The next series of posts are authored by Stacy Morris, a partner in LDM’s litigation department.  Mr. Morris has agreed to draw upon his experiences with the False Claims Act to provide information about the growing issues for businesses and individuals.

By Stacy Morris

Last week, we provided a brief introduction to the origins of the FCA, and pointed out three of the provisions that are often alleged in FCA claims.  Today we will look at these provisions, and some of the key definitions, in a little more detail.  

 1.         Section 3729(a)(1)(A) imposes liability upon any person who: “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval.” 

The government or relator (a private party who can file a claim on the government’s behalf) can prove “knowingly” by demonstrating that the defendant knew the information was false, acted in reckless disregard of the truth or falsity, or acted with deliberate indifference.  In other words, constructive knowledge may be enough. 

 A “claim” is “any request or demand, whether under a contract or otherwise, for money or property….”  31 U.S.C. § 3729(c).  This means that certain communications to the government may fall within this definition, while other may not.  The inherent ambiguity in the definition of a claim has prompted creative efforts at characterizing various transactions as “claims” under the FCA.

 Whether a particular transaction can be characterized as a “claim” for purposes of the FCA is a critical question because the very essence of the FCA is the existence of a claim; a defendant can be in violation of the FCA only if the particular transaction is meant to induce the government to pay out money.  Additionally, the number of claims becomes important because, as will be discussed next week, the FCA obligates the court to assess a monetary penalty for each and every claim that has been proven.  This becomes especially significant, for instance, in cases against medical providers alleging submission of fraudulent invoices to Medicare.  Such a case may involve hundreds of claims, if not more.  

 2.         Section 3729(a)(1)(B) imposes civil liability on any person who “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.” 

 In 2008, the United States Supreme Court decided Allison Engine Co., Inc. v. United States ex rel. Sanders, 553 U.S. 662 (2008).  There, the court specifically held that it was not enough to merely show that someone used a false statement to get payment or approval of a false claim, but they must have submitted false reports for the purpose of getting the government to pay out funds to which the defendants would not otherwise be entitled.  The court also recognized that before liability can attach under § 3729(a)(2), the government must rely upon the false claim as a condition of payment, and that a claim for conspiracy to violate the FCA requires a showing that defendants shared a specific intent to defraud the Government. 

The next year, on May 20, 2009, Congress passed the Fraud Enforcement and Recovery Act of 2009 (“FERA”), Pub. L. No. 111-21, § 4(f)(1), 123 Stat. 1617, 1625 (2009).  FERA renumbered several of the provisions of the FCA, and was an attack on what Congress viewed as the unintended and undesirable consequences of the Allison Engine decision.  One of the notable changes was that instead of having to prove under § 3729(a)(2)) (renumbered to § 3729(a)(1)(A) under FERA) that the defendant submitted a false statement with the purpose of getting the government to pay out a claim, it is now sufficient if the government can show that the false statement was merely “material” to the government’s decision to make the payment.  By making it less burdensome for the government to prove different aspects of a FCA claim, the FERA appears to be have been successful in legislatively reversing the precedent set by Allison Engine, and in the process, has made it easier for the government to establish violations of the FCA.  

3.         Finally, § 3729(a)(1)(C) imposes civil liability on persons who conspire to defraud the Government by violating any other substantive provisions of the FCA.  A necessary element of this count is an agreement to carry out the wrongful act.   Courts have held that it does not matter whether the persons charged with a conspiracy received any compensation for taking part in the alleged conspiracy, nor does it matter if they had different roles, or motives, so long as they had a “meeting of the minds” as to what was to be carried out.   

 Next week, a brief look at the measure of damages in FCA claims.