A Pennsylvania district court recently weighed in on the question of whether the government’s continued payment after the filing of a qui tam action defeats materiality under Escobar. In a decision helpful to FCA defendants, the court in United States ex rel. Cressman v. Solid Waste Services, Inc. granted the defendant summary judgment where the government continued to pay the defendant after the plaintiff filed his FCA action and DOJ declined to intervene.
Relator Gary Cressman worked as a truck driver for a trash collection and hauling division of defendant Solid Waste Services, Inc. Between 2008 and 2014, a separate division of Solid Waste Services performed trash collection services for several federal agencies. In February 2013, Cressman observed two employees discharge polluted material onto a grassy area of the facility where he worked, and reported it to the Pennsylvania Department of Environmental Protection (“DEP”), as well as to the defendant’s director of operations for the facility. The defendant fired the two offending employees, corrected the violation, and entered into a “Consent Assessment of Civil Penalty” with the DEP. Cressman subsequently filed an FCA complaint under an implied false certification theory of liability, alleging that the defendant’s compliance with federal environmental safety laws is an implied condition of its waste removal contracts, and by submitting invoices to the various federal agencies without disclosing the discharge incident, the defendant violated the FCA.
In granting the defendant summary judgment, the court first noted that the discharge incident was unrelated to services provided by defendant under the contracts with the federal agencies, as those services were in fact performed by a separate division of the company. More important to our readers, the court next evaluated whether Cressman met Escobar’smateriality requirement (as interpreted by the Third Circuit in United States ex rel. Petratos v. Genentech Inc.). In holding that Cressman failed to clear Escobar’s high bar, the court reasoned that the agencies’ continued payment after the FCA complaint was filed and after DOJ investigated the allegations and declined to intervene demonstrated that the discharge incident was not material to the agencies’ payment decisions. The court further reasoned that the alleged misrepresentation about the regulatory violation did not go “to the very essence of the bargain,” as required by Petratos, because there was no nexus between the regulatory violation and the waste collection services performed for the federal agencies by a different division of defendant company.
Count Cressman as another significant post-Escobar win for FCA defendants. It provides further ammunition to argue that the government’s decision not to intervene (which happens in the overwhelming majority of qui tam FCA cases) could be evidence of immateriality. We at LLB will continue to keep you posted on everything Escobar.