Top Gov't Contracts Cases Of 2018 So Far

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1 Portfolio Media. Inc. 111 West 19 th Street, 5th Floor New York, NY Phone: Fax: Top Gov't Contracts Cases Of 2018 So Far By Daniel Wilson Law360 (July 17, 2018, 10:58 PM EDT) -- The first half of 2018 has seen a number of important legal decisions handed down for federal contractors, with important developments on issues ranging from the materiality of claims and the statute of limitations under the False Claims Act to the jurisdiction of the Court of Federal Claims and the use of Other Transaction Authority. Both district courts and circuit courts have weighed in on a number of important FCA issues this year, as the shakeup to the FCA landscape from the U.S. Supreme Court s important 2016 Escobar decision and continued uncertainty over certain phrases within that decision continues to be a prominent issue for government contractors and their attorneys. But consequential decisions have not been limited to FCA cases, with important rulings touching on the Court of Federal Claims' and the U.S. Government Accountability Office's jurisdiction also handed down in the first half of the year. Here are some of the more prominent cases and the relevant underlying issues that have made an impact on government contracting law so far in The GAO Affirms it Can Review Other Transaction Authority Deals In a May decision, the GAO sustained a protest by Oracle America Inc. over a deal awarded by the U.S. Army to support the pending transition of legacy U.S. Department of Defense software to a commercial cloud system. The decision involved the Army's use of an Other Transaction Authority deal, a key point for two reasons. First of all, OTAs a type of prototyping deal are increasingly being used by the military as it seeks to improve its outreach to commercial technology companies, in order to get better access to cutting edge technology as U.S. rivalries with China and Russia heat up. Secondly, OTAs, which are intended to cut through typical acquisition rules and requirements to allow for rapid prototyping work, aren't considered a procurement a factor that would normally put a dispute outside the jurisdiction of the GAO. But although OTAs aren't procurements, the GAO noted that its authority does extend to disputes alleging the improper use of non-procurement vehicles for procuring goods or services, including OTAs, ultimately finding that the Army did not follow the contractual and legal requirements for transitioning from the initial OTA that had been awarded into a production contract.

2 While not the first time the GAO has addressed an OTA, it was the first time it had sustained an OTArelated protest, and the decision has reinforced for agencies and contractors that the claimed misuse of an OTA is an issue open to review in certain circumstances, and that agencies must be careful to fully follow the terms of their OTAs, attorneys said. "That s a particularly noteworthy decision first and foremost you don't see very many decisions involving OTA, so that in and of itself caught the procurement community's eye," Bradley Arant Boult Cummings LLP partner Aron Beezley said. "Also, OTA is being used with increasing frequency, so I think it's very likely we'll see more bid protest decisions involving it." The dispute was also notable for drawing a rare public GAO response to criticism of its decision, with its managing associate general counsel for procurement law Kenneth Patton recently hitting back at comments by experienced defense acquisition expert Bill Greenwalt. Greenwalt had said the "outrageous" decision had effectively negated the benefits to the DOD of using OTAs, cutting off the DOD's "ability to access Silicon Valley and the rest of leading edge commercial innovators in the U.S. and the free world," and handing the military technology lead to chief rival China. But in Patton's eyes, the decision had neither overreached the GAO's authority nor created new law or policy regarding the GAO's jurisdiction over OTAs, but merely applied its existing authority. "GAO of course fully supports agencies using their OTA as long as they satisfy the statutory conditions granting such authority," he said. The case is Matter of: Oracle America Inc., file number B , before the U.S. Government Accountability Office. Limits to Court of Federal Claims Jurisdiction In a March ruling, the Federal Circuit declined to overturn the U.S. General Services Administration's imposition of a rent cap on a leasing proposal for the FBI's Cleveland field office. The dispute did not involve a high profile or particularly lucrative contract, but a particular aspect of the ruling has set alarm bells ringing for a number of government contracts attorneys specifically, a finding that claims involving 40 U.S. Code Section 3307, a statute that requires congressional approval before appropriations can be made for certain federal construction and leasing contracts, cannot be heard by the Court of Federal Claims. The panel noted that the claims court has jurisdiction over statutes and regulations "in connection with a procurement or proposed procurement." But the congressional approval law was an "appropriations statute," not a "procurement statute," it found, saying that to rule otherwise would open up "every appropriations bill and rider" to challenges at the claims court. In doing so, the circuit court had effectively narrowed the otherwise broad scope the claims court had previously set out regarding its authority to hear any challenge "in connection with" a procurement, under any statute or regulation as part of its jurisdiction under the Tucker Act which waives sovereign immunity for contract claims several attorneys said.

3 McCarter & English LLP government contracts practice group co-leader Franklin Turner questioned the decision, saying it appeared to come "out of thin air" without much empirical analysis or fidelity to the intent of the Tucker Act. "I think [the decision] effected a really unwarranted narrowing of the Tucker Act," he said. "If you look at the Tucker Act... it says that the Court of Federal Claims does have jurisdiction when considering challenges in connection with a procurement, and I think that the acquisition at issue in that case was clearly 'in connection with' a procurement." Not everyone is as concerned about the practical effect of the ruling, however. "Any time that the Federal Circuit addresses jurisdictional issues with respect to bid protests or contract claims, it's a big deal [and] when the Federal Circuit's opinion was first issued in that case, some commentators were concerned that the decision would have the effect of narrowing the Court of Federal Claims' bid protest jurisdiction," Beezley said. "But I think the prevailing view now is that the Federal Circuit's holding in that case applies to a very, very narrow set of circumstances." That wasn't the only decision the Federal Circuit has made so far this year touching on the Court of Federal Claims' jurisdiction. Another circuit court panel in January, as part of a rare appellate ruling on a bid protest, overturned an injunction imposed by the claims court against the Army's plan to use Airbus UH-72A Lakota training helicopters as its sole institutional training model. A related "execution order" formally designating the Lakota as the Army training helicopter did not direct "or even discuss" procuring Lakotas, instead only contemplating the use of existing assets, meaning it wasn't a procurement decision open to the jurisdiction of the claims court, the panel found. The cases are Cleveland Assets LLC v. U.S., case number and Agustawestland North America v. U.S., case number , both in the U.S. Court of Appeals for the Federal Circuit. Courts Continue to Wrestle with Materiality Post-Escobar In one of the most consequential FCA decisions ever made, the Supreme Court in Escobar affirmed that implied false certification where a party falsely implies that it has met all required laws, regulations and contractual conditions when submitting a claim for federal payment, even if those requirements aren't explicitly tied to payment is a valid basis for an FCA claim. While the high court's backing of implied false certification was clear, a number of parts of the decision were left open to interpretation, most prominently the requirement that alleged false claims must be "material" to payment to support an FCA suit. That materiality standard, Justice Clarence Thomas noted, was "demanding," and many courts since the Escobar decision have tried to parse what counts as material, looking at factors such as whether the government has continued to pay claims in similar circumstances and whether the alleged false claims go to the "essence of the bargain." Among the dozens of FCA decisions to touch on Escobar this year, several stand out in addressing various aspects of how that materiality standard should be applied. These include a March decision in D.C. district court, in which the judge pointed to both the high court's

4 "demanding" standard for materiality and the "holistic" approach taken by the First Circuit in Escobar on remand from the high court, to reject an FCA suit over a technology distributor's alleged sale of thousands of networking products to the federal government that violated the Trade Agreements Act. The TAA requires that goods supplied under federal contracts come either from U.S.-based sources or from countries with which the U.S. has a trade agreement, but the relator failed to show sufficient facts to prove the alleged noncompliance was actually material to payment, and not just technically material to payment based on the relevant written compliance requirements, the judge found. "I did like that case that's sort of how I interpret materiality," Wiley Rein LLP government contracts practice co-chair Paul Khoury said. "TAA is becoming a huge, huge issue for a number of our clients [and] the Folliard decision offered the recognition that oftentimes the agency wants to work with you and doesn't really care that much [about TAA issues]; they want to make sure they're getting their product and at the end of the day will try to help you get to 'yes.'" That was followed by a Sixth Circuit ruling in June finding that allegations that doctors' certifications underlying Medicare claims for home health services that were made retroactively, when those certifications were meant to be obtained when a plan of care was first established, had been sufficiently alleged to be material to payment. The cases are U.S. ex rel. Folliard v. Comstor Corp. et al., case number 1:11-cv-00731, in the U.S. District Court for the District of Columbia, and U.S. ex rel. Prather v. Brookdale Senior Living Communities Inc. et al., case number , in the U.S. Court of Appeals for the Sixth Circuit. Other Important FCA Rulings While materiality continues to be an important issue in FCA cases, not all important FCA rulings so far in 2018 have involved Escobar, with the Eleventh Circuit, for example, widening a circuit split over the statute of limitations in FCA cases in an April decision. Under the law, cases must be brought within six years of an FCA violation, or three years after material facts "are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances," whichever is later, alongside a hard limit of 10 years from the violation. The whistleblower in the case had accused his former employer of defrauding the DOD, due to a subcontract awarded under a kickback deal, as part of a contract to clean up and dispose of excess and abandoned munitions in Iraq. His case, filed seven years after the alleged fraud but within three years of telling FBI agents about the alleged kickback scheme, was tossed by a district court as untimely, after it ruled the three-year statute of limitations based on government knowledge only applied if the government had intervened in the case. The Eleventh Circuit panel disagreed, finding the three-year government knowledge statute of limitations applied even in non-intervened cases, effectively giving relators in the circuit up to 10 years to file suit in certain circumstances, not the typical six years, attorneys said. This has created a split with the Fourth and Tenth circuits which rejected the use of the government

5 knowledge statute of limitations in non-intervened cases and in part with the Ninth Circuit, which had allowed the three-year statute of limitations in non-intervened cases, but tied it to the relator's knowledge, not the government's knowledge, they noted.. "I think this is a circuit split that's going to be [eventually] resolved by the Supreme Court," Turner said. "The problem from a contractor's perspective is that oftentimes would-be whistleblowers lie in wait long after any purported wrongdoing has taken place, and after contractors get rid of their records [and] this tacks on the additional three years for relators to bring their claim, and it essentially ties that claim to the actions of a non-party." And the Third Circuit in a January decision found that the submission of claims for federal reimbursement by a party allegedly paying kickbacks at the same time was not enough without showing a direct link between the kickback scheme and those payment claims, rejecting an argument that the broad "taint" of a kickback scheme can render false all claims for payment during that scheme. That is a particularly significant decision in the context of pharmaceutical industry FCA cases, where kickback allegations are common, attorneys said. The cases are U.S. ex rel. Hunt v. Cochise Consultancy Inc. et al., case number , in the U.S. Court of Appeals for Eleventh Circuit and U.S. ex rel. Greenfield v. Medco Health Solutions Inc. et al., case number , in the U.S. Court of Appeals for the Third Circuit. --Additional reporting by Nathan Hale and Emma Cueto. Editing by Kelly Duncan and Pamela Wilkinson. All Content , Portfolio Media, Inc.

More Relators Push FCA Cases To The End In 2017

Portfolio Media. Inc. 111 West 19 th Street, 5th Floor New York, NY 10011 www.law360.com Phone: +1 646 783 7100 Fax: +1 646 783 7161 customerservice@law360.com More Relators Push FCA Cases To The End In