In its January 8, 2015  decision in United States v. Triple Canopy, Inc., the Fourth Circuit reiterated its acceptance of the implied certification theory of False Claims Act (“FCA”) liability.  Under the FCA, a contractor can face steep financial penalties for knowingly making false statements in order to get fraudulent claims paid or approved by the Government.  Conventionally, the false statement underlying an FCA violation was clear – for example, an invoice for more hours than were worked or for a service that was never performed.  Some federal appellate courts, however, have adopted the theory of implied certification, allowing a court to find an FCA violation based on certifications implicit in a payment request, for example, compliance with a material contract provision. 

It was employing this theory that the Fourth Circuit reversed the dismissal of an FCA complaint against Triple Canopy, despite the lack of an objectively false statement in the contractor’s invoices.  This decision potentially broadens the already unsure landscape of the theory of implied certification.  It may open government contractors up to FCA liability despite accurate claims for payment if the contractor does not disclose its noncompliance with a contractual requirement.   This expands traditional implied certification FCA cases because it may open the door to FCA liability if a contractor submits a claim for payment and fails to disclose noncompliance with almost any contract provision, regardless of whether it is explicitly required for payment.

Triple Canopy was awarded a Task Order to provide security services at the Al Asad Airbase in Iraq.  One of the Task Order’s listed “responsibilities” was a marksmanship requirement, requiring Triple Canopy to ensure all employees had been trained on their weapon and could score a minimum of 23 of 40 rounds on a US Army qualification course.  Qualifying scorecards had to be maintained in personnel files, but the Task Order did not expressly condition payment on compliance with any of the Task Order’s twenty “responsibilities.”

Over the course of performance, Triple Canopy hired over 300 trained Ugandan guards, but later discovered that the guards could not satisfy the marksmanship requirement.  In response, Triple Canopy allegedly falsified scorecards for the guards’ personnel files.  Triple Canopy submitted twelve monthly invoices for guard services, which listed only the number of guards in service for the month and which did not expressly certify compliance with any contract requirements, including the marksmanship requirement.  A whistleblower brought a qui tam suit and the Government intervened, alleging that Triple Canopy knowingly billed the Government for unqualified guards. 

In its decision, the Fourth Circuit held that the Government pleads a false claim when it alleges that a contractor knowingly makes a claim for payment and withholds information about its noncompliance with material contractual requirements.  In finding the marksmanship requirement was material, the Fourth Circuit relied on common sense, which “strongly suggest[ed]” that the Government’s decision to pay would be influenced by whether the guards hired to protect its airbase could properly discharge their weapons.  Interestingly, the court also found that the fact that the contractor covered up its guard’s failed marksmanship tests itself suggested the marksmanship requirement was material to the contract.  In other words, if Triple Canopy did not believe the marksmanship requirement would influence the Government’s decision to pay, it would not have falsified the score cards. 

Ultimately, because the Task Order listed marksmanship as a “responsibility,” and the Government alleged that Triple Canopy had failed to satisfy that material requirement, the Fourth Circuit found that the Government had sufficiently pled a violation of the FCA.