United States of America Ex Rel. Hassan Foreman v. AECOM
19 F.4th 85
| 2d Cir. | 2021Background
- AECOM (and affiliates) held a multi-year, cost-plus-fixed-fee MOSC-A contract to provide vehicle/equipment maintenance, supply/inventory management, and related services for the U.S. Army in Afghanistan; the contract required daily/weekly electronic labor reporting, an 85% man-hour utilization (MHU) target, and strict government property tracking via designated systems.
- Relator Hassan Foreman, a former AECOM finance supervisor, alleged that AECOM: (1) submitted false timesheets and had a policy of billing inflated hours (estimated internal liability > $140M); (2) manipulated or failed to report true MHU data; and (3) misused "parts-only" orders and otherwise failed to track/return government property (recoverables).
- Foreman brought qui tam claims under the False Claims Act (FCA) for false claims (31 U.S.C. § 3729(a)(1)(A)), false records/statements (§ 3729(a)(1)(B)), conversion (§ 3729(a)(1)(D)), reverse false claims (§ 3729(a)(1)(G)), fraudulent inducement, and retaliation.
- The district court dismissed all claims, concluding Foreman failed to plead materiality under Universal Health Servs. v. Escobar, and it relied on several government/audit documents (including a September 2014 DCAA report and work-order documents) as incorporated or integral to the complaint.
- On appeal, the Second Circuit held the district court erred by considering certain extrinsic documents at the 12(b)(6) stage, reversed dismissal of the labor-billing-based § 3729(a)(1)(A)/(B) claims (materiality adequately pled), affirmed dismissal of claims premised on MHU and property-tracking violations, affirmed dismissal of reverse-false and conversion claims, and held the public-disclosure bar did not apply.
Issues
| Issue | Foreman (Plaintiff) | AECOM (Defendant) | Held |
|---|---|---|---|
| Whether Escobar's materiality requirement applies only to implied-certification claims or to all FCA § 3729(a)(1)(A) claims | Escobar limited to implied theories; express/factual/fraudulent-inducement claims need not meet Escobar materiality | Materiality is a universal requirement for § 3729(a)(1)(A) claims | Escobar's materiality standard applies to all § 3729(a)(1)(A) claims (express, implied, inducement) |
| Whether the district court could rely on extrinsic government/audit/work-order documents at motion-to-dismiss without converting to summary judgment | Court should not consider documents outside the complaint | Documents were integral or incorporated and thus properly considered | Court erred: the September 2014 DCAA report and certain work-order materials were not integral/incorporated and could not be considered without converting to summary judgment |
| Whether Foreman adequately pleaded materiality for labor-billing, MHU-rate, and property-tracking allegations | Alleged widespread, financially substantial labor overbilling, concealment, and systemic property failures — material to payment | Government had actual knowledge (per audits/reports) and continued payments/extensions, so noncompliance was immaterial | Labor-billing allegations: materiality sufficiently pleaded (reversal). MHU-rate and property-tracking allegations: government knowledge and continued payment show immateriality (affirmed dismissal) |
| Validity of reverse-false-claim (§ 3729(a)(1)(G)) and conversion (§ 3729(a)(1)(D)) claims | Foreman: obligations to return overpayments and specific recoverables were alleged | AECOM: reverse claim duplicates direct false-claim theory; conversion lacks specific property and scienter | Reverse false claim dismissed as duplicative of direct FCA claims; conversion dismissed for failure to identify specific items and to plead knowing possession/delivery less than all property |
| Applicability of the FCA public-disclosure bar | Bar applies only to public disclosures outside government; Foreman argues various reports were confidential and not public | AECOM: audit/investigation reports were effectively disclosed and bar should apply | Public-disclosure bar does not apply: the key reports were confidential/government-only and disclosures to government auditors do not equal public disclosure |
Key Cases Cited
- Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016) (establishes FCA materiality standard applicable to false-claim theories)
- United States v. Strock, 982 F.3d 51 (2d Cir. 2020) (applies Escobar materiality analysis and examines government response factor)
- Bishop v. Wells Fargo & Co., 870 F.3d 104 (2d Cir. 2017) (reads Escobar to impose materiality across FCA claims)
- DiFolco v. MSNBC Cable L.L.C., 622 F.3d 104 (2d Cir. 2010) (standards for documents incorporated by reference or integral to a complaint)
- Chambers v. Time Warner, Inc., 282 F.3d 147 (2d Cir. 2002) (limits on considering extrinsic documents at motion to dismiss)
- Friedl v. City of New York, 210 F.3d 79 (2d Cir. 2000) (if court considers materials outside pleadings, must convert to summary judgment)
- John Doe Corp. v. United States ex rel. John Doe, 960 F.2d 318 (2d Cir. 1992) (public-disclosure bar discussion; accessibility to strangers is the touchstone)