Opinion ID: 158481
Heading Depth: 2
Heading Rank: 1

Heading: Implied and Express False Certification Claims

Text: Plaintiffs' third amended complaint asserts claims under § 3729(a)(1) and (2) of the False Claims Act. [3] The FCA covers all fraudulent attempts to cause the government to pay out sums of money. Conner, 543 F.3d at 1217 (quoting United States ex rel. Boothe v. Sun Healthcare Grp., Inc., 496 F.3d 1169, 1172 (10th Cir. 2007)). Its qui tam provisions allow an individual to sue on behalf of the government. 31 U.S.C. § 3730(b). Though the government may intervene and take over a private plaintiff's case, id. § 3730(b)(2) and (c)(3), it often declines to do so. In such instances, the private plaintiff, termed a relator, conducts the litigation and shares any recovery with the government. Id. § 3730(d). Section 3729(a)(1) imposes civil liability when a person knowingly presents, or causes to be presented to the Government a false or fraudulent claim for payment or approval.... Section 3729(a)(2) renders a party liable for knowingly mak[ing], us[ing], or caus[ing] to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government.... Violation of these provisions subjects a party to treble damages and civil penalties. Id. § 3729(a). Under § 3729(a), liability can attach when a government payee submits either a legally or factually false request for payment. Claims arising from factually false requests generally require a showing that the payee has submitted `an incorrect description of goods or services provided or a request for reimbursement for goods or services never provided.' Conner, 543 F.3d at 1217 (quoting Mikes v. Straus, 274 F.3d 687, 697 (2d Cir.2001)). Claims arising from legally false requests, on the other hand, generally require knowingly false certification of compliance with a regulation or contractual provision as a condition of payment. See id. Plaintiffs' suit rests on allegations of legal falsitythat Envirocare falsely certified compliance with, inter alia, the terms of its government contracts in seeking payment. Plaintiffs allege both that Envirocare violated a variety of state and federal regulations and that, in doing so, it violated its contractual obligations to the government. [4] See, e.g., Aplt.App. at 452, 486. Plaintiffs assert claims under the FCA based on both implied and express false certification theories. See, e.g., Aplt.App. at 458-66; See Conner, 543 F.3d at 1217; Shaw v. AAA Eng'g & Drafting Inc., 213 F.3d 519, 531 (10th Cir.2000) (recognizing that, in light of the FCA's language, structure and legislative history, § 3729(a) authorizes claims for false certification of compliance with a government contract under both implied and express false-certification theories). Claims under an express-false-certification theory arise when a payee falsely certifies compliance with a particular statute, regulation or contractual term, where compliance is a prerequisite to payment. Conner, 543 F.3d at 1217 (quoting Mikes, 274 F.3d at 698). The payee's certification need not be a literal certification, but can be any false statement that relates to a claim. Id. ; see, e.g., United States ex rel. Hendow v. Univ. of Phoenix, 461 F.3d 1166, 1172 (9th Cir.2006) (So long as the statement in question is knowingly false when made, it matters not whether it is a certification, assertion, statement, or secret handshake; False Claims liability can attach.). While express-false-certification claims may presumably arise under any subsection of § 3729(a), we have held that implied-false-certification claims can arise under § 3729(a)(1) but not under § 3729(a)(2). Shaw, 213 F.3d at 531-32. In so finding, we recognized that § 3729(a)(1) requires only the presentation of a false or fraudulent claim for payment or approval without the additional § 3729(a)(2) requirement of a false record or statement. Id. (internal quotation marks and citations omitted). Thus, claims under an implied-false-certification theory do not require courts to examine a payee's statements to the government. Rather, the analysis focuses on the underlying contracts, statutes, or regulations themselves to ascertain whether they make compliance a prerequisite to the government's payment. Conner, 543 F.3d at 1218. If a contractor knowingly violates such a condition while attempting to collect remuneration from the government, he may have submitted an impliedly false claim. Id. In this circuit, the nature of claims advanced under an implied-false-certification theory has been addressed most directly in Shaw. 213 F.3d at 531-33. In Shaw, and later in Conner, we recognized that the key attribute of implied-false-certification claimsand what most clearly differentiates them from express-false-certification claimsis that the payee's request for payment lacked an express certification. Id. Thus, we found that the pertinent inquiry for such claims is not whether a payee made an affirmative or express false statement, but whether, through the act of submitting a claim, a payee knowingly and falsely implied that it was entitled to payment. Id. at 532-33; see also Conner, 543 F.3d at 1218. Though implied claims differ from express claims, they nonetheless share some common elements, including a materiality requirement. This requirement necessitates showing that the false certification was material to the government's decision to pay out moneys to the claimant. Conner, 543 F.3d at 1219 (internal quotation marks and citations omitted). Thus, a false certificationregardless of whether it is implied or expressis actionable under the FCA only if it leads the government to make a payment which, absent the falsity, it may not have made. Id.
To state viable implied-false-certification claims, Plaintiffs' third amended complaint needed to contain sufficient factual allegations to show that Envirocare knowingly submitted legally false requests for payment to the government, that the government paid the requests and that, had the government known of the falsity, it may not have paid. While Plaintiffs were not required to prove their case in the complaint, they needed to give enough facts to show that relief was plausible. See Twombly, 550 U.S. at 553, 127 S.Ct. 1955. The third amended complaint contained sufficient factual allegations to support Plaintiffs' implied-false-certification claims. First, they documented a series of instances in which they personally observed Envirocare violate its contractual and statutory obligations. See Aplt.App. at 464-86. For the alleged violations, Plaintiffs detailed the violative activity, the regulation or contractual provision violated, the date on which the alleged violation occurred, and the Plaintiff that witnessed or, at Envirocare's direction, participated in the activity. See id. Next, Plaintiffs explained how Envirocare was aware of the violations, listing specific instances in which Plaintiffs documented and/or informed their superiors of the violations. See id. With regard to government payments, Plaintiffs provided the dates, numbers, and amounts of Envirocare's requests for payment under its contracts with the government. Id. at 456-57. Plaintiffs stated that they had reviewed all of Envirocare's requests for payment during the pertinent period and that none disclosed any violations of Envirocare's contractual or regulatory obligations. Id. at 464. Plaintiffs further alleged that each request for payment submitted during the pertinent time period was paid in full by the government. Id. Finally, addressing the materiality requirement, Plaintiffs cited specific contractual provisions under which the government, had it been aware of the violations, may have refused or reduced payment to Envirocare. Id. at 459. Plaintiffs also showed that the violations undercut the purpose of the contractsthe safe and permanent disposal of waste. See, e.g., id. at 466-68, 472-77, 482-85. Based on the contractual provisions, Plaintiffs contended that, had it been aware of the violations, the government may not have paid in full. Viewing Plaintiffs' allegations, it is difficult to discern the purported Rule 12(b)(6) deficiencies. As noted above, the district court did not mention the implied-false-certification claims. Instead, the district court's order faulted Plaintiffs for not tying the alleged incidents with an identifiable certification of regulatory compliance. Aplt.App. at 704. As explained above, implied-false-certification claims do not involvelet alone requirean explicit certification of regulatory compliance. The district court found that Plaintiffs failed to allege that the state and federal regulations require complete regulatory compliance before certification for payment. Id. Yet Plaintiffs' third amended complaint makes clear that the alleged regulatory violations also constituted material breaches of Envirocare's contractual obligations. See, e.g., Aplt.App. at 457 (Pursuant to the specific provisions of the Contracts, Envirocare agreed and was obligated to receive and dispose of contaminated materials in accordance with all applicable, relevant and appropriate federal, state and local regulations....), 486 (The numerous violations detailed in paragraphs 68-129 are all material violations of Envirocare's contracts with the U.S. Government.... None of these violations were reported to the U.S. Government as required by the contracts.). Even if Plaintiffs failed to state a claim arising directly from Envirocare's regulatory obligations, Plaintiffs' allegations provided more than enough factual detail to support their contract-based claims. Envirocare largely ignores Plaintiffs' extensively pled contract-based claims, arguing instead that numerous regulations govern waste disposal, and that, because remedies for regulatory violations abound, no claims can arise directly from its purported regulatory breaches. See Aplee. Br. at 14-18. Even if accepted as true, Envirocare's argument does little to justify the dismissal because none of Plaintiffs' claims rely exclusively on regulatory breaches. Equally unavailing is Envirocare's materiality argument. On this front, Envirocare contends that Plaintiffs' pleading failed to show that, had the alleged violations been known by the government, they would have affected the government's payment decision. Aplee. Br. at 18. But materiality does not require a plaintiff to show conclusively that, were it aware of the falsity, the government would not have paid. Rather, it requires only a showing that the government may not have paid. See Conner, 543 F.3d at 1219-20. Here, as Plaintiffs point out, the pertinent contracts explicitly state that if Envirocare fails to live up to all of its contractual obligations the government might refuse or reduce payment. Taken in context, such allegations are enough. Because Plaintiffs sufficiently pled their contract-based claims, the district court's Rule 12(b)(6) dismissal was in error.
Plaintiffs' third amended complaint sufficiently alleges that Envirocare knowingly submitted legally false requests for payment to the government and that the government paid the requests. Thus, in order to sustain their express-false-certification claims, Plaintiffs need only to have allegedwith sufficient factual basis-that the requests contained a false statement and that the statement was material to the government's decision to pay. Plaintiffs' third amended complaint addresses the false-statement requirement by pointing to the payment requests' certification that the payments requested were only for work performed in accordance with the specifications, terms and conditions of the contract.... Aplt.App. at 462. Because Envirocare's work was not performed in accordance with the contractual requirements, Plaintiffs allege, the certifications were false. Envirocare contends that the FCA does not apply because the language of the certification fails to certify compliance with any specific contractual term. See Aplee. Br. 30-31, 33. Envirocare relies on language in Conner regarding certification of compliance with a  particular ... contractual term. Conner, 543 F.3d at 1217 (quoting Mikes, 274 F.3d at 698) (emphasis added). So read, this language would preclude claims whenever a payee certifies compliance with all contractual requirements rather than with a single, specific contractual requirement. [5] Such a reading runs counter to the plain language of § 3792(a)(2), the FCA's broad application to all fraudulent attempts to cause the Government to pay out sums of money, United States v. Neifert-White Co., 390 U.S. 228, 233, 88 S.Ct. 959, 19 L.Ed.2d 1061 (1968), the legislative history of the FCA, see, e.g., S.Rep. No. 99-345 (noting that the FCA covers any claim for goods or services ... provided in violation of contract terms ....), and our recognition in Conner that an express-false-certification claim can arise from any false statement that relates to a claim, Conner, 543 F.3d at 1217. We decline to read this language in Conner as exclusive, i.e., the only way to raise an express-false-certification claim, and thus find that requirements of Rule 12(b)(6) have been satisfied.