Court Opinion

ID: 2767614
Source: CourtListenerOpinion
Date Created: 2015-01-08 20:00:51.469423+00
Date Added: 2024-06-11T11:27:31.576056
License: Public Domain

PUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                             No. 13-2190

UNITED STATES OF AMERICA,

                Intervenor/Plaintiff – Appellant,

          and

UNITED STATES ex rel. OMAR BADR,

                Plaintiff,

          v.

TRIPLE CANOPY, INC.,

                Defendant – Appellee.

                             No. 13-2191

UNITED STATES ex rel. OMAR BADR,

                Plaintiff – Appellant,

          v.

TRIPLE CANOPY, INC.,

                Defendant – Appellee.

Appeals from the United States District Court for the Eastern
District of Virginia, at Alexandria. Gerald Bruce Lee, District
Judge. (1:11-cv-00288-GBL-JFA)
Argued:   October 30, 2014             Decided:   January 8, 2015

Before SHEDD, AGEE, and WYNN, Circuit Judges.

Affirmed in part, reversed in part, and remanded by published
opinion. Judge Shedd wrote the opinion, in which Judge Agee and
Judge Wynn joined.

ARGUED: Charles W. Scarborough, UNITED STATES DEPARTMENT OF
JUSTICE, Washington, D.C.; Earl N. Mayfield, III, DAY & JOHNS,
PLLC, Fairfax, Virginia, for Appellants. Tara Melissa Lee, DLA
PIPER LLP (US), Reston, Virginia, for Appellee.       ON BRIEF:
Stuart F. Delery, Assistant Attorney General, Joyce Branda,
Acting Assistant Attorney General, Michael S. Raab, Civil
Division, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.;
Dana J. Boente, Acting United States Attorney, Richard W.
Sponseller, Assistant United States Attorney, Peter S. Hyun,
Assistant United States Attorney, OFFICE OF THE UNITED STATES
ATTORNEY, Alexandria, Virginia, for Appellant United States of
America. Paul A. Prados, Milt C. Johns, Christopher M. Day, DAY
& JOHNS, PLLC, Fairfax, Virginia, for Appellant Omar Badr.
Joseph C. Davis, Reston, Virginia, Paul D. Schmitt, DLA PIPER
LLP (US), Washington, D.C., for Appellee.

                                2
SHEDD, Circuit Judge:

        The Government appeals the district court’s dismissal of

Counts I and II of its complaint under the False Claims Act

(FCA)        against       Triple      Canopy,       Inc.   Omar    Badr,         the   original

relator, also appeals the dismissal of his complaint — including

four        additional          FCA   counts     (Counts     II-V)      —    against       Triple

Canopy. For the following reasons, we conclude that the district

court correctly dismissed Counts II-V of Badr’s complaint, but

erred        in    dismissing         Counts     I    and   II     of    the       Government’s

complaint.

                                                 I.

       In June 2009, the Government awarded a firm-fixed price

contract to Triple Canopy to provide security services at the Al

Asad Airbase, the second largest airbase in Iraq. 1 Triple Canopy

was    one        of    several       security    firms     awarded         the    Theatre-Wide

Internal          Security        Services       contract;       under       that       contract,

security at specific locations was governed by individual Task

Orders. The Task Order for Al Asad was TO-11.

        Under          TO-11,    Triple    Canopy      agreed      to   provide         “internal

security services” at Al Asad and to “supplement and augment

        1
       Because this appeal stems from the grant of a motion to
dismiss, we accept as true all well-pled facts in the complaint
and construe them in the light most favorable to the Government
and Badr. Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc.,
591 F.3d 250, 255 (4th Cir. 2009).

                                                  3
security      operations.”        (J.A.     98).        These    services     included

“providing internal operations at entry control points, internal

roving      patrols,”    and     “prevent[ing]          unauthorized    access”      by

enforcing “security rules and regulations regarding authorized

access to [Al Asad] including internal check points.” (J.A. 98).

TO-11 identified 20 “responsibilities” Triple Canopy was tasked

with   in    providing    these    services,        including     typical     security

functions      such     as      repelling       attacks,        providing     escorts,

performing entrance searches, and preventing theft, as well as

ancillary services such as running background checks, checking

ammunition     lists,     and    computerizing          personnel   systems.       (J.A.

99). As relevant here, the final responsibility was to “ensure

that all employees have received initial training on the weapon

that they carry, [and] that they have qualified on a US Army

qualification course.” (J.A. 99) (marksmanship requirement). To

satisfy the marksmanship requirement, employees had to score a

minimum of 23 rounds out of 40 from a distance of 25 meters.

Qualifying scorecards for the guards were to be maintained in

their respective personnel files for one year. Nothing in TO-11

expressly       conditioned        payment         on     compliance        with    the

responsibilities.

       To   fulfill     TO-11,    Triple    Canopy       hired   approximately       332

Ugandan guards to serve at Al Asad under the supervision of 18

Americans. The guards’ personnel files indicate that they met

                                            4
the   qualifying         marksmanship          score      at    a    course    in   Kampala,

Uganda.     Upon       arriving      at    the    base,       however,    Triple    Canopy’s

supervisors learned that the guards lacked the ability to “zero”

their rifles and were unable to satisfy the qualifying score of

23    on    the       marksmanship        course.       Thus,       shortly    after     their

arrival, Triple Canopy supervisors were aware that the Ugandans

could      not       satisfy    the       final       responsibility      of    TO-11:     the

marksmanship requirement. Nonetheless, Triple Canopy submitted

its monthly invoices for the guards. After a failed training

attempt,         a    Triple        Canopy    supervisor            directed   that      false

scorecard sheets be created for the guards and placed in their

personnel         files.       Because       there      was     attrition,      replacement

Ugandan guards arrived at Al Asad during the year. These guards

were also unable to satisfy the marksmanship requirement, and

consequently additional false scorecards were created.

      In May 2010, toward the end of the contract, Triple Canopy

attempted        to    have    40    Ugandan      guards       qualify    in   marksmanship

before leaving for vacation. None could do so. A Triple Canopy

supervisor ordered Omar Badr, a Triple Canopy medic, to prepare

false scorecards for the guards, reflecting scores of 30-31 for

male guards and 24-26 for the female guards. Triple Canopy’s

site manager signed these new scorecards and post-dated them,

showing that the guards qualified in June 2010.

                                                  5
       TO-11    was    in   effect      for       one    year,     and    Triple       Canopy

presented 12 monthly invoices for guard services during that

time. Each invoice listed the number of guards in service for

that month; the term “guard” was undefined. Pursuant to TO-11, a

contracting      officer      representative         (COR)       was    “responsible        for

acceptance      of    the   services    [Triple          Canopy]       performed.”      (J.A.

41.)   The     COR    was   appointed    by       the        Government   and       confirmed

acceptance      of    Triple     Canopy’s         guard        services       by   filing    a

Material Inspection and Receiving Report (DD-250) Form. (J.A.

41). The DD-250 required the COR to accept the services if they

“conform[ed] to contract” and to sign the form if the services

provided “were received in apparent good condition.” (J.A. 73).

The COR completed twelve DD-250 forms, none of which included

any certification or endorsement from Triple Canopy. In total,

Triple Canopy submitted invoices totaling $4,436,733.12 for the

Ugandan guards—a rate of $1,100 per month for each guard. Triple

Canopy    did   not    receive    a    renewal          of    TO-11,    and    the    Ugandan

guards were thereafter dispatched to four other contract sites

around Iraq: Cobra, Kalsue, Delta, and Basra.

       Badr eventually instituted a qui tam action under the FCA

against Triple Canopy in the Eastern District of Virginia. Badr

alleged five false claims counts: Al Asad (Count I) and Cobra,

Kalsue,      Basra,     and     Delta     (Counts             II-V).     The       Government

intervened on the Al Asad count and filed an amended complaint

                                              6
alleging that Triple Canopy knowingly presented false claims, in

violation of 31 U.S.C. § 3729(a)(1)(A) (Count I), and caused the

creation    of    a       false   record   material   to     a    false   claim,   in

violation    of       §    3729(a)(1)(B)    (Count    II).       Specifically,     the

Government alleged that Triple Canopy knew the guards did not

satisfy TO-11’s marksmanship requirement but nonetheless “billed

the Government the full price for each and every one of its

unqualified guards” and “falsified documents in its files to

show that the unqualified guards each qualified as a ‘Marksman’

on a U.S. Army Qualification course.” (J.A. 24). The Government

also brought several common law claims.

     The    district         court   granted    Triple     Canopy’s       motion    to

dismiss the FCA claims. United States ex rel. Badr v. Triple

Canopy, Inc., 950 F.Supp.2d 888 (E.D. Va. 2013). The court first

dismissed Count I because the Government failed to plead that

Triple Canopy submitted a demand for payment that contained an

objectively false statement. Next, the court dismissed Count II

because the Government (1) failed to allege a false claim and

(2) failed to allege that the COR ever reviewed the scorecards.

Finally, the court dismissed Counts II-V in Badr’s complaint

because he failed to plead with particularity the facts giving

rise to the claims. The court also dismissed Count I of Badr’s

complaint, concluding that Badr lacked standing to press that

claim because of the Government’s intervention. The court later

                                           7
dismissed the Government’s remaining common law claims. 2 Both the

Government and Badr filed timely appeals.

                                         II.

      We   review   de    novo    the   district       court’s    dismissal   of   a

complaint for failure to state a claim under Federal Rule of

Civil Procedure 12(b)(6). United States ex rel. Rostholder v.

Omnicare, Inc., 745 F.3d 694, 700 (4th Cir. 2014). To survive a

motion to dismiss under the rule, a complaint must “state a

claim to relief that is plausible on its face.” Ashcroft v.

Iqbal,     556   U.S.    662,    678    (2009)    (internal      quotation    marks

omitted). Facts that are “merely consistent with” liability do

not   establish     a    plausible      claim    for    relief.    Id.   (internal

quotation marks omitted).

      In addition, claims under the FCA “must also meet the more

stringent ‘particularity’ requirement of Federal Rule of Civil

Procedure 9(b).” United States ex rel. Ahumada v. NISH, 756 F.3d

      2
       The district court dismissed each of these counts without
prejudice. We requested the parties to brief whether the orders
are appealable under Domino Sugar Corp. v. Sugar Workers Local
Union 392, 10 F.3d 1064, 1066-67 (4th Cir. 1993) (holding
dismissal “without prejudice” is not an appealable order if the
“plaintiff could save his action by merely amending his
complaint”). Pursuant to Chao v. Rivendell Woods, Inc., 415 F.3d
342 (4th Cir. 2005), both the Government and Badr have elected
to “stand” on their complaints and “waived the right to later
amend unless we determine that the interests of justice
require[]   amendment.”  Id.   at   345. Accordingly,   we  have
jurisdiction to hear these appeals.

                                          8
268,    280       (4th    Cir.        2014).      Rule    9(b)     requires      that      “an    FCA

plaintiff         must,    at     a    minimum,         describe    the    time,     place,       and

contents of the false representations, as well as the identity

of the person making the misrepresentation and what he obtained

thereby.” United States ex rel. Wilson v. Kellogg Brown & Root,

Inc.,   525       F.3d     370,       379    (4th      Cir.     2008)    (internal       quotation

marks       omitted).          Imposing        this      requirement       serves        to     deter

“fishing       expeditions.”             United          States    ex     rel.      Harrison       v.

Westinghouse Savannah River Co., 176 F.3d 776, 789 (4th Cir.

1999) (Harrison I).

                                                  III.

                                                    A.

       Section 3729(a)(1)(A) prohibits any person from knowingly

“caus[ing]         to     be    presented”          to    the     Government     a       “false    or

fraudulent claim for payment.” 31 U.S.C. § 3729(a)(1)(A). To

prove a false claim, a plaintiff must allege four elements: (1)

a false statement or fraudulent course of conduct; (2) made with

the    requisite         scienter;          (3)    that     is    material;      and      (4)    that

results in a claim to the Government. United States ex rel.

Harrison v. Westinghouse Savannah River Co., 352 F.3d 908, 913

(4th Cir. 2003) (Harrison II). A false statement is material if

it    has    “a    natural        tendency        to     influence,       or   be    capable       of

influencing,”            the    Government’s            decision    to    pay.      31    U.S.C.    §

3729(b)(4). Scienter under the FCA encompasses actual knowledge,

                                                    9
deliberate indifference, and reckless disregard, but does not

require     proof    of   specific   intent       to    defraud.      31   U.S.C.    §

3729(b)(1).

      The phrase “false or fraudulent claim” should be “construed

broadly,” Harrison I, 176 F.3d at 788, “to reach all types of

fraud,    without     qualification,      that    might    result     in   financial

loss to the Government,” United States v. Neifert-White Co., 390

U.S. 228, 232 (1968). Liability thus attaches “any time a false

statement is made in a transaction involving a call on the U.S.

fisc.” Harrison I, 176 F.3d at 788.

      The district court determined that Count I failed to state

a claim because the Government did not allege the first element,

a   false   statement     or    fraudulent       course    of    conduct.    In     the

court’s view, the Government “failed to sufficiently plead that

[Triple Canopy] submitted a demand for payment containing an

objectively false statement.” Triple Canopy, 950 F.Supp.2d at

890. The court reached this determination by reasoning that the

Government        never   alleged    that      Triple      Canopy     “invoiced      a

fraudulent number of guards or billed for a fraudulent sum of

money.” Id. at 896. The Government argues that Triple Canopy

submitted false claims because its monthly invoices billed the

Government    for     guard    services    although       the    company    knew   its

guards      had      failed     to   comply        with         one   of     TO-11’s

responsibilities, the marksmanship requirement.

                                          10
      We have previously recognized that a false claims plaintiff

cannot   “shoehorn            what   is,     in    essence,     a   breach         of    contract

action into a claim that is cognizable under the” FCA. Wilson,

525   F.3d    at       373.    See   also     United    States        ex   rel.         Steury    v.

Cardinal Health, Inc., 625 F.3d 262, 268 (5th Cir. 2010) (noting

that courts “seek[] to maintain a crucial distinction between

punitive      FCA      liability       and    ordinary        breaches       of     contract”)

(internal quotation marks omitted). In Wilson, we concluded that

two qui tam relators failed to plead a false claim when the

claim was based on “mere allegations of poor and inefficient

management        of    contractual         duties.”        Wilson,    525     F.3d       at     377

(internal quotation marks omitted). “An FCA relator cannot base

a fraud claim on nothing more than his own interpretation of an

imprecise     contractual            provision,”       id.    at    378,      we    explained,

particularly            where         the         Government          never         “expressed

dissatisfaction” with the contract’s performance, id. at 377.

See also Harrison I, 176 F.3d at 792 (noting fraud is limited to

“expressions of fact which (1) admit of being adjudged true or

false    in   a     way       that   (2)     admit     of    empirical       verification”)

(internal quotation marks omitted).

      We reiterated the line between breaches of contract and FCA

claims in United States ex rel. Owens v. First Kuwaiti General

Trading & Contracting Co., 612 F.3d 724, 734 (4th Cir. 2010). In

Owens, we rejected claims from a qui tam relator regarding the

                                                  11
construction         of    the    United       States    embassy         in   Baghdad.       While

noting that some of the construction work required remediation,

we nonetheless explained that “[t]o support an FCA claim, there

needs    to     be    something          more    than        the    usual      back-and-forth

communication        between       the      government        and    the      contractor      over

this or that construction defect and this or that corrective

measure.”     Id.     at    729.       We   summarized        the    relators’      claims        as

“garden-variety issues of contractual performance” involving “a

series of complex contracts pertaining to a construction project

of massive scale.” Id. at 734. We expressly recognized that the

purposes of the FCA were not served by imposing liability on

“honest disagreements, routine adjustments and corrections, and

sincere and comparatively minor oversights,” “particularly when

the party invoking [the FCA] is an uninjured third party.” Id.

     While we have guarded against turning what is essentially a

breach of contract into an FCA violation, we have also continued

to recognize that the FCA is “intended to protect the treasury

against the claims of unscrupulous contractors, and it must be

construed in that light.” Id. To satisfy this goal, courts have

recognized that “a claim for payment is false when it rests on a

false    representation           of    compliance       with       an   applicable      .    .   .

contractual      term.”          United     States      v.    Sci.       Applications        Int’l

Corp.,    626    F.3d       1257,       1266    (D.C.        Cir.    2010)      (SAIC).       Such

“[f]alse certifications” are “either express or implied.” Id.

                                                12
While    we    label      the     claim        in     this         case    as    “implied

certification,” we note that this label simply recognizes one of

the “variety of ways” in which a claim can be false. Harrison I,

176 F.3d at 786. 3

     “Courts    infer     implied    certifications            from       silence   ‘where

certification    was      a     prerequisite        to       the    government      action

sought.’”     SAIC, 626 F.3d at 1266 (quoting United States ex rel.

Siewick v. Jamison Sci. & Eng’g, Inc., 214 F.3d 1372, 1376 (D.C.

Cir. 2000)). Recognizing that claims can be false when a party

impliedly     certifies       compliance       with      a     material      contractual

condition “gives effect to Congress’ expressly stated purpose

that the FCA should ‘reach all fraudulent attempts to cause the

Government to pay [out] sums of money or to deliver property or

     3
       The use of “judicially created formal categories” for
false claims is of “relatively recent vintage,” and rigid use of
such labels can “do more to obscure than clarify” the scope of
the FCA. United States ex rel. Hutcheson v. Blackstone Medical,
Inc., 647 F.3d 377, 385 (1st Cir. 2011). Our focus, regardless
of the label used, remains on whether the Government has alleged
a false or fraudulent claim. In Harrison I, we briefly noted the
existence of implied certification claims and, while mentioning
such claims might be “questionable” in the circuit, reserved
ruling on their viability. Harrison I, 176 F.3d at 788 n.8.
Since Harrison I, however, the weight of authority has shifted
significantly in favor of recognizing this category of claims at
least in some instances. See United States ex rel. Wilkins v.
United Health Grp., Inc., 659 F.3d 295, 305-06 (3d Cir. 2011)
(collecting cases from the First, Second, Sixth, Ninth, Tenth,
Eleventh, and D.C. Circuits). For the reasons expressed infra,
we agree that contractual implied certification claims can be
viable under the FCA in the appropriate circumstances.

                                          13
services,’”      United    States   ex    rel.   Wilkins    v.     United    Health

Group, Inc., 659 F.3d 295, 306 (3d Cir. 2011) (quoting S.Rep.

No. 99–345, at 9 (1986)), a purpose we explicitly recognized in

Harrison    I.   An   example   provided       by   the   D.C.     Circuit   helps

explain the benefits of recognizing this theory:

     Consider a company that contracts with the government
     to supply gasoline with an octane rating of ninety-one
     or higher. The contract provides that the government
     will pay the contractor on a monthly basis but nowhere
     states that supplying gasoline of the specified octane
     is a precondition of payment. Notwithstanding the
     contract’s ninety-one octane requirement, the company
     knowingly supplies gasoline that has an octane rating
     of only eighty-seven and fails to disclose this
     discrepancy to the government. The company then
     submits pre-printed monthly invoice forms supplied by
     the government—forms that ask the contractor to
     specify the amount of gasoline supplied during the
     month but nowhere require it to certify that the
     gasoline is at least ninety-one octane. So long as the
     government can show that supplying gasoline at the
     specified octane level was a material requirement of
     the contract, no one would doubt that the monthly
     invoice qualifies as a false claim under the FCA
     despite the fact that neither the contract nor the
     invoice expressly stated that monthly payments were
     conditioned on complying with the required octane
     level.

     SAIC, 626 F.3d at 1269.

     Accordingly, we hold that 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

                                         14
contractual      requirements.”         Id. 4    The   “pertinent     inquiry”     is

“whether,      through   the    act     of      submitting   a   claim,   a    payee

knowingly and falsely implied that it was entitled to payment.”

United States ex rel. Lemmon v. Envirocare of Utah, Inc., 614

F.3d 1163, 1169 (10th Cir. 2010). We appreciate that this theory

“is prone to abuse” by parties seeking “to turn the violation of

minor contractual provisions into an FCA action.” SAIC, 626 F.3d

at   1270. 5    The   best     manner     for     continuing     to   ensure     that

      4
        To that end, we note there are several key distinctions
between this case and what we viewed as garden-variety breaches
of contract in Owens and Wilson. First, this case does not
involve uninjured third parties making claims against their
former employers or contracts under which the Government does
not “express[] dissatisfaction.” To the contrary, the Government
has clearly expressed its displeasure with Triple Canopy’s
actions by prosecuting this action. In addition, this is not a
case involving subjective interpretations of vague contractual
language. In Wilson we noted that the relators “do not claim
that the maintenance provisions . . . set forth anything
resembling a specific maintenance program.” Wilson, 525 F.3d at
377. Absent such specific language, the relators could not prove
an “objective falsehood.” Id. Here, the Government has presented
an   objective  falsehood—the  marksmanship  requirement   is  a
specific, objective, requirement that Triple Canopy’s guards did
not meet.
      5
       Triple Canopy argues that implied representations can give
rise to liability only when the condition is expressly
designated as a condition for payment. “Of course, nothing in
the statute’s language specifically requires such a rule,” and
we decline to impose Triple Canopy’s proposed requirement. SAIC,
626 F.3d at 1268. In practice, the Government might have a
difficult time proving its case without an express contractual
provision. Because the FCA violations must be “knowing,” the
Government must establish that both the contractor and the
Government understood that the violation of a particular
contractual provision would foreclose payment. In addition,
(Continued)
                                          15
plaintiffs cannot shoehorn a breach of contract claim into an

FCA claim is “strict enforcement of the Act’s materiality and

scienter    requirements.”       Id.;   see       also    United    States       ex    rel.

Hutcheson v. Blackstone Med., Inc., 647 F.3d 377, 388 (1st Cir.

2011)     (same).    In     addition,   parties          who    engage     in    abusive

litigation remain subject to appropriate sanctions, whether in

the context of the FCA or otherwise.

                                        B.

        Applying    these    standards,      we    readily      conclude        that   the

Government has sufficiently alleged a false claim for purposes

of Rule 12(b)(6) and Rule 9(b). TO-11 lists the marksmanship

requirement    as    a    “responsibility”        Triple       Canopy    must    fulfill

under    the   contract.      The   complaint       contains       an    abundance      of

allegations that Triple Canopy did not satisfy this requirement

and,     instead,    undertook      a   fraudulent         scheme       that    included

falsifying     records      to   obscure   its      failure.       The    Government’s

complaint also properly alleges that Triple Canopy’s supervisors

had actual knowledge of the Ugandan guards’ failure to satisfy

because the violation must be material, not every part of a
contract can be assumed, as a matter of law, to provide a
condition of payment. Cf. Mann v. Heckler & Koch Def., Inc., 630
F.3d 338, 346 (4th Cir. 2010) (finding no fraud or FCA violation
even though contractor’s actions “may have violated federal
bidding regulations”).

                                        16
the    marksmanship           requirement            and        ordered       the        scorecards’

falsification.

       Turning to materiality, in implied certification cases this

element      operates         to     protect         contractors         from       “onerous       and

unforeseen FCA liability as the result of noncompliance with any

of    potentially          hundreds       of   legal       requirements”            in    contracts,

because “[p]ayment requests by a contractor who has violated

minor contractual provisions that are merely ancillary to the

parties’ bargain” do not give rise to liability under the FCA.

SAIC, 626 F.3d at 1271. To establish materiality, the Government

must    allege    the        false       statement        had    “a    natural       tendency       to

influence,       or     be     capable         of    influencing,”            the    Government’s

decision to pay. 31 U.S.C. § 3729(b)(4). “Express contractual

language may ‘constitute dispositive evidence of materiality,’

but    materiality          may    be     established           in    other      ways,     ‘such    as

through      testimony            demonstrating           that       both     parties       to     the

contract understood that payment was conditional on compliance

with   the    requirement           at    issue.’”         Hutcheson,         647    F.3d    at    394

(quoting SAIC, 626 F.3d at 1269).

       The Government has sufficiently pled materiality under this

standard.      First,         common       sense          strongly       suggests         that     the

Government’s decision to pay a contractor for providing base

security     in       an     active      combat          zone    would      be    influenced        by

knowledge that the guards could not, for lack of a better term,

                                                    17
shoot straight. In addition, Triple Canopy’s actions in covering

up the guards’ failure to satisfy the marksmanship requirement

suggests its materiality. If Triple Canopy believed that the

marksmanship         requirement      was    immaterial         to    the   Government’s

decision to pay, it was unlikely to orchestrate a scheme to

falsify records on multiple occasions.

      Like     the    hypothetical         gasoline       supplier,      Triple       Canopy

agreed    to    provide        a     service       that    met       certain       objective

requirements, failed to provide that service, and continued to

bill the Government with the knowledge that it was not providing

the   contract’s       requirements.        In     addition,     Triple     Canopy      then

endeavored to cover up its failure. Distilled to its essence,

the   Government’s        claim       is    that    Triple       Canopy,       a    security

contractor with primary responsibility for ensuring the safety

of servicemen and women stationed at an airbase in a combat

zone, knowingly employed guards who were unable to use their

weapons   properly       and       presented      claims   to    the    Government       for

payment   for    those     unqualified         guards.     The       Court’s       admonition

that the FCA reaches “all types of fraud, without qualification”

is simply inconsistent with the district court’s view of the FCA

that Triple Canopy can avoid liability because nothing on the

“face” of the invoice was objectively false. Neifert-White, 390

U.S. at 232.

                                             18
       Accordingly,          because        the    Government           has     sufficiently

alleged that Triple Canopy made a material false statement with

the requisite scienter that resulted in payment, we reverse the

district     court’s        dismissal       of     Count    I    of     the     Government’s

complaint.

                                              C.

       We also reverse the district court’s dismissal of Badr as a

party to this claim. The district court, relying on an out-of-

circuit district court decision, United States ex rel. Feldman

v. City of New York, 808 F.Supp.2d 641 (S.D.N.Y. 2011), held

that     Count    I     of    Badr’s        complaint,          which     was    “virtually

indistinguishable” from the Government’s, was “superseded” and

“therefore dismissed for lack of standing.” Triple Canopy, 950

F.Supp.2d    at       895    n.1.     The    FCA     does       provide       that,   if   the

Government elects to participate in a qui tam FCA action, it

“shall    have    the       primary    responsibility            for     prosecuting       the

action, and shall not be bound by an act of the person bringing

the action.” 31 U.S.C.A. § 3730(c)(1). However, the FCA further

provides that the relator “shall have the right to continue as a

party to the action,” subject to certain limitations. Id. We

thus conclude that the district court erred in finding that Badr

lacked standing to remain as a party on Count I. On remand, the

district court is free to decide whether any of the limitations

in § 3730(c)(2) apply to Badr.

                                              19
                                        IV.

                                         A.

      We next turn to the district court’s dismissal of Count II,

the   Government’s       false    records     claim.    Section    3729(a)(1)(B)

creates liability when a contractor “knowingly makes, uses, or

causes to be made or used, a false record or statement material

to a false or fraudulent claim.” The district court dismissed

the Government’s false records claim for (1) failing to allege a

false statement and (2) failing to allege that the COR actually

reviewed the falsified scorecards. 6 The district court concluded

the scorecards were not material because the Government failed

to specifically allege that the COR reviewed them. The court’s

conclusion,         however,     misapprehends      the    FCA’s     materiality

standard.

      “[T]he materiality of the false statement turns on whether

the false statement has a natural tendency to influence agency

action    or   is    capable     of   influencing      agency   action.”   United

States ex rel. Berge v. Bd. of Tr. of Univ. of Ala., 104 F.3d

1453, 1460 (4th Cir. 1997) (internal quotation marks omitted);

see also 31         U.S.C.   §   3729(b)(4).   Materiality      focuses    on   the

      6
       Because we have already determined that the Government
adequately pled a false statement, we turn only to the question
of whether the false scorecards themselves were “material” to
the false statement.

                                         20
“potential effect of the false statement when it is made, not on

the actual effect of the false statement when it is discovered.”

Harrison     II,    352    F.3d   at    916-17    (emphasis       added).           See    also

United States ex rel. Feldman v. Van Gorp, 697 F.3d 78, 96 (2d

Cir. 2012) (holding materiality requirement is objective, not

subjective,        and    “does   not    require      evidence       that       a    program

officer relied upon the specific falsehoods proven”). In other

words, the FCA reaches government contractors who employ false

records that are capable of influencing a decision, not simply

those   who     create        records    that     actually      do      influence          the

decision. Thus, in Harrison II, we rejected the sort of “actual

effect” standard used by the district court because a government

contractor     could      never   be    held    liable    under      the       FCA    if   the

governmental entity decides that it should continue to fund the

contract, notwithstanding the fact that it knew the contractor

had made a false statement in connection with a claim. Harrison

II,   352    F.3d    at   916-17.      Along    the   same     lines,      a    contractor

should not receive a windfall and escape FCA liability if — as

the district court suggested here — a Government employee fails

to catch an otherwise material false statement. That approach

would   be    doubly      deficient:     it     would    inappropriately             require

actual reliance on the false record and import a presentment

requirement        from   §   3729(a)(1)(A)       that    is    not     present           in   §

3729(a)(1)(B). See United States ex rel. DRC, Inc. v. Custer

                                           21
Battles, LLC, 562 F.3d 295, 308 (4th Cir. 2009). In addition,

that approach “does not accomplish one of the primary purposes

of the FCA—policing the integrity of the government’s dealings

with those to whom it pays money.” Harrison II, 352 F.3d at 917.

The FCA is meant to cover “all fraudulent attempts to cause the

Government to pay out sums of money.” Neifert-White, 390 U.S. at

233. The district court thus erred in focusing on the actual

effect of the false statement rather than its potential effect.

A false record may, in the appropriate circumstances, have the

potential to influence the Government’s payment decision even if

the Government ultimately does not review the record.

                                         B.

        Applying the proper standard, we find that the Government

has properly pled materiality in Count II. The false records in

this case — the falsified scorecards — are material to the false

statement (the invoices) because they complete the fraud. The

false scorecards make the invoices appear legitimate because, in

the event the COR reviewed the guards’ personnel files, the COR

would    conclude    that      Triple    Canopy    had     complied      with    the

marksmanship        requirement.         TO-11’s      provisions          likewise

anticipated that the COR would indeed review the scorecards, as

they    offered   the   most    direct    evidence       that   Triple    Canopy’s

guards    satisfied     the     marksmanship       requirement.       The       false

scorecards were thus integral to the false statement and satisfy

                                         22
the   materiality     standard.      We      therefore    reverse    the     district

court’s dismissal of Count II of the Government’s complaint. 7

                                          V.

      Finally, we address the dismissal of Counts II-V in Badr’s

complaint.    Badr    alleged      in   those     counts   that     Triple    Canopy

submitted false claims by invoicing the Government for guard

services under four additional contracts: Cobra, Kalsue, Basra,

and Delta. The sum of Badr’s allegations on these counts is as

follows: that the Ugandan guards were “demobilized . . . and

transferred” to the four contracts while still not “qualified to

provide” security services, and that Triple Canopy was “paid by

the U.S. Government under terms similar to those under the Al

Asad Contract.”       (J.A.   15).      By   comparison,    in    support     of    his

claim     regarding    the    Al    Asad       airbase,    Badr     listed    dates,

specified the actions taken on those dates, and identified the

Triple Canopy personnel involved. See, e.g. J.A. at 14 (“Site

Manager D.B. instructed [Badr] to falsely indicate that the men

had obtained scores in the 30-31 range . . . A new Site Manager,

D.B.2.,    then   signed     the   sheets,      falsely    post-dating       them   to

      7
        Triple Canopy argues in the alternative that the
Government has failed to allege causation. Causation is likely
not required under § 3729(a)(1)(B). See Ahumada, 756 F.3d at 280
n.8. In any event, causation in this situation is no different
than materiality: if the false record had a natural tendency or
was capable of influencing agency action, then the record caused
the false claim.

                                          23
indicate that the Ugandans had qualified in the following month

of June”).

      The     district         court     correctly      dismissed          Counts   II-V     for

failing     to    comply       with     Rule    9(b).       Rule    9(b)    requires    “at    a

minimum” that Badr “describe the time, place, and contents of

the   false      representations,”             United    States      ex     rel.    Nathan    v.

Takeda Pharmaceuticals North America, Inc., 707 F.3d 451, 455-56

(4th Cir. 2013) (internal quotation marks omitted). We agree

with the district court that Badr cannot state a claim by doing

“nothing      more      than     simply        presum[ing]”         that     Triple    Canopy

submitted false claims under those contracts. Triple Canopy, 950

F.Supp.2d at 900. Badr contends that discovery may reveal the

contents of the contracts and invoices, but fraud actions that

“rest primarily on facts learned through the costly process of

discovery”       are        “precisely    what       Rule    9(b)    seeks    to    prevent.”

Wilson, 525 F.3d at 380. See also Harrison I, 176 F.3d at 789

(“The clear intent of Rule 9(b) is to eliminate fraud actions in

which   all      the    facts     are    learned       through      discovery       after    the

complaint is filed.”) (internal quotation marks omitted).

                                               VI.

      The     FCA      is    “strong     medicine       in    situations      where    strong

remedies are needed.” Owens, 612 F.3d at 726. That strong remedy

is needed when, as here, a contractor allegedly engages in a

year-long fraudulent scheme that includes falsifying records in

                                                24
personnel files for guards serving as a primary security force

on   a   United   States   airbase   in   Iraq.   Accordingly,   for   the

foregoing reasons, we reverse the district court’s dismissal of

Counts I and II of the Government’s complaint, we affirm the

dismissal of Counts II-V of Badr’s complaint, and we remand for

proceedings consistent with our opinion.

                                                       AFFIRMED IN PART,
                                                       REVERSED IN PART,
                                                            AND REMANDED

                                     25