Materiality: a Needed Return to Basics in False Claims ACT Liability
- A Basic Overview of the FCA
- Factual Falsities Versus Legal Falsities
- Theories of Legal Falsity
- The Materiality Regime
The False Claims Act ("FCA" or "Act") [FN1] allows private individuals to file suits on behalf of the federal government against entities thathave obtained government monies through the submission of fraudulent claims. The Act has been highly successful. It is credited for returning well over $15 billion to the federal fisc *106 from 1987 through 2011. [FN2] On account of its success, the FCA is rightly hailed as the premiere statute for protecting government programs from fraud and abuse by government contractors. [FN3] Naturally, the falsity or fraudulent nature of the contractors' claims is necessarily at the heart of all FCA litigation. Remarkably, however, there is a significant lack of uniformity among federal courts regarding what makes a claim [FN4] "false" under the Act. This Article discusses the legal constructs that federal courts have developed to interpret the concept of ""falsity" under the FCA and argues that these legal constructs have obfuscated, rather than advanced, uniform and sound legal analysis of the FCA. In light of courts' varying interpretations, this Article advocates the abandonment of such legal constructs in favor of a unified approach to falsity under the FCA that hinges exclusively on materiality.
To that effect, Part II of this Article provides readers with a basic overview of the FCA. Part III discusses the types of "falsities" that form a basis for liability under the Act, distinguishing legal falsities from factual falsities. Part IV explains the theories of legal falsity federal courts utilize as a basis for imposing FCA liability, including express certification and implied certification. Part IV also identifies what the author views as inadequacies and failures of these theories in advancing the text and underlying policies of the FCA. Part IV further discusses materiality as an alternative*107 theory employed by some federal courts to determine the falsity of a claim under the FCA. Part V argues that courts should retire the express and implied certification theories and instead adopt a materiality regime as the exclusive framework for evaluating falsities as a basis for liability under the FCA. Part VI provides a brief summary and conclusion of the foregoing topics.
[FNa1]. Monica P. Navarro is an Associate Professor of Civil Procedure and Health Law at Thomas M. Cooley Law School in Auburn Hills, Michigan. She graduated summa cum laude from Florida International University in 1990 and cum laude from the University of Michigan Law School in 1993. The Author thanks Research Assistant Christina Gyarmati for her valuable contributions to this Article.[FN1]. The FCA can be found at 31 U.S.C. ss 3729-3733 (2006 & Supp. V 2011). In 2009, Congress signed into law the Fraud Enforcement and Recovery Act of 2009 (FERA) to reinforce and clarify the FCA. Where appropriate, this Article indicates whether a cited case is pre-FERA or post-FERA. See U.S. Dep't of Justice, Fraud Statistics--Overview, October 1, 1987--September 30, 2010, Taxpayers Against Fraud Educ. Fund (Nov. 23, 2010), http://www.taf.org/FCA-stats-2010.pdf (providing statistics on FCA recoveries).
[FN3]. See Responses to Senator Charles Grassley Questions for Paul McNulty, Taxpayers Against Fraud Educ. Fund, http:// www.taf.org/mcnultyresponsetograssley.pdf (containing Deputy Attorney General Paul McNulty's comments about the FCA). It is of note that the number of private contractors performing government functions has increased significantly in the last century. Thus, the number of people in the private sector potentially subject to liability under the FCA has also significantly increased. See generally Martha Minow, Partners Not Rivals: Privatization and the Public Good 3 (2002); Martha Minow, Outsourcing Power: How Privatizing Military Efforts Challenges Accountability, Professionalism, and Democracy, 46 B.C. L. Rev. 989, 990-95 (2005) .
[FN4]. The Act defines the term "claim" as "any request or demand, whether under a contract or otherwise, for money or property . . . if the United States Government provides or has provided any portion of the money or property which is requested or demanded . . . ." s 3729(b)(2).