Sixth Circuit Examines Materiality And Government Knowledge Under The FCA

As its name implies, the False Claims Act (FCA) prohibits false or fraudulent claims to the federal government. Broadly construed, the FCA can apply to anyone receiving federal funds, but it is especially critical to government contractors, health-care entities, and financial institutions that routinely do business with the government.

One of the key issues in FCA cases is whether a false statement is "material," that is, did it matter to the government decision-maker. Materiality has been defined and interpreted by courts in different ways, and, in a significant new holding, the Sixth Circuit Court of Appeals recently refined its materiality analysis in FCA cases. In U.S. ex rel. Am. Sys. Consulting, Inc. v. ManTech Advanced Sys. Int'l, No. 14-3269 (6th Cir. Feb. 2, 2015), the Court held, among other things, that materiality is an issue of law to be determined by the court and not reserved for the jury, a holding that increases the likelihood of cases being disposed of without a trial. Notably, the Court also held that the government's continued performance under a contract, despite knowledge of a misrepresentation, may weigh against a finding that the misrepresentation was material, though it does not necessarily preclude materiality.

Competing Bidders and Alleged RFP Misrepresentations

In ManTech, the parties were competing bidders on a request for proposal (RFP) for a government contract involving software and systems engineering. Under the RFP guidelines, each bidder had to provide the qualifications of a specific program manager. Defendant ManTech did so, but the identified program manager later resigned from the company. ManTech did not disclose his resignation to the government and, in later submissions in the RFP process, continued to identify him as the program manager. The government ultimately awarded the contract to ManTech.

Plaintiff ASCI lodged a bid protest. When that protest failed, ASCI sought review from the Government Accountability Office (GAO), arguing that ManTech made misrepresentations about the program manager. Although GAO dismissed the matter as untimely, the RFP issuer conducted its own evaluation, after which it chose to continue working with ManTech.

ASCI next filed an FCA complaint, alleging that ManTech violated the FCA by wrongly identifying a former employee as the project manager. When the government declined to intervene, the parties litigated the case. The district court ultimately granted ManTech's...