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WBK Industry News - Litigation Developments

Fifth Circuit Finds False Claims Act’s Public Disclosure Bar is not Jurisdictional and Affirms Summary Judgment on Materiality Grounds

The Fifth Circuit recently addressed whether the public disclosure bar of the False Claims Act (FCA) is jurisdictional in light of the 2010 amendment to the FCA, and concluded it is not. Separately, the court applied the “demanding” materiality requirements of the FCA as set forth by the United States Supreme Court in Universal Health Servs., Inc. v. United States ex rel. Escobar (2016), and affirmed summary judgment against a qui tam relator on materiality grounds.

An employee of a company that built and maintained an oil production platform in the Gulf of Mexico filed a federal lawsuit under seal in 2009 claiming FCA violations. As a qui tam relator, the employee claimed his employer did not have the necessary documentation for the project and that company plans were not approved by engineers as required by applicable regulations. The relator later filed an amended complaint adding an additional plaintiff and new claims for violations of the Outer Continental Shelf Lands Act.

While the case was pending, the Department of the Interior (DOI) performed a full investigation of the employer/oil company’s compliance with applicable regulatory requirements. The investigation culminated in a 2011 report, in which the DOI found no grounds for suspending the operations of the oil production facility, or for revoking the company’s designation as an operator.

After the district court granted summary judgment as to all claims in favor of the company, the plaintiffs appealed. On appeal, the Fifth Circuit addressed whether it lacked subject matter jurisdiction due to the FCA public disclosure bar. The court ruled that changes to the public disclosure bar by the Affordable Care Act had altered its jurisdictional nature. Joining the Third, Fourth, and Eleventh Circuits, the court concluded that the public disclosure bar is no longer jurisdictional.

As to whether alleged false claims by the company were material and caused the government to pay claims in violation of the FCA, the court relied on the materiality standards outlined in Escobar. In Escobar, the Supreme Court concluded that “if the Government pays a particular claim in full despite its actual knowledge that certain requirements were violated, that is very strong evidence that those requirements are not material.”

Here, the Fifth Circuit found the relator’s allegations did not create any issues of fact as to materiality. In particular, the DOI’s decision to permit the production facility to continue drilling after a substantial government investigation into plaintiffs’ allegations represented “strong evidence” that the regulatory requirements were not material to the claims presented. The plaintiffs’ failure to rebut that evidence was fatal to the FCA claims and supported summary judgment in favor of the company.

The case name is Abbott v. BP Exploration & Productio, Inc. The opinion may be found here: http://www.ca5.uscourts.gov/opinions/pub/16/16-20028-CV0.pdf.