United States ex rel. Sorenson v. Wadsworth Bros. Constr. Co.

• Decision Date: 09 September 2022
• Docket Number: 21-4005
• Citation: 48 F.4th 1146
• Parties: UNITED STATES of America EX REL. Kelly E. SORENSON, Plaintiff - Appellant, v. WADSWORTH BROTHERS CONSTRUCTION COMPANY, INC., Defendant - Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

48 F.4th 1146

UNITED STATES of America EX REL. Kelly E. SORENSON, Plaintiff - Appellant,

v.WADSWORTH BROTHERS CONSTRUCTION COMPANY, INC., Defendant - Appellee.

No. 21-4005

United States Court of Appeals, Tenth Circuit.

FILED September 9, 2022

Russell T. Monahan, Cook & Monahan, LLC, Salt Lake City, Utah, for Plaintiff-Appellant.

Wilford A. Beesley, III (Jonathan T. Tichy with him on the brief), Wilford Beesley, P.C., Salt Lake City, Utah, for Defendant-Appellee.

Before BACHARACH, BRISCOE, and MURPHY, Circuit Judges.

MURPHY, Circuit Judge.

I. INTRODUCTION

Kelly Sorenson, acting as a qui tam relator, brought suit on behalf of the United States against his former employer, Wadsworth Brothers Construction Company ("Wadsworth"), under the provisions of the False Claims Act ("FCA"), 31 U.S.C. §§ 3729 - 33. Sorenson alleged Wadsworth, a contractor working on a federally funded transportation project, falsely certified its compliance with the prevailing-wage requirements of the Davis-Bacon Act, 40 U.S.C. §§ 3141 - 48. The district court granted Wadsworth's Fed. R. Civ. P. 12(b)(6) motion as to the following claims in Sorenson's complaint: (1) Claim 1, alleging Wadsworth presented to the government a false claim, see 31 U.S.C. § 3729(a)(1)(A) ; (2) Claim 2, alleging the use or making of a false record to obtain payment on a false claim, see id. § 3729(a)(1)(B) ; and (3) Claim 3, alleging a conspiracy to defraud, see id. § 3729(a)(1)(C).¹ The district court concluded Sorenson's complaint failed to satisfy the demanding materiality standard set out by the Supreme Court in Universal Health Services, Inc. v. United States ex rel. Escobar , 579 U.S. 176, 192–96, 136 S.Ct. 1989, 195 L.Ed.2d 348 (2016). Thereafter, the district court granted summary judgment to Wadsworth on Sorenson's Claim 5, a retaliation claim based on the whistleblower provisions of 31 U.S.C. § 3730(h). The district court concluded Sorenson failed to put Wadsworth on notice his protected activities were related to purported violations of the FCA and, in addition, failed to demonstrate Wadsworth's actions were retaliatory.

Sorenson appeals the dismissal of Claims 1, 2, and 3 and the grant of summary judgment to Wadsworth on Claim 5. This court exercises jurisdiction pursuant to 28 U.S.C. § 1291 and affirms the orders of the district court.²

II. DISCUSSION

A. The Rule 12(b)(6) Issues

1. Background

a. Statutory Background

I. The FCA

The FCA imposes liability for "fraudulent attempts to cause the government to pay out sums of money." United States ex rel. Reed v. KeyPoint Gov't Sols. , 923 F.3d 729, 736 (10th Cir. 2019) (quotation omitted). It permits the recovery of civil penalties and treble damages from anyone who, inter alia, (1) "knowingly presents ... a false or fraudulent claim for payment or approval," 31 U.S.C. § 3729(a)(1)(A), or (2) "knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim," id. § 3729(a)(1)(B). The FCA also imposes liability on anyone who "conspires to commit a violation" of the provisions of § 3729(a)(1). Id. § 3729(a)(1)(C). Falling within the umbrella of liability created by § 3729(a)(1) are "false certifications." Universal Health , 579 U.S. at 180–81, 186–87, 136 S.Ct. 1989. A false claim within the meaning of § 3729(a)(1) can be either factually false or legally false. United States ex rel. Polukoff v. St. Mark's Hosp. , 895 F.3d 730, 741 (10th Cir. 2018). This case involves allegations of legal falsity. Legally false requests for reimbursement "generally require knowingly false certification of compliance with a regulation or contractual provision as a condition of payment." Id.

The FCA's provisions can be enforced in two ways. "[T]he [g]overnment itself may sue the alleged false claimant to remedy the fraud." Reed , 923 F.3d at 736 (quotation omitted); see also 31 U.S.C. § 3730(a). Alternatively, "a private person (the relator) may bring a qui tam suit on behalf of the government and also for herself alleging that a third party made fraudulent claims for payment to the government. As a bounty for identifying and prosecuting fraud, relators get to keep a portion of any recovery they obtain." Reed , 923 F.3d at 736 (quotations omitted); see also 31 U.S.C. § 3730(b), (d).

Importantly, the liability imposed by § 3729(a)(1) is predicated on a "rigorous" materiality requirement. Universal Health Servs. 579 U.S. at 192, 136 S.Ct. 1989. "A misrepresentation about compliance with a statutory, regulatory, or contractual requirement must be material to the Government's payment decision in order to be actionable under the [FCA]." Id. And, the mere fact "the Government designates compliance with a particular statutory, regulatory, or contractual requirement as a condition of payment" is not enough, standing alone, to render a misrepresentation material. Id. at 194, 136 S.Ct. 1989. Likewise, the mere fact the government could opt not to pay if it knew about a defendant's noncompliance does not, in itself, establish materiality. Id. And, "minor or insubstantial" noncompliance with statutory, regulatory, or contractual requirements is immaterial. Id.

In sum, when evaluating materiality under the [FCA], the Government's decision to expressly identify a provision as a condition of payment is relevant, but not automatically dispositive. Likewise, proof of materiality can include, but is not necessarily limited to, evidence that the defendant knows that the Government consistently refuses to pay claims in the mine run of cases based on noncompliance with the particular statutory, regulatory, or contractual requirement. Conversely, if the Government pays a particular claim in full despite its actual knowledge that certain requirements were violated, that is very strong evidence that those requirements are not material. Or, if the Government regularly pays a particular type of claim in full despite actual knowledge that certain requirements were violated, and has signaled no change in position, that is strong evidence that the requirements are not material.

Id. at 194–95, 136 S.Ct. 1989 (footnote omitted).

ii. The Davis-Bacon Act

The Davis-Bacon Act governs federally funded construction contracts. Int'l Bhd. of Elec. Workers, Local 113 v. T & H Servs. , 8 F.4th 950, 953 (10th Cir. 2021). It 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 protects "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. Research Ass'n, Inc. v. Coutu , 450 U.S. 754, 773–74, 101 S.Ct. 1451, 67 L.Ed.2d 662 (1981) (quotation omitted); see T & H Servs. , 8 F.4th at 953 (citing 40 U.S.C. § 3142). It requires contractors on most federally funded building projects to pay employees minimum wages based on the Department of Labor's ("DOL") 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).³ Notably, payment of Davis-Bacon wages is jobsite and task specific, not project related. The Act mandates payment of Davis-Bacon wages only to "mechanics and laborers employed directly on the site of the work." Id. at § 3142(c)(1). The applicable regulation defines the term "site of work" as "the physical place or places where the building or work called for in the contract will remain; and any other site where a significant portion of the building or work is constructed, provided that such site is established specifically for the performance of the contract or project." 29 C.F.R. § 5.2(l)(1). Because the applicable statutory and regulatory provisions focus on the jobsite, work that is only tangentially related to the site is not covered by the prevailing-wage requirement. See, e.g. , 29 C.F.R. § 5.2(j)(2) ("[T]he transportation of materials or supplies to or from the site of the work by employees of the ... contractor ... is not" covered by the statutory requirement to pay Davis-Bacon wages).

This court has noted the "elaborate administrative scheme" created by the Davis-Bacon Act and its implementing regulations "is meant to provide consistency and uniformity" in "the administration and enforcement of the ... Act, and balances the interests of contractors and their employees." T & H Servs. , 8 F.4th at 957 (quotation omitted).⁴

Enforcement of the Davis-Bacon Act is the responsibility of both the contracting agency and the DOL. Employees can submit complaints regarding alleged violations of the Davis-Bacon Act to the contracting officer, who can investigate and take action against an offending contractor, and refer disputes to the DOL.... The procedures by which the DOL resolves such disputes, which are set forth in 29 C.F.R. § 5.11, include notification of the affected parties by the Administrator of the DOL Wage and Hour Division, potential referral to an administrative law judge for factfinding, and eventual appeal of Administrator decisions to the [administrative review board].

Id. at 956-57 (citations and footnotes omitted).⁵ Enforcement and transparency are also furthered by requirements that (1) DOL promulgate regulations mandating "that each contractor and subcontractor each week must furnish a statement on the wages paid each employee during the prior week," 40 U.S.C. § 3145 ; and (2) contractors submit to the contracting agency weekly payrolls along with a certification that those payrolls comply with the requirements of the Act, 29 C.F.R. § 5.5(a)(3)(ii).

Violations of the Act "can result in withheld payments, contract termination, and debarment." T & H Servs. , 8 F.4th at 956 (citing 40 U.S.C. §§ 3142 – 44 ; 29 C.F.R. §§ 5.9, 5.12 ; 48 C.F.R. §§ 22.406–9, 22.406–11 ). "If withheld sums are...