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Catch of the Week — American Airlines Required to Pay Over $22 Million for Falsely Reporting Delivery Times

Posted  August 23, 2019

Ever wondered why a package you were desperately waiting for showed up late?  Ever wished you could hold those responsible accountable for it?

If so, the U.S. government agrees with you.  Its recent settlement against American Airlines required the airline to pay over $22 million for allegedly falsely reporting its delivery times.  The resolution shows that timeliness matters and is yet another reminder that failures to comply with all the material aspects of a government contract can expose companies to liability under the False Claims Act.  That’s why it’s our Catch of the Week.

According to the Department of Justice press release, American had contracted with the USPS to deliver certain U.S. mail to domestic and international locations.  After delivering the mail, which included mail for U.S. servicemembers stationed around the world, American was required to report the time it was delivered.  Late or incorrectly delivered mail was subject to penalties under the contract.  Allegedly, rather than face those penalties, American submitted false reports to the government.

On these alleged facts, American was potentially liable on two theories under the FCA.  First, it was failing to comply with a material term of its contract with the government.  Second, it was making false statements (erroneous time reports) to avoid an obligation to pay money (the contractual penalties) to the government.  Both are viable theories with a long history of government enforcement.

Indeed, even in the seemingly narrow realm of mail and package delivery, American joins a line of others who have faced penalties for similar allegations.  In 2016, XPO Logistics and Estes Express Lines, on behalf of subsidiaries, paid $13 million to resolve allegations that they had overcharged the Department of Defense on freight shipping.  According to the whistleblower complaint in that case, the shippers had allegedly charged air freight rates for shipments they sent by ground instead, pocketing the surcharge.

Similarly, in 2015, UPS paid out two settlements to resolve allegations that it had engaged in behavior very similar to the allegations against American: that it had allegedly falsified delivery times and exception codes permitting late delivery.

Notably, that settlement represented another trend among whistleblower lawsuits: it included payments to resolve a complex set of claims by state and local agencies who had also been harmed.  Like our recent settlement against Cisco, it demonstrates the versatility of the qui tam mechanism.  Any jurisdiction with its own False Claims Act (and there are many) can hold accountable those who defraud it.

More broadly, as this line of settlements makes clear, companies who would attempt to lie their way out of contractual obligations are likely to face steep penalties for doing so.

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Tagged in: Catch of the Week, Contract Non-Compliance, FCA Federal, FCA State, Government Procurement Fraud, Importance of Whistleblowers,


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