USA December 18 2015
U.S. ex rel. Badr v. Triple Canopy, Inc., 775 F.3d 628 (4th Cir. 2015)
In Triple Canopy, the Fourth Circuit joined several other circuits in adopting the “implied- certification” theory of falsity under the FCA. The case involved a government contract to provide security guards at an airbase in Iraq. The contractor allegedly hired guards who did not meet a marksmanship requirement contained in the contract, and allegedly created false shooting scorecards to disguise the deficiency. The relator, a Triple Canopy employee, filed an FCA complaint, and the government later intervened on one count. The district court subsequently dismissed the complaint, finding, among other deficiencies, the government failed to plead a demand for payment containing an objectively false statement.
On appeal, the Fourth Circuit held that the government adequately pleads a false claim when it alleges that the government contractor “made a request for payment under a contract and ‘withheld information about its noncompliance with material contractual requirements’.” Further, “[t]o establish materiality, the Government must allege the false statement had a natural tendency to influence, or [was] capable of influencing, the Government’s decision to pay.”
Applying those standards, the Court found the marksmanship requirement was material because “common sense strongly suggests that the Government’s decision to pay a contractor for providing base security in an active combat zone would be influenced by knowledge that the guards could not, for lack of a better term, shoot straight.” The Court also noted that the contractor’s alleged efforts to cover up the deficiency also suggested materiality.
Similarly, the Fourth Circuit rejected Triple Canopy’s argument that the government failed to establish materiality in its false records claim under § 3729(a)(1)(b). Triple Canopy argued the plaintiff failed to properly allege that the falsified scorecards were material because there was no allegation that the government official in charge of payment actually reviewed the scorecards. Rejecting this reasoning, the Court stated that “the FCA reaches government contractors who employ false records that are capable of influencing a decision, not simply those who create records that actually do influence the decision.”
Triple Canopy filed a petition for certiorari that remains pending before the U.S. Supreme Court. The Supreme Court recently granted cert to address the validity of the implied-certification theory in the Universal Health Services case (discussed above), and FCA practitioners continue to watch for related developments in Triple Canopy.