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United States ex rel. Foreman v. AECOM

United States ex rel. Foreman v. AECOM

United States Court of Appeals for the Second Circuit

May 21, 2021, Argued; November 19, 2021, Decided

Docket No. 20-2756-cv

Opinion

 [*95]  SACK, Circuit Judge:

This action involves a billion-dollar defense contract entered into between AECOM (a publicly held corporation), AECOM Government Services, Inc., AC FIRST, LLC, and AECOM/GSS Ltd. (collectively, "AECOM") and the United States government, under which AECOM was tasked with providing [**3]  maintenance and management support services to the United States Army in Afghanistan. In order to ensure that AECOM effectively and efficiently provided such services, the contract imposed various obligations on AECOM to properly catalog data regarding labor hours and costs, so-called "man-hour utilization" rates, and acquisition and receipt of government property into various government tracking systems. AECOM allegedly failed to live up to these contractual obligations.

Plaintiff-appellant Hassan Foreman, on behalf of the United States and himself, therefore filed an action against AECOM in the Southern District of New York, asserting violations of several provisions of the False Claims Act ("FCA"). According to Foreman, AECOM submitted fraudulent claims for payment to the government, falsely certifying that it was in compliance with its obligations under the contract. In reality, AECOM allegedly overstated its man-hour utilization rate, improperly billed the government for labor not actually performed, and failed to properly track government property, resulting in significant financial costs to the government.

AECOM moved to dismiss Foreman's third amended complaint (the "Complaint"), and the district court [**4]  (Louis L. Stanton, Judge) granted the motion. The district court dismissed Foreman's claims  [*96]  under 31 U.S.C. § 3729(a)(1)(A)-(B), because it concluded that Foreman had failed to adequately plead materiality as required by Universal Health Services, Inc. v. United States. ex rel. Escobar ("Escobar"), 579 U.S. 176, 136 S. Ct. 1989, 195 L. Ed. 2d 348 (2016). In reaching this conclusion, the district court considered multiple reports outside of the complaint on the basis that they were either incorporated by reference into, or integral to, the complaint. The district court also dismissed Foreman's FCA conversion claim brought under 31 U.S.C. § 3729(a)(1)(D) because it concluded that the Complaint failed to identify "any specific excess or recoverable item or other property that defendants possessed but failed to deliver to the government." United States ex rel. Foreman v. AECOM, 454 F. Supp. 3d 254, 268 (S.D.N.Y. 2020). The district court also dismissed Foreman's reverse false claim brought under 31 U.S.C. § 3729(a)(1)(G),2 because it concluded that the allegations underlying these claims were identical to those underlying his direct false claims under § 3729(a)(1)(A)-(B). Such duplicative allegations, the district court concluded, could not state a viable reverse false claim.

Following the district court's dismissal of the Complaint, Foreman moved for reconsideration. The district court denied the motion and entered [**5]  judgment in favor of AECOM. Foreman subsequently filed a motion to alter or amend the judgment and requested leave to file a fourth amended complaint. The district court denied the motion, concluding that the proposed fourth amended complaint would be futile.

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19 F.4th 85 *; 2021 U.S. App. LEXIS 34790 **

UNITED STATES OF AMERICA EX REL. HASSAN FOREMAN, Plaintiff-Appellant, UNITED STATES OF AMERICA, Plaintiff, v. AECOM, AECOM GOVERNMENT SERVICES, INC., AC FIRST, LLC, AND AECOM/GSS LTD. D/B/A GLOBAL SOURCING SOLUTIONS, INC., Defendants-Appellees.1

Subsequent History: US Supreme Court certiorari denied by u.s.u.s., ex rel Foreman v. Aecom, 2022 U.S. LEXIS 2265 (U.S., May 2, 2022)

Prior History: The plaintiff-appellant Hassan Foreman, on behalf of the United States and himself, filed an action under the False Claims Act ("FCA"), 31 U.S.C. § 3729 et seq., against defendants-appellees AECOM (a publicly held corporation), AECOM Government Services, Inc., AC First, LLC, and AECOM/GSS Ltd. d/b/a Global Sourcing Solutions, Inc., (collectively, "AECOM") in the Southern District of New York. AECOM entered into a billion-dollar contract with the United States government to provide maintenance and support services to the United States Army in Afghanistan. According to Foreman, in order to boost its bottom line, AECOM submitted fraudulent claims for payment to the government. Foreman alleges that AECOM overstated its man-hour utilization rate, improperly billed the government for labor not actually performed, and failed to properly track government property, resulting in significant financial costs and government waste. AECOM moved to dismiss, and the district court (Louis L. Stanton, Judge) granted the motion. The court concluded that Foreman's false claims under 31 U.S.C. § 3729(a)(1)(A)-(B) failed to plausibly allege materiality and were therefore not actionable under the FCA, and that Foreman failed to state viable reverse false claims or conversion claims under [**2]  the FCA. We affirm the dismissal of most claims but conclude that the district court's materiality analysis of Foreman's § 3729(a)(1)(A)-(B) claims premised on the labor billing allegations was flawed because the district court improperly relied on materials extraneous to the complaint. We further conclude that the public disclosure bar does not provide an alternative basis to affirm. We therefore VACATE the judgment, REVERSE the district court's order dismissing the 31 U.S.C. § 3729(a)(1)(A)-(B) [**1]  claims premised on the labor billing allegations, AFFIRM the dismissal of Foreman's other claims, and REMAND for further proceedings consistent with this opinion.

United States ex rel. Foreman v. AECOM Gov't Servs., 454 F. Supp. 3d 254, 2020 U.S. Dist. LEXIS 64323, 2020 WL 1849749 (S.D.N.Y., Apr. 13, 2020)

CORE TERMS

allegations, district court, false claim, billing, work order, violations, Army, documents, public disclosure, track, employees, recoverable, audit, contractual, disclosures, timesheet, integral, motion to dismiss, noncompliance, costs, government property, knowingly, incorporate by reference, actual knowledge, amended complaint, corrective action, confidential, compliance, premised, contractor

Governments, Federal Government, Claims By & Against, Labor & Employment Law, Employer Liability, False Claims Act, Burdens of Proof, Scope & Definitions, Qui Tam Actions, Civil Procedure, Appeals, Standards of Review, De Novo Review, Defenses, Demurrers & Objections, Motions to Dismiss, Failure to State Claim, Pleadings, Complaints, Requirements for Complaint, Summary Judgment, Motions for Summary Judgment, Notice Requirement, Heightened Pleading Requirements, Fraud Claims, Business & Corporate Compliance, Labor & Employment Law, False Claims Act, Public Contracts Law, Types of Contracts, Cost Contracts, Legislation, Interpretation, Evidence, Weight & Sufficiency, Burdens of Proof, Allocation, Contracts Law, Standards of Performance, Discharge & Termination, Construction Contracts, Remedies, Civil Penalties, Responses, Motions to Dismiss, Record on Appeal, Jurisdictional Bar, Public Contracts Law, Voiding Contracts, Fraud & Whistleblowing, Discovery & Disclosure, Discovery, Protective Orders, Torts, Business Torts, Fraud & Misrepresentation