On January 9, 2017, the Supreme Court denied certiorari in United States ex rel. Purcell v. MWI Corp., No. 16-361, ending one of the longest running False Claims Act (“FCA”) cases in history. In so doing, the Supreme Court let stand a significant decision by the D.C. Circuit that severely limits FCA liability where the allegations are dependent on violations of ambiguous agency regulations. See United States ex rel. Purcell v. MWI Corp., 807 F.3d 281 (D.C. Cir. 2015).
As described in detail in one of our prior alerts, the FCA case against Moving Water Industries Corp. (“MWI”) involved an Export-Import Bank loan that funded Nigeria’s purchase of MWI irrigation equipment and the qui tam relator’s claim (adopted by the Justice Department after intervention) that MWI falsely certified that it paid “regular commissions” to agents in connection with the transaction. On appeal, the D.C. Circuit found that the term “regular commissions” was ambiguous, that MWI’s interpretation was objectively reasonable, and that no published guidance supported the government’s post hoc claim that the term referred to the supposed commission rate within the industry as a whole rather than to commission rates MWI regularly paid its agents. Based on these findings, the D.C. Circuit unanimously reversed the jury verdict, and remanded the action to the district court with instructions to enter final judgment for MWI. See FraudMail Alert No. 15-11-25.
Then, notwithstanding its years of active and vigorous post-intervention prosecution of the case— including petitioning the D.C. Circuit for rehearing and rehearing en banc—the Justice Department suddenly reversed course. Not only did it decline to seek a writ of certiorari, but it went a step further and filed a brief opposing Supreme Court review (after the qui tam relator petitioned for certiorari). In its opposition, the Justice Department sought to justify its stance by positing a self-serving interpretation of the D.C. Circuit’s decision, its continuing relevance, and its precedential value, while at the same time urging the Supreme Court not to weigh in. The Justice Department’s self-serving—and as yet untested— interpretation would undermine the D.C. Circuit’s decision in Purcell and conflicts with a growing body of FCA case law. See Br. of Nat’l Ass’n of Mfrs. as Amicus Curiae in Support of Defendant-Appellee/CrossAppellant and in Support of Reversal of the Decisions Finding Liability under the False Claims Act, United States ex rel. Purcell v. MWI Corp., No. 14-5210 (D.C. Cir. filed Mar. 2, 2015) (the reader should note that some authors of this Alert filed the referenced amicus brief).
With its denial of certiorari, the Supreme Court did not adopt (or even acknowledge) the Justice Department’s interpretation, but instead let stand the D.C. Circuit’s decision in Purcell. However, FCA defendants and their counsel should not be surprised if the Justice Department continues to press this interpretation in future cases.