Last week the 10th Circuit affirmed the District Court's grant of summary judgment in favor of the defendant in US ex rel Thomas v. Black and Veatch Special Projects Corp., 2016 WL 1612857 (10th Cir.). I previously covered the District Court's decision.
Black and Veatch is a great case that addresses whether and when a defendant's "false certification" of its compliance with a government contract is material to the government's decision to pay on that contract. As the Court explained, "liability [under the False Claims Act (FCA)] does not arise merely because a false statement is included in the claim; rather, the false statement must be material to the government's decision to pay out moneys to the claimant." Here, the Court essentially found that the false certification regarding minor breaches of the contract was not material to the government's decision to continue paying on the contract because the government continued to pay defendant on the contract long after the government knew of and defendant self-reported the violations.
Defendant Black and Veatch was a large construction firm that contracted with the United States Agency for International Development (USAID) to build a huge electrical plant in Afghanistan. The Relators discovered (and the construction firm also self-reported) that some of the employment records for a handful of the defendant's employees had been fraudulently tampered with so that the employees could get visas and work permits in Afghanistan. Such violations, Relators alleged, constituted a "material" violation of the contract and resulted in a false certification to the government that went to the heart of the defendant's government contract.
Looking at the contract as whole and the impact these minor violations had on its performance, the Court found that these violations did not undermine the contract's purpose and that the defendant substantially performed all of its contractual duties and obligations. More importantly, the Court found that these violations were not material because the USAID continued to pay the defendant on the contract long after government officials learned of the defendant's violations and the results of defendant's internal investigation.
I said it when I reviewed the District Court case but it's worth repeating: the real significance of this case is the government's failure to exercise its authority under the FCA to dismiss the Relators' suit pursuant to 31 U.S.C. 3730(c)(2)(a). What possible justification was there for allowing it to continue? If the government as the "real party in interest" didn't have a problem with the defendant, why let Relators, acting in the government's name and collecting money for the government, proceed with this matter? Why force a defendant to defend a case like this?
Apparently, the government never exercises its power to dismiss meritless qui tam cases. I know of only one case where the government dismissed a claim under 3730(c)(2)(a): US ex rel Roach v. Obama, 2014 WL 7240520 (D. DC). In that case, the relator alleged that Barack Obama was not eligible to hold the office of President and that transactions engaged by him as President violated the FCA. Is Roach the bar for when the government will exercise its power to dismiss meritless qui tam suits -- that they have to be brought by a birther? It sure seems like it.