Damages When a Government Receives Nonconforming Goods

Qui tam lawyer Lee Wallace has prepared this page for her whistleblower clients who want to learn more about the damages when a contractor delivers nonconforming products to the Government. An honors graduate of Harvard Law School, Lee couples her education with 20 years of legal experience to help relators file lawsuits against companies that are defrauding the Government.

Contact False Claims Act Attorney Lee Wallace today to find out if she can help you hold a government contractor accountable for its fraud.

Lee Wallace has been named one of Georgia’s Top 100 Trial Lawyers, and she has handled legal matters nationwide, in 20 different states. If you have information about fraud against the Government, do not hesitate to contact us.

DEFINITIONS

Some important terms include:

  • A “relator” is a whistleblower who files suit under the False Claims Act.
  • “Nonconforming goods” are items, products or services that do not meet the specifications of the contract made with the Government. Whistleblowers are entitled to bring False Claims Act lawsuits when government contractors do not provide the goods they agreed to provide. Whistleblowers who bring successful FCA cases are entitled to receive between 15% and 30% of all the money that the Government recovers.

WHAT THE ACT SAYS ABOUT DAMAGES

If a company violates the False Claims Act, the Government can collect “3 times the amount of damages which the Government sustains because of the act of that person.” 42 U.S.C. § 3729(a)(1). The violator also is liable for a civil penalty of between $5500 and $11,000 for each false claim it made to the Government. In some cases – for example, in the case of a doctor or hospital that bills for many, many patients – this penalty can be very significant.

IF A CONTRACTOR DELIVERS NONCONFORMING GOODS, IT OWES THE ENTIRE AMOUNT THE GOVERNMENT PAID FOR THE GOODS IT WANTED

The Government is entitled to receive what it contracted to get. If the courts arbitrarily limit the Government’s damages to the difference between the value of the goods that the Government requested and the value of the goods it received, then contractors have no incentive to provide the Government with what the Government asked for. The contractor could arbitrarily decide to substitute any item it wanted, and simply pay the difference.

Recognizing that the Government has to be permitted to contract for specific things it wants, the Second Circuit has said:

  • “where the government has provided funds for a specified good or service only to have defendant substitute a non-conforming good or service, a court may, upon a proper finding of False Claims Act liability, calculate damages to be the full amount of the grant payments made by the government after the material false statements were made.” Feldman v. van Gorp, 697 F.3d 78 (2d Cir. 2012) (emphasis added). See also U.S. v. Aerodex, Inc., 469 F.2d 1003 (5th Circuit 1973).

The van Gorp case:

  • In that case, Dr. Wilfred van Gorp had sued Cornell University Medical College (“Cornell”) for fraud in obtaining a T32 grant for HIV and AIDS research from the National Institute of Health’s (NIH) program called the“Ruth L. Kirschstein National Research Service Award Institutional Research Training Grant. The intent of the program was to train students “with the primary objective of developing or extending their research skills and knowledge in preparation for a research career.” Id. The Government agency very specifically said that the program was not intended to fund general training for students headed into clinical work.
  • Despite Cornell’s representations, van Gorp and other students said that: “the curriculum identified in the application was never implemented”, “core courses were not regularly conducted”, and “fellows were never evaluated or supervised” by the training committee referred to in the Grant Application. Although the program supposedly focused on HIV research, “out of the 165 clinical cases that the fellows saw during their fellowship, only three involved HIV-positive patients.” “[M]uch of the research . . . had no relation to HIV or AIDS at all.”
  • In the trial court, the Government was awarded treble damages in the amount of $855,714. The appellate court upheld the trial court decision. Although the government had still received a program that provided training, “the government bargained for something qualitatively, but not quantifiably, different from what it received.”

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Contact our office at (888) 581-9132.