Mary Cafasso, a former employee of General Dynamics C4 Systems (“GDC4”), brought a False Claims Act case against her former employer after her job was eliminated following corporate restructuring.  The 9th Circuit affirmed the District Court’s dismissal of Cafasso’s claims and the granting of summary judgment in favor of GDC4 on its counterclaim for breach of a confidentiality agreement.  The Court held that, in addition to meeting the heightened pleading standard of Rule 9(b) of the Federal Rules of Civil Procedure, an FCA complaint must also “state a plausible claim for relief” pursuant to Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949-50 (2009).  See United States ex rel. Cafasso v. General Dynamics C4 Systems, Inc., 637 F.3d 1047 (9th Cir. 2011).

GDC4 is a technology company that services the military.  Cafasso alleged that GDC4 is a participant in the Advanced Telecommunications & Information Distribution Research Program (“ATIRP”), which grants the government certain rights to inventions developed in performance of the military contracts.  Cafasso claimed that GDC4 failed to disclose new inventions to the government.  Before her termination, Cafasso copied almost eleven gigabytes of data from GDC4 computers.

The 9th Circuit affirmed the dismissal of Cafasso’s claims under Rules 8(a) and 9(b).  As the Court stated:

Because Rule 8(a) requires the pleading of a plausible claim, Iqbal, 129 S. Ct. at 1949-50, we hold that claims of fraud or mistake--including FCA claims--must, in addition to pleading with particularity, also plead plausible allegations.  That is, the pleading must state “enough fact[s] to raise a reasonable expectation that discovery will reveal evidence of [the misconduct alleged].” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007). 

Cafasso’s complaint was not “sufficiently particularized and plausible” because she did not allege an actual false claim.  “An actual false claim is the sine qua non of an FCA violation.”  The Court found that Cafasso’s allegations, if true, might rise to the level of breach of contract, but not a false or fraudulent claim for payment.  Breach of contract or allegations of “unsavory conduct” cannot, by themselves, form the basis for an FCA claim.

Cafasso admitted that she breached her confidentiality agreement with GDC4 by taking files from GDC4’s computers, but asked the Court to adopt a public policy exception that would allow relators to disclose such information in furtherance of an FCA action.  The Court declined to do so under the circumstances of this case due to the “vast and indiscriminate appropriation of GDC4’s files,” but left open the possibility in other cases.  As the Court stated:  

Although we see some merit in the public policy exception that Cafasso proposes, we need not decide whether to adopt it here. Even were we to adopt such an exception, it would not cover Cafasso's conduct given her vast and indiscriminate appropriation of GDC4S files. Cafasso copied nearly eleven gigabytes of data--tens of thousands of pages… Swept up in this unselective taking of documents were attorney-client privileged communications, trade secrets belonging to GDC4S and other contractors, internal research and development information, sensitive government information, and at least one patent application that the Patent Office had placed under a secrecy order…Were we to adopt a public policy exception to confidentiality agreements to protect relators--a matter we reserve for another day--those asserting its protection would need to justify why removal of the documents was reasonably necessary to pursue an FCA claim.