Former employee, Ali Bahrani, filed a False Claims Act lawsuit against ConAgra, alleging that ConAgra altered thousands of meat and hide export certificates issued by the United States Department of Agriculture (USDA) to avoid paying fees charged by the USDA for replacement certificates. Bahrani lost most of his claims at trial, winning a judgment of only $27,822.50 plus $9,274.16 in attorneys’ fees and costs. Both sides appealed, and the Tenth Circuit held that all of Bahrani’s claims fail as a matter of law and reversed the judgment. See United States ex rel. Bahrani v. Conagra, Inc., Nos. 09-1163, 09-1180, 09-1388, 2010 WL 4188251 (10th Cir. Oct. 26, 2010).
The relator, Bahrani, brought his lawsuit under the “reverse false claims” provision of the False Claims Act, 31 U.S.C. § 3729(a)(7). (This provision was amended by the Fraud Enforcement and Recovery Act (FERA) and is now codified at 31 U.S.C. § (a)(1)(G).) A reverse false claim occurs when a person knowingly makes a false statement to avoid paying the Government, as compared to making a false statement to increase the amount of money the Government pays. Bahrani alleged that ConAgra altered export certificates and failed to pay fees for replacement certificates. The court found that alterations to certificates to correct errors and omissions did not necessarily give rise to the requirement to obtain replacement certificates, which would then have required ConAgra to pay additional fees. Rather, only certificates needing “significant” or “material” changes required replacement certificates.
The district court held two trials. In the first trial, the jury was asked to determine whether the court had subject matter jurisdiction over Bahrani’s alleged reverse false claims concerning the meat export certificates. Where the allegations in the lawsuit had been publicly disclosed before the lawsuit was filed (as was the case here), the court only has jurisdiction if the relator (Bahrani) is an “original source” of information on which the allegations were based. The district court instructed the jury that Bahrani was an “original source” if he had a “subjective belief” that the alterations he witnessed were done to defraud the Government. The Tenth Circuit found this instruction erroneous, holding that the jury should have been instructed to determine “whether Bahrani had direct and independent knowledge that ConAgra employees were making ‘major’ or ‘significant’ changes to the certificates (and not whether he reasonably believed that the changes he actually observed were fraudulent).” Nonetheless, the Tenth Circuit still found that Bahrani was not an “original source” as to the meat certificates because his knowledge “was far too limited to allow a jury to reasonably find that he was an original source.”
The second trial was on the merits of Bahrani's claims concerning the hide certificates. The jury found that only 5 of the 1057 hide certificates were altered with “major” or “significant” changes. ConAgra argued that, under the Supreme Court case, Allison Engine Co. v. United States, 553 U.S. 662 (2008), Bahrani was required to show that the certificates were changed with the intent or purpose of avoiding a fee for replacement certificates. In Allison Engine, this specific intent requirement was made applicable to claims under §§ 3729(a)(2) and (3). “Out of an abundance of caution,” however, the district court did not apply the higher intent standard set forth in Allison Engine to Bahrani’s claim under § 3729(a)(7). Nonetheless, the district court included on the verdict form a special interrogatory applying this standard in the event the Tenth Circuit adopted it on appeal. The jury found that Bahrani failed to meet the standard.
On appeal, the Tenth Circuit compared claims under §§ 3729(a)(2) and (3) at issue in Allison Engine to claims under § 3729(a)(7) at issue in the ConAgra case. The Tenth Circuit held that the language “to avoid” paying of § 3729(a)(7) incorporates the same intent requirement as the language “to get” paid under §§ 3729(a)(2) and (3). Therefore, based on the jury’s answer to the special interrogatory, Bahrani’s claims failed as a matter of law.
In 2009, Congress amended the False Claims Act with the Fraud Enforcement and Recovery Act (FERA), which included modifications to the reverse false claims provision. While inapplicable to Bahrani’s claims because this revision was not retroactive, the Tenth Circuit noted that the language incorporating the specific intent requirement was changed.