Opinion ID: 158481
Heading Depth: 3
Heading Rank: 1

Heading: Implied False Certification Claims

Text: 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.