricing discounts to GSA customers. The PRC requires the contractor to monitor its ongoing commercial sales to ensure that the government receives the same price reductions given to the “tracking customer.” Through the New Rule, GSA is replacing the CSP disclosures and PRC requirements with a different method of award monitoring: transactional data reporting.Continue Reading Major Changes to GSA’s Federal Supply Schedules Program

Bass, Berry & Sims PLC announces the launch of its new blog, Inside the FCA, which will provide ongoing updates related to the False Claims Act (FCA), including insight on the latest legal decisions, regulatory developments and FCA settlements affecting federal programs and government contractors. Inside the FCA focuses on providing timely updates for

In a February 4, 2016, decision, United States ex rel. Wall v. Circle C. Construction, LLC, the Sixth Circuit summarily rejected the government’s assertion that the measure of damages in a False Claims Act (FCA) suit involving a violation of prevailing wage rate requirements was the total amount paid for the work.  The Sixth Circuit’s rejection of the “total contract value” theory of damages in the prevailing wage rate context is a welcome development for FCA defendants who are faced with increasingly creative damages theories asserted by the government and the relator’s bar.

Circle C’s Army Contract

For a case that involved a relatively minor non-compliance with the prevailing wage rate requirements applicable to federal construction contracts, the Circle C. Construction case has a long history.  Circle C entered into a contract to construct warehouses at the U.S. Army base at Fort Campbell, located in Kentucky and Tennessee.  Pursuant to the Davis-Bacon Act, Circle C was required to pay electrical workers at least $19.19 per hour, plus a fringe benefit rate of $3.94 per hour.  Circle C was also required to submit certified payroll for itself and its subcontractors.Continue Reading DOJ’s “Fairyland Damages” Calculation Rejected in Prevailing Wage Rate False Claims Act Case

Last month, the Sixth Circuit affirmed sanctions imposed by a district court against a relator and his counsel for bringing a frivolous False Claims Act (FCA) action. The ruling in United States ex rel. Jacobs v. Lambda Research, Inc., No. 14-3705, 2015 WL 1948247 (6th Cir. May 1, 2015) is a positive development for companies that have faced an increase in FCA actions in recent years. It also illustrates the use of a sanctions provision that is specific to FCA claims.

Lambda Research is a small business that contracts with the United States Navy to strengthen the metal components of warplanes. Terry Jacobs, the individual who brought the FCA case, worked for Lambda for two years before he left the company to become vice president of a competitor business, Ecoroll Corporation.

Lambda thereafter sued Jacobs in state court, alleging that Jacobs stole Lambda’s trade secrets and gave them to Ecoroll. A jury found Jacobs liable and awarded Lambda $8 million in damages. Additionally, the state court found that Jacobs misappropriated trade secrets willfully, and ordered him to pay Lambda $1.4 million in attorney’s fees.Continue Reading Relators Beware – Sanctions Upheld for “Vexatious” False Claims Act Suit

Employee severance packages and settlement agreements often include a broad waiver of any claims, known or an unknown, which an employee may have against the company.  Although such broad pre-filing releases are highly recommended, companies doing business with the government should be cautioned that these waivers do not always protect against False Claims Act (“FCA”) litigation.  A line of federal cases has established that these so-called “pre-filing releases” are sometimes unenforceable against suits filed by whistleblowers, or qui tam actions, for public policy reasons.

Pre-filing releases bar qui tam actions only if the government was already aware of the fraudulent conduct that forms the basis for the employee’s allegations.  The Ninth Circuit in an early case held that enforcing such a waiver where the government was not aware of the fraud until the filing of a qui tam complaint would be against public policy.  U.S. ex rel. Green v. Northrop Corp., 59 F.3d 953 (9th Cir. 1995).  The court noted that the FCA’s qui tam provisions are meant to incentivize whistleblowers to come forward with information that the government would not otherwise be able to obtain.  Thus, when the government first learns about alleged fraud from a whistleblower complaint, the pre-filing release will not be enforced.  This view is shared by the Fourth and Tenth Circuits.  See U.S. ex rel. Radcliffe v. Perdue Pharma, L.P., 600 F.3d 319 (4th Cir. 2010); U.S. ex rel. Ritchie v. Lockheed Martin Corp., 558 F.3d 1161 (10th Cir. 2009).Continue Reading Enforceability of Employee Releases on Qui Tam Actions

United Parcel Service Inc.’s (“UPS”) recent settlement with the Department of Justice (“DOJ”) to resolve allegations that it submitted false claims to the federal government to conceal its failure to timely deliver packages serves as a reminder of the range of conduct that can lead to False Claims Act (“FCA”) liability for not satisfying the

Despite fulfilling its contractual obligations and voluntarily disclosing its possible oversight, nLight Photonic, Inc. (“nLight”), a Washington-based small business, was pushed to a $420,000 settlement with the Department of Justice to resolve allegations that it violated the False Claims Act by knowingly submitting false certifications regarding its eligibility for contracts and grants under the U.S. Small Business Administration’s (“SBA”) Small Business Innovation Research (“SBIR”) program.

The SBIR program was created to encourage U.S. small businesses to conduct federal research & development that may also serve the community at-large. To be eligible for SBIR funds, a company must satisfy several conditions, including:

1. Having a U.S. place of business;
2. Being majority owned and controlled by individuals that are U.S. citizens (or permanent residents) or by another entity meeting this requirement; and
3. Employing fewer than 500 employees.

Continue Reading Small Business Reaches Settlement to Resolve Allegations it Falsely Certified Compliance with SBIR Program

On April 6, 2015, the Sixth Circuit delivered a costly blow to the United States government to the tune of $657 million when it issued its opinion in United States v. United Technologies Corporation and remanded the case back to the district court to review the damages award, yet again.

This was the second time that the Sixth Circuit heard arguments deriving from the United States False Claims Act case against Pratt & Whitney (“Pratt”), now owned by United Technologies, for false statements the company made when competing against GE Aircraft for contracts to build F-15 and F-16 jet engines. In 1983, in an attempt to outbid GE Aircraft and make it hard for the government to issue a split-award contract, Pratt misstated its projected costs and certified that the company’s bid included its “best estimates and/or actual costs.” After uncovering Pratt’s overstated costs projections, the government filed both an administrative action against the company in the Armed Services Board of Contract Appeals (“ASBCA”) under the Truth in Negotiations Act and a lawsuit in district court alleging violations of the False Claims Act.Continue Reading United Technologies is Saved from $657 million False Claims Act Verdict by the Sixth Circuit