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Originally enacted during the Civil War to fight profiteering by suppliers to the Union Army, the False Claims Act has evolved into a sweeping statute covering nearly every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 $3.7 billion in FY 2017.

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

 

Suggested Resources

Research

All Results for False Claims Act (FCA)

  1. ILR Research Review - Fall 2018

    November 20, 2018 | Research

    ILR's Fall 2018 research cycle was about two things: spotting new, destructive legal trends before they become unstoppable, and highlighting concrete progress in addressing long-standing litigation challenges. The 2018 Fall Research Review reveals the exploding costs of the U.S. tort system, and examines developments in securities litigation, forum shopping, False Claims Act policy reform, and the European Commission's project to implement class actions.... Read More

  2. How Escobar Is Affecting False Claims Act Litigation

    November 01, 2018 | News

    Two years after the U.S. Supreme Court handed down its landmark Universal Health Services v. Escobar decision, Law360 looks at how courts across the country are interpreting and applying it to False Claims Act (FCA) litigation.... Read More

  3. In the News Today - October 1, 2018

    October 01, 2018 | News

    DOJ Official: Department and Business Should Be "Partners, Not Adversaries;" "Dismissing FCA Cases: The Granston Memo In Action;" DOJ Objects to Bankruptcy Trust Appointment; Find Out What's Trending at ILR's Summit XX: Law, Policy, Politics... Read More

  4. In the News Today - September 20, 2018

    September 20, 2018 | News

    "Third Circuit Clarifies Public Disclosure Bar in False Claims Act"... Read More

  5. In the News Today - September 6, 2018

    September 06, 2018 | News

    "Why Escobar Materiality Rule Applies To California FCA"... Read More

  6. In the News Today - August 29, 2018

    August 29, 2018 | News

    Healthcare Group Asks for TCPA Clarity; Recent Decision Adds to "Growing Consensus" on False Claims Act Test... Read More

  7. In the News Today - August 27, 2018

    August 27, 2018 | News

    West Virginia Governor Appoints Two to Open Supreme Court Seats; Ninth Circuit: SCOTUS Escobar Ruling Created a Mandatory Test for FCA Liability... Read More

  8. Defense Attorneys Examine "Circuit Split" on False Claims Act Dismissals

    August 22, 2018 | News

    In a Law360 analysis piece, two defense attorneys from Wiley Rein LLP examine the growing circuit split on the U.S. Department of Justice's authority to dismiss False Claims Act lawsuits in light of its January Granston memo.... Read More

  9. From Theory to Practice: DOJ Asserts Its Rightful Authority

    August 01, 2018 | Blogs

    For more than 30 years, the Department of Justice (DOJ) has largely declined to take action against frivolous litigation under the False Claims Act (FCA)-but that's starting to change.... Read More

  10. Lighting the Way: FCA Reform and Compliance Program Credit

    June 27, 2018 | Research

    This paper contends that in order to encourage companies to create and sustain a culture of consistent compliance, particularly with regard to the federal False Claims Act, the U.S. Department of Justice should formalize a policy of offering credit for companies that implement effective compliance and ethics programs.... Read More