## Facts

- Relators filed a qui tam action under the False Claims Act (FCA) against Accudyne Corp., a Department of Defense (DoD) contractor, and Alliant Techsystems, Inc., a related entity.
- Accudyne supplied military components under contracts that required compliance with applicable federal, state, and local environmental laws and regulations, including obligations associated with the Clean Water Act, Clean Air Act, and RCRA.
- Relators alleged Accudyne made knowingly false bid-stage representations that its contract pricing included the costs of environmental compliance.
- Relators further alleged that during contract performance Accudyne knowingly failed to comply with required environmental obligations while submitting claims for payment.
- The theory of falsity was that Accudyne’s payment requests were false or fraudulent because they were accompanied by, or premised on, express or implied certifications of contractual environmental compliance.
- The United States intervened on a separate count not centered on environmental compliance but declined to intervene on the environmental-compliance count at issue here.
- Defendants moved to dismiss and/or for summary judgment on the environmental-compliance FCA count.

## Issues

1. Whether a contractor’s alleged violations of environmental requirements incorporated into federal contracts, coupled with alleged false certifications of compliance, can render payment claims “false or fraudulent” under the FCA.
2. Whether the relators adequately alleged that environmental compliance was material to the government’s contracting and payment decisions.
3. Whether the existence of environmental statutory enforcement schemes forecloses or limits FCA liability based on alleged noncompliance with environmental requirements.

## Decision

- The court denied dismissal of the environmental-compliance FCA count.
- The court declined to grant summary judgment for defendants on that count at this stage.
- The court held the relators could proceed on a theory that knowingly false certifications (express or implied) of contractually required regulatory compliance may support FCA liability if material to payment and made with the requisite scienter.

## Legal Principles

- FCA liability may rest on false certifications of compliance with statutes or regulations where compliance is part of the contractual bargain and is tied to payment.
- Regulatory violations, standing alone, are not necessarily FCA violations; the actionable misconduct is submitting a false claim for payment that misrepresents compliance required by contract.
- Materiality is required: the alleged compliance obligation must be capable of influencing the government’s decision to award the contract or pay claims.
- Scienter under the FCA includes actual knowledge, deliberate ignorance, or reckless disregard; allegations of knowing misrepresentation and knowing noncompliance may suffice to withstand early dispositive motions.
- The FCA’s anti-fraud function is not displaced merely because other statutes also regulate the underlying conduct through separate enforcement mechanisms.

## Conclusion

The court permitted an FCA qui tam claim to continue where relators alleged that a defense contractor knowingly failed to satisfy contractually incorporated environmental requirements and nonetheless sought payment through claims that falsely represented or implied compliance, with materiality and scienter remaining matters for proof.


United States ex rel. Fallon v. Accudyne Corp., 880 F. Supp. 636 (W.D. Wis. 1995)