Josh Harman, a former customer and competitor of Trinity Industries, filed a sealed False Claims Act (FCA) suit on March 6, 2012, in the Eastern District of Texas. The FCA prohibits anyone from defrauding the government through false statements or fraudulent activity.

The FCA includes a right of private action, known as the qui tam provision. This allows a private person, or whistleblower, to bring a civil action for violation of the FCA on behalf of the U.S. Government. The FCA does provide incentive for whistleblowers. This includes protection from retaliation and 15-25 percent of recovered funds.

Harman’s suit stemmed from changes he documented of Trinity’s ET-Plus guardrails. Trinity was potentially eligible for reimbursement from the government for its improvement to state highways; however, at the time acceptance by the Federal Highway Association (FHWA) was required for reimbursement. Harman discovered there were five distinct characteristics of the ET-Plus rails that differed from what was approved by the FHWA. The most notable change was the length of the guide channel, which was reduced from five inches to four inches. After presenting his findings to the FHWA, the FHWA questioned Trinity about the changes. Ultimately the FHWA approved states to reimburse Trinity for the ET-Plus.

After the FHWA approval, Harman filed his FCA suit. The government chose not to intervene, but the FHWA released a memorandum stating the FHWA “validated that the ET-Plus with the 4-inch guide channels was crash tested in May 2005” and that “[t]he Trinity ET-Plus with the 4-inch guide channels became eligible for Federal reimbursement … on September 2, 2005.” Trinity moved for summary judgment based on the memorandum, but was denied.

After a mistrial, there was a six-day jury trial, with a verdict in favor of Harman. Rather than revoking approval of the ET-Plus, the government sought independent testing. Trinity renewed a motion for judgment as a matter of law. After the investigation, the Federal Government concluded the ET-Plus guardrails were uniform and representative of those tested. The court still entered final judgment for Harman and the U.S. Government for $663,360,750 plus attorney’s fees. They denied Trinity’s motion for judgment as a matter of law and a new trial.

Trinity appealed the decision to the Fifth Circuit. The Fifth Circuit reversed the lower court’s decision and rendered judgment as a matter of law for Trinity. The foundation of the appellate court’s holding was the lack of materiality. The court relied on the Supreme Court’s decision in Escobar. Justice Thomas explained that the materiality standard is demanding. The most important quote from Escobar for this case:

[I]f 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.

The “natural tendency test” was approved in Escobar, that “the term ‘material’ means having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property,” and “look[s] to the effect on the likely or actual behavior of the recipient of the alleged misrepresentation.”

The FHWA never retracted its explicit approval of the ET-Plus, and the government continued payment after it learned of the fraud. The activity did not materially cause the government to pay out money that it would not have otherwise done. The court noted that the 2005 changes did not seem to affect the FHWA’s choice to keep purchasing the end terminals in a present or future sense. Harman could not show that Trinity’s alleged misstatements had any material effect on the government’s payment decisions.

As the Fifth Circuit held: “When the government, at appropriate levels, repeatedly concludes that it has not been defrauded, it is not forgiving a found fraud—rather it is concluding that there was no fraud at all.”

* * *

Are you aware of fraud being committed against the federal government, or a state government? If so, you may be protected and rewarded for doing the right thing by reporting the fraud. If you have any questions about whether you qualify as a whistleblower, please contact an attorney at Beasley Allen for a free and confidential evaluation of your claim. There is a contact form on this website, or you may email one of the lawyers on our whistleblower litigation team: Archie Grubb, Larry Golston, Lance Gould or Andrew Brashier.

Sources:
United States ex rel. Harman v. Trinity Indus. Inc., No. 15-41172, 2017 WL 4325279, (5th Cir. Sept. 29, 2017).
Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S Ct. 1989, (2016).



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