Claims Court Reviews Standards for False Claims Act and Contracts Disputes Act Liability for Inaccurate Claims

Al Munford, Inc. v. United States,
1995 U.S. Claims LEXIS 163 (Cl. Ct. August 15, 1995)

False Claims Act – Federal contractor violated the False Claims Act, 41 U.S.C. 3729 (1988) when it submitted a certified claim to the contracting officer which included amounts which the Government had previously paid.

The Federal Government awarded the Munford Construction Company a contract to build and repair washracks at Fort McClellan, Alabama and subsequently terminated Munford for default approximately eight months later. Munford filed an action in the United States District Court seeking to reinstate the contract and recover monetary damages. As part of this District Court action, Munford subpoenaed the contracting officer and attached a certified claim for alleged damages, arising from the termination of the contract, to the subpoena. As the issue of reinstatement became moot, both parties filed a joint motion for dismissal agreeing that Munford would pursue its monetary claims in the United States Court of Federal Claims. Munford subsequently filed an action in the Federal Claims Court after the contracting officer denied Munford’s claim. The Government responded by filing counterclaims for civil fraud, alleging that Munford had submitted a fraudulent claim under both the False Claims Act, 31 U.S.C. 3729 (1988) and the Contract Disputes Act 41 U.S.C. 604 (1988).

The False Claims Act imposes a civil penalty on a party “who knowingly presents . . . to an officer or employee of the United States Government . . . a false or fraudulent claim for payment or approval.” The Act deems a claim false if the moving party proves by a preponderance of the evidence that the non-moving party acted with knowledge of the false information containedovernment had already paid Munford and for costs which Munford had not yet incurred. These unrealized costs included $123,476.57 for material and labor which Munford had already invoiced and received payment and $95,000 for anticipated legal expenses. During the discovery phase of the litigation, Munford admitted that its claim included all of the false costs, asserted by the Government. Munford, however, contended “unbelievably” that it never had any intention of double-billing the Government or of claiming amounts which it was not entitled.

Focusing on the amounts already paid rather than the costs not yet incurred, the Claims Court held that Munford violated the False Claims Act when it submitted the claim for an amount already paid by the Government which amounted to recklessness with regard to the validity of the claim. In reaching this decision, the Court clearly set forth the claimant’s duty when preparing a claim against the Government:

Every party filing an action in this court has a duty to examine its records to determine what amounts the government already has paid. A failure to make this type of minimal examination is nothing more than deliberate ignorance.

To find otherwise would allow any party filing an action to double bill the government and then cloak itself behind a veil of “feigned ignorance.” The Court went on to reject the Government’s counterclaim for fraud under the Claims Dispute Act because the Government failed to provide any direct evidence that Munford intended to deceive or mislead the Government when it submitted its claim.

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