Triple Canopy Case | West Palm Beach False Claims Act
The U.S. Supreme Court will consider Triple Canopy, Inc.’s petition for a writ of certiorari this week for review of the Fourth Circuit’s decision in U.S. ex rel. Badr v. Triple Canopy, Inc. The case that wades into the thorny issue of “implied certifications.”
In Triple Canopy, the federal government awarded a fixed price contract to Triple Canopy to provide security services at an airbase in Iraq. The “task order” setting forth Triple Canopy’s requirements in fulfilling the contract required that each guard hired pass a marksmanship test. Neither the “task order” nor any other document conditioned payment on passing the marksmanship test.
Triple Canopy hired 332 Ugandan guards to deploy at Al Asad Airbase for which it was providing security. When the guards arrived in Iraq, Triple Canopy’s supervisors discovered that none of the guards could pass the marksmanship test. Nonplussed, Triple Canopy continued to use the guards to provide security. To cover their tracks, Triple Canopy’s employees created fake documentation showing passing scores for each of the Ugandan guards. Over a one year period, Triple Canopy submitted over $4 million in invoices for providing services at Al Asad, and the contract was not renewed.
Omar Badr, a Triple Canopy employee, brought a qui tam action against Triple Canopy, and the government intervened. (Badr also brought claims related to other airbases, but these were dismissed under Rule 9(b).) The district court dismissed the government’s complaint, finding that the government did not plead a demand for payment with an objectively false statement.
The Fourth Circuit reversed. The court noted that a claim may be false when it “impliedly certifies compliance with a material contractual condition.” Thus, the court held, “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.’” Because the government pled sufficient facts showing materiality, including but not limited to the allegation that Triple Canopy created fake scorecards for the Ugandan guards, the government’s claims must be reinstated.
The court rejected the prevailing view in other circuit courts that an implied certification gives rise to liability only when the contractual (or statutory) requirement is an express condition of payment. This view, originating in the Second Circuit’s opinion in Mikes v. Straus, 274 F.3d 687 (2d Cir. 2001), has been adopted by the Second, Third, Fifth, Sixth, Ninth, and Tenth Circuits. Only the First Circuit and D.C. Circuit (and now the Fourth Circuit) have adopted the looser “materiality” standard.
In petitioning for a writ of certiorari, Triple Canopy is challenging the minority view of an “implied certification,” in other words, the idea that knowing noncompliance with a “material” contractual term is sufficient for a False Claims Act violation. Specifically, Triple Canopy seeks review of the circuit split and endorsement of the majority view that an “implied certification” is actionable only when a defendant fails to comply with an express condition of payment set forth in a statute, regulation, or contract.
More fundamentally, Triple Canopy is asking the Court to review “the underlying legitimacy of the implied certification theory of liability itself.” If the Court were to find that “implied certifications” were not actionable false claims, it could significantly hamper the government’s ability to police Medicare and Medicaid fraud. Many “false claims” in the healthcare context are “implied certifications.” For instance, a Medicare claim submitted by a provider in violation of the Anti-Kickback Statute is premised on the “implied certification” that the claim complies with that statute. With these claims, the claim itself is facially truthful (i.e., the service billed was actually rendered), but the claim was a product of an illicit kickback. If Triple Canopy’s argument were successful before the Supreme Court, such violations of the Anti-Kickback Statute would be extremely difficult to prove.