The contractor claimed its subcontractor defrauded the government by submitting low bids with the intention of increasing prices later. The court dismissed for failure to state a claim. The contractor’s allegations alone, without any specific facts, could not support the purported violations.
Direct Steel, LLC d/b/a Direct Steel and Construction v. American Buildings Company, N.D. Illinois, No. 22 CV 226
- Background – The agency hired the contractor to construct pre-engineered metal buildings. The contractor subcontracted with the defendant to provide the materials. The defendant later sent the contractor multiple change orders that increased the contract prices. The contractor brought the instant lawsuit challenging the validity of the change orders and alleging an FCA claim. The defendant moved to dismiss.
- FCA Claim – The contractor claimed the defendant knowingly submitted an artificially low bid and date it knew it could not meet. Then, the contractor alleged, the defendant knowingly and intentionally presented fraudulent change orders for payment.
- Specificity – In support of its argument, the contractor alleged the defendant knew of the contract with the government and engaged in a bait-and-switch scheme by quoting the contract to win the subcontract, then substantially increasing prices after it was too late for the contractor to find another supplier. The court held that the contractor’s allegation alone was insufficient. The complaint contained no specific facts showing that the defendant knew it could not reach the price-protection date, nor that it intended to raise prices later.
- Falsity – Regarding the falsity element, the contractor only alleged that the defendant defrauded the government by presenting false or fraudulent estimated costs. While Rule 9 (b) does not require the plaintiff to prove its case, it does require specificity. The court determined the contractor’s allegations did not meet this requirement. Thus, the court granted the defendant’s motion to dismiss the FCA claim.
— Case summary by Joshua Lim, Assistant Editor
