Allison Engine decision--must actually be presentment to government

In another unanimous decision, the Court (opinion by Alito) reversed the Sixth Circuit and held that in a qui tam action for construction fraud under the federal False Claims Act ("FCA"), the relator (Sanders) must show an actual presentment of a claim to the US Government in order to trigger the statute on his behalf. In the language of the Supreme Court, the notion of presentment involves proving "that the defendant intended that the false statement be material to the Government's decision to pay or approve the false claim." The Sixth Circuit, the court below, held that a 1986 amendment to the FCA had expanded the reach of the statute so that presentment to the Government was no longer an operative portion of the statute. This summary quotes from the Syllabus of the Decision.

Relevant facts are provided in my case summary. For your convenience, however, I will quote from the Court's precis of the facts.

"The Navy contracted with two shipyards to build destroyers, each of which needed generator sets (Gen-Sets) for electrical power. The shipyards subcontracted with petitioner Allison Engine Company, Inc. (Allison Engine), to build Gen-Sets, Allison Engine subcontracted with petitioner General Tool Company (GTC) to assemble them, and GTC subcontracted with petitioner Southern Ohio Fabricators, Inc. (SOFCO), to manufacture Gen-Set bases and enclosures. The subcontracts required that each Gen-Set be accompanied by a certificate of conformance (COC) certifying that the unit was manufactured according to Navy specifications. All of the funds paid under the contracts ultimately came from the U.S. Treasury.

"Former GTC employees Sanders and Thacker (hereinafter respondents) brought this qui tam suit seeking to recover damages from petitioners under the False Claims Act (FCA), which, inter alia, imposes civil liability on any person who knowingly uses a “false ... statement to get a false or fraudulent claim paid or approved by the Government,” 31 U.S.C. § 3729(a)(2), or who “conspires to defraud the Government by getting a false or fraudulent claim allowed or paid,” § 3729(a)(3). At trial, respondents introduced evidence that petitioners had issued COCs falsely stating that their work was completed in compliance with Navy specifications and that they had presented invoices for payment to the shipyards. They did not, however, introduce the invoices the shipyards submitted to the Navy. The District Court granted petitioners judgment as a matter of law, concluding that, absent proof that false claims were presented to the Government, respondents' evidence was legally insufficient under the FCA. The Sixth Circuit reversed in relevant part, holding, among other things, that respondents' §§ 3729(a)(2) and (3) claims did not require proof of an intent to cause a false claim to be paid by the Government; proof of an intent to cause such a claim to be paid by a private entity using Government funds was sufficient."

The crucial sentence for this case is the following: "They did not introduce invoices the shipyards submitted to the Navy." Thus, there was no official "presentment" to the Government. Was this a minor oversight, or would it cut off Sanders' remedy? The Court would choose the second option.

Legal Argument

The Court criticized the Sixth Circuit for its broad reading of sec. 3729(a)(2) of the statute:

"The Sixth Circuit's interpretation of § 3729(a)(2) impermissibly deviates from the statute's language, which requires the defendant to make a false statement “to get” a false or fraudulent claim “paid or approved by the Government.” Because “to get” denotes purpose, a person must have the purpose of getting a false or fraudulent claim “paid or approved by the Government” in order to be liable. Moreover, getting such a claim “paid ... by the Government” is not the same as getting it paid using “government funds.” Under § 3729(a)(2), a defendant must intend for the Government itself to pay the claim. Eliminating this element of intent would expand the FCA well beyond its intended role of combating “fraud against the Government.” Rainwater v. United States, 356 U.S. 590, 592, 78 S.Ct. 946, 2 L.Ed.2d 996."

The Government contended that the "paid..by the Government" clause does not literally mean what it says:

"The Government's contention that “paid ... by the Government” does not mean literal Government payment is unpersuasive. The assertion that it is customary to say that the Government pays a bill when a recipient of Government funds uses those funds to pay involves a colloquial usage of the phrase “paid by” that is not customarily employed in statutory drafting, where precision is important and expected. Section 3729(c)'s definition of “claim” does not support the Government's argument. The definition allows a request to be a “claim” even if it is not made directly to the Government, but, under § 3729(a)(2), it is necessary that the defendant intend that a claim be “paid by the Government,” not by another entity."

Yet, Justice Alito further clarified:

"This does not mean, however, that § 3729(a)(2) requires proof that a defendant's false statement was submitted to the Government. Because the section requires only that the defendant make the false statement for the purpose of getting “a false or fraudulent claim paid or approved by the Government,” 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. 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. The Court's reading gives effect to Congress' efforts to protect the Government from loss due to fraud but also ensures that “a defendant is not answerable for anything beyond the natural, ordinary, and reasonable consequences of his conduct.” Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 470, 126 S.Ct. 1991, 164 L.Ed.2d 720."

It sounds to me as if the Court is injecting an unnecessary "squishiness" into the discussion. Would proof of a subcontractor's submitting a false claim to the prime contractor, with the expectation that the claim then be paid by the contractor with Government money, violate the statute? According to Justice Alito's reading, probably not. There would have to be a closer connection between the submission of the bill and the intent actually to defraud the Government. Isn't this a bit too vague for our tastes, however? Defrauding the Government means actually seeking to get money directly from the Government for one's action--it doesn't mean conspiring to or actually defrauding a federally funded private entity. That, then, is the unanimous holding of the case.

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