DuPont Appeal May Clarify What Constitutes a Reverse False Claim “Obligation”

by Dorsey & Whitney LLP

On January 20, a federal district court in Louisiana certified for appeal its 2014 ruling denying defendant DuPont’s motion for summary judgment, thereby permitting DuPont to seek appellate review of the district court’s ruling. Simoneaux v. E.I. du Pont Nemours & Co., No. 12-cv-00219 (M.D. La. Jan. 20, 2016).  Central to the district court’s now-certified ruling is the meaning and interpretation of the term “obligation” as used in the False Claims Act (“FCA”).

The plaintiff, Jeffrey Simoneaux, was a DuPont employee who alleged that DuPont knowingly concealed its reporting obligations under the Toxic Substances Control Act (“TSCA”) to avoid paying environmental penalties to the government, thereby giving rise to a “reverse false claim”—namely, a defendant avoiding or decreasing its obligation to pay the government through false records or statements, as opposed to obtaining an improper payment from the government.

The sole issue on summary judgment—and the sole issue that DuPont sought to certify for appeal—was DuPont’s contention that regulatory fines and penalties not actually levied or imposed are not “obligations” under the FCA.  In denying DuPont’s motion for summary judgment, the district court applied the 2009 amendments to the FCA, which defined the term “obligation,” as “an established duty, whether or not fixed . . . .”  The court concluded that this statutory definition clearly and unambiguously included a reporting obligation under the TSCA because, “whether fixed or not,” failing to report would cause the imposition of a fine or penalty.

Following its denial of summary judgment, the district court also denied DuPont’s initial 2014 motion to certify the issue for appeal. Subsequently, a jury returned a verdict for DuPont.  However, the court set aside the verdict based on litigation misconduct by DuPont, and the case was set for retrial.  Faced with a lengthy and costly retrial, and because of an intervening case decided by another district court within the Fifth Circuit, the court granted DuPont’s motion to reconsider the 2014 denial of certification, and certified the ruling for appeal.

The intervening case that persuaded the district court to certify the appeal is United States ex rel. Guth v. Roedel Parsons Koch Blache Balhoff & McCollister, No. 13-cv-6000 (E.D. La. Dec. 14, 2014).  The Guth case presented a reverse false claim arising after the 2009 FCA amendments.  The Guth court held that the relator’s reverse FCA claim was “predicated on potential or contingent obligations to pay the government [amounts] which have not been levied or assessed (and to which no formal proceedings to do so have been instituted).”  The Fifth Circuit affirmed the Guth decision. United States ex rel. Guth v. Rodel Parsons Koch Blache Balhoff & McCollister, No. 15-30043 (5th Cir. Sept. 9, 2015).

Although the Simoneaux court stood by the correctness of its prior ruling on the statutory issue, and noted that the Guth court did not address the statutory definition of “obligation” enacted in the 2009 FCA amendments, it nonetheless certified the issue for appeal because, “in light of Guth, there is a lack of consensus on whether the 2009 promulgation of a statutory definition of the term obligation alters the analysis of reverse FCA claims.”

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