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On August 11, 2015, the U.S. Court of Appeals for the D.C. Circuit issued a writ of mandamus supporting the robust applicability of the attorney-client privilege and attorney work product doctrines in the context of False Claims Act (“FCA”) investigations conducted under the direction of corporate and outside counsel. This marks a continuation of its repudiation of a 2014 lower-court decision that significantly eroded these privileges. Interpreting the scope of the privileges in the context of internal investigations of potential FCA violations is especially tricky because of the unique roles played by the parties (the Government as a potential plaintiff, the relator as a bounty hunter, and the corporation-as-defendant). This latest ruling from the D.C. Circuit, in a case arising out of wartime contracts in Iraq run by Kellogg, Brown & Root, Inc. (“KBR”)(formerly part of Halliburton), is a breath of fresh air for companies doing business with the Federal Government. The ruling from the Court of Appeals also sends a signal to the trial court that an overly narrow view of the attorney-client privilege and attorney work product doctrine creates unacceptable uncertainty that will ultimately be rejected on appeal.
Continue Reading Whew! That Was Close – D.C. Circuit Reaffirms Application of Attorney-Client Privilege and Attorney Work Product Doctrine in Internal Investigations

On June 8, 2015, the U.S. Court of Appeals for the Seventh Circuit rejected the doctrine of implied false certification in a False Claims Act (“FCA”) lawsuit, U.S. ex rel. Nelson v. Sanford-Brown Ltd.  No. 14-2506, 2015 WL 3541422.  In a welcome decision for government contractors, the Court held that the FCA is “not the proper mechanism” for Government enforcement of regulations.  Instead, regulatory violations should be handled by the appropriate Government agency–not the courts.
Continue Reading Seventh Circuit Rejects FCA Implied False Certification Theory

In an opinion released May 26, 2015, Kellogg Brown & Roots Services, Inc. v. United States ex rel. Carter, the U.S. Supreme Court unanimously held that whistleblowers cannot extend the statute of limitations for war-related civil false claims under the Wartime Suspension of Limitations Act (“WSLA”), reinstating an already generous statute of limitations period under the civil False Claims Act (“FCA”).  The Court also settled a split between the U.S. Courts of Appeals for the D.C. Circuit and the Fourth Circuit.  For purposes of the FCA’s “first-to-file” bar, the FCA only limits a lawsuit based on the same underlying facts as another case that is actually open and pending when the later lawsuit is filed.  In reaching these holdings, the Court relied heavily on the plain meaning of the statutory language, simultaneously handing a victory to both Defendants (on the statute of limitations issue) and Plaintiffs (on the first-to-file issue).  But, the holding relating to the WSLA may prove to be the greatest legacy from the KBR decision, reigning in aggressive whistleblowers and government lawyers who would try to allege a case of “fraud” decades after the conduct occurred, and long after a Defendant is able to defend itself effectively.
Continue Reading SCOTUS: No Unlimited Suspension of the Statute of Limitations Under the False Claims Act; “First-to-File” Doctrine Does Not Bar Related Suits in Perpetuity

The federal crop insurance program is an often overlooked area of potential liability under the False Claims Act (“FCA”).  The program, which is governed by a substantial body of regulatory law, is subject to intense oversight by the U.S. Department of Justice.  So much so that the U.S. Department of Agriculture’s Risk Management Agency maintains and keeps public a long list of DOJ prosecutions for fraud and violations of the False Claims Act.  See DOJ Prosecutions.  These prosecutions include criminal charges brought against North Carolina tobacco farmers, Texas peanut growers, and California fruit and vegetable producers for fraudulently filing claims against the USDA crop insurance program.
Continue Reading When it Comes to Crop Insurance, the FCA Bears Fruit

On February 12, 2015, the Department of Justice (“DOJ”) announced that three U.S.-based importers had agreed to pay more than $3 million to resolve a lawsuit brought by the United States under the False Claims Act (“FCA”).  The Government alleged that the importers had made false declarations to U.S. Customs and Border Protection (“CBP”) and conspired with other domestic companies to make false declarations to CBP in order to avoid paying “antidumping” and “countervailing” duties.  No Government contracts were involved.  These were “reverse” FCA claims based upon underpayment of duties for private sector import transactions.
Continue Reading Add Importers to Those Facing Expanding Whistleblower Claims Under the False Claims Act

The Federal False Claims Act (“FCA”), 31 U.S.C. § 3729, et seq., has unique procedural aspects that come into play when a private whistleblower (the “relator”) seeks to sue on behalf of the Government.  One of these, the so-called “first-to-file” bar, applies when two “related” whistleblower actions are filed:  “When a person brings an [FCA action], no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.”  31 U.S.C. § 3730(b)(5).  The circuits are split as to whether the bar applies only while the first-filed action is “pending,” or applies even if the first-filed action has been dismissed.  For example, the Fourth Circuit held “that once a case is no longer pending the first-to-file bar does not stop a relator from filing a related case.”  U.S. ex rel. Carter v. Kellogg Brown & Root Servs., Inc., 710 F.3d 171, 181, 183 (4th Cir. 2013), cert. granted, 134 S. Ct. 2899, 189 L. Ed. 2d 853 (2014).  On the other hand, the D.C. Circuit expressly disagreed with Carter, rejecting the concept that the first-to-file bar is a “temporal limit” to related suits, and concluding that related actions are barred “regardless of the posture of the first-filed action.”  U.S. ex rel. Shea v. Cellco P’ship, 748 F.3d 338, 343-44 (D.C. Cir. 2014), reh’g denied en banc (July 16, 2014).   In finding that the statutory reference to “pending action” means the first-filed action, the D.C. Circuit noted that its interpretation “better suits” the policy of the bar—to prohibit subsequent private actions once the Government is on notice of the fraud.  The Supreme Court’s July 1, 2014 grant of certiorari to review the Fourth Circuit’s decision in Carter should resolve the circuit split.
Continue Reading You Again?: Application of the First-to-File Bar Where Subsequent Actions Are Brought By the Same Relator

Under the “implied certification” theory of liability, a government contractor can violate the False Claims Act (“FCA”) by submitting a mere invoice for payment.  The theory is that the invoice’s submission impliedly certifies compliance with contract conditions.  If a contractor is not complying with material contract requirements and — despite the contractor’s noncompliance — submits an invoice for payment, then the Government or a relator might argue that the contractor has violated the FCA. …
Continue Reading The Fourth Circuit Strengthens the FCA’s Implied Certification Theory in Triple Canopy

On November 14, 2013, the U.S. Department of Justice announced a False Claims Act settlement with Basco Manufacturing Company, a maker of shower enclosures, for $1.1 million related to misstatements on U.S. Customs and Border Protection (CBP) entry forms.  The alleged misstatements were intended to allow the company to avoid antidumping duties (ADD) and countervailing duties (CVD) on aluminum extrusions used in its products that were actually from China, but transshipped through Malaysia in an attempt to avoid the duties.  The settlement against Basco does not resolve the entire matter, as Basco was one company of many involved in an alleged conspiracy to conceal the Chinese origin of the aluminum extrusions at issue.  Aspects of the settlement highlight certain risks posed by the False Claims Act that compound general U.S. enforcement of trade laws, and a reminder that diversion for inbound products to the United States may be a significant compliance issue of which companies should  be aware.
Continue Reading A Peek Around the Curtain: A “Reverse” False Claims Act Settlement for Avoiding Customs Charges

The DOJ has released its Fiscal Year (“FY”) 2013 totals for civil settlements and judgments recovered under the federal False Claims Act (“FCA”).  To say that the Department had a successful year in prosecuting fraud against the government would be putting it mildly.  According to the DOJ release, the government recovered $3.8 billion under the FCA in FY 2013.  That total is second only to the approximately $5 billion recovered under the FCA in FY 2012; and it marks the fourth time in as many years that the government’s recoveries under the Act exceeded $3 billion.
Continue Reading False Claims Act Whistleblower Bounties Exceed $345 Million in Fiscal Year 2013

In a recent False Claims Act (“FCA”) opinion that has already been heavily criticized, the Fourth Circuit held that a $24 million penalty was not “excessive” under the Constitution even where damages were not proven at trial and where the government had paid only a total of $3.3 million for the services in question.  United States ex rel. Bunk v. Gosselin World Wide Moving, N.V., No. 12-1369 (4th Cir. Dec. 18, 2013).
Continue Reading Fourth Circuit Finds $24 Million False Claims Act Penalty Not Excessive Even Where No Damages Proven at Trial