surety liability FCA constructionThe federal Miller Act requires government construction contracts over $100,000 to be bonded. This process involves insurance companies, known as “sureties,” who issue payment or performance bonds to contractors, who in turn furnish the required bonds to the federal government. The bonds guarantee that the contractor will comply with the terms of the contract and perform as required. Although the sureties do not interact directly with the federal government, a recent decision from the US District Court in DC suggests that sureties could face liability where the bonded contractor violates the civil False Claims Act (“FCA”), 31 U.S.C. § 3729. In Scollick ex rel. United States v. Narula, No. 1:14-CV-01339-RCL, 2022 WL 3020936 (D.D.C. July 29, 2022) the court held, under the facts of that case, that the sureties had no knowledge of the fraud allegedly committed by the bonded contractor, and thus did not violate the FCA. Although the sureties escaped in this instance, this case demonstrates the expansive reach of the FCA and puts the insurance industry on notice that they are not immune from FCA liability.
Continue Reading Surety Liability Under the False Claims Act

On May 3, Seyfarth attorneys Teddie Arnold and Anthony LaPlaca are presenting a 1-day session on Government Contract Compliance as part of the Federal Publications Seminars’ Training Academy in La Jolla, California. Seyfarth attorneys Joe Dyer, Stephanie Magnell, and Bret Marfut will also be presenting remotely.

A substantive compliance program can reduce the chances that

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The Port of Anchorage Intermodal Expansion Project was envisioned to be a $1 billion project that would replace outdated infrastructure at the Port of Alaska, but defective management, design, and construction derailed the Project. Seyfarth was tasked with prosecuting claims and recovering money spent by the Department of Transportation Maritime Administration (MARAD) for the

Adam Lasky, co-chair of Seyfarth’s Government Contracts practice, and Scott Hecker, senior counsel in Seyfarth’s Labor & Employment practice, are presenting “Hot Labor & Employment Issues in Federal Contracting” at the Alliance Northwest Conference on March 10, 2022. The program will cover hot issues and recent regulatory developments on Service Contract Act, Davis-Bacon Act, Project

Teddie Arnold and Stephanie Magnell spoke about government contractors protecting themselves from government fraud arguments in the February 25th Federal Publications Seminars Podcast “Avoiding Fraud in Federal Contract Claims.”

When contractors file claims against the government, they should make sure they are on solid ground to protect against government claims of fraud. Listen to the

The Fourth Circuit, in United States ex rel. Sheldon v. Allergan Sales, LLC, No. 20-2330, 2022 WL 211172 (4th Cir. Jan. 25, 2022) recently upheld the dismissal of False Claims Act (“FCA”) lawsuit brought by a quit tam relator (“Relator”) against his employer, Forest Laboratories, LLC (“Forest”) alleging that Forest engaged in a fraudulent price reporting scheme under the Medicaid Drug Rebate Statute (“Rebate Statute”).[1]

Notably, the Fourth Circuit adopted the US Supreme Court’s decision in Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47 (2007) in holding that the scienter element of the FCA is subject to an “objective reasonableness” standard, where a defendant can defeat FCA liability by establishing that its interpretation of the applicable statute or regulation was objectively reasonable and that no authoritative guidance from a court or agency could have “warned defendant away” from that interpretation. Just last year, the Seventh Circuit adopted this standard in U.S. ex rel. Schutte v. SuperValu Inc., joining the Third, Eighth, Ninth, and DC Circuits in holding the same.

At issue in Sheldon was the reasonableness of Forest’s interpretation of the Rebate Statute in determining how it calculated certain discounts given to separate customers for purpose of reporting its “best price” to the government. The District Court dismissed the complaint on the basis that Forest’s reading of the Rebate Statute was “objectively reasonable,” there was no authoritative guidance to the contrary, and thus Forest did not act “knowingly” under the FCA. The Fourth Circuit affirmed.[2]
Continue Reading Fourth Circuit Adopts Objective Reasonableness Standard in Determining Scienter Element of the False Claims Act

Seyfarth partner Teddie Arnold is moderating the “Enhancing Small Business Ethics and Compliance Efforts” panel for the Defense Industry Initiative’s (DII) first quarter webinar on Thursday, March 24 at 1:00 p.m. Eastern. The program will include a discussion of ethics and compliance risks and opportunities for small and mid-sized businesses, with perspectives from industry, experts,

In a recent decision, the Court of Appeals for the Federal Circuit held that FAR 52.212-4(l), the Termination for Convenience clause used in commercial items contracts, had no effect in a services contract—even though the services contract explicitly incorporated the clause. The case could have significant implications not just for services contracts that borrow commercial-items clauses, but also for contractors evaluating whether new clauses added into their contract (like clauses requiring COVID-19 vaccines) are operative.
Continue Reading Federal Circuit Holds Termination for Convenience Clause Inoperative in Services Contract

Executive Order 14005

Not even one week into the Biden Administration’s tenure, Buy American rules are yet again taking center stage as a fundamental policy objective. On January 25, 2021, President Biden issued Executive Order 14005 entitled “Ensuring the Future is Made in All of America by All of America’s Workers,” which sets forth the new Administration’s policy of utilizing the federal procurement process to maximize the use of goods, products, and materials that are US-origin. Executive Order 14005 takes aim at overhauling “Made in America Laws,” which it defines broadly as inclusive of all statutes, regulations, rules, and Executive Orders relating to federal financial assistance awards or federal procurement—known interchangeably as Buy America or Buy American rules—which provide a preference for purchase of domestic goods and materials that are US-origin. But unlike Executive Order 13788 issued by the Trump Administration making changes to Buy America rules, President Biden’s Executive Order 14005 does not make any immediate changes to those rules. Rather, it calls for a review of existing laws and implementing rules. That review, however, and what proposed changes in existing laws comes out of that review, could be significant.
Continue Reading Biden Administration Issues Executive Order 14005 Aimed at Strengthening Made in America Laws

Seyfarth Government Contracts partners Adam Lasky and Donald Featherstun are presenting programs at Navigating Federal Government Contracts Northwest 2020 on October 21 and 22. The conference—which is hosted by Associated General Contractors of Washington, Washington State Procurement Technical Assistance Center, Pacific Northwest Defense Coalition, and Oles Morrison Rinker & Baker LLP—is two days of informative