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Originally enacted during the Civil War to fight profiteering by suppliers to the Union Army, the False Claims Act has evolved into a sweeping statute covering nearly every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



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.

Enforcement Gone Amok: The Many Faces of Over-Enforcement in the United States

May 26, 2016 | This paper documents compelling examples of over-enforcement abuses, and offers details of the wide-ranging and interrelated ways government enforcement actions impact American businesses.

All Results for False Claims Act (FCA)

In the News Today - May 5, 2016

May 05, 2016 | News and Blog

House FCA Reform Proposals Stem from ILR Report: Chelsea M. Rutherford from McDermott, Will & Emery writes of last week's House Judiciary Subcommittee on the Constitution and Civil Justice's hearing on the False Claims Act. Read More »

Focus on compliance to fix False Claims Act, says former U.S. Deputy AG Thompson

April 28, 2016 | News and Blog

As a former U.S. Attorney, deputy U.S. Attorney General, law professor, and general counsel for a major corporation, Larry D. Thompson knows a thing or two about corporate compliance and enforcement. This week, he brought this unique public and private sector experience to Capitol Hill to testify in a House Judiciary Subcommittee on the Constitution and Civil Justice oversight hearing on the False Claims Act (FCA). Read More »

In the News Today -- April 25, 2016

April 25, 2016 | News and Blog

Uber last week agreed to a $100 million class action settlement filed by drivers claiming they should be classified as employees instead of independent contractors -- at least part of which some are calling a "win" for the ride-sharing company. Read More »

SCOTUS Considers What Constitutes Fraud Under the False Claims Act

April 20, 2016 | News and Blog

The Supreme Court debated what constitutes fraud between government contractors and the government under the False Claims Act this week, hearing arguments in Universal Health Services v. U.S. ex rel Escobar, writes Daniel Fisher in Forbes. Read More »

In the News Today - April 18, 2016

April 18, 2016 | News and Blog

Mom and Son Sue over SAT Typo that Gave Students Extra Test Time: Students take the SAT in hopes of going to college and getting a good education, but some New Jersey students are getting a first-hand lesson in the ins and outs of the legal system - all due to a simple typo. Read More »

In the News Today - April 12, 2016

April 12, 2016 | News and Blog

Australian Class Action Attorneys Pocket Settlement Dividends While Victims Wait for Compensation: Attorneys at Australian class action plaintiffs' firm Maurice Blackburn reportedly have "pocketed dividends of over $16 million" from a $494 million settlement over bush fires in the country. Read More »

In the News Today - February 24, 2016

February 24, 2016 | News and Blog

FL Court Rules State AG Has Authority to Dismiss False Claims Act Suit: A Florida appeals court has ruled that the state's attorney general "has the authority to unilaterally dismiss a whistleblower suit against Motorola Inc., a decision that plaintiffs attorneys fear could open the door to having their clients' suits tossed for political reasons." The ruling affirms a lower court ruling that dismissed a former Motorola employee's False Claims Act suit at the request of the state attorney general's office. (Law360) Read More »

In the News Today - September 22, 2015

September 22, 2015 | News and Blog

The Oklahoman editorial board notes the state's improved ranking (33rd) in the 2015 Lawsuit Climate rankings, writing, "Oklahoma is improving its national reputation regarding lawsuit issues at a time when such issues are growing in importance to businesses." (The Oklahoman) Read More »

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

Author: Victor E. Schwartz and Cary Silverman, Shook, Hardy & Bacon L.L.P. | September 10, 2015 | Research

101 Ways to Improve State Legal Systems offers some of the many options available to foster a sound legal system. It considers fair and effective measures to improve the litigation process, promote rational liability rules, and rein in excessive awards. Read More »

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