Government Knowledge and Continued Payment as “Very Strong Evidence” Against FCA Materiality at Summary Judgment

1. Introduction

In United States of America ex rel. Hassan Foreman v. AECOM (2d Cir. Mar. 19, 2026) (summary order), the Second Circuit affirmed summary judgment for AECOM on False Claims Act (“FCA”) claims arising from a U.S. Army services contract in Afghanistan. The relator, Hassan Foreman (a former AECOM employee), alleged that AECOM submitted false claims by billing labor improperly (timekeeping/labor charging) and by failing to meet contractual requirements concerning the qualifications and vetting of certain personnel.

The appeal presented three clusters of issues: (i) procedural fairness when a district court converts a remanded motion to dismiss into a motion for summary judgment and denies a sur-reply; (ii) the denial of additional discovery under Fed. R. Civ. P. 56(d); and (iii) the central merits question—whether the alleged noncompliance was material to the Government’s payment decisions under the demanding FCA materiality standard set out in Universal Health Servs., Inc. v. United States ex rel. Escobar.

Although issued as a nonprecedential summary order, the decision is a useful synthesis of how the Second Circuit operationalizes Escobar materiality at summary judgment—particularly where the Government had knowledge of the alleged problems (via a Defense Contract Audit Agency report and other investigations) yet continued paying and extending the contract.

2. Summary of the Opinion

The Second Circuit affirmed on all grounds:

• Conversion / sur-reply: The district court did not abuse its discretion in converting the remanded motion to dismiss into a motion for summary judgment under Rule 12(d), nor in proceeding without allowing Foreman a sur-reply to address evidence/arguments advanced in AECOM’s “in further support” (reply) brief.
• Rule 56(d) discovery: The denial of Foreman’s Rule 56(d) request was not an abuse of discretion because the germane material was not identified with sufficient specificity and/or sought matters the court deemed immaterial.
• Merits (materiality): No reasonable juror could find materiality. The Government’s actual knowledge of the alleged billing issues (notably through the DCAA Report) and continued payment/contract extensions was “very strong evidence” that the requirements were not material under Escobar. As to the personnel qualification/vetting theories, the panel additionally agreed with the district court that the contract contained no such requirements—independently defeating that branch of the FCA case.

3. Analysis

3.1. Precedents Cited

A. Conversion to summary judgment and opportunity to respond

• Fed. R. Civ. P. 12(d) (conversion framework): The panel emphasized that conversion is permissible if parties have a “reasonable opportunity” to submit pertinent material.
• King v. Simpson, 189 F.3d 284, 288 n.2 (2d Cir. 1999): Cited for the proposition that a district court may convert a remanded motion to dismiss into a motion for summary judgment, rebutting Foreman’s claim that remand foreclosed conversion.
• In re G. & A. Books, Inc., 770 F.2d 288, 295 (2d Cir. 1985): Used to reject complaints about lack of opportunity where both sides actually submit extensive evidence (exhibits, affidavits, depositions, etc.) in support/opposition.

B. Reply evidence and sur-replies

• Bayway Refin. Co. v Oxygenated Mktg. and Trading A.G., 215 F.3d 219, 226 (2d Cir. 2000): Provides the abuse-of-discretion lens for a district court’s reliance on evidence first presented in a reply.
• Ruggiero v. Warner-Lambert Co., 424 F.3d 249, 252 & nn. 3-4 (2d Cir. 2005): Supplies the three-factor guide—surprise, request for sur-reply, and proffer of counter-evidence.
• Pager v. Greater N. Ins. Co., 24-cv-813, 2025 WL 855846, at *5 (2d Cir. Mar. 19, 2025) (summary order): Cited as applying the Bayway approach.

Applying these authorities, the panel found no abuse because (i) Foreman declined a normal briefing schedule that would have anticipated a reply; (ii) he could not plausibly claim surprise after two years of discovery; and (iii) he failed to identify responsive evidence that would change the materiality outcome.

C. Rule 56(d) discovery standards

• Alphonse Hotel Corp. v. Tran, 828 F.3d 146, 151 (2d Cir. 2016): Sets the abuse-of-discretion standard of review for Rule 56(d) rulings.
• Paddington Partners v. Bouchard, 34 F.3d 1132, 1138 (2d Cir. 1994) (quoting Sundsvallsbanken v. Fondmetal, Inc., 624 F. Supp. 811, 815 (S.D.N.Y. 1985)): Requires that the sought material be germane and not cumulative/speculative; “bare assertions” that evidence is in the defendant’s hands are insufficient.
• Elliott v. Cartagena, 84 F.4th 481, 488 n.7 (2d Cir. 2023): Noted for the renumbering of the former Rule 56(f) to current Rule 56(d).

D. Summary judgment standards

• Kowalchuck v. Metro. Transp. Auth., 94 F.4th 210, 214 (2d Cir. 2024): De novo review of summary judgment.
• Murphy v. Hughson, 82 F.4th 177, 183 (2d Cir. 2023): Evidence viewed in the light most favorable to the nonmovant.

E. FCA materiality doctrine

• Universal Health Servs., Inc. v. United States ex rel. Escobar, 579 U.S. 176, 192, 194–96 (2016): Anchors the “demanding” materiality test and the maxim that Government payment despite “actual knowledge” of violations is “very strong evidence” against materiality; also confirms materiality can be decided at summary judgment. The panel treated Escobar as the controlling rule.
• United States ex rel. Foreman v. AECOM, 19 F.4th 85, 109–17 (2d Cir. 2021): The prior appeal in the same litigation supplied the Second Circuit’s factor-based materiality framework and earlier assessments of the “condition of payment” and “substantiality” factors for these same theories.
• United States ex rel Lemon v. Nurses To Go, Inc., 924 F.3d 155, 161 (5th Cir. 2019): Cited (via the 2021 AECOM opinion) for the principle that no single materiality factor is dispositive.
• United States v. Strock, 982 F.3d 51, 64 (2d Cir. 2020): Used to distinguish post hoc enforcement from contemporaneous payment decisions—enforcement after the fact is at most “neutral” on materiality compared to evidence about how the Government pays claims in real time.

F. Affirmance on any ground supported by the record

• Beijing Neu Cloud Oriental Sys. Tech. Co. v. Int'l Bus. Machines Corp., 110 F.4th 106, 113 (2d Cir. 2024) (quoting Headley v. Tilghman, 53 F.3d 472, 476 (2d Cir. 1995)): The court may affirm on any ground supported by the record even if not relied upon below—reinforcing the panel’s flexibility in sustaining judgment given the record’s strong materiality evidence.

3.2. Legal Reasoning

A. The procedural holdings: conversion, reply evidence, and discretion

The panel treated conversion under Rule 12(d) as a practical question: did Foreman have a “reasonable opportunity” to present pertinent materials? The record cut against him. After remand, discovery ran for nearly two years. When the district court converted the motion, Foreman filed an extensive response (60 pages and 70+ exhibits), which underscored that he was not procedurally “boxed out.”

On the sur-reply dispute, the court applied the Bayway/Ruggiero factors with an emphasis on litigant choice and predictable litigation sequence. Foreman declined an offered “typical” briefing schedule (which would have included a reply and often allows a sur-reply request in an ordinary posture). That choice undermined “surprise” and weighed against finding an abuse of discretion when the district court refused further briefing. In short, the panel signaled that “procedural unfairness” arguments are weak where the party had (and used) opportunities to submit evidence and where the additional reply materials are the natural product of discovery.

B. Rule 56(d): specificity and materiality gatekeeping

Rule 56(d) is not an entitlement to more discovery; it is a safety valve against premature summary judgment when a party can identify concrete, germane evidence it cannot yet present. The panel endorsed the district court’s twin rationales: (i) much of what Foreman sought was immaterial to the dispositive issue (materiality), and (ii) the remainder lacked adequate specificity under Paddington Partners v. Bouchard.

The important doctrinal move here is that “germaneness” is measured against what will actually decide the case. Because the case ultimately turned on the Government’s knowledge and payment behavior, discovery requests not tethered to those points were properly discounted.

C. Merits: materiality as the fulcrum, with Government knowledge doing the decisive work

The panel’s materiality analysis tracked the three-factor approach articulated in the earlier United States ex rel. Foreman v. AECOM (2021) applying Escobar:

1. Express designation (condition of payment): The panel treated its prior holding as effectively settling that this factor was neutral or of limited weight for the relevant allegations, and nothing in the summary judgment record changed that balance.
2. Government response to noncompliance (knowledge + payment behavior): This factor “weigh[ed] decisively” against Foreman. Relying on Escobar’s “very strong evidence” formulation, the panel held that the DCAA Report showed the Government knew about the alleged labor-billing deficiencies—down to findings that mirrored Foreman’s allegations and a warning that AECOM’s “internal controls cannot be relied on.” Yet the Government continued to pay and extended the contract. That combination, under Escobar, is nearly case-dispositive on materiality absent countervailing evidence.
   
   For the personnel qualification/vetting theories, the record likewise showed Government awareness: AECOM disclosed use of foreign nationals early; the Government investigated missing evidence of training/certifications/licenses and “access issues” tied to vetting; and still paid. Under Escobar, continued payment in the face of actual knowledge defeats an inference that the requirement was material to payment.
3. Substantiality (minor vs. significant): The court acknowledged that the alleged dollar magnitude could modestly support materiality for certain labor claims, but noted that Foreman’s own position suggested the estimate had shrunk and that the expert estimate for the other theory was “far less.” Even assuming some weight for substantiality, it could not overcome the “decisive” second factor: knowledgeable payment.

Two additional reasoning points matter:

• Materiality can be resolved at summary judgment: The panel leaned on Escobar’s express endorsement of summary judgment as an appropriate stage to decide materiality, rejecting the idea that materiality is invariably “too fact intensive.”
• Contractual “hook” as a separate failure mode: In a notable aside, the panel agreed that the contract contained no certification/vetting requirements for the personnel at issue. That defeats FCA falsity theories premised on “noncompliance,” independent of materiality. Practically, it underscores that FCA implied certification claims must start with an actual requirement in the contract (or incorporated statutes/regulations), not an assumed best practice.

3.3. Impact

Even as a nonprecedential summary order, the decision is likely to be influential in FCA practice in three ways:

1. Government knowledge + continued payment is powerful summary judgment evidence: The order reinforces that where defendants can show the Government actually knew the nature and scope of the alleged noncompliance (e.g., via audits like a DCAA report, investigations, or documented disclosures) and still paid—especially repeatedly or through contract extensions—courts in this Circuit will treat that as “very strong evidence” against materiality, often outcome-determinative.
2. Audit reports can be double-edged in FCA litigation: Foreman’s earlier appeal turned on the impropriety of considering the DCAA Report at the motion-to-dismiss stage. After discovery, that same category of evidence became central to defeating materiality at summary judgment. The case thus illustrates a procedural arc: evidence excluded at pleadings can become dispositive once properly in the summary judgment record.
3. Procedural discipline matters post-conversion: Litigants opposing conversion (or seeking more briefing/discovery) must concretely show prejudice—what evidence they lacked, why it matters to a dispositive issue, and how it would change the result. Strategic choices (declining a normal schedule, filing an oversized “response”) may later weaken claims of surprise or lack of opportunity.

4. Complex Concepts Simplified

• Qui tam relator: A private individual who sues on behalf of the United States under the FCA, potentially sharing in any recovery.
• False Claims Act (FCA): A federal statute imposing liability for knowingly submitting (or causing) false or fraudulent claims for Government payment.
• Implied false certification theory: A claim that by requesting payment, a contractor impliedly represents compliance with certain material contract or regulatory requirements; if that implied representation is false and material, FCA liability may attach.
• Materiality (under Escobar): Not every contract breach matters. The question is whether the misrepresentation would likely influence the Government’s payment decision. If the Government pays despite actual knowledge of the violation, that is “very strong evidence” the requirement is not material.
• Fed. R. Civ. P. 12(d) conversion: If a court considers matters outside the pleadings on a motion to dismiss, it may convert the motion into one for summary judgment—so long as parties get a reasonable chance to submit relevant evidence.
• Summary judgment: Judgment without trial when no genuine dispute of material fact exists and the movant is entitled to judgment as a matter of law.
• Fed. R. Civ. P. 56(d): A mechanism to request more discovery before summary judgment; the request must identify specific, non-speculative evidence that is germane to defeating summary judgment.
• DCAA Report: An audit product by the Defense Contract Audit Agency; here it served as evidence of the Government’s actual knowledge of labor-billing control weaknesses and billing errors.

5. Conclusion

The Second Circuit’s affirmance in United States of America ex rel. Hassan Foreman v. AECOM underscores an increasingly decisive FCA lesson from Universal Health Servs., Inc. v. United States ex rel. Escobar: where the Government knows of the alleged noncompliance and continues to pay (and even renews the relationship), relators face a steep—often insurmountable—materiality barrier at summary judgment. Procedurally, the order also confirms broad district-court discretion in post-remand conversion to summary judgment, management of reply evidence, and denial of Rule 56(d) requests that are not tightly specified and tied to dispositive issues.