False Claims Act (FCA)

Originally enacted during the Civil War to fight profiteering by suppliers to the Union Army, the False Claims Act has evolved into a sweeping statute covering nearly every company doing business with the federal government. The law imposes liability on persons who knowingly submit false claims seeking government funds or who knowingly seek to avoid paying amounts owed to the government. Although well-intentioned, the law has been transformed into a lucrative money machine for plaintiffs’ lawyers and their clients—while hurting American businesses and taxpayers. read more...

While the need for an antifraud statute is clear, the False Claims Act’s broad language and overzealous enforcement have encouraged significant abuse—turning what should be simple contractual disagreements and paperwork errors into claims for fraud. In addition, many states have their own state-level False Claims Acts that also suffer many of the same problems as the current federal statute. 

The law allows the government to pursue any government contractor suspected of making “false claims” about their goods or services to the government. It also allows third-party whistleblowers (called qui tam relators) to sue in the name of the government and to keep a large part of any award or settlement. The statute allows for treble damages (damages three times the amount of the alleged fraud) as well as other potentially excessive penalties. A successful False Claims Act case against a company or person can ultimately result in a prohibition against that company or person receiving future federal contracts or funds. Total monetary damages under the False Claims Act have risen from $272 million in 1992 to a record $4.7 billion in FY 2016.

Since the law was expanded in 1986, plaintiffs’ lawyers have built a cottage industry around qui tam lawsuits—netting tens of millions for whistleblowers and themselves instead of for taxpayers. In fact, the current application of the law is so unbalanced that some whistleblowers are receiving monetary awards for information on violations that they committed.

A number of reforms to the False Claims Act are needed to restore fairness and predictability and to prevent inappropriate payments. These include (among others):

  • Providing a safe harbor for companies with robust compliance programs
  • Creating reasonable whistleblower incentives to ensure that legitimate fraud is reported, while preventing outrageous awards to whistleblowers and their attorneys
  • Clarifying the use and meaning of “implied certifications”—the doctrine that says a simple, non-monetary error (such as incorrect paperwork by a government contractor) can be used as the basis for a False Claims Act lawsuit
  • Limiting the government’s power to bar ethical companies and individuals from federal contracts as a method to coerce massive settlements

 

Research

101 Ways to Improve State Legal Systems: A User's Guide to Promoting Fair and Effective Civil Justice - FIFTH EDITION 2017

September 12, 2017 | A user's guide to state legal reforms, providing policymakers with a compendium of options available to foster a sound legal system and promote state economies. This resource also offers a compilation of recently-enacted legal reforms to show how legislators can move the proposals described in the guide from theory into practice.

The ILR Research Review - Fall 2016

September 22, 2016 | This edition of the ILR Research Review offers valuable insights from ILR's latest research on over-criminalization and the challenges of business compliance, over-enforcement, third-party litigation funding in the UK, and asbestos trust claims.

All Results for False Claims Act (FCA)

Customs Laws Could Be Next False Claims Act Front

January 30, 2018 | News and Blog

The Wall Street Journal reports that whistleblower lawyers may have found a new angle to pursue False Claims Act (FCA) lawsuits: customs and import cases. Read More »

In the News Today - January 30, 2018

January 30, 2018 | News and Blog

Debate Continues About WV Intermediate Appeals Court; Orange Juice Decision Shows the True Silliness of Many Food Lawsuits; False Claims Act Teleforum on February 1 Read More »

Justice Dept. Memo: "Meritless" and "Parasitic" Whistleblower Lawsuits Should be Dismissed

January 26, 2018 | News and Blog

A new U.S. Department of Justice memo advised attorneys to consider dismissing "meritless" or "parasitic" whistleblower lawsuits filed under the False Claims Act (FCA), Reuters reports. Read More »

In the News Today - January 10, 2018

January 10, 2018 | News and Blog

Florida Appeals Court, Regulator Reject Curbing "Assignment of Benefits" Lawsuit Abuse; Attorneys Duel Over Fee Split In $785M Pfizer FCA Settlement Read More »

In the News Today - November 13, 2017

November 13, 2017 | News and Blog

White House, HUD Secretary Contest DoJ FCA Enforcement; Defense Verdict in Medical Implant Trial Could Spell Trouble for MDL Cases against Cook Medical Read More »

DoJ Suffers Major Defeat in Qui Tam Intervention

November 13, 2017 | News and Blog

U.S. Magistrate Judge Theresa Carroll Buchanan of the Eastern District of Virginia struck a DoJ expert witness and ordered the Department to pay legal fees to Maryland-based nursing facilities company HCR ManorCare Inc. Read More »

In the News Today - October 16, 2017

October 16, 2017 | News and Blog

Spike in IL lawsuits vs employers over fingerprints, other biometric data may be just the beginning; Carson: Government considering ending use of False Claims Act against FHA lenders Read More »

DOJ Drops "Closely Watched" False Claims Act Suit

October 16, 2017 | News and Blog

After a California judge pushed back against the case, the Department of Justice dismissed a "closely watched" False Claims Act lawsuit, in which it alleged that United Healthcare defrauded Medicare Advantage, reports Law360. Read More »

101 Ways to Improve State Legal Systems: A User's Guide to Promoting Fair and Effective Civil Justice - FIFTH EDITION 2017

September 12, 2017 | Research

A user's guide to state legal reforms, providing policymakers with a compendium of options available to foster a sound legal system and promote state economies. This resource also offers a compilation of recently-enacted legal reforms to show how legislators can move the proposals described in the guide from theory into practice. Read More »

Plaintiffs' Bar 'Salivating' at Fmr. AG Lynch's Rule Doubling False Claims Act Penalties

February 21, 2017 | News and Blog

Former U.S. Attorney General Loretta Lynch signed a final rule before leaving office that would "effectively double penalties under the False Claims Act," reports the Washington Free Beacon's Joe Schoffstall. Read More »

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