United States ex rel. Kelly v. Serco

United States ex rel. Kelly v. Serco (9th Cir. 14-56769 1/12/17) False Claims Act/Qui Tam



The panel affirmed the district court’s summary judgment in favor of the defendant in an action under the False Claims Act.



The plaintiff alleged that his former employer Serco, Inc., a technology and project management services provider, submitted fraudulent claims for payment to the United States for work done under a government contract. The Department of Defense, Navy Space and Naval Warfare Systems Command (SPAWAR), contracted with Serco for work on the Advanced Wireless Systems Spectrum Relocation Project, a project to upgrade the wireless communications systems situated along the United States-Mexico border for the Department of Homeland Security, Customs and Border Protection (DHS). The interagency contract between SPAWAR and DHS required SPAWAR to implement a cost and progress tracking system known as an earned value management (EVM) system. The services provided by Serco were covered under its Naval Electronic Surveillance Systems contract with SPAWAR.



The panel affirmed the district court’s summary judgment on a claim that Serco submitted false or fraudulent claims for payment under an implied false certification theory of liability under the False Claims Act. The panel applied Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016), which held that a government contract need not expressly designate a requirement as a condition of payment in order to trigger liability under the theory of implied certification. Instead, what matters is whether the defendant knowingly violated a requirement that it knew was material to the government’s payment decision. To establish liability, the defendant’s claim for payment must make specific representations about the goods or services provided, and the defendant’s failure to disclose material statutory, regulatory, or contractual requirements must make those representations misleading half-truths. The panel held that the plaintiff did not satisfy the standard for materiality set forth in Escobar because there was no genuine issue of material fact as to the materiality of Serco’s compliance with the American National Standards Institute/Electronic Industries Alliance Standard 748 (ANSI-748) or its obligation to provide valid EVM reports.



The panel also affirmed the district court’s summary judgment on claims that Serco violated the False Claims Act by making false records material to a false or fraudulent claim, conspired to violate the False Claims Act, wrongfully retained overpayments, and wrongfully terminated the plaintiff in violation of public policy under California state law.

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