The U.S. Court of Appeals has upheld a judgment of liability under the False Claims Act against a contractor at the Ft. Campbell military base. While affirming liability, the ruling in U.S. v Circle C Construction LLC, ___ F3d ___ (6th Cir 2012) reversed the treble damages award of $1.6 Million and remanded the case back to the district court for a recalculation of damages.
Circle C contracted to construct buildings at Ft. Campbell. Wage rates on the project were dictated by the Davis-Bacon Act, which also imposed various reporting and other requirements. These included but were not limited to submitting payroll certifications as a condition of payment, ensuring that subcontractors complied with the Davis-Bacon Act, and ensuring that payroll certifications were complete and accurate.
The project appears to have begun in 2004. According to the opinion, "Phase Tech was Circle C's subcontractor on at least 98 percent of the electrical work on the Ft. Campbell project," although it had no written contract with Circle C. While eight Phase Tech employees worked on the project, the original payroll certifications submitted by Circle C reportedly did not list them. Phase Tech did not submit any payroll certification for the years 2004 or 2005, and subsequently asserted that Circle C did not inform it of the need to submit certified payrolls on the Ft. Campbell project until approximately two years after the project began.
The subject lawsuit was filed in January of 2007. The United States intervened in the action approximately ten months later and filed a three-count amended complaint alleging a violation of the Fair Claims Act, unjust enrichment, and payment by mistake. "Specifically, plaintiffs averred that all of the payroll certifications during the period when Wall and McPherson worked at the construction site were false because defendants (1) failed to disclose that any Phase Tech employees worked on the Circle C contract, and (2) the payroll certifications falsely asserted that Circle C paid the prevailing Davis-Bacon Act wages to employees, including Circle C's subcontracted employees, when this was not the case."
Approximately two years after the suit was initially filed, Phase Tech provided Circle C with new payroll certifications for the years when its employees were not included on any certified payrolls. Circle C passed that information on to Ft. Campbell officials without verifying that it was either accurate and/or complete. As it turned out, nine of the certifications that Phase Tech had signed were inaccurate and failed to match Phase Tech's contemporaneous documents for workers on the project.
Phase Tech ultimately settled with plaintiffs and the action proceeded solely against Circle C. In March of 2010, the district court granted plaintiffs' motion for summary judgment and, as to the False Claims Act allegations, held that: "(1) Circle C violated the FCA by submitting false payroll certifications to the government regarding wages for Phase Tech employees, contrary to its agreement to abide by Davis-Bacon requirements; and (2) because Circle C did not have a written subcontract with Phase Tech and did not ensure that Phase Tech complied with the Davis-Bacon Act, its wage certifications wrongly certified that prevailing wages were paid to Phase Tech electricians working on the Fort Campbell Project in violation of the FCA." The district court determined that actual damages were approximately $554,000, which it then trebled pursuant to the False Claims Act, resulting in the entry of a judgment against Circle C in the amount of roughly $1.6 Million. Following the denial of its motion to alter or amend the judgment, Circle C appealed.
The Sixth Circuit Court of Appeals affirmed the district court's ruling on liability, noting that "liability is established by the express false certifications that were made." Specifically, the court held in relevant part that, "Circle C conceded that it should submit payroll certifications for all employees on the project, but did not include Phase Tech employees on the original certifications, although it did submit separate payroll certifications for the other subcontractors. Circle C acknowledged that it never paid or supervised the payment of any Phase Tech employees and had no first-hand knowledge regarding Phase Tech's payments to its employees. It was only in 2006 that Circle C finally informed Phase Tech of the need to submit payroll certifications to Fort Campbell. Once the records were provided by Phase Tech, Circle C never verified their accuracy. * * * [T]here were 62 inaccurate submissions, 53 of which pertained to 2004 and 2005 and failed to list any Phase Tech workers. The 62 certifications also were false because they wrongly certified that the prevailing wages were paid."
The appellate court nevertheless reversed the damages award and remanded the case back to the district court for recalculation. It cited deficiencies in the manner in which the damages were originally calculated as the basis for its ruling in this regard.
Disclaimers
Circle C contracted to construct buildings at Ft. Campbell. Wage rates on the project were dictated by the Davis-Bacon Act, which also imposed various reporting and other requirements. These included but were not limited to submitting payroll certifications as a condition of payment, ensuring that subcontractors complied with the Davis-Bacon Act, and ensuring that payroll certifications were complete and accurate.
The project appears to have begun in 2004. According to the opinion, "Phase Tech was Circle C's subcontractor on at least 98 percent of the electrical work on the Ft. Campbell project," although it had no written contract with Circle C. While eight Phase Tech employees worked on the project, the original payroll certifications submitted by Circle C reportedly did not list them. Phase Tech did not submit any payroll certification for the years 2004 or 2005, and subsequently asserted that Circle C did not inform it of the need to submit certified payrolls on the Ft. Campbell project until approximately two years after the project began.
The subject lawsuit was filed in January of 2007. The United States intervened in the action approximately ten months later and filed a three-count amended complaint alleging a violation of the Fair Claims Act, unjust enrichment, and payment by mistake. "Specifically, plaintiffs averred that all of the payroll certifications during the period when Wall and McPherson worked at the construction site were false because defendants (1) failed to disclose that any Phase Tech employees worked on the Circle C contract, and (2) the payroll certifications falsely asserted that Circle C paid the prevailing Davis-Bacon Act wages to employees, including Circle C's subcontracted employees, when this was not the case."
Approximately two years after the suit was initially filed, Phase Tech provided Circle C with new payroll certifications for the years when its employees were not included on any certified payrolls. Circle C passed that information on to Ft. Campbell officials without verifying that it was either accurate and/or complete. As it turned out, nine of the certifications that Phase Tech had signed were inaccurate and failed to match Phase Tech's contemporaneous documents for workers on the project.
Phase Tech ultimately settled with plaintiffs and the action proceeded solely against Circle C. In March of 2010, the district court granted plaintiffs' motion for summary judgment and, as to the False Claims Act allegations, held that: "(1) Circle C violated the FCA by submitting false payroll certifications to the government regarding wages for Phase Tech employees, contrary to its agreement to abide by Davis-Bacon requirements; and (2) because Circle C did not have a written subcontract with Phase Tech and did not ensure that Phase Tech complied with the Davis-Bacon Act, its wage certifications wrongly certified that prevailing wages were paid to Phase Tech electricians working on the Fort Campbell Project in violation of the FCA." The district court determined that actual damages were approximately $554,000, which it then trebled pursuant to the False Claims Act, resulting in the entry of a judgment against Circle C in the amount of roughly $1.6 Million. Following the denial of its motion to alter or amend the judgment, Circle C appealed.
The Sixth Circuit Court of Appeals affirmed the district court's ruling on liability, noting that "liability is established by the express false certifications that were made." Specifically, the court held in relevant part that, "Circle C conceded that it should submit payroll certifications for all employees on the project, but did not include Phase Tech employees on the original certifications, although it did submit separate payroll certifications for the other subcontractors. Circle C acknowledged that it never paid or supervised the payment of any Phase Tech employees and had no first-hand knowledge regarding Phase Tech's payments to its employees. It was only in 2006 that Circle C finally informed Phase Tech of the need to submit payroll certifications to Fort Campbell. Once the records were provided by Phase Tech, Circle C never verified their accuracy. * * * [T]here were 62 inaccurate submissions, 53 of which pertained to 2004 and 2005 and failed to list any Phase Tech workers. The 62 certifications also were false because they wrongly certified that the prevailing wages were paid."
The appellate court nevertheless reversed the damages award and remanded the case back to the district court for recalculation. It cited deficiencies in the manner in which the damages were originally calculated as the basis for its ruling in this regard.
Disclaimers
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