Since 1986, the little brother to the civil False Claims Act, known as the Program Fraud Civil Remedies Act of 1986 (“PFCRA”), has seen very little use. Section 5203 of the Fiscal Year 2025 National Defense Authorization Act (“NDAA”) seeks to breathe new life into the law by renaming it
Continue Reading Congress Attempts to Revitalize the Program Fraud Civil Remedies ActFalse Claims Act
Penn State Agrees to Pay $1.25M in Settlement for Cybersecurity Non-Compliance False Claims Act Allegations
On Tuesday, October 22, 2024, Pennsylvania State University (“Penn State”) reached a settlement with the Department of Justice (“DoJ”), agreeing to pay the US Government (“USG”) $1.25M for alleged cybersecurity compliance violations under the False Claims Act (“FCA”). This settlement follows a qui tam action filed by a whistleblower and former employee of Penn State’s Applied Research Laboratory. The settlement agreement provides some additional insight into the priorities of DoJ’s Civil Cyber Fraud Initiative (“CFI”) and the types of cybersecurity issues of interest to the Department. It also highlights the extent to which DoJ is focusing on the full range of cybersecurity compliance obligations that exist in a company’s contract in enforcement actions.Continue Reading Penn State Agrees to Pay $1.25M in Settlement for Cybersecurity Non-Compliance False Claims Act Allegations
Tick-tock, the Court Starts the Clock: Deconflicting the FCA and Rule 4(m) of the FRCP
In keeping with the trend of increased attention on the False Claims Act’s (“FCA”) qui tam provisions, the Second Circuit recently weighed in on a seeming conflict between the statute and the relator’s obligations under the Federal Rules of Civil Procedure (“FCRP”). Under Rule 4(m) of the FRCP, the court generally must dismiss a complaint if the plaintiff fails to serve the defendant with a complaint and summons within 90 days of filing. Fed. R. Civ. P. 4(m). But a relator bringing suit under the qui tam provisions of the FCA may not serve a defendant until the complaint is unsealed and “until the court so orders.” 31 U.S.C. § 3730(b)(2). In cases brought under the qui tam provisions of the FCA, this creates the potential for questions regarding when the Rule 4(m) service-of-process clock begins to tick.
These questions seldom arise because courts ordinarily unseal a relator’s complaint and simultaneously order the relator to serve the defendant. In which case, the express order to serve the defendant plainly triggers the service-of-process clock under Rule 4(m). But what if the court unseals the relator’s complaint and then delays (or never issues) the order to serve the defendant? This was the question before the Second Circuit last month in U.S. ex rel. Weiner v. Siemens AG, No. 22-2656, 2023 WL 8227913, at 3 (2d Cir. Nov. 28, 2023).Continue Reading Tick-tock, the Court Starts the Clock: Deconflicting the FCA and Rule 4(m) of the FRCP
Third-Party Funding and the Constitutionality of Qui Tam Suits After Polansky
The Supreme Court’s decision in United States ex rel. Polansky v. Executive Health Resources, Inc., 143 S. Ct. 1720 (2023), has increased attention on arguments that the False Claims Act’s qui tam provisions may be unconstitutional. Although the majority’s opinion in the case did not address the issue, the…
Continue Reading Third-Party Funding and the Constitutionality of Qui Tam Suits After PolanskyAmici Curiae Submit Brief Urging Supreme Court to Adopt “Objectively Reasonable” FCA Knowledge Standard
The Coalition for Government Procurement and the National Defense Industrial Association filed an amicus brief in the consolidated Supreme Court cases United States ex rel. Schutte v. SuperValu, Inc. and United States ex rel. Proctor v. Safeway, Inc. The brief urges the Court to hold, consistent with the decisions of multiple federal courts of appeals, that a defendant cannot be liable under the False Claims Act (“FCA”) for “knowingly” submitting a “false” claim if (1) it acted in accordance with an objectively reasonable reading of an ambiguous statute, regulation, or contract provision and (2) there was no authoritative guidance warning it away from that interpretation. The Amici are represented by Covington & Burling LLP.
In SuperValu and Safeway, the Court is asked to resolve questions over the role that subjective intent plays in evaluating whether a defendant satisfies the FCA’s “knowledge” requirement. Petitioners argue that a contractor can be liable under the FCA for submitting a claim that is premised on an objectively reasonable interpretation of an ambiguous legal provision if the contractor recognized that the provision could be interpreted a different way. However, as the amicus brief explains, such a claim cannot be false for alleged noncompliance with the ambiguous legal provision that has not otherwise been clarified by authoritative guidance. Nor can such a contractor knowingly submit a false claim just because it was aware that the legal obligation may be interpreted differently.Continue Reading Amici Curiae Submit Brief Urging Supreme Court to Adopt “Objectively Reasonable” FCA Knowledge Standard
En Banc Rehearing of Fourth Circuit Sheldon Decision Addresses FCA’s Falsity And Knowledge Requirements
On Thursday, September 15, 2022, an en banc panel of the Fourth Circuit Court of Appeals heard oral argument in the rehearing of an important case concerning the “knowledge” element of the False Claims Act—United States ex rel. Sheldon v. Allergan, No. 20-2330. The panel was active, posing numerous questions for both parties during the oral argument, which spanned approximately 94 minutes. The audio recording of this hearing is available here.
As Covington has reported in the past, this appeal concerns questions related to the scope of the False Claims Act’s “knowledge” requirement. In its January 25, 2022 decision, the Fourth Circuit upheld the district court’s dismissal, finding that under the FCA “a defendant cannot act ‘knowingly’ as a matter of law if it bases its actions on an objectively reasonable interpretation of the relevant statute when it has not be warned away from the interpretation by authoritative guidance” and that “this objective standard precludes inquiry into a defendant’s subjective intent.” United States ex rel. Sheldon v. Allergan Sales, LLC, 24 F.4th 340, 348 (4th Cir. 2022). That opinion was also subject to a strong dissent by Judge Wynn, which argued that the majority opinion disregarded two of the three FCA’s enumerated forms of knowledge (actual knowledge and deliberate ignorance), focusing only on the Safeco test for objective recklessness.Continue Reading En Banc Rehearing of Fourth Circuit Sheldon Decision Addresses FCA’s Falsity And Knowledge Requirements
DOJ Settlement Underscores the Significance of Incorrect Small Business Representations
The Department of Justice (“DOJ”) recently announced a $5.2 million settlement with Numet Machining Techniques, LLC and affiliated entities (collectively, “Numet”) concerning alleged misrepresentations of size and ownership in connection with pursuing U.S. Government contracts. The Numet settlement is an important reminder to the contractor community that representations and certifications—particularly those concerning small business status—should be made with due caution and that the discovery of incorrect representations during M&A due diligence can be a significant finding. In this post, we explore the recent Numet settlement, examine the Small Business Administration (“SBA”) size and affiliation rules, and offer guidance to companies assessing the significance of incorrect representations.Continue Reading DOJ Settlement Underscores the Significance of Incorrect Small Business Representations
First Settlement of DOJ Civil Cyber-Fraud Initiative
On March 8, 2022, the Department of Justice announced the first settlement of a case under the Civil Cyber-Fraud Initiative. Established in October 2021, the Initiative aims to utilize the government’s authority under the civil False Claims Act to pursue alleged instances of fraud and misrepresentation concerning cyber practices. (We previously wrote about the Initiative here.) The Initiative has been a point of emphasis in DOJ speeches and public comments in recent months. This settlement is a milestone in the rollout of the program and confirmation that DOJ intends to take allegations of cyber fraud seriously.
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Senior HHS Official Discusses Role of OIG in FCA Resolutions and Enforcement Priorities for 2022
On February 23, 2022, Gregory E. Demske, Chief Counsel to the Inspector General for HHS’s Office of Inspector General (“OIG”), provided opening remarks and answered questions during the Federal Bar Association’s annual Qui Tam Conference. Mr. Demske spoke about OIG’s role in False Claims Act (“FCA”) enforcement and resolutions, and discussed enforcement priorities for the upcoming year.
Continue Reading Senior HHS Official Discusses Role of OIG in FCA Resolutions and Enforcement Priorities for 2022
DOJ Records Historic False Claims Act Recoveries in FY 2021
On February 1, 2022, the Department of Justice (“DOJ”) released its annual report summarizing False Claims Act (“FCA”) enforcement activity in FY 2021. The report confirmed what many practitioners already suspected: FY 2021 was another banner year in FCA enforcement. DOJ’s annual judgments and settlements exceeded $5.6 billion, making FY 2021 the second largest annual recovery ever (and the largest since 2014). But beyond this top line number, a closer analysis of the figures in DOJ’s report offers additional insight on strategies for preventing and mitigating costly FCA exposure.
Continue Reading DOJ Records Historic False Claims Act Recoveries in FY 2021