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Fourth Circuit Clarifies Federal False Claims Standards in January 2015 Majority Decision

Authored by attorney Neil Lowenstein

Last month the United States Court of Appeals for the Fourth Circuit (which has Federal Court appellate jurisdiction for Virginia, North Carolina, South Carolina, West Virginia, Maryland and the District of Columbia) clarified a number of aspects of Federal False Claim actions. The case is United States, et al. v. Triple Canopy, Inc., Nos. 13-2190 and 13-2191, decided January 8, 2015, and involves a whistleblower (“qui tam”) claim by an ex-employee of a security contractor, Triple Canopy, respecting Triple Canopy security service contracts with the Federal Government.

The whistleblower, a medic named Omar Badr, claimed that Triple Canopy had knowingly provided non-qualified guards, asked him to falsify related records, and then when he refused falsified them and invoiced for the non-conforming services. The Attorney General elected to intervene and proceed with the action after it was filed by Badr, and then filed an amended complaint alleging additional violations, and bringing several common law claims against Triple Canopy. The district court dismissed the False Claims Act claims and common law claims, as well as the whistleblower’s claims, and the appeal resulted.

Reviewing the district court’s decisions “de novo” (anew; the applicable review standard), the Fourth Circuit reversed several aspects of the district court’s decision, and in the process clarified the pleading (and proof) standards applicable to False Claims Act (“FCA”) actions. Particularly of note as being clarified by the court are the following:


As part of its analysis, the court noted the importance of construing the FCA as a “strong remedy” when one was needed to confront fraud upon the government. While noting that its decisions in Triple Canopy might be “prone to abuse” by efforts to turn minor contractual violations into FCA claims, the court noted the FCA purposes overrode that concern and further noted the available remedies for any such “abusive litigation.”

How the Fourth Circuit’s decision in Triple Canopy expands FCA claims, and whistleblower actions in particular, remains to be seen; but it clearly seems to widen the door of FCA action-ability, and should serve as a caution to any Federal contractor respecting both what is said, and not said, to the Government throughout contractual performance.

             

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