Seventh Circuit Sidesteps Escobar; Boots FCA Claims for Lack of Knowledge

July 14, 2016
Firm Publication

The Seventh Circuit’s rejection of the implied certification theory of liability gave rise, in part, to the circuit split resolved by the Supreme Court’s opinion in Escobar. In its first FCA decision since the Supreme Court’s opinion – U.S. ex rel. Sheet Metal Workers International Association v. Horning Investments, LLC, the Seventh Circuit sidestepped the question of whether the relator’s allegations that a government contractor’s certification of compliance with the Davis-Bacon Act amounted to an implied false certification sufficient to give rise to FCA liability. Rather than tackle the implications of Escobar, the Seventh Circuit affirmed entry of summary judgment in favor of the contractor, explaining that the defendant’s conduct amounted to certifying compliance with an ambiguous statutory obligation and, therefore, did not constitute a “knowing” violation of the FCA.

In Horning, the relator asserted FCA claims against a subcontractor on a construction project for the U.S. Department of Veterans Affairs (VA) for allegedly violating the Davis-Bacon Act by failing to compensate workers at prevailing wages. According to the relator, Horning failed to pay workers prevailing wages because it deducted a $5.00 per hour flat fee from the paychecks of each of its employees and placed those funds in an insurance trust without regard to whether an employee was presently eligible for any benefits and without evaluating the actual monetary value of the benefit for each individual employee. Horning allegedly violated the FCA by certifying compliance with the Davis-Bacon Act in connection with its request for payment from the VA.

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