Sixth Circuit: FERA False Claims Act Amendment Applies Retroactively to Cases Pending as of June 7, 2008

by Sheppard Mullin Richter & Hampton LLP
Contact

[author: John Hynes]

On November 2, 2012, the Sixth Circuit held that a 2009 amendment Congress made to the liability provisions of the False Claims Act ("FCA") applies retroactively to civil FCA cases pending as of June 7, 2008. U.S. ex rel. Sanders v. Allison Engine Co., Nos. 10-3818/10-3821, at *17-20 (6th Cir. Nov. 2, 2012).

Background of the Allison Engine Case

In 1995, whistleblowers filed an action under the qui tam provisions of the FCA against various subcontractors alleging that they submitted claims for payment to the Government relating to the construction of generator sets used in Navy Arleigh-Burke-class Guided Missile Destroyers despite knowing that the sets failed to conform to contract specifications and Navy regulations. The district court dismissed the claim on the ground that relators failed to satisfy the presentment element under the FCA, i.e., relators failed to show that defendants presented a false claim to the Government. Sanders v. Allison Engine Co., No. 1:95-cv-970, 2005 U.S. Dist. LEXIS 5612, at *32 (S.D. Ohio Mar. 11, 2005).

On appeal, the Sixth Circuit reversed the decision, holding that presentment was not required for a violation of the FCA. U.S. ex rel. Sanders v. Allison Engine Co., 471 F.3d 610, 622-23 (6th Cir. 2006). The U.S. Supreme Court, however, reversed the Sixth Circuit and remanded the case to the district court, holding that contrary to the Sixth Circuit’s holding, the FCA requires the plaintiff to prove that the defendant intended that the false record or statement be material to the Government’s decision to pay or approve a false claim. Allison Engine Co. v. U.S. ex rel. Sanders, 553 U.S. 662, 665 (2008).

The FERA FCA Amendments

In response to the Supreme Court's decision, Congress amended the FCA as part of the 2009 Fraud Enforcement and Recovery Act (“FERA”) to expand FCA liability to anyone who "knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim" (“FCA Liability Amendment”). As such, the amendment removed the requirement that a false claim be actually presented to the Government for FCA liability to attach – the element that the trial court found unsatisfied in Allison Engine. The FERA also contained a retroactivity clause providing that the FCA Liability Amendment "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" (“FERA Retroactivity Clause”). (emphasis added.)

The Allison Engine Holding and Resulting Circuit Split

On remand, the Allison Engine district court held that the word "claims" in the FERA Retroactivity Clause meant claims for payment from the government, not civil actions. Because there were no such claims for payment pending on or after June 7, 2008, the trial court dismissed the action. U.S. ex rel. Sanders v. Allison Engine Co., 667 F.Supp.2d 747, 752 (S.D. Ohio 2009). The district court further held that even if the FERA Retroactivity Clause rendered the FCA Liability Amendment applicable, its application would have violated the ex post facto clause of the Constitution because Congress intended to impose punishment when it amended the FCA. Id. at 752-56.

The Sixth Circuit reversed the trial court's decision, holding that "claims" in the FERA Retroactivity Clause refers to a “civil action or case,” not a "claim for payment" from the Government. U.S. ex rel. Sanders v. Allison Engine Co., Nos. 10-3818/10-3821, at *17-20 (6th Cir. Nov. 2, 2012). The court also found that such retroactive application did not violate the ex post facto or due process clauses of the Constitution. Id. at 20-33.

The Sixth Circuit's decision adds to an existing circuit split on the interpretation of "claims" in the FERA Retroactivity Clause. The Sixth Circuit joins the Second and Seventh Circuits holding that "claims" means "cases," and is at odds with the Ninth and Eleventh Circuits as well as various district courts holding that "claims" means "claims for payment" from the government. Given the circuit divide and the importance of this issue to FCA litigation, one should not be surprised to see the U.S. Supreme Court resolve the question once and for all.

Impact of Allison Engine

The Allison Engine decision is the latest in a line of cases from various circuits interpreting the word "claims" in the FERA Retroactivity Clause. The interpretation of this term is important because the subsection of the FCA imposing liability for making or using a "false record or statement material to a false or fraudulent claim" and not requiring presentment of a claim can only apply in pre-FERA cases if the requirements of the retroactivity clause are met. There can be a wide gap of time between an alleged claim for payment from the Government and the time at which a resulting FCA action is filed. As such, whether "claims" is interpreted to mean a claim for payment from the government or an FCA action can have a great impact on the number of defendants with potential FCA exposure for making or using a false record or statement material to a false or fraudulent claim.

If and when the U.S. Supreme Court steps in and resolves this issue, we will have an answer in all circuits as to the proper application of the FERA Retroactivity Clause to claims under the FCA Liability Amendment. Until then, however, companies must deal with the current circuit split. In the Second, Sixth, and Seventh Circuits, the FCA Liability Amendment applies retroactively to FCA cases filed as of June 7, 2008, while in the Ninth and Eleventh Circuits, it applies retroactively to claims for payment from the government pending as of June 7, 2008. FCA defendants must be mindful of the rule applicable in their circuit and plan their defense strategy accordingly.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Sheppard Mullin Richter & Hampton LLP | Attorney Advertising

Written by:

Sheppard Mullin Richter & Hampton LLP
Contact
more
less

Sheppard Mullin Richter & Hampton LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.