Seeking more scienter: the effect of False Claims Act interpretations.

• Author: Murray, Michael

The U.S. Treasury can now rely on recovering a billion dollars each year from antifraud efforts. Enacted during the Civil War to combat war profiteering, (1) the False Claims Act (FCA) prohibits the submission of false or fraudulent claims for payment to the United States? An individual violates the FCA when he "knowingly presents, or causes to be presented" to the government "a false or fraudulent claim for payment or approval," (3) or "knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government." (4) A defendant acts "knowingly" if he acts with "actual knowledge," "deliberate ignorance," or "reckless disregard of the truth or falsity" of the claim. (5) The government or private individuals (in qui tam suits) may sue under the FCA for civil penalties and treble damages. (6) The amount of recovery under the FCA has greatly increased over the past two decades. In the 1980s and early 1990s, the government only recovered approximately three hundred million dollars per year, (7) but since 2000, the government has recovered well over one billion dollars in all but one year. (8)

Two circuit conflicts have developed regarding the proper interpretation of the FCA. First, the circuits are divided over whether an implicit certification of compliance with a federal law, regulation, or contract is sufficient to give rise to liability under the FCA. Second, the circuits have split on what constitutes "presentment" of a claim to the government as required by the FCA. (9)

Part I of this Comment describes the circuit conflicts. Part II then argues that, while the two circuit splits involve separate questions of interpretation, courts that have rejected liability on both issues are motivated by a common but unacknowledged concern: ensuring that unsuspecting defendants do not face FCA liability. The interpretive moves used to achieve this result, however, in practice create additional scienter requirements that are imperfect solutions for the problem of unsuspecting defendants. In fact, the courts are doing more harm than good. Part III argues that the statutory scienter framework can better protect unsuspecting defendants than the courts' similarly intentioned reinterpretations of the FCA.

1. THE FALSE CLAIMS ACT IN THE COURTS

   1. The Conflict over Implied Certification

      Courts have long allowed FCA liability for claims based on a defendant's express false certification. (10) An "express false certification" occurs when a defendant "who makes a claim for payment from the United States submits a form or document expressly certifying compliance with a law, contract term, or regulation, when the defendant did not in fact comply." (11) An implied false certification, however, occurs when the claimant does not explicitly indicate compliance with a federal law or regulation but only submits a claim for payment. (12)

      Most circuits that have addressed the issue have embraced implied certification as sufficient for FCA liability. For example, in Shaw v. AAA Engineering & Drafting, Inc., the Tenth Circuit affirmed the liability of a government contractor who submitted an invoice for payment that "did not contain any factual misrepresentations regarding [contractual compliance]" because "a false implied certification may constitute a 'false or fraudulent claim.'" (13)

      Several circuits, however, have criticized the implied certification theory. For example, in United States ex rel. Hopper v. Anton, the Ninth Circuit expressed disdain for the argument that a school district whose forms did "not contain any certification concerning regulatory compliance" could nonetheless face FCA liability for its receipt of federal education monies. (14) The court argued that "[v]iolations of laws, rules, or regulations alone do not create a cause of action under the FCA" because "[i]t is the false certification of compliance which creates liability when certification is a prerequisite to obtaining a government benefit." (15)

   2. The Conflict over Presentment

      The two primary provisions of the FCA use different language to describe prohibited conduct. One subsection imposes liability on any person who "knowingly presents, or causes to be presented" a false claim, (16) while the other imposes liability on any person who "knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government." (17) The language of the first subsection has given rise to the requirement that a plaintiff prove that a defendant "presented" a claim to the government. (18) The circuits have split, however, on whether every plaintiff, regardless of the subsection under which he seeks FCA liability, must show that a false claim was "presented" to the government.

      The D.C. Circuit in United States ex rel. Totten v. Bombardier Corp. recently held that FCA liability always requires presentment of a claim by a defendant to a U.S. government officer or employee. (19) The court rejected FCA liability for the contractor of a federal grantee, Amtrak, who only submitted claims to Amtrak and was paid out of funds previously granted by the federal government because the "clear unambiguous language" of [section] 3729(a)(1) (20) requires presentment to the government and the phrase "by the Government" in subsection (a)(2) "supports" an identical presentment requirement for FCA liability under that provision. (21)

      The Sixth Circuit in United States ex rel. Sanders v. Allison Engine Co. (22) explicitly rejected the Totten approach. The court upheld liability for subcontractors on a Navy project who did not present claims "directly" to the government because "the plain language of subsections (a)(2) and (a)(3) simply does not require that a claim must be presented to the government to be actionable." (23) Instead, the court concluded that a plaintiff must only "show that government money was used to pay the false or fraudulent claim." (24)

2. THE MOTIVATION AND EFFECT OF THE RECENT INTERPRETATIONS

   1. The Motivation of the Courts

      A common fear motivates the courts that limit FCA liability in both...