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Roger Abbott is a Litigation & Dispute Resolution associate in Mayer Brown’s Washington DC office.

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On December 26, 2017, defendant Gilead Sciences Inc. filed a petition for certiorari (case number 17-936), requesting the Supreme Court to review a major Ninth Circuit False Claims Act (FCA) ruling on liability in United States of America ex rel. Campie v. Gilead Sciences Inc. The petition argues that the Ninth Circuit adopted an approach to materiality that is inconsistent with the guidelines provided by the Supreme Court in Universal Health Services, Inc. v. United States ex rel. Escobar, and conflicts with other appellate interpretations of Escobar’s materiality guidance. This is a case with significant implications for the Government contracts community, as the Ninth Circuit’s approach dilutes the protections offered by Escobar to FCA defendants.
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Should whistleblowers be permitted to recover hundreds of millions of dollars when the Government steadfastly insists that the factual underpinnings of a False Claims Act relator’s allegations are flatly incorrect? Although a federal district court in Texas awarded more than $660 million in damages to a relator based on purportedly inadequate disclosures to a federal agency, the post-Escobar materiality standard served as an important guardrail for the U.S. Fifth Circuit Court of Appeals. The appeals court reversed and put an end to the abusive FCA lawsuit. Among other things, the court recognized that the federal agency’s repeated, “authoritative” findings that the design and product at issue was compliant with federal safety standards and eligible for federal reimbursement were fundamentally at odds with the notion that the disclosures at issue were material to the government’s decision to pay the claim.
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On July 21, 2017, President Trump issued Executive Order No. 13,806 on “Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States.” Noting that the ability of United States domestic manufacturers to supply “essential components” that are “critical to national security” is “essential to the economic strength and national security of the United States,” the Order announced a policy of fostering “healthy manufacturing and defense industrial base and resilient supply chains.”
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On December 6, 2016, the Supreme Court ruled that the False Claims Act (“FCA”) does not require the dismissal of lawsuits brought by relators who violate the requirement that information regarding the FCA complaint (and alleged fraud) not be disclosed to anyone (other than the district court and Department of Justice) and remain “under seal.” In State Farm Fire & Casualty Co. v. United States ex rel. Rigsby , the Court held that district courts retain discretion to fashion an appropriate remedy based on the facts of the case.
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On October 24, 2016, a federal district court in Texas issued a preliminary injunction in a case called Associated Builders & Contractors, et al. v. Rung, in which it halted implementation of the most controversial aspects of the newly-minted “Fair Pay and Safe Workplaces” FAR rule and the corresponding Department of Labor guidance, including the disclosure provision and the restriction on arbitration agreements. This post discusses the district court decision, which represents a sweeping repudiation of the most significant provisions of the controversial Fair Pay and Safe Workplaces rule and guidance. Mayer Brown previously published a Legal Update explaining the new rule and the Department of Labor guidance in far greater detail.
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On August 25, 2016, DoD, GSA, and NASA issued a final rule amending the FAR to implement President Obama’s Executive Order on “Fair Pay and Safe Workplaces” (“E.O.”) The Department of Labor (“DOL”) also issued final guidance to assist in the implementation of the E.O. The new FAR rule follows a proposed FAR rule that generated substantial comments. The final rule and guidance represent significant new obligations and risks for contractors and subcontractors, who should start preparing now to address them. This post focuses on the final FAR rule because it imposes specific requirements on contractors and subcontractors. Notably, this post provides only a high-level summary because the new rule, related commentary published in the Federal Register, and DOL’s guidance are lengthy and sometimes complex documents. Mayer Brown also published a Legal Update that discusses these developments in greater detail.
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Today, in Universal Health Services v United States ex rel. Escobar, the Supreme Court resolved a circuit split on a question of great importance for government contractors: whether a claim presented to the United States for payment can be false or fraudulent for purposes of the False Claims Act (“FCA”) under the so-called “implied certification” theory. The Court answered in the affirmative, unanimously holding that “the implied false certification theory can, at least in some circumstances, provide a basis for liability.” The Court sought to allay any “concerns about fair notice and open-ended liability” by emphasizing the strict application of the FCA’s materiality and scienter requirements, clarifying the meaning of these requirements, and rejecting the Government and Second Circuit’s interpretation of implied certification as “extraordinarily expansive.” It remains to be seen whether the Court’s descriptions of the manner in which the FCA’s materiality and scienter requirements should be “rigorous[ly]” applied will provide meaningful protections to government contractors, including healthcare and other companies participating in various government programs, that face potential FCA liability based on implied certification theories of liability.
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On May 31, 2016, the Supreme Court granted certiorari in State Farm Fire & Casualty Co. v. United States ex rel. Rigsby, No. 15-513. At issue is an important question for the government contract community: “What standard governs the decision whether to dismiss a relator’s claim for violation of the FCA’s seal requirement, 31 U.S.C. § 3730(b)(2)?”
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