September 11, 2014

D.C. Circuit Opines on What Constitutes Knowledge of Falsity Under the False Claims Act

By Jason Enzler

The Court of Appeals for the District of Columbia Circuit issued an opinion recently affirming a trial court’s grant of summary judgment against a qui tam relator.  The ruling in U.S. ex rel. Folliard v. Government Acquisitions, Inc. dealt with two issues: whether the lower court properly denied discovery of certain information and whether the defendant had “knowingly” submitted false claims for payment to the government.  While the first issue is common to many types of litigation, the second is unique to False Claims Act cases.

The relator, Brady Folliard, filed his qui tam lawsuit against several defendants, alleging that they were selling products to the government without complying with the Trade Agreements Act of 1979 (TAA).  The TAA requires the government to purchase products under certain contracts only from designated countries.  When contracts include a TAA requirement, the government ensures compliance by requiring government contractors to certify the products they are selling to the government are from designated countries.

After the district court entered summary judgment in favor of all defendants, relator appealed the decision, but only with respect to one defendant, Govplace, a small business provider of IT solutions to the government.  Govplace had argued at summary judgment (and the district court agreed) that it did not knowingly submit false claims to the government for products that did not comply with the TAA because it relied on the certification of its supplier, Ingram Micro, that the products were TAA compliant.

On appeal, the Court rejected relator’s argument that Govplace had recklessly relied on Ingram Micro’s certification such that it had knowledge as defined by the False Claims Act.  The Court found no evidence that Govplace had been put on notice to be even the slightest bit suspicious about the certifications or the origins of the IT products being sold to the government and noted that the government had implicitly approved Govplace’s reliance on Ingram Micro.

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