Contractors Have No False Claims Act Liability for Overweight Trucks

In a refreshing rebuke to the certification theory of False Claims Act (“FCA”) liability, the Fifth Circuit in United States ex rel. Stephenson v. Archer Western Contractors, Case No. 13-30327 (5th Cir. Dec. 2, 2013) affirmed the dismissal of a complaint alleging FCA liability brought by the owner and manager of a trucking company against various contractors working on the reconstruction of the New Orleans levee system for the United States Army Corps of Engineers.  The complaint alleged that the contractors had defrauded the government by falsely certifying as part of their requests for payment that they were in compliance with all “Federal, state and municipal laws, codes and regulations applicable to the performance of the work” when in fact they were consistently violating state and local weight limits for trucks on highways.   The evidence presented to the Court indicated that the topic of overweight trucks had been raised in emails between the government and the contractors and that it was readily visible on-site.  Nevertheless, the government had never issued any stop work orders, never stopped the delivery of clay by the overweight trucks to the project site, and never withheld payment to the contractors.  Accordingly, the Fifth Circuit concluded that the alleged “fraud” was immaterial and could not be a basis for FCA liability.

There are innumerable laws and regulations that may apply to a particular construction project.  This decision makes it clear that only those violations of law which actually affect the decision of the government to pay for the work being performed on the project are a basis for FCA liability.  In particular, the decision suggests that payment by the government with full knowledge of the violation may be a basis to conclude that such violations are immaterial.  This should hopefully alleviate any concerns for contractors signing off on such certifications that technical violations of laws or regulations unrelated to the government’s payment decision should not result in FCA liability.

For more information on professional liability and construction issues, contact attorney Nathan Fennessy or a member of Preti Flaherty's Professional Liability group.