District Court partially grants summary judgment to defendants in FCA case

Courts Data Breach False Claims Act / FIRREA Privacy/Cyber Risk & Data Security Relator

On February 1, the U.S. District Court for the Eastern District of California denied a relator’s (plaintiff’s) motion for summary judgment on an allegation of promissory fraud in violation of the False Claims Act (FCA) in a case against a rocket manufacturer and its subsidy (defendants). The court similarly denied the defendants’ cross-motion for summary judgment on the promissory fraud violation, but granted the defendants’ motion for summary judgment with respect to allegations of false certification in violation of the FCA. According to the opinion, the plaintiff, who was briefly employed by defendants as the senior director for Cyber Security, Compliance, and Controls, alleged that the defendants fraudulently induced the government to contract with the defendants in 18 contracts, while knowingly out of compliance with Defense Federal Acquisition Regulation 48 C.F.R. § 252.204– 7012 and NASA Federal Acquisition Regulation 48 C.F.R. § 1852.204-76, which impose cybersecurity and confidentiality requirements applicable to persons who receive government contracts. The court noted that plaintiff’s claims were based in part on allegations that defendants failed to disclose data breaches when required to do so. Conversely, defendants argued that they had disclosed their non-compliance with the identified regulations to the DoD and to NASA on multiple occasions and had been working with the government to obtain a waiver. In light of this, the court denied summary judgment on the promissory fraud violation, holding that “[a] genuine dispute of material fact exists as to the sufficiency of the disclosures[.]” The court also decreased the number of contracts the court will assess from 18 to 7, holding that the court will only rule on allegations that pertain to events before the case was filed in 2015. Similarly, the court granted defendants’ motion for summary judgment with respect to allegations of false certification on the grounds that “relator’s claim for false certification is based solely on an invoice payment under a NASA contract that was entered into after relator brought this action and is therefore not a proper basis for his false certification claim.”