Businesses get guidance from Supreme Court on False Claims Act

It is relatively unusual for any case involving the False Claims Act to be considered by the Supreme Court.

There has been some new guidance from the Supreme Court related to the historic False Claims Act.

The False Claims Act was adopted in 1863 and signed into law by President Abraham Lincoln because of “rampant fraud in Civil War defense contracts.”

The False Claims Act can be enforced via litigation brought by the federal government or through civil qui tam actions that are filed by private parties, called relators, “in the name of the government.”

So the act allows someone to file a lawsuit in the name of the U.S. government and they in turn get to share in the proceeds, according to Demme Doufekias, an attorney at Morrison & Foerster.

The recent case before the Supreme Court involves a provider of services to the U.S. military in Iraq. Defense contractors allegedly fraudulently billed the government for water purification services, according to the case.

The whistleblower’s claims were dismissed in a lower court ruling using the “first-to-file” rule under the False Claims Act, and most claims were also dismissed under the act’s six-year statute of limitations.

It is relatively unusual for any case involving the False Claims Act to be considered by the Supreme Court.

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FURTHER READING:

Whistleblowers & internal investigations: The new privilege and confidentiality challenges

How to strengthen your qui tam case with an expert

Medtronic settles FCA lawsuit with federal government 

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But last month, the justices unanimously ruled in Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, the False Claims Act’s “first-to-file bar” actually precludes a qui tam suit ‘based on the facts underlying [a] pending action.’”

Also, the Supreme Court kept in place the statute of limitations related to the False Claims Act. The justices rejected an argument involving the Wartime Suspension of Limitations Act (WSLA). It said the WSLA statutes of limitations “applies only to criminal offenses, not to civil claims like those in this case,” the ruling said.

The ruling also represents mixed news for corporations which do business with the government. As far as some takeaways for corporate counsel, Bradley Wine, an attorney with Morrison & Foerster, said that to avoid False Claim Act actions filed against a business, it is important to be “proactive” and the company should have a “robust compliance program” where “prevention is paramount.”

Wine said that should include such areas as:

  • Details on how a company should maintain compliance.
  • Appropriate training for all employees.
  • And updates of program as laws change.

Contributing Author

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Ed Silverstein

Ed Silverstein (emsilverstein@gmail.com) is a veteran freelance writer and and editor for magazines, websites and newspapers. He writes frequently for ALM Media's

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