PHILADELPHIA – A federal appellate court unanimously ruled that an amendment to the False Claims Act which lowered the burden of proof on whistleblowers does apply retroactively, to any case pending when the U.S. Supreme Court issued a ruling that the amendment was designed to cover.
On July 13, U.S. Court of Appeals for the Third Circuit judges D. Brooks Smith, Theodore A. McKee and Thomas L. Ambro ruled to affirm a special master’s $1 million judgment against The Farfield Co. in 2019, for its underpayment of rail workers on a project that finished construction in 2007.
The root cause of the action dates back to 2002, when Farfield was awarded a $54.7 million contract for a railroad upgrade project near Philadelphia.
As the project received partial federal funding, Farfield was mandated to pay wages classified under the federal Davis-Bacon Act to its workers. That law provides for different levels of personnel to be paid the local wage for those positions.
Two years after the project wrapped, IBEW Local Union No. 98 filed suit in the U.S. District Court for the Eastern District of Pennsylvania in 2009, claiming that Farfield a purposely permitted lower-wage workers to perform high-skilled tasks – and in accordance with that action, violated the False Claims Act by submitting false claims to the federal government.
Farfield countered that the workers were rightly classified, and the lower-paid employees only “assisted” staff performing more skilled work.
Subsequent litigation in the trial court lasted for a decade.
A federal court-appointed special master found in 2019 that Farfield employees designated as laborers and groundmen had in fact performed the work of higher-paid linemen. The master further found the workers were underpaid by about $160,000, and recommended a $1 million+ judgment against Farfield.
U.S. District Court for the Eastern District of Pennsylvania Judge Mark A. Kearney adopted the special master’s recommendation in full in 2020.
On appeal, Farfield alleged that its underpayment of workers took place too early in time for the Fraud Enforcement and Recovery Act of 2009 to apply in the instant matter and the size of the judgment was not proportional to its worker misclassification, but that argument did not prove successful.
Smith wrote the Third Circuit’s ruling in this case, which further illustrated a rift on the issues at hand among federal appellate courts.
Along with the Third Circuit, the Sixth and Seventh Circuits have also decided that FERA applied to any lawsuit pending on the date the law took effect, June 7, 2008.
FERA removed a tenet of the False Claims Act, which mandated that whistleblowers show specific proof of a defendant’s intent to defraud the government.
However, the Fifth, Ninth and Eleventh Circuits have ruled that FERA applies only to supposed false claims sent in to the government which were pending payment on or after the date it took effect in June 2008.
In this case, Smith and his colleagues found that FERA was applicable to any action pending when it was enacted.
“Congress’s 2009 amendments to [the False Claims Act] apply retroactively to cases pending on or after June 7, 2008, no matter when the underlying conduct occurred. When deciding how to classify workers on a federally-funded project, a contractor must contact either the Department of Labor or the signatories, including the union(s), to the collective bargaining agreement underpinning the prevailing wage determination incorporated into the contract,” Smith said.
“A contractor’s false certifications of Davis-Bacon compliance on payrolls submitted to the government are material, absent evidence of the government’s past action relevant to associated claims or proof that the contractor’s noncompliance was minor or insubstantial. And the damages burden-shifting framework applicable in Fair Labor Standards Act and Davis-Bacon cases may apply in the appropriate False Claims Act case.”
U.S. Court of Appeals for the Third Circuit case 20-1922
U.S. District Court for the Eastern District of Pennsylvania case 5:09-cv-04230
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com