Relators frequently bring qui tam cases based in large part on allegations that a defendant violated some obscure government regulation. These alleged regulatory violations become the basis for a False Claim Act qui tam when the defendant "certifies" to the government its compliance with regulations in conjunction with submitting a request for payment to the government. Yet, what if the underlying regulations were ambiguous, unclear, or simply had not been previously applied in the manner urged by the relators? Can the alleged violation of such ambiguous regulations give rise to a False Claims Act case? More often, courts are answering "no" and refusing to permit the False Claims Act to be used to police violations of unclear or ambiguous regulations.
A good example can be found in the recent Third Circuit case, U.S. Department of Transportation ex rel Arnold v. CMC Engineering, Inc., et al., __ Fed. Appx.__, 2014 WL 2442945 (3rd Cir. June 2, 2014). In this qui tam case, the Third Circuit affirmed the entry of summary judgment in favor of the defendant on the grounds that the defendant could not have "knowingly" submitted a false claim because the contractual terms it allegedly violated were so ambigious that no reasonable jury could have found a knowing violation.
In CMC Engineering, the defendant was a contractor who provided inspection services to the Pennsylvania Department of Transportation ("PennDOT") in support of federally funded highway projects. PennDOT contracted with the defendant for several different classes of inspectors, and the PennDOT contract set forth different credential and experience requirements for the inspectors. The relator, a construction engineer for PennDOT, alleged that CMC's inspectors who worked on the project did not have the contractual qualifications that entitled CMC to the pay rates it billed to PennDOT which were ultimately paid by the federal government. The relator contended that defendant "submitted factually and legally false claims by knowingly requesting payments at certain rates for inspectors it knew did not meet credentialing requirements." As to what the acceptable credentials were for the inspectors, the relator argued that those were set forth in the only "reasonable" interpretation of the CMC's contract with PennDOT.
The Court found, however, that the "language of the contracts . . . undermines [relator's] assertion that the contract is susceptible to only one reading" and that "the contracts themselves are ambiguous concerning the credentials required for particular positions that justify particular pay rates." The Court noted further that PennDOT employees acknowledged that the contract terms were "open to interpretation" and that PennDOT had subsequently taken steps to make them clearer. "As a result of this ambiguity," the Court observed, "there is no evidence from which a reasonable jury could find CMC 'knowingly' made a factually false claim or false certification . . . by requesting reimbursement for inspectors at rates for which [the relator] contends they were unqualified."
In short, given that many government regulations are often as clear as mud, cases like CMC Engineering represent a welcome trend among courts who are skeptical of relators who try to use the False Claims Act either to police technical regulatory violations or to enforce ambiguous and unclear government regulations.