Earlier this week, the U.S. Attorney’s Office for the Eastern District of Virginia announced that defense contractor Triple Canopy has agreed to settle the long-running FCA suit related to its provision of security services in Iraq. Although a victory for the government, contractors can take some comfort from the fact that the $2.6 million settlement represents less than 25 percent of the damages sought in the government’s complaint-in-intervention (which totaled more than $12 million when trebled). $500,000 of the settlement will be paid to the relator pursuant to the FCA’s qui tam provisions.
As we have discussed previously, the government alleged that Triple Canopy submitted false claims for payment for guards who failed to meet the marksmanship skill level required by the contract. The government further alleged that Triple Canopy concealed that its guards were unqualified. In 2015, the Fourth Circuit held that the government’s complaint stated an implied false certification claim. Triple Canopy sought cert, but the Supreme Court elected to take up the implied certification issue through Escobar, and subsequently remanded Triple Canopy to the Fourth Circuit to reconsider in light of Escobar.
On remand, the Fourth Circuit held that the complaint adequately pleaded materiality, reasoning that “[c]ommon sense” compels the conclusion that “[g]uns that do not shoot” (an example given by the Supreme Court in the Escobar decision) “are as material to the Government’s decision to pay as guards that cannot shoot straight.” The court also pointed to the government’s decision not to renew its contract with Triple Canopy and its “immediate” intervention in the case as evidence of materiality. Notably absent from the decision (which we would argue is inconsistent with Escobar) was any discussion of the government’s conduct in the “mine run of cases” when a contractor bills for services without explicitly referencing compliance with underlying terms.
This week’s settlement thus brings to an end a case that has been at the forefront of recent FCA implied certification and materiality jurisprudence.