United States ex rel. Adams v. Dell Computer Corp.- Contractual Conditions Must be Material to the Government’s Decision to Pay
The plaintiff in this case alleges that Dell violated the False Claims Act (“FCA”) by knowingly selling a large number of computers to the United States government, which contain undisclosed security vulnerabilities. Dell moved to dismiss the case for failure to state a claim, which the court granted and dismissed the complaint. Although there were other claims in this case such as (1) false claim for payment; and (2) a false statement, the court discussed the false certification theory in detail.
To prove a false certification theory claim, a person must show that another individual withheld information about its noncompliance with a material contractual requirement, even though it stated it would comply with such requirements. There must be express contract language that specifically links compliance to eligibility for payment, or at the very least, that both parties understood that payment was conditional on compliance with the requirement at issue. The specific elements to prove false certification theory are:
- The defendant certified compliance with a particular contractual condition;
- The defendant failed to comply with that condition;
- The defendant knowingly misrepresented the noncompliance; and
- Compliance was a condition material to the government’s decision to pay.
First, the court focused on the material element. Under the FCA, plaintiffs must plead facts which support allegations of materiality, which the court considers a “demanding” standard. Here, the court determined that the existence of a security vulnerability within the Dell computers was not material to the contract or payment. While the U.S. Government would likely not have purchased the computers had it known of the security vulnerability, Dell was not required to provide a defect-free product. Also, the contract did not state that Dell was to comply with any federal technology policies. Thus, the existence of the vulnerability was not material to the contract.
Second, the court also focused on the “knowing” state of mind requirement. Under the FCA, this means that a person has actual knowledge of the information and acts in a deliberate or reckless manner with respect to the truth or falsity of the information. The court determined that, even if Dell was aware of the security vulnerability, it has no reason to think that such vulnerability violated any material aspect of the contract. Again, Dell did not have any requirement to satisfy any federal technological policies. Therefore, the plaintiff was unable to satisfy the elements of the false certification theory, or allege that Dell was aware of the false claim. Thus, the claim was dismissed.
Chelsea A. Padgett, Esq. is an associate attorney with Ward & Berry, PLLC. Ms. Padgett attended law school at the University of Florida Levin College of Law and is licensed to practice law in the Commonwealth of Virginia and Florida.