False Claims Act Trial Likely for Shipbuilder’s Statements to the Coast Guard

In a suit filed under the False Claims Act (“FCA”) by the Department of Justice, the government alleges that Bollinger Shipyards, a provider of new construction, repair, and conversion products and services to the U.S. Government and naval shipbuilding marketplace, falsified information  that led the Coast Guard to contract with the firm to lengthen eight deepwater cutters – all of which turned out to be “unseaworthy and unusable.” In May, the case was transferred from federal court in Washington, D.C. to federal court in New Orleans, LA . The district court judge presiding over the case has set the date of trial to commence in November of 2013.

The government’s complaint claims that Bollinger exaggerated the structural hull strength of the eight boats it had contracted to lengthen from 110-feet to 123-feet. The Coast Guard paid out some $78 million under the contract with Bollinger. Under the FCA, Bollinger may be liable for treble damages, or $234 million, in addition to civil penalties of between $5,500 and $11,000 per violation of the Act. In 2007, after doubts were raised regarding the structural strength of the eight ships, the Coast Guard decommissioned the construction.

The FCA is a federal whistleblower statute dating back to 1863. Its qui tam provisions allow relators (i.e., whistleblowers) to file suit on behalf of the government for fraud. Individuals and contractors face liability under the FCA for submitting false claims for payment to the government, or failing to return an overpayment form the government. When a relator files an FCA complaint, the government reviews the allegations therein and determines whether or not to intervene in the litigation. Even if the government does not intervene, relators may proceed privately with their legal claims. If successful, relators stand to recover between 15% and 30% of any final judgment or settlement.

Numerous amendments to the statute in 2009 and 2010, particularly in the wake of passage of major legislation such as the Fraud Enforcement and Recovery Act (“FERA”) in 2009, the Dodd-Frank Bill in 2010, and the Patient Protection and Affordable Care Act (“PPACA”) in 2010 have expanded the potential for whistleblower recovery and strengthened the FCA’s protections against employer retaliation. Under the FCA, any agent, contractor, or employee who takes lawful efforts to stop a violation of the FCA may file suit under the statute’s anti-retaliation provisions even if no suit was initially filed under the FCA.