The Supreme Court has recently limited the scope of False Claims Act (FCA) liability in its decision in Allison Engine Co., Inc. v. U.S., 128 S.Ct. 2123 (June 9, 2008). A qui tam action was filed against Allison Engine, a subcontractor who was contracted to build generators set for electrical power under a prime contract to two shipyards to build Navy destroyers. Pursuant to the terms of the subcontract, Allison Engine was required to execute a certificate of conformance (COC) certifying that each generator set was manufactured in accordance with Navy specifications. In its performance of its subcontract, Allison Engine issued COCs falsely stating that their work was completed in compliance with Navy specifications and presented false invoices for payments to the shipyards. An action was brought against Allison Engine asserting its conduct violated U.S.C. §§ 3729(a) (2) of the FCA, which imposes liability when a person knowingly uses a “false . . . statement to get a false or fraudulent claim paid or approved by the Government.”

The Supreme Court, however, questioned Allison Engine’s liability under the FCA and vacated and remanded the case based upon its interpretation of the FCA. In reaching it decision, the Court held that “[i]t is insufficient for a plaintiff asserting a § 3729(a)(2) claim to show merely that the false statement’s use resulted in payment or approval of the claim or that Government money was used to pay the false or fraudulent claim.” Instead, FCA liability attaches only where it is demonstrated that the “defendant intended that false statement to be material to the Government’s decision to pay or approve the claim,” and its purpose in submitting the false or fraudulent claims was to get the claim paid or approved by the Government. In analyzing the intent element of FCA liability, the Court in Allison Engine, however, also cautioned that getting claim “paid . . . by the Government” is not the same as getting paid using “government funds,” as the term “to get” denotes purpose and thus, plaintiff must show that defendant intended for the Government itself to pay the claim.

Furthermore, interpreting the language of § 3729(a)(2), the Court concluded that liability under that section did not included a presentment requirement as found in § 3729(a)(1) of the FCA. Instead, the Court held that FCA liability under § 3729(a)(2) did not require proof that defendant’s false statement was actually submitted or presented to the Government for payment. In the context of subcontracts, a subcontractor violates the FCA if “it submits a false statement to the prime contractor intending the contractor to use the statement to get the Government to pay its claim. However, if a subcontractor makes a false statement to a private entity but does not intend for the Government to rely on the statement as a condition of payment, the direct link between the statement and the Government’s decision to pay or approve a false claim is too attenuated to establish liability.”