United States ex rel. Omar Bad v. Triple Canopy, Inc.

Filing

PUBLISHED AUTHORED OPINION filed. Originating case number: 1:11-cv-00288-GBL-JFA. [999507280]. [13-2190, 13-2191]

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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 13-2190

UNITED STATES OF AMERICA,
Intervenor/Plaintiff – Appellant,
and
UNITED STATES ex rel. OMAR BADR,
Plaintiff,
v.
TRIPLE CANOPY, INC.,
Defendant – Appellee.

No. 13-2191

UNITED STATES ex rel. OMAR BADR,
Plaintiff – Appellant,
v.
TRIPLE CANOPY, INC.,
Defendant – Appellee.

Appeals from the United States District Court for the Eastern
District of Virginia, at Alexandria. Gerald Bruce Lee, District
Judge. (1:11-cv-00288-GBL-JFA)

Appeal: 13-2190

Argued:

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October 30, 2014

Decided:

January 8, 2015

Before SHEDD, AGEE, and WYNN, Circuit Judges.

Affirmed in part, reversed in part, and remanded by published
opinion. Judge Shedd wrote the opinion, in which Judge Agee and
Judge Wynn joined.

ARGUED: Charles W. Scarborough, UNITED STATES DEPARTMENT OF
JUSTICE, Washington, D.C.; Earl N. Mayfield, III, DAY & JOHNS,
PLLC, Fairfax, Virginia, for Appellants. Tara Melissa Lee, DLA
PIPER LLP (US), Reston, Virginia, for Appellee.
ON BRIEF:
Stuart F. Delery, Assistant Attorney General, Joyce Branda,
Acting Assistant Attorney General, Michael S. Raab, Civil
Division, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.;
Dana J. Boente, Acting United States Attorney, Richard W.
Sponseller, Assistant United States Attorney, Peter S. Hyun,
Assistant United States Attorney, OFFICE OF THE UNITED STATES
ATTORNEY, Alexandria, Virginia, for Appellant United States of
America. Paul A. Prados, Milt C. Johns, Christopher M. Day, DAY
& JOHNS, PLLC, Fairfax, Virginia, for Appellant Omar Badr.
Joseph C. Davis, Reston, Virginia, Paul D. Schmitt, DLA PIPER
LLP (US), Washington, D.C., for Appellee.

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SHEDD, Circuit Judge:
The Government appeals the district court’s dismissal of
Counts I and II of its complaint under the False Claims Act
(FCA)

against

Triple

Canopy,

Inc.

Omar

Badr,

the

original

relator, also appeals the dismissal of his complaint — including
four

additional

FCA

counts

(Counts

II-V)

—

against

Triple

Canopy. For the following reasons, we conclude that the district
court correctly dismissed Counts II-V of Badr’s complaint, but
erred

in

dismissing

Counts

I

and

II

of

the

Government’s

complaint.
I.
In June 2009, the Government awarded a firm-fixed price
contract to Triple Canopy to provide security services at the Al
Asad Airbase, the second largest airbase in Iraq. 1 Triple Canopy
was

one

of

Internal

several

Security

security
Services

firms

awarded

contract;

the

under

Theatre-Wide

that

contract,

security at specific locations was governed by individual Task
Orders. The Task Order for Al Asad was TO-11.
Under

TO-11,

Triple

Canopy

agreed

to

provide

“internal

security services” at Al Asad and to “supplement and augment
1

Because this appeal stems from the grant of a motion to
dismiss, we accept as true all well-pled facts in the complaint
and construe them in the light most favorable to the Government
and Badr. Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc.,
591 F.3d 250, 255 (4th Cir. 2009).

3

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security

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operations.”

(J.A.

Pg: 4 of 25

98).

These

services

included

“providing internal operations at entry control points, internal
roving

patrols,”

and

“prevent[ing]

unauthorized

access”

by

enforcing “security rules and regulations regarding authorized
access to [Al Asad] including internal check points.” (J.A. 98).
TO-11 identified 20 “responsibilities” Triple Canopy was tasked
with

in

providing

functions

such

these

as

services,

repelling

including

attacks,

typical

providing

security
escorts,

performing entrance searches, and preventing theft, as well as
ancillary services such as running background checks, checking
ammunition

lists,

and

computerizing

personnel

systems.

(J.A.

99). As relevant here, the final responsibility was to “ensure
that all employees have received initial training on the weapon
that they carry, [and] that they have qualified on a US Army
qualification course.” (J.A. 99) (marksmanship requirement). To
satisfy the marksmanship requirement, employees had to score a
minimum of 23 rounds out of 40 from a distance of 25 meters.
Qualifying scorecards for the guards were to be maintained in
their respective personnel files for one year. Nothing in TO-11
expressly

conditioned

payment

on

compliance

with

the

responsibilities.
To

fulfill

TO-11,

Triple

Canopy

hired

approximately

332

Ugandan guards to serve at Al Asad under the supervision of 18
Americans. The guards’ personnel files indicate that they met
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the

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qualifying

Uganda.

Upon

marksmanship

arriving

at

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score

the

at

base,

a

course

however,

in

Kampala,

Triple

Canopy’s

supervisors learned that the guards lacked the ability to “zero”
their rifles and were unable to satisfy the qualifying score of
23

on

the

marksmanship

course.

Thus,

shortly

after

their

arrival, Triple Canopy supervisors were aware that the Ugandans
could

not

satisfy

the

final

responsibility

of

TO-11:

the

marksmanship requirement. Nonetheless, Triple Canopy submitted
its monthly invoices for the guards. After a failed training
attempt,

a

Triple

Canopy

supervisor

directed

that

false

scorecard sheets be created for the guards and placed in their
personnel

files.

Because

there

was

attrition,

replacement

Ugandan guards arrived at Al Asad during the year. These guards
were also unable to satisfy the marksmanship requirement, and
consequently additional false scorecards were created.
In May 2010, toward the end of the contract, Triple Canopy
attempted

to

have

40

Ugandan

guards

qualify

in

marksmanship

before leaving for vacation. None could do so. A Triple Canopy
supervisor ordered Omar Badr, a Triple Canopy medic, to prepare
false scorecards for the guards, reflecting scores of 30-31 for
male guards and 24-26 for the female guards. Triple Canopy’s
site manager signed these new scorecards and post-dated them,
showing that the guards qualified in June 2010.

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TO-11

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was

in

effect

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for

one

year,

and

Triple

Canopy

presented 12 monthly invoices for guard services during that
time. Each invoice listed the number of guards in service for
that month; the term “guard” was undefined. Pursuant to TO-11, a
contracting
acceptance
41.)

officer

representative

the

services

COR

The

of

was

appointed

acceptance

of

Triple

(COR)

[Triple
by

Canopy’s

was

Canopy]

the

“responsible
performed.”

Government

guard

and

services

by

for

(J.A.

confirmed
filing

a

Material Inspection and Receiving Report (DD-250) Form. (J.A.
41). The DD-250 required the COR to accept the services if they
“conform[ed] to contract” and to sign the form if the services
provided “were received in apparent good condition.” (J.A. 73).
The COR completed twelve DD-250 forms, none of which included
any certification or endorsement from Triple Canopy. In total,
Triple Canopy submitted invoices totaling $4,436,733.12 for the
Ugandan guards—a rate of $1,100 per month for each guard. Triple
Canopy

did

not

receive

a

renewal

of

TO-11,

and

the

Ugandan

guards were thereafter dispatched to four other contract sites
around Iraq: Cobra, Kalsue, Delta, and Basra.
Badr eventually instituted a qui tam action under the FCA
against Triple Canopy in the Eastern District of Virginia. Badr
alleged five false claims counts: Al Asad (Count I) and Cobra,
Kalsue,

Basra,

and

Delta

(Counts

II-V).

The

Government

intervened on the Al Asad count and filed an amended complaint
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alleging that Triple Canopy knowingly presented false claims, in
violation of 31 U.S.C. § 3729(a)(1)(A) (Count I), and caused the
creation
violation

of
of

a

false
§

record

3729(a)(1)(B)

material
(Count

to

a

II).

false

claim,

Specifically,

in
the

Government alleged that Triple Canopy knew the guards did not
satisfy TO-11’s marksmanship requirement but nonetheless “billed
the Government the full price for each and every one of its
unqualified guards” and “falsified documents in its files to
show that the unqualified guards each qualified as a ‘Marksman’
on a U.S. Army Qualification course.” (J.A. 24). The Government
also brought several common law claims.
The

district

court

granted

Triple

Canopy’s

motion

to

dismiss the FCA claims. United States ex rel. Badr v. Triple
Canopy, Inc., 950 F.Supp.2d 888 (E.D. Va. 2013). The court first
dismissed Count I because the Government failed to plead that
Triple Canopy submitted a demand for payment that contained an
objectively false statement. Next, the court dismissed Count II
because the Government (1) failed to allege a false claim and
(2) failed to allege that the COR ever reviewed the scorecards.
Finally, the court dismissed Counts II-V in Badr’s complaint
because he failed to plead with particularity the facts giving
rise to the claims. The court also dismissed Count I of Badr’s
complaint, concluding that Badr lacked standing to press that
claim because of the Government’s intervention. The court later
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dismissed the Government’s remaining common law claims. 2 Both the
Government and Badr filed timely appeals.
II.
We

review

de

novo

the

district

court’s

dismissal

of

a

complaint for failure to state a claim under Federal Rule of
Civil Procedure 12(b)(6). United States ex rel. Rostholder v.
Omnicare, Inc., 745 F.3d 694, 700 (4th Cir. 2014). To survive a
motion to dismiss under the rule, a complaint must “state a
claim to relief that is plausible on its face.” Ashcroft v.
Iqbal,

556

U.S.

662,

678

(2009)

(internal

quotation

marks

omitted). Facts that are “merely consistent with” liability do
not

establish

a

plausible

claim

for

relief.

Id.

(internal

quotation marks omitted).
In addition, claims under the FCA “must also meet the more
stringent ‘particularity’ requirement of Federal Rule of Civil
Procedure 9(b).” United States ex rel. Ahumada v. NISH, 756 F.3d

2

The district court dismissed each of these counts without
prejudice. We requested the parties to brief whether the orders
are appealable under Domino Sugar Corp. v. Sugar Workers Local
Union 392, 10 F.3d 1064, 1066-67 (4th Cir. 1993) (holding
dismissal “without prejudice” is not an appealable order if the
“plaintiff could save his action by merely amending his
complaint”). Pursuant to Chao v. Rivendell Woods, Inc., 415 F.3d
342 (4th Cir. 2005), both the Government and Badr have elected
to “stand” on their complaints and “waived the right to later
amend unless we determine that the interests of justice
require[]
amendment.”
Id.
at
345.
Accordingly,
we
have
jurisdiction to hear these appeals.

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268,

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280

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(4th

plaintiff

Cir.

must,

at

2014).
a

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Rule

minimum,

9(b)

requires

describe

the

that

FCA

place,

time,

“an

and

contents of the false representations, as well as the identity
of the person making the misrepresentation and what he obtained
thereby.” United States ex rel. Wilson v. Kellogg Brown & Root,
Inc.,

525

marks

omitted).

“fishing

F.3d

370,

379

Imposing

expeditions.”

(4th

Cir.

this

2008)

(internal

requirement

United

States

ex

serves
rel.

quotation
to

deter

Harrison

v.

Westinghouse Savannah River Co., 176 F.3d 776, 789 (4th Cir.
1999) (Harrison I).
III.
A.
Section 3729(a)(1)(A) prohibits any person from knowingly
“caus[ing]

to

be

presented”

to

the

Government

a

“false

or

fraudulent claim for payment.” 31 U.S.C. § 3729(a)(1)(A). To
prove a false claim, a plaintiff must allege four elements: (1)
a false statement or fraudulent course of conduct; (2) made with
the

requisite

scienter;

(3)

that

is

material;

and

(4)

that

results in a claim to the Government. United States ex rel.
Harrison v. Westinghouse Savannah River Co., 352 F.3d 908, 913
(4th Cir. 2003) (Harrison II). A false statement is material if
it

has

“a

natural

influencing,”

the

tendency

to

Government’s

influence,
decision

to

or

be

pay.

capable
31

U.S.C.

of
§

3729(b)(4). Scienter under the FCA encompasses actual knowledge,
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deliberate indifference, and reckless disregard, but does not
require

proof

of

specific

intent

to

defraud.

31

U.S.C.

§

3729(b)(1).
The phrase “false or fraudulent claim” should be “construed
broadly,” Harrison I, 176 F.3d at 788, “to reach all types of
fraud,

without

qualification,

that

might

result

in

financial

loss to the Government,” United States v. Neifert-White Co., 390
U.S. 228, 232 (1968). Liability thus attaches “any time a false
statement is made in a transaction involving a call on the U.S.
fisc.” Harrison I, 176 F.3d at 788.
The district court determined that Count I failed to state
a claim because the Government did not allege the first element,
a

false

statement

or

fraudulent

course

of

conduct.

In

the

court’s view, the Government “failed to sufficiently plead that
[Triple Canopy] submitted a demand for payment containing an
objectively false statement.” Triple Canopy, 950 F.Supp.2d at
890. The court reached this determination by reasoning that the
Government

never

alleged

that

Triple

Canopy

“invoiced

a

fraudulent number of guards or billed for a fraudulent sum of
money.” Id. at 896. The Government argues that Triple Canopy
submitted false claims because its monthly invoices billed the
Government
guards

for

had

guard
failed

services
to

although

comply

the

with

company
one

responsibilities, the marksmanship requirement.
10

of

knew

its

TO-11’s

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We have previously recognized that a false claims plaintiff
cannot

“shoehorn

what

is,

in

essence,

a

breach

of

contract

action into a claim that is cognizable under the” FCA. Wilson,
525

F.3d

at

373.

See

also

United

States

ex

rel.

Steury

v.

Cardinal Health, Inc., 625 F.3d 262, 268 (5th Cir. 2010) (noting
that courts “seek[] to maintain a crucial distinction between
punitive

FCA

liability

and

ordinary

breaches

of

contract”)

(internal quotation marks omitted). In Wilson, we concluded that
two qui tam relators failed to plead a false claim when the
claim was based on “mere allegations of poor and inefficient
management

of

contractual

duties.”

Wilson,

525

F.3d

at

377

(internal quotation marks omitted). “An FCA relator cannot base
a fraud claim on nothing more than his own interpretation of an
imprecise

contractual

particularly

where

provision,”
the

id.

at

Government

378,
never

we

explained,
“expressed

dissatisfaction” with the contract’s performance, id. at 377.
See also Harrison I, 176 F.3d at 792 (noting fraud is limited to
“expressions of fact which (1) admit of being adjudged true or
false

in

a

way

that

(2)

admit

of

empirical

verification”)

(internal quotation marks omitted).
We reiterated the line between breaches of contract and FCA
claims in United States ex rel. Owens v. First Kuwaiti General
Trading & Contracting Co., 612 F.3d 724, 734 (4th Cir. 2010). In
Owens, we rejected claims from a qui tam relator regarding the
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construction

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of

the

United

Pg: 12 of 25

States

embassy

in

Baghdad.

While

noting that some of the construction work required remediation,
we nonetheless explained that “[t]o support an FCA claim, there
needs

to

be

communication

something
between

more

the

than

the

government

usual

and

the

back-and-forth
contractor

over

this or that construction defect and this or that corrective
measure.”

Id.

at

729.

We

summarized

the

relators’

claims

as

“garden-variety issues of contractual performance” involving “a
series of complex contracts pertaining to a construction project
of massive scale.” Id. at 734. We expressly recognized that the
purposes of the FCA were not served by imposing liability on
“honest disagreements, routine adjustments and corrections, and
sincere and comparatively minor oversights,” “particularly when
the party invoking [the FCA] is an uninjured third party.” Id.
While we have guarded against turning what is essentially a
breach of contract into an FCA violation, we have also continued
to recognize that the FCA is “intended to protect the treasury
against the claims of unscrupulous contractors, and it must be
construed in that light.” Id. To satisfy this goal, courts have
recognized that “a claim for payment is false when it rests on a
false

representation

contractual

term.”

Corp.,

F.3d

626

of

compliance

United
1257,

States

1266

with
v.

(D.C.

an

Sci.
Cir.

applicable

.

Applications
2010)

(SAIC).

.

.

Int’l
Such

“[f]alse certifications” are “either express or implied.” Id.
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label

the

claim

Pg: 13 of 25

in

this

case

as

“implied

certification,” we note that this label simply recognizes one of
the “variety of ways” in which a claim can be false. Harrison I,
176 F.3d at 786. 3
“Courts
certification
sought.’”

infer
was

implied
a

certifications

prerequisite

to

from

the

silence

‘where

government

action

SAIC, 626 F.3d at 1266 (quoting United States ex rel.

Siewick v. Jamison Sci. & Eng’g, Inc., 214 F.3d 1372, 1376 (D.C.
Cir. 2000)). Recognizing that claims can be false when a party
impliedly

certifies

compliance

with

a

material

contractual

condition “gives effect to Congress’ expressly stated purpose
that the FCA should ‘reach all fraudulent attempts to cause the
Government to pay [out] sums of money or to deliver property or

3

The use of “judicially created formal categories” for
false claims is of “relatively recent vintage,” and rigid use of
such labels can “do more to obscure than clarify” the scope of
the FCA. United States ex rel. Hutcheson v. Blackstone Medical,
Inc., 647 F.3d 377, 385 (1st Cir. 2011). Our focus, regardless
of the label used, remains on whether the Government has alleged
a false or fraudulent claim. In Harrison I, we briefly noted the
existence of implied certification claims and, while mentioning
such claims might be “questionable” in the circuit, reserved
ruling on their viability. Harrison I, 176 F.3d at 788 n.8.
Since Harrison I, however, the weight of authority has shifted
significantly in favor of recognizing this category of claims at
least in some instances. See United States ex rel. Wilkins v.
United Health Grp., Inc., 659 F.3d 295, 305-06 (3d Cir. 2011)
(collecting cases from the First, Second, Sixth, Ninth, Tenth,
Eleventh, and D.C. Circuits). For the reasons expressed infra,
we agree that contractual implied certification claims can be
viable under the FCA in the appropriate circumstances.

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services,’”

Filed: 01/08/2015

United

States

ex

Pg: 14 of 25

rel.

Wilkins

v.

United

Health

Group, Inc., 659 F.3d 295, 306 (3d Cir. 2011) (quoting S.Rep.
No. 99–345, at 9 (1986)), a purpose we explicitly recognized in
Harrison

I.

An

example

provided

by

the

D.C.

Circuit

helps

explain the benefits of recognizing this theory:
Consider a company that contracts with the government
to supply gasoline with an octane rating of ninety-one
or higher. The contract provides that the government
will pay the contractor on a monthly basis but nowhere
states that supplying gasoline of the specified octane
is a precondition of payment. Notwithstanding the
contract’s ninety-one octane requirement, the company
knowingly supplies gasoline that has an octane rating
of only eighty-seven and fails to disclose this
discrepancy to the government. The company then
submits pre-printed monthly invoice forms supplied by
the government—forms that ask the contractor to
specify the amount of gasoline supplied during the
month but nowhere require it to certify that the
gasoline is at least ninety-one octane. So long as the
government can show that supplying gasoline at the
specified octane level was a material requirement of
the contract, no one would doubt that the monthly
invoice qualifies as a false claim under the FCA
despite the fact that neither the contract nor the
invoice expressly stated that monthly payments were
conditioned on complying with the required octane
level.
SAIC, 626 F.3d at 1269.
Accordingly, we hold that the Government pleads a false
claim when it alleges that the contractor, with the requisite
scienter,

made

a

request

“withheld

information

for

about

payment

its

14

under

noncompliance

a

contract
with

and

material

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contractual
“whether,

Filed: 01/08/2015

requirements.”
through

the

act

Pg: 15 of 25

Id. 4
of

The

“pertinent

submitting

a

inquiry”

claim,

a

is

payee

knowingly and falsely implied that it was entitled to payment.”
United States ex rel. Lemmon v. Envirocare of Utah, Inc., 614
F.3d 1163, 1169 (10th Cir. 2010). We appreciate that this theory
“is prone to abuse” by parties seeking “to turn the violation of
minor contractual provisions into an FCA action.” SAIC, 626 F.3d
at

1270. 5

The

best

manner

for

continuing

to

ensure

that

4

To that end, we note there are several key distinctions
between this case and what we viewed as garden-variety breaches
of contract in Owens and Wilson. First, this case does not
involve uninjured third parties making claims against their
former employers or contracts under which the Government does
not “express[] dissatisfaction.” To the contrary, the Government
has clearly expressed its displeasure with Triple Canopy’s
actions by prosecuting this action. In addition, this is not a
case involving subjective interpretations of vague contractual
language. In Wilson we noted that the relators “do not claim
that the maintenance provisions . . . set forth anything
resembling a specific maintenance program.” Wilson, 525 F.3d at
377. Absent such specific language, the relators could not prove
an “objective falsehood.” Id. Here, the Government has presented
an
objective
falsehood—the
marksmanship
requirement
is
a
specific, objective, requirement that Triple Canopy’s guards did
not meet.
5

Triple Canopy argues that implied representations can give
rise to liability only when the condition is expressly
designated as a condition for payment. “Of course, nothing in
the statute’s language specifically requires such a rule,” and
we decline to impose Triple Canopy’s proposed requirement. SAIC,
626 F.3d at 1268. In practice, the Government might have a
difficult time proving its case without an express contractual
provision. Because the FCA violations must be “knowing,” the
Government must establish that both the contractor and the
Government understood that the violation of a particular
contractual provision would foreclose payment. In addition,
(Continued)
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plaintiffs cannot shoehorn a breach of contract claim into an
FCA claim is “strict enforcement of the Act’s materiality and
scienter

requirements.”

Id.;

see

also

United

States

ex

rel.

Hutcheson v. Blackstone Med., Inc., 647 F.3d 377, 388 (1st Cir.
2011)

(same).

In

addition,

parties

who

engage

in

abusive

litigation remain subject to appropriate sanctions, whether in
the context of the FCA or otherwise.
B.
Applying

these

standards,

we

readily

conclude

that

the

Government has sufficiently alleged a false claim for purposes
of Rule 12(b)(6) and Rule 9(b). TO-11 lists the marksmanship
requirement
under

the

as

a

“responsibility”

contract.

The

complaint

Triple

Canopy

contains

must

an

fulfill

abundance

of

allegations that Triple Canopy did not satisfy this requirement
and,

instead,

falsifying

undertook

records

to

a

fraudulent

obscure

its

scheme

failure.

that

The

included

Government’s

complaint also properly alleges that Triple Canopy’s supervisors
had actual knowledge of the Ugandan guards’ failure to satisfy

because the violation must be material, not every part of a
contract can be assumed, as a matter of law, to provide a
condition of payment. Cf. Mann v. Heckler & Koch Def., Inc., 630
F.3d 338, 346 (4th Cir. 2010) (finding no fraud or FCA violation
even though contractor’s actions “may have violated federal
bidding regulations”).

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the

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marksmanship

Pg: 17 of 25

requirement

and

ordered

the

scorecards’

falsification.
Turning to materiality, in implied certification cases this
element

operates

to

protect

contractors

from

“onerous

and

unforeseen FCA liability as the result of noncompliance with any
of

potentially

hundreds

of

legal

requirements”

in

contracts,

because “[p]ayment requests by a contractor who has violated
minor contractual provisions that are merely ancillary to the
parties’ bargain” do not give rise to liability under the FCA.
SAIC, 626 F.3d at 1271. To establish materiality, the Government
must

allege

influence,

the
or

false

be

statement

capable

of

had

“a

natural

influencing,”

the

tendency

to

Government’s

decision to pay. 31 U.S.C. § 3729(b)(4). “Express contractual
language may ‘constitute dispositive evidence of materiality,’
but

materiality

through

may

testimony

be

established

demonstrating

in

that

other
both

ways,

‘such

parties

to

as
the

contract understood that payment was conditional on compliance
with

the

requirement

at

issue.’”

Hutcheson,

647

F.3d

at

394

(quoting SAIC, 626 F.3d at 1269).
The Government has sufficiently pled materiality under this
standard.

First,

common

sense

strongly

suggests

that

the

Government’s decision to pay a contractor for providing base
security

in

an

active

combat

zone

would

be

influenced

by

knowledge that the guards could not, for lack of a better term,
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shoot straight. In addition, Triple Canopy’s actions in covering
up the guards’ failure to satisfy the marksmanship requirement
suggests its materiality. If Triple Canopy believed that the
marksmanship

requirement

was

immaterial

to

the

Government’s

decision to pay, it was unlikely to orchestrate a scheme to
falsify records on multiple occasions.
Like
agreed

the

to

hypothetical

provide

a

gasoline

service

supplier,

that

met

Triple

certain

Canopy

objective

requirements, failed to provide that service, and continued to
bill the Government with the knowledge that it was not providing
the

contract’s

requirements.

In

addition,

Triple

Canopy

then

endeavored to cover up its failure. Distilled to its essence,
the

Government’s

claim

is

that

Triple

Canopy,

a

security

contractor with primary responsibility for ensuring the safety
of servicemen and women stationed at an airbase in a combat
zone, knowingly employed guards who were unable to use their
weapons

properly

payment

for

those

and

presented

unqualified

claims
guards.

to
The

the

Government

Court’s

for

admonition

that the FCA reaches “all types of fraud, without qualification”
is simply inconsistent with the district court’s view of the FCA
that Triple Canopy can avoid liability because nothing on the
“face” of the invoice was objectively false. Neifert-White, 390
U.S. at 232.

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Accordingly,

because

Pg: 19 of 25

the

Government

has

sufficiently

alleged that Triple Canopy made a material false statement with
the requisite scienter that resulted in payment, we reverse the
district

court’s

dismissal

of

Count

I

of

the

Government’s

complaint.
C.
We also reverse the district court’s dismissal of Badr as a
party to this claim. The district court, relying on an out-ofcircuit district court decision, United States ex rel. Feldman
v. City of New York, 808 F.Supp.2d 641 (S.D.N.Y. 2011), held
that

Count

I

of

Badr’s

complaint,

which

was

“virtually

indistinguishable” from the Government’s, was “superseded” and
“therefore dismissed for lack of standing.” Triple Canopy, 950
F.Supp.2d

at

895

n.1.

The

FCA

does

provide

that,

if

the

Government elects to participate in a qui tam FCA action, it
“shall

have

the

primary

responsibility

for

prosecuting

the

action, and shall not be bound by an act of the person bringing
the action.” 31 U.S.C.A. § 3730(c)(1). However, the FCA further
provides that the relator “shall have the right to continue as a
party to the action,” subject to certain limitations. Id. We
thus conclude that the district court erred in finding that Badr
lacked standing to remain as a party on Count I. On remand, the
district court is free to decide whether any of the limitations
in § 3730(c)(2) apply to Badr.
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IV.
A.
We next turn to the district court’s dismissal of Count II,
the

Government’s

false

records

claim.

Section

3729(a)(1)(B)

creates liability when a contractor “knowingly makes, uses, or
causes to be made or used, a false record or statement material
to a false or fraudulent claim.” The district court dismissed
the Government’s false records claim for (1) failing to allege a
false statement and (2) failing to allege that the COR actually
reviewed the falsified scorecards. 6 The district court concluded
the scorecards were not material because the Government failed
to specifically allege that the COR reviewed them. The court’s
conclusion,

however,

misapprehends

the

FCA’s

materiality

standard.
“[T]he materiality of the false statement turns on whether
the false statement has a natural tendency to influence agency
action

or

is

capable

of

influencing

agency

action.”

United

States ex rel. Berge v. Bd. of Tr. of Univ. of Ala., 104 F.3d
1453, 1460 (4th Cir. 1997) (internal quotation marks omitted);
see also 31

U.S.C.

§

3729(b)(4).

6

Materiality

focuses

on

the

Because we have already determined that the Government
adequately pled a false statement, we turn only to the question
of whether the false scorecards themselves were “material” to
the false statement.

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“potential effect of the false statement when it is made, not on
the actual effect of the false statement when it is discovered.”
Harrison

II,

352

F.3d

at

916-17

(emphasis

added).

See

also

United States ex rel. Feldman v. Van Gorp, 697 F.3d 78, 96 (2d
Cir. 2012) (holding materiality requirement is objective, not
subjective,

and

“does

not

require

evidence

that

a

program

officer relied upon the specific falsehoods proven”). In other
words, the FCA reaches government contractors who employ false
records that are capable of influencing a decision, not simply
those

who

create

records

that

actually

do

influence

the

decision. Thus, in Harrison II, we rejected the sort of “actual
effect” standard used by the district court because a government
contractor

could

never

be

held

liable

under

the

FCA

if

the

governmental entity decides that it should continue to fund the
contract, notwithstanding the fact that it knew the contractor
had made a false statement in connection with a claim. Harrison
II,

352

F.3d

at

916-17.

Along

the

same

lines,

a

contractor

should not receive a windfall and escape FCA liability if — as
the district court suggested here — a Government employee fails
to catch an otherwise material false statement. That approach
would

be

doubly

deficient:

it

would

inappropriately

require

actual reliance on the false record and import a presentment
requirement

from

§

3729(a)(1)(A)

that

is

not

present

in

§

3729(a)(1)(B). See United States ex rel. DRC, Inc. v. Custer
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Battles, LLC, 562 F.3d 295, 308 (4th Cir. 2009). In addition,
that approach “does not accomplish one of the primary purposes
of the FCA—policing the integrity of the government’s dealings
with those to whom it pays money.” Harrison II, 352 F.3d at 917.
The FCA is meant to cover “all fraudulent attempts to cause the
Government to pay out sums of money.” Neifert-White, 390 U.S. at
233. The district court thus erred in focusing on the actual
effect of the false statement rather than its potential effect.
A false record may, in the appropriate circumstances, have the
potential to influence the Government’s payment decision even if
the Government ultimately does not review the record.
B.
Applying the proper standard, we find that the Government
has properly pled materiality in Count II. The false records in
this case — the falsified scorecards — are material to the false
statement (the invoices) because they complete the fraud. The
false scorecards make the invoices appear legitimate because, in
the event the COR reviewed the guards’ personnel files, the COR
would

conclude

marksmanship

that

Triple

requirement.

Canopy

had

TO-11’s

complied

with

provisions

the

likewise

anticipated that the COR would indeed review the scorecards, as
they

offered

guards

the

satisfied

most

direct

evidence

the

marksmanship

that

Triple

requirement.

Canopy’s

The

false

scorecards were thus integral to the false statement and satisfy
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materiality

standard.

We

Pg: 23 of 25

therefore

reverse

the

district

court’s dismissal of Count II of the Government’s complaint. 7
V.
Finally, we address the dismissal of Counts II-V in Badr’s
complaint.

Badr

alleged

in

those

counts

that

Triple

Canopy

submitted false claims by invoicing the Government for guard
services under four additional contracts: Cobra, Kalsue, Basra,
and Delta. The sum of Badr’s allegations on these counts is as
follows: that the Ugandan guards were “demobilized . . . and
transferred” to the four contracts while still not “qualified to
provide” security services, and that Triple Canopy was “paid by
the U.S. Government under terms similar to those under the Al
Asad Contract.”
claim

regarding

(J.A.
the

15).
Al

By

comparison,

Asad

airbase,

in

support

Badr

listed

of

his

dates,

specified the actions taken on those dates, and identified the
Triple Canopy personnel involved. See, e.g. J.A. at 14 (“Site
Manager D.B. instructed [Badr] to falsely indicate that the men
had obtained scores in the 30-31 range . . . A new Site Manager,
D.B.2.,

then

signed

the

sheets,

7

falsely

post-dating

them

to

Triple Canopy argues in the alternative that the
Government has failed to allege causation. Causation is likely
not required under § 3729(a)(1)(B). See Ahumada, 756 F.3d at 280
n.8. In any event, causation in this situation is no different
than materiality: if the false record had a natural tendency or
was capable of influencing agency action, then the record caused
the false claim.

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indicate that the Ugandans had qualified in the following month
of June”).
The
failing

district
to

court

comply

with

correctly
Rule

dismissed

9(b).

Rule

Counts

9(b)

II-V

requires

for

“at

a

minimum” that Badr “describe the time, place, and contents of
the

false

representations,”

United

States

ex

rel.

Nathan

v.

Takeda Pharmaceuticals North America, Inc., 707 F.3d 451, 455-56
(4th Cir. 2013) (internal quotation marks omitted). We agree
with the district court that Badr cannot state a claim by doing
“nothing

more

than

simply

presum[ing]”

that

Triple

Canopy

submitted false claims under those contracts. Triple Canopy, 950
F.Supp.2d at 900. Badr contends that discovery may reveal the
contents of the contracts and invoices, but fraud actions that
“rest primarily on facts learned through the costly process of
discovery”

are

“precisely

what

Rule

9(b)

seeks

to

prevent.”

Wilson, 525 F.3d at 380. See also Harrison I, 176 F.3d at 789
(“The clear intent of Rule 9(b) is to eliminate fraud actions in
which

all

the

facts

are

learned

through

discovery

after

the

complaint is filed.”) (internal quotation marks omitted).
VI.
The

FCA

is

“strong

medicine

in

situations

where

strong

remedies are needed.” Owens, 612 F.3d at 726. That strong remedy
is needed when, as here, a contractor allegedly engages in a
year-long fraudulent scheme that includes falsifying records in
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personnel files for guards serving as a primary security force
on

a

United

States

airbase

in

Iraq.

Accordingly,

for

the

foregoing reasons, we reverse the district court’s dismissal of
Counts I and II of the Government’s complaint, we affirm the
dismissal of Counts II-V of Badr’s complaint, and we remand for
proceedings consistent with our opinion.
AFFIRMED IN PART,
REVERSED IN PART,
AND REMANDED

25