UNITED STATES of America, Intervenor/Plaintiff-Appellant, and United States ex rel. Omar Badr, Plaintiff, v. TRIPLE CANOPY, INC., Defendant-Appellee. United States ex rel. Omar Badr, Plaintiff-Appellant, v. Triple Canopy, Inc., Defendant-Appellee.
Nos. 13-2190, 13-2191
United States Court of Appeals, Fourth Circuit
Argued: Oct. 30, 2014. Decided: Jan. 8, 2015.
775 F.3d 628
“Local Rule 103.6 of the District of Maryland requires that a party requesting leave to amend provide a copy of the proposed amendment to the court.” Francis v. Giacomelli, 588 F.3d 186, 197 (4th Cir. 2009). Nemphos, like the plaintiffs in Francis, did not file a separate motion requesting leave to amend her complaint or attach a proposed amended complaint to her opposition brief. We are therefore compelled to find that the district court did not abuse its discretion in dismissing Nemphos‘s third amended complaint with prejudice and denying her a fourth bite at the apple.
V.
For the foregoing reasons, the judgment is affirmed.
AFFIRMED.
Before SHEDD, AGEE, and WYNN, Circuit Judges.
Affirmed in part, reversed in part, and remanded by published opinion.
Judge SHEDD wrote the opinion, in which Judge AGEE and Judge WYNN joined.
SHEDD, Circuit Judge:
The Government appeals the district court‘s dismissal of Counts I and II of its complaint under the False Claims Act (FCA) against Triple Canopy, Inc. Omar Badr, the original relator, also appeals the dismissal of his complaint—including four additional FCA counts (Counts II–V)—against Triple Canopy. For the following reasons, we conclude that the district court correctly dismissed Counts II–V of Badr‘s complaint, but erred in dismissing Counts I and II of the Government‘s complaint.
In June 2009, the Government awarded a firm-fixed price contract to Triple Canopy to provide security services at the Al Asad Airbase, the second largest airbase in Iraq.1 Triple Canopy was one of several security firms awarded the Theatre-Wide Internal Security Services contract; under that contract, security at specific locations was governed by individual Task Orders. The Task Order for Al Asad was TO-11.
Under TO-11, Triple Canopy agreed to provide “internal security services” at Al Asad and to “supplement and augment security operations.” (J.A. 98). These services included “providing internal operations at entry control points, internal roving patrols,” and “prevent[ing] unauthorized access” by enforcing “security rules and regulations regarding authorized access to [Al Asad] including internal checkpoints.” (J.A. 98). TO-11 identified 20 “responsibilities” Triple Canopy was tasked with in providing these services, including typical security functions such as repelling attacks, providing escorts, performing entrance searches, and preventing theft, as well as ancillary services such as running background checks, checking ammunition lists, and computerizing personnel systems. (J.A. 99). As relevant here, the final responsibility was to “ensure that all employees have received initial training on the weapon that they carry, [and] that they have qualified on a U.S. Army qualification course.” (J.A. 99) (marksmanship requirement). To satisfy the marksmanship requirement, employees had to score a minimum of 23 rounds out of 40 from a distance of 25 meters. Qualifying scorecards for the guards were to be maintained in their respective personnel files for one year. Nothing in TO-11 expressly conditioned payment on compliance with the responsibilities.
To fulfill TO-11, Triple Canopy hired approximately 332 Ugandan guards to serve at Al Asad under the supervision of 18 Americans. The guards’ personnel files indicate that they met the qualifying marksmanship score at a course in Kampala, Uganda. Upon arriving at the base, however, Triple Canopy‘s supervisors learned that the guards lacked the ability to “zero” their rifles and were unable to satisfy the qualifying score of 23 on the marksmanship course. Thus, shortly after their arrival, Triple Canopy supervisors were aware that the Ugandans could not satisfy the final responsibility of TO-11: the marksmanship requirement. Nonetheless, Triple Canopy submitted its monthly invoices for the guards. After a failed training attempt, a Triple Canopy supervisor directed that false scorecard sheets be created for the guards and placed in their personnel files. Because there was attrition, replacement Ugandan guards arrived at Al Asad during the year. These guards were also unable to satisfy the marksmanship requirement, and consequently additional false scorecards were created.
In May 2010, toward the end of the contract, Triple Canopy attempted to have 40 Ugandan guards qualify in marksmanship before leaving for vacation. None could do so. A Triple Canopy supervisor ordered Omar Badr, a Triple Canopy medic, to prepare false scorecards for the guards, reflecting scores of 30–31 for male guards and 24–26 for the female guards. Triple Canopy‘s site manager signed these new scorecards and post-dated them,
TO-11 was in effect for one year, and Triple Canopy presented 12 monthly invoices for guard services during that time. Each invoice listed the number of guards in service for that month; the term “guard” was undefined. Pursuant to TO-11, a contracting officer representative (COR) was “responsible for acceptance of the services [Triple Canopy] performed.” (J.A. 41.) The COR was appointed by the Government and confirmed acceptance of Triple Canopy‘s guard services by filing a Material Inspection and Receiving Report (DD-250) Form. (J.A. 41). The DD-250 required the COR to accept the services if they “conform[ed] to contract” and to sign the form if the services provided “were received in apparent good condition.” (J.A. 73). The COR completed twelve DD-250 forms, none of which included any certification or endorsement from Triple Canopy. In total, Triple Canopy submitted invoices totaling $4,436,733.12 for the Ugandan guards—a rate of $1,100 per month for each guard. Triple Canopy did not receive a renewal of TO-11, and the Ugandan guards were thereafter dispatched to four other contract sites around Iraq: Cobra, Kalsue, Delta, and Basra.
Badr eventually instituted a qui tam action under the FCA against Triple Canopy in the Eastern District of Virginia. Badr alleged five false claims counts: Al Asad (Count I) and Cobra, Kalsue, Basra, and Delta (Counts II–V). The Government intervened on the Al Asad count and filed an amended complaint alleging that Triple Canopy knowingly presented false claims, in violation of
The district court granted Triple Canopy‘s motion to dismiss the FCA claims. United States ex rel. Badr v. Triple Canopy, Inc., 950 F.Supp.2d 888 (E.D.Va.2013). The court first dismissed Count I because the Government failed to plead that Triple Canopy submitted a demand for payment that contained an objectively false statement. Next, the court dismissed Count II because the Government (1) failed to allege a false claim and (2) failed to allege that the COR ever reviewed the scorecards. Finally, the court dismissed Counts II–V in Badr‘s complaint because he failed to plead with particularity the facts giving rise to the claims. The court also dismissed Count I of Badr‘s complaint, concluding that Badr lacked standing to press that claim because of the Government‘s intervention. The court later dismissed the Government‘s remaining common law claims.2 Both the Government and Badr filed timely appeals.
We review de novo the district court‘s dismissal of a complaint for failure to state a claim under
In addition, claims under the FCA “must also meet the more stringent ‘particularity’ requirement of
III.
A.
Section
The phrase “false or fraudulent claim” should be “construed broadly,” Harrison I, 176 F.3d at 788, “to reach all types of fraud, without qualification, that might result in financial loss to the Government,” United States v. Neifert-White Co., 390 U.S. 228, 232, 88 S.Ct. 959, 19 L.Ed.2d 1061 (1968). Liability thus attaches “any time a false statement is made in a transaction involving a call on the U.S. fisc.” Harrison I, 176 F.3d at 788.
The district court determined that Count I failed to state a claim because the Government did not allege the first element, a false statement or fraudulent course of conduct. In the court‘s view, the Government “failed to sufficiently plead that [Triple Canopy] submitted a demand for payment containing an objectively false statement.” Triple Canopy, 950 F.Supp.2d at 890. The court reached this determination by reasoning that the Government never alleged that Triple Canopy “invoiced a fraudulent number of guards or billed for a fraudulent sum of money.” Id. at 896. The Government argues that Triple Canopy submitted false claims be-
We have previously recognized that a false claims plaintiff cannot “shoehorn what is, in essence, a breach of contract action into a claim that is cognizable under the” FCA. Wilson, 525 F.3d at 373. See also United States ex rel. Steury v. Cardinal Health, Inc., 625 F.3d 262, 268 (5th Cir.2010) (noting that courts “seek[] to maintain a crucial distinction between punitive FCA liability and ordinary breaches of contract“) (internal quotation marks omitted). In Wilson, we concluded that two qui tam relators failed to plead a false claim when the claim was based on “mere allegations of poor and inefficient management of contractual duties.” Wilson, 525 F.3d at 377 (internal quotation marks omitted). “An FCA relator cannot base a fraud claim on nothing more than his own interpretation of an imprecise contractual provision,” id. at 378, we explained, particularly where the Government never “expressed dissatisfaction” with the contract‘s performance, id. at 377. See also Harrison I, 176 F.3d at 792 (noting fraud is limited to “expressions of fact which (1) admit of being adjudged true or false in a way that (2) admit of empirical verification“) (internal quotation marks omitted).
We reiterated the line between breaches of contract and FCA claims in United States ex rel. Owens v. First Kuwaiti General Trading & Contracting Co., 612 F.3d 724, 734 (4th Cir.2010). In Owens, we rejected claims from a qui tam relator regarding the construction of the United States embassy in Baghdad. While noting that some of the construction work required remediation, we nonetheless explained that “[t]o support an FCA claim, there needs to be something more than the usual back-and-forth communication between the government and the contractor over this or that construction defect and this or that corrective measure.” Id. at 729. We summarized the relators’ claims as “garden-variety issues of contractual performance” involving “a series of complex contracts pertaining to a construction project of massive scale.” Id. at 734. We expressly recognized that the purposes of the FCA were not served by imposing liability on “honest disagreements, routine adjustments and corrections, and sincere and comparatively minor oversights,” “particularly when the party invoking [the FCA] is an uninjured third party.” Id.
While we have guarded against turning what is essentially a breach of contract into an FCA violation, we have also continued to recognize that the FCA is “intended to protect the treasury against the claims of unscrupulous contractors, and it must be construed in that light.” Id. To satisfy this goal, courts have recognized that “a claim for payment is false when it rests on a false representation of compliance with an applicable contractual term.” United States v. Sci. Applications Int‘l Corp., 626 F.3d 1257, 1266 (D.C.Cir.2010) (SAIC). Such “[f]alse certifications” are “either express or implied.” Id. While we label the claim in this case as “implied certification,” we note that this label simply recognizes one of the “variety of ways” in which a claim can be false. Harrison I, 176 F.3d at 786.3
Consider a company that contracts with the government to supply gasoline with an octane rating of ninety-one or higher. The contract provides that the government will pay the contractor on a monthly basis but nowhere states that supplying gasoline of the specified octane is a precondition of payment. Notwithstanding the contract‘s ninety-one octane requirement, the company knowingly supplies gasoline that has an octane rating of only eighty-seven and fails to disclose this discrepancy to the government. The company then submits pre-printed monthly invoice forms supplied by the government—forms that ask the contractor to specify the amount of gasoline supplied during the month but nowhere require it to certify that the gasoline is at least ninety-one octane. So long as the government can show that supplying gasoline at the specified octane level was a material requirement of the contract, no one would doubt that the monthly invoice qualifies as a false claim under the FCA despite the fact that neither the contract nor the invoice expressly stated that monthly payments were conditioned on complying with the required octane level.
Accordingly, we hold that the Government pleads a false claim when it alleges that the contractor, with the requisite scienter, made a request for payment under a contract and “withheld information about its noncompliance with material contractual requirements.” Id.4 The “per-
implied certification claims and, while mentioning such claims might be “questionable” in the circuit, reserved ruling on their viability. Harrison I, 176 F.3d at 788 n. 8. Since Harrison I, however, the weight of authority has shifted significantly in favor of recognizing this category of claims at least in some instances. See United States ex rel. Wilkins v. United Health Grp., Inc., 659 F.3d 295, 305–06 (3d Cir.2011) (collecting cases from the First, Second, Sixth, Ninth, Tenth, Eleventh, and D.C. Circuits). For the reasons expressed infra, we agree that contractual implied certification claims can be viable under the FCA in the appropriate circumstances.
B.
Applying these standards, we readily conclude that the Government has sufficiently alleged a false claim for purposes of Rule 12(b)(6) and Rule 9(b). TO-11 lists the marksmanship requirement as a “responsibility” Triple Canopy must fulfill under the contract. The complaint contains an abundance of allegations that Triple Canopy did not satisfy this requirement and, instead, undertook a fraudulent scheme that included falsifying records to obscure its failure. The Government‘s
jective, requirement that Triple Canopy‘s guards did not meet.
Turning to materiality, in implied certification cases this element operates to protect contractors from “onerous and unforeseen FCA liability as the result of noncompliance with any of potentially hundreds of legal requirements” in contracts, because “[p]ayment requests by a contractor who has violated minor contractual provisions that are merely ancillary to the parties’ bargain” do not give rise to liability under the FCA. SAIC, 626 F.3d at 1271. To establish materiality, the Government must allege the false statement had “a natural tendency to influence, or be capable of influencing,” the Government‘s decision to pay.
The Government has sufficiently pled materiality under this standard. First, common sense strongly suggests that the Government must establish that both the contractor and the Government understood that the violation of a particular contractual provision would foreclose payment. In addition, because the violation must be material, not every part of a contract can be assumed, as a matter of law, to provide a condition of payment. Cf. Mann v. Heckler & Koch Def., Inc., 630 F.3d 338, 346 (4th Cir.2010) (finding no fraud or FCA violation even though contractor‘s actions “may have violated federal bidding regulations“).
Like the hypothetical gasoline supplier, Triple Canopy agreed to provide a service that met certain objective requirements, failed to provide that service, and continued to bill the Government with the knowledge that it was not providing the contract‘s requirements. In addition, Triple Canopy then endeavored to cover up its failure. Distilled to its essence, the Government‘s claim is that Triple Canopy, a security contractor with primary responsibility for ensuring the safety of servicemen and women stationed at an airbase in a combat zone, knowingly employed guards who were unable to use their weapons properly and presented claims to the Government for payment for those unqualified guards. The Court‘s admonition that the FCA reaches “all types of fraud, without qualification” is simply inconsistent with the district court‘s view of the FCA that Triple Canopy can avoid liability because nothing on the “face” of the invoice was objectively false. Neifert-White, 390 U.S. at 232, 88 S.Ct. 959.
Accordingly, because the Government has sufficiently alleged that Triple Canopy made a material false statement with the requisite scienter that resulted in payment, we reverse the district court‘s dismissal of Count I of the Government‘s complaint.
C.
We also reverse the district court‘s dismissal of Badr as a party to this claim. The district court, relying on an out-of-circuit district court decision, United States ex rel. Feldman v. City of New York, 808 F.Supp.2d 641 (S.D.N.Y.2011), held that Count I of Badr‘s complaint, which was “virtually indistinguishable” from the Government‘s, was “superseded” and “therefore dismissed for lack of standing.” Triple Canopy, 950 F.Supp.2d at 895 n. 1. The FCA does provide that, if the Government elects to participate in a qui tam FCA action, it “shall have the primary responsibility for prosecuting the action, and shall not be bound by an act of the person bringing the action.”
IV.
A.
We next turn to the district court‘s dismissal of Count II, the Government‘s false records claim. Section
“[T]he materiality of the false statement turns on whether the false statement has a natural tendency to influence agency action or is capable of influencing agency action.” United States ex rel. Berge v. Bd. of Tr. of Univ. of Ala., 104 F.3d 1453, 1460 (4th Cir.1997) (internal quotation marks omitted); see also
if—as the district court suggested here—a Government employee fails to catch an otherwise material false statement. That approach would be doubly deficient: it would inappropriately require actual reliance on the false record and import a presentment requirement from
B.
Applying the proper standard, we find that the Government has properly pled materiality in Count II. The false records in this case—the falsified scorecards—are material to the false statement (the invoices) because they complete the fraud. The false scorecards make the invoices appear legitimate because, in the event the COR reviewed the guards’ personnel files, the COR would conclude that Triple Canopy had complied with the marksmanship requirement. TO-11‘s provisions likewise anticipated that the COR would indeed review the scorecards, as they offered the most direct evidence that Triple Canopy‘s
V.
Finally, we address the dismissal of Counts II–V in Badr‘s complaint. Badr alleged in those counts that Triple Canopy submitted false claims by invoicing the Government for guard services under four additional contracts: Cobra, Kalsue, Basra, and Delta. The sum of Badr‘s allegations on these counts is as follows: that the Ugandan guards were “demobilized ... and transferred” to the four contracts while still not “qualified to provide” security services, and that Triple Canopy was “paid by the U.S. Government under terms similar to those under the Al Asad Contract.” (J.A. 15). By comparison, in support of his claim regarding the Al Asad airbase, Badr listed dates, specified the actions taken on those dates, and identified the Triple Canopy personnel involved. See, e.g. J.A. at 14 (“Site Manager D.B. instructed [Badr] to falsely indicate that the men had obtained scores in the 30–31 range ... A new Site Manager, D.B.2., then signed the sheets, falsely post-dating them to indicate that the Ugandans had qualified in the following month of June“).
The district court correctly dismissed Counts II–V for failing to comply with Rule 9(b). Rule 9(b) requires “at a minimum” that Badr “describe the time, place, and contents of the false representations,” United States ex rel. Nathan v. Takeda Pharmaceuticals North America, Inc., 707 F.3d 451, 455–56 (4th Cir.2013) (internal quotation marks omitted). We agree with the district court that Badr cannot state a claim by doing “nothing more than simply presum[ing]” that Triple Canopy submitted false claims under those contracts. Triple Canopy, 950 F.Supp.2d at 900. Badr contends that discovery may reveal the contents of the contracts and invoices, but fraud actions that “rest primarily on facts learned through the costly process of discovery” are “precisely what Rule 9(b) seeks to prevent.” Wilson, 525 F.3d at 380. See also Harrison I, 176 F.3d at 789 (“The clear intent of Rule 9(b) is to eliminate fraud actions in which all the facts are learned through discovery after the complaint is filed.“) (internal quotation marks omitted).
VI.
The FCA is “strong medicine in situations where strong remedies are needed.” Owens, 612 F.3d at 726. That strong remedy is needed when, as here, a contractor allegedly engages in a year-long fraudulent scheme that includes falsifying records in personnel files for guards serving as a primary security force on a United States airbase in Iraq. Accordingly, for the foregoing reasons, we reverse the district court‘s dismissal of Counts I and II of the Government‘s complaint, we affirm the dismissal of Counts II–V of Badr‘s complaint, and we remand for proceedings consistent with our opinion.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.