S.B. 2428 Proposes Amendments To The False Claims Act

• Published date: 25 August 2021
• Subject Matter: Litigation, Mediation & Arbitration, Food, Drugs, Healthcare, Life Sciences, Criminal Law, Trials & Appeals & Compensation, White Collar Crime, Anti-Corruption & Fraud
• Law Firm: Manatt, Phelps & Phillips LLP
• Author: Ms Kate M. Hammond, Joseph E. Laska and John M. LeBlanc

On July 22, 2021, a bipartisan group of senators led by Chuck Grassley (R-IA) introduced the False Claims Amendments Act of 2021 (S.B. 2428). As the name suggests, the bill proposes certain amendments to the False Claims Act, 31 U.S.C. ' 3729, et. seq. (FCA), including imposing a burden of proof on the defendant with respect to materiality and providing the Government with the ability to recover its costs and attorneys' fees in connection with certain discovery.¹ The bill proposes that all amendments would apply to future and pending FCA actions.

According to the bill's sponsors, S.B. 2428 is intended to combat the purported "confusion and misinterpretation of the Supreme Court decision in United Health Services v. United States ex rel. Escobar, [136 S. Ct. 1989 (2016)]."² The sponsors contend that Escobar "made it all too easy for fraudsters to argue that their obvious fraud was not material simply because the government continued payment."³ The sponsors also argue that these "fraudsters" now use costly "fishing expeditions to see if someone, somewhere, in the government was aware of the fraud."⁴ Regardless whether these concerns are valid, it is unclear if the bill adequately addresses them or generates any meaningful changes to the statute.

The False Claims Act and Escobar

The FCA imposes civil liability on any person who "knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval."⁵ A violation of the statute requires "(1) a false statement or fraudulent course of conduct, (2) made with the scienter, (3) that was material, causing (4) the government to pay out money or forfeit moneys due."⁶ The Government or relator must prove each of these elements by a preponderance of the evidence.⁷

The Supreme Court in Escobar held that a defendant may violate the FCA under an implied certification theory'i.e., when a claim fails to disclose a defendant's violation of material statutory, regulatory or contractual requirements'in certain circumstances.⁸ The Court held that "[t]he materiality standard is demanding," and clarified that "if the Government pays a particular claim in full despite its actual knowledge that certain requirements were violated," it is "very strong evidence that the requirements are not material."⁹ Similarly, "if the Government regularly pays a particular type of claim in full despite actual knowledge that certain requirements were violated, and has signaled no change in position," it is "strong...