Relators frequently bring qui tam cases based in large part on allegations that a defendant violated some obscure government regulation. These alleged regulatory violations become the basis for a False Claim Act qui tam when the defendant "certifies" to the government its compliance with regulations in conjunction with submitting a request for payment to the government. Yet, what if the underlying regulations were ambiguous, unclear, or simply had not been previously applied in the manner urged by the relators? Can the alleged violation of such ambiguous regulations give rise to a False Claims Act case? More often, courts are answering "no" and refusing to permit the False Claims Act to be used to police violations of unclear or ambiguous regulations.
A good example can be found in the recent Third Circuit case, U.S. Department of Transportation ex rel Arnold v. CMC Engineering, Inc., et al., __ Fed. Appx.__, 2014 WL 2442945 (3rd Cir. June 2, 2014). In this qui tam case, the Third Circuit affirmed the entry of summary judgment in favor of the defendant on the grounds that the defendant could not have "knowingly" submitted a false claim because the contractual terms it allegedly violated were so ambigious that no reasonable jury could have found a knowing violation.
In CMC Engineering, the defendant was a contractor who provided inspection services to the Pennsylvania Department of Transportation ("PennDOT") in support of federally funded highway projects. PennDOT contracted with the defendant for several different classes of inspectors, and the PennDOT contract set forth different credential and experience requirements for the inspectors. The relator, a construction engineer for PennDOT, alleged that CMC's inspectors who worked on the project did not have the contractual qualifications that entitled CMC to the pay rates it billed to PennDOT which were ultimately paid by the federal government. The relator contended that defendant "submitted factually and legally false claims by knowingly requesting payments at certain rates for inspectors it knew did not meet credentialing requirements." As to what the acceptable credentials were for the inspectors, the relator argued that those were set forth in the only "reasonable" interpretation of the CMC's contract with PennDOT.
The Court found, however, that the "language of the contracts . . . undermines [relator's] assertion that the contract is susceptible to only one reading" and that "the contracts themselves are ambiguous concerning the credentials required for particular positions that justify particular pay rates." The Court noted further that PennDOT employees acknowledged that the contract terms were "open to interpretation" and that PennDOT had subsequently taken steps to make them clearer. "As a result of this ambiguity," the Court observed, "there is no evidence from which a reasonable jury could find CMC 'knowingly' made a factually false claim or false certification . . . by requesting reimbursement for inspectors at rates for which [the relator] contends they were unqualified."
In short, given that many government regulations are often as clear as mud, cases like CMC Engineering represent a welcome trend among courts who are skeptical of relators who try to use the False Claims Act either to police technical regulatory violations or to enforce ambiguous and unclear government regulations.
A. Brian Albritton
June 25, 2014
Wednesday, June 25, 2014
Tuesday, June 10, 2014
Whistleblower's False Claims Act Case Does Not Toll Statute of Limitations If Relator Seeks to Later Add a Retaliation Claim
When a relator files a False Claim Act case and seeks to later add a claim that his or her employer retaliated against them, is the three-year statute of limitations for retaliation claims "tolled" during the time the relator's False Claims Act claims are pending? And, if a relator seeks to amend his or her False Claims Act case to add a retaliation claim, does the retaliation claim "relate back" in time to when the relator originally filed their False Claims Act case? In a thoughtful opinion, the Court in Hayes v. Department of Education of the City of New York, __ F.Supp. 2d__, 2014 WL 2048196 (May 16, 2014 S.D.N.Y.) addressed both of these questions and found that a relator's attempt to amend her False Claims Act complaint long after she had filed it in order to add a retaliation claim was futile and barred by the statute of limitations.
In Hayes, the relator's attorney withdrew from relator's False Claims Act case. After several attempts to obtain new counsel, the Court granted the defendant's motion to dismiss the case on the grounds that the relator could not bring the case without an attorney or pro se. Relator sought to amend her False Claims Act complaint to add a claim of retaliation, a claim for which she did not need an attorney to pursue. Relator's proposed retaliation claim was more than three years after the events in question.
The Court considered the question of "when a relator herself tolls the statute of limitations for her own claim." While the relators' filing of the False Claims Act complaint may toll the statute of limitations for claims pled in that complaint, the Court concluded that the statue is not tolled for relator's claims which are not brought in the original complaint. The statute of limitations for a retaliation claim related to an underlying False Claims Act case would continue to run, the Court found, even if the case were under seal for a period.
Finding the relator's claim to be barred by the statute, the Court next considered whether the relator may be permitted to amend her complaint to add a retaliation claim pursuant to Federal Rule of Civil Procedure 15. After undertaking a lengthy analysis, the Court found that "an amended pleading adding a retaliation claim may not relate back to the original complaint filed here: neither Rule 15(c)(1)(A) nor 15(c)(1)(B) permits it."
This decision prevents relators from trying to belatedly salvage their False Claims Act cases by trying to add a retaliation claim more than three years after the events at issue. It is not clear, however, how much effect this case will have: False Claims Act cases by ex-employees almost invariably contain retaliation claims and such claims are frequently the bases for settlements when relators' False Claims Act cases fail.
A. Brian Albritton