Today, the Supreme Court granted certiorari in Allison Engine Co., Inc. v. United States ex rel. Sanders, No. 07-214, agreeing to review a decision by the Sixth Circuit Court of Appeals in a qui tam case based on allegations of procurement fraud. Granting this petition puts directly before the Supreme Court the issue of whether "presentment" of a false claim to the Federal government is a requirement for liability under the False Claims Act.
The district court had dismissed the case on defendants' motion for a judgment as a matter of law (after relators rested their case at trial but before a verdict was rendered) on the basis that no evidence was submitted that any false claims were "presented" to the Federal government for payment. United States ex rel. Sanders v.Allison Engine Co., No. 1-95-CV-970, 2005 U.S. Dist. LEXIS 5612 (S.D. Ohio Mar. 11, 2005). The alleged false claims were submitted by subcontractors to the prime contractors but, according to the district court, no evidence was admitted to show presentment by the prime contractors to the government.
On appeal, the Sixth Circuit (in a split decision) reversed on that issue, holding that "presentment" was not required for violations of 31 U.S.C. § 3729(a)(2) and (a)(3). United States ex rel. Sanders v. Allison Engine Co., Inc., 471 F.3d 610 (6th Cir. 2006). The majority opinion in the Sixth Circuit decision conflicts with the D.C. Circuit, which, in a majority opinion by then-Circuit Judge Roberts in United States ex rel. Totten v. Bombardier Corp., 380 F.3d 488 (D.C. Cir. 2004) ("Totten II"), held that the text and structure of the FCA require presentment to the government under both subsections (a)(1) and (a)(2). See FraudMail Alert Nos. 04-09-01 and 04-12-13. The Third, Eighth, and Eleventh Circuits have specifically followed the Totten II majority holding. The majority decision in Allison Engine, however, adopted the view of the dissenting judge in Totten II that, although the Act expressly requires presentment to the government for direct submissions of false claims under subsection (a)(1), all that is required for a violation of Section 3729(a)(2) is that the claim was paid with "government money." 471 F.3d at 622.
The question to be decided by the Court, as expressed in the petition for certiorari, is this:
Sections 3729(a)(2) and 3729(a)(3) of the False Claims Act impose liability upon anyone who uses a "false record or statement to get a false or fraudulent claim paid or approved by the Government" or who "conspires to defraud the Government by getting a false or fraudulent claim allowed or paid." 31 U.S.C. § 3729(a)(2), (a)(3). In direct conflict with the decisions of four other circuits, the Sixth Circuit held that Sections 3729(a)(2) and 3729(a)(3) "cover[ ] false claims made to parties other than the government so long as the claim will be paid with government funds." The question presented is whether a plaintiff asserting a cause of action under Section 3729(a)(2) or Section 3729(a)(3) of the False Claims Act is required to prove that a false claim was submitted to the federal government, or whether it is sufficient to establish that the claim was paid using federal funds.
While at first the facts of Allison Engine may seem unusual because the proof at trial showed that the subcontractors' false claims were submitted to the prime contractors but no evidence was presented that any false claims were presented by the prime contractors to the government, the question presented to the Supreme Court raises broader issues that could affect other defendants who provide services to recipients of Federal funds. If presentment to the government is not required under subsection (a)(2), then any person or company that submits claims to those who receive Federal money (including government contractors, Federal grantees, Medicare providers and beneficiaries, and a host of other entities) could be open to FCA liability for treble damages and mandatory penalties because of their "mere association" with government funds even though their claims are never submitted to the government. See Allison Engine, 471 F.3d at 627 (Batchelder, J., dissenting). In addressing this issue, the Court will resolve a sharp conflict among the circuits on the necessity of presentment to the government under subsections (a)(2) and (a)(3).