Government Contractors Beware: Recent Federal Appellate Decisions Are Sure to Fuel Increased FCA Litigation

August 28, 2012

Two recent federal appeals court decisions are sure to fuel the already explosive growth of False Claims Act litigation and suggest that the courts are out of touch with the realities of today’s Government contracting world. First, in U.S. ex rel. Little v. Shell Exploration & Prod. Co., the U.S. Court of Appeals for the Fifth Circuit held that a federal auditor, "even one whose job it is to investigate fraud," has standing to bring a qui tam lawsuit based on evidence uncovered during the course of his employment. In so holding, the court rejected the amicus curiae argument of the U.S., on whose behalf every qui tam action is brought, urging the court to construe the FCA as barring such actions. Second, in U.S. ex rel. Hooper v. Lockheed Martin Corp., the Ninth Circuit held, as a matter of first impression, that fraudulent underbids or false estimates used to procure Government contracts may violate the FCA. In that case, the U.S. in its amicus curiae brief acknowledged that "there are a number of legitimate reasons why a contractor could make an intentionally low bid," but nevertheless argued in favor of a broad fraud-in- the-inducement theory of FCA liability that penalizes fraudulent bids even in the absence of subsequent attempts to overcharge.

Joe West, Drew Tulumello and Jessica Sanderson of Gibson Dunn discuss these recent appellate decisions and their implications for government contractors in their article "Government Contractors Beware: Recent Federal Appellate Decisions Are Sure to Fuel Increased FCA Litigation" published in The Government Contractor on August 22, 2012.

Reprinted from The Government Contractor, with permission of Thomson Reuters. Copyright © 2012.