United States ex rel. Int'l Bhd. of Elec. Workers Local Union No. 98 v. Farfield Co.

Citation5 F.4th 315
Decision Date13 July 2021
Docket NumberNo. 20-1922,20-1922
CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Susan R. Friedman [ARGUED], Stevens & Lee, 51 South Duke Street, P.O. Box 1594, Lancaster, PA 17602, Thomas I. Vanaskie, Stevens & Lee, 1500 Market Street, Centre Square, East Tower, Suite 1800, Philadelphia, PA 19102, Counsel for Appellant

Marc L. Gelman [ARGUED], James E. Goodley, I, Ryan P. McCarthy,Richard B. Sigmond, Jennings Sigmond, 1835 Market Street, Suite 2800, Philadelphia, PA 19103, Counsel for Appellee

Catherine Ruckelshaus, National Employment Law Project, 90 Broad Street, Suite 1100, New York, NY 10004, Counsel for Amicus Appellees Community Justice Project, Community Legal Services, and National Employment Law Project

Shauna B. Itri, Seeger Weiss, 1515 Market Street, Suite 1380, Philadelphia, PA 19102, Counsel for Amicus Appellee Taxpayers against Fraud Education Fund

Esmeralda Aguilar, Sherman Dunn, 900 7th Street, N.W., Suite 1000, Washington, DC 20001, Counsel for Amicus Appellee North America Building Trades Unions

Before: SMITH, Chief Judge, McKEE and AMBRO, Circuit Judges

SMITH, Chief Judge.

Table of Contents
I. Legal Background ...323
B. The False Claims Act...324
II. Factual Background ...325
III. Procedural Background ...327
IV. Jurisdiction & Standard of Review ...329
V. Discussion ...329

A. Section 3729(a)(1)(B) Applies Retroactively to the Project and Does Not Violate the Ex Post Facto Clause...329

1. In context, "claims" can only mean cases ...331
2. Congress repudiated Allison Engine with clear intent for full retroactivity . ...333
3. Applying § 3729(a)(1)(B) does not violate the Ex Post Facto Clause ....335

B. Farfield Misclassified Its Employees....338

1. No clear error in finding that groundmen were not "assisting" linemen. ...338
2. Local industry practice controls the propriety of worker classification. ...338

C. Farfield's False Certified Payrolls Were Material. ...342

1. Proper classification and accurate certified payrolls were payment conditions. ...343
2. No evidence of past relevant Government (in)action. ...346
3. Davis-Bacon compliance was essential to the bargain ...346

D. The Facts Support the District Court's Finding of Recklessness....348

1. The testimony supported the District Court's recklessness finding. ...348
2. No clear error based on DOL audit. ...349
3. Farfield's other arguments fail. ...349

E. The District Court Properly Shifted the Burden of Proof on Damages to Farfield. ...350

1. Mt. Clemens applies in an appropriate FCA case, like this one. ...351
2. Local 98's evidence was sufficiently representative ...353

F. The Award of Attorneys’ Fees Was Reasonable. ...353

VI. Conclusion ...354

Contractors on most federally funded construction projects must pay their workers a minimum wage based on the type of work they perform. The Department of Labor (DOL) usually sets those prevailing wage rates for each classification of worker needed on such a project. A contractor who bids on a project knows well that compliance with these regulations is required. And once it commences work, the contractor knows that it must also certify its compliance on payrolls supporting invoices for payment.

If a contractor misclassifies workers—thereby paying them less than required—the federal government may withhold funds in an amount proportionate to the affected work. The DOL is usually the forum for adjudicating claims of misclassification, for misclassified employees to recover underpaid wages, and for aggrieved contractors to assert entitlement to withheld funds.

But a contractor found to have misclassified employees can also face collateral consequences. For example, its certifications of compliance with wage-and-hour regulations may have been false. And those same false certifications may, in turn, have been material to the Government's decision to pay invoices associated with the misclassified work.

So what happens when a contractor is sued under the False Claims Act for falsely certifying compliance, but the DOL declines to adjudicate the underlying issue of whether workers were misclassified? In this case, the results have been over a decade of litigation and a panoply of first-impression issues. We conclude that a 2009 amendment to the FCA's liability standard applies retroactively to cases, like this one, pending on or after June 7, 2008; that the record establishes the contractor's misclassification of its workers; that its false certified payrolls were material to the Government's decision to pay for the associated work; and that the burden-shifting framework for damages in Fair Labor Standards Act cases applies. We also reject the appellant-contractor's other arguments en route to affirming the challenged orders of the District Court.

A. The Davis-Bacon Act

The Davis-Bacon Act, "[o]n its face," is "a minimum wage law designed for the benefit of construction workers." United States v. Binghamton Constr. Co. , 347 U.S. 171, 178, 74 S.Ct. 438, 98 L.Ed. 594 (1954). The Act was intended "to protect local wage standards by preventing contractors from basing their bids on wages lower than those prevailing in the area" where the work is to be done. Univs. Res. Ass'n v. Coutu , 450 U.S. 754, 773–74, 101 S.Ct. 1451, 67 L.Ed.2d 662 (1981) (quotation omitted); see 40 U.S.C. § 3142(a). Its purpose was "to give local labor and the local contractor a fair opportunity to participate in [ ] building program[s]." Coutu , 450 U.S. at 774, 101 S.Ct. 1451 (quoting 74 Cong. Rec. 6510 (1931)). To that end, the Act requires contractors on most1 federally funded infrastructure projects to pay employees minimum wages based on the DOL's determination of prevailing wages "for the corresponding classes of laborers and mechanics employed on projects of a character similar to the contract work in the civil subdivision of the State in which the work is to be performed." 40 U.S.C. § 3142(b).

Per DOL regulations, see 29 C.F.R. pts. 1, 5, 7, prevailing wage determinations are typically promulgated at the county level, 29 C.F.R. § 1.7(a), often based on survey data of wages paid or local collective bargaining agreements. See 40 U.S.C. § 3142(b) ; 29 C.F.R. § 1.3(b). Though the determinations sometimes don't include detailed information about the duties covered by each job classification, the DOL's regulations provide that "[a]ll questions relating to the application and interpretation of wage determinations (including the classifications therein) ... shall be referred to the Administrator for appropriate ruling or interpretation." 29 C.F.R. § 5.13 ; see also Coutu , 450 U.S. at 760–61, 101 S.Ct. 1451 ("Disputes over the proper classification of workers under a contract containing Davis-Bacon provision must be referred to the Secretary for determination." (citations omitted)).

Shirking Davis-Bacon obligations can have dire consequences. For example, covered contracts must provide for the Government's withholding from the contractor as much of the accrued payments as is necessary to pay the workers the difference between the required wages and those paid. See 40 U.S.C. § 3142(c)(3). And if the contractor is found to have failed to pay the specified prevailing wages, the Government "by written notice ... may terminate the contractor's right to proceed with the work or the part of the work as to which there has been a failure to pay the required wages." § 3143 (providing also that contractor and its sureties "shall be liable to the Government for any excess costs the Government incurs"). When a contractor is determined to have "disregarded" its Davis-Bacon obligations to employees or subcontractors, it is barred from federal contracts for three years. See § 3144(b).

B. The False Claims Act

The False Claims Act (FCA) imposes civil liability for making a false or fraudulent "claim," or a false record or statement material to such a claim, to obtain payment from the federal government. 31 U.S.C. § 3729(a)(1)(A)(G), (b)(2). Both the Justice Department and private parties (called "relators") may bring an FCA action. The FCA imposes civil penalties on a per-violation basis plus three times actual damages, § 3729(a)(1), and authorizes recovery of a relator's attorneys’ fees, § 3730(d)(1)(2).

In 2008, the Supreme Court held in Allison Engine Co. v. U.S. ex rel. Sanders , 553 U.S. 662, 128 S.Ct. 2123, 170 L.Ed.2d 1030 (2008), that liability under (former) § 3729(a)(1) required a defendant's direct presentment of the false claim to an officer or employee of the Government and that liability under (former) § 3729(a)(2) required proof of the defendant's specific intent to defraud the Government. Id. at 668–72, 128 S.Ct. 2123. To "clarify and correct [those] erroneous interpretations of the [FCA]," S. Rep. No. 111-10, at 10 (2009); see also id. at 4, Congress amended the FCA in the Fraud Enforcement and Recovery Act of 2009 (FERA). Pub. L. No. 111-21, § 4, 123 Stat. 1625. FERA eliminated (a)(1)’s requirement that the false claim be presented "to an officer or employee of the United States" and amended (a)(2) to remove the language that the Supreme Court had read to require specific intent to defraud the Government. See, e.g. , Pub. L. No. 111-21, § 4; S. Rep. No. 111-10 at 11.

FERA also amended the FCA to make clear that liability under the renumbered § 3729(a)(1)(B) (formerly (a)(2)), as well as another subsection not relevant here, requires that the false statement be material. So (a)(1)(B) liability now attaches when the defendant "knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim." 31 U.S.C. § 3729(a)(1)(B). After FERA,2 materiality means "having the tendency to influence, or be capable of influencing, the payment or receipt of money or property." § 3729(b)(4). And "kno...

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