Lead Opinion
Horning Investments, LLC, is a roofing company, but this case is about a floor — in particular, the lower limit on wages and benefits imposed by the federal Davis-Bar con Act. The dispute concerns a construction project for the U.S. Department of Veterans Affairs. Horning was a subcontractor for the project; its workers are represented by Local 20 of the Sheet Metal Workers International Association (the Union). Believing that Horning had paid its workers less than the Davis-Bacon Act requires, the Union sued. Interestingly, however, it did not pursue relief directly under Davis-Bacon; instead, it filed a qui tam action under the False Claims Act, 31 U.S.C. §§ 3729-3733 — the statute at issue in the Supreme Court’s recent decision in Universal Health Servs., Inc. v. United States ex rel. Escobar, — U.S.-,
By choosing the False Claims route, the Union undertook to show that Horning knowingly made false statements (or misleading omissions of the type described in Universal Health Services) that were material to the government’s payment decision. We conclude that the Union did not proffer enough evidence to permit a reasonable jury to conclude that Horning acted with the requisite knowledge. We thus affirm the judgment of the district court in Horning’s favor. .
I
Horning Investments does business as Horning Roofing & Sheet Metal, LLC; we
That Act requires contractors who perform construction projects for the federal government to pay their workers the “prevailing wage.” Id. § 3142(a). Regulations issued by the Department of Labor define that term by region; the definition outlines base wage rates and fringe benefits for each type of worker. Id. § 3142(b). The parties have stipulated that in Dayton, Ohio, at the time the Medical Center was being built, the base rate for a worker classified as a Sheet Metal Worker was $26.41 per hour, and the additional fringe benefit rate was another $16.82 an hour. The parties also agree that the workers were classified in the proper category and that they were paid the appropriate base rate. This case is about their fringe benefits.
Horning provides certain fringe benefits to all of its employees, both those who work on projects covered by Davis-Bacon and those who work on other projects. For example, employees who have worked at Horning for more than 90 days are eligible for life, dental, vision, and health insurance; some also receive vacation days. After a year, they become eligible for matching contributions to a 401 (k) account. In October 2010, Horning created a Trust for its employee insurance benefits. (It already had a separate fund for the 401(k) accounts.) Robin Moore, who handled Horning’s human resources portfolio, testified that she relied on advice from Horn-ing’s accountants to determine how much to deduct from paychecks and how to allocate those funds between the 401(k) account and the new Trust. The accountants advised Horning about how much it needed to deposit into the Trust in order to comply with applicable law, including both the Employment Retirement Income Security Act of 1974 (which is not at issue here) and the Davis-Bacon Act.
Horning ran into trouble when it decided to deduct a flat hourly fee, to be paid into the Trust, from the paycheck of each employee working on the Medical Center project. Moore testified that, based on a “rounded figure” she received from the accountants, she deducted $5.00 per hour from those paychecks and deposited those funds into the Trust. That amount was deducted regardless of whether the employee was eligible for any benefits at all (for instance, without differentiating between those employed for more than 90 days and new hires). Furthermore, the $5.00 did not correspond to the actual monetary value of the benefits each individual employee received. It is this arrangement, according to the Union, that violates Davis-Bacon.
In order fully to understand the Union’s theory, we must delve into the details of Horning’s system for paying benefits. First, Moore calculated the paycheck deduction for each employee. Then Leanne Torres, the person directly responsible for payroll, passed along information about each employee’s paycheck, including total amount, deductions, and-contributions to the Trust and the 401(k) account, to Horn-ing’s external payroll processor, Paychex.
Initially, the Certified Payroll Report listed the higher, total amount, before deductions for payments to the Trust and the 401(k) account were made, as the “wage” paid to each employee. It incorrectly indicated that amounts paid into the Trust and the 401(k) accounts were in addition to the listed number rather than included within it. Torres eventually corrected the Certified Payroll Reports. The Union contends, however, that -this was not enough, because its employees were still not receiving the proper Davis-Bacon pay rates. Each Certified Payroll Report included a statement attesting that it was accurate, that no further deductions were taken, and that fringe benefits were properly paid.
In addition to the Certified Payroll Reports that it submitted to the government, Horning also prepared eight specific applications for payment and sent them to Construct Solutions. Construct Solutions later forwarded these to the government. Like the Certified Payroll Reports, the applications included a statement attesting that Horning was paying Davis-Bacon rates to its employees.
The Union brought this action, in which it alleges that Horning’s Certified Payroll Reports and the eight applications for payment (along with the certifications of Davis-Bacon compliance appearing in both types of documents), violated the False Claims Act. That Act provides a damages remedy against any person who “knowingly presents, or causes to be presented, a false or fraudulent claim for payment.” 31 U.S.C. § 3729(a)(1)(A). It permits a private party, known as a relator, to sue on behalf of the United States in specified circumstances. Id. § 3730(b). The Union is seeking to take advantage of that provision. It argues that Horning, through the actions of Moore and Torres, “knowingly ... eause[d] to be presented [ ] a false or fraudulent claim for payment.” Id. § 3729(a)(1)(A). After discovery, the parties filed cross-motions for summary judgment. Finding that Horning had relied on the advice of its accountants and thus did not have the requisite knowledge that its statements were false, the district court granted Horning’s motion. The Union appeals.
II
A
Before we may turn to the merits of this appeal, we must assure ourselves that the district court’s jurisdiction was secure. On the surface, this seems clear: the Union’s claims rest on the False Claims Act, which indicates that federal-question jurisdiction exists under 28 U.S.C. § 1331. Horning resists this simple conclusion, however, for two reasons: first, it contends that the Union is not the original source of the information on which the suit is based and thus is not entitled to act as a relator (ie. as the one asserting the interests of the United States in not paying false claims); second, it argues that the Department of Labor has “primary jurisdiction” here, and that its authority ousts the district court’s power to adjudicate the case. We find no merit in either of these contentions.
It is true that claims that previously have been disclosed may be brought only in limited circumstances, see 31 U.S.C. § 3730(e)(4), and that this rule is jurisdictional, see Rockwell Int’l Corp. v. United States,
Its second one is equally unavailing. Despite the label, the doctrine of “primary jurisdiction” is not jurisdictional in the sense that matters here. Illinois Bell Tel. Co. v. Global NAPs Illinois, Inc.,
There is no need here to defer to the Department of Labor. Although it has special expertise in classifying employees for Davis-Bacon purposes, this case does not present a classification dispute. As the Sixth Circuit put it, when the “core dispute ... involves misrepresentation, not mis-classification,” primary jurisdiction does not prevent a federal court from hearing a False Claims Act case that rests on alleged Davis-Bacon violations. United States ex rel. Wall v. Circle C Const., LLC,
B
To defeat the district court’s grant of summary judgment in Horning’s favor, the Union must be able to point to evidence from which a reasonable jury could conclude “(1) that the defendant made a statement in order to receive money from the government; (2) that the statement was false; and (3) that the defendant knew the statement was false.” Thulin v. Shopko Stores Operating Co., LLC,
The Union has presented more than enough to satisfy the first element. Horning’s employee, Torres, made statements to the government in order to receive money for Horning from it. She submitted the Certified Payroll Reports and the eight applications that initially went to Construct Solutions with the knowledge that they were to be presented to the Department of Veterans Affairs for payment. See United States ex rel. Garbe v. Kmart Corp., No. 15-1502,
The second element, which may well be affected by Universal Health Services, is less certain. It is not clear whether this is the kind of “implied false certification” that the Court discussed in its opinion, but it seems that it may be, in the absence of an affirmative lie. The Court held that “liability can attach when the defendant submits a claim for payment that makes specific representations about the goods or services provided, but knowingly fails to
While the statute does not require a specific intent to defraud, it does state that the defendant must “have acted with ‘actual knowledge,’ or with ‘deliberate ignorance’ or ‘reckless disregard’ to the possibility that the submitted claim was false.” United States v. King-Vassel,
The Union has not met that standard. It argues that because all employees who worked on the project had $5.00 per hour deducted from their paychecks, and at least some of the employees had not worked for Horning long enough to receive benefits, then Horning must have known that it was not giving each employee the full value of the $5.00 deducted. The Union further urges that not all employees received the full value of their fringe benefits because the Trust covered expensive medical treatments for some and nothing for others. In other words, it says, because Horning never tried to determine whether each employee received the equivalent of $5.00 per hour in medical, dental, vision, or life insurance, Horning acted with reckless disregard with respect to its handling of fringe benefits.
The fallacy in the Union’s argument lies in its failure to distinguish between payments for these insurance-like benefits and payment of later claims submitted. The value of health insurance, for example, is not computed by asking how much medical care a person consumed; it is how much the person pays each month to purchase the desired policy. Horning was under no obligation to track down each employee to see if his or her claims worked out to $5.00 times the number of hours worked over a relevant period. Certainly nothing in the Davis-Bacon Act requires this unusual approach. The Act defines “prevailing wages” to include fringe benefits, and it defines those benefits as including payment
for medical or hospital care, pensions on retirement or death, compensation for injuries or illness resulting from occupational activity, or insurance to provide any of the forgoing ... for vacation and holiday pay ... or for other bona fide fringe benefits ... the amount of—
(i) the rate of contribution irrevocably made by a contractor or subcontractor to a trustee ... under a fund ...; and
(ii) the rate of costs to the contractor ... that may be reasonably anticipated in providing benefits ... pursuant to an enforceable commitment to carry out a financially responsible plan[.]
40 U.S.C. § 3141(2). This passage does not suggest that the value paid out from a
The fact that some of the employees from whose checks the $5.00 deductions were made were not yet eligible to receive fringe benefits does not matter either. The Department of Labor has stated that the Davis-Bacon Act permits an employer to count contributions to an insurance plan for employees who are not yet eligible for coverage when the plan itself requires the employer to make that contribution during the waiting period. See Dep’t of Labor, Field Operations Handbook, § 15fl3, available at https://www.dol.gov/whd/foh/ foh_chl5.pdf (last visited June 18, 2016); William J. Lang Land Clearing, Inc. v. Admin.,
C
We conclude with a few words about Horning’s asserted reliance on its accountants. The district court decided, and Horn-ing has argued on appeal, that this fact alone is enough to negate its knowledge. We do not agree with that flat statement, and as we have shown above, our decision rests on the full record that was made on summary judgment.
In some situations, reliance on the advice of a professional, such as an attorney or an accountant, “can negate the mental state required for some crimes.” United States v. Roti,
Horning did not develop the facts that were needed to provide a basis for an “advice-of-accountant” defense. We do not know precisely what it told its accountants, whether they provided all necessary details, or what exactly the accountants recommended. We therefore cannot say whether any reliance that followed was reasonable and thus sufficient to negate any inference that Horning knew that its statements were false, and for that reason we place no weight on this point.
Ill
Horning may, or may not, have violated the Davis-Bacon Act. But the Union did not bring a claim under that statute. Instead, it sued under the False Claims Act, which requires proof that the defendant knowingly submitted a false claim to the government for payment. The Union did not present enough evidence to survive summary judgment on that issue, and so we AFFIRM the judgment of the district court.
Notes
. The record does not indicate where, exactly, the $5.00/hour number came from, but both parties say that it was deducted from the fringe rate and that the rest of the fringe rate went into the employee’s 401(k) account. The Union has made nothing of this loose end, and so neither will we.
Dissenting Opinion
dissenting.
For Horning, the employer defendant, to be found to have violated the False Claims Act, the union had to prove that the company had “knowingly presented], or eause[d] to be presented [to the government], a false or fraudulent claim for payment or approval.” 31 U.S.C. § 3729(a)(1)(A). The employer does not have to have intended to defraud (i.e., cheat) the government. § (b)(1)(B). It just has to have known that the claim it’s submitting is false, or act in reckless disregard of its truth or falsity. § (b)(1)(A). It might think the falsehood harmless — it might for example be sure the claim would be turned down — or it might think it had underclaimed in the past, and the false claim if accepted would merely place it in the position it would be in, rightfully, had it not made such mistakes. But as long as the claimant knows that its representations are both false and “material” (i.e., relevant in the sense of “having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property” by the government, § (b)(4)), it has violated the False Claims Act. Universal Health Services, Inc. v. United States ex rel. Escobar, — U.S. -,
By way of background it needs to be understood that a separate statute, the Davis-Bacon Act, establishes a minimum wage for workers on certain federal construction projects, 40 U.S.C. § 3142, among them a project in Dayton, Ohio, for which Horning was a contractor. That minimum (which is based on the prevailing wage for similar work in the location in which the work will be performed, § 3142(b)) includes fringe benefits. § 3141(2). For example, Horning was required to pay roofers a wage of $22.36 an hour plus $11.58 an hour in fringe benefits, for a total of $33.94 an hour. The fringe benefits included insurance: $5 of the $11.58 was not paid to the employees but instead was to be used to fund an insurance program for them (“the trust”).
The false-claims evidence begins with the false statement, in the Certified Payroll Reports that Horning submitted to the Department of Veterans Affairs, that “all persons employed on [the] project have been paid the full weekly wages earned ... and no deductions have been made either directly or indirectly from the full wages earned by any person, other than permissible deductions.” An employee named Federico Gonzalez had $5 per hour deducted from his pay and placed into the fringe-benefits trust even though he was
There is uncontradicted evidence that four other Horning workers had $5 per hour of work credited to the trust as well even though like Gonzalez they didn’t participate in the benefits program and so never benefited from the $5 that was an ostensible part of their compensation — a part, I repeat, to which Davis-Bacon entitled them.
Horning’s manager of human resources acknowledged that the $5 per hour subtracted from the workers’ compensation was not based on an estimate of the benefits the worker would or might receive. She said that “Horning would put that money how they — you know, how they [the management] saw fit on that money. It wasn’t just cash money in [the worker’s] hand” — or, in the case of the five workers we’ve mentioned, money in their insurance accounts. No one in management attempted to match the $5 deductions to each employee’s eligibility to receive benefits, even though as an experienced contractor on Davis-Bacon Act projects Horning’s executives must have known about the statute’s requirements. See United States ex rel. Wall v. Circle C Construction, L.L.C.,
A nontrivial part of the investment fund financed by the $5 wage deductions — at least $54,000 — was diverted to the company’s owner and to a relative of the general manager, neither of whom, so far as the record reveals, was entitled to receive money from the insurance fund. This is further evidence that Horning knowingly made false statements in claiming that the $5 of “fringe benefits” it took out of each worker’s hourly salary went to “appropriate programs for the benefit of such employees,” that is, by buying insurance for the employee. When “a defendant makes representations in submitting a claim but omits its violations of statutory, regulatory, or contractual requirements, those omissions can be a basis for liability if they render the defendant’s representations misleading with respect to the goods or services provided.” Universal Health Services, Inc. v. United States, supra,
To understand the full scope and gravity of Horning’s conduct, we need to remand the case for a trial. We need to know how many employees were forced to contribute $5 of their compensation to a trust from which they could not benefit or how much less they received than they were entitled to. But we need to know even more. The company’s principal defense is not that it never underpaid its workers, in violation of the Davis-Bacon Act, but that it had relied on its accountants to advise it with respect to its duty to pay its workers the minimum wage required by that Act, and that since
In short, it is premature to exonerate Horning.