Pleading Fraud Claims with Particularity Under the False Claims Act: New Lockheed Case

I am a
whistleblower lawyer writing about fraud against the United States Government. I am in a series
of blog entries about a March 2012 decision in a False Claims Act case
that was filed against Lockheed Martin.

Judge Nina Totenberg, a judge in the Northern District of Georgia, issued
an opinion in the case on 3/9/12. U.S. ex re. Harris v. Lockheed Martin
Corporation, 1:08-CV-3819-AT (3/9/12). I have been blogging about this
order because Judge Totenberg wrote a very comprehensive, 27-page order
that touches on many of the hot-button issues in False Claims Act law.
These issues are important not only to Marietta, Georgia False Claims
Act lawyers who are litigating against Lockheed Martin, but also to False
Claims Act lawyers across the United States.

Mr. Harris, who had worked in the trim department at Lockheed’s Marietta
plant for 27 ½ years, blew the whistle on fraud against the Government
when he reported a variety of schemes to defraud the Government. He accused
Lockheed of re-coding hours and parts and billing them under a costs-plus
contract. In a cost-plus contract, the Government pays for the cost of
the item plus a profit to the manufacturer. In actuality, however, Mr.
Harris says that these items should have been billed to another contract
that Lockheed had with the U.S. Government. This other contract was a
fixed-price contract — meaning that the amount the Government paid
for the contract already included full and complete payment for these
items. Mr. Harris had a number of other allegations, as well.

In my earlier entries I have talked about the public disclosure bar and
the “first-to-file” rule. Today I want to talk about another
issue defendants like to raise in False Claims Act cases:
Federal Rule of Civil Procedure 9(b). Rule 9(b) provides that: “In alleging fraud or mistake, a party
must state with particularity the circumstances constituting fraud or
mistake.”

Citing
United States ex rel. Clausen v. Lab. Corp.of Am., 290 F.3d 1301, 1308-1312 (11th Cir. 2002), Lockheed argued that Mr. Harris’
claims should be dimissed because he had not provided “particularized
factual support for his contention that Defendant actually presented”
the false claims it made to the government.

In Clausen, the 11th Circuit wrote that a litigant should not just allege
a “belief that claims requesting illegal payments must have been
submitted, were likely submitted or should have been submitted to the
Government.” Instead, the Circuit Court stated, “some indicia
of reliability must be given in the complaint to support the allegation
of an actual false claim for payment being made to the Government.”
290 F.3d at 1311.

Judge Totenberg stepped back and looked at the bigger picture. She looked
at Clausen, but also at the cases that followed it. She explained that
these cases showed courts should apply a “more flexible, case-by-case
approach” when “the relator’s complaint provides other
‘indicia of reliability’ that support the relator’s
belief and allegations.”

The Northern District of Georgia federal judge explained that Mr. Harris
had alleged “factually specific allegations” about the billing
practices in his department “over several decades, providing concrete
examples of how these practices were implemented over many years.”
Not only did Mr. Harris’ “allegations provide detailed factual
indicia of reliability to plausibly support” his claim, but also
Mr. Harris had “discussed his concerns regarding the fraudulent
time billing practices” with Lockheed’s management, and he
described specific instances in which the management employees had confirmed
the practice when he spoke to them.

The Georgia judge found that Lockheed’s motion to dismiss the claims
was not grounded in the law, and she allowed the relator Mr. Harris to
proceed toward trial. As a False Claims Act lawyer, this sort of analysis
is very helpful.