Contract – False Claims Act – Bidding Process

Mann v. Heckler & Koch Defense Inc. (Lawyers Weekly No. 11-01-0032, 20 pp.) (Wilkinson, J.) No. 09-1847, Dec. 27, 2010; USDC at Alexandria, Va. 4th Cir. Click here for the full text of the opinion.

Holding: Statements made by a dealer of firearms for military and law enforcement agencies on its bid to supply weapons to the Secret Service’s counterassault team were not covered by the False Claims Act, nor did the FCA shield the dealer’s employee from adverse employment action for the employee’s investigation of and opposition to the dealer’s alleged attempts to defraud the U.S.; the 4th Circuit affirms the district court’s rejection of the employee’s claims under the FCA.

Jason Mann, the former employee, contends he was dismissed because of his efforts to stop defendant HKD’s attempts to defraud the U.S. and his filing of a retaliation claim. HKD, however, asserts that Mann’s termination stemmed from his involvement in an unlawful scheme to procure machine guns for a small police force.

The district court noted that Mann never identified any instance of HKD making a false statement or engaging in fraudulent conduct. Without evidence of a false or fraudulent claim against the U.S., the district court reasoned, there was no reasonable possibility that HKD was violating the FCA. Therefore, Mann did not qualify for FCA protection.

Under the “distinct possibility” standard, protected activity occurs when an employee’s opposition to fraud takes place in a context where litigation is a distinct possibility, when the conduct reasonably could lead to a viable FCA action, or when litigation is a reasonable possibility. The distinct possibility standard is an objective one. It enjoys widespread support among the circuits because it focuses attention on the ills the statute is designed to prevent.

Where, as in the instant case, only the protected activity element is at issue, viewing the distinct possibility standard from the employer’s perspective makes little sense. When the sole question relates to an employee’s protected activity, we apply the distinct possibility standard from the perspective of the facts known by the employee at the time of the protected conduct.

Here, Mann cannot meet the distinct possibility standard because of one undeniable fact: there was no fraud. Based on the facts known to Mann at the time of his conduct, there was no reasonable possibility that his efforts could lead to a viable FCA action. HKD made no effort to hide the defects in its bid. Rather, it took care to point them out so as not to deceive the U.S. Indeed, the bid explicitly stated that HKD could not, at that time, meet the ambilever and trigger specifications. HKD submitted a bid free of false statements or efforts to camouflage defects. It was unreasonable to expect opposition to such a bid to lead a viable FCA action.

With regard to the aftermarket ambilevers for the weapons, Mann never identifies any instance where HKD misrepresented the quality of the ambilevers or in any way overbilled. HKD submitted the ambilevers outside the normal channels, opting to utilize a Secret Service contact and make a personal delivery. It is undisputed that HKD made this submission after the close of bidding. Given these circumstances, HKD may have violated federal regulations, but the FCA is not concerned with bidding regulations.

Mann’s investigatory activities had no reasonable prospect of uncovering fraud. And his contention that filing a § 3730 retaliation action itself qualifies as protected conduct, regardless of the nature or merits of the underlying claim, is nothing more than an attempt to skirt the deficiencies of his first § 3730(h) claim.

Judgment for defendant company affirmed.