Jonathan Cone

FCA Amendments

Congress enacted the Fraud Enforcement And Recovery Act (FERA) of 2009 to broaden the language of the False Claims Act to impose liability on anyone who knowingly uses "a false record or statement material to a false or fraudulent claim." 31 U.S.C. § 3729(a)(2). It made this change to legislatively overrule the Supreme Court’s decision in Allison Engine Co. v. United States ex rel. Sanders, that held that a false statement was not actionable under the FCA unless it was made with the purpose of getting the government to pay a false claim. 128 S. Ct. 2123, 2128 (2008). The Supreme Court’s decision in Allison Engine therefore required the government and qui tam relators to prove that a defendant acted with the purpose of getting a false or fraudulent claim paid by the government, and that the government itself was to pay the claim, not simply that the claim was to be paid using government funds. Allison Engine made it more difficult to successfully litigate FCA cases against subcontractors and companies that do not directly submit claims to the government.

On Remand

Ironically, when Allison Engine was remanded, the district court ruled that FERA did not apply retroactively to the case-despite that it was the specific case Congress sought to overturn. That’s because when Congress enacted FERA, it provided that the amendment to § 3729(a)(2) "shall take effect as if enacted on June 7, 2008, and apply to all claims under the False Claims Act . . . that are pending on or after that date." See § 4(f)(1), P.L. 111-21, § 4(a), 123 Stat. 1621 (emphasis added). Looking at this retroactivity provision, the district court concluded that a plain reading of the word "claims" revealed that FERA only applied to claims for payment-as the term claim is defined in the FCA-and not cases. (A claim "means any request or demand . . . for money or property . . . ." 31 U.S.C. § 3729(c)). The district court emphasized that Congress used the word "cases" in the next subsection to mean cases, which suggested that its use of the word claim was intentional and that claim meant a claim for payment. It also noted that Congress used the word claims in the legislative history to means claims for payment. Because all of the "claims" in Allison Engine were submitted before June 7, 2008, the triggering date, the district court found that they were not subject to FERA’s retroactivity provision.

On Appeal

On appeal, the Sixth Circuit disagreed. United States ex rel. Sanders v. Allison Engine Co., Nos. 10-3818/10-3821 (6th Cir. Nov. 2, 2012). It did not find Congress’ use of the word "claims" in one subsection and "cases" in the next all that persuasive, because it noted that the two provisions were drafted by "different chambers of Congress at different times." Id. at 10. Instead, the Sixth Circuit focused on how Congress used the terms elsewhere in the FCA, concluding that the FCA contains references to "claims that clearly refer to and invoke the same concept of a civil action or legal claim, and not a request for payment." It also noted that reading the "technical definition" of the term claim into the retroactivity would, as the government argued, lead to a "strained" reading: The provision would then apply to any "claims under the False Claims Act," which makes little sense because contractors do not make demands for payment under the FCA. The Sixth Circuit concluded that FERA applies to all cases asserting FCA causes of action that were pending on or after June 7, 2008, regardless of when any allegedly false claims were submitted.

Takeaway

There is a growing circuit split as to whether FERA applies to claims or cases that were pending on June 7, 2008. The Sixth Circuit joined the Second and Seventh Circuits in holding that it applies to any cases, although it is arguable that the Second Circuit’s decision on the issue was dicta. The Ninth and Eleventh Circuits have found that it applies only to claims for payment, the interpretation adopted by most district courts. The Fifth Circuit appears to have adopted both interpretations in different cases. Now we wait to see what the remaining circuits say-or whether Allison Engine goes back to the Supreme Court.