False Claims Act Recent Developments

The U.S. Supreme Court's recent denial of a writ of certiorari in a False Claims Act ("FCA") case and two other opinions in the Ninth Circuit and by the Seventh Circuit Court of Appeals leave the circuits split on two important FCA issues: (i) whether the Fraud Enforcement Recovery Act of 2009 ("FERA") applies retroactively to cases filed by June 7, 2008, or only to claims for payment made to the government by that date; and (ii) the extent to which the specific fraud on the government must have been disclosed for the FCA's jurisdictional Public Disclosure Bar to apply. This Commentary discusses those recent court actions, the remaining splits among the circuits, and the implications for defendants in FCA cases.

U.S. Supreme Court Declines Opportunity to Resolve Scope of FERA's Retroactive Reach

The U.S. Supreme Court's recent denial of a petition for writ of certiorari in Allison Engine Co. v. United States ex rel. Standers, Dkt. No. 12-1057 (June 24, 2013), leaves a split among the circuit courts as to which "claims under the False Claims Act" FERA retroactively applies—to all FCA lawsuits pending on or after June 7, 2008, or to claims for payment for work provided to the government that were pending on or after June 7, 2008.

In 2008, in an earlier opinion in Allison Engine Co. v. United States ex rel. Standers ("Allison Engine I"), the U.S. Supreme Court unanimously held that liability under the FCA requires that the "defendant intended that the false record or statement be material to the Government's decision to pay or approve the false claim." 553 U.S. 662, 665 (2008) (emphasis added). The Senate Report for FERA described the bill as an effort to "correct" what Congress believed to be the Supreme Court's "erroneous interpretations of the law" in Alison Engine I, including that intent and materiality standard. S. Rep. No. 10, 111th Cong., 1st Sess. 10 (2009). Under Section 4(f)(1) of FERA, the legislation "took effect as if enacted on June 7, 2008," two days before the Allison Engine I opinion was issued, and would apply to "all claims under the False Claims Act...that are pending on or after that date."

Circuit Court Split. The U.S. circuit courts of appeals have split on that provision's retroactive effect because they have interpreted "claims" in Section 4(f)(1) differently. Some courts interpret "claims" to mean legal actions before a court or other adjudicative body (i.e., court claims pending on or after June 7, 2008), and accordingly do not require (in cases pending on July 7, 2008) proof of the defendant's intent for the government's reliance on a material misrepresentation. United States ex rel. Yannacopoulos v. Gen. Dynamics, 652 F.2d 818, 822 n.2 (7th Cir. 2011); United States ex rel. Kirk v. Schindler Elevator Corp., 601 F.3d 94, 113 (2nd Cir. 2010), rev'd on other grounds, 131 S. Ct. 1885 (2011). Other courts have interpreted, albeit with little analysis, "claims" to mean requests to the government for payment (i.e., alleged false claims to the government) regardless of when the case was filed. United States ex rel. Cafasso v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1051 n.1 (9th Cir. 2011); Hopper v. Solvay Pharm., Inc., 588 F.3d 1318, 1327 n.3 (11th Cir. 2009).

The other circuits' positions are unclear. The Fifth Circuit, for example, held that the FERA provision concerning fraudulent intent applies when a complaint was pending on June 7, 2008, regardless of when the requests for payment were made. United States ex. rel. Steury v. Cardinal Health, Inc., 625 F.3d 262, 267 n.1 (5th Cir. 2010). Two years later, however, the Fifth Circuit affirmed a district court ruling that had adopted the opposite view. Gonzalez v. Fresenius Med. Care N. Am., 689 F.3d 470, 475 & n.4 (5th...