Supreme Court wants to spark new dispute over scope of false claims law (1)

Justices will almost certainly reject a narrow interpretation of the False Claims Act, but at least for now they are unlikely to do so comprehensively.

The FCA, which seeks treble damages and a statutory minimum penalty, aims to prevent fraud against the government by allowing private parties or whistleblowers to sue on behalf of the government. These “qui tam” lawsuits can be brought against anyone who allegedly made a false claim to the government.

The question for the court in the case heard on Monday is whether allegedly false allegations against a fund set up through government regulation but using mainly private funds can form the basis of a “claim” under the FCA.

Several judges seemed inclined to rule that an FCA claim can be brought because at least some of the funding is provided by the government. In the first question posed in the argument, Justice Clarence Thomas noted that the government is providing at least $100 million to the multibillion-dollar Universal Services Fund.

That contradicts the argument that this isn't government money, Thomas said.

However, a number of judges appeared hesitant to go further and rule that the nominal amount provided by the government opened the entire multibillion-dollar fund to FCA claims.

Given the potential impact on programs like Medicare and minimum wage laws, it would be “aggressive” for the court to decide now, Justice Brett Kavanaugh said.

That would leave the question of how much damages whistleblowers and the government are entitled to for another day. Those questions “may be fleshed out later,” Judge Amy Coney Barrett said.

Assume a loss

The case involves the often controversial $9 billion Universal Services Fund, which is intended to help expand telecommunications services to rural and low-income communities, including schools and libraries. Under the Federal Communications Commission's E-Rate program, either schools, libraries or the telecommunications companies themselves can submit reimbursement requests to the fund for discount services.

Whistleblower Todd Heath filed a lawsuit under the FCA, alleging that telecommunications provider Wisconsin Bell overcharged schools and libraries for services under the E-Rate program, resulting in the fund paying out more money have.

Wisconsin Bell argued that the reimbursement requests are not claims against the government because the fund is funded by telecommunications providers, not the federal government. Wisconsin Bell also argued that the entity created to administer the fund — the Universal Service Administrative Company — was a private, nonprofit corporation and not a government agency.

The U.S. Court of Appeals for the Seventh Circuit rejected these arguments and allowed the lawsuit to proceed.

The government pays some money into the fund because it has the authority to collect delinquent debts and impose penalties on those who do not pay into the fund, the Seventh Circuit said.

The Supreme Court seemed to agree.

Chief Justice John Roberts, Barrett and Justice Neil Gorsuch all asked Wisconsin Bell attorney Allyson Ho to assume the justices would rule against telecom on the issue.

Instead, they examined what impact a limited decision would have on the litigation moving forward.

Both Gibson Dunn's Ho and whistleblower Heath's attorney, Tejinder Singh of Sparacino PLLC, agreed there would still be questions about what damages might be awarded. In particular, whether they would somehow be limited to the small percentage of money the government pays into the fund.

Limitation principle

That seemed to be all the judges were willing to do for now. In particular, it seemed unlikely that they would go as far as the Seventh Circuit and decide that the government's role in establishing and overseeing the program is to “provide” all the money to the fund.

Some justices, like Thomas, seemed to believe the decision was wrong. The fund consists largely of private money from private parties to other private parties, he said. That doesn't look like public funding, Thomas said.

Others feared their ruling could have unintended consequences.

If the court were to decide that question, it would be venturing into an area that the lower courts have not yet fully grappled with, Barrett said.

And Kavanaugh worried that the court might not have enough information about the impact such a ruling could have beyond USF. The judges were not given much guidance about a limiting principle, he said.

Doctrine of non-delegation

Also playing in the background of the case is the so-called non-delegation doctrine and a closely watched request for review by the US Attorney General. In FCC vs. Consumer ResearchThe Biden administration is asking justices to overturn a Fifth Circuit ruling that found the entire USF unconstitutional.

Part of the Fifth Circuit's decision rested in part on its finding that the company that manages the fund, USAC, is not an agent of the federal government but rather a private entity.

But the Seventh Circuit in there Wisconsin Bell noted that USAC – the entity that manages the fund – is an agent of the federal government, making it within the scope of the FCA.

“The resolution of these questions by this court Wisconsin Bell “could shed light on the nature of the FCC’s relationship with the company – which in turn could impact the non-delegation analysis in this case,” the Biden administration said in its motion to review the Fifth Circuit’s ruling.

The Secretary-General's petition is scheduled to go to the judges' private conference on November 15, where they will discuss whether to accept the case, reject it or reserve it for their decision Wisconsin Bell.

The case is Wisconsin Bell, Inc. v. United States, ex rel. Heath, USA, No. 23-1127, argued 11/4/24.