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FCA Claim Revived After New Ruling

Deborah Elkins//March 12, 2015

FCA Claim Revived After New Ruling

Deborah Elkins//March 12, 2015//

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A plaintiff’s False Claims Act suit against defendant armored car manufacturer is revived because the 4th Circuit recently held that the “implied certification” theory of liability under the FCA is viable in this circuit; the Danville U.S. District Court grants relator’s motion for reconsideration and denies defendant’s motion to dismiss.

The court also denies defendant’s motion to stay pending the outcome of criminal proceedings against defendant William Whyte. While it is true that Whyte’s statements during discovery or at trial could later be used by the government against Whyte in the criminal trial, that fact does not mean Whyte will inadvertently waive his Fifth Amendment protections entirely in a separate, subsequent proceeding.

The “testimonial waiver” that defendants fear only applies to testimony given in the context of the same judicial proceeding. The criminal case is not the same “judicial proceeding” as the civil case and thus the “testimonial waiver” analysis has no bearing in this context. Even if Whyte does testify, he only waives his Fifth Amendment rights as to the statements he chooses to make. Testifying in part in the civil proceeding does not mean that he cannot invoke his rights against self-incrimination in a separate, subsequent criminal proceeding.

The proper consideration is whether and to what extent Whyte’s Fifth Amendment rights are implicated in the civil case, and whether those considerations warrant a stay. Whyte is free to claim Fifth Amendment protections at any time he and his able attorneys see fit. In the context of a civil proceeding, however, Whyte is not free from an adverse inference as a result of his silence.

Plaintiff certainly has an interest in proceeding expeditiously, especially considering the initial delays caused by the government exercising its right to decide whether it wished to take over this qui tam action, plaintiff’s difficulty in locating Whyte’s Canadian whereabouts and Whyte’s efforts to avoid service of process in Canada. Despite what they contend, plaintiffs want this case stayed until the criminal case has concluded, which could take years.

The burden on defendants is slight, despite their protestations to the contrary. The court has a policy of efficient and expeditious resolution of cases; neither party has directed the court to any third parties with an interest in the litigation; and the public has an interest in seeing a resolution of this action. Considering all relevant factors, a stay is not warranted.

New law

On Jan. 8, 2015, the 4th Circuit clearly stated in U.S. ex rel. Badr v. Triple Canopy Inc. [VLW 015-2-004], that the implied certification theories of liability under the FCA are valid in this circuit.

Following the language of Triple Canopy, plaintiff alleged that Whyte and Armet – the contractors – made a request for payment and knowingly withheld information about its noncompliance with material contractual provisions. Plaintiff alleged Whyte and Armet knew the vehicles for which it was billing the government did not meet the ballistic protection requirements of its contracts with the government. Nevertheless, defendants billed and collected for vehicles it knew did not meet the contract specifications. Under the guidance of Triple Canopy, the allegations make out a claim for an “implied certification “ claim under the FCA. I see no basis to conclude the court did not intend for its holding to reach facts like those presented here.

Because there has been a change in the law, it is appropriate to grant the motion for reconsideration and, on reconsideration, deny defendants’ motion to dismiss in its entirety.

Skinner v. Armet Armored Vehicles Inc. (Kiser) No. 4:12cv45, Feb. 10, 2015; USDC at Danville, Va. VLW 015-3-078, 12 pp.

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