Critical issues remaining in FCA cases include what damages might be imposed by courts, and what types of violations courts find "material" to the government's funding decision, potentially leading to FCA claims. Not surprisingly, qui tam relators and their counsel have pursued extremely aggressive positions on these issues, arguing that all funding received by a school's students under a program participation agreement should constitute the damages imposed for any violation of that agreement. Relators and their counsel take this position regardless of whether the students benefit from the government's funding and no matter how minor the alleged violation.

Thankfully, courts are rejecting these aggressive arguments with greater frequency. In the first of two recent decisions from courts of appeals, United States ex rel. Davis v. District of Columbia, 679 F.3d 832 (D.C. Cir. 2012), the D.C. Circuit Court curbed the damages that relators might seek under the FCA. There, the relator argued that the District of Columbia and its schools violated Medicare documentation requirements and should be held liable for damages in the full amount of Medicare payments received (trebled under the FCA), even though the beneficiaries of the program actually received the intended benefit. The D.C. Circuit rejected this argument, finding that because FCA damages are intended to put the government in the same position as it would have been had the defendant's claim not been false, in order to demonstrate damages, the relator or government must show not only that the government would have withheld payment had it known the true facts, but also that the performance that the government received was worth less than what it believed it had purchased. This case should aid defendants in the education sector being charged with technical violations in arguing that damages should not consist of all funds received under a program participation agreement when the beneficiaries of the government's program (i.e., the students) received the intended benefit (i.e., education). Importantly, the Davis court noted that although there may not be "damages" in cases such as these, there may still be per-claim penalties.

In United States ex rel. Williams v. Renal Care Group, Inc., 696 F.3d 518 (6th Cir. 2012), the Sixth Circuit adopted arguments that we have long been advocating that not every violation of an alleged condition of participation in a government program (such as each item listed in a school's program participation agreement) should be considered "material" to the government's funding decision, potentially leading to an FCA case. Rather, in Williams, in the Medicare context, the court found that only those regulations where compliance with that regulation is truly a condition of government payment may constitute a violation "material" to the government's funding decision. The court commented that the FCA is not a vehicle for policing technical compliance with complex federal regulations, and it concluded that even though the regulations at issue were a condition of participation, their violation did not result in FCA liability. Defendants in the sector may find cases like Williams helpful in battling arguments from relators and their counsel that any and every violation of the program participation agreement may provide the basis for an FCA case.