In two prior posts, we reported on a case which an insurance company was deemed subject to liability under the False Claims Act even when it did not directly submit claims to the federal government.  See United States v. Hawley, No. 08-2992, 2010 WL 3292710 (8th Cir. Aug. 23, 2010) and click here and here for the prior posts.  In the most recent opinion in the Hawley case, the District Court held that the Fraud Enforcement and Recovery Act (FERA) amendments did not apply retroactively in Hawley, and such retroactive application would violate the Ex Post Facto clause of the United States Constitution.  See United States v. Hawley, No. C 06–4087–MWB, 2011 WL 3295419 (N.D.Iowa Aug. 1, 2011).

Hawley, an insurance agent, was alleged to have caused farmers to submit false claims to North Central Crop Insurance, Inc., a private insurance company, which then submitted claims for reimbursement to the Federal Crop Insurance Corporation (FCIC), established pursuant to federal statute.  The Government argued that, since the FCIC was approving and paying claims, the FCA reached Hawley’s conduct.  The Eighth Circuit held that there was a genuine issue of material fact as to whether the Government had claims under Sections 3729(a)(2) and (a)(3) of the FCA prior to the 2009 amendments of the Fraud Enforcement and Recovery Act (FERA).  Prior to FERA, these provisions provided for liability where the defendant “intended that the false record or statement be material to the Government’s decision to pay or approve the false claim.”  See Allison Engine co. v. United States ex rel. Sanders, 128 S. Ct. 2123 (2008).  The Eighth Circuit did not decide whether FERA, which modified these provisions of the FCA, was retroactive to the claims in Hawley.

FERA eliminated the requirement that a false statement be made “to get a false or fraudulent claim paid or approved by the Government.”  See 31 U.S.C. § 3729(a)(1)(B).  FERA provides for liability where the false statement is material to a false or fraudulent claim.  FERA further states that these amendments “shall take effect as if enacted on June 7, 2008, and apply to all claims under the False Claims Act (31 U.S.C. 3729 et seq.) that are pending on or after that date.”  In dispute was the meaning of the term “claims”.  Hawley argued that “claims” refers to claims submitted to the Government for payment, which in this case were prior to June 7, 2008.  The Government, by contrast, argues that “claims” refers to when the case was filed, which was subsequent to June 7, 2008.  The court agreed with Hawley, relying on United States ex rel. Burroughs v. Central Ark. Development Council, 2010 WL 1542532 (E.D.Ark.2010).  Additionally, the District Court held that application of FERA retroactively would violate the Ex Post Facto clause of the United States Constitution because, though the FCA is a civil statute, the sanctions (treble damages and penalties) make the statute punitive in nature.