United States: Opening Brief Filed Before Fifth Circuit In Appeal Of Largest False Claims Act Judgment

Trinity Industries filed its appeal brief before the U.S. Court of Appeals for the Fifth Circuit in U.S. ex rel. Harman v. Trinity Industries on March 21, 2016, appealing "the largest judgment in the 150-year history of the False Claims Act." In its appeal brief, Trinity argues that the relator's case failed every element of the False Claims Act (FCA), including materiality, falsity, scienter and false claim. According to Trinity, the applicable regulatory agency, the Federal Highway Administration (FHWA), expressly approved the expenditure of federal funds at issue after the submission of the claims in question. Thus, the Fifth Circuit's decision in the case will be instructive on whether agency guidance issued after the presentment of an allegedly false claim prevents materiality or legal falsity of the claim. This question is particularly relevant to industries such as health care, where regulatory guidance often changes in light of updated evidence or changes in industry practice.

The relator in the case is a competitor of Trinity, a highway guardrails manufacturer. The federal government, through the FHWA, reimburses state transportation departments for certain highway construction expenses, including installation of safety guardrails. In order to be eligible for reimbursement, guardrails must be crash-tested and accepted by the FHWA. Defendant Trinity had obtained such acceptance for its ET Plus guardrail units in 1999. In 2005, Trinity then modified the design of the ET Plus units. The relator alleged that Trinity did not disclose these modifications to the approved guardrails. The relator thus argued that the underlying claims for reimbursement for installation of the modified guardrails were false claims because they were founded on misrepresentations that the modified guardrails complied with the underlying FHWA regulations.

However, as Trinity explains in its appeal brief, the relator informed the FHWA of this nondisclosure in 2012, before filing the FCA lawsuit in the U.S. District Court for the Eastern District of Texas in 2013. In response, the FHWA met with Trinity, met again with the relator, and conducted additional inspections of the guardrails in question. In June of 2014, the FHWA reaffirmed its approval of the modified guardrail in an official memorandum, confirming "an unbroken chain of eligibility for Federal-aid reimbursement has existed since September 2, 2005, and the ET[]Plus continues to be eligible today." In other words, whether the changes to the units were disclosed in 2005 or thereafter, the FHWA determined retroactively that the modified guardrails met reimbursement standards.

Despite the FHWA's June 2014 memorandum, trial in the matter started a month later. That trial ended in mistrial. Before the second trial, Trinity filed a mandamus petition to the Fifth Circuit, asking it to grant relief based on the FHWA's statements confirming eligibility of the modified guardrails for federal reimbursement. Though the Fifth Circuit denied the petition, it stated in its October 2014 decision that "a strong argument can be made that the defendant's actions were neither material nor were any false claims based on false certifications presented to the government." The Fifth Circuit stated that the FHWA letter "seems to compel the conclusion" that FHWA found the product compliant with federal safety standards and therefore eligible for federal reimbursement claims.

The case went forward to a second trial in October of 2014, resulting in a $175 million jury verdict. Last June, the district court confirmed the verdict. Under the FCA, the jury award was automatically trebled to $525 million. In addition, the district court imposed civil penalties in the amount of $138.4 million and awarded attorney's fees, expenses and costs to the relator in the amount of $19 million. The amount of the total judgment was $682.4 million. The result seems improbable where the relevant federal agency has expressly stated that the modified guardrails have been eligible for reimbursement since 2005. Indeed, according to Trinity's appeal brief, the federal government continues to reimburse state departments of transportation for the modified guardrails, having conducted additional crash testing in 2015 confirming that the guardrails met the criteria imposed by FHWA regulations.

In its appeal, Trinity makes four primary arguments. First, it argues that any failure to disclose the modifications of the guardrail design was not material, as the FHWA learned of the nondisclosure but confirmed that the modified units were eligible for reimbursement. Trinity states, "In the end, all that remains of [the relator's] allegations is a policy dispute with the FHWA.... But the FCA is about fraud on the United States, not policy disagreements—let alone policy disagreements in which the United States agrees with the defendant."

Second, Trinity claims that the alleged false statement in the claims—that the modified guardrail was compliant with certain FHWA regulations—was actually true as a matter of law based on a correct interpretation of the FHWA regulations.

Third, Trinity argues that it could not knowingly make a false statement, because a reasonable interpretation of an ambiguous regulatory regime prevents scienter.

Finally, Trinity claims that compliance with the FHWA regulation is not a condition to federal payment, and thus cannot give rise to a false claim under the FCA.

We will report on the relator's response to these arguments and provide further updates in this significant appellate case addressing government knowledge and materiality.

Opening Brief Filed Before Fifth Circuit In Appeal Of Largest False Claims Act Judgment

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions