The Procurement Lawyer

Court Findings Open the Floodgates to Claims against Project Sureties

by Claire E. Sauls

Claire E. Sauls is an associate at Dunlap Fiore, LLC in Baton Rouge, Louisiana. Her areas of practice include construction, surety, and government contracts.

The United States District Court for the District of Columbia’s recent opinion in United States ex rel. Scollick v. Narula addresses the sufficiency of a plaintiff’s claims and explores the potential for surety liability in a litigation involving alleged False Claims Act (FCA) violations.1 The case originates from a matter brought by plaintiff-relator Andrew Scollick (Plaintiff) against 18 defendants, including construction companies and their principals, sureties, and other individuals, for alleged violations of the FCA in connection with a scheme to obtain certain set-aside government contracts through fraudulent means.2

Specifically, Plaintiff alleged that a group of central actors established “front companies” for the purposes of misrepresenting their past performance, employee information, and project personnel in order to obtain millions of dollars in set-aside government contracts.3 Plaintiff alleged that the other actors named as defendants participated in this scheme, either directly or indirectly, by facilitating and/ or silently assenting to the central actors’ fraudulent claims and procurement of service-disabled veteran-owned small business (SDVOSB) status, HUBZone status, or section 8(a) status in order to bid on and obtain set-aside contracts when the defendant bidders did not actually qualify for the statuses claimed.4

After the court granted in part and denied in part several defendants’ motions to dismiss for Plaintiff’s failure to state a claim, Plaintiff moved for leave to amend his complaint in order to address the deficiencies in the original pleading, reasserting the same causes of action under the FCA.5 Several defendants opposed the motion for leave on the grounds that the amended complaint failed to cure the pleading deficiencies previously identified by the court, and therefore amendment would be futile.6 The court addressed these arguments in the subject opinion, examining the sufficiency and applicability of Plaintiff’s allegations against each defendant.7

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