Category

Penalties

13 February 2014

Court Affirms Relator’s Standing to Pursue Civil Penalties In The Absence of Damages

In many FCA cases, the potential liability for civil penalties is vastly higher than potential damages, even after trebling. For that reason, defendants have asserted various challenges, including Constitutional challenges, to the applicability or imposition of civil penalties. In a February 6 opinion, U.S. ex rel. Baklid-Kunz v. Halifax Hospital Medical Center, a district court in Florida rejected the argument that a relator who foregoes a claim for damages, and seeks only civil penalties under the FCA, lacks Article III standing. Relying primarily on the Supreme Court’s 2000 opinion in Vermont Agency of Natural Resources</em&ggt;, the district court concluded that the long tradition of qui tam actions – including those for recovery of civil penalties – dating back centuries, which was cited in Vermont Agency, supported the conclusion that qui tam suits seeking recovery of civil penalties only are properly understood to be “cases” or “controversies” within the meaning of Article III. The district court also cited in support the December 2013 opinion in U.S. ex rel. Bunk v. Gosselin World Wide Moving, N.V., in which the Fourth Circuit held that relators have standing to pursue qui tam claims for civil penalties, even in the absence of any claim for damages. As we previously reported, the Fourth Circuit in that case also rejected Constitutional challenge to imposition of civil penalties under the Eighth Amendment, holding that imposition of $24 million in civil penalties in the absence of any damages did not violate the Eighth Amendment’s prohibition against excessive fines.

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04 February 2014

Supreme Court of Louisiana Overturns $330 Million Judgment In Off-Label Marketing Case

Posted by Jonathan Cohn and Josh Fougere

Last week, the Supreme Court of Louisiana reversed a $330 million judgment ($258 million in penalties, $70 million in attorney fees, and $3 million in costs) against Johnson & Johnson and its subsidiary, Janssen Pharmaceutical, because there was no evidence that “any defendant made or attempted to make a fraudulent claim for payment against any Louisiana medical assistance program within the scope of [the Louisiana Medical Assistance Programs Integrity Law (‘MAPIL’)]”—a state statute based on the federal False Claims Act. Caldwell ex rel. State v. Janssen Pharmaceutical, Inc., Nos. 2012-C-2447, 2012-C-2466, 2014 WL 341038, slip op. at 1-2, 19-20 (La. Jan. 28, 2014)

The case centers on a narrow set of facts related to defendants’ antipsychotic drug Risperdal. In September 2003, the FDA told all manufacturers of so-called atypical antipsychotics to amend their labels to warn about potential adverse side effects associated with the drugs, and to issue letters about the change to healthcare providers around the country. Defendants did so, but their letter also reported that Risperdal had been associated with lower risks than other atypical antipsychotics. The FDA took issue with those statements and directed defendants to issue a “corrective” letter, which they did in July 2004. Just a couple of months later, the Louisiana Attorney General brought suit, alleging that the original letter contained off-label statements misrepresenting Risperdal’s safety and efficacy and that defendants were subject to civil penalties under Louisiana law as a result. In 2010, a jury returned a verdict for the state, finding that the defendants had violated Louisiana’s MAPIL 35,146 times (based on the number of letters mailed and sales calls made) and assessed a civil penalty of $7,250 per violation. The verdict was affirmed by the intermediate appellate court.

The Louisiana Supreme Court found no evidence to support that judgment based on its reading of the state’s false-claims act. Proceeding through each of the statute’s three subsections one-by-one, the court explained the law’s scope and why the conduct at issue did not fall within it. First was subsection (A), which provides that “[n]o person shall knowingly present or cause to be presented a false or fraudulent claim.” La. Rev. Stat. § 43:438.3(A). Because the statute elsewhere defined a “false or fraudulent claim” as one that a provider submits “knowing” it to be false or misleading, the court focused the responsibility for policing falsity on the person or entity actually making the claim for payment. The AG was thus required to “show that a Louisiana doctor who prescribed Risperdal for his patient, or a healthcare provider who dispensed the drug to the patient, knew that the defendants had made misleading statements about their product, but nonetheless prescribed or dispensed the drug to the patient knowing that there may be drugs that are equally safe, and less expensive, or safer than Risperdal, and notwithstanding that knowledge, prescribed or dispensed Risperdal.” Put another way, the “doctor or healthcare provider would have had to have knowingly committed malpractice, prescribing or dispensing Risperdal despite knowing there were better, cheaper, or safer, more efficacious drugs available, for the defendants to be liable under this provision.” No evidence supported such a finding.

Next, the court turned to subsection (B), which provides that “[n]o person shall knowingly engage in misrepresentation to obtain, or attempt to obtain, payment from medical assistance programs funds.” Again requiring a tight nexus between the claim for payment and the allegations, the court found “no showing the defendants knowingly attempted to obtain payment from the medical assistance programs pursuant to a claim.” In addition, the court read the “misrepresentation” requirement to “logically place[] the obligation of truthful and full disclosure on the healthcare provider or any person seeking to obtain payment through a claim made against medical assistance program funds or entering into a provider agreement,” in light of the “absurd consequences” that would arise if “potentially any information required by any federal or state agency or source, which is not fully disclosed by any person who ultimately receives Medicaid funds, directly or indirectly, could, if not truthfully or fully disclosed, subject that person to civil penalties under MAPIL.”

The third subsection states that “[n]o person shall conspire to defraud, or attempt to defraud, the medical assistance programs through misrepresentation or by obtaining, or attempting to obtain, payment for a false or fraudulent claim.” La. Rev. Stat. § 43:438.3(C). Here, too, the gap between the allegedly misleading statements and the claims for payment doomed the state’s case: “Even if the defendants were attempting to gain a competitive edge over other manufacturers of atypical anti-psychotics through the use of misleading off-label statements,” and “even if the defendants’ conduct was intended to influence the prescribing decisions of doctors treating schizophrenia patients,” there could be no liability because there was “no showing the defendants failed to truthfully or fully disclose or concealed any information required on a claim for payment made against the medical assistance programs” or that any such statements “were made to the department relative to the medical assistance programs,” and there was “no causal connection” between any such conduct and “any false or fraudulent claim for payment to a healthcare provider or other person.”

The thrust of the Louisiana court’s reasoning is straightforward but powerful: a statute designed to prevent false or fraudulent claims requires a close connection between the allegedly fraudulent conduct and the claim for payment from the state, and liability will not necessarily attach to any allegation of wrongdoing that ultimately winds its way to a Medicaid claim. Because the Louisiana statute bears similarities with false claims act statutes in other jurisdictions, this is a significant ruling for manufacturers defending false marketing claims elsewhere.

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30 December 2013

Fourth Circuit Avoids Excessive Fines Clause By Allowing Relator To Select An Alternative FCA Penalty

As we previously reported, a federal court in Virginia last year held that the minimum statutory civil FCA penalties were unconstitutionally excessive in light of the facts before it, and refused to impose any penalties. U.S. ex rel. Bunk v. Birkard Globistics GMBH (E.D. Va. Feb. 14, 2012). On December 19, the Fourth Circuit reversed and remanded the district court’s decision to enter no penalties with an instruction to award the plaintiff $24 million – the amount relator Bunk previously had expressed a willingness to accept. United States ex rel. Bunk v. Gosselin World Wide Moving, N.V., No. 12-1369, slip op. 30 (4th Cir. Dec. 19, 2013).

At trial, the jury found defendants liable under the FCA for conspiring with subcontractors to fix prices in advance of a bid for a government contract and submitting a false Certificate of Independent Pricing. The Relator did not seek damages, but only penalties based on the parties’ stipulation that the defendant had filed 9,136 invoices under the fraudulently obtained contract. While Relator proposed a $24 million civil penalty, the court calculated the mandatory minimum penalty as no less than $50,248,000 ($5,500 x 9,136). The court determined that this penalty violated the Excessive Fines Clause of the Eighth Amendment in light of the relator’s failure to establish that the defendant’s fraud caused any economic harm to the government. As such, the district court concluded “that [it] must simply refuse to enforce the mandated penalty . . . and not substitute its own fashioned penalty.”

The Fourth Circuit reversed, rejecting the district court’s determination that it was unable to craft an alternative penalty. The court held that the government – or a relator standing in the government’s shoes – has “unbounded” discretion to pursue a lesser judgment than that to which it may be entitled and, by exercising that discretion, may avoid the application of the Excessive Fines Clause. In reaching this conclusion, the court noted that the dilemma under the Excessive Fines Clause was the result of the court’s own precedent construing the FCA penalty provisions broadly to impose penalties on each false or fraudulent claim submitted, rather than narrowly to attach only to an underlying fraud. By concluding that a relator may simply select an alternative penalty without regard to the FCA’s requirements, the Fourth Circuit avoided the Constitutional dilemma created by the law’s draconian penalty provisions and the court’s precedent. The court then concluded – without analysis – that the alternative penalty proposed by the relator was not unconstitutionally excessive in light of the “gravity” of defendant’s misconduct and the “necessary and appropriate deterrent effect” served by the FCA’s penalties provision.

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14 October 2013

Court Enters Judgment Against Healthcare System Following Jury Verdict

In recent decisions, a federal court entered judgment under the FCA against a healthcare system that a jury had found violated the Stark Law and submitted claims for prohibited patient referrals. Among relatively few FCA cases that have proceeded to a jury verdict, this case illustrates the significant penalties defendants face.

As we previously reported, U.S. ex rel. Drakeford v. Tuomey Healthcare System involved claims that the defendant healthcare system entered into compensation arrangements with physicians that violated the Stark Law and resulted in the submission of false claims for patients who were referred in violation of Stark. In 2010, a jury concluded that the defendant violated the Stark Law but not the FCA. The district court subsequently set aside the verdict and ordered a new trial on the FCA claim, but entered a judgment on equitable claims based on the jury’s finding of a Stark Law violation. The Fourth Circuit reversed the judgment and remanded the case for a new trial.

In May 2013, the retrial concluded with the jury finding the defendant violated the Stark Law and caused the submission of 21,730 false claims, in violation of the FCA. The jury calculated the total value of false claims filed by Tuomey as $39,313,065. The court calculated the award under the FCA as including treble damages plus the statutory minimum per-claim penalty of $5,500, for a total judgment under the FCA of $237,454,195. On September 30, the court ordered the defendant to pay $276 million. The government moved to amend the judgment, noting that the court’s award appeared to include $39,313,065 above the treble damages and statutory penalties to which it was entitled under the FCA. The government noted this appeared to be a “clerical error.” The court agreed, entering an amended judgment for $237 million.

In its order entering the amended judgment, the court also disposed of the defendant’s post-trial motions. Among the arguments for setting aside the jury verdict the court rejected, it denied Tuomey’s request for judgment as a matter of law because the government “failed to prove damages.” The Court noted that although the government “received the medical services it paid for, and it paid the same amount it would have paid had the services been performed by another hospital,” the government was entitled to damages under the FCA because the Stark Law prohibits “any payment” for a claim for prohibited referrals. In addition, the court denied Tuomey’s motion to set aside the $237 million award based on the excessive fines provision of the Eighth Amendment, finding the award of treble damages plus statutory per-claim penalties not to be “grossly disproportional to the gravity of Tuomey’s offense.”

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28 June 2013

HHS Touts FCA Settlement in Spring 2013 Semiannual Report to Congress

The Department of Health and Human Services (“HHS”) Office of Inspector General (“OIG”) recently reported expected recoveries of approximately $3.8 billion for the first half of fiscal year 2013, which included last year’s $1.5 billion global settlement with pharmaceutical company Abbott Laboratories to resolve False Claims Act violations.

In its recently released Semiannual Report to Congress (“Semiannual Report”), which covered the period of October 1, 2012, through March 31, 2013, the HHS OIG touted its global settlement with Abbott as well as other settlements and criminal actions. The Semiannual Report is produced to inform Congress and the HHS Secretary of the OIG’s notable findings, recommendations, and activities over specific six-month periods.

The Semiannual Report highlighted the five-year Corporate Integrity Agreement with Abbott, described as “a global criminal, civil, and administrative settlement,” that the HHS OIG originally entered into with the pharmaceutical company in May 2012 “to resolve allegations that it violated the False Claims Act by improperly marketing and promoting the drug Depakote for uses not approved by the Food and Drug Administration (FDA), including the treatment of aggression and agitation in elderly dementia patients and the treatment of schizophrenia.”

Of the $3.8 billion that the HHS OIG expected to recover, over $521 million was from audit receivables and approximately $3.28 billion was from investigative receivables. Other activity highlighted in the Semiannual Report included:

  • The exclusions of 1,661 individuals and entities from participation in federal health care programs;
  • The filing of 484 criminal actions against individuals or entities that engaged in crimes against HHS programs;
  • And 240 civil actions, including false claims and unjust-enrichment lawsuits filed in federal district court, civil monetary penalties settlements, and administrative recoveries related to provider self-disclosure matters.

The HHS OIG has said that historically, approximately 80 percent of its resources have been directed to Medicare and Medicaid-related work. In the Semiannual Report, it reported that efforts by the government’s Medicare Fraud Strike Force teams led to charges against 148 individuals or entities, 139 criminal actions, and $193.7 million in investigative receivables.

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28 June 2012

Supreme Court Upholds Affordable Care Act; FCA And AKS Provisions Remain Standing

The Supreme Court this morning announced that the so-called “individual mandate,” the centerpiece of the Patient Protection and Affordable Care Act (PPACA), which requires most individuals to maintain a minimum level of health insurance, is a constitutional exercise of Congress’s power to tax. Separately, the Court held that a provision of PPACA that would penalize States that elected not to participate in the expansion of the Medicaid program by withdrawing their existing federal Medicaid funding is unconstitutional. However, the Court concluded that this violation can be cured by severing this provision from the rest of the law, leaving the remainder of PPACA standing.

Thus, those False Claims Act and Anti-Kickback Statute-related amendments enacted as part of PPACA, briefly listed here, remain standing: (1) the amendment to the AKS establishing that claims “resulting from” AKS violations that are submitted to the federal healthcare programs give rise to FCA liability (PPACA § 4204(f)(1)); (2) the further AKS amendment, clarifying that knowledge of and specific intent to violate the AKS are not necessary to establish a violation (PPACA § 6402(f)(2)); (3) amendments to the FCA’s “public disclosure bar” provision that convert it from a jurisdictional bar to an affirmative defense that can be raised by a defendant in a motion to dismiss but rejected by the government, precluding judicial resolution of the issue, and significantly limiting the types of disclosures that can give rise to the defense (PPACA § 10104(j)(2)); (4) requiring recipients of “overpayments” to report and return them, and making the failure to do so the basis of a “reverse false claim” cause of action under the FCA (PPACA § 6402(a)); and (5) creating additional civil monetary penalties that may be applied to conduct that violates the FCA (PPACA §§ 6402(d)(2), 6408(a)).

The opinion is available at http://www.supremecourt.gov/opinions/11pdf/11-393c3a2.pdf

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26 June 2012

Mortgage Lender May Face FCA Liability For False Statements In HUD Applications And Annual Certifications In Connection With Loans That Ultimately Defaulted

Last week, the United States District Court for the Northern District of Illinois denied a motion to dismiss an FCA suit brought by the government against the president of MDR Mortgage Corp., a HUD and FHA loan correspondent. U.S. v. Luce, 2012 U.S. Dist. LEXIS 85095 (N.D. Ill. Jun. 20, 2012). The court held that the government may pursue its claims based on allegations that the defendant falsely certified in HUD residential loan applications (Form 92900-A) and annual verification reports that he had not previously been charged with “making false statements,” a crime for which he was indicted in 2005. In reaching this holding, the court held that the government had alleged that at least some of the loans connected to the false statements had defaulted, causing the government to pay money on the loan insurance policies, and was not required to specify the amount of damages at the pleadings stage. Notably, however, the court rejected the government’s contention that the defendant would be subject to statutory penalties for each of the loans for which false statements were submitted; rather, the court held that the government could only recover penalties as to those loans that resulted in a “claim” on the loan insurance.

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20 April 2012

Prosecutors Dust off Savings & Loan Crisis Era Statute to Address Subprime Lending

Posted by Meghan Delaney Berroya and Gordon D. Todd

The Obama Administration’s subprime lending task force, as well as U.S. Attorney’s Offices, are turning to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”) (12 U.S.C. § 1833a) as a complement to the False Claims Act to prosecute claims arising out of the 2007-2009 financial crisis. Congress enacted FIRREA in 1989 in response to the Savings and Loan crisis, but until recently the statute has been used only sparingly. In the past year prosecutors have begun adding FIRREA allegations to FCA cases during settlement. In addition, the twenty five billion dollar settlement resolving FCA claims against a number of banks in connection with the servicing of mortgages and processing of foreclosures included FIRREA allegations.

FIRREA’s ten year statute of limitations period and the possibility of imposing civil penalties of up to one million dollars per violation and five million dollars for continuing violations make it an attractive tool for prosecutors. FIRREA may be able to reach a wide range of fraud offenses, including mail and wire fraud, bribery and embezzlement, and requires only that the government establish the right to recovery by a preponderance of the evidence. Facing challenges in bringing criminal charges associated with the subprime mortgage crisis, prosecutors view FIRREA as a potentially useful tool.

The Defense bar is pushing back. For instance, this past November, the Southern District of New York filed a civil mortgage fraud lawsuit against Allied Home Mortgage seeking penalties under the False Claims Act and FIRREA. At the end of March, Allquest Home Mortgage Corporation (formerly known as Allied Home Mortgage Corporation) and Americus Mortgage Corporation moved to dismiss the FIRREA claims on the basis that: (1) one of the provisions of the statute plead by the government, 18 U.S.C. §1006, applies only to individuals; (2) the government failed to allege an intent to defraud, and ; (3) the statute does not prohibit false or fraudulent statements to the FHA prior to July 30, 2008. View the motions to dismiss here and here. As additional defendants are forced to respond to FIRREA actions, the scrutiny it receives by the defense bar will undoubtedly increase.

At least one aspect of FIRREA has already had had a tour through the federal courts. In United States v. Winstar Corporation, 518 U.S. 839 (1996), the Supreme Court held that the United States breached contracts with defendant financial institutions when, pursuant to FIRREA, the government stripped thrifts of the ability to book “regulatory goodwill” as an asset.

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03 April 2012

Sanction for Relator’s Counsel Who Engaged in “Abusive Behavior”

Posted by Lauren K. Roth and Kristin Graham Koehler

The public disclosure bar is meant to prevent or cut short the life of the “parasitic” lawsuit. In short, if a relator’s allegations are substantially the same as claims have been publicly disclosed already, and the relator is not the “original source” of the information, then a court generally must dismiss the suit. But as defendants know all too well, getting to dismissal can be a long and costly process. Moreover, enticed by the prospect of sharing in settlement proceeds, relators—and relators’ counsel—have an incentive to reprocess public allegations and “see what sticks.” Last week, however, a district court in Indiana sent a strong message by penalizing such conduct and demonstrating that it, too, may be costly for relators and their lawyers.

In U.S. ex rel. Leveski v. ITT Educational Services, Inc., the court—having earlier dismissed relator’s case—granted (in part) ITT’s Motion for Attorneys Fees and Sanctions and ordered relators’ counsel to pay nearly $400,000 in fees. U.S. ex rel. Leveski v. ITT Educational Services, Inc., 1:07-cv-0867 (D. Ind. March 26, 2012). Moreover, in a 30+ page opinion, the court took Leveski and her lawyers to task for filing such a contemptible, blatantly frivolous lawsuit, which reportedly cost ITT over $13 million to litigate. “Common sense,” the court opined, “suggests that Leveski is worlds apart from the type of genuine whistleblower contemplated by the FCA.”

The facts in the case were as follows: Leveski had worked at ITT for approximately 11 years, during which time she filed an unrelated employment suit against ITT that settled. In May 2007, after Ms. Leveski had ended employment with ITT, she was contacted by an investigator for Timothy Matusheski, her would-be FCA counsel. Matusheski had learned of Leveski through a public records search for former employees of for-profit educational institutions who had sued their former employer. Soon after their introduction, Leveski became convinced that ITT had violated an incentive compensation provision of Title IV of the Higher Education Act and she filed her FCA suit. (“Matusheski plucked a prospective plaintiff out of thin air and tried to manufacture a lucrative case,” the court wrote.) She was, apparently, not alone. The court’s decision cites to four other lawsuits against for-profit educational institutions that were filed by plaintiffs who had been recruited by Matusheski. All of the suits had been dismissed. Indeed, in one instance, Matusheski—”in consultation with his client, who was fearful of the potentially devastating financial impact of an attorney’s fees award” formally apologized to the court, the Department of Justice, and the Defendant after the dismissal.

In Leveski’s case, the court dismissed her suit for lack of subject matter jurisdiction, based on a public disclosure bar analysis. In support of its subsequent Motion for Attorney’s Fees and Sanctions, ITT identified several significant events in the case and argued that it was entitled to attorney’s fees incurred from the date of those events. Ultimately, the court found the triggering event to be Leveski’s deposition, in which she had revealed an extensive lack of knowledge about the substance of her allegations, undermining any argument that she was original source of the information. Although ITT reported having incurred approximately $2.6 million in legal expenses since the deposition, the court decreased its award to $394,998.33 for two reasons: (i) ITT’s delay in deposing Leveski, and (ii) the court’s application of Rule 11’s instruction that sanctions be limited to “what suffices to deter repetition of the same conduct or comparable conduct by others similarly situated.” See Fed. R. Civ. P. 11(c)(4). “In light of these considerations, the Court finds that 15 percent of the amount of attorney’s fees actually spent [from the date of the deposition onward] is an appropriate figure.”

Ultimately, ITT recovered only a tiny fraction of the attorney’s fees that it incurred defending a wholly unmeritorious lawsuit. Nevertheless, the mere fact of the award should provide a stronger deterrent effect to specious FCA suits than the public disclosure bar alone.

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29 March 2012

Railway Logistics How not to prepare and litigate a claim under the Contract Disputes Act

Earlier this year, we posted regarding government fraud counterclaims in Court of Federal Claims (COFC) cases (see link to that post, here, and a link to our West’s Briefing Paper on the subject, here). Soon thereafter, the COFC issued a decision once again addressing such counterclaims, see Railway Logistics International v. United States, — Fed. Cl. –, 2012 WL 171895 (Jan. 17, 2012). Railway Logistics offers contractors a powerful lesson in how not to prepare and litigate a claim submitted to the government pursuant to the Contract Disputes Act (CDA), 41 U.S.C. §§ 7101-7109.

In that case, the government awarded two contracts to Railway Logistics International (RLI) to provide materials for the rehabilitation of the Iraqi Republic Railway. After repeatedly missing contractual obligations and deadlines, the government terminated the contracts for convenience. In response to the termination, RLI submitted a certified claim for equitable adjustments and costs totaling nearly $6.5 million, approximately $2.4 million of which was based upon alleged subcontractor and vendor invoices, with the remainder due to the government’s alleged delays and changes. The sole support for RLI’s certified claim was a cost spreadsheet RLI had generated.

The government not only disclaimed responsibility for any of RLI’s damages, but also filed counterclaims against RLI, pursuant to the CDA’s fraud provision, 41 U.S.C. § 7103(c)(2), the False Claims Act, and the Special Plea in Fraud (also known as Forfeiture of Fraudulent Claims Act), 28 U.S.C.§ 2514. The government alleged that RLI knowingly submitted its CDA claim containing overstatements of costs. RLI, in response, contended that “at most, perhaps it could be charged with poor record keeping.”

The court flatly rejected RLI’s story, explaining that although RLI’s revised damages claim “totaled less than $1 million[,]” RLI presented a “certified claim to the contracting officer for over $6 million, and swore that the amount of the claim was what” the government owed RLI. In ruling for the government on all of its counterclaims, the court noted that RLI had “retreated” from the spreadsheet RLI allegedly prepared to support its claim, withdrawing, among other damages items, a claim for $3 million in lost business. Indeed, RLI seemingly was all but compelled to do so because “the spreadsheet was replete with exaggerated or fabricated figures” and costs for which “[p]laintiff provided no support.” In light of the certified claim, the court similarly rejected RLI’s proffered defense that the spreadsheet was intended to be simply “a ‘rough estimate'” of damages. Finally, the court observed that plaintiff “had no support” for many of the factual allegations and legal theories upon which plaintiff’s complaint was based.

Aside from actually possessing evidence to support a CDA claim, the lesson from this case is clear: contractors should scrub their CDA claims for factually (and legally) unsupportable items before submitting them to the contracting officer, and certainly prior to the filing of a complaint in the COFC to appeal a contracting officer’s final decision. Merely declining to pursue certain claim items in litigation may raise red flags, so ideally contractors should consult with counsel during the claim preparation process. The fact is that the government appears prepared to pursue fraud claims based upon abandoned CDA claim items, on the theory that such items likely are baseless, having been included solely for the purposes of negotiation – a particularly dangerous practice in light of Daewoo Eng’g & Constr. Co. v. United States, 557 F.3d 1332 (Fed. Cir. 2009).

Finally, despite the differences between the government’s burden of proof with respect to the Special Plea in Fraud (clear and convincing evidence), on the one hand, and the CDA’s fraud provision and the FCA (preponderance of evidence), on the other, we noted in the aforementioned Briefing Paper that “the Federal Circuit clearly has held that where the Government demonstrates a violation of the CDA’s fraud provision, the Government a fortiori, meets its burden under the FCA.” When the Government’s Best Defense Is a Good Offense: Litigating Fraud and Other Counterclaim Cases Before the U.S. Court of Federal Claims, Briefing Papers No. 11-12 (November 2011), at 9 (concluding that “the Federal Circuit implicitly has held that evidence sufficient to prove a CDA violation also is sufficient to sustain a forfeiture under the Special Plea in Fraud”). The COFC, in Railway Logistics, appears to have continued that trend. While explicitly distinguishing between the applicable burdens of proof, the court held that RLI’s “liability is clear by any standard” where the CDA “claim [was] based upon overestimations of costs” and where “[s]ubstantial parts of the claim cannot be supported.” In that regard, the court observed that the “[g]overnment limited its counterclaims to amounts that are directly contrary to invoices in evidence and costs that are obviously and grossly inflated.” The court thus ordered RLI’s claim forfeited – that is, “[a]ny amount of RLI’s claim that might have been valid” – based upon “[s]tatements contained in the spreadsheet alone[,]” which the court held to constitute clear and convincing evidence of fraud in violation of 28 U.S.C. § 2514.

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