We recently posted about the Fourth Circuit’s decision in United States ex rel. Badr v. Triple Canopy, — F.3d —-, 2015 WL 105374 (4th Cir. Jan. 8, 2015). In that case, the court explicitly recognized the implied certification theory of liability under the False Claims Act (FCA) and held that some contractual violations can give rise to implied certification claims. We also noted that the decision failed to provide meaningful guidance for lower courts to determine which types of contractual violations can give rise to such claims. On February 10, 2015, the U.S. District Court for the Western District of Virginia issued a decision that demonstrates the uncertainty following Triple Canopy.
The district court in Skinner ex rel. Armet Armored Vehicles, Inc., No. 4:12-cv-00045, 2015 WL 540156 (W.D. Va. Feb 10, 2015), granted a motion for reconsideration of its prior dismissal of a relator’s implied certification claims under the FCA, ostensibly as a result of Triple Canopy. While the district court acknowledged that Triple Canopy was not “a reversal of standing precedent” (in that previously, the viability of implied certification claims had simply been questioned in the Fourth Circuit), the district court determined that Triple Canopy provided sufficient cause to reconsider. The Skinner court then held:
Following the language in Triple Canopy, Plaintiff alleged that [Defendants] made a request for payment and knowingly “withheld information about its noncompliance with material contractual provisions.” Plaintiff alleged that [Defendants] knew that the vehicles for which it was billing the government did not meet the ballistic protection requirements of its contracts with the government. Nevertheless, Defendants billed and collected for vehicles it knew did not meet the contract specifications. Under the guidance of Triple Canopy, the allegations make out a claim for “implied certification” claims[sic] under the FCA.
The district court also rejected the defendants’ argument that Triple Canopy should be cabined to its facts, instead finding that “the language employed by the Court was inclusive; they set forth the elements of an implied certification claim generally.”
What the Skinner opinion does not do is something the Triple Canopy court did: analyze whether the contractual provisions allegedly breached were sufficient to state a claim under the FCA. While the “common sense” materiality analysis the Triple Canopy court employed to answer this question imparted little guidance for future courts dealing with other facts, the district court in Skinner did not undertake a similar analysis. Nor did the Skinner court evaluate whether the alleged contractual breaches were conditions of payment, the essential cornerstone of the falsity analysis in an implied certification case.
Instead, the Skinner court appears to construe Triple Canopy to mean that any knowing contractual violation is sufficient to plead a false claim. Assuming a complaint makes a conclusory assertion that a contractual term is or was material, evaluating that assertion seems, in the Skinner court’s view, to be a question for another day: “Defendants are free to argue that those specifications were immaterial. This does not change, for pleading purposes, the fact that Plaintiff has alleged that Defendants’ implications to the government in submitting its invoices were demonstrably false. For this reason, it does not negate the fact that, under Triple Canopy, Plaintiff has stated a claim for violation of the False Claims Act.”
The difficulty with this holding is the fact that, as even the Triple Canopy court recognized, an FCA claim is not a mere alternative to a breach of contract claim. It is fundamental that not every contractual (or regulatory or statutory) violation states a claim for fraud under the FCA. It will be interesting to see how other district courts within the Fourth Circuit apply Triple Canopy to implied certification claims in future cases.