Phelps Team Successfully Defends Major Construction Contractor in False Claims Act Case
NEW ORLEANS, April 2021 — Capping off a nearly 10-year federal suit in the Eastern District of North Carolina, Phelps attorneys Frank Trapp, Nate Huff and A. Brian Albritton successfully defended major construction contractor W.G. Yates and Sons Construction Co. against a federal False Claims Act suit seeking hundreds of millions of dollars in damages.
The suit alleged that Yates Construction and its joint venture partner Caddell Construction Company falsely certified the contractors’ achievements of minority and small business subcontracting goals of a $194.7 million construction contract of a new Marine Corps barracks at Camp LeJeune, North Carolina. The plaintiff-whistleblower sought False Claims Act damages in excess of $210 million.
In granting summary judgment in favor of the joint venture, U.S. District Court Judge Flanagan held that the joint venture had not submitted false claims for payment or knowingly violated any contract provision. The Court found that the disputed subcontracting status reports were not claims for payment, had no influence on payment decisions and the project executive acted in good faith.
This is an important decision for the defense of FCA claims. It affirms that the FCA is not a vehicle for punishing garden-variety contract disputes and should be confined to fraudulent conduct that induces the government to render payments. “When regulations or contracts are unclear,” said Trapp, “a whistleblower cannot use that ambiguity to attempt to establish false claim liability – especially where it is conceded the billings were accurate. The Court’s decision was right on point.”
False Claims Act suits, especially “qui tams” initiated by whistleblowers, are a challenge for the construction industry that participates in government and defense contracting projects. Of the $2.2 billion in FCA settlements and judgments reported by the federal government in fiscal year 2020, $1.6 billion arose from qui tam lawsuits. With deep experience in defending FCA claims and a strong construction practice, Phelps is poised to help the construction industry with overcoming those challenges.
The Phelps team was led by Frank Trapp, Nate Huff and Brian Albritton. Interested parties can learn more about the False Claims Act practice at Phelps here.
Co-counsel for Caddell included D.J. O’Brien and Kearns Davis of Brooks, Pierce, McLendon, Humphrey & Leonard, LLP.
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