On March 2, 2017, the U.S. Government Accountability Office (GAO) published a report highlighting necessary improvements to effectively implement the Whistleblower Protections Pilot Program (WPPP). The WPPP, introduced in the National Defense Authorization Act for Fiscal Year 2013, and made permanent by Congress in December 2016, expanded whistleblower rights against reprisal for employees of contractors, subcontractors, and grantees. That same year, the FAR was also amended to require contracting officials to include a contract clause requiring contractors to communicate to their employees their rights under the WPPP in contracts exceeding the simplified acquisition threshold and awarded after September 30, 2013. The WPPP also required agencies use best efforts to include the FAR clause in major contract modifications of existing contracts.
On February 14, the Fourth Circuit issued an opinion in United States ex rel. Michaels v. Agape Senior Cmty. Inc. addressing only the first of the two issues that the district court had certified for interlocutory appeal: (1) whether the Department of Justice (DOJ) possesses an unreviewable veto authority over proposed settlements and (2) whether statistical sampling, the analysis of data from a subset of the population of interest in order to make projections across the population of claims at issue, is an appropriate methodology for establishing liability and damages in False Claims Act (FCA) cases.
In its decision, the Fourth Circuit became the third circuit to affirm that the DOJ has absolute, unreviewable authority to veto settlements in qui tam cases where it has declined to intervene. However, notwithstanding that the name of the defendant corporation is derived from the Greek word for love, the Fourth Circuit’s decision (on Valentine’s Day) not to opine on the statistical sampling issue showed no love for those that hoped that the court would bring needed clarity on the permissibility of statistical sampling in FCA cases. Instead, as the authors predicted in a recent Law360 article, the Fourth Circuit dismissed the interlocutory appeal as “improvidently granted” because the panel viewed statistical sampling as an evidentiary issue, rather than a pure question of law.
Congress amended the civil False Claims Act in 1986 to give the statute more teeth as a fraud enforcement tool. Thirty years later, FCA litigation is as active as ever with more than 800 new cases filed in 2016, which is the second highest number of new cases on record. Not only was 2016 a major year for FCA recoveries (the third-highest ever) but the year also saw major developments ranging from a massive increase in civil penalties and a landmark decision on the implied certification theory of liability. In a “Feature Comment” published in The Government Contractor, C&M attorneys highlight some of the most important settlements and decisions from 2016 on key issues—from liability to damages, qui tam provisions, and more.
On September 29, 2015, the Fourth Circuit agreed to hear an interlocutory appeal in U.S. ex rel. Michaels et al. v. Agape Senior Community, Inc. to address whether the statistical method of extrapolation may be used to prove liability, in addition to damages, under the False Claims Act. The Fourth Circuit will be the first appellate court to rule on this controversial issue.
Extrapolation, or statistical sampling, is a method in which a sample of data is used to draw inferences about a larger population. Litigators implement extrapolation in areas of complex litigation, including antitrust, employment discrimination, mass torts, and voting rights cases. In the FCA context, however, litigators have utilized extrapolation solely to prove damages. The use of extrapolation expanded in 2014, when the U.S. District Court for the Eastern District of Tennessee, in U.S. ex rel. Martin v. Life Care Centers, allowed plaintiffs to use statistical sampling not only to calculate damages, but also to establish the underlying FCA liability. Subsequent rulings by federal district courts reach divergent positions.
In “Extrapolation in FCA Litigation: A Statistical Anomaly or a Tactic Here to Stay?”, a Feature Comment published by The Government Contractor, C&M Attorneys outline the origins of extrapolation, examine the divergent federal district court rulings on whether it may be used to prove damages, explain the significance of extrapolation to contractors facing False Claims Act liability, and offer practice tips for litigating cases with statistical sampling.
On February 12, 2015, the Federal Circuit issued an opinion in K-CON Building Systems, Inc. v. United States, addressing jurisdiction over contractor claims under the Contract Disputes Act (“CDA”).
Specifically, K-CON Building Systems explores the implications of claim identification, and whether a contractor can add a new claim to a pending matter when the new claim seeks a different remedy or is based upon a different legal theory. In this case, K-CON Building Systems, Inc. (“K-CON”) contracted with the federal government to construct a “cutter support team building” for the U.S. Coast Guard. The contract included a liquidated damages clause and obligated K-CON to pay $589 for each day of delay. When K-CON completed the building 186 days after the contract’s completion date, the Coast Guard withheld $109,554 in liquidated damages due to alleged delay. Continue Reading Federal Circuit Permits Contractor to Add New Claim to Pending Complaint