Support for Rigsby qui tam found hanging on the Branch qui tam docket

Since claims brought under the FCA are not contract-based claims or dependent upon the degree of negligence involved, the claims are unimpaired by contractual limitations on liability.

We missed it or did until today when I went to the Branch docket for an update and found a Statement of Interest in Opposition to Defendant State Farm’s Motion to Dismiss filed by the United States among the entries made before the Order dismissing Branch was issued.

There was no blog SLABBED until after Branch was dismissed.  However, once we were up and running in March 2008, we posted the Branch Consultants’ qui tam case here; wrote about the Appeal here and here ; and reported on 5th Circuit’s decision here and here.

Nonetheless, until today, we missed the Government unequivocally stating that statutory authority over a WYO carrier can not be contracted away.

The fact that FIA and the WYO carriers enter into an agreement, and the agreement relates to the WYO carriers’ alleged violation of the FCA, does not mean that the FCA claim is founded on that agreement. Rather, the FCA claim is founded on the defendants’ alleged violation of a federal statute which prohibits a person, like the defendants, from acting with appropriate scienter to submit false or fraudulent claims to the government or make false statements in order to avoid an obligation to the government. Further, the FCA provides for relief – treble damages and penalties – that is not available under the Arrangement but that arises instead by statute.

With FCA claims not contract – based claims or dependent upon the degree of negligence involved, there is no “reasonable overpayment” – no “little bit pregnant” fraud permissible under the Expedited Claim Handling Processes authorized following Hurricane Katrina.

The USA supports its position noting, Other courts have also squarely held that claims under the FCA do not arise pursuant to a contract.  This point was clearly articulated in United States ex rel. Roby v. Boeing Co. (“Roby I”):

Claims under the FCA do not arise pursuant to a contract. See United States v. Woodbury, 359 F.2d 370, 377 (9th Cir. 1966) (finding that the legal basis of claims is an intentional violation of  the FCA and is not a mere breach of contract); see also Ueber, 299 F.2d at 313 (finding that the FCA was violated not by merely entering into a contract, but by the submission of fraudulent vouchers for payment). Claims under the FCA arise when a person knowingly presents or causes to be presented a false or fraudulent claim, or knowingly makes, uses or causes to be made or used a false record or statement to get a false or fraudulent claim paid.

See, e.g., Title 31 U.S.C. § 3729(a)-(c) (defining a “claim” as “any request or demand, whether under contract or otherwise, for money or property …”); United States v. Neifert-White Co., 390 U.S. 228, 233, 88 S.Ct. 959, 19 L.Ed.2d 1061 (1968) (“This remedial statute reaches beyond ‘claims’ which might be legally enforced to [include] all fraudulent attempts to cause the government to pay out sums of money.”); McLeod, 721 F.2d at 284-85 (concluding that a “knowing endorsement” of a mistakenly issued Treasury check is a false claim). As we concluded above, the appropriate
reading of the [High Value Items Clause] is one that is consistent with the plain language of both the HVIC itself and the FCA. Since claims brought under the FCA are not contract-based claims or dependent upon the degree of negligence involved, the claims are unimpaired by contractual limitations on liability.

With evidence of overpayment of the McIntosh claim demonstrated in the recent hearing and USAA’s outright admission of paying wind damage from NFIP funds, it seems the only question is will the Attorney General do his job.

31 U.S.C. § 3729. The Attorney General’s authority over FCA matters is exclusive …United States v. Woodbury,359 F.2d at 376-77 (assuming arguendo that the Government was a party to an agreement that compromised contractual claims, such agreement could not be construed as compromising, settling, or releasing claims under the FCA and it is “doubtful” that a contracting agency has any authority to compromise those claims); United States ex rel. Mayman v. Martin Marietta, 894 F.
Supp. 218 (D. Md. 1995) (accord and satisfaction did not waive Government’s fraud and FCA claims; “an accord and satisfaction is enforceable only to the extent that the parties have authority to settle disputes . . . The Government’s contracting office for this contract had no authority to settle fraud claims”).


I almost forgot the Branch update.  Consistent with direction from Judge Vance, the defendants, with agreement from all parties including the plaintiffs, have filed an Order for the Preservation of Documents

Aside from learning such orders are appropriate in cases with electronic discovery, I found a great resource with a lot of information on related cases, including one where the court granted a motion to compel and ordered the appointment of an independent expert to retrieve any deleted responsive files from the Defendant’s computer. Check out the Electronic Discovery Law blog.