HomeProtecting the Efficacy of the False Claims Act

Protecting the Efficacy of the False Claims Act

Our pro bono team has helped lead the fight to pass amendments which would strengthen the False Claims Act (FCA). Furthermore we've filed numerous amicus curiae briefs with the Supreme Court championing FCA whistleblowers' rights.

False Claims Act Fix It Law

As the nation’s leading qui tam whistleblower firm, the attorneys of Kohn, Kohn & Colapinto are among the foremost experts on the False Claims Act (FCA). In addition to representing FCA whistleblowers, Kohn, Kohn & Colapinto has consistently engaged in pro bono advocacy to protect the efficacy of the law.

The FCA is one of the United States’ premier whistleblower and anti-fraud laws. Since the law was modernized in 1986 by legislation introduced by Senator Chuck Grassley (R-IA), the FCA’s qui tam provisions have allowed the government to recover over $70 billion from fraudsters. The FCA has been described by the U.S. Assistant Attorney General as “the most powerful tool the American people have to protect the government from fraud.”

However, a number of court cases have threatened to diminish the efficacy of the FCA. The pro bono team at Kohn, Kohn & Colapinto has filed numerous amicus curiae briefs arguing for the Supreme Court to uphold the law’s power and has worked directly with Congressional offices to ensure that legislation gets passed which closes loopholes undermining the law.

Kohn, Kohn & Colapinto’s pro bono advocacy protecting the FCA dates back decades and continues to this day.

The False Claims Amendments Act of 2021

With the input of Kohn, Kohn & Colapinto, Senator Grassley and a bipartisan group of Senators introduced the False Claims Amendments Act of 2021 in July 2021. The pro bono team at Kohn, Kohn & Colapinto worked directly alongside Congressional staff to ensure that the bill adequately addresses loopholes that have diminished the efficacy of the FCA in recent years.

The loopholes undermining the FCA stem from court rulings concerning the definition of the FCA’s “materiality” requirement. The FCA “makes liable anyone who ‘knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval,’ or ‘knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.’” The elements required to show a violation of the FCA are “(1) a false statement or fraudulent course of conduct, (2) made with the scienter, (3) that was material, causing (4) the government to pay out money or forfeit moneys due.”

A 2016 Supreme Court case, Universal Health Services v. U.S. ex rel. Escobar, has led some courts to follow a new definition of what makes a fraud “material.” Escobar states that “if the Government pays a particular claim in full despite its actual knowledge that certain requirements were violated, that is very strong evidence that those requirements are not material.” This has led some courts to dismiss cases merely because the government paid claims in full.

This has created a “materiality” loophole in the False Claims Act. Companies who defraud the government are often able to escape liability if they can show that one person somewhere in the government was aware of the fraud and yet the government still paid the claims. There are many instances where the government may pay a claim despite knowing it is fraudulent including national security concerns and potential harm to the public if payment was suspended for a scarce drug or health service.

The False Claims Amendments Act of 2021 first and foremost seeks to fix this materiality loophole, among other more minor technical fixes to the FCA. The Amendment fixes this loophole by adding the language

“[i]n determining materiality, the decision of the Government to forego a refund or to pay a claim despite actual knowledge of fraud or falsity shall not be considered dispositive if other reasons exist for the decision of the Government with respect to such refund or payment.”

This language does not make any substantive changes to the law but only provides clarification for courts on the definition of materiality that has been muddled in the courts since the Escobar decision.

While widely supported by whistleblower advocacy groups, the bill has faced heavy opposition from pharmaceutical companies who have aggressively lobbied against it. Large pharmaceutical companies have commonly been charged with False Claims Act violations; the definition of “materiality” offered by Escobar can allow these companies to avoid liability in instances where they commit healthcare fraud. Whistleblower Network News reports that the American Hospital Association successfully lobbied to have the bill removed from the 2021 Infrastructure Act. The Intercept further reports that Pfizer, Amgen, AstraZeneca, Merck, and Genentech have all lobbied against the bill.

Despite the lobbying efforts of pharmaceutical giants, on October 28, the Senate Judiciary Committee voted to advance the False Claims Amendments Act of 2021 onto the floor of the U.S. Senate. The bill awaits a vote by the full Senate.

Amicus Curiae Briefs

In addition to working on much-needed legislation to protect the FCA, the pro bono team at Kohn, Kohn & Colapinto has filed numerous amicus curiae briefs in Supreme Court cases with implications for the efficacy of the FCA. Kohn, Kohn & Colapinto’s briefs have consistently outlined the public interest need for an effective FCA and the Congressional intent behind crafting provisions which empower whistleblowers to hold fraudsters accountable.

  • Cochise Consultancy, Inc. v. United States, ex rel. Hunt (2019). Kohn, Kohn & Colapinto filed an amicus curiae brief arguing against a narrow reading of the False Claims Act’s statute of limitations which would limit the timeframe FCA whistleblowers had to file qui tam suits. “The statute of limitations in the FCA is clearly set forth in the law,” KKC states in its brief. “It would be inappropriate for the Court to weigh in on the issue given the plain language of the statute and the clear expressions of Congressional intent regarding a broad interpretation of the law.” In a unanimous ruling, the Supreme Court agreed with the broad interpretation of the FCA’s statute of limitations in cases where the government does not intervene in a whistleblower’s qui tam suit.
  • State Farm Fire and Casualty Company v. U.S. ex rel. Rigsby (2016). Kohn, Kohn & Colapinto filed an amicus curiae brief opposing the automatic dismissal of FCA cases in which seal was violated. “Mandatory dismissal would undermine the FCA and hurt taxpayers—the intended beneficiaries of the False Claims Act,” the brief states. “Congress clearly considered whether to include a mandatory dismissal sanction for seal violations and answered that question in the negative.” In a win for whistleblowers, the Supreme Court ruled against the automatic dismissal. 
  • Universal Health Services v. U.S. ex rel. Escobar (2016). Kohn, Kohn & Colapinto filed an amicus curiae brief arguing that the FCA does not require express conditions of payment to be stated in a contract to impose liability. “The original drafters of the FCA did not require that express conditions be stated in a contract to impose liability under the Act, and the creation of such ‘artificial barriers’ are contrary to Congress’ original intent, the express terms used in the statute and the statute’s purpose,” the brief states. The Supreme Court’s unanimous ruling aligned with KKC’s arguments and upheld FCA whistleblowers’ right to pursue claims even if the violations were not explicitly set forth in contract.
  • Vermont Agency of Natural Resources v. U.S. ex rel. Stevens (2000). Kohn, Kohn & Colapinto filed an amicus curiae brief arguing that a state or a state agency may be the subject of a qui tam lawsuit and that Congress has clear authority to utilize qui tam whistleblowers to protect the fiscal situation and to enforce Congress’ broad powers. While the Supreme Court ruled that a whistleblower may not file a qui tam suit against a state, it did uphold the constitutionality of key provisions of the FCA.

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