Failing to Meet Cybersecurity Requirements May Expose Company to False Claims Act Liability

Recent developments in a case heard by the U.S. District Court for the Eastern District of California shine a spotlight on the importance of cybersecurity measures for government contractors. The district court denied in part a motion to dismiss from defendants Aerojet Rocketdyne Holdings, Inc. and Aerojet Rocketdyne, Inc. (collectively, "Aerojet"), holding that the relator "plausibly pled that defendants’ alleged failure to fully disclose its noncompliance [with cybersecurity requirements] was material to the government’s decision to enter into and pay on the relevant contracts." [1] More

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TAGS: Materiality, Military & Defense Fraud

The Public Disclosure Bar

The False Claims Act qui tam provision allows private citizens to act as whistleblowers, and file a lawsuit on behalf of the government if they are aware of fraud taking place. These whistleblowers, or relators, are eligible to receive a portion of the money the government recovers if the lawsuit is successful.

It is important to note that the False Claims Act is designed to encourage people to report fraud that might otherwise go undetected; it is not designed to reward people who repeat allegations that have already been publicized. To that end, the False Claims Act includes language stipulating that the court will dismiss a case if substantially the same allegations contained therein were already publicly disclosed and the relator bringing the action is not an original source of the information. This section of the Act is commonly referred to as the "public disclosure bar". More

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TAGS: Evidence, Legal Procedures, Materiality, Whistleblower Awards, Whistleblower Information

Escobar decision continues to affect major FCA cases

In 2016, the Supreme Court decided the landmark FCA case Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S.Ct. 1989 (2016). Escobar resolved a circuit split over the implied false certification theory of liability under the FCA, upholding the theory as valid but tightly circumscribing its scope through a "rigorous" interpretation of the Act's materiality and scienter requirements—holding that "[a] misrepresentation about compliance with a statutory, regulatory, or contractual requirement must be material to the Government's payment decision in order to be actionable under the False Claims Act." Escobar, 136 S.Ct. at 1996. This holding continues to percolate through the federal courts, proving determinative in several recent cases of interest. More

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TAGS: Circuit Court Opinions, Housing and Urban Development, Kickbacks, Legal Procedures, Materiality, Military & Defense Fraud, Supreme Court

Materiality after Escobar: Why Government Behavior after a Defendant Presents a False Claim Is Not Dispositive

In Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016), the Supreme Court resolved a circuit split over the implied false certification theory of liability under the False Claims Act (FCA). As opposed to express false certification, where the defendant allegedly has made an affirmative false statement regarding its compliance with underlying statutory or regulatory requirements, implied false certification is based on the defendant's failure to disclose its noncompliance with these requirements. In Escobar, the Court upheld implied false certification as a valid theory of liability under the FCA, but tightly circumscribed its scope through a "rigorous" interpretation of the Act's materiality and scienter requirements, holding that "[a] misrepresentation about compliance with a statutory, regulatory, or contractual requirement must be material to the Government's payment decision in order to be actionable under the False Claims Act." Escobar, 136 S. Ct. at 1996. More

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TAGS: Circuit Court Opinions, Materiality, Supreme Court