United States ex rel. Darryn Kelly, Plaintiff-Appellant,
Serco, Inc., a New Jersey Corporation, Defendant-Appellee.
and Submitted October 19, 2016 Pasadena, California
from the United States District Court for the Southern
District of California D.C. No. 3:11-cv-02975-WQH-RBB William
Q. Hayes, District Judge, Presiding
J. Emge (argued), Emge & Associates, San Diego,
California, for Plaintiff-Appellant.
Francis J. Burke, Jr. (argued), Foley & Lardner LLP, San
Francisco, California; James M. Harris and Daniel P. Wierzba,
Seyfarth Shaw LLP, Los Angeles, California; for
Before: Richard C. Tallman, Barrington D. Parker, Jr.,
[*] and Morgan
B. Christen, Circuit Judges.
panel affirmed the district court's summary judgment in
favor of the defendant in an action under the False Claims
plaintiff alleged that his former employer Serco, Inc., a
technology and project management services provider,
submitted fraudulent claims for payment to the United States
for work done under a government contract. The Department of
Defense, Navy Space and Naval Warfare Systems Command
(SPAWAR), contracted with Serco for work on the Advanced
Wireless Systems Spectrum Relocation Project, a project to
upgrade the wireless communications systems situated along
the United States-Mexico border for the Department of
Homeland Security, Customs and Border Protection (DHS). The
interagency contract between SPAWAR and DHS required SPAWAR
to implement a cost and progress tracking system known as an
earned value management (EVM) system. The services provided
by Serco were covered under its Naval Electronic Surveillance
Systems contract with SPAWAR.
panel affirmed the district court's summary judgment on a
claim that Serco submitted false or fraudulent claims for
payment under an implied false certification theory of
liability under the False Claims Act. The panel applied
Universal Health Servs., Inc. v. United States ex rel.
Escobar, 136 S.Ct. 1989 (2016), which held that a
government contract need not expressly designate a
requirement as a condition of payment in order to trigger
liability under the theory of implied certification. Instead,
what matters is whether the defendant knowingly violated a
requirement that it knew was material to the government's
payment decision. To establish liability, the defendant's
claim for payment must make specific representations about
the goods or services provided, and the defendant's
failure to disclose material statutory, regulatory, or
contractual requirements must make those representations
misleading half-truths. The panel held that the plaintiff did
not satisfy the standard for materiality set forth in
Escobar because there was no genuine issue of
material fact as to the materiality of Serco's compliance
with the American National Standards Institute/Electronic
Industries Alliance Standard 748 (ANSI-748) or its obligation
to provide valid EVM reports.
panel also affirmed the district court's summary judgment
on claims that Serco violated the False Claims Act by making
false records material to a false or fraudulent claim,
conspired to violate the False Claims Act, wrongfully
retained overpayments, and wrongfully terminated the
plaintiff in violation of public policy under California
TALLMAN, Circuit Judge:
Darryn Kelly brought this qui tam action under the
False Claims Act (FCA), 31 U.S.C. §§ 3729-3733,
against his former employer, Serco, Inc., a technology and
project management services provider, alleging that Serco
submitted fraudulent claims for payment to the United States
for work done under a government contract. Kelly also
asserted claims for wrongful termination under California
law. The district court granted Serco's motion for
summary judgment on all of Kelly's claims. We affirm.
2007, Serco was awarded a $62 million, three-year contract by
the Department of Defense, Navy Space and Naval Warfare
Systems Command (SPAWAR) to provide project management,
engineering design, and installation support services for a
range of government projects. The Naval Electronic Surveillance Systems
(NESS) Contract was a type of contract that "provides
for an indefinite quantity, within stated limits, of supplies
or services during a fixed period." 48 C.F.R. §
16.504(a). Pursuant to the NESS Contract, SPAWAR submitted
individual Delivery Orders to Serco that detailed the
specific work Serco was to perform.
2008, the Department of Homeland Security, Customs and Border
Protection (DHS) entered into an interagency contract with
SPAWAR to upgrade the wireless communications systems
situated along the United States-Mexico border. This project
became known as the Advanced Wireless Systems Spectrum
Relocation Project (AWS Project). The contract required
SPAWAR to implement a cost and progress tracking system known
as an earned value management system (EVMS), "a project
management tool that effectively integrates the project scope
of work with cost, schedule and performance elements for
optimum project planning and control." 48 C.F.R. §
in turn, subcontracted with Serco to purchase the necessary
equipment, perform non-construction upgrades, and provide
project management services for the AWS Project. Because
these services were covered under the NESS Contract, SPAWAR
issued Delivery Orders #0049 and #0054 to Serco under the
NESS Contract detailing the work that Serco was to perform on
the AWS Project. Delivery Orders
49 and 54 provided for different periods of performance from
September 2009 to January 2012, but were nearly identical in
all other respects. Each Delivery Order contained a Statement
of Work (SOW) that required Serco to provide project
management and cost reports to SPAWAR, including EVM reports,
"in accordance with the attached CDRLs [Contract Data
Requirements Lists]." The attached CDRLs specified:
"Contractor [Serco's] format acceptable. Create
reports using MS Office Applications."
employees manually recorded their hours on Serco's
internal accounting system using a single charge code for all
tasks they performed on the AWS Project. Serco then compiled
the time entries into Microsoft (MS) Excel spreadsheets to
create monthly cost reports that it sent to SPAWAR. In
January 2010, Serco informed SPAWAR that it could not
automate its accounting system or accommodate the thousands
of AWS Project task line-items that SPAWAR used in the
reports it sent to DHS under its interagency contract. SPAWAR
advised Serco that it would accept Serco's monthly cost
reports on MS Excel spreadsheets using information that Serco
employees tracked and compiled manually. SPAWAR also advised
that DHS was aware of Serco's cost tracking format and
had approved it.
hired Kelly as an EVM analyst in October 2009 to monitor
Serco's performance on the AWS Project and identify any
cost or schedule overruns. In April 2011, Kelly informed DHS
that Serco's monthly cost reports were unreliable because
they tracked costs manually and with a single charge code in
violation of the guidelines in the American National
Standards Institute/Electronic Industries Alliance Standard
748 (ANSI-748). Kelly also informed DHS that Serco was
falsifying its monthly reports to make its actual costs match
the expected budget for the AWS Project. That same month, DHS
and SPAWAR determined that EVM reports were no longer
necessary or cost-justified for the AWS Project. SPAWAR
directed Serco to reduce the number of EVM analysts working
on the AWS Project. Kelly's supervisors at Serco, unaware
of his recent report to DHS, terminated Kelly in May 2011.
Following his termination, Kelly's position no longer
existed at Serco.
filed suit against Serco as a qui tam relator under
the FCA, asserting the following claims for relief: (1)
submitting false claims for payment in violation of the FCA
under a theory of implied false certification, (2) making
false records material to a false or fraudulent claim in
violation of the FCA, (3) conspiring to violate the FCA,
(4)retention of overpayments in violation of the FCA, and
(5)unlawful termination in violation of public policy under
California common law.
district court granted summary judgment in favor of Serco on
all of Kelly's claims. The district court also denied as
moot Serco's motion to strike the opinion and deposition
testimony of Kelly's expert, Kevin Martin, on whether
Serco's compliance with ANSI-748 was incorporated by
reference into the Delivery Orders and whether Serco's
internal system was capable of complying with ANSI-748. This
timely appeal followed.
jurisdiction to review the district court's grant of
summary judgment under 18 U.S.C. § 1291. Strategic
Diversity, Inc. v. Alchemix Corp., 666 F.3d 1197, 1205
(9th Cir. 2012). "We review de novo the district
court's grant of summary judgment." Id.
"Viewing the evidence in the light most favorable to the
nonmoving party, we must determine whether there are genuine
issues of material fact and whether the district court
correctly applied the relevant substantive law."
Id. (quotation marks omitted). "[T]he mere
existence of some alleged factual dispute between
the parties will not defeat an otherwise properly supported
motion for summary judgment; the requirement is that there be
no genuine issue of material fact."
Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
247-48 (1986). "If the evidence is merely colorable, or
is not significantly probative, summary judgment may be
granted." Id. at 249-50 (citations omitted).
survive summary judgment, the relator must establish
evidence on which a reasonable jury could find for
the plaintiff." United States ex rel. Aflatooni v.
Kitsap Physicians Serv., 314 F.3d 995, 1001 (9th Cir.
2002) (citation and alterations omitted). "If the facts
make a claim 'implausible, ' the non-movant must
present 'more persuasive evidence than would otherwise be
necessary' in order to defeat a summary judgment
motion." United States ex rel. Anderson v. N.
Telecom, Inc., 52 F.3d 810, 815 (9th Cir. 1995).
"The district court's grant of summary judgment may
be affirmed if it is supported by any ground in the ...