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Lyndsay Gorton is a Government Contracts counsel in Crowell & Moring’s Washington, D.C. office. Her practice focuses on government contracts litigation and counseling, including government investigations, fraud matters under the False Claims Act, bid protests, and federal and state regulatory compliance. In addition to her primary government contracts practice, Lyndsay has federal court litigation experience representing a broad variety of clients in commercial litigation matters, and has led and managed teams at every stage of litigation, including discovery, dispositive motion practice, trial, and settlement. She also uses her litigation experience to assist her clients with internal investigations, risk management, and compliance.

Next Tuesday, April 18, 2023, the highest court in the land will hear arguments in what is poised to be the most influential False Claims Act (FCA) case since the landmark decision in Universal Health Servs. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016).  On January 13, 2023, the U.S. Supreme Court granted certiorari to hear two consolidated appeals from the U.S. Court of Appeals for the Seventh Circuit in United States ex rel. Schutte v. SuperValu Inc., 9 F.4th 455 (7th Cir. 2021) and United States ex rel. Proctor v. Safeway, Inc., 30 F.4th 649 (7th Cir. 2022).  The Court’s decision will likely have far-reaching ramifications for FCA cases involving ambiguous contractual or regulatory requirements and may also provide benchmarks for assessing the key element of scienter across all FCA cases.  

In Supervalu and Safeway, the Seventh Circuit joined several of its sister circuits in applying the scienter standard articulated by the Supreme Court in Safeco Insurance Company of America v. Burr, 551 U.S. 47 (2007) to the FCA, finding that a defendant’s conduct is not reckless when (1) acting under an objectively reasonable, albeit erroneous, interpretation of an ambiguous regulation or contract provision; and (2) no authoritative guidance existed to warn the defendant away from that interpretation.

Continue Reading Fair Warning Protection or a “Free Pass to Fleece the Public Fisc”?: SCOTUS Takes Up the Safeco Objective Reasonableness Standard and Subjective Intent Under the FCA

2022 was a busy year for the False Claims Act.  While recoveries were down, new cases reached a record mark, and settlements addressed multiple important and developing enforcement areas, from cybersecurity to small business fraud, bid rigging, Trade Agreements Act compliance, pandemic fraud, and more.  Of particular note, the U.S. Supreme Court held argument concerning

In a prime example of the significant interplay between the Anti-Kickback Statute (“AKS”) and the False Claims Act (“FCA”), a federal jury has returned a verdict of more than $43 million in damages against Cameron-Ehlen Group, Inc., which does business as “Precision Lens,” and its owner.  The verdict in this long-running and closely watched fraud case out of the U.S. District Court for the District of Minnesota comes after a six-week trial, with the jury ultimately finding that the defendants paid kickbacks to ophthalmic surgeons to induce their use of defendants’ products in cataract surgeries reimbursed by Medicare, resulting in the submission of 64,575 false claims between 2006 and 2015.  While the jury calculated damages at the massive sum of $43 million, that number may grow exponentially after the court applies the FCA’s treble-damages calculation (increasing the liability to $129 million) and statutory penalties of between $5,500 and $11,000 for each of the 64,575 claims (resulting in additional penalties of $355 million to $710 million).  All told, the total FCA liability is expected to range between $485 million and $839 million.

Continue Reading Hundreds of Millions of Potential Liability Result from Federal Jury False Claims Act Verdict Against Ophthalmology Product Distributor

The National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2023, signed into law on December 23, 2022, makes numerous changes to acquisition policy. Crowell & Moring’s Government Contracts Group discusses the most consequential changes for government contractors here. These include changes that provide new opportunities for contractors to recover inflation-related costs, authorize new programs for small businesses, impose new clauses or reporting requirements on government contractors, require government reporting to Congress on acquisition authorities and programs, and alter other processes and procedures to which government contractors are subject. The FY 2023 NDAA also includes the Advancing American AI Act, the Intelligence Authorization Act for FY 2023, and the Water Resources Development Act of 2022, all of which include provisions relevant for government contractors.

Continue Reading FY 2023 National Defense Authorization Act: Key Provisions Government Contractors Should Know

On Friday September 9, 2022, the Principal Director for DoD Defense Pricing and Contracting (DPC) issued a Memorandum titled “Managing the Effects of Inflation with Existing Contracts.”  The Memorandum provides guidance to Contracting Officers about the range of approaches available to address the effects of inflation on the Defense Industrial Base.  Of note, it highlights two paths contractors may pursue to recover for inflation under fixed-price contracts.

First, the Memorandum notes that the ability to recognize cost increases is largely dependent on contract type, asserting that “[c]ontractors performing under firm-fixed-price contracts that were priced and negotiated before the onset of the current economic conditions generally bear the risk of cost increases.”  This is similar to guidance DPC issued in May encouraging Contracting Officers to consider including economic price adjustment (EPA) clauses in new contracts but expressing skepticism about contractors’ ability to recover for inflation under existing fixed-price contracts.  However, the new Memorandum allows that “there may be circumstances where an accommodation [such as schedule relief or amended contract requirements] can be reached by mutual agreement of the contracting parties, perhaps to address acute impacts on small business and other suppliers.”

Continue Reading DoD Will Consider Contract Adjustments Addressing Inflation

Last week, the United States Congress passed the $280 billion CHIPS and Science Act of 2022 (CHIPS Act)[1] to bolster domestic semiconductor and microchip manufacturing in the United States. The bipartisan legislation will facilitate federal investments in the form of grants, loans, and loan guarantees to eligible entities and create significant business opportunities for companies in the U.S. The legislation also provides funding and new programs to boost advanced workforce training and research and development in a range of scientific and technology areas. The legislation now awaits the signature of President Biden, who hailed its passage as “exactly what we need to be doing to grow our economy right now.”

The legislation seeks to reverse the decades-long decline in U.S. microchip and semiconductor manufacturing and counter the rise of China as a source for technologically advanced manufacturing processes and products. By boosting domestic manufacturing and supply chains, the legislation also aims to relieve the global semiconductor shortage that has plagued manufacturers of a diverse set of products – everything from automobiles to children’s toys – and has contributed to the nation’s supply chain woes for more than two years.

The cornerstone of the legislation is $52 billion that will be allocated to the U.S. Department of Commerce semiconductor initiative to develop and expand domestic manufacturing capacity. Implementation of that program was already underway at the Department of Commerce[2], following Congressional authorization in the Fiscal Year 2021 National Defense Authorization Act (FY21 NDAA), and the legislation passed last week now provides the critical funding needed to commence direct federal incentives for the construction, expansion, or modernization of semiconductor manufacturing facilities.

Continue Reading The CHIPS Are Down and Incentives Flow as Congress Attempts to Vitalize the U.S. Semiconductor Industry

On June 23, 2022, a federal grand jury returned an indictment against Army contractor Envistacom LLC and two of its executives alleging participation in a fraudulent scheme that deprived the federal government of competition and making false representations to the government in furtherance of the conspiracy. The indictment also charged the executive as a co-conspirator, and asserts the conspirators coordinated in the preparation of so-called “competitive quotes” submitted in connection with 8(a) set aside contracts. The quotes were allegedly fraudulently inflated in order to all but guarantee the government customer would sole source the award to the conspirators’ pre-determined bidder. This indictment represents the fruits of yet another investigation by the Department of Justice’s Procurement Collusion Strike Force (“PCSF”).

According to the indictment, the defendants conspired to prepare and secure “sham” pricing quotes from third-party companies that were intentionally higher than Envistacom’s proposals to ensure that the government issued sole source awards to Envistacom. Further, the defendants allegedly coordinated with an unnamed government employee who acted as a co-conspirator and assisted in preparing and submitting Independent Government Cost Estimates (“IGCE”) for certain set aside contracts to ensure that the pre-determined bidder’s proposal would be lower than the IGCEs. Finally, the indictment alleges that the defendants made “false statements, representations, and material omissions to federal government contracting officials” about the IGCEs being “legitimate” and the sham quotes being “competitive.”

Continue Reading Procurement Collusion Strike Force Nabs Another Military Contractor in Bid Rigging Scheme

Yesterday, the U.S. Supreme Court granted certiorari in Polansky v. Executive Health Resources Inc., No. 19-3810 (3d Cir. Oct. 28, 2021), which involves the Government’s authority to dismiss a relator’s qui tam action pursuant to 31 U.S.C. § 3730(c)(2)(A) of the False Claims Act. In Polansky, the U.S. Court of Appeals for the Third Circuit held the Government must intervene in FCA suits before moving to dismiss and that, where responsive pleadings have been filed, a court has wide discretion to permit or deny the Government’s exercise of dismissal authority. This cemented two circuit splits. The first split is between the Third, Sixth, and Seventh Circuits, which require the Government to intervene before moving for dismissal of an FCA suit, and the D.C., Ninth, and Tenth Circuits, which do not require the Government to intervene before moving for dismissal of an FCA suit at any point in the litigation. The second is a three-way split among the Circuits regarding the standard of review a court must apply when determining whether the Government can dismiss a qui tam action over a relator’s objection: the Third and Seventh Circuits apply the Rule 41(b) standard, the D.C. Circuit considers the Government’s dismissal authority unfettered, and the Ninth Circuit applies a “rational relation” test requiring the Government to demonstrate a valid government purpose and a “rational relation” between the dismissal and that government purpose. The Supreme Court is now poised to resolve both of these splits.

Continue Reading U.S. Supreme Court Poised to Resolve Two FCA Circuit Splits

In an effort to boost the domestic mining industry for critical minerals, on March 31, 2022, President Biden issued Presidential Determination 2022-11, the Memorandum on Presidential Determination Pursuant to Section 303 of the Defense Production Act of 1950, as amended (“Presidential Determination”).  The Presidential Determination states that sustainable and responsible domestic mining, beneficiation, and

2021 was another busy year in False Claims Act enforcement and litigation. Significant decisions were issued across the circuits, spanning government dismissal authority, materiality, scienter, Rule 9(b) pleading standards, the Eighth Amendment’s Excessive Fines Clause, and more. The year also saw proposed amendments introduced by Senator Chuck Grassley aimed at strengthening the statute and overruling