UNITED STATES OF AMERICA EX REL. INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS LOCAL UNION NO. 98 v. THE FARFIELD COMPANY, Appellant
No. 20-1922
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
July 13, 2021
Argued March 10, 2021
PRECEDENTIAL
On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 5-09-cv-04230)
District Judge: The Honorable Mark A. Kearney
Before: SMITH, Chief Judge, McKEE and AMBRO, Circuit Judges
(Filed July 13, 2021)
Susan R. Friedman [ARGUED]
STEVENS & LEE
51 South Duke Street
P.O. Box 1594
Lancaster, PA 17602
Thomas I. Vanaskie
STEVENS & LEE
1500 Market Street
Centre Square
East Tower, Suite 1800
Philadelphia, PA 19102
Counsel for Appellant
Marc L. Gelman [ARGUED]
Richard B. Sigmond
JENNINGS SIGMOND
1835 Market Street, Suite 2800
Philadelphia, PA 19103
James E. Goodley, I
1650 Market Street, Suite 3600
Philadelphia, PA 19103
Ryan P. McCarthy
GOODLEY MCCARTHY
1650 Market Street
One Liberty Place, Suite 3600
Philadelphia, PA 19103
Counsel for Appellee
Catherine Ruckelshaus
NATIONAL EMPLOYMENT LAW PROJECT
90 Broad Street, Suite 1100
New York, NY 10004
Counsel for Amicus Appellees Community Justice Project, Community Legal Services, and National Employment Law Project
Shauna B. Itri
SEEGER WEISS
1515 Market Street, Suite 1380
Philadelphia, PA 19102
Counsel for Amicus Appellee Taxpayers against Fraud Education Fund
Esmeralda Aguilar
SHERMAN DUNN
900 7th Street, N.W., Suite 1000
Washington, DC 20001
Counsel for Amicus Appellee North America Building Trades Unions
I. Legal Background ..........................................................2
A. The Davis-Bacon Act....................................................2
B. The False Claims Act....................................................4
II. Factual Background .......................................................6
III. Procedural Background...............................................11
IV. Jurisdiction & Standard of Review ............................15
V. Discussion ......................................................................16
A. Section 3729(a)(1)(B) Applies Retroactively to the Project and Does Not Violate the Ex Post Facto Clause.. ........................................................................16
1. In context, “claims” can only mean cases……...….. 19
2. Congress repudiated Allison Engine with clear intent for full retroactivity. ...................................................24
3. Applying § 3729(a)(1)(B) does not violate the Ex Post Facto Clause...............................................................28
B. Farfield Misclassified Its Employees..........................34
1. No clear error in finding that groundmen were not “assisting” linemen....................................................34
2. Local industry practice controls the propriety of worker classification. .................................................35
C. Farfield‘s False Certified Payrolls Were Material. .....42
1. Proper classification and accurate certified payrolls were payment conditions............................................44
2. No evidence of past relevant Government (in)action. 50
3. Davis-Bacon compliance was essential to the bargain…………………………………………………….52
D. The Facts Support the District Court‘s Finding of Recklessness................................................................55
1. The testimony supported the District Court‘s recklessness finding....................................................56
2. No clear error based on DOL audit...........................57
3. Farfield‘s other arguments fail. .................................58
E. The District Court Properly Shifted the Burden of Proof on Damages to Farfield. ..............................................60
1. Mt. Clemens applies in an appropriate FCA case, like this one. ......................................................................61
2. Local 98‘s evidence was sufficiently representative……......................................................65
F. The Award of Attorneys’ Fees Was Reasonable. .......67
VI. Conclusion..................................................................69
OPINION OF THE COURT
SMITH, Chief Judge.
Contractors on most federally funded construction projects must pay their workers a minimum wage based on the type of work they perform. The Department of Labor (DOL) usually sets those prevailing wage rates for each classification of worker needed on such a project. A contractor who bids on a project knows well that compliance with these regulations is required. And once it commences work, the contractor knows that it must also certify its compliance on payrolls supporting invoices for payment.
If a contractor misclassifies workers—thereby paying them less than required—the federal government may withhold funds in an amount proportionate to the affected work. The DOL is usually the forum for adjudicating claims of misclassification, for misclassified employees to recover underpaid wages, and for aggrieved contractors to assert entitlement to withheld funds.
But a contractor found to have misclassified employees can also face collateral consequences. For example, its certifications of compliance with wage-and-hour regulations may have been false. And those same false certifications may, in turn, have been
So what happens when a contractor is sued under the False Claims Act for falsely certifying compliance, but the DOL declines to adjudicate the underlying issue of whether workers were misclassified? In this case, the results have been over a decade of litigation and a panoply of first-impression issues. We conclude that a 2009 amendment to the FCA‘s liability standard applies retroactively to cases, like this one, pending on or after June 7, 2008; that the record establishes the contractor‘s misclassification of its workers; that its false certified payrolls were material to the Government‘s decision to pay for the associated work; and that the burden-shifting framework for damages in Fair Labor Standards Act cases applies. We also reject the appellant-contractor‘s other arguments en route to affirming the challenged orders of the District Court.
I. LEGAL BACKGROUND
A. The Davis-Bacon Act
The Davis-Bacon Act, “[o]n its face,” is “a minimum wage law designed for the benefit of construction workers.” United States v. Binghamton Constr. Co., 347 U.S. 171, 178 (1954). The Act was intended “to protect local wage standards by preventing contractors from basing their bids on wages lower than those prevailing in the area” where the work is to be done. Univs. Res. Ass‘n v. Coutu, 450 U.S. 754, 773–74 (1981) (quotation omitted); see
end, the Act requires contractors on most1 federally funded infrastructure projects to pay employees minimum wages based on the DOL‘s determination of prevailing wages “for the corresponding classes of laborers and mechanics employed on projects of a character similar to the contract work in thе civil subdivision of the State in which the work is to be performed.”
Per DOL regulations, see
Shirking Davis-Bacon obligations can have dire consequences. For example, covered contracts must provide for the Government‘s withholding from the contractor as much of the accrued payments as is necessary to pay the workers the difference between the required wages and those paid. See
pay the specified prevailing wages, the
B. The False Claims Act
The False Claims Act (FCA) imposes civil liability for making a false or fraudulent “claim,” or a false record or statement material to such a claim, to obtain payment from the federal government.
In 2008, the Supreme Court held in Allison Engine Co. v. U.S. ex rel. Sanders, 553 U.S. 662 (2008), that liability under (former) § 3729(a)(1) required a defendant‘s direct presentment of the false claim to an officer or employee of the Government and that liability under (former) § 3729(a)(2) required proof of the defendant‘s specific intent to defraud the Government. Id. at 668–72. To “clarify and correct [those] erroneous interpretations of the [FCA],” S. Rep. No. 111-10, at 10 (2009); see also id. at 4, Congress amended the FCA in the Fraud Enforcement and Recovery Act of 2009 (FERA). Pub. L. No. 111-21, § 4, 123 Stat. 1625. FERA eliminated (a)(1)‘s
requirement that the false claim be presented “to an officer or employee of the United States” and amended (a)(2) to remove the language that the Supreme Court had read to require specific intent to defraud the Government. See, e.g., Pub. L. No. 111-21, § 4; S. Rep. No. 111-10 at 11.
FERA also amended the FCA to make clear that liability under the renumbered
Given FERA‘s substantive changes to the sweep of FCA liability, Congress anticipated that disputes would arise over how to apply the amendments to conduct pre-dating FERA‘s date of enactment. So Congress promulgated the following “Effective Date and Application” provision in section 4(f) of FERA:
The amendments made by this section shall take effect on the date of enactment of this Act [May 20, 2009] and shall apply to conduct on or after the date of enactment, except that—
(1) subparagraph (B) of subsection 3729(a)(1) of title 31, United States Code, as added by subsection (a)(1), shall take effect as if enacted on June
7, 2008, and apply to all claims under the False Claims Act (31 U.S.C. 3729 et seq.) that are pending on or after that date; and (2) section 3731(b) of title 31, as amended by subsection (b); section 3733, of title 31, as amended by subsection (c); and section 3732 of title 31, as amended by subsection (e); shall apply to cases pending on the date of еnactment.
Pub. L. No. 111-21, § 4(f), 123 Stat. 1617, 1625 (codified at
II. FACTUAL BACKGROUND
The Farfield Company is an open-shop construction company based in Lititz, Pennsylvania. It contracted with the Southeastern Pennsylvania Transportation Authority (SEPTA)
for a track and signal improvement project on a 7.5-mile stretch of railroad track running from the Wayne Junction station to the Glenside station in the Philadelphia area (“the Project“). The federal government partially funded the Project. Work began in 2002 and concluded in 2007.
The contract between Farfield and SEPTA was executed in 2002 and valued at $54.7 million. It included several provisions required by federal regulation, addressing how Farfield was to classify and pay its workers. For example, the contract provided that “[a]ll laborers and mechanics employed or working upon the site of the work . . . will be paid . . . at rates not less than those contained in the [incorporated] wage determination.” A8213; see
The DOL‘s prevailing wage determinations incorporated into the contract derived from the rates specified in local collective bargaining agreements (“CBAs“). The prevailing wage determinations referenced a CBA executed on December 3, 2000, between a contractors’ association and Local 126 of
the International Brotherhood of Electrical Workers (IBEW),4 and listed certain relevant worker classifications and their associated minimum rates of pay: “groundman” ($19.34 hourly plus fringes), “lineman” or “journeyman lineman” (total cash equivalent of $41.34 hourly), and “electrician” (total cash equivalent of $46.83 hourly). A832. From a May 1, 2001 CBA involving a separate laborers union, the prevailing wage determinations derived the classification of “laborer,” paid at a $32.70 cash equivalent for those able to lay “conduit and duct” and a $32.50 cash
The contract also required that Farfield submit to SEPTA for transmission to the Federal Transit Administration (FTA) a copy of Farfield‘s certified payroll, setting out all the information required to be maintained under various provisions of the Davis-Bacon Act.5 In each week‘s certified payroll, Farfield had to include a “Statement of Compliance” averring, among other things, that the information in the payroll was correct and complete and that each worker “has been paid not less
than the applicable wage rates and fringe benefits or cash equivalents for the classification of work performed, as specified in the applicable wage determination incorporated into the Contract.” A824;
A few years before the Project, Farfield formed a transit division with the objective of obtaining contracts for rail work. To that end, it hired Joseph McGee, Sr. to be vice president of the new division because of his expertise in “captur[ing]” rail work. A1823–24. McGee‘s background included work with groundmen and linemen—experiences no one else at Farfield possessed when he was hired. Farfield relied on McGee to ensure that employees were properly classified based on the work they performed on the Project. Yet under McGee‘s management, Farfield‘s forepersons exercised unfettered discretion over which individual employee would perform which tasks on Project job sites. Neither Farfield nor McGee instructed them on how to classify workers on rail projects.
Farfield used daily “phase codes” internally to track labor, material, insurance, tax, overhead, subcontracting, and other costs of the Project. Farfield‘s forepersons tracked labor on the Project by recording on handwritten or typed timesheets the daily hours an employee had worked and associating those hours with a particular phase code.6 These codes were applied irrespective of whether an employee was physically working
or, instead, attending briefings, traveling to and from the worksite, or waiting for trains to pass. Each week, forepersons were given prepared sheets—reflecting information generated by Farfield‘s corporate offices—that set forth phase codes associated with work needed on the Project, with a blank space for the foreperson to insert a phase code not already printed on the sheet. Forepersons prepared daily reports noting the work done by their crews as well as the number of workers in each classification who were part of a crew. But these reports did not identify which workers (or classifications of workers) performed which of the tasks embraced by the phase codes marked on the sheets.
In September 2004, about midway through the Project, a DOL auditor reviewed some of Farfield‘s certified payrolls and spoke with one of the company‘s vice presidents as well as certain employees not identified in the record. After reviewing one particular payroll, the auditor asked the vice president, who in turn consulted McGee, why certain employees had been
SEPTA made full payment of all monies that Farfield was due under the contract, with some funds ultimately reimbursed to SEPTA by the FTA. On September 18, 2007, Farfield submitted its final bill to SEPTA for the Project. The bill was paid in early December of the same year.
III. PROCEDURAL BACKGROUND
A business manager at IBEW Local 988 susрected that Farfield had won several government contracts with low bids by intending to pay less-skilled workers, such as groundmen, to perform certain work that would otherwise have been the bailiwick of higher-skilled (and higher-paid) workers, such as linemen.9 So the business manager requested copies of Farfield‘s certified payrolls. His concerns unmollified, the business manager then contacted someone at Local 126 to discuss the Project. Local 98‘s business manager and its attorneys eventually met to discuss worker classification issues with eight Farfield employees who had worked on the Project.
On September 17, 2009, Local 98 filed a sealed qui tam FCA complaint in the Eastern District of Pennsylvania. Local 98 alleged that, on the Project and four others, Farfield had schemed to intentionally pay wages lower than required by the
Davis-Bacon Act and then to submit claims to the federal government for payment based on sworn certifications of compliance with the Act. About two years later, the United States Department of Justice elected not to intervene in the action. After the District Court unsealed the complaint and Local 98 served it, Local 98 amended its complaint to allege that Farfield submitted fraudulent certified payrolls to SEPTA, intending that SEPTA then use those documents to secure the federal government‘s payment on the projects.
Farfield moved to dismiss the amended complaint, arguing that the FCA did not apply to its contract with SEPTA and that the Court lacked subject-matter jurisdiction because the DOL had sole authority to adjudicate Davis-Bacon worker misclassifications. The District Court denied Farfield‘s motion and appointed a Special Master to manage the discovery that ensued. Despite arguing that the case did not require the DOL to resolve complex worker classifications, Local 98 eventually requested expert witnesses to prove industry classification practices. So in a September 26, 2017 order, the District Court referred the case to the DOL as a complex Davis-Bacon worker classification case. Then the case stagnated. Local 98 took no action until November 2018 when the District Court ordered it to effectuate the DOL referral. But the DOL declined the referral, refusing to investigate chiefly due to “the passage of time and the significant
With the case once again before the District Court, Farfield filed a renewed motion to dismiss. The District Court denied it. Local 98 then withdrew its claims arising out of Farfield‘s work on four of the five projects, leaving only worker classifications on the Project to anchor its FCA suit. After
deposing Local 98‘s three experts, Farfield moved for summary judgment. The District Court denied that motion and directed the parties to select a Special Master to conduct the trial. The parties designated the same Special Master who had presided over discovery.
Local 98 sought to introduce before the Special Master six workers’ testimony about their own work and that of others on the Project as representative proof for the entire set of 42 Farfield employees who, as groundmen or laborers, had their daily time logged under phase codes that purportedly signified lineman work. To the extent that Farfield‘s phase codes fail to capture the work its employees performed, Local 98 argued, the burden should shift to Farfield—as it does in collective actions under the Fair Labor Standards Act—to show the amount of non-lineman work performed under those codes. The District Court granted Local 98‘s motion to authorize this burden-shifting and, in an October 2019 order, held that the damages burden would shift to Farfield were the Special Master presented with such “representative” damages evidence. See A139–57.
In his Report & Recommendation (“R&R“), the Special Master made extensive findings of fact and conclusions of law based on the evidence at trial. He found that employees whom Farfield classified (and thus paid) as laborers and groundmen had performed lineman work under six Farfield phase codes by pulling wire and laying conduit. He determined that local practice does not permit laborers and groundmen to perform such tasks, as they are reserved for higher-paid linemen with electrical experience. Thus, the Special Master concluded, Farfield had falsely certified on payrolls submitted to the FTA that “the classifications set forth therein for eаch laborer or mechanic
conform with the work performed.” A824 (Contract ¶ 7(c)(2)(b)).
Concluding that wage underpayments were the measure of FCA damages, and after shifting the burden of proof to Farfield to rebut Local 98‘s prima facie damages showing, the Special Master calculated $159,273.54 in total wage underpayments. Trebling under
to the United States and $316,596.19 to Local 98. In a subsequent order and supporting opinion, it partially granted Local 98‘s motion for attorneys’ fees and costs, taxing $1,229,927.55 in fees and $203,226.45 in costs. Farfield‘s appeal followed.
IV. JURISDICTION & STANDARD OF REVIEW
The District Court had jurisdiction over this action under
A district court‘s findings of fact “must not be set aside unless clearly erroneous, and the reviewing court must give due regard to the trial court‘s opportunity to judge the witnesses’ credibility.”
We review statutory constructions de novo. United States v. Hodge, 948 F.3d 160, 162 (3d Cir. 2020). We review any mixed questions of fact and law de novo insofar as “the primary facts are undisputed and only ultimate inferences and legal consequences are in contention.” U.S. Gypsum Co. v. Schiavo Bros., 668 F.2d 172, 176 (3d Cir. 1981). But when the mixed questions immersed the district court in case-specific factual issues, our review is a deferential one for clear error.
V. DISCUSSION
Farfield appeals the District Court‘s orders denying its initial and renewed motions to dismiss, referring the case to the DOL, denying its motion for summary judgment, shifting the damages burden of proof to Farfield, overruling its objections to and adopting the Special Master‘s R&R, and awarding attorneys’ fees. We treat Farfield‘s most substantial arguments at length and dispose of the remaining ones in short order. We will affirm all the District Court‘s challenged orders.
A. Section 3729(a)(1)(B) Applies Retroactively to the Project and Does Not Violate the Ex Post Facto Clause.
This appeal presents a threshold issue of first impression in our Circuit: whether
Our retroactivity analysis is sequential. We first look for an “unambiguous directive” from Congress to apply the statute retroactively. Landgraf v. USI Film Prods., 511 U.S. 244, 263 (1994). If there is one, we follow it—and our inquiry ends. See id.; Mathews v. Kidder, Peabody & Co., Inc., 161 F.3d 156, 161 (3d Cir. 1998). But if the statute contains no express retroactivity command and normal rules of construction do not require that it have only prospective reach, we next ask whether applying the statute would “impair rights a party possessed when he acted, increase a party‘s liability for past conduct, or impose new duties with respect to transactions already completed?” Id. at 280; see Mathews, 161 F.3d at 160–61 (also citing Lindh v. Murphy, 521 U.S. 320, 324–29 (1997)). If so, the statute has “retroactive effect“—and our final task is to employ the strong presumption against applying such statutes to pending cases unless Congress manifested clear intent that the statute apply retroactively. Landgraf, 511 U.S. at 280; Mathews, 161 F.3d at 161, 166.
The critical language in FERA‘s retroactivity provision applies
can rebut the presumption against retroactivity. See Landgraf, 511 U.S. at 263, 280; Mathews, 161 F.3d at 161.12
Whether Congress used “claims” in the FCA-specific sense as “requests for payment” (i.e., underlying conduct) or generically to mean “cases” has engendered a Circuit split. The Eleventh Circuit has interpreted FERA to apply
By contrast, the Sixth and Seventh Circuits have rejected Hopper‘s reading in thorough opinions, holding that Congress used the term “claims” in § 4(f) of FERA simply to mean cases or lawsuits. See U.S. ex rel. Garbe v. Kmart Corp., 824 F.3d 632, 637–41 (7th Cir. 2016); Sanders v. Allison Engine Co., Inc., 703 F.3d 930, 936–42 (6th Cir. 2012). The Second Circuit has seemingly reached the same conclusion, though without detailed analysis. See U.S. ex rel. Kirk v. Schindler Elev. Corp., 601 F.3d 94, 113 (2d Cir. 2010) (concluding that
We agree with the more comprehensive decisions and conclude, following the Sixth and Seventh Circuits, that Congress used “claims” generically in FERA‘s retroactivity provision to mean cases or lawsuits. At any rate, Congress‘s intent to apply
1. In context, “claims” can only mean cases. Proponents of limiting FERA‘s retroactivity, including Farfield, urge that the FCA‘s definition of “claim” controls Congress‘s use of “claims” in § 4(f)(1). But the mere fact that “claim” is a defined term dоes not mean that it is used in that technical sense every time it appears in the statute. “A given term in the same statute may take on distinct characters from association
with distinct statutory objects calling for different implementation strategies.” Envtl. Def. v. Duke Energy Corp., 549 U.S. 561, 574 (2007). With “several commonly understood meanings among which a speaker can alternate in the course of an ordinary conversation, without being confused or getting confusing,” the word “claim” eschews the presumption of uniform usage. Gen. Dynamics Land Sys., Inc. v. Cline, 540 U.S. 581, 595 (2004). Indeed, § 4(f)(1) speaks of “claims under the False Claims Act,” and FERA elsewhere uses “claims” as synonymous with cases. So Congress did not use “claims” in its technical sense in FERA‘s retroactivity clause.
First, in the specific context of the retroactivity provision, replacing “claims” with the word‘s technical definition “makes no sense.” Kmart, 824 F.3d at 640. Doing so yields this: “all request[s] or demand[s], whether under a contract or otherwise, for money or property . . . under the [FCA] that are pending on or after June 7, 2008.” It would be anomalous for Congress to say that a request for payment is submitted “under” a statute that only comes into play if the request violates (or is alleged to violate) it. See, e.g., Matthew Titolo, Retroactivity and the Fraud Enforcement and Recovery Act of 2009, 86 IND. L.J. 257, 289 (2011). The FCA and its liability standards are more naturally understood to apply only once an allegedly fraudulent request for payment is made, and a civil action filed. Sanders, 703 F.3d at 938 & n.3; see Kmart, 824 F.3d at 640 (“Rather, a claim ‘under the [FCA]’ is a legal action by the government or a relator to recover
interpreted so as not to render one part inoperative.” (citation omitted)); United States v. Bass, 404 U.S. 336, 344 (1971) (“[C]ourts should interpret a statute with an eye to the surrounding statutory landscape and an ear for harmonizing potentially discordant provisions . . . .“). The generic reading of “claims,” on the other hand, avoids rendering superfluous the phrase “under the False Claims Act.”13
Second, interpreting “claims” to mean legal actions reflects the broader statutory landscape. The FCA uses “сlaims” synonymously with “cases.” See, e.g.,
Granted, the second retroactivity clause of § 4(f) of FERA uses the word “cases.” See FERA § 4(f)(2). But the negative contextual implication that Farfield would have us
draw—that Congress‘s disparate use of “claims” in the preceding subsection reflects a different intent—is unreasonable.
To begin with, “the presumption that ‘disparate inclusion or exclusion’ is purposeful is weakened when, as here, the provisions were not joined together or considered simultaneously.” Kmart, 824 F.3d at 641 (quoting Sanders, 703 F.3d at 937) (citation omitted). On the contrary, §§ 4(f)(1) and 4(f)(2) of FERA were drafted by different chambers of Congress, at different times. S. 386, 11th Cong. § 4(b) (as reported in Senate, March 5, 2009); S. 386, 11th Cong. § 4(f) (House engrossed amendment, May 6, 2009); see also Titolo, Retroactivity, at 300. This drafting history undermines any negative inference that Congress‘s differing word choice in the two subsections signals a different intention.
What‘s more, §§ 4(f)(1) and 4(f)(2) of FERA “address wholly distinct subject matters.” Martin v. Hadix, 527 U.S. 343, 356 (1999). So we should not infer that Congress‘s use of different terms in the two sections is meaningful. Start, as did the Hadix Court, with Lindh. There, the Court concluded that Congress‘s use of disparate language regarding pending-case applicability in two adjacent chapters was intentional because the two chapters addressed overlapping subject matter: “new standards for review of habeas corpus applications by state prisoners” and “new standards for review of habeas corpus applications by state prisoners under capital sentences.” Hadix, 527 U.S. at 356 (citing Lindh, 521 U.S. at 329). In Hadix, by contrast, the Court concluded that no such inference followed from disparate pending-case applicability language in two adjacent provisions
orders,” in the first, and “the award of attorneys’ feеs,” in the second. Id. at 356–57. What was true in Hadix is true here: The relevant provisions of FERA concern different subject matters. Section 4(f)(1) discusses retroactive application of the new liability standard in
Tools of statutory interpretation leave us, then, with a provision that admits of only “one interpretation.” INS v. St. Cyr, 533 U.S. 289, 316–17 (2001) (quoting Lindh, 521 U.S. at 328 n.4). By using concrete temporal language (“pending on or after“) linked to a pre-enactment date and a word (“claims“) whose only logical meaning in context is as a synonym for “cases,” § 4(f)(1) of FERA expressly commands that the new liability standard in
applying section “to all prospective relief whether such relief was originally granted or approved before, on, or after the date of the enactment of this title,” was clear statement (quotation omitted)); Graham v. Goodcell, 282 U.S. 409, 418–419 (1931) (clear statement rule satisfied where new tax refund statute “expressly applied to internal revenue taxes” assessed before pre-enactment date certain).
2. Congress repudiated Allison Engine with clear intent for full retroactivity. Even if § 4(f)(1) lacks an express command to apply
The Supreme Court‘s decision in Rivers v. Roadway Express, Inc., 511 U.S. 298 (1994), is instructive. At issue was the retroactivity vel non of § 101 of the Civil Rights Act of 1991, which defines “make and enforce contracts” in
The Rivers petitioners, garage mechanics covered by a collective-bargaining agreement who were allegedly fired in 1986 for racially discriminatory reasons, argued that § 101 of the 1991 Act applied retroactively because their appeal was pending at the time of its passage. Id. at 301–03.
In rejecting the petitioners’ arguments, the Rivers Court contrasted the 1991 Act with a prior version of the bill that the President had vetoed. The Court stated that Congress clearly intended for the vetoed bill to apply retroactively: Its express purpose was to “respond to the Supreme Court‘s recent [Patterson] decision[] by restoring the civil rights protections that were dramatically limited [there]by.” Id. at 307–08 (quoting S. 2104, § 2(b)(1) (alterations omitted)). The section of the bill responding to Patterson was titled “Restoring Prohibition Against All Racial Discrimination in the Making and Enforcement of Contracts.” 511 U.S. at 307 (quoting S. 2104, § 12). The bill also included a provision establishing “that the amendment to § 1981 ‘shall apply to all proceedings pending on or commenced after’ the date of the Patterson decision.” 511 U.S. at 307–08 (quoting S. 2104, § 15(a)(6)).15
By contrast, the statute enacted in 1991 lacks comparable language about its application to pending proceedings, describes its function as “expanding the scope of relevant civil rights statutes” rather than restoring pre-existing rights, and “lacks any direct reference to cases arising before its enactment, or to the date of the Patterson decision.” 511 U.S. at 308 (quoting Act of 1991 § 3(4), 105 Stat. 1071). So the Court
could glean from the 1991 Act only that it was passed in response to Patterson. See id. at 308–09; see also id. at 304–05 (noting that legislatively overruling Supreme Court decision, without more, does not “reveal whether Congress intends the ‘overruling’ statute to apply retroactively to events that would otherwise be governed by the judicial decision“).
Like the vetoed bill in Rivers that sought to “restore” pre-existing rights supposedly trammeled by a Supreme Court decision, FERA‘s amendments to the FCA after Allison Engine are expressly meant “to reflect the original intent of the law.” FERA § 4(f) (heading). And in sеtting
Conversely, Farfield‘s interpretation of “claims” would subvert Congress‘s intent to undo the effect of Allison Engine to the maximum extent possible. Indeed, on that reading, what significance would attach to Congress’ May 2009 choice of a June 2008 date? Just as FCA defendants in prior cases could not explain Congress‘s choice of retroactivity date, see, e.g., Kmart, 824 F.3d at 640 (concluding that Kmart‘s reading rendered June 7, 2008 date meaningless), Farfield fails to do so as well.
Reasons rooted in federal procedure also counsel against Farfield‘s reading. “When a new law makes clear that
it is retroactive, an appellate court must apply that law in reviewing judgments still on appeal that were rendered before the law was enacted, and must alter the outcome accordingly.” Plaut, 514 U.S. at 226 (citations omitted). And even Farfield concedes that FERA‘s choice of a pre-enactment effective date for
FERA‘s express purpose of “clarify[ing]” the FCA “to reflect the original intent of the law” and the pre-enactment effective date chosen for
* * *
There is no reasonable contextual reading of § 4(f) of FERA other than that it mandates applying
3. Applying
Our Constitution provides that “[n]o Bill of Attainder or ex post facto Law
Congress intended the FCA to impose a “civil penalty” plus three times the amount of damages sustained by the Government, and for a relator to bring a “civil action” on the Government‘s behalf for a violation.
That said, it is possible for a civil statute to be criminally punitive in effect. But a finding of punitive effect requires the “clearest proof” to override legislative intent based on factors such as
- Whether the sanction involves an affirmative disability or restraint;
- Whether it has historically been seen as punishment;
- Whether it comes into play only upon a finding of scienter;
- Whether its operation will promote the traditional aims of punishment—retribution and deterrence;
- Whether the behavior to which it applies is already a crime;
- Whether an alternative purpose to which it may rationally be connected is assignable for it; and
- Whether it appears excessive in relation to the alternative purpose assigned.
See Hudson, 522 U.S. at 99–100 (citing Ward, 448 U.S. at 249; Kennedy v. Mendoza-Martinez, 372 U.S. 144, 168–69 (1963)). Taking these factors in turn, we conclude that Farfield has not shown by the “clearest proof” that retroactively applying
First, the FCA‘s treble damages and civil fines do not involve an affirmative disability or restraint because they do not restrict one‘s physical liberty similar to imprisonment. See, e.g., Myrie v. Comm‘r, N.J. Dept. of Corr., 267 F.3d 251, 260–61 (3d Cir. 2011) (requiring comparison to “infamous punishment of imprisonment” (quoting Flemming v. Nestor, 363 U.S. 603, 617 (1960))). This factor does not favor characterizing the FCA as criminally punitive in effect.
Second, the sanction here—monetary penalties—has not historically been viewed as punishment. See, e.g., Cook Cnty., Ill. v. U.S. ex rel. Chandler, 538 U.S. 119, 132 (2003) (“Treble damages certainly do not equate with classic punitive damages, which leave the jury with open-ended discretion . . . .“); Hudson, 522 U.S. at 104 (“payment of fixed or variable sums of money . . . ha[s] been recognized as enforc[ea]ble by
civil proceedings” (quotation omitted)). The second factor too disfavors viewing the FCA as criminally punitive.
Third, the post-FERA FCA requires proof only of “reckless disregard” and thus penalizes acts committed without guilty
Fourth, the FCA‘s operation does promote deterrence—one of the traditional aims of punishment. Indeed, the original goal of the FCA was to stop massive frauds perpetrated by government contractors during the Civil War. See, e.g., Bornstein, 423 U.S. at 309. But “all civil penalties have some deterrent effect.” Hudson, 522 U.S. at 102 (citations omitted). If the fourth factor favors a determination that the FCA is criminally punitive in effect, then it does so only slightly.
Fifth, the conduct for which the FCA imposes sanctions may also bear criminal liability under
cf. 89 Firearms, 465 U.S. at 366 (“Congress in fact drafted § 924(d) to cover a broader range of conduct than is proscribed by the criminal provisions of § 922(a)(1).“). And the separate existence of a criminal statute suggests that the civil statute serves a different purpose. See, e.g., Hudson, 522 U.S. at 105. This factor thus carries neutral weight or, at best for Farfield, only slightly favors a determination of criminally punitive effect.
Sixth, the FCA‘s treble damages provision may be assigned a remedial (i.e., compensatory) purpose. See, e.g., Chandler, 538 U.S. at 130–31 (stating that “some liability beyond the amount of the fraud is usually ‘necessary to compensate the Government completely‘” and that “[i]n qui tam cases the rough difference between double and triple damages may well serve not to punish” (quoting Bornstein, 423 U.S. at 315)). After all, the FCA does not authorize the award of prejudgment interest or consequential damages, which typically accompany recovery for fraud. See id. at 131. Another unique purpose of the FCA‘s treble damages function is to incentivize private enforcement, “to quicken the self-interest of some private plaintiff who can spot violations and start litigating to compensate the Government, while benefitting himself as well.” Id. (citation omitted) (“The most obvious indication that the treble damages ceiling has a remedial place under this statute is its qui tam feature with its possibility of diverting as much as 30 percent of the Government‘s recovery to a private relator who began the action.“). This alternative remedial purpose supports a conclusion that the FCA operates civilly.
Seventh, although recovery can significantly exceed the pecuniary loss sustained directly as a result of the false claims—as it arguably did here—this does not mean that the FCA permits sanctions that are constitutionally excessive in relation to their civil compensatory purpose. Farfield makes much of statements by the Supreme
* * *
We therefore conclude that the FCA‘s treble damages and civil penalties do not violate the Ex Post Facto Clause so as to vitiate Congress‘s express command or, alternatively, clear intent that
B. Farfield Misclassified Its Employees.
Farfield next contends that the District Court erred in adopting the Special Master‘s conclusion that it misclassified certain of its employees as groundmen and laborers when what they actually performed was lineman work. First, Farfield urges, the record shows that a lineman was present on nearly every job site on the Project and, because a groundman was permitted to assist a lineman in performing all the relevant tasks, there was no misclassification. Second, Farfield presses that whatever the local industry practice, its worker classifications were proper because they did not violate Local 126‘s CBAs. Neither argument carries the day.
1. No clear error in finding that groundmen were not “assisting” linemen. The Special Master‘s factfinding disposes of Farfield‘s first contention because he found the relevant testimony of Farfield‘s witnesses “not . . . credible.” A292 (Findings of Fact ¶ 144). Neither the Special Master‘s findings of fact, nor the District Court‘s adoption of his R&R, were clearly erroneous.
not performed by any particular classification” but by “all workers on a crew.” A290–91 (Findings of Fact ¶¶ 133–41).
2. Local industry practice controls the propriety of worker classificаtion. Farfield points out that nothing in contemporaneous CBAs negotiated by Local 126 restricted the work that a groundman could do, other than certain tasks not relevant here. These CBAs provided that the employer “ha[s] no restrictions, except
Davis-Bacon decisions establish that “[w]age determinations implicitly include the locally prevailing practice of classifying jobs [and] [w]here collective bargaining agreements form the basis of wage determinations, the practice of local signatory unions is conclusive.” Abhe & Svoboda, Inc. v. Chao, 508 F.3d 1052, 1058–59 (D.C. Cir. 2007) (emphasis added) (citations omitted) (citing In the Matter of Fry Bros. Corp., WAB Case No. 76-06, 1977 WL 24823, at *6 (June 14, 1977)).18 And the DOL instructs that, when classifications are
unknown or disputed, “[i]f . . . the rates listed for all the classifications that may perform the work in question are union rates, the dispute will be resolved by examining the practice(s) of union contractors in classifying workers performing the duties in question on similar construction in the area (usually the same county).” U.S. DOL Field Ops. Handbook, Ch. 15, § 15f05(c)(5)(b) (emphasis added). The legal question as Farfield frames it, then, is whether local “practices” control even in the face of silent or potentially inconsistent CBAs.
Before reaching the merits of Farfield‘s argument, we first address a threshold issue. The DOL‘s wage determination incorporated into the contract prescribes wage rates for groundmen under “ELEC0126D 12/03/2000,” which seemingly refers to a Local 126 CBA executed on December 3, 2000. A832. See, e.g., Abhe & Svoboda, 508 F.3d at 1056 (“[T]he wages for painters, laborers, and carpenters were each based on union collective bargaining agreements; the relevant unions were noted in the wage determinations by their initials.“); id. at 1056 n.1 (“[T]he general wage determination includes the initials PAIN0011C to indicate that wages for ‘Pаinters (Bridge Construction)’ were based on the wages established in a collective bargaining agreement signed by District Council 11 of the International Brotherhood of Painters and Allied Trades.” (citation omitted)). But the earliest CBA in the record was executed December 3, 2001.19 And though
they contain a classification for “groundhands,” the Local 126 CBAs in the record include no classification of “laborer“; the “laborer” classifications in the wage determination appear to derive from a Laborers’ Union
In other words, it is unclear whether the CBA on which the DOL‘s prevailing wage determinations and classifications were based contains the same “permissive” approach to
sification is before us. And though Farfield‘s employees worked on the Project from 2002–2007, the prevailing wage determination incorporated into the SEPTA contract associated the electrician worker classifications with the earlier December 3, 2000 CBA not in the record. Counsel represented at oral argument that “the relevant provisions didn‘t change,” id. at 13:21–22, so we will consider Farfield‘s argument on the assumption that the subsequent CBAs in the record are indeed identical in relevant respects to the critical one cited in the prevailing wage determination.
groundman duties—to say nothing of “laborer” duties—as the later Local 126 CBAs included in the record.
In any case, Farfield‘s argument fails because it is not the language of a CBA but rather signatory parties’ local practice that controls worker classifications under the Davis-Bacon Act. To that end, the DOL‘s Field Operations Handbook provides that when the applicable wage determination reflects union wage rates for the classifications involved, “the unions whose members may have performed the work in question” should be contacted “to determine whether the union workers performed the work on similar projects in the county in the year prior” to the relevant start date of the project. U.S. DOL Field Ops. Handbook, Ch. 15, § 15f05(d)(1)(a). “If union contractors performed the work, each union should be asked how the individuals who performed the work in question were classified.” § 15f05(d)(1)(c). That information “provided by the unions should be confirmed with collective bargaining rеpresentatives of management,” and “the area practice is established” only “[i]f all parties agree as to the proper classification of the work in question.” § 15f05(d)(1)(d)–(e). The Handbook thus requires that a contractor, rather than simply reading a CBA to determine for itself whether a classification is prohibited, achieve consensus with both labor and management on how individuals who perform comparable work are actually classified.
Following the Handbook‘s dictates, the most comprehensive court decision on point similarly holds that local practices of the referenced CBA‘s signatories control Davis-Bacon
worker classifications.21 In Abhe & Svoboda, the D.C. Circuit held that wage determinations derived from CBAs require worker classifications to be “determined exclusively by the practices of signatory unions.” 508 F.3d at 1059 (emphasis added) (citations omitted). Farfield tries to minimize the import of this ruling, arguing that it doesn‘t elevate local practices over inconsistent terms of a CBA. While we acknowledge that such a proposition
Abhe & Svoboda arose out of a contractor‘s classification of workers based on its own national “tools of the trade” analysis, which it claimed to have relied on for over 500 government contract jobs across the country. 508 F.3d at 1056.
The court held that this practice strayed from DOL regulations and practices establishing “that contractors do not have the authority to determine the scope of job classifications based on their own methodologies.” Id. at 1061–62 (emphasis added). Noting the DOL‘s Fry Brothers decision, the court held that the contractor was on notice of the need to “follow the practice of the local unions.” Id. at 1060–61 (citing Fry Bros., 1977 WL 24823, at *5–6). “From start to finish,” the court noted, “the focus of the [Davis-Bacon] Act is on local practice” such that a contractor‘s application of its own classifications, even if based on a national standard, “is inconsistent with the fundamental principle of the Davis-Bacon Act that local practice should control government contracts.” Id. at 1061. The court rejected a narrow construction of Fry Brothers that would have “require[d] only that contractors abide by known union practices,” instead faulting the contractor “for not contacting the relevant unions or inquiring of the Department [of Labor] if it was unclear about the local practices for classifying jobs.” Id. at 1062 (emphasis added) (“the Company made no effort to ascertain the practices of the unions noted in the wage determination“).22 And the court was unpersuaded by the arguments of amici that contractors should not be saddled with “break[ing] through the union wall to adequately and clearly determine their invariably unwritten practices and rules.” Id. (emphasis added).
The takeaway from Abhe & Svoboda is straightforward. If the DOL‘s prevailing wage determinations rest on a particu-
lar CBA, then a contractor may not base classification practices on its own reading of that CBA. Rather, it must engage with the signatory union(s) and management on local classification practices, even if “unwritten.” Failing that, the contractor may contact the DOL for clarification.
The evidence before the Special Master offers no quarter to Farfield. Local 98‘s expert testified that under local practice “groundmen are not permitted to connect conduit; thread conduit; lay conduit; connect or splice conduit at a manhole; pull wire; monitor[] or address[] tension of a cable through a conduit; terminate a cable run; and perform splicing and/or stripping functions.” A83–84. It is linemen who perform this work. Farfield offered no compelling evidence on the issue.23 Farfield‘s assigning groundmen and laborers to perform
“journeyman [lineman] work, including installing electrical conduit [and] pulling electrical wires or cable,” A303 (Findings of Fact ¶ 184)—conflicted with prevailing local practices and so amounted to misclassification of its workers.
* * *
The District Court, via the Special Master, did not clearly err in finding any of the relevant facts. We reject Farfield‘s legal contention that it did not misclassify workers because one could read the relevant CBAs to permit its practices. Instead, whether workers were properly classified turns on the local practices of the CBA signatories. And the direct evidence showed that, under such practices, only linemen could lay conduit and pull wire. So the District Court correctly held that Farfield misclassified workers on the Project.
C. Farfield‘s False Certified Payrolls Were Material.
A materiality inquiry under the FCA is a holistic, totality-of-the-circumstances examination of whether the false statement has “a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property.”
materiality “look[s] to the effect on the likely or actual behavior of the recipient of the alleged misrepresentation.” Id. at 2002 (alteration in original) (quoting 26 R. Lord, WILLISON ON CONTRACTS § 69:12, p. 549 (4th ed. 2003)).
Farfield argues that even if it misclassified workers, it cannot be liable under the FCA because the false certified payrolls that it submitted to SEPTA, which SEPTA in turn submitted to the FTA, were not material to the Government‘s decision to pay.24 This is so, Farfield claims, because (1) the contract language permitted, but did not require, the Government to withhold payment from SEPTA if work was misclassified or certified payrolls were false; (2) the Government took no action at various stages of the Project and this litigation; and (3) the total amount of underpaid wages due to misclassifications was small in relation to the overall value of the contract. But none of the relevant circumstances convince us that the false certified payrolls were immaterial to the Government‘s decision to pay invoices for Farfield‘s work.25
After Escobar, the Government‘s designation of compliance with a particular regulatory requirement as a condition of payment is relevant to, but not dispositive of, materiality. 136 S. Ct. at 2003. The SEPTA contract incorporates several of the federal regulations pertinent to this
fraudulent claim.”
materiality factor. These provisions give the Government the unilateral right to exercise withholding and debarment remedies in response to Farfield‘s non-compliance with Davis-Bacon requirements.
First, the federal agency (here, the FTA) “shall upon its own action or upon [application] of the Department of Labor withhold or cause to be withheld from the contractor . . . so much of the accrued payments or advances as may be considered necessary to pay . . . the full amount of wages required by the contract.”
Second, “[i]n the event of failure to pay . . . all or part of the wages required by the contract, the (Agency) may, after written notice . . ., take such action as may be necessary to cause the suspension of any further payment, advance, or guarantee of funds until such violations have ceased.”
Third, if the contractor fails to maintain or submit required documents, the Government “may, after written notice . . ., take such action as may be necessary to cause the suspension of any further payment,” with “failure to submit the required records” a permissible “grounds for debarment” for a three-year period.
Still another regulation says that the Government “shall” suspend sufficient payments when a contractor fails “to comply with the labor standards clauses contained in § 5.5,”
from the contractor so much of the accrued payments as the contracting officer considers necessary” to pay the required wages.
The parties spill more ink than necessary arguing whether the Government has a mandatory obligation to suspend payment when it learns of Davis-Bacon noncompliance or merely the right to do so. Farfield claims that the Government has discretion and thus that Davis-Bacon compliance is not a condition of payment, whereas Local 98 presses that the Government must withhold payment for noncompliance. There is scant case law interpreting whether the Government must withhold funds sufficient to make misclassified employees whole. See, e.g., Favel v. Am. Renovation and Const. Co., 59 P.3d 412, 420 (Mont. 2002) (“Whether [withholding was] discretionary or mandatory, the USAF Contracting Officer had the unilateral authority to make such a decision . . . .” (citing
We need not decide whether the Government lacks or indeed has discretion to withhold payment unilaterally. Its undisputed right to do so and to debar Farfield—combined with Farfield‘s relevant actual knowledge and the lack of evidence that the Government would overlook misclassification—support the conclusion that proper worker classification and, by extension, submission of payrolls accurately certifying the same were conditions of payment. Post-Escobar, courts decide whether regulatory compliance is an express condition of payment based on what the regulation requires the defendant to do under the federal contract or program, not
whether the Government must act in response.26 See, e.g., U.S. ex rel. Prather v. Brookdale Sr. Living Communities, Inc., 892 F.3d 822, 831–33 (6th Cir. 2018). Here, that analysis supports the District Court‘s materiality finding.
Compliance with the relevant Davis-Bacon regulations was mandatory for Farfield to bid on the contract and for the Government to perform under it. Under those regulations, Farfield‘s workers “will be paid unconditionally . . . the full amount of wages . . . computed at rates not less than those contained in the wage determination.”
required to be maintained under [(a)(3)(i), except Social Security numbers].”
Farfield‘s Davis-Bacon compliance and weekly submission of complete and accurate certified payrolls were thus designated conditions of the Government‘s obligation to perform (i.e., pay) under the SEPTA contract. See Prather, 892 F.3d at 832–33; U.S. ex rel. Absher v. Momence Meadows Nursing Ctr., Inc., 764 F.3d 699, 713 (7th Cir. 2014) (“[A] reasonable jury could certainly find that these MDS [Minimum Data Sheet] forms were conditions of payment because they specif-
ically affirm that reimbursement is ‘conditioned on the accuracy and truthfulness of [the] information’ contained in the forms. And such a certification of accuracy is required by the Medicare and Medicаid regulations.” (last alteration in original) (citing
Even were we disinclined to call Davis-Bacon compliance an express or designated condition of payment here, testimony of Farfield‘s witnesses reveals actual knowledge that compliance was a de facto condition of both payment and Farfield‘s continued eligibility for federally funded projects. “The existence of express contractual language specifically linking compliance to eligibility for payment . . . is not, as [defendant] argues, a necessary condition” for materiality. United States v. Sci. Apps. Int‘l Corp., 626 F.3d 1257, 1269 (D.C. Cir. 2010). And the Supreme Court, endorsing a similar conception of materiality, recognizes that “[a] defendant can have ‘actual knowledge’ that a condition is material without the Government expressly calling it a condition of payment.” Escobar, 136 S. Ct. at 2001–02; Sci. Apps., 626 F.3d at 1269 (“The plaintiff may establish materiality in other ways, such as through testimony demonstrating that both parties to the contract understood that payment was conditional on compliance with the requirement at issue.“).
As the District Court summarized, one of Farfield‘s vice presidents testified that he “understood if the DOL ever found Farfield to have . . . violated a prevailing wage act the consequence ‘would have put us out of business.‘” A103. McGee testified that, based on “a problem years prior,” Farfield was “concern[ed]” at the Project‘s inception “that we used the proper people in the proper positions and certified payrolls were accurate.” A1294. It was clear to McGee that “if there was a problem” with classification, it “would be a real problem.” A1306. There was also evidence that Farfield had generally “been very sensitive to [prevailing wage laws]” and pеrceived itself as “‘under a magnifying glass’ by the union.” A105. While a defendant‘s actual knowledge “that the Government would be entitled to refuse payment were it aware of the violation” is not dispositive of materiality, Escobar, 136 S. Ct. at 2004 (emphasis added), Farfield‘s clear appreciation that Davis-Bacon violations would “likely” so affect the “behavior of the recipient of the alleged misrepresentation” is enough to tilt the condition-of-payment factor in favor of materiality. Id. at 2002 (emphasis added) (quoting WILLISTON ON CONTRACTS, at 549).
The parties have pointed us to no record evidence showing that the Government “consistently refuses to pay claims in the mine run of cases based on noncompliance with” Davis-Bacon requirements or pays claims like those at issue here “despite its actual knowledge that certain requirements were violated.” Escobar, 136 S. Ct. at 2003–04. So nothing suggests that this is a case where the Government would have knowingly paid invoices associated with false certified payrolls or, by extension, misclassified workers. Cf. U.S. ex rel. Spay v. CVS
Caremark Corp., 875 F.3d 746, 764 (3d Cir. 2017) (summarizing evidence of Government‘s knowledge that pharmacy benefit managers were submitting claims that flouted regulatory requirements and its payment of such claims anyway). Left intact is Local 98‘s prima facie materiality showing based on the contract and regulations as well as the knowledge of Farfield decisionmakers. See, e.g., U.S. ex rel. Doe v. Heart Sol‘n, PC, 923 F.3d 308, 318 (3d Cir. 2019) (faulting defendants for failing to show “that Medicare generally pays this type of claim ‘in full despite its actual knowledge that certain requirements were violated‘” (quoting Escobar, 126 S. Ct. at 2003)).
In a trompe l‘oeil, Farfield paints the Justice Department‘s choice not to intervene in the litigation as a Government act that fatally undermines materiality. But intervention decisions are, at best, of minimal relevance. In Escobar, the Government chose not to intervene, see 136 S. Ct. at 1998, yet the Supreme Court did not mention this as a pertinent materiality factor. And “[if] relators’ ability to [meet] the element of materiality were stymied by the government‘s choice not to intervene, this would undermine the purposes of the Act.” Prather, 892 F.3d at 836 (citation omitted) (rejecting similar intervention argument); cf. U.S. ex rel. Petratos v. Genentech Inc., 855 F.3d 481, 490 (3d Cir. 2017) (listing non-intervention as one among many Government actions and inactions that undermined relator‘s materiality allеgation). Nor do the “administrative mechanism[s]” for enforcing compliance with wage-and-hour laws weigh against materiality—at least not on the record we confront here. Appellant‘s Br. 32–33. The DOL declined to act on the District Court‘s referral of the case, mak-
ing that forum well and truly unavailable to Local 98.28 And it did so based on the vintage of the facts and related concerns for investigatory resources, not on any grounds suggesting immateriality.
3. Davis-Bacon compliance was essential to the bargain.
A third materiality factor is whether the noncompliance is “minor or insubstantial” or, instead, goes “to the very essence of the bargain.” Escobar, 136 S. Ct. at 2003 & n.5 (quotation omitted). Farfield argues that its misclassification violations were small, calculated at just over $150,000 in wage underpayments, in comparison to the $54.7 million value of the SEPTA contract. We refuse to measure materiality based only on the monetary value of Farfield‘s wrongdoing in relation to some larger, undefined whole. After all, Davis-Bacon compliance is concerned not with minimizing costs but, on the contrary, aims to impose additional costs on contractors and the Government in pursuit of goals that Congress has prioritized for federally funded projects.
evaluate the materiality denominator? Should we look at the ratio between the affected work and the overall amount of electrical work performed on the Project? The overall dollar value of the Project? The overall budget of the FTA while the work was performed? And then, even if we could formulate the correct denominator, what percentage of misclassified work in relation to that whole suffices to meet the materiality threshold? 0.1 percent? One percent? Ten percent? A search for answers proves a Sisyphean task. Neither Davis-Bacon nor case law provides a guide.
And opposite the dollar magnitude of the violation are other factors one might reasonably consider in evaluating whether a contractor‘s regulatory violations were minor or insubstantial. We might ask, for example, about temporal duratiоn: For how long did the Davis-Bacon noncompliance affect the contractor‘s work? Farfield falsely certified compliance 105 times—once a week for more than two years on the five-year Project. Arguably, undercutting the local labor market for over two years is neither minor nor insubstantial. Though we have no reason to think that any work on the Project was sub-standard, we might also consider in our objective materiality analysis the possible consequences to the public of unskilled workers building public infrastructure that local practices reserve for an electrician‘s skill and experience. Cf. Spay, 875 F.3d at 764 (“The misstatements that gave rise to this qui tam action allowed patients to get their medication, and they are precisely the type of ‘minor or insubstantial’ misstatements where ‘materiality . . . cannot be found.‘” (alteration omitted) (quoting Escobar, 136 S. Ct. at 2003)). Should the potential for widely felt negative consequences from public transit failure lower the dollar threshold for materiality in cases like this one? One might even say that the Davis-Bacon Act‘s debar-
ment remedy implicitly recognizes that certain regulatory violations on public works projects should have ramifications for the contractor beyond wage restoration. And, of course, Davis-Bacon compliance is a keystone of federally funded construction projects. See, e.g., Coutu, 450 U.S. at 771, 773–76; Fry Bros. at *6. Whether a contractor “complied with the regulations” that are central to decisions about how to spend public funds “is a fact that a reasonable person would want to know.” Prather, 892 F.3d at 835; see also United States v. Luce, 873 F.3d 999, 1007–08 (7th Cir. 2017) (misrepresentation that no officers of loan-originating company were currently subject to criminal proceedings was material because certification “addressed a foundational part of the Government‘s mortgage insurance regime, which was designed to avoid the systemic risk posed by unscrupulous loan originators“).
In view of the totality of the circumstances, we conclude that Farfield‘s Davis-Bacon violations were not minor or insubstantial. Farfield misclassified more than $150,000 in electrical work on a public infrastructure project. The consequence was that, on 105 occasions across morе than two years’ worth of payrolls, Farfield falsely certified its compliance to the Government. And it did so under a regulatory regime and a contract that authorized debarment as a remedy for misclassification and false certifications. This Escobar consideration also favors a conclusion that Farfield‘s false statements were material to the Government‘s decision to pay SEPTA invoices.
* * *
Proper worker classification and submission of accurate payroll certifications were
ment based on Farfield‘s knowledge of the Government‘s likely response to non-compliance. And Farfield‘s regulatory violations were not minor or insubstantial. Seeing no evidence of relevant Government (in)action, we conclude that Farfield‘s false certified payrolls were material to the Government‘s decision to pay.
D. The Facts Support the District Court‘s Finding of Recklessness.
The District Court adopted the Special Master‘s finding that Farfield recklessly ignored its worker classification obligations under the Davis-Bacon Act, and thus acted with reckless disregard for the truth or falsity of its certified payrolls. Under the FCA, an individual or entity responsible for submitting an objective falsehood must have acted “knowingly“—that is, with actual knowledge of the falsehood, in deliberate ignorance of its truth or falsity, or in reckless disregard of its truth or falsity. See
The Special Master‘s essential conclusion from the facts was that Farfield, via McGee, delegated full discretion to forepersons to use workers on their crews as they saw fit while, at the same time, fully aware of Farfield‘s contractual and regulatory obligations to ensure that employees were paid prevailing wages for the classification of work performed. Farfield
raises a hodgepodge of factual objections that it claims rendеr the recklessness finding erroneous, but none have merit.
1. The testimony supported the District Court‘s recklessness finding. Farfield contends that its forepersons and managers reasonably believed that groundmen could do whatever work linemen could do. They testified that McGee told them so. Transit work was not something that Farfield specialized in prior to undertaking the Project, and its supervisors may have understandably relied on McGee for direction. But Farfield‘s argument fails to grapple with the District Court‘s recklessness finding. For his part, McGee testified that a groundman could not do all the work that a lineman could, including specifically “pulling wire through conduit,” A1338–39, because groundmen were “completely unskilled” “grunt[s].” A1313–14; A1341. So McGee‘s statements to subordinates that “any worker could do any task” such that they needn‘t worry about properly classifying groundmen, A291 (Findings of Fact ¶ 141), conflicted with his own knowledge of the proper role of groundmen and the centrality of proper classification to the health of Farfield‘s business.29
The District Court reasonably concluded from this conflicting testimony that McGee, and thus Farfield, recklessly delegated to unknowledgeable individuals the responsibility
for ensuring that employees were properly classified. See, e.g., United States v. Krizek, 111 F.3d 934, 941–42 (D.C. Cir. 1997) (observing that, although FCA is “not intended to apply to mere negligence, it is intended to apply in situations that could be considered gross negligence where the submitted claims to the Government are prepared in such a sloppy or unsupervised fashion that resulted in overcharges to the Government” (emphasis added) (quotation omitted)); United States v. Stevens, 605 F. Supp. 2d 863, 867, 869 (W.D. Ky. 2008) (find ing “reckless disregard” of physician‘s duty as Medicare and Medicaid provider to “take reasonable steps to ensure that his clinic‘s claims for reimbursement [were] accurate” where physician “completely delegated” all billing responsibilities to someone with “absolutely no prior experience with medical billing” (emphases added)). That Farfield hired McGee for his knowledge of and experience with classifications on rail projects, or that other individuals may have been ignorant for their part, does not mean that Farfield is unaccountable for McGee‘s reckless actions. An entity‘s knowledge for FCA purposes may be imputed based on that of a particular employee or officer. See, e.g., Sci. Apps., 626 F.3d at 1272–73; U.S. ex rel. Harrison v. Westinghouse Savannah River Co., 352 F.3d 908, 919–20 & n.11–12 (4th Cir. 2003).
2. No clear error based on DOL audit.
Farfield next claims that the District Court‘s recklessness finding was clearly erroneous for glossing over the DOL‘s 2004 audit of the Project, which found only minor holiday-pay violations. But the District Court did indeed recognize that the DOL audit was “evidence going to whether a defendant acted in reckless disregard of wage and classification requirements.” A81 (cit ing U.S. ex rel. Rueter v. Sparks, 939 F. Supp. 636 (C.D. Ill. 1996), aff‘d, 111 F.3d 133 (7th Cir. 1997)). The audit evidence
simply wasn‘t compelling or specific enough to rebut the otherwise strong proof that Farfield acted recklessly. For instance, though the DOL auditor appears to have reviewed some payroll information, the record does not show that he examined information about the work that groundmen and linemen were actually performing. In fact, the limited evidence related to the audit suggested that the auditor‘s remit may have been much narrower than examining worker classification and prevailing wage compliance across the entire project.
3. Farfield‘s other arguments fail.
Farfield throws additional facts at the wall, but none of them stick. Farfield contends that it could not have recklessly misclassified workers on the Project because Local 98 voluntarily dismissed its claims against Farfield related to four other projects. But that tells us nothing about recklessness as to the Project at issue. Nor does the Special Master‘s description of the case as entailing “close questions of fact and law” mean that Farfield could not have acted recklessly. Appellant‘s Br. 40–41. This case implicates fact-bound wage-and-hour issues and complex questions of law, including issues of statutory retroactivity, but nothing that would diminish Farfield‘s culpability.30
* * *
The record supports the Special Master‘s factual findings underpinning his conclusion that Farfield recklessly disregarded whether its workers were properly classified and paid, and thus recklessly disregarded the truth or falsity of the payrolls’ certifications of compliance with the Davis-Bacon Act.
E. The District Court Properly Shifted the Burden of Proof on Damages to Farfield.
Next, Farfield argues that the District Court improperly shifted the burden of proof on damages after Local 98 introduced “representative” evidence about the 42 employees found to have been misclassified and underpaid. Appellant‘s Br. 44–50. Recall that Farfield did not segregate its employees’ hours spent performing groundman or laborer work from those performing lineman work. The Special Master found that substantial lineman work, such as laying conduit and pulling wire, was performed when an employee‘s daily time was coded to six of the 12 Farfield phase codes that Local 98 challenged. He then required Farfield to show that the 42 groundmen and laborers whose time was recorded under those six codes actually performed non-lineman work for which they were paid appropriately. After crediting Farfield‘s rebuttal evidence that an average of 1.5 hours of unproductive time per day was billed to these codes, and after reducing the misclassified hours accordingly, the Special Master calculated damages based on the resulting hours recorded to those codes for the 42 employees. The Special Master awarded this recovery while acknowledging that “it [wa]s possible . . . that some of the remaining time . . . was not [lineman] work.” A307.
The District Court authorized this burden-shifting as an extension of the Supreme Court‘s decision in Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680 (1946). Under Mt. Clemens, an FLSA plaintiff bears the initial burden of proving that employees have “in fact performed work for which [they were] improperly compensated” and “produc[ing] sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference.” Id. at 687. The burden
“then shifts to the employer to come forward with evidence of the precise amount of work performed or with evidence to negative the reasonableness of the inference to be drawn from the employee‘s evidence.” Id. at 687–88. If the employer fails to do so, “the court may then award damages to the employee, even though the result be only approximate.” Id. (citation omitted). Mt. Clemens also permits an award of back wages to non-testifying employees based on the representative
According to Farfield, the burden should have remained with Local 98 throughout to prove all damages with specificity. While granting that Mt. Clemens burden shifting is appropriate in FLSA cases, Farfield nonetheless argues that it cannot apply in this FCA case. It points out that no cases have applied Mt. Clemens to shift the damages burden to the defendant in an FCA case and that, unlike an FLSA case, the underpaid employees will not receive the damages award here. Farfield also challenges the “representativeness” of Local 98‘s evidence. Appellant‘s Br. 45–49. We reject both arguments.
1. Mt. Clemens applies in an appropriate FCA case, like this one. Farfield correctly notes that Mt. Clemens burden shifting has not been applied in an FCA case prior to this one. But Mt. Clemens has been either cited approvingly or applied outright in Davis-Bacon cases. See, e.g., Janik Paving & Const., Inc. v. Brock, 828 F.2d 84, 93 (2d Cir. 1987) (charac-
terizing Mt. Clemens as “the burden of proof to which the Department [of Labor] and employees [a]re generally subject in wage-standard violations“); Pythagoras Gen. Contracting Corp. v. U.S. Dept. of Labor, 926 F. Supp. 2d 490, 495–96, 498–99 (S.D.N.Y. 2013) (affirming DOL Administrative Review Board‘s invocation of Mt. Clemens in Davis-Bacon dispute). And a contractor‘s false certifications that its workers were paid at the rate legally required by the Davis-Bacon Act are fodder for an FCA claim.31 See, e.g., U.S. ex rel. Plumbers & Steamfitters Local Union No. 38 v. C.W. Roen Const. Co., 183 F.3d 1088, 1091–92 (9th Cir. 1999)
(“[A] false certification that workers have been paid at the legally required wage rate may give rise to
In this FCA false-certification case, the Davis-Bacon Act supplies the substantive law by which the falsity of Farfield‘s statements is judged as well as the measure by which employees were misclassified and underpaid. Just because the employees themselves will not receive the underpayments originally owed them does not mean that an employer can, by keeping shoddy records, defeat the recovery of a person or entity statutorily entitled to those damages.32 Indeed, account-
ability would seem at least equally important when a contractor recklessly fails to track its employees’ work on a project funded by the public fisc.
While the FCA specifically places the burden of proving damages by a preponderance of the evidence on the Government or, as here, the relator,
Finally, though it argued as much to the District Court, Farfield does not sufficiently raisе whether Mt. Clemens is inapplicable because Farfield complied with recordkeeping obligations, such as “the three-year record retention” regula-
tion under
2. Local 98‘s evidence was sufficiently representative. Farfield‘s challenge to the “representativeness” of Local 98‘s evidence also fails. Local 98 adduced direct testimony from six workers who were classified as groundmen or laborers on the Project yet whose work was logged using the phase codes associated with lineman tasks. Those witnesses testified about the work of 22 of the 42 affected groundmen and laborers (i.e., a 52-percent sample). Contrary to Farfield‘s argument, this evidence is quantitatively representative. See, e.g., Mt. Clemens, 328 U.S. at 680 (8 out of 300 employees testified);
Reich v. S. New Eng. Tel. Corp., 121 F.3d 58, 66–68 (2d Cir. 1997) (39 of 1,500 employees representative); Gateway Press, 13 F.3d at 701 (testimony of 22 out of 70 employees for whom back wages were sought); McLaughlin v. Ho Fat Seto, 850 F.2d 586, 589 (9th Cir. 1988) (5 out of 28), cert. denied, 488 U.S. 1040 (1989); Donovan v. Simmons Petroleum Corp., 725 F.2d 83, 86 (10th Cir. 1983) (testimony of 12 employees sufficient for all former employees); New Floridian Hotel, 676 F.2d at 472 (23 testified out of 207 receiving an award).
The testimony of the six workers was also qualitatively representative. Farfield cites nothing suggesting that the frequency with which testifying workers performed lineman work under the relevant phase codes was so unique that it was unreasonable to conclude that they devoted “approximate[ly]” the same amount of time as the other affected workers to lineman work. Mt. Clemens. 328 U.S. at 688: see also Tyson Foods, Inc. v. Bouaphakeo, 577 U.S. 442, 459 (2016) (“Reasonable minds may differ as to whether the average time [] calculated is probative as to the time actually worked by each employee. Resolving that question, however, is the near-exclusive province of the [factfinder]. The District Court could have denied class certification on this ground only if it con cluded that no reasonable juror could have believed that the employees spent roughly equal time donning and doffing.” (citation omitted)). In fact, there was evidence that “most crews were not limited in the work they performed” and that “all workers on a crew performed all of these tasks [installing conduit and pulling wire] at various times.” A290–91 (Findings of Fact ¶¶ 135, 140). And to the extent that differences existed, the factfinding seems to have accounted for them.
* * *
Shifting the burden of proof on damages to Farfield after Local 98 made out a prima facie case valuing those damages was justified here, just as it would have been in an FLSA case or a Davis-Bacon proceeding before the DOL. And the testifying workers’ incidence of lineman work under the relevant phase codes was representative of that experienced by the non-testifying affected workers.
F. The Award of Attorneys’ Fees Was Reasonable.
Finally, we reach Farfield‘s challenge to the District Court‘s award of $1,229,927.55 in attorneys’ fees to Local 98. Farfield does not claim that the District Court erred in awarding $203,226.45 in costs, nor does it assert that any of the Court‘s factual findings were erroneous. The core of Farfield‘s argument is that Local 98‘s attorneys’ fees incurred on the four voluntarily dismissed claims relating to other projects were not fully excluded from the lodestar, and that many of a paralegal‘s time entries were too vague. Along with Farfield‘s other arguments, these fail as well.
In a 54-page memorandum opinion and order, the District Court granted in part Local 98‘s motion for attorneys’ fees and costs. The Court made extensive findings of fact and rejected the same arguments Farfield makes here. On the point about limited success, the Court noted that Local 98‘s attorneys cut over 1,000 hours to account for time spent pursuing work on the four voluntarily dismissed claims. The Court then applied the test announced in Hensley v. Eckerhart, 461 U.S. 424 (1983), to conclude that no further reductions were warranted because “the legal theories and claim were the same across all five projects.” A19–24.35 And the Court rejected Farfield‘s challenge to the paralegal‘s time entries.
The District Court applied the correct legal standards and procedures, and it made extensive findings of fact that are supported by the record and the posture of the litigation. We will affirm its award of attorneys’ fees to Local 98.
VI. CONCLUSION
In the preceding pages, we resolve several issues not previously decided by our Court. Congress‘s 2009 amendments to