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Recent Qui Tam Actions Predicated on Human Trafficking Allegations

In Short:

The Situation: A new line of qui tam cases predicated on alleged human trafficking violations has begun to emerge.

The Result: Potential exposure to qui tam claims heightens the risk of allegations of human trafficking in business operations.

Looking Ahead: Companies contracting with the federal government should consult with counsel to ensure compliance with contractual and regulatory obligations related to human trafficking and should implement risk mitigation strategies where reasonably feasible. 

Two recently unsealed qui tam actions reveal efforts by former employees of government contractors to bring False Claims Act ("FCA") actions predicated on claims of human trafficking. Under the FCA, whistleblowers ("relators"), can file qui tam actions alleging fraud against the government. Successful FCA claims can expose defendants to treble damages, substantial penalties, and debarment. In the two recently unsealed actions, the alleged fraud was predicated on violations of the Trafficking Victims Protection Reauthorization Act ("TVPRA"), which imposes liability on companies for knowingly benefiting from a venture that engaged in forced labor. The relators in both cases premised their FCA claims on an "implied certification" theory, meaning that the employer-government-contractor impliedly certified compliance with all conditions of payment when it submitted its invoices to the government for payment, and, because compliance with TVPRA was an implied condition of payment, the undisclosed violation of the TVPRA would constitute a fraudulent or false claim. While one of the cases was dismissed, the other remains and because qui tam cases are initially filed under seal, it is likely that other such cases already are in progress and will be unsealed in the near future.

In Hawkins v. ManTech Int'l Corp., ManTech allegedly employed relators to perform engineering services to U.S. military vehicles in Kuwait pursuant to a $2.85 billion contract with the U.S. Army. Relators alleged ManTech compelled them to work in a dangerous environment, filled with toxic fumes and lacking proper safety precautions, under fear of economic and legal repercussions. According to relators, the company confiscated their passports and did not supply them with proper Kuwaiti work visas such that relators reasonably feared that if they stopped working, ManTech would report they were working illegally to the Kuwaiti authorities, which could lead to criminal prosecutions for violation of immigration laws. Moreover, in the relators' employment contracts, they faced large fees if they prematurely terminated their work contracts. Relators alleged that ManTech violated the FCA by falsely certifying its compliance with TVPRA when they requested and accepted payment from the government.

In response to ManTech's motion to dismiss, the court found that its TVPRA compliance was material to the contract and that relators sufficiently alleged TVPRA violations. Nevertheless, the court found relators failed to plead with particularity a specific instance of the company's certification or representation that was rendered misleading by a TVPRA violation such that Hawkins' FCA complaint could not survive dismissal under FRCP 9(b)'s heightened pleading standard.

In United States ex rel. Fadlalla v. DynCorp Int'l LLC, Global Linguist Solutions, LLC ("GLS") employed relators as linguists pursuant to multibillion dollar contracts with the government for U.S. military and intelligence-gathering efforts in Kuwait. The former employees alleged multiple violations of the TVPRA, including: confiscation of passports; inhumane treatment, including forcing them to stay in tents on bases that were "overcrowded, unsanitary, and dangerous"; and intentionally circumventing local laws such that, unbeknownst to the relators at the time, they were working illegally, ultimately resulting in some being arrested and detained. Relators alleged GLS induced the government to award it additional contracts by falsely representing it had complied with the TVPRA, and that GLS's noncompliance with the TVPRA rendered it ineligible to perform a second contract, rendering invoices for payment false claims under the FCA.

The court denied GLS's motion to dismiss, finding the allegations of a pattern of abuses sufficiently alleged a violation of the TVPRA. In doing so, the court denied GLS's argument that the court lacked subject matter jurisdiction over the claims, finding that, as government contractors working abroad, GLS could be held liable for their actions in Kuwait. Further, the court found that the relators pled with particularity that GLS falsely certified their compliance with the TVPRA. The court found that, because the contract was obtained and performed "against a backdrop of the Government's zero tolerance policy regarding trafficked persons," it could plausibly infer that, to obtain contracts and receive payments, GLS had to impliedly certify its compliance with TVPRA.

Notably, the contracts at issue in these cases predated the 2015 promulgation of sweeping additional mandates for federal contractors and subcontractors aimed at eliminating labor trafficking in supply chains, known as the "Ending Trafficking in Persons" rule. In addition to affirmatively prohibiting government contractors, subcontractors, their employees, and their agents from engaging in specified trafficking-related activities, contractors are required to self-report credible information of violations in their supply chain. Further, contractors engaged in contracts or subcontracts abroad exceeding $500,000 must create compliance plans, and certify the implementation of these plans on an annual basis prior to accepting an award. The new "Ending Trafficking in Persons" rule provides additional potential avenues for qui tam actions predicated on alleged non-compliance with trafficking-related requirements in government contracts.

Two Key Takeaways:

  1. Companies should consult with counsel to keep abreast of the rapidly evolving statutory, regulatory, and compliance issues involving human trafficking and forced labor.
  2. Companies should consider assessing their supply chains and compliance programs in consultation with auditors and legal counsel.

Taylor M. Grode, an associate in the Chicago Office, assisted in the preparation of this Commentary.

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