2023 is shaping up to be a major year in False Claims Act (“FCA”) practice, with the Supreme Court weighing in on both FCA scienter (in SuperValu) and the reach of the government’s dismissal authority (in Polansky), and the government focusing its enforcement efforts around antitrust, cyber, and national security. We focus today on the United States ex rel. Schutte v. SuperValu, Inc. decision, in which the Supreme Court held that a contractor’s subjective belief about its compliance at the time it submitted claims for payment is relevant to whether it had the requisite scienter for FCA liability. Much has been written on this case, with most articles exploring esoteric concepts like “scienter,” “falsity,” and the “objectively reasonable person.” But assuming—as we do—that the decision will reduce the prospect of successful early dispositive motions, what practical steps can contractors take to reduce their False Claims Act exposure and avoid litigation in the first place? We offer three suggestions.
We begin with a basic refresher on the issue presented in SuperValu. A defendant is not liable under the False Claims Act unless it “knowingly” (including acting with “reckless disregard”) submits a false claim to the government. The “knowing” scienter element—particularly around reckless disregard—can be difficult to prove in the world of complex and often ambiguous laws and regulations that govern contractors’ compliance. The federal circuits had split on the issue of whether a defendant’s subjectiveinterpretation at the time it submitted claims for payment to the government was relevant to determining FCA “knowledge” if the defendant could later show that the underlying rule was ambiguous and its conduct (regardless of its contemporaneous understanding or belief) was consistent with an objective, reasonable interpretation of the unsettled requirement. SuperValu resolved the debate by holding that whether a defendant knowingly violated the FCA—and satisfied the scienter element—must consider the defendant’s real-time “knowledge and subjective beliefs.” United States ex rel. Schutte v. SuperValu, Inc., 143 S. Ct. 1391 (2023).
After several Federal District Courts issued injunctions against the federal contractor vaccine mandate in December 2021, the Federal Government issued guidance fully suspending its enforcement of the federal contractor mandate. Despite the guidance, the future of the federal contractor vaccine mandate continued to remain in a state of limbo. This was best demonstrated two weeks ago when the Ninth Circuit sided with the Federal Government by lifting the district court’s preliminary injunction of the federal contractor vaccine mandate. The Ninth Circuit’s decision created a split with the Fifth, Sixth, and Eleventh Circuits that have enjoined the mandate. This Circuit split was likely headed to the United States Supreme Court.
On May 1, 2023, all of this changed. The Biden Administration announced its plan to end its federal contractor vaccine mandate on May 11, 2023, the same day the public health emergency ends. Accordingly, the Administration plans to issue an Executive Order “rescinding the vaccination requirement for federal employees and COVID-19 safety protocols for federal contractors, effective at 12:01 am on May 12, 2023.” For Federal Contractors | Safer Federal Workforce. Until then, the guidance suspending the enforcement of the federal contractor mandate remains in effect.
This should be the end of the federal contractor vaccine mandate; however, we will know more by May 11, 2023. Stay tuned for further developments.
A Blank Rome team represented KPMG LLP in a successful bid protest before the Government Accountability Office (“GAO”), in which KPMG challenged the award decision of the United States Air Force in a procurement for visible accessible understandable linked trusted (“VAULT”) subject matter expert support.
Since December 2021, after a Federal District Court for the Southern District of Georgia issued a nationwide injunction against the federal contractor vaccine mandate, compliance with the federal contractor vaccine mandate has been in limbo. Many hoped that, on appeal, the Eleventh Circuit would bring some clarity to vaccine requirements. Unfortunately, that is not the case. On August 26, 2022, the Eleventh Circuit agreed that a preliminary injunction was warranted, however the Court narrowed the applicability of the injunction. The court held that the injunction should only apply to the specific plaintiff-states and trade associations in the case, and should not “extend nationwide and without distinction to plaintiffs and non-parties alike.” Georgia v. President of the United States, No. 21-14269 (11th Cir. Aug. 26, 2022).
The Eleventh Circuit agreed with the lower court that a preliminary injunction was warranted, stating that while “Congress crafted the Procurement Act to promote economy and efficiency in federal contracting, the purpose statement does not authorize the President to supplement the statute with any administrative move that may advance that purpose.” Therefore, the Court held that “the President likely exceeded his authority under the Procurement Act when directing executive agencies to enforce” the vaccine mandate.
In an important decision for preserving contractor data rights, the Court of Federal Claims recently confirmed that “technical data” has a limited scope and, per the DFARS, includes only information “of a scientific or technical nature.” Raytheon Co. v. United States, No. 19-883C, 2022 WL 2353085 (Fed. Cl. June 15, 2022).
Pursuant to DFARS 252.227-7013, if any data is identified as “technical data” the Government may be able to assert licensing rights in a contractor’s noncommercial technical data. See DFARS 252.227-7013(b). In contrast, for any data identified as proprietary non-technical data, the Government cannot assert any licensing rights in the proprietary non-technical data.
Office Depot challenged GSA’s attempt to use a single blanket purchase agreement to purchase both hardware/industrial supplies and office supplies, arguing that the evaluation scheme was unreasonable because it was predicated on consideration of incomplete historical sales information for the office supplies.
The protester argued that the market basket to be used for evaluation was based on historical sales of hardware and industrial items, to the exclusion of data on office supplies, which resulted in a market basket which didn’t reasonably represent the likely purchases of office supplies.
GAO agreed that the Agency had unreasonably relied on limited historical data regarding office supply sales to predict its future buying needs and that it had no (or virtually no) basis for forecasting estimated quantities of office supplies.
GAO recommended GSA conduct additional market research and revise the solicitation with a reasonable representative sample of estimated hardware/industrial items and office supply purchases.
Lawsuits challenging the Biden Administration’s many vaccine mandates have changed the compliance landscape over the last few months. This post summarizes the current status of the four major mandates:
Occupational Safety and Health Administration (“OSHA”) mandate;
Healthcare Worker mandate;
Federal Employee mandate; and
Federal Contractor mandate.
Spoiler alert: The Federal Contractor mandate–which has caused the most significant confusion for Government contractors since its issuance–still does.
1. OSHA Mandate
OSHA’s Emergency Temporary Standard (“ETS”) required that all employees of employers with 100 or more employees either be fully vaccinated or wear a mask and submit to weekly COVID‑19 testing. On January 13, 2022, the Supreme Court upheld a preliminary injunction of the OSHA mandate, finding that it likely exceeded OSHA’s authority.
Status: Withdrawn (OSHA announced that it was withdrawing the ETS on January 26, 2022).
Earlier today, November 4, 2021, the White House issued a fact sheet addressing its vaccination policies, including the government contractor mandate under EO 14042. Three key points stand out: (1) the compliance deadline for “full vaccination” status will be extended from December 8, 2021, to January 4, 2022; (2) the Occupational Safety and Health Administration (“OSHA”) vaccine rule for larger employers (which may permit weekly testing in lieu of vaccination) will not apply to workplaces covered by the federal contractor mandate; and (3) the Government continues to take the position that its mandates will preempt conflicting state or local laws. The full press release can be found at Fact Sheet: Biden Administration Announces Details of Two Major Vaccination Policies.
How does this new guidance impact government contractor compliance with EO 14042?
Most notably, the guidance extends the deadline for full vaccination status for covered contractors from December 8, 2021, to January 4, 2022. Covered contractor employees should receive their final vaccine dose by the new January 4, 2022, deadline.