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Schnader Appellate Team Secures Dismissal of Misguided False Claims Lawsuit Against Covanta

05/16/2012

The U.S. Court of Appeals for the Third Circuit recently affirmed a district court decision dismissing a purported false claims lawsuit against the Firm's client, Covanta Holding Corp., and certain of its affiliates. The lawsuit was brought in federal court in New Jersey by the former Executive Director of the Union County Utilities Authority ("UCUA"), Sunil K. Garg.

Garg contended that Covanta was not making certain payments to the UCUA and the City of Rahway, New Jersey, that Covanta supposedly was obligated to make under a number of waste disposal and leasing agreements related to its operation of a waste disposal facility in Rahway. While publicly available documents demonstrated that Garg's claims were factually incorrect, the federal trial court and now the Third Circuit held that, even if his allegations were true, they did not amount to "false claims" under the federal False Claims Act. At most, they were breaches of contract that Garg had no standing to assert. Moreover, as the Third Circuit emphasized, the False Claims Act is only implicated when a defendant makes a claim for federal funds and the only money involved in Covanta's relationship with the UCUA was local government money. Garg had argued that, because the UCUA constructed the waste disposal facility with federally tax-exempt bonds, when the UCUA paid Covanta pursuant to the parties' contracts, it did so with federal money. The federal courts rejected this argument.

As the Third Circuit held in its recent decision affirming the dismissal of Garg's claims with prejudice: "At best, Garg's complaint established that UCUA had to pay money out of its general operating funds that it should not have had to pay. The fact that some unknown portion of those general operating funds might be tangentially attributable to a tax break from the federal government is irrelevant. The specific money demanded by Covanta was not to be spent or used on the Government's behalf, nor to advance any government program or interest." The Schnader attorneys who handled the appeal were Peter Colonna-Romano, Theresa E. Loscalzo, Bruce P. Merenstein, Laura Navarro, Edward J. Sholinsky, and David Smith.