Judgment in favor of the government in an action brought under the False Claims Act (FCA) (31 U.S.C. §3729, et seq.) was reversed because it was based on an incorrect interpretation of the statutory requirements regarding the relationship between the making of a false statement and the payment or approval of a false or fraudulent claim by the government. According to the U.S. Supreme Court, to incur liability under the FCA, a person must have the purpose of getting a false or fraudulent claim paid or approved by the government. Moreover, the person must intend for the government itself to pay the claim.
Factual background
The government alleged that subcontractors engaged in a Navy contract to build destroyers issued false certifications that their work was completed in compliance with Navy specifications and presented invoices for payment to the prime contractor. The district court granted the subcontractors judgment as a matter of law, concluding that, absent proof that false claims were presented to the government, the evidence was legally insufficient under the FCA. The Sixth Circuit Court of Appeals reversed the district court's judgment, holding that the FCA claims did not require proof of an intent to cause a false claim to be paid by the government. Rather, the appellate court said, proof of an intent to cause such a claim to be paid by a private entity using government funds was sufficient.
Supreme Court analysis
Contrary to the Sixth Circuit's interpretation of the FCA provisions, the U.S. Supreme Court held that it is insufficient for a plaintiff to show merely that the false statement's use resulted in obtaining or getting payment or approval of the claim or that government money was used to pay the false or fraudulent claim. Rather, a plaintiff asserting a claim under 31 U.S.C. §3729(a)(2) must prove that the defendant intended that the false statement be material to the government's decision to pay or approve the false claim.
In the context of the instant case, the Court determined, a subcontractor violates §3729(a)(2) if it submits a false statement to the prime contractor intending that contractor to use the statement to get the government to pay its claim. The Court emphasized the "fraudulent purpose" element of the FCA intent requirement, explaining that "if a subcontractor or other defendant makes a false statement to a private entity and does not intend the government to rely on that false statement as a condition of payment, the statement is not made with the purpose of inducing payment of a false claim by the government…and the government's decision to pay or approve a false claim is too attenuated to establish liability."
Similarly, the Supreme Court held, it is not enough under §3729(a)(3) for a plaintiff to show that the alleged conspirators agreed upon a fraud scheme that had the effect of causing a private entity to make payments using government funds. Instead, it must be shown that the alleged conspirators intended to defraud the government, that is, "they agreed that the statement would have a material effect on the government's decision to pay the false or fraudulent claim."
Because the Sixth Circuit's decision was based on an incorrect interpretation of §§3729(a)(2) and 3729(a)(3), its judgment was vacated and the case was remanded for further proceedings.
Source: Allison Engine Co., Inc. v. United States ex rel. Sanders, U.S. Supreme Court, June 9.
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