Fifth Circuit Applies “Demanding” Escobar Materiality Standard
The Supreme Court’s holding in Universal Health Services, Inc. v. United States ex rel. Escobar continues to be hashed out in the lower courts.
Last month, the Fifth Circuit applied Escobar’s materiality standard in U.S. ex rel Abbott et al. v. BP Exploration and Production, Inc. et al., a whistleblower case former BP contractor Kenneth Abbott brought under the False Claims Act (FCA) in 2009. Abbott alleged BP had falsely certified compliance with certain safety regulations applicable to its Atlantis Platform, a semi-submersible oil production facility in the Gulf of Mexico that was the company’s second largest in the region. Abbott alleged that by falsely certifying compliance with regulatory requirements, BP had lied to obtain offshore leases, and had thus submitted false claims in violation of the FCA. Abbott’s complaint was amended in late 2010 to include claims under the Outer Continental Shelf Lands Act (OCSLA).
As detailed in the Fifth Circuit’s opinion, Abbott’s complaint prompted a U.S. Department of the Interior (DOI) investigation that ultimately unearthed no wrongdoing. Indeed, in a detailed 2011 report, the agency qualified Abbott’s claims as both “unfounded” and “without merit.” The DOI report “found no grounds for suspending the operations of the Atlantis . . . or revoking BP’s designation as an operator . . . .”
Despite the DOI report, Abbott continued with his FCA case alongside environmental nonprofit Food & Water Watch, which had joined the action in September 2010. Following discovery, the district court granted summary judgment in BP’s favor on all claims.
The Fifth Circuit, applying Escobar’s “demanding” materiality standard, hinged its succinct decision upholding the lower court’s ruling on the DOI report, noting the report “considered many of the same arguments advanced before us now by Plaintiffs and nonetheless found that the Atlantis was in compliance with those regulations relating to certification.” The court concluded that DOI’s decision to allow the Atlantis to continue drilling following its investigation was sufficient, un-rebutted evidence that the regulatory requirements on which Abbott had based his FCA case were immaterial. The court further concluded Abbott and Food & Water Watch lacked standing to bring their OCSLA claims.