False Claims Act Ruling Sends Troubling Signal to Federal Contractors

A recent reversal in the Ninth Circuit Court of Appeals means that Lockheed Martin will have to face False Claims Act charges brought by a former employee who has no specific evidence of the alleged fraud. And that’s troubling news for all federal contractors. From law firm McKenna Long & Aldridge:

“First, the Ninth Circuit addressed whether the qui tam relator’s FCA allegation—that the contractor had fraudulently underbid and/or relied upon false estimates to obtain a government contract—stated a cognizable theory of FCA liability. On this issue, the contractor argued that contract bids or estimates, because they are subjective, judgment-based opinions, cannot constitute ‘false statements’ within the meaning of the FCA. The court rejected the contractor’s argument and found that the relator could proceed on his fraudulent underbidding/false estimate theory.

Second, the Ninth Circuit considered whether the district court had improperly granted summary judgment for the contractor on the relator’s fraudulent underbidding/false estimate allegation. According to the Ninth Circuit, the district court had granted the contractor summary judgment on this issue because the relator had not identified any evidence that the contractor had specifically intended to defraud the government by submitting the allegedly fraudulent underbids/false estimates. Reversing this holding, the appellate court noted that under the express terms of the FCA, the qui tam relator was not required to identify evidence of specific intent to defraud the government in order to survive the contractor’s summary judgment motion, because ‘reckless disregard’ or ‘deliberate ignorance’ of the truth is sufficient to establish FCA liability.”

Read the full update, Ninth Circuit Issues Troubling False Claims Act Decision - McKenna Long & Aldridge LLP»